Legal Document

417 U.S. 380 94 Supreme Court Reporter 2315. 41 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 141 FEDERAL POWER COMMISSION, Petitioner,v.TEXACO INC. et al. Dudley T. DOUGHERTY al., Co-Executors, Estate of Mrs. James R. Dougherty Petitioners, versus TEXACO Nos. 72—1490 and 72—1491. Argued Feb. 19, 1974. Decided June 10, Syllabus. Following its notice proposed rulemaking 'propos(ing) prospectively to exempt from regulation under the Natural Gas Act all existing future jurisdictional sales made by small producers . .,' filing comments informal conferences, Federal Power Commission (FPC) issued Order Number 428, which exempted 'small producers' direct rate regulation, provided that they could thereunder contract for sale their gas at any obtainable rates, without refund obligations with respect increased if any, collected regulated pipelines. The FPC asserted order did not amount 'deregulation producers,' but was intended regulate in course regulating rates pipeline large producer customers producers. Pipelines purchasing above ceiling prices were be allowed 'tracking increases' those would subject 'with new sales, only as part is unreasonably high considering appropriate comparisons highest or prevailing market price intrastate same producing area.' intention reviewing small-producer maintain reasonable specified remain § 7(b) Act. Appeals set aside order, holding blanket certificate procedure contravened FPC's statutory responsibilities §§ 4 5 ensure 'just rates.' It viewed merely calling compared large-producer market, court held unacceptable possible contention themselves produce just rates. Held: 1. scheme indirectly exceed authority. Pp. 386—393. (a) 428 invalid because it does initially consider each company reasonableness has a two-tier system Cf. Permian Basin Area Rate Cases, 390 747, 88 1344, 20 312. Pacific KF135 P2 390. (b) Since are extent purchased component excessive, there an incentive 'to bargain down.' 390—391. (c) Requiring pipelines assume risks bargaining might entail refunds unrecoverable producers, abuse discretion 4(e) balancing interests involved. 391—392. (d) premature assert indirect contemplated confiscatory, especially since close review avowedly experimental scheme. 392—393. 2. But clear wording satisfies requirement sold interstate commerce reasonable; least, too ambiguous satisfy standard clarity administrative must exhibit, implication judged assertion 'would relevant factors' determining whether comported 'public convenience necessity' insufficient sustain order. 394—397. 3. lacks authority rely exclusively on final measure reasonable' mandated Act; moreover, no finding actual impact increases have consumer expenditures. 397—399. 154 U.S.App.D.C. 168, 474 Reporter, 2nd 416, vacated remanded. Mark L. Evans, Washington, D.C., petitioner 72 1490. Ben KF105 F3 Vaughan III, Austin, Tex., petitioners 1491. Christopher Boland, Peter Haw. Hawai‘i KFH45 A2 Schiff, Albany, N.Y., respondents both cases. Mr. Justice WHITE delivered opinion Court. 1 This litigation involves validity Commission, 45 F.P.C. 454 (1971), provides natural gas, relieves them almost requirements. longer directly subjected through costs whom these sell. Appeals, one judge dissenting, 416 (1972), concluding Commission's amounted 'deregulation' unauthorized (the Act), 52 Statutes-at-Large 821, 15 Code KF62 717 seq. Because obvious importance, we granted petition writ certiorari filed estate Dougherty, intervenor 414 817, 119, 38 49 (1973). 2 * On July 23, 1970, ..' 35 Fed.Reg. 12,220 (1970). noting important assure maintenance adequate supply market,' aimed encouraging producers1 increase exploratory efforts so discovery sources facilitate entry into stimulate competition among sell commerce.'2 assured 'when he enters provisions his will change. We also want relieve expenses burdens relating regulatory matters.' F.P.C., 455. Accordingly, nationwide relieved them, some exceptions, requirements Unlike Commission-fixed ceilings charged, bear, even though excess maximum pertinent area proceedings. Furthermore, 'no hereunder Id., 457. 3 nevertheless 'action taken here our view constitute deregulation producers.' id., 455, continue such gas. permitted file issue resolved either cases, proceeding limited tracking increase, 'The shall factors.' 458. Review anticipated contracts producers; authorized contracts, terms permitting. Large buying obligation 'as long differential consistent differentials high, 456. To reflected standard, refund. finally '(w)e intend established amendments charged pursuant action taking herein. In event determine this approach inimical consumers, take further protect consumers.' 459. apparently remained free institute separate proceedings 5(a) Act, 717d(a), reduce producer's prospectively. 6 717f(b), abandonment including dealt use indefinite escalation clauses excluded reach reserves transferred producers.3 7 statute carry permissible statute, infirm nothing satisfied 'duty insure reasonable." U.S.App.D.C., 173, F.2d, 421. Instead, thought call market—'factors Commission) derive solely forces.' Ibid. Nor accept argument forces particularly when understood itself position just-and-reasonable mandatory. accordingly II 8 contend permits criterion less demanding than 717c 717d. Its major propositions are, first, properly understood, means indirect, rather direct, regulation; and, second, forbid kind regulation. Respondents, other hand, duty imposed provide cannot abandons 9 face first rates: assumption allows reflect charges valid? hold is, see requires fix chargeable orders addressed proscribes undertaken here. 10 directs specify prescription attained. That every require cost ascertained fixed own costs. Although time following Phillips Petroleum Wisconsin, 347 672, 74 794, 98 L.Ed. 1035 (1954), proceeded company, soon shift technique setting based composite considerations. sustained mode 11 Wisconsin FPC, 373 294, 309, 83 1266, 1274, 357 (1963), affirmed decision abandon individual cost-of-service method fixing substitute ratemaking. said: 12 'To declare particular sanctified make highly unlikely wholly out keeping Court's clearly articulated question power repeatedly been stated single need followed justness 13 prior views, Pipeline Co., 315 575, 62 736, 86 1037 (1942); Hope 320 591, 64 281, 333 (1944); Colorado Interstate 324 581, 65 829, 89 1206 (1945), reaffirmed principle had case: 'Under result reached employed controlling.' U.S., 602, S.Ct., 287. 14 principles cases recognized applied 312 (1968), where doing so, exploration development aims functions Commission. performance role obviously involved structure implied broad summarized controlling judicial very here: create, exercise national over commerce, 'an agency wholesale distribution public service companies moving interstate'; Illinois Public Service 314 498, 506, 384, 387, 371; purpose expected 'balanc(e) investor interests.' (320 U.S.), 603, 288. width measured purposes conferred; see, e.g., Piedmont & Northern Commerce Comm'n, 286 299, 541, 76 115; Phelps Dodge Corporation National Labor Relations Board, 313 177, 193—194, 61 845, 852, 85 1271; Broadcasting States, 319 190, 63 997, 87 1344; American Trucking Assns. 344 298, 311, 73 307, 315, 97 337. Surely therefore demand generous construction (Footnote omitted.) 16 'Such making uniformly said 'legislative necessarily extends entire legislative process, embracing used reaching determination well itself.' Los Angeles Electric Railroad 289 287, 304, 53 637, 643, 77 1180. And San Diego Land Town Jasper, 189 439, 446, 23 571, 574, 47 892. follows rate-making agencies bound formula; permitted, unless otherwise plainly indicates, pragmatic adjustments may called circumstances.' (315 586, 743.' 776—777, 1364. 17 pursuit legitimate goal enjoyed presumption validity, 767, 1360, who upset carries "the heavy burden convincing showing unjust unreasonable consequences." 18 Accepting views sitting review, point say exceeded powers instituting regime fatal not, initial matter, vulnerable level another As previously noted, approved two sets justification being necessity supplies 796—797, 1375. 19 Indirect mechanism recreate situation case found inconsistent pre-Phillips era, although asserting right pass prudentiality various items pipelines' costs, purport aim within limits, now asserts 428. argued permitting charge what bear relying later contrary Atlantic Refining 360 378, 79 1246, 1312 (1959) (CATCO). suspension limits noted Sunray DX Oil 391 9, 26, 1526, 1535, 388 basic underlain CATCO 'that pipeline, whose purchase current operating expense entitled sufficient Here, provided—pipeline excessive. 21 leads envisioned unfairly subjects risk turn recover high.4 characteristically justifying unavoidably profits income. prices, like applications police power, value property regulated. fact reduced mean invalid.' 601, All protected against, constitutional sense, higher confiscatory level. 585, 742. context Act's matter reasonable,' can 'the reached, employed.' supra, 769, 1361, truism regulation: 'Regulation may, consistently Constitution, limit stringently return recovered investment, investors' variables calculus reasonableness.' 22 requiring working balance excessive producer, engaged necessary activity, thus serving interest getting greater production Under circumstances, surely retains 826—827, 1391, refrain imposing Any broadside premature. consequences entirety effect unknown until period time. Moreover, 'regulation still experimental,' 772, 1362, keep experiment review. claims license arbitrary capricious disallowing review; courts orders, supported substantial evidence rational expect financial integrity, attract capital, fairly compensate investors assumed, yet protection interests, foreseeable.' 792, 1373. 24 If, given guidance whatsoever standards be, incurring unrefundable disallowed considerably enhanced. scope difficulty standards, lack reveals, aware problem, additional attention remand which, explained Part think here.5 III 25 failure comply reasonable. rejected along mandatory simply choose 175, 422. Whatever heretofore been, wisely challenge aspect judgment. Sections applies great how plain enough us empower compliance standard. 26 Section 16, 717o, upon relies, contrary. authorizes perform acts rules regulations find Act'; '(f)or regulations, classify persons matters jurisdiction prescribe different classes vest authorize naught explicit provision No 5. Neither Cases nor Louisiana Light 406 621, 92 1827, 32 369 Government suggests holds ignore specific mandates sections.6 27 read failing insuring view, pure approval pipelines, fell short 28 equate place. remaining misread contemplates factors considerations arrive considered judgment For present purposes, then, accepts Appeals' insists construed. 29 posture case, stand form should remanded before studied care, presses us. At falls exhibit. expressed 'for done 'disclose basis order' 'give indication exercised Congress empowered it." Burlington Truck Lines 371 156, 167—168, 239, 245, 207 (1962), quoting NLRB, 197, 853, 1271 (1941). indicate briefly conclusion. 30 place, expressly mention comes closer reduction 'only sales. .' (Emphasis added.) took similar contractually flowing automatically passed examination There brief familiar reserved acceptable 31 true 'unreasonable' appears marketplace. deregulating 'shall necessity,' herein.' generalities do requisite convince sustained. Had unambiguously provide,7 far decide. 'accept appellate counsel's post hoc rationalizations action'; agency's upheld, all, 'on Lines, 168—169, 246; SEC Chenery Corp., 332 194, 196, 67 1575, 1577, 91 1995 (1947). IV 33 occur remand, stress marketplace abundantly history events prompted adoption industry heavily concentrated monopolistic distorting gas.8 Hence, hence statement DX, 391, 25, price, subjecting anticompetitive conditions industry, assumed conclusively determined reference price. Our implies opposite. never, coincide consideration 793—795, 1373—1374, certainly account factors, Southern 407, 441 (C.A. 5), cert. denied sub nom. Associated Distributors Austral 400 950, 244, 257 require, however, conclusion identity between 'true' 'actual' 34 unresponsive special needs play critical ameliorating shortage. distinguish Even dent consumer's pocket, makes unlawful reasonable, little unlawfulness permitted. projected expenditures record decision, stating: '(T)he consumers de minimis basis, situations.' 159, 235 (1965). V place exclusive reliance bow perception intent. economists persuasively argued,9 assumptions 1930's about competitive today. control shortage, counterproductive increasing role, overturn congressional embedded framework proper task Legislature multifaceted points representational process. 36 Attempts past coverage attempts unsuccessful. realized much case. 685, n. 14, 800. 1950, bill, H.R.1758, 81st Cong., Sess., President Truman vetoed bill stating 'there possibility effective, least levels. remove regulate, do, seem me wise policy.' despite arguments imposition discourage wells. Papers President, Harry S. Truman, Page step outside construing insert debate economics interest, unwarranted intrusion forum again rages 37 engage providing insures paid ultimately borne consumer, suggest, ensuring administratively feasible, consider. agree aside; reasons stated, vacate instructions opinion. 39 Vacated 40 STEWART A producer' defined independent affiliated total together 10,000,000 Mcf 14.65 psia during calendar year. New included dated after March 18, 1971. 10% excluding pipeline-to-pipeline appears, 80% country. Subsequently, supplemental 428—A, 548, revising annual 428—B, 46 47, rehearing modified respects mentioned put disadvantage permit whereas so. function authority, absent 'is low adverse interest,' raise Sierra 350 348, 355, 368, 372, 100 (1956); Pipe Line Mobil 332, 373, (1956). unfair treatment discrimination, equally ill-founded. York questions feasible sure claiming vengeance morass led instance. claim light approaches remand. advanced Hunt, 376 515, 527, 84 861, 868, 878 (1964). questioned exemption prove, study, available alternative. brief, indicated include (1) (2) pipeline's (3) availability supplies, (4) dedicated contract, (5) recent flowthrough. 1(a) 717(a), legislation stemmed 1935 Report Trade S.Doc. 92, pt. 84—A, 70th 1st Sess. (published 1936). report concluded concentration largest groups percent output produced 1930.' 589. ownership 'accentuates whatever supply.' 590. concluded, detailed investigation '(t)he prime characteristic described steadily developing concert dominating producing, transporting, distributing branches industry.' 600. heart problem end, marketed transported. gives produced.' Based findings, singled 'Specific Evils Existing Natural-Gas Industry' '(u)nregulated certain natural-gas areas' transmission distribution.' 615. 616, required. belief approximate closely price—the rate. doubtless relationship, urged intimate, contradict caused See C. Hawkins, Structure Producing Industry, MacAvoy, Regulation-Induced Shortage Gas, Regulation Industry 137—191 (K. Brown ed. 1972). Statement John N. Nassikas, Chairman, Hearing Subcommittee Antitrust Monopoly Senate Committee Judiciary, 93d 43—72

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