Opinion ID: 349481
Heading Depth: 2
Heading Rank: 2

Heading: Issued Pursuant to Proper Procedure

Text: 18 Superior and Mitchell contest the procedure by which the FPC adopted Form 64 promulgating Orders No. 543 and No. 543A. We find that the FPC, in promulgating Form 64, satisfied both the Administrative Procedure Act and the relevant provisions of the Natural Gas Act. 19 Superior and Mitchell do not challenge the FPC's compliance with the informal rule making provisions set forth in section 4 of the APA. 13 5 U.S.C.A. § 553 (1967). Rather, they maintain that, because section 19(b) of the Natural Gas Act adopts a substantial evidence test for the factual components of an FPC order, 14 this court must require the FPC to implement additional fact-finding procedures that can produce a record able to withstand a stricter scrutiny than courts give an informal rule making proceeding governed solely by the APA. We do not agree. 15 20 A court reviewing informal rule making under section 10(e) of the APA, after determining that the agency acted within the Constitution and its enabling statute, must determine whether the agency action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C.A. § 706(2)(A) (1967). The APA also requires that a substantial evidence standard be applied to adjudications and to actions reviewed on the record of an agency hearing provided by statute. 5 U.S.C.A. § 706(2)(E) (1967). The Supreme Court has defined the two standards as follows: 21 Under the arbitrary and capricious standard . . . . (a) reviewing court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment . . . . 22 Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447, 455 (1974). 23 Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 24 Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126, 140 (1938). It is generally accepted that the latter standard allows for a considerably more generous judicial review than does the former. Abbott Laboratories v. Gardner, 387 U.S. 136, 143, 87 S.Ct. 1507, 1513, 18 L.Ed.2d 681, 688 (1967). However, in Florida Peach Growers Ass'n v. United States Dep't of Labor, 489 F.2d 120, 128-29 (5th Cir. 1974), quoting Associated Indus. of New York State, Inc. v. United States Dep't of Labor, 487 F.2d 342, 349-50 (2d Cir. 1973), this circuit acknowledged that when applied to informal rule making, the two criteria tend to converge. A respected authority in the field of administrative law agrees. 16 25 Whether there be any practical difference in the result of a review under the two concepts, it is clear that an effort to apply the substantial evidence standard to informal rule making is sure to produce awkward results. Difficulties occur because informal rule making does not produce the hearing-type record to which substantial evidence review is customarily applied. See Florida Peach Growers Ass'n v. United States Dep't of Labor, supra, 489 F.2d at 128; Mobil Oil Corp. v. FPC, 157 U.S.App.D.C. 235, 257, 483 F.2d 1238, 1260 (1973). 17 26 The scope of review provision in the Natural Gas Act, Section 19(b), provides that (t)he finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. 15 U.S.C. § 717r(b) (1976). (Emphasis supplied.) When the Commission is developing rates or making particularized rules which depend upon determinations of fact, Section 19(b) requires that the FPC develop in the record those facts upon which the ultimate decision rests. Then, review must test the substantiality of those facts. This requirement of the Natural Gas Act limits the substantial evidence test to findings of fact. Thus, the statutory approach differs from many others, such as that contained in the Occupational Health and Safety Act, which couples informal rule making power with the requirement that (t)he determinations of the Secretary shall be conclusive if supported by substantial evidence in the record considered as a whole. 29 U.S.C.A. § 655(f) (1975). See Florida Peach Growers Ass'n v. United States Dep't of Labor, supra. Section 19(b) of the Natural Gas Act does not oblige the FPC to develop a record demonstrating that substantial evidence compelled the adoption of policy-based legislative rules unless the process involves findings of fact. The meaning of substantial evidence does not change, but the extent to which the Natural Gas Act's conclusive presumption displaces the APA's informal rule making provisions varies with the degree to which FPC action rests upon findings of facts rather than policy decisions within the agency's discretion. 27 Our analysis of Section 19(b) requires that we reject the approach taken by the Ninth Circuit in Union Oil v. FPC, 542 F.2d 1036 (9th Cir. 1976). In Union Oil, the Ninth Circuit determined that the FPC acted properly in promulgating Form 40 only if substantial evidence indicated that the agency's need for the information outweighed the burden to producers of getting the information and reporting it. Adopting this formulation of a factual basis for the FPC's order would require the agency to show not only that substantial evidence supported factual components of agency action, but that it compelled the promulgation of Form 64. This approach, adopted in Union Oil, would always subject the FPC's policy decisions to formal fact-finding standards and would constrain its rule making authority contrary to Section 19(b), which does not undertake to supplant APA requirements for broad-based policy decisions. 28 Absent clear and specific congressional requirements, we decline to import into informal rule making those formalities developed for the adjudicatory process and basically unsuited for policy rule making. See American Airlines, Inc. v. CAB, 123 U.S.App.D.C. 310, 315, 359 F.2d 624, 629 cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966). Not only do we fail to discern a clear and specific legislative intention that the FPC employ additional procedures in actions such as these, we see no such intent whatsoever. An agency need not make findings of fact in the conventional sense in a Section 553 proceeding. Florida Sugar Cane League, Inc. v. Usery, 531 F.2d 299, 303 (5th Cir. 1976), quoting General Telephone Co. of the Southwest v. United States, 449 F.2d 846, 862 (5th Cir. 1971). See also, United States v. Florida East Coast Railway, 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973). 29 The promulgation of Form 64 resulted from the FPC's decision that submitting data in the prescribed form would aid the agency in performing its regulatory duties under the Natural Gas Act and would not disproportionately harm producers. At the root of this choice lies not ascertainable fact but a policy decision about how precise factual data must be for the FPC to determine reasonable rates under a broad statutory mandate. 18 While we do not adopt a single rule for all rule making, we recognize that many legislative judgments cannot be anchored securely and solely in demonstrable fact, Industrial Union Dep't, AFL-CIO v. Hodgson, 162 U.S.App.D.C. 331, 340, 499 F.2d 467, 476 (1974), and consequently these policy choices are not susceptible to the same type of verification or refutation by reference to the record as are factual questions. National Asphalt Paving Ass'n v. Train, 176 U.S.App.D.C. 296, 304, 539 F.2d 775, 783 (1976). Thus, we scrutinize the instant broad policy decision only to determine whether the FPC acted arbitrarily and capriciously. 30 Even though neither the APA nor the Natural Gas Act requires that procedures not prescribed by Section 553 be used in this rule making, we still must ask whether the agency abused its discretion by not using additional procedures. See Jicarilla Apache Tribe of Indians v. Morton, 471 F.2d 1275, 1285-86 (9th Cir. 1973); United Telegraph Workers v. FCC, 141 U.S.App.D.C. 190, 195, 436 F.2d 920, 925 (1970). (T)he Commission should 'realistically tailor the proceedings to fit the issues before it.'  Mobil Oil Corp. v. FPC,157 U.S.App.D.C. 235, 249, 483 F.2d 1238, 1252 (1973). The petitioners challenge the procedural foundation of the orders on the ground that the FPC should not have denied the producers' persistent requests for a conference with the FPC's staff. The FPC replies that the notice and comment procedures amounted to a conference on paper, and that nothing more was needed. We agree. We ordinarily will defer to an agency's choices concerning its procedures because in making such choices agencies are best situated to determine how they should allocate their finite resources. See Wisconsin v. FPC, 373 U.S. 294, 313-14, 83 S.Ct. 1266, 1277, 10 L.Ed.2d 357, 370 (1963). 31 As we explained in Alabama Ass'n of Insurance Agents v. Board of Governors of the Federal Reserve System, 533 F.2d 224, 236-37 (5th Cir. 1976), 32 as partners with the agencies, in the effectuation of Congressional will through the administrative process . . . (the courts) do not function to strike down agency action because of merely formal or technical flaws. . . . (Citations omitted.) For this reason, a court must not only examine whether an agency's promulgation of a challenged regulation complies with the procedural requirement; it must also determine whether . . . any procedural flaw so subverts the process of judicial review that invalidation of the regulation is warranted. 33 Here, the producers have not explained why they were not able adequately to present their views through written comments or what they could have done by way of an oral conference with the staff that they could not have done without it. Under these circumstances, the agency need not come forward to explain why it chose not to grant one. 34 In sum, out review is under the arbitrary and capricious standard. The agency was not required to develop a substantial evidence record as would be required if we were presented with a factual finding. The procedures adopted were within the agency's proper discretion and were not shown to be insufficient.