Court Opinion

ID: 8916815
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:25:47.931746+00
Date Added: 2024-06-11T17:09:04.039185
License: Public Domain

HOLLOWAY, Circuit Judge,
concurring in part and dissenting in part:
I concur in the majority’s holding that there is no reviewable issue as to the McCombs Group’s settlement proposal. However, I respectfully dissent from the majority’s other holdings.
I
I would hold that there is an issue ripe for review as to whether the Commission properly refused to recognize the dissolution of the Butler A and B units for purposes of the Natural Gas Act and properly ordered deliveries of gas from wells on the Butler A tracts. I would hold that these determinations by the Commission had a proper factual and legal basis and should be sustained.
It is true that in Opinion No. 740-A the Commission did divide the case into two phases and provide that in Phase I that it would consider the staff’s argument that gas from the Butler A tract was itself dedi*1188cated to interstate commerce under the 1953 gas purchase contract. (J.A. 242). The record before us does not indicate that this issue has been adjudicated by the Administrative Law Judge or the Commission. It is also true that if the staff’s argument is upheld, the issues as to the unitization of the tracts and the subsequent attempt at dissolution will be rendered moot. However, without awaiting the resolution of Phase I, the Commission entered a definitive order requiring the McCombs Group to deliver part of the Butler A gas to United on the ground that the dissolution of the Butler A and B units should not be recognized for purposes of the Natural Gas Act. (Id. at 239, 248). The impact of the Commission’s order on the McCombs Group in this respect “is sufficiently direct and immediate as to render the issue appropriate for judicial review at this stage.” Abbott Laboratories v. Gardner, 387 U.S. 136, 152, 87 S.Ct. 1507, 1517, 18 L.Ed.2d 681.
Reaching the merits of the issue, I would uphold the Commission’s ruling that the attempted dissolution should not be recognized for purposes of the Natural Gas Act, due to the failure to obtain abandonment authority under § 7(b) of the Act. The Commission found that Mr. Forney’s testimony demonstrates that dedicated gas reserves would be withdrawn from interstate commerce; and Opinion No. 740-B says that as a result, the record makes a prima facie showing that an abandonment application is a necessary prerequisite for recognition of the attempted dissolution for the purpose of the Natural Gas Act. (J.A. 258-59). This finding on withdrawal of gas is not shown to be in error. In these circumstances I believe the Commission’s ruling not to recognize the dissolution for purposes of the Act was proper under abandonment «principles developed under § 7(b).
The certificates authorized sales under •the gas purchase contract which itself says ■it covers “ ‘merchantable natural gas . .. produced from all wells now or hereafter drilled during the [10 year] term of this contract’ on the specified leaseholds, including the Butler B tract, ‘and Seller’s proportionate part of all merchantable natural gas produced from any well or wells located on any unit or units which include any part of said lands and leaseholds....’” (Id. at 160). (Emphasis added). The Commission concluded that the G-12694 certificate “covers all of the gas which has been produced from or attributable to the Butler B lease since gas was rediscovered at deeper depths late in 1971.” (Id. at 161) (emphasis added).
It is true that there was no gas delivered from the Butler A or B acreage to United during the period of unitization and before the dissolution.1 However, the earlier deliveries until 1966 and the acceptance of the Commission’s certificates effected the dedication of all gas attributable to the Butler B leasehold. “The initiation of interstate service pursuant to the certificate dedicated all fields subject to that certificate.” California v. Southland Royalty Co., 436 U.S. 519, 525, 98 S.Ct. 1955,1959, 56 L.Ed.2d 505. I would agree with the Commission’s interpretation that the dedication includes the portion of the gas produced from or attributable to the Butler B lease (J.A. 161); and I would agree that the dedication thus covers production from the McCombs-Butler Units Nos. 1 and 2, created later, which is attributable to the Butler B leasehold as computed in the Commission’s order. (Id. at 165-66). These interests were dedicated to interstate service and “once so dedicated there can be no withdrawal of that supply from continued interstate movement without Commission approval.” United Gas Pipe Line Co. v. McCombs, 442 U.S. 529, 542, 99 S.Ct. 2461, 2469, 61 L.Ed.2d 54; Southland, supra, 436 U.S. at 524, 98 S.Ct. at 1958; Sunray Mid-Continent Oil Co. v. FPC, 364 U.S. 137, 156, 80 S.Ct. 1392, 1403, 4 L.Ed.2d 1623; Atlantic Refining Co. v. *1189Public Service Commission, 360 U.S. 378, 389, 79 S.Ct. 1246, 1253, 3 L.Ed.2d 1312. The Supreme Court’s interpretation of § 7(b) adequately supports the Commission’s ruling that in view of the evidence indicating that the dissolution would result in a net withdrawal of gas reserves from interstate commerce, such dissolution could not be recognized for purposes of the Act, absent Commission approval as an abandonment.2
There remains the argument of the McCombs Group that the matter of unitization and dissolution falls within the production and gathering exemption of § 1(b) of the Act. I find this argument is untenable however since “the ‘production or gathering’ exemption relates to the physical activities, processes and facilities of production or gathering, but not to sales of the kind affirmatively subjected to Commission jurisdiction.” United Gas Improvement Co. v. Continental Oil Co., 381 U.S. 392, 402, 85 S.Ct. 1517, 1523, 14 L.Ed.2d 466; see Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 678, 74 S.Ct. 794, 796, 98 L.Ed. 1035.
Thus, I would sustain the Commission’s ruling on the dissolution issue.
II
I would hold that the authority conferred on the Commission by §§ 7(b) and 16 of the Act empowers it to order paybacks of gas improperly diverted from interstate commerce. However, I would hold that, under the circumstances of this case, the Commission’s order is unjustified to the extent that it requires payback of volumes of gas improperly diverted from United prior to United’s June 6, 1973, demand to the McCombs Group for such gas.
Having found that the intrastate sales, which commenced in 1972, to du Pont were-an unlawful diversion of gas from interstate commerce, the Commission had to determine the proper remedy. It could surely order that future unlawful sales cease and that gas be delivered to United under the gas purchase contract and the Commission’s certificate pursuant to the requirement of § 7(b) that “[n]o natural-gas company shall abandon any service rendered by means of such facilities, without the permission of the Commission first had and obtained .. . . ” Likewise, I feel that it was within the Commission’s proper discretion to order that the McCombs Group restore past unlawful diversions by a payback order, but only to the limited extent discussed below.
The Commission is the agency entrusted with the administration of the Act. FPC v. Hope Natural Gas Co., 320 U.S. 591, 617, 64 S.Ct. 281, 294, 88 L.Ed. 333. Broad authority to carry out the Act is conferred on the Commission by § 16 which says in part that
The Commission shall have power to perform any and all acts, and to prescribe, issue, make, amend and rescind such orders, rules, and regulations as it may find necessary or appropriate to carry out the provisions of this chapter....
I find persuasive here the cases which have upheld other remedial orders of the Commission. See Cox v. FERC, 581 F.2d 449 (5th Cir.); see also FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 155, 83 S.Ct. 211, 216, 9 L.Ed.2d 199, Gulf Oil Corp. v. FPC, 563 F.2d 588, 606-608 (3d Cir.), cert. denied, 434 U.S. 1062, 98 S.Ct. 1235, 55 L.Ed.2d 762, cert. dismissed, 435 U.S. 911, 98 S.Ct. 1462, 55 L.Ed.2d 402, Texas Gulf, Inc. v. FPC, 494 F.2d 789, 792 (5th Cir.); Mesa Petroleum Co. v. FPC, 441 F.2d 182, *1190186-89 (5th Cir.). Commission orders both to cease unlawful diversions and to restore unlawfully diverted quantities of gas are logical remedies to carry out the important provisions of § 7(b). Such orders place violators of § 7(b) in the same position in which they would have been had they complied with the statute all along. The narrower reading of § 16 in Mobile Oil Corp. v. FPC, 483 F.2d 1238, 1256-57 (D.C.Cir.), should not be applied here to overturn a direct, logical remedy for diversions from interstate commerce in contravention of the protective prohibitions of § 7(b). The payback remedy was designed to implement those prohibitions and to reverse the effect of violation of them.3
Since I would hold that the Commission has discretion under the Act to order paybacks of gas, there is the further question whether the Commission’s order requiring the payback for all the diversions since execution of the July 1, 1972, du Pont-McCombs Group contract was proper or an abuse of discretion.4 On the facts found by the Commission which bear on this issue (see J.A. 139-41, 168-69), it seems clear that there was uncertainty among all the parties about the possible rights of United and the possible dedication of the gas to interstate commerce. Not until June 6, 1973, did United assert its claim under the 1953 gas purchase contract to the McCombs Group, and United did not file its complaint with the Commission, in this proceeding until October 9,1973. (J.A. 140-41). In these circumstances it seems to me that the equities clearly did not justify an order to restore gas diverted by the McCombs Group before the June 6, 1973, demand by United to the McCombs Group for the gas. To that extent the order should be modified for an abuse of discretion. See Gulf Oil Corp. v. FPC, 563 F.2d 588, 608 (3d Cir.), cert. denied, 434 U.S. 1062, 98 S.Ct. 1235, 55 L.Ed.2d 762, cert. dismissed, 435 U.S. 911, 98 S.Ct. 1462, 55 L.Ed.2d 502.
In sum, I would modify the Commission’s payback order to limit the payback requirement to the amount of gas delivered from the specified units after June 6, 1973. As thus modified I would uphold the payback order as a proper exercise of the Commission’s authority to implement the Act.
Ill
Although my reasoning is somewhat different, I agree with the majority’s conclusion that as to the McCombs Group’s settlement proposal, we have no issue which is ripe for review.
The supplemental brief on remand filed by the McCombs Group advises us that “[t]he Commission’s errors in this matter have indeed caused the settlement to die on the vine, and there is little hope of resurrecting it in its present form.” (Supplemental Brief of McCombs Group filed July *119115, 1980, at 3-4). The brief concludes that this court “should correct the Commission’s error in failing to consider the settlement proposal by remanding to the Commission for the purpose of permitting the McCombs Group to submit whatever other settlement proposal it may wish to make, and for consideration thereof by the Commission. All of these issues should be considered in the light of the Court’s decision on the dissolution issue.” (Id. at 15).
The issue earlier raised about the former settlement proposal is thus implicitly conceded by the McCombs Group to be moot since that proposal “died on the vine.” Apparently the Commission has not ruled on the AU’s rejection of the McCombs proposal. In those proceedings before the Commission, or in the proceedings which will follow there in winding up the case after our decision, the McCombs Group or any other party can make new settlement proposals since the Commission’s rules permit the submission of proposals by participants at any time. 18 CFR § 1.18(e)(1)(h).
Thus I agree that there is no issue before us which is appropriate for review concerning the settlement issue.
IV
I am unable to agree that there is a reviewable order within the meaning of § 19(b) of the Act with respect to du Pont’s motion to dismiss. I feel, however, that in remanding we should direct that the Commission promptly rule on the motion to dismiss under our authority to “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. § 706(1).
I cannot agree with the majority opinion’s holding that the Commission in effect denied du Pout’s motion and asserted jurisdiction over the company. The difficulties and unreasonableness of delay do not make a ruling out of inaction and deferral of a decision on du Pont’s motion. Opinion No. 740 expressly says that the Commission will defer ruling on the motion, that du Pont need not be subjected to any Commission directive “unless and until” the McCombs Group refuses or fails to make United whole for its Butler B gas entitlements, and that “[w]hen that becomes an accomplished fact we can grant du Pont’s motion without deciding whether it has become a ‘natural gas company.’ ” (J.A. 168).
The handwriting may seem to be on the wall as to the potential liability of du Pont in the event of a payback default by the McCombs Group, but there is no actual definitive order making du Pont an aggrieved party entitled to review under § 19(b) of the Natural Gas Act. .See FPC v. Metropolitan Edison Co., 304 U.S. 375, 383-84, 58 S.Ct. 963, 966-67, 82 L.Ed. 1408. The Commission’s opinions explicitly leave open the issue of jurisdiction over du Pont. The company is not ordered to make any payback or to take any other action, nor do the opinions definitively rule that du Pont will be held liable as a “natural gas company,” if the McCombs Group does not fulfill its payback obligations. The orders do not have a sufficiently direct and immediate impact on du Pont, or require an immediate and significant change in the conduct of its affairs as in Abbott Laboratories v. Gardner, 387 U.S. 136, 152-53, 87 S.Ct. 1507, 1517,18 L.Ed.2d 681, so as to justify review at this stage. See also Amerada Petroleum Corp. v. FPC, 285 F.2d 737, 739 (10th Cir.).5
Moreover, the potential of exercise of Commission jurisdiction over du Pont pictured by the opinions is subject to change by the later ruling which Opinion No. 740 refers to. (J.A. 168). Thus the orders do not meet the requirement for reviewability of having a “substantial effect on the parties which cannot be altered by subsequent administrative action.” Public Service Company of New Mexico v. FPC, 557 F.2d 227, 233 (10th Cir.). There is no definitive order with an impact of such a nature that it will cause irreparable injury if not re*1192viewed now. du Pont is thus not an “aggrieved” party within, the meaning of § 19(b) under the present orders of the Commission, entitled to review by us now on the issue of jurisdiction. Public Service Co. of New Mexico v. FPC, supra, 557 F.2d at 233.
As mentioned, I feel that the record does warrant other relief based on the showing of agency delay and inaction on the du Pont motion. 5 U.S.C. § 556(b) requires administrative agencies to decide issues presented within a reasonable time. Here du Pont’s motion to dismiss was filed on November 9, 1973, with its answer to the complaint, and the motion was renewed on May 3, 1974. The Commission has failed to decide the challenge to jurisdiction over du Pont from the initial decision on other issues by the ALJ in April 1974 through Opinion No. 740-B on January 19, 1976. du Pont has been embroiled in this lengthy litigation and is under the cloud of potential liability, without there having been a determination at the Commission level that there is a lawful basis for exercise of Commission jurisdiction over the company.
In these circumstances we may compel agency action unreasonably delayed. See 5 U.S.C. § 706(1); Nader v. FCC, 520 F.2d 182, 206-07 (D.C.Cir.). I feel we should remand with directions that du Pont’s motion to dismiss and challenge to jurisdiction be considered and disposed of promptly by the Commission, without awaiting further developments and proceedings as indicated by Opinion No. 740. (J.A. 168).

. The McCombs-Butler Units Nos. 1 and 2 were created respectively on November 5, 1971, effective November 1, 1971, and on or about April 1, 1972. (J.A. 138). The dissolution instrument, stating that the dissolution of the units was retroactive to the dates of creation of the units (Brief of McCombs Group filed February 13, 1976 at 38), was recorded on October 21, 1974. (J.A. 237).

. The McCombs Group claims that th'ere was no effective dedication of the production on Butler A attributable to Butler B under the unitization because unitization would never have occurred had United’s rights or the 1953 gas purchase contract been known to the McCombs Group. The Commission’s opinion in Louisiana-Nevada Transit Co., Dkt. No. RP 76-31 (October 31, 1978), is cited for the proposition that unintentional acts do not suffice to subject a producer to Commission jurisdiction. However, that case involved gas flowing through a pipeline from Arkansas to Louisiana by sheer accident. The physical flow itself was unintended. Here, on the other hand, unitization was a deliberate act. To the extent that intent is required under the Act, all that is needed is some sort of purposeful activity. The fact that one does not intend to be subjected to Commission jurisdiction is irrelevant. See Southland, supra, 436 U-S. at 524, 98 S.Ct. at 1958.

. Furthermore, I would reject the McCombs Group’s argument that the Natural Gas Policy Act (NGPA), 15 U.S.C. §§ 3301 et seq., when read with the legislative history, precludes the Commission from issuing a payback order. This issue was not reached in the majority opinion since it held that the payback order was unauthorized by the Natural Gas Act itself.
The NGPA gives limited relief from the Supreme Court’s decision in California v. Southland Royalty Co., 436 U.S. 519, 98 S.Ct. 1955, 56 L.Ed.2d 505, inter alia. NGPA §§ 2(18)(B)(iii), 601(a)(1)(A), 15 U.S.C. §§ 3301(18)(B)(iii), 3431(a)(1)(A). However, nothing in the NGPA itself applies to the facts of this case, which does not involve the South-land doctrine. Petitioners rely on remarks made by Congressman Dingell on the floor of the House concerning this legislation, payback orders, and enforcement policies of the Commission, inter alia. To me, the remarks are not shown to have any bearing on this case by any connection with an application of the NGPA to the facts of the instant controversy. For this reason I cannot agree that the comments relied on are persuasive in this case.

. The McCombs Group argues that the Commission’s orders are in error because of failure of the Commission to consider the equities. Although the Commission did not explicitly discuss the equitable considerations, it did recognize the fact that waiver, estoppel and laches on the part of United were alleged by the McCombs Group and du Pont. (J.A. 148). This statement, together with the Commission’s findings about the conduct of the parties as the controversy developed (see J.A. 139-41, 168-69), indicates that the Commission considered and implicitly rejected these contentions.

. This case does not involve the threat of denial of due process rights by being subjected to an allegedly unconstitutional procedure as in Phillips Petroleum Co. v. FPC, 475 F.2d 842, 847-48 (10th Cir.), where an order rejecting a challenge to rule making procedure to set rates was held reviewable before any rates were actually set under the rule.