# Opposition Brief — Transwestern Pipeline Co. v. Federal Energy Regulatory Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1986
- **Citation:** 476 U.S. 1114

## Text

Supreme Court, U.S.
FILED
MAR 27 1986
Bs 2 \ a JOSEPH F. SPANIOL, JR.
Va a 4 y, CLERK
Nos. 85-1219, 85-1236, 85-1237, 85-1250 and 85-1252.
In the Supreme Court
OF THE
United States
OCTOBER TERM, 1985
TRANSWESTERN PIPELINE COMPANY, et al.,
Petitioners,
vs.
FEDERAL ENERGY REGULATORY COMMISSION, et al.,
Respondents.

On Petitions for a Writ of Certiorari to
the United States Court of Appea!s
for the District of Columbia Circuit

BRIEF OF RESPONDENT
SOUTHERN CALIFORNIA GAS COMPANY
IN OPPOSITION TO PETITIONERS

THOMAS D. CLARKE

E. R. ISLAND

MICHAEL D. GAayDA*
810 South Flower Street
Los Angeles, CA 90017
(213) 689-4255

Attorneys for Southern
California Gas Company

March 28, 1986 * Counsel of Record

Bowne of Los Angeles, Inc., Law Printers. (213) 742-6600.

i

QUESTIONS PRESENTED

1. Whether the Federal Energy Regulatory Commis-
sion (Commission) has the authority under Section 5 of
the Natural Gas Act to modify tariff provisions when the
Commission finds that those tariff provisions have anti-
competitive effects.

2. Whether the Commission’s notice and comment pro-
cedures in a formal rulemaking proceeding satisfy the
requirements of the Natural Gas Act.

3. Whether the Commission’s finding that minimum
commodity bill and minimum take provisions in tariffs
have anti-competitive effects was supported by substan-
tial evidence.

il

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW .... i

TABLE OF AUTHORITIES. ....ccccccccccsess ili
LIST OF PARENT, SUBSIDIARIES AND

Pi git hue) Peete ee ee v

STATEMENT OF THE CASE......ccccesccess 2
REASONS WHY THE WRIT SHOULD BE

SORNUERIEED . vac occuceeeehcdee sues ere senenes 4

I.

The Court’s Decision Below Follows An Unbro-
ken Line Of Authority In Finding That The
Commission Acted Within Its Authority To
Modify Tariffs And Contracts Under Section 5
Of The Natural Gas Act... ....cccccccccces 4

II.

The Court’s Decision Below Does Not Raise
Certain Of The Questions Presented In The
re err Sr 6

III.

As The Court Below Found, The Commission
Utilized The Proper Procedures And There-
fore There Is No Reason For This Court To
Grant The Writ For Certiorari ............-. 8

IV.

The Court’s Decision Below Gave Full Consider-
ation To The Issues And Determined That The
Commission’s Decision Was Based Upon Sub-
stantial Tividdemee ... ccc cc cccsconssascenses 9

CONCLUBION ...... 0s cccccccnaccsensenessseans 11

ill

TABLE OF AUTHORITIES

Court Cases
Page
American Smelting and Refining Co. v. FPC, 494
F.2d 925 (D.C. Cir. 1974), cert. denied, 419 U.S.
EE st en 7
Atlantic Refining Co. v. Public Service Commission
of New York, 360 U.S. 378 (1950) ............ 7
Colorado Interstate Gas Co. v. FPC, 142 F.2d 943
(10th Cir. 1944), aff’d., 324 U.S. 581 (1945),
reh’g denied, 325 U.S. 891 (1945) ............ 10
FPC v. Transcontinental Gas Pipeline Corp., 423
a 8
Pacific Gas Transmission Co. v. FPC, 536 F.2d 393
(D.C. Cir. 1976), cert. denied, 429 U.S. 999
ee Ss A eer eee 7
Pacific Lighting Service Co. v. FPC, 518 F.2d 718
EE 4
Permian Basin Area Rate Cases, 390 U.S. 747
(1968), reh’g denied, 392 U.S. 917 (1969) ..... 5, 6, 10
Phillips Petroleum Co. v. FPC, 475 F.2d 842 (10th
Cir. 1973), cert. denied, 414 U.S. 1146 (1974) 8
Pubiic Service Commission of the State of New York
v. FERC, 642 F.2d 1335 (D.C. Cir. 1980), cert.
dented, 454 U.S. 879 (1981) ................. 9
SEC v. Chenery Corp., 332 U.S. 194 (1974) ..... 8
Umited States v. Florida East Coast Ry. Co., 410
ek eau wes asenaes 8,9

Vermont Yankee Nuclear Power Corp. v. NRDC, 435
EE TS 9

iv

TABLE OF AUTHORITIES

A

Commission Cases
El Paso Natural Gas Co., 26 FERC § 61,423 (1984) +

El Paso Natural Gas Co., 34 FERC § 61,171 (1986) 4
Transwestern Pipeline Co., 26 FERC { 61,424
(| rrr rrr rrr errs re 4
Transwestern Pipeline Co., 34 FERC § 61,201
TRBED ccc ccinccnswstesaveneicineasescsers 4
Statute

Natural Gas Act, 15 U.S.C. §§ 717-717w (1982) . . passim

Vv

LIST OF PARENT, SUBSIDIARIES AND
AFFILIATES

Southern California Gas Company (SoCalGas) is a
wholly-owned subsidiary of Pacifie Lighting Corporation.
The following are the parent, subsidiaries and affiliates of
SoCalGas:

Ankirk

Blackfield Hawaii Corporation
California LNG Company

Carmel Mountain Properties

Central Plants, Ine

Dual Fuel Systems, Inc.

Dunn Properties Corporation

Dunn Properties of Georgia, Inc.
Dunn Properties of Texas, Inc.
Fredericks Sales, Inc.

Fredricks Development Corporation
Fuel Industries New Zealand Limited
Hawaii Management Corporation
Mayflower Realty Associates, Inc.
Modular Products, Ine.

Nellie Gail Ranch Recreation Company
Pacific Alaska LNG Company

Pacific Center Downtown, Inc.

Pacific Energy Resources Incorporated
Pacific Gas Gathering Company
Pacific Geothermal Company

Pacific Hydropower Company

Pacific Indonesia LNG Company
Pacific Interstate Company

Pacific Interstate Mojave Company
Pacific Interstate Offshore Company
Pacific Interstate Transmission Company

Pacific Interstate Transmission Company
(Arctic)

vi

Pacifie Lighting Bio-Energy Company

Pacifie Lighting Capital Company N.V.

Pacific Lighting Commercial Loans, Inc.

Pacifie Lighting Corporation

Pacifie Lighting Energy Systems

Pacifie Lighting Exploration Company

Pacific Lighting Gas Development (Canada)
Ltd.

Pacifie Lighting Gas Development Company

Pacifie Lighting International Finance N.V.

Pacifie Lighting Land Company

Pacific Lighting Leasing Company

Pacific Lighting Marine Company

Pacific Lighting Oil and Gas Company

Pacific Lighting Overseas Finance N.V.

Pacific Lighting Properties, Inc.

Pacific Lighting Real Estate Group

Pacific Lighting Securities Company

Pacific Offshore Pipeline Company

Pacifie Oroville Power, Ine.

Pacific Synthetic Fuel Company

Presley ASW Finance Co., Inc.

Presley Chicago, Inc.

Presley Company East, Inc.

Presley Company of New Mexico

Presley Development Company of Arizona

Presley Financial Corporation

Presley-Home Mace Finance Co., Ine.

Presley of Northern California

Presley of San Diego

Presley of Southern California

Sabagli N.V.

S. M. Dunn, Ine.

SMA Development Corporation

Southern California Conservation Financing
Company

Vii

Southern California Gas International Finance
N.V.

Southern California Solar Financing Company

Terra Resources, Ine.

The Presley Companies

Western LNG Terminal Company

Western Power, Ine.

Nos. 85-1219, 85-1236, 85-1237, 85-1250 and 85-1252

In the Supreme Court

OF THE
United States

OCTOBER TERM, i985

TRANSWESTERN PIPELINE COMPANY, et al.,
Petitioners,
vs.

FEDERAL ENERGY REGULATORY COMMISSION, et al.,
Respondents.

On Petitions for a Writ of Certiorari
to the United States Court of Appeals
for the District of Columbia Circuit

BRIEF OF RESPONDENT
SOUTHERN CALIFORNIA GAS COMPANY
IN OPPOSITION TO PETITIONERS

Respondent, Southern California Gas Company (So-
CalGas),' respectfully requests that this Court deny the
Petitions for Writ of Certiorari, seeking review of the
District of Columbia Cireuit Court of Appeals’ opinion in
this case. App. at 1.” This case involves no conflict be-
tween the Circuits, raises no Constitutional question, and

‘SoCalGas and its affiliate, Pacifie Lighting Gas Supply Company
(PLGS), were parties below. Recently, SoCalGas and PLGS merged
and are operating under the name of SoCalGas.

*The appendix references are to the appendix filed with this Court
by Transwestern Pipeline Company.

2

involves no significant issue concerniug the administra-
tion of the Natural Gas Act. 15 U.S.C. §§ 717-717w
(1982).

STATEMENT OF THE CASE

This case involves the Federal Energy Regulatory Com-
mission’s (Commission) promulgation of a rule which
eliminates non-incurred variable gas costs from the tariffs
of interstate pipelines. Under the rule, the pipelines
continue to collect, unchanged, the fixed costs in their
tariffs. These fixed costs include the non-gas costs of a
pipeline such as wages, operation and maintenance ex-
penses, depreciation and return on rate base. The pipe-
lines also continue to collect the gas costs which they
ineur for the gas they sell. However, pipelines can no
longer bill and collect from their customers for gas costs
which they do not ineur.

The Commission has applied this rule to both minimum
commodity bills and minimum take provisions. Minimum
commodity bills require customers of pipelines to pay for
minimum quantities of gas whether or not it is taken.
Minimum take provisions are even more restrictive, re-
quiring customers of pipelines to actually take a minimum
quantity of gas whether or not they want it. Both of these
minimum bill provisions severely restricted a customer’s
discretion in making purchases.

Six natural gas pipeline companies have filed Petitions
with this Court to seek review of a unanimous decision of
the Court of Appeals for the District of Columbia Circuit
which affirmed the Commission’s Orders in all respects,
except one which is not a subject of these Petitions.”

*Petitions have been filed by Transwestern Pipeline Company
(Transwestern) (No. 85-1219); ANR Pipeline Company (ANR) (No.
§5-1236); Texas Easter: Transmission Corporation (Texas Eastern)

3

Petitions for Rehearing were denied by the Court of
Appeals, with no member requesting the taking of a vote
on the Petitions. App. at 69, 70.

SoCalGas is a natural gas distribution company which
provides natural gas service in southern and central
California. SoCalGas is the largest natural gas distribu-
tion company in the country having more than 4.0 million
customers and providing natural gas service to a popula-
tion of approximately 13.0 million. SoCalGas purchases
natural gas from a number of interstate pipeline compa-
nies including Transwestern Pipeline Company (Trans-
western), one of the Petitioners before this Court.

Under the provisions in Transwestern’s tariff, SoCal-
Gas had the annual obligation to take or pay for 91
percent of a contract quantity of 750,000 Mef of gas per
day. Transwestern’s tariff provisions also required that
SoCalGas actually take from Transwestern, regardless of
its need and regardless of the cost, on a daily basis, 80
percent of the contract quantity of 750,000 Mef or 600,000
Mef of gas. If SoCalGas did not need this volume of gas
on a daily basis it was still required to take such volumes.

The Commission’s Order Nos. 380, 380-A, 380-B, 380-C
and 380-D* relieved SoCalGas of these severe tariff re-
strictions and allowed it to purchase gas based upon
relative cost rather than these tariff provisions.”

(No. 85-1237); Trunkline Gas Company and Panhandle Eastern
Pipeline Company (No. 85-1250); and Arkla Energy Resources
(Arkla) (No. 85-1282).

“These orders are referred to in this brief as “Order No. 380.”

*It should be noted that other provisions in Transwestern’s tariff
relieve Transwestern of the obligation to provide the contracted
quantity of gas during periods when gas is unavailable. These tariff
provisions which were placed in Transwestern’s tariff long after
Transwestern’s contract was signed with SoCalGas were approved by

4

The Commission’s intention of promoting competition
among interstate pipelines in issuing Order No. 380 has
had its desired effect. For example, Transwestern which
at the time of the issuance of Order No. 380 was a higher
priced supplier to SoCalGas, has, in response to competi-
tion generated by Order No. 380, become the low price
leader of the suppliers to southern California.® As the
result of discretionary actions which Transwestern has
taken, it has significantly reduced its commodity rate to
SoCalGas. The ratepayers of SoCalGas are the ultimate
beneficiaries of this reduction.

REASONS WHY THE WRIT SHOULD BE DENIED
I

The Court’s Decision Below Follows An Unbroken Line
Of Authority In Finding That The Commission Acted
Within Its Authority To Modify Tariffs And Contracts
Under Section 5 Of The Natural Gas Act.

Petitioners here launch what the Court below termed a
“barrage of attacks upon the Commission’s authority to
issue Order No. 380.” App. at 25. The Commission’s
authority to act under Section 5 of the Natural Gas Act,
15 U.S.C. § 717d (1982), is so clear, and the arguments by

the Commission and upheld by the Ninth Circuit Court of Appeals in
Pacific Lighting Service Co. v. FPC, 518 F.2d 718 (9th Cir. 1975).

°Prior to the effective date of Order No. 380, Transwestern’s
commodity rate of $3.85/MMBtu was significantly higher than the
$3.57/MMBtu commodity rate of El Paso Natural Gas Company (El
Paso), which is Transwestern’s major competitor in the southern
California market. Compare Transwestern Pipeline Co., 26 FERC
€ 61,424 (1984) with El Paso Natural Gas Co., 26 FERC § 61,423
(1984). Currently Transwestern’s commodity rate is $2.87/MMBtu
eompared to El Paso’s current commodity rate of $2.98/MMBtu.
Compare Transwestern Pipeline Co., 34 FERC § 61,201 (1986) with El
Paso Natural Gas Co., 34 FERC § 61,171 (1986).

5)

the Petitioners are so tenuous, that the Court below found
that the Petitioners’ claims concerning the Commission’s
authority to act were either “frivolous” or “completely
without merit.’ App. at 25.

Simply put, an argument cannot credibly be made that
the Commission exceeded its authority in issuing Order
No. 380. Section 5 of the Natural Gas Act empowers the
Commission upon finding “that any rate, charge, or classi-
fication... or that any rule, regulation, practice, or con-
tract affecting such rate, charge, or classification is
unjust, unreasonable, unduly discriminatory or preferen-
tial” to determine the just and reasonable rate or contract
and to fix that rate or contract by order. 15 U.S.C.
§ 717d(a). The Court below, in citing to this Court’s
decision in Permian Basin Area Rate Cases, 390 U.S. 747,
783-84 (1968), stated, “At any rate, Section 5 gives the
Commission authority to alter terms of any existing
contract found to be ‘unjust’ or ‘unreasonable’’’. App. at
25-26.

In fact, Petitioners acknowledge that the Commission
is authorized under Section 5 of the Act to modify
contracts and tariffs. See Transwestern’s Petition at 9,
Texas Eastern’s Petition at 11. Petitioners cite no case
which challenges the Commission’s authority to modify
tariffs or contracts. Instead, Petitioners argue that the
Commission exceeded its authority because it did not
fully consider the role of contracts under the Natural Gas
Act or that the provisions of Order No. 380 destroy the
mutuality of contracts. In essence, these arguments by
Petitioners, while termed to be challenges to the statutory
authority of the Commission to issue its Order, are in
reality merely disagreements with the Commission’s
weighing of the various factors which were considered in
issuing its decision. The role of this Court is not to weigh
the individual factors in evidence but to defer to the

6

expertise of the administrative agency in considering the
evidence before it. Permian Basin, 390 U.S. 747 (1968).

I

The Court’s Decision Below Does Not Raise Certain Of
The Questions Presented In The Petitions.

Petitioners have raised for review certain issues which
were not the holding in the decision of the Court below.
First, Petitioners question if the Commission is author-
ized to abrogate a settlement agreement which was previ-
ously approved by the Commission. Second, Petitioners
question if the Commission is authorized to modify or
revoke a certificate of public convenience and necessity
issued under Section 7 of the Natural Gas Act, 15 U.S.C.
§ 717f (1982). The District of Columbia Cireuit Court of
Appeals either did not decide these issues or did not base
its decision upon such finding. Moreover the facts below
indicate there was no violation of a settlement or revoca-
tion of a certificate.

A Petitioner, ANR, contends that the Commission has
exceeded its statutory authority by abrogating a settle-
ment agreement to which the Commission was a party.
The District of Columbia Cireuit however did not decide .
this issue. The Court below stated, “We find that Order
No. 380 does not violate any term of either Transco’s or
ANR’s settlement. We therefore do not reach the issue of
whether the Commission has the statutory authority to
abrogate settlement agreements to which it is a party
through a generic section 5 rmnlemaking.” App. at 26.

Moreover, the record in this proceeding does not permit
the formulation of a resolution of this question presented
by the Petitioner. The underlying settlement merely
provides that the minimum bill issue shall be set for
hearing in Docket No. RP82-80. (ANR attachment I at

7

B-1). In discussing this settlement the Court below
found that the Commission was not restricted in dealing
with ANR’s minimum bill in an ongoing rulemaking. The
Court stated, “As it is written, however, the agreement
neither binds the Commission to resolve the issues in
ANR’s ratemaking proceeding nor exempts ANR’s mini-
mum bill provisions from the general rulemaking in pro-
gress. We conclude, therefore, that by issuing Order No.
380 the Commission did not violate the terms of the
settlement agreement.” App. at 29.

Petitioners, Transwestern and Arkla, claim that the
Commission was without authority to revoke or modify
certificates of public convenience and necessity granted
under Section 7 of the Natural Gas Act. 15 U.S.C. § 717f.
Whiie the Court found that the Commission did have the
authority to modify certificates, its holding was not based
upon this finding. The Court below, citing this Court’s
decision in Atlantic Refining Co. v. Public Service Commis-
sion of New York, 360 U.S. 378, 389 (1959), found that
Section 7 of the Natural Gas Act does not guarantee a
recipient of a certificate that the initial terms of the
certificate will never be changed. The Commission has
the authority under Section 5 of the Natural Gas Act, 15
U.S.C. § 717d, to alter and amend terms and conditions of
certificated service. Pacific Gas Transmission Co. v. FPC,
536 F.2d 393 (D.C. Cir. 1976), cert. denied, 429 U.S. 999
(1976). In faet, once the Commission determines a term
or condition is unjust and unreasonable it must remedy
the situation. American Smelting and Refining Co. v. FPC,
494 F.2d 925 (D.C. Cir. 1974), cert. denied, 419 U.S. 882
(1974); Pacific Gas Transmission Co. v. FPC, 536 F.2d 393
(D.C. Cir. 1976).

The decision of the Court below would not change even
if its determination is incorrect since the Court found
that the Commission’s decision did not revoke or modify

8

the Section 7 certificates of Petitioners. The Court
stated:

Even assuming arguendo that the Commission has no
authority to amend or revoke certificated service in a
Section 5 proceeding, the elimination of minimum
bills has no effect on the pipelines authorized service.
The Order merely addresses the rates the pipeline
may charge its customers and therefore was properly
issued pursuant to Section 5.

App. at p. 25, n.9 (emphasis in original). Thus, the issues
which Petitioners have asked this Court to review are
simply not material to the decision of the Court below.

Ill

As The Court Below Found, The Commission Utilized
The Proper Procedures And Therefore There Is No
Reason For This Court To Grant The Writ For
Certiorari.

Petitioners argue that the rulemaking procedures used
by the Commission in this case were insufficient to satisfy
the hearing requirement of Section 5 of the Natural Gas
Act. The statutory requirement for a hearing can be
satisfied through either a rulemaking proceeding or an
adjudicatory proceeding. SEC v. Chenery Corp., 332 U.S.
194 (1947); Phillips Petroleum Co. v. FPC, 475 F.2d 842
(10th Cir. 1973), cert. denied, 414 U.S. 1146 (1974). In
this case, the Commission within its discretion, utilized
its rulemaking procedures. The Court below found that
the Commission’s decision to proceed through rulemak-
ing, “clearly passes muster under our deferential stan-
dard of review.” App. at 51. See, FPC v. Transcontinental
Gas Pipeline Corp., 423 U.S. 326, 333 (1976).

The use of notice and comment procedures by the
Commission was an appropriate method to acquire infor-
mation on an industry-wide problem. See, United States v.

, ale

9

Florida East Coast Ry. Co., 410 U.S. 224, 245 (1973). The
fact that 95 parties submitted over 1,000 pages of com-
ments in response to the Commission’s first notice of
proposed rulemaking indicates that the Commission’s
proposed rulemaking was not a matter that uniquely or
exceptionally affected only a few parties. A review of the
two series of comments and reply comments filed with the
Commission reveals that all sectors of the natural gas
industry took the opportunity to make their views known
and address the arguments raised by other parties.

The repeated notices and comments which characterize
this proceeding demonstrate the thorough procedures
used by the Commission. As this Court has stated, and as
noted by the Court below, App. at 54, nothing permits
“the court to review and overturn the rulemaking pro-
ceeding on the basis of the procedural devices employed
(or not employed) by the Commission so long as the
Commission employed at least the statutory minima.”
Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S.
519, 548 (1978). There is no doubt that the Commission
has done so here.

IV

The Court’s Decision Below Gave Full Consideration To
The Issues And Determined That The Commission’s
Decision Was Based Upon Substantial Evidence.

Petitioners raise a wide-range of issues which, in es-
sence, challenge the reasonableness of the Commission’s
Order. Pursuant to Section 19(b) of the Natural Gas
Act, 15 U.S.C. § 717r(b), the standard which is to be used
by a Court in reviewing the Commission’s factual findings
is that of substantial evidence. Public Service Commission
of the State of NewYork v. FERC, 642 F.2d 1335 (D.C. Cir.
1980), cert. denied, 454 U.S. 879 (1981). The factual
findings of the Commission are to be considered conclu-

10

sive if supported by substantial evidence. In this regard
the Court is not to substitute its view of the facts for that
of the Commission. Colorado Interstate Gas Co. v. FPC,
142 F.2d 943 (10th Cir. 1944), aff’d., 324 U.S. 581 (1945),
reh’g denied, 325 U.S. 891 (1945).

The Commission’s examination of all aspects of this
rule ean only be described as overwhelming and conclu-
sive. In fact, the reviewing Court below has so found.
The Court’s conclusion is illustrative in describing the
breadth of the Commission’s review where it states,

In sum, we find that each of the order’s essential
elements is supported by substantial evidence. Since
we have assured ourself “that the Commission has
given reasoned considerstien to each of the pertinent
factors’, it is not our province “to supplant the
Commission’s balance of these interests with one
more merely to [our] liking’, Permian Basin, 390
U.S. at 792.

App. at 42.

Thus, Petitioners’ claims simply do not merit review by
this Court.

11

CONCLUSION

For these reasons, the Petitions for a Writ of Certiorari
should be denied.

Respectfully submitted,

THOMAS D. CLARKE
K. R. ISLAND
MICHAEL D. GAYDA
810 South Flower Street
Los Angeles, California 90017
Attorneys for Respondent
Southern California Gas
Company
March 28, 1986

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_1366%3A06. Public record. Not legal advice.