Opinion ID: 339939
Heading Depth: 2
Heading Rank: 1

Heading: Producer-Pipeline Transactions

Text: 4 By contracts executed on February 1, 1957, the producers agreed to sell, and Texas Eastern to buy, their natural gas production in Rayne Field, 4 in Southern Louisiana, at an initial price of 23.9 cents per Mcf. 5 Shortly thereafter, the producers applied to the Commission for certificates of public convenience and necessity authorizing the sale, 6 and Texas Eastern sought a certificate permitting construction of new pipeline facilities extending its system to Rayne Field. 7 Because the unit price specified by the contract was high, 8 the applications were opposed by PSC and nine distributor intervenors. Hearings were held and on April 15, 1958, the presiding examiner recommended that the sale and construction be unconditionally certificated. 9 Exceptions to the examiner's decision were noted, but before the Commission ruled on them the Court of Appeals for the Third Circuit rendered its decision in the so-called CATCO litigation, 10 reversing an earlier Commission order granting unconditional certification of gas sales at an initial price lower than the 23.9-cent price involved in the pending application. 11 The Third Circuit's decisional ground was that the applicants for certification had not discharged their burden of demonstrating that the sale price they proposed was justified in terms of public convenience and necessity. 12 5 After that pronouncement, Texas Eastern and the producers renegotiated, and on December 4, 1958, agreed upon another arrangement. Instead of a conventional well-held sale of the gas at a 23.9-cent price, the new plan provided for sales to Texas Eastern of the producers' leasehold interests in the gas reserves in place. 13 The aggregate sale price was some $134 million, 14 which equated during the early years 15 to about 23.5 cents per Mcf for the gas, a figure out of line with prevailing prices. 16 The producers terminated their original contracts with Texas Eastern and withdrew their applications for certification. 17 Texas Eastern moved to amend its certificate application to reflect these developments, and to reopen the administrative hearing.