# Petition for A Writ of Certiorari — Prado Oil & Gas Co. v. Federal Power Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_1667%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for A Writ of Certiorari - **Published:** January 1, 1964 - **Citation:** 377 U.S. 963 ## Text ’ Cb j : ae . Office-Supreme Court, U.S. BicGnKARY ° 2) po FILED - ‘APR 10 1964 iL . i ei , Is Tue ~~ | LORIN F. DAVIS, CLERK a, . ° 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. 6. Honston, ‘Texas April 7, 1964. : on . . «* A hs +. - PRINTED IN U.S A -~ BY DELARUE TEXAS : 5 : Jf \ =: » \ 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 “ 3 ’ - . 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., _— © GDS T.2B eeepc ssseengeenetoneenecesengesteateasenrsendiaessnessie ss aanianataill os, ae ——. 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 * g *. : i bie Pee Ix THE ot : 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 - : a . 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 ° ca] ry e? es os. SD ‘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. $s * 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 a (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. ay ~ 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 ¥ . 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 - s Hfrogey i in- line pris. (Eniphasis supplied. , Al Sunrd . “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.¥ ey condi. Here Petitioner was net - 3 ® © en S = . 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 © A 341 U.S. 246 (1951): EPC vy. Hop “Natural Gas Co-. 320 US. S91 (1944): 9 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~ 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, FS . : 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 _ Houston, Teyas ie y 5 ° 9 April 7, 19640 Pes 2° vA ‘oe wattorney for Petitioner .. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385601_1667%3A02. Public record. Not legal advice.