# Petition — Federal Energy Regulatory Commission v. McCombs

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1978
- **Citation:** 439 U.S. 892

## Text

‘ AUG 14 I9TEé
“0.9 8-249) *

MICHAEL ROBAK, JR_CLERK |
In the Supreme Court of the United States

OCTOBER TERM, 1978

FEDERAL ENERGY REGULATORY COMMISSION,
PETITIONER

v.

BILLY J. MCCOMBS, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

WADE H. MCCRER, JR.,
Solicitor General,
Department of Justice,
Washington, D.C. 20530.
ROBERT R. NORDHAUS,
General Counsel,

HOWARD E. SHAPIRO,
Solicitor,
Federal Energy Regulatory Commission,
Washington, D.C. 20426.

Page

Opinions below EE CO CEC 1

TE aT EEE is A 2

Question presented 2

Statute involved EE ener 3

A 3

Reasons for granting the writ 9

IE RS Se 19

CITATIONS
Cases:

Atlantic Refining Co. v. Public Service
Commission of New York, 360 U.S.

378 - m 11
California v. Southland Royalty Co., No.

76-1114, decided May 31, 1978 - _.. 10,12
Federal Communications Commission v.
National Citizens for Broadcasting, No.

76-1471, decided June 12,1978 —s—- 18
Federal Power Commission v. Idaho Power

Co., 344 U.S. 17 - a ae _ 12,18
Federal Power Commission Vv. _ Transcon-
tinental Gas Pipe Line Corp., 423 U.S.

326 . 12,18
Minneapolis & St. Louis R. Co. v. Peoria

& Pekin Union Ry. Co., 270 U.S. 580 14
Phillips Petroleum Co. v. Wisconsin, 347

U.S. 672 _ alc 4

Securities & Exchange: “Commission — v.
Chenery Corp., 332 U.S. 194 12

ll

Cases—Continued Page

Sunray Mid-Continent Oil Co. v. Federal
Power Commission, 364 U.S. 137 - 11
Texaco, Inc., et al., FERC Docket Nos. ¢
8820, et al., Order Granting Petition for
Reconsideration and Modifying Prior

Order issued November 1, 1977 __.... 15
Thompson v. Texas Mexican Railway Co.,
a sie linineitasseoneeh—aneioeniote 14,17

Union Oil Co. of California v. Federal
Power Commission, 542 F. 2d 1036... 17-18
United Gas Pipe Line Co. v. Federal

Power Commission, 385 U.S. 83 11
United States v. Radio Corporation Wd
America, 358 U.S. 334 _....----- 17

Vermont Yankee Nuclear Power Corp. v.
Natural Resources Defense Council,
Inc., No. 76-419, decided April 3, 1978 - 18

Statute:
Natural Gas ‘Act, 52 Stat. 821, as amend-
Re Boe ee gs oo 3-4
Section 7, 15 U.S.C. 717f -..............-. 11

Section 7(b), 15 U.S.C. 717f£(b)--passim

Miscellaneous:

6 Williams and Meyers, Oil and Gas Law
(1977 I aie santas 3 ae 6

aiid

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

No.

FEDERAL ENERGY REGULATORY COMMISSION,
PETITIONER

Vv.

BILLY J. MCCOMBS, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

ee
a

The Solicitor General, on behalf of the Federal
Energy Regulatory Commission, petitions for a writ
of certiorari to review the judgment of the United
States Court of Appeals for the Tenth Circuit in this
case.

OPINIONS BELOW

The opinion of the court of appeals (App., infra)’
is reported at 570 F.2d 1376. The orders of the

‘“A” refers to the separately bound appendix to the peti-
tion filed in United Gas Pipe Line Company v. McCombs, et
al., No. 78-17, seeking review of the same judgment. To

(1)

2

Federal Power Commission (Opinion Nos. 740 (A-1
to A-45) and 740-A (A-46 to A-69)) are reported at
54 FPC 755 and 2034. Opinion No. 740-B (A-70 to
A-80) is not yet reported.

JURISDICTION

The judgment of the court of appeals was entered
on February 9, 1978 (A-94), and an order denying
timely petitions for rehearing and suggestions for
rehearing en banc was reissued as of April 4, 1978,
for the purpose of correcting a clerical error, on
April 6, 1978 (A-95 to A-96). By order of July 25,
1978, Mr. Justice White extended the time for filing
a petition for a writ of certiorari to August 14, 1978.
The jurisdiction of this Court is invoked under 28
U.S.C. 1254(1) and Section 19(b) of the Natural
Gas Act, 52 Stat. 831, as amended, 15 U.S.C. 717r

(b).
QUESTION PRESENTED

Whether a court of appeals, reviewing a Commis-
sion determination that gas currently flowing from
a tract is dedicated to interstate commerce, may in-
dependently determine that the certificated gas serv-

relieve the Court of unnecessary additional documents, we
have agreed with petitioner in that case, with the consent of
the Clerk of this Court, to use jointly and share the expenses
of only one separately bound appendix. We have, however,
included the opinion of the court of appeals as an appendix
to this petition, infra.

* An earlier opinion of the court of appeals (A-81 to A-91),
subsequently vacated and withdrawn (A-93), is reported at
542 F.2d 1144.

3

ice was abandoned under Section 7(b) of the Natural
Gas Act because production from the tract had ceased
between 1966 and 1971, even though the permission
of the Commission for abandonment was never sought
or obtained as required by Section 7(b).

STATUTE INVOLVED

Section 7(b) of the Natural Gas Act, 52 Stat.
824, 15 U.S.C. 717f(b), provides:

No natural-gas company shall abandon all or
any portion of its facilities subject to the juris-
diction of the Commission, or any service ren-
dered by means of such facilities, without the
permission and approval of the Commission first
had and obtained, after due hearing, and a find-
ing 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 ne-
cessity permit such abandonment.

STATEMENT

This case results from proceedings before the
Federal Power Commission on a complaint by United
Gas Pipe Line Company (“United”) alleging that
respondents * were violating the Natural Gas Act,

* Respondents are “the McCombs Group’ Billy J. McCombs,
R. James Stillings d/b/a Gastill Company, David A. Onsgard,
Basin Petroleum Corporation, Louis H. Haring, Jr., and Na-
tional Exploration Company) and “the du Pont Company”
(E.I. du Pont de Nemours & Company).

4

52 Stat. 821, as amended, 15 U.S.C. 717 et seq., by
failing to deliver gas that had been dedicated to
interstate commerce and to United’s pipeline under
the terms of a certificate of public convenience and
necessity. The gas is being produced from a 163-
acre tract known as the Butler B tract in Karnes
County, Texas (App., infra, pp. 2a-5a).

In 1948, B. C. Butler, Sr., as lessor, executed an
oil and gas lease covering the Butler B tract (A-3).
In 1953, the leaseholders-producers entered into a gas
purchase contract with United whereby they agreed
to sell to United all the natural gas produced then
or thereafter from the tract (App., infra, p. 2a). Fol-
lowing this Court’s decision in Phillips Petrolewm
Co. v. Wisconsin, 347 U.S. 672, the leaseholders ap-
plied to the Commission for certificates of public con-
venience and necessity authorizing the sale to United
of the natural gas covered by the 1953 contract. In
December 1954, the Commission granted the cer-
tificates (App., infra, pp. 2a-3a). There was no pro-
vision in the lease, the contract, or the certificates
limiting the depth of origin or the amount of gas
from the Butler B tract that was committed.

One well, the Butler No. 7 gas well, was completed
on the Butler B tract to a depth of 2,960 feet, and
gas from this well was delivered to United (A-6).
Meanwhile, the Butler B lease was assigned several
times, and in March 1966 it came into the ownership
of a group headed by Louis H. Haring, Jr. (A-6;
App., infra, p. 3a). On May 28, 1966, the Butler
No. 7 well, which was the only well producing gas on

5

the lease at that time, ceased production (A-6; App.,
infra, p. 3a).

The property was then being operated for the Har-
ing group (“Haring”) by Bay Rock Corporation.
On December 5, 1966, Bay Rock notified United that
the wells on the lease were depleted “and there will
be no other gas available at this time” (A-7; App.,
infra, p. 3a). In response, United advised Bay Rock
that it would remove its metering equipment but
that it would reinstall the equipment whenever Bay
Rock might have further gas to deliver under the
contract (7bid.). Neither Haring nor Bay Rock
sought or obtained the Commission’s authorization
under Section 7(b) of the Natural Gas Act to
abandon the sale to United (ibid.).

In August 1968 and January 1971, the Secretary
of the Commission wrote to Haring’s predecessor and
to Bay Rock, respectively, advising them that if no
further sales of gas were contemplated, it would be
necessary for them to file applications to abandon
service (A-97 to A-98, A-100 to A-101; App., infra,
p. 8a). No such abandonment applications were filed.

In 1971 to 1972, Haring divided the Butler B
leasehold horizontally and vertically. Haring as-
signed the western 50 acres of Butler B, from the
depth of 4,115 feet to the depth of 8,700 feet, to
National Exploration Company (“National”) (A-7 to
A-8; App., infra, p. 4a). Haring assigned the eastern
113 acres of Butler B, from 6,500 feet to 8,653 feet,
to the McCombs Group, who unitized that interest
with their interest at the same depths of the adjoin-

6

ing “Butler A” tract (A-8 to A-9; App., infra,
p. 4a).*

Drilling to these deeper horizons, the new working-
interest owners discovered gas. In 1971 and 1972,
the McCombs Group drilled four productive wells on
their unitized acreage, one of which was on Butler B.
On June 1, 1972, the McCombs Group contracted to

* The Butler B lease authorized the unitization of the lease-
hold, or of any part of it (A-3 to A-4). “Unitization” means
the combining of tracts for “the joint operation of all or some
part of a producing [oil and/or gas] reservoir. * * * The
puxpose of unitization is to permit the entire field (or a very
substantial portion of it) to be operated as a single entity,
without regard to surface boundary lines.” 6 Williams and
Meyers, Oil and Gas Law 2-3 (1977 ed.).

For example, lessees of tracts A and B may agree to unitize
their tracts into a single field and share the total production
on some agreed formula—in this case, the ratio of each
tract’s surface area to the total surface area unitized. If gas
from tract A is certificated for sale in interstate commerce
and tract A is later unitized with tract B, the lessee of A is
obligated to deliver to interstate commerce his share of the
gas produced from the unitized acreage. See A-36 to A-37,
A-54 to A-55, A-75 to A-78. The various unitization dis-
putes in this case are not relevant to the issue presented by
the court of appeals’ opinion. While the parties before the
Commission disagreed with respect to whether certain other
acreage was in fact unitized with Butler B (and thus whether
gas from the additional acreage was dedicated to interstate
commerce (see A-54, A-56; A-70 to A-80)), the court of ap-
peals held that gas from neither Butler B nor any additional
acreage was dedicated to interstate commerce because the
certificated service had been lawfully abandoned. The only
issue presented by the court’s opinion is whether the service
was lawfully abandoned. See also p. 8, note 5, infra.

7

sell to the du Pont Company, for industrial uses in
intrastate commerce, all the gas from its interests
in both the Butler B and the Butler A leases (A-9 to
A-10; App., infra, pp. 5a-6a).

National successfully produced gas in 1972 from
two wells drilled to its allotted depths on the west
50 acres of the Butler B tract (A-10; App., infra,
p. 4a). National was in the process of arranging to
sell this gas to United, when United, on making a
title search, learned of its interest in the Butler B
tract under the 1953 contract (A-10 to A-11; App.,
mfra, p. 4a). On June 6, 1973, United notified the
McCombs Group that it claimed all the gas being
produced from the Butler B tract (subject to its
unitization with the Butler A tract) by virtue of the
1953 gas purchase contract (A-11; App., infra, pp.
5a-6a).

Acting on the ensuing complaint by United, the
Commission, after hearing and initial decision by an
administrative law judge (A-13 to A-16), held in
Opinion No. 740, issued August 20, 1975 (A-1 to A-
45), that gas produced from the unitized Butler B
acreage was dedicated to interstate commerce and to
United. The Commission found that service from
the Butler B lease had been commenced as authorized
in the certificate, so that the Butler B gas was dedi-
cated to interstate commerce (A-29 to A-36). Al-
though service from the original well on Butler B
had ceased by the end of 1966, there had been no
abandonment pursuant to Section 7(b), the Com-
mission found. Hence the gas currently flowing from
the acreage was required to be delivered to United,

8

and the sales in intrastate commerce by the present
leaseholders were in violation of Section 7(b) (A-29,
A-42 to A-43).°

On petition for review, a divided court of appeals,
acting after rehearing (A-92), set aside the Com-
mission’s order (App., infra). The court concluded
that as a physical fact, abandonment had occurred
in 1966 when the production of gas from the origi-
nal well on the Butler B leasehold ceased (App.,
infra, pp. 1la-15a). The court also relied on the two
letters that the Commission’s Secretary had written to
the leaseholders in 1968 971 (A-97 to A-98, A-100
to A-101; see p. 5, supra). The court quoted excerpts
from the opinion it had previously withdrawn (A-
93) which stated, for example, that the two letters
“must be acknowledged as a recognition by the Com-
mission that there was in fact an abandonment, but

*In Opinion No. 740 and in subsequent opinions on rehear-
ing (Opinion No. 740-A (A-46 to A-69) and Opinion No.
740-B (A-70 to A-80)), the Commission dealt with other is-
sues. These included an alleged settlement between the par-
ties and the question whether the Butler A - Butler B unit
had been dissolved by the parties and, if so, whether the
Commission would have to approve, under Section 7(b), the
attempted dissolution of the unit. The Commission in those
opinions also remanded the case for further evidentiary hear-
ings on some of those issues. The court of appeals did not
consider any of those issues, since it concluded that the inter-
state service from both Butler B and Butler A had been law-
fully abandoned. The court set aside the Commission’s orders
and directed that the other pending proceedings based on
those orders be dismissed (App., infra, p. 15a). In view of
the court’s opinion, those other issues are not now presented.

9

there was something needed for the record” (App.,
infra, p. 8a).

The court concluded: “We hold that, as a matter
of law, based upon the facts and circumstances of
the instant case, there was an abandonment under
Section 7(b) of the Natural Gas Act which does not
render the issue within the expertise of the Com-
mission. * * * [T]he only known reserves of natural
gas for which applications for certification had been
made and authorized had been depleted. With its
depletion and subsequent five year period of non-
Service, there was no need for the formality of a
Section 7(b) hearing” (App., infra, pp. 1la-12a).

Judge Holloway dissented ( App., infra, pp. 16a-
20a).

REASONS FOR GRANTING THE WRIT

The court of appeals, by holding that it may deter-
mine in the first instance to permit an abandonment
of certificated natural gas service, where the Com-
mission neither made nor was asked to make the find-
ing required by Section 7(b) of the Natural Gas Act,
has disregarded the terms of the Act and intruded
on the exclusive responsibility that Congress has given
the Commission. The court is wrong in suggesting
that the Commission “acknowledged” the fact of
abandonment, and wrong in assuming that the Com-
mission would have granted abandonment if an appli-
cation had been filed. Most important, the decision
below should not be allowed to stand because it will
undermine the administrative procedure established

10

by Section 7(b) and the important regulatory pur-
poses that that procedure serves.

1. The holding of the court of appeals is contrary
to the terms of the statute. Section 7(b) states
that “[n]Jo natural-gas company shall abandon” a
service of supplying natural gas for resale in inter-
state commerce “without the permission and approval
of the Commission first had and obtained, after due
hearing, and a finding by the Commission that the
available supply of natural gas is depleted to the ex-
tent that the continuance of service is unwarranted,
or that the present or future public convenience or
necessity permit such abandonment” (see p. 3, supra).

In this case the permission and approval of the
Commission for abandonment of the certificated serv-
ice from the Butler B tract were not sought, much
less “first had and obtained.” Nor was there any
“finding by the Commission that the available supply
of natural gas is depleted * * *.” The Commission
plainly could not make such a finding, since it is un-
disputed that, at the time of the proceeding under
review, the available supply of Butler B gas was not
depleted but was being delivered in intrastate com-
merce to du Pont (A-10).°

* As the Commission found, since the 1953 gas purchase con-
tract covered “merchantable natural gas * * * produced from
all wells now or hereafter drilled” on the Butler B leasehold,
the original and amended certificates embraced “the merchant-
able gas produced from any depth * * * drilled through Febru-
ary 7, 1981,” and in particular “all of the gas which has been
produced from or attributable to the Butler B lease since gas
was rediscovered at deeper depths late in 1971” (A-32 to A-

11

This Court has often recognized that Section 7 (b),
as it plainly says, requires the approval of the Com-
mission before a certificated service in natural gas
may be abandoned. As the Court stated in Sunray
Mid-Continent Oil Co. v. Federal Power Commission,
364 U.S. 137, 158 n. 25 (emphasis added) :

It might be observed that in these cases the
Commission issued certificates without time limi-
tations. Thus if the companies, failing to find
new sources of gas supply, desired to abandon
service because of a depletion of supply, they
would have to make proof thereof before the
Commission, under § 7(b). The Commission thus,
even though there may be physical problems be-
yond its control, kept legal control over the con-
tinuation of service by the applicants.

See also, e.g., United Gas Pipe Line Co. v. Federal
Power Commission, 385 U.S. 83, 89; Atlantic Refin-
ing Co. v. Public Service Commission of New York,
360 U.S. 378, 389. Most recently, in California v.
Southland Royalty Co., No. 76-1114, decided May 31,
1978, the Court held (slip op. 7):

Once the gas commenced to flow into interstate
commerce from the facilities used by the lessees,
$ 7(b) required that the Commission’s permis-
sion be obtained prior to the discontinuance of
“any service rendered by means of such facili-
ties.”

33). Thus, “[t]he initiation of interstate service pursuant to
the certificate dedicated all fields subject to that certificate.”
California v. Southland Royalty Co., No. 76-1114, decided
May 31, 1978, slip op. 5.

12

This Court has thus made it clear that under Sec-
tion 7 the Commission may “control both the terms on
which a service is provided to the interstate market
and the conditions on which it will cease.” California
v. Southland Royalty Co., supra, slip op. 4. This
authority is essential if the Commission is to dis-
charge its responsibility of assuring, in accordance
with the “fundamental purpose” of the Natural Gas
Act, “an adequate and reliable supply of gas at rea-
sonable prices” (id. at 3). The court below, in
holding that certificated service may be lawfully
abandoned without the Cormmission’s approval or even
a request for such approval, has disregarded what the
Act says.

In addition to the language of Section 7(b), basic
principles of administrative law preclude review-
ing courts from engaging in fact-finding or other
functions that are within “the domain which Congress
has set aside exclusively for the administrative
agency.” Securities & Exchange Commission v.
Chenery Corp., 332 U.S. 194, 196. Indeed, even after
reviewing an agency’s decision and determining that
additional consideration or evidence is necessary, the
court may not itself undertake the fact-finding func-
tion that Congress has assigned to the agency, or
prescribe the details of how the agency should under-
take that function. E.g., Federal Power Commission
v. Transcontinental Gas Pipe Line Corp., 423 U.S.
326, 333; Federal Power Commission v. Idaho Power
Co., 344 U.S. 17, 21. See Judge Holloway’s dissent,
App., infra, p. 17a.

13

2. The court of appeals’ conclusion that abandon-
ment had occurred “as a matter of law” rested on its
view that between 1966 and 1971 all parties, “includ-
ing the Commission,” had “acknowledged” that the
known reserves on the Butler B tract were depleted
(App., infra, p. 12a). The conclusion apparently
rested also on the court’s view that, on the basis of the
facts known at the time, the Commission would have
granted an abandonment application had one been
filed, so that “there was no need for the formality of
a Section 7(b) hearing” (ibid.). These conclusions
are incorrect. Moreover, they reflect a basic miscon-
ception of the administrative procedure established
by the Act and the regulatory purposes embodied in
that procedure.

First, the Commission never “acknowledged” that
the available reserves were depleted. The letters from
the Commission’s Secretary on which the court relied
—though they were not in the record—stated that if
further sales were not contemplated, “it will be neces-
sary for you to file an abandonment application * * *”
(A-97, A-100). This was an insistence that the
statutory procedure be complied with—so that the
Commission could determine whether the supply of
gas had been depleted or whether abandonment was
otherwise warranted. It was in no way a waiver of
that procedure, or a dismissal of the procedure as a
needless “formality.” *

*Even if the Commission’s Secretary had opined on the
depletion of reserves or the merits of abandonment, which he

14

Second, there is no warrant for the court’s apparent
assumption that the Commission would have granted
an abandonment application if one had been filed be-
tween 1966 and 1971. Subsequent drilling has dem-
onstrated that there was in fact an abundant reserve
of gas underlying the leasehold. To be sure, the one
relatively shallow well then producing on the lease-
hold ceased production in 1966. But this fact does not
establish that the Commission, after a Section 7(b)
hearing at which all interested parties would have
had an opportunity to explore the facts,* would have
concluded that the reserves under the leasehold were
sufficiently depleted to warrant abandonment.’ It is,
indeed, strange for the court to conclude with such
certainty that the Commission, if it had been asked

clearly did not, his opinion would not be binding on the Com-
mission. Under Section 7(b) only the decisions of the Com-
mission itself have legal effect. Thus, it has been held that
an interpretation by the Secretary of the Interstate Com-
merce Commission of the abandonment provisions of the In-
terstate Commerce Act could not bind that agency (Thompson
v. Texas Mexican Railway Co., 328 U.S. 134, 146); nor can
the views of a single commissioner do so (Minneapolis & St.
Louis R. Co. v. Peoria & Pekin Union Ry. Co., 270 U.S. 580,
585).

*It is noteworthy that the letters from the Commission’s
Secretary to the lessee-producers, stating that it would be
necessary for them to file an application for abandonment if
further sales were not contemplated, both required, as part of
the filing, “three copies of a statement from the buyer [i.e., the
pipeline] indicating its position with respect to the proposed
abandonment” (A-97, A-101).

* The court noted that at oral argument the Commission’s
counsel had acknowledged that circumstances such as those

15

to make the finding that the statute requires, would
have found as a fact what is now known to have
been false.”

3. Even if there were ground for assuming that
the Commission would have granted an abandon-
ment application if one had been filed between 1966
and 1971, that assumption would be legally irrelevant
under the regulatory scheme of the Act. This is so
because Section 7(b) mandates an administrative
procedure, and that procedure serves important regu-
latory interests.

By requiring that abandonment applications ac-
tually be filed with the Commission before abandon-
ment may be granted, Section 7(b) assures, first,

attending the 1966 termination of service to United “have
been acceptable evidence of depletion of gas for purposes of
abandonment orders under Section 7(b)” ( App., infra, p. 13a).
But since no application for abandonment was filed in 1966,
it is idle to speculate about what the factual evidence would
actually have been, about whether that evidence would have
been rebutted, or otherwise about what the Commission might
have done if an application had been filed. The controlling facts
are that the original certificated obligation was still in force
at the time it became clear that the gas supply underlying But-
ler B was not depleted.

*° The Commission has, in fact, recently refused to grant
abandonment authority to a producer who failed to show that
his leasehold had been explored to an extent sufficient to estab-
lish that no additional gas reserves could be expected to be
discovered through further exploratory efforts. Texaco, Inc., et
al., FERC Docket Nos. G-8820, et al., Order Granting Petition
for Reconsideration and Modifying Prior Order issued No-
vember 1, 1977, mimeo at 3.

16

that the Commission and all other interested parties
will have an opportunity, in a “due hearing” and in
the light of the statutory standard, to examine the
facts bearing on the alleged depletion of reserves.
Moreover, it assures that they will have that oppor-
tunity at the relevant time, not years after the fact.
The decision of the court of appeals, on the other
hand, to a large extent vests the determination of
whether dedicated service has been abandoned in the
certificate holders themselves, and empowers the
courts retroactively to convert de facto termination
of service into de jure abandonment.”

Moreover, the requirement of filing with the Com-
mission promotes certainty and regularity in the reg-
ulatory scheme. It makes it possible for producers,
pipelines, customers, and prospective assignees of
once-dedicated acreage to know whether or not a
given tract (and future production from it) remains
dedicated to interstate service. Under the court’s
ruling, in contrast, abandonment may be established
not only by an order of the Commission but by “the

™ The impact of the court’s holding would not be limited to
cases where the court would be as confident as it was here
that the Commission would have granted abandonment if
asked to. Indeed, to the extent that a producer seeking to
terminate interstate sales fears that the Commission would
not grant his abandonment application, to that extent he has
an incentive, under the court’s decision, to simply terminate
service, avoid facing the Commission, and trust that his fait
accompli will look inevitable to a court after some years have
' passed. Under the court’s decision producers have more to
gain than to lose by failing to comply with the statutory re-
quirement.

17

fact” of actual or assumed depletion of the dedicated
reserves, as that fact may be certified—or not certi-
fied—by a court years later. It would often be un-
clear whether particular facts met the test for the
doctrine of “de facto abandonment” that the court
has here created, and undesirable uncertainty would
result.

Finally, Section 7(b) ensures that abandonment
questions will be determined in the first instance by a
single tribunal applying uniform standards and its
own expertise. The court of appeals’ ruling—that
abandonment can be determined in the first instance
by any reviewing court on the basis of its own view
of the facts—invites inconsistent decisions and stand-
ards by a multiplicity of tribunals, contrary to the
basic purpose of the statute. Cf. United States v.
Radio Corporation of America, 358 U.S. 334, 346;
Thompson v. Texas Mexican Railway Co., 328 U.S.
134,

In short, Section 7(b) gives the Commission pri-
mary jurisdiction over the abandonment of certifi-
cated service, and that primary jurisdiction is es-
sential to the effective performance of its regulatory
responsibility. Thus it is irrelevant whether a court
believes that the Commission would or should have
exercised its authority in a certain way if it had
been given the opportunity to do so. The statute
requires that the Commission have the opportunity.”

2 Although the court of appeals (App., infra, p. 14a) relied
on language from Union Oil Co. of California v. Federal Power

18

4. Because the court of appeals’ decision is incon-
sistent with the plain language of Section 7(b), with
this Court’s decisions and with well-established prin-
ciples governing the proper relationship between re-
viewing courts and regulatory commissions (cf. Ver-
mont Yankee Nuclear Power Corp. v. Natural Re-
sources Defense Council, Inc., No. 76-419, decided
April 3, 1978, slip op. 22), we suggest that it would
be appropriate in this case for the Court summarily
to reverse the decision of the court of appeals. Fed-
eral Power Commission v. Transcontinental Gas Pipe
Line Corp., supra; Federal Power Commission v.
Idaho Power Co., supra.

Commission, 542 F.2d 1036 (C.A. 9), we are unable to see how
that case has any bearing here. That case involved review
of Commission rulemaking, and the court set aside a Com-
mission rule requiring producers to file reports of their gas
reserves on the ground that the rule was not supported by
substantial evidence. Although the court erroneously applied
the substantial evidence test to the review of notice and com-
ment rulemaking (see Federal Communications Commission
v. National Citizens Committee for Broadcasting, No. 76-1471,
decided June 12, 1978, slip op. 26), it did not hold or suggest
that a court could find abandonment in the first instance or
otherwise supplant the Commission’s fact-finding responsi-
bilities under the Act.

19
CONCLUSION

For the reasons stated, the petition for a writ of
certiorari should be granted and the judgment of the
court of appeals should be summarily reversed.

Respectfully submitted.

WADE H. MCCREE, Jr.,
Solicitor General.
ROBERT R. NORDHAUS,
General Counsel,

HOWARD E. SHAPIRO,
Solicitor,
Federal Energy Regulatory Commission.

AUGUST 1978.

la

APPENDIX

UNITED STATES COURT OF APPEALS
TENTH CIRCUIT

No. 75-1829

[Filed Feb. 9, 1978]

BILLY J. McComss, R. JAMES STILLINGS, d/b/a Gas-
TILL COMPANY, DAVID A. ONSGARD, BASIN PETRO-

LEUM CorpP., E.I. DUPONT DENEMOURS & COMPANY,
and BILL FORNEY, PETITIONERS

v8.

FEDERAL ENERGY REGULATORY COMMISSION,
formerly known as FEDERAL POWER COMMISSION,
RESPONDENT

UNITED GAS PIPE LINE COMPANY, INTERVENOR

OPINION ON REHEARING
ON PETITION FOR REVIEW OF ORDERS
OF THE FEDERAL POWER COMMISSION

Submitted: November 14, 1977

Before SETH, HOLLOWAY and BARRETT, Cir-
cuit Judges.

BARRETT, Circuit Judge.

2a

These proceedings come before us for rehearing
involving a review cf opinions rendered by the Fed-
eral Power Commission (FPC) finding that the pe-
titioners (McCombs Group) had violated two sec-
tions of the Natural Gas Act, 15 U.S.C. $§ 717f£(b)
and 717f(f) by failing to deliver natural gas to
United Gas Pipe Line Company (United) under a
producer’s certificate authorizing the sale and con-
tinued sale of gas in interstate commerce. The pivo-
tal dispute is whether the certificate was in force
and effect or whether it had been abandoned prior
to these proceedings. The FPC found that there had
been no abandonment. In McCombs v. Federal Power
Commission, 542 F.2d 1144 (10th Cir. 1976), au-
thored by Judge Seth, the orders of the Commission
involved here were set aside. However, this court
granted the Commission’s petition for rehearing.
Thereafter, on October 18, 1977, this court directed
and ordered that the opinion and judgment of Oc-
tober 18, 1976, supra, be withdrawn and vacated.
We will refer to and quote from the prior opinion
which has been vacated and withdrawn, however,
inasmuch as it is reported in 542 F.2d 1144, supra.

In 1953, the leaseholders-producers of the Butler
B Lease covering a 163 acre tract situate in Karnes
County, Texas, entered into a Gas Purchase Contract
with United whereby the producers agreed to sell
to United all natural gas produced then or thereafter
from the tract. The producers applied to the FPC
for producer certificates which were granted on De-

3a

cember 8, 1954, authorizing the sale of the natural
gas in interstate commerce.

The Butler B lease was assigned on various oc-
casions prior to June 19, 1963, when the FPC termi-
nated the 1954 certificates and issued a new cer-
tificate authorizing one H.A. Pagenkopf, then the
Butler B lease assignee, to continue the service. This
operator assigned the Butler B lease to one Louis
H. Haring (Haring), et al., effective March 1, 1966.
Haring appointed Bay Rock Corporation (Bay Rock)
to operate the properties. At that time one well only
had been completed on Butler B at a depth of 2,900
feet. It was not then producing. Haring-Bay Rock
attempted to re-establish production from this well
but those efforts failed for the most part and all
production from the well and the lease terminated on
May 28, 1966. —

On December 5, 1966, Haring and Bay Rock in-
formed United that production had ceased, that the
gas reserve was depleted from the well and that there
was no gas available for sale at that time. No de-
liveries of gas had been made to United since Sep-
tember 16, 1966. Following the notification that gas
from the well was depleted, United wrote Bay Rock
that it planned to remove its measuring station which
had been used to measure gas delivered to it from
the well on the Butler B lease but that if, at some
future date, further gas should become available from
the properties subject to the 1953 contract, United
should be informed so that it could arrange to re-
install the measuring equipment. United then re-

4a

moved the measuring equipment. Haring testified
that he then considered the 1953 contract terminated.

Haring thereafter assigned his working interest
rights, as successor lessee, to certain sands or reser-
voirs between depths of 8,700 feet to 9,700 feet. By
means of unitization, the McCombs Group (Group)
acquired the right to drill into these deeper depths
involving the Butler B lease and an adjoining
tract known as the Butler A lease, consisting of some
150 acres. Thereafter, the Group drilled and com-
pleted four producing gas wells from the deeper
depths. One other company, National Exploration
Company (National) which had previously acquired
the Haring working interests in the west 50 acres
of the Butler B lease covering depths of 4,115 feet
to 8,700 feet had completed two producing gas wells.
United contacted National in April of 1972 relative
to purchasing the gas from these two wells. National
then first became aware, in examining title documents
in anticipation of sale of the gas, of United’s 1953
purchase contract. National informed United that
the gas from its two wells may be subject to United’s
1953 Gas Purchase Contract. It was then that United
undertook a title search concerning the Butler B tract.
In May, 1973, United learned of its interest under
the 1953 contract.

Haring did not at any time inform the Group of
United’s 1953 Gas Purchase Contract. He considered
that contract terminated when production ceased
from the single producing well on May 26, 1966.

5a

When he transferred his working interest rights to
the deeper horizons in the Butler B lease to the Group,
Haring did not believe that United had any further
right or claim to gas which may be thereafter pro-
duced from the lease. The Group, before drilling,
relied upon a 1967 title opinion which did not reflect
any interest which United might have in the Butler
B tract. After the Group realized production from
its first well drilled on the Butler A tract in 1971,
it contacted United, together with other prospective
gas purchasers, relative to negotiations for sale of
the gas. United wrote the Group on November 19,
1971, inquiring with regard to how the Group had
acquired its interests in the leases. There is nothing
in the record which casts any light on the negotia-
tions. However, the Group did obtain a new title
opinion on December 7, 1971, which for the first time
disclosed to the Group United’s 1953 Purchase Con-
tract relating to the Butler B lease. Thereafter, in
February, 1972, the Group discovered commercial
gas from another well drilled on the Butler A tract.
A title opinion of May 31, 1972, did not disclose any
interest of United therein. In June of 1972, the
Group concluded successful negotiations whereby it
agreed to sell all of the gas it purchased from the
Butler A and B leases to E.I. duPont deNemours &
Company for industrial uses in intrastate commerce.

The Group successfully completed two more gas
wells on the unitized tracts. Thereafter, on June 6,
1973, United notified the Group that it claimed all

6a

of the gas being produced from these tracts under
and by virtue of its 1953 Gas Purchase Contract.
The Group thereupon initiated a declaratory judg-
ment action in the district court of Karnes County,
Texas, against United. The action was removed to
federal district court. On October 9, 1973, United
filed a complaint with the FPC. Our reported opinion
in McCombs v. Federal Power Commission, supra,
detailed those proceedings leading to the Commis-
sion’s adoption of the administrative law judge’s
conclusion that “the service authorized and the gas
supply dedicated [under the original certificate in-
volved here] include any and all gas produced from
the Butler B acreage “and that, consequently, the
intrastate sale to duPont was violative of the Natural
Gas Act. The administrative law judge further found
that however negligent United may have been in
asserting its rights under the 1953 Gas Purchase
Contract and however innocent the Group may have
been, that, notwithstanding, the Group should be
ordered to cease and desist from continuing sales to
duPont.

The basic matter for our determination on this
rehearing relates to the issue of abandonment. The
Commission held that there can be no abandonment
of a certificate authorizing interstate service absent
strict compliance with the requirements of petition,
notice, hearing and establishment of cause for aban-
donment as required under 15 U.S.C.A. § 717(b) and
§ 717f(b).

7a

Additional facts relating to the matter of abandon-
ment set forth in our reported opinion in McCombs
v. Federal Power Commission, supra, are appropriate
here:

To consider again some of the facts outlined
above as they relate to this issue, the one produc-
ing gas well on the Butler B lease ceased produc-
ing early in 1966. The lease was assigned by
Pagenkopf effective in March 1966, and the as-
signee, Haring, attempted to work over the well.
During this work, about 3,000 Mcf was produced,
but all production again ended in May 1966.
The operator for Haring advised the gas pur-
chaser, United, in December 1966 that the well
was depleted. United thereafter in 1966 re-
moved the equipment it had connected to the
well. Thus, the only producing gas well was
abandoned in the fall of 1966. The operator and
the purchaser recognized that there could be no
more gas delivered from the well. This was a
physical fact beyond the control of either of
them, and they recognized the realities of the
situation. The operator or owner had tried to
restore production but was unable to do so. The
sellers and buyers wished to continue the sale
and purchase of gas but could not do so. The
record does not show that any gas was ever
produced thereafter from this original well. The
witness Haring who was the owner who at-
tempted the workover, and who was a petroleum
geologist, testified:

“Certainly I was not aware of the gas
reserves at deeper levels when the gas pro-

8a

duction ceased in 1966, and, as far as I
know, neither United nor anyone else was
aware of its existence.”

In August 1968, the FPC wrote a letter to
Pagenkopf suggesting that he file an applica-
tion for abandonment. By an undated letter
the Commission made a similar suggestion to
the operator for Pagenkopf’s successor, Haring.
The FPC thus twice recognized that there had
been no production for an extended time, and
recognized that the abandonment should be for-
malized for its records. This must be acknowl-
edged as a recognition by the Commission that
there was in fact an abandonment, but there
was something needed for the record. The rec-
ords of the FPC as to this matter have ap-
parently been destroyed under its procedures;
consequently, it is not known what they may
have indicated as to abandonment. The Com-
mission in Opinion No. 740 in footnote 2 states
as to the original proceedings for certification:
“Our records indicate that Docket Nos. G-2997
and G-2998 were destroyed in 1964.” It is ap-
parent however from the testimony that no op-
erator or owner filed a formal application to
abandon.

542 F.2d, at p. 1148. |
In that same opinion we further observed and held:

Thus we have a situation where there was
an abandonment as a recognition of the indis-
putable physical facts beyond anyone’s control.
The Commission participated in this recognition
as there were at least two suggestions by the

9a

Commission that someone file something tu“tidy
up the records. These letters from the Commis-
sion must be taken, in view of the destruction
of the supporting records, to be an acknowledg-
ment that there was an abandonment. It is
difficult to see how a formal application, and a
decision by the Commission could have added
anything to these letters. In these circumstances,
we must hold that there was an abandonment
which was recognized by the Commission, and its
jurisdiction ended.

Thus we must hold as a matter of law that
there was an abandonment sufficient under Sec-
tion 7(b) of the Natural Gas Act. This being a
matter of law, we do not consider it within the
expertise of the Commission.

The “abandonment” we refer to is that con-
templated under Section 7(b) of the Act, as
above indicated. This is the only “abandonment”’
which is applicable to these circumstances. Sec-
tion 7(b) refers to “service rendered,” and the
ordering of further “service” would have been a
futile gesture. The seeking of an application by
the Commission was a recognition of the fact
that no more gas could be delivered from the
only gas well, and that the “service rendered”
had long since ceased contrary to everyone’s
wishes. This action by the Commission thus
could only have reference to Section 7(b).

542 F.2d, at pp. 1148, 1149.
We know of no opinion dealing with a factual situa-

tion similar to that presented here. In light of the
facts and circumstances contained and reflected in

10a

this record, we hold that the Commission erred in
concluding that the cessation of gas production from
the Butler B leasehold on May 28, 1966, did not con-
stitute an abandonment under Section 7(b) of the
Natural Gas Act.

I,

FPC contends that § 7(b) of the Natural Gas Act
[15 U.S.C.A. § 717f(b)] is explicit in requiring that
prior Commission approval must be obtained by any
natural gas company before it can abandon any “fa-
cilities,” or “service” involving the transportation
and resale of gas dedicated by certificate to sale in
interstate commerce. The full text of §7(b) is as
follows:

No natural-gas company shall abandon all or
any portion of its facilities subject to the juris-
diction of the Commission, or any service ren-
dered by means of such facilities, without the
permission and approval of the Commission first
had and obtained, after due hearing, and a find-
ing by the Commission that the available supply
of natural gas is depleted to the extent that the
continuance of service is unwarranted, or that
present or future public convenience or necessity
permit such abandonment.

To be sure, just as we previously recognized in
McCombs v. Federal Power Commission, supra, the
decisions are abundant and clear on the point that in
those cases where the supply of natural gas is not
depleted, the service must be continued via the fa-
cilities authorized. Obviously, there could be no find-

lla

ing by the Commission that the available supply of
natural gas has been depleted under such circum-
stances. United Gas Pipe Line v. Federal Power
Commission, 385 U.S. 83 (1966); Sunray Mid-Con-
tinent Oil Co. v. Federal Power Commission, 364
U.S. 137 (1960); Sun Oil Co. v. Federal Power
Commission, 364 U.S. 170 (1960); Atlantic Re
fining Co. v. Public Service Commission of New
York, 360 U.S. 378 (1959); Phillips Petroleum Co.
v. Federal Power Commission, 556 F.2d 466 (10th
Cir. 1977); Farmland Industries, Inc. v. Kansas-
Nebraska Natural Gas Co., 486 F.2d 315 (8th Cir.
1973) ; Valley Gas Co. v. Federal Power Commission,
487 F.2d 1182 (D.C, Cir. 1973); J. M. Huber Corp.
v. Federal Power Commission, 236 F.2d 550 (3rd
Cir. 1956); Panhandle Eastern Pipe Line Co. v.
Michigan Consolidated Oil Co., 177 F.2d 942 (6th
Cir. 1949). These decisions support the proposition
advanced by this court in Harper Oil Co. v. Federal
Power Commission, 284 F.2d 137 (10th Cir. 1960):

It would thus seem clear that once an inde-
pendent producer of gas has dedicated his pro-
duction to interstate commerce and thereby has
come under the jurisdiction of the Commission,
he remains thereunder so long as production con-
tinues. [Citing to Sun Oil Co. v. F.P.C., 364
U.S. 170.]

284 F.2d, at p. 139.

We hold that, as a matter of law, based upon the
facts and circumstances of the instant case, there was
an abandonment under Section 7(b) of the Natural

12a

Gas Act which does not render the issue within the
expertise of the Commission. Abandonment in the
context of the facts and circumstances of this case
cannot be equated with a voluntary “giving up” of
valuable rights and/or property in the usual sense of
relinquishment or surrender. Rather, the abandon-
ment here presents the very practical recognition that
there was no service to be rendered following the
depletion of gas on December 5, 1966, from the Butler
B leasehold. All parties recognized that for a period
of five years thereafter no service could be rendered
because the known gas reserves were depleted. These
facts were acknowledged by all of the parties, includ-
ing the Commission. Thus, the only known reserves
of natural gas for which applications for certification
had been made and authorized had been depleted.
With its depletion and the subsequent five year period
of non-service, there was no need for the formality
of a Section 7(b) hearing. This is so because, in our
view, all parties, including the Commission, con-
sidered that there were no gas reserves available
following cessation of production and the subsequent
efforts to restore production by workover methods in
order to service the public consumer, and, of course,
to profit from the discovery and sale.

At oral argument, the FPC contended that the
certificate originally granted authorized and dedi-
cated all gas without regard to depth or sand/reser-
voir limitations, to sale in interstate commerce and
that there cannot be an “abandonment in fact.” The
FPC further argued that its expertise is required as

13a

a prerequisite to any abandonment in that a formal
hearing may or might see the presentation of expert
evidence by the Commission that further reserves
of natural gas are likely to exist at other depths,
zones, reservoirs, etc., underlying the subject lease-
hold. Nevertheless, counsel for the Commission did
acknowledge that in factual instances such as those
presented here, proof of depletion and efforts to
resurrect production by workover attempts have been
acceptable evidence of depletion of gas for purposes
of abandonment orders under Section 7(b).

The Commission urges that Mitchell Energy Corp.
v. Federal Power Commission, 533 F.2d 258 (5th
Cir. 1976) controls. That opinion held that although
the 1949 contract between the gas producer and gas
purchaser which dedicated all gas from the seller’s
interest in leaseholds and units in a particular field
had expired in 1973, that nevertheless the successor
in interest to the original producer was bound to
dedicate the gas to interstate commerce because the
successor assumed, as a matter of law, the original
producer’s obligations. That simply is not the case
before us here. There had been no cessation of pro-
duction in Mitchell and certainly no depletion of
known reserves. Mitchell is not at variance with
those decisions we have heretofore cited for the
proposition that once natural gas is dedicated to
interstate commerce it cannot be withdrawn from
service in interstate movement without prior Section
7(b) FPC approval.

l4a

Our holding that strict compliance with the non-
abandonment language of 15 U.S.C.A. §717f(b),
supra, does not control under the facts and circum-
stances here is, we believe, buttressed by certain lan-
guage contained in Union Oil Co. of California v.
Federal Power Commission, 542 F.2d 1036 (9th
Cir. 1976). At issue there was the FPC require-
ment that all producers of natural gas dedicated to
interstate commerce annually submit a Form 40 con-
taining detailed information about their natural gas
reserves. The Court rejected the FPC contention that
the reporting burden on the producers was out-
weighed by the Commission’s need to have the reser-
voir data. The Court stated, in pertinent part:

There is no evidence from which the FPC
could conclude that the data required on Form
40 on a by reservoir basis were or could easily
become available. The only evidence is to the
contrary . . . Although there was no evidence
before the Commission to contradict the unani-
mous statements of the producers that natural
gas reserve data are not kept by them on a ‘by
reservoir’ basis and that such data would be
extraordinarily expensive to obtain, the Commis-
sion majority found that ‘[T]here is little doubt
that the information required . . . is possessed
by the respondents.’ . . . This assertion is simply
wrong . . . The Commission’s factual determina-
tion that the data required are available is not
supported by any evidence, much less by substan-
tial evidence.

542 F.2d, at p. 1042.

ld5a

We conclude that the abandonment of the service
in the instant case was accomplished, as a matter of
law, when all of the parties recognized that the then
known natural gas reserves were depleted in 1966
followed by failure to provide any service under the
certificates for a period of five years during which
time there was no evidence of other estimated gas
reserves recoverable from the subject leaseholds.

We direct that all orders included in the Commis-
sion’s Opinions Nos. 740, 740-A, and 740-B be set
aside. We remand with directions that other pend-
ing proceedings in the Commission’s Docket No.
CP74-94 based on such orders be terminated and that
the proceedings be dismissed.

IT IS SO ORDERED.

16a

HOLLOWAY, Circuit Judge, dissenting:

I respectfully dissent. While the equities favor the
McCombs Group, du Pont and National, usual con-
tract rules and equitable considerations do not con-
trol in this proceeding under the Natural Gas Act,
in my opinion. Instead, there are mandatory statu-
tory requirements on abandonment of service which
were imposed to protect the public interests recog-
nized by the Act, Sunray Oil Co. v. FPC, 364 U.S.
137, 143, and these provisions convince me that we
should affirm the basic holding of the Commission in
this case.’

The majority opinion reasons (p. 8) that: there
was an abandonment in fact after all production
ceased in 1966 on the Butler B lease from then
known productive formations, as recognized by the
Commission and the parties; that with this recog-
nized abandonment the Commission’s jurisdiction
ended; and that this abandonment was sufficient, as
a matter of law, under § 7(b) of the Natural Gas
Act, 15 U.S.C. § 717f(b), and this being a matter
of law, it was not within the expertise of the Com-
mission.

1The majority opinion does not reach t.... raised
such as the propriety of the ruling on dissolution of the units,
of the order requiring repayment to United of quantities of
gas sold to du Pont in the intrastate transaction, and the fail-
ure to sustain the motion challenging jurisdiction as to du
Pont. Thus it is unnecessary for me to address these issues.
I will consider only the holding of the majority on the central
abandonment issue.

17a

To me these conclusions are directly contrary to
the plain terms of §7(b). The statute could hardly
be clearer in saying that:

No natural-gas company shall abandon all or
any portion of its facilities subject to the juris-
diction of the Commission, or any service ren-
dered by means of such facilities, without the
permission and approval of the Commission first
had and obtained, after due hearing, and a find-
ing 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 neces-
sity permit such abandonment. (Emphasis add-
ed).

It is the Commission that must make the required
findings and give approval before abandonment is
legally effected, and not private parties by their
agreement on the facts as to depletion and their
consent to discontinuation of service. Nor does a de-
termination by another tribunal that abandonment
has occurred, as a matter of law, satisfy §7(b). As

the Supreme Court pointed out in Sunray, supra, 364
U.S. at 158 n. 25: 3

“It might be observed that in these cases the
Commission issued certificates without time limi-
tations. Thus if the companies, failing to find
new sources of gas supply, desired to abandon
service because of a depletion of supply, they
would have to make proof thereof before the
Commission, under §7(b). The Commission
thus, even though there may be physical prob-

18a

lems beyond its control, kept legal control over
the continuation of service by the applicants.
(Emphasis added).
See also Atlantic Refining Co. v. Public Service Com-
mission, 360 U.S. 378, 389; Phillips Petroleum Co. v.
FPC, 556 F.2d 466, 469 (10th Cir.) ; Mitchell Energy
Corp. v. FPC, 533 F.2d 258, 261 (5th Cir.).

The majority lays stress on the fact that produc-
tion from the known reserves underlying the Butler
B lease was depleted in 1966, that there was testi-
mony that neither United, the producer, nor anyone.
else was then aware of deeper reserves, and that as
a practical matter there was no service that could
be rendered thereafter from that lease. And, as the
majority says, counsel for the Commission conceded
that proof of such depletion and of failure of efforts
to re-establish production has been accepted by the
Commission in §7(b) proceedings as a basis for
permission for abandonment. Further the Commis-
sion did twice write suggesting that an application
for abandonment be filed, which action the majority
interprets as Commission recognition that there was
in fact an abandonment.

However, there were other reserves as is now
known, and United did state that while it would re-
move its metering equipment in 1966, it would rein-
stall such equipment whenever further gas might be
delivered under the contract. (J.A. 137). In view of
these circumstances it may not be quite certain what
would have happened if application for a complete
abandonment had been made, notice thereof had been

OS

198 ©

given by publication,’ and a final abandonment ap-
proval had been considered by the Commission. But,
in any event, permission for abandonment of all
service was for the Commission and we cannot make
the findings and give the approval which Congress
deemed it necessary for the Commission to make.
Sunray, supra, 364 U.S. at 142.

The Commission noted in its Opinion 740 that the
original 1953 contract covered merchantable natural
gas produced from all wells now or hereafter drilled
during the 10-year term of that contract (later ex-
tended to 1981) on specified leaseholds including the
Butler B tract, and further noted that there was no
mention of any particular depths in that contract.
(J.A. 160-61). Further, the McCombs Group now
does not contest the fact of delivery of gas from the
Butler B lease to United.* Such delivery constituted

* The Commission’s regulations required notice by publica-
tion and mailing to States affected by the application, see 18
CFR § 157.9 (January 1, 1969), and permitted petitions for
interventions by persons desiring to participate. See 18 CFR
§ 157.10 (January 1, 1969). Pipeline purchasers have been
permitted to intervene in such proceedings. See, e.g., Trans-
continental Gas Pipe Line Corp. v. FPC, 488 F.2d 1325, 1326-
27 (D.C. Cir.), cert. denied sub nom. Natural Gas Pipeline
Co. v. Transcontinental Pipe Line Corp., 417 U.S. 921.

*The McCombs Group says that the statement by United
indicating that the record shows that gas was received by
United from the Butler B lease should be read with some
caution. The McCombs Group points to the absence of evidence
in the original record that gas was actually delivered from the
Butler B lease to United, but recognizes that United later
presented some evidence on the point in subsequent proceed-
ings before the Commission. The McCombs Group states that

20a

both a sale under the contract and commencement of
a “service” obligation in interstate commerce under
the Act. Phillips Petroleum Co. v. FPC, supra, 556
F.2d at 469. As this delivery was made under a
contractural dedication without limits as to depths,
there was a dedication to interstate commerce of the
underlying reserves in question, and the effort to re-
sell the same gas amounted to an attempted abandon-
ment, which could not be done without first obtaining
approval of the Commission under § 7(b). Ibid.

For these reasons I would sustain the Commission’s
conclusion that the commencement of service com-
pleted dedication to United in interstate commerce
and thereby invoked the protection of §7(b). (J.A.
163). And concluding that procedures made manda-
tory by the Act have not been complied with, I must
dissent.

since it is not seeking merely a remand, it has not raised the
delivery of Butler B gas to United as an issue in this review
proceeding, except as evidence of the Commission’s partiality
toward United. (Reply Brief of McCombs Group, 2).

wv U. S. GOVERNMENT PRINTING OFFICE; 1978 271102 92

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1525%3A1. Public record. Not legal advice.
