Opinion ID: 305863
Heading Depth: 1
Heading Rank: 1

Heading: background and commission action

Text: 2 Cities Service Gas Company (Cities) is a natural gas pipeline company operating primarily in Kansas and western Missouri. On May 16, 1967 Cities filed a request with the Commission under Section 7(c) of the Natural Gas Act, 15 U.S.C. Sec. 717f(c) (1970), for a certificate of convenience and necessity to construct a major extension of their pipeline system to serve 38 municipalities and three direct industrial customers in central Missouri. FPC Docket No. CP67-340. The project contemplated construction of a 38.4 mile 20-inch pipeline looping a portion of Cities' existing 16-inch line between its Saginaw Station and Springfield, Missouri, in the southwestern corner of the state; a new compressor station near Springfield; 182.5 miles of main transmission line extending in a generally northeasterly direction from Springfield to Washington, Missouri; and 192.6 miles of lateral lines to serve the various communities and industrial customers in the vicinity of the new transmission line. (A map of this proposal is printed as an Appendix to this opinion.) Cities' financial projections included an estimated $15.4 million in construction costs, to be largely financed by long-term debt bearing an approximately 5.75% interest rate. Cities' proposal, as amended, was to create a new Rate Division 3, averaging 58.5cents per Mcf for firm service. Existing customers in western Missouri were included in Cities' Division 2, with rates averaging 23.5cents per Mcf lower than the proposed rates for this new service. 3 Several applications under Section 7(a) of the Act 3 were filed, all of which were consolidated with the proceedings in Docket No. CP67-340. In addition to MDG's application, two others are relevant here. In Docket No. CP67-385, the Cities of Rogersville, et al., applied for a Section 7(a) order directing Cities to construct approximately 186 miles of pipe facilities to serve Rogersville and 13 other communities in south-central Missouri. The Secretary of the Army, in Docket No. CP69-80, also applied for a Section 7(a) order to provide natural gas service to Fort Leonard Wood, located approximately mid-way between Cities' proposed transmission line and the Rogersville group of communities. 4 The MDG application, Docket No. CP68-227, the denial of which is the subject of this appeal, proposed for the Commission's consideration two alternatives to Cities' requested project. Motivated primarily by the desire to obtain natural gas at rates lower than those in Cities' proposed Division 3 rate schedule, the MDG application was premised on bringing gas to a much larger market than that envisoned by the Cities plan. 4 Alternate I of the MDG application proposed routing Cities' pipeline extension almost due east from Saginaw through the Rogersville communities, thence north through Fort Leonard Wood, then turn northeast along the same trace as the Cities proposal. (See Appendix for map.) Lateral lines off this re-routed line would serve all the same customers as the Cities plan, as well as meet the Rogersville group and Army requests for gas service. Under Alternate I, the primary line would extend 267 miles, and 311 miles of laterals would be constructed. Of the total estimated cost of $20.1 million, Cities would bear nearly $18 million, with the remainder coming from capital contributions from 18 of the communities to be served. MDG's Alternate II proposal, offered in the event Cities' application was either withdrawn or denied, requested a Section 7(a) order to Cities to sell and deliver gas at either Saginaw or Springfield to a pipeline following the same general trace as Alternate I. (See Appendix for map.) This pipeline was to be built, owned, and operated by the consuming municipalities themselves. This project was to be smaller in scope than Alternate I, serving only the MDG, Fort Leonard Wood, and those of the Rogersville group willing and able to participate. 5 After consolidating all the applications and holding a prehearing conference on October 16, 1968, the hearing was set for March 18, 1969 and ran through 29 days of testimony to May 7. The Presiding Examiner's opinion issued on December 10, 1969. He found the omission of service to Fort Leonard Wood to be a major defect in Cities' application, and he noted that rising interest rates posed a significant problem with regard to Cities' financial projections. He ruled, however, that Cities should be given the opportunity to revise its application to cure these defects. All the other applications relevant here were denied. Exceptions to the Examiner's decision were filed, including a statement from Cities concurring with his evaluation of the project's financial problems and stating that they did not wish to proceed with the project and would not revise their application. 6 On July 27, 1970 the Commission issued a brief order that largely adopted the findings and conclusions of the Examiner. Acceding to Cities' unwillingness to proceed with the project and their failure to revise their application to conform to the Examiner's conditions, the Commission found that they had no alternative but to deny Cities' project application, as well as the several 7(a) applications which are predicated upon it. II JA at 624. Alone among the 7(a) applicants, the MDG filed a petition for rehearing before the Commission. The Commission's order denying rehearing was issued on September 21, 1970. In this case the MDG petitions us for review of the Commission's July 27 and September 21 orders. We granted Cities Service leave to intervene.