Court Opinion

ID: 8876560
Source: CourtListenerOpinion
Date Created: 2022-11-26 19:16:06.254785+00
Date Added: 2024-06-11T17:06:23.582046
License: Public Domain

SETH, Circuit Judge
(dissenting in part):
I respectfully dissent on the issue of the “in-line” price because the Commission, in its determination of this issue in the consolidated cases here on review, has adopted a new concept of “in-line” which constitutes too wide a departure from prior usage and practice and from the authorities to be approved.
The Commission has here divided the range of prices into several segments, and has announced that the price here to be certificated is the lowest segment, “ * * * the lowest price at which substantial volumes of new gas were sold in interstate commerce. * * * ” The Commission is very candid in its selection of this lowest price. Its findings and its comments on the evidence show that a higher price would otherwise follow. For example, the Commission stated that the evidence “ * * * points in the direction of a higher price * * than 16 cents which was the price here adopted. The Commission also said: “Our decision herein draws the line substantially below the average going price for gas in the area and in fact, two cents per Mcf below the Commission’s guideline ceiling price prevailing at the time these contracts were executed.”
The Commission also found that only a price above 18 cents “ * * * would have an adverse impact on the pricing structure in the area.”
The selection of the lowest segment is explained by the Commission in its opinion where it states: “In the final analysis our action in fixing the price at which these sales should be certificated requires an exercise of our informed judgment and utilization of the expertise developed in the handling of thousands of producer certificate applications.”
To provide some factual material on this particular issue, reference should be made to the evidence upon which the Commission placed its principal reliance, if not its sole reliance. This consisted of the following:
1. The Commission’s Statement of General Policy No. 61-1, September 28, 1960, 24 F.P.C. 818, announcing an 18 cent guideline price.
2. The Fifth Amendment to Statement of General Policy No. 61-1, August 30, 1962, 28 F.P.C. 441.
3. Staff Exhibit No. 16, admitted at the hearing, which consisted of a summary of field prices under contracts executed between January 1, 1955, and August 31, 1962, for sales in Texas Railroad Commission District No. 4 on file with the Commission and having a total initial rate of 14 cents per M.c.f. This exhibit included permanent certificates, temporary certificates, and the sales which were in issue in the consolidated proceedings.
Of the above several exhibits, the Commission considered Staff Exhibit No. 16 as the most important. The opinion of the Commission with reference to this exhibit, and to the period in issue, shows the following:
1. The weighted average price by volume was above 17.178 cents.
2. Eighty-two per cent of the gas sold was at 16.0 cents and above.
3. Seventy-one per cent of the gas was being sold at 17.0 cents and higher.
4. The table in the Commission’s opinion with reference to this Exhibit also shows that twenty-seven per cent of the gas was sold at 16 cents amd below and twenty-eight per cent at 16.5 cents and below.
The Commission found that 16 cents was the “in-line” price and stated, as referred to above, “ * * * the record makes it clear that the lowest price at which substantial volumes of new gas were sold in interstate commerce in the area in the period in question was 16 cents per M.c.f.”
The use in the text of the opinion of the term “and above” in the finding that eighty-two per cent of the gas passed at 16 cents and above appears to be somewhat unusual in view of the Commission’s selection of the lowest price. It would appear that the reference to per*196centages or quantities of gas would instead include the amounts which passed at a figure of 16 cents or less. The opinion itself shows that some ten per cent of the gas was sold at 16 cents, some eleven per cent of the gas was sold at 16 cents to 16.5 cents, inclusive, and twenty-seven per cent at 16 cents and below.
As stated above, it is however not necessary to demonstrate by the figures that the Commission selected the lowest segment by reason of their recitation that they were so doing. In this consideration it should also be borne in mind that the Commission also found that there would be no adverse impact on the pricing structure in the area except by a price above 18 cents.
There would seem to be no question but what an “in-line” price is to be determined on the basis of contemporaneous certificates as stated by the Supreme Court, and on contemporaneous contracts where necessary. This price must represent the prevailing current conditions as the Commission states in its opinion. United Gas Improvement Co. v. Federal Power Comm’n, 283 F.2d 817 (9th Cir.). The Supreme Court has clearly stated that the “in-line” price is a device which will prevent gas from entering the interstate market “* * * at prices higher than the existing levels * * * ”; and“* * * [c]onsumer protection is afforded by keeping the ‘in-line’ price at the level where substantial amounts of gas have been certificated to enter the market under other contemporaneous certificates, no longer subject to judicial review or in any way ‘suspect.’ ” United Gas Improvement Co. v. Callery Properties, Inc., 382 U.S. 223, 86 S.Ct. 360. Also “where the proposed price is not in keeping with the public interest because it is out of line or because its approval might result in the triggering of general price rises. * * * ” Atlantic Refining Co. v. Public Service Comm’n, 360 U.S. 378, 79 S.Ct. 1246.
The Commission in its determination of the “in-line” price in this case by an adoption of the lowest price departed from the “current conditions test,” and the “existing levels test,” referred to by the Supreme Court. This departure represents a basic change in policy, and is not just a difference in what quantity may constitute a “substantial quantity.” The Commission did not base its decision on such a distinction. It clearly and candidly selected the lowest segment of the price range. The Supreme Court in its references to current conditions can only mean the prevailing or predominant conditions existing in the area and cannot mean the lowest or the highest of the prices, for such are not typical or prevailing prices. In common usage something “in-line” is in conformance with other persons or things; it is, to borrow a phrase from the civil rights vocabulary, “in the mainstream”; it is a “prevailing price,” a “going rate.” It is not of the extreme in any direction, it is not the widest, the longest, the lowest, or the highest.
The Commission properly used the permanently certificated prices, and the temporary certificated prices, including the prices in issue here. I agree with the majority that these contracts or prices elsewhere referred to as “suspect” must be used in this case. They must be used for all purposes. This was the only data available for a realistic consideration of the issues, the economic data of the petitioners having been excluded. The Commission considered all the certificates in order that it could have before it a “substantial quantity” of gas. It rejected the examiner’s limited consideration with the following language :
“Examination of the staff exhibit reveals that the permanently certificated sales considered by the examiner in fixing the ‘in-line’ price amount to only 1.39 per cent of the volumes for all sales shown and to no more than 2.05 percent of the sales permanently certificated in the District contained in the exhibit.’
and
“ * * * In such circumstances it can hardly be maintained that the ‘in*197line’ test of the ‘prices under which a substantial amount of natural gas presently moves in interstate commerce’ has been fully met by the examiner. In our opinion it would be manifestly improper to base an ‘in-line’ price upon the initial prices permitted in these few isolated and inherently nonrepresentative sales whose total volume does not even begin to approach the amount of natural gas production involved in these dockets.”
Thus all were considered to attain a sufficient volume, and the Commission did not and could not then disregard the temporary certificates on the price issue. Nor did the Commission state in its opinion that the temporary certificates were to be given less weight in its determination in this case. There is also no indication that they were given less weight other than the arguments in the briefs. The Opinion of the Commission in its explanation as to why the temporary certificates should be considered referred to its Texaco Seaboard case, 29 F.P.C. 593, where it said permanent certificates are decidedly more persuasive than are temporary, but continued “ * * * this does not thereby render temporary authorizations per se inadmissible.” The Commission then said:
“The soundness of this principle is readily apparent when viewed in the light of the facts before us, where, absent the ability to consider these authorizations, we would not be basing our decision upon ‘substantial volumes of gas moving in interstate commerce.’ ”
The Commission then refers to the examiner’s consideration quoted above. These references are only to what should be examined.
Thus the Commission considered the very large proportion of gas passing under temporary certificates, but did not state that this should receive less consideration or be given less weight than that permanently certificated. The Commission only stated:
“We believe that the fact that the great bulk of the gas moving in interstate commerce in the area during this period was contracted for and temporarily authorized at initial rates between 16 and 18 cents per Mcf must be considered in fixing the ‘in-line’ price for this period. Refusal to consider the temporarily authorized prices, in the circumstances of this proceeding, and reliance only on the few permanently certificated prices can only result in a complete stagnation of prices at the ‘in-line’ level initially determined for this District, a level based on prices being paid for gas under contracts drawn up long before these contracts were executed.”
Thus from what is said in the Opinion, it cannot be concluded that the Commission has given less weight to the prices in the temporary certificates. With the minute percentage of the volumes considered being permanently certified, it would indeed require that the temporary certificates be virtually disregarded to explain a 16 cent price, and there is no indication that the Commission did so.
The Supreme Court has repeatedly said that the prices added as conditions to certificates under Section 7 do not constitute initial pricing by the Commission. Federal Power Comm’n v. Hunt, 376 U.S. 515, 84 S.Ct. 861, 11 L.Ed.2d 878. Thus the Commission is to set a price in the public interest and in line with current conditions in the area, not what the Commission thinks is just and reasonable or to be on the “safe side,” one way or the other, for that would clearly be initial pricing. The selection here by the Commission of the “lowest price” by the exercise of its expertise is initial pricing because it is not and does not purport to represent “current conditions.”
This error by the Commission is one of law. It is the erroneous application of the standards set by the Supreme Court for the determination of “in-line” prices.
*198It would seem to be unnecessary to dwell on the importance of the Commission’s determination of “in-line” prices, as the delays which are necessarily inherent in their determination and in any subsequent determination of just and reasonable rates are obvious. The period under consideration in these consolidated cases begins in 1960, and the case concerns certificates covering some 31,500,-000 M.c.f. per year. It is apparent that the prices so established will remain in effect for many years, and consequently large quantities of gas will be sold under any determination of “inline” prices by the Commission. The Supreme Court, in Atlantic Refining Co. v. Public Service Comm’n, 360 U.S. 378, 79 S.Ct. 1246, referred to the “inordinate delay presently existing in the processing of § 5 proceedings, * * * ” and again in the same case to “ * * * the delay incident to determination in § 5 proceedings through which initial certificated rates are reviewable appears well nigh interminable.” These prices have in reality become more than a mere interim device, especially when coupled with moratoriums which may be imposed by the Commission.
Thus the importance of the “in-line” •determination of the price additive to-public convenience and necessity becomes all the greater. The Commission’s methods and the evidence used to support its findings must be more closely scrutinized.
Thus I would conclude that the Commission committed an error in law in applying the wrong standards for its determination of 16 cents as the “in-line” price in this case. This was selected, as the Commission states, as the lowest price, and I would remand the case for a determination not of the lowest price and not of the highest price, but of the “inline” price.
On a somewhat different point I also disagree with the majority. Reference is made in the majority opinion to Superior Oil Co. Opinion No. 437, 32 F.P.C. 241, and there is adopted a rule that the “in-line” price once established is presumed to continue until “substantial evidence is presented that it has changed.” If this means that some sort of a presumption attaches to prior “in-line” prices which must be overcome, I disagree.
The authorities demonstrate clearly that the “in-line” price is to be determined on the basis of contemporaneous certificates, contracts, and price data. This necessarily contemplates the possibility of change from time to time in either direction. Sohio Petroleum Co. v. Federal Power Comm’n, 298 F.2d 465 (10th Cir.). Once an “in-line” price is established, it continues for those bound until formally changed but this does not necessarily mean that a presumption attaches to a previous “in-line” price which must be overcome by any greater weight of evidence than would be required had no “in-line” price been established. There is no basis in the statutes for a presumption or continuing weight to be given to a prior determination in another proceeding. By definition the “inline” price is what then prevails and not what has prevailed in the past nor influenced by what has prevailed in the past. Whether the change is large or small should of itself make no difference in the determination; the changes from time to time should freely come about, based upon conditions as they may then exist.