Appendix — Mobil Oil Corp. v. Federal Power Commission
Supreme Court brief1974
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78438 °
SEP 6 19
MICHAEL RODAK, JR.
IN THE -
United States Court of Appeals
FoR THE FIFTH CIRCUIT
No. 72-1114
On Petitions to Review Orders of the
Federal Power Commission
JOINT APPENDIX
{PART DH
OTHER SOUTHWEST AREA RATE CASE
SHELL OIL CoMPANY, et al.,
Petitioners,
Vv.
FEDERAL POWER COMMISSION,
Respondent.
WILSON - EPES PRINTING Co.. INC. - RE 7-6002 - WASHINGTON, D. C. 20001
ROSY ENE EES LOPES VRIES ster MNT, RT SANTA RRR ae —
FOV Ae Qa:
-——
TABLE OF CONTENTS
DOCUMENTS
Documents
Order Instituting Area Rate
Proceedings, AR67-1, et al.,
issued 2/28/67
Order on Motions for Reconsider-
ation and Clarification, issued
4/26/67
Order Clarifying and Enlarging
Definition of Area, issued
12/8/67
Presiding Examiner’s Initial
Decision on Other Southwest
Area Rates, issued 9/22/69
Errata Notice issued 10/31/69
Opinion No. 607, Opinion and
Order Determining Just and
Reasonable Rates for Natural
Gas Produced in the Other
Southwest Area, issued
10/29/71
Errata Notice issued 1/5/72
Amoco Production Co. Supple-
mental Application for Rehear-
ing, received 11/26/71
Shell Oil Co., et al.
Application for Rehearing,
received 11/26/71
Mobil Oil Corp. Application
for Rehearing and Reconsidera-
tion, received 11/26/71
Superior Oil Company Application
for Rehearing, received
11/26/71
Record Pages
R.10,911-10,934
R.11,131-11,133
R.11,287-11,288
R.11,319-11,511
R.11,512-11,514
R.12,083-12,208
R.12,210-12,211
R.12,212-12,214
R.12,216-12,278
R.12,279-12,295
R.12,297-12,308
App.
Pages
2- 31
32- 35
36- 37
38-294
295-297
298-420
421-422
423-426
427-507
508-522
523-534
ii TABLE OF CONTENTS—Continued
App.
Documents Record Pages Pages
New York State Public Service
Commission Application for
Rehearing, received 11/29/71 R.12,316-12,327 535-544
Order Granting Rehearing for
Purpose of Reconsideration,
issued 12/23/71 R.12,330 545-546
Opinion No. 607-A, Order on
Rehearing, issued 1/17/72 R.12,331-12,339 547-556
Mobil Oil Corporation Applica-
tion for Rehearing and Recon-
sideration of Opinion No.
607-A, received 2/8/72 R.12,341-12,344 557-560
Public Service Commission for
the State of New York Petition
for Rehearing, received 2/11/72 R.12,347-12,348 561-562
Errata Notice to Opinion No.
607-A, issued 3/3/72 R.12,350 563
Order Denying Rehearing, issued
3/8/72 R.12,351-12,353 564-567
IN THE
United States Court of Appeals
FoR THE FIFTH CIRCUIT
No. 72-1114
On Petitions to Review Orders of the
Federal Power Commission
JOINT APPENDIX
(PART I)
OTHER SOUTHWEST AREA RATE CASE
SHELL OIL COMPANY, et al.,
Petitioners,
Vv.
FEDERAL POWER COMMISSION,
Respondent.
[10,911]
Order Instituting Area Rate Proceeding
[10,911]
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Docket Nos. AR67-1, et al.
Before Commissioners: Lee C. White, Chairman; L. J.
O’Connor, Jr., Charles R. Ross,
Carl E. Bagge, and John A.
Carver, Jr.
AREA RATE PROCEEDING, et al.
(OTHER SOUTHWEST AREA)
ORDER INSTITUTING AREA RATE PROCEEDING
(Issued February 28, 1967)
On September 28, 1960, the Commission in its decision
in the Phillips case (24 FPC 537), and its Statement
of General Policy No. 61-1 (24 FPC 818, stated that it
proposed to fix just and reasonable rates for independent
producers of natural gas on an area basis. Since that
time four area rate proceedings have been instituted.
The Permian Basin proceeding (Docket No. AR61-1) has
been decided by the Commission and a decision was ren-
dered on appeal by the United States Court of Appeals
for the Tenth Circuit on January 20, 1967, in which the
Commission’s decision was affirmed in part and remand-
ed on certain issues.* The hearing in the Southern Lov-
isiana proceeding (Docket No. AR61-2) has been con-
cluded and the presiding examiner has rendered his in-
* The Commission intends to request the Solicitor General to seek
Supreme Court review on behalf of the Commission,
2
i WP NEI NGI Meer 2
a le A -
PRY ERT SD Na
[10,912]
Order Instituting Area Rate Proceeding
termediate decision. The hearings in the Hugoton-Ana-
darko (Docket No. AR64-1) and the Texas Gulf Coast
(Docket No. AR64-2) proceedings have also been con-
cluded. These area proceedings will establish just and
reasonable rates for about 79% of gas sales in interstate
commerce, based on 1962 sales.
By this order we initiate a proceeding to determine
just and reasonable rates for the Other Southwest Area
described in Appendix A hereto. Sales in this area in
1962 accounted for approximately 14% of total sales in
that year, so that upon conclusion of that proceeding
[10,912]
rates will have been established for about 93% of the
natural gas sold in interstate commerce. The remaining
7% of sales which are in widely scattered areas will be
treated separately from this proceeding.
The parties have had an opportunity in the current
Hugoton-Anadarko and Texas Gulf Coast proceedings to
present evidence directed not only to the principles enun-
ciated in the Permian Basin decision but also to the
questions raised in that decision on which other evidence
was invited. Thus, presumably there exists in the record
of these proceedings extensive evidence with respect to
current gas costs, demand-supply conditions, reserve-
production ratios, nation-wide flowing gas costs, alloca-
tion methods and other similar matters, much of such
evidence substantially duplicating that presented in the
Permian and Southern Louisiana records. No good rea-
son exists for a re-trial or further duplication of this
evidence in the proceeding being initiated by this order.
Accordingly, the presiding examiner is directed to in-
corporate by reference all the evidence adduced in the
[10,912]
Order Instituting Area Rate Proceeding
joint record in the Hugoton-Anadarko—Texas Gulf Coast
proceedings (and may permit incorporation by reference
to the Permian and Southern Louisiana proceedings)
provided that specific portions of the joint record may be
excluded upon a clear showing of irrelevance or imma-
teriality. Evidence may be presented on any new issues
record but cumulative or repetitive direct evidence, cross-
examination or rebuttal shal] not be permitted. It is our
intention that, absent new evidence, the same issues shall
not again be tried in this proceeding but that non-repeti-
porated by reference. ee ee
will require continued attention of the parties, we are
confident that the experience gained in the past and pend-
ing proceedings will do much to expedite the hearings
herein and lighten the burden of all parties concerned.
[10,913]
Order Instituting Area Rate Proceeding
number of Questionnaire respondents, however, the Com-
mission, by orders issued January 9, 1964, and June 12,
1964,
[10,913]
indefinitely deferred the requirement to furnish certain
data including that involving gathering and processing
costs in the subject area. It is now appropriate that the
gathering and processing data be furnished for the Other
Southwest area and we are accordingly today terminating
the deferral of the submission of such data. While we
would normally require submission of questionnaire data
within four months, we have extended the period to eight
months in order that the parties may have the oppor-
tunity at the prehearing conference to consider stipula-
tions or agreements as to gathering and processing costs
to be utilized in the proceedings. If, after the initial
prehearing conference, the presiding examiner reports to
the Commission that agreement has been reached which
may make it unnecessary to obtain the deferred data as
required by the order referred to, the Commission will
then reconsider the order. If no such agreement or other
satisfactory disposition is reached, the respondents will
proceed to furnish the data in accordance with the order.
To expedite the proceedings at the prehearing confer-
ence and the disposition of data requests, any parties
interested in making data requests or in receiving copies
of such requests made by others shall so advise the Sec-
ee Se ee ee ee
of the order instituting this proceeding. _ The Secretary
teal ~ 0 Te ORR eRe 2D
[10,913]
Order Instituting Area Rate Proceeding
This proceeding, like the Permian and pending pro
ceedings, will result in the establishment of just and rea-
sonable rates under Sections 4(e) and 5(a) of the Act
applicable to all persons making sales of gas in inter-
state commerce from the production areas delimited here-
in. These persons are listed in Appendix B attached
hereto and are made respondents in this proceeding.
A number of pipeline companies make purchases in
:
i
¢
:
au
os
propriate that these pipeline purchasers be made
ents in this proceeding. In Appendix C are listed
pipelines making purchases in the area covered
proceeding.
This proceeding will also establish the refunds, i
which may be required under Section 4 of the Na
Gas Act, and all proceedings involving increased rate
ference all proposals for stipulations as to gathering and
6
SLRs Ger eee
. . —
i ee eee
: Mee or”
[10,914]
Order Instituting Area Rate Proceeding
costs and all other requests for data previously
made shall be considered and disposed of by the presiding
examiner. At the initial and subsequent prehearing con-
ferences which the presiding examiner may schedule, con-
sideration should be given to the incorporations by ref-
erence herein required and such other matters as may be
deemed relevant to expedite conclusion of this proceeding.
The Commission orders:
(A) A proceeding is hereby instituted pursuant to
Sections 4, 5, 10, 14, 15 and 16 of the Natural Gas Act
to determine the just and reasonable rate or rates for
the sales of natural gas subject to the jurisdiction of
the Commission produced in the geographical areas desig-
nated in Appendix A and public hearings shall be held in
this proceeding as determined by the presiding examiner.
All persons named in Appendix B hereto and all parties
on whose behalf such persons have filed FPC gas rate
schedules for sales in such areas are hereby made re-
spondents herein.
(B) All pipeline purchasers named in Appendix C
hereto are hereby made respondents herein.
(C) The proceeding hereinbefore instituted shall also
encompass the investigation of facts, conditions, practices,
or matters relating to the sale of natural gas produced
in said geographical area to aid in the enforcement of
the provisions of the Act or in prescribing rules and
regulations thereunder, and shall also encompass issues
as to whether any rate or charge demanded, observed,
charged or collected by any natural gas company in con-
nection with such sales is unjust, unreasonable, unduly
discriminatory or preferential.
dea ef en in iad 2 eer rey Say Eee 7 Seay
bali be panel Se oat hte
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Pe ee ee Te ee ae Te —s
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Me re Sn Ee
[10,914]
Order Instituting Area Rate Proceeding
(D) The Section 4 proceedings listed in Appendix D
are hereby consolidated for purposes of hearing with the
proceeding herein instituted.
(E) Any person other than the respondents specifi-
cally named in Appendices B and C who desires to par-
ticipate as intervenor in the hearings designated herein-
above ordered to be held, shall, on or before March 28,
1967, file a notice of intervention or petition to intervene
with the Secretary of the Commission in accordance with
Section 1.8 of the Commission’s Rules of Practice and
Procedure.
(F) All respondents or intervenors making data re-
quests or wishing to have such requests served upon them
shall so notify the Secretary of the Commission on or
before March 28, 1967.
[10,915]
(G) A prehearing conference shall be held pursuant
to the Commission’s Rules of Practice and Procedure in
a Hearing Room of the Commission at 441 G St., N. W.,
Washington; D. C., commencing at 10:00 a.m. June 28,
1967 before a hearing examiner designated to act as the
presiding examiner in this proceeding for the purpose
of but not limited to affording all interested persons an
opportunity to be heard with respect to the procedures
to be followed in expeditiously determining the issues to
be tried in these proceedings. At the conclusion of the
prehearing conference or as soon thereafter as may be
feasible, the presiding examiner shall set the dates for
the service of testimony and exhibits by the staff, parties,
and interveners, and the date for commencement of the
hearing and cross-examination.
ot are gp cerar.
V2 een ope
oa 2 “STEAD RENE ER
. : Se Ry ee erage I:
[10,915]
Order Instituting Area Rate Proceeding
(H) Howell Purdue, a duly qualified and appointed
hearing examiner, or any officer or officers of the Com-
mission designated by the chief hearing examiner for
that purpose (See Delegation of Authority, 18 CFR
3.5(d), ete.) is designated to act as presiding examiner
in this proceeding as of the date of the issuance of this
order and is authorized and directed in so doing to exer-
cise all of the functions and authority prescribed by the
Administrative Procedure Act and the Commission’s
Rules of Practice and Procedure, including the holding
of the above scheduled prehearing conference and such
other prehearing conferences as he may deem advisable
to expedite the proceeding herein.
(I) A copy of this order shall be published in the
FEDERAL REGISTER and served upon each of the re-
spondents set out in Appendices B and C and upon in-
terested State Commissions as is provided for in Section
1.19 of the Commission’s Rules of Practice and Proce-
dure.
By the Commission. Commissioner Ross dissenting in
part filed a separate statement ap-
pended hereto.
[SEAL]
JOSEPH H. GUTRIDE
Secretary
Re a te tae a ee a -
[10,916]
Order Instituting Area Rate Proceeding
[10,916]
APPENDIX B
RESPONDENTS TO THE AREA RATE PROCEEDING
(OTHER SOUTHWEST AREA),
DOCKET NOS. AR67-1, ET AL.
J. S. Abercrombie Mineral Ashland Oil and Refining
Adams, N. L., Sr. Athens, E. J
Alexander, C. W. Atkins, Katherine Adger
Alexander, E. B., Jr. Atlantic Richfield Company
Allied Materials Corporation Austral Oil Company, Inc.
Alston, Francis H. ;
Amax Petroleum Corporation B and A Pipe Line Company
A’Mell Oil Bailey, Virginia Mitchell
Amerada Petroleum Corporation K. Baker, Receiver
Americana Oil & Gas Properties Bander, Joe
of Texas, Inc. Barker, Walter L.
American Exploration Develop- Barnes, Earl E
ment Corporation Barnwell Debardeleben Oil
American Petrofina, Inc.
American Petrofina Company of Barnwell and Kinzler
Barnwell Inc.
American Realty and Petroleum Barnwell Production Company
Corporati: Barrett, Charlotte Osborn
American Trading and Produc- Basin Operating Company
tion tion Bass, Harry W.
Amigos Oil & Gas Ventures Baton, J. W
Anadarko Production Company Thelma Bauerdorf and Con-
An-Son Corporation stance Cartwright Trustees
Anderson, Jacqueline for George F. Bauerdorf,
yee nome ga
Andrewski, H. C. :
M. ~~ Si gaa
Anisman, Morris Beolt, Alien
4 Beard Oil Company
Apache Corporation C.M
Apco Oil Corporation Beckett, C.
Argo, M. M. — Production Company,
Exploration Company :
Arrington, J. H. Belgram Oil Company, Inc.
Thomas N. Berry and Company
Biedenharn, Betty Osborn
Big Chief Drilling Company
Biggs, Robert A., Jr.
Biglane, D. A.
Blackburn Gasoline Plant
[10,917]
Order Instituting Area Rate Proceeding
Bond, Durbin
Bond Oil Corporation
Bond, Roland S.
Borden, S. P.
Boteler, R. H.
Boteler, R. T.
Bracken Oil Company
Brandenburg, R. P.
Breckenridge Gasoline Company
[10,917]
Brooks, Jesse M.
Brooks, Jesse M. & M. James
Brooks
Zach Brooks Drilling Company
Brown, George R.
Brown, L. D. and Trant, Sam
Broyles, C. W.
Broyles, Harvey
Bryant, W. H.
Buckwalter, Charles F.
Burk Gas Corporation
Burk Royalty Company
Burnett, T. C. and Ruby C.,
Estate
Burnham, Joe M.
Burns, L. T., Estate
Burns, R. G.
Burns, R. H.
Burton, C. P.
Butler, J. R.
C. F. and H. Oil Company, Inc.
Ceddo Pine Island Corporation
California Company, a Division
of Chevron Oil Company, The
Inez Calmes Executrix of the
Estate of Kermit W. Calmes,
Deceased
Calto Oil Company
Calvert-Mid American Inc.
Cameron, A. A. d/b/a Cameron
Oil Company
George E. Cameron Inc.
Canary, S. C.
Cararas, Jerome A.
Caraway, Reagan J.
Cargill, Robert
Carpenter, E. M.
Carter-Jones Drilling Company,
Inc.
Car-Tex Producing Company
Caruthers, J. D.
Caruthers Operating Company,
Inc.
Carver, Mrs. Helen d/b/a An-
thony Oil Company
Casey, Carl
Caska Corporation
Cassard, A. R.
J. G. Catlett Company
Central Commercial Company
Central Oil Company
Champlin Petroleum Company
[10,917]
Order Instituting Area Rate Proceeding
Chisholm, Alexander F.
A. F. Chisholm d/b/a The
Brandon Company
Cities Service Company
Cities Service Oil Company
Citizens Bank of Hattiesburg,
Mississippi
Claiborne Gasoline Company
Clark, Anson L.
Clark and Cowden
Clark, F. A.
Clay, Thomas W.
Cleary Petroleum Inc.
Cloud, Robert E.
Coastal States Gas Producing
Company
[10,918]
Cook, Tom, Jr.
Cook, William H.
Corban, Charlie
Cotton, Doyle W., Jr.
Cotton Valley Community
Coulston Drilling Company
Coutant, A. E.
Cox, Edwin L.
Crescent Drilling Company, Inc. -
Creslenn Oil Company
Crestmont Oil Company
Crest Petroleum Inc., Agent
Crichton, John H.
Criner Processing
Crockett, M. W. and Charles
Kelly d/b/a Crockett & Kelly
Crow, Mrs. Cordelia K.
Crow, David, Trustee
Crow Drilling and Producing
Company
Milton Crow Inc,
Crystal Oil & Land Company
Culpepper, Curtis
Curry, W. C.
12
Coats, Alton
Cochran, Phil K.
Coffield, H. H.
Cohen, Don
Coles, Marvin J.
Coles, Otis C., Jr.
Collins, George Fulton, Jr.
Colpitt, James R,
Columbian Fuel Corporation
Comegys, W. M., Jr.
Commercial Solvents Corporation
Compadre Oil Corporation
Consolidated Oil & Gas Inc.
(Colo.)
Continental Oil Company
Cuttychamp Oil & Gas
Corporation
Cyprus Mines Corporation
Dal-Rock Production Company
Darby, Beulah K.
Daube, Olive H. d/b/a Daube
Company
Davidor & Davidor, Inc.
Davis, C. D.
Davis, Paul R.
Davis, Waymon L.
Davon Drilling Company
Debardeleben, Charles F., Jr.
Dees, M. H.
Delaney, W. A., Jr.
Delhi Taylor Oil Corporation
Delta Drilling Company
Delta Gulf Drilling Company
Deposit Guarantee Bank & Trust
Company
Despot, George J.
Dial, J. B.
— Oil & Gas Company,
ne.
Si a Se a a pe he |
Dorchester Gas Production
Company
Dorfman, Elizabeth F., Trust
Dorfman, Louis
Dorfman, Sam Y., Jr.
Draughn, Paul V., Jr.
Draughn, Paul V., Sr.
Dunbar, Blaine
N. V. Duncan Drilling Company
Estate of N. V. Duncan
Duncan, Walter
Dunford, O. D.
E. Dunlap, Jr. & State Oil
Company
Eason Oil Company
Everett Eaves
Ward M. Edinger Inc.
Edwards, Robert J., Jr.
Elledge, Vernon and Hall
Ells, H. A. d/b-a All Star Gas
Company
Elm Grove Gathering System
Inc.
[10,919]
Order Instituting Area Rate Proceeding
Erickson, E. L.
Evans, James P., Jr.
Fagadau, Sanford P.
Fair Oil Company
Fairfield Oil Company
Falcon Seaboard Drilling
Company
Feazel, W. C., Estate
Felsenthal, S. J., Estate
Fender, Harris R.
Ferguson, Hershal C.
Ferguson Oil Company Inc.
Fields, Bert Estate
Fleet, Howard W.
Flesh, David J.
Florsheim, S. L.
Fohs, Julius F., Estate of
Fontaine, W. B.
Ford, Evon A.
Helen H. Feldman, Gertrude M.
Reilly and Raymond J. Gertz,
Trustees, Estate of Joseph
Feldman
[10,919]
Forest Oil Corporation
Forgey, R.
Forgotson, James M.
Foster, W. H.
Four States Drilling Company
Inc.
Franks, John
Franks Petroleum
John N. Free d/b/a Free Lichty
Drilling Company
Joseph F. Fritz
Fryer and Hanson Drilling
Company
Gage, Coke L.
Gammill, Dave
Gant, Walter H.
Garrett, J. M.
Gas Rock Corporation
Gas Transmission Company
Genecov, A. S., Trustee
General American Oil Company
of Texas
Genere Gas Industries Inc.
Geochemical Surveys
Geological Exploration Company
Gerhig Company of Arkansas
Gibbons, Ed
Gilbert, Arch B.
Gilmer Oil Company
Glassell, A. C.
Glassell, Alfred C., Jr.
Glassell and Glassell
Glen Rose Gasoline Company
Godfrey, Roy A.
Goins, J. I.
18
[10,919]
Order Instituting Area Rate Proceeding
Gose, Steve
Gragg Drilling Company
Graokla Gas Corporation
Graridge Corporation of Texas
Graves, A. R.
Graves, A, R. and Wetzel, Guy
Greenbaum, R. R. d/b/a Time
Petroleum Company
Greenville Gasoline Company
Inc.
Grigsby, Jack W.
Grimes, Otha H.
Gulf Mobile and Ohio R. R.
Company
Gulf Natural Gas Corporation
Gulf Oil Corporation
H & H Oil & Gas Corporation
Hall, Frank J.
Hall, G. C.
Hall, Stanton A.
Hamill, Claud B.
Hamilton Gas Company
Hardey, Charles O.
Hargrave, Horace C.
Harper Oil Company
Harris, James W.
Harrison, Wallace
Harvey, W. W. & Sojourner,
W. C.
Hawkins, H. L. & H. L., Jr.
Hayes, Marshall A., Jr.
Heape, Gene
Hearnsberger, H. G.
The Hefner Company
Hefner, Robert A., Jr.
Heidelberg, Cecil F., Jr.
Roy Heidelberg II
Heldt, James D.
Helmerich and Payne Inc.
Henry, S. O., Jr.
Herold, Simon
Maxwell Herring Drilling
Corporation
Hewell, W. A., Trustee
Hibbert, R. E., Agent
Hamman, Blake Hilburn, C. A.
Hamon, Jake L. Hinton, Charles A.
Hansbro, M. G. Hinton Producing Company
Estate of M. G. Hansbro Hodge, T. F.
Harden, Jack A. J. Hodges Industries Inc.
[10,920]
Hodges, R. M. Huffines, V. R.
Hoffman, L. C. Dudley, J. Hughes
Mrs. Luna T. Holcomb Hughey, W. R.
Hollandsworth, G. J. Hughey, W. R. Operating
Hollandsworth and Travis Company
Holleman, Wilbur J. Humble Oil and Refining
Hollyfield and McFarlene Company
Home-Stake Production Hunt, H. L.
Company
Hood, F. M.
Hooper, S. J.
Houston Royalty Company
J. M. Huber Corporation
Haroldsen L. Hunt, Jr., Trust
Estate
Hassie Hunt Trust
Hunt Industries
_ Lamar Hunt
14
SRE APS als a SO
Lamar Hunt Trust Estate
Hunt, Nelson Bunker Trust
Estate
Hunt Oil Company
Hunt Petroleum Corporation
William Herbert Hunt Trust
Estate
The Hunter Company, Inc.
Hunter, James A.
Hurley Oil and Gas Company
Hutton, H. L.
Ben C. Hyde, Jr.
Hynson, R. C.
Imperial Production Corporation
Inabnet, W. B.
Inger, Henry S.
Ingersoll Power & Fabricating
Company Inc.
International Helium Inc.
Investors Royalty Company, Inc.
Jabeo Inc.
Jackson, F. R.
Jackson, J. E.
Jackson, J. E. Inc.
L. B. Jackson Company
T. L. James and Company, Inc.
Javelin Oil Company, Inc.
The Jaybird Corporation
Jenkins, Charles L.
Jenkins-Ray Supply
[10,921]
Order Instituting Area Rate Proceeding
Jennings, R. L. and Clogg, M.
d/b/a Jennings, and Clogg
Jernigan, J. E. & Morgan, M. V.
d/b/a Jernigan & Morgan Oil
Company
Jernigan and Morgan Transmis-
sion Company
Johnson, E. Lyle
Johnson, Gilbert S.
Johnson, Howard C.
Johnson, Rubein V.
Jones, Carroll G.
Jones, James Marshall
Jones, Joseph M.
L. E. Jones Drilling Company
Jones, O’Brien Inc.
Jones, Shelburne and Pellow Oil
Jorden, Jack C., Jr.
Josaline Production Company
Jowoco, Inc.
Karll, R. P.
K. B. Compression Company,
Inc.
Keener Oil Company
Kemp, James E.
Kenyon, Clarence
Kerr-McGee Corporation
Ketchum, Ralph F. d/b/a Ketch-
um Oil Company
Key, Edmund M.
Killingsworth, S. H.
[10,921]
King, Liberto Investments
King, Robert E.
Kinnebrew, Lee
Kinsey, Norman V.
Kirby Petroleum Company
Kirkpatrick Oil and Gas
Company
Kubler, E. C., Jr.
R. Lacy, Inc,
Ladner, Heber
Laffoon Oil Company
La Gloria Oil & Gas Company
P. G. Lake, Inc.
William H. Lambdin
The Lancer Corporation
Lando Oil Company
Langford Drilling Company
Lankford, K. D., Jr.
Larco Drilling Company
15
[10,921]
Order Instituting Area Rate Proceeding
Lario Oil and Gas Company
Larson, Perry E. and Max L.
Thomas
Larue, Fred d/b/a Larue-Smith
Prod. Co.
Latham, Joe
Latimer, D. C.
Lechner and Hubbard
LeCuno Oil Corp.
Lee Drilling Company
Lee, R. A. and Ladner, H. L.
Lee, Robert A.
Le Gendre, P. G.,
Lemon, I. M., Mrs
Lerner, W Zolley d/b/a Ko-Ler
Oil Company
Lewis, Ethel May Neel
Lillystrand, T, O., Jr.
The Lincoln Converse Company
Little, Quintin
Livingston Oil Company
Lomac Drilling Company
London, D. E.
London Gas Company
Lone Star Producing Company
Longhorn Production Company
Lubell Oil Company
Lynn Drilling Company
Lyons, C. H., Jr.
Lyons and Logan
Lyons, C. H., Sr.
McAlester Fuel Company
W. C. McBride, Inc.
McCain, M. F.
McCalman Drilling Company,
Inc.
McCamic, Charles
McCasland, T, H.
McCausland, Oscar B.
McCommons Oil Company
McCommons, Williams E. d/b/a
McCommons Exploration
Company
McConnell, D. B.
McCord, Charles T., Jr. d/b/a
McCord Oil Company
McCulloch Oil Corporation of
California
McGoldrick and Watson Drilling
Company
McGuire, T. W.
McKnight, Peyton, Jr.
McLemore, B. Regan
McMahon, C. L., Jr.
MeMillin, Frank E.
McMurrey, Jim, Estate
MeNeish, George R.
McRae, Ethel C.
McWood Corporation
M & M Producing Company
Machin Oil Ltd.
Mack Oil Company
Mackey, Earl T.
Madole, J. D.
Magna Oil Corporation
MaGuire, Russell
Malernee Oil Company
Manziel, Bobby
[10,922]
Manziel, Dorothy N.
Mapco Production Company
Marathon Oil Company
Marcus, Earl
Marks, E, W., Sr.
Marr, M. H.
C. F. Martin Inc.
W. T. Massey and Harry A.
Moore d/b/a Massey & Moore
Mathews, Howard
Mayfield Corporation
Maynard Oil Company
Marshall Exploration Company Mayronne, R. W., Jr. d/b/a
Inc. Riverside Oil Company
16
ERMA Merrett ite OnmNNnsan annem nares
ETS ET ro eer pcan pore saree een .
“ SETS WE MS LOTR PY RAI RIOR 8 A NR EO
Maytex Company
Medallion Oil Company
Menefee, J. M.
Mercury Drilling Company
Merrick, Ward S., Jr.
Mid-America Minerals Inc.
Mid Century Oil and Gas
Company
Midhurst Oil Corporation
Midway Oil Company
Midwest Oil Corporation
Miles Kimball Company
Miller, Paul L.
Miss-Tex Oil Producers
Mitchell, George and Associates,
Inc.
Mitchell, W. H.
Mobil Oil Corporation
Mobley and Stephens
Moffatt, Robert J.
Moffitt, Mrs. Tom J.
Moise, Mrs. Leah H.
W. A. Moncrief
Monla Gas Company Inc.
Monroe Gas System Inc.
Monsanto Company
Morgan Brothers
Morgan, J. A.
Morgan, Margaret M., Mrs.
Morris, C. L.
Morris, P. D.
Mortimer, Mrs. Betty D.
Mosbacher, Robert
OK and B Drilling Company
Oklahoma Natural Gas Company
Oliver, Rees R.
Oliphant, A. G.
Olympic Oi] Company
Omega Petroleum Corporation
Onstott, L. J. d/b/a Progress
Bae EET reese eae oy SEIT PERO
17
Sy RPE AEP EDGE ET, LU EEE ER PROF LEP BIG TORS
[10,923]
Order Instituting Area Rate Proceeding
Moss, H. S.
Murphy, Charles H., Jr.
Murphy Oil Company of Okla-
homa Inc.
Murphy Oil Corporation
Muslow, James
Mutual Investment Company
Myers, Sidney G., Jr.
Nafco Oil and Gas Company Inc.
National Bank of Commerce of
Houston
National Fuels Corporation
National Oil Company Inc.
Natol Petroleum Corporation
Natural Gas and Oil Corporation
Neal, T. J.
Nemours Corporation
Neustadt, Doris W.
Newton Naval Stores Company,
Inc.
Nichols, Irl A.
Nolan, William C. and T. M.
North Central Oil Corporation
North Louisiana Gas Company
Ine.
Norton, Annie
Norton Oil Company Inc.
Norville Oil Company Inc.
Nowery, James R.
O’Boyle, John W.
O’Boyle, Kathleen, Trust No. 2
O’Rourke, D. F.
[10,923]
Petroleum Products
Orr, B. B.
Osborn, Jewel
Osborn, W. B., Jr.
W. B. Osborn, Jr., Executor The
Estate of W. B. Osborn, Sr.
Owen, K. D.
Ee ee
[10,923]
Order Instituting Area Rate Proceeding
Oxley, John C.
Ozark Gas Corporation
P. S. and G., Ine.
Page, Wiley
Palmer, Milo T.
Pan American Petroleum
Corporation
Panola Trading Company, Inc.
Parker, G. C.
Patterson, H. I. and Williams,
R. E.
Peake Petroleum Company
Penn, G. E.
Perkins, Elizabeth
Perkins, J. R.
Perkins, J. R. d/b/a Perkins
Production Company
Perritt, H. W.
Petroleum Exploration, Inc. of
Texas
Petroleum Corporation of Texas
Petroleum Management, Inc.
Pewitt, Paul H.
Phillips, B. F., Estate of
Phillips, Jack L.
Phillips, Leonard W.
Phillips, Loyce
Phillips, O. A., Estate of
Phillips Petroleum Company
Pickens, W. L.
Pioneer Oil and Gas Company,
Ine.
Pioneer Oil Investment Company
Roberts, J. I.
Roberts, J. I. and Murphy, C. H.,
Jr. d/b/a Roberts and Murphy
Robinson, L. L.
Robinson & Marshall Drilling
Company
Rogers, Hellena Fox Wright
[10,924]
18
Placid Oil Company
Porter, L. B.
Potter, Tom
Powers, M. F. Estate
Prentice, Paul R.
Prentiss, W. P.
Price, Jack E.
Proctor, Douglas E., Jr.
Pruet, Chesley
Quiesenberry, W. Y.
R, A. F. Natural Gas
Corporation
Radford, C. H.
Raigorodsky, Paul M.
Ray, Lucie L.
Raymond Oil Company, Inc.
Read, Paul L.
Howard M. Redwine
Reed, M. T.
Republic Royalty Company
Reserve Oil and Gas Company
Reynolds Mining Corporation
Rhoades Oil Company
Richardson Oils, Inc.
Richenthal, Arthur
C. R. Ridgway and W. B.
Ridgway
Ridgway Management, Inc.
Rimrock Tidelands Inc.
Rio Rojo Gathering System Inc.
Robbins, J. C., Jr.
Robbins Petroleum Corporation
Roosth and Genecov Production
Company
Roper, Frank C.
Rorem, S. D.
Rosario Production Company
Henry R. Rose
Ross Production Company
—
[10,924]
Order Instituting Area Rate Proceeding
Ross, R. M.
Wilhelmina duP. Ross
Rougon, Dr. and Mrs. A. L.
Rowan, J. Mike
R. D. Roy and Company, Inc.
Roseman, A. M.
Rudco Oil and Gas Company
Rudman, Rose
Ruffin, J. F., Jr. Trustee
Rushing, J. S.
Russ, John
Ryan, Fred H.
Ryan, P. H.
Ryan, Ray
Sabianna Oil Company, Inc.
Samedan Oil Corporation
Martin A. Samuelson
Sanders, Nell E.
Sanford, John T.
Schafer Drilling Company
Schober, Henry I.
Schwartz, C. B.
Scott, Francis W.
Joseph E. Seagram and Sons
Inc. d/b/a Texas Pacific Oil
Company
Sells Petroleum Inc.
Sellwood and Myers
Service Gas Products Company
Seseco Production Company
Shadid, Fred V.
Shalett, H. T. and Crow, David
Shear, Warren
Shell Oil Company
Shields, Jay M.
Sho Van Gas Producing
Company
R. H.. Siegfried Inc.
Siesta Oil and Exploration Com-
pany, Inc.
Signal Oil & Gas Company
Simmons, D. J. d/b/a Farrell
and Company of Louisiana
Simmons, Jay
Simmons, Maxwell D.
Sinclair Oil & Gas Company
Singer, Joseph B.
Skeeters, A. Z.
Skelly Oil Company
Skelton, D. W.
Sklar, Sam
Slack, Bob B.
Smith, Douglas V.
Smith, E. D.
Smith, H, S.
Smith, J. J.
Smith, L. E.
Smith Operating & Management
Company
Smith, P. E.
Smith, R. E.
Smith, Walter R.
Snee, William E.
Schio Petroleum Company
Sohoma Natural Gas Company,
Inc.
South Central Natural Gas
Corporation
Southern Union Production
Company
Southwest Gas Producing
Company
Southwestern Exploration Con-
sultants, Inc.
Stack, J. E., Jr.
R. A. Stacy, Jr.
Standard Oil Company of Texas,
a Division of Chevron Oil
Company
States Oil Company, Inc.
Stephens Production Company
Stephenson, J. F.
Stewart, Austin E.
D. W. Stewart, Jr., and E. L.
Stewart
[10,925]
Order Instituting Area Rate Proceeding
[10,925]
Strahan, Joe G.
Strength, (Mrs.) Janie R.
Harry J. Strief, Estate of
Stringer, Murray D.
Sun Oil Company
Sunnyland Contracting Com-
pany, Inc.
Sunray DX Oil Company
Sunset International Petroleum
Corporation
The Superior Oil Company
Sutton, Carol Daube
Tacony Company, The
Talbot, C. P.
Tanner, J. W.
Tate, Ernest W.
Taubert, J. E.
Taylor, Mrs. Douglas Havard _
Taylor, McCleland
Teekel, Lloyd G.
Tenneco Corporation
Tenneco Oil Company
Texaco Inc.
Texas Gas Exploration
Corporation
Texas San Juan Oil Corporation
Thomas, Evan A.
Thomason, D.
D. Thomason Production Com-
pany, Inc.
Thompson, J. Cleo
Tidewater Oil Company
Tittle, W. M.
Todd, Dr. John D.
Toto Gas Company
Trahan, J. C.
J. C. Trahan Drilling Contracter
Inc.
Trans-State Oil Company, Divi-
20
sion of Hess Oil and Chemical
Corp.
Trant, Mike d/b/a Mike Trant
Drilling Company
Trant, Sam
Treat, Frank B.
Tri J. Inc.
Trice Production Company
Tuttle, R. M. d/b/a R. M. Tuttle
Pipe Line
Twin Gas Company
Union Oil Company of
California
Union Producing Company
Union Texas Petroleum, a Divi-
sion of Allied Chemical
Corporation
Vanson Production Corporation
Vaughn, G. H., Jr. and Jack C.
Vaughn, G. H., Jr.
Vaughn Petroleum Inc., Agent
Vaughey and Vaughey
Venters, Harley E.
The Vickers Petroleum Co., Inc.
Wager, Dan R.
Walker, Keith F.
Walker, Ross
Walsh, Frank H.
Wandel, Philip
Wannop, Mary Fitts
Warren American Oil Company
Warren Petroleum Corporation
Wegmann, W. A.
Westates Petroleum Company
Westheimer Neustadt
Corporation
Westland Oil Deviopment
Corporation
Whelan, D. E. and R. J.
[10,926]
Order Instituting Area Rate Proceeding
[10,926]
Wheless Drilling Company
Wheless, Joseph Sidney, Jr.
N. H. Wheless Oil Company
Wheless, W. M.
Whitaker, Douglas
Whitaker, John C.
White, Blanche N.
White, Janet
White, T. J., Jr.
Whitehall Oil Company, Inc.
Whittington Number Four
Wichita River Oil Corporation
Wico Oil Company
Wiederhold, William C., Agent
Williams, Charles K.
Williams, E. B., Jr.
Williams, E. B., Sr.
Williams, George H. and Hill
Williams Pressure Service
Company
Williams, Robert Gordon
Wilson, Bruce L.
Wilson, Norton F.
Winwell Inc.
Wise Operating, Inc., of Tyler
Wood Oil Company
Woods, Harold L.
Woods Petroleum Corporation
Woolf, Geraldine H.
Worldwide Petroleum
Corporation
Worth Drilling Company
Wrather, J. D., Jr.
Hattie C. Wright, Administratix
to J. F. Wright
Wunderlich Development
Company
W. R. Yinger
Yoakam, Coler, Jr.
Young, Marshall R.
Marshall R. Young Oil Company
Zephyr Drilling Corporation
Zephyr Oil Company
[10,927]
Order Instituting Area Rate Proceeding
[10,927]
APPENDIX C
PIPELINE PURCHASERS MADE RESPONDENTS
TO THE AREA RATE PROCEEDING
(OTHER SOUTHWEST AREA),
DOCKET NOS, AR67-1, ET AL.
Arkansas Louisiana Gas Company
Cimarron Transmission Company
Cities Service Gas Company
Cushing Gas Transmission Company
El Paso Natural Gas Company
Fort Smith Gas Corporation (now Arkansas Oklahoma
Gas Corporation)
Humble Gas Transmission Company
Lone Star Gas Company
Louisiana Nevada Transit Company
Michigan Wisconsin Pipe Line Company
Mississippi River Transmission Corporation
Natural Gas Pipeline Company of America
Panhandle Eastern Pipe Line Company
Rio Sabien, Incorporated
Southern Natural Gas Company
Tennessee Gas Pipeline Company, A Division of Tenneco
Ine.
Tensas Gas Gathering Corporation
Texas Eastern Transmission Corporation
Texas Gas Transmission Corporation
Trunkline Gas Company
Union Gas System, Incorporated
United Fuel Gas Company
United Gas Pipe Line Company
Valley Gas Transmission, Incorporated
[10,928]
Order Instituting Area Rate Proceeding
[10,928]
APPENDIX D
SECTION 4 RATE SUSPENSION PROCEEDINGS?
CONSOLIDATED FOR HEARING WITH AREA RATE
PROCEEDING (OTHER SOUTHWEST AREA),
DOCKET NO. AR67-1
Name? and Docket Nos.
Amerada Petroleum Corp.; R165-334
American Petrofina Company of Texas (Oper.), et al.;
RI64-442
Appache Corporation; RI63-332
Arkla Exploration Co.; RI64-233, RI64-240, RI64-277,
RI66-339
Ashland Oil & Refining Co., et al.; RI60-288
Bander, Joe, et al.; RI67-54
Biglane, D. A., et al.; G-20190
Bond, Durbin; G-20184
Borden, S. P.; G-20191
Bracken Oil Co. (Oper.), et al.; G-16084
Bridewell, Billy (Oper.), et al.; RI63-241
Cameron, A. A., d/b/a Cameron Oil Co., et al.; RI65-521,
RI67-80
Carter-Jones Drilling Co., Inc. (Oper.), et al.; RI61-546
Champlin Petroleum Co.; RI63-304
Claiborne Gasoline Co.; RI64-260
‘These proceedings are consolidated only insofar as they pertain
to sales in the areas enumerated in Appendix A.
? This producer designation is for general identification and may
not include all of the respondents designated in the respective
orders initiating rate suspension proceedings.
28
a SE Neerer es: |
La jase ly Leis
[10,928]
Order Instituting Area Rate Proceeding
Cohen, Don (Oper.), et al.; RI64-421
Coles, Marvin J., et al.; R164-134
Continental Oil Co.; G-19734, G-19919, G-20197, RI60-
193, RI60-223, RI61-249, RI63-217, RI63-350, RI63-
868, R1I64-165, R164-166, RI64-784, RI65-231, RI67-
72
Continental Oil Co. (Oper.), et al.; RI63-240, RI65-128
Cook, Tom, Jr. (Oper.), et al.; G-16638, RI60-133
Cox, Edwin L.; RI63-219, RI63-428, R1I64-68, RI64-573
Cyprus Mines Corp. & Skelly Oil Company (Operator);
RI64-8
Coastal States Producing Company; RI67-159
[10,929]
Davis, C. D., et al., and Car-Tex Producing Co., et al.;
RI65-374
Draughn, Paul V., Sr.; RI65-422
Draughn, Paul V., Jr.; R165-424
Ells, H. A., et al., d/b/a All Star Gas Company; RI63-
178
Falcon Seaboard Drilling Co., et al.; RI63-221
Fields, Bert, Estate, et al.; R164-290
Forest Oil Corp.; R163-230
Forest Oil Corp. (Oper.), et al.; RI65-125
Four States Drilling Co., Inc. (Oper.), et al.; G-20081
Gant, Walter H. (Oper.), et al.; RI64-254
General American Oil Co. of Texas; RI63-377, RI65-845
Greenville Gasoline Co., Inc. (Oper.) ; RI63-275
Gulf Oil Corp.; G-11335, G-13519, G-13581, G-16657,
G-19742, G-20560, RI60-214, RI61-169, RI61-212,
RI62-114, RI63-148, RI64-198, RI64-231, R1I64-247,
RI65-600
Gulf Oil Corp. & Ashland Oil & Refining Co.; RI65-599
24
[10,930]
Ordzr Instituting Area Rate Proceeding
Hall, Stanton A.; RI65-421
Hamman, Blake (Oper.), et al.; RI64-710
Harper Oil Co. (Oper.), et al.; RI63-450, R165-274
Hefner Co., The (Oper.), et al.; RI63-472
Helmerich & Payne Inc. (Oper.), et al.; R1I63-445
Home-Stake Production Co. (Oper.), et al.; RI64-124
Humble Oil and Ref. Co. (Oper.), et al.; RI66-24, RI66-
149, RI66-279, RI67-108
Hunt, H. L.; G-13531, G-16642, G-19754
Hunt, H. L., et al.; RI61-203, RI62-136, RI64-44, RI66-
131
[10,930]
Haroldson L. Hunt, Jr., Tr. Est.; RI66-239, RI67-180
Hassie Hunt Trust; G-19752, RI61-206, RI63-104, RI64-
213, RI65-265, RI67-100
Hassie Hunt Trust (Oper.), et al.; RI66-130
Hunt, Lamar; G-14936, G-16615, RI61-195, RI62-137,
RI63-151, R1I64-212, RI65-263, RI66-134, R1I67-101
Lamar Hunt Trust Estate; G-14938, G-16618, RI61-194,
RI62-105, RI63-150, RI64-215, RI65-264, RI66-135,
RI67-102
Lamar Hunt Trust Estate, et al.; RI66-240, RI67-181
Hunt, Nelson Bunker Trust Est.; G-14939, G-16616, RI
61-196, RI62-139, RI63-149, RI64-211, RI65-262, RI
66-136, RI66-241, RI67-103, RI67-182
Hunt Oil Co.; RI63-229, RI66-127, RI66-243, RI67-98,
RI67-178, R1I67-179
Hunt Oil Co. (Oper.), et al.; RI66-237, RI66-270
Hunt Oil Co., et al.; RI66-242
Hunt Petroleum Corp.; RI65-261
Hunt, William Herbert Trust Est.; G-14937, G-16617, RI
61-197, RI62-140, RI64-216, RI65-253, RI66-125, RI
66-238, RI67-104, RI67-183
25
[10,930]
Order Instituting Area Rate Proceeding
Hunter Co. Inc., The; G-19920
Hurley Oil & Gas, et al.; G-16645
Hurley Oil & Gas (Oper.), et al.; & Mobil Oil Corpora-
tion; RI62-318, RI64-201
Hyde, Ben C. W., Jr. (Oper.) ; RI63-279
T. L. James & Co., Inc., et al.; RI66-172, RI66-173
Jernigan, J. E. & Morgan, M. V., d/b/a Jernigan &
Morgan Oil Co.; R163-233
Jernigan & Morgan Transmission Co., RI63-234
R. Lacy, Inc., et al.; G-14315
Laffoon Oil Co.; R164-689
Landa Oil Co.; G-19028, RI64-730, RI64-740, RI65-397
Lario Oil & Gas Co.; RI64-601
D. C. Latimer; RI61-410
LeCuno Oil Corp.; RI60-459
LeCuno Oil Corp., & Landa Oil Co.; RI61-210
London Gas Co., et al.; RI61-112, RI63-176, R1I63-177
[10,931]
McCommons Oil Co., et al.; RI64-21, RI65-568
McCommons, W. E., d/b/a McCommons Exploration Co.,
et al.; RI63-281
Mack Oil Co.; RI64-18
Mapco Production Co. (Oper.), et al.; RI66-20
Marathon Oil Co., RI66-140, RI67-121, RI66-33, RI66-74
Marathon Oil Co. (Oper.), et al.; RI66-19
Marks, E. W., Sr., et al.; RI62-272
Marr, M. H.; RI66-144
C. F. Martin, Inc.; RI65-372
Maynard Oil Co.; R164-288, RI67-17, RI67-18
Maynard Oil Co. (Oper.), et al.; RI64-287, RI66-10
Midway Oil Co., et al.; RI64-87
26
[10,932]
Order Instituting Area Rate Proceeding
Midwest Oil Corp., RI64-195
Midwest Oil Corp. (Oper.), et al.; RI64-214
George Mitchell & Associates, Inc., Agent for Ann W.
Alexander, Executrix, et al.; R161-239
Mobil Oil Corp.; R1I61-118, R161-188, RI65-196
Mobil Oil Corp. (Oper.), et al.; RI61-114, R164-210, RI
65-276, RI66-98
Mortimer, Mrs. Betty D., et al.; G-20194
Murphy Oil Corp., et al.; R1I61-145
Murphy Oil Corporation; RI61-146
Newton Naval Stores Co., Inc.; RI65-346
North Central Oil Corp., et al.; G-19026
Norville Oil Co., Inc.; R1I64-19
Page, Wiley (Oper.), et al.; RI64-203
Pan American Petroleum Corp.; G-13516, G-16629, G-
17058, G-19641, G-19765, RI61-167, R1I61-192, RI62-
151, RI63-81, RI63-138, RI63-231, RI64-222, RI64-
231, RI65-178, RI65-277, R165-294, RI66-129
Pan Amer. Petr. Corp. (Oper.), et al.; RI65-112
Perkins, Elizabeth, et al.; RI64-114
Phillips Petroleum Co.; G-12283, G-16112, G-16113, RI60-
257, RI63-394, RI64-619, RI65-127, RI65-577, RI66-
324
Phillips Petroleum Co. (Oper.), et al.; R1I61-284, RI67-
173
Pioneer Oil & Gas Co., Inc., et al.; G-20195, RI61-51
[10,932]
Placid Oil Co. (Oper.), et al.; G-15370, G-15371, G-17428,
G-19767, RI61-176, RI61-198, RI61-213, RI62-104,
RI62-144, R163-132, R164-202, R164-239, RI65-259,
RI66-132, RI67-91
27
ae Se a
a sp RBCS GRRE RETR AS AROSE AE ARLE RAN TEPER ALDI PEE NIRA a
eee AE
wake We REY
[10,932]
Order Instituting Area Rate Proceeding
Ridgway, C. R. & W. B.; G-19932
Ridgway Management Inc.; G-20068
Rimrock Tidelands Inc., et al.; G-15073
Robbins, J. C., Jr.; RI63-475
Robbins Petroleum Corp. (Oper.), et al. and Pan Ameri-
can Petr. Corp.; R163-476
Roper, Frank C.; RI60-389
Ross, R. M.; RI65-318
Rowan, J. Mike (Oper.), et al.; R163-293
Ruffin, J. F., Jr., Trustee; G-20192
Samedan Oil Corp.; RI63-466, RI63-467
Joseph E. Seagram Sons Inc., d/b/a Tex. Pacifie Oil Co.;
RI63-183, R1I63-443
Shell Oil Co.; RI64-791, RI65-474, RI65-477, RI65-483
Shell Oil Co. (Oper.) ; RI65-485
Shell Oil Co. (Oper.), et al.; RI66-14, RI65-476
Shell Oil Co., Cabot Corporation (SW) (Oper.), et al.
Herman George Kaiser, & Phillips Petroleum Com-
pany (Oper.), et al.; RI65-475
R. H. Siegfried Inc., et al.; RI62-380, RI64-677
Simmons, Maxwell D. (Oper.), et al.; R163-477
Sinclair Oil & Gas Co.; RI61-530, RI62-152, RI63-131,
RI64-257, R1I65-14, RI65-38, RI66-77, RI66-86, RI66-
345
Sinclair Oil & Gas Co., et al.; RI60-231, RI61-172
Sinclair Oil & Gas Co. (Oper.), et al.; RI64-256, RI65-
28, R1I66-166
Skelly Oil Co.; RI60-253, RI67-10
Sohio Petroleum Co.; RI66-276, RI67-81
Southern Union Production Co.; RI65-587
Southwest Gas Producing Co., Inc.; RI66-351
Southwestern Explor. Consultants Inc. (Oper.), et al.;
RI60-245, RI60-360
28
[10,933]
Order Instituting Area Rate Proceeding
Standard Oil Co. of Tex. Div. of Chevron Oil Co., RI63-
462
Sun Oil Company, RI66-401
[10,933]
Sunray DX Oil Co.; R1I64-335
Sunset International Petroleum Corp.; RI61-545
The Superior Oil Co.; G-20347, RI61-83
The Superior Oil Co. (Nevada) and James W. Harris;
G-14106
The Superior Oil Co. and Gas Rock Corporation; G-18694
Ernest W. Tate; RI66-357
Tenneco Oil Co.; RI63-474, RI65-145
Tenneco Oil Co. (Oper.), et al.; RI64-741, RI65-534, RI
66-87, RI66-369
Tenneco Oil Co., Continental Oil Co.; RI62-539
Texaco Inc.; RI66-329, RI66-383, RI67-2
Tidewater Oil Co. (Oper.), et al.; RI64-726, RI65-129,
RI67-78
Tidewater Oil Company & James W. Harris (Oper.),
et al.; RI64-762
Todd, Dr. John D.; RI60-352
J. C. Trahan Drilling Contr., Inc. & Marshall R. Young
Oil Co.; RI61-499, RI64-722
J.C. Trahan Drilling Contr. Ine. (Oper.), et al.; RI63-
21, RI64-329, RI64-380, RI65-548
Twin Gas Co.; R1I63-464
Twin Gas Co. (Oper.) ; RI63-465
Union Oil Co. of Calif. (Oper.), et al.; RI66-316, RI66-
317, RI66-426
Union Texas Petroleum Div. of Allied Chemical Corp.
(Oper.), et al.; RI64-742, RI65-126
29
Jak Bhi Rene the AAR ALP A DEE DORPI 1 ER TT TET
Ah sa DREAMS ah agp
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wwe
a alld
PR er ater ee een Pe Lt Ae Py
[10,933]
Order Instituting Area Rate Proceeding
Union Texas Petroleum Div. of Allied Chemical Corp.,
et al.; RI63-461
Vaughn, G. H., Jr., et al.; RI61-182
Venters, Harley E.; RI66-356
Walker, Ross; RI65-499
Whelan, D. E. and R. J.; RI62-39
Wichita River Oil Corp.; RI64-151
Wunderlich Development Co. (Oper.), et al.; RI65-124
[10,934]
Order Instituting Area Rate Proceeding
[10,934]
Docket Nos. AR67-1, et al.
AREA RATE PROCEEDING, et al.
(OTHER SOUTHWEST AREA)
(Issued February 28, 1967)
ROSS, Commissioner dissenting in part:
In refusing to dispense with the Examiners’ decisions
in the Hugoton-Anadarko and Texas Gulf Coast proceed-
ings, the Commission now finds itself in the position
where it must proceed on an ad hoc, case-by-case basis,
as I feared. The repetitive, time consuming and expen-
sive procedures of the last seven years are to be repeated.
With all the interested parties anxiously awaiting not
only a final determination of the Permian Basin case,
which should come sometime within a year, but also an-
ticipating the Commission’s decision itself in South Lou-
isiana, it seems senseless to me to institute still another
area rate proceeding.
I agree to securing information which is clearly need-
ed, but I do not agree that we will gain anything in the
interim by diverting the attention of all concerned from
a determination of the method of establishing just and
reasonable rates now underway in pending area cases.
/s/ Charles R. Ross
CHARLES R. Ross
31
a — = — = ————————————————————————eOeOEeeeOo_vo_c_eereeree
2 ential Tene WAIN Saab ir Lila WA Tic Nie he tas Lae patented OSMAN NN DED a er He ails aan tht Sehinbnat Ds ee PY Te |
[11,131]
Order on Motions for Reconsideration and Clarification
[11,131]
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Lee C. White, Chairman; L. J.
O’Connor, Jr., Charles R. Ross,
Carl E. Bagge, and John A.
Carver, Jr.
Docket Nos. AR67-1, et al.
AREA RATE PROCEEDING, et al.
(OTHER SOUTHWEST AREA)
ORDER ON MOTIONS FOR
RECONSIDERATION AND CLARIFICATION
(Issued April 26, 1967)
By motions filed by Continental Oil Company (Con-
tinental) on March 27, 1967, Pan American Petroleum
Corporation and Sunray DX Oil Company (Pan Amer-
ican, et al.) on March 29, 1967, Texaco Inc. and Mobil
Oil Corporation (Texaco, et al.) on March 30, 1967, At-
lantic Richfield Company, Dorchester Gas Producing
Company and Magna Oil Corporation (Atlantic, et al.) on
March 30, 1967, and Humble Oil & Refining Company
(Humble) on March 31, 1967, respondents in the above
entitled proceeding, reconsideration and clarification are
requested of the Commission’s Order Instituting Area
1The motions filed by Pan American, et al., Texaco, et al.,
Atlantic, et al., and Humble are styled as being applications for
rehearing under Section 19(a) of the Natura] Gas Act. However,
applications for rehearing are not properly directed to an interlocu-
tory order such as is here under consideration and accordingly the
motions are being treated as motions for reconsideration.
—
[11,132]
Order on Motions for Reconsideration and Clarification
Rate Proceeding issued on February 28, 1967. In the
main the motions are concerned with the provision in the
order which directs the presiding examiner to incorpor-
ate by reference all the evidence adduced in the joint
record in the Hugoton-Anadarko—Texas Gulf Coast pro-
ceedings. The order provided that “specific portions of
the joint record may be excluded upon a clear showing
of irrelevance or immateriality.” It further provided
that evidence may be presented on any new issues not
raised in the joint record and supplemental data or
opinions which are not cumulative or repetitive would
also be permitted. While non-repetitive testimony or
cross-examination would be allowed on new issues or on
matters incorporated by reference, the proceeding es-
sentially would be limited to new evidence respecting
area conditions, area costs and rate design.
Continental urges that the “only criteria for restric-
tion of evidence should be relevancy and materiality
and duplication” and that the Commission should “make
clear that all relevant and nonduplicative evidence will
be admissible.” As indicated, the order provides that
the exclusions from the record will be based upon a clear
showing of irrelevance or immateriality. Furthermore,
evidence supplementing that already received and evi-
[11,132]
dence which is directed to new issues or relates to area
conditions, area costs and rate design would be admis-
sible so long as it met the criteria of relevance, com-
petence, and materiality.
Pan American, et al., contends in its motion that the
order could be interpreted as an incorporation by ref-
erence of findings of fact as distinguished from incorp-
—_— —o Sto. ey Sty Ree ee Ot a eee
[11,132]
Order on Motions for Reconsideration and Clarification
oration by reference of evidence. Texaco, e¢ al., Atlantic,
et al., and Humble likewise claim that the order could
be interpreted as meaning that findings or decisions
would be incorporated by reference. The order clearly
refers only to the evidence adduced and does not refer
to findings of fact or decisions by the presiding ex-
aminers in other proceedings. Consequently, the record
as developed in the instant proceeding will consist of
applicable portions of the joint record in the Hugoton-
Anadarko—Texas Gulf Coast (not excluded by the ex-
aminer), portions of the records in other proceedings
incorporated by reference therein, supplemental and up-
dated evidence permitted by the examiner, and evidence
on new issues and on area conditions, area costs, and
rate design relating to the Other Southwest Area. Thus,
whether or not parties to the instant proceeding were
parties in the other proceedings, they will have the op-
portunity to urge the examiner to make findings of fact
and law based upon the record in this proceeding as
developed either by incorporation by reference as sup-
plemented or updated and such new relevant evidence as
may be introduced. The examiner will be free in his de-
cision to make such findings and reach such conclusions
as he deems appropriate based upon the entire record
in this proceeding. He will not be bound by rulings,
findings, or decisions made by the examiners in other
proceedings, nor are such findings incorporated in this
record. If, in the opinion of any of the parties, evidence
was admitted in the aforesaid joint record which should
have been excluded for reasons of irrelevance or im-
materiality and objections on these grounds were made
and overruled by the presiding examiners in the other
proceedings, the parties are free to urge before the
examiner in the instant proceeding that such material
WH RH Ger
SIS te _— . ust
ihe a HET 8 Te NE
[11,133]
Order on Motions for Reconsideration and Clarification
be excluded from the incorporation by reference. In
making his rulings herein, the examiner would not be
bound by the prior rulings of other examiners.’
Pan American, et al., urges that the Commission order
should provide that the presiding examiner may divide
the hearing into “revenue requirements and rate design
phases.” The conduct of the hearings and any phasing
thereof is strictly within the province of the presiding
examiner. If, in his determination, the hearing will be
handled most expeditiously by the phasing of the hear-
ings, he is in the best position to so order.
[11,133]
The Commission orders:
The motions filed by Continental, Pan American, et
al., Texaco et al., Atlantic, et al., and Humble for recon-
sideration and clarification of the order issues herein on
February 28, 1967, are denied except in the respects
above set forth. By the Commission. Commissioner Ross
not participating.
[SEAL]
JOSEPH H. GUTRIDE,
Secretary
2 Accordingly, we delete from the February 28 order those por-
tions thereof which may be inconsistent with our position herein.
In the first full paragraph of page 2 of that order on line 10 “a
retrial or” is deleted, and starting on line 22”, absent new evidence,
the same issues shall not be tried in this proceeding but that” is
also deleted.
2 NEE IRE TERA ED TEE RET METAL es
TD. 4D) ind tet, .0 ita nba Beit 5 2 ee Ue a
[11,287]
Order Clarifying and Enlarging Definition of Area
[11,287]
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Lee C. White, Chairman; L. J.
O’Connor, Jr., Charles R. Ross,
Carl E. Bagge, and John A.
Carver, Jr.
Docket Nos. AR67-1, et al.
AREA RATE PROCEEDING, et al.
(OTHER SOUTHWEST AREA)
ORDER CLARIFYING AND ENLARGING
DEFINITION OF AREA
(Issued December 8, 1967)
On November 13, 1967, Shell Oil Company petitioned
the Commission to clarify or enlarge the definition of
the Other Southwest Area to include lands on the cont-
inental shelf off the shore of Mississippi—both offshore
lands subject to the jurisdiction of the State of Missis-
sippi and offshore lands within the Federal domain. This
request is unopposed. The Commission staff in its an-
swer to the petition did not oppose including the offshore
Federal domain and is of the opinion that offshore lands
under the jurisdiction of Mississippi are already in-
cluded within the area.
Lands off the shore of Louisiana were specifically in-
cluded in the Southern Louisiana Area. Although the
original definition of the Texas Gulf Coast Area did not
specifically include offshore areas, the Commission by its
its order of April 14, 1964, 31 FPC 922, clarified and
amended its original order to include the offshore areas.
86
[11,288]
Order Clarifying and Enlarging Definition of Area
In both prior Area Rate Proceedings in which offshore
continental shelf lands were adjacent to an onshore
production area, the Commission included the offshore
lands within the area which was the subject of the pro-
ceeding.
Accordingly, the petition of Shell Oil Company will
be granted by clarifying and modifying the definition
of the Other Southwest Area to include underwater
lands on the
[11,288]
continental shelf off the shore of Mississippi within the
Other Southwest Area. The inclusion of these offshore
lands within the area is not a determination that the
same rates should or should not apply as are upon ap-
plicable to onshore production in Mississippi, nor even
that the same rates should apply everywhere in the off-
shore area. Whether rates should differ in different
portions of the area or under different conditions within
the area is a matter to be included in the final deter-
mination of the Area Rate Proceeding and nothing in
this order is intended to influence that later determin-
ation.
The Commission orders:
The definition of the Other Southwest Area is clarified
and modified to include the underwater lands on the
continental shelf off the shore of Mississippi including
both underwater lands subject to the jurisdiction of the
State of Mississippi and underwater lands within the
*ederal domain.
By the Commission.
KENNETH F. PLuMp,
Acting Secretary
87
[SEAL]
. ee eee it a eee Re en ne
5 lek Rhee apie a es ee |
a
3
%
¥
3
4
-
[11,319]
Presiding Examiner’s Initial Decision
[11,319]
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Docket Nos. AR67-1, et al.
AREA RATE PROCEEDING, et al.
(OTHER SOUTHWEST AREA)
PRESIDING EXAMINER’S INITIAL DECISION
ON OTHER SOUTHWEST AREA RATES
(Issued September 22, 1969)
APPEARANCES
Edwin S. Nail for Amerada Petroleum Corporation.
Charles F. Wheatley, Jr. for American Public Gas Asso-
ciation.
Robert Roberts, Jr., Blanchard, Walker, O’Quin & Rob-
erts, Bernard A. Foster, Jr., Ross, Marsh & Foster
for Arkansas Louisiana Gas Company.
J. N. Clayton, Bernard A. Foster, Jr., Ross, Marsh &
Foster for Arkla Exploration Company.
Ted Holshouser for Ashland Oil & Refining Company.
John E. Holtzinger, Jr., Frederick Moring and J. David
Mann, Jr., Morgan, Lewis & Bockius for Associated
Gas Distributors Group, consisting of Atlanta Gas
Light Comapny; The Berkshire Gas Company; Boston
Gas Company; Bristol and Warren Gas Company;
Brockton Taunton Gas Company; Buzzards Bay Gas
Company; Cambridge Gas Company; Central Massa-
chusetts Gas Company; City of Holyoke, Massachusetts
38
—
[11,320]
Presiding Examiner’s Initial Decision
Gas and Electric Department; City of Norwich, De-
partment of Public Utilities; City of Westfield Gas and
Electric Light Department; Concord Natural Gas Cor-
poration; The Connecticut Gas Company; Fall River
Gas Company; Fitchburg Gas and Electric Light Com-
pany; Gas Service, Inc.; The Greenwich Gas Company;
The Hartford Electric Light Company; The Hartford
Gas Company; Haverhill Gas Company; Lawrence Gas
Company; Lowell Gas Company; Lynn Gas Company;
Manchester Gas Company; Mystic Valley Gas Com-
pany; New Bedford Gas and Edison Light Company;
The New Britain Gas Light Company; The Newport
Gas Light Company; Northampton Gas Light Com-
pany; North Attleboro Gas Company; North Shore
Gas Company; Norwood Gas Company; The Pequot
Gas Company; Providence Gas Company; South County
Gas Company; The Southern Connecticut Gas Com-
pany; Springfield Gas Light Company; Tiverton Gas
Company; Valley Gas Company; Wachusett Gas Com-
pany; Worcester Gas Light Company; Brooklyn
[11,320]
Union Gas Company; Central Hudson Gas and Elec-
tric Corporation; Consolidated Edison Company of
New York, Inc.; The East Ohio Gas Company; Con-
solidated Gas Supply Corporation; Lake Shore Pipeline
Company; The Peoples Natural Gas Company; The
River Gas Company; Elizabethtown Gas Company;
Long Island Lighting Company; New Jersey Natural
Gas Company; New York State Electric & Gas Corpo-
ration; Niagara Mohawk Power Corporation; Orange
and Rockland Utilities, Inc.; Philadelphia Electric
Company; Philadelphia Gas Works, Division of UGI
Corporation; Piedmont Natural Gas Company, Inc.;
39
ht pA RAN hth coe, |
DO st ORE TE PD
es Deer ste te tees
[11,320]
Presiding Examiner’s Initial Decision
Public Service Company of North Carolina; Public
Service Electric and Gas Company; Rochester Gas and
Electric Corporation; South Jersey Gas Company; UGI
Corporation; and Washington Gas Light Company.
Stdart J. Scott, Robert E. Wade, Bernard A. Foster, Jr.,
Ross, Marsh & Foster for Atlantic Richfield Company.
J. Evans Attwell, Vinson, Elkins, Weems & Searls for
Austral Oil Company, Inc., Alfred C. Glassell, Jr., et
al., George Mitchell & Associates, Inc., Richardson Oils,
Inc., Robert Mosbacher, J. Hughes Dudley and A. C.
Glassell.
John W. Glendening, Jr. and John S. Schmid, Glenden-
ing and Schmid for The Berkshire Gas Company; Bos-
ton Gas Company; Bristol and Warren Gas Company;
Brockton Taunton Gas Company; Buzzards Bay Gas
Company; Cambridge Gas Company; Central Massa-
chusetts Gas Company; City of Holyoke, Massachusetts
Gas and Electric Department; City of Norwich, De-
partment of Public Utilities; City of Westfield Gas
and Electric Light Department; Concord Natural Gas
Corporation; The Connecticut Gas Company; Fall
River Gas Company; Fitchburg Gas and Electric Light
Company; Gas Service, Inc.; The Greenwich Gas Con-
pany; The Hartford Electric Light Company; The
Hartford Gas Company; Haverhill Gas Company; Law-
rence Gas Company; Lowell Gas Company; Lynn Gas
Company; Manchester Gas Company; Mystic Valley
Gas Company; New Bedford Gas and Edison Light
Company; The New Britain Gas Light Company; The
Newport Gas Light Company; Northampton Gas Light
Company; North Attleboro Gas Company; North Shore
Gas Company; Norwood Gas Company; The Pequot Gas
Company; Providence Gas Company; South County
Gas Company; The Southern Connecticut Gas Com-
40
_—
[11,321]
Presiding Examiner’s Initial Decision
pany; Springfield Gas Light Company; Tiverton Gas
Company; Valley Gas Company; Wachusett Gas Com-
pany; Worcester Gas Light Company.
Edwin F. Russell, Jr. and Barbara M. Suchow, Cullen
and Dykman for The Brooklyn Union Gas Company.
Mary Moran Pajalich, J. Calvin Simpson and Sheldon
Rosenthal for The People of the State of California
and The Public Utilities Commission of California.
[11,321]
Woollen H. Walshe, Justin R. Wolf and Eugene E.
Threadgill, Wolf & Case for The California Company,
a Division of Chevron Oil Company.
Gould & Wilkie for Central Hudson Gas & Electric Cor-
poration.
Mathias M. Mattern for the City of Chicago.
Cecil C. Cammack, Graydon D. Luthey, and R. J. Leit-
head for Cities Service Oil Company, Cities Service
Company, and Columbian Fuel Corporation.
Charles S. Rhyne, Rhyne & Rhyne for City Group Gas
Defense Association, consisting of the Kansas Cities of
Altamont, Atchison, Chanute, Countryside, Erie, Fair-
way, Girard, Grenola, Howard, Iola, Leavenworth, Neo-
desha, and Prairie Village; and the Missouri Cities of
Aurora, Carl Junction, Carthage, Independence, Joplin,
Kansas City, Marshall, Monett, Mt. Vernon, Neosho,
Nevada, Oronogo, St. Joseph, Springfield, Waverly, and
Webb City.
Haleyon G. Skinner and Lex K. Larson, LeBoeuf, Lamb,
Leiby & Mac Rae for Consolidated Edison Company of
New York, Inc., Niagara Mohawk Power Corporation,
and Orange and Rockland Utilities, Ine.
41
me Si iui ine
i ite ib) Fins cca Ath
j
|
j
i
4
§
4
;
4
:
4
4
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j
;
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by
[11,321]
Presiding Examiner’s Initial Decision
K. M. Waters, Jr., C. William Cooper, H. B. Griffith, Jr.,
Lawrence L. Gray, Norman A. Flaningam, Henry A.
Jackson, Thomas G. Roderick and Thomas A. White
for Consolidated Gas Supply Corporation.
Bruce R. Merrill, Joseph C. Johnson and Thomas H. Bur-
ton for Continental Oil Company.
Edward Kliewer, Jr. for Delta Drilling Company, Eliza-
beth F. Dorfman Trust, Louis Dorfman, Sam Y. Dorf-
man, Jr. and S. L. Florsheim.
J. G. Eckel, Bernard A. Foster, Jr., Ross, Marsh & Fos-
ter for Dorchester Gas Producing Company.
C. William Cooper, H. B. Griffith, Jr., Lawrence L. Gray,
Norman A. Flaningam, Henry A. Jackson, Thomas G.
Roderick and Thomas A. White for The East Ohio Gas
Company, The River Gas Company, Lake Shore Pipe-
line, Co., and The Peoples Natural Gas Company.
G. Scott Cuming, Walter G. Henderson, C. Frank Reif-
snyder and Stanley S. Harris, Hogan & Hartson for
El Paso Natural Gas Company.
[11,322]
John R. Sailer for Elizabethtown Gas Company.
John L. Arrington, Jr., Lupardus, Holliman and Huf-
man for Falcon Seaboard Drilling Company.
C. R. Eyster and Richard F. Generelly for Forest Oil
Corporation.
Warren M. Sparks and Donald R. Arnett for Gulf Oil
Corporation and Warren Petroleum Corporation.
Blake Hamman in propria persona.
Richard F. Generelly, May, Shannon and Morley for
H. L. Hawkins & H. L. Hawkins, Jr., Houston Royalty
Company and Norton Oil Company, Inc.
42
~~ ae ee ae ere ee ee ee ee eee
p—
x
‘
[11,323]
Presiding Examiner’s Initial Decision
Douglas J. Miles for Humble Gas Transmission Company.
Martin N. Erck, Frank S. Troidl, Robert L. Norris, Jr.,
and J. Kirby Ellis for Humble Oil & Refining Com-
pany.
Robert W. Henderson, Paul W. Hicks and Donald K.
Young for Hunt Oil Company, H. L. Hunt, Haroldson
L. Hunt, Jr., Trust Estate, Hassie Hunt Trust, Hunt
Industries, Lamar Hunt, Lamar Hunt Trust Estate,
Nelson Bunker Hunt Trust Estate, Hunt Petroleum
Corporation, William Herbert Hunt Trust Estate, and
Placid Oil Company.
L, Dan Jones and William I. Powell for Independent
Petroleum Association of America.
John F. Gaston for Iowa Electric Light and Power Com-
pany.
Bertram D. Moll for Long Island Lighting Company.
Robert W. Russell for the City of Los Angeles.
H. E. McCommons in propria persona.
Bernard A. Foster, Jr., Ross, Marsh & Foster for Magna
Oil Corporation, and J. C. Trahan, Drilling Contractor,
Inc.
Jack Fariss for Marathon Oil Company.
F. W. Reese for M. H. Marr.
Richard M. Merriman and Peyton G. Bowman, III, Reid
and Priest for Michigan Gas Utilities Company.
[11,323]
David P. Van Note for Michigan Public Service Commis-
sion
Charles V. Shannon, May, Shannon and Morley and Paul
S. Davis for Michigan Wisconsin Pipe Line Company.
43
ee... eee
a cs
[11,323]
Presiding Examiner’s Initial Decision
John F. Brown for Mississippi River Transmission Cor-
poration.
Charles B. Swanner, R. D. Haworth, Charles S. Chester
and James L. Armour for Mobil Oil Corporation.
Richard F. Generelly for Monsanto Company.
E. H. Hasenberg for Natural Gas Pipeline Company of
America.
Kent H. Brown and Morton L. Simons for The Public
Service Commission of the State of New York.
Harry L. Bristol, Naylor, Aronson, Huber & Magill for
New York State Electric & Gas Corporation.
Lauman Martin for Niagara Mohawk Power Corpora-
tion.
George W. Ryerson for Northern Illinois Gas Company.
Edmund A. Schroer and Joseph T. Morrow, Lawyer,
Schroer & Eichhorn for Northern Indiana Public Serv-
ice Company.
Lewis G. Mosburg, Jr., Mosteller, Andrews & Mosburg
for Oklahoma Independent Petroleum Association.
John L. Arrington, Jr., Lupardus, Holliman and Huf-
man for Oklahoma Natural Gas Company.
Frederick T. Searls, Malcolm H. Furbush and Stanley
T. Skinner for Pacific Gas and Electric Company.
John Ormasa, Eric W. Martens, William H. Owens, R. D.
Twomey, Jr., and K. R. Edsall for Pacific Lighting
Service and Supply Company.
J. P. Hammond and William H. Emerson for Pan Amer-
ican Petroleum Corporation.
W. P. Anderson for Panhandle Eastern Pipe Line Com-
pany.
44
[11,324]
Presiding Examiner’s Initial Decision
Herbert E. Squires for Pennsylvania Public Utility Com-
mission.
Samuel G. Miller, Henry P. Sullivan and Donald Blanken
for Philadelphia Electric Company.
[11,324]
William T. Coleman, Jr. and Robert W. Maris, Dilworth,
Paxson, Kalish, Kohn & Levy for Philadelphia Gas
Works, Division of The United Gas Improvement Com-
pany.
Kenneth Heady and John R. Rebman for Phillips Petro-
leum Company.
James V. Landress for W. L. Pickens.
Stanley M. Morley, May, Shannon and Morley for Pipe-
line Purchaser Group, consisting of Southern Natural
Gas Company, Texas Eastern Transmission Corpora-
tion, United Gas Pipe Line Company, Natural Gas
Pipeline Company of America, Tennessee Gas Pipeline
Company, Texas Gas Transmission Corporation, Pan-
handle Eastern Pipe Line Company, Trunkline Gas
Company, Cities Service Gas Company, and Lone Star
Gas Company.
J. Harry Mulhern, Edward S. Kirby and James R. Lacey
for Public Service Electric and Gas Company.
Norman P. Hines, Jr. for Reserve Oil and Gas Company.
Lynn R. Coleman for Richardson Oils, Inc.
Richard N. George, Nixon, Hargrave, Devans & Doyle for
Rochester Gas and Electric Corporation.
Sherman Chickering, C. Hayden Ames and Donald J.
Richardson, Jr., Chickering & Gregory for San Diego
Gas & Electric Company.
45
oe SO) YET OEE ee oF Ce
[11,324]
Presiding Examiner’s Initial Decision
Gene P. Morrell for Samedan Oil Corporation.
James D. McKinney, Jr., Ross, Marsh and Foster for
Service Gas Products Company.
Oliver L. Stone, Thomas G. Johnson and Dan A. Bruce
for Shell Oil Company.
A. E. Stebbings, Michael P. Kelly, Bradford Ross and
James D. McKinney, Jr., Ross, Marsh & Foster for
Signal Oil and Gas Company and Service Gas Products
Company.
Rex Short, Charles E. McGee, John T. Ketcham and
Charles E. Holmes for Sinclair Oil Corporation.
John Ormasa, Eric W. Martens, R. D. Twomey, Jr., and
K. R. Edsall for Southern California Gas Company and
Southern Counties Gas Company of California.
Hugh J. Morgan, Jr. for Southern Natural Gas Com-
pany.
[11,325]
Robert C. Koury, Cole, Koury, Cole and Tighe for South
Jersey Gas Company.
T. A. McEachern, Jr., for Southwest Gas Producing Com-
pany, Inc.
Claude Proctor, Justin R. Wolf and Eugene E. Thread-
gill, Wolf & Case for Standard Oil Company of Texas,
a Division of Chevron Oil Company.
Phillip D. Endom, Francis H. Caskin, May, Shannon and
Morley for Sun Oil Company.
Homer E. McEwen, Jr. for Sunray DX Oil Company.
H. W. Varner and William T. Kilbourne for The Supe-
rior Oil Company.
William K. Tell, Jr., William R. Slye and James D. An
nett for Texaco Inc.
46
Pee.
RI re Ua ee “gre ee -_ ——
[11,326]
Presiding Examiner’s Initial Decision
Crawford C. Martin, C. Daniel Jones, Jr. and Linward
Shivers for The State of Texas and the Railroad Com-
mission of Texas.
John Davenport for Texas Independent Producers & Roy-
alty Owners Association.
Raymond N. Shibley and William J. LeBuhn, Patterson,
Belknap, Farmer, Shibley & Wells for Trunkline Gas
Company.
George C. Bond for Union Oil Company of California.
Thomas Fletcher for Union Producing Company.
Elliot G. Flowers, Justin R. Wolf and Eugene E. Thread-
gill, Wolf & Case for Union Texas Petroleum, a Divi-
sion of Allied Chemical Corporation.
J. David Mann, Jr. and John E. Holtzinger, Jr., Morgan,
Lewis & Bockius for The United Gas Improvement Com-
pany.
Saunders Gregg for United Gas Pipe Line Company.
Paul E. Reichardt for Washington Gas Light Company.
George J. Eckert for Westates Petroleum Company.
Thomas M. Knebel, Rea, Cross & Knebel for Willmut
Gas and Oil Company.
[11,326]
William E. Torkelson for Public Service Commission of
Wisconsin.
Reuben Lozner, Robert W. Perdue, Kenneth F. Plumb,
Walter J. Kendall, III, Richard V. Mattingly, Jr., and
Robert A. Jablon for the staff of the Federal Power
reat or
47
SOR EER I PALIT
nes lg aia a Pelle th BL lt 1 AEP Ra NEE ETI EE A I ee eg
[11,327]
Presiding Examiner’s Initial Decision
[11,327]
TABLE OF CONTENTS
Page
Introduction
I. Improper Argument
II. Preliminary Findings of Fact —......________
III. Rate of Return
Claimed siete for High Return as Incentive
for Exploratory Effort _ ae ED ae Le
National Gas Supply -
Gas Supply in Other Southwest Area _
Fair Rate of Return —_.___.
Rate Structure __ acerca
Federal Income-Tax Benefits—Spillovers—Attrac-
tion of Capital _
Rate of Return Allowance i in : Previous. ‘Area Rate
Cases Not Governing _ FEL ce AB
Oe
Producer Witnesses _ Paseo Raa
Alternative Investment Opportunities edekesiienes
State of Texas cniicbncidtaan:
[11,328]
Small Producer =.
IV. Cost of New Gas-Well Gas -
Successful Well Costs — 2 SSE
Lease Acquisition Costs _...._...._._-» =
Other Production Facilities =o.
Dry-Hole Costs _..____.________.
Other Exploratory Costs - eee
Geological and Geophysical Expenses and Lease
Rentals -
Exploration ‘and ‘Development Overheads _
48
[11,330]
Presiding Examiner’s Initial Decision
Adjustment for Exploration in Excess of Produc-
tion _—
Production Operating Expenses
Net Liquid Credit
Lease Condensates —
Plant Condensates —...._.
Other Plant Liquids
Summary -.
Regulatory Expense
Return Allowance
Return on Production Investment
[11,329]
Return on Working Capital
Royalties __
Production Taxes ______.
Summary of Nationwide Cost of New Gas-Well
V. Cost of Flowing Gas -
Preliminary Siete
AGD Argument That All Flowing Gas in Area
Should be Costed -
Body of Cost Data -
Position of Hunt Group _ eahininad
Miscellaneous Minor Adjustments to Basic Data _
Functionalization and Allocation of Overhead
Comte ......0.,
Cycling Lease Data -
Allocation of Sactieation ‘Cost by Relative-Cost
Method .
Cininciiiien “ Gas Leg -
Area or Nationwide Legs ee rer ee
Shut-in Property Adjustment _ aa
Inclusion of Water Production Volumes - eee
[11,330]
Summary of Unit Production Cost
49
= eI ETRE OFT ED SY S2OEY IP Fae
ho Fit i lieth ta iat
[11,330]
Presiding Examiner’s Initial Decisi
Exploration and Development Costs
Economic Factor to be Used in Modified Btu
Method
Regulatory Expense
VI. Pricing Areas
Consideration of Recommendations
i 4, eee
Producer Group ‘Proposal
GMA Proposal
VII. Price Adjustments to Reflect Quality Differentials ___
Btu Standards - edema
Other Quality Standards .
VIII. Producer Plant and Gathering Operations _________.
Allocation Method
Plant Fuel Cost - fi TOLL
Separate Gathering-System Costs”
Rate of Return
Position of Associated Gas Distributors _______
Producer Witness’ Adjustment of Staff Rate-Design
Exhibit _
[11,331]
IX. Rate Design
Derivation of Ceiling Rates for Flowing Gas _..
Finding and Producing Costs
Cost of Processing Incurred Beyond the Lease —
Producer-Operated Separate yal Systems .
Pipeline-Incurred Conditioning Costs - ase
Gathering Allowance
Production Taxes -
Total Costs and Ceiling Rates ‘for Pipeline > Quality
er BE
Derivation of Ceiling Rates rt New Gas-Well Gas _
X. Miscellaneous Matters
Question of Minimum Rates _ Ber
Small Producer maneceneel ue
SN EEE IIE
Cut-Off Date
50
[11,332]
Presiding Examiner’s Initial Decision
Quality Adjustment Procedure
Intermediate Sales
[11,332]
Prepayments -
Indefinite Escalation ‘Provisions
OS a ee eee
Special Relief Procedure
Application of Order
New Gas-Well Gas on Previously Committed
Acreage _
Claim of Built-in Revenue Deficiency —— = _____
Question of Competition in Gas Industry —.._
Noncost Factors
Rate Proposals of Producers and AGD
“Location Factor” __.
“Sharp and Abrupt Departures”
Guideline and In-Line Prices
Findings and Conclusions
51
" ees <Sry - a ie EP LEE LOT FILS LIB OLIN IOD IE
eer |
[11,333]
Presiding Examiner’s Initial Decision
[11,333]
PURDUE, PRESIDING EXAMINER: This is a pro-
ceeding to fix rates for sales by independent producers,
in interstate commerce, of natural gas produced in the
“Other Southwest Area.” Such term is used to distin-
guish the proceeding from prior proceedings of like na-
ture involving areas elsewhere in the southwest. The
region here embraced, the Other Southwest Area, com-
prises the whole or part of six States; viz., four counties
in northwest Alabama; Mississippi (onshore and off-
shore) ; Arkansas; that portion of Louisiana north of the
31° parallel; 56 counties in eastern and southern Okla-
homa (hereinafter referred to as “other Oklahoma) ; and
Railroad Commission Districts Nos. 5, 6, and 9 in north-
east Texas.
By order issued February 28, 1967, the Commission
instituted the proceeding “to determine just and reason-
able rates” for the area, under Section 5(a) of the Natu-
ral Gas Act. The order named as respondents, 795 in-
dependent producers and 24 pipeline purchasers; and
consolidated for hearing with the area rate proceeding,
347 rate suspension proceedings under Section 4(e) of
the Act, involving 162 producers. By subsequent action,
78 of the respondent independent producers were deleted;
certain of the suspension proceedings were severed or
terminated; and in other suspension proceedings, new
parties were added as corespondents. The remaining
respondent independent producers are listed in Appendix
A hereto; the respondent pipeline purchasers, in Appen-
dix B; and the present consolidated suspension proceed-
ings, 300 in number, involving 160 producers (as of Au-
gust 31, 1969), in Appendix C. The order recites that
the respondent independent producers are “all persons
making sales of gas in interstate commerce from the
[11,334]
Presiding Examiner’s Initial Decision
production areas delimited herein”; and that the pipeline
purchasers “make purchases in [such] producing areas,”
and hence are directly “concerned” with the determina-
tion to be made herein. The order directed the Examiner
to incorpyrate by reference all the evidence adduced in the
joint record in Hugoton-Anadarko Area Rate Proceeding,
Docket No. AR64-1, and Texas Gulf Coast Area Rate
Proceeding, Docket No. AR64-2 (these proceedings and
record are hereinafter referred to as “the joint proceed-
ing’ and “the joint record”). The order contained a
proviso that after receipt of the joint record, specific
portions might be rejected by ruling of the Examiner on
the ground of irrelevancy or immateriality.
On June 28, 29, and 30, and September 12, 1967, a
prehearing conference was held in the instant proceed-
ing. The conference in
[11,334]
effect constituted part of the hearing in that the Exam-
iner (as theretofore prescribed by him) received the joint
record in evidence and ruled on motions to strike por-
tions thereof.
On October 17 and 18, 1967, a phase of the hearing
was held in Dallas, Texas, to enable small producers to
make a statement of position or to adduce evidence. A
“small producer” is a natural-gas company having ju-
risdictional sales of not more than 10,000,000 Mcf an-
nually on a nationwide basis. At the Dallas sessions,
statements of position were made by respondent small
producers M. H. Marr, Estate of Russell Maguire, W. L.
Pickens, Richardson Oils, Inc., McCommons Exploration
Company, Samedan Oil Corporation, McCommons Oil
Company, and Hurley Oil and Gas Company; and by
intervenor Texas Independent Producers & Royalty Own-
ers Association (TIPRO), whose 4,500 members are small
53
[11,334]
Presiding Examiner’s Initial Decision
unintegrated producers and royalty owners in Texas,
Richardson, TIPRO, and small producer Robert Cargill
adduced evidence.
All other sessions of the hearing were in Washington,
D. C. Prepared testimony and exhibits constituting the
parties’ and participants’ cases-in-chief having been served
and filed, on January 10, 1968, the Examiner held a
short session of the hearing in order to have the testi-
mony copied in the transcript, subject to later adoption
by the witnesses.
The proceeding came on for hearing proper before the
Examiner on March 20, 1968, and concluded on Septem-
ber 19, 1968, consuming 55 hearing days. The transcript,
including the prehearing conference and the sessions at
Dallas, totaled 6,939 pages. One hundred and seventeen
exhibits, 16 items incorporated by reference to other
Commission proceedings, and 3 public document items,
were received in evidence. At the prehearing conference,
the Dallas phase of the hearing, and the main hearing,
appearances of respondents, intervenors, and the staff of
the Federal Power Commission were entered as listed
under the caption hereof.
A number of the respondent major independent pro-
ducers cooperated in expediting the hearing by joining
in the presentation of evidence and cross-examination of
witnesses, and in making motions and responses to mo-
tions. They reserved the right, however, to participate
individually. (1:17 et seg.) These companies, referred
to herein as “the principal producer group” or “the pro-
ducer group,” are the following: Gulf Oil Corporation,
Warren Petroleum Corporation, Amerada Petroleum Cor-
poration, Ashland Oil & Refining Company, Atlantic Rich-
field Company, The California Company a Division of
Chevron Oil Company, Cities Service Oil Company, Cities
54
SUEY) ry A reine Pr te
MINER AP FRY AUT ARNE eR NR eNMErO COE amar nnnyye
_—
Presiding Examiner’s Initial Decision
[11,335]
Service Company, Continental Oil Company, Getty Oil
Company, Humble Oil & Refining
[11,335]
Company, Marathon Oil Company, Midhurst Oil Corpo-
ration, Midwest Oil Corporation, Murphy Oil Corpora-
tion, Pan American Petroleum Corporation, Shell Oil
Company, Signal Oi! and Gas Company, Service Gas
Products Company, Sinclair Oil Corporation, Sohio Petro-
leum Company, Southwest Gas Producing Co., Inc., Sun
Oil Company, Tenneco Oil Company, Texaco Inc., and
Union Producing Company.' The following respondents
participated to a limited extent in the hearing: major
independent producers Phillips Petroleum Company; The
Superior Oil Company; Hunt Oil Company together with
associated companies and persons (the Hunt group);
George Mitchell & Associates, Inc. (GMA), an operator
for a large number of small independent producers in
Texas Railroad Commission District No. 9; and six small
independent producers in such district. Intervenors the
Associated Gas Distributors group (AGD), comprised of
64 public utilities engaged in the distribution of natural
gas, and the staff of this Commission, participated
throughout the hearing. Evidence both oral and docu-
mentary was introduced by the respondent producers who
participated in the hearing, with minor exceptions; by
AGD, and by the staff. Cross-examination of witnesses
was conducted by said respondents, intervenors, and the
staff. After the conclusion of the hearing, briefs were
filed by the following parties and participants: the prin-
cipal producer group (adopted by Phillips and Mobil Oil
Corporation, and by Superior in part), Superior, the
1Getty Oil Company did not enter an appearance at the hearing
but joined in the briefs filed by the principal producer group.
55
DOMED LPR RNP YT AYA
ms niente
PLE DAE BS hilo 5 Papin 6 GBP Ore
Sw a Pee ie th
‘
%
;-
FE
‘
[11,335]
Presiding Examiner’s Initial Decision
Hunt group, GMA, Richardson, the respondent pipeline
purchaser group, AGD, Texas Independent Producers &
Royalty Owners Association, intervenor the State of
Texas, and the staff.2 The proceeding was thus submitted
for consideration and decision.
[11,336]
I. IMPROPER ARGUMENT
At pages 21-22 of their initial brief, the principal pro-
ducer group quote an excerpt from a printed address;
at page 40, they cite a printed address; at page 191,
footnote 111, they cite and quote excerpts from a “study”
by a bank; at page 196, footnote 114, they make state-
ments based on a “study” prepared for a brokerage con-
cern; at page 198, footnote 116, they cite an article in
the Wall Street Journal; and at page 250, footnote 138,
they refer to the contents of an application in another
proceeding.
2 Pan American filed a supplemental reply brief. The following
counsel who did not enter appearances at the hearing were on the
briefs: Joseph W. Morris for Amerada Petroleum Corporation;
Edward J. Kremer for Atlantic Richfield Company; EF. L. Creasey
for Cities Service Oil Company and Cities Service Company;
Clyde E, Willbern for Getty Oil Company; Morton Taylor for
Marathon Oil Company; Neal Powers, Jr., Butler, Binion, Rice,
Cook & Knapp for Midhurst Oil Corporation; James E. Bye, Holme,
Roberts & Owen for Midwest Oil Corporation; H. Y. Rowe for
Murphy Oil Corporation; Richard F. Remmers for Sohio Petroleum
Company; A. T. Shotwell, Shotwell, Brown & Sperry for Southwest
Gas Producing Co., Inc., Homer E. McEwen, Jr., for Sun Oil Com-
pany; Joseph Tamasy and John E. Watson for Tenneco Oil Robert
E. Newey for Texaco Inc.; and J. C. Ohrt for Union Producing
Company—all on brief of principal producer group; Frank P.
Saponaro, Jr. for Superior; Vinson, Elkins, Weems & Searls for
Richardson; E. M. Barrett, Ira L, Freilicher, L. George Folsom,
Ronald D. Jones, Myles V. Whalen, Jr., and Dale A. Wright for
AGD; and Nola White for the State of Texas.
56
[11,337]
Presiding Examiner’s Initial Decision
g
At pages 4 and 5 of their reply brief, the principal
producer group quote from a letter, dated December 16,
1968, to the then Chairman of the Commission from W.
Morton Jacobs, president of American Gas Association,
Inc, and from a petition of Independent Natural Gas
Association of America, dated December 2, 1968, to in-
tervene in another proceeding. They also make an aver-
ment at page 4 based on other “recent communications
to the Commission.” The letter and the petition are set
out in full as Appendixes B and C to the brief. At page
7, the producer group make an averment based on the
AGA letter to the Chairman. At page 8, footnote 7, they
quote «nother excerpt from the AGA letter. At pages 9
and 10, they make an averment based on the contents
of “extensive applications for rehearing filed by various
parties” in another proceeding and “motions” therein
“of various pipelines and other nonproducers”; and in
an accompanying footnote they cite a certain motion in
the other proceeding and a “joinder” therein.
At page 20 of their reply brief, footnote 13, the prin-
cipal producer group cite briefs of the staff and AGD
in another proceeding as basis for a statement made. At
page 41, they make a statement based on, and quote
from, a staff brief in another
[11,337]
proceeding. At page 68, footnote 36, they quote testimony
of a witness in Southern Louisiana Area Rate Proceed-
ing, Docket No. AR61-1. At page 118, footnote 49, they
make a statement based on an application for rehearing
in another proceeding. At page 15 of its supplemental
reply brief, footnote 14, Pan American makes a state-
ment based on briefs of the staff and AGD in another
proceeding.
57
datathe Bhihei son dined vibe Pn. Naat ianite nites er eandh oe oe
Statin Bk d
[11,337]
Presiding Examiner’s Initial Decision
At page 7 of their initial brief, the pipeline purchaser
group cite the same bank study quoted in the producers’
initial brief, page 191.
At pages 85, 97, and 106 of their initial brief, the
staff cite five articles in The Oil and Gas Journal.
None of the material referred to in the five preceding
paragraphs is a part of the record. At the hearing, the
Examiner repeatedly rejected similar material on the
ground of hearsay and immateriality. (See, e.g., 3:377-
81; 7:824-35; 58:6164-72; 64:6708-09.) The materials
mentioned in the foregoing paragraphs not being evidence
in the case, their use is improper argument. The Exan-
iner gives no consideration to them.
At pages 213-14 of their initial brief, an argument of
the principal producers is based on material rejected by
the Examiner and made an “offer of Proof.” The Exam-
iner ignores this improper argument. An offer of proof
is not evidence. The purpose of Rule 43(c) of the Fed-
eral Rules of Procedure, permitting an offer of proof, is
to enable the reviewing court intelligently to pass upon
the question as to the admissibility of the excluded mat-
ter. Pennsylvania Lumbermens Mutual Fire Insurance
Co. v. Nicholas (C.A. 5), 253 F.2d 504, 507. To argue
a case to a trial examiner on the basis of material which
he rejected is frivolous.
In the reply brief of the principal producer group,
pages 11 and 12, two more offers of proof are cited as
* One of these articles was referred to in the prepared testimony
of a producer witness, 57:6060; and was stricken out by the
Examiner, 58:6165. Manifestly, the staff inadvertently overlooked
this ruling.
In this decision, in citing the transcript in this proceeding and
portions of transcripts incorporated by reference, the first figure
is the transcript volume; the subsequent figure or figures are the
transcript page or pages.
ett ee ae te
[11,338]
Presiding Examiner’s Initial Decision
basis for statements made. The Examiner does not give
consideration to these statements for the same reason.
[11,338]
At pages 102 and 103 of their reply brief, the producer
group set out a table and make averments based on
Schedule 2 of Exhibit D of Exhibit 129-J in Hugoton-
Anadarko and Texas Gulf Coast. Exhibit 129-J is in-
corporated by reference in this proceeding but was made
the subject of a motion to strike. The Examiner ruled
that Schedule 2 of Exhibit D thereof “will be allowed to
stand only for” a specified “limited purpose.” (3:354-
56.) The table and language at pages 102 and 103 vio-
late this ruling. Such Schedule 2 was part of the offer
of proof referred to at pages 213-14 of the producer
group’s initial brief. The producer group may be making
its argument because of this offer of proof. Whatever
the reason, the Examiner gives no consideration to such
improper argument.
Likewise, at pages 3 and 4 of its initial brief, Superior
makes an argument based in part on Exhibit 21 for
Identification, which was rejected, and certain testimony
of Don W. Prescott and Pat F. Timmons which was
stricken out (Examiner’s ruling issued January 16,
1968), which material was made the subject of an offer
of proof. The Examiner gives no consideration to the
rejected exhibit or the stricken testimony.
Again, at pages 6 to 10, inclusive, of its initial brief,
Superior makes an argument based in part on Schedule
2 of Exhibit D of Exhibit 129-J in the joint proceeding,
in violation of the Examiner’s ruling in Volume 3, pages
854-56 of the transcript; based in part on Exhibits 109-J
and 130-J in the joint proceeding, which the Examiner
struck out in this proceeding (3:362) ; and based in part
[11,338]
Presiding Examiner’s Initial Decision
on testimony of Clark W. Breeding in support of the
proposition that the respondent producers pay certain
claimed amounts as income taxes, which testimony the
Examiner rejected insofar as it went to such question.
(3:361-62.) The Examiner gives no consideration to Ex-
hibits 109-J, 130-J, and the calculation at page 8 of Su-
perior’s brief from Exhibit D of Exhibit 129-J; and
gives no consideration to the remainder of the foregoing
material except for the limited purposes specified in his
rulings at the hearing.
At page 71 of their initial brief, the principal pro
ducer group cite data from U.S. Bureau of the Census,
Long Term Economic Growth: 1860-1965 (1966) ; at page
75, they cite a table from an issue of Fortune (June
1968) and a table from Board of Governors of the Fed-
eral Reserve System, Federal Reserve Bulletin (Septem-
ber 1968) ; at page 86, footnote 56, they make statements
based on citations to certain pages of the Congressional
Record; at page 198, footnote 117, they make statements
based on Economic Report of the President, issues of
January 1963 and February 1968; and at pages 206-07,
they cite material from The American Association of
Petroleum Geologists Bulletin (June 1966). At page 83
of their initial brief, the staff quote two excerpts
[11,339]
from American Gas Association, Inc., Reserves of Crude
Oil, Natural Gas Liquids, and Natural Gas in the United
States and Canada as of December 31, 1967 (May 1968);
and at page 84, the staff quote an excerpt from US.
Atomic Energy Commission, E] Paso Natural Gas Co,
and the Department of the Interior, Project Gasbuggy
(September 15, 1967). These data and materials are not
a part of the record. Had they been offered in evidence,
[11,339]
Presiding Examiner’s Initial Decision
the Examiner might have received them, in line with
rulings receiving similar matter. Near the outset of the
hearing, the Examiner even put the participants on no-
tice that they would be required to prove their case by
introducing in evidence the material upon which they
rely or by otherwise making a proper evidentiary show-
ing during the hearing. (10:1364-66.) The use of these
materials in the briefs is improper argument, which the
Examiner ignores in reaching his decision.
It may be contended that the Examiner should now take
official notice of the citations above referred to from gov-
ernment and American Gas Association publications, even
though they were not received in evidence. This conten-
tion is unwarranted for two reasons. First, neither the
parties nor the staff have complied with the provisions
of Rules of Practice and Procedure, Section 1.26(d),
that, “Any participant requesting the taking of official
notice after the conclusion of the hearing must set forth
the reasons claimed to justify failure to make the request
prior to the close of the hearing.” Second, due process
may require that a party be afforded opportunity to chal-
lenge such noticed facts and “parry their effect” by evi-
dence and proper argument, if he desires to do so. Ohio
Bell Telephone Co. v. Public Utilities Commission, 301
U.S. 292, 301-02; United States v. Abilene & Southern
Railway Co., 265 U.S. 274, 289. This proceeding must
be brought to conclusion, and the likelihood of having to
reopen the hearing should be avoided.*
*Section 1.27(d) of the Rules of Practice makes a distinction
between the participants on the one hand and the Examiner and
the Commission on the other respecting official notice of facts. The
Examiner and the Commission have broad authorization, on their
own account, to take official notice after the conclusion of the hear-
ing. This distinction is proper. The participants have the oppor-
tunity during the course of the hearing to make out their case. But
the Examiner and the Commission, upon studying the record in
61
— EN ae Se ne QS che
[11,340]
Presiding Examiner’s Initial Decision
[11,340]
II. PRELIMINARY FINDINGS OF FACT
Pee
The evidence establishes the following facts:
General
Petroleum was first discovered in the Other Southwest
Area in 1866. The first recorded natural-gas discovery
was in 1901. (9:944-45.) Gas production assumed major
importance in the middle 1920’s, when natural gas was
piped from the area to markets in southeastern Texas
and southern Louisiana; and soon thereafter to Memphis
and St. Louis. (9:946, 949.) The tremendous expansion
of demand following World War II brought many pipe-
lines into the area seeking sources of supply. The 24 re
spondent pipeline companies now purchase gas there.
(9:950; Order, Feb. 28, 1967, App. B.)
Total gas production in the area in 1967 was 2.2 tril-
lion cubic feet, representing about 12% of total conti-
nental United States gas production. (Ex. 70, p. 26.)
preparing their decision or opinion, may discover points on which
additional information is needed. It is proper administrative pro-
cedure for the Examiner and the Commisison to avail themselves
(as they are authorized to do by Section 1.27(d)) of such material
“as might be judicially noticed by the courts of the United States,”
or “as to which the Commission by reason of its functions is an
expert.” However, if a reopening of the hearing is to be obviated,
the Examiner and the Commission should not make use of extra-
record materials which a party should reasonably have an oppor-
tunity to meet. See Davis, Administrative Law Treatise, Vol. 2, p.
344.
In the instant decision, the Examiner has in certain instances taken
official notice of material which he is satisfied will not call for a
reopening of the hearing—principally updated statistical data
not available before the close of the hearing or at the time wit-
nesses prepared their exhibits.
62
a on SERENE En RENAN A IR SNe aA es —— |
[11,341]
Presiding Examiner’s Initial Decision
Gas-well gas has accounted for about 50% of total gas
production in the area in recent years. (Ex. 8, p. 183.)
In 1966, approximately 38% of the gas produced was
sold in interstate commerce; and 62% was consumed in
intrastate commerce. (Ex. 4, p. 30.) As of 1964, of the
volume sold interstate, approximately 48% was consumed
in the eastern part of the United States (New England,
Appalachian and Southeast regions) ; 18%, in the Great
Lakes-Northern Plains regions; and the remaining 34%,
in the Mid-Continent and Gulf Coast regions. 9:1082;
calculation based on Ex. 4, pp. 28-30.)
[11,341]
The year-end 1967 proved gas reserves in the Other
Southwest Area, 26.5 trillion cubic feet, represents
about 9% of the proved reserves in the continental
United States. (Ex. 70, p. 25.) This volume is less
than the proved gas reserves in any of the areas hereto-
fore the subject of this type of proceeding; viz., Permian
Basin Area Rate Proceeding, 34 F.P.C. 159, 34 F.P.C.
1068, 34 F.P.C. 1286, Permian Basin Area Rate Cases,
390 U.S. 747; Southern Louisiana Area Rate Proceed-
ing, Opinion No. 546; Hugoton-Anadarko and Texas
Gulf Coast, supra. The proved reserves in the Southern
Louisiana Area are about three times as great. (Ex.
70, p. 25.)
Annual reserve additions (new supply) in the Other
Southwest Area have been nearly in balance with annual
production during the period 1956-1967, and the year-
end reserves to production ratio has remained fairly
constant during that period, ranging from a low of 11.0
to a high of 12.8. (Ex. 70, p. 27.)
In his initial decision in Hugoton-Anadarko, Examin-
er Kane correctly found:
[11,341]
Presiding Examiner’s Initial Decision
“By order of October 30, 1963, the Commission
issued a questionnaire to 114 natural-gas produc-
tion companies making sales of natural gas for re
sale, seeking 1962 cost and related operating data.
Responses were required of (a) independent pro-
ducers having annual nationwide jurisdictional sales
in excess of 10,000,000 Mcf, (b) pipelines having
annual production in excess of 10,000,000 Mcf and
(ec) all pipeline affiliates [oil and gas production
affiliates of pipeline companies—31 F.P.C. 34, 35]
whether or not their annual sales or production was
in excess of 10,000,000 Mcf.
“Ninety companies filed responses to the question-
naire. Of the 24 producers who did not file, four
were excluded for reasons of duplication, and the
remainder were relieved from filing because their
annual sales or production were less than the adopt-
ed standard. For various undisputed reasons, the
Staff did not use the data from six of the companies
in compositing its cost data. The remaining &
companies comprise 69 producers and pipeline affili-
ates and 15 pipeline producers.” (Mimeo., 9-10.)
Fifty-eight independent producers (including production
affiliates of pipeline companies) and eight pipeline con-
panies having production in the Other Southwest Area
filed responses to the questionnaire. By a supplemental
order issued February 28, 1967, the Commission directed
that certain additional data involving gathering and pro-
cessing costs be supplied for the
[11,342]
Other Southwest Area. This order was sent only to pre
ducer respondents to the AAQ, but the additional data
were furnished by AAQ pipelines as well. (See order
herein dismissing appeal, issued March 4, 1968.) The cost
64
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[11,342]
Presiding Examiner’s Initial Decision
studies used by the staff in this proceeding are based
on the responses of the 58 independent producers.
This entire group of 66 companies (58 independent pro-
ducers and 8 pipelines) includes all major producers oper-
ating in the area. (Ex. 13, pp. 56-57.) Their gas pro-
duction accounted for over 50% of the total in the area.
The 1962 lease revenue in the area of these 66 com-
panies was:
Production Lease Revenues
(Barrels or Mcf) ($)
Crude Oil 197,214,146 $568,685,860 (76.4%)
Lease Condensate 10,229,814 29,515,421 (4.0%)
Gas 1,142,255,817 146,199,146 (19.6%)
744,400,427
(Exs. 14, 16.)
Geology of Area
The Other Southwest Area is geologically heterogeneous,
with little homogeneity involving natural-gas production
or the geologic circumstances under which natural gas
is found and produced. (9:935; 14:2050.)
The major structural feature is the Ouachita Front,
which divides the area into two major geological segments.
(9:938.) From northeastern Mississippi the front ex-
tends in an are northwestward into Arkansas, thence
westward and southwestward through eastern and south-
ern Oklahoma, thence southward and southwestward into
the Big Bend area of west Texas. The oil and natural-
gas production northward and westward from the Ouachi-
ta Front is from rocks of the Paleozoic era, whereas south-
ward and eastward from the front all significant produc-
tion is from rocks of the younger Mesozoic and Cenozoic
ah CMT EO eI aT ee nee an oN eee | a
[11,342]
Presiding Examiner’s Imtial Decision
The Paleozoic rocks which produce oil and natural gas
range from Permian to Ordovicion, the Mesozoic produc-
tion is from Cretaceous and Jurassic rocks; and the Cen-
ozoic production, from Tertiary rocks. The Paleozoic res-
ervoirs are generally
[11,343]
characterized by inferior porosity and permeability;
whereas the porosities and permeabilities of the Mesozoic
Cretaceous and Jurassic, and the Cenozoic Tertiary, rocks
are generally much better than in the Paleozoic. (9:938-
40.)
In the northern or Paleozoic segment, there are a nun-
ber of major uplifts and basins. The Ouachita uplift dom-
inates the western portion of south central Arkansas and
the adjoining portion of Oklahoma; the Ozark uplift lies
in northern Arkansas and adjoining portions of Oklahoma
extending into Missouri. Between these two uplifts is
the Arkoma Basin, located generally in the Arkansas
Valley. Westward from the Ozark Mountains and the
Arkoma Basin is the Central Oklahoma platform and
northeastern Oklahoma shelf of central and northestern
Oklahoma. Westward from the Ouachita Mountains are
the Arbuckle and Wichita-Criner uplifts. South of the
Arbuckle Uplift is the Ardmore Basin, in south central
Oklahoma and northeast Texas. The Ardmore Basin is
separated from the Marietta-Sherman Basin by an arm
of the Wichita-Criner uplift.
The Marietta-Sherman Basin extends from Oklahoma
into Grayson County, Texas, in District 9. Westward
from the Marietta-Sherman Basin is the Muenster Arch.
This arch plunges southestward across Jefferson County,
Oklahoma, into portions of Montague, Cooke, Grayson,
Denten, and Collin Counties, Texas, in District 9. (9:942-
44; Ex. 1. Map 3.) Two other major geological features
66
[11,344]
Presiding Examiner’s Initial Decision
are common to both Texas District 9 and adjacent Okla-
homa; namely, the Hardeman Syncline and the Red River
Arch. (Ex. 26; Ex. 11, Map 3.) “Other’ Oklahoma (ex-
cept the southeastern part) and Texas District 9 (except
a narrow strip on its eastern border) lie in the Osage
Plains. (9:936.)
A major structural element in west-central Texas is
the northward plunge of the Bend Arch. Only the north-
ern part of this arch is in the Other Southwest Area.
The Fort Worth Basin lies between the Bend Arch and
the Muenster Arch; and, except its western flant, is with-
in the Other Southwest Area. The Fort Worth Basin and
the Muenster Arch disappear under the Ouachita struct-
ural front.
In the southeastern portion of the Paleozoic segment is
the Black Warrior Basin of northeastern Mississippi and
adjoining Alabama. Westward, Paleozoic rocks are buried
under thick younger sediments. (9:943-44; Ex. 1, Map
3.)
The crystalline-rock basement of the Paleozoic is highly
irregular. It ranges from basement at the surface in the
Witchita and Arbuckle uplifts to a depth of at least
36,000 feet in the trough of the Arkoma Basin. (9:958.)
[11,344]
Eighty-two “major” fields have been discovered in the
United States (fields producing nonassociated or associ-
ated gas having recoverable reserves of more than one
trillion cubic feet). Of these, fifteen are located in the
Other Southwest Area. (9:945-47.)
In the southern or Cenozoic-Mesozoic segment there are
two major embayments or basinal areas—the Mississippi
on the east, extending from the coast into northeastern
Arkansas; and the East Texas Embayment on the west.
67
So ea Oe eae ee ne ete ene epee oh entent te cota e
beta lixduhis ib scataate aemmamcee |
Piet igen
[11,344]
Presiding Examiner’s Initial Decision
They are separated by two major uplifts, the Sabine Up-
lift eastward from the deeper portion of the East Texas
Basin; and the Monroe Uplift eastward on the western
side of the Mississippi Embayment. Within these em-
bayments and southward from the Sabine and Monroe
uplifts are three interior salt dome basins. The salt domes
are located in east Texas, southwestward from the Sab-
ine Uplift; in northern Louisiana, southeastward from the
Sabine Uplift, and in Mississippi southeastward from the
Monroe Uplift. Many of the accumulations of gas and
oil in the embayments are controlled by arches in over-
lying rocks resulting from deep-seated upswellings of
salt.
An important fault system in Cenozoic and Mesozic
rocks extends northward along the western rim of the
East Texas Embayment. This is the Mexia-Talco fault
zone which continues northward through Texas, eastward
through southern Arkansas, and probably eastward across
the Mississippi Embayment and southeastward through
Mississippi into Alabama, where it is known as the
Pickens-Pollard fault zone. Major oil and gas fields are
associated with this fault zone. (9:941-42.) In southeast-
ern Arkansas is the small Desha Basin. (9:961; 15:1175.)
In the Cenozoic-Mesozoic segment, rocks generally dip
and progressively become deeper southward toward the
Gulf. Depth to the basement increases from somewhat
less than 20,00 feet in the northern portion of the seg-
ment to more than 32,000 feet along the coast; and, off-
shore, to over 40,000 feet at water depths of less than
500 feet. (9:958.)
Nine nonassociated major gas fields have been dis-
covered in the Cenozoic-Mesozoic segment; viz., six in
north Louisiana, two in east Texas, and one in south
Mississippi. (9:947; Ex 1, Map 4.) Discovered in 1916,
Monroe, in north Louisiana, is a gas field of the first
68
[11,345]
Presiding Examiner’s Initial Decision
magnitude. Carthage Field, in east Texas, was found in
1936. No gas field discovered in the United States since
then (with the possible exception of Gomez) is comparable
to it in amount of reserves. (9:948.)
[11,345]
III. RATE OF RETURN
Claimed Necessity for High Return as Incentive for Ex-
ploratory Effort
The essence of the respondent producers’ argument is
that the rates they seek are needed as incentives to induce
exploratory effort for gas supplies sufficient to meet the
increasing market requirements. The argument was made
in prior area rate proceedings.
This argument has a familiar ring. Following the de-
cision of the Supreme Court in 1954 in Phillips Petroleum
Co. v. Wisconsin, 347 U.S. 672, holding that this Com-
mission has jurisdiction under the Natural Gas Act over
producer wholesales in interstate commerce, unsuccessful
legislation was introduced in Congress to exempt produc-
ers from the Act. More than fifteen years ago, in hear-
ings before the House and Senate Committees on the
bills, representatives of the producers made the same
argument to justify such exemption as the producers are
now making to justify the rates which they seek. In the
House and Senate hearings, David T. Searls, representa-
tive of producer interests, argued that the legislation gave
the independent producer “the incentive to undertake the
risks and hazards which someone must take in order to
insure an adequate supply.” (Hearings before the House
Committee on Interstate and Foreign Commerce on H. R.
4560, 84th Cong., Ist Sess., March 24, 1955, p. 145; Hear-
ings before the Senate Committee on Interstate and
69
~ org Mad = —
Be et TS to * SARE DS FERRET LETS LEI DOPE TINT MES ETI ELE EY EB PA aS
Presiding Examiner’s Initial Decision
(111,845)
E
3 Foreign Commerce on S. 1853, May 10, 1955, p. 82.)
: In the Senate hearings, a resolution of the Natural Gas
4 Committee, Independent Petroleum Association of Amer-
ica, declared: “. . . Federal regulation of production of
natural gas will inevitably result in diminishing supplies
. .” (Hearings on S. 1853, May 12, 1955, p. 274.)
Use of this argument over the years, under variant situ-
ations, weakens its force.
Significantly, at the time of these Congressional hear-
ings, before the Commission had attempted to regulate
independent producers, their rates for sales to interstate
pipelines in the Other Southwest Area were a weighted
average price of 10.2¢ per Mcf. (Ex 60, Sch. 7, sheet
1, col f.) Yet the producers are now claiming that to
receive a reasonable return they must have rates in var-
: ious parts of the Other Southwest Area ranging from at
least 16.0¢ to 22.6¢. (Prod. Br., 231, 237.) * These rates
Cie een yr ee eSt et
[11,346]
would be roughly 60% to 120% higher than the prices
the producers voluntarily had in effect when they were
protesting the Natural Gas Act being applied to them.
This large advance in rates makes their claim suspect
and requires that they be tested against producer costs.
Cf. Dayton Power & Light Co. v. Public Utilities Com-
mission, 292 U.S. 290, 311-12; Federal Power Commis-
sion v. Interstate Natural Gas Co., 336 U.S. 577, 581-82;
Atlantic Refining Co. v. Public Service Commission, 360
U.S. 378, 390-91, 393.
5 The following abbreviations are used to denote various briefs:
“Prod. Br.”—Initial Brief, Principal Producer Group; “Prod. Rep.
Br.”—Reply Brief, Principal Producer Group; “AGD Br.”—Initial
Brief, Associated Gas Distributors; “AGD Rep. Br.”—Reply Brief,
Associated Gas Distributors; “Staff Br.”—lInitial Staff Brief;
“Staff Rep. Br.”—Staff Reply Brief.
70
ETL S PFO Ce ae bt tee: =
ar en ne SAE mI RR SEER a e
2 ' PRE SREP Ee OME TE RIE Ri
[11,346]
Presiding Examiner’s Initial Decision
The largest single factor in respondent producers’
cost approach is their claim that, for both “flowing gas”
and “new gas-well gas,” a rate of return of 16% on net
book investment is justified. (Prod. Br., 187-88, 191.)
The Examiner is of the considered view, and finds, that
this claim is unreasonable; and that a fair, adequate, and
reasonable rate of return, both for flowing gas and new
gas-well gas, is 1014%. (See infra, pp. 116-17 for ex-
planation of rate structure with separate rate ceilings
for new gas-well gas and flowing gas.)
The producers’ argument that there is an “urgent
necessity of providing greater profit incentive” to en-
courage exploration for and development of new gas sup-
plies (Ibid., 191), is divided into two parts. The first
part pertains to the national supply and the second part,
to the supply in the Other Southwest Area.
National Gas Supply. The producers’ expert witness
on gas supplies, Radford L. Schantz, expressly concedes
that he is “not questioning the level of ultimate gas sup-
ply.” He cites a study of the Potential Gas Committee
of the Independent Natural Gas Association of America,
as of December 31, 1966, that there remains over and
above the 286 trillion cubic feet of proved gas reserves
in the continental United States, an additional 300 trillion
cubic feet of “probable supply,” “210 trillion cubic feet
of possible supply,” and 180 trillion cubic feet of “spec-
ulative supply.” (9:1067.) The position of the witness
and of the respondent producers is that the additional
incentives are needed to increase “the relative near-term
future finding rates for natural-gas reserves.” (Prod.
Br., 24.)
Schantz has made three supply-demand studies and
describes the results of Study One as “quite startling.”
(9:1068. )
71
EP INL IIS LTR IRE SELL, OES IERIE EI
[11,347]
Presiding Examiner’s Initial Decision
[11,347]
In this study, he estimates that the annual supply of
natural gas in the United States for the entire period
1968 to 1980 will remain constant; i.e., a static figure
of 19,515 billion cubic feet derived by computing the
average new supply for the 12-year period 1956 to 1967.
He compares this figure with the future demand (net
production) forecast by the Future Requirements Com-
mittee, which progressively increases from 18,960 billion
cubic feet in 1968 to 26,900 billion cubic feet in 1980.
Thereby he shows net production exceeding new supply
by 1969 and each year thereafter through 1980. (Ex. 70,
p. 15.) He refers to the year when the net production
first exceeds the annual new supply as the “cross-over
point.” (9:1066.)
In Study Two, Schantz likewise estimates that the an-
nual supply of natural gas from 1968 to 1980 will remain
constant. Study Two differs from Study One in that the
static figure used is 20,610 billion cubic feet, the average
new supply for the three-year period 1965-1967. He
compares this figure with the future demand forecast by
the Future Requirements Committee, and on this basis
shows net production outstripping new supply in the year
1971 and thereafter. (Ex 70, p. 16.)
The Examiner is of the view that the witness’ estimate
of new supply is unsound; and his use of a constant fig-
ure, unjustified. The record shows that the new supply of
natural gas exceeded net production in every year from
1946 to 1967, inclusive. (Ex. 70, p. 4.) Furthermore,
Schantz’s position in these two studies that the annual
supply will not increase between 1968 and 1980 is refuted
by two recent reports of the U.S. Department of the In-
terior, Office of Oil and Gas, Items II and III, herein-
after considered.
[11,348]
Presiding Examiner’s Initial Decision
Schantz’s third study adopts a projection of new supply
contained in C. L. Moore, Office of Oil and Gas, Projec-
tions of U.S. Petroleum Supply to 1980 (December 1966),
Item II herein. This report “projects to 1980 the historic
patterns of discovery, development and production of
petroleum in the United States. These projections are not
forecasts of future supply,” but are “guide lines which
may be compared with projected requirements.” (Item II,
Foreword by Onnie P. Lattu, Director, Office of Oil and
Gas.) The Moore projections are based on application of
the Gompertz curve; the data on gross additions to reserves
cover the period 1946 to 1965. (Item II, p. 1.) Unlike the
Schantz estimate, Moore projects an increase in “gross
additions to proved reserves,” or new supply, each year to
1980. (Jbid., p. 22.) Schantz combines the Moore projec-
tion of supply with the future demand forecast of the
Future Requirements Committee, and is thereby able to
reach a result indicating a cross-over in 1973. (Ex. 70, p.
17.) However, the Moore projections do not show a
cross-over until 1978 (Item II, p. 22.), and are
[11,348]
guide lines, not forecasts of supply.*
*Schantz points out that for 1966, Moore’s projection of produc-
tion was too conservative—16 trillion cubic feet, whereas the actual
production that year was 17% trillion cubic feet. (11:1614.) How-
ever, Moore notes, “In the discovery projections, accelerated off-
shore exploration may increase the trend.” Moore goes on to say
that “Other factors, such as area-pricing for natural gas, may tend
to decrease it.” (Item II, p. 3.) But Moore, an engineer, does not
profess to know how low a rate would have to be set for producer
wholesalers in order to decrease the trend.
Attendant upon the receipt of Item II in evidence, the Examiner
afforded the producers opportunity to arrange for C. L. Moore to
testify in the proceeding, but they did not call him as a witness.
(11:1588-89.)
—_, a. fk. 2 ee,
[11,348]
Presiding Ezaminer’s Initial Decision
On July 1, 1968, the Office of Oil and Gas issued a
report, Item III, entitled, United States Petroleum through
1980. This authoritative, objective study was prepared
and approved by a select group of government officials,
geologists, engineers (including petroleum engineers) , nat-
ural-gas specialists, and economists. The presentation and
the findings therein “of the outlook for domestic oil and
gas availability over the 15-year period between 1965
and 1980” were made by a Working Task Force, under
the general purview of the Energy Policy Staff of the De
partment of the Interior. (Item III, p. iii.) The members
of the Energy Policy Staff and the Working Task Force
are: “Energy Policy Staff—William T. Pecora, Chairman,
Director U.S. Geological Survey; Newcomb B. Bennett, Jr.,
Assistant Commissioner, Bureau of Reclamation; Milton
Chase, Staff Assistant, Office of Assistant Secretary—
Water & Power; William E. S. Flory, Director, Office of
Minerals and Solid Fuels; George Fumich, Jr., Director,
Office of Coal Research; Onnie P. Lattu, Director, Office of
Oil and Gas; Vincent E. McKelvey, Research Geologist,
U.S. Geological Survey; J. M. Morgan, General Engineer,
Office of Assistant Secretary—Water & Power; James
C. Rettie, Assistant Director, Program Support Staff;
Paul Zinner, Assistant Director—Planning, Bureau of
Mines; Harry Perry, Secretary, Mineral Resources Re
search Advisor to Assistant Secretary—Mineral Re
sources. Working Task Force—Onnie P. Lattu, Chair-
man, Director, Office of Oil and Gas; C. Marvin Case,
Foreign Programming Specialist, Office of Oil and Gas;
Neil Cochran, Chief, Division of Utilization, Office of
Coal Research; Donald Duncan, Geologist, Organic Fuels
Branch,
i ee ee - ’
[11,349]
Presiding Examiner’s Initial Decision
[11,349]
U.S. Geological Survey; William C. Elliott, Jr., Chief Di-
vision of Petroleum, Bureau of Mines; Ferdinand Gagné,
Natural Gas Specialist, Office of Oil and Gas (to June
1967); Richard F. Meyer, Domestic Oil Specialist, Office
of Oil and Gas; David R. Oliver, Economic Research Speci-
alist, Office of Oil and Gas; John Ricca, Deputy Director,
Office of Oil and Gas; J. J. Simmons, III, Assistant Di-
rector, Office of Oil and Gas; Ralph E. Williams, Secre-
tary, Special Assistant to Director, Office of Oil and Gas.”
(Ibid., p. ii.)
On the basis of United States Petroleum through 1980,
the reasonable and justifiable conclusion is that an ade-
quate supply of proved reserves will be acquired to meet
demands through 1980. As true in any projection, this
report is necessarily based on assumptions. One assump-
tion is that “uncontrolled inflation or deflation will be
avoided.” Another is that “pollution abatement measures”
will have “nominal” effects on the “consumption of hydro-
carbon fuels.” (Item 3, p. 1.) Within these and other
necessary limitations, the report furnishes the best esti-
mate by the Office of Oil and Gas of the supply demand
relationship for natural gas through 1980. According to
the estimate, an adequate supply of natural gas for such
period should be realized. The Examiner is of the view
and finds that such estimate is reasonable, sound and
valid; and is the best opinon available upon the question.
' Other assumptions are that there will be “no large scale war,”
“no major depression,” and no “real” price changes; “e.g., the price
of coal as related to the price of fuel oil or gas with which it
competes, and to the general wholesale price index of which it is a
part”; “population to increase at 1.3% annually”; “real gross
national product to grow at four percent annually”; and “tech-
nological advances will be gradual and evolutionary.’ (Jbid.)
[11,349]
Presiding Examiner’s Initial Decision
After describing the petroleum resources base, the
report, Item III, reaches this conclusion:
“The rate at which these resources will be dis-
covered, developed, and produced will be determined
by individual entrepreneurs, large and small, as they
respond to opportunities for profit which they be
lieve to exist in these operations. The preceeding
description of the petroleum resource base merely
indicates that the amounts of oil and gas that are
physically present beneath the surface are very large
indeed—enough to supply any conceivable need for
a period running well beyond that
[11,350]
contemplated by this survey. They can be made avail-
able to the nation—but at a cost which may be more,
or less, than that experienced in the past... .”
(underscoring added.) (Jbid., p. 12.)
The Examiner so finds and concludes.
At page 24, the report makes this assessment of the
results of gas exploration in the period 1946 to 1966:
“Exploratory effort is down but results have held up
well as findings per well improve.” The Examiner s0
finds, upon the basis of the report and other evidence
in the record to the same effect.
Total natural-gas requirements for the period 1966-
1980 are estimated in the report at 310 trillion cubic
feet, of which approximately 302 trillion cubic feet will
be supplied by domestic production. (Jbid.,) p. 21.) The
Examiner finds that these estimates of requirements are
reasonable and sound.
On the question as to what is a proper natural-gas
reserves-to-production ratio, the report offers no opinion,
other than saying that a ratio of 11.9 to 1 would ap
76
Te veer -
Ot OCTET Ah PO RR oe SEI PERERA ee nayroneen Ct tl
[11,351]
Presiding Examiner’s Initial Decision
pear to be too low. However, the publication contains
these observations:
“Just how far the ratio will be permitted to de-
cline from the current 15.7 to 1 will be determined
by the requirements for pipeline reserves imposed
upon gas pipelines by regulatory agencies and in-
vestors. At what point the combined effect of these
requirements upon individual companies will create
a floor under the ratio of reserves to production can-
not readily be determined.”
“On the arbitrary assumption that a minimum re-
quirement of 15 to 1 will constitute the ‘floor,’” the re-
port proceeds to give these natural-gas requirements
figures: Over the 15-year period between 1965 and
1980, there will be a requirement for gross additions
to proved reserves of 376 trillion cubic feet; and re-
quired additions in the terminal year 1980 will be 28.7
trillion cubic feet. (Ibid.,) p. 21.)
The report makes these significant findings respecting
gas reserves and production:
“Over the period from 1946 to the present [i.e.,
1967], additions to proved reserves indicate an an-
ual rate of increase of 2.5 percent, obtained by com-
paring the mean additions of the earliest and the
latest 5-year periods (1946-50 vs 1963-67). The
average annual increase over the most recent 5-year
period, ended in 1967, was at a
[11,351]
rate of 2.4 percent, suggesting that the longer term
growth trend is still being well sustained. As-
suming that this slow decline in growth rate may
continue through the period ended in 1980, so that
an average annual increase of 2.2 percent is real-
77
+ DR WE LOT AS IPI
ie ase IPP ESS Per SS Ne
[11,351]
Presiding Examiner’s Initial Decision
ized, gross additions for the period 1965-1980 would
reach 383 trillion cubic feet, with additions in the
terminal year of 29.8 trillion cubic feet. Given the
encouraging results of gas exploration, particularly
in the recent past, the acquisition of proved reserves
of this order seems well within the industry’s capa-
bilities.” (Zbid., pp. 24-25.)
The Examiner so finds and concludes.
It will be seen that the 383 trillion cubic feet of new
supply over the period 1965-1980 exceeds the Office of
Oil and Gas estimate of domestic production over that
period, 302 trillion cubic feet. In other words, the Office
of Oil and Gas anticipates an excess of supply over pro
duction through 1980. The Examiner shares this view,
observing, however, that in any one year, an excess of
production relative to new supply may occur.®
8 The 1968 report of the Committee on Natural Gas Reserves of
the American Gas Association, issued in May 1969 (after the
conclusion of the hearing), shows a sharp decline in new supply
in relation to production. The new supply in 1968 was only 13,772
MMMcf, whereas net production was 19,479 MMMcf. (American
Gas Association, Inc., etc., Reserves of Crude Oil, Natural Gas
Liquids, and Natural Gas in the United States and Canada as of
December 31, 1968, p. 126; figures converted from 14.73 psia to
14.65 psia. This and like reports for other years are hereinafter
cited as AGA Reserves Report.) In the previous year, new supply
was 21,923 MMMcf and net production, 18,481 MMMcf. (AGA Re-
serves Report, 1967, p. 131; figures converted from 14.73 psia to
14.65 psia.) Hence, for the first time since 1946, when AGA began
reporting statistics on proved gas reserves, total U.S. net production
exceeded new supply; and a cross-over in the supply-demand re
lationship took place. In the Examiner’s opinion, this happening
is an anomaly, a temporary situation; and soon annual new suply
should again continue to exceed annual net production. This
opinion is justified by the Moore report and United States Petroleum
through 1980.
Other evidence supports this opinion. Speaking of declines and
increases in annual new supply in relation to net production, as 8
measure of probabilities for the future, producer witness Dr. J.
Rhodes Foster said:
[Footnote continued on page 79]
78
PEN ELE TEE ENIO LOOP LEP AT CE pe —
[11,352]
Presiding Examiner’s Initial Decision
[11,352]
It has been noted that the required gross additions
to proved reserves during the 1966-1980 period of 376
trillion cubic feet are at an assumed reserves-to-produc-
tion ratio of 15 to 1. A fortiori it must be true that
the industry can bring forth supplies which would result
in maintaining a lower reserves-to-production ratio. The
Office of Oil and Gas has found, and the Examiner finds,
that the industry can achieve a task more difficult than
is necessary under prior Commission holdings in area
rate proceedings. Southern Louisiana, Opinion 546,
mimeo., 15; Permian, 34 F.P.C., at 184-85.
It is apparent that a substantial margin remains for
consumption of natural gas in control of environmental
pollution, if use of gas for such purpose becomes neces-
sary.
It has been noted that United States Petroleum
through 1980 was released by the Department of the In-
terior on July 1, 1968. On July 24 following, during
* [Continued]
“,.. there is an inherent instability in reserve data.
“... you really can’t reach reliable conclusion by looking
to data for one year.” (49:5187, 5188.)
Twice before, in 1954 and 1960, there was a sharp decline in new
supply as compared with net production, only to have new supply
rebound the following year. Thus, in 1953 new supply was 20,453
MMMcf and net production, 9,289 MMMcf. In 1954, new supply was
only 9,599 MMMcf and net production, 9,427 MMMcf—a situation
close to a cross-over. But in 1955, new supply was up to 22,017
MMMcf, and net production, 10,118 MMMcf.
In 1959, new supply was 20,734 MMMcf and net production, 12,441
MMMcf. In 1960, new suply dropped to 13,970 MMMcf, close to a
cross-over point, since net production was 13,090 MMMcf. But in
1961, new supply rebounded to 17,260 MMMcf, whereas net pro-
duction —. 13,452 MMMcf. (AGA Reserve Reports for the years
in question.
79
PD NE AOD US EL OLE, ONE IM
[11,352]
Presiding Examiner’s Initial Decision
4 cross-examination of Schantz testifying in rebuttal, the
report was produced in the hearing for the first time;
and the witness was asked questions about the projec-
: tion therein of gross additions for the 1965-1980 period.
Schantz took the position that he did not believe “those
terminal figures” would be reached” based on the exist-
. ing incentive and well-drilling activity structure”; that
the report
ae ened.
aie hee ae
[11,353]
: “assumes, in my judgment, .. . that there will be sufi-
; cient incentive and well-drilling activity to bring forth
4 these new supplies.” (52:5630-31.)
The next day the report, offered by the staff, was re
ceived in evidence as Item III. The producer group
asked for opportunity to controvert the report, and “to
3 obtain . . . clarification [of it] through those parties
who prepared the report.” (52:5633; 53:5700.) Staff
counsel stated, “I would have no objection if the pro-
ducers, or any of them, would wish to rebut any of the
statements, conclusions, assumptions or what-have-you,
: in the report.” (53:5701-02) The Examiner ruled,
4 “. . the producers, or any intervenor in the case, will
; be afforded the opportunity to produce evidence respect-
; ing this document. . . . The producers will have the
month of August in which to prepare whatever evidence
they may see fit to prepare, or arrange for a witness
or witnesses to be present, because under the schedule
which has been outlined we are going to take most of
August as a vacation month, and we will resume early
in September.” (53:5705.)
To the end of producing evidence respecting Item III,
counsel for Humble had a conference with Admiral
Lattu, Director of the Office of Oil and Gas and Chair-
man of the Task Force, about it. (59:6359.) Shortly
thereafter, on August 12, Humble’s counsel addressed 3
80
[11,354]
Presiding Examiner’s Initial Decision
letter to Admiral Lattu with reference to the instant
proceeding and the “Need for Clarification from Depart-
ment of Interior of Document Entitled ‘United States
Petroleum Through 1980.’” The letter recited:
“One of the factors which the Commission will
consider in reaching its decision will be the ade-
quacy or inadequacy of future gas supplies to meet
the projected demand for natural gas in the United
States.
... rather than subpoenaing a witness, we would,
if possible, prefer to handle the clarification through
correspondence with the Office of Oil and Gas.
“We recognize that this report was not prepared
for the purpose of being used as evidence in an ad-
ministrative proceeding, . .
“... in referring [in the paragraph at pages
24 and 25] to a projection of reserves addditions
from 1965 to 1980 and projected additions in 1980
of 29.8 trillion cubic feet [the report]states, ‘. ..
the acquisition of projected reserves of this order
seems well within the industry’s capabilities.’
[11,354]
“Did the Department of Interior in making this
projection find it necessary to make an assumption
as to the gas price in cents per Mcf required to
induce the necessary exploratory effort to discover
reserves of approximately 30 trillion cubic feet in
1980?” (Ex: 101.)
In his reply, Admiral Lattu states in effect that the
Department did not make an assumpiton as to the price
of gas required to induce the necessary exploratory ef-
fort. Nor does he say that the report was not prepared
for use as evidence in an administrative proceeding. In-
stead, the reply of the Director states:
81
IS ae Snore : SANDE OTIS TLE RET WR, POI LPR ES, OE RY
[11,354]
Presiding Examiner’s Initial Decision
“The price of gas is only one of the factors which
may affect ‘the industry’s capabilities.’ Some other
factors include the cost of the industry’s inputs,
the state of its technology, the location, reservoir
size, and overall magnitude of remaining undiscov-
ered resources, and industry’s fortune and acumen
in finding them. Our analysis in the quoted para-
graph did not attach specific values to any of these
factors but reflected our implicit judgment of their
composite relationship.” (Ex. 100.)
Thus Schantz’s supposition, that the Office of Oil and
Gas in making its projections to 1980 assumed a higher
price for gas than the existing incentive, is erroneous.
Adducing rebutting evidence, Schantz found fault with
United States Petroleum through 1980 in that at page
21, domestic production is reported to be 15,610 billion
cubic feet for 1965, whereas the American Gas Associ-
ation reports 1965 net production at 16,252 billion cubic
feet. The 15,610 billion cubic feet was a figure used
by the Office of Oil and Gas to develop a trend in esti-
mating the requirement for gross additions to reserves
over the 1966-1980 period. The producer witness recog-
nized that the 15,610 billion cubic feet must have been
a preliminary figure. (59:6365.) The small difference
between the preliminary figure and the actual figure
is unimportant.
Other evidence supplements the showing in Item III
that supplies of natural gas stand to be adequate through
1980. The most detailed evidence pertains to Southern
Louisiana. This area has become preeminent as a source
of gas supplies for interstate pipeline companies. An
analysis of gas supply data submitted by 24 major pipe
line companies to the Commission for 1963-64 shows that
the Southern Louisiana area accounts for about 37% of
the total 1967 year-end reserves (including warranty
gas), and 36% of the total production, reported by these
oe wmweset®wwee &¢& we se
I
h
n
e
n
it
if
y
se
[11,355]
Presiding Examiner’s Initial Decision
[11,355]
companies. The next largest gas supply area for these
pipelines, Hugoton-Anadarko, accounted for only about
18% of total reserves and 21% of total production.
Total natural-gas production in Southern Louisiana has
almost doubled since 1960. As of 1966, over 70% of the
4.6 trillion cubic feet of production was onshore, but
production offshore has been increasing at a substantially
greater rate. Since 1962, the onshore production has been
increasing annually at a rate of from 7.2% to 11.9%
(Ex. 94, p. 1); whereas from 1965 to 1966, gas produced
from the offshore areas (federal and state) increased by
over 30%. (Ibid.) Dr. Gordon I. Atwater, a geologist of
outstanding ability, made a careful study for another pro-
ceeding in which he estimated the total recoverable gas
reserves of the Louisiana offshore water bottoms at 75,-
000 billion cubic feet, of which 21,673 billion cubic feet
had been dedicated to interstate commerce by February
1966. (58:6203-04.)
New discoveries of natural gas in Southern Louisiana
are increasing. In 1966, there were 29 new discoveries,
of which 17 were in the offshore segment. Both figures
are the highest for any year in the period 1960-1966.
Exploratory drilling is also on the increase, particularly
in the offshore region. (Ex. 94, p. 9; Ex. 9, pp. 372, 375.)
The staff introduced an exhibit which lists 18 pipeline
applications filed in 1968 seeking authorization for con-
struction of offshore Louisiana facilities. The proposed
facilities are to be constructed at an estimated cost of
approximately $270 million; have a total combined ca-
pacity of about 2.8 million Mcf per day; and involve total
estimated proved offshore Louisiana reserves dedicated
to the pipeline companies of approximately 7,921.9 mil-
lion Mcf. (60:6390; Ex. 95, pp. 1, 15.) Subsequent to
[11,355]
Presiding Examiner’s Initial Decision
the preparation of this exhibit, eight more certificate
applications were filed in 1968 for the construction in
the Southern Louisiana offshore segment involving a total
amount of proposed construction of about $277 million.
Other evidence introduced by the staff shows that there
3 is presently a large number of shut-in gas wells in off-
; shore Louisiana.
i Taking up the Permian Basin, the evidence establishes
that from 1958 through 1966, the number of gas wells
and exploratory gas-well footage increased. (Ex. 9, p.
527, cols. e and f.) In the same period, total gas-well
: drilling—exploratory and development—increased: total
P gas wells increased from 147 in 1958 to 259 in 1966;
? gas-well footage increased from 1.1 million feet in 1958
; to 2.2 million feet in 1966. (Ex. 9, p. 532, cols. e and f;
Staff Br., p. 104.) The 1967 ratio of new supply to net
production was 2.6 to 1. (Ex. 70, p. 25.)
[11,356]
; In the Anadarko Basin, exploratory footage drilled in
j the Oklahoma Anadarko area from 1958 through 1966
4 increased substantially (Ex. 9, p. 383, col. 0) ; and total
footage (exploratory and developmental) has more than
doubled. (Ex. 9, p. 488, col. 0.) There has been a de-
cline in exploratory footage drilled in the Oklahoma Pan-
handle area; total footage in that area (exploratory and
developmental) has remained relatively constant. (Ex.
9, pp. 382, 385; p. 487, col. 0.)
Phillips has drilled a number of deep wells in the Ana-
darko Basin, and the results for the most part have been
disappointing. (57:6069 et seg.) However, Phillips con-
tinues to hold to the opinion that “the potential . . . is
pretty high in the deep parts of the Anadarko basin.”
(58 :6259.)
YS ORIREA Kernen, ;
. . PRIA Ste tpn renner ape
SNARES A aR Nitra ae cert net tetera . -
SEL REL REE ITNT Net NAT RU Ase
[11,356]
Presiding Examiner’s Initial Decision
The Examiner finds and concludes that, through 1980,
the producers should produce as much gas as the markets
can take.
Gas Supply in Other Southwest Area. Contrasting with
the national picture, in the Other Southwest Area since
1956, new gas supply, net production, and exploratory
drilling have been relatively stable. The table below sets
out the figures:
New Supply and Net Production (Billion Cublic Feet
at 14.65 psia) and Number of Exploratory Wells
Other Southwest Area
New Supply* Net Production* Exploratory Wells®
Oil Gas Dry
1956 1,594 2,133 _-_ - —
1957 2,146 2,342 — — —
1958 3,154 2,205 211 76 1,842
1959 2,037 2,275 179 55 1,797
1960 2,222 2,254 208 78 1,663
1961 2,114 2,124 129 60 1,412
1962 2,196 2,080 145 66 1,281
1963 2,655 2,260 159 49 1,397
1964 2,882 2,215 173 67 1,445
1965 2,270 2,183 143 37 1,368
1966 2,105 2,298 204 89 1,425
1967 1,117 2,196 _— _-_ —
*Ex. 4, p. 27; Ex. 70, p. 27.
>Ex. 9, p. 521.
SEN SETS ERLE NTE E BNET LRT FEMI TRE OST IE IS
[11,357]
Presiding Examiner's Initial Decision
[11,357]
The principal producer group point out that the re
serves-to-production ratio has hovered around 12 to 1;
production has not increased; and interstate markets his-
torically served by the area have obtained incremental
new deliveries from other producing areas, such as Lov-
isiana. They contend that the rates fixed should contain
special noncost allowances as incentives “so that increased
new supplies and net production in the Other Southwest
Area will enable that area to make a meaningful contri-
bution towards the substantial future demand for gas
throughout the United States.” (Prod. Br., 26-27.) Simi-
larly AGD argues that there is a need to provide an in-
ducement for added exploratory efforts in the area, and
hence the rates for new gas should be fixed at “a reason-
able margin above the average new gas cost.” (AGD
Br., 44-45.) In similar vein, the pipeline purchaser group
argue that “the producers must be given the incentive
greatly to increase their exploratory efforts.” (Pipeline
Br., 6-7.)
These arguments beg the question. They assume that
the rates which respondent producers seek, and also those
which AGD recommend, will cause the producers to ex-
plore for meaningful new supplies of gas. The Examiner
disagrees with this
In conformity with Permian, the Examiner prescribes
a rate structure consisting of one set of ceiling rates for
“new gas-well gas” and another set of ceiling rates for
“flowing gas” or all other gas. In the context of this dual-
pricing method, the producer group advocate rates with
those for new gas-well gas containing the aforementioned
noncost allowances.®
amy tL OP Dek PTL tite sin Sahl Ml
* TIPRO recommends a single area rate in the range of 18¢ and
21¢ per Mcf, as an incentive to search for new supplies and to make
FF ey ern, sone abl.
at Pa’ ae
‘berate’. 1+ ey And tot CC were in 4 Ds 6 ooo al
a ae ay r > , ih ta te .. +
[11,358]
Presiding Examiner’s Initial Decision
The new-gas ceiling rates herein prescribed and those
which the producer group recommend cannot be stated
on a fully compatible basis. The rates proposed by the
producers would be applicable to sales of gas without
regard to quality or delivery point, with higher rates re-
quired (at unstated levels) should a system of manda-
tory delivery conditions be adopted. (Prod. Br., 237.)
The ceiling rates herein prescribed are applicable to
[11,358]
pipeline quality gas. They include cost allowances for
gathering and quality improvement, with the qualifica-
tion that deductions from the ceiling for failure to meet
certain quality standards are left to the parties to nego-
tiate. H the rates prescribed are not specific with
respect to deductions applicable to gas of less than pipe-
line quality. The most nearly comparable basis on which
the new-gas ceiling rates established by this decision and
those recommended by the producer group is to make a
comparison of the new-gas ceiling rates herein estab-
lished for both gathered and ungathered gas, with the
producer group’s new-gas ceiling rates. Such rates (¢/
Mcf) are set out below:
Pe arr
[11,358]
Ezaminer’s Initial Decision
Examiner Producers
Ungathered Gathered
Other Oklahoma 16.9 18.4 18.0
North Arkansas 16.3 17.8 18.0
Texas Districts 5 and 6 17.1 18.1 18.0
Texas District 9 17.2 18.7 18.0
South Arkansas 16.25 17.25 18.0
Mississippi (onshore) 17.0 * 18.25* 22.6"
5 Louisiana Parishes Adjacent
to Mississippi® 18.6 * 18.25" 22.6*
Remaining North Louisiana 18.6 * 19.6 * 20.5*
4 Alabama Counties‘ 17.0 * 18.25* 22.6*
®These rates are stated at a pressure base of 15.025 psia. All other
rates are stated at 14.65 psia.
>Catahoula, Concordia, Franklin, LaSalle, and Tensas Parishes.
©Marion, Fayette, Lamar, and Pickens Counties.
[11,359]
Looking solely to a comparison of rates based on the
rates herein prescribed for ungathered gas, it will be
seen that the spread between the prescribed rates and
those proposed by the producers is from 1.70¢ per Mef to
less than a cent for other Oklahoma, north Arkansas, and
Texas Railroad Districts Nos. 5, 6, and 9. In south Ar-
kansas and north Louisiana (excluding the five parishes
adjacent to Mississippi), the spread is 1.75¢ and 1.9¢,
respectively. Finally, the largest differences are for Mis-
sissippi (onshore), the four Alabama counties, and the
five Louisiana parishes adjacent to Mississippi. For Mis-
sissippi and the Alabama counties, the spread is 5.6¢;
and for the five Louisiana parishes, 4.0¢.
The rates advocated by AGD are indeterminate. They
are geared to what may be allowed in other area rate
Pree
~ Lr eee . .
FFI BOE ee ~ gem — —
[11,359]
Presiding Examiner’s Initial Decision
proceedings. AGD’s premise is that new gas prices in
various subareas of the Other Southwest Area should not
be less than those applicable in adjacent areas covered
by other area rate proceedings. Thus, their rate design
witness, Charles H. Frazier, stated that the north Lou-
isiana and Mississippi prices should be set at a level not
lower than that applicable in south Louisiana. The top
rate for new gas in south Louisiana that the Commission
has come up with so far is 20¢. Frazier recommended
that prices in east Texas (Districts 5 and 6) be not
lower than that applicable in District 3 (17.4¢) for un-
gathered gas under the Examiner’s initial decision in
Texas Gulf Coast. The same procedure would be followed
in designing ceiling rates for Arkansas and other Okla-
homa. Their figure would lie between the rates herein
fixed and the producers’ proposed rates for the Alabama
counties, Mississippi, north Louisiana, and Texas Dis-
tricts 5 and 6.
Remember that the only representatives of consumers
who have participated in the hearing or the briefing are
extensive production properties either directly or through
affiliates.
The arguments of the producer group, the pipeline
group, and AGD do not take into account the reason
for the static condition of exploration and new supplies
in this area. The evidence shows that this reason is that
the major producers have primarily sought gas in other
provinees, which are more attractive to them. Frazier
* 28 DCL SVS owe reer .
[11,359]
Presiding Examiner’s Initial Decision
tion offices which had existed for years in various dis-
tricts, such as Shawnee and Ardmore, Oklahoma; Wichita
Falls, and Tyler; Texas; Shreveport,
[11,360]
Louisiana; and Jackson, Mississippi. Population of geolo-
gists and geophysicists in these districts has also fallen.
(9:955.)
Testifying on behalf of the producers, B. W. Beebe, a
geologist whose principal business is directing explora-
tion for and development of gas and oil, said: “The in-
centive is to look in the large areas that are relatively
unexplored. . . . There is a limit to the amount of money
that any company has to spend, and they will spend it
where they think they will find the largest reward.”
f (14:2047.) And further, “In a relatively unexplored
area, obviously such as off-shore Louisiana, we find a
: number of large fields. In the Delaware Basin we found
some large fields.” (15:2097.) And further, “I think it
is pretty generally recognized in the industry that most
of the large companies have pulled out of the central part
of the United States as far as budget is concerned. Many
offices have been closed. And from the prices paid in off-
shore California they find offshore California more in-
teresting; and they find Alaska more interesting; and
they find southern offshore Louisiana, particularly, more
interesting.” (15:2143.) “Money is being spent where
they think they can find large reserves,....” (15:2144.)
The Examiner so finds.
Rich deposits of oil and gas in other provinces, notably
the Texas Gulf Coast and other parts of the Permian
Basin, for more than a decade have been the focuses of
major exploration and development. These endeavors are
continuing at an augmented pace. Thus, on June 13,
3
3
3
90
Dette is Beare: Ns
3
= eg .
[11,361]
Presiding Examiner’s Initial Decision
1967, large producers purchased 158 blocks of federal
leases in offshore Louisiana for which they paid the fed-
eral government $510,079,178 in bonuses. (Ex. 99-A,
Sch. 4; 57:6053.) On February 6, 1968, large producers
purchased federal leases in offshore California for which
they paid the federal government $602,719,262 in bonuses.
(Ex. 99-A, Sch. 7; 57:6055.) On May 21, 1968, large
producers purchased federal leases in offshore Texas for
which they paid the federal government $595,870,355 in
bonuses. (Ex. 99, Sch. 8; 57:6057-58.)
The Examiner is of the view, and finds, that the spread
between the rates prescribed in this decision and those
proposed by the producer group and AGD would not suf-
fice to cause the large companies who have “pulled out
of” major exploratory activity in the Other Southwest
Area to open their closed offices and reengage in major
exploration. The record justifies the conclusion that the
reserve potential in this area, as viewed by the industry
itself, is insufficiently attractive for such result to ensue.
Since 1950, no major field has been discovered in the
area; nor, according to Beebe, has much been accom-
plished in finding “sizable” fields. (9:948; 15:2097.)
[11,361]
More particularly, taking up the portions of the area
where the spread under the prescribed rates and the pro-
ducers’ proposed rates is from 1.70¢ to less than a cent:
Northeastern Oklahoma northward and westward from
the Arkoma Basin, including the Shelf and Central Okla-
homa Platform, which formerly had largely oil produc-
tion, is virtually drilled out. The remaining potential
for gas discovery is of no importance. (9:969-70.) In
north Arkansas, including the Arkansas portion of the
Arkoma Basin, gas has not attracted large interstate
91
yee Tape) aed at
[11,361]
Presiding Examiner’s Initial Decision
markets because of lack of large fields; hence most of
the gas is sold locally. (9:949-50, 965, 967, 2131; Ex.
52, Sch. 5.) The complex, tightly folded Ouachita Up-
lift is of little or no interest in relation to oil and gas;
the potential is completely speculative. (9:969, 1173.)
In the Ardmore and Marietta-Sherman basins of Okla-
homa, several gas discoveries have been made, but the
fields are not large and the reserves are only fair. A
good potential exists for additional discoveries of this
type. The remainder of southern Oklahoma southward
and westward from the Meunster Arch and northward
from the Red River Arch of Texas offers a poor poten-
tial for natural-gas discoveries. (9:970.) Manifestly
these localities will not attract major exploration.
In the late 1950’s, major exploration and development
of gas deposits in the Oklahoma portion of the Arkoma
Basin began; and have continued as the most active por-
tion of the Paleozoic segment. (9:945, 950, 965.) Sev-
eral large gas discoveries in the deeper Arkoma Basin
have been made. (9:956.)
In north Texas, major exploration and development of
gas deposits in the Fort Worth Basin began after World
War II. (9:950.) Despite its relatively small area and
volume, this basin has numerous natural-gas fields. One
of these, the Boonsville Field, was a major discovery.
(9:971.)
Beebe testified that “both the Arkoma and Fort Worth
basins offer excellent prospects for additional major
natural-gas discoveries in Pennsylvanian beds now pro
ducing in both areas. The possibilities in the pre-Penn-
sylvanian are somewhat more speculative, but there is
ample evidence that they merit prospecting.” There are
large virgin areas in both basins. (9:974.) Also, in his
judgment, “the deeper part of the Fort Worth basin ...
is a gas province.” (15:2141.)
92
_———
[11,362]
Presiding Examiner’s Initial Decision
The Examiner agrees with the foregoing testimony ex-
cept the term, “excellent prospects.” The Examiner does
not question the
[11,362]
opinion of the distinguished geologist who gave the testi-
mony. However, the term was manifestly used by the
witness in a relative sense; e.g., as compared with a re-
gion of little or no prospects. The prospects of the Ar-
koma and Fort Worth Basins are not excellent compared
with those of the offshore and other districts where the
major operators are now focusing their attention—else
these operators would not have pulled out of the Other
Southwest Area in major exploratory activity to go to
these other places. The Examiner finds the statements
of fact in the foregoing quotations to be true. He sub-
stitutes “good prospects” for “excellent prospects,” and
with this modification, finds the opinions expressed to be
sound. Clearly, an additional rate allowance of 1.70¢ at
most, over and above the rates herein adopted, will not
cause the large companies to cut down on their present
drilling programs in the other provinces they have found
more attractive, and institute deep drilling in a major
way in the Arkoma and Fort Worth Basins.
Texas Districts 5 and 6 comprise east Texas as re-
ferred to in the testimony. Of these districts, 6 is by far
the more important from the standpoint of production.
(14:2081.) It should be noted, though, that in 1967 an
increase in leasing activity occurred in District 5. (59:
6318-19.) East Texas has been heavily explored in the
strata above the Jurassic but has promising potential in
the Jurassic. Some 250 new field wildcat and deeper
pool tests have been drilled to the Jurassic, resulting in
37 Jurassic discoveries, of which 17 are gas pools. (9:
963.) This degree of interest and activity support the
93
[11,362]
Presiding Examiner’s Initial Decision
conclusion that good possibilities for discovery of sub-
stantial natural-gas production exist. (9:963.) How-
ever, the conclusion is unwarranted that large companies
would institute major deep-drilling operations in these
districts because of an additional rate allowance of 1.0¢
in the price of gas.
Turning to south Arkansas, where the spread is 1.75¢:
In south Arkansas the fields are oil fields. (39:4224.)
That part of the State offers little promise for major
natural-gas discoveries, except for speculative possibili-
ties eastward from production and in the small Desha
Basin in the southeastern portion of the State, which is
relatively unexplored and speculative. (9:961, 973.)
Considering next north Louisiana: It has been seen
that the producers recommend that gas from five parishes
adjacent to Mississippi be accorded the same rate as Mis-
sissippi gas. This recommendation is pursuant to their
pricing-area proposal that the five Louisiana parishes be
included in the Mississippi area instead of northern Lov-
isiana. As hereinafter developed, there is want of evi-
dence in the record to justify such proposal and the
Examiner necessarily rejects it. (Infra, pp. 93-95.) In
[11,363]
other words, the five parishes are to be accorded the
same rates as the remainder of northern Louisiana. In
the discussion at this point, in the interest of simplicity
the producer recommendation for “Remaining North
Louisiana” will be treated as applying to all of northern
Louisiana. For northern Louisiana, the spread between
the rates herein prescribed and the producer proposal as
thus adjusted is 1.9¢.
North Louisiana contains more large gas fields than
any other portion of the entire hearing area and has
94
i
ail
eer —
[11,363]
Presiding Examiner’s Initial Decision
been the major gas producing region of the Cenozoic-
Mesozoic segment. (9:961, 962.) The segment has been
heavily explored in the Tertiary and Cretaceous forma-
tions. (9:958-59, 972; Ex. 1, Chart 1.) No large dis-
coveries have been made since the end of World War II
until 1964, when a field was brought in in the Lower
Cretaceous limestone at approximately 8,000 feet with an
estimated potential ultimate recovery of 600 Bef of natu-
ral gas. This discovery stimulated exploratory drilling,
but no additional discoveries have been made. (9:962.)
Average prices paid by pipelines increased from 10.7¢
in 1956 to 15.22¢ in 1966, but annual gas purchases re-
mained fairly constant. (Ex. 60, Sch. 7.) The potential
appears to be good. (9:958.) However, the conclusion
is unjustified that major exploration would be conducted
there because of an additional incentive in the price of
gas of 1.9¢.
Next to be considered are Mississippi (onshore) and
the four counties in northwest Alabama. In this portion
of the Other Southwest Area, the spread between the
rates prescribed herein and the producers’ and AGD’s
proposals is 5.6¢. The potential in the Black Warrior
Basin of northeast Mississippi and the four Alabama
counties is speculative. Sixteen small gas fields have been
discovered there since 1909. Of these, half have been
abandoned. The basin has been characterized to date by
poor reservoir characteristics, small structures, and small
producing areas; and remains an unknown quantity.
(9:964-65.) The prospects elsewhere in north Mississippi
appear to be poor. In the Examiner’s view, the excess
rate allowance of 5.6¢ reflected in the producers’ pro-
posal, as compared with the rate prescribed herein, would
provide no greater motivation to conduct large-scale test-
ing in the Black Warrior Basin or other parts of north-
95
[11,363]
Presiding Examiner’s Initial Decision
ern Mississippi than would the lesser excess allowances
in the Arkoma and Fort Worth Basins.
Taking up central and south Mississippi: In 1930 the
Jackson Field in the Mississippi Embayment was an im-
portant gas discovery, but this field is now depleted and
used for storage. (9:949.) About a half dozen fields
south of Jackson—Cretaceous, Tertiary and some Juras-
| sic production—have been important sources of natural
gas. (9:959, Ex. 1, Map 4, Chart 1.) The Upper Cre.
taceous formations which have produced so much gas in
[11,364]
North Louisiana, generally have been oil-bearing in Mis-
sissippi. (9:958-59.)
The evidence shows that producers do not possess the
ability to search directionally for gas in central and south
Mississippi. The strata having the best potential for pro-
duction are Jurassic, lying at depths below which the
general level of drilling has been conducted. (9:959-60;
972-73.) The evidence establishes that the producers do
not have geological knowledge and data upon which to
predicate a separate search for natural gas at these
depths. No areas in central and south Mississippi have
been found which are predominantly gas, and such dis-
coveries as have been made indicate that the predominant
hydrocarbon at these depths is oil. By the end of 1966,
19 discoveries had been completed in Jurassic reservoirs;
and of these, only 3 were gas. Only five pools contained
more than one well. By far the most important field is
Bay Springs, an oil field, producing from the Cotton
Valley. (Ex. 1, Map 4; 9:960.)
Since directional selectivity of gas is wanting, the posi-
tion that the proposed additional price allowance will
increase new supplies of gas in this part of the Other
-
Bi a Ni a 5 lt malt
96
EE
—
[11,364]
Presiding Examiner’s Initial Decision
Southwest Area is correspondingly weakened. The AGD
witness’ recommended margin above cost as an induce-
ment for added exploratory efforts was premised upon
an ability of producers to search directionally for gas.
(50:5898, 5403.) Exploratory oil wells predominate over
exploratory gas wells in the Other Southwest Area by a
ratio of more than 2% to 1; and unless the operators
have confidence that their exploration in central and
south Mississippi will be rewarded by striking gas reser-
voirs, the spread does not have much meaning or incen-
tive.
Moreover, there are strong indications from explora-
tory drilling in Mississippi in recent years that the price
of 22.6¢ which the producers seek would not result in
meaningful increased discoveries of gas. The cost-ori-
ented rate, 17¢, prescribed herein is substantially less
than the policy statement price of 21.5¢. The prices
realized by producers in Mississippi for sales in inter-
state commerce reached 20.81¢ in 1960 and remained in
excess of 20¢ until 1964. (Ex. 60, Sch. 7, sheet 3.) Yet
during the entire period of five years when the prices
were near the rate for which the producers contend, only
10 successful exploratory gas wells were drilled in Mis-
sissippi. (Ex. 9, p. 75.)
The Examiner finds that the spread of 5.6¢ in the maxi-
mum rate herein fixed for Mississippi (onshore) and that
proposed by the producer group would not cause pro-
ducers to engage in exploration in central and south
Mississippi in a major way, or significantly different
then at present.
[11,365]
Overall, the Examiner finds and concludes that in all
portions of the Other Southwest Area, neither the pro-
posed rates of the producers nor of AGD would result in
97
ss
: Were ae
[11,365]
Presiding Examiner’s Initial Decision
meaningful or substantial increases in new supplies above
those which will be obtained under the rates fixed herein.
With the operators concentrating their main efforts in
the relatively new provinces elsewhere in the United
States, including the Continental Shelf, the Delaware-Val
Verde Basins, and Alaska, where rich deposits of oil and
gas are to be found, it is the view of the Examiner that
large increases in new supply and net production in the
Other Southwest Area are not reasonably attainable,
However, drilling of shallow and medium depth wells
(9:963; 14:2086; 15:2125-26, 2142); and a relatively
few deep exploratory wells, as in recent years (9:960,
961, 962, 963, 969; 14:2069-70, 2083-84; 15:2116, 2132),
will unquestionably continue. It can reasonably be ex-
pected that current levels of production will be main-
tained under the two-price rate structure; and at the
new-gas ceiling rates herein fixed, which include a fair
rate of return. Permian, 34 F.P.C., at 186; cf. Southern
Louisiana, Opinion 546, mimeo., 14. Also, the federal
income tax benefits accorded producers, hereinafter con-
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