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

Heading: the facts, the issues, and the arguments

Text: 192 The American Gas Association (AGA) is a trade association of producers, distributors, and marketers of natural gas. Through its Committee on Natural Gas Reserves, the AGA has since 1946 been providing the industry, the Government, and the general public with annual estimates of the proved natural gas and natural gas liquid reserves of the United States. 2 193 In May 1969 when the AGA reported its 1968 figures, they indicated a decline in proved reserves nationally, the first such decline ever reported. Before the year 1969 was out, this and other information reaching the Federal Power Commission (FPC) prompted a reopening of its just-concluded Southern Louisiana Area Rate Proceeding. 194 In late 1970 the Federal Trade Commission began an investigation into the reporting of natural gas reserves in Southern Louisiana. On 3 June 1971 the investigation achieved more formal status when the Trade Commission issued a resolution authorizing the use of compulsory process in furtherance of a nonpublic investigation. From the beginning of the investigation the AGA cooperated with the Trade Commission on a voluntary basis. As a result the Commission was able to obtain the field-by-field estimates of proved reserves made by each Southern Louisiana subcommittee member for the years 1966 through 1970. 3 The Commission also obtained reserve information from Form 15 reports filed with the Federal Power Commission. These reports are filed by interstate natural gas pipelines and list recoverable saleable gas reserves committed to, collected by, or held by reporting pipelines. 195 Approximately one year after beginning its investigation, on 24 November 1971, the Commission staff issued identical administrative subpoenas duces tecum to eleven natural gas producers. All eleven producers moved to quash the subpoenas. Following the Commission's denial of the motions, the Trade Commission's staff, after negotiations with the gas producers, offered additional safeguards for confidentiality of the information to be supplied. As a result two producers agreed to comply fully with the subpoenas and one agreed to comply in part. Soon after petitions for enforcement were filed in the District Court, one more firm agreed to comply with the subpoena. 196 Petitions for enforcement of the remaining subpoenas were filed in the District Court on 4 June 1973. The two orders here under review were filed on 22 March 1974. One order covered the subpoenas issued to appellees Texaco, Inc., Standard Oil Co. (Indiana), Shell Oil Co., Exxon Corp., Standard Oil Co. of California, and Mobil Oil Corp. (hereinafter the Six-Company Order) and enforced specifications A through F and K through L in full. 197 During the hearings held on 30 July and 13 December 1973, the District Court found the subpoenas to be overly broad and unduly burdensome because they sought to duplicate investigations of the Federal Power Commission which had already resulted in a finding that AGA proved reserve estimates were valid and accurate. As a result, specifications G through I were modified so that raw field data, bid calculation data, and bid calculation files need not be produced. 4 However, all documents, wherever located, containing or underlying proved reserve estimates in the Southern Louisiana area are to be produced under the District Court's order. 198 The court, in an attempt to make the subpoenas less burdensome, limited production of the documents called for by specifications G through I to a random sample of 100 out of the approximately 225 relevant fields and to the years 1969, 1970, and 1971. Specifications J, K, and L were also modified so that only documents relating to proved natural gas reserve estimates in the offshore Southern Louisiana area need be submitted. The court, however, enforced the subpoena as regards any documents prepared between 1966 and 1971, inclusive, which were exchanged between or among, or constitute, contain or refer to any agreement, arrangement or communication between or among, respondents or others, including the American Gas Association. Finally, the subpoenas were modified so that additional protections were afforded to confidential information and the producers were accorded the option of producing records for inspection where they were stored.
199 Because the producers have not cross-appealed, the issues before us relate solely to those limiting modifications fashioned by the District Court which were not subsequently accepted by the Trade Commission and the producers in their field stipulations. Those issues, in the order we will deal with them, are as follows: 200 1. Did the District Court abuse its discretion under the relevance standard of United States v. Morton Salt Co., 5 in refusing to order the production of documents which did not relate to estimates of proved reserves? In other words, was the District Court's finding that documents related to non proved reserve estimates (e. g., raw field data and bid files) were not reasonably relevant to the investigation described in the FTC's resolution of 3 June 1971 a clearly erroneous finding? (a relevance issue an essentially factual determination for the District Court) 6 201 2. Considering the purpose of the Power Commission's investigation and the FPC's previous factual determination that AGA proved reserve data was reasonably reliable for ratemaking purposes, 7 would the effort and expense involved in producing documents so that the FTC could determine for itself the validity and accuracy of all natural gas reserve estimates (proved or unproved) have imposed an unfair and unreasonable burden on the producers? If so, did the District Court abuse its discretion in (1) limiting enforcement of the subpoenas to documents containing or underlying proved reserve estimates and (2) restricting use of the documents to an investigation of an alleged conspiracy in the reporting of natural gas proved reserve estimates? (a burdensomeness issue a determination within the sound discretion of the District Court) 202 3. Was the District Court in error in refusing to permit the Trade Commission to use the documents called for by specifications G through I to investigate or determine the amount of proved natural gas reserves, i. e., in ordering this production for the sole purpose of permitting the Trade Commission to investigate whether there is a conspiracy in the reporting of natural gas proved reserve estimates. . . . 8 (the administrative collateral estoppel issue a question of law initially for the District Court) 203 4. Did the District Court abuse its discretion in: 204 a. limiting the production of documents called for under specifications G through I to a random sample of fields in which the producers had an ownership interest as of the date reports were submitted by the Southern Louisiana Subcommittee of the (AGA) for the years 1969, 1970, and 1971? 9 205 b. limiting the production of documents called for under specifications J and K to . . . documents relating to . . . estimates . . . which were included in reports for 1971 by the Southern Louisiana Subcommittee of the (AGA) and . . . prepared or dated during the years 1966 through 1971, inclusive, (and) which were exchanged between or among, or constitute, contain or refer to any agreement, arrangement or communication between or among, (the producers) or others, including the (AGA)? 10 206 c. permitting documents to be produced for inspection at their situs? 11 207 d. attaching conditions to disclosure to insure confidentiality? 12 208 e. allowing the producers . . . 180 days after the date upon which they are advised of the sample fields selected . . . in which to comply with the subpoenas? 13 209 5. Was the District Court in error, under the relevance standard of United States v. Morton Salt Co., 14 in affording Superior Oil Co. differing treatment? 15 (a relevance issue an essentially factual determination for the District Court).
210 Before embarking on our analysis of these issues we will briefly summarize the arguments of the parties. The producers have never quarreled with the power or the right of the Federal Trade Commission to investigate the natural gas industry to uncover violations of the antitrust laws or unfair trade practices. However, they do argue that there can be no possible reason for wanting documents that do not relate to proved reserve estimates simply because it is only proved reserve estimates that are taken into account by the Federal Power Commission in setting area rate ceilings and it is only proved reserve estimates that are reported to the AGA and then, through the AGA, to the public. Alternatively, the producers argue that the Federal Power Commission, the only agency possessing the requisite expertise, has determined that AGA proved reserve data are accurate. Therefore, the FTC is collaterally estopped from relitigating this one issue of fact. 211 The Trade Commission, on the other hand, points out that there is no provision in the Federal Trade Commission Act (FTCA) excepting gas producers from the coverage of the Act, as there is for banks and certain common carriers, and that therefore jurisdiction to investigate exists. They argue that such jurisdiction is broad, reaching not only existing violations of . . . (the Sherman and Clayton Acts), but trade practices which conflict with their basic policies. 16 The Trade Commission goes on to argue that, as a factual matter, its investigation does not duplicate studies made by the Federal Power Commission and that, even if it did, collateral estoppel would be inapplicable because its purpose in determining the accuracy of reserve data is different from the Power Commission's purpose in determining accuracy. 212 Although the producers are correct in arguing that data relating to any reserves other than proved reserves would not be reasonably relevant 17 to the investigation defined by the Trade Commission's resolution of 3 June 1971 (and that this part of the District Court's order could properly be supported on relevance grounds alone), it is not clear from the transcript of the 13 December 1973 hearing whether the District Court reached the issue of relevance in regard to all documents subpoenaed. Since the Trade Commission had subpoenaed all reserve records so that it could determine independently the total gas reserves of the area, and since the Power Commission had already determined that the AGA figures were accurate, the court apparently was of the view that the Trade Commission was collaterally estopped from forcing the producers to relitigate this matter, and that therefore it was unnecessary to reach the issue of relevance for all documents. In any event, it seems clear that the District Court also felt that it would be unduly burdensome to permit yet another plenary investigation (for the third time in two years) of natural gas reserves. 18 213 Thus, there are three independent grounds for affirming the District Court's most important limiting modifications: 19 relevance (issue 1 supra ), burdensomeness (issue 2 supra ), and administrative collateral estoppel (issue 3 supra ). For the sake of clear analysis, we will attempt to keep these three grounds separate as we now proceed to a discussion of the issues. 20 214