Opposition Brief — King v. United States

IN THE

Supreme Court of the United States

OcroBEer TERM, 1964

Nos. 714, 768, 769, and 776

Ocean DriminG & Expioration Company, J. R.

ET AL., J. Ray McDermort & Co., Inc.,

Tue Superior Or. Company, Petitioners,

Vv.

FEpERAL Powrk CoMMIssION, PuBLic SERVICE COMMIS-

SION OF THE State oF New York, THE UNITED

Gas IMPROVEMENT Company, LoNnG IsLanp LiGcHt-

Inc ComPANy, Respondents.

ON PETITIONS FOR WRITS OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

BRIEF FOR PUBLIC SERVICE COMMISSION

OF THE STATE OF NEW YORK IN OPPOSITION

QUESTION PRESENTED

Where, prior to completion of appeal proceedings

challenging the Federal Power Commission’s issuance

ofa certificate of public convenience and necessity, a

natural gas producer commences service under the cer-

tificate, which later is held invalid on the ground that

the initial price thereunder is out of line, does the

Commission, on remand, have power to require refunds

of the excess amounts collected. by the producer under

the invalid certificate ?

2

STATEMENT

By orders issued September 4, 1958 and August 10,

1959, the Federal Power Commission, over the objection

of the Public Service Commission of the State of New

York and other consumer interests, granted uncondi-

tional certificates to a substantial number of natural

gas producers, including the four petitioners here, au-

thorizing them to commence the sale of natural gas

from Louisiana fields at initial prices ranging from

21.4¢ to 23.8¢ per Mcf. On appeal, the Commission’s

actions were reversed and the several cases remanded.”

In the meantime, however, and notwithstanding the

pendency of the appeals, the present petitioners com-

menced service under the unconditional certificates and

collected the high initial price that was the basis for

the legal attack on, and judicial invalidation of, the

certificates. Following hearings on remand, the Com-

mission determined that the maximum initial price at

which these sales should have been certificated was 20¢

per Mcf, including 1.5¢ tax reimbursement where ap-

plicable, and, to give effect to this finding, it issued

new certificates at that level and directed petitioners to

refund all amounts in excess of 20¢ per Mecf which had

been collected under the original, j:-dicially invalidated

certificates.

1 Public Service Commission of New York v. F.P.C., 361 U.S. 195

(1959) ; United Gas Improvement Co. v. F.P.C., 288 F. 2d 817

(9th Cir. 1960), cert. denied, 365 U.S. 879, 881 (1961); Public

Service Commission of New York v. F.P.C., 287 F. 2d 146 (D.C.

Cir. 1960), cert. denied, 365 U.S. 880, 882 (1961); United Gas

Improvement Co. v. F.P.C., 287 F. 2d 159 (10th Cir. 1961) ; United

Gas Improvement Co. v. F.P.C., 290 F. 2d 183 (5th Cir. 1961),

cert. denied, 368 U.S. 823 (1961) ; United Gas Improvement Co. v.

F.P.C., 290 F. 2d 147 (5th Cir. 1961), cert. denied, 366 U.S. 965

(1961). -

wa a a - a

3

On appeal by petitioners and other producers, the

Court of Appeals for the Fifth Circuit, though revers-

ing other aspects of the Commission’s order,” held that,

on remand, the Commission had power to require re-

funds of “‘the fruits obtained [by petitioners] under

an invalid, that is illegal, order.”” Callery Properties,

Inc. v. F.P.C., 335 F.2d 1004 at 1019. .

ARGUMENT

Although, for the reasons stated in its own petition

for a writ of certiorari (O.T. 1964, No. 678, filed

November 12, 1964), the Public Service Commission

of the State of New York believes that the decision be-

low urgently requires review and, indeed, summary

reversal by this Court, it does not believe that the nar-

row aspect of the decision below presented by peti-

tioners in Nos. 714, 768, 769, and 776 merits certiorari.

1. The issue raised by petitioners was rightly decided

below.

a. The Commission’s determination to require re-

funds of excess amounts was eminently correct, and

was, in fact, required by this Court’s landmark deci-

sion in Atlantic Refining Co. v. Public Service Com-

mission of New York (Catco), 360 U.S. 378 (1959),

in which the Commission’s unconditional certification

of a 21.4¢ Louisiana sale was struck down precisely

because it would permit the producers to retain, with-

out refund obligation, an out-of-line price during the

‘tnigh interminable’ period between initial certifica-

- 2The court’s action in reversing the Commission is the subject

of pending petitions for certiorari in F.P.C. v. Callery Properties,

Inc., O.T. 1964, No. 756; Public Service Commission of New York

v. Callery Properties, Inc., O.T. 1964, No. 678; Untted Gas Im-

provement Co. v. Callery Properties, Inc., 0.T. 1964, No. 671.

4

tion and the ultimate conclusion of a rate investiga-

tion. Here, where there has been a “‘nigh intermina-

ble’’ delay of four to five years between initial, invalid

certification and lawful certification on remand, the

producers nevertheless urge that, as a matter of law,

they cannot be required to refund the excess amounts

collected during this period. Acceptance of the pro-

ducer position, however, would result in ‘‘a windfall

for the natural gas company and a consequent squall

for the consumers,’’ 360 U.S. at 390, thereby frustrat-

ing the

“overriding intent of the Congress to give full

protective coverage to the consumer as to price.”’

360 U.S. at 389.

b. Not only are refunds necessary to meet the sub-

stantive requirements of the Act, as spelled out by this

Court in Catco, supra, but they are necessary, as a

remedial measure, to carry out the purpose of the re-

versal of the original, unlawful certificates and to as-

sure that the petitioners in the earlier appeals will be *

made whole.

ce. Wholly aside from the Commission’s power on

remand to correct the errors laid bare by the earlier

appeals, the express conditioning power conferred by

Section 7(e) of the Natural Gas Act*® provides ample

authority for the Commission to condition its issuance

of the new certificates upon the applicants’ refunding

all excess amounts collected under the invalid certifi-

cates. See F.P.C. v. Hunt, 376 U.S. 515 at 521 (1964).

8**The Commission shall have the power to attach to the issu-

ance of the certificate and to the exercise of the rights granted there-

under such reasonable terms and conditions as the public con-

venience and necessity may require.’’

*

we oe?

5

d. In electing to commence service at a time when-

the validity of their certificates was under attack, the

present petitioners necessarily assumed the risk that

the certificates might be rendered invalid. See Vir-

ginta Petroleum Jobbers Ass’n v. F.P.C., 259 F.2d 921

at 927 (D.C. Cir. 1958). The producer contention that

the consumer representatives, the successful petition-

ers in the earlier appeals, either could have or should

have obtained a stay of the invalid certificates pending

appeal is devoid of merit; no stay was available pre-

cisely because those petitioners, if successful, could be

made whole through refunds on remand, Jd., 259 F.2d

at 925-27.

2. There is no conflict between the decision below

(insofar as it sustains the Commission’s power to or-

der refunds) and the decision of any other circuit or

of this Court. ~*

Although attitneaie correctly cite Montana-Dakota

Utilities Co. v. Northwestern Public Service Co., 341

U.S. 246 (1951), and related cases‘ for the proposition

that the‘Commission has no power, under Section 5 of

the Act, to require refunds of excess amounts collected

under a rate which has assumed finality, they overlook

the fact that, as noted by the Commission at the very

outset of these remanded proceedings (27 FPC 482 at

483, R. 411):

‘*[The] unconditional certificate orders under Sec-

tion 7 were erroneously issued in the first place

and as a result of the invocation of Section 19 have

never assumed apie ag

“TIME. v. United States, 359 U.S. 464 (1950); PPC. v. Heie

Natural Gas Co., 320 U.S. 691 (1944) ; Hops Hetwre Ges-Os:" v.

F.P.C., 134 F. 2a 287 (4th Cir. 1948).

Absent finality, of course, the filed-rate doctrine of

Montana-Dakota has no applicability. See, ¢.g., Pub-

lic Service Commission of New York v. F.P.C., 329

F.2d 242 at 249 (D.C. Cir. 1964), cert. denied sub nom.

Prado Oil & Gas Co. v. F.P.C., 3T7 U.S. 963 (1964) 5

Pan American Petroleum Corp. v. Kansas-Nebraska

Natural Gas Co., 297 F.2d 561 (8th Cir. 1962), cert.

denied, 370 U.S. 937; Cities Service Gas Co. v. Colum-

bian Fuel Corp., 52 Del. 262, 155 A.2d 879 (1959).

CONCLUSION

In sustaining the Commission’s power to order re-

funds of excess amounts, the decision below was emi-

nently correct and presents no conflict with the deci-

sion of any other circuit. Accordingly, the petitions

for a writ of certiorari should be denied.

Respectfully submitted,

Kent H. Brown, Counsel

55 Elk Street

Albany, New York

Morton L. Smuons

1815 H Street, N. W.

Washington, D. C.

January 11, 1965

5 The arguments now presented by Ocean Drilling, petitioner in

No,-714, are virtually identical fone the’

pressed by Prado Oil & Gas Co.

Co. v. F.P.C., O.T. 1963, No. 987, petition pp. 8-10. _

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