# Petition for a Writ of Certiorari — Southern California Edison Co. v. Federal Power Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_1448%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for a Writ of Certiorari - **Published:** January 1, 1968 - **Citation:** 392 U.S. 909 ## Text N LIBRARY — rr SUPREME COURT, u. a APR 16 1968 ‘Supreme Court of the United States October Term, 1967 JOHN F. DAS, CLERK © Vo E 329 — a SOUTHERN CALIFORNIA EDISON COMPANY, Petitioner, > vs. FEDERAL POWER COMMISSION, 1 Respondent. __ PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT Rotim E. Woopsury Harry W. Srurczs, In. WLAN E. Marx Attorneys for Petitioner, Southern California Edison Company 4 P. O. Box 351 Los Angeles, Calif. 90053 Of Counsel: WnLIaxM R. CoxxolE 1000 Connecticut Avenue, N. W. | Washington, D. C. „R. Crype —— F. O. Box 188 Shreveport, Louisiana Ww ° . © * . © , N * * * 5 — \ ‘ . 8 * * . . & : . 3 ° | . . * * 5 TOPICAL INDEX - of timely: request by Edison for such a oondition- e. 4 — 8 * Citation to Opinion below . 1. Jurisdiction : : 1 Questions presented for · review 2 Constitutional provisions, statutes, and regulations in- volved neanern 7 3 r 8 Statement of the ease. 5 Reasons for granting Writ. 10 What the Commission did a 1. The Commission flagrantly violated its own Rules of Practice and Procedure and the Admini i Procedures Act and denied Edison a fair hearing. 12 2. The Commission frustrated local police regula- tions designed to- alleviate air pollution which in- volved no conflict with national air pollution poli- cies and no conflict with the policies of The Natural Gas Act as heretofore'construed by this Court and. in 80 doing exceeded its jurisdiction. — — 20 3. The Commission arbitrarily changed the ground rules which it had previously established as justifi- cation for its delay in processing the Gulf Pacific application is * bd 24 4. The Commission unlawfully applied the provisions of The Natural Gas Act and in so doing exceeded its autbbrity. ——— — —V 2 a (a) The Commission ap~lied improper standards of public convenien:: and neoessity _. 27 (b) The Commission unlawfully applied the pro- visions of The Natural Gas Act relating to di- rect. industrial sales . 29 What the Commission did not do ai 90 5. The Commission failed, or refused, after determin- ing to certificate the El Paso-and Transwestern Proposals, to so condition such certificates as to Protect the constitutional rights of Edison in spite 30 3 | Page What the Court of Appeals did 2 N 31 The Court of Appeals erred in concluding that the : Commission's orders were rationally based, sup- ported by the record and reached by pracedares | required by law... 32 1. The Court of Appeals’ 00 that the Commis- , Sion’s order was rationally based contained an in- herent ambiguity and was erroneous upon all alter- native interpretations. - 32 2. The Court’s conclusion that the G s ac- tion was supported by the record and reached by procedures required by law is in error and sanc- tions such a departure from the accepted and usual course of administrative procedure as to call for the exercise of this Court’s power of supervision 36 3. Failure of Court of Appeals to resolve ambiguity it created. unlawfully auen Edison its statutory a review ; 37 Conelusion 5 ve . — 38 : Appendices j 2 0 * . of the United States Court of Appeals for the Third Cireuit, No. 16,434, dated December 21, 1967 Opinion of the United States Court of Appeals for the Third Circuit, filed December 21, 1967. — Petition for 15 Mr rn (dated: January 24, 1968 : B. Constitutional provisions, statutes and innen U.S. Constitution, Amend V. amn nee See. 1 (b) Sed. 7e) Ses 700. — d PARSE ES 7 N oad 8 — . * * . 0 — . Pe G SS WwW Supreme Court of the United States. 5 0 October Term, 1967 CORES : No. de; A _ PETITION FOR A WRIT OF CERTIORARI 10 THE UNITED STATES COURT-OF Petitioner, Southern California Edison Company (Edi- son), prays that a writ of certiorari be issued to review a judgment of the United States: Court of Appeals for the Third Cireuit entered December 21, 1967, in No. 16434 affirming Decisions Nos. 300 (R. 68820-960, Jt. App.“ pp. 738-878) and 500-A (R. 69314-38, Jt. App. pp. 105781) of the Federal Power Commission** (hereinafter sometimes referred to as “Commission” or W SS ree ____ CITATION TO OPINION BELOW The judgment and supporting opinion of the Court of Appeals for the Third Circuit of December 21, 1967 and Order denying rehearing are printed as Appendix A hereto (infra, pp. Ia to 4a) and have not yet been reported. The orders of the Federal Power Commission under review are Printed in the Joint Appendix below (R. 68887-90, Jt. App., pp. 805-8 and R. 69328, Jt. App., p. 1071) and are reported at 36 FPC 176, and at 36 FPO 1010, respectively. JURISDICTION ; a The opinion of the Court of Appeals was filed on Decem- ber 21, 1967, and the judgment was entered on December 21, 1967. A petition for rehearing was filed by petitioner on January 5, 1968, and the Court of Appeals’ order deny- *“Jt. App.” refers to Joi ix filed with the United States Court of 4 for the Third Crest is No. 16434. n re Transwestern Pipeline Company, et al, FPC Dockets cP 63-204, et al. c 78 ; 2 ing rehearing Was entered on January 24, 1968. Jurisdic- tion of this Court over said judgment is invoked under Title 28 U.S.C. § 1254(1) pursuant to Rules 19, et seq., of this Court and Section’ 19(b) of the Natural Gas Act, 15 U.S.C. §717r(b) (1958). Said statutory provisions are set forth in Appendix 5 hereto (pp. GaSe, ame, infra). QUESTIONS PRESENTED FOR REVIEW 1. Whether the Federal Power Commission, under the guise of administrative expertise, may depart from procedures specified in its. own rules and in Section 7(c) and (d) of the Administrative Procedures Act by reaching a decision in a certificate proceeding, involving competing applications, through reliance on material outside the rec- ord which significantly influences the decision and which a party is denied, after timely request, opportunity to meet and rebut, particularly when such material is demonstrably wrong in a number of material respects, and results in a denial of a fair hearing and in the deprivation of property without due process of law in cöntravention of the Fifth Amendment to the Constitution of the United States (U. S. Const. Amend. V; Natural Gas Act (Sec. 7 (e)); Adminis- trative e ‘Act (Sec. 50a) and (b) and Sec. 7 (e). and (d)); Regulations Under The Natural Gas Act ($157.11) ; and 61.26 (d) of the Rules of Practice and Pro- cedure, of the Federal Power Commission. 2. Whether the grant of the certificating powers to the Federal Power Commission in the Natural Gas Act is in- tended to permit the FPC effectively to preempt state and local air pollution control laws and regulations, which are not incompatible with any defined policy of the Federal Government, and to be so broad as to permit the FPO, to frustrate and prevent the consummation of a pipeline proj- cet which undeniably would have reduced fuel oil burnihg in the local area involved, i in accordance with the desires of “the Air Pollution Control authorities and the public, > ? oe 3 ee ae particularly where there was no finding that the consuin-. mation of such project would be harmful to any other areas or would deprive them of adequate gas supplies and where there was no question of the projects’ meeting the tradi- tional tests of public convenience and necessity, i.e., ade- quacy of supply and market, economic feasibility and ability to finance (Natural Gas Act, Section 7(c)). ; : 3. Whether the Federal Power Commission in granting _ Certificates of public convenience and necessity under the Natural Gas Act (Sec. 7(c)) can arbitrarily, under the guise of administrative discretion, refuse to attach condi- tions which are both appropriate and essential to protect a party’s rights Ao due process of law under the Fifth ; Amendment of the Constitution of the United States (U. S. Const., Amend. vo. 4. Whether the Commission, in denying the Gulf Pacific Pipeline Company (Gulf Pacific) application, exceeded its authority and improperly applied the statutory standards. of the Natural Gas Act: | : | £ a. By preventing more adequate compliance with the local air pollution controls, thereby frustrating their pur- pose and the desires of the public; 3 | b. By utilizing its: certificate powers to perpetuate a monopolized gas supply situation by requiring Edison to take gas service from its chief competitors for the energy market, instead of from a new independent gas supplier in one of the few areas in the United States now served solély by one affiliated gas utility system; and o. By determining in this case that the statutory ex- emption for direct sales (Section 1(b) of the. Natural Gas Act, (15 U.S.C. §717(b)) is limited to such sales which are “a useful adjunct to the normal pattern of interstate pipelines.” (R. 68881, It. App., p. 799) ies ? 5. Whether the Commission arbitrarily denied to Edison © fair comparative consideration upon the basis that it had , 4 . . Previously established for the proceeding, namely “to de- termine how the long term needs for natural gas deliveries to Southern California may be met in the manner which is most desirable from the standpoint of the public interest”. (Re El Paso Natural Gas ‘Company, Docket G-16235, 30 FPO 77, 92). e 5 6. Whether the Court of Appeals erred in concluding that the Commission’s orders were rationally based, sup- ported by the record and reached by procedures required by law. ; ‘ N ü ; 4 fer \ 7. Questions arising from an inherent ambiguity of the: decision of the Court of Appeals: af a. Whether the Court of Appeals, in its decision af- firming the orders of the Federal Power Commission, concluded that a basis different from that used by the Commission could rationally support the result and, in 80 doing, has exercised its judicial review in a way in conflict with the applicable decisions of this Court and with the decisions of other Courts of, Appeal and, in so doing, has erred; ae MES BRS el ae aes | 5. Whether the Court of Appeals, in its decision affirm- ing the orders of the Federal Power Commission, upheld the reliance by that Commission upon its defective gas _balanee study and other material also outside of the record and, in so doing, has sanctioned such a departure of judicial and administrative proceedings as to call for , Al exercise of this Court’s power of supervision. 8. Whether the Court of Appeals erred in denying Edi- son’s petitiotl for rehearing which sought clarification of in order that the patties and this reviewing Court could be ‘Sppropriately apprised: of the basis for the Court of Ap- ) as a public etre 5 : 9. Whether the Court of Appeals denied petitioner the appropriate judicial review to which itis entitled under the. Natural Gas Act (Section 19(b)). | ith. fort CONSTITUTIONAL PROVISIONS, STATUTES - The provision of the United States Constitution involved is Amendment V (U.S. Const. Amend. V). r ee a The statutory provisions involved are Title 28 U. S. C., Seetion 1254 (1); Sections 1(b), 7(e), 7(e) and 19(b) of the Natural Gas Act (15 U.S. C. Sections 717 (b), 717£(c), 717£(e) and 717r(b)) and Sections 5(a) and (b), 6(a), 7(e) and (d), and 10(e) of the Administrative Procedures Act (Chapter 24 — Public Law 404, 60 Stat. 237-244 (1946). The regulations involved are 9 157.11 of Regulations Under The Natural Gas Act (18 C. F. R. 5 157.11) and § — 1.26(d) of the Rules of Practice and Procedure of the Federal Power Commission (18 C. F. R. § 1.26(d)). The Constitutional provision, statutes and regulations relied upon are printed in Appendix B hereto as pp. 5-14. Edison, a ness of gene _ tered into the arrangements underlying the Gulf Pacific. Project to firm up supplies for its long term needs for gas fuel from a reliable competitive source. , The needs of Edison for long-term assured natural gas supply arrangements, of the type. exemplified by those in- volved in the Gulf Pacific Project, resulted from the changed circumstances which have occurred in the southern California area since World War II, requiring ‘revolu- tionary changes in the operations of the eléctric utilities. in that area. These resulted primarily from two main -«, . | . The demands of an exploding postwar population in e e Wess Was t upon 2 5 = 7 7 : : During the period since the end of World War II, the Sas supplies available to Edison for electric generation have principally come from the Pacific Lighting companies (Southern California Gas Company and Southern Counties Gas Company of California, referred to herein along ggith Pacific Lighting Service and Supply Company as “Pacific ighting”) which provided service to the electrie gen- e utilities only upon an “interruptible” basis,? with the electric generating utilities having the lowest priority and being the first to be curtailed. The amount of gas avail- able under such type of service varies greatly from time to time during the year and from year to year, depending upon the gas resources available at any particular time to Pacific Lighting and its other market requirements, and these, in turn, are substantially affected by the weather, since its higher priority customers utilize many times more gas in cold weather than in warm weather (Ex. 41, pp. 54, 56, 57, R. 29309, 29311-12, Jt. App., Pp. 190-2).4 5 0 } As has heretofore been recognized by this Court, the . assurance of a steady and ample supply of fuel for steam _ electric generation and the need for adequate arrangements therefor by an electric utility is in, the public interest; otherwise electric consumers are exposed to unjustified increased costs and to service failures. . (See: Tampa Elec- tric Co. vs. Nashville Coal Co., 365 U.S. 320, 334 (1961)). Pollution Control District of the County of Los ‘Angeles (APCD adopted. by the “Ee oe County Board of Supervisors One 19 a 24, 24a, R. 2-3, It. App., pp. 235-6; orton, R. 303-5, 1, “Interruptible” gas schedules permit the seller to curtail buyers’ ) nd read (Pacific Lighting) who are also Edison , principal rival for the et in southern 7 myn C.f., Chart * „pp. 1 ). - ss “For example, between an avera; and a cold year, ga br Uae cee year anc ee ralent of _ Cs: Faced with these circumstances, Edison and the City of Los Angeles Department of Water and Power negotiated contracts with Humble Oil and Refining Company and other Texas producers for an assured gas supply for a _ twenty-year period, and with Gulf Pacific for the transpor- tation of such supply to their respective steam electric generating stations in the Los Angeles area, the net result of which was stabilized delivered prices for gas for twenty years at levels which were competitive with the prices being paid by the electric utilities for the inferior service of the Pacific Lighting companies (Horton, R. 306-10, Jt. App., pp.-7-9). In addition, the utilization of such gas in such electric generating stations would have uncon- tradictably meant that substantially less fuel oil would have had to be burned in the area, in accordance with the demands of the public in southern California, and would have permitted greater compliance with the regulations and desires of the air pollution control authorities in south- - ern California (Horton, R. 303-7, Jt. App., pp. 6-8; Proctor, R. 18156, 18163, 18419.22, It. App., pp. 1314; Ex. 639, 640, R. 35979-82, Jt. App., pp. 364-7). : ae | Tue Commission’s proceedings below involved the pur- ported ‘comparative determination by the Commission of three separate applications for certificates of public con- — venience and necessity under Section 7(c) of the Natural das Act for facilities required to deliver additional gas to California. The proceedings, which were held before an FPO Examiner, involved 170 days of hearing, a tran. data, including a purporting to de- 0 would meet the market requirements at the lowest oost) which was the central basis of its conclusions’ upon the comparative economics involved ; such data were never pre- sented at the hearings, and Edison was denied all oppor- tunity to test or rebut such data, though it made timely request to be permitted to do so in its petition to the Com: : mission for rehearing.“ The Commission also committed a number of additional legal errors which were ‘prejudicial Edison, an intervenor and interested party in the pro- ceedings and one of the entities for whom Gulf Pacific was 5 to transport gas in FPC Docket No. CP63-223, being ‘ aggrieved by Opinions Nos. 500 and 500-A, and accompany- ing Orders dated July 26, 1966, and December:9, 1966, . Tespectively, sought review of said orders in the United States Court of Appeals for the Third Cireuit under Sec- tion 19(b) of the Natural Gas Act (13 USC S 717r(b)). The Court of Appeals having affirmed. the Commissions orders on December 21, 1967, and denied Edison's petition for rehearing on January 24, 1968, Edison seeks here to have said Commission orders reviewed as well as the Third Circuit’s judgment affirming those orders.“ . _ REASONS FOR GRANTING WRIT : Petitioner is gravely.concerned with the effect of the afore- _ said unlawful. actions on its ability to obtain adequate fuel supplies for its electric generating plants in the years. ahead so as to continue te provide essential electric utility service in a reliable, efficient and economical manner to the ; regulatory agencies and the public generally to discontinue : use of conventional fuel oil in such generating plants and _ § Edison’s petition to ission fi ing; p. 14, R. 66 8 Jt Ape N . e Commission for cheat 5. ‘6899 a AN 2 eas ‘ , forth Appendix Cnn teen of theoreti ee * 7 this Court; nor (6) any judicial decision which sanctions such policies and procedures of an administrative agency. | | 5 such actions go unreversed, they must, be expected to oon. tinue to have a significant adverse effect upon the existing asa piviedent that could he expected to undermine the in- 2 of the entire administrative process. -. WHAT THE COMMISSION vm With this background regarding the results of the Commission action, let us review in detail what the Com- mission erroneously did which achieved such unfortunate results for southern California electricity. users. 1. The Commission Tlagrantly violated Its Own Rules Of Practice and Procedure and the Administrative Pro-. | cedures Act and Denied Edison A Fair Hearing. The Commission, in ‘relying on material outside the record without allowing the parties opportunity to meet . ‘and rebut it, or otherwise respond thereto, has violated the requirements of both its own: Rules of Practice and Pro- cedure ($1.26(d)) and the Administrative Procedures Act (Sec. 7(c) and (d)), denied Edison the fair hearing re- quired by thé Natural Gas Act (Sec. 7(¢)) and unlawfully deprived it of its property without due process of law in violation of the Constitution of the United States (Amend. V). The Commission reversed the W of its Presiding Examiner which was based on the record and, in so doing, demonstrably relied upon material outside. the record; it placed: its principal reliance upon a complicated off-the- record. study (which included admitted errors) of the com- parative, cost of the alternative supply arrangements in- . volved in tlie proceeding. The Commission further refused Edison’s timely request to be permitted to meet and rebut ae the oll. che. record material, contrary to the unequivocal mts of the Commission’s.own Rules of Practice aud Procedure and of the Administrative Procedures Act. This is 4 clear violation of the basic requirements of a fair ig in istrative proceedings. As stated by Pro- fessor den in ie Adnitative Lat Fats, | a} ** 5 . “The basic principle is that parties should. have op- _ .Portnnity to meet in the appropriate fashion all ma: - > terials that influence decision. Nothing short of op- portunity for cross examination and presentation of . rebuttal evidence is appropriate for disputed adjudi- cative facts at the Center of the controversy”. ( 2 Davis 3 Administrative Law Treatise, page 403-404). | Better illustrations of the violations of this basie prin- ciple could hardly be imagined than those provided by the case at bar.“ f (a) In reaching its ection: the Commission relied upon a number of reports and studies made by Congressional Committees and others which were nowhere presented in the record and which bore dates subsequentito the close of the record, and denied all opportuntiy to cross-examine or to present rebuttal testimony, even though Edison made . timely request to do so in a its bewegt for — 3 to the Commission. 9 See Ohio Bell Telaphone Co. v. PUC, 301 US 292 (1937) ; ‘Man « ket Street Railway v. Railroad Comm., 324 US 548 (1945) ; Davis, : Adm. Law Treatise, Vol, 2, p. 418; see also annotation f tive decision or findings FFC hearing, and nde presence of interested party or counsel,” 18 et P “The Ade quacy: of Technology for Pollution Abatement,” a report of the Re- search Management Advisory Panel (Subcornimittee on Science and . Astronautics, U.S. . Be sues) [R. 68839, APP.» P. 757]; and Control”, Report to the F Council for Science and Tes by the „ 14 As stated in the Dissent to Opinion. No, 500-A (R. : Jt. App. „ P. 1073): he extent to which the majority relied on these reports in making its determination to certificate a _. , Short-term supply is evidenced in its discussion of re- mote mine-mouth generation and extra high voltage transmission (EHV) in the initial opinion. It said regarding EHV and the West Coast Intertie, ‘One _ 835-mile line is scheduled to be energized in 1969 and the second in 1971.“ For this proposition it cited, ‘Hearings Senate Subcommittee on Public Works, Committee on Appropriations, June 13, 1966.’ It is not coincidental. that the apparent availability ‘of. these sources of energy by 1969 and 1971 coincides with the time TSP" will require more gas. This report obvi- ously had an influential effect on the majority in its decisional process, yet the report deals with such spec- ulative issues as timing, energy, and availability which the protesting parties could not inquire into. Nor was this an isolated instance. Further, in the initial opin- ion, the majority refers to a study introduced by Pa- - Cifie. Lighting pertaining to production of electrical energy in southern California by nuclear plants. This | study was attacked in the hearing by Gulf Pacific as being too optimistic. Nevertheless, the majority, hav- ing the advantage of a report entitled, ‘Comparison of Coal-fired and Nuclear Power Plants for the TVA System’, published in June 1966 by the Tennessee Valley Authority, stated, Whatever merits Gulf Pa- cific’s position. may have had in 1964-when testimony ! on this subject was taken, it now appears that nuclear Seneration is meeting this economic test.“ IR. 68883, . It. App., P. 771] [Our emphasis added]. Of course, a “sinee the TVA report was outside the record it could 1 e f i TSP ref eee e Pacific anit not be questioned or looked into by the protesting parties. Furthermore, in the highly contested matter of air pollution, two. recently published reports were. relied upon by the ‘Commission without the parties having the opportunity to cross examine or introduce ä additional or -counterbalancing evidence. The dictates of a fair hearing would seem to require that they be able to meet them in some manner. On this point I would refer to Davis, Administrative Law Treatise; Vol. 2, ‘Our thesis is that the reconciliation can best be ac- complished by recognizing that the cardinal principle of fair hearing is not that all facts should be in the record or that all facts should be subject to eross- examination, but rather that parties should have op- portunity to meet in the appropriate fashion any materials that influence decision.’ (emphasis added). Thus, I cannot look upon a ‘timely request’ so lightly as the majority and would allow an opportunity for the protesting parties to respond to these documents . which were obviously relied upon heavily by the ma- . jority in its decision to certificate TSP rather than the often promised, bes: never granted, long-term sup- _ ply of natural gas.” (b) The very foundation of the Gonttnisstin’s decision (Opinion No. 500) was a comparative cost analysis on the basis of which the Commission made specific findings (R. 68869, 68880, Jt. App., pp. 787, 798) but which was also outside the record and as to which no opportunity to cross examine, rebut; or prove to the contrary ever has been granted.” The Commission’s analysis in this case was based ) in The Commission itself emphasized R. 68865, t. App., Pushape decisive rola. Lx Opin a Bes Jt App, | econ atte: Je: Opinion Tod tha (at R. . it clear beyond question that the 55 comp 5 ee tion indeed, the Gas n 5 1 tif ng ee bse, ; 7 16 : x upon a gas balance study (such gas balance studies are designed to determine which combination of alternative, . available gas supplies will meet the market requirements at the lowest cost) involving complex assumptions and com- plicated computations that were not disclosed at any time before the Commission’s decision denying rehearing. That this was the procedure followed has really nowhere been denied. Rather, the Commission attempted to justify it, in its brief to the lower. Court (P. 22), upon the grounds of alleged “expertise” and on a purported reliance upon the Market Street Railway base, 324 U.S. 548 (1945). In contrast to the facts in the case at bar, this Court, in that ease in which the outside-the-record material utilized by the Commission was material which the Market Street Rail- way Company’s own employees had ove peer mn ol its own reports, pointed out: No contention is made here that the information was erroneous or was misunderstood by the Commission, and no contention is made that the Company could , have disproved it or explained away its effect for the purpose for which the Commission used it . It does Hil 1 11165 1 : 1 re i 55 l i : 10 Hl Til ui 115 115 U \ „ ‘diced thereby, and it makes no showing that, if a rehearing were held to introduce its own reports, it would gain much by cross-examination, ‘rebuttal, or _ impeachment of its own auditors or the reports they had filed.” (324 U.S. 548, 561-2). (our emphasis) That the contrary is true in the case at bar is demon- strated by Edison’s “Revision of the Commission’s Gas Balance Study to Correct Defects” (Appendix D hereto) which Edison presented to the Court of Appeals to indicate the kind of evidence which could have been presented to the Commission in refutation of its study. Even when using the same principal assumptions used by the Com- mission,” Edison's revision of the Commission’s gas bal- ance “With Gulf Pacific” (the proposal supported by Edi- son) for the Commission’s test year 1970 shows an average cost af gas to the market which is 0.86 cents per Mef less than with the Commission’s gas balance Without Gulf Pacific” (the proposal adopted by the Commission). _ In total dollars this represents more than $10 million less cost per year “With Gulf Pacific” than “Without Gulf Pa- _ Cifie”, when applied to the potential gas market found by the Commission. This Court, in the Market Street Railoay case, went on to say: Due process, of course, requires that commissions proceed upon matters in evidence and that parties have opportunity to subject evidence to. the test of cross-examination and rebuttal. But due process deals with matters of substance and is not to be trivialized by formal objections that have no substantial bearing @ , Nobody in the case at ber has contended, nor could any- one, that more than $10 million less annual cost “With Gulf Pacific” is not substantial. A miach ‘loser ‘parallel to the factual ‘and procedural situation’ in the ease at bar is that which was involved in Ohio Bell ‘Telephone Company v. PUC, 301 U.S. 292 (1987) where this Court, in a unanimous decision written by Mr. Justice Cardozo, reversed.a rate order bécause of the Commission’s having gone outside the record in fixing property values for rate-making purposes, and stated: , Without warning or even the hint of warning that the ease would be considered or determined upon any other basis than the evidence submitted; the ion cut ~ down the values for the years after the date certain upon the strength of information secretly collected ~ and never yet disclosed. The company protested. It ‘asked disclosure of the documents indicative of price _ trends, and an opportunity to examine them, to analyze them, to explain and to rebut them. The response was a curt. refusal. Upon the strength of these unknown ä documents refunds have been ordered for sums mount- ing into millions, the Commission reporting its con- clusion, but not the underlying proofs. The putative : debtor does not know the proofs today. This is not the 7 Fee eee It is condemna- Pea ithout trial.” (301 US 292, 300). a 2 in . ela “expertise” of the Commission in the case at bar, it is also pertinent to point out that reliance | of the Court in the Market Street Railway case was placed upon the fact that there the state Commission was “so experienced. . with the affairs of [the] particular ap- (324 “DS, 548, 860); such justification for the : 110 ie actions does not exist here, for neither the Fro nor its Staff is ‘so “experienced with the affairs” of 7 “li ne ne ane a 8 jurisdiction, with whom it has core into coritaét upon sup: ply issues only occasionally, and whose load balancing op: "erations and economic behavior differ ‘materially from natural gas transmission systems (c.f. El Paso Natural Gas Co. G-12580, 22 FPC 900, 9037·eſ⁊a As one demonstration of thé’ Commission’s lack af ex- pertise in this regard, we would respectfully urge the Court to consider this fact: tlie Commission's gas balance study “Without Gulf Pacific”, which was disclosed for the first time in the Commission’s decision denying rehearing (Opinion No. 500-A, R. 69333-88, It. App. pp. 1076-81), pos- tulates gas storage operations which force the Pacific Lighting system into the winter peak heating season with | a zero gas storage e e of need. The oo- currence of a severe peak in Décember or early January — could literally mean disaster from the ‘standpoint of thoge ~ distributing companies’ operations. No one has claimed, and no one with any expertise could claim, that the Pacific Lighting system could be operated this way, for it ‘would violate every principle of sound management of a gas aut Gulf Pacific” by employing a supply which admittedly economics’ of the situation, admittedly without u consider: ation of all ot the cost factors which would inécesbarily ba, involved. The recognized. hecessity 0 buying m ‘eo 3 would obviously require the construction of a completely new study and a completely new gas balance to make any _ orrect determination of the cost of gas at the load center and of the most economic’ supply combinations to meet at least the minimum requirements. Such a new study, to be electric generating plants in that area, would no so, the . FPC’s view have an appreciable effect upon air pollu- tion control,” in spite of the determinations of the local air pollution control authorities to the contrary® and in spite of its own previous recognition that “the state and local agencies „have the best knowledge of the smog problems” and that the F'PC should not “pre-empt the ex- pertise of the California authorities” (re El Paso Natural Gas Co. 22 FPC 900, 903). In this case, the Commission ‘did effectively pre-empt the expertise of the California, authorities and create a serious conflict between its policy position and that of the local regulatory authorities and did so because of its conclusion, based upon its dost study that did not reflect all the costs, that it would be more economi- cal (supra, pp. 19 and 20). There is no such conflict between W air pollu- tion poliey or the federal agencies directly responsible therefor, such as the Department of Health, Education and Welfare and local authorities, but, rather, the announced federal policies relating to air pollution and policy actions of the federal executive department and enactments of · the Congress support the aims and objectives of the local authorities involved (see infra, pp. 22-4). A resolution of the conflict created in this case between the pre-emptive actions by the FPO on the one hand and the air pollution ake control policies of the federal executive and legislative branches and the local air pollution control authorities on the other hand is urgently needed to enable those canght on the horns of the dilemma thereby created to resolve the resulting Problems and to eliminate the cross-currents of administrative jurisdiction and control which, until re- ate eee tional policies on air pollution. "3 Opinion No. 300 K. 68839, j E Griswold, 0 1718} Rules 62 and 621 of APCD, Ee de 8 JR me 238.6. 22 : This FPC created conflict seems. clearly in violation of decisions of this Court as well as the policy pronouncements and legislative enactments of the federal government. v It is well established that the Constitution, in conferring upon Congress the regul ation of commerce, never intended to prevent the from legislating upon all subjects relat- ing to the health, life and safety of their citizens. In elch Co. v. New Hampshire, 306 U.S. 79 (1939), this Court stated: ee, ee e, c Plainly Congress by mere grant of power to the Inter- _, State Commerce Commission did not intend to super- sede state police regulations established for the protec- tion of the public sing state highways.” (306 U.S. 79, and in Huron Cement Co. v. Detroit™ this Court stated: Legislation designed to free from pollution the very : air that people breathe clearly falls within the exercise : “of everi the most traditional ‘concept’ of what is oom. 3 : Ne know as the police power.” (362 U.S. 440, ü Un the ubsenee of conflict or incompatibility of such loeal police regulations dealing with air pollution with some Aaeariy defined pélivy of the Federal Government, the regu-. - lations and their objectives are entitled to full recognition and support and should not be frustrated by any action of The clearly defined policy’ of the federal government supports such local air pollution control regulations. As stated by this Court in the Huron case, supra, at page 445: 4 Clean Air Act of 1963; Public Law 88.206; Air Quality Act of pene 90-148, disc ‘de ‘11282 dated 25, 196 relating to restrictions governmental — . R. 4415, Mar e 1 As disclosed record, the APCD been most successful in defending its Penton in 8 People Ply. CER en ee {une 2 1 5 0, Jane 3, 1956) 2 wood Mfrs. of Cal. etc, Ia CA2; 859, 201 Pad 587 1955), Amen Coment Co. t Detroit; 361 US: 40 (18600. 0 8 7 8 : 1 2 1 7 2 5 “By contrast, the sole aim of the Detroit.ordinance is the elimination of air pollution to protect the health 2 enhance the cleanliness = ee : Congress recently recognized the importance legiti- macy of such a purpose, when in 1955 it provided: oe ln recognition of the dangers to the publie health and welfare, injury to agricultural crops and livestock, da e to and deterioration of property, | and hazards to air and ground transportation, from _ air pollution, it is hereby declared to be the policy of ‘sibilities and rights of the states and local govern- ments in controlling air pollution, to support and aid technical research to devise and develop methods of Sorernment air pollution control agencies and other public or private agencies and institutions in the |. formulation and execution of their air pollution abatement research programs’. 69 Stat. 322; 42 “Congressional recognition that the problem of air . a matter of state and local con- cern is ifest in this legislation. Such recognition is “underlined in.the Senate Committee Report: = The committee recognizes that it is the primary responsibility.of State and local governments to pre- ' Cong., Ist Sess. 3.“ Fas This compatible and supportive Federal Polic has been further supplemented by the Clean Ai Act adopted De- cember 17, 1963, (Public Law a A At H. R. 6518) which contains, among other things, ‘Section 2(b) This reference is to the act formerly known as the “Clean Air Act” adopted on July. 14, 1955, and now known as “An act to provide 5 More recently (in fact, last year) the Congress enacted the Air Quality Act. of 1967 (Public Law 90-148, 81 Stat. 485) reiterating a national policy to encourage and not to _ displace action by local agencies to abate air pollution. may be met in the manner which is most desirable from the standpoint of the public interest” (EI Paso Natural Gas Company Docket G-16235, 30 FPC 77, 92). After hav- sion arbitrarily refused, in its Opinion and Order, to com... _ pare and analyze the alternative proposals before it on the comparative basis upon which the proceeding was or- dered, thereby denying to Edison and the other proponents: of the Gulf Pacifie Project any true comparative hearing (ef. Ashbacker Radio Corp. v. FOC, 326 US. 327 (1945)). That off-the-record study, on which the Commission based its cost. conclusions, was, aside from its other pro- cedural and substantive defects, a ‘One-year study pur- portedly covering the year 1970, but using 1968 levels of gas supply to the market, which it conceded to be grossly inadequate.” This was the basic: economic “evidence” con- sidered by the Commission (Op. 500; R. 68869, Jt. App, p. 787; Edison Petition to Commission for Rehearing, pp. 48-51, Exh. C to Petition for Review, pp. 5la, et seq.; Op. than fifteen days before the commencement of a hearing on a pending lication and seeks rity to serve some or all of the markets . petege ee ee . or is o ise competitive there- |. Of ee ndings Caowhene made n fOr beating, in the absence 0 no in case), until a C mission decision on the pending applicati lacked ke power to compel competitive ings ; it improvised the purported suing invi alternative of tations, and provi ample time for filing. > 5 : . *¢ P bli 1 1 Request for Early Hearing, filed June 7, 1963, R. 55204210 It. a pp. 468-74, Motion for Prompt Consolidated Hearing of : C163. Fe and CP63-223, filed June 21, 1963, R. 55252-266 jt. App., pp. 475-89, Motion to ite ‘filed 2; 1963, RP 55349-361, Jt. App., pp. 490-502. See Appendix C for a more : 0 dings). Time 500A, R. 69323-4, Jt. App., Pp. 1066-7) in a proceeding which it well in advance had “advertised” as one in which it would determine “how the long-term needs for natural gas deliveries to Southern California may be met in the manner. which is most desirable from the standpoint of the. public interest”. (Emphasis added). (Re El Paso Natural Gas Company, FPC Docket No. G-16235, 30 FPC 77, 92). ‘The Commission’s determination in its decision which followed (based upon its asserted “objective” review of the long term and upon its “knowledge”. external to the record) that “flexibility”, which avoids the making of _ Commitments necessary to any long-term solution, was to be the governing criteria was tantamount to an arbitrary abandonment of any long-term solution, and constituted a reversal of the ground rules previously laid down by it as the reason for its extensively delaying the processing the Gulf Pacific application and for ordering a comparative hearing. Certainly, as a short-term solution, the Tailored Supply Program (TSP) sponsored by the gas companies and adopted by the Commission is not mutually exclusive with the long-term solution provided by the Gulf Pacific Project, and such comparison is thus not proper for a com- parative hearing.“ (Cf., Ashbacker, 326 US. 327, supra.) The Commission in its opinion and order doesn’t even make a finding of mutual exclusivity. As pointed out in * * 7 * 5 denied.“ (R. 68904, It. App., p. 822 27 the’ Dissent: “There is no finding that additional 5 : ) of beyond 1968 are not necessary. There is no finding that El Paso expanded is not required. Neither is there a finding on @ comparative basis as to why Gulf Pacific must be versal, after the conclusion of the hearing, of the ground rules which were theretofore used by the Commission as a basis for delaying the prompt processing of the Gulf Pacific Project, constitutes a denial to Edison of a prompt 4. The Commission Unlawfully Applied The Provisions Of The Natural Gas Act And In So Doing Exceeded Te Authority, While assuming that there would be adequate future supplies of gas available to serve the needs of the Califor- ~ nia market and that there would be no future problems with respect to gas acquisition and supply (R. 68841, Jt. App., p. 759), the Commission applied improper stand- ards of public convenience and necessity® and in so doing exceeded its statutory authority by denying to the southern California publie a higher level of gas service, which the record shows it wanted and was willing to pay for, simply 21 App. B. hereto, pp. 10a-1 Ia. an : rad tid ot question the fact that Gulf Pacific met the traditional e of public convenience and necessity (i.e, adequacy of supply and market, economic feasibility and ility to finance Kansas Pipeli Gas Company, et al, 2 29 193); pollution is relccted ie gg enten. Tad in Los Angeles County expended nearly $108 million for air control equipment 28 Se because the Commission did not agree with the public’s | desires (or the reasons therefor) for increases in the level of gas service to the area. In so doing, the Commission made no finding and expressed no determination that the satisfaction of the public’s insistent demands in this regard would deprive other areas of adequate gas service. The denial of the Gulf Pacific Project (which the record showed without dispute would provide for substantially less burn- ing of fuel oil and a higher level of gas service in the area in accordance with the public's demands — Exs. 639-640, R. 3597982, Jt.App., pp. 364-7; Proctor, R. 18156, 18168, Jt. App., pp. 131-2) for such a reason, involves a misinter- pretation and an arbitrary, capricious and unlawful ap- plication of the statutory standard of public convenience _ and necessity. (Cf., re Kansas Pipeline & Gas Co., 2 FC 29, 56; Union Pacific R. Co. v. Public Service Comm., 103 Utah 459, 135 P(2d) 915, 918.). It is no different in this respect than would be an administrative determination in 2 Washington that the people of southern California who prefer to enjoy total electric living should be deprived. of the opportunity to do so because of a determination that (b) The Commission U wiully Applied The Provisions 2 Of The Natural Gas Act Relating To Direct Indus- The Commission erroneously interpreted the exemption kor direet sales to be limited. to situations in which direct sales are “a useful adjunct to the normal operational pat- tern of interstate pipelines” (R. 68881, It. App., p. 799). This restrictive interpretation of Section 1(b) (see App. B., p. Sa) of the Natural Gas Act is nowhere to be found in the Act, is without authority in law, and is contrary to 5 the intent of the law. * 8 „ As stated in the dissenting opinion, “Such a decision direct sales from Commission jurisdiction” (R. 68956, Jt.App., p. 874) The effect of the ) ion’s attempt so to exceed its statutory authority by denying a certificate to Gulf Pacific is to deny to Edison the benefits of, and property rights in its contracts underlying the Gulf Pacific Project without due process of ly mp. 1 ee In Opinion No. 500-A (R. 69324, It. App., p. 1067), the Commission purports to explain away its aforesaid state- ment from Opinion No. 500 regarding direct industrial sales as being directed at the nature of Gulf Pacific’s pro- posed operation as an exclusively industrial pipeliné and not at direct sales as such, but then goes on to refer to other cases where the Commission had certificated pipelines which do not make sales for resale“ “where the particular a : * e Corp. $68 051 685 * Natural Cas Piper Co. of America, Docket No. CP 62:243, et al., Opinion No. 474 issued Sen | 965; 34 FP@.771:' ee as lat year in other proceedings of commingling gus fo f ‘Florida Gee Tae Ce FPC Docket 516 issued March 1, 1967). N x S 2 TE 1 i at . 8 a i 5 K f 1 30 Pa cireumistances indicated that such operations. would not adversely affect other gas customers in the area Served. The circumstance that the Commission may have properly applied the standard of the Natural Gas Act in other casés, of course, does not constitute an adequate answer to the charge that it improperly applied the law in this ease nor does it justify the application in this case of an Waden Wege engage Mar THE COMMISSION DID NOT DO 5. The Commission Failed, Or Refused, After Deter. | mining To Certificate The El Paso And Transwestern Pro- posals, To So Condition Such Certificates As to Protect Request By Edison For Such A Condition. N Alfter making its determination that the substitution of gas for conventional fuel oil in electric generation would not significantly contribute to air pollution control (R. 68839, Jt. App., p. 757) the Commission concluded that economics should be the con lling consideration (R. 68868, It. App., p. 783), but thereafter arbitrarily refused to condition its certificate, in an appropriate. way, which " © As found by thé Eee & 6662931 8 App. pp. 6746) i ect would served. : the‘record showed that operations of the Gulf - SS desigried — ae Lighting to effect the most economiical level of service from the standpoint of the gas companies A 6887-8, Jt. App, pp. 768 6). It was also established and unchallenged in the record that such level of service R. 69322, It. App., p. 1065) and is not the most economical level ‘from their standpoi (c.f.,. Dissent to Op. 500, R. 6894 2.3, Jt. App., pp. 860.1). . been en, It is respectfully submitted that, under such conditions and so long as economics are deemed to be the controlling criteria, the only way in which the interests of Edison and its customers can be afforded due ‘process, in such a case, is for the Commission’s order to contain a condition which would provide that such gas could not be made available by the gas companies to the electric utilities for electric generation when there were cheaper alternatives available to the electric utilities. Under such circumstances, the in- clusion: of such a condition is necessary to provide equal protection and due process, and cannot be discretionary — with the Commission, WHAT THE COURT OF APPEALS DID. : At the outset, in view of the Court of Appeals having taken occasion in its opinion to make reference to the circumstances: that Humble Oil & Refining Company and ‘other producers have terminated their gas supply con- tracts and that Gulf ‘Pacifie Pipeline Company has now been dissolved, we feel constrained to point out to this Court the fact that it was previously determined by the Court of Appeals, following motions to dismiss and full argument thereon, that such cireumstances do not render _ the ease moot (Order of Court of Appeals dated Sept. 29, 1967 on Intervenors’ Motion to Dismiss) and that it did not in its decision overrule its determination in this as indeed it could not have properly done’ We have m. -_ 8 Reference is also made to Edison's Answers to. Motions to I cluded in Appendix E, a brief summary of the sound bases for such determination under the principles established by | City of Pittsburgh vs. PC, 287 Fady 741 (1956), Scenic Hudson ‘Preservation Conf. v. VC, 354 F(2d) 608 (1965), FPC, 169. ¥ (2a) 302, 899 (1948) and an example of the appropriate relief which could now be granted to petitioner than announce its conelusic that on reviewing the record, “the questions compel answers in the affirmative” and did that all three conditions had Court of Appeals’ affirm- " Feached stich conclusion.’ However, it is dear that it did err sion’s action is ascertained the reviewing viewing power is estopped | from: further consideration of the Commission’s action.” (our emphasis). In doing so, the Court of Appeals eréated . an inherent ambiguity which it declined, to clarify when called to its attention by Edison’s Petition for Rehenring This Court’s attention is respectfully directed to the fact that such statement of the Court of Appeals is‘subject to two very different interpretations,’ namely: (1) that the Court of Appeals concluded that the same basis which ‘the Commission used was rational, or (2) that the Court of Appeals concluded that a basis different from that used by the Commission could the Court of. Appeals was demonstrably in error: (a) If the Court of Appeals affirmed the * 5 U.S., 944 (1957); C. E. O. vs. Chenery Corp., 318 U.S. 80 lis); see also FPC vs. Idaho. Power Co,, 344 U. 17 ~ (1952)) and with decisions of other Courts of Appeal con- cerning the proper review of decisions of administrative | agencies, (Pan American Petroleum Corp. v. FPC, 376 F(2d) 161, 174 (1967)). These cases hold that once it is _ By the regulatory agency is unlawful, its inquiry, is prop. g- erly at an end and that the reviewing court cannot ~ Properly sustain the action on some different basis, Neither ol the cases cited by the Cour of Appeals in its decision — _ Supports.s conttary view. eon the other hand, if the Gourt of Appeals afirmed. 935-8, 1065-6), was not a study upon which the Commission's order. could be rationally based: 124 e) The Commissions decision was admittedly based upon its own comparative cost study which in turn, was \. admittedly based upon the Commission’s “Gas Balance” (ess references in preceding paragraph and Comm. Br. to CA for the. 3; Cir., p. 21), neither of which was ever presented in the record, and neither of which petitioner, operations which would force the Pacific Lighting system into the winter peak heating season with a zero gas stor- d Balance “at a time of need” (Comm. Br. to the CA for e 3rd Cir, p. 28). No one claimed, and no one with any cs expertise oon claim, that the Pacific Lighting system could (ü! The Commission’s response, while not denying that its “Gas Balahce Study” reflected such zero balance, was that the problem could be resolved by simply buying more that the buying of more gas, Le., a higher level of service, produce high (B. 68847-48, R. 68879, Jt App. ATSE AE, 75 is a purported testing of the economics of the situation ad- o~ 35 ; mittedly without a consideration of all of the cost factors sity of buying more gas would obviously require the con: struction of a completely new study and a completely new gas balance to meet at least the minimum market require- ments in order to make any rational determination of the ee ea at the load center and of the most economic 4 Before the Court of Appeals, the Commission, while con- and the Commission, conceded in its argument before the Court of Appeals (Com. Br. to the C. A. for the Third Cireuit, page 21) that the system could not be so operated. without purchasing more gas than was reflected in its study. The costs of such required additional gas were also not teflected in the study (see pp. 19-20, supra). The Court of Appeals obviously could not properly con- clude that the orders of the Commission were rationally based upon the same basis as that used by the Commission inadequate, incompléte and erroneous. 2. The Court’s Conclusion That The Commission’s Action Was Supported-By The Record And Reached By Pro- _ cedures Required By Law Is In Error And Sanctions Such A Departure From The Accepted And Usual Course Of | Administrative Procedure As To dan For The Exercise Of This Court's Power Of Supervision. 20K As we have heretofore demonstrated supra pp. 12 et seq.), the decision of the Commission in this proceeding — was made in reliance upon materials and studies that were outside of the reoord, on which its findings on comparative economics were based (R. 68869, 68880, Jt. App., pp. 787, 798) in violation of See. 19(b) of the Natural Gas Act (App. B, pp. 8a-9a) and with respect to which the petitioner was denied all opportunity for cross-examination and presenta- tion of rebuttal evidence, despite its timely request that it be permitted so to test and contest the disputed adjudica- tive facts covéred thereby which. were at the very center . of the controversy. a 5 The Commission's reliance upon week off-the-record studies constituted a patent violation of the Commission’s own Rüles of Practice and Procedure (§ 1:26(d)), and the Administrative Procedures Act (Sec. 7(d)), both of which require that any party ‘shall on timely request be af- forded an opportunity: to.show the contrary” when the ad- ministrative agency relies on material not appearing in evidence in the record. (See App. B, pp. 12a 14a). Tus actions of the Commission also violated the guide- lines heretofore recognized in Ohio Bell Tel. Co. vs. PUC, 301 U.S. 292, 300 (1936), where this Court, in reversing a rate order because of the Commission’s having gone outside’ of the record in fixing property values for rate- making purposes, stated: “This is not the fair hearing essential to due process. It is condemnation without triaj.” ‘If: the Court of Appeals’ decision constitutes an in- tended judicial approval of the procedures followed by — —¼——'. — —— — 0 = _ the Commission here, under the guise of administrative _ . “discretion” referred to in the Court of Appeals’ decision, and if such decision: were allowed to stand, it could, we submit, lead to a breakdown of the integrity of adminis- trative justice and procedural due process. We are con- fident that in the case at bar, as in the past, such denial of a fair hearing essential to due process is of concern to this | Court and would not: be sanctioned by it and that this Court. will invoke its power of supervision. (Ohio Rell Telephone Co. v. PUC, 301 US 292, 30)... 2. Failure Of Court Of Appeals To’ Resolve quest to do so by Edison in its petition: to that Court for rehearing, denied to Edison any effective review of the Commission orders ‘as required by Section 19(b) of the - Natural.Gas Act. Yet in the absence of supporting reasons by the Court, such affirmance of. unlawful Commission action could be construed as a precedent supportive of such - unlawful action in future administrative proceedings. 3 When a party, such as Edison here, has a statutory - right to a review of administrative agency action, such review should, in fairness, comprise a consideration of and disposition of all the issues raised by the petitioning Party and the articulation of the basis for such disposition. (et. FIC v. Standard Oil Co, 355 US 396 (19380). This the Court of Appeals has clearly failed to do and such failure is legal error, resulting in a denial to Edison of its statutory right of appropriate judicial review under Sec- tion 19(b) of the Natural Gas Act. ee