# Appendix — Mobil Oil Corp. v. Federal Power Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1820%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1974 - **Citation:** 417 U.S. 973 ## Text 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 aati Pe ee ee Te ee ae Te —s en ad tel bites ttea ates tein the acai 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 te a 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 ] j ; ¥ 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 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- sidered, insure continued exploration and production. At- tempted artificial stimulation to induce gas finds by the special rate allowances would fail of its objective. As hereinafter explained (pp. 92-93), prices will not be fixed in this proceeding for offshore Mississippi; s0 the effect on supply in that segment of proposed prices need not be considered. Fair Rate of Return The standards to be employed in fixing a rate of re turn may vary. Permian Cases, 390 U.S., at 806. The familiar criteria of the Hope case, quoted in Permian Cases at page 790, are “whether ‘the return to the equity owner [is] commensurate with returns on investments 98 [11,366] Presiding Examiner’s Initial Decision in other enterprises having corresponding risks,’ and whether the return was ‘sufficient to assure confidence in the financial integrity of the enterprise, so as to main- tain its credit and attract capital.’” Applied to compa- nies engaged in natural-gas production, such criteria in- clude a supply-inducement function so that the companies can conduct a satisfactory program of exploration and development. Southern Louisiana, Opinion No. 546, mimeo., 50; Item A: 177:12,150; 12,153-54. The Exam- iner is of the view, based on the record in the instant proceeding, that these criteria should govern here. In applying them, the two-price rate structure is to be con- sidered. Also to be taken into account is the effect of federal income-tax benefits enjoyed by producers. Cities of Lexington, etc., Ky. v. Federal Power Commission (C.A. 4), 295 F.2d 109, 118. [11,366] Dr. Felix I. Shaffner, Supervisory Financial Analyst on the staff of the Commission and head of the Finance Section of its Division of Finance and Statistics, recom- mended a 104% rate of return component as part of the area ceiling prices of both new gas-well gas and flow- ing gas. (Item A: 10:1950.) The Examiner accepts this recommendation as satisfying all of the foregoing criteria. Since there are no major producers engaged solely in the gas business, Shaffner compiled a group of the major suppliers of oil and gas. As the basis of his recommenda- tion, he took the actual rates of return, from overall earnings, of these companies. (Item A: 10:1956; 87: 13,205.) His compilation is a national group of 35 in- dependent producers, comprised of those which, during the period 1962-66, had annual sales of gas in interstate 99 [11,366] Presiding Examiner's Initial Decision commerce exceeding 2 million Mcf, had common stock which was actively traded, and made periodic reports of earnings and financial condition. (Item A: 10:1953.) A: Ex. 8-J, Sch. 4; Ex. 12, Sch. 3A.) The group of 35 companies weighted earnings in the future. (Cf. Item A: 177:12,168-70.) In view of the earnings experience of the national group ! i during such period, it appears that a 10%% rate of return should be sufficient to maintain the industry's credit and continue to attract capital. 100 [11,367] Presiding Examiner's Initial Decision [11,367] This rate of return represents an allowance for com- mon equity of 11.72%, since the senior capital (debt and preferred stock) produces leverage. In other words, be- cause the senior capital funds are employed at a rate of return higher than their cost, the return on the in- vestment of the common stockholders is increased. (Item A: 10:2031.) The higher the ratio of debt in the cap- italization, the greater the leverage. In arriving at the equity allowance, under the Commission’s settled prac- tice the embedded cost of debt is employed. (Item A: 87 :13,179-80.) The tabulation below shows the derivation of the 11.72%. In this tabulation senior capital have peen added together as though each of the companies in the national group of 35 independent producers, in each calculation, was a part of one larger company repre- senting the total. (Item A: 10:2050.) Capital Ratios and Capital Costs—Overall Rate of Return Allowance on Equity—National Group (1966) Long Term Debt 16.43% @ 458% = 0.752% Preferred Stock 1% @ 538% = 0.038% 0.790% Common Equity 82.86% @ 11.72% = 9.71% 10.50% (Ex. 12, Sch. 28A.) In addition, the record shows that oil and gas com- panies secure results similar to leverage, in the form of an increased return to the common stockholder, in sev- eral ways; viz., (1) by ABC transactions, which are in the nature of debt contracts; (2) by leasing oil and gas acreage instead of owning the property outright; 101 FR Sp Oe [11,367] Presiding Examiner’s Initial Decision and (3) by farm-out exploratory programs combined with partial support of the exploratory work of others, whereby a company makes use, for its benefit, of the funds of others, and makes a little money go a long way. (Item A: 10:1964, 2032-34.) A return on common equity of 11.72% is commensur- ate with returns to the common stockholder on invest- ments in other business undertakings attended by corre- sponding risks. Earnings data respecting the 500 largest industrial corporations are compiled annually by For- tune (reproduced by the U.S. Census Bureau in the an- nual Statistical Abstract of the United States). (9:1185.) Fortune’s classification “petroleum refining” includes most of the companies on Shaffner’s national group of independent producers. (Item A: 10:2047.) According to the Fortune compilation for 1961-1966, the petroleum refining industry achieved a return on equity capital which fell near the middle of the range experienced by some 20 or more industry [11,368] groups comprising the 500 corporations. The average of the medians for petroleum refining was 9.7%; and for all industry, 10.2%. The median of the medians for petrole um refining was 9.3%; and for all industry, 9.8%. (Ex 12, Sch. 26A.) Investments in the great majority of Fortune’s 500 investments in the companies of significance in the oil and gas industry. Standard & Poor’s Security Owners Stock Guide “500” stock index, representing in value a substantial proportion of all the stocks listed on the New York Exchange, gives composite investment quality rat- ings of the 500 stocks covered in its study. (Item A: 102 10:1997.) Of 18 oil companies in Standard & Poor’s composite average, 17 are included in Shaffner’s national group of independent producers; and the 18th company, Royal Dutch, is surrogated in the staff witness’ group by its subsidiary, Shell Oil. (Jbid., 2004.) Shaffner’s analy- sis of Standard & Poor’s quality rating shows that the ei! industry stocks are high in the list of the top rated categories. Shaffner gave as his opinion, and the Exam- iner finds, that on a long-term basis, the investment qual- ity of a stock reflects its investment risk. (Item A: 10: 2005-06.) It follows that a return of 11.72% to the own- er of oil- and gas-industry stocks is commensurate with returns on manifold investments in high quality stocks of greater risks. The producer group point to the returns on the com- mon stock equity of natural-gas pipeline companies for the period 1963-1967, 12.4%; and aver, as was held in Permian (34 F.P.C., at 201) and Southern Louisiana (Opinion 546, mimeo., 46), that pipelines are a safer in- vestment than gas production. (Prod. Br., 204.) In re- sponse, first, the 12.4% cited by the producer group was not the Commission’s allowance on equity in prescribing the rates. For a number of years the equity allowances in high-debt pipeline company cases have been from 9% to 11%. Southern Louisiana, Opinion 546, mimeo., 50, and cases cited; Florida Gas Transmission Company, Opinion 561, mimeo., at 7, 18° The 12.4% is the result of higher earnings after the rates were fixed. Also, this percentage does not reflect the effect of substantial refunds ordered in rate-case settlements subsequent to the publication of the figures for the respective years. (Item A: 87:13,- 174-75.) Secondly, in the context of the In Cities Service Gas Co., Opinion 547, mimeo., 8, the Com- mission allowed a return on equity of 7.39%; but this was a special situation. 103 [11,369] Presiding Examiner’s Initial Decision [11,369] present discussion, the risks of pipeline companies are to be compared with those of integrated producers in their company-wide operations. The fact that natural-gas production operations are combined with other operations tends to reduce the risk; the risks of separate parts are greater than the risk of the integrated enterprise as a whole. (Item A: 86:13,902; 87:13,200.) The revenues from natural-gas sales to pipe line companies comprise only 2.48% of the gross oper- ating income of the national group of companies. (Ex. 12, Sch. 7A.) As Shaffner observed, “. . . this oil and gas producing industry is a giant industry and an industry of giants.” (Item A:87:13,199.) The investment quality of the national group of independent producers is far higher than the investment quality of the pipelines. (Item A: 10:1996-2008; 87:13,198-13,200; Ex. 8-J. Sch. 12.) Moreover, as hereinafter developed (p. 46), federal in- come tax benefits accorded oil and gas producers mitigate investor risk. The producer group complaint that in his recommended rate of return the staff witness did not give weight to the earnings of nonintegrated producers separately, and to the earnings on domestic production operations of inte grated companies. They argue that such earnings “are the closest one can come to earnings on activities comparable in risk to the business of jurisdictional gas production.” (Prod. Br., 194-97.) On the basis of the evidence in the instant proceeding, this position is invalid. The Examiner is satisfied, and finds, that noninte grated producers are an unreliable and unrepresentative sample upon which to measure a fair return for the re spondent independent producers. The record shows that the typical oil and gas producer is an integrated com- [11,370] Presiding Examiner’s Initial Decision pany. (Item A: 79:12,328.) Particularly in recent years, there has been a headlong rush toward integration. (Item A: 10:1958-60; 77:12,139.) Although there are many struggling nonintegrated companies that earn little or nothing, there are few remaining outstanding noninte- grated companies, (Item A: 10:1956, 86:13,123-24.) The disappearance of nonintegrated producers results from sell-outs and mergers (especially mergers with integrated gas and oil companies), in order to produce for the suc- cessor company a better balance between the amount of oil produced and the amount refined. This purpose has become a more dominant objective of the petroleum in- dustry in recent years. (9:1187; Item A: 10:1959-61; 77:12,139-40; 79:12,314-15; 79:12,344.) Since the hear- ing in Permian two of the nine nonintegrated companies in the Shaffner [11,370] exhibit have been acquired by integrated companies (Ex. 12, Sch. 3A; Item A: 77:12,153) ; and of the 13 noninte- grated companies used by producer witness Dr. Walter A. Morton, only 7 remain. (Item A: 111:16,053.) Two companies in the Shaffner and Morton exhibits, Amerada and Superior, account for more than 50% of the capitalization of Shaffner’s nine nonintegrated pro- ducers. Amerada is a very high-rate-of-return company, its average return for the period 1962-1966 being 20.4%. Superior is a low-rate-of-return company, its average re- turn for the same period being 5.8%. For the seven Shaffner nonintegrated companies still in existence, the average return weighted by 1966 average capitalization is 12.0%. If either Superior or Amerada should cease to exist, the impact on the average return would be sub- stantial. Elimination of Superior increases the group re- 105 4 Lat i Sate cca aden RN Ei an ks Milt Nas ta 13 lies BC ied, [11,370] Presiding Examiner’s Initial Decision turn to 14.7%, whereas elimination of Amerada reduces the return to 9.1%. (Ex. 12, Sch. 17A.) Manifestly, the nonintegrated companies of sufficient size to be used at all are too small and too shaky a sample. The unrepresentativeness of the nonintegrated produc- ers further appears from a study by the First National City Bank of New York of the return on net worth of the companies which the bank includes under “petroleum production and refining,” covering the period 1951-1965. This study lists considerably more nonintegrated com- panies than integrated, and many more non-integrated companies than those contained in the Shaffner national group of independent producers. The study shows that the nonintegrated companies, in net worth and profits, represent only a small portion of the total industry. In the period 1951-1965, earnings and net worth ranged between about 5% and 7% of the total for integrated and nonintegrated companies. Also, the proportion of both earnings and net worth of the nonintegrated companies to the total declined markedly since about 1953. (9:1186- 87.) Clearly, the earnings of nonintegrated companies, sepa- rately, are no longer entitled to weight in fixing a rate of return. The only proper use now to be madc abibNah He eiaeninh CB cA Scie eRS RRS: cumneatil] Wik ip eal ice aT Nh ae OLE SEA ARINS Sh He Other Exploratory Costs Geological and Geophysical Expenses and Lease Rent- als. In computing the allowance for this item in the new- gas costing, the Examiner follows the Commission’s basic methodology in Permain (34 F.P.C., at 193) and South- ’ ern Louisiana (mimeo., 28). Application of such meth- : odology results in a unit allowance of 1.36¢ per Mcf.” 21 (0.487) (1.35x) + (0.513) (x) = $8.69. Cost per foot, developmental dry holes = $7.43. Cost per foot, exploratory dry holes = $10.03. 22 Quinn, Roseman, and Loring used the Permian approach in arriving at their respective allowances for this item of 1.09¢, 1.09¢, and 1.14¢ per Mcf. (Item F: Ex. 82-1; Item A: Ex. 66-J; and Ex. 20.) 134 [11,391] Presiding Examiner’s Initial Decision The ratio of geological and geophysical expenses (G&G) and lease rentals to the expenditures for lease acquisi- tions, as shown by Chase Manhattan Bank data for the period 1961-1966, is 104%.* The unit allowance of 1.36¢ is arrived at by applying this ratio to the 1.31¢ per Mcf unit allowance made herein for lease acquisitions. Producer witness Sherwin is the only witness departing from Permian techniques in determining the allowance for G & G and lease rentals. He finds an average annual ex- penditure level of $615 million for G&G, land department expenses, and lease rentals, by reference to Chase Manhat- tan data “for the last six to seven years.” He allocates this amount between gas reservoirs and oil reservoirs on the basis of successful well costs, and calculates [11,391] an allowance of 1.16¢ per Mcf.* (9:1017-18.) The Ex- aminers in the joint proceeding rejected this method be- cause “no reason appears for departing from the Com- mission’s adopted methodology.” (Hugoton-Anadarko, mimeo., 62.) This Examiner rejects the Sherwin method on the same ground. Exploration and Development Overheads. In Permian, this item was determined by reference to the relation- ship between “exploration and development overheads” and total finding and development costs as shown by JAS, the only available source for such overheads. The ratio so developed was then applied to the sum of the finding and development costs found by the Commission (7.¢., suc- 23 Ex. 3-A, Sch. 9, sheet 1. This is the same period adopted herein for determining the allowance for lease acquisitions. **Sherwin shows a combined allowance of 1.56¢ per Mcf for “other exploratory costs.” The separately computed amounts are 1.16¢ for G&G and lease rentals, and 0.40¢ for overheads. 135 a tA hl ADS ete Rel pet SE [11,391] Presiding Examiner’s Initial Decision cessful wells, lease acquisitions, other production facili- ties, dry holes, and G&G and lease rentals) to yield an overhead allowance. (34 F.P.C., at 193.) The Commis- sion followed the same method in Southern Louisiana, (Mimeo., 28.) In the instant proceeding, the staff witness Loring uses a modified method to avoid a duplication or “double count” of overheads. He testified that “exploratory and develop- mental overheads relating to successful well and lease ex- penditures are already included in my computation as a part of Other Production Facilities. Thus, the only other overheads are related to dry holes and to the other ex- ploratory costs not connected directly with successful wells or leases.” (9:1248.) Consequently, in stead of ob- taining a relationship between total exploration and de- velopment overhead and total finding costs, Loring de- velops a similar relationship between exploration over- head and exploration expenditures. This relationship, re- flecting the average for the period 1959-1963 as shown by JAS, is 13.9%.* Loring applies the relationship to the sum of his allowances for dry holes, and G&G and lease rentals, thereby obtaining an overhead allowance of 0.39¢ per Mcf. (9:1248-49; Ex. 20, Sch. 1 sheet 2.) Sherwin shows JAS exploration overhead data for the years 1959-1964. (Ex. 3-A, Sch. 9, sheet 1.) He adopts an average annual overhead level of $210 million. As in the case of G&G and lease rentals, he allocates this dol- lar amount between gas reservoirs and oil reservoirs on the basis of the cost of successful wells. The resulting allowance for overheads is 0.40¢ per Mcf. (9:1018.) 25 Inclusion of more recent JAS data gives the same result. 186 [11,392] Presiding Examiner's Initial Decision [11,392] Although there is not much difference in the results reached by Loring and Sherwin, the Examiner prefers Loring’s procedure. Sherwin’s procedure departs substan- tially from Permian methods, where as Loring follows Permian and merely imposes a refinement to eliminate a double count. Applying Loring’s percentage to the sum of the allowances for dry holes, and G&G and lease rent- als, found herein (2.77¢ per Mcf), the Examiner finds an overhead allowance of 0.39¢ per Mcef. Adjustment for Exploration in Excess of Production The Examiner follows Southern Louisiana, Opinion 546, mimeo. pages 28-30, the most recent precedent. There, the Commission determined a gas-well gas findings-to- production ratio for the period 1961-1966. In reaching this determination, the Commission multiplied 587 Mcf per foot (the adopted productivity figure) by World Oil gas- well footage drilled in that period; and divided the total findings figure thus computed by AGA gas-well gas pro- duction for that period. The result was an average F/P ratio for the six years of 1.378. Exercising “careful judg- ment rather than scientific formula,” the Commission concluded that the total allowance for exploration and de- velopment should be 1.37 times the cost before adjust- ment; in other words, that the adjustment should be 37%. The following table is patterned on the table in Southern Louisiana, mimeo. page 29, which the Commission used in reaching its decision to allow a 37% adjustment factor (volumes are at 14.65 psia) : 187 T _ ; E 4 [11,392] 4 Presiding Examiner’s Initial Decision i MMMef of | MMMcf of AGA { World Oil Gas Well Finding: Gas-Well Gas Year Drilling Footage* Footage x 612 Production ‘ 1961 29,292 17,927 9,740 i 1962 28,950 17,717 10,005 ‘ 1963 24,533 15,014 10,866 { 1964 25,597 15,665 11,538 + 1965 24,981 15,258 12,228 : 1966 25,636 15,689 18,178 1967 21,482 18,147 18,718 110,417 81,258 «Ex. 8-A, Sch. 4, sheet 2 for years 1961 through 1966. See World Oil, February 15, 1968, issue, for 1967 figure. >bEx. 66-J, Sch. 18, for years 1961 through 1964. Data for 1965 f through 1967 are taken from the AGA Reserves Report, 1967, pp. $ 225, 126. Sais dei tasatortesk a8 Red [11,393] The significant differences between this table and i that shown in Southern Louisiana are: (1) addition of , 1967 data; (2) use of a productivity figure of 612 Mef 3 per foot (instead of 587); and (3) use of actual AGA- i reported gas-well gas production for 1965 and later years : instead of estimates based on AGA-reported total gas production. j The findings-to-production ratio for gas-well gas there- by obtained is 1.359 (110,417 = 1.859), as compared with ( 81,258 ) the 1.878 found in Southern Louisiana. Both the ratio derived in Southern Louisiana and that derived here, “point to an adjustment figure in the range of 35 to 40 percent.” In the Examiner’s opinion, a figure in this range is a “desirable expenditure in the public interest.” 138 [11,393] Presiding Examiner’s Initial Decision Permian, 34 F.P.C., at 194. In these circumstances, the Examiner sees no reason for departing from the 37% used by the Commission in Southern Louisiana. Applying the 37%adjustment figure to the sum of the allowances herein for dry holes, G&G and lease rentals, and exploration overhead, gives 1.17¢ per Mcf as the al- lowance for exploration in excess of production. Sherwin generally would use the method employed in Permian. He computes an adjustment factor of 41%. This factor is derived from a comparison of an average of 15.5 trillion cubic feet of reserve additions for the per- iod 1960-1966 said to underlie the witness’ cost com- ponents, and average annual gas-well gas production of 11.0 trillion cubic feet over the same period. Use of the 41%factor with Sherwin’s unit exploration and develop- ment cost (E&D) would result in an allowance of 1.46¢ per Mcf. (Ex. 3-A, Sch. 1) In their initial brief, the producers say that the same adjustment factor of 41% is derived by the Southern Louisiana method, using net production and gas-well footage drilled in the period 1960- 1966 and productivity for that same period. (P. 108, n. 72.) Sherwin abandons the Permian technique in using a six-year period instead of a four-year period; in so doing, he includes data for the atypical year 1962. The pro- ducers’ brief abandons the Southern Louisiana technique in commencing with 1960 instead of 1961 data for foot- age drilled and net production; and further, in comput- ing productivity commencing with 1960 data rather than 1947 data. In the Examiner’s view, the producers and their witness have failed to justify departure from the 37% adjustment allowed in Permian and Southern Louisiana. 139 [11,394] Presiding Examiner’s Initial Decision [11,394] Production Operating Expenses The Examiner incorporates by reference the entire treatment of Production Operating Expenses in the initia] decision in Hugoton-Anadarko, mimeo. pages 68 to 70, inclusive; except that the following words and figures are substituted for footnote 3 at the bottom of page 69: “3 Ex. 20, Sch. 13, sheet 1.” Net Liquid Credit Upon the authority of Permian, 34 F.P.C., at 195-96, and Southern Louisiana, Opinion 546, mimeo., 31-32, the Examiner includes a credit allowance for liquids de rived from gas-well gas. In arriving at the amount of this credit allowance, the initial question to be determined is whether the computation should reflect reserve addi- tions or actual production experience. AGD argues that the figure for net liquid credit should measure the revenue yield of new gas-well gas reserve ad- dition rather than the revenue yield of all gas production; hence, that the reserves-added approach is preferable (AGD Br., 14.) The producers urge use of the produc tion basis. They correctly say that “reserves additions for natural gas liquids (NGL) are not separately reported for condensate and plant liquids, nor was it possible, prior to 1965, on the basis of published data, to ascertain © the NGL reserves additions separately for nonassociated as distinguished from associated gas.” (Prod. Br., 111.) Conceptually, it would be desirable to compute the liquid credit by reference to reserve additions, as AGD argues. However, the Examiner is persuaded by other considerations of greater weight that the liquid credit should be measured by production volumes. There are the 140 tl [11,395] Presiding Examiner’s Initial Decision technical difficulties in employing the reserves additions basis pointed out by the producer group. In addition, the Examiner agrees with Examined Kane in the initial de- cision in Hugoton-Anadarko that, “The production basis provides a better measure of the current and expected experience in the foreseeable future.” (Mimeo., 71.) The staff witness recommended a net liquid credit of 3.69¢, but the staff in their brief say that this figure “may well be at the lower end” of a range of reason- ableness. (Staff Br., 127.) Producer witness Sherwin calculated a total net liquid credit of 3.72¢ Mcf. (9:1022.) In rebuttal to Sherwin, Dr. Bruce C. Netschert, a witness on behalf of AGD, presented evidence to support a net liquid credit of not less than 3.67¢ per Mef. (13:1823.) In their brief, AGD contend for an allowance of 3.84¢ per Mcf, based on Roseman’s testimony in the joint rec- ord. (AGD Br., 14.) [11,395] The Examiner adopts the producers’ analysis of liquid credit into three component parts: lease condensates, plant condensates, and other plant liquids (extracted liquids) . Lease Condensates. The producer group assert that The Oil and Gas Journal is the most reliable source for lease-condensate production volumes data, and that such data show no upward trend in recent years in bar- rels per MMcf. (Examiner Kane so found in Hugoton- Anadarko, mimeo., 73.) This Examiner agrees. From The Oil and Gas Journal data, Sherwin shows a lease-condensate-to-gas ratio of 9.6—9.7 barrels per MMcef for 1965-1966. Using a ratio of 9.7 and a value of $3.00 per barrel shown by Shewin, the producer group calculate a maximum gross lease credit (before produc [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1820%3A2. Public record. Not legal advice.