Supplemental Memorandum — Transcontinental Gas Pipe Line Corp. v. Federal Energy Regulatory Commission

No. 76-1799

IN THE

Supreme Court of the United States

OcToBeR TERM, 1976

TRANSCONTINENTAL Gas Pipe LINE CORPORATION,

Petitioner,

v.

FeperRAL ENERdYW REGULATORY COMMISSION

SUPPLEMENTAL MEMORANDUM OF PETITIONER

TRANSCONTINENTAL GAS PIPE LINE

CORPORATION

Tuomas F. Ryan, JR.

Ropert G. Harpy

ANDREWS, KURTH,

CAMPBELL & JONES

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Attorneys for Petitioner

Transcontinental Gas Pipe Line

Corporation

Of Counsel:

Brian E. O'NEILL, Senior Vice

President and General Counsel

WILLIAu N. Bonner, JR.

Transcontinental Gas Pipe Line

Corporation

Post Office Box 1396

Houston, Texas 77001

Paess ory Bron S. ADAMs PrRinTING, Inc., Wasuinoton, D. C.

IN THE

Supreme Court of the United States

OcToBER TERM, 1976

No. 76-1799

TRANSCONTINENTAL Gas Pipe LINE CORPORATION,

Petitioner,

V.

FEDERAL ENERGY REGULATORY COMMISSION

SUPPLEMENTAL MEMORANDUM OF PETITIONER

TRANSCONTINENTAL GAS PIPE LINE

CORPORATION

In its memorandum to this Court in response to the

petition for certiorari, the Federal Energy Regula-

tory Commission (at that time known as the Federal

Power Commission) requested that this case be held

in abeyance pending the decision of the United States

Court of Appeals for the District of Columbia Circuit

in Elizabethtown Gas Company v. Federal Energy

Regulatory Commission, No. 76-1465. Because the

Elizabethtown case presented the identical question on

the merits as was presented to the same court of

appeals in the instant case, petitioner Transconti-

nental Gas Pipe Line Corporation (Transco) acqui-

2

esced in the Commission’s request and this Court has

not yet acted upon the petition.

The decision of the court of appeals in Elizabeth-

town was rendered on January 26, 1978 and, while

the Commission has committed itself to filing a sup-

plemental memorandum, petitioner Transco also

wishes to express its view of the interrelationship of

Elizabethtown to this case.’

1. The issue presented to the court of appeals in

Elizabethtown was exactly the same as the issue pre-

sented to another panel of the same court in the in-

stant case, namely, the legality of a compensation

scheme for unequal curtailment of natural gas sup-

ply. In Elizabethtown, the court had no difficulty in

deciding the case on its merits despite the fact that

there was no evidence relating to the pipeline’s gas

supply. In the instant case, however, the court of ap-

peals has three times refused to decide the case on its

merits. Instead, on an issue which only it has raised,

it has thrice remanded the case to the Commission

with various directions to undertake gas supply in-

quiries. The first time, this Court summarily reversed

the court of appeals’ action upon a petition filed by

the Commission. Federal Power Commission v. Trans-

continental Gas Pipe Line Corporation, 423 U.S. 326

(1976). The second time, the Commission attempted to

comply with the court of appeals’ mandate “to deter-

mine whether a real shortage exists“ by certifying to

the reality of the shortage based upon record evidence

and the stipulation of the parties. This did not satisfy

The lower court’s decision in Elizabethtown is attached hereto

as Appendix A.

* Order of February 6, 1976, Appendix E to the petition herein.

3

the court of appeals, however, and the third remand

ensued. It is this third remand, with its instruction to

the Commission to determine the “duration, shape and

causation” of the shortage on Transco’s system, which

is the subject of the petition in this case.

What the court of appeals found to be “absolutely

essential“ to a decision on the merits in this case,

was of no concern to a different panel of the same

court in Elizabethtown. Indeed, the panel in Eliza-

bethtown, while determining the issue on the merits

to be relatively simple’’, showed full awareness of the

inconsistent posture and treatment of the Transco

case and made no effort to distinguish the two cases

(Appendix A, pp. 4a, 10a-12a).* Transco submits that

there is no basis for distinguishing the cases; rather,

to paraphrase the words of this Court in the prior

chapter, 423 U.S. 326 at 334, it is no longer ‘‘con-

ceivable” that any nexus exists between the lawfulness

of compensation and the extent of the gas shortage.

2. In its memorandum to this Court, the Commis-

sion agreed with Transco that the court of appeals

once again seriously overstepped the proper bounds

of judicial review by dictating to the administrative

agency the type of gas supply investigation which it

must undertake. Moreover, while the Commission did

not object to granting Transco’s petition, it did not

itself seek a writ of certiorari because the instant

Id.

* The opinion in Elizabethtown was written by Judge Leventhal

who was one of the four judges voting to deny rehearing en banc

in this case in a 4-4 split. In order to be consistent with his action

in Elizabethtown, Judge Leventhal today would unquestionably

vote to grant rehearing en banc and there would be no need for

action in this case.

4

case appeared to be sui generis insofar as treatment

of gas supply is concerned. While the Elizabethtown

decision reinforces that view, it also highlights the

egregious error committed by the court of appeals in

‘this case in requiring a nebulous inquiry into gas

supply on Transco’s system before deciding the merits

of an issue which every other court has been able to

decide without any inquiry into gas supply.“

3. Over two years ago, this Court determined that

“swift and priority consideration“ should be given to

this case by the court of appeals. Yet, if the kind of

esoteric inquiry mandated by the court of appeals

is now required, it is likely that another two years or

more will go by before there is a decision by the court

of appeals on the merits. In the meantime, there is

presently being held in escrow for the benefit of one

group of Transco customers or another approximately

$22.5 million of compensation money (including earn-

ings on the escrow balance) which cannot be distrib-

uted until this case is decided on its merits.

4. Under all of the foregoing circumstances, Transco

respectfully urges this Court to grant the petition

for certiorari, summarily reverse the latest order of

the court of appeals as once again invading the right-

ful province of the Conunission, and remand the case

See also Mississippi Public Service Commission v. FPC, 522

F. 2d 1345 (5th Cir. 1975), rehearing denied, 526 F. 2d 810, cert.

denied, 429 U.S. 870 (1976), and Ft. Pierce Utility Authority of

City of Ft. Pierce v. FPC, 526 F. 2d 993 (5th Cir. 1976).

FO v. Transco, supra, 423 U.S. at 334.

5

to the court of appeals with directions to decide this

case promptly on its merits.

_ Respectfully submitted,

THomas F. Ryan, JR.

Rosert G. Harpy

ANDREWS, KURTH,

CAMPBELL & JONES

1700 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

Attorneys for Petitioner

Transcontinental Gas Pipe Line

Corporation

Of Counsel:

Brian E. ONE, Senior Vice

President and General Counsel

Wiu1aM N. Bonner, JR.

Transcontinental Gas Pipe Line

Corporation

Post Office Box 1396

Houston, Texas 77001

APPENDIX

ne no 2 ee

la

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1465

ELIZABETHTOWN GAS COMPANY, PETITIONER

V.

FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT

WASHINGTON GAS LIGHT COMPANY

COLUMBIA GAS TRANSMISSION CORPORATION

COLUMBIA GAS DISTRIBUTING COMPANIES

COMMONWEALTH NATURAL GAS CORPORATION

GENERAL MOTORS CORPORATION, INTERVENORS

Petition for Review of an Order of the

Federal Energy Regulatory Commission

Argued June 17, 1977 | Judgment entered

, this date

Decided January 26,1978 | <==

John T. Miller, Jr., for petitioner.

Thomas Walsh, Attorney, Federal Energy Regulatory

Commission, for respondent. Drexel D. Journey, General

Counsel, Federal Energy Regulatory Commission, Roberi

W. Perdue, Deputy General Counsel, Allan Abbot Tuttle,

2a

Solicitor and John H. Burnes, Jr., Attorney, Federal

Energy Regulatory Commission were on the brief, for

respondent. John J. Lahey, Attorney, Federal Energy

Regulatory Commission also entered an appearance for

respondent.

Stephen J. Small with whom Tilford A. Jones was on

the brief for intervenor, Columbia Gas Distribution Com-

panies.

Edward J. Grenier, Jr., Richard P. Noland, Robert R.

Morrow, Frazer F. Hilder and Julius Jay Hollis were

on the brief, for intervenor, General Motors Corporation.

John D. Daly, Giles D. H. Snyder, Leonard Sargeant,

III, and William P. Saviers, Jr., were on the brief, for

intervenor, Columbia Gas Transmission Corporation.

Lewis Carroll, Monte R. Edwards and Susan A. Low

were on the brief, for intervenor, Washington Gas Light

Company.

James O. Watts, Jr., entered an appearance for inter-

venor, Commonwealth Natural Gas Corporation.

Before: LEVENTHAL and Ross, Circuit Judges and

RONALD N. DAviEs,* Senior United States Dis-

trict Judge for the District of North Dakota.

Opinion for the Court filed by Circuit Judge LEVEN-

THAL.

LEVENTHAL, Circuit Judge: In this case, we rule that

the Federal Power Commission has the power to require

compensation as part of a curtailment plan. We remand

to the Federal Energy Regulatory Commission, as the

successor to the FPC,** for consideration of whether

such compensation should be provided.

* Sitting by designation pursuant to Title 28, U.S.C.

§ 294(d).

** See 42 U.S.C. f 7101 et seq., § 7295 (e) (Supp. 1977).

3a

The issue arises out of orders of the FPC relating to

two successive interim curtailment plans for the inter-

state natural gas pipeline transmission system of Co-

lumbia Gas Transmission Corporation (Columbia). The

appeal is by Elizabethtown Gas Co. (Elizabethtown),

one of the public utilities that buys natural gas from

Columbia for resale to consumers.

Elizabethtown opposed each of the plans on the ground

that it unfairly failed to compensate the customers of

Columbia which received less than their pro rata share of

gas. The Commission approved the plans, rejecting Eliza-

bethtown’s claim on the ground that it lacked jurisdic-

tion under the Natural Gas Act to order or approve

any curtailment plan that included a compensation fea-

ture. The appeals have been consolidated.

As indicated at the outset, in our view, the Commis-

sion does have the power to require compensation as part

of a curtailment plan. We remand for a determination

in appropriate proceedings whether or how this power

should be exercised.

I. PROCEDURAL BACKGROUND

The procedural background of these pending appeals is

of considerable complexity. To aid reader understanding,

we have presented that background in some detail in

Appendix A to this opinion, and confine ourselves at this

point to a brief statement that Elizabethtown contends

that the interim curtailment plans approved by the FPC

are unlawful (as constituting undue preference and for

other reasons) because the plans do not provide a com-

pensation feature, whereby purchasers who receive more

than their pro rata share of gas pay a surcharge, and

purchasers who receive less than their pro rata share of

gas receive compensation out of the proceeds of the sur-

charges.

4a

II. COMMISSION’S AUTHORITY TO EMPLOY

A COMPENSATION PROVISION

On the merits, these appeals pose the question whether

the FPC was correct in its construction of the Natural

Gas Act, when it determined that a compensation scheme

is impermissible under the Act as a matter of law.

As set forth in Appendix A, the Commission’s position

emerged in these proceedings in the course of procedural

rulings in the handling of a Columbia plan that contained

a compensation feature. Columbia then dropped the com-

pensation feature (“under duress”) in the next interim

plan(s) proposed to the FPC, and those interim plans

were in due course approved. The FPC has rejected Eliz-

abethtown’s petitions for rehearing, which sought a com-

pensation feature, and in doing so has relied on its opin-

ion in the Transco case. Another opinion and order of

the Commission to similar effect has been reversed by

the Fifth Circuit and certiorari has been denied. Missis-

sippi Public Service Commission v. FPC, 522 F.2d 1345

(6th Cir. 1975), cert. denied, 45 L. W. 3254 (S.C. Oct. 4,

1976).

Although the procedural situation is complicated al-

most beyond belief, we find the issue on the merits to be

relatively simple. In brief, we agree with the reasoning

of Judge Bell in Mississippi Public Service Commission,

and with his reliance upon the language of the Supreme

Court in FPC v. Louisiana Power and Light Company,

406 U.S. 621 (1972).

1 Transcontinental Gas Pipeline Corporation, FPC Docket

No. RP72-99, orders of Nov. 12, 1974 and Jan. 10, 1975. On

appeal, as noted in Appendix A, this court did not reach the

compensation issue, and Transcontinental has sought certio-

rari on the ground that this court erred in its remands, and

requirements for further consideration, without ruling on

the compensation issue.

5a

In the latter case, the Court dealt with a somewhat

different issue—that of the Commission’s authority to

regulate curtailment of direct interstate sales of natura)

gas—but its construction of the Act is relevant to the

case at bar. In finding authority for such curtailment in

the Commission’s transportation jurisdiction, the Court

noted that the Commission has broad powers to meet its

responsibilities under that aspect of its jurisdiction. The

Commission

must be free, “within the ambit of [its] statutory

authority, to make the pragmatic adjustments which

may be called for by particular circumstances.” FPC

v. Natural Gas Pipeline Co., 315 U.S. 575, 586

(1942). Section 16 of the Act assures the FPC the

necessary degree of flexibility in providing that: “The

Commission shall have the power to perform any and

all acts, and to prescribe, issue, make, amend, and

rescind such orders, rules, and regulations as it may

find necessary or appropriate to carry out the provi-

sions of this act... .” 15 U.S.C. § 7170. In apply-

ing this section, we have held that “the width of

administrative authority must be measured in part

by the purposes for which it was conferred... .

Surely the Commission’s broad responsibilities there-

fore demand a generous construction of its statutory

authority.” Permian Basin Area Rate Cases, 390

U.S. 747, 776 (1968)....

406 U.S. at 642.

No compensation feature was involved in the curtail-

ment plan at issue in Louisiana Power and Light. That

case did, however, turn on an expansive view of the Com-

miss on’s latitude to make “pragmatic adjustments which

may be called for by particular circumstances,” and the

statutory grant of “necessary degree of flexibility” as

necessary or appropriate to further the Congressional ob-

jective. In our view, this embraces the authority to em-

ploy a compensation feature as part of a curtailment

6a

plan where necessary or appropriate to promote the poli-

cies of the Natural Gas Act.’

Implicit in the Commission’s handling of the case at

bar is its view that it was inconsistent to require a pur-

Cf. Cities Service Company v. FEA, 529 F.2d 1016 (Temp.

Emer. Ct. App. 1975), cert. denied, 426 U.S. 947 (1975),

where the court was confronted with a problem of statutory

interpretation similar to that of the case at bar, arising within

the same general context of the national energy crisis. In

finding that the FEA had authority under § 4(a) of the Emer-

gency Petroleum Allocation Act of 1973, 87 Stat. 628, as

amended, 15 U.S.C. § 753 (a) (1976), to promulgate the Old

Oil Entitlements Program, 10 C.F.R. § 211.67, the court held

that “[a] proper interpretation of the Allocation Act and its

provisions requires recognition of the fact that the authority

under Section 4(a) must be read together with the objectives

[set forth in Section 4 (b)] which the exercise of that author-

ity is to obtain.” 529 F.2d at 1022.

In Niagara Mohawk Power Corporation v. FPC, 126 U.S.

App.D.C. 376, 381-88, 379 F.2d 153, 158-60 (1967), this court

held, more generally, that an act that entrusts a broad subject-

matter to administration by an agency should be read to pro-

vide the agency with sufficient authority to implement the

purposes and policies of Congress. [TIhe breadth of agency

discretion is, if anything, at zenith when the action assailed

relates primarily not to the issue of ascertaining whether con-

duct violates the statute, or regulations, but rather to the

fashioning of policies, remedies and sanctions, including en-

forcement and voluntary compliance programs in order to

arrive at maximum effectuation of Congressional objectives.”

Id. at 382, 379 F.2d at 159. [Citations omitted.] We further

observed that “[t]he principles of equity are not to be isolated

as a special province of the courts. They are rather to be wel-

comed as reflecting fundamental principles of justice that

properly enlighten administrative agencies under law. The

courts may not rightly treat administrative agencies as alien

intruders poaching on the court’s private preserves of justice.

Courts and agencies properly take cognizance of one another

as sharing responsibility for achieving the necessities of con-

trol in an increasingly complex society without sacrifice of

fundamental principles of fairness and justice.” Id. at 383,

379 F. ad at 160. [Citations omitted.]

7a

chaser to provide for compensation in order to obtain

rights to deliveries of natural gas when those deliveries

were properly allocated to him. The Commission argues,

for example, that a compensation scheme, by rewarding

low priority users and penalizing high priority users, is

“inconsistent with the theory and purpose of end use

curtailment.” (Br. at 20).

In human affairs generally our society owns a deep-

seated conviction that, to use Emerson’s words in the

influential essay on Self-Reliance, a man should not be

required to “pay for a privilege where [he has] intrinsic

right.” That principle does not answer the question, how-

ever; it rather bids us to focus on defining the “right”

that is involved.

The decision that a system of priorities is mandated

by fundamental policy considerations does not, in our

view, necessarily imply that priority status should be

entirely unburdened. The question of whether, and how,

to provide compensation may well turn on the fairness

of balancing the benefit accorded a high-priority pur-

chaser with a charge that offsets, at least in part, the

added expense imposed by a curtailment plan upon a

lower-priority purchaser." We do not attempt to resolve

this question on the present facts. We hold, merely, that

it is open to the Commission to consider employing a

compensation feature.“

In order that the Commission may proceed, on the

premise of legal authority, to consider whether and how

* The issue of fairness is an issue of policy for the Commis-

sion. Our function is only to consider the issue of law whether

the Commission has the legal authority to implement that

policy of fairness.

Our opinion in State of Louisiana v. FPC, 175 U.S. App.

D.C. 104, 533 F.2d 1239 (1976), is not to the contrary. We

there assumed, without deciding, that the Commission had

authority to impose a compensation feature as a condition

upon the granting of a certificate of public convenience and

necessity, but held that no showing had been made, under the

peculiar facts of that case, that the public interest required

compensation. 175 U.S. App. D.C. at 110, 533 F.2d at 1245.

8a

a compensation feature should be or should have been

included, we remand for further consideration by the

Commission, in appropriate proceedings, of an interim

curtailment plan.“

So ordered.

* We do not vacate the orders of the Commission. The Com-

mission may conclude that those orders should be retained.

Portland Cement Ass’n v. Ruckelshaus, 158 U.S.App.D.C. 308,

486 F.2d 375 (1973); Portland Cement Ass’n v. Train, 168

U.S.App.D.C. 248, 518 F.2d 506 (1975).

* Washington Gas Light Company filed a suggestion of moot-

ness in No. 75-1767, based on the fact that no Columbia cus-

tomer requested or took more than its pro rata share of gas

during the period May 1, 1975 to October 31, 1975. (As ex-

plained in Appendix A, that is the period governed by the

1974 interim curtailment plan, as extended in time and modi-

fied to omit the compensation feature originally in Columbia’s

1974 plan.)

Elizabethtown’s response develops a contention that the

1974 plan, as modified, presents a live issue because its dispo-

sition affects the proper handling by the Commission of the

1975 plan.

In American Smelting and Refining Co. v. FPC, 161 U.S.

App.D.C. 6, 494 F.2d 925 (1974), we held that the Commis-

sion, in remedying unjust or discriminatory rates, is required

by §5(a) of the Act to proceed in two steps, by finding, first,

that an existing condition is unjust or discriminatory, and then

prescribing the remedy for that condition. Id. at 21-22, 494

F.2d at 940-41. Under the approach there enunciated, the pro-

ponent of an existing plan would, indeed, enjoy some ad-

vantage deriving from considerations of burden of proof.

But we dealt there with an existing plan; here, by contrast,

the curtailment plan challenged in No. 75-1767 expired of its

own force. Elizabethtown cannot, consequently, derive any

procedural advantage from American Smelting on remand.

Naturally, the Commission’s findings of fact will be required

to meet the substantial evidence test, and its action in settling

upon a new interim curtailment plan must not be arbitrary

or capricious. We believe these standards provide ample pro-

cedural protection for Elizabethtown.

The appeal in No. 75-1767 stands dismissed for mootness.

9a

APPENDIX A: PROCEDURAL BACKGROUND

On December 15, 1971, Columbia filed with the Com-

mission a curtailment plan providing for pro rata cur-

tailment of large wholesale customers in the event of gas

shortages. The plan included an exemption from curtail-

ment to protect residential and commercial service, and

a compensation provision to reimburse customers who

might suffer ‘greater than pro rata curtailment as a re-

sult of the exemption provision. After a period of sus-

pension by the Commission, the plan was made effective

on Columbia’s motion as of April 1, 1972, and continued

in effect until November 1, 1972.

1972 INTERIM PLAN

On September 29, 1972, the Commission approved an

interim settlement curtailment plan with similar provi-

sions, to be effective until July 1, 1974. Under this plan,

buyers who took advantage of the exemption provision

to purchase more than their pro rata share of gas were

subject to a surcharge on such exempt volumes of $1.65

per Mcf during the months of November through March,

and 50¢ per Mcf during the months of April through

October. The proceeds of this surcharge were to be used

by Columbia to compensate the purchasers who, in effect,

freed up the exempt volumes by receiving less than their

pro rata share of gas.“ The compensation feature was

intended by Columbia to provide] an incentive for its

customers to develop their own peak shaving facilities,

R. 360-62, 363-64, 364A, 364B.

Compensation was fixed at $1.65 per Mcf of curtailment

in excess of ratable curtailment during the cold-weather

months, provided that the excessively curtailed buyers or their

distributor customers utilized all gas supply sources avail-

able, including peak shaving—and then only to the extent that

peak shaving was utilized as a result of the additional curtail-

ment. Otherwise, conspensation during the cold weather

months was at the rate of 50¢ per Mcf. Compensation during

the warmer months was fixed at 50% per Mef.

10a

. . . to preclude customers from requesting exempt vol-

umes except when actually needed to protect firm non-

industrial loads, and [to] compensate[] customers pro-

viding the exempt volumes for using their own peak

shaving facilities.” *

1974 INTERIM PLAN

On June 6, 1974, the Commission granted Columbia’s

motion to extend this interim curtailment plan until

April 30, 1975.“ However, on January 24, 1975, and

March 25, 1975, the Commission, acting on the complaint

of Washington Gas Light Company (WGL) (a customer

of Columbia), issued orders reflecting a change in its

appraisal of the compensation feature. While the man-

date of these orders was simply to set a date for formal

hearing of WGL’s complaint, the Commission’s language

made it clear that it now regarded the compensation fea-

ture as illegal.’

Record at 381 (hereinafter cited as R ——).

R. 781-91.

* The order of January 24, 1975, noted that the Commission

had concluded in its orders of November 12, 1974 and January

10, 1975, in Transcontinental Gas Pipe Line Corporation

(Transco), Docket No. RP 72-99, that

a compensation plan similar to the one now before us was

unacceptable as a matter of law because it is discrimina-

tory, fixes rates unrelated to costs, and does not comply

with the filing requirements of Sections 4 and 7 of the

Natural Gas Act because the transfers would involve

sales. It was further concluded that the compensation

plan was unacceptable as a matter of policy because of

its inherent inequity. The Commission recognized, how-

ever, that its position was subject to judicial review, and

provided that notwithstanding the Commission’s views as

to unlawfulness the plan should remain in effect as pro-

vided by the Ccurt of Appeals pending further order.

Pending hearing and final decision, no change in Co-

lumbia’s rates shall be effective, nor any transfer of en-

titlements among Columbia’s customers be effectuated

lla

unless and until appropriate certificate and rate filings

have been made and approved in accord with Sections

4 and 7 of the Act.

R. 874, J.A. at 276. And in its order of March 25, 1975

(formally a response to Columbia’s petition for clarification

of, or application for rehearing of, the January 24 order) the

Commission reiterated its position.

We deny so much of the applications as seek to have

us withdraw the language in the January 24, 1975, order

relating to sales for resale in interstate commerce which

may be attempted by Columbia’s customers under the

purported authority of our June 6, 1974, order approving

Columbia’s interim curtailment plan. We have determined

that sales for resale between and among pipeline cus-

tomers, even when attempted in the guise of “compensa-

tion features” of a curtailment plan, are subject to Sec-

tions 4 and 7 of the Natural Gas Act. See Transco, supra;

Northwest Pipeline Corp., Docket No. RP74-49, order

issued February, 1975; Consolidated Natural Gas Com-

pany, Docket No. RP73-115, order issued January 15,

1975. We are without power to waive compliance with

the statute itself; accordingly, any sales by and between

Columbia’s customers can lawfully be made only after

compliance with the statute and regulations thereunder.

We have not forbidden implementation of Columbia’s

interim curtailment plan; indeed we expect allocation of

Columbia’s supplies to be made in strict conformity

therewith until expiration of the interim plan. We have

attempted to make clear, however, that sales for resale

among Columbia’s customers are uniawful unless and un-

til the requirements of Sections 4 and 7 have been met.

R. 895-96; J.A. at 282-83.

The Transco case, upon which the Commission relies in

these passages, involved a curtailment plan with a compensa-

tion feature similar to that of the case at bar. The plan was

filed by Transcontinental Gas Pipeline Corporation (Transco)

in September 1974. The Commission found the compensation

feature unlawful for reasons stated in the quoted passages of

the Commission’s orders in the present case. Transco sought

review of the Commission’s determination in this court. On

August 1, 1975, another panel of this court remanded the

case to the Commission for further investigation of the need

12a

Columbia’s 1974 interim curtailment plan was due to

expire on April 30, 1975. On April 1, 1975, Columbia

filed a motion with the Commission requesting an exten-

sion of that interim curtailment plan for six months.°

In light of the Commission’s new appraisal of the com-

pensation provision, however, Columbia felt that it had

“no alternative but to propose an extension of its interim

plan as modified to exclude said compensation features.“

Columbia expressed disagreement with the Commission’s

determination of illegality, but stated that it felt itself

“under duress” of the Commission’s orders.“

for curtailment. Subsequently, the case has returned to this

court twice, and the panel has twice more remanded it, Trans-

continental Gas Pipe Line Corporation v. FPC, No. 74-2036

(D.C. Cir. Feb. 6, 1976) (unpublished per curiam); Trans-

continental Gas Pipe Line Corporation v. FPC, No. 74-2036

(D.C. Cir. Nov. 29, 1976), without reaching the merits of the

legality of the compensation provision. Following the most

recent refusal of this court to decide the compensation issue,

Transco sought Supreme Court review, 46 U.S.L.W. 3022

(U.S. June 17, 1977) (No. 76-1799), on the grounds that this

court exceeded the proper scope of judicial review by ordering

a remand to determine the “duration, shape, and causation” of

the alleged gas shortage; and that the “duration, shape, and

causation” of the shortage had no substantial bearing on the

legality of the compensation scheme.

The Commission has suggested to the Supreme Court that

it defer ruling on Transco’s petition for certiorari until we

decide the present case. Memorandum for the Federal Power

Commission (in response to Transco’s petition for a writ of

certiorari) at 10-12, Transcontinental Gas Pipe Line Corpora-

tion v. FPC, S. Ct. No. 76-1799.

* The matter of a permanent curtailment plan for Columbia

was still pending before the Commission, but there was no

chance that the Commission could issue an order on a perma-

nent plan to become effective before the interim plan expired.

R. 898.

R. 905.

— ͤ 6 5

138

By order of April 25, 1975, the Commission granted

Columbia’s motion to extend the 1974 interim plan, (mod-

ified o delete the compensation feature) for a six-month

period ending October 31, 1975.“ Elizabethtown’s appli-

cation for rehearing was denied, and it filed an appeal

with this court.“

1975 INTERIM PLAN

Because of continuing doubts as to when a permanent

curtailment plan for Columbia would be approved, Co-

lumbia and Armco Steel Corporation presented to the

Commission, on July 2, 1975, competing proposals for a

new interim curtailment plan, to take effect beginning

November 1, 1975. Both of these proposals effected cur-

tailment through a system of priorities of service (rang-

ing from high-priority residential service to low-priority

large-volume industrial boiler fuel use) rather than

through the pro rata cutback approach, with exemptions,

employed in Columbia’s earlier curtailment plans. Eliza-

bethtown opposed both proposals because of their failure

to include a compensation provision to ameliorate what

Elizabethtown regarded as disproportionate allocations of

shortages.

By order of October 31, 1975, the Commission pre-

scribed Columbia’s 1975 Plan as an interim curtailment

plan for the period November 1, 1975 through March 31,

1976 “and thereafter subject to further order of the Com-

mission.” It rejected the contentions of Elizabethtown

concerning the need for a compensation provision, refer-

ring to its previously expressed views on this matter.”

Elizabethtown applied for rehearing on the ground,

inter alia, that this curtailment plan created undue pref-

erences, and lacked a compensation feature that would

R. 1054-58; J.A. at 305-09.

1° Elizabethtown Gas Co. v. FPC, D.C. Cir. No. 75-1767.

* R. 21487, J. A. at 527.

1 R. 21484, J. A. at 524A.

l4a

redress these preferences and induce the favored buyers

to exercise self-help.”

By order of March 26, 1976, the Commission denied

Elizabethtown’s application for rehearing. Elizabethtown

filed an appeal with this court asking that the Commis-

sion be required to institute a compensation feature, retro-

active to November 1, 1975.

In its application for rehearing, Elizabethtown also

argued that the Commission had improperly “rejected” the

interim curtailment plan that was in effect through October

31, 1971. In the view of Elizabethtown, the Commission was

constrained by American Smelting and Refining Co. v. FPC,

494 F.2d 925, 940-41 (D.C. Cir. 1974), to expressly find un-

lawful the curtailment plan that expired on October 31, 1975,

before replacing it with the priorities-of-service plan.

Elizabethtown Gas Company v. FPC, D.C. Cir. No. 76-

1465.