Opinion ID: 339939
Heading Depth: 2
Heading Rank: 2

Heading: The Lease-Sale Contrasted

Text: 42 Upon a conventional gas-sale transaction, then, the ratemaking aspect of a Section 7 certification proceeding has as its purpose the fixing of an initial price in line with prices in other jump-free transactions pending the establishment of a just and reasonable rate. 178 The Rayne Field lease-sale transaction, however, could not easily be subjected to the in-line price concept. Although the total price which Texas Eastern was to pay to the producers was fixed by the contract, the eventual volume of gas which the field would produce was necessarily an estimate, and so also any cost per Mcf of the gas which would be extracted. Nonetheless, it was clear that until the late years of production from the producers' holdings in Rayne, Field, the price to be paid would exceed the in-line cost of gas actually delivered. 179 Since the purchase price of $134 million was to be remitted in full by 1975 but production was expected to continue until 1986, 180 the parties and Commission alike were seemingly reconciled to the conclusion that the price of the gas would run considerably higher than the 20-cent in-line price during most of the production period. 181 43 Adherence to the Supreme Court's CATCO 182 ruling demanded that the Section 7 certification process not develop into a protracted affair bogged down in the mire of intricate cost calculation. 183 The in-line price measure was an available index of price tends, and so a ready reference to a price that might shield consumers against exorbitance. 184 Producers could secure reasonable protection under Section 4 by immediately filing for rate increases, subject to refunds contingent upon the just and reasonable rate ultimately determined. 185 Consumers, on the other hand, got no refund protection under Section 5 against the contingency that the initial price might turn out to be too high. 186 It was against this need to safeguard the interest of consumers that the Commission was summoned to determine whether the lease-sale merited unconditional certification.