Court Opinion

ID: 9842778
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:17:58.346516+00
Date Added: 2024-06-11T09:13:43.157600
License: Public Domain

JOHNSEN, Circuit Judge
(concurring separately).
1 should not engage in this separate expression, except that on some matters my *724thinking has taken me over a slightly variant course, although I have tried for the sake of unanimity to avoid allowing it to lead me to a different result. I shall' here, however, discuss only a single question which I regard as the most important and most perplexing one in the case, in order to bring it a little more fully into the spotlight.
I initially felt, with some degree of conviction, that the Federal Power Commission was required, or at least deferentially ought, in the balancing of proper state and national interests, to have accepted, for purposes of its formulaic processes, the attribution value mandated by the State of Kansas, of 8 cents per thousand cubic feet at the wellhead, on all natural gas taken from Kansas ground,1 2as representing a legally fixed production cost, under the State’s right and policy of conserving its natural gas resources, preventing any profligate promotion or exploitation of them, and conditioning undiscriminatingly as between local distribution' and commerce the privilege of removing them from the ground, and within the authority which it seems to me that the Natural Gas Act has specifically permitted to remain in the States to regulate production.2
Cities Service Gas Co. v. Peerless Oil & Gas Co., 340 U.S. 179, 71 S.Ct. 215, 95 L.Ed. 190, and Phillips Petroleum Co. v. State of Oklahoma, 340 U.S. 190, 71 S.Ct. 221, 95 L.Ed. 204, leave no room for any further contention of inherent invalidity in such an attribution mandate as a federal question' in relation to a State’s powers of regulation generally, or as to the amount of the attribution value here fixed being possibly so unreasonable as legally to lack fair relationship to its object or as to constitute an undue burden as such upon interstate commerce. The only question not. answered by these decisions as to the validity of such a form of state regulation — because the question was not there involved — is whether the making of such an attribution order by a State, as a conservational, preventive and conditioning measure in production, is in conflict with or otherwise excluded by the nature and scope of the federal authority which has been asserted in the natural gas domain through the Natural Gas Act.
The Act itself provides, as has been indicated in footnote 2, supra, that its provisions have no application to “the production or gathering of gas.” But the Act also leaves no doubt as to its intent to preempt fully the control of all rates charged for jurisdictional gas, as a question of whether they are “just and reasonable”, on the basis of all necessary elements of consideration, including overall result. This then directly poses the question of whether such an attribution value as has here been mandated by the State of Kansas as a production cost, which concededly is otherwise regulationa'lly valid, can be refused operation and effect as a state conservational, preventive and conditioning measure, as being excluded by the Natural Gas Act, because of its possible touch upon the Federal Power Commission’s rate-fixing powers.
I should be hesitant in view of the fact that Congress has left the field of production and its regulation exempt from federal invasion, to answer the posed question, in its application to such an otherwise proper and manifestly purposive guarding by a State of its gas resources in production, except upon the same basis that it has been many times answered as to a state regulation of some matter of local concern which may affect commerce — -that the mere fact that such a regulation may have some impact upon commerce, as an incident and not as an undue burden, does not require that it be given federal nullity. No more, it would seem to me, ought such a conservational, preventive and privilege-conditioning regulation in the state-preserved field of production to have its operativeness abstractly and generally cut off, just because of its incidence legally as a fate element or factor.
*725Justness and reasonableness from the standpoint of consumer consideration could hardly be said to require such a holding, since the attribution value necessarily would have had to be recognized by the Federal Power Commission, if Northern Natural had purchased from others the approximately 13 per cent of its gas supply which it took from its own wells in the State of Kansas (just as the Commission in effect did recognize the attribution value as a legitimate element of cost as to the gas which Northern Natural was so purchasing) and this amount obviously would in that event have had to be paid by the customer. Nor, in the present situation, on the amount here involved, with the rest of the elements used by the Commission left standing, would it be possible to say that the additional return to Northern Natural as a result thereof would be publicly or industrially intolerable on its face, since, thus considered, its consequence would be to give Northern Natural a return of approximately 6 per cent instead of the 5% per cent which the Commission allowed.
But in any event, in the viewpoint here being discussed, all of these considerations would have had to be weighed against the State’s interest in conservation and its right to control production to that end, before there would be any right to say that they were excluded or outweighed as a matter of federal interest, just because of the incidental effect which they might have upon customer rates or upon Northern Natural’s financial position in the particular situation.
I recognize, however, that there also is some possible basis in the situation for contending that, since the State of Kansas could have nothing to say about how much more or whether anything more was charged for the gas which Northern Natural distributed than the attribution value which it had mandated, its attribution order could, in a certain legal sense at least, be said not to have been here nullified or dishonored, within the scope of its right to make complaint, in view of the fact that the rates fixed by the Commission had all been in excess of 8 cents per thousand cubic feet. And, of course, only insofar as it would be necessary to respect the attribution order in favor of the State of Kansas, as a proper exercise of state policy and interest, would there be any occasion to consider Northern Natural’s claim to have it recognized.
The contention which I have just stated is one which is more escapive than satisfying to me, but, for the sake of unanimity in our disposition, I shall accept it as a sufficient basis for avoiding a dissent, in that it still preserves for me the position that the Federal Power Commission could not completely ignore the attribution order as a proper state regulation in the field of gas production.
I might add just a word on the remand which is being directed for further consideration and explanation by the Commission of the matter of rate of return. I recognize that the judgment of the Commission in this field, unless confiscatoriness or discriminatoriness is manifest, must ordinarily be accepted in a particular situation. Here, however, the Commission is venturing upon a pioneering change in its rate-of-return concept, which presumably is intended to set a pattern and to establish a future policy. This is being done at a time when the investment and financing market has been evidencing an increasing and projective demand for return climbs, over those which have existed for the past several years, and similarly while costs of production are still continuing in their economic rise. Other events also have happened, such as the permission since given Northern Natural by the Commission to make substantial expansion. All of these elements, in the time which has elapsed since the Commission’s order, should give it a better opportunity for evaluation and explanation than its present order reflects, as a basis for any pioneering change in previous concept and apparent future policy and a more solid foundation for a court to feel satisfied to give approval to it.

. “except gas for the operation of leases” —not here involved.

. “The provisions of this Act * * * shall not apply * * * to the production or gathering of natural gas.” 52 Stat. 821, § 1(b), 15 U.S.C.A. § 717(b).