Court Opinion

ID: 9465359
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:44:17.421745+00
Date Added: 2024-06-11T17:39:08.538224
License: Public Domain

ROBB, Circuit Judge,
dissenting:
The majority argues that without adequate explanation the Commission has allowed producers to use the optional procedure to recover project costs that are higher than the national rate. National ratemak-ing, says the majority, “already takes care of high cost projects; producers are reimbursed for such projects by their inclusion in the national average cost base. Optional certification would reimburse producers a second time, directly, for the same high cost projects, without any coordination with national ratemaking. There is thus a plain risk of ‘double counting’ — billing consumers twice for the same high costs. The FPC has not provided any justification for a double burden on the consumer.” (Maj. Op. at - of 191 U.S.App.D.C., at 545 of *564589 F.2d) The Commission is also faulted for failure to justify the conclusion that the allowance of Pennzoil’s costs, including the cost of leases, would be an incentive to increase the gas supply. The majority remands the case to the Commission with instructions to give “reasoned consideration” to these matters. In my opinion however the questions and objections raised by the majority are subsumed by the Commission’s orders establishing the optional procedure, which were approved by this court. 18 C.F.R. § 2.75; Order No. 455, 48 F.P.C. 218; Order No. 455A, 48 F.P.C. 477; Moss v. FPC, 164 U.S.App.D.C. 1, 502 F.2d 461 (1974), rev’d in part, 424 U.S. 494, 96 S.Ct. 1003, 47 L.Ed.2d 186 (1976).
As we recognized in Moss v. FPC the Commission in its orders contemplated that applications for certification under the optional procedure would be considered “notwithstanding that the contract rate may be in excess of an area ceiling rate established in a prior opinion or order of this Commission.” 18 C.F.R. § 2.75e, 164 U.S.App.D.C. at 13, 502 F.2d at 473. We recognized further that although in general the cost findings embodied in area rate decisions would be accepted, applications would be subject to hearings at which those cost findings might be challenged. Project costs would be allowed if shown to be justified by special circumstances. Order No. 455A, 48 F.P.C. 477, 478-79; 164 U.S.App.D.C. at 6-7, 502 F.2d at 466-67. This principle has been followed by the Commission in applying Order No. 455. Thus in McCulloch Oil Corp., 52 F.P.C. 1430 (1974) the Commission said:
In the present proceeding McCulloch has introduced cost evidence relating to the five wells it has drilled in the Olson Prospect, Ellis County, Oklahoma. As will be developed, the Judge employed these project cost figures in determining that the proposed price was just and rea-' sonable. The staff, on the other hand, concluded that project cost data is not a proper evidentiary basis for the approval of a Section 2.75 application. It said that to submit such data would make Order No. 455 more of an insurance policy rather than an example of responsible rate-making, for the applicant would use project costs or nationwide costs, whichever are the higher. APGA agreed with the staff that project costs should not be used. On the other hand, McCulloch contended that an optional price proceeding must be flexible and should not be confined to one type of cost.
In Order No. 455, Statement of Policy Relating to Optional Procedure for Certificating New Producer Sales of Natural Gas, 48 FPC 218 (18 CFR 2.75) issued August 3, 1972, we stated (Id. 229):
We believe that each contract filed under the alternative procedure must be considered on the merits of the terms and provisions within each contract. There certainly must be some evidentiary basis preferred by the seller-applicant upon which we can judge whether the contract rate is just and reasonable. We will, absent a showing of special circumstance, accept as conclusive the cost findings embodied in our area rate decisions, as such may be supplemented from time to time by appropriate Commission order.
As we indicate in Order No. 455 cost evidence is indispensable for the determination of just and reasonable rates as a basis of comparison and point of departure. City of Detroit, Michigan v. F.P.C., 230 F.2d 810, 818 (CADC-1955), certiorari denied, 352 U.S. 829, 77 S.Ct. 34, 1 L.Ed.2d 48 (1956). Area cost evidence would, of course, be found in the area rate decisions, but in accordance with the language above from Order No. 455, if a producer claims costs higher than those found in the applicable area determination he is required to make a showing of special circumstance. In our opinion, as we said in William A. Jenkins, et al, 52 FPC 873, Docket Nos. CI75-119 and RI75-5 and earlier cases, a showing of project costs should properly be deemed to constitute the “special circumstance” to be considered together with all other material evidence which would support a finding of a just and reasonable rate in *565excess of the applicable area rate. It follows, as Jenkins says, that “the seller-applicant may introduce relevant evidence of the cost of the particular project for which certification is sought”.
(52 F.P.C. 1431-32) [Footnote omitted].
My conclusion from what has been said is that the policies underlying the optional procedure about which the majority complains were fixed by Orders 455 and 455A, and are not open to attack now. Pennzoil’s application on its face qualified for consideration under the optional procedure. The Commission need not hold an evidentiary hearing for each producer to test the validity and applicability of the rule. See, e. g., Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312, (1968).
The 80$ rate approved by the Commission was supported by the evidence. Pennzoil’s testimony was that its project cost was $1,649 per Mcf, including a 15% rate of return. The Administrative Law Judge found that the cost after eliminating eight years retroactivity on the return allowance was $1.0148 and this finding is not seriously challenged by the petitioner New York Public Service Commission. I note also that the national rate at the time briefs were filed in this court was $1.01 per Mcf, and that Pennzoil’s contract would have qualified for that rate had Pennzoil not obtained its optional certificate.
The majority would also require the Commission to give further consideration to Pennzoil’s amendment of its application for an optional certificate. I see no reason to question the Commission’s action in this regard. The contract originally submitted by Pennzoil provided for a rate of 47$. Because of a change in economic conditions however Pennzoil became unwilling to sell at that price and informed the buyer that it desired to cancel the contract. This Pennzoil had a right to do.' 18 C.F.R. § 2.75(n). Not wishing to cancel however the buyer agreed to increase the price to 80$ and the contract and the application were amended accordingly. (J.A. 57) I do not see anything irregular, or that needs explanation, in this procedure. Presumably no question would be raised if Pennzoil had cancelled the contract, withdrawn its application, see 18 C.F.R. § 2.75(n) and then submitted a new contract and a new application.
In conclusion I respectfully suggest that the majority opinion concerns itself with matters of policy, which are the business of the Commission and not of this court, and which were settled by the Commission when it established the optional procedure. See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 U.S. 519, 98 S.Ct. 1197, 1218-19 (1978); FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775, 98 S.Ct. 2096, 2120, 56 L.Ed.2d 697 (1978); Action for Children’s Television v. FCC, 183 U.S.App. D.C. 437, 460-61, 564 F.2d 458, 481-82 (1977).