# Petition — Transcontinental Gas Pipe Line Corp. v. Federal Energy Regulatory Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2032%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 436 U.S. 930 ## Text Supreme Coud, U. & | JUN 17 W977 No. —=- or ~T ) CLERK IN THE Supreme Court of the United States OcTOBER TERM, 1976 — 76-1799 TRANSCONTINENTAL GAS Pipe LINE CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT Tuomas F.. RYAN, JR. Rospert G. HARDY GALLAGHER, CONNOR AND BOLAND 821 Fifteenth Street, N.W. Washington, D.C. 20005 Attorneys for Petitioner Transcontinental Gas Pipe Line Corporation Of Counsel: Brian E. O’NEILL, Senior Vice President and General Counsel WILLIAM N. Bonner, JR. Transcontinental Gas Pipe Line Corporation Post Office Box 1396 Houston, Texas 77001 Press or Byron 8S. ADAMS PRINTING, INC., WASHINGTON, D. C. INDEX Page CD ID sks. o cs ain is dewncaccaddscvccccsasadees 1 JURISDICTION ..... i cerkeenen wes eaedanéeesienendecees 2 SI TAI in noc nc cc ccdesncnceskececes 3 AE TOMI ook ic kk hieiwccnctivicnscene sca 3 Is ois hanced d6eecaeates hat cekedecedeessa 3 Reasons FoR GRANTING THE WRIT .............+.05- 7 CAD i kina oid cdannneda nd buatesi dekeieesnens 12 pF MPPPUYT ETT TT TTT TTT TT TT Tre Titi rt ee la PEE ED nc ids cecadeccceciwrsicentasencssesids 23a ROI SS. 5:0: 6 sb asin ciddadandescctisiadssaceades 25a BOI TP 6. 8 6 66 eik eetinenenetsecesessssiideeees 27a pe PPP TTT TOT ET TTIT TEL eee TT Ter eee 35a ROOM. Fs 660s candwoncceccesdsétsesadsvesetcuve 44a I TE n'5 6:00 0:065d odnendeckad ede dncesxencdexs 52a pf Perry rr eeTr erry TT TTT eT or Terrier Try Te d4a RON Tix iiceShdiscdndduaceteseatanndvssseseets 57a CITATIONS American Public Gas Association v. FPC, D.C, Cir. No. 76-2000, et al., decided June 16, 1977 ........ 10 Elizabethtown Gas Co. v. FPC, D.C. Cir. Nos, 75- 1767, et al., order issued March 29, 1977 ......... 7 Federal Power Commission vy, Louisiana Power & Bee Wels Ge ES EE Kb bbe cdeccetesesecscess 10 ii Citations Continued Page Federal Power Commission v. Transcontinental Gas Pipe Line Corporation, 423 U.S. 326 ........ 2-7, 12 Forsyth v. Hammond, 166 U.S. 506 «2.6.2... eee eee 3 Lend ¥. Dellat, BO UB. TEL 0. csccvcccsccccccccecss 3 Larson v. Domestic & Foreign Commerce Corp., 337 CT on dng ease sedérenecacceniecess ceceenss 3 Mobil Oil Corp. v. Federal Power Commission, 417 SS rrr re —ibbenadcnestneen wens 10 Philadelphia Gas Works v. F PC, D.C. Cir. No. 76- 1367, decided May 9, 1977 .......scccccccccccees 11 Public Service Commission of New York v. FPC, 467 Pp kB) es RS PPPPrePerererrerree 10 St. Louis, K.C. & C.R.R. Co. v. Wabash R.A. Co., 217 eee sce ciek Cedevasbaeeeeuieuanates 3 United States v. General Motors Corp., 323 U.S. 373... 3 IN THE Supreme Court of the United States OcTOBER TERM, 1976 No. TRANSCONTINENTAL GAS Pipe LINE CORPORATION, Petitioner, Vv. FEDERAL POWER COM MISSION PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT Transcontinental Gas Pipe Line Corporation (Transco) hereby petitions for a writ of certiorari to review an opinion and order of the United States Court of Appeals for the District of Columbia Circuit in this case, OPINIONS BELOW The opinion and order of the court of appeals (App. A, infra, pp. la-22a), its order denying suggestions for rehearing en banc on a 4-4 split vote (App. B, infra, pp. 23a-24a), and its order denying rehearing (App. C, infra, pp. 25a-26a) are not reported. The court of appeals’ initial interlocutory order (App. D, infra, pp. 27a-34a), issued August 1, 1975 in this case, is not reported. 2 This Court’s January 19, 1976 opinion granting certiorari, vacating the court of appeals’ initial order, and remanding with instructions, is reported at 423 U.S. 326, 96 S. Ct. 579, 46 L.Ed 2d 533 (1976). The court of appeals’ order and memorandum of February 6, 1976 (App. E, infra, pp. 35a-43a) re- manding to the Federal Power Commission (IPC or Commission) is not reported. The subsequent order of the Commission (App. F, infra, pp. 44a-51la), issued June 25, 1976, is not re- ported. JURISDICTION The opinion and order of the court of appeals (App. A, infra) was entered on November 29, 1976. Timely petitions for rehearing and suggestions for rehearing en banc were denied by orders issued January 18, 1977 (Apps. B and C, infra). By order dated April 14, 1977 in No. A-834, Chief Justice Burger granted an exten- sion of time for filing a petition for writ of certiorari to and including June 17, 1977." The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). Although the opinion and order of the court of ap- peals is interlocutory, this Court has jurisdiction to review it by writ of certiorari. Indeed, this Court has previously granted a writ of certiorari with respect to a prior interlocutory order of the court of appeals in this case. Federal Power Commission v. Transconti- nental Gas Pipe Line Corporation, 423 U.S. 326.2 See 2On April 14, 1977, the Commission was granted a like extension for filing a petition for a writ of certiorari in No. A-827. We are advised, however, that the Commission has decided not to seek a writ, as discussed at p. 7, n. 5, infra. 2 Hereinafter cited as FPC vy. Transco. 3 also, Forsyth vy. Hammond, 166 U.S. 506, 513, 514; St. Louis, K.C.&C. RR. Co. v. Wabash R.R. Co., 217 U.S. 247, 251; United States v. General Motors Corp., 323 U.S. 373, 377; Land v. Dollar, 330 U.S. 731, 734, n.2; Larson v. Domestic and Foreign Commerce Corp., 337 U.S. 682, 685, n.3. QUESTIONS PRESENTED 1. Whether the court of appeals has once again abused its diseretion and overstepped the bounds of proper judicial review by ordering another remand to the Commission, this time for extensive findings ‘‘re- garding the duration, shape and causation of the alleged {natural gas] shortage on the Traisco system”’, 2. Whether, having established that a natural gas shortage does in fact exist on Transco’s system, the “duration, shape and causation” of such shortage has any conceivable bearing on the legality of “‘compensa- tion” for unequal curtailment under the Natural Gas Act. STATUTE INVOLVED Section 19(b) of the Natural Gas Act, 52 Stat. 831, as amended, 15 U.S.C. 717r(b), is set forth in Appen- dix G, infra, pp. 52a-53a. STATEMENT 1. Over a year and a half ago, this Court determined that ‘‘swift and priority consideration’’ should be given to this case by the court of appeals. FPC v. Transco, supra, 423 U.S. at 334. Yet, the court of appeals still has not reached the merits of the case, which involves 4 the lawfulness of a so-called ‘‘compensation” provision contained in a curtailment plan of Transco covering natural gas deliveries to Transco’s customers for the limited one year period November, 1974 through Oc- tober, 1975. The point of controversy presented here is the continued insistence of the court of appeals in this case of dictating to the Commission the methods and procedures for determining the reality of the shortage of natural gas o1 Transco’s system. 2. In the prior chapter of this same proceeding, this Court ruled that the court of appeals “overstepped the bounds of its reviewing authority” in “dictating to the agency the methods, procedures and time dimension”’ of an evidentiary inquiry thought by the court of ap- peals to be essential to meaningful judicial review of the curtailment compensation provision. PPC v. Trans- co, 423 U.S. at 331-3332 In remanding to the court of appeals, this Court authorized the lower court either to proceed to decide the case on the merits or, because it was “conceivable” that there was some nexus between the existence of the shortage and the lawfulness of the compensation scheme, to remand to the Commission for adequate findings. 3. The court of appeals opted for the latter course. By its February 6, 1976 decision (Judge MacKinnon dissenting) (App. FE, tufra), the court of appeals con- cluded that evidence on the shortage was “absolutely essential” to a decision. The court of appeals stated : “ “We do not perceive how we could fairly consider ‘the lawfulness of the proposed compensation scheme’ unless the Commission has first fulfilled its *The background of that phase of the proceeding is set out in the Court’s vpinion and will not be repested here. 5 duty to determine whether a real shortage exists. Thus far the Commission has refused to certify the existence of the shortage claimed by Transco .. .” (App. E, infra, p. 39a) (emphasis supplied). 4. In response to the court of appeals’ mandate, the Commission found ‘‘that a natural gas supply shortage has in the past and continues to exist on Transco’s sys- tem’’ requiring curtailment of service. Order of June 25, 1976 (App. F, infra, p. 51a). The Commission’s findings and conclusions were based upon a stipulation and agreement among the parties to FPC Docket No. RP75-51 (an investigation of Transco’s curtailment situation) which in turn was based upon relevant por- tions of the record in that case. Such stipulation is set forth as Appendix H, infra, pp. 54a-56a. In so con- firming the reality of the shortage, the Commission pointed out that ‘deliverability (the amount of gas capable for delivery in a fixed time period) evidence is more relevant to the issue of need for curtailment than is evidence on total proved reserves.’? (App. F, infra, p. 50a). . 5. In its November 29, 1976 opinion and order (App. A, infra), the court of appeals concluded that the Com- mission’s order on remand was deficient.‘ Whereas the court in its original order of May 28, 1975 had re- quested certification of proved reserves and in its Feb- ruary 6, 1976 order (App. FE, infra) had merely asked the Commission to certify whether ‘‘a real shortage ex- ists”, the same panel now wanted ‘‘to be able to assess the nature, extent and duration of shortage” along cer- tain preconceived lines of inquiry. The court was criti- cal of the fact that the Commission focused on evidence *In this action and all preceding actions on the same subject, the panel was divided 2 to 1. 6 regarding deliverability rather than reserves, and opined that deliverability evidence : “does not necessarily constitute substantial evi- dence of actual and legitimate long-term shortage if, for example, a pipeline or producer could, by more or less simple acts, make its proved reserves more deliverable.” (App. A, infra, p. 10a). The court below also speculated that sizeable reser- voirs of gas might “by physically and economically achievable acts” be moved from “possible’’ or “prob- able” categories into the category of ‘proved reserves”. Such category of gas was characterized as “provable” reserves, a term heretofore unheard of in the natural gas industry. While the court of appeals conceded that deliverability evidence might suffice as proof of an immediate shortage, it now expressed its belief that the determination of the legality of compensation re- quired a ‘‘broader base of information’’. In summary, the court of appeals now decided to re- quire answers to sweeping questions looking far into the future, despite the fact that the compensation issue on review is tied to a one year time period (November 15, 1974 through October 31, 1975) long since past. 6. Transco filed a petition for rehearing and a sug- gestion for rehearing en banc (App. I, infra, pp. 57a- 7 66a), as did the Commission‘ and several other parties. The suggestions for rehearing en banc were denied by virtue of a 4-4 split among the judges of the circuit in regular active service who voted on the case (App. B, infra), and the majority of the 3-judge panel, con- sisting of Chief Judge Bazelon and Judge Edwards (of the Sixth Circuit Court of Appeals), thereupon denied rehearing, with Judge MacKinnon continuing to dissent (App. C, infra). REASONS FOR GRANTING THE WRIT This case presents an important question concerning the propriety of a reviewing court attempting to recast and reshape a lawsuit to fit its own ideas of appropriate issues and areas of inquiry, despite the fact that no private or publie party to the case raised such matters or believed that the Commission’s determination of the existence of the shortage was inadequate to a resolu- tion of the case. More specifically, Transco submits 5 We have been advised that the Commission is not seeking cer- tiorari this time although, as evidenced by the motion for extension of time in Nv. A-827, the Commission had earlier requested the Solicitor General to seek certiorari in this case. This request to the Solicitor General was recently withdrawn by the Commission after the same court of appeals inexplicably scheduled oral argument in three other pending ‘‘compensation’’ cases without requiring the same gas supply inquiry as is being required by that court in the instant case. Order issued March 29, 1977 in Elizabethtown Gas Co. v. FPC, D. C. Cir. Nos. 75-1767, et al. Aithough the reasoning for the Commission’s sudden change of position will have to be supplied by the Commission itself, the fact that Transco apparently will now be the only pipeline singled out for such an inquiry does not make the judicial interference any less unlawful. Indeed, the ac- tions of the court of appeals cannot in our judgment be reconciled if there is any validity to the court’s claim that verification of the shortage is ‘‘absolutely essential’’ to determining the legality of ‘*compensation’’. 8 that the court below overstepped the bounds of proper judicial review by imposing its judgment of technical matters upon the expert agency, and by ordering a second remand of the case for “exceptionally complex findings and prophecies”* which, under the cireum- stances, have no possible bearing on the question in- volved in the lawsuit. Although the court of appeals couches its latest de- cision in terms of lack of ‘‘substantial evidence”, the plain fact is that the court has again dictated to the Commission the methods and procedures for determin- ing the existence of the natural gas shortage on Trans- co’s system.’ The court of appeals takes no issue with the quantum of evidence used by the Commission to determine that the shortage really exists. Rather, it de- termines that the Commission went about its inquiry in the wrong way. It disagrees with the Commission (the supposed expert body) that deliverability (the ability of attached wells to produce) is the best test of exist- ence of an actual shortage and then orders the Commis- sion to embark upon a wholly new line of inquiry, one to determine the “duration, shape and causation of the alleged shortage”. And in so doing, it tells the Commis- sion that it must look at “provable’’ reserves, a brand- new term which the court defines as reserves which could become proved through “physically and economi- “ally achievable acts lying entirely within the control of a pipeline or a producer”, This aetion by the court of appeals, we submit, constitutes even greater judicial interference with the administrative process than that * As stated by Judge MacKinnon in his dissenting opinion, App. A, mfra, p. 20a. "In the prior chapter, the court of appeals also dictated the time dimension for the inquiry, Only that element is missing this time. 9 which this Court overturned in the prior chapter of this case. First, the court of appeals has ordered a far-reach- ing inquiry, complete with its own term and definition,’ into matters which are fraught with inherent uncer- tainties and which, in any event, are far beyond the power of the agency to control. The “duration” and “shape” of the future shortage on Transco’s system will require crystal ball gazing of the highest magni- tude and will offer little assistance in resolving any is- sue, much less the issue of the legality of compensation in a curtailment case. Quite obviously, with the Com- mission having found that the existing shortage is gen- uine, the duration—and we might add, degree—of fu- ture shortage will be dependent upon a great many un- knowns, the principal one being the amount of new re- serves found and dedicated by producers to Transco’s system. This, in turn, will be a function of the eco- nomies of exploring for and developing new reserves, as well as the existence and magnitude of the reserves in the ground. By this, we do not intend to suggest that a court could not comprehend the geologie, engineering, eco- nomie and regulatory complexities of gas production, but rather that the court of appeals’ desire to satisfy * As dissenting Judge MacKinnon aptly stated: ‘Originally the majority were concerned with ‘proved re- serves’... . The majority now expand their prior remand * inelude so-called * provable reserves '—not just proved reserves. The industry reports (/d.) do not refer to any such eclass:tica- tion. So unless some industry support can be cited for the term ‘provable reserves’, it must be eoneluded that the ma jority ‘ave coined an ad hoe detinition and gratmitous’y & dowed » h their own non-scientifie trappings.” (App. A, infra, } * 4-I6a,n.1). 10 its curiosity ° cannot possibly be meaningful, particu- larly in the context of the powers and responsibilities of the Commission and the judiciary, respectively. One thing is certain, however, and that is that neither the Federal Power Commission nor the court of ap- peals can force producers to drill wells, which is the only way that gas can be brought to the surface of the earth for transportation by pipelines.”° Second, it is inconceivable that the “duration, shape and causation” of the gas shortage, with all of the ne- °**Curiosity’’ may be an understatement. ‘udge MacKinnon pointedly observes that the majority of the panel is ‘‘apparently obsessed with the idea that there is no actual gas or oi] shortage’’ (App. A, infra, p. 15a). Such a notion has no foundation in the record on review and is flatly contrary to this Court’s recognition of the energy shortage in prior gas cases. See, ¢.g., FPPC v. Louisiana Power & Light Co., 406 U.S. 621, and Mobil Oil Corp. v. FPC, 417 U.S, 283. And, some five years age, in Public Service Commission of New York v. FPC, 467 F.2d 361, 371 (D.C. Cir. 1972), the court below took notice of ‘‘our national critical shortage of nat- ural gas’’; most recently, in American Public Gas Association v. FPC, [The Second National Natural Gas Rate Cases’’], D.C. Cir, No, 76-2000, et al., decided June 16, 1977, the court of appeals characterized the gas shortage as a ‘‘national emergency’’ (Slip Op., p. 61). “A prime example of the attempt by the court of appeals to interfere with the functions of the expert administrative agency and impose its erroneous notions of the gas industry upon the Commission is found in the following statement: **Diminished deliverability does not necessarily constitute sub- stantial evidence of actual and legitimate long-term shortage if, for example, a pipeline or producer could, by more or less simple acts, make its proved reserves more deliverab!e.’’ (App. A, tafra, p. 10a). Since the pipeline has no control over the drilling of wells by its producers, the court’s reference to the pipeline is clearly wrong. More fundamentally, however, the statement is totally erroneous, since the way to improve deliverability of proved reserves is to drill more wells in existing fields and while such actions would alleviate the short-term shortage, they would aggravate the long- term shortage by depleting known reserves at a faster rate. 11 bulous judgments which would attend any such find- ings,’ could have any bearing upon the issue of the lawfulness of “compensation’”’ in the context of this ease. While it was conceivable that the existence of a true shortage could bear upon the lawfulness of “com- pensation” as this Court previously determined, we submit that the Commission has now adequately an- swered that question (App. H, infra), particularly since the compensation here involved covers only a past period. Furthermore, we fail to see how the new, expanded inquiry ordered by the court of appeals has any relationship to the threshold legal issue of whether any compensation plan is lawful. The Commission has determined that all plans are unlawful on their face; it is this issue and this issue alone which is before the court of appeals, and speculation on how long the gas supply shortage is going to last will not aid in that determination. Furthermore, if the court of appeals is correct, it would seem to follow logically that the ‘‘duration, shape and causation’’ of the shortage would permeate the gas allocation features of all curtailment plans as well as the ancillary compensation schemes that have accom- panied some.” While we firmly believe that all such in- quiries would be fruitless in the long run, the logical effect of the court of appeals’ order would be to im- 11 F.g., how much new gas will be found, in what supply areas will it be found, and when? How much of that which will be found in its supply area will Transeo acquire and when ? 12 We have pointed out above (p. 7, n.5) that the court of appeals has set for argument three other eases involving the legality of compensation plans. In addition, the court has decided the mexits of the gas allocation feature of curtailment plans, including one involving Transeo (Philadelphia Gas Works v. FPC, D.C. Cir. No. 76-1357, decided May 9, 1977). We cannot reconcile these actions with the one here at issue. a ae 12 pede the Commission’s ability to oversee curtailment practices and policies in the short run. Finally, although the court’s order is interlocutory, its effect is immediate and irreparable. Transco submits that, in terms of judicial interference, the latest order is even more grievous than the court of appeals’ Au- gust 1, 1975 order which was summarily reversed by this Court. As this Court there determined, any re- view of the propriety of the order must be immediate to the meaningful. FPC v. Transco, 423 U.S. at 330, 331. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted, THomMAS IF’. Ryan, JR. Rosert G. Harpy GALLAGHER, CONNOR AND BOLAND 821 Fifteenth Street, N.W. Washington, D.C. 20005 Counsel for Petitioner Of Counsel: Brian FE. O'NEILL, Sentor Vice President and General Counsel WiLi1aAM N. Bonner, JR. Transcontinental Gas Pipe Line Corporation Post Office Box 1396 Houston, Texas 77001 June 1977. APPENDIX Ee la APPENDIX A United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 74-2036 TRANSCONTINENTAL GAS PIPE LINE CORPORATION, ET AL., PETITIONERS Vv. FEDERAL POWER COMMISSION, RESPONDENT PIEDMONT NATURAL GAS Co., INC. FARMERS CHEMICAL ASSOC., INC. GAS SECTION GEORGIA MUNICIPAL ASSO. MANUFACTURES INSTITUTE, INC. STAUFFER CHEMICAL Co. OWENS-CORNING FIBERGLAS CORP. PUBLIC SERVICE Co. OF NORTH CAROLINA THE BROOKLYN UNION GaAs Co. LONG ISLAND LIGHTING Co. CONSOLIDATED EDISON Co. OF NEW YORK, INC. PHILADELPHIA GAS WORKS ALUMINUM Co. OF AMERICA SOUTH JERSEY GAS Co. ATLANTA GAS LIGHT Co. PUBLIC SERVICE ELECTRIC AND GAS Co. INTERVENORS 2a No. 75-1038 PIEDMONT NATURAL GAS COMPANY, INC., PETITIONER V. FEDERAL POWER COMMISSION, RESPONDENT GENERAL Motors Corp. AMERICAN TEXTILE MANUFACTURES INSTITUTE INC. TRANSCONTINENTAL GAS PIPE LINE Corp. OWENS-CORNING FIBERGLAS CorP. CONSOLIDATED EDISON Co. OF NEW YorRK, INC. SOUTH JERSEY Gas Co. EASTERN SHORE NATURAL Gas Co. PHILADELPHIA GAS WoRKS BROOKLYN UNION Gas Co. PUBLIC SERVICE Co. OF NORTH CAROLINA, INC. PUBLIC SERVICE ELECTRIC & Gas Co. ALUMINUM Co. OF AMERICA PUBLIC SERVICE COMMISSION FOR THE STATE OF NEW YORK NORTH CAROLINA NATURAL GAs Co. FARMERS CHEMICAL Asso. INC. LONG ISLAND LIGHTING Co. INTERVENORS 3a No. 75-1045 ELIZABETHTOWN GAS COMPANY, PETITIONER Vv. FEDERAL POWER COMMISSION, RESPONDENT GENERAL Motors Corp. PIEDMONT NATURAL GAS Co. INC. THE AMERICAN TEXTILE !1[ANUFACTURING INSTITUTE INC. TRANSCONTINENTAL GAS PIPE LINE Corp. OWENS-CORNING FIBERGLAS CORP. CONSOLIDATED EDISON CO. OF NEW YORK, INC. SouTH JERSEY GAS Co. PHILADELPHIA GAS WORKS PUBLIC SERVICE ELECTRIC AND GAs Co. PuBLIC SERVICE COMPANY OF NORTH CAROLINA INC. EASTERN SHORE GAS Co. BROOKLYN UNION GAs Co. FARMERS CHEMICAL Asso. INC. PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK ALUMINUM Co. OF AMERICA NorTH CAROLINA GAS CORP. LONG ISLAND LIGHTING Co. INTERVENORS Oe es ee ne ta - ta No. 75-1077 CONSOLIDATED GAS SUPPLY CORPORATION, PETITIONER V. FEDERAL POWER COMMISSION, RESPONDENT TRANSCONTINENTAL GAS PIPE LINE PIEDMONT NATURAL GAS Co. AMERICAN TEXTILE MANUFACTURES INSTITUTE OWENS-CORNING FIBERGLAS SOUTH JERSEY GAs Co. CONSOLIDATED EDISON Co. oF NEW YORK GENERAL Motors Corp. PHILADELPHIA GAS WORKS - PUBLIC SERVICE ELECTRIC & GAS Co. PUBLIC SERVICE Co. OF NORTH CAROLINA EASTERN SHORE NATURAL Gas Co. THE BROOKLYN UNION Gas Co. FARMERS CHEMICAL Asso., INC. NORTH CAROLINA NATURAL GAS CorP. THE PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK ALUMINUM Co. OF AMERICA LONG ISLAND LIGHT Co. INTERVENORS No. 75-1099 ATLANTA GAS LIGHT COMPANY, PETITIONER Vv. FEDERAL POWER COMMISSION, RESPONDENT AMERICAN TEXTILE MANUFACTURERS INSTITUTE INC. TRANSCONTINENTAL GAS PIPE LINE Corp. GENERAL Motors Corp. OWENS-CORNING FIBERGLAS CorP. FARMERS CHEMICAL Asso. INC. Da NORTH CAROLINA NATURAL GAS CORP. THE PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK ALUMINUM Co. OF AMERICA PIEDMONT NATURAL GAs Co. INC. BROOKLYN UNION GAS CoO. PUBLIC SERVICE Co. OF NORTH CAROLINA INC. PUBLIC SERVICE ELECTRIC & GAs Co. INTERVENORS No. 75-1103 CONSOLIDATED EDISON COMPANY OF NEW York, INC., PETITIONER Vv. FEDERAL POWER COMMISSION, RESPONDENT AMERICAN TEXTILE MANUFACTURERS INSTITUTE INC. TRANSCONTINENTAL GAS PIPE LINE CorP. GENERAL Motors Corp. OWENS-CORNING FIBERGLAS CorP. FARMERS CHEMICAL Asso., INC. NORTH CAROLINA NATURAL GAS CoRP. PuBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK ALUMINUM Co. OF AMERICA PIEDMONT NATURAL GAS Co., INC. LONG ISLAND LIGHTING Co. PHILADELPHIA GAS WORKS BROOKLYN UNION GAs Co. PuBLIC SERVICE Co. OF NORTH CAROLINA INC. PUBLIC SERVICE ELECTRIC & GAS Co. EASTERN SHORE NATURAL GAS Co. SouTH JERSEY GAS Co. INTERVENORS remem ae 6a No. 75-1200 STATE OF NORTH CAROLINA AND NORTH CAROLINA UTILITIES COMMISSION, PETITIONERS Vv. FEDERAL POWER COMMISSION, RESPONDENT PIEDMONT NATURAL GAS CoMPANY, INC. FARMERS CHEMICAL Assoc. Co. EASTERN SHORE NATURAL Gas Co. PHILADELPHIA GAS WoRKS SOUTH JERSEY GAs Co. GENERAL Motors Corp. NORTH CAROLINA NATURAL GAS Corp. PUBLIC SERVICE ELECTRIC AND Gas Corp. CAROLINA PIPELINE COMPANY THE PUBLIC SERVICE COMMISSION OF THE STATE OF NEW YORK PUBLIC SERVICE Co. OF NORTH CAROLINA, INC. OWENS-CORNING FIBERGLAS CORP. On Proceedings Subsequent to Remand Filed November 29, 1976 Before: BAZELON, Chief Judge, Epwarps,* United States Circuit Judge for the Sixth Circuit; and MACKINNON, Circuit Judge Opinion for the Court filed by Chief Judge BAZELON. Dissenting Opinion filed by Circuit Judge MACKINNON. * Sitting by designation seusaen pursuant to Title 28 U.S.C. Ta BAZELON, Chief Judge: At issue in this case is an in- terim curtailment plan negotiated by the Transconti- nental Gas Pipe Line Corporation (Transco) and its customers, in response to the natural gas shoriage said to exist on the Transco pipe line. The plan is designed to allocate this gas shortfall among Transco’s distributor customers. One element of the proposed plan is a com- pensation scheme, whereby those Transco customers cur- tailed less than the system-wide average would com- pensate those curtailed more than the average. The Fed- eral Power Commission found the compensation scheme violative of the Natural Gas Act, and therefore rejected the proposed interim plan. This appeal followed. On August 1, 1975, this court withheld consideration of this case, “until the Commission has completed its own investigation and report to this court of Transco’s claims of reduced reserves... .” On January 19, 1976, the Supreme Court granted certiorari, vacated this court’s order, and remanded with instructions that we should: either . . . proceed to the merits of the issues pre- sented by ‘the compensation scheme and only there- after deal with the adequacy of the record in regard to the evidence of shortage, or immediately remand the case to the Commission for the required inquiry. 44 U.S.L.W. 3418; 96 S.Ct. — (1976). On February 6, 1976, we followed the latter course and remanded to the Commission ‘ 1 Notwithstanding our local Rule 13(d) governing remands “of the record” and “of the case” or the specific Supreme Court language we quoted in our February 6 order, and in light of the Supreme Court’s purpose here of remand for supplementation of the record, we do not read our prior order as surrendering jurisdiction. Upon the Commission’s motion to lodge its order of June 25, 1976 and attached documents, the court determines to treat the motion as a motion to file and to supplement the record in a case over which it has on-going jurisdiction, and as such grants it. Sa |W jell aware that the Commission has disapproved this compensation scheme rather than approved it, we do not see how we can fairly weigh the legality of that decision unless the record contains a basis for our deciding whether or not the agreement was a truly voluntary response to an actual shortage. No such basis is provided absent the Commission’s in- vestigation of the shortage question and findings of fact on this issue which can be properly reviewed by this court. Memorandum accompanying Order of February 6, 1976, at 4-5. Because we find that the information provided by the Commission on return of remand is still inadequate we must, reluctantly, remand the record once again. I. DEFICIENCIES ON PRIOR REMAND On remand, in an attempt to expand the record to establish proof of an actual gas shortage, the parties en- tered into a stipulation of “facts [which] demonstrate that Transco has had, and continues to have, a necessity to curtail service to its customers. .. .” Among the recitations was that, “The annual volume of natural gas available from Transco’s producer-suppliers has been declining since 1971 and has been and continues to be, insufficient to enable Transco to satisfy the certificated requirements of its customers. .. .” In support of the accuracy of this statement, the stipulation summarizes the affidavit of FPC staff witness, Wayne M. Thompson, a geologist in the Gas Supply and Production Section of the Bureau of Natural Gas. Thompson testified that staff initially undertook a review of the delivery capa- bility of 18 fields connected to the Transco pipeline sys- tem and responsible for 12% of its supply. Thompson concluded that “Transco’s projections of deliverability are reasonably accurate, although somewhat lower than our own.” Affidavit at 2. He further concluded that “if Ga the fields studied are representative of the entire Trans- co supply,” then “curtailment on Transco’s system will be necessary, roughly to the extent Transco itself has stated.” The stipulation also recites that Thompson “stated that a further staff review of 19 additional fields accounting for approximately 9% of Transco’s gas sup- ply did not change his opinion... .” Stip. at 2. The Administrative Law Judge certified the stipula- tion to the Commission, along with relevant record evi- dence. On June 25, 1976, the Commission issued an eight-page order with these underlying materials as at- tachments. The principal Commission finding states, Upon consideration of the mandate of the remand by the Court of Appeals and the record evidence prop- erly before the Commission we find that a natural gas supply shortage has in the past and continues to exist on Transco’s system which has necessitated some curtailment of service to Transco’s customers. Order of June 25, 1976, at &.° We find that the record here, even as supplemented on remand, lacks the “ ‘substantial evidence’ . . . necessary to support any such finding |of shortage] by the Com- mission.” 44 U.S.L.W. at 3414; 96 S.Ct. — (1976). * This finding negates the dissenter’s view that “If Transco has curtailed its customers in the past, or does so in the fu- ture, because of any shortage which is fictitious or self- induced, or in any way wrongful, it can be sued for damages.” Dissent at 4. We note that a recent FPC news release indi- cates that in the gas year just ended (April 1975-March 1976), Transco was curtailing 35% of firm requirements system- wide. FPC Report of June 18, 1976 on 1976-77 Projected Natural Gas Pipeline Curtailments, Schedule I of Bureau of Natural Gas Staff Report. For the current gas year (April 1976-March 1977), Transco projects a deficiency of 42.98% of firm requirements. Jd. Plainly the question of whether a shortage is “fictitious,” “self-induced,” or “in any way wrong- ful” is not simply a related or future question, but goes to the heart of the propriety of compensation. 1V0a This court has previously suggested that the existence and legitimacy of shortage on the Transco system could best be proven by thorough examination of the pipeline’s proved reserves. But the Commission order on remand, while finding that a natural gas supply shortage has existed and continues to exist, does so exclusively in terms of “deliverability.” The Commission states that “deliverability (the amount of gas capable of delivery in a fixed time period) evidence is more relevant to the issue of need for curtailment than is evidence on total proved reserves.” Order, supra, at 7. Deliverability may, indeed, be “more relevant” to the question of whether curtailment is required on any given day; however, it eeems clear that at least some explanation of the rela- uonship between Transco’s present deliverability crisis and its proved reserves, and the reasons for Transco’s alleged inability to bring sufficient gas onstream, is re- quired in order for the Commission and a reviewing court to be able to assess the nature, extent, and dura- tion of shortage. Diminished deliverability does not necessarily consti- tute substantial evidence of actual and legitimate long- term shortage if, for example, a pipeline or producer could, by more or less simple acts, make its proved re- serves more deliverable. Similarly, diminished proved reserves may not support a finding of long-run shortage if by physically and economically achievable acts lying entirely within the control of a pipeline or producer, sizeable reservoirs of gas might be moved from the ‘possible’ or ‘probable’ categories into the category of ‘proved reserves’.® In a related context, the Commission has noted that the need for curtailment may arise in two legally dis- tinct situations. In the first, reduction of service comes * Gas which could be so moved into “proved reserves” will be termed “provable” throughout this opinion. al lla about because of government-ordered curtailment “nec- essary as a result of the [legitimate] gas shortage.” In the second, “the pipeline’s need to curtail resulted from its own negligence, bad faith, or other wrongful con- duct.” See United Gas Pipeline Co., 49 F.P.C. 1211, 1220 (1973). We fail to see how the Commission can distinguish between these two shortfall conditions em- ploying deliverability data alone. However, even assuming that the deliverability data now in the record constituted proof of Transco’s imme- diate shortage sufficient to justify curtailment of some sort, a determination of the legality of compensation would require a broader base of information. II. SCOPE OF THE PRESENT REMAND OF RECORD Because of ambiguities in the Commission orders of November 12, 1974, and January 10, 1975, we are unable to determine whether the Commission concluded that all like compensation plans employed in the context of end- use curtailment would be barred by the Act, or whether instead it concluded only that this particular plan is improper.‘ But whether the opinions are intended to be read broadly or narrowly, we believe it is clear that any proposed compensation plan cannot be measured against *There would appear to be serious questions about the validity of a broad ban on all compensation plans. See Missis- sippi Public Service Commission v. FPC, 522 F.2d 1345 (Sth Cir. 1975), cert. denied, 45 U.S.L.W. 3220. In that case the Fifth Circuit set aside an FPC order denying extraordinary relief from a curtailment plan. The relief sought consisted of a compensation plan, and the Commission denied the relief because it concluded that it lacked jurisdiction to order or approve any plan of compensation. The court disagreed, hold- ing that “‘the imposition of compensation payments as a con- dition for the receipt of higher priority gas is within the statutory power of the FPC ....” Jd. at 1350. l2a the strictures of § 4 of the Act’ without substantial in- *The overarching requirement of the Natural Gas Act is that all rates and charges by natural gas companies subject to FPC jurisdiction, and all governing rules and regulations, must be “just and reasonable,” and those that are not are deemed unlawful. §4(a). Under the compensation plan at issue in the instant case, the pipeline’s distributor customers would pay differing prices for gas depending upon whether they were being curtailed more or less than the systemwide average. A threshold determination, therefore, would be whether the financial burdens and benefits related to compen- sation constitute “rates” or “charges” within the reach of § 4(a) for regulatory purposes. Although we need not now reach this issue, we note that the Fifth Circuit has determined that such payments do not con- stitute “rates”: “[{[C]Jompensation payments are not ‘rates’ but in the nature of surcharges imposed in the context of a curtailment plan to insure that the burdens of curtailment are spread evenly and equitably among those affected. . . .”” Missis- sippi Public Service Commission, supra, at 1350. The court suggested that “compensation plans are more analogous to the penalty payments included by the Commission in various curtailment plans to deal with the problem of overtakes.” Id. “Surcharges” and “penalty payments,” however, suggest limited application of a pricing mechanism for a short dura- tion to achieve a clearly defined purpose; higher prices for gas sold as emergency relief or improperly taken in excess of cur- tailment, may not necessarily be analogous to varying perma- nent prices for gas allocated by the curtailment plan itself. Assuming that compensation payments were found to be regulable “rates” or “charges,” they would have to meet the non-discrimination requirements of § 4(b) of the Act, as well as the “just and reasonable” test of § 4(a). Section 4(b) provides: (b) No natural gas company shall, with respect to any transportation or sale of natural gas subject to the juris- diction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, l3e formation regarding the duration, shape and causation of the alleged shortage on the Transco system. Such in- formation is simply not provided by deliverability data alone. We believe that the legality of compensation may well turn, at least in part, on answers to the following sorts of questions: Are sufficient volumes of gas avail- able as proved or provable reserves so that greater total deliverability can be foreseen in the short-term future? Are present levels of curtailment likely to continue for the indefinite future, or to deepen? And more specifi- cally: will compensation be a short-term financial ad- justment between customers of the pipeline to keep some of those customers financially afloat until the supply situation stabilizes, or will it be a permanent cross- subsidization? We believe that without such informa- tion, neither the Commission nor the court can hope to give meaning to statutory terms such as “rates,” “charges,” and “classes of service” in a regulatory land- scape vastly altered by end-use curtailment. service, facilities, or in any other respect as between localities or classes of service. 15 U.S.C. §717c. Determining whether compensation fees (if held to be regulable “rates” or “charges’’) constitute un- due preference or disadvantage, or involve unreasonable differences as between localities or classes of service would be difficult. It is unclear, in the context of deep end-use curtailment, what the statutory phrase “classes of service” has come to mean. For example, when two distributor customers of a pipeline have vastly different consumer loads, one with mostly high priority volumes and transacting near-normal business, the other selling almost no gas because its mostly low priority volumes have been fully curtailed, are they simi- larly situated from the perspective of § 4(b)(2) simply be- cause the underlying contractual terms of sale from the regu- lated pipeline are identical? Upon decision of this question may turn the lawfulness of differing gas prices charged those distributor customers under compensation. l4a III. CONCLUSION In remanding the case to this court, the Supreme Court noted, “. . . it is at least conceivable that the Court of Appeals could determine that the lawfulness of the pro- posed compensation scheme is partially a function of the actual severity of the shortage.” 44 U.S.L.W. 3413; 96 S.Ct. (1976). This court has so determined, as we suggested in our order of February 6, 1976. The addi- tional information we now require in this second remand of the record is necessary to determine how Transco is marshaling its resources and proved and provable re- serves to produce maximum deliverability in the future. Only when the anticipated duration and shape of the shortage is in better perspective will this court be able to assess the legality of the compensation scheme at issue here. The Clerk is instructed to remand the record here- in to the Federal Power Commission for supplementation in accordance with this opinion. So ordered. 15a MACKINNON, Circuit Judge, dissenting: The foregoing opinion finds it necessary to again remand this case (rather the record) to the Federal Power Commission. The stated objective of such a remand is to determine how Transco is marshaling its re- sources and proved and provable |") reserves to pro- duce maximum deliverability in the future. Only when the anticipated duration and shape is in bet- ter perspective will this court be able to assess the legality of the compensation scheme at issue here. Maj. op. p. 9 (emphasis added). In my view the foregoing misconceives the issues here and this court’s ability to deal with them. This court has before it a curtailment plan involving a compensation scheme. If the compensation scheme is invalid the entire curtailment plan falls and it would be unnecessary to consider any of the facts and issues that the remand directs the Commission to determine and consider. However, the majority, apparently obsessed with the idea that there is no actual gas or oil shortage,’ ‘ Originally the majority were concerned with “proved re- serves” (Majority op. p. 10), which term has a precise meaning in the accepted geological and engineering concepts and methods used throughout the oil and gas industry, i.e.: {[P]roved reserves [are] the current estimated quantity of natural gas and natural gas liquids which analysis of geologic and engineering data demonstrate with rea- sonable certainty to be recoverable in the future from known oil and gas reservoirs under existing economic and operating conditions. Reservoirs are considered proved that have demonstrated the ability to produce by either actual production or conclusive formation test. The area of a reservoir considered proved is that por- tion delineated by drilling and defined by gas-oil, gas- water contacts or limited by the structural deformation or lenticularity of the reservoir. In the absence of fluid l6a contacts, the lowest known structural occurrency of hydrocarbons controls the proved limits of the reservoir. The proved area of a reservoir may also include the ad- joining portions not delineated by drilling but which can be evaluated as economically productive on the basis of geological and engineering data available at the time the estimate is made. Therefore, the reserves reported . . . should include total proved reserves which may be in either the drilled or undrilled portions of the field or reservoir. 28 AMERICAN GAS ASSN., RESERVES OF CRUDE OIL, NATURAL Gas LIQUIDS, AND NATURAL GAs 102 (1974). [P]roved reserves .. . include gas and natural gas re- serves of all types regardless of size, availability of market, ultimate disposition or use. Id. at 96-97. The majority now expand their prior remand to include so-called “provable reserves”—not just proved re- serves. The industry reports (id.) do not refer to any such classification. So unless some industry support can be cited for the term “provable reserves,” it must be concluded that the majority have coined an ad hoc definition and gratuitously endowed it with their own non-scientific trappings. They define it to mean sizeable reservoirs of gas which might be moved from the “possible” or “probable” categories (both un- defined) into the category of “proved reserves” by “physically and economically achievable acts lying wholiy within the con- trol of a pipeline or producer.” Majority op. p. 10 & n.3. The term “proved reserves” already includes considerable quanti- ties of natural gas that are not absolutely proved and which may be said to involve some degree of “possibility” or “prob- ability’”—such as reserves in the “undrilled portions of the field or reservoir.” AMERICAN GAS ASSN., supra at 102. How much more “possible” or “probable” the majority want the Commission to go in their now expanded effort to find some additional basis for supporting the remand, they do not say. Whether this attempt by the majority to now expand the inquiry into this nebulous area is practical remains to be seen. At the present time no industry or scientific support has been cited to justify it. If the Commission or the parties considered this request to be impractical, they can move for its modification. l7a have taken the bit in their teeth and sua sponte deter- mined to compel the Commission to make an extensive and complex investigation, study and report on that issue. This same effort is being substantially duplicated for other gas producing areas by Congress, Ashland Oil, Inc. v. FTC, —— U.S.App.D.C. . F.2d (Nos. 76-1174 & 76-1304, Sept. 20, 1976), and other agencies, FTC v. Texaco, Inc., 170 U.S.App.D.C. 323, 517 F.2d 137 (1975), vacated pending rehearing en banc (Feb. 6, 1976). : In determining that it has the right to do this, the majority hangs on the strict language of the sentence in the Supreme Court remand order which, inter alia, states: |I}t is at least conceivable ... that the /awfulness of the proposed compensation scheme is partially a function of the actual severity of the shortage. FPC v. Transcontinental Gas Pipe Line Corp., 423 U:S. 326, 334 (1976) (emphasis added). However, to my mind, the reliance of the majority does not fully consider the import of the Supreme Court order. First, to the extent that the Supreme Court sup- ported the theory of the majority it did so by saying it was only “conceivable.” That is not much support. Sec- ond, the Supreme Court recognized that the validity of the compensation scheme was, at best, dependent only “partially [on] . .. the actual severity of the shortage.” Id. This recognizes that this court could pass on that part of the plan that involved the va..dity of any compu- tation scheme inter sese without the necessity of deter- mining the existence or non-existence or exact extent of a gas shortage on the line. In fact, the two alternatives which the Supreme Court gave this court on remand? * [T]he court below is free on remand either to proceed to the merits on the issues presented by the compensation scheme and only thereafter deal with the adequacy of the 18:8 are another recognition that it was not necessary to pass on the validity or extent of the gas shortage in order to rule that the plan was invalid because the Natural Gas Act does not permit the incorporation of any compensa- tion scheme. Third, when the Supreme Court referred to the “lawfulness of the proposed compensation scheme” (emphasis added) as being only “partially a function of the actual severity of the shortage” (emphasi. added), it indicated to me that it recognized that (1) the Commis- sion might find the scheme to be lawful under the Natu- ral Gas Act, but that (2) in its application to curtailed users, the same plan might at some later date be deter- mined to involve an unlawful breach of their contracts because of Transco’s “negligence, bad faith, or other wrongful conduct.” This conduct might then also be found to violate the Natural Gas Act even though the Commission had ; reviously approved the plan. In my view of the present proceedings, none of the parties has raised any issue as to the lawfulness of the application of the plan to particular parties or in par- ticular circumstances. Transco started back over 5 years ago on May 17, 1971, responding to the Commission’s Order No. 431 to file proposed permanent curtailment plans for use in such future shortages as might arise. The presently proposed curtailment plan is a continua- tion of that original start as modified by subsequent al- terations and such orders of the Commission and of this court as have compelled it to alter its plans. Also, the parties eventually negotiated a settlement among them- selves involving the presently questioned compensation scheme. record in regard to the evidence of shortage, or immedi- ately to remand the case to the Commission for the re- quired inquiry. 423 U.S. at 334, quoted in majority op. p. 7. 19a The principal concern of the parties and the Commis- sion with the plan is the validity of any compensation scheme in a curtailment plan in which priorities are based wholly or in part on end use criteria. And the in- herent validity of such a compensation scheme is not dependent upon the existence of any particular degree of shortage, real or spurious. The plan is to be applied over a wide range of possible degrees of shortages. If Transco has curtailed its customers in the past, or does so in the future, because of any shortage which is ficti- tious or self-induced, or in any way wrongful, it can be sued for damages. Alternatively, parties aggrieved could conceivably petition the Commission for relief. But that is not this case and such issues have not been raised and cannot be decided on this record. We are restricted to acting on the basis of the record before us. However material the bona fides of a particular gas shortage might be to litigation involving the application of a cur- tailment plan to particular parties in particular circum- stances, it is not “absolutely essential to a decision by [this court] on the issues presently before [this] court for review,” FPC v. Transcontinental Gas Pipe Line Corp., 423 U.S. 326, 334 (1976), i.e., to the validity of a monetary compensation scheme in a curtailment plan based on end use criteria. The question as to the bona fides of the shortage, and possibly the bona fide charac- ter of various degrees of shortages, that the majority now seek to interject into the proceeding for a Commis- sion determination should be left to a more appropriate time and proceeding. So far as the parties are concerned, they have not raised any of these issues in this proceed- ing, and the determination of proved and provable re- serves which the majority order by the present remand is premature and might never be required if this court passed on the issue involving the facial validity of the compensation scheme. 0a As previously indicated, the compensation scheme which was negotiated with Transco’s customers would be in- valid if Transco fraudulently misrepresented the exist- ence or extent of a gas shortage, and the customers re- lied thereon in agreeing to the scheme and thereby suf- fered damage. But the more immediate question, and the one raised in this proceeding by those priority cus- tomers of Transco who would be required to pay com- pensation to lower priority customers, is whether the compensation scheme, per se, creates an “unreasonable difference in rates, charges, service ... or in any other respect . . . as between classes of service.” 15 U.S.C. §717c(b) (1970). The Commission determined that the scheme was a facial violation of the Act. That issue can easily be ruled on by this court, right now, without any further delay and inconvenience to the parties and to the Commission and without the necessity of determining the amount of proved reserves, provable reserves, re- serves economically achievable by acts lying wholly with- in the control of a pipeline or producer, etc. In my opin- ion we should rule on the merits of the facial validity of the compensation scheme before the Commission is forced to make the exceptionally complex findings and prophecies * that the majority orders, because if we find * The majority assert: We believe that the legality of compensation may well turn, at least in part, on answers to the following sorts of questions: Are sufficient volumes of gas available as proved or provable reserves so that greater total deliverability can be foreseen in the short-term future? Are present levels of curtailment likely to continue for the indefinite future, or to deepen? And more specifically : will compensation be a short-term financial adjustment between customers of the pipeline to keep some of those customers financially afloat until the supply situation stabilizes, or will it be a permanent cross-subsidization ? We believe that without such information, neither the Commission nor the court can hope to give meaning Pla the scheme to be facially invalid there is no necessity for the additional investigation. Certainly such procedure would work an economy of the time of this court and all parties concerned. A finding that the compensation scheme of the plan violated the Act would doom the entire plan for unlawfulness and no second reason for reaching the same conclusion would be necessary. The majority assert that answering some of the ques- tions “would be difficult” and that the meaning of the phrase “classes of service” is unclear.‘ Apparently the majority has some initial difficulty with whether the compensation called for by the compensation scheme is subject to regulation by the Commission. On the latter point the majority cites a Fifth Circuit case as holding that compensation payments do not constitute “rates,” i.e., “|Cjompensation payments are not ‘rates’ but in the nature of surcharges . .. .”* (Emphasis added.) Well, the statute says “rates” and “charges” and cer- tainly the majority would not have any great difficulty in holding that a “surcharge” is a “charge.” And as to whether “classes of service” are involved, the cases on permissible classification run into the thousands. It is thus clear that the majority are overcomplicating the case, unreasonably burdening the parties without any assurance that it is necessary to do so, and unreasonably delaying a decision on the facial validity of the com- to statutory terms such as “rates,” “charges,” and “classes of service” in a regulatory landscape vastly al- tered by end-use curtailment. Majority op. p. 13 (emphasis added). * Majority op. pp. 12-13 n.5. * Mississippi Public Service Commission v. FPC, 522 F.2d 1345, 1350 (5th Cir. 1975), petition for cert. filed, 45 U.S.L.W. 3061 (U.S. May 19, 1976), quoted in majority op. p. 12 n.5. ors) weil pensation scheme. Nothing would be lost by this panel immediately coming to grips with that issue and decid- ing it. If we decided the scheme was invalid the further inquiry would be unnecessary. If we decided the scheme was facially valid then the majority could remand for such additional information as they desired. That is the sensible way to approach the situation. In addi- tion to the foregoing I do not find that the majority has fairly considered the record furnished by the Commis- sion in response to the remand and I also object to the indefinite and imprecise nature of the second remand that the majority now orders. I respectfully dissent. * It is argued that the FPC should not consider the compen- sation agreement without first determining that there is a legitimate shortage. To my mind that question should be explored and determined when it is raised by the parties— and certainly not when the Commission has found the scheme to be invalid for other reasons which made it unnecessary to determine the existence of a legitimate shortage. I would pass on the case that was presented to us by the parties. In that respect I would apply the Supreme Court’s finding that the majority “overstepped the bounds of its re- viewing authority .. . [by not confining its review] to ‘con- sideration of the decision of the agency . . . and of the evi- dence on which it was based.’ U.S. v. Carlo Bianchi & Co., 373 U.S. 709, 714-715 (1963).” FPC v. Transcontinental Gas Pipe Line Corp., 423 U.S. 326, 331 (1976). 23a APPENDIX B UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA September Term, 1976 No. 74-2036 TRANSCONTINENTAL Gas Pipe Line Corporation, Petitioner We FeperaAL Power Commission, Respondent PrepmMont Naturat Gas Co., Inc., et au, Intervenors And Consolidated Case Nos. 75-1038, 75-1045, 75-1077, 75-1099, 75-1103 75-1200 Berore: BazeLton, Chief Judge; Wricut, McGowan, Tamm, LeventHaL, Ropinson, MacKinnon, Ross and Wrkey, Circuit Judges Order (filed January 18, 1977) Upon consideration of the suggestions for rehearing en banc filed by Consolidated Gas Supply Corporation, Con- solidated Edison Company of New York, Inc., Elizabeth- town Gas Company, Piedmont Natural Gas Company and Transcontinental Gas Pipe Line Corporation, respectively, petitioners for review herein, and by respondent Federal Power Commission, and a majority of the Judges of the Court in regular active service not having voted in favor thereof, it is — 24a OrpvereD by the Court, en banc, that the aforesaid sug- gestions for rehearing en banc are denied. Per Curiam For the Court: /s/ Grorce A. FIsHER George A. Fisher Clerk Circuit Judge McGowan did not participate in the fore- going order. Circuit Judges Tamm, MacKinnon, Robb and Wilkey would grant the suggestion for rehearing en banc. 25a APPENDIX C UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA (Caption omitted in printing) BeroreE: Bazeton, Chief Judge; Epwarps*, United States Circuit Judge for the Sixth Circuit; MacKinnon, Circuit Judge Order Upon consideration of the petitions for rehearing filed by Consolidated Gas Supply Corporation, Elizabethtown Gas Company, and Piedmont Natural Gas Company, Inc., petitioners for review herein, and by respondent Federal Power Commission, and of the petition for rehearing lodged in the Clerk’s Office by Intervenor Brooklyn Union Gas Company, and of the petitions for rehearing and/or suggestions for rehearing en banc lodged in the Clerk’s Office by Consolidated Edison Company of New York, Ine. and by Transcontinental Gas Pipe Line Corporation, petitioners for review herein, it is Orperep, by the Court, that the Clerk is directed to file the petition for rehearing lodged by intervenor Brooklyn Union Gas Company and the petitions for rehearing and/ or suggestions for rehearing en banc lodged by Consoli- dated Edison Company of New York, Inc. and Transcon- _tinental Gas Pipe Line Corporation, respectively, petition- ers for review, and to enter the same on the docket, and it is * Sitting by designation pursuant to 28 U.S.C. § 291(a). Circuit Judge MacKinnon would grant the instant petitions. iene. 7a 26a FurtHer Orperep, by the Court, that all of the afore- : “a ' 4 APPENDIX D said petitions for rehearing are denied. Per Curiam — For the Court: United States Court of Appeals for the District of /s/ Geornce A. FisHEr Columbia Circuit George A. Fisher SEPTEMBER ‘l'ERM, 1974 Clerk | Filed August 1, 1975] No. 74-2036 TRANSCONTINENTAL Gas Pipe Ling Corporation, mi PETITIONER v. FEDERAL PoWER COMMISSION, RESPONDENT PrepMont Natura Gas Co., INC., ET AL., INTERVENORS, AND CONSOLIDATED CASES Before: Bazeton, Chief Judge; MACKINNON, Circutt Judge and KEpwarops,' United States Cirewit Judge for the United States Court of Appeals for the Sixth Circuit. ORDER On receipt and consideration of the briefs and ree- ord in the above-styled ease; and upon consideration ‘ Sitting by designation pursuant to Title 28 U.S.C. § 291(a). 28a of the replies of the parties to this court's order of May 28, 1975, and to the order to show eause of this court entered on June 17, 1975; Noting the refusal of the Federal Power Commis- sion to certify to figures supplied by Transecontinen- tal Gas Pipe Line Corporation purporting to support its claim of necessity for a severe curtailment of sup- ply with consequent economic and financial hardship to many thousands of industrial, commercial and house heating customers on the Eastern Seaboard; Now, therefore, this court will hold in abeyance any decision upon the order of the Federal Power Commission concerning Transeo’s plan for allocating the allegedly searee gas supply until the Commission has completed its own investigation and report to this court of Transco’s claims of reduced reserves by im- mediate subpoena of Transco’s books and records per- taining to all gas supplies in which it has any legal interest, whether by ownership, lease, contract or other means and by field investigation has determined the extent of the reduced reserves and the bona fides of Transco and its suppliers in meeting their past and future contract commitments: Aud further, reecgnizing that time is of the essenee, and for the reasons stated in the attached memoran- dum opinion, that said investigations and report to this court be made within 30 days from the effective date of this order. Per Curiam. Huan FE. Kune, Clerk. MEMORANDUM It was in April of 1971 that the Federal Power Commission promulgated Order No. 431, 36 Fed. Reg. 7905, which required pipelines within FPC jurisdie- ont a 29a tion to indieate whether an inadequate supply of na- tural gas would require curtailment of deliveries to customers. FPC vy. Louisiana Power & Light Co., 406 U.S. 621, 623. In early cases, it was argued that FPC authority to accept curtailment plans arose from Sec- tion 7(b) of the Natural Gas Act, 15 U.S.C. §717f(b), the provision respecting abandonments in whole or part of facilities or service within FPC jurisdiction. That provision denies to a jurisdictional company the power to abandon such facility or service unless and until there is a finding by the Commission, that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.” Decisions of the Supreme Court and this Court have held (without holding that Section 7(b) is inapplicable under all circumstances) that the curtailment power of the FPC is embraced within the Commission’s transporta- tion jurisdiction, as implemented by Section 4 of the Act. Michigan Power Co. vy. F PC, 161 USS. App. D.C. 221, 494 FF. 2d 1140 (D.C. Cir. 1974); FPPC v. Louisi- anu Power & Light Co., supra. The substantive standard governing FPC evaluation of curtailment plans is found in $4 (b) of the Act: No natural-gas company shall, with respect to any transportation or sale of natural gas sub- ject to the jurisdiction of the Commission (1) make or grant any undue preference or advan- tage to any person or subject any person to any undue prejudice or disadvantage, or (2) main- tain any unreasonable difference in rates, charges, serviee, facilities, or in any other re- speet, cither as between localities or as between classes of service. 15 U.S.C. S717e(b) 30a As indicated above, the FPC processes curtailment plans under 4, including subsection (b) quoted above and subsections (d) and (e). In Loutsiana Power & Light, the Supreme Court found a ‘pattern of temporary and chronic natural gas shortages throughout the Nation,” and supplier inability ‘‘to meet all of its eontraet commitments during peak demand periods.”’ 406 U.S. at 626. In part, the Supreme Court relied for its finding of shortage upon the FPC's own Staff Report No. 2, National Gas Supply and Demand 1971-1990 (1972). That ease, which defined the breadth of FPC eurtail- ment power, said, “ln the present cause, the issue is whether the FPC, acting under the head of its trans- portation jurisdiction and its broad mandate under 416, may order pipelines facing shortages to develop and submit rational curtailment arrangements.’? After distinguishing United Gas Pipe Line Co. vy. Mobile Gias Service Corp., 350 US. 332 (1956), whieh held that a pipeline may not unilaterally alter its contraec- tual arrangements, the Court stated, “‘we conelude therefore that the FPC has the jurisdiction asserted here and that the Natural Gas Aet fully authorizes the method chosen by the FPC for its exercise.” The Louisiana Power & Light ease uphelds [sie] the proposition that the FPC may require enrtailment plans of pipelines ‘‘facing shortages.” and there can be no doubt that actual shortage both underlies the concept of eurtailment and justifies its application. In light of that proposition, we have before us five challenging facts. First, in this case, Transeo reported the highest proven reserves of gas in its history in 1969, yet less than five ve cs later was reporting a shortage as severe that it required curtaihnenuts of 43.22 percent in this coming winter heating season, and ——_~ 3la 53.13 percent next summer. Response of Petitioner Elizabethtown Gas Company ‘To Court’s Order to Show Cause at 2. Second, the FPC “does not necessarily endorse the accuracy of the data supplied by Traneo,”’ [sic] has not confirmed the existence of the claimed shortage, and is not now proceeding to do so for the purpose of this case, despite the Commission’s ap- proval of previous curtailment plans.’ Response of FPC to Order Of May 29, 1975 at 2. Third, the FPC has informed this Court that the House Subcommit- tee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce “has referred eertain matters to the Justice Department for possible eviminal proeseention,” possibly for perjury charges eoneerning the extent of natural gas reserves. Fur- ther, Subcommittee Chairman, John E. Moss, “has specifically requested the Commission and _ its. staff to refrain from contacting Mitehell Mnergy and De- velopment. Corporation and Cities Service Oil Corpo- ration pending the present series of Subcommittee hearings on June 26 * * * and pending * * * [the Commission’s| coordination with the Justice Depart- ment.” Letter From John i. Moss to Hon. John N. Nassikas, June 19, 1975. Fourth, Transeo’s response to our show cause order states, “Beeause of claims of confidentiality of certain data supplied by independ- ent producers, some of the underlying information may not be available on a pubhe basis without ob- taining a release from the producers (not from Transeo). Towever, such data is regularly shown to FPC staff members for their review and analysis.”’ 'We note that the Commission, by Order Amending Prior Order and Broadening Scope of Investigation, issued July 1, 1975, has expanded their investigation in Docket No. PR 75 51 [sie RP 75-51]. however, we do not believe that that proceeding mects the requirements of the instant litigation. 32a We think this comment tends to indicate reluetance on the part of Transeo to disclose the extent of com- mitted contractual entitlements which it holds, and from whieh it committed itself to supply [astern Seaboard ultimate customers. Fifth, Chairman Moss has advised the FPC Chairman that it is his view that the instant order of this Court “is not only justified but essential.” Letter of John E. Moss to Hon. John N. Nassikas, June 25, 1975. In a pending ease, United States Steel ve FPC, U.S. App. D.C. ——, 510 F. 2d 689 (1).C. Cir., No. 74-2117, January 10, 1975), we denied a motion to stay the Commission’s denial of emergency relief, saying, “Only an ageney sufficiently aware of the over- all state of natural gas supply and demand could posstbly handle requests for emergeney relief seri- atim, and yet avoid the circumstances where relief grants, each with a de minimus impaet upon compet- ing customers, cumiulate in outright suffering for all.” Clearly, that statement postulates that actual short- age, and the Commission’s detailed knowledge there- of, underlies any curtailment and emergeney relief therefrom. Further, we deferred to this detailed knowledge of the Commisison, “sinee all these pieces of data are required to decide each request for emer- geney relief, and since in the absenee of detailed in- formation our decision would have to be hased upon speculation of the rankest sort, chaos would likely result.” We believe now as then, and our order of January 10th was clear notice to the ageney if notice it had not had before, that a solid hase of data is ab- solutely essential for just determination of enrtail- ments and relief therefrom. Thus, requiring that the Commission undertake the Investigation ordered today, and complete the same 33a within thirty days, is hy no mearis so stark a eom- mand as that time limit viewed alone might suggest. Indeed, in light of the record in this ease and the abundant notice given to the agency in the past, we would think the Commission highly remiss in_ its duties had it not begun that undertaking long before today’s order. Certainly, a responsible administrator would have attempte [ste] to determine whether a shortage requiring curtailment presently exists, at least sines attention was called to the matter by the people’s representatives in Congress. To summarize, Order No. 431, respecting the filing of curtailment plans predicated upon actual shortage was promul- gated more than four vears ago. Order No, 467, set- ting forth general policy respecting curtailment based upon “end-use” and establishing categories with re- spect thereto, has been in foree since January 8, 1973. Surely the Commission has long been on notice that substantial data are required to justify eurtail- ment, which is, after all, the denial of an amount of gas otherwise contracted for. As we said in Pacific Gas & Electrie Co. v. FPC, U.S. App. D.C. ' 406 F. 2d 33, 35 (1.C. Cir. 1974); “The eountry ap- pears to be experiencing a natural gas shortage which necessitates the eurtailment of supplies to certain cus- tomers during peak demand periods.”? (emphasis added) (footnote omitted). The only rationale ad- vaneed in support of any curtailment plan is actual shortage of natural gas to the pipeline, and that faet remains to be established by the investigation today ordered, MackKinnxoyx, Crrewt Judge: The curtailment plan we consider here ts the result of a settlement amone the parties based on an alleged shortage of natural gas. If the shortage is not as severe as we have beer 34a led to believe, then the parties to the settlement may also have been misled, and may have reached their agreement based on misinformation. The fairness of the terms of the settlement is one factor in the Federal Power Commission’s determination whether to ap- prove the proposed eurtailment plan, and thus Neces- sarily a consideration in our review of the Commis- siun’s action. While the existence of an actual short- age is peripheral to our obligation to pass on the legal- ity of the curtailment plan, it is not wholly irrelevant. Nevertheless it is not our primary funetion in re- viewing the instant plan to become involved in that complex factual inquiry. Since other bodies are in- vestigating the extent of Transeo’s shortage, with more direct authority than ours, | would reach the merits of the eurtailment plan we are asked to con- sider. It seems misdirected to me to imply neglect by the Commission when it has acted promptly to dis- approve the proposed plan. Our failure to review the agency’s decision and to pass on the merits of the challenged compensation feature will only delay our judgment on an aspect of ‘Transeo’s curtailment plan to whieh all parties coneerned seem dedicated. Thus, while T am not opposed to verification of the existence and extent of the alleged shortage, | believe that it would be more in keeping with the jurisdiction eenferred upon us by Congress with respeet to this matter to affirm the action of the Commission on the instant order and direct the Commission to determine the existence and extent of the gas shortage prior to passing on any subsequent eurtatiment plan. 35a APPENDIX E UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA (Caption omitted in printing) Berore: Bazeton, Chief Judge; *Evwarvs, United States Circuit Judge for the Sixth Circuit; and MacKinnon, Circuit Judge Order (filed February 6, 1976) On consideration of the per curiam opinion of the Su- preme Court of the United States granting the petition for certiorari, vacating the order of this Court, and re- manding the case to this Court for further proceedings consistent with the Supreme Court’s opinion, it is OrvereD by the Court that the above cases are re- manded to the Federal Power Commission for further proceedings not inconsistent with the opinion of the Su- preme Court of the United States and the attached deci- sion by this Court. Per Curiam Circuit Judge McKinnon dissents for the reasons set forth in his attached statement. * Sitting by designation pursuant to Title 28 U.S.C. § 291(a). 36a No. 74-2036—Transcontinental Gas Pipeline Co. v. FPC Per Curiam. On August 1, 1975, this court issued the following order in the above-styled case: On receipt and consideration of the briefs and ree- ord in the above-styled case; and upon consideration of the replies of the parties to this court’s order of May 28, 1975, and to the order to show cause of this court entered on June 17, 1975; Noting the refusal of the Federal Power Commis- sion to certify to figures supplied by Transcontinental Gas Pipe Line Corporation purporting to support its claim of necessity for a severe curtailment of supply with consequent economic and financial hardship to many thousands of industrial, commercial and house heating customers on the Eastern Seaboard; Now, therefore, this court will hold in abeyance any decision upon the order of the Federal Power Commission concerning Transeo’s plan for allocating the allegedly searee gas supply until the Commission has completed its own investigation and report to this court of Transco’s claims of reduced reserves by im- mediate subpoena of Transco’s books and records pertaining to all gas supplies in which it has any legal interest, whether by ownership, lease, contract or other means and by field investigation has deter- mined the extent of the reduced reserves and the bona fides of Transeo and its suppliers in meeting their past and future contract commitments: And further, recognizing that time is of the essence, and for the reasons stated in the attached memoran- dum opinion, that said investigations and report to this Court be made within 30 days from the effective date of this order. rears ae wer en 2 Sia Thereafter the Commission petitioned The Supreme Court of the United States for a writ of certiorari. Sub- sequently on January 19, 1976, the Supreme Court handed down a per curiam opinion granting the petition for cer- tiorari, vacating the order of this court, and remanding the case to this court for further proceedings consistent with the Supreme Court’s opinion. The Supreme Court held that this ecourt’s order, to the extent that it prescribed for the ageney *‘the methods, procedures, and time dimension of the needed inquiry and order[ed] the results to be reported to the court without opportunity for further consideration on the basis of the new evidence by the ageney[.]’’ invaded the administra- tive domain. The Court also, however, held: Second. We agree with the Court of Appeals that the existence of actual shortage of gas supplies forms the factual predicate necessary to the Commission's assertion of authority under its transportation juris- diction, §1(b) of the Act, 15 U.S.C. 717b, to approve the curtailment of gas already contracted for. FPC v. Loutsiana Power d& Light Co., 406 U.S. 621 (1972). Certainly that Court would properly conclude that the Commission would have abused its discretion had it approved eurtailment plans in the absence of evi- dence whereby it ‘‘could have reasonably believed’’ the shortage to exist, Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971), and that ‘‘sub- stantial evidence’’ in the record is necessary to sup- port any such finding by the Commission. The Supreme Court also held: Fourth. We are unable to determine with certainty, from this vantage point and on the partial record now before us, whether the evidence regarding Trans- 38a co’s actual shortage with which the instant order is concerned is absolutely essential to a decision by the Court of Appeals on the issues presently before that court for review. Although Judge MacKinnon in his separate statement was apparently of the view that the Court of Appeals could determine that the lawful- ness of the proposed compensation scheme is par- tially a function of the actual severity of the short- age. Cf. FPC vy. Louisiana Power & Light Co., supra. Accordingly, the Court below is free on remand either to proceed to the merits of the issues presented hy the compensation scheme and only thereafter deal with the adequacy of the record in regard to the evidence of shortage, or immediately remand the case to the Commission for the required inquiry. It is ap- parent that under neither alternative need the Court of Appeals’ ability fully and effectively to review the administrative process regarding the implementation of curtailment plans and their underlying factual premises be relinquished. Obedient to the views expressed by the Supreme Court, including its suggestion that ‘‘swift and priority consid- eration of this case’’ be given, we have considered whether or not on the partial record before us ‘‘the evidence re- garding Transco’s actual shortage with which the instant order is concerned is absolutely essential to . . . decision’’ of the instant case. We conclude that it is, and hence this case is immediately remanded to the Commission for the required inquiry ‘‘in regard to the evidence of shortage.”’ We have noted with interest a case decided after the date of our preceding order and referred to in the Su- preme Court’s per curiam opinion without comment. Mississippi Public Service Com’n v. F.P.C., 522 F.2d 1345 (5th Cir. 1975). In this ease the Fifth Cireuit held that contrary to the view expressed by the Federal Power — TD ee SA ee ne 39a Commission, the Commission did have jurisdiction ‘‘to effectuate relief of the type sought in the petition for ex- traordinary relief.’’ Jd. at 1349. The relief sought in this Fifth Cireuit case was a Federal Power Commission order to implement the same sort of proposal as is before us for high priority users who are scheduled to receive above average allotments of gas to compensate lower priority users who are allotted below average amounts of gas. In our instant case, however, the Commission was pre- sented with a negotiated agreement between higher prior- ity users and lower priority users for the former to com- pensate the latter. This court has been urged by Transco and various of its distributing companies to find that the Commission’s disapproval of this ‘‘voluntary agreement’’ is not supported by the record. We do not perceive how we could fairly consider ‘‘the lawfulness of the proposed compensation scheme’’ unless the Commission has first fulfilled its duty to determine whether a real shortage exists. Thus far the Commission has refused to certify the existence of the shortage claimed by Transco, and as far as our record shows, has not completed any investi- gation of its own. While, of course, we are well aware that the Commis- sion has disapproved this compensation scheme rather than approved it, we do not see how we can fairly weigh the legality of that decision unless the record contains a basis for our deciding whether or not the agreement was a truly voluntary response to an actual shortage. No such basis is provided absent the Commission’s investigation of the shortage question and findings of fact on this issue which can be properly reviewed by this court. For these reasons (to employ the words of the Su- preme Court) we ‘‘immediately remand the case to the Commission for the required inquiry.”’ ee ee ee ao 40a Mackinnon, Circuit Judge, dissenting: My views on this case were initially set forth in the memorandum ac- companying the order of this court of August 1, 1975. We deal here with a disapproval by the Commission of a com- pensation scheme in a curtailment plan. If the Commis- sion is affirmed by the court, then it is unnecessary to de- termine the existence or extent of a gas shortage because the compensation scheme is invalid on its face and it is not necessary to go further and determine the existence or extent of a gas shortage because such factual predi- eate is only necessary to a valid plan. It is true that if the record does not furnish the Commission with a basis for reasonably believing that a gas shortage exists or is imminent the Commission would not have authority to approve a curtailment plan but certainly the Commission ean disapprove a compensation scheme in a curtailment plan submitted by the parties thereto when the scheme appears to be facially invalid and the existence of a shortage is not questioned by any party to the proceed- ing. As to the substantive issue concerning the validity of the compensation scheme, it is my opinion that the Com- mission properly held the scheme to be an undue dis- crimination prohibited by section 4(b) of the Natural Gas Act. Under FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972), curtailment plans are to be weighed against section 4(b) of the Natural Gas Act. This section pro- vides: No natural-gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disad- vantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other tla respect, either as between localities or as between classes of service. 15 U.S.C. §717e(b). There is no question that the rates here are diser.uiinatory; many natural gas rates are. The question is whether they are unduly discriminatory. Ad- dressing this point, it is clear that under the settlement proposal Transeo would charge different rates to simi- larly situated customers which rates were not the result of differences in Transco’s cost of serving these ecustom- ers. In actual operation, different rates would result from the varying degree to which each customer is curtailed and the degree of curtailment would be determined in part by the character of the use of the gas by the ens- tomer. Neither of these factors, degree of curtailment or nature of the use, is related to Transco’s cost of service; but standing alone this is an insufficient ground upon which te base a finding of illegality. The issue is whether the ‘‘difference in . . . charges, service . . . or in any other respect,’’ based as it is on the nonpipeline costs specified in the settlement curtailment plan, is reasonable under the circumstances here present. Under the proposed compensation scheme contained in the settlement curtailment plan it is obvious that high priority customers will be charged more for their gas and lower priority customers will pay less. Thus, the compen- sation plan would penalize high priority users for the benefit of low priority users, and in so doing would oper- ate inconsistent with the approved objective of the Com- mission to base curtailment on our use.’ This inconsist- ency would result from the fact that the higher price re- quired to be paid by high priority users would deter such *FPC v. Louisana ower & Light Co., 406 U.S. 621, 641-647 (1972): American Smelting & Refining Co. v. FPC, 161 U.S.App. D.C. 6, 17, 494 F.2d 925, 936, cert. denied sub nom. Southern Cali- fornia Gas Co. v. FPC, 419 U.S. 882 (1974). 42a priority customers from fully satisfying their needs and would thereby make the unused portion of their full en- titlement to gas available for low priority users which in many instances is the more inefficient use. In any event it has been determined to be the lower priority use and favoring such low priority use, to the extent that the ecom- pensation scheme does, would frustrate and interfere with the operational scheme of the curtailment plan by inter- jecting factors that work against the principles upon which the plan is based. Upon such reasoning the Com- mission acted properly within its authority in rejecting the proposed compensation scheme.’ It is also significant that the record does not support any showing of compelling need to discriminate in favor of the low priority users who would benefit from the com- pensation scheme. The Commission noted: {T]he payments unrelated to costs, losses or hard data of any sort, are as certain to be hurtful to one group of consumers as they are to [be] helpful to another, without visible regard to the question of how much helpfulness is actually needed. (R. 11689) It is accordingly my view that the settlement agree- ment was properly rejected because the compensation scheme constituted an undue discrimination in that it would maintain unreasonable difference in ‘‘charges, service, facilities [and] in other respect{[s] . .. as be- tween .. . classes of service’’ contra to section 4(b).’ I would thus affirm the decision of the Commission. I see no necessity for getting into matters that are not neces- sary to determine the invalidity of the plan. Finding the plan invalid on one ground is sufficient. If it were to be * FPC v. Louisiana Power & Light Co., supra, note 1, 406 U.S. at 646-47. * Td. ree Det = 43a found invalid because of an insufficient shortage, the re- sulting invalidity would not be changed in any way. I thus see no necessity for a remand. I would rule on the principal issue. I thus respectfully dissent from the finding in the fore- going opinion that ‘‘the evidence regarding Transco’s actual shortage .. . is absolutely essential to . . . decision’’ of the instant case. tta APPENDIX F UNITED STATES OF AMERICA FEDERAL POWER COMMISSION Before Commissioners: Richard L. Dunham, Chairman: Don S. Smith, John H. Holloman III, and James G. Watt. Transcontinental Gas Pipe Line ) Docket No. RP72-99 ) Corporation ORDER UPON REMAND BY THE COURT OF APPEALS (Issued June 25, 1976) Presently before the Commission is a remand by the United States Court of Appeals for the District of Columbia Circuit 1/ ordering the Commission to find whether or not a natural gas shortage exists on the interstate pipeline system of Transcontinental Gas Pipe Line Corporation (Transco). The Court of Appeals has stated that it must first have evidence of an actual gas shortage on Transco's system before it can rule upon the consolidated appeals before it concerning the validity of the Commission's prior orders rejecting a proposed compensation provision included in a proposed interim curtailment plan settlement previously filed by Transco. We find that a natural gas shortage does in fact exist on Transco'’s system which has necessitated some curtailment of service. To better understand how the Commission has arrived at this conclusion it is first advisable to review the lengthy and intricate procedural history surrounding this curtail- ment proceeding. (1) Pursuant to Order No. 431 2/, Transco on May 17, 1971, tendered for filing its first permanent curtailment plan which the Commission suspended for one day and set for hearing by order of May 27, 1971, in Docket No. RP71-118. Then by order of November 15, 1971 (46 FPC 1212) the Commission conditionally approved an interim settlement agreement filed by Transco on October 26, 1971, which l/ Transcontinental Gas Pipe Line Corporation, et al. v. FPC, 2/ 45 PPC 570 (1971). DC-31 per Curiam. os ta Docket No. RP72-99 established a pro rata curtailment plan to be in effect from November 16, 1971, through November 15, 1972, and it accordingly terminated that docket. (2) Thereafter on January 17, 1972, Transco tendered for filing its second proposed permanent curtailment plan which the Commission by order of February 16, 1972, again suspended and set for hearing in Docket No. RP72-99. Thereafter by order of November 15, 1972, (48 FPC 1060) the Commission approved a second interim settlement agreement, this time filed by Transco on September 12, 1972. This settlement provided an interim pro rata curtailment plan to be in effect from November 16, 1972, through November 15, 1973. (3) Notwithstanding the fact that the second interim settlement agreement bound Transco to file a new curtailment plan, Transco filed on May 1, 1973, a motion requesting a one-year extension of this second interim curtailment plan; however, by order of May 23, 1973, (49 FPC 1141) the Commis- sion denied this motion and moreover directed Transco to file a new curtailment plan by July 1, 1973, noting in passing that Transco should consider the curtailment priorities and procedures outlined in Order No. 467-B. 3/ In response thereto Transco on June 29, 1973, tendered for filing a new curtail- ment plan embodying Order No. 467-B priorities, but on July 6, 1973, it nevertheless renewed its motion for a one-year extension of its second interim curtailment plan. By order of July 30, 1973, (50 FPC 281) the Commission denied this renewed motion, suspended the 467-B type plan until November 16, 1973, and set the matter for hearing. Rehearing of this order was denied on September 17, 1973 (50 FPC 803). Immediately thereafter on September 18, 1973, one of Transco's direct customers, Consolidated Edison Company of New York, petitioned the United States Court of Appeals for the District of Columbia Circuit for review of the abovementioned May 23, July 30, and September 17 orders. It also moved for stay of the same orders, which the Court of Appeals granted on November 9, 1973. 4/ The Court of Appeals subsequently clarified this order 3/ by stating that, while the Commission should proceed with hearings on Transco's permanent plan, the second interim curtailment plan would continue in effect pending further 3’ 49 FPC $83 (1973). 4/ Consolidated Edison Company of New ies Inc. v. FPC, No. ° D. C. Cir. November 9, 1973). S/ Consolidated Edison Company of New York, Inc. v. FPC, No. - D. C. Cir. December 14, 1973). 46a Docket No. RP72-99 Court order. This appeal was ultimately denied by the Court of Appeals 6/, as will be discussed in greater detail subsequently. The second interim curtailment plan, which was originally contemplated to operate only for the period from November 16, 1972, through November 15, 1973, in fact remained in effect beyond the end of that period and through most of 1974 as well due to the continued operation of the November 9, 1973, Court- imposed stay. (4) Having received several complaints from Transco's customers that this pro rata plan endangered high priority service in light of an increased level of curtailment, the Commission on September 12, 1974, file » motion with the Court of Appeals requesting permissic imvestigate these complaints and to take appropriate a . for the 1974-75 winter season. On Ictober 4, 1974, v.... Court of Appeals, however, ordered ti.uat the second interim plan remain in effect until the Commission could implement a permanent plan, except that Transco was free to file a new interim plan with the Commission. Between the Commission motion and Court order Transco had in fact on September 30, 1974, tendered for filing a third interim settlement agreement to cover the period from November 16, 1974, through November 15, 1975. This proposed interim curtailment plan basically functioned 50% on a pro rata basis and 50% on an end-use 467-B type basis. It also contained a compensation provision by which the least curtailed customers would compensate the most curtailed customers. By order of November 12, 1974, the Commission rejected this third interim settlement agreement because of the compensation provision contained therein; however, the Commission also found that in light of the deepening gas crisis on Transco's system continuation of the pro rata second interim plan would not be in the public interest. It therefore noted that it was going to seek dissolution of November 9, 1973, stay of its orders putting Transco's 467-B related plan in effect. Although on November 13, 1974, Transco did file this 467-B type interim plan, it thereafter appealed the November 12, 1974, order and after consolidated oral argument on November 21, 1974, the Court of Appeals on November 26, 1974, 7/ modified 6/ Consolidated Edison Company of New York, Inc. v. FPC, F. D. C. Cir. 5) (Con Ed II). 7/ Consolidated Edison Company of New York, Inc. v. FPC, ~ ‘SID F.2d 373 (D. Cc. Cir. 1974), per curiam. (Con Ed I)® eee 9/ dia Docket No. RP72-99 its earlier stay of November 9, 1973, by implementing Transco's third interim settlement agreement rejected by the Commission on November 12, 1974, having found that neither the earlier pro rata second interim settlement agreement nor the 46/7-B type plan is appropriate under current conditions. The Court of Appeals did, however, require that all compensation provision payments be placed in escrow. The Commission complied with the Con Ed I order in its order of January 10, 1975, on rehearing of the November 12, 1974, order. It also found that the record of the permanent proceeding should be reopened for purposes of environmental review. . In the previously noted Con Ed II decision of May 28, 1975, supra note 6, besides affirming the Commission orders of May oy. July 30, and September 17, 1973, the Court of Appeals moreover stated that “we release our grip on the interim curtailment arrangements," noting, that the stay which imposed Transco's third interim settlement agreement would continue until the Commission moved for its dissolution. By order of July 25, 1975, the Court of Appeals went further by stating that the Commission had the authority to approve and effectuate a curtailment plan without express Court permission. Several petitions for review of the November 12, 1974, and January 10, 1975, Commission orders rejecting the com- pensation provision of Transco's third interim settlement agreement were filed with the Court of Appeals. It is this appeal which is presently before the Court of Appeals and for the resolution of which this order on remand is requested. Following oral ar nt of this appeal the Court of Appeals on May 28, 1978, issued an order sua sponte requesting the parties to supply answers to a series Of questions con- cerning Transco's proven reserves. 8/ This was followed on June 7, 1975, by an order to show cause why the Court should not require the Commission to complete within thirty days an investigation of Transco'’s claim of reduced reserves in light of the Commission's refusal to certify to curtailment figures it had received from Transco and had offered in answer to the Court's May 28, 1975, questions. 9/ 8/ 4Sa Docket No. RP72-99 Thereafter on August 1, 1975, the Court of Appeals in fact did issue such an order hclding resolution of the appeal in abeyance pending completion of the Commission's investiga- tion of Transco's gas supply using subpoena and field investigation. 10/ The Court denied rehearing en banc of the order on August 28, 1975. While the Commission commenced compliance with this Court order by ordering the Secretary to issue a subpoena duces tecum to Transco in the ongoing investigation Tate Transco’s curtailment, Docket No. RP/5-51, infra, it petitioned the Supreme Court in October 1975 for a writ Of certiorari to the Court of Appeals August 1, 1975, order, supra note 10. By per curiam opinion the Supreme Court on January 9, 1976, granted the Commission's petition for certiorari, vacated the August 1, 1975, order, and remanded to the Court of Appeals either to proceed on the merits or to remand to the Commission for required inquiry into Transco's actual gas shortage. 11/ It is upon this remand that the Court of Appeals, upon concluding that evidence of Transco's actual gas shortage is essential, remanded the case to the Commission, supra note l. (5) By order of November 28, 1975, the Commission accepted and approved Transco's fourth interim settlement agreement, which it had introduced into evidence — the permanent plan hearings on October 15, 19/5. The resulting interim curtailment plan, which is directed to ———— high end-use priority loads, is in effect from November 16, 1975, through October 31, 1976. In the meantime the proceed- ing to establish a permanent curtailment — continues wich Staff's environmental presentation the only unfinished segment of the hearing. (6) A separate —. related prgeeotins commenced when by order of January 8, 1975, the Commission instituted an investigation into the level of curtailment on Transco's system for the 1974 winter hearing season. Thereafter by order of July 1, 1975, the Commission expanded this investiga- tion to determine the need for any curtailment at all by 10/ Transcontinental Gas Pipe Line Corporation v. F.P.C., No. 74-2036 (D.C. Cir. Tagust I, 1375), per curiam. , per curiam. SR ee ee NT tae oO EE POET ete ewe EET 49a Docket No. RP72-99 Transco in its deliveries to its resale customers. Then on August 8, 1975, as noted above, the Commission ordered the Secretary to issue a subpoena duces tecum to Transco pursuant to the August l, 1375 order of the Court of Appeals. On the same date the Commission also ordered Transco's nineteen large ee ee which together furnish Transco with 80% of its gas supplies, pursuant to Section 10 of the Natural Gas Act to report certain preliminary informa- tion in furtherance of this Transco investigation. Although hearings in Docket No. RP75-51 have not been completed at this time, the parties to that proceeding have entered into a stipulation and agreement in order to assist in our expeditious response to the Court of Appeals remand, supra note l, and the Presiding Administrative Law Judge n 75-51, Curtis L. Wagner, Jr., certified (APPENDIX A) this stipulation and agreement, along with related portions of the record to the Commission on May 26, 1976. Against this historic backdrop we turn to the evidence before us and conclude that Transco has both suffered in the past from and continues to suffer from an actual gas supply shortage which has necessitated the curtailment of service to both direct and resale customers. In reaching this con- clusion we turn first of all to the stipulation and agreement certified to us from the record (Tr. 3131-3132) of Docket No. RP75-51 (APPENDIX B). We note that this stipulation is expressly limited to the "question of Transco's necessity to curtail service to its customers." In considering this stipulation our ew A is similarly limited, and this order is in no way intended to prejudice the other issues pending in RP75-51. We find particularly relevant and a the following stipulated facts: (1) Ever since 1971 the total annual o ——r received from Transco from its producer-supplier has been er and has been and con- tinues to be insufficient to meet all of Transco's certif- icated requirements. (2) System-wide curtailment by Transco has been increasing as the flowing gas wiry declines: 1971 - 3.9%; 1972 - 8.3%; 1973 - f3° 12, 1974 - 24. 8%; 1975 - 33.7%; and 1976 (projected) - 41%. (3) Evidence introduced by Commission Staff (Exh. 74; Tr. 2582, 2583, 2621) indicates that, based upon review of a sample of the fields supplying gas to Transco, Transco's deliverability projections were reasonably accurate, and Transco needed to curtail service. Although we do not rely exclusively upon the agreement of the parties in Docket No. RP75-51 that "Transco has had, and continues to have, a necessity to curtail service to its customers" (Tr. 3131), the c lete absence of any opposition to and the active support b” almost all parties for the stipulation and agreement (Tr.312u -3130) (APPENDIX C) do enhance the veracity and significance of this document. 50a Docket No. RP72-99 Our review of the certified evidence in Docket No. RP75-51l (Exh. 74; Tr. 2582, 2583, 2621) (APPENDIX 0D) upon which the stipulation is predicated reinforces our finding of an actual natural gas shortage on Transco's system necessitating cur- tailment. Exhibit 74, which is an affidavit of Commission Staff witness Thompson, presents the results of Staff's deliverability study. Preliminarily we agree with witness Thompson (Exh. 74, p. 2) that deliverability (the amount of gas capable of delivery in a fixed time period) evidence is more relevant to the issue of need for curtailment than is evidence on total proved reserves. Moreover, while this Staff study did not include all of the many fields supplying Transco, Staff was justified in randomly selecting certain fields. 12/ After calculating the deliverability for these 18 fieIds for a 13 month test period Staff then compared its findings with Transco's deliverability projections and found that, while comparisons on individual fields varied to a greater degree, Staff's total deliverability figure for the 18 fields for ~ae 13 month period (July 1975 through July 1976) was only 6.77% higher than Transco's related estimate. Staff witness Thompson concluded from these results that for these 18 fields Transco's deliverability estimates were reasonably accurate. In light of Staff witness Thompson's unimpeached expertise in gas supply matters, as well as the reliable methodology employed in Staff's study, we find that, not only were Transco's deliverability estimates reasonably accurate for the 18 fields considered, but it is also reason- able to project that Transco's estimates for the remainder of the 171 fields are sufficiently accurate for our present purposes. Since Transco's deliverability estimates indicate its available = supply over a fixed time period, which Transco in curn relies upon in projecting the volume and percent of curtailment (Exh. 74, p. 6), we are justified in ee from Exhibit 74 that at least for the period from July 197 through July 1976 Transco in fact has Seen experiencing a yas supply shortage which has necessitated curtailment generally to the extent projected. 12/ The corpus of Staff's raw data for this study was the tremendous quantity of gas supply documents delivered pursuant to the Commission's August 8, 1975, subpoena duces tecum, supra. Staff. determined therefrom that Transco was purchasing gas from producers out of 171 fields containing 1700 reservoirs and 3000 wells. Since this study was made in response to the Court of Appeals order directing the Commission to investigate Transco's gas supply, pvpra note 10, Staff could not determine the delivera ty for all 171 fields, and it acted ore in randomly selecting 18 fields which produced 11.9% of Transco's avaflable gas supply. ree oe Eres Ae ee ee Docket No. RP72-99 The conclusions we have reached above upon analysis of Exhibit 74 are strengthened by the additional certified evidence (Tr. 2582, 2583, 2621) that a further deliverability study of another 19 fields did not alter Staff witness Thompson's conclusion. Finally, we reference our November 28, 1975, order accepting Transco's fourth interim settlement agreement in which we found (Slip Op. at 7) that "Transco's supply situation has deteriorated within the last year . , as well as finding "the existence of an emergency on Transco's eyeeem .. -+ «” The Commission further finds: Upon consideration of the mandate of the remand by the Court of Appeals and record evidence properly before the Commission we find that a natural gas supply shortage has in the past and continues to exist on Transco's system which has necessitated some curtailment of service to Transco's customers. The Commission orders: (A) We direct the Commission's Solicitor this dav to file a motion to lodge this order and appended documents with the United States Court of Appeals for the District of Columbia Circuit. (B) Upon the cenclusion of the proceedings in Docket No. RP75-51 the Commission will issue whatever order is appropriate in light of the record evidence therein. By the Commission. (S E A L) Kenneth F. Plumb, Secretary. 52a APPENDIX G The Natural Gas Act, 52 Stat. 821-833, as amended, 15 U.S.C. 717-717w, provides in pertinent part: Section 19(b): Any party to a proceeding under this act aygrieved by an order issued by the Commission in such proceed- ing may obtain a review of such order in the circuit court of appeals of the United States for any circuit wherein the natural gas company to which the order re- lates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court, within sixty days after the order of the Commission upon the application for rehearing, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall forthwith be trans- mitted by the clerk of the court to any member of the Commission and thereupon the Commission shall file with the court the record upon which the order complained of was entered, as provided in scction 2112 of title 28, United States Code. Upon the filing of such petition such court shall have jurisdiction, which upon the filing of the record with it shall be exclusive, to affirm, modify, or set aside such order in whole or in part. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do. The finding of the Commission as to the facts, if supported by substan- tial evidence, shall be conclusive. If any party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such addi- tional evidence is material and that there were reason- able grounds for failure to adduce such evidence in the proceedings before the Commission, the court may order such additional evidence to be taken before the Commis- 53a sion and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts by reason of the additional evidence so taken, and it shall file with the court such modified or new find- ings, which if supported by substantial evidence, shall be conclusive, and its recommendation, if any, for the modi- fication or setting aside of the original order. The judg- ment and decree of the court, affirming, modifying, or set- ting aside, in whole or in part, any such order of the Commission, shall be final, subject to review by the Su- preme Court of the United States upon certiorari or cer- tification as provided in [former] sections 239 and 240 of the Judicial Code, as amended (U.S.C., title 28, sec. 1254). [15 U.S.C. 717r(b)]. Sta APPENDIX H Berore THE FeperaL Power ComMIssION WASHINGTON, D.c. 20426 Docket No. RP75-51 In the Matter of TRANSCONTINENTAL Gas Pipe Line CorporaTION Stipulation and Agreement Wuereas, the instant proceeding was instituted by the Commission’s Order issued January 8, 1975, for the pur- poses of investigating the circumstances underlying the projections of Transcontinental Gas Pipe Line Corpora- tion (‘*Transeo”) for increased curtailment on Transco’s system during the 1974-1975 winter, and a determination as to the then-current projections of curtailment for Transco’s system; and Wuereas, the scope of the aforesaid investigation was enlarged by Commission Order of July 1, 1975 to encom- pass, inter alia, ‘‘the extent of the alleged necessity for any curtailment on the system of Transco’’; and Whereas, in order to enable the Commission to comply with the February 6, 1976 order of the United States Court of Appeals for the District of Columbia Circuit in Transcontinental Gas Pipe Line Corporation, et al., v. F. P. C., Nos. 74-2036, et al., issued in furtherance of the Supreme Court’s January 19, 1976 order calling for ‘*swift and priority consideration’’ of that proceeding, the parties agree that the Supreme Court’s directive and the public interest would be served by prompt resolution of the threshhold question of Transco’s necessity to cur- tail natural gas service to its customers; and, 5da Wuereas, the parties agree that such questions should he severed and submitted on stipulation because it is un- likely that other matters involved in the instant investiga- tion can promptly be resolved under present procedures; Now THEREFORE, the parties stipulate and agree, pursu- ant to Section 1.25 of the Commission’s Rules of Practice and Procedure, that the following facts demonstrate that Transco has had, and continues to have, a necessity to curtail service to its customers: 1. The total annual volume of natural gas available from Transco’s producer-suppliers has been declining since 1971 and has been, and continues to be, insufficient to enable Transco to satisfy the certificated requirements of its customers, and Transco instituted mandatory curtailment of its customers commencing in June, 1971. Such curtailment has been effectuated under a series of curtailment plans filed by Transco and approved by the Commission, or placed into effect pursuant to Court order; 2. System-wide curtailment percentages have steadily in- creased due to the continuing decline in flowing gas supplies, as follows: 1971-3.9%; 1972-83%; 1973 - 13.1% ; 1974 - 24.8% ; 1975 - 33.7%; and system average curtailment is projected to be 41% for 1976. 3. The Commission’s staff initially undertook a review of the delivery capability of 18 fields connected to Transco’s system accounting for approximately 12% of Transco’s supply. On the basis of such review, Staff’s witness, Mr. Wayne M. Thompson, expressed his opinion that the projections of deliverability made by Transco are ‘‘reasonably accurate’’ and that ‘‘cur- tailment of Transco’s system will be necessary, roughly to the extent Transco itself has stated.’’ (Ex. 74). Mr. Thompson also stated that a further review 56a of 19 additional fields accounting for approximately 9% of Transco’s gas supply did not change his opin- ion stated above (Tr. 2582, 2583, 2621). The foregoing Stipulation and Agreement is entered into for the purpose of resolving promptly the question of Transco’s necessity to curtail service to its customers, pursuant to the directions on remand by the Court of Appeals in D.C. Cir. Nos. 74-2036, et al., supra, and is without prejudice to the positions which any party hereto may take with respect to any and all questions which have been raised or which may be raised in the instant proceeding, other than that stipulated to herein, ie., Transco’s need to curtail service to its customers. The parties hereto agree that the foregoing Stipulation and Agreement and the record in this proceeding shall be certified to the Commission pursuant to Section 1.30(c) of the Commission’s Rules of Practice and Procedure, and request that the Commission promptly enter its find- ings regarding Transco’s need to curtail based upon this Stipulation and Agreement. ee =a ee _ 57a APPENDIX I IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 74-2036 TRANSCONTINENTAL Gas Pipe Line CorporaTION, ET AL., No. 75-1038 PrepMont NaturaL Gas Company, Inc., No. 75-1045 ELizaBETHTOWN Gas Company, No. 75-1077 Consotipatep Gas Supp.y CorporaTIon, No. 75-1099 ATLANTA Gas Licut Company, No. 75-1103 Conso.matep Epison Company or New York, Inc., No. 75-1200 State or Nortn Carotina anp NortH CaRouina Urimitres Commission, Petitioners, Vv. FeperaL Power Commission, Respondent. Petition for Rehearing and Suggestion for Rehearing En Banc of Transcontinental Gas Pipe Line Corporation Comes now Transcontinental Gas Pipe Line Corpora- tion (Transco) and, pursuant to Rules 35 and 40 of the Federal Rules of Appellate Procedure, respectfully sub- —e—_— 5Sa mits its petition for rehearing with respect to the opinion issued by this Court on November 29, 1976, in the above- captioned proceedings. Because the matter involved here- in is of exceptional importance, Transco submits that re- hearing en banc is appropriate. In support of this peti- tion, Transco avers as follows: I STATEMENT OF THE CASE This case arose originally because the Federal Power Commission (‘‘FPC’’ or ‘‘Commission’’) refused, on the threshold of the 1974-75 winter, to approve a one-year interim settlement of the curtailment rules on the pipe- line system of Transcontinental Gas Pipe Line Corpora- tion (‘‘Transco’’). Because of the urgency caused by the Commission’s action, which took place on November 12, 1974, only three days before Transco’s then-effective rules were to expire, Transco and General Motors Corporation jointly appealed to this Court on November 18, 1974 and requested a ‘‘stay” of the Commission’s action, i.e., that the Court order into effect the gas allocation method pro- vided by the settlement. After argument held on Novem- ber 21, 1974, on motions made in this case and in Consolt- dated Edison Company of New York, Inc., et al., v. FPC, Nos. 73-1999, et al., another panel of this Court on No- vember 24, 1974 took the unprecedented step, because of ‘‘a shortage on the Transco system of what appears to be crisis proportions’’ of ordering the allocation procedures into effect commencing as of November 16, 1974. 511 F. 2d 372, 382. At the same time, at the suggestion of Transco and others, the Court provided for placing in escrow the funds relating to the issues of ‘‘compensa- tion’’, the claimed illegality of which was the sole basis for rejection of the settlement by the FPC.* 1 Pursuant to the order of this Court, approximately $19 mil- lion collected pursuant to the compensation provision has been placed in escrow pending disposition of the instant appeals. 59a Briefs were thereafter filed with respect to the sole re- maining issue of the legality of ‘‘compensation’’,? and oral argument was held on May 21, 1975. Commencing on May 28, 1975, there ensued a series of unusual actions which have culminated over a year and a half later with the Court’s opinion of November 29, 1976, as to which rehearing is here sought. First, on May 28, 1975, the Court issued an order, sua sponte, in which it requested detailed information from ‘‘the parties’’ con- cerning the history of ‘‘proven reserves’’ on Transco’s system. Transco responded to this request, furnishing data to the Court which had been filed over the years with the Commission under oath and indicating, inter alia, that Transco’s proved reserves at the end of 1974 were slightly less than half what they were at the end of 1966, the point of greatest volume.’ The response also in- dicated that ‘‘Transco would be pleased to provide any additional information desired by the Court for its evalu- ation of the need for prompt action,’’ an indication that Transco was puzzled as to the basis for the Court’s in- quiry. The FPC also responded (through its counsel, not by formal action as a Commission) to the Court’s injuiry. Unfortunately, the FPC’s response used the wrong infor- mation from its public reports;? and counsel for the Com- mission also indicated that ‘‘the Commission does not ne- * Despite an open invitation from the Court to change settle- ment allocation procedure if the evidence and expertise of the Commission warranted any such change, 511 F. 2d. at 381-383, the Commission made no move to effect any change. This issue was therefore not briefed or argued and, upon expiration of the one- year period, became moot. * Letter of June 2, 1975. *The errors were pointed out in Transco’s follow-up letter of June 6, 1975. 60a cessarily endorse the accuracy of the data . . ., [because] Transco’s gas reserve and supply situation is currently the subject of two separate Commission investigations . ’ Seizing upon this disclaimer by counsel for the Commission, the Court on June 7, 1975, issued an order to show cause why the Court should not require the Com- mission to subpoena Transco’s books and records and in- vestigate in 20 days ‘‘the extent of the reduced reserves and the bona fides of Transco and its suppliers in meet- ing their past and future contract commitments.’’ In the meantime, the Court suggested that it would hold in abey- ance any decision . . . concerning Transco’s plan for allocating the allegedly searce gas supply ... .’’ (empha- sis supplied).? Despite unanimous opposition to the issu- ance of the order, primarily on the ground of relevance,’ the Court did in fact order the subpoena and investiga- tion. Because Transco felt that it was high time to dis- 1We repeat that the allocation method was not in dispute; rather, the only issue briefed, argued and pending was ‘‘compen- sation’’. Moreover, the ‘‘compensation’’ issue arose from a near- unanimous settlement plan, not ‘‘Transco’s plan’’. See, 511 F. 2d. at 381. 2In an attempt to be helpful, Transco in its letter advised the Court that ‘‘the key question in determining the extent of a cur- rent gas shortage is deliverability.’’ Although the Court did not then even address this observation, it apparently now disagrees with it. *In its accompanying ‘‘Memorandum’’, the majority of the Court cited ‘‘five challenging facts’’ as the bases for its action. One of these ‘‘challenging facts’’ was that ‘‘Transco reported the highest proven reserves of gas in its history in 1969, yet less than five years later was reporting shortage as severe that it required curtailments of 43.22% in this coming winter. . .’’ The actual fact is that Transco reported its highest reserves at the end of 1966, not 1969, as shown in Transco’s June 2 and June 6 letters to the Court. Another ‘‘challenging fact’’ was Transco’s indicated ‘reluctance . . . to disclose the extent of committed contractual entitlements which it holds’’, a wholly unwarranted and baseless Ola pel the inferences and innuendoes that the shortage was contrived, Transco opposed the Commission’s rehearing request and urged a prompt investigation’ and for the same reason, Transco did not participate in the Supreme Court proceedings. After summary reversal by the Supreme Court on Jan- uary 19, 1976, the majority of this Court remanded the ease to the Commission ‘‘to determine whether a real shortage exists.’’* Responsive to that command and act- ing upon a stipulation entered into by the active parties to the Trans [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2032%3A1. Public record. Not legal advice.