Court Opinion

ID: 7839328
Source: CourtListenerOpinion
Date Created: 2022-09-08 16:57:06.75213+00
Date Added: 2024-06-11T15:58:12.050919
License: Public Domain

LEVENTHAL, Circuit Judge,
dissenting:
In my view, the Commission’s order should be affirmed in the light of its authority under § 7 of the Natural Gas Act.1
As construed in Atlantic Refining Co. v Public Service Commission [CATCO], 360 U.S. 378, 76 S.Ct. 1246, 3 L.Ed.2d 1312 (1958), the “public convenience and necessity” standard and the power to condition the award of certificate contained in § 7(e) gave the Federal Power Commission authority to set prices for deliveries by natural gas producers under temporary or permanent certificates, even though these were not prescribed under the “just and reasonable” standards governing rate orders under either § 4 or § 5 of the Act.2 In the context of the delays attendant to the determination of just and reasonable rates, § 7 provided a source of ratemaking authority for the Commission separate from §§ 4 and 5 and subject to a different analysis.
In United Gas Improvement Co. v. Callery Properties, Inc., 382 U.S. 223, 86 S.Ct. 360, 15 L.Ed.2d 284 (1965), and FPC v. Sunray DX Oil Co., 391 U.S. 9, 88 S.Ct. 1526, 20 L.Ed.2d 388 (1968), the Supreme Court approved the Commission’s determination of “in-line” rates governing sales under permanent certificates, even though those rates might differ from what would subsequently be found to be just and reasonable.3 These in-line rates were subject to a “zone of reasonableness” test, in terms of conformance to current prices, Sunray DX, 391 U.S. at 29-32, 88 S.Ct. 1526, but did not have to fall within the zone of reasonableness determined • after appraisal of the “mass of evidence” presented in the area rate case. Callery Properties, 382 U.S. at 227-28, 86 S.Ct. 360. In short, the in-line rates constituted the lawful prices for sales during the interim period (before completion of rate proceedings and establishment therein of just and reasonable rates); and they were not subject to reopening following the determination of just and reasonable rates. Further, the Court found that in-line rates set in permanent certificates also had applicability to deliveries during the period of operation under a temporary certificate. In Sunray DX, the Court concluded that the in-line rates represented a floor for refunds of amounts collected under temporary certificates. 391 U.S. at 45, 88 S.Ct. 1526.4
Using Blanco Oil Co. as an example, I apply this background to the circumstances of this case. The Natural Gas Act does not contemplate separate applications for temporary and permanent certificates. Instead, granting the temporary certificate is only an “emergency” measure pending resolution of the application for the permanent certificate.5 Blanco filed its § 7 certificate *249application on October 20, 1960. On November 25, 1960, the Commission issued a temporary certificate that permitted Blanco to collect 18 cents per Mcf — pending the determination of the permanent certificate proceeding. That proceeding was completed some five years later, when, on September 30, 1965, the Commission granted the permanent certificate specifying an in-line price of 15 cents per Mcf. Almost six years after that, on May 6, 1971, the Commission completed its area rate proceeding establishing just and reasonable rates for the entire area. The order in the rate proceeding, as applicable to Blanco’s location, provided: 15 cents per Mcf for the period prior to January 1, 1965 (as it happens, the same as Blanco’s in-line price); 17 cents for the period from January 1, 1965, to September 30, 1968; and 19 cents for the period from October 1, 1968, to September 30, 1973.
It is undisputed that the in-line price of 15 cents governed all deliveries from September 30, 1965 (the date of issuance of the permanent certificate) to May 6, 1971 (determination of the just and reasonable price). Yet petitioners argue that the lawful in-line price established in the § 7 certificate proceeding governed only part of the deliveries made by the applicant pursuant to the § 7 authority requested. Petitioners say that the rate that the FPC took as a rough cut when it issued the temporary certificate in 1960 cannot be adjusted to what was finally determined to be the inline price. This might be arguable if the position was that temporary certificates were a separate universe. That was the producers’ argument prior to the decision in Sunray DX, supra, where they contended that the prices set in temporary certificates could not be lowered at all by subsequent agency action. See 391 U.S. at 40, 88 S.Ct. 1526. They now accept Sunray DX, as they must, and intervenors embrace it, insisting that they are entitled to the in-line prices set in the permanent certificates — for the period governed by deliveries made prior to the issuance of the permanent certificate— without subsequent reduction to just and reasonable prices.
In my view, the controlling doctrine is this: the statutory provision for just and reasonable rates, § 4(a), is applicable to § 7 orders that are issued at a time when the just and reasonable rates are known. See Public Service Commission v. FPC [Rayne Field], 177 U.S.App.D.C. 272, 543 F.2d 757 (1974), cert. denied, 424 U.S. 910, 96 S.Ct. 1106, 47 L.Ed.2d 314 (1976). But § 4 need not control when just and reasonable rates were not known at the time the certificate proceeding was completed.
The Commission acted within its discretion under Sunray DX in the 1966 orders determining that the in-line rates governed deliveries by petitioners while the temporary certificates were in effect pending the award of permanent certificates. The orders fixed the petitioners’ obligations to refund amounts collected in excess of the in-line prices. The provision for retention of funds owing, rather than prompt disbursement, did not undercut the refund obligation. It is incontrovertible that the Commission could have ordered immediate payment of refunds. There was a delay in the mechanics of ordering the actual payment of the funds.6 That delay was not for petitioners’ benefit. The Commission was within its authority in its instant ruling that the delay did not necessitate revision of what had been conclusively declared to be the lawful price.
This conclusion is reinforced by the terms of the Commission’s orders fixing the producers’ refund obligations. The producers were given the option of placing the funds found to be subject to refund in an escrow account or of retaining the funds for use *250within the business, subject to an accounting requirement and a relatively modest interest rate. In substance, the funds were held in trust, pending a determination of the identity of the ultimate beneficiaries. Blanco and others were given the privilege of mingling these funds with their own— subject to an accounting requirement. Those producers that exercised this option likely earned a rate of return higher than the interest obligation. Because of the Commission’s permissiveness and delay, they now stand in a better position than had they been ordered to refund immediately. They were permitted to make money on the trust funds by delaying the date of distribution of refund, but this does not mean they must be permitted to reduce the trust account.
Petitioners claim that they would suffer undue discrimination were they held to inline rates where other producers who operated under temporary certificates and never received permanent certificates are entitled to gauge their refund obligations by reference to just and reasonable rates. But petitioners, for whom in-line rates were determined, are in a different position from those producers who operated under temporary certificates, for petitioners received an asset of certainty, getting the assurance that they could retain the in-line price without fear of reduction if the just and reasonable price were ultimately set at a lower figure.
The Commission ruling was not arbitrary, nor was it violative of the statute. I would affirm.

. Id. §§ 717c, 717d (1976).

. See Callery Properties, supra, 382 U.S. at 227, 86 S.Ct. at 363: “The fixing of an ‘in-line’ price establishes a firm price at which a producer may operate, pending determination of a just and reasonable rate, without any contingent obligation to make refunds should a just and reasonable rate turn out to be lower than the ‘in-line’ price.” This pronouncement was expressly reaffirmed in Sunray DX, supra, 391 U.S. at 23-24, 88 S.Ct. 1526.

. Technically, the Court’s ruling approved an FPC order to refund amounts collected in excess of the finally established in-line price. The Court noted that no party had even contended that the refunds should have been based on the eventual just and reasonable rate. 391 U.S. at 45 n. 34, 88 S.Ct. 1526. While this left open the possibility now urged by Blanco and the other petitioners that they were entitled to keep the rate eventually established under §§ 4 and 5, if higher, one cannot discern from this even a glimmer of a plausible argument that a price could be mandated for a temporary certificate that was lower than the in-line price set in the permanent certificate.

. Natural Gas Act, § 7(c), 15 U.S.C. § 717f(c) (1976).

. The record does not enlighten as to the reasons for the admittedly protracted delay in the disbursement of the refunds. In one order requiring the retention of funds, 40 F.P.C. 1, 2 (1968), the Commission made reference to an earlier opinion, Humble Oil & Refining Co., 32 F.P.C. 49 (1964), that outlined difficulties that had arisen because the Natural Gas Act makes no express determination whether refunds ordered under § 4(e) were to “flow through” to the ultimate consumers of the gas, or whether the purchasers were entitled to retain all or part of the refunds.