Opinion ID: 349481
Heading Depth: 2
Heading Rank: 1

Heading: Within the Granted Power

Text: 7 The petitioners do not challenge the FPC's authority to promulgate rules requiring them to furnish it with information concerning their production, transportation, and disposition of natural gas. The existence of that general power is conclusively established by the Act. 10 Instead, they contend that the FPC exceeded its statutory power in issuing the orders under attack to the extent that they require entities that are affiliated producers of natural gas company gas that term is defined in 18 C.F.R. § 157.40(a)(2) (1977), but not themselves natural gas companies as that term is defined by Section 2 of the Natural Gas Act, 15 U.S.C.A. § 717a(6) (1976), to complete Form 64. In Continental Oil, we held that the FPC could compel entities that were natural gas companies within the meaning of the Act to report information concerning their non-regulatable intrastate sales. See 519 F.2d at 33-34; see also Union Oil Co. of California v. FPC, supra, 542 F.2d at 1038-39. The question here is whether the FPC may go further and (a) require statutory natural gas companies to report information concerning the expenditures of affiliates whom they control, or (b) require the affiliates themselves to complete and file Form 64. 11 8 As the Supreme Court stated in Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana, 332 U.S. 507, 516, 68 S.Ct. 190, 195, 92 L.Ed. 128, 137 (1947): 9 Three things and three only Congress drew within its own regulatory power delegated by the Act to its agent, the Federal Power Commission. These were: (1) the transportation of natural gas in interstate commerce; (2) its sale in interstate commerce for resale; and (3) natural gas companies engaged in such transportation or sale. 10 See also FPC v. Louisiana Power & Light Co., 406 U.S. 621, 636, 92 S.Ct. 1827, 1836, 32 L.Ed.2d 369, 382 (1972). In addition to whatever power may be derived from category (3), category (2) grants the FPC jurisdiction to require submission of expenditure data pertaining to the operations of affiliates controlled by statutory natural gas companies whether it seeks such data from the statutory natural gas companies or from the affiliates themselves. 11 The congressional delegation of power to regulate the interstate sale of natural gas for resale has long been held to encompass the power to fix the price at which such sales shall be made. 12 For effective and meaningful price regulation, the FPC must be able to insure the integrity of its information about producer expenditures for exploration and development which are critical components of cost and essential for determining a just and reasonable rate. The FPC argues that without exploration and development expenditure data of affiliates controlled by statutory natural gas companies, accurate analysis of production costs would be impossible, because transfers of property between affiliates might result in interstate sales being made from higher-cost properties and intrastate sales from lower-cost properties. This would distort the true cost of production for interstate sales and mislead the FPC in setting a proper national rate. The principal aim of the Act was to protect consumers against exploitation at the hands of natural gas companies. FPC v. Hope Natural Gas Co., 320 U.S. 591, 611, 64 S.Ct. 281, 291, 88 L.Ed. 333, 349 (1944). Therefore, if the FPC lacked the power to compel both statutory natural gas companies and their controlled affiliates to disclose the affiliates' exploration and development expenditures, it would be unable to prevent the artificial shifting of properties among affiliates and powerless to accomplish the primary purposes of the Act. As we explained in Continental Oil, when information is essential to effective ratemaking, the FPC is authorized to procure it. 519 F.2d at 33. 12 Other sections of the Act, while falling short of specifically empowering the FPC to gather from affiliates the information sought by Form 64, support the view that the FPC's investigatory powers are broad and are not limited by the constraints which Congress has placed on the regulatory and rate-setting jurisdiction of the FPC. See Union Oil Co. of California v. FPC,supra, 542 F.2d at 1039. For example, section 14(a) of the Act authorizes the FPC to 13 investigate any facts . . . which it may find necessary or proper . . . to aid in the enforcement of the provisions of this chapter or in prescribing rules or regulations thereunder, or in obtaining information to serve as a basis for recommending further legislation to the Congress. 14 15 U.S.C.A. § 717m(a) (1976) (emphasis added). Similarly, section 5(b), 15 U.S.C.A. § 717d(b), permits the FPC to investigate the costs of producing natural gas even where it lacks the authority to set rates. Moreover, section 8 provides that 15 The books, accounts, memoranda, and records of any person who controls directly or indirectly a natural-gas company subject to the jurisdiction of the Commission and of any other company controlled by such person, insofar as they relate to transactions with or the business of such natural-gas company, shall be subject to examination on the order of the Commission. 16 15 U.S.C.A. § 717g(c) (1976) (emphasis added). 17 Mitchell contends that 15 C.F.R. § 157.40(a)(2) (1976) furnishes an improper basis for defining affiliates for the purpose of determining who must complete Form 64 because it was originally designed for another purpose. We think this is irrelevant. The regulation defines an affiliate as an entity that is either (a) controlled (in a practical sense) by a natural gas company, or (b) possesses a director in common with a natural gas company (in which case a conclusive presumption of control arises). In our view, the definition of the term affiliated producer contained in § 157.40(a)(2) of the regulations is both workable in this context and rationally related to the accomplishment of the purposes which the affiliate filing requirement of Order No. 543 is designed to serve. We find the FPC acted within the power granted to it in promulgating Form 64.