Opinion ID: 345561
Heading Depth: 1
Heading Rank: 2

Heading: the federal power commission investigations

Text: 215 First, we turn to the District Court's determination that, for the years covered by the Trade Commission's subpoena, the Federal Power Commission had already (1) considered and ruled upon the validity and accuracy of natural gas reserve data, and (2) determined natural gas reserves. 21 The majority opinion implicitly agrees with this District Court finding, but some development of this point is necessary, as it forms the background of the whole case. 216 Although the Power Commission began area rate proceedings in 1961 for the Southern Louisiana area, it was not until 1968 that the Commission rendered a final decision, which in turn was modified in early 1969. Even before oral argument could be heard before the Fifth Circuit on petitions for review sought by producers, pipeline companies, and consumers, the FPC had instituted new proceedings (So La II ) to reconsider all major actions it had taken in the prior proceedings. 22 As the FPC stated in its order instituting So La II, Phase I of its new proceeding solicited . . . evidence with respect to the adequacy of gas supply and adequacy of service to consumers, the demand for gas, the gas shortage, if any, the effect of price on gas supply and demand, and other relevant economic evidence. . . . 23 217 The FPC was concerned in So La II with complaints that adequate supplies of natural gas were not being produced and would not be produced under the recently ordered area rate ceilings. More important for present purposes, the FPC during So La II was presented with the argument by Municipal Distributors Group (MDG), an intervenor which represented the interests of municipal and other publicly owned gas distribution systems, that the supply shortage was more apparent than real. It was argued that the sharp decline in the supply picture in 1968-69 is revealed by the above record evidence to be caused . . . largely by revisions in the estimates of proved reserves reported by the AGA. 24 Such a contention went to the heart of the Power Commission investigation. If it were true that the decline in reserves was a matter of definition and not of economics, the concern of the FPC that new area rates might be required to encourage production would be obviated. 218 In its final opinion in So La II the FPC discussed testimony which was used by MDG to impeach AGA data. The testimony outlined several methods by which producers could withhold reserves from the AGA. Discussed also were MDG's arguments relating to discrepancies between figures gathered by the FPC and those submitted by the AGA. Additionally, the FPC referred in some detail to the testimony and exhibits supporting the reliability of AGA data. 25 As a result, it reached the following conclusions: 219 AGA and Form 15 data show similar trends of reserves and reserve-to-production (R/P) ratios. AGA data indicates a steady decline in the national R/P ratio from 19 in 1963 to 13 in 1969. Form 15 data indicates a similar decline in the national R/P ratio from 20 in 1963 to 14 in 1969. The American Gas Association reserve data is not impeached, in our opinion, in this discrepancy. 26 220 For the reasons stated herein, we find the AGA reserve data is reasonably reliable for the purposes used herein. Accordingly, and because petitioner has not raised any new evidence, we deny the petition to reopen. 27 221 In other words, while in 1963 AGA data started with nineteen years of reserves and the Form 15 data started with twenty years of reserves, by 1969 each calculation had dropped 6 years of reserves off its proved reserve figure, so the two calculations were comparable. Other substantial corroborating evidence, including the fact and extent of pipeline curtailments of gas service, was received and considered by the FPC during So La II. 28 Thus, AGA data was shown to be reliable. 222 The underreporting issue was again raised on review before the Fifth Circuit and received the following extensive rebuttal in a footnote: 223 . . . Standing virtually alone against the National (and record) judgment of a near energy calamity, the American Public Gas Association (APGA) contends that the current critical shortage of natural gas is but a pretextual cry of wolf calculated to mislead FPC into establishing artificially high rates in the producers' behalf. APGA would have us believe that the energy crisis is a mirage indeed, a hoax! APGA claims that there appear to be adequate supplies of gas in the domestic United States to satisfy the projected demands of U.S. consumers well into the 21st Century. APGA Supp. Brf. at 5 n. 9. But to talk of Supplies of gas is a misleading oversimplification. Obviously, the gas is not presently available. At most, if there is appropriate exploration, the demonstrable reserves may be exploited to meet the needs. Given a system which depends on private stewardship and marshalling of natural resources, there is a supply shortage if the producers do not produce. FPC has the statutory duty, not only to guard the consumers against super-profits reaped from artificially inflated rates, but also to protect consumer interests by making sure that the rate schedule is high enough to elicit an adequate supply. It is a delicate balancing test. FPC must fix its course to attain the utopian optimum rate schedule. Given the current shortage of available supply FPC must swing the pendulum towards the incentive, supply-eliciting side of rates. And so it has done. 29 224 In addition to the examination undertaken in relation to the So La II proceedings, the Power Commission undertook in early 1971, at the direction of Congress, a National Gas Survey, a portion of which was the National Gas Reserves Study (NGRS). The NGRS was a completely independent survey of reserves and did not rely on AGA figures at any point. However, in the final staff report of the NGRS (issued May 1973) a comparison was made with AGA figures: 225 The NGRS estimate is lower than the estimate by A.G.A.; however, the difference is less than 10 percent. The difference of 23.5 Tcf between the estimate of the non-associated and associated gas reserves for the 6,358 entries in the reported fields category (a) is the primary difference between the total estimates. The gas reserves in the A.G.A. omitted fields are a relatively insignificant part in the total NGRS estimate, and it seems evident that the 62 entries in the omitted category (b) are small fields. The two dissolved gas estimates differ by 1.7 Tcf or by about 5 percent. 30 226 Thus, this independent study concluded that, if anything, AGA proved reserve estimates overstated the true picture. 227 In these Power Commission investigations the FPC necessarily analyzed and checked the AGA reserve data in So La I and So La II, the FPC considered the data offered by the Municipal Distributors Group to impeach the AGA data and found that this data (derived from the regular Form 15 reports) confirmed rather than contradicted the AGA data, all of which was reviewed by the Fifth Circuit and the Supreme Court. Then separately and in addition to the above, the Power Commission made, in 1971-73 at the request of Congress, a completely independent analysis, not relying on AGA data in any way, called the National Gas Reserves Study, which concluded that proved gas reserves were actually somewhat less than calculations based on the AGA figures showed. 228 While the analyses of the FPC in the So La I and So La II proceedings were made for ratemaking purposes, the National Gas Reserves Study was not. And in both instances the Power Commission made findings of fact on the precise issue (accuracy of reported reserves) which the Trade Commission now seeks to relitigate. Hence the District Court made the factual determination that the Power Commission had already (1) considered and ruled upon the validity and accuracy of natural gas reserve estimates and (2) determined natural gas reserves. The District Court's finding of fact should not be confused with the question of law which necessarily followed, whether it was appropriate to give this finding of fact collateral estoppel effect, which we explore in section VI, infra.III. COURT ENFORCEMENT OF ADMINISTRATIVE SUBPOENAS 229
230 The Trade Commission and a majority of this court apparently would have us proceed as if there were on appeal here an order of the Trade Commission, entitled to deference as an exercise of that agency's expertise. 231 To the contrary, this is an appeal from orders of the District Court enforcing the Commission's subpoena with some limiting modifications. Accordingly, it is not the views of the Commission staff which must be accorded deference, but the determinations of the District Court which must be upheld unless clearly erroneous or an abuse of discretion. 232 There are limits to the subpoena power of an administrative agency, and the duty and authority to enforce those limits rests in our federal district courts. As the Ninth Circuit has stated, 233 There is no rule requiring a court to act against conscience. The proceeding (judicial enforcement of administrative subpoenas) is equitable in character. Equitable considerations should prevail. There is no power to compel a court to rubberstamp action of an administrative agency simply because the latter demands such action. 31 234 By arguing as if it had been denied the ability to proceed with its investigation, and by arguing that its subpoena must be enforced unless the evidence sought is plainly irrelevant to any purpose within (its) statutory authority . . ., 32 the Trade Commission demonstrates that its real purpose is to strip the federal judiciary of any discretion in subpoena enforcement proceedings. Ironically, the District Court's order here enforces the FTC's subpoena as to the great preponderance of the documents sought, and even specifically preserves the FTC's ability to obtain further documents and information. 33 Consequently, the majority's failure to sustain the District Court in its reasonable limitations of the FTC's subpoena may have exactly the precedential effect desired by the Trade Commission. By stripping the District Court, which has reviewed countless submissions and has held two full days of hearings, of any discretion in enforcing this FTC subpoena, our colleagues have totally undermined the concept of judicial enforcement of administrative subpoenas. 235 The Supreme Court has announced repeatedly the principles which should guide a district court in deciding the lawfulness of investigative subpoenas issued by administrative agencies: 236 The gist of the protection is in the requirement, expressed in terms, that the disclosure sought shall not be unreasonable. . . . 237 (T)he requirement of reasonableness . . . comes down to specification of the documents to be produced adequate, but not excessive, for the purposes of the relevant inquiry. Necessarily, . . . this cannot be reduced to formula; for relevancy and adequacy or excess in the breadth of the subpoena are matters variable in relation to the nature, purposes, and scope of the inquiry. 34 238 It is now settled that, when an administrative agency subpoenas corporate books or records, the Fourth Amendment requires that the subpoena be sufficiently limited in scope, relevant in purpose, and specific in directive so that compliance will not be unreasonably burdensome. 35 239 More specifically, in United States v. Morton Salt Co., in the context of a Trade Commission investigatory proceeding, the Supreme Court wrote, 240 Of course a governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter properly under inquiry as to exceed the investigatory power. . . . But it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant. 36 241 In addition, the Court has made clear that these issues of . . . relevancy of the materials sought, and breadth of the demand are neither minor nor ministerial matters. 37 They are, instead, matters which require the exercise of sound discretion on the part of a district court and matters which raise questions essentially factual in nature. Accordingly, we, at the appellate level, must defer to the determinations of the District Court unless we find those determinations clearly erroneous or an abuse of discretion. 38 242 In a recent opinion affirming the order of a district court enforcing another Trade Commission subpoena, this court correctly stated the standard of appellate review applicable to a district court's determinations of relevance: 243 A finding by the district court that documents are relevant and necessary to an inquiry by the FTC is essentially factual in nature and cannot be overturned unless the district court's finding is clearly erroneous. 39 244 We point out in Part IV.A., infra, how the majority has ignored and evaded this established standard and any other appellate standard of judicial review. Similarly, in NLRB v. Northern Trust Co., the Seventh Circuit has written, 245 We agree that the courts are not mere rubber stamps and that subpoenas are in the District Court's discretion, but we fail to see how that helps appellants. It seems to us to have the opposite effect, for here the court after a very thorough and careful inquiry granted the Board's request for enforcement. Thus appellants are in the unenviable position of sustaining the great burden of showing an abuse of discretion. They have failed to do so. The facts of the case insofar as the Board knew them at the time of the application and the materiality of the evidence sought were brought out before the trial judge, who concluded that the documents which the Board wanted to be produced were relevant. We are not willing to disturb his holding, because we do not think any abuse of discretion was involved. 40 246 Thus, we are left to decide in the instant case whether the District Court abused its discretion, under the reasonably relevant standard of United States v. Morton Salt Co., by refusing to enforce those portions of the subpoenas that called for documents which did not relate to estimates of proved reserves. In other words, was the District Court's finding that only documents related to proved reserves were reasonably relevant to the FTC's investigation a clearly erroneous finding? We conclude that it was not and that the District Court acted well within the bounds of its discretion.