Document: 442 U.S. 529 99 S.Ct. 2461 61 L.Ed.2d 54 UNITED GAS PIPE LINE COMPANY, Petitioner,v.Billy J. McCOMBS et al. FEDERAL ENERGY REGULATORY COMMISSION, Petitioner, v. Billy Nos. 78-17, 78-249. Argued Feb. 22, 1979. Decided June 18, Syllabus In 1954, the Federal Power Commission, now Energy Regulatory issued a certificate of public convenience and necessity authorizing sale to petitioner United Gas Pipe Line Co. (United) natural gas produced from leased tract land. After lease had been assigned several times replacement issued, lessee-producer notified in 1966 that existing wells were depleted no other was available at time. Despite warning lessee never sought Commission's authorization, pursuant § 7(b) Natural Act (Act), for abandoning service interstate commerce. The subsequently group headed by respondent McCombs, which discovered new reserves underlying contracted sell E. I. du Pont de Nemours & uses intrastate Upon learning renewed production, asserted its contractual right purchase newly filed complaint with Commission. Commission upheld Administrative Law Judge's determination McCombs could not divert market, because dedicated commerce agency authorized an abandonment service. addition, refused grant approval retroactively since supply fact depleted. Accordingly, ordered delivery all derived tract. Court Appeals set aside order, holding "strict compliance" 7(b)'s requirement unnecessary this case, having accomplished "as matter law, when parties recognized then known followed failure provide any . period five years." Held: 1. Section requires producers continue supplying leasehold until they obtain permission Pp. 535-539. (a) Congress have more explicit establishing as prerequisite lawful within jurisdiction. statutory language simply does admit exception procedure forth 7(b), Court's previous decisions recognized. 535-538. (b) control over continuation is fundamental component regulatory scheme, deprive authority, even limited circumstances, would conflict basic policies Act. Requiring abandonment, "after due hearing," permits interested be heard therefore facilitates full presentation facts necessary determine whether criteria met. Moreover, obligation promotes certainty reliability scheme. 538-539. 2. It need determined allows approve disregard evidence subsequent did abuse discretion declining do so here. Given potential retroactive approvals disrupt it reject allegations good faith failing seek sufficient justification, itself, determining warranted granting abandonment. 539-541. 3. Respondents' contention current production subject requirements without merit. properly found certificates cover reservoirs located on And initiation fields certificates. California Southland Royalty Co., 436 519, 525, 98 1955, 1958, 56 505. Once dedicated, there can withdrawal market absent approval. Sunray Mid-Continent Oil FPC, 364 137, 156, 80 1392, 1403, 4 1623. 541-543. 570 F.2d 1376, reversed. Richard A. Allen, Dept. Justice, Washington, D.C., No. Knox Bemis, D. C., 78-17. Stanley L. Cunningham, Bartlesville, Okl., respondents both cases. Mr. Justice MARSHALL delivered opinion Court. 1 Under 7(c) Act, who pipelines resale must Commission.1 obligates these authorizes "abandonment."2 principal issue presented case producer may, consistent ever terminate obtaining agency's express 2 * involved 163-acre land Karnes County, Tex., Butler B 1948, owner land, B. C. Butler, Sr., executed oil W. R. Quin lessee. Quin's widow 1953 (United), 10-year period, "merchantable or hereafter" App. 7A. Because pipeline company, Ms. applied sale. contained neither time limitation nor designation depths produced. 3 installed gathering facilities property began receiving well 2,960 feet deep, times. H. Pagenkopf eventually obtained leasehold, 1961, he agreed extend term United's contract through February 7, 1981. Pagenkopf's application, 1963, continued under same terms earlier certificate. March 1966, Haring,3 shortly thereafter, only successful stopped producing. Haring's operator, Bay Rock Corp., some months later replied remove metering equipment use elsewhere, but reinstall "if, future date, you further deliver us above point, will above-captioned contract." 8A-9A. required filing application if sales contemplated, Haring authorization United.4 During 1971 1972, divided hold horizontally vertically, working interest eastern 113 acres between 6,500 8,653 feet. A few later, acquired similar entire 8,700 9,700 Drilling deeper horizons, reserves.5 industrial however, rights contract, extended property. When rejected claim, 5 commerce, least Opinion 740, Pet. Cert. pp. A-32 A-33. particular, group's predecessors covered property, including 1972.6 commenced deliveries certificates, ruled embraced "dedicated" diverted 7(b). Noting during 5-year interruption service, where, here, declared violative leasehold.7 6 panel Tenth Circuit order. 1376 (1978).8 court dispute However, while acknowledging expressly before may withdraw majority held F.2d, 1381. court's view, "there formality ibid., 7 "the instant accomplished, years estimated recoverable leaseholds." Id., 1382. 8 sum, considered clear longer "within expertise Commission." dissenting judge conclusion "directly contrary plain 7(b)," mandate sole means effectuating valid 9 We granted certiorari, 439 892, 248, 58 237 (1978), reverse. II 10 provides: 11 "No natural-gas company shall abandon portion jurisdiction rendered such facilities, first obtained, after hearing, finding extent continuance unwarranted, present permit abandonment." 52 Stat. 824, 15 U.S.C. 717f(b). 12 Not statute require companies "approval also prohibits specific findings procedure.9 13 This meaning has acknowledged our decisions. Emphasizing Act's purpose assure reliable reasonable prices, noted Atlantic Refining Public Service Comm'n, 360 378, 79 1246, 1312 (1959), once movement approval." 388, 389, 392, S.Ct., 1254 (emphasis added). again addressed 1623 (1960). There, authority insist upon issuing permanent necessity, reasoning power essential prevent circumventing For demand duration, thereby escape federal regulation expire, procedures meaningless. U.S., 142-144, 148, 1395-1397, 1399. Of particular importance specifically impact depletion supplies company's permission. Approving practice beyond expected life given reserve, stressed: 14 "[I]f companies, find sources supply, desired make proof thereof thus, though physical problems control, [keeps] legal applicants." 158 n. 25, 1404 25. short, makes secure little doubt are exhausted. 16 expressed understanding provision 385 83, 87 265, 17 181 (1966), violated unilaterally jurisdictional avoid paying increased prices. holding, reiterated "statutory prior approval, findings, cannot escaped." 89, 269 reaffirmed interpretation just last Term 505 (1978). lessees tract, expired, lessors whom reverted arranged remaining market. expiration selling To conclude otherwise, we reasoned, enable private circumvent abandonments. evasion reconciled principle "[o]nce flow into used lessees, require[s] discontinuance 'any facilities.' " 527, 1960 Thus, consistently "legal service," Sunray, supra, 18 Contrary respondents' assumption, see Brief Respondents 20-21, automatically abandonments whenever ceased. Indeed, recently where adequately tested reserves.10 Had 1971, might demonstrated exploration insufficient justify [was] unwarranted." concluded measures restore feasible. Permitting bypass proceedings appear obviously foreclose factual inquiries. Consequently, rest, practical matter, producer's result clearly odds Congress' regulate price gas. See 526-527, 529-530, 1959-1960, 1961-1962; 142-147, 1395-1399. 19 Knowledge termination enables producers, prospective assignees, assurance remains contrast, Appeals' test facto invite speculation regarding confusion inevitably lack standards fortifies intended supervision III 20 maintain always decision below should nevertheless affirmed. their actually erred law refusing authorize retroactively. Assuming true purport below, believe lacked order ground. 21 Although urged B, Judge suggestion light still capable production. Respondents, contend acted obligated treat answer 1966. according respondents, entitled ignored based 22 production.11 certainly Authorizing often opportunity meaningful likelihood renewing future. hypothetical what action taken timely filed. Additionally, status acreage become uncertain, pronouncements indefinite Frequent undermine scheme creating incentive delay seeking hope establish faith. disruption procedure, alone justification abandonment.12 IV 23 Finally, defend judgment ground shallow opposed gas, made rather than define "service" abandoned reservoir approximately 2,900 "separate distinct" B.13 24 Our compel rejection narrow interpretation. "initiation certificate." 1959 emphasized 'once approval.' quoting 1253.14 25 Applying principles, 1954 534, 6, There being ample conclusions, Sun 170, 1388, 1639 (1960), 26 Reversed. 27 STEWART took part consideration 825, amended, 717f(c). Phillips Petroleum Wisconsin, 347 672, 74 794, L.Ed. 1035 (1954). Pursuant Department Organization 91 565, functions here transferred effective October 1, 1977. 717f(b), advised apply successor certificate, A-6 A-7. Secretary wrote January file notice cancellation rate schedule. A-100 A-101. letter directed submit either copy agreement canceling statement "indicating position respect proposed Ibid. written August 1968, he, too, failed respond. A-97 A-98. addition interests, owned adjoining operate tracts single entity, "unitized," combined, interests those corresponding adjacent As result, fraction each four total unitized attributable purposes A-8 A-10. generally Williams Meyers, 2-3 (1977 ed.) scope analyzed separately duration encompassed absence reference applications certification, incorporated United, Quin. A-29 A-35. Referring documents, interpreted encompass drilled contract's extracted consider date. A-33, 28; Since challenged view ruling concerning address validity contract. raised separate suit, abeyance pending completion litigation. SA-73-CA-210 (W.D.Tex., Aug. 2, 1973). rehearing withdrawing different panel. 542 1144 (1976). revised regulating Policy 1978, 92 3351, legislation affect outcome case. With certain exceptions relevant November 8, remain §§ 2(18), 104, 106(a), 601(a) 3354, 3362, 3365, 3409, 3301(18), 3314, 3316(a), 3431(a) (1976 ed., Supp.III); S.Conf.Rep.No.95-1126, 71-72, 82, 84-85, 123-124 (1978); H.R.Conf.Rep.No.95-1752, U.S.Code Cong. Admin.News 8800, 8983. Texaco, Inc., FERC Docket G-8820 al., Order Granting Petition Reconsideration Modifying Prior (Nov. 1977). approved Arkansas Louisiana FPC CP76-329 (Mar. certificated excess became 1971. 1977, additional impact. Relying lower involve argue None cases, supports abused suit. Ellwood City FERC, 583 642 (CA3 1978), cert. denied, 440 946, 1423, 59 634 (1979), Niagara Mohawk Corp. 126 U.S.App.D.C. 376, 379 153 (1967), Courts give effect schedules licensing orders. addresses exercise manner. retrospective utility benefiting comply militates against action. Plaquemines 146 287, 450 1334 (1971), merely chooses "to regard done done," id., 290, 1337, Highland Resources, Inc. 537 1336 (CA5 1976), that, relying published applications. changed requirements, promptly tendered appropriate papers. effect. aspect penalized reliance own pronouncements. reliance, 4, supra. courts see, e. g., Cumberland 34 F.P.C. 132 (1965); Mesa 441 182 (CA5, 1971), "service rendered" measured necessity. misperceive basis certification requirement, must, rely ascertain dedication These cases preclude referring exist. reflected example, yet "dedication occur[red] soon commenc[ed]" 9,000-acre contractually committed pipeline. F.P.C., 136. dedication, sold 136-137. Pioneer Gathering System, 260, 263 (1960); Murphy 589 944 (CA8 1978); Mitchell 533 258 1976).

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