Petition — Mississippi Power & Light Co. v. United Gas Pipe Line Co.
Supreme Court brief1977
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Supreme Goud, U. 3,
FILED
DEC 13 1976
| MICHAEL RODAK, JR., CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM 1976
NO. —t6-796
MISSISSIPPI POWER & LIGHT COMPANY,
Petiticner
Vv
UNITED GAS PIPE LINE COMPANY,
PENNZOiL COMPANY,
Respondents
STATE OF MISSISSIPPI,
Plaintiff-Intervenor
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
SHERWOOD W. WISE
JOSEPH P. WISE
WISE, CARTER, CHILD,
STEEN & CARAWAY
925 Electric Building
Post Office Box 651
Jackson, Mississippi 39206
CLAYTON L. ORN
ANDERSON, BROWN, ORN & JONES
1122 Southwest Tower
Houston, Texas 77002
Attorneys for Petitioner
Mississippi Power & Light
Company
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Alpha Law Brief Co., One Main Plaza, No. 1 ‘ain St., Houston, Texas 77002
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Reasons for granting the writ ............ceccesceecees
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Appendix A — Opinion of Court of Appeals ..............
Appendix B — Order of Court of Appeals of May 28, 1975
Granting Leave To Appeal From Order of
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Appendix C -— Judgment of Court of Appeals ...........
Appendix D— Order of Court of Appeals Denying Peti-
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Appendix E— Order of District Court Denying Motions
to Dismiss and Granting Motions to Stay
Appendix F — Memorandum Opinion of District Court ...
Appendix G—-Complaint of Mississippi Power & Light
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Appendix H — Order of District Court Granting Motion of
State of Mississippi for Leave to Intervene
Appendix I— Complaint in Intervention of State of Mis-
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Appendix J— Motion of United Gas Pipe Line Company
To Dismiss or Alternatively To Stay All
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Appendix K — Motion of Pennzoil Company To Dismiss or
Alternatively To Stay All Proceedings ....
Appendix L— Answer of United Gas Pipe Line Company
Appendix M — Answer of Pennzoil Company ...........
Appendix N—FPC Order Partially Granting Petition for
Declaratory Order and Motion to Consolidate
A22
A23
A25
A27
A29
A32
A100
Al0l
A103
A107
All2
Al42
A154
II
Appendix O — Findings and Conclusions of The United
States Court of Appeals For the Fifth Circuit
in Southern Natural Gas Company et al v.
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Appendix P — F.P.C. Order Implementing Court Order and
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CITATIONS
: CASES
Bisso v. Inland Waterways Corp., 349 U.S. 85 ..........
Breen Air Freight, Ltd. v. Air Cargo Inc., 470 F.2d 767
Brown & Sons Lumber Co. v. Louisville & N. R. Co., 299
ks le DO 6 hne5h 606s 0h 0bedneedebtseesencendees
Civil Aeronautics Board v. Modern Air Transport, 179 F.2d
se eg an le ee ac rk
County of Allegheny v. Frank Mashuda Co., 360 U.S. 185,
POONE. 1ncd cde cecesecctececedndeseaeciccsdbeponss
Fairfax Gas & Supply Co. v. Hadary, 151 F.2d 939, 941
FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972)
Gordon v. New York Stock Exchange, 422 U.S. 659, 686-690
Great Northern Railway Co. v. Merchants Elevator Co., 259
a Bis SED nbdbeeccnccccdccgnsensscopsnacncecets
Gulf Oil Corp. v. American Louisiana Pipe Line Co., 282
Seee -dnucevdees det cheaducbeteadesdvekwan vesdex
International Paper Co. v. Federal Power Commission, 476
Sle Be. 006960 00ced000006nn Comeedsbetuanaseenesee
Landis v. North American Co., 299 U.S. 248, 265 .......
Louisiana Power & Light Co. v. Federal Power Commission,
ee Se Gy TE kvieucesesahes eévensndudeanedscac
Meat Cutters Union v. Jewel Tea Co., 381 U.S. 676, 684
Merle E. Rowan v. Allied Chemical Company, 39 FPC 64
Mississippi Public Service Commission v. Federal Power
Commmeianm, SOB FG BOGS ccccccdccesccccccscceses
Monsanto Company v. Federal Power Commission, 463 F.2d
TO, Geo cccvendisecedndstcenviass svescesantecsss
Nader v. Allegheny Airlines, Inc., 96 S. Ct. 1978, 48 L.Ed.
Be MD io cuckedhadece sl euessesaeesnbecéesceuneeeen’
Pan American P. Corp. v. Superior Court, 366 U.S. 656,
GD xv veticecesusece venseasenbetsneusdananaekar
Page
Al6l
A169
9,11
9,18
7,19
14, 18
6,7, 10
Ill
CASES Page
Panhandle Eastern Pipe Line Co. v. Public Service Commis-
et ee Ee ED 6 0caescd scenes cosscccess 7
Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 304 7,16
Sey Ge GR. TG. Fite GOO Pete BFE ccccccccccescccces 14
State of Louisiana v. Federal Power Commission, 503 F.2d
MEE Ken eeecnncedceccgsenesncdsecesecocece 9, 18
Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S.
SL EE snes néhedeeel ened uWkdenenenenrestecsesescs 14
Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S.
SP whnwhes 6dbbus 650 096666 6d06dRdR dese Sov eereeeece 10
United States v. Western P. R. Co., 352 U.S. 59, 69 ..... 13
Warren Petroleum Corp. v. FPC, 282 F.2d 312 ........... 14
World Airways, Inc. v. Northeast Airlines, Inc., 349 F.2d
PET co checccccecevccccdvenésaasasccececcooocccees 14
STATUTES AND REGULATIONS
Natural Gas Act, 52 Stat. 821:
NS IE SAE ED 2, 3,8
Sec. 21, 22, 15 U.S.C. 717(t), 717(u) ......eceeeeeees 15
wa eat 2
a caeeuiace’ 3
Constitution of the United States:
i er ee, 2 ee. 6 edieuubeseececccdctencescees 9,10
Supreme Court of the United States
OCTOBER TERM 1976
NO.
MISSISSIPPI POWER & LIGHT COMPANY,
Petiiioner
Vv.
UNITED GAS PIPE LINE COMPANY,
PENNZOIL COMPANY,
Respondents
STATE OF MISSISSIPPI,
Plaintiff-Intervenor
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Mississippi Power & Light Company (MP&L) petitions
for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Fifth Circuit in
this case.
OPINION BELOW
The opinion of the Court of Appeals (App. A, infra,
pp. Al-A21) is reported at 532 F.2d 412.
2
JURISDICTION
The judgment of the Court of Appeals (App. C, infra,
pp. A23-A24) was entered on May 27, 1976. MP&L’s
timely petition for rehearing was denied on September 27,
1976. (App. D, infra, pp. A25-A26). The jurisdiction
of this Court is invoked under 28 U.S.C. 1254(1).
QUESTIONS PRESENTED
1. Whether a common-law action by an electric utility
against a jurisdictional gas pipeline for the tortious making
and breaking of a long-term contract for the direct (non-
jurisdiction) sale of natural gas should have been stayed
pending reference to the Federal Power Commission for
a determination whether the contract was tortiously made
and breached, and if it was whether the Commission
could approve a tariff filing by the pipeline which would
exculpate it from liability.
2. Whether the stay while the Commission decides “a
major part of the litigation”, and makes “all findings that
it believes will aid the prompt resolution of the dispute”
has been kept in the bounds of moderation, or is a denial
of that promptness of decision which in all judicial actions
is one of the elements of justice.
STATUTE INVOLVED
Section 1(b), 15 U.S.C. 717(b) of the Natural Gas
Act, 52 Stat. 821 (1938) which provides:
“The provisions of this act shall apply to the trans-
portation of natural gas in interstate commerce, to
the sale in interstate commerce of natural gas for
resale for ultimate public consumption for domestic,
commercial, industrial, or any other use, and to
3
natural gas-companies engaged in such transportation
or sale, but shall not apply to any other transpor-
tation or sale of natural gas or to the local distribu-
tion of natural gas or to the facilities used for such
distribution or to the production or gathering of nat-
ural gas.”
STATEMENT
Petitioner Mississippi Power & Light Company
(MP&L) brought this action on August 30, 1974 against
United Gas Pipe Line Company (United) and Pennzoil
Company (Pennzoil) to recover damages in the sum of
$160 million for United’s breach of a long-term gas sales
contract entered into on Decémber 28, 1967. MP&L
alleged that United represented that it would be able to —
perform its obligations under the contract; that the repre-
sentation was false, and that MP&L, believing it to be
true, expended large sums of money in constructing and
maintaining power plant facilities designed to burn natural
gas as a primary fuel. MP&L also alleged that Pennzoil,
the former parent of United, directed and induced United
to breach the gas sales contract (App. G, infra, pp. A32-
A90).
The State of Mississippi’s motion to intervene as a party
plaintiff was granted (App. H, infra, p. A100), and it
filed its complaint in intervention, adopting MP&L’s com-
plaint in its entirety (App. I, infra, pp. A101-A102).
Jurisdiction of the district court was invoked on the
ground of diversity of citizenship, 28 U.S.C. 1332(a)(1).
United and Pennzoil filed separate motions to dismiss
MP&L’s complaint, or alternatively to stay the action
(App. J, infra, pp. A103-A106; App. K infra, pp. AiO7-
A111). They gave as grounds for their motions that the
4
complaint raised numerous issues within the competency
and primary jurisdiction of the Federal Power Commis-
sion.
Following oral argument on the motions, the District
Court ordered United and Pennzoil to file answers, which
they filed on March 24, 1975 (App. L, infra. pp. A112-
Al41; App. M, infra, pp. Al42-A153). The District
Court thereafter in a memorandum opinion delivered on
April 2, 1975 denied the motions to dismiss, but granted
the motions to stay (App. F, infra, pp. A29-A31). It
accordingly entered an order to that effect on April 4,
1976 (App. E, infra, pp. A27-A28).
In the memorandum opinion the District Court stated
that MP&L’s common law action for damages was oc-
casioned and necessitated, according to MP&L’s conten-
tions, by the misfeasance of United and Pennzoil, in that
United knowingly and deliberately oversold its supply of
natural gas well knowing that the ultimate effect would
be an insufficient supply of gas to discharge its contrac-
tual obligations to MP&L. It concluded, though, that
the Federal Power Commission probably had jurisdiction
of MP&L’s action, and that for that reason the District
Court should defer to the Commission a decision of the
controversy. It stayed the action to await a decision of
the Commission as to its primary jurisdiction.
While the Court of Appeals held that the District Court
“acted properly in staying the procedures and in referring
the case to the Federal Power Commission so that that
agency might exercise primary jurisdiction” it also held
that on remand “the District Court should prepare an
order which outlines with some specificity both the pro-
ceedings before the Commission that should be con-
5
cluded before the damage litigation should continue and
the issues upon which the Commission’s opinion is sought”
(App. A, infra, p. A21; p. Al9). Consequently it re-
manded with direction the case to the District Court for
the limited purpose of that Court modifying its stay order
(id, p. A21). Even so, though, the Court said “For a
court to attempt to determine whether it or the FPC
had final authority over all aspects of the damage action
on the record before the District Court would be singularly
unwise”; (id. p. Al7) and that “By requiring the Dis-
trict Court to prepare an order in which certain issues are
referred to the FPC, we do not intend to unduly restrict
that agency’s ability to assist the District Court. The
agency is free to make all findings that it believes will aid
the prompt resolution of the dispute”. (id, p. A19, n.14).
The Court of Appeals, however, in attempting to deter-
mine the aspects of the damage action which it believed
an informed opinion of the Commission would be of ma-
terial aid to the District Court, discussed what it con-
sidered were five components of the dispute. (id, pp.
A16-Al7).
It held that the Commission could determine whether
a tariff provision, such as Section 12.3 proposed by United,
would immunize United from liability and provide it with
a defense to the action by MP&L. (id, p. A 16). It
pointed to its opinion in State of Louisana v. Federal
Power Commission, 503 F.2d 844, 865-868 (1974) where
it, in reversing a curtailment order of the Commission,
also reversed a holding of the Commission that the cur-
tailment order would provide an absolute defense to the
damage actions against United, rendering unnecessary an
exculpatory tarit, such as Section 12.3 proposed by
United. (id, p. A7).
6
The Court of Appeals referred to a petition for declara-
tory order filed by United with the Commission a day or two
before oral argument in the District Court on the motions
to dismiss or alternatively to stay. It concluded that the
Commission had not clearly articulated what, if any, its
action would be on United’s petition. (id, p. A8). The
Commission’s order clearly shows it will not determine
whether United’s shortage was caused by negligent or
willful misconduct on United’s part (App. N infra, pp.
A154-A160).
Other determinations which the Court of Appeals ex-
pressed the belief might be of aid to the District Court
will be discussed under reasons for granting the writ.
Suffice it to say the Court said that “referral encompasses
the major part of the litigation”. (App. A, infra, p. A20).
REASONS FOR GRANTING THE WRIT
1. The Court of ‘Appeals decided in a way in conflict
with the decision of this Court in Nader v. Allegheny
Airlines, Inc., U.S. ___. (1976), 96 S.Ct. 1978, 48
L.Ed.2d 643' an important federal question regarding
the primary jurisdiction of the Federal Power Commission
of a common-law action for fraudulent misrepresentations
which induced the plaintiff to enter into a long-term natu-
ral gas sales contract with the defendant.
Even if the Commission’s informed opinion might “be
of material aid in the resolution of the damage action”,
as the Court of Appeals opined, that is not adequate
grounds for referring this action to the Commission for
1. Although Nader was decided after the Court of Appeals de-
livered its opinion on May 27, 1976, MP&L in its motion for rehear-
ing, urged the Court to follow federal law laid down in Nader.
7
trial and decision. In Ricci v. Chicago Mercantile Ex-
change, 409 U.S. 289, 304 (1973) the majority of a
5-4 divided court said that although it need not finally
define the administrative jurisdictional issue, nevertheless
in order for a governmental agency to exercise primary
jurisdiction, there must be sufficient statutory support
for it to decide the issues referred to it. And in Meat
Cutters Union v. Jewel Tea Co., 381 U.S. 676, 684
(1965) it said that the primary jurisdiction doctrine
comes into play only when enforcement of the claim in
a court “requires the resolution of issues which, under a
regulatory scheme, have been placed within the special
competence of an administrative body.”
The Natural Gas Act has not placed within the special
competence of the Federal Power Commission a common-
law action involving the question whether a jurisdictional
pipeline falsely misrepresented its gas supplies in order
to induce an electric utility to enter into a long-term gas
sales contract. Indeed the Act does not even confer juris-
diction of the direct sale on the Federal Power Commis-
sion, Panhandle Eastern Pipe Line Co. v. Public Service
Commission, 332 U.S. 507, 516-517 (1947). Nor does
the Act abrogate state law claims, such as the claims of
MP&L. MP&L’s claims, as were those in Nader, and the
statute (here the Natural Gas Act) are not “absolutely
inconsistent.” They, too, may coexist.
MP&L has not sought to restrain the Commission or
United from curtailing deliveries of gas to it, nor has it
interfered with the Commission in the exercise of its
curtailment jurisdiction. The curtailment orders are not
the gravamen of MP&L’s claim. They were issued because
United could no longer meet its contractual obligations.
MP&L’s claim is for United’s false misrepresentations of
the adequacy of its gas supplies. Whether United falsely
misrepresented the adequacy of its gas supplies is not
an issue in the curtailment proceedings. The power of
the Commission to issue curtailment orders stems from
its transportation jurisdiction under Section 1(b). This
limited jurisdiction does not vest the Commission with
authority to determine whether false misrepresentations
were made in a nonjurisdictional sale of natural gas.
2. The Court of Appeals, in holding that the Com-
mission’s resolution of five specific components of the
dispute, will materially aid the District Court has so far
departed from the accepted and usual course of judicial
proceedings as to call for an exercise of this Court’s
power of supervision.
First, the Court of Appeals has incorrectly held that
a component of the dispute is the cause of United’s short-
age. Even if it were necessary to determine the facts and
circumstances giving rise to United’s gas shortage, a
determination could be made only on the basis of evidence
received at a public hearing; and this would be true
whether the determination was made by the Commission
or a District Court.* The Commission’s expertise would
not be a deciding factor. Courts have greater expertise
than the Commission in weighing conflicting testimony,
and in resolving common-law actions involving applica-
2. The Court of Appeals says that the Commission is reviewing
the facts and circumstances that resulted in the shortage in order
to determine what is a fair, equitable, permanent curtailment plan
(App. A, infra, pp. Al5-A16). The Court is mistaken. The Commis-
sion is engaged in determining, in context of a curtailment plan,
whether a curtailment plan is unduly discriminatory which does not
place in the lowest priority new and enlarged service initiated at a
time when United knew it would soon be curtailing (App. N, injra,
p. A158).
9
tion of state law. Moreover, courts are unbiased in actions
against regulated industries.°
The cause of United’s gas shortage in the context of
the damage suit is a matter for the courts, and in the end
must be determined by the courts, Gordon v. New York
Stock Exchange, 422 U.S. 659 (1975).
The Court of Appeals was mistaken when it said that
the Commission had not clearly articulated what, if any,
its action would be on United’s petition for declartory
order. The petition was filed in an effort to persuade the
Commission to decide MP&L’s claims (App. A, infra,
p. A8). The Commission declined to issue a declartory
order on three of the four issues, One of the issues it
refused to include in its order was whether United’s
shortage was caused by its willful misconduct. This is
unmistakably shown by the following concluding para-
graph: “Good cause has not been shown for granting
United’s petition for declaratory order and motion to
consolidate, except as to the consolidation of the issue
of the effect of United’s tariff Section 12.1 on its general
liability to curtail direct sales customers.” (App. N, infra,
p. A160).
The Court of Appeals gives as a reason for referral,
“no federal policy or statute entrusts the decision to courts
in the first instance”, (App. A, infra p. Al7). The action,
in the constitutional sense, is a case or controversy within
the jurisdiction of the courts, Art. III Sec. 2 Cl. 1 Con-
3. In International Paper Co. v. Federal Power Commission, 476
F.2d 121, 125-126 (Sth Cir. 1973) and State of Louisiana v. Federal
Power Commission, 503 F.2d 844, 865-866 (Sth Cir. 1974) the court
reversed decisions of the Commission exonerating United from
liability on the ground of no record support, and further on the
ground that United might be liable for creating the need to curtail.
10
stitution of the United States. Courts have traditionally
exercised jurisdiction of actions for false representations.
It is not a question of whether a statute has entrusted a
decision to the courts in the first instance, but whether
a Statute has entrusted a decision to the Federal Power
Commission.
Second, the Commission cannot accept a tariff exculpat-
ing United from past liability for false misrepresentations.
The Natural Gas Act does not abrogate state-law or
common-law claims, nor does it authorize the Commission
to immunize a jurisdictional pipeline from claims arising
after, or even before the wrong was committed. No power
to immunize can be derived from the Commission’s au-
thority to curtail under its transportation jurisdiction.
The power to curtail is not coextensive with the right to
vindicate a wrong under state law. As was pointed out in
Nader, where Congress has sought to confer the power
to immunize “it was done so expressly.” It was there said:
The Court [Texas & Pacific R. Co. v. Abilene Cotton
Oil Co., 204 U.S. 426] conceded that a common-law
right, even absent a saving clause, is not to be
abrogated “unless it be found that the preexisting
right is so repugnant to the statute that the survival
of such right would in effect deprive the subsequent
Statute of its efficacy; in order words, render its
provisions nugatory.”
Whether the Natural Gas Act authorizes the Com-
mission to approve, as a part of a curtailment plan, a
tariff provision, such as proposed Section 12.3, which
would exculpate United from liability for state-law or
common-law claims is a question of law for the courts
and not the Commission.
11
The decision of the Court of Appeals is in conflict
with the principle announced in Gordon v. New York
Stock Exchange, 422 U.S. 659, 686-690 (1975). There
the Court held that in a treble damage antitrust suit
the question whether the system of fixed Commission
rates, over which the Securities and Exchange Commission
had active supervision under the Securities Exchange Act,
was beyond the reach of the antitrust laws, was a question
of law for the courts to decide, and in particular for the
court in which the antitrust claim was raised.
The decision of the Court of Appeals is also in conflict
with the principle enunciated in Breen Air Freight, Ltd.
v. Air Cargo, Inc., 470 F.2d 767 (2nd Cir. 1972) cert.
den. 411 U.S. 932 in which it was held that in a treble
damage antitrust suit where the issue was whether agree-
ments approved by the Civil Aeronautics Board (CAB),
immunized an air carrier from antitrust violations, the
courts would determine in the treble damage action
whether the agreements approved by the CAB met the
requirements of 49 U.S.C. Section 1384, which relieves
air carriers from antitrust laws on agreements between
air carriers approved by the CAB. It was there said at
p. 774
“Finally, we see no need to direct the district court
to stay, in its discretion, the proceedings in court
pending administrative action by the CAB. The issues
are not technical in nature, and there is no need
to seek uniformity. Compare Trans World Airlines,
Inc. v. Hughes, supra, with Pan American World
Airways, Inc. v. United States, supra. Furthermore,
the CAB cannot award damages, the only relief
which the plaintiffs request. Apgar Travel Agency
v. International Air Trans. Association, 107 F. Supp.
760, 711 (SDNY 1952); Slick Airways, Inc. v.
12
American Airlines, Inc., 107 F. Supp. 199, 211
(D.N.J. 1952). Whenever possible courts shoul
avoid duplicated or drawnout proceedings. The ef-
ficient administration of justice demands it. See
Allied Air Freight, Inc. v. Pan American World
Airways, Inc., supra, 393 F.2d at 445; Japan Line,
Ltd. v. Sabre Shipping Corporation, 407 F.2d 173
(2 Cir.), cert. denied, 395 U.S. 922, 89 S.Ct. 1774,
23 L.Ed.2d 239 (1969).
Likewise, whether the Commission can approve a tariff
provision exculpating United from past liability for false
misrepresentations is a question of law for the courts and
not the Commission. Public utilities cannot by tariff or
contract escape liability for their own negligence, false
misrepresentations or past wrongs. Bisso v. Inland Water-
ways Corp., 349 U.S. 85, 91-94 (1955); Fairfax Gas &
Supply Co. v. Hadary, 151 F.2d 939, 941 (4th Cir.
1945); 175 A.L.R. 38-74.
Nothing, therefore, would be gained by awaiting a
decision of the Commission on the proposed Section 12.3
tariff provision. Approval or disapproval of an exculpa-
tory tariff provision is not a matter within the discretion
of the Commission.*
Nor would anything be gained by awaiting a decision
of the Commission as to whether Section 12.1 of United’s
tariff exculpates United from liability for false misrepre-
4. In Pan American P. Corp. v. Superior Court, 366 US. 655,
665-66 the Court held that a pipeline company could recover an
overcharge under a gas purchase contract in an action filed in a state
court, even though the contract had been filed as the producer’s sate
schedule. It said that the rights under the contract were “traditional
common law claims” and they did not “iose their character because
it is common knowledge that there exists a scheme of federal regula-
tion of interstate transmission of natural gas.”
13
sentations. United must not believe that Section 12.1
exculpates it, otherwise it would not have urged the
approval of proposed Section 12.3.
Mr. Justice Brandeis, speaking for a unanimous court
in Great Northern Railway Co. v. Merchants Elevator
Co., 259 U.S. 285, 290 (1922), said: “Every question
of the construction of a tariff is deemed a question of
law; and where the question concerns an interstate tariff
it is one of federal law” (Emphasis added). He went on
to say at p. 294, that “The task to be performed is to
determine the meaning of words of the tariff which were
used in their ordinary sense and to apply that meaning to
the undisputed facts. That operation was solely one of
construction; and preliminary resort to the Commission
was, therefore, unnecessary.”
The rule laid down in Great Northern was reaflirmed
in United States v. Western P. R. Co., 352 U.S. 59, 69
(1956) and Brown & Sons Lumber Co. v. Louisville &
N. R. Co., 299 U.S. 393, 397 (1937). It was said in
Civil Aeronautics Board v. Modern Air Transport, 179
F.2d 622, 624 (2nd Cir. 1950), that “it has been con-
tinuously asserted that courts have original jurisdiction to
interpret tariffs, rules, and practices where the issue is one
of violation, rather than reasonableness.” The reasonable-
ness of Sections 12.1 and 12.3 is not an issue in MP&L’s
action.
Third, the gas sales contract, if it need be construed,
should not be referred to the Commission for construction,
but should be construed by the courts. It is a Mississippi
contract, and must be construed under the laws of that
State and in accordance with the canons of contract con-
struction. A construction of the contract by the Commis-
14
sion would not be binding on the courts.’ Moreover in
Merle E. Rowan vy. Allied Chemical Corp., 39 FPC 64
(1968) the Commission declined to decide contract ques-
tions referred to it by a federal district court on the ground
that it was not the policy of the Commission to decide
contract questions involved in a lawsuit being tried by a
court. The Court of Appeals clearly departed from the
accepted and usual course of judicial proceedings when
it held that questions regarding the interpretation of a
Mississippi contract for the nonjurisdictional sale of nat-
ural gas should be referred to the Commission.
Fourth, the Court of Appeals concluded that a fourth
component of the dispute which should be referred to the
Commission is MP&L’s request for compensation from
the customers of United who receive higher priorities. The
Court had reference to its opinion in Mississippi Public
Service Commission v. Federal Power Commission, 522
F.2d 1345 (Sth Cir. 1975) cert. den. 50 L.Ed. 149
(1976) where it held that the imposition of compen-
sation payments as a condition for the receipt of higher
priority gas is within the statutory power of the Commis-
sion over the movement of such gas in interstate com-
merce.
MP&L and the Mississippi Public Service Commission
have not asked that the compensation plan be made retro-
active. If a plan were adopted, as a part of a curtailment
program, it could not apply retroactively to curtailments
5. Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S. 263,
270 (1960); World Airways, Inc. v. Northeast Airlines, Inc., 349
F.2d 1007, 1011-1012 (1st Cir. 1965), cert. den. 382 U.S, 984;
Skelly Oil Co. v. FPC, 532 F.2d 177 (10th Cir. 1976); Gulf Oil
Corp. v. American Louisiana Pipe Line Co., 282 F.2d 401 (6th Cir.
1960); Warren Petroleum Corp. v. FPC, 282 F.2d 312 (10th Cir,
1960).
15
under prior plans because reparations are impermissible
under the Natural Gas Act.* A plan, if included in a
permanent curtailment program for United’s system, would
not immunize United from liability for accrued damages
suffered by MP&L. It might, at the most, reduce future
damages by the increased amounts paid by high priority
customers to United for the credit of MP&L and other low
priority customers. Consequently the trial of this action
for damages already suffered should not be stayed until
all of the issues in a permanent curtailment program are
tried and decided by the Commission and the courts on
petitions for review.
Fifth, the Court of Appeals would refer to the Com-
mission for determination whether the payment of dam-
ages for false misrepresentations might “significantly affect
the allocation decision.” There is no nexus between claims
for false misrepresentations and the Commission’s power
to curtail, or its power to determine the order of priority
of service. MP&L’s common-law claims should not be
extinguished on some theory that if United were held
liable it might violate the Commission’s curtailment orders
in an effort to mitigate the damages by delivering MP&L
greater volumes of gas than it was entitled to under
the curtailment orders. A reduction in liability to one
customer would expose United to liability to customers
who were excessively or unlawfully curtailed. Moreover,
a violation of the curtailment orders would expose United
to heavy criminal penalties under Sections 21 and 22, of
the Natural Gas Act, 15 U.S.C. 717t, 717u.
6. In F.P.C. v. Louisiana Power & Lighi Co., supra, the Court,
in upholding the curtailment jurisdiction of the Commission said in
406 U.S. at p. 644; “In addition a prescribed remedial order can
have only prospective application.”
16
3. The stay has not been kept within the bounds of
moderation. As was said in Landis v. North American
Company, 299 U.S. 248, 265 (1936) “The limits of a
fair discretion are exceeded.” The stay also, as was said in
County of Allegheny v. Frank Mashuda Company, 360
U.S. 185, 196-197 (1959) denies “that promptness of
decision which in all judicial actions is one of the elements
of justice”. In Ricci v. Chicago Mercantile Exchange,
supra Justices Marshall, Douglas, Stewart and Powell, in
their dissents, said in 409 U.S. at pp. 320-321 “And
surely the right to a ‘meaningful opportunity to be heard’
comprehends within it the right to be heard without un-
reasonable delay”.
It is self-evident that a referral of this action to the
Commission for it to determine “a major part of the liti-
gation” and make all findings “that it believes will aid the
prompt resolution of the dispute” will unduly delay a trial
in the District Court. First, the District Court, under the
opinion of the Court of Appeals, must prepare an order
which outlines with some specificity both the proceedings
before the Commission that should be concluded before
the litigation can continue, and the issues upon which
the Commission’s opinion is sought. Such an order could
be prepared only after an evidentiary hearing for the Court
of Appeals said that it would be singularly unwise for a
court to attempt to determine whether it or the FPC had
final authority over all aspects of the damage action on
the record before the District Court.
Second, the Commission would need to determine, after
notice and hearing, which of the issues referred to it by
the District Court it had an adequate staff and the ex-
pertise to make the determinations. It also would have to
determine whether there were other issues it could try
¥ one ainrenhCndll
17
where its findings might in its opinion aid the court in
resolving the dispute. Of even greater importance it needs
to decide whether the new issues could be determined
without unduly delaying a resolution of the issues for
which the proceedings were instituted.
Third, the Commission would have to find a time when
it could try the damage suit issues without interferring
with its statutory duties.
Fourth, the Commission would then have to try and
determine the damage suit issues.
Fifth, then there would be the delay incident to an
appeal to the court of appeals of the Commission’s find-
ings and order.
With all of this delay, still the Commission would not
have jurisdiction to right the wrongs done MP&L and its
customers. Moreover the District Court held in its memo-
randum (App. F, infra, p. A30) that the findings and
determination of the Commission would not be binding
on the courts in the damage suit actions.’ However the
Court of Appeals cautioned “We have been careful not
to articulate the exact effect of the findings of the Com-
mission upon the subsequent litigation. . . . We believe
that it is singularly inappropriate to determine at this
point in this complex litigation what the effect of the
Commission’s decision will be before the nature and
extent of the Commission’s action is ascertainable”, App.
A, infra, p. A20. Trial of the damage suit issues before
the Commission may, therefore, be an exercise in futility.
7. In Monsanto Company v. Federal Power Commission, 463 F.2d
799, 807 (D.C. Cir. 1972) it was held that the FPC’s determination
would only be “advisory”.
18
The Fifth Circuit in Louisiana Power & Light Com-
pany, supra, said in 526 F.2d at p. 910: “The Commis-
sion’s delay in acting on a permanent plan for the United
system is, of course, discouraging.” It also said in State
of Louisiana, supra, 503 F.2d at p. 864:
FPC should bear in mind that the question is not
whether United should ‘bear responsibility for the
shortage on its system’; rather it is who would get
the gas that is now available. FPC seems to have
been concerned with deciding the issue of United's
culpability. It would seem to us that that question
should be resolved in a damage suit.
The Federal Power Commission has not yet concluded
hearing commenced on December 21, 1970 for the pur-
pose of delineating a permanent curtailment plan for
United. Its curtailment orders have been reviewed and
reversed in International Paper Company v. Federal
Power Commission, 476 F.2d 121 (Sth Cir. 1973);
State of Louisiana v. Federal Power Commission, 503
F.2d 844 (Sth Cir. 1974); Mississippi Public Service
Commission v. Federal Power Commission, 522 F.2d
1345 (Sth Cir. 1975); and Louisiana Power & Light
Company v. Federal Power Commission, 526 F.2d 898
(Sth Cir. 1976). The failure of the Commission to obey
the mandate of the Fifth Circuit in Louisiana Power &
Light Company v. Federal Power Commission, supra,
resulted in the Court entering an order on November 13,
1976 modifying an interim curtailment plan for United’s
system, and directing obeyance of the Court’s mandate.
(App. O, infra, pp. A161-A168). The Commission by
order issued November 24, 1976 has taken steps to deter-
mine, as the Court had mandated, whether to continue in
RMS Eee ue io we
oa?
en ee
19
force the four-priority plan, which the Fifth Circuit held
had not been lawfully vacated, or to vacate the plan
(App. P, infra, pp. A169-A171). Referral to the Com-
mission of common-law damage action issues to be tried
and decided in the curtailment proceedings will further
delay the delineation of a permanent curtailment’ plan
for United’s system.
The Commission is understaffed and overworked.” The
need to expeditiously resolve the issues in this lawsuit
greatly outweighs any aid the FPC may be able to give
the District Court.’
This case has now been pending for more than two
years, and the curtailment proceedings for more than
six years, but the Commission is still attempting to deline-
ate a permanent curtailment plan for United. The evi-
dentiary record in the curtailment proceedings (RP71-29
et al Phase II) was recently closed on December 2, 1976.
The record contains 24,621 pages of testimony and 852
exhibits. Relatively short briefing schedules have been set
by the Presiding Administrative Law Judge. Obviously
8. The Chairman of the Commission in testifying before the
Senate Committee on Government Operations on May 27, 1976 said
that in January 1976 10,480 cases were pending before the Com-
mission; that the number had grown to 11,426 cases at the end of
February and to 14,454 cases at the end of March 1976. He testified
that the Commission was able to decide about 62 cases per week
or about 3,224 per year. He said the Commission was on a treadmill
and rapidly going backward; that the “system is in serious danger
of breaking down.” Obviously, the Commission is already four or
five years behind with its docket and getting further behind each
month.
9. The Courts must always balance the benefits of seeking agency’s
aid with the need to resolve disputes fairly yet as expeditiously as
possible. Meat Cutters Union v. Jewel Tea Co., 381 US. 676, 686
(1965).
20
the damage suit issues cannot be tried in that proceeding.
Trial of United’s petition for a declaratory order (Phase
III) has not commenced, but as pointed out earlier, supra,
p. 6, p. 9 the Commission has declined to issue a declara-
tory order on three of the four issues raised by United
(App. N, infra, pp. A154-A160), leaving only the ex-
culpatory tariff questions for determination. The stay
has not been kept within the bounds of moderation, and
MP&L has been denied promptness of decision which in
all judicial actions is one of the elements of justice.
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted,
SHERWOOD W. WISE
JosEPH P. WISE
WIsE, CARTER, CHILD,
STEEN & CARAWAY
Post Office Box 651
925 Electric Building
Jackson, Mississippi 39206
CLAYTON L. ORN
ANDERSON, BROWN, ORN & JONES
1122 Southwest Tower
Houston, Texas 77002
Attorneys for Petitioner
Mississippi Power & Light
Company
Al
APPENDIX A
MISSISSIPPI POWER & LIGHT COMPANY,
Plaintiff-Appellant
v.
UNITED GAS PIPELINE COMPANY
et al., Defendants-Appellees,
STATE OF MISSISSIPPI,
Plaintiff-Intervenor.
No. 75-2316.
UNITED STATES COURT OF APPEALS
Fifth Circuit.
May 27, 1976
Utility brought action against pipeline company and its
former parent for breach of contract. The United States
District Court for the Southern District of Mississippi at
Jackson, William Harold Cox, J., granted stay of all pro-
ceedings to await response of the Federal Power Commis-
sion as to its primary jurisdiction of curtailment question
and utility appealed. The Court of Appeals, Lewis R.
Morgan, Circuit Judge, held that referral was appropriate
inasmuch as FPC was presently resolving issues related to
curtailment plans, FPC assistant would be of material
aid to the District Court and the resolution of damage
action and none of the factors mitigating applicability of
the primary jurisdiction doctrine were preseat; and that
District Court should have been more precise in its stay
order by outlining with some specificity both the proceed-
ings before the FPC that should be concluded before
the damage litigation should continue and the issues upon
which the FPC’s opinion was sought.
Remanded with directions.
A2
Appeal from the United States District Court for the
Southern District of Mississippi.
Before THORNBERRY, COLEMAN and MORGAN,
Circuit Judges.
LEWIS R. MORGAN, Circuit Judge:
This appeal involves another facet of the problems
created by the nationl energy shortage. Specifically, this
litigation was commenced by Mississippi Power and Light
Co. (MP&L) for breach of contract against one of the
major natural gas pipeline companies, United Gas Pipe-
line (United) and its former parent, Pennzoil Co. Al-
leging failure to supply the amounts of gas provided by
the contract and basing its action solely on state law,
MP&L brought a diversity action against United and
Pennzoil in the United States District Court for the
Southern District of Mississippi. After filing their answers,
United and Pennzoil asserted the primary jurisdiction of
the Federal Power Commission. The district court granted
a stay of all proceedings “to await the response of the
Federal Power Commission as to its primary jurisdiction
of this curtailment question. . . .”’ MP&L appeals’ the
1. The district court order states in relevant parts:
It is the opinion of this Court that under the Natural Gas
Act that the Federal Power Commission probably has jurisdiction
of this curtailment controversy, and that the Court at this time
should defer to its decision as to the authority of the Commission
in this controversy, which is in the process of being handled by
that agency; and while the agency’s decision is not final and
binding on the court, it must be sought at this time.*
The motion of the defendants to dismiss will be denied. The
motion to stay proceedings here to await response of the Fed-
eral Power Commission as to its primary jurisdiction of this
curtailment question will be granted. In the meantime, all other
and further processes of this Court will be stayed to await the
ultimate answer of the Commission as to this paramount and
controlling question of law.
* Federal Power Commission v. Louisiana Power & Light
A3
district court’s order basically arguing that the Federal
Power Commission does not have primary jurisdiction
over any of the issues raised in this action. MP&L argues,
moreover, that even if the FPC does have primary juris-
diction, the district court erred in not making its order
more specific by stating which issues should be referred to
the FPC. Finally, MP&L objects to the district court’s
stay of discovery. While we agree that the district court
order should be more specific, we hold that the court was
correct in staying the proceedings in order that the Federal
Power Commission may exercise primary jurisdiction in
this matter.
I. THE CURTAILMENT CONTROVERSY:
In order to more clearly understand the issues presented
by this complex litigation, a review of the natural gas
shortage controversy and the litigation accompanying it is
helpful.’
Company, et al, 406 U.S. 621, 92 S.Ct. 1827, 1842, [32 L.Ed.
2d 369] the Court among other things held: “In that circum-
stance, the District Court and the Court of Appeals were obliged
to defer to the FPC for the initial determination of its jurisdic-
tion. See Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41,
58 S.Ct. 459, 82 L.Ed. 638 (1938). The need to protect the
primary authority of an agency to determine its own jurisdiction
‘is obviously greatest when the precise issue brought before a
court is in the process of litigation through procedures originating
in the [agency]. While the [agency’s] decision is not the last
word, it must assuredly be the first.’ ”
2. This court granted leave to appeal from an interlocutory order
on May 28, 1975.
3. See, e. g., FPC v. Louisiana Power and Light Co., 406 U.S.
621, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972); Louisiana Power and
Light Co. v. FPC, 526 F.2d 898 (Sth Cir. 1976); Fort Pierce Utility
Authority of City of Fort Pierce v. FPC, 526 F.2d 993 (Sth Cir.
1976); Mississippi Public Service Commission v. FPC, 522 F.2d
1345 (Sth Cir. 1975); State of Louisiana v. FPC, 503 F.2d 844 (Sth
A4
By the spring of 1971, several pipeline companies, in-
cluding United, had notified the Federal Power Commis-
sion that their supplies were inadequate to meet commit-
ments to their customers. United, as well as other pipeline
companies, proposed to meet this shortage situation by
instituting curtailment plans that would allocate the avail-
able gas among their customers. Most of these plans had
been adopted by the pipelines during a temporary short-
age created by the Korean war. Needless to say, these
plans were often unsuitable as a method of curtailing
supplies during the present period of continual and severe
shortage. The FPC, in Order No. 431,* Statement of Gen-
eral Policy, ordered the pipelines to institute all necessary
steps to alleviate the shortage and to submit new tariffs
which would incorporate revised curtailment plans. Under
United’s temporary curtailment plan filed pursuant to
Order 431, MP&L, a utility who used natural gas as a
fuel to generate electricity, was placed in the category
to be curtailed first.’ Therefore, MP&L has been receiving
substantially less natural gas than it had before curtail-
ment.
The necessity for curtailment gave rise to two distinct
problems. The first question was how much of the avail-
able supply of natural gas each of the pipeline’s customers
Cir. 1974); Atlanta Gas and Light Co. v. FPC, 476 F.2d 142 (Sth
Cir. 1973); International Paper Co. v. FPC, 476 F.2d 121 (Sth Cir.
1973).
4. 49 FPC 85 (1973).
5. Originally, MP&L was given a preference over other customers.
The Commission, however, ordered that utilities like MP&L be placed
in the lowest priority for gas supplies. While this court has remanded
to the Commission for further evidence on this point, the court has
allowed United to operate through the present heating season under
a plan that denied MP&L any priority. See Louisiana Power and
Light Co. v. FPC, 526 F.2d 898 (Sth Cir, 1976).
AS
would receive. The second question was who would bear
the economic consequences of the shortage. Those cus-
tomers who were curtailed in whole or in part would have
to seek alternative sources of energy which would gene-
rally be available at significantly increased cost, and some-
how this additional cost would have to be allocated. The
various parties, therefore, sought to insure that others bore
the financial burden of curtailment.
United feared liability on two separate theories. First,
a curtailed customer might bring a general breach of con-
tract action alleging failure to deliver the amounts of gas
stated in the contract. Second, a customer could bring an
action under a specific clause—the substitute fuel clause—
contained in many of United’s contracts, including its
agreement with MP&L. That provision arguably requires
United to compensate a customer for the additional cost
of obtaining other types of fuel to meet the customer’s
energy needs. While United contended that the substitute
fuel clause did not apply in a general curtailment situation
and if it did the language of the clause limited liability to
the amount of fuel purchased by the customer for only
a few days, should these contentions fail, United faced
a possibility of over a billion dollars in liability.
Even before suit was instituted, United sought by means
of proceedings before the Federal Power Commission to
insure that it would not bear the financial cost of curtail-
ment. In 1970, United sought a declaratory order from
the Commission which would hold that § 12.1 of its
tariff on file with the Commission immunized United from
liability. That section provided that curtailment could
6. See United Gas Pipe Line Company, FPC Docket No. RP71-
29. MP&L has contended from the beginning that no tariff provision
can affect its agreements with United,
A6
be instituted “without liability.” United also sought to file
with the Commission proposed § 12.3 of the tariff that
stated in relevant part,
. nor shall seller (United) be obligated to pay
or credit such customers any sums with respect to
substitute fuels burned by such customers during
such a period of proration or interruption.
The Commission rejected United’s proposal in Opinion
606’ and stated that,
implementation of the curtailment plan itself, pur-
suant to our procedures, would be an absolute de-
fense for United against all claim for specific per-
formance, damages, or other requests for relief under
these contracts affected by curtailment that may be
initiated in the courts.
In /nternational Paper Co. v. Federal Power Commission,
476 F.2d 121 (Sth Cir. 1973), however, this court
vacated that statement in Opinion 606 as “mere dicta”
totally lacking evidentiary support. /d. at p. 125.
Subsequently, United resubmitted § 12.3, but in Opin-
ion 647-A* the Commission again rejected United’s pro-
posed exculpatory language. This time, the Commission
reasoned that United would only be vulnerable under a
general breach of contract theory if the curtailment had
resulted from its own negligence, bad faith, or other
wrongful conduct. The Commission had found, however,
that United had not acted “improvidently” and that it
would not therefore be held liable for damages. Next, the
7. 46 FPC 786 (1971); See also, Opinion Nos. 606-A, 46 FPC
1290 (1971).
8. 49 FPC 1211 (1973). See also, 49 FPC 179 (1973).
A7
Commission stated that substitute fuel clauses required
United at most to reimburse its customers the extra costs
of substitute fuels for only “a maximum of seven days.”
Then, the Commission opined that if a court found that
the clause created “open ended” liability, the FPC would
be “compelled to find such clauses are unduly preferential.”
The Commission reasoned that the prospect of open ended
liability might cause United to disobey FPC orders and
in some way favor customers who had substitute fuel
clauses in their contracts.
Once again, in State of Louisiana v. Federal Power
Commission, 503 F.2d 844 (Sth Cir. 1974), this court
vacated the FPC’s findings. The court pointed out that
the proper determination of whether United was liable
for breach of contract absent an exculpatory tariff such
as § 12.3 would be decided by a court in the contract
actions. Then, the court found the FPC’s interpretation
of the substitute fuel clauses to be an “assertion (which)
cannot stand without supporting reasons.” Jd. at 868.
Furthermore, the court instructed the FPC not to assume
that United was not liable for breach of contract but
to evaluate the proposed § 12.3 in light of possible con-
tract liability. The court stated at page 867:
We think the Commission should have determined
what would happen with the proposed change in
effect. Can a tariff provision remove general con-
tractual liability? If the provision would remove
liability, would the unavailability of damages subject
United’s curtailed customers to ‘any undue prejudice
or disadvantage?’ In short, since the Commission
cannot adjudicate contract liability, it should evalu-
ate section 12.3 on the assumption that United faces
possible liability—not on the assumption it is immune,
A8
In State of Louisiana, the court also reversed the Com-
mission’s decision on various other aspects of United’s
curtailment plan. On remand, the FPC established pro-
cedures to meet the objections of this court.’ Part of
these procedures, delineated Phase III by the Commission,
were specifically designed to determine the advisability of
adopting § 12.3 as a part of United’s tariff. At present,
hearings are being conducted as a part of these Phase III
proceedings.
United also filed with the Commission on March 3,
1975, a petition requesting a declaratory order. Under
United’s request, the Commission would determine, inter
alia, (1) whether the availability of damages to some of
United’s curtailed customers would create an undue prefer-
ence in violation of the Natural Gas Act, (2) whether
§ 12.1 of United’s tariff would preclude liability to certain
customers such as MP&L and (3) whether the shortage
was caused by the negligence or willful misconduct of
United. The Commission has not clearly articulated what,
if any, its action will be on United’s petition.’
On August 5, 1974, Mississippi Public Service Com-
mission (MPSC) filed a petition for extraordinary relief
before the Commission on behalf of MP&L and other
Mississippi utilities. In this petition, the utilities sought
9. Order on Remand Denying Motion for Immediate Modification
of Curtailment Plan, United Gas Pipe Line Company, FPC Docket
Nos. RP71-29 and RP71-120, March 7, 1975 on rehearing May 2,
1975.
10. See Order partially granting petition for declaratory order
and motion to consolidate, United Gas Pipe Line Company, (Phase
Ill) FPC Docket Nos. RP71-29, RP75-71, RP75-69, August 20,
1975; Supplemental Order modifying order issued December 9, 1975
and referring ruling to Commission for review, United Gas Pipe Line
Company, (Phase III) FPC Docket Nos. RP71-29, RP75-69 and
RP75-71, December 16, 1975.
A9
compensation from those customers of United who re-
ceived a higher preference for gas. Under their proposal,
a customer who received full gas supplies would have to
make payments to customers of United who had been
curtailed. In this way, the utilities sought to allocate
among all the customers of United the burden of cur-
tailment. The Commission denied MPSC’s petition on the
ground that it was without jurisdiction to require such
compensation. This court in Mississippi Public Service
Commission v. Federal Power Commission, 522 F.2d
1345 (Sth Cir. 1975), rejected the Commission’s jur-
isdictional argument and remanded for determination of
whether compensation payments should be a condition
for receipt of a higher priority in a gas curtailment plan.
On August 30, 1974, MP&L brought this present action
against United and its former parent Pennzoil. As has
been outlined above, MP&L sought damages of approxi-
mately $160,000,000 from United for breach of contract.
The district court stayed these proceedings pending the
exercise of primary jurisdiction by the Federal Power
Commission, and MP&L objects to that stay.
Il. PRIMARY JURISDICTION:
[1] The doctrine of primary jurisdiction has evolved as
a means of reconciling the functions of administrative
agencies with the judicial function of the courts.'' When
11. See generally, Travis, Primary Jurisdiction, A General Theory
and Its Application to the Securities Exchange Act, 63 Calif. L. Rev.
926 (1975); Jaffe, Primary Jurisdiction, 77 Harv. L. Rev. 1037
(1964); Handler Regulation v. Competition, 44 U. Conn. L. Rev.
191 (1975); King, The “Arguably Lawful” Test of Primary Jurisdic-
tion in Antitrust Litigation Involving Regulated Industries, 40 Tenn.
L. Rev. 617 (1973); Robinson, Antitrust Developments: 1973, 74
Colum. L. Rev. 163 (1974); Note, Primary Jurisdiction in Antitrust
Cases. Three recent decisions, 42 U. Cinn. L. Rev. 725 (1973).
Al0
legal disputes develop that directly affect an industry sub-
ject to regulation, the need arises to integrate the regula-
tory agency into the judicial decision making process.
One method to accomplish integration is to have the
agency pass in the first instance on those issues that are
within its competence. In short, the agency should have
the first word. Marine Engineers Beneficial Assn. v. Inter-
lake Steamship Co., 370 U.S. 173, 185, 82 S.Ct. 1237,
1243, 8 L.Ed.2d 418, 426 (1962).
Reference to administrative agencies was first estab-
lished in those cases where Congress by statutory pro-
vision had allocated to the agency the power to con-
clusively decide the contested issue. For example, the In-
terstate Commerce Commission is the exclusive agency
for determining the reasonableness of rates; therefore, a
court must defer to that agency when a party challenges
a rate in a legal proceeding. Texas and P. R. Co. v. Abi-
lene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51
L.Ed. 553 (1907). Under this methodology, before in-
voking the doctrine of primary jurisdiction it was impera-
tive that the court determine whether the agency’s deci-
sion would be definitive. There was the implication that if
the agency’s conclusion did not finally resolve the issue,
reference would not be warranted. Public Utilities Com-
mission v. United States, 355 U.S. 534, 539, 78 S.Ct.
446, 450, 2 L.Ed.2d 470, 475 (1958); Montana-Dakota
Utilities Co. v. Northwestern Public Service Co., 341 U.S.
246, 254, 71 S.Ct. 692, 696, 95 L.Ed. 912, 920 (1951).
Applying the doctrine of primary jurisdiction only in
those situations where the issue was solely within the
agency's competence created difficulties in integrating the
administrative agency’s position with the judicial process.
First, the court would have to determine, often on the
Al}
barest of pleadings and in the most complicated litigation,
to which decision making body—the court or the agency
—Congress had allocated the resolution of the issue. Ad-
ministrative jurisdiction, however, is difficult to determine
without some factual underpinnings and often depends
upon the particular context in which the issue arises. Cf.
Federal Power Commission v. Louisiana Power and Light,
406 U.S. 621, 647, 92 S.Ct. 1827, 1841, 32 L.Ed.2d 369,
388 (1972). This difficulty in determining jurisdiction is
particularly acute where the agency, such as the Federal
Power Commission, has only a limited grant of jurisdic-
tion from Congress. Compare Federal Power Commission
v. Panhandle Eastern Pipeline Co., 337 U.S. 498, 69 S.Ct.
1251, 93 L.Ed. 1499 (1949), with United Gas Improve-
ynent Co. v. Continental Oil Co., 381 U.S. 392, 85 S.Ct.
1517, 14 L.Ed.2d 466 (1965). Secondly, such limited
invocation of the doctrine of primary jurisdiction would
emasculate the agency’s ability to participate in those
cases where a final decision was left to the courts even
though the litigation had a profound impact on the regu-
latory process. Therefore, the courts have often required
the prior resort to an administrative agency before allow-
ing the litigation to proceed.”*
Recently, the Supreme Court has required reference to
the relevant regulatory agency without even deciding
whether that agency has jurisdiction to finally determine
the basic dispute in the case. In Ricci v. Chicago Mercan-
tile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d
525 (1973), the Court dealt with an antitrust complaint
attacking a commodity exchange’s decision to transfer a
membership of the exchange. The defendant had sought
12. Robinson, Antitrust Developments: 1973, 74 Colum. L. Rev.
163, 174-179 (1974).
Al2
reference to the Commodity Exchange Commission, but
there was considerable dispute over whether the Com-
mission had jurisdiction to resolve the contested issues.
The Supreme Court stated at page 304, 93 S.Ct. at page
582, 34 L.Ed.2d at page 537:
We need not finally decide the jurisdictional issue
for present purposes, but there is sufficient statutory
support for administrative authority in this area that
the agency should at least be requested to institute
proceedings.
The Court then went on to state that it was “very likely
that a prior agency adjudication of this dispute will be a
material aid in ultimately deciding” the issue. Jd. at 305,
93 S.Ct. at 582, 34 L.Ed.2d at 537.
Even before Ricci, this court had mandated referral to
the Federal Communication Commission even though
that agency decision might not have been “the end to the
matter.” Carter v. American Tel. & Tel. Co., 365 F.2d
486, 499 (Sth Cir. 1966). In Carter, we required that the
doctrine of primary jurisdiction be invoked where there
was only a “strong possibility” that the FCC decision
would resolve the dispute. Jd at 497. See also, Southern
Railway Co. v. Combs, 484 F.2d 145 (6th Cir. 1973).
Also, this court had referred to the very agency involved
in this litigation, the Federal Power Commission, the issue
of whether a particular dispute was encompassed by that
agency’s jurisdictional grant. J. M. Huber Corp. v. Den-
man, 367 F.2d 104 (Sth Cir.. 1966); see also, Agri-
cultural Trans. Assoc. of Texas v. King, 349 F.2d 873
(Sth Cir. 1965); Louisville and Nashville Railroad v.
Knox Home, 343 F.2d 887 (Sth Cir. 1965). See also,
A13
Monsanto Co. v. Federal Power Commission, 146 U.S.
App.D.C. 396, 463 F.2d 799 (1972).
[2] A court’s discretion to seek the administrative
agency’s input in those cases where the agency will be a
“material aid” to the ultimate decision is not unlimited. In
this period of expanding federal regulation, there are few
disputes in which reference to some federal or state
agency might not conceivably be of material aid to the
court."* As the Supreme Court stated in United States vy.
Western Pacific Railroad Co., 352 U.S. 49, 77 S.Ct. 161,
1 L.Ed.2d 126 (1956),
No fixed formula exists for applying the doctrine of
primary jurisdiction. In every case the question is
whether the reasons for the existence of the doctrine
are present and whether the purposes it serves will
be aided by its application in the particular litiga-
tion.
See also, Watts v. Missouri-Kansas-Texas Railroad Co.,
383 F.2d 571, 581 (Sth Cir. 1967); CAB v. Modern Air
Transp. Inc., 179 F.2d 622, 625 (2d Cir. 1950).
[3-10] The courts should be reluctant to invoke the
doctrine of primary jurisdiction, which often, but not al-
ways, results in added expense and delay to the litigants
where the nature of the action deems the application of
the doctrine inappropriate. While one cannot easily recon-
cile all the cases wherein referral was denied, there was a
few general situations in which referral is often unwar-
ranted. If, under no conceivable set of facts, the agency
could immunize what would be a clear violation of fed-
13. King, The “Arguably Lawful” Test of Primary Jurisdiction
in Antitrust Litigation Involving Regulated Industries, 40 Tenn. L.
Rev. 617, 657 (1974).
Al4
eral law, referral would be inappropriate. Federal
Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 78 S.
Ct. 851, 2 L.Ed.2d 926 (1958). In implementing the na-
tional policy of free competition as embodied in the anti-
trust laws, the court normally should not defer where the
issue is not dissimilar from that encountered in nonregu-
lated industries. See United States v. Philadelphia National
Bank, 374 U.S. 321, 339, 83 S.Ct. 1715, 1728, 10 L.Ed.
2d 915, 930 (1963); California v. Federal Power Com-
mission, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54
(1962). Deference is particularly inappropriate where the
litigation deals with a single event which requires no con-
tinuing supervision by the regulatory agency. Cf. Federal
Maritime Commission v. Seatrain Lines, Inc., 411 U.S.
726, 93 S.Ct. 1773, 36 L.Ed.2d 620 (1973). The nature
of relief sought, moreover, is also relevant consideration
in deciding whether to refer to the agency. The court in
instituting injunctive relief may be able to provide ade-
quate flexibility to coordinate its decision with subsequent
regulatory action. Otter Tail Power Co. v. United States,
410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973). In
addition, in those cases where Congress has determined
by statute that the courts should decide the issue in the
first instance, primary jurisdiction should not be invoked.
Mercury Motor Express v. Brinke, 475 F.2d 1086 (Sth
Cir. 1973). Likewise, when the agency’s position is suf-
ficiently clear or nontechnical or when the issue is peri-
pheral to the main litigation, courts should be very reluc-
tant to refer. Great Northern Railway Co. v. Merchants
Elevator Co., 259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 941
(1922); Shew v. Southland Co., 370 F.2d 376 (Sth Cir.
1966); Strickland Transportation Co. v. United States,
334 F.2d 172 (Sth Cir. 1964). Finally, the court must
Al5
always balance the benefits of seeking the agency’s aid
with the uced to resolve disputes fairly yet as expedi-
tiously as possible. Cf. Local 189, Amalgamated Meat
Cutters v. Jewel Tea Co., 381 U.S. 676, 686, 85 S.Ct.
1596, 1600, 14 L.Ed.2d 640, 647 (1965); Foremost In-
ternational Tours v. Quantas Airways Ltd., 525 F.2d 281
(9th Cir. 1975), petition for cert. filed, 44 L.W. 3533
(March 23, 1976).
Ill. THE PRESENT LITIGATION:
{11, 12] In this litigation, referral is particularly ap-
propriate. While the Federal Power Commission’s juris-
diction is somewhat limited, the Natural Gas Act, as in-
terpreted by the Courts, has provided the Commission
with the statutory basis for pervasive regulation of the
curtailment question. See Louisiana Power and Light v.
Federal Power Commission, supra; see also Fort Pierce
Utility Authority v. Federal Power Commission, 526 F.
2d 993 (Sth Cir. 1976); Consolidated Edison Co. v. Fed-
eral Power Commission, 168 U.S.App.D.C. 92, 512 F.2d
1332, modified, 171 U.S.App.D.C. 55, 518 F.2d 448
(1975). The Commission is presently involved in resolv-
ing issues which have a direct impact on civil litigation in-
volving curtailment plans. The advisability of invoking
primary jurisdiction is greatest when the issue is already
before the agency. Louisiana Power and Light v. Federal
Power Commission, supra, at 910; Industrial Communica-
tions System Inc. v. Pacific Tel. & Tel. Co., 505 F.2d
152, 157 (9th Cir. 1974); MCI Communications Corp.
v. American Tel. & Tel. Co., 496 F.2d 214, 223-24 (3rd
Cir. 1974). The Commission, moreover, is reviewing in
some detail the facts and circumstances that resulted in
the present shortage in order to determine what is a fair,
Al6
equitable, permanent curtailment plan. Indeed, this court
has already stated in a similar action that referral to the
FPC is preferred. Atlanta Gas and Light Co. v. Federal
Power Commission, 476 F.2d 142, 151 (Sth Cir. 1973).
[13, 14] There also can be no doubt that the Com-
mission’s informed opinion will be of material aid to the
district court in the resolution of the damage action. In
five specific components of the dispute the Commission’s
assistance would be significant. First, the Commission
can determine in detail the facts and circumstances that
resulted in the severe shortage United is experiencing.
Development of the factual context by those expert in the
area, is an established basis for primary jurisdiction. Far
East Conference v. United States, 342 U.S. 570, 72 S.Ct.
492, 96 L.Ed. 576 (1952). Second, the Commission
could determine whether to accept an exculpatory tariff
from United such as proposed § 12.3. In reaching this de-
cision, the Commission could also determine whether a
tariff provision can immunize United from liability and
particularly whether such a tariff would provide United
with a defense in this suit by MP&L. Certainly, the in-
terpretation and implementation of a tariff is a question
properly passed upon in the first instance by the Commis-
sion, and reference by a court to a regulatory agency may
not even be discretionary on such an issue. /nterstate
Commerce Commission v. Atlantic C.L.R. Co., 323 U.S.
576, 600-601, 86 S.Ct. 1000, 1014-1015, 16 L.Ed.2d
109, 126 (1966); United States v. Western P. R. Co.,
352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956);
Watts v. Missouri-Kansas-Texas Railroad Co., supra.
Third, the Commission’s interpretation of the United-
MP&L contract provisions that might possibly limit dam-
ages would aid a court in the ultimate decision. See, J. M.
Al7
Huber Co. v. Denman, supra. Fourth, the Commission
is presently reviewing a request by MP&L for compensa-
tion from the customers of United who receive higher
priorities. In that proceeding, MP&L seeks payment for
some of the very damages which it claims in this damage
action. Finally, the Commission could clearly articulate
whether in its view the presence or absence of damages
significantly affects the allocation decision. While the
Commission has at times stated that it believes such an
impact is evident, see, State of Louisiana v. Federal
Power Commission, supra, referral of this damage action
would give the Commission an opportunity to articulate
its rationale and support it with relevant findings of fact.
In short, there are several aspects of the damage action
that the Commission decisions may either resolve for or,
at a minimum, be of material assistance to the trial court.
See, Ricci v. Chicago Mercantile Exchange, supra; Carter
v. American Tel. & Tel. Co., supra.
None of the factors mitigating the applicability of the
primary jurisdiction doctrine are present. First, the cur-
tailment question is extremely complicated, affecting
energy policy throughout the entire nation. For a court
to attempt to determine whether it or the FPC has final
authority over all aspects of the damage action on the
record, before the district court would be singularly un-
wise. Second, here there are circumstances such as the
addition of § 12.3 to United’s tariff that might immunize
United from liability. Third, no federal policy or statute
entrusts the decision to courts in the first instance. Cer-
tainly, these curtailment damage actions are vastly dis-
similar to the bulk of federal diversity contract litigation.
Finally, the FPC has stated that damage actions could dis-
rupt its resolution of the curtailment problem—a problem
A18
which all parties agree is likely to be a continual difficulty
for quite some time. In balance, we believe that the Com-
mission’s assistance will be of “sufficient aid to the court
that the action should not go forward without making
reasonable efforts” to obtain the FPC’s assistance. Chicago
Mercantile Exchange v. Deaktor, 414 U.S. 113, 115, 94
S.Ct. 466, 467, 38 L.Ed.2d 344, 347 (1973).
MP&L’s reliance on our opinions in /nternational
Paper, supra, and State of Louisiana, supra, for the propo-
sition that no issue in this case is subject to the primary
jurisdiction of the FPC is misplaced. There the court
dealt with the Commission’s refusal to institute United’s
proposed exculpatory tariff. The Commission, acting upon
an inadequate evidentiary basis, had concluded that such
a tariff was unnecessary because United was immune from
damages. We vacated such statements by the Commission
because they lacked evidentiary support. We also stated
that the contractural liability of United, absent an excul-
patory tariff, should be finally determined in a court of
law. Nothing we said in either case, however, implied
that although a court will make the final determination,
that court could not and should not seek the Commission’s
assistance pursuant to the doctrine of primary jurisdiction
before resolving the litigation.
[15] While we agree that the district court properly
stayed proceedings pending the decision of the Federal
Power Commission, we believe the district court should
have been more precise in its order. The district court
simply stayed all proceedings pending future action by
the Federal Power Commission. In its present posture,
the United proceedings before the Commission could ter-
minate with several of the issues that might be relevant
to the damage action still unresolved. For example, the
Al19
Commission might determine that an exculpatory pro-
vision such as proposed § 12.3 could not immunize
United from liability and terminate all proceedings con-
cerning the damage question. In such a situation, it would
be even more important for the Commission to state
its interpretation of United’s contract provisions. In addi-
tion, the Commission is presently resolving the issues
concerning the facts underlying United’s shortage in pro-
ceedings intended to develop a permanent curtailment
plan. We believe it would be beneficial for the Commission
to address the issue of contract liability in a proceeding
where the damage action was clearly before it. Reference
by the district court of an order to the Commission which
specifically outlines those issues in which the courts seeks
assistance would provide the Commission with a context
to focus on the damage action. Part of the difficulty that
has resulted in the United litigation has been the tendency
of the Commission, in almost an aside, to resolve the
question of United contract liability while its focus has
been primarily on developing a curtailment plan. On
remand, the district court should prepare an order which
outlines with some specificity both the proceedings before
the Commission that should be concluded before the dam-
age litigation should continue and the issues upon which
the Commission’s opinion is sought.** See, International
Ass'n, Etc. v. United Contractors, Etc., 483 F.2d 384,
400-401, 404, modified 494 F.2d 1353 (3rd Cir. 1974).
[16] In its final contention, MP&L argues that the
district court erred in not allowing discovery to continue
14. By requiring the district court to prepare an order in which
certain issues are referred to the FPC, we do not intend to unduly
restrict that agency’s ability to assist the district court. The agency
is free to make all findings that it believes will aid the prompt
resolution of the dispute.
A20
and proceeding to trial on those issues which were not
referred to the Commission. While the district court
has an affirmative obligation to resolve those issues in
the litigation which, if they are sufficiently distinct, are
not referred to the Commission, Louisville and Nashville
Railroad Co. v. Knox Homes Corp., supra at 895 (Sth
Cir. 1965), in a suit such as this one where referral
encompasses the major part of the litigation the district
court has discretion to stay all proceedings.’® Chronicle
Publishing Co. v. NBC, 294 F.2d 744, 749 (9th Cir.
1961).
Finally, we add a note of caution. We have been care-
ful not to articulate the exact effect of the findings of
the Commission upon the subsequent litigation. The dis-
trict court stated in its order that the Commission’s de-
cision would not be binding upon the court. We believe
that it is singularly inappropriate to determine at this point
in this complex litigation what the effect of the Commis-
sion’s decisions will be before the nature and extent of
the Commission’s action is ascertainable. While, as we
have stated before, the court will finally determine United's
liability in the damage action, we express no opinion as
to the degree to which the trial court in reaching its
decision will be bound by prior agency determination.
Once the Commission decides the issues referred to it by
the district court, there will be adequate time to determine
the proper procedures for reviewing such findings and their
15. According to United’s brief, discovery is proceeding in various
other similar actions brought against United in federal and state
courts. Nothing we say here is meant to deny the district court the
power to allow discovery if after preparing a new order the court
believes that allowing discovery will aid in the resolution of the
dispute.
A21
effect on the subsequent litigation. Cf. Carter v. American
Tel. & Tel. Co., supra at 499-500.
In conclusion, we believe the district court acted prop-
erly in staying the procedures and in referring the case to
the Federal Power Commission so that that agency might
exercise primary jurisdiction. We also believe that the
district court should have been more precise in its order
staying the litigation. We therefore remand to the district
court for the limited purpose of modifying its order.
Remanded with directions.
A22
APPENDIX B
IN THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 75-8134
(Filed May 28, 1975)
MISSISSIPPI POWER & LIGHT COMPANY, and
STATE OF MISSISSIPPI, Petitioners,
versus
UNITED GAS PIPE LINE COMPANY and
PENNZOIL COMPANY, Respondents.
On Application for Leave to Appeal from an
Interlocutory Order
Before THORNBERRY, MORGAN and RONEY Cir-
cuit Judges.
BY THE COURT:
IT IS ORDERED that leave to appeal from the inter-
locutory order of the United States District Court for
the Southern District of Mississippi entered on April 4,
1975, is
GRANTED.
A23
APPENDIX C
UNITED STATES COURT OF APPEALS
For The Fifth Circuit
October Term, 1975
No. 75-2316
D. C. Docket No. CA-J74-185(C)
MISSISSIPPI POWER & LIGHT COMPANY,
Plaintiff-Appellant,
versus
UNITED GAS PIPE LINE COMPANY, ET AL.,
Defendants-Appellees,
STATE OF MISSISSIPPI,
Plaintiff-Intervenor.
Appeal from the United States District Court for the
Southern District of Mississippi
Before THORNBERRY, COLEMAN and MORGAN,
Circuit Judges.
JUDGMENT
This cause came on to be heard on the transcript of the
record from the United States District Court for the
Southern District of Mississippi, and was argued by
counsel;
A24
ON CONSIDERATION WHEREOF, It is now here
ordered and adjudged by this Court that the order of the
District Court appealed from, in this cause be, and the
same is hereby, remanded to the said District Court with
directions in accordance with the opinion of this Court;
It is further ordered that plaintiff-appellant pay to
defendants-appellees, the costs on appeal to be taxed by
the Clerk of this Court.
May 27, 1976
Issued as Mandate:
A25
APPENDIX D
‘UNITED STATES COURT OF APPEALS
Fifth Circuit
Office of the Clerk
Edward W. Wadsworth Tel. 504-589-6514
Clerk 600 Camp Street
New Orleans, La. 70130
September 27, 1976
(Received October 1, 1976)
TO ALL COUNSEL OF RECORD
No. 75-2316—NMississippi Power & Light Co. vs.
United Gas Pipe Line Co., et al.; State
of Mississippi
Dear Counsel:
This is to advise that an order has this day been entered
denying the petition( ) for rehearing, and no member of
the panel nor Judge in regular active service on the Court
having requested that the Court be polled on rehearing
en banc (Rule 35, Federal Rules of Appellate Procedure;
Local Fifth Circuit Rule 12) the petition( ) for rehearing
en banc has also been denied.
See Rule 41, Federal Rules of Appellate Procedure for
issuance and stay of the mandate.
Very truly yours,
EDWARD W. WADSWORTH, Clerk
By /s/ CLARE S. SACHS
Deputy Clerk
A26
cc: Messrs. Sherwood W. Wise
Joseph P. Wise
Mr. Clayton L. Orn
Messrs. W. DeVier Pierson
Peter J. Levin
Mr. E. L. Brunini
Mr. Alvin M. Owsley, Jr.
Mr. Joe H. Daniel
Messrs. Giles W. Bryant
Marshall G. Bennett
A27
APPENDIX E
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
CIVIL ACTION NO. J74-185(C)
(Filed April 4, 1975)
(Received April 8, 1975)
MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff
and )
STATE OF MISSISSIPPI, Plaintiff-Intervenor
vs.
UNITED GAS PIPE LINE COMPANY and
PENNZOIL COMPANY, Defendants
ORDER
This cause having come on for hearing on the separate
motions of the defendants to dismiss this civil action, or,
in the alternative, to stay this civil action until further
order of the Court, and the Court with the consent of all
parties having retained jurisdiction of said motions for
tiie purpose of ruling thereon, and the Court having
received oral and documentary evidence, having received
the briefs of the parties, having heard the argument of
A28
counsel, and being fully advised in the premises, is of the
opinion that the motions to dismiss should be denied and
that the motions to stay should be granted for the reasons
set forth in the Court’s April 2, 1975, opinion.
It is, therefore, ordered and adjudged that the separate
motions of the defendants to dismiss this civil action
should be and the same are hereby denied.
It is further ordered and adjudged that the separate
motions of the defendants to stay these proceedings should
be and the same are hereby granted, and it is further
ordered and adjudged that all other and further processes
of this Court will be and they are hereby stayed until
further order of the Court.
IT IS SO ORDERED AND ADJUDGED, this the 4th
day of April, 1975.
/s/ HAROLD COX
United States District Judge
A29
APPENDIX F
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
CIVIL ACTION J74-185(C)
(Received April 3, 1975)
MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff
v.
UNITED GAS PIPE LINE COMPANY and
PENNZOIL COMPANY, Defendants
The plaintiff instituted this diversity suit to recover
damages for the alleged breach of a contract to supply
it with natural gas. This is basically an action to recover
actual damages for the alleged breach of a contract to
sell and deliver to the plaintiff natural gas for its use and
consumption.
The defendants have answered and both contend in
effect that they have no liability for the present allotments
of natural gas which are supplied under curtailment orders
of the Federal Power Commission, and in strict compliance
with its mandate. The plaintiff contends that this action
‘is one at common law for damages and was and is oc-
casioned and necessitated by misfeasance of the defend-
ants in that the defendants knowingly and deliberately
A30
oversold its supply of natural gas well knowing and
understanding the ultimate effect to be that it lacked
sufficient natural gas to comply with their contract re-
quirements and obligations.
The defendants first seck a dismissal of this suit for
lack of jurisdiction, or alternatively, for a stay of this
proceeding to await a decision by the Federal Power
Commission as to its primary jurisdiction or not of this
controversy. A detailed discussion of the myriad orders
and opinions of the Commission in its exercise of primary
jurisdiction is not necessary or helpful to a disposition of
the motions here.
It is the opinion of this Court that under the Natural
Gas Act that the Federal Power Commission probably
has jurisdiction of this curtailment controversy, and that
the Court at this time should defer to its decision as to
the authority of the Commission in this controversy, which
is in the process of being handled by that agency; and
while the agency’s decision is not final and binding on the
Court, it must be sought at this time.’
The motion of the defendants to dismiss will be denied.
The motion to stay proceedings here to await response
of the Federal Power Commission as to its primary juris-
1. Federal Power Commission v. Louisiana Power & Light Com-
pany, et al, 406 U.S. 621, 92 S.Ct. 1827, 1842, the Court among
other things held: “In that circumstance, the District Court and the
Court of Appeals were obliged to defer to the FPC for the initial
determination of its jurisdiction. See Myers v. Bethlehem Shipbuilding
Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938). The need to
protect the primary authority of an agency to determine its own
jurisdiction ‘is obviously greatest when the precise issue brought
before a court is in the process of litigation through procedures
originating in the [agency]. While the [agency’s] decision is not the
last word, it must assuredly be the first.’ ”
A3i
diction of this curtailment question will be granted. In
the meantime, all other and further processes of this #.
Court will be stayed to await the ultimate answer of the
Commission as to this paramount and controlling question
of law.
The defendants may present an appropriate order to
the Court consistent with such views within five days
after this date.
April 2, 1975
/s/ HAROLD COX
United States District Judge
A32
APPENDIX G
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
CIVIL ACTION NO. J74-185(C)
JURY TRIAL REQUESTED
(Filed August 30, 1974)
MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff
v.
UNITED GAS PIPE LINE COMANY and
PENNZOIL COMPANY, Defendants
COMPLAINT
1. The Plaintiff, Mississippi Power & Light Company
(MP&L), is a corporation incorporated under the laws
of the State of Mississippi having its principal place of
business in the State of Mississippi; Defendant, United
Gas Pipe Line Company (United), is a corporation in-
corporated under the laws of the State of Delaware having
its principal place of business in a state other than the
State of Mississippi; and Defendant, Pennzoil Company
(Pennzoil), is a corporation incorporated under the laws
of the State of Delaware having its principal place of
A33
business in a state other than the State of Mississippi.
The matter in controversy exceeds, exclusive of interest
and costs, the sum of $10,000.00.
2. MP&L is engaged in generating, transmitting and
distributing electricity, principally in the western half of
the State of Mississippi where it serves approximately
273,000 retail customers and 62 wholesale customers.
The Defendant United is engaged in transporting and
selling natural gas. MP&L has purchased natural gas for
use as a boiler fuel at its Rex Brown Steam Electric
Station in Jackson, Mississippi, and its Baxter Wilson
Steam E'ectric Station in Vicksburg, Mississippi, from
United as hereinafter appears. The Defendant Pennzoil
was, at all relevant times, the parent corporation of
United and was in control of United and directed its ac-
tivities in United’s dealings with MP&L.
3. On or about December 8, 1967, United and MP&L
entered into a contract denominated a “Gas Sales Agree-
ment” a copy of which is attached hereto as Exhibit “A”
and made a part hereof. The Gas Sales Agreement was
subsequently amended by United and MP&L as follows:
(a) by a Letter Agreement dated December 8,
1967, a copy of which is attached hereto as Exhibit
“B”;
(b) by an Amendatory Agreement dated January
15, 1969, a copy of which is attached hereto as
Exhibit “C”;
(c) by an Amendatory Agreement dated April
29, 1969, a copy of which is attached hereto as
Exhibit “D”;
A34
(d) by a Letter Agreement dated June 19, 1969,
a copy of which is attached hereto as Exhibit “E”;
(e) by an Amendatory Agreement dated March
12, 1970, a copy of which is attached hereto as
Exhibit “F”; and
(f) by a Letter Agreement dated March 12, 1970,
a copy of which is attached hereto as Exhibit “G”.
The Gas Sales Agreement, as amended, imposes upon
United the firm obligation to deliver up to 190,000 Mcf
of gas to MP&L each day for use as boiler fuel at its
Rex Brown and Baxter Wilson Steam Electric Stations
referred to above. MP&L may receive the entire maximum
daily delivery obligation of 190,000 Mcf at its Baxter
Wilson Steam Electric Station, or it may elect to take up
to 80,000 Mcf per day at its Rex Brown Steam Electric
Station, so long as the aggregate at both stations does
not exceed the maximum daily obligation of 190,000 Mcf.
COUNT ONE
4. In negotiating the Gas Sales Agreement of Decem-
ber 8, 1967, and the amendments thereto, United repre-
sented to MP&L that it had the ability to perform its obli-
gations pursuant to such Agreement. As a consequence,
MP&L, in reliance upon the Gas Sales Agreement and
United’s representations, expended substantial sums in
constructing and maintaining power plant facilities de-
signed to burn natural gas as a primary boiler fuel. United
has breached the Gas Sales Agreement of December 8,
1967, as amended, and failed to furnish MP&L with all
of the gas which it is obligated to furnish to MP&L pur-
suant to said Agreement. As a result of the breach of
<n
A35
said Agreement and as a result of United’s misrepresenta-
tion to MP&L of its abilities to perform said Agreement,
MP&L has been, or will be, damaged in an amount in
excess of $67,750,000 in converting its power plant facili-
ties so as to enable them to use fuel oil as a primary
boiler fuel, for all of which United is indebted to MP&L
because of the breach of the Gas Sales Agreement and
United’s misrepresentation of its abilities to perform its
Obligations.
COUNT TWO
5. As a further result of the breach of the Gas Sales
Agreement of December 8, 1967, as amended, and as a
result of United’s misrepresentation to MP&L of its abili-
ties to perform said Agreement, MP&L has been damaged
by the loss of capacity of its power plant facilities de-
signed to use natural gas. In order to restore its lost
capacity, MP&L has installed replacement capacity at a
cost of $42,450,000 for which United is indebted to
MP&L because of the breach of the Gas Sales Agreement
and United’s misrepresentations of its abilities to perform
its obligations.
COUNT THREE
6. In the Gas Sales Agreement of December 8, 1967,
as amended (more particularly Article XVI of said Agree-
ment), United agreed that it would reimburse MP&L the
difference in cost between natural gas sold by United
pursuant to the Gas Sales Agreement and fuel oil which
MP&L would use as a substitute fuel for natural gas when
requested by United or under certain other conditions.
United agreed that it would reimburse MP&L for the use
A36
of such substitute fuel for any period in which substitute
fuel was used by MP&L not exceeding seven (7) days.
United has refused and continues to refuse to perform its
obligations to reimburse MP&L for the use of substitute
fuel and has breached the Gas Sales Agreement to that
extent. Consequently, United is indebted to MP&L for
such breach in the amount of $6,250,000 down through
July 31, 1974, and for additional sums which have been
or may be accrued subsequent to such date, which amount
MP&L seeks to recover to refund to its customers.
COUNT FOUR
7. As a consequence of its misrepresentations of its
ability to perform and of its breach of the Gas Sales
_ Agreement dated December 8, 1967, as amended, United
has failed to supply MP&L with all of the gas that it
required for its operations and which MP&L was entitled
to expect to receive from United. In addition to fuel oil,
for which MP&L is entitled to reimbursement pursuant
to the substitute fuel clause referred to in paragraph 6
above, MP&L has been and continues to be required to
purchase power and addition] fuel oil as a result of
United’s breach of contract and misrepresentation, and
has been damaged by United’s breach and misrepresenta-
tion, to the extent of $43,750,000 down through July
31, 1974, and for additional sums which have been or
may be accrued subsequent to such date, which amount
MP&L seeks to recover to refund to its customers.
COUNT FIVE
8. At all times relevant hereto, Pennzoil was the
parent corporation of United and knew, or should have
known, of the Gas Sales Agreement between United and
A37
MP&L. Pennzoil has directed and controlled the activities
of United for the sole profit and benefit of Pennzoil,
without regard to the contractual obligations of United.
Pennzoil, with the intention of reducing or discontinuing
United’s sales of natural gas to MP&L pursuant to the
Agreement, interfered with MP&L’s contractual rights with
United, which interference was a proximate cause of
MP&L’s damages described above, all of which is here
incorporated by reference. Pennzoil is therefore liable for
the damages which MP&L has experienced or will experi-
ence as a result of United’s breach of contract and mis-
representations.
COUNT SIX
9. In the alternative, at all times relevant hereto,
Pennzoil was the parent corporation of United, and
Pennzoil and United conspired with each other, with the
intention of reducing or discontinuing United’s sales of
natural gas to MP&L pursuant to the Agreement, for
United to breach the Gas Sales Agreement in the manner
described above, all of which is here incorporated by
reference. By reason thereof, Pennzoil and United are
jointly and severally liable for the damages which MP&L
has experienced or will experience as a result of United’s
breach of contract and misrepresentation.
WHEREFORE, Plaintiff demands judgment in the
amount of $160,200,000 and other relief against the
Defendants as follows:
(a) for the cost of converting its facilities so as
to enable such facilities to use fuel oil as an exclu-
sive fuel, in the amount of $67,750,000, and such
other amounts as MP&L may be entitled to receive;
A38
(b) for damage for loss of capacity in its Gerier-
ating Plants in the amount of $42,450,000 and such
other amounts as MP&L may be entitled to receive;
(c) for reimbursement for the use of substitute
fuel as provided in the Gas Sales Agreement of
December 8, 1967, as amended, in the amount of
$6,250,000 through July 31, 1974, and for such
other amounts as MP&L may be entitled to receive,
and for a deciaration of rights that MP&L is entitled
to continue to receive reimbursement from Defend-
ants pursuant to the substitute fuel clause for the
first seven days of any period in which MP&L is
required to use a substitute fuel for the remaining
period of time covered by the Gas Sales Agreement
of December 8, 1967, as amended, and
(d) for power and fuel oil in the amount of
$43,750,000, which MP&L has been required to
purchase down through July 31, 1974, and for such
other amounts as MP&L may be entitled to receive,
and a declaration of MP&L’s rights that it is entitled
to continue to receive an amount from Defendants
as damages for United’s continuing breach of the
Gas Sales Agreement of December 8, 1967, as
amended, for the remaining period of time covered
by said Agreement,
A39
together with interest and all costs of this action and all
other relief to which the Plaintiff is entitled.
SHERWOOD W. WISE
THOMAS G. LILLY
"RICHARD B. WILSON, JR.
Post Office Box 651
925 Electric Building
Jackson, Mississippi 39205
CLAYTON L. ORN
122 Southwest Tower
Houston, Texas 77002
By: /s/ S. W. WISE
| Attorneys for Plaintiff
WISE CARTER CHILD STEEN & CARAWAY
Post Office Box 651
925 Electric Building
Jackson, Mississippi 39205
ANDERSON, BROWN, ORN & JONES
122 Southwest Tower
Houston, Texas 77002
OF COUNSEL
A40
EXHIBIT “A”
GAS SALES AGREEMENT
Between
UNITED GAS PIPE LINE COMPANY
and
MISSISSIPPI POWER & LIGHT COMPANY
Dated 12-8-67
United Gas Pipe Line Company
CONTENTS
ID gk yo oc see ce see casee:
ARTICLE I—Definitions .................
ARTICLE II—QUALITY ..............
ARTICLE III—MEASUREMENT .........
ARTICLE IV—-MEASUREMENT EQUIP-
So 4's ws eN SECURES HEES CRORES EEN ORAS
ARTICLE V—BILLINGS AND PAYMENTS
ARTICLE VI—POSSESSION OF GAS ......
ARTICLE VII—WARRANTY ............
ARTICLE VIII—FORCE MAJEURE ......
ARTICLE [IX—IMPAIRMENT OF DELIVER-
Pere error rer ere
ARTICLE X—PERIODIC REQUIREMENTS
AND NOTIFICATION OF CHANGES ....
ARTICLE XI—SCOPE AND QUANTITIES .
wow NN
A4l
ARTICLE XII—DELIVERY POINTS AND
Ee a
ARTICLE XIV—RATES ................
ARTICLE XV—TAX REIMBURSEMENT ..
ARTICLE XVI—USE OF SUBSTITUTE
aa Ble I, Leanne Mad ig Riek oie
a cadaauly skew os coos wks ho WG
ARTICLE XVIII—DULY CONSTITUTED
EE oh 'n.k sou os CARE RIES
I cid ie i dla wn ise n
ARTICLE XX—SUCCESSORS AND ASSIGNS
ARTICLE XXI—DESCRIPTIVE HEADINGS
ATS, ee ke
EXHIBITS
Exhibit “A”—Boyle’s Law Deviation Multipliers
Exhibit “B”—United Gas Pipe Line Company
Area Map
16
17
17
23
24
28
29
29
29
30
31
THIS AGREEMENT made and entered into this
Eighth day of December 1967, by and between UNITED
GAS PIPE LINE COMPANY, a Delaware corporation,
hereinafter called “Seller”, and MISSISSIPPI POWER &
LIGHT COMPANY, a Mississippi corporation, herein-
after called “Buyer”;
A42
WITNESSETH:
WHEREAS, under the terms of that certain agreement
dated June 14, 1963, as amended, Seller is selling and
delivering to Buyer and Buyer is purchasing and receiving
from Seller natural gas for all of the fuel requirements of
Buyer’s Rex Brown Power Plant located at Jackson, in
Hinds County, Mississippi and Buyer’s Baxter Wilson
Power Plant located near Vicksburg, in Warren County,
Mississippi;
WHEREAS, Buyer has notified Seller that it proposes
to construct an additional generating unit at Buyer’s Bax-
ter Wilson Power Plant, which unit will have a nameplate
rating of 750,000 KW;
WHEREAS, Buyer has notified Seller that it will re-
quire substantial additional quantities of gas in the opera-
tion of said unit which is to be placed in operation ap-
proximately October 1, 1971, and desires to purchase
such gas from Seller; :
WHEREAS, Seller is agreeable to providing such great-
er quantities of natural gas for Buyer’s said increased re-
quirements; and,
WHEREAS, Seller and Buyer desire to terminate the
above mentioned agreement as hereinabove mentioned and
to enter into the within agreement;
NOW, THEREFORE, in consideration of the mutual
covenants and obligations herein contained and assumed
by each party, the parties hereto covenant and agree as
follows:
ee Se ee
when Oar ew a
A43
I.
DEFINITIONS
The following terms, when used in this agreement, shall
have the following meaning;
1. The term “day” shall mean a period of 24 consecutive
hours beginning as nearly as is practicable at 7:00
a.m. or at such other time as may be mutually agreed
to by Buyer and Seller.
2. The term “billing month” shall mean the calendar
month.
3. The term “cubic foot of gas”, for the purpose of meas-
urement of the gas delivered and for all other pur-
poses, unless otherwise specifically provided, is the
amount of gas necessary to fill a cubic foot of space
when the gas is at an absolute pressure of fourteen and
nine-tenths (14.9) pounds per square inch and at a
base temperature of sixty (60) degrees Farenheit.
4. The term “Mcf” which is the sales unit hereunder,
shall mean one thousand (1,000) cubic feet of gas.
5. The term “Maximum Daily Delivery Obligation” shall
mean the maximum volume of gas deliverable by Sel-
ler to Buyer hereunder in any one day.
Il.
QUALITY
The gas deliverable hereunder shall be natural gas as
produced in its natural state from the wells, except that
Seller may extract or permit the extraction of any of the
A44
constituents of said natural gas; provided that Seller shall
not subject said gas nor permit said gas to be subjected to
any treatment in the extraction of any of the constituents
of said gas which shall substantially change the chemical
composition of any of the component parts of said gas. Seller
is to tender delivery to Buyer of natural gas which is of
merchantable quality only and reasonably free from water
and other objectionable liquids, reasonably free from sand
and other objectionable solids and which contains not
more than forty (40) grains of sulphur or twenty (20)
grains of hydrogen sulphide per thousand (1,000) cubic
feet.
Il.
MEASUREMENT
1. Assumed Atmospheric Pressure—The average atmos-
pheric pressure shall be assumed to be fourteen and
sevent-tenths (14.7) pounds per square inch, irrespec-
tive of actual elevation or location of the point of de-
livery above sea level or variations in such atmos-
pheric pressure from time io time.
2. Orifice Meters—When orifice meters are used for the
measurement of gas, the computations of the volumes
of gas measured shall be made in accordance with the
following sub-sections (a) to (h) inclusive:
(a) The orifice coefficient for each meter shall be
calculated at the base pressure and base tempera-
ture set forth in Section 3 of Article I hereof, at
a flowing temperature of sixty (60) degrees Far-
enheit and for gas of six hundred thousanths
(.600) specific gravity.
pt lita — ns eae a om + ot
nn
A45
(b) The temperature of the gas shall be determined
(c)
by a recording thermometer so installed that it
may record the temperature of the gas flowing
through the meter or meters. The average of the
record obtained shall be deemed to be the gas
temperature for the period under consideration,
and the orifice coefficient as calculated in (a)
above shall be corrected for each degree varia-
tion in the average temperature from sixty (60)
degrees Farenheit.
The specific gravity of the gas shall be deter-
mined by a recording gravitometer so installed that
it may record the specific gravity of the gas flowing
through the meter or meters; provided, however,
if Seller does not consider the installation of such
recording gravitometer necessary, Seller shall
make spot tests with an Edwards or other stand-
ard type specific gravity balance. If the record-
ing gravitometer is used, the average of the re-
cord obtained shall be deemed to be the specific
gravity of the gas for the period under considera-
tion and the orifice coefficient as calculated in
sub-section (a) above shall be corrected for each
one-thousandth (.001) variation from six hun-
dred thousandths (.600). If the spot test method
is used, the specific gravity of the gas delivered
hereunder shall be determined once monthly on
a day as near the first (1st) of the billing month
as is practicable, or as much oftener as is found
necessary in practice. The result obtained from
the test made on or near the first (1st) of the
billing month shall be deemed to be the specific
gravity of the gas during that billing month and
(d)
(e)
(f)
(g)
A46
the orifice coefficient as calculated in subsection
(a) above shall be corrected accordingly for each
one-thousandth (.001) variation from six hun-
dred thousandths (.600). Any special test which
~is made shall be applicable from the day made
until the next regular test or other special test is
made.
Exact measurements of inside diameters of pipe
runs and orifices shall be obtained to the nearest
one-thousandth (.001) inch, which measure-
ments shall be used in computation of coeffi-
cients.
Pressure taps for meter installations shall be
taken from pipe runs two and one-half (2-2)
inside pipe diameters upstream and eight (8)
inside pipe diameters downstream from the ori-
fice.
All orifice meter computations required in this
Section 2 shall be made in accordance with for-
mulae and tables contained in Metric Metal
Works Bulletin E-2 (Revised 1931). In the com-
putations of the orifice coefficient, the calcula-
tion of “X” shall be carried to six (6) decimals
and “C” shall be determined to three (3) deci-
mal places by interpolations from tables on Pa-
ges 76 and 77 in Metric Metal Works Bulletin
E-2 (Revised 1931). The pressure base, flowing
temperature and specific gravity factors used
shall consist of four (4) significant figures, un-
less the first digit is “1”, in which case five (5)
significant figures shall be used.
In determining the volume of gas delivered
through the orifice during a period, either the
ee ee ow wad
(h)
A47
observation method or the orifice chart integra-
tor shall be used in reading the meter chart. The
sum of the extensions obtained from the reading
or integration of the meter chart shall be multi-
plied by the orifice coefficients, corrected in ac-
cordance with subsections (b) and (c) above,
to obtain the gas volume for that chart.
The volumes of gas as determined in the manner
described above shall be adjusted to give effect ©
to the deviation of such gas from Boyle’s Law,
as follows:
(1) There shall be determined the average pres-
sure (gauge) at which the gas was metered
during the period under consideration.
(2) The average temperature for the period un-
der consideration shall be determined as pro-
vided in sub-section (b) above.
(3) There shall be selected from the table of
multipliers, attached hereto and made a
part hereof and identified as Exhibit “A”,
the multiplier corresponding to the average
pressure and the average temperature as de-
termined in (1) and (2) above; provided,
however, that if at any time the composition
of the gas delivered shall have materially
changed so that said multipliers are no long-
er reasonable, Seller shall substitute appro-
priate multipliers.
(4) The corrected volume of gas for the period
under consideration shall be the result ob-
tained by multiplying the volume of gas de-
A48
termined in the manner hereinabove set
forth by the multiplier selected in (3)
above. :
3. Positive Meters—When positive meters are used for
the measurement of gas, the flowing temperature of
the gas metered shall be assumed to be sixty (60) de-
grees Farenheit, and no correction shall be made for
any variation therefrom; provided, that Seller shall
have the option of installing a recording thermometer,
and if Seller exercises such option and installs such
thermometer, correction shall be made for each de-
gree variation in the average flowing tempezature for
each positive meter chart.
The volumes of gas determined shall be adjusted
to give effect to the deviation of such gas from Boyle’s
Law, as follows:
(a) There shall be determined the average pressure
(gauge) at which the gas was metered during the
period under consideration.
(b) The average temperature for the period under
consideration sha!l be determined as provided
above.
(c) When the flowing temperature of the gas metered
is assumed to be sixty (60) degrees Farenheit,
there shall be selected from the table of positive
meter multipliers, shown in sub-section (e) be-
low, the multiplier correspond to the average
pressure as determined in (a) above; and, when
the flowing temperature of the gas metered be
recorded as provided above, the multiplier shall
be obtained by squaring the appropriate multi-
one ne oe meee tenetanlil se
*
ee eee ee
ee
A49
plier selected from the table of said Exhibit “A”;
provided, however, that if at any time the com-
position of the gas delivered shall have materially
changed so that said multipliers are no longer
reasonable, Seller shall substitute appropriate
multipliers.
(d) The corrected volume of gas for the period under
consideration shall be the result obtained by mul-
tiplying the volume of gas hereinabove deter-
mined by the multiplier selected in (c) above.
(e) Boyle’s Law Deviation Multipliers for Positive
Meters:
Average Pressure Assumed Temperature
PSIG 60° F.
0-49 1.006
50-99 1.016
100-149 1.025
150-199 1.033
200-249 1.042
250-299 1.051
300-349 1.061
350-399 1.070
400-449 1.079
450-499 1.088
4. Determination of Heat Content—The Btu content of
the gas delivered, when required to be determined un-
der the provisions of this agreement, shall be deter-
mined for a cubic foot of gas at a temperature of sixty
(60) degrees Fahrenheit, at an absolute pressure of
fourteen and nine-tenths (14.9) pounds per square
inch, and at the moisture content of the gas delivered.
Such total heating value of the gas delivered shall be
A50
determined by Seller, using a Thomas or other stand-
ard type calorimeter, either by taking a spot sample
or by using a record from a recording calorimeter.
The spot sample shall be taken as often as is found
necessary in practice, and such sample shall be taken,
or the recording calorimeter shall be located at a suit-
able point on Seller’s line so that the heating value of
the gas delivered may be obtained. The moisture con-
tent of the gas delivered shall be determined at a suit-
able point by Seller as often as is found necessary in
practice.
IV.
MEASUREMENT EQUIPMENT .
. Ownership and Operation — Seller shall furnish, in-
Stall, operate and maintain, at its Own expense at
the point(s) of delivery, the meters, instruments and
equipment of standard type necessary to measure
properly, in accordance with Article III hereof, the
gas to be delivered. Seller shall likewise furnish,
install, operate and maintain, at its own expense,
such instruments and equipment as may be necessary
at points other than the point(s) of delivery to obtain
the information to measure properly, in accordance
with Article III hereof, the gas to be delivered. The
metering and other equipment installed, together with
any buildings erected by it for such equipment, shall
be and remain the property of Seller.
Either party shall have access to the metering
equipment of the other at all reasonable times, but the
reading, calibration and adjustment thereof and chang-
A51
ing of charts (unless otherwise mutually agreed upon)
shall be done only by the employees or agents of
the owner thereof. Charts and records from such meter-
ing equipment shall remain the property of the owner
thereof. Upon request of the other party, the requested
party will submit its records and charts from its meter-
ing equipment, together with calculations therefrom,
for the requesting party’s inspection and verification,
subject to return within ten (10) days after receipt
thereof, after which return they shall be kept on file
by the owner thereof for the mutual use of both parties
for a period of one (1) year.
. Buyer’s meters — Buyer may, at its option and ex-
pense, install and operate meters, instruments and
equipment of standard type at or near any point of
delivery to check Seller’s meters, instruments and
equipment, but the measurement of gas delivered
shall be by Seller’s meters only, except in cases herein
provided to the contrary. The meters, instruments and
equipment installed by Buyer shall be subject at all
reasonable times to inspection or examination by
Seller, but the reading, calibration and adjustment
thereof and changing of charts (unless otherwise
mutually agreed upon) shall be done by Buyer.
. Notice of Meter Tests — Each party shall give to the
other party notice of the time of all tests of meters
sufficiently in advance of the holding of the test so
that the other party may conveniently have its repre-
sentatives present; provided, however, that if either
party has given such notice to the other party and
the other party is not present at the time specified,
then the party giving the notice may proceed with the
test as though the other party were present.
A52
At least once each thirty (30) days, on a day as
near the first (1st) of each month as practical, each
party shall calibrate its orifice meters and appurtenant
instruments, and-at least once each ninety (90) days,
on a day as near the first (1st) of the month as prac-
tical, each party shall calibrate its positive displace-
ment meters, all in the presence of representatives of
the other, as hereinabove provided in this Section, and
the parties shall jointly observe any adjustment made.
. Correction for Errors of Meters — If, upon any test,
the percentage of inaccuracy of any metering equip-
ment is found to be in excess of two per cent (2%),
registrations thereof shall be corrected for a period
extending back to the time such inaccuracy occurred,
if such time is ascertainable, and if not ascertanable,
then back one-half of the time elapsed since the last
date of calibration. If for any reason meters are out
of service or out of repair, so that the amount of gas
delivered cannot be ascertained or computed from the
readings thereof, the gas delivered during the period
such meters are out of service or out of repair shall
be estimated and agreed upon by the parties hereto
upon the basis of the best data available, using the
first of the following methods which is feasible:
(a) By using the registration of any check meter or
meters if installed and accurately registering.
(b) By correcting the error if the percentage of error
is ascertainable by calibration, test or mathe-
matical calculation.
(c) By estimating the quantity of delivery by deliv-
eries during preceding periods under similar con-
ditions when the meters are registering accurately.
A53
V.
BILLING AND PAYMENTS
. Billing Date— On or before the tenth (10th) day
of each calendar month Seller shall render to Buyer,
at such office as Buyer may designate, statements
showing the calculation of the monthly bill for gas
delivered by Seller to Buyer during the preceding
billing month.
. Payment Date — On or before the twentieth (20th)
day of each calendar month Buyer shall make pay-
ments to Seller, at such office as Seller may designate,
of amounts due Seller as shown by statements fur-
nished Buyer in accordance with the foregoing Sec-
tion 1. ¢
. Late Payment — In the event Buyer shall fail to pay
any amount due Seller when the same is due, then
interest thereon shall accrue at the rate of six per
cent (6%) per annum from the date when such
amount is due until the same is paid. If such failure
to pay continues for sixty (60) days, Seller may
suspend deliveries of gas, and the exercise of such
right shall be in addition to any and all othe: remedies
available to Seller.
. Error in Bills —In the event an error is discovered
in the amount billed in any statement rendered by
Seller, such error shall be adjusted promptly.
. Late Billing —If presentation of a bill to Buyer is
delayed after the tenth (10th) day of the month,
then the time of payment shall be extended accord-
ingly unless Buyer is responsible for such delay.
AS54
6. Access to Billing Data — Buyer and Seller shall have
the right to examine the books, records and charts
of the other party at all reasonable times to the extent
necessary to verify the accuracy of any statement,
charge or computation made pursuant to the pro-
visions of any article of this agreement.
VI.
POSSESSION OF GAS
Seller shall be in exclusive control and possession of
the gas deliverable and responsible for any damage or in-
jury caused thereby until the same shall have been de-
livered to Buyer, after which delivery Buyer shall be in
exclusive control and possession thereof and responsible
for any injury or damage caused thereby.
Vil.
WARRANTY
Seller warrants generally the title to all gas delivered,
and agrees to indemnify Buyer from all suits, actions,
debts, accounts, damages, costs, losses and expenses arising
from or out of adverse claims of any or all persons to said
gas or to royalties or charges thereon.
Vill.
FORCE MAJEURE
1. Definition of “Force Majeure’”—The term “force
majeure” as employed herein shall mean acts of God,
ASS
strikes, lockouts, or other industrial disturbances, acts
of public enemy, wars, blockades, insurrections, riots,
epidemics, landslides, lighting, earthquakes, fires,
storms, floods, washouts, arrests and restraints of gov-
ernments and people, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe,
the necessity for making repairs or alterations to
machinery or lines of pipe, freezing of wells or lines
of pipe, partial or entire failure of wells, and any other
causes, whether of the kind herein enumerated or
otherwise, not within the control of the party claiming
suspension and which by the exercise of due diligence
such party is unable to prevent or overcome; such
term shall likewise include (a) in those instances
where either Buyer or Seller is required to obtain
servitudes, rights of way grants, permits or licenses
to enable such party to fulfill its obligations under
this agreement, the inability of such party to acquire,
or the delays on the part of such party in acquiring,
at reasonable cost, and after the exercise of reasonable
diligence, such servitudes, rights of way grants, permits
or licenses and (b) in those instances where either
Buyer or Seller is required to furnish materials and
supplies for the purpose of constructing or maintaining
facilities or is required to secure permits or permission
from any governmenial agency to enable such party to
fulfill its obligations under this agreement, the inability
of such party to acquire, or the delays on the part of
such party in acquiring, at reasonable cost and after
the exercise of reasonable diligence, such materials
and supplies, permits and permissions.
. Limitations on Obligations —In the event of either
Buyer or Seller being rendered unable wholly or in
A56
part by force majeure to carry out its obligations
under this agreement, other than to make payments
due hereunder, it is agreed that on such party giving
notice and full particulars of such force majeure in
writing or by telegraph to the other party as soon as
possible after the occurrence of the cause relied on,
then the obligations of the party giving such notice
so far as they are affected by such force majeure, shall
be suspended during the continuance of any inability
so caused but for no longer period, and such cause
shall as far as possible be remedied with all reasonable
dispatch.
3. Strikes and Lockouts — The settlement of strikes or
lockouts shall be entirely within the discretion of the
party having the difficulty, and the above requirements
that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of op-
posing party when such course is inadvisable in the
discretion of the party having the difficulty.
1X.
IMPAIRMENT OF DELIVERIES
Buyer specifically recognizes the fact that Seller delivers
gas: (i) to gas utilities for resale to domestic consumers,
and (ii) to public utility power plants for generation
of electricity which is sold to domestic consumers. In the
event a shortage of gas renders Seller unable to supply
the full gas requirements of all its consumers, then it is
mutually agreed that the gas requirements of (i) gas
utilities selling gas to domestic consumers, and (ii) pub-
AS7
lic utility power plants using gas for generation of electri-
city which is sold to domestic consumers, shall first be
supplied by Seller, and the remaining available gas shall
be prorated by Seller among its other consumers.
X.
PERIODIC REQUIREMENTS AND
NOTIFICATION OF CHANGES
All gas taken hereunder sshall be taken in equal daily
and hourly quantities as nearly as operating conditions will
permit.
Buyer and Seller will notify each other from time to
time as necessary of expected changes in the rates of daily
delivery or takings of gas under this agreement, or in the
pressures or other operating conditions, and the reasons for
such expected changes as soon as such reasons come to
the knowledge of either Buyer or Seller to the end that
the other party may be prepared to meet or to take ad-
vantage of such expected changes when, as and if they
occur.
XI.
SCOPE AND QUANTITIES
Subject to the terms, conditions, and limitations hereof,
Seller agrees to sell and deliver or cause to be delivered
to Buyer, and Buyer agrees to purchase and receive from
Seller and pay Seller for, natural gas for all of the fuel
requirements of Buyer’s said Rex Brown Power Plant,
Hinds County, Mississippi, and Buyer’s said Baxter Wilson
AS58
Power Plant, Warrent County, Mississippi, and all exten-
sions and enlargements of said plants.
During the period commencing with the date of execu-
tion hereof and extending to October 1, 1971, or such
earlier date as Buyer places into operation its said new
proposed 750,000 KW generating unit, Seller shall not
be required to deliver to Buyer and Buyer shall not be
required to purchase and receive from Seller hereunder
at said Baxter Wilson Power Plant, more than a total
maximum of 110,000 Mcf of gas in any one day.
During the period commening October 1, 1971, or
such earlier date as Buyer places into operation its said
new 750,000 KW enit at said Baxter Wilson Plant, Seller
shall not be required to deliver to Buyer and Buyer shall
not be required to purchase and receive from Seller here-
under for the total requirements of said Baxter Wilson
Power Plant, more than a total of 275,000 Mcf of gas
in any one day.
Seller shall not be required to deliver to Buyer and
Buyer shall not be required to purchase and receive from
Seller hereunder at said Rex Brown Power Plant, more
than the total maximum of 80,000 Mcf of gas in any
one day.
The above mentioned quantities for the periods indi-
cated, unless and until changed as hereinafter provided,
shall be the Maximum Daily Delivery Obligation.
If Buyer should, from time to time, require daily quan-
tities of gas in excess of the Maximum Daily Delivery
Obligation then in effect, Buyer shall notify Seller in
writing, at least twelve (12) months in advance, of the
daily quantity of gas by which Buyer’s requirements will
A59
exceed said Maximum Daily Delivery Obligation then in
effect, stating in such notice the date on which such
increase will occur. Within ninety (90) days after receipt
of such notice, Seller shall elect, and so notify Buyer,
whether Seller is agreeable to so increasing said Maximum
Daily Delivery Obligation by the amount so requested by
Buyer. In the event Seller elects to deliver such additional
daily quantity of gas, the Maximum Daily Delivery Obli-
gation then in effect shall be increased, on the date so
specified in said notice or the first anniversary of the
date on which said notice was given, whichever date is
the later, by the additional quantity of gas required by
Buyer as specified in said notice. In the event Seller does
not elect to deliver such additional quantity of gas, Buyer
shall thereafter have the right to make other arrangements
or agreements for fuel for that portion of Buyer’s daily
requirements which is in excess of the Maximum Daily
Delivery Obligation then in effect.
XI.
DELIVERY POINTS AND PRESSURES
The points of delivery for all gas to be delivered by
Seller to Buyer hereunder for said (i) Rex Brown Power
Plant shall be at the outlet side of a metering and regulat-
ing station as now installed by Seller and located on the
site of Buyer’s said Rex Brown Power Plant, located at
Jackson, Hinds County, Mississippi and for said (ii)
Baxter Wilson Power Plant shall be at the outlet side of
a metering and regulating station as now installed by
Seller and located on the site of Buyer’s said Baxter
Wilson Power Plant, located near Vicksburg, Warren
County, Mississippi.
A60
In the event any of Seller’s facilities required to make
deliveries of gas to Buyer hereunder are or will be located
on the premises of Buyer then, and in such event, Buyer
agrees to furnish to Seller, free of charge, the use of the
premiises so occupied or to be occupied by any of Seller’s
facilities which may be located on Buyer’s premises, with
the right of ingress and egress at all times for the purposes
of installation, operation, repair and removal of said fa-
cilities.
The gas shall be delivered hereunder at such pressures
as may be necessary to meet Buyer’s requirements at each
point of delivery; provided, however, that Seller shall not
be obligated to maintain a pressure in excess of 50 pounds
per square inch gauge at Buyer’s Rex Brown Power Plant
or 125 pounds per square inch gauge at Buyer’s Baxter
Wilson Power Piant.
XII.
TERM
Subject to the other terms and conditions hereof, this
agreement shall become effective on the date of execution
hereof and extend to January 1, 1993, at 7:00 a.m.
XIV.
RATES
Subject to the adjustments hereinafter provided, the
price to be paid by Buyer to Seller for all gas sold and
delivered to Buyer at each separate point of delivery
hereunder shall be as follows: |
Aél
(A) For the period commencing on the date of execu-
tion of this agreement and extending to January 1, 1973,
for all gas delivered by Seller to Buyer at Buyer’s Rex
Brown Power Plant and for gas delivered in quantities
each day of 110,000 Mcf or less at Buyer’s Baxter Wilson
Power Plant, the following monthly rate for all gas shall
apply:
MONTHLY RATE
76.25¢ per Mcf when total deliveries are between
0 and 150 Mcf
35.75¢ per Mcf when total deliveries are between
151 and 300 Mcf
32.75¢ per Mcf when total deliveries are between
301 and 1,500 Mef
27.75¢ per Mcf when total deliveries are between
1,501 and 5,000 Mcf
25.75¢ per Mcf when total deliveries are between
5,001 and 10,000 Mcf
25.25¢ per Mcf when total deliveries are between
10,001 and 50,000 Mcf
24.75¢ per Mcf when total deliveries are between
50,001 and 85,000 Mcf
23.75¢ per Mcf when total deliveries are between
85,001 and 125,000 Mcf
22.75¢ per Mcf when total deliveries are between
125,001 and 160,000 Mcf
21.75¢ per Mcf when total deliveries are between
160,001 and 400,000 Mcf
21.25¢ per Mcf when total deliveries are over
400,000 Mcf
provided, however, that the above prices shall be increased
or decreased, by the amount by which Seller’s weighted
average purchase price of gas for the preceding billing
month in the Jackson Area exceeds or is less than 15¢
A62
per Mcf; provided, further, that the maximum amount
payable in each of the above steps shall never be more
than the minimum amount which would be payable in
the step next below. Weighted average purchase price of
gas in the Jackson Area, or any other area, as outlined
in Exhibit B attached hereto, shall be determined by:
(1) adding together all the volumes of gas which Seller
purchased in the area and transferred into the area during
the preceding billing month; (2) adding together the cost
payable by Seller for the gas it purchased in the area
and the cost assignable to the gas transferred into the
area during the preceding billing month, and (3) dividing
the total of said costs payable by the total of said volumes
purchased in and transferred into the area. The resulting
quotient shall be the weighted average purchase price of
gas in the area. In computing weighted average purchase
price, costs as used in the steps outlined above shall be:
(a) Cost assignable to gas transferred into an area
shall be the result obtained by multiplying the weighted
average purchase price of gas in the area, from which the
gas is transferred, by the volume of gas transferred.
(b) Cost of gas purchased on the seaward side of the
shorelines of Florida, Alabama, Mississippi, Louisiana,
and Texas, under contracts executed after January 1,
1968, shall be the amount payable to the producer, pipe-
line or other seller thereof, plus the amount, if any, pay-
able by Seller to others for delivery of the gas onshore;
or, if Seller’s facilities are used to deliver such gas onshore,
an amount obtained by (i) dividing 1/12th of 25% of
the depreciated investment, at the beginning of the preced-
ing billing month, in Seller’s facilities used to deliver such
gas on shore by the total volume of gas delivered through
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A63
such facilities during said billing month, and (ii) multiply-
ing the result so obtained by the volume of gas purchased
under contracts executed after January 1, 1968, and
deliverec through such facilities during said billing month.
(c) The cost of any other gas purchased by Seller
Shall be the amount payable by Seller to the producer,
pipeline or other seller thereof; provided, that in the
computation of the weighted average purchase price for
the Jackson area neither the cost nor volumes of gas
purchased by Seller from Tennessee Gas Pipeline Com-
pany for sale in nothern Mississippi shall be included in
the computation.
(d) For the purpose of determining weighted average
purchase price there shall be included as part of the cost of
gas, all taxes (as hereinafter defined) which may be levied
upon and paid by Seller, or which Seller under contractual
or legal obligation pays to or for the person or company
on which such taxes are levied, on or with respect to
such gas prior to the receipt thereof by Seller in its Main
Pipe Line System, but shall not include any deductions
for compression of such gas or any payments for special
services which may be provided for in Seller’s gas pur-
chase contracts.
(B) If, during the period hereof prior to January 1,
1973, Seller delivers gas to Buyer at said Baxter Wilson
Power Plant in excess of 110,000 Mcf on any day, for
the period beginning on the day Seller delivers such ex-
cess gas to the Baxter Wilson Power Plant and ending
365 days therefrom but in no event beyond January 1,
1973, the price for such excess gas shall be as set forth
in (A) above. For the period beginning 365 days from
the day Buyer first exceeds 110,000 Mcf on any day,
A64
but in no even for a period extending beyond January 1,
1973, the price for such gas in excess of 110,000 Mcf
on any day during such period shall be as set forth in (A)
above except that each step of the monthly rate shall be
increased by .75¢ per Mcf.
(C) During the period commencing January 1, 1973,
and extending to January 1, 1978, the price for all gas
delivered hereunder shall be the same rate as set forth in
(A) above except that each step of the monthly rate shall
be increased by 1.25¢ per Mcf.
(D) During the period commencing January 1, 1978,
and extending to January 1, 1983, the price for all gas
delivered hereunder shall bc the same rate as set forth in
(A) above except that each step of the monthly rate shall
be increased by 1.75¢ per Mcf.
(E) During the period commencing January 1, 1983,
and extending to January 1, 1988, the price for all gas
delivered hereunder shall be the same rate as set forth
in (A) above except that each step of the monthly rate
shall be increased by 2.25¢ per Mcf.
(F) During the period prior to January 1, 1973, as
to quantities of gas delivered by Seller to Buyer at Buyer's
Baxter Wilson Power Plant in excess of 110,000 Mcf
each day, and after January 1, 1973, as to all quantities
of gas delivered by Seller to Buyer hereunder, the pro-
visions of the next succeeding paragraph hereof shall
apply.
During the respective periods and as to quantities pro-
vided for in the next above paragraph hereof, should Seller
during any billing month deliver to Buyer gas hereunder
containing a monthly average of less than 1,000 Btu per
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A65
cubic foot, then Seller’s weighted average purchase price
of gas as hereinabove defined in Section (A) of this
article, shall be decreased 0.1% for each Btu that such
monthly average is below 1,000 Btu per cubic foot.
(G) During the period commencing January 1, 1988,
and extending to January 1, 1993, a price determined in
the manner hereinafter provided in this subdivision (G).
At least ninety (90) days, but not more than 180 days,
prior to the beginning of said period Seller shall determine
and submit to Buyer in writing a new monthly rate for
the gas deliverable hereunder during such period.
In the event the new monthly rate submitted by Seller
represents an increase over the rate which is then in effect
under the provisions of the preceding subdivision (E)
hereof, Buyer shall notify Seller in writing at least thirty
days prior to the beginning of the period to which such
new monthly rate shall apply whether or not Buyer is
agreeable to such new monthly rate so submitted by Seller;
it being understood that if such rate does not represent
any increase over the rate which is then in effect under
the provisions of the preceding subdivision (E) hereof
then such new monthly rate so submitted by Seller shall
be in effect hereunder for the five-year period in question
and Buyer shall not have the right to terminate this
contract. If such new monthly rate should represent an
increase over the rate which is then in effect under the
provisions of the preceding subdivision (E) hereof and
Buyer notifies Seller that it does not agree to such new
increased monthly rate, Seller shall have the right at any
time within ten days after receipt of Buyer’s notice to
continue the contract in force throughout the five-year
period in question by notifying Buyer that it will continue
A66
deliveries of gas through such period at the rate which
is then in effect under the provisions of the preceding
subdivision (E) hereof. However, if such new monthly
rate should represent an increase over the rate which is
then in effect under the provisions of the preceding sub-
division (E) hereof and Buyer notifies Seller that it does
not agree to such new monthly rate and Seller does not
exercise its right in accordance with the foregoing to
continue the contract in force, such contract shall, unless
Buyer exercises its right to purchase gas during the period
and on the conditions set forth in the next suceeding
paragraph hereof, automatically terminate on the date
of expiration of the period next preceding the period for
which such new monthly rate is applicable. Should Buyer
exercise the right set forth in the next succeeding para-
graph hereof, this cortract shall automatically terminate
on the expiration of the right so granted to Buyer.
If Buyer does not agree to any such new monthly rate
and Buyer has not made arrangements for ‘ts fuel re-
quirements prior to the beginning of the period for which
such new monthly rate is applicable, Buyer shall, upon
giving Seller notice prior to the commencement of such
period, have the right to continue to purchase gas from
Seller during the period Buyer is making any necessary
physical changes or arrangements for its fuel requirements
on the same terms and conditions as set forth herein ex-
cept that the price to be paid for gas delivered shall be
in accordance with said new monthly rate so determined
by Seller for the period under consideration and to which
such monthly rate Buyer did not agree; provided, how-
ever, that Buyer shall notify Seller immediately upon the
completion of such arrangements for supplying its said
requirements at which time the right granted to Buyer
A67
in this paragraph shall terminate and provided further that
under no conditions shall this right extend beyond one
year from the date this contract is subject to termination
as hereinabove provided in the preceding paragraph here-
of.
(H) If during any billing month Buyer uses fuel oil
in lieu of the quantities of gas up to but not in excess
of the Maximum Daily Delivery Obligation then in effect
hereunder, which Seller is obligated to deliver to Buyer
for Buyer’s fuel requirements, either at Seller's request
or in the event Seller is excused by reason of force majeure
or proration of impaired deliveries from delivering such
gas to Buyer for Buyer’s fuel requirements hereunder
(whether or not payments for the gas equivalent of such
fuel oil so used shall be made by Buyer to Seller as
provided in Article XVI), the gas equivalent, up to the
Maximum Daily Delivery Obligation then in effect, of
such fuel oil so used by Buyer during such billing month
shall be determined in the same manner as set out in
Article XVI, and the quantity of such gas equivalent
shall be added to the total quantity of gas actually de-
livered and the sum of such two quantities shall be
deemed to be the total gas deliveries during such month
for the sole purpose of arriving at the rate per Mcf of
gas, under the rate schedule provided for in this Article
XIV, to be paid by Buyer to Seller for all gas delivered
by Seller to Buyer during the month in question.
XV.
TAX REIMBURSEMENT
Buyer agrees to reimburse Seller for all taxes which
may be levied upon and paid by Seller, or which Seller
A68
under contractual or legal obligation pays to or for the
person or company on which such taxes are levied on or
with respect to the gas delivered hereunder; provided,
however, that no reimbursement shall be made to Seller
under the provisions of this article for any taxes which
* were included in the weighted average price of gas under
the provisions of the above Monthly Rate.
The term “taxes” as used herein shall mean any tax
(other than ad valorem, income or excess profits taxes),
license, fee or charge now or hereafter levied, assessed or
made by any governmental authority on the gas itself,
or on the act, right or privilege of production, serevance,
gathering, transportation, handling, sale or delivery of
gas which is measured by the volume, value or sales price of
the gas in question; provided, however, that the term
“taxes” shall not be deemed to include any general
franchise tax imposed on corporations on account of their
corporate existence or on their right to do business within
the State as a foreign corporation.
XVI.
USE OF SUBSTITUTE FUEL
It is recognized by Buyer that in the pipe line opera-
tions of Seller it is desirable to relieve as far as possible
conditions which cause excessive or peak demands of gas,
and it is recognized by Seller that in the plant operations
of Buyer it is desirable to eliminate any shutdowns caused
by failure of the gas supply from whatsoever cause. Ac-
cordingly, in order to enable both Seller and Buyer to
eliminate the above-described conditions, it is agreed that
Buyer shall furnish or cause to be furnished at Buyer’s
sole cost and expense proper and adequate facilities (in-
A69
cluding oil storage tanks, fuel lines, oil meters and oil
burning equipment) necessary to enable Buyer to use
Number 2 grade fuel oil, to be purchased and supplied
by Buyer in lieu of gas for Buyer’s fuel requirements, up
to the Maximum Daily Delivery Obligation then in effect,
under the conditions hereinafter set forth; and that pay-
ments with reference to such fuel oil so used by Buyer
shall be made between the parties hereto on the basis
of Bunker “C” grade fuel oil as hereinafter specifically
provided. All fuel oil so used by Buyer for its fuel re-
quirements shall be accurately metered by Buyer as it is
used.
If so requested by Seller at any time and from time to
time, Buyer agrees that it will use Number 2 grade fuel
oil purchased and supplied by Buyer, as above set forth,
in lieu of gas for Buyer’s fuel requirements hereunder
during the period or periods of time so requested by Seller.
In the event Seller is prohibited by governmental action
or excused by reason of force majeure or proration of im-
paired deliveries from delivering gas to Buyer for Buyer’s
fuel requirements hereunder, up to the Maximum Daily
Delivery Obligation then in effect, and Buyer uses Num-
ber 2 grade fuel oil for its fuel requirements, even though
not so requested to do by Seller, during the period Seller
is so prohibited or excused from delivering gas hereunder,
all such fuel oil so used by Buyer during any period
of not more than seven consecutive days shall be deemed
to have been used by Buyer at Seller’s request; provided,
that during the time Seller is so prohibited or excused
Seller shall have no bligation to pay for fuel oil used by
Buyer after expiration of any such seven day period.
Payments with reference to fuel oil which is used by
Buyer for its fuel requirements at Seller’s request, up to
A70
the Maximum Daily Delivery Obligation then in effect,
as provided in the next preceding paragraph, shall be
made between the parties on the basis on Bunker “C”
grade fuel oil as hereinafter set forth.
On or before the fifth day of the month following any
month hereunder during which Buyer used fuel oil for
which payments are to be made between the parties as
above provided, Buyer shall furnish to Seller a statement,
together with supporting computations, calculations and
determinations, showing:
(a) The number of barrels of fuel oil used by
Buyer during the preceding billing month for its fuel
requirements in lieu of the quantities of gas which
Seller failed to deliver during such month up to but
not in excess of the Maximum Daily Delivery Obliga-
tion in effect hereunder on any day.
(b) The weighted average (expressed in cents per
barrel) of the purchase price of Bunker “C” grade
fuel oil Buyer would have purchased, per barrel,
f.o.b. Buyer’s plant, for equivalent quantities of fuel
oil in Buyer’s storage facilities during the preceding
month; such weighted average price shall not include
any storage and handling costs and expense for such
fuel oil at Buyer’s plant, and shall not take into
consideration any volumetric losses or gains resulting
from the storage and handling of such fvel oil. Such
weighted average price shall be determined as follows:
(1) Buyer shall at any time a purchase of
Number 2 fuei oil is made, obtain a written
quotation of the price of Bunker “C” fuel oil in
the same quantity as the quantity of Number 2
fuel oil that Buyer purchases at such time.
A7l1
(2) The sum of such quotation for Bunker
“C” fuel oil plus the delivery charge incurred
by Buyer for delivery into Buyer’s tanks of the
Number 2 fuel oil purchased shall be used by
Buyer in determining such weighted average
price.
(c) The amount of money due Buyer by Seller
for such fuel oil so used by Buyer for its fuel require-
ments hereunder during such preceding month, which
amount shall be determined by multiplying the
number of barrels of fuel oil so used by Buyer during
such preceding month as provided for in subpara-
graph (a) above, by the weighted average purchase
price per barrel of Bunker “C” grade fuel oil as
provided for in subparagraph (b) above.
Upon receipt of each such statement from Buyer, Seller
shall determine the gas equivalent of such fuel oil so used
by Buyer for its fuel requirements hereunder during such
preceding month; such determination to be made on the
basis of one barrel of Number 2 grade fuel oil being the
equivalent of 6,000 cubic feet of gas. The total quantity of
such gas equivalent, so determined, shall be added to the
total quantity of gas actually delivered by Seller to Buyer
hereunder during such preceding month in order to arrive
at the Monthly Rate per Mcf to be paid by Buyer to Seller
for such gas equivalent during the month in question.
Such monthly rate per Mcf, so arrived at, shall be multi-
plied by the total quantity of such gas equivalent, so de-
termined for the month in question as above provided,
and the result of such multiplication, without any ad-
justment thereof for Btu, shall be the amount of money
due Seller by Buyer for such gas equivalent during the
month in question.
A72
Proper adjustment shall be made on the bill to be ren-
dered by Seller to Buyer for gas delivered by Seller to
Buyer during the preceding month, to give effect to the
amount of money due Buyer by Seller as above provided,
for fuel oil so used by Buyer during such preceding month,
and to the amount of money due Seller by Buyer, as above
provided, for the gas equivalent of such fuel oil.
It is recognized that Buyer plans to use Number 2
grade fuel oil at Baxter Wilson Power Plant and Bunker
“C” grade fuel oil at Rex Brown Power Plant. It is the
intention of the parties hereto that the provisions of this
Article apply to the use of Bunker “C” grade fuel oil
the same as Number 2 grade fuel oil, by substituting the
designation “Bunker ‘C’ " for “Number 2” when and where
appropriate.
XVIL.
REGULATORY REQUIREMENT
It is expressly recognized that before Seller may pro-
ceed with the construction of any necessary facilities to
enable Seller to make deliveries of the additional quanti-
ties of gas contemplated to be delivered hereunder to
Buyer's Baxter Wilson Power Plant, Seller must apply to
the Federal Power Commission for a Certificate of Public
Convenience and Necessity, authorizing the construction
of said facilities and delivery of natural gas to Buyer.
Seller and Buyer agree to proceed with reasonable dili-
gence with the filing and prosecution of applications for
such governmental authorizations as may be respectively
required of them for the construction of the facilities
which each is required to construct under the provisions
hereof and for the sale and purchase of gas hereunder,
A73
Each party reserves the right to pursue its applications in
such manner as it deems to be in its best interest, includ-
ing the right to file whatever pleadings and motions it
deems desirable. Neither party shall be obligated to accept
any authorization which contains, in the opinion of the
party receiving such authorization, unreasonable or oner-
ous terms and conditions. In the event that Seller and
Buyer have not by July 1, 1970, obtained such authoriza-
tions upon terms and conditions which are not unreason-
able or onerous to the party receiving such authorization,
then Seller or Buyer shall have the right at any time there-
after, but prior to the parties having been issued such au-
thorization, to cancel this agreement by giving the other
party written notice of such cancellation, Upon such can-
cellation both parties shall be relieved of any liability
hereunder.
XVIII.
DULY CONSTITUTED AUTHORITIES
This agreement is especially made subject to all present
or future valid rules, regulations or orders of any com-
mission or regulatory body having jurisdiction.
XIX.
SUPERSEDING OF PRIOR AGREEMENT
This agreement supersedes, cancels and terminates, as
of the effective date hereof, as set forth in Article XIII
hereof, the above mentioned agreement dated June 14,
1963, covering the sale and delivery of natural gas to
Buyer for the purposes herein set forth. Both parties shall
on said effective date be released from any and all obliga-
tions under said agreement of June 14, 1963, except as
A74
to the obligation of Buyer to pay for all gas delivered to
Buyer by Seller prior to said effective date and for which pay-
ment has not been made. Notwithstanding the provisions
of this article, should this contract be canceled pursuant
to the provisions of Article XVII, the contract of June 14,
1963, shall thereupon be reinstated and shall continue in
effect according to its terms.
XX.
SUCCESSORS AND ASSIGNS
This contract shall be binding upon and inure to the
benefit of the respective heirs, representatives, successors
and assigns of the parties hereto,
If all or any part of Buyer's plants, facilities, and/or
other property, into which the gas sold hereunder is re-
ceived and/or utilized, are voluntarily sold or exchanged
by Buyer, then, and in such event, Buyer agrees that it
will cause the person, firm or corporation so acquiring
such property to take and hold the same subject to this
agreement and subject to the obligation to fully and faith-
fully perform all of the obligations created by this agree-
ment, and Buyer further agrees that it will incorporate
appropriate covenants to this effect in any act or convey-
ance or instrument of transfer which may be executed by
it.
If all or any part of Seller's pipe line system through
which the gas sold hereunder is delivered to Buyer is
voluntarily sold or exchanged by Seller and Seller will
thereby be rendered unable to supply to Buyer any gas
which it is obligated to supply hereunder, then, and in
such event, Seller agrees that it will cause the person,
firm or corporation so acquiring such property to take
A75
and hold the same subject to this agreement and subject
to the obligation to fully and faithfully perform all of the
obligations created by this agreement applicable to the
property so sold or exchanged and Seller further agrees
that it will incorporate appropriate covenants to this effect
in any act of conveyance or instrument of transfer which
may be executed by it.
XXI1.
DESCRIPTIVE HEADINGS
The descriptive headings of the provisions of this agree-
ment are formulated and used for convenience only and
shall not be deemed to affect the meaning or construction
of any such provisions.
IN WITNESS WHEREOFP, the parties hereto have
caused this agreement to be executed by their respective
corporate officers thereunto duly authorized and their re-
spective corporate seals to be hereunto affixed in two (2)
counterparts, each of which shall constitute an original,
on the day and year first above written.
MISSISSIPPI POWER & UNITED GAS PIPE
LIGHT COMPANY LINE COMPANY
By /s/ R. B, WILSON By /s/ SIGNATURE IL-
President LEGIBLE
President
ATTEST: ATTEST:
SIGNATURE ILLEGIBLE /s/ R. B. BERRYMAN
Secretary Secretary
A76
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A77
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A78
EXHIBIT “B”
UNITED GAS PIPE LINE COMPANY
Shreveport, Louisiana
December 8, 1967
Mississippi Power & Light Company
Electric Building
Jackson, Mississippi 39205
Gentlemen:
We have, as of even date herewith, entered into a Gas
Sales Contract with you relating to the sale and purchase
of gas for the fuel requirements for your Rex Brown
plant at Jackson, Mississippi, and the Baxter Wilson plant
near Vicksburg, Mississippi.
The hereinabove described contract provides for a
monthly “step rate” which is computed on the basis of
the monthly quantities of gas delivered at each delivery
point. The lowest rate available at any delivery point is
during months in which the volumes delivered exceed
400,000 Mcf. You have advised that you will have peri-
odic shutdowns for inspection and maintenance of your
machinery so as to properly maintain all of your equip-
ment as well as minimize the possibilities of any break-
downs, and you have inquired as to whether such events
are covered under the provisions of Article VIII (force
majeure) of our contract so as to assure you of the same
rates you would have had if such shutdowns had not oc-
curred. We are of the opinion that these events do not
come within the provisions of Article VIII of our con-
tract. However, we are willing, in computing the monthly
rate provided for in Article XIV of the contract, to give
you credit for the down time occasioned by such inspec-
tions and shutdown periods so that when the monthly rate
is computed you will pay for gas on the same basis as you
would have paid if the plant had been operating during
A79
such shutdown periods, provided that you give us proper
notice relating to such shutdowns in the same manner as
provided in said Article VIII. You will then be assured
that such shutdown periods will not in anywise increase
the price to be paid by you for gas delivered under the
contract.
If the above is satisfactory with you, please signify your
acceptance on the duplicate originals hereof in the space
provided below and return one of the duplicate originals
to us, thus constituting this letter an agreement between
us. This letter shall be considered a part of the contract
between us of even date herewith.
Yours very truly,
UNITED GAS PIPE LINE
COMPANY
By SIGNATURE ILLEGIBLE
President
Accepted and agreed to:
MISSISSIPPI POWER & LIGHT COMPANY
By /s/ R. B. WILSON
President
A80
EXHIBIT “C”
AMENDATORY AGREEMENT
Between
UNITED GAS PIPE LINE COMPANY
and
MISSISSIPPI POWER & LIGHT COMPANY
Dated January 15, 1969
THIS AGREEMENT made and entered into this 15th
day of January, 1969, by and between UNITED GAS
PIPE LINE COMPANY, a Delaware corporation, here-
inafter called “Seller”, and MISSISSIPPI POWER &
LIGHT COMPANY, a Mississippi corporation, herein-
after called “Buyer”;
WITNESSETH:
WHEREAS, Seller is selling and delivering to Buyer
and Buyer is purchasing and receiving from Seller natural
gas for all of the fuel requirements of Buyer’s Rex Brown
Power Plant located at Jackson, in Hinds County, Mis-
sissippi, and Buyer’s Baxter Wilson Power Plant located
near Vicksburg, in Warren County, Mississippi, under
the terms and conditions of that certain agreement dated
December 8, 1967, between Seller and Buyer;
WHEREAS, the above mentioned agreement of De-
cember 8, 1967, provides that in the event Seller and
Buyer have not by July 1, 1970, obtained the necessary
governmental authorizations either Seller or Buyer shall
have certain cancellation rights; and
A81
WHEREAS, Seller and Buyer desire to amend Article
XVII, Regulatory Requirement, of the above mentioned
agreement to reflect more fully the understanding be-
tween Seller and Buyer in connection with the filing and
prosecution of the necessary governmental applications;
NOW, THEREFORE, in consideration of the mutual
covenants and obligations. herein contained and assumed
by each party, the parties hereto covenant and agree as
follows:
1.
From and after the date of execution hereof, Article
XVII, Regulatory Requirement, of the above mentioned
agreement of December 8, 1967, shall be changed and
amended so that said Article shall thereafter, in its en-
tirety, read as follows:
“XVII.
“REGULATORY REQUIREMENT
“It is expressly recognized that before Seller may pro-
ceed with the construction of any necessary facilities to
enable Seller to make deliveries of the additional quanti-
ties of gas contemplated to be delivered hereunder to
Buyer’s Baxter Wilson Power Plant, Seller must apply
to the Federal Power Commission for a Certificate of
Public Convenience and Necessity, authorizing the con-
struction of said facilities and delivery of natural gas to
Buyer.
“Seller and Buyer agree to proceed with reasonable
diligence with the filing and prosecution of applications for
such governmental authorizations as may be respectively
required of them for the construction of the facilities
A82
which each is required to construct under the provisions
hereof and for the sale and purchase of gas hereunder;
provided, however, that shouid Seller not have filed with
the Federal Power Commission an application for a Cer-
tificate of Public Convenience and Necessity on or before
May 1, 1969, Buyer shall have the right, upon written
notice delivered to Seller before Seller should have filed
such an application, to cancel this contract. Each party
otherwise reserves the right to pursue its applications
in such manner as it deems to be in its best interest,
including the right to file whatever pleadings and motions
it deems desirable. Neither party shall be obligated to
accept any authorization which contains, in the opinion
of the party receiving such authorization, unreasonable
or onerous terms and conditions. In the event that Seller
and Buyer have not by January 1, 1970, obtained such
authorizations upon terms and conditions which are not
unreasonable or onerous to the party receiving such au-
thorization, then Seller or Buyer shall have the right at any
time thereafter, but prior to the parties having been issued
such authorization, to cancel this agreement by giving
the other party written notice of such cancellation. In
the event Buyer exercises its option to cancel this contract
because Seller has not timely applied to the Federal Power
Commission for a Certificate of Public Convenience and
Necessity, as provided above, or in the event either party
exercises its option to cancel this contract because either
party has not timely received acceptable regulatory au-
thorization, as provided above, then, and in any such
event, both parties and either party shall be relieved of all
liability hereunder, including liability for damages, if
any, incurred by the other party as a result of the can-
cellation.”
A83
2.
Except as herein specifically changed and amended
the above mentioned agreement of December 8, 1967,
shall remain in full force and effect as written.
IN WITNESS WHEREOF, the parties hereto have
caused this agreement to be executed by their respective
corporate officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed in two
(2) counterparts, each of which shall constitute an origi-
nal, on the day and year first above written.
UNITED GAS PIPE
ATTEST: LINE COMPANY
/s/ Signature Illegible By /s/ Signature Illegible
Assistant Secretary President
MISSISSIPPI POWER &
ATTEST: LIGHT COMPANY
/s/ Signature Illegible By /s/ R. B. WILSON
Secretary Vice President
AB4
EXHIBIT “D”
AMENDATORY AGREEMENT
Between
UNITED GAS PIPE LINE COMPANY
And
MISSISSIPPI POWER & LIGHT COMPANY
Dated April 29, 1969
THIS AGREEMENT made and entered into this 29th
day of April, 1969, by and between UNITED GAS
PIPE LINE COMPANY, a Delaware corporation, here-
inafter called “Seller”, and MISSISSIPPI POWER &
LIGHT COMPANY, a Mississippi corporation, herein-
after called “Buyer”;
WITNESSETH:
WHEREBAS, Seller is selling and delivering to Buyer
and Buyer is purchasing and receiving from Seller natural
gas for all of the fuel requirements of Buyer's Rex Brown
Power Plant located at Jackson, in Hinds County, Mis-
sissippi, and Buyer's Baxter Wilson Power Plant located
near Vicksburg, in Warren County, Mississippi, under
the terms and conditions of that certain agreement dated
December 8, 1967, as amended, between Seller and
Buyer; and
WHEREAS, Seller and Buyer desire to amend Article
XIV, Rates, of the above mentioned agreement to reflect
more fully the understanding between Seller and Buyer;
NOW, THEREFORE, in consideration of the mutual
covenants and obligations herein contained and assumed
by each party, the parties hereto covenant and agree as
follows:
a A lta:
A85
From and after the date of execution hereof, Article
XIV, Rates, of the above mentioned agreement of De-
cember 8, 1967, shall be changed and amended so that
said Subsection (A) of Article XIV shall thereafter read
as follows:
“(A) For the period commencing on the date of exe-
cution of this agreement and extending to January 1,
1973, for all gas delivered by Seller to Buyer at Buyer's
Rex Brown Power Plant and for gas delivered in quantities
each day of 110,000 Mef or less at Buyer's Baxter Wilson
Power Plant, the following monthly rate for all gas shall
apply:
“MONTHLY RATE
76.25¢ per Mc! when total deliveries are between
0 and 150 Mef
35.75¢ per Mcf when total deliveries are between
151 and 300 Mef
32.75¢ per Mcf when total deliveries are between
301 and = 1,500 Mef
27.75¢ per Mcf when total deliveries are between
1,501 and 5,000 Mef
25.75¢ per Mcf when total deliveries are between
5,001 and 10,000 Mef
25.25¢ per Mcf when total deliveries are between
10,001 and 50,000 Mef
24.75¢ per Mcf when total deliveries are between
50,001 and 85,000 Mef
23.75¢ per Mcf when total deliveries are between
85,001 and 125,000 Mef
22.75¢ per Mcf when total deliveries are between
125,001 and 160,000 Mef
21.75¢ per Mcf when total deliveries are between
160,001 and 400,000 Mef
21.25¢ per Mcf when total deliveries are over
400,000 Mef
A86
provided, however, that the above prices shall be increased
or decreased, by the amount by which Seller's weighted
average purchase price of gas for the preceding billing
month in the Jackson Area, as outlined in Exhibit B
(Drawing UB21566 1-1-69) attached hereto, exceeds
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