Petition for A Writ of Certiorari — Prado Oil & Gas Co. v. Federal Power Commission

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’ Cb j

: ae . Office-Supreme Court, U.S.

BicGnKARY ° 2) po FILED -

‘APR 10 1964

. i

ei , Is Tue ~~ | LORIN F. DAVIS, CLERK

. ° Supreme Court of the United States

— Term, 1963

Sy 987

Prapo Ou. anp Gas Company, / :

\- . Petitioner, .

: - Vv.

FeperaL Power CoMMIssIoN,

Pvusuic Service CoMMIssION OF |

Tue State or New York,

Unitev Gas Improvement Compayy,

Long Istaxp LicHtixG Company

Respoude sek:

PETITION FOR A WRIT OF CERTIORARI TO THE .

UNITED STATES COURT-OF-APPEALS FOR THE

DISTRICT OF-COLUMBIA_ . +

” se . * i ¥ ° o

° ; iivae T. SEARLS,

Pe Attorney for Petitioner

Of Counsel: ®

J. Evans ATTWELL aa

W. H. DrvsuHe., Jr.

_ Vrxsox, ELkixs, WeEmMs & ‘SE ARLS

First City National Bank Building.

Honston, ‘Texas

April 7, 1964. :

on . . «* A hs +. -

PRINTED IN U.S A -~ BY DELARUE TEXAS : 5 : Jf

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é SS

» de : ;

. ,

: INDEX

ae PaGr.

| | Opinions belBW ......csecsscsesceseeiceeseseeen ee cade ee 2

a | ene AR SiN aa eeane* as mee

hes Questions presented ARICUES Stiaicsir incense ee ane oe

‘Statutes involved eee a saihGdetsnadsbaataeedbiaee Lene! oe

+ Statement .......... islamic ietlnininnennprstensentotinasenssiaianioal A Te 2

- Reasons for granting the writ | hiss jiasoctaapahenssigiil Sins ei

P Conclusion ............. eamclicammnatinimetenn seseseneessenseaseessnnsnneseensenes ORO 13 ©

Appendix A — Statutes HRY he Les Ho BO AE AGE ARE 15

é -B — Opinions and judgment Kelow Pa LED 1s

| C— Conflicting Opinion 5.2... oesccssssccsssssnseeen 35

Co . "

a | ° CITATIONS.

, | j Cases

Amerada Petraleum Corp., et al, Opinion No 422, jase. fs

a ‘Mareh 28, 1964. ...... WA sonse’, simonsni taianiatnnianent ei cscsephimereinas ao

Atlantic Ref. Co. ¥--Publice Serv. Comm’ n, 360 U.S. 378

Seem emma (19: 39) ii Raithhadatedavemtubeaietsenbsatidiathiiesatshanak oni deniaakoniaadesimbeadiilesees iene

“- _ FPC vy. Sine Natural Gas Co., 320 U.S. 591 (1944)............

° FPC y. Hunt, 223 US. ...... (No. 273, decided Mareh 30, 196-4).

. ‘Moutane Babess Utilities Ce. v. North western Public Service

im ' Co., 341 U.S. 246 (1951) .......ccccceee trossceccooecseseseecessesnes en

: , PhillipsPetroleum Company, 24 F PuC.. 537, 042 .( 1960),

: aff'd sub nom. Wisconsin v. FPC, 373 U.S. 294 (1963) gasses”

- Placid Oil Co., et al; , Opinion No. 398, issued ly 17, 1963,

30 FPC ..

eee Berw. Dalea’ nm V. “PPC, 287 F. 2d 146 4D.C. Cir.

1960), cert. denied 365 U.S. 880 (1961) a...

, unray Mid-Continent Oi Company v. Federal Power Com--

misston, 270 F. 2d 404 (10th Cir.. 1959) oo. pecans “

’ -

oF |

: ii

ya ? : a Page

Texaco Seaboard Inc; et ul, Opinion No. 383, issued Mar. 27, Mi

1963, 29 PPO FOB nnn... .neicseecensteccsescesecncnssnsnsnconegonsnsnconsornesens aa’.

TAME. v. ‘United States, 359 U.S. 464 (1959) . suite jana -8

United Gas Improvement Co. v. PPC, 283 F. 2d 817 (9th Cir. :

1960), cert—denied 365 U.S. Ba (1961). sdekaaitaitteatiabdadasicibemaes i

United Gas (mprovement Co. v. PPC, 287 F. 2a 159 (10th o

I creak ccncnsetetiehaciepintenaibaictsornighinincnetbmenatnonnthomnest 11

United Gas Improvement Co. v. FPC, 290° F. 2d 133 (Sth

_ Cir) cert. den. 268-U.8. 823 (1961) .....:....cccecccecsseeetosoenseesess ae

_ United Gas. Pipe Line Co., et al, Opinion No. 399, issued “

July 17, 1963, 30 FPC ...... Sci scabies ncdeaataaalenttlehanenace svorseneece 11

Wisconsirt vs. FPC, 373 US tS se , en ones Auennn his Sate

a a. A ge

Natural Gas Aét, 15 U.S.C, §§T(e), Te) puecncitintcinmnen 23 -

‘Miscellaneous

Regulations of the Federal Power Commission, is C¥E.R., _—

——. of General. Policy: No. 61- 1, 24 BPC. 818, 18

CHE 2B nsosrcncstenesssshanvensnnssesescinge Sil ccqnikeienanenpedaiciechcammpiadinedentans "3.4

Fifth pee to Statement of General Policy No. 61- 1,

27 Fed. jaies 8918 (1962) asain Sclnsuiinedessguinhiopipelied pein t

—— @ 7

: i bie Pee Ix THE

: Supréme Court of the United States

' Oetober Terti, 1963 °

“a3 a) : ~ ° rm

| ; TE oigeles pon. ae

ey ; ; .

Me | Prado Ow anu Gas Company, oe

| Fe is ? Petitesiter.

°°. Prperss; Pewer Com wif. :

‘ . Pustic Service ComMssstox ov ees

‘THe State or New. York,

Uxirep Gas Improvewextr Company,

Lone Istaxp Ligut1xe ComMPANY | |

i. : tA . Respondents.

a a RTE eer see :

' PETITION FOR A WRIT OF CERTIORARI TO THE

‘UNITED STATES COURT OF APPEALS FOR THE.

~. :. DISTRICT OF COLUMBIA - :

1 2. / : ne 5 ° a .

Petitioner, Pytino Ou. anv Gas’ Company, prays that a

. , sd . 4 . "s . ee . » “ee

writ of certiorari issue to review. the judgment of thie

is oy oe . a ij es wd ae 1: 5

United Sti Fs Court.of Appeals for the District of olimbr

ws ° oi ° < et 4 .)°

Circuit, aptered in the above entitled cause on Janne 23.

1964.7 $ a en

+ 1 Petitioner’ Prado Oil ard Gas Company filed a petition for

review. of Opinion Nos. 362 and 362-A, naming the’ Federal

Power Commission as respondent, which was assigned No. 17554

i the Court. of Appeals for the District of Cotumbia- “A con-

anion appeal filed by Continental i] Company et al was

igned No. 17627 by the court. Petitions for review of the

cate orders of the Commission were filed -by United Gas Im-

proyement Company and Long {sland Lighting Company in

No. 17628 and by the Public Service Commission of the ‘State

of New York in No, 17582. Petitioner Prado Oil and Gas

Company iftervened in No: .17628 and No. 17582. All appeals

were consolidated for hearing and a single opinion affirming

= No. 17627 and No. 17859 and remanding No. 17852 and No.

17628 was issued by the Court of Appeats on January 25, 164.

s ? ; Ae eee

‘under 28 USC, § 1254(1).*

: CITATION TO OPINIONS BELOW +.

The cpinion and judgment of theT'ourt’ of ‘neni for

the District of Columbia Circuit is gst yet reported. bnt

is printed as Appendix B heretg, infra, pp. 18-34. .

_ JURISDICTION

The judgment of the-Court of Appeals was entered on ,

January ,23, 196-4. Juriediction of this Court: is invoked

_ QUESTIONS PRESENTED See

1. Whether the- Federal Pow erC ommission has authori ity

under Section 7(e) of the Natural Gas Act to require

producers to.refund amounts previously ¢ ‘olleeted pur-

suant to unconditional temporary certificates,

Whether, in certificate proceedings under Section 7

of the Natural Gas“ Act, the Federal Power Commis-

sion may refuse to consider probative wa and finan-

| cial evideace addue cd producer s in sttpport of their

"initial coutraet prices. °

2 \ graT@rEs INVOLVED | :

bhis case iitVolves, primarily © 7(e) and § 4(e) of the

Natural Gat<Act, 15 U.S.C. ,-. T17¥ (©). and. “ff (0) and

157.28 of the Regulations of tite Federal Power

Commission 18 CFR § 157.28. Those seetions of the Aci

‘and Regulations‘ are set out in Appendix A, infra, Le 15-17.;

STATEMENT |

*ursuant to Section 7(¢) of the Natural Gas Act and

the regulations promulgated fhereunder,’ the Federai

Power ‘Commission issued temporary certificates to: Peti-_

— F Ly ee

-2 Section 157.28 of the Regulations of the Federal Power Commis.

sion, which is set ‘forth in Appendix A, infra. pp. 16-17

i“

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‘tioner on August 17, 1960 to- make sales. of. natural gas

from fields in ‘South Texas for ultimate consumption in

the northeastern United States (R: 64).* The Commis-

‘sion did not exercise. its authority under $ —, of

the Actto, condition — these temporary certificates on a

reduction in: the 16¢ .per Mef initial eontraet price. Nor

did the Commission -attach a. a condition as Was

its established practice in cases Where there was a sub-

Stuntial question of w hether the ‘price authorized der

. the temporary, certifies ite Was consistent with the. public

interest. , a, ane

Before Pe titiener cdmmenced deliveries of gas, thé Com-

mission for the first. time cnuciates “policies whieh must

. be followed ingrder to regulate the rates of indepefde nt

; producers: of natural gas in a’sdne, sensible and effective

manner.”* The Commission initiated ‘area pricing by’ its

Hate ment wy Grenerat Policy NX or 1, issued Bader

YS, 19608 and esti ‘fblished an Ise per Met area price for

initial sales from: Texas Railroad Commission ° District

No. 4— tht area from which Petitioner's sales are: made. -

Iii reliance on such area price and the unconditions i) tem-

porary certificates issued by the Commisston.’ Sig sees

had little hesitaney- in commencing deliveries at tha Ibe

per Met initial price set forth in its eoptricts on file ‘oy

the C oMMission as rate ‘schedules.3

-. °

Ree onl citations are to the’ pages of the Joint Kppendix wand in

'* .the Court. of ‘Appeals, re of whic h are toncurrently filed

with this petition.

ae os

4 Phillips Petrofeum Company; 94 FPLC. 539, 542 (19601, aff'd —

sub nom. Wisconsin v. F. ees 373 U.S. 294 (1963)... °

594 F.C. 818, 1S CFR 2.56, 25 Fed. Reg. 9575.

6 The validity of these temporary certificates without price or.

retund conditions was never challenged or appealed. , -

7 Seetion 157.28 .¢ ) (2) of the Commission’s Regulation’s (Ap-

pe mndix A, fra, yp. 17) “required Petitioner to file its contracts

“as the rate schedule intended to be effective” for the saie of

gas under the temporary certificates.

e an nif

/ &

Petitiener’s applicatigns for permanent certificates were

subsequently édnsdlidated for hearing with similar applica-

tions, filed by other” producers making interstate sales of

natural gas from fields-in the area. -Hearings were held.

-% before a Presiding Examiner of the Commission, who issued

a decision on January 25, 1962 (R. 939-974). Tie Examiner

granted unconditional permanent’ certificates Of public eon-

Vv énicne e and necessity to Petitioner and the other producers

_and approv ‘ed their initialcontract prices. Various parties

— the Examiner's decision to the C ‘ommission.

* In. the orders wader review,” the Chscpiltaieit issued,

permanent certificates of publie ‘convenience and necessity

to Petitioner conditioned upon a reductio#f in its 16¢, aestial

coutract price to’ 15¢ per Mef.’. The Conimission’s * price

condition was. based solely upigu selected pric es being paid

to other producers in the area (R. 604- 610): The ¢ Conmiis-

sion expressly declined to consider the cost and other fiiani-

Gal evidence 6ftered by Petitione ‘r-and: other iggy bs in.

¢ support of their initial contract, prices (R. 610).

The Conimission did not, however, condition. the per-

manent. certificates to require Petitioner and the other pro- ©

5H ‘to refund amounts previously collected in excess

of t5¢ per Mef for deliveries of gas pursuant to their un-

conditional temporary certificates and filed rate schedules

(R. 614).

Petitioner and other producers sought review in tlie

Court. below of the -price condition: imposed by the Con).

mission. Various intervenérs appealed the failure of the

Commission to condifion the permanent certificates to re-’

*¢ pinion No. 362 issued. August 30, 1962 (R. 594- 639) and Ope :

ion No. 362-A issued December 18, 1962 (R. 708-721)

'* The Commission simultantously issued the F ister Amendment to,

its Statement of General Policy. No. 61-1, 27 Fed.. Reg. 8918,

reducing the areasprice for initial sales in Texas Railroad.

Commission District No. 4 from 18¢ to 16¢ per Mef.

~ and i in disregarding the cost and financial evidence of rec--

_ord. The court further held that the Commission has the stat-

POEs ead ee

quire refunds ‘of a

-of the-15é per Mef-:price. condition. > F -

. —404-44959). The tyourt

jmiounts previously collected in excess

The Court of. Appeals he ld that undies this Court's we

cision in the € "ATCO case" the Commission was just! ified

in conditioning the: permanent certifieates on a 15 ¢- price

predicated solely on certain prices being paid in the area

utory power’ ‘under Section 7(e) of the Natural Gas Act to

condition the permanent certificates to require the pro

ducers. to refund all amouyts . previously collected under

* their effectiv e filed rate schedules, afid unconditional tem.

porary certificates in excess of the Lie price condition ini-

_ posed. Since the court held that this power to require

refunds is not amaiidatory, it ‘remanded the case to the

. Commission to reconsider the question of refunds in light

of the equities invol: ed.

/ REASONS FOR GRANTING THE WRIT

he decision, of the eourt below ix in eonfiiet with the

aSion of the Tenth © irenit in Suiray Mid-Continent Qi

Co. ve FPC) 270 F. 2d 404 (Appendix Co infra,.pp. 35-44).

‘This conflict was recognized by Judge Fahy when he stated |’

: . ©

(ckppe ndix B, infra, p32): °°" °° ”

sion in Sunreg Mid-Continent Oil Co.v. FPC,: 210 F. 2

here held that even ne attac

ing a refund condition to a temporary certificate 4 he

-. Commission must. lignig it by setting a price ator below

which the producer can acl without risk of a subse-

quent refund order. The Court’ felt that. without sue:

‘a limit‘on the refund obligation the'C onimission’= grant.

“The produc ‘ers rely i the Tenth Cireuit’s ws

of temporary atliority wa- too vague to allow the-

producer to decide intelligently whether to. accept the,

; - Py nae . , . ‘ ; all

1° Atlantic Ref. Co. v. Public sere. Comm’ n, 360 J S378 ase :

a ¥ .

, ia

r: : . . 6 . .

Commission’s conditional grant and, thereby commit

its gas reserves to interstate cominerce.

- “To the extent that our decision ‘may be-iné ‘onsistent

we ith Sunray, we are constrained respectfully fo dis-

agree with the latter, Moreover, it. should “also be

e pointed out that as a practical matter the producer's,

- in this case were relatively assured of being able to

sell their ga’ without risk of subseq uent refund at a

price of 14:6 cents per Mef., the pri@ which PSC and

the other consumer interests originally’ mrged as the -

Hfrogey i in- line pris. (Eniphasis supplied. ,

Al Sunrd <the court wis vonfrorited with a teoledrars

cortifieate whith contained an express refund condition obli-.

gating the producer to refund the difference between the

initial cofitract price and whatever price. the Commission

ultimately found to be required by the publie convenience

and necessity when permanent certificates were issued. In

holding that such an express refund condition wixunlawful

beeause it did not apprise the producer of the terms and,

conditions applicable to the sales under its temporary

certificate, the Tenth Circuit, srated (Appendix C, infra,

pp. 42-44): £

“Phe Act contemplates that the Commission neceb

not accept the conditions contained in an application,

Sunray Mid-Continent’ Gi}. Co. v. FRC, supra: it like-

wise contemplates that the applicant need not acces

cond itiogs imposed -by the Commission. in its infin}

decep lance. Where conditions are linposed\ by the Com

mission the applicant, has the free choice to accept or

reject: to dedicate his property tO public service or to

refuse.so to do: to submit to the jurisdiction of the

Coynmission-or to remain heyond the bounds of, inter

‘Stute commerce., This choice cannot be.exercised by the

applicant if the Commission says, im effect: ‘Sell your

— gas; collect your proposed initial price; we will late:

‘tell you if you can keep your collections; if we decide

* you cannot, you must assure ‘refund by bond. ,

es 6¢6h6©t

“But in Attantie, the applicant - was tendered a cer-

lificate. settiig a firm ‘initial rate with a condition

allowing. potential increase. In the instant case no.

bine. ‘Mitial rate is aeeepted. None is rejected. The applicant

igh eee « is merely asked fo. speculate as to What the ultimate

temporary rate may be, to rely on the ultimate fairness

-of the final détermination, and to mneanwhile dedicate

; its gas to publie service: The ; action of the Commission

is neither an cceeptance, rejection” ner proper

tional acceptance of Sunray’s application. Tt merely

‘purports to hold in abeyance potential conditions.

Under such cireumstances: Sunray is denied its right

to haye the Commission act upRan its application with

such certainty as to allow the exercise of choice upon

Sunray” 5 part.” ° : \

ft.

In the present case, the inipevary certificates did? not.

sa . contain a refund condition. - Thus, the vice condemned in

Sunray was compounded. The Tenth Cireuit held illegal

an express refund condftion which required the producer,

to speculate as to what the ultimate rate might,be for sales.

‘under its temporary certificate.

even given -notiee of ati indefinite retund obligation. Cér-

tainly the “boiler plate” language in Petitioner’ s temporary

certificates referred to by the court be low” (Appendix B,

= hagra, pp. 31-3 2) did not-prov ide Petitioner with notice of its.

refund obligation. Identical language i ix contained in every

temporary certificate! and we: never -beem construed by the

. C OMMUSSION as constituti: ‘ga refimd conditions Nor does

the fact that « certayy intervenors ured a 14. per Mer

; price vy other proesedings'= cure this hack of naiice, (Ap-

pendix B, cifre. p. 82). Under the Natural. fias Net the.

Federal Powe ‘y Commission is Charged withthe re sponstbil-

= AN : ;

s 1 The temporary certifie ate found to be uniawful isthe Niiieay

Case ¢ ontained such language. 23 :

; i '? This'assertion was not made in the case of Petitioner's eertifie ‘ate

applications until hearings were -held.on such’ applications. At

that tine Petitioner had been delivering gas for over six months.¥

condi.

Here Petitioner was net -

= . 4.

ity of regulating’ interstate sales by producers, And what

certain intervenors argue in other proceedings could not

assure Petitioner of a 14.6¢ price tloor. The only official

‘action ou which Petitioner coud rely was the 18¢ per Met

area price established by the Commission, , o

2: The conflict between Sunray and the decision of the

epurt below is readily apparent. Resolution of this con-

flict js of importance in the administration of the Natural!

Gas Act. The Commission has issued literally thousands

of temporary certificates without refund conditions. Prior

to the decision of the court below, producers assumed that.

«ibsent an express refund condition, they were entitled to

retain all amounts éollected pursuant td unconditional

temporary: certilicates and filed rate schediles.!! | Neeard-

ifigly; they have paid Federal income taxes, royaltie’,

styte production taxes and made other expenditurys on

the. basix of their initial contract prices. 6

The Tenth Circuit's Sunray decision provided additional

assurance to these producer@ that the. Commission could

net grant unconditional temporary certificates authorizing

the collection-of initial contract prices and then subsequent-

lye tell them what portion of such initial price they were

> entitled to keep.

/ ie

’ ; ‘ ; “

Now, these producers‘are told by the court below that

“they nfay have to refund some undetermined part of the

initial price beige collected) pursuant’ to unconditional

temporary certificates, The operating: problems due 16.

« . Se :

Y Produecerseacted in reliance upeu the established principle of

utility law that onee payments are made pursuant to an effee-

ti®e filed rate schedule, the recipient cannot be requireal without

prior notice to retroactively refund any part of the payments

received—FAALE. v. United States, 359 US. 464 (1959) ;

Mantana-Dakota. Utilities Co. vo Northivesterns Public Service

320 US. S91 (1944):

the uncertainty: created by- this decision are readily ap-

parent. For example, praducers . selling gas pursuant to

unconditional temporary’ authorization pay state produe-

tion taxes, royalties and Federal income taxes and mak@,

other expenditures on the. basis of the initial price author-

ized in such certificates. How will they recoup amounts

they are subsequently required to “refund 2" Since “there

-is:no. basis for a producer to know how’ much of his

inifial price may be subject to refund’? he cannot protect

himself by withholding. payment of ‘royalties, taxes, etc.,

on apart of his-initial price. From an accounting stand-

point, what contingent Hability is a producer ‘to show on

hist balance sheet for amounts. lieretofore collected pur-

suant’to unconditienal temporary authorization 2'°

* Tt is clear that the actual practical effect of the decision

below will disrupt operations in the natural gas producing

industry. The econoniie detriment to the small producer,

-such as Petitioner, will be particularly acute. He simply

cannot assume the risk of irrevocably ‘committing his gas~ <

to interstate commerce! ‘without knowing what part of his

price he will be allowed to retain. In inany cases, the sales

authorized under his temporary certificate ntay constitute a

stbstantial .part of his total income. This is no academic

matter, for sales under temporary certificates often con-

tinue for several years. See FPC v. Hunt, ...... oi <wnialcs

(Nol273, decided March 30, 1964): Thus, a small producer

santitciaatiiiloiadia : . 2

4The problem is crucial with respect’to state productyou taxes

* since as a, general rule taxes paid to the state will not be

refunded unless paid under protest.

>This is particularly true where, as in the present case, Peti-

tioner’s 16¢ per Mef initial contract price was actually 2¢ per

Mef below the Commission’s 18¢ per Mcf area price for new

gas sales. | :

>For publicly held companies this is important since the invest-

ing public must be able to rely upon their financial statements.

.17 The temporary certificates issued in this case contained: the

standard provision that once service was commenced it could

not be discontinyed without permission ‘of the Commission issued

pursuant to provisions of the Natural Gas Act.

| a 4

ied M ve

may’ be required to curtail his operations until sich time

as he definitively knows whether he will be required to re-

fund atiy part of, the amounts previously collected pursuant

*,¢ ‘a ar “a. ee .

.to an unconditional certificate. His ability to borrow may be_

severely impaired. In summary, economic considerations

may preclude the small producer from utilizing the Com- °

mission’s temporary authorization procedure. This will

put him at 2 competitive disdidvantage. Indeed, all pro-

ducérs may be reluctant to irreveeably commit their gas

to interstate» markets on the basis of temporary certifi-

cates if they do not know what portion of the collections

they will ultimately be allowed Yo retain. Fog Nis

3. The decision of the court below affirming the Com-

Sere

“uurssfon's refusal to consider cost or finaneig wtciiee

in -a Section 7 certificate proceeding: is iawmmernid to the

decision of this Court in the C ATC ‘0 Ci ise!

In the orders under review, the Couimmission, for the

first time, delineated the evidentiary crigeria it would

consider in deciding the initial price question in producer

certifieate cases. The Commission stated that “the pAnci-

pal criterion” w: as—whether the “préposed price was’ “in

line’ with other certificated sales in the area at the time-

of contract execution, citing this Court’s CATCO decision.

the Commission expressly refused to consider the cost

and financial evidence. of record. The Commission went

even further and gave notice to the- natural gas producing

industry that it did not consider cost or financial ev iience

appkopri: ate ina produc ‘r certificate’ case, stating:

“However, we. do not think it necessary or appropri-

‘ate in a certificate proceeding to eonsider evidence of

Cad

area costs or financial requirements, ar of individual.

company costs or financial requirements, Any such

“Atlantic Rif. Co oy. Paublie Nerv. Comm'n, 360 US. B78 619595,

. : 1. ry

approach is of limited utility and, leads to complicated,

. long-drawn-out praceedings, detrimental to the public.”

In subsequent cases? the Commission has consistently

excladed the cost and financial: evidence offered by pro-

ducers in support of their initial contract priees. In each

of these eases the Commia€ion ‘has -relicd upon the blanket

¢ondemnation of cost and financial evidence contained: in

the orders under review. as justification for its evidentiary

exclusion. Judigial review of the Commission's ruling in

certain of these cases is now pending in the courts below.?”

The Court of Appeals affirmed the Commission's express

_ refusal to consider the cost and financial evidence of-recozd,

citing this Court’s CATCO decision (Appendix B, refre.

pp. 29-26). It is somewhat. anomalous thatthe court below

should cite CATCO, for in that ease Justice Clark pointedly

wondered why the producer applicants had not presented —

evidence, of “relative production costs” for other areas.

(360 US, at 392-393.) ,

If the Court of Appeals-is coxreet rt <nterpretation

_ of TATCO, then “the wheel has come full circles! Thi

CATCO and its progeny?” the, courts refused unecuditional

7 ww

1° {merada Petroleum Corp. et al, Opinion No. $22, issued Mareh

23, 1964, ........ FPC \....3 Teraco Seaboard Inc., et al, Opinion

No. 383, issued March 27, 1963, 29 FPC 593; Placid Oi Co.,

ct al, Gpinion No. 398, issued July 17, 1968, 36 FPO 0.3

‘United Gas Pipe Line Co., et al, Opinion No. 399, issued July

17, 1963, 30 FPG... seo <

20 See Otcan Drilling & Exploration Compaiy v. PPC, Xo. 2099),

and related cases in the Fifth Cirenit Court of Appeals.

21 King Lear, Act V. Seene 3, Shakespeare,

23 United Gas Improvement Co. vFPC, 290 F.2d 433 (oth Cir.),

cert. dented 368 U.S. 823 (1961) ; United Gas Improvement Co.

v. EPC, 287 F. 2d 159 (10th Cir. 1961) ; Public Serv. Comm'n.

v. FPC, 287 F. 2d 146 (D. C. Cir. 1960), cert. denied 365 U.S.

880 (1961); United Gas’ Improvement Co. V. FPPC, 283 F. 2d

$17 (9th Cir. 1960), cert. denied 365 U.S. 879 (1961). ;

12°" ae Te

certification of saies of natuyal’ gas from fields in Seuth

“‘Louisian#- berause- the producer applicants did not offer:

sufficient evidence to support the proposed initial prices.»

These. ‘degisions held’ that .the Commission's refiance on

other certificated sales in the area without supporting evi-

dence was not sufficient to support unconditional certitiea-

tion of the proposed initial: prices. In this case, the Com.

Mission stated that the only. evidence to be considered

in a certificate case jis that. of other certificated sales in

the area and that supporting: Cost or financial ev idence will |

he disregarded. . -

., The neck for clarification of the evidentiary standards

ta be applied in producer certificate cases under Section ri

of the Natural (ias Act is readily apparent. If the Com-

mission’s-sole function is to leok Aliy at other certifieated

prices i the area and determine! the so-ealied “in-line”

—_ then let this Court <o state. However, if ‘preducer~

are are entitled to support their ipitial contract prices by addi

tional ‘evidence of costs and Tinancial requireme nts, then

let the Court reverse the Commission's universal disregard

‘of all evidence except that related to the determination of

the “in-line” price, 4

~The’ question of what- evidentiary standards a are te be

utilized iit Seetion.7 certificate cases is ‘ot vital importance

in the administri ition of the Natural Gas Act. The apr

propriate ev identiary standards should — in faet, must —

be elarified- by this Court, as soon as possible.

.* | oe oe | -

- CONCLUSION

For the fore egoing reasons, this: Petition for a Wi rit of -

Cc ertiorari should be granted. .

oar = Respectfully submitted,

Davin T. SEARLS

Of e ounisel:

‘se Evand Artem,

WH. Divsuet, Jn. ene,

* Vinson, Elkitis, Weems & Searls — 4

First City National Bank Building - ~ >

_ Houston, Teyas

y 5

° 9

April 7, 19640 Pes 2°

vA ‘oe

wattorney for Petitioner ..

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