Court Opinion

ID: 7279161
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:04:44.916046+00
Date Added: 2024-06-11T14:37:22.731522
License: Public Domain

FAHY, Senior Circuit Judge,
dissenting:
I agree with the court that all rates and charges of any natural-gas company subject to the jurisdiction of the Natural Gas Act, which includes the small producers here involved, shall be just and reasonable and, if not, that they are unlawful. But we have no particular rate or charge before us for scrutiny as to its justness or reasonableness. Order No. 428 of the Commission, before us for review, was made in a rule-making proceeding duly conducted. It passed upon no particular rate or charge of any or all small producers. It laid down certain guides within which small producers may contract for sales of their gas. It is properly entitled by the Commission as an “Order Establishing Blanket Certificate Procedure for Small Producer Sales and Providing Relief from Detailed Filing Requirements.” The Commission explicitly relies upon the Supreme Court decision in Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968), to the effect that under section- 16 of the Act,1 for purposes of its rules and regulations, the Commission may “classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters.” It cannot be questioned that it is within the power of the Commission separately to classify small producers.2 The question really is whether the rules or regulations applied to this classified group are within the Act. More precisely, as it seems to me, the question is whether we can hold, on the record before us, that the type of regulation of prices adopted by the Commission has led or will lead inevitably to unjust or unreasonable rates charged by small producers to purchasers of gas from them, notwithstanding
[a] presumption of validity . attaches to each exercise of the Com*177mission’s expertise, and those who would overturn the Commission’s judgment undertake “the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences” . . .
. . . [It] must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests.
Permian, supra, 390 U.S. at 767, 88 S.Ct. at 1360.
The Commission has made a judgment which I think is within the ambit of its competence and expertise 3 not to require small producers to be bound to the area rate and certain filing requirements, on an experimental basis.4 A higher rate than that previously fixed for the industry in the area may be just and reasonable for the small producer as a separate classification within the area. The Commission is attempting to learn whether under this program the small producers, relieved of much of the burden of regulation required of other classifications, can improve their exploratory efforts while charging rates which on review will nevertheless prove to be just and reasonable, and which will not adversely affect the consumer interests protected by the Act. The Order provides :
We intend to review the prices established in new contracts or contract amendments relating to sales by small producers to assure the reasonableness of the rates charged by such producers pursuant to the action we are taking herein. In the event we determine that this approach is inimical to the interests of consumers, we shall take further action to protect consumers.
The Commission is attempting “to reach an accommodation of conflicting interests, through experimentation, that will result in the proper alleviation of the gas shortage.” Public Service Commission of the State of New York v. FPC, 151 U.S.App.D.C. 307, 467 F.2d 361 (1972).
I do not think the Commission has abdicated its responsibility to insure that rates of small producers will be just and reasonable. It does not appear from the record before us that any such price that might be charged is necessarily unjust or unreasonable. It is the Commission’s assumption, given the small percentage of gas sales the small producers account for, and given their situation within the industry, that the rates to be collected from their sales of gas under this new plan will in fact be just and reasonable. The record before us does not rebut this assumption. Moreover, consumer protection is promised, and I cannot now hold that the promise will not be fulfilled. The Commission states:
The action taken here in our view does not constitute deregulation of sales by small producers. We will continue to regulate such sales but will do so at the pipeline level by reviewing the purchased gas costs of each pipeline with respect to small producer sales. We shall also provide certain other safeguards against unreasonably *178high small producer prices, as hereinafter discussed, to assure adequate protection of the consumer.
I have considered the contention that Order No. 428 discriminates against large producers vis-a-vis pipelines, but I find in this, as in other contentions made, no reason to depart from my basic position that as the matter now comes before the court the Order should not be set aside.
I would, however, modify Order No. 428 in one respect. I would strike its provisions prohibiting refunds to pipelines and large producers, leaving open to the Commission to exercise such authority as it has to protect large producers and pipelines in the event the Commission finds they have been charged unreasonably high prices by small producers. As thus modified I would affirm Order No. 428 and its alphabetical series. Should such a modification temper to a degree the charges of small producers, I think that result must be accepted as required by the public interest represented by the Act. I do not think such possible tempering would go so far as to defeat the purposes of Order No. 428.
I respectfully dissent.

. 15 U.S.C. § 717(o) (1970).

. Permian, supra, 390 U.S. at 787, 88 S.Ct. at 1370, where the Supreme Court stated: The problems and public functions of the small producers differ sufficiently to permit their separate classification, and the exemptions created by the Commission for them are fully consistent with the terms and purposes of its statutory responsibilities. It is not without relevance that this Court has previously expressed the belief that similar arrangements would ameliorate the Commission’s administrative difficulties.

. Recently, in FPC v. Louisiana Power and Light Co., 406 U.S. 621, 642, 92 S.Ct. 1827, 1839, 32 L.Ed.2d 369 (1972) the Court referred to the Commission’s authority under section 16 of the Act as follows:
[T]he Commission must possess broad powers to devise effective means to meet these responsibilities. FPC and other agencies created to protect the public interest must be free, “within the ambit of their statutory authority, to make the pragmatic adjustments which may be called for by particular circumstances.” . . . Section 16 of the Act assures the FPC the necessary degree of flexibility. ... In applying this section, we have held that “the width of administrative authority must be measured in part by the purposes for which it was conferred. . . . Surely the Commission’s broad responsibilities therefore demand a generous construction of its statutory authority.”

. The court is not bound by Commission counsel’s response during argument that the Commission could establish a class of “medium” producers for regulation similar to that which Order No. 428 applies to small producers.