Petition for Writ of Certiorari — FPC v. Transcontinental Gas Pipe Line Corp.

Ofticg Supreme LOU, d..

FILED:

FEB 20 1950

MOSES R. BROWNING, Clerk

FILE COPY

— a

Vn be Supreme Gort ofthe Wed Sites

Qcroser TERM, 1959

Feperat Power Conn sk, PETITIONER

f . v. .

TRANSCONTINENTAL Gas Pree Love Corporation, Con-

SID TED EpIson Company or New York, Ixc., ad

Tue City or New York

PRTLTION POR & WRIT OF CERTIORARI TO THE UNITED BTATES -

COURT OF &PPBALS POR THE THIRD CIRCUIT

Department of Justice, Washington 25, DS.

WILLARD W. GATCHELL, .

Generel Counsel, ö 8 1

HOWARD 8. WABRENBROCK, ' 1

Soliottor, :

ROBERT L. RUSSELL, . . ;

Assittent Generel Counsel, " *

DAVID J. BARDIN,

Attorney,

— Commission, Washington 25, D.C.

*

>

INDEX

CITATIONS

Cases:

Atlantic Refining Co. v. Public Service Commis-

1 ——TT—T—T—T—000—00T0 13

Cabot Gas Corporation, Re, 16 PUR. (NS) 2

Charleston & N. 0. Ry. v. 3

c 19, 20

City of Pittsburgh v. Federal Power Commis-

sion, 237 F. 2d 74. „ 12, 19

Colorado Interstate Gas Co. v. Federal Power

Commission, 324 U.S. 58 I. 12

El Paso Natural Gas Company, EPC Opinion

No. 333, November 27, 1959, Tehearing

denied, January 26, 1960 22

Federal Power’ Commission v. East Ohio Gas. N

Company, 338 U.S. 464 ꝓ 17

Faderal Power Commission v. Hope Natural

Gas Company, 320 U.S. 5911. 12, 15, 16

Federal Power Commission v. Idaho Power Co.,

344 U.S. 17 ee bees E 26

84146 0 1 ©

Interstate Commerce Commission v. Railway em '

Labor Executives Association, 315 U.S. 373.. 12

Kansas Pipe Line and Gas Co. and North Da-

kota Consumers Gas Company, 2 FFC 29

1 8 18

National Broadcasting Company v United

States, 319 U. 190... ......2....---- 22 12

National Coal Ass'n v. Federal Power Commis-

sion, 191 F. 2d 46219, 20, 24, 26

Phillips Petroleum Co. v. Wisconsin, 347 Us. 3

—ꝛ —A—A—hꝛ — — 2¹

Securities and Exchange Commission v. Chenery aor

— 9 26.

Sunray Mid-Continent Oil Co. v. Federal :

Power Commission, 353 U.S. 944. 25, 26

_ United States v. Del Nevigation Ce, 326 - :

. 10

United States v. Lowden, 308 U.S. ON 12

‘Statute:

: Natural Gas Act, Act of June 21, 1938, c. 556,

52 Stat. 821-833, as amended, 15 U.S.C.

7I77IT W:

r ta ilebegint aganntsiibinn 16

r ee ae kore: * . 16

1111 2, 5, 8, 12, 15, 16, 23

r 3, 17, 18, 19

e 4. 10, 13, 15

Section 111. — 16

r ere 2, 25

Federal Power Commission order (1944) in-

stituting Natural Gas Investigation, Docket

: No. G-880, 4 FPC 725-727 K „ 283

* *

*

b

Federal Power Commission, Report of Shin

missioners Olds and Draper on the Natural

Gas Investigation (1948), F.P.C. Docket _—

%% ͤͤPſ— K 13

Federal Power Commissions Twenty-Sixth

Annual Report (1946), 66-600. 23

Hearings before,the Committee on Interstate

and Foreign Commerce, on H.R. 5249,

House of Representatives, 77th Cong., Ist

6661. —— 18

Hearings before a subcommittee of the Senate

Committee on Interstate and Foreign Com-

merce on S. 734, 80th Cong., Ist Sess. 60. 20°

H. Rep. No. 1290, 77th Cong., Ist Ses. 19

Senate Joint Resolution 92, 78th Cong., 2d

— — 23

S. Rep. No. 1234, ist Cong., 2d Sess. :

C — walkiankuitde deme duiekissanke 23

CCT a SRN AEE Wee 23-24

p. 6—— 9/77 ⁵—— 24

: *

3

3 the Supreme ent of he Ue Sines

e Ocrunzn Team, 2 5 ö

FEDERAL Pow ER COMMISSION, PETITIONER

TRANSCONTINENTAL Gas PE Live Corporation, Con- .

* SOLIDATED EbisoN COMPANY OF N EW York, INc., AND

THE City or NEw Youn

*

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT

The Solicitor General, on behalf of the Federal

Power Cominission, prays that a writ of certiorari

issue to review judgment of the United States

Court of pone Fad the Third Circuit entered in the

above ae on November 3, 1959.

OPINIONS BELOW

The opinion of the Court of Appeals (App., infra,

pp. 28-49) is reported at 271 F. 2d 942. The orders

of the Federal Power Commission denying the cer-

tificate application (R. 174a-183a) and denying re-

hearing (R. 184a-19 4a) are reported at 21 FPO 138

and 21 FPC 399. |

JURISDICTION

The 8 of the Court of Appeals was entered

on November 3, 1959 (App., infra, pp. 9 By

6 0

‘ *

order of Mr. Justice Brennan dated January 27, 1960,

the time within which to file a petition for a writ of cer-

tiorari was extended to and including March 1, 1960.

The jurisdiction of this Court is invoked under 28

.S. C. 1254(1) and Seetion 19(b) of the Natural Gas

Act, 15 U.S.C. 717r(b). 5

4 New * ork electric wal steam utility contracted to .

- buy natural gas in the field in Texas for consumption

under its own boilers in New. Vork. Federal Power

Commission approval of such transactions would not be

required since no sale for resale is involved. The New

York company arranged’ for transportation of the gas.

from the places of purchase in Texas to the point’ of

consumption in New York. The transporting pipeline

company then applied to the Federal Power Com-

mission for a certificate of convenience and necessity, -

under Section 7 of the Natural Gas Act (15 U.S.C.

‘717f£). In denying the certificate, the Commission.

considered the effect of this and future similar trans-

actions on the price and availability of natural gas

generally; it also considered’ the desirability of the

particular end-use to which this gas would be put.

The question presented is whether the Commission

had power, under Section 7, to consider these factors

in this proceeding. fora certificate to transport the gas

through an interstate pipeline.

A

STATUTES INVOLVED

The pertinebt provisions of the Natural Gas Act are

as follows: N

3

_ Seetion-7(c), 56 Stat. 83, U.S.C, 717f(c):

(e) No natural- gas company or person which .

will be a natural-gas company upon sean

of any proposed construction or extension shall

engage in the transportation or sale of natural

gas, subject to the jurisdiction of the Commis-

sion, or undertake the construction or extension

of any facilities therefor, or acquire or operate

any such facilities or extensions thereof, unless

there is in force with respect to such natural-

gas company a certificate of public convenience

and necessity issued by the Commission au-

. thorizing such acts or operations: Provided,

however; That if any such natural-gas edmpany

or. predecessor in interest was bona fide engaged

in transportation or sale of natural gas, subject

to the jurisdiction of the Commission, on

February 7, 1942, over the route or routes or

within the area for which application is made

and has vo operated since that time, the Com-

mission shall issue“ such certificate without re-

quiring further proof that public convenience

and necessity will be served by such operation,

and without further proceedings, if application

for such certificate is made to the Commission

within ninety days after February 7, 1942..

Pending the determination of any such applica-

tion, the cohtinuance of such operation shall be

lawful.

In all other cases the Commission shall set

the matter for hearing and shall give such

reasonable notice of the hearing thereon +o all

interested persons as in its judgment may be

necessary under rules and regulations to be pre-

seribed by the Commission; and the application

shall be decided in accordance with the pro-

* * —_ |

- eedure provided in subsection (e) of this sec-

tion and such certificate shall be issued or

denied accordingly: Provided, however, That

the Commission may issue a temporary certifi-

,cate in cases of emergency, to assure mainte-

nance of adequate service or to serve particular

customers, without notice or hearing, pending

the determination of-an application for a cer-

tificate, and may by regulation exempt from

the requirements of this section temporary acts

or operations for which the issuance of a certifi-

eate will not be required in the publie interest.

* * * * *

Section 7(e), 56 Stat. 84, 15 U.S.C. T17f(e) :

Exeept in the cases governed by the provisos

contained in subsection (e) of this section, a

certificate shall be issued to any qualified ap-

plicant therefor, authorizing the whole or any

part of the operation, sale, service, construc-

tion, extension, or acquisition covered by the

application, if it is found that the applicant

is able and willing properly to do the acts and

to perform the service proposed and to con-

form to the provisions of the Act and the re-

quirements, rules, and regulations of the Com-

mission thereunder, and that the proposed serv- _

ice, sale, operation, construction, extension, or

acquisition, to the extent authorized by the

certificate, is or will be required by the. present

or future public convenience and necessity ;

otherwise such application shall be denied. The

Commission shall have the power to attach to

the issuance of the certificate and to the exer-

cise of the rights granted thereunder such

reasonable terms and conditions as the public

convenience and necessity may require.

5

STATEMENT ee ee a

Ina eutifieate proceeding brought under Section 7

of the Natural Gas Act, Transcontinental Gas Pipe

ine Corporation, (Transeo) sought a certificate of

public convenience and necessity to transport in inter- f

state commeree, for Consolidated Edison Company

of New York, Ine. (Con Edison), natural gas which

Con Edison had contracted to buy from producers in

Texas. Because the transportation was to be per- 2

formed under a proposed . Transco rate schedule

X20“, applicable to Con Edison alone, the arrange-

1 2 eomè to be known as the X-20 service.“

Con Edison had contracted to buy natural gas at

1914 cents per Mef in the Normanna and Sejita

fields, in southerh Texas, for use as boiler fuel at its

Waterside steam-electric station in New York City.

The gas-purchase contracts prohibit resale of the gas

by Con Edison,’ and therefore no Commission ap-

proval of the sales or purchases is ‘required’ by the

Natural Gas- Act. Con Edison then arranged with

Con Edison's Vice President testified that it acquiesced in

the producers’ insistence that the gas not be for resale because

it wanted a firm supply, and this could not be assured under

Transco’s regular tariff (R. 30a). The tariff provision in ques-

tion is paragraph 2(b) of Rate Schedule CD-3, under which

Con. Edison buys gas from Transco, and which permite ‘cur-

7 tailment of deliveries destined for use as boiler fuel when the

. gas is needed for use in Transco’s underground storage facili-

ties (R. 154a-155a). Paragraph 2(b) would not apply to the gas

involved in the X-20 arrangement.

The reference “R. —” is to the pages of the Joint n ppendir

— for use in the cour? below.

4

641483—60-—-2

6

Transco for transportation of the gas at a rate of

50,000 Mef daily to New York City.’

At the certificate hearing, Con Edison undertook .

to show that its proposed use of the gas was in the

public interest as the only effective and economical

means of reducing air pollution in the vicinity of its

Waterside station, which is located near the United

Nations. building in New York City. The examiner’ ~

regarded the evidence concerning pollutign as most |

- . speculative, and found that the proponents. had not

sustained their burden (R. 17la, 172a). However, he

held that the Commission had no legal basis for

inquiry into the merits of the proposed end-use and

approved the. _Fequested transportation service (R.

17a).

*The proponents testified that they planned shortly to in-

crease X-20. transportation to 120,000 Mcf per day. Transco

also undertook to sell from its. own reserves, at Con Edison’s :

option, and without restriction as to resale, up to 50,000 Mcf

per day on up-to-60 days of the year, backing off the trans-

portation service. to obtain pipeline capacity to deliver its

own gas. Con Edison, presented testimony that it would exer-

cise that option only in part, and that it planned to burn as

boiler fuel on every day of the year at least 25,000 Mcf of the

‘gas it had purchased in the field (R. 7a, 29a, 98a). Although,

under the X-20 arrangement, Con Edison | prould. have the

right to buy up to 3,000,000 Mcf a year from Transco for

resale, the estimate presented to the Commission by Transco

was for actual purchases of * 912,500 Mcf (R. 123a, line

10).

The 88 permitted n by Con Edison and

the City of New York (which supported Transco’s application),

by the “coal interests” (National Coal Association, United Mine

Workers of America, and Fuels Research Council, Inc., which

opposed the application), and by the New York Public Service

Commission (which remained mute as to the X-20 *

n others.

—

0

7

The Commission noted the attractiveness of the

idea of amcliorating the unpleasant air pollution

both around the United Nations building, and gen-

erally in New York City (R. 178a, 191a-192a).: It con-

cluded; tievertheless, Mat weightier considerations

compelled the denial of the grant, and in denying

_ rehearing pointed to various possible adverse effects

of the proposal. Included among these were (R.

185a) :° '

the ,effect of stimulating increased purchases

of a in the field by distributing companies

in substitution for the present, prevalent types

of interstate natural-gas service involving pur-

chases and resales by natural-gas pipeline com-

panies; the effect of pre-empting pipeline ca-

_ pacity which would otherwise be available for

more widely beneficial public service; the effect

of making it more difficult to meet the require-

ments of smaller purchasers in the event ar-

rangements of this type become wide-spread;

and the effect of increasing the rates for gas,

to the detriment of the consumer. We also

considered the proposed inferior end use of

the gas. * * *

Weighing these factors 8 the desirability of

alleviating air pollution, and the conventional elements

of publie convenience and necessity, the Commission

found the proposal. not in the public n and

denied the application.

The Court of Appeals set aside the Commission's

order denying Transco’s application, on the basis that

the Commigsion had exceeded its jurisdiction by even

considering the end-use to which the gas would be put.

;

It read in the Commission’s ‘‘examination and “ped

approval of the end use to be made of this gas,

assertion of n general allocation and conserv .

authority over the tiatural gas fields of the United

States” (App., infra, p. 33). It found from-an

examination of legislative materials that the

Commission had requested such general conservation

authority from Congress and was not granted it in

the Natural Gas Act or its amendments. The court -

commented directly on each of the critical poliey con-

siderations which persuaded the Commission, on bal-

ance with other factors, to deny the application. It

found two of these considerations—ie., preemption of

capacity, and effect on price—to be implicit asser-

tions af general conservation authority. Without

characterizing the Commission's consideration of the

small gas consumer’s inability to bid competitively

with large purchasers in the gas fields, the court

found this also to be a consideration ‘‘which the

Congress did not envisage”’ (App., infra, p. 47).

The court directed that the Commission grant the

certificate, permitting it first to conduct hearings on

a minor, disputed, factual matter.

REASONS FOR GRANTING THE WRIT.

In legal 1

tent of the Federal Power Commission's authority to

inquire into the “present or future public convenience

and necessity” i in issuing certificates for inturstate gas

transportation under Seetion 7 of the Natural Gas

Aet, where the Commission has no direct authority

under the Act over the sale of the gas in the field

or its end-use at the point of consumption. The

court below has confined the Commission’s power of

scrutiny in these circumstances very narrowly—con- .

trary to the teachings of this Court’s decisions, the

consistent understanding of the Commission for many

years, the pertinent legislative history, and recent rul-

ings of the District of Columbia Circuit. For these

reasons, the case fully deserves review here.

In practical terms, moreover, the decision below

bears within itself very serious consequences for the

proper administration of the Natural Gas Act. It

would permit a vast, new, unregulated, interstate

market fer gas—by industrial enterprises purchasing

for their own use —side by side and competing with

the regulated market over which the Commission

currently exercises jurisdiction. This new market

(1) would probably. have definite and lasting infla-

tionary impact on gas prices generally, (2) could well

be devoted to end-uses inappropriate to the broad pur-

poses of the Natural Gas Act, (3) would disrupt pat-

terns of industry growth.evolved from 20 years of

congressionally-directed regulation, and (4) would

probably be beyond effective state regulation. If the

ruling below is permitted to stand, the attractiveness

of this unregulated market, especially to gas pro-

ducers, will undoubtedly foster transactions compara-

ble to that between the producers in this ease, Transco

(the . pipeline), and Con Edison (the industrial

purchaser). The basic’ problem of the permissible

range of Commission inquiry and decision will thus

be recurrent, and in vjew of the issue’s considerable

public importance it deserves early review by this

10

Court. The need for an authoritative ruling is under-

_soored by the Court of Appeals’ statement that [wle

nave no decided court case to give us a precedent or

guidance in the matter here under discussion“ (App.,

in fra, p. 42).T

1. The scope of Commission i inquiry in n all certificate

cases is, and must be, broad. Section 7(e) of the Nat-

ural Gas Act (supra, p. 4) demands that the Com-

mission find, before issuing a certificate, that it “is or

will be required by the present or future public conven-

ience and necessity’: This Court has described the

administrative function in granting certificates under

that standard as ;

Sie eee nlp tins Qe nen %

draw inferences from them but also to bring to

bear upon the problem an expert judgment and

to determine from its analysis of the total situ-

ation on which side of the controversy the pub-

lie interest lies * * * [United States v. Detroit

Navigation Co., 326 U.S. 236, 241]. [Emphasis

added.]

The court below, in its insistence that the Commission

could properly consider solely the conventional re-

quirements“ for granting or denying a certificate,

»The need for resolution by this Court of the problem

by this case is also emphasized by the fact that, if this

does not grant certiorari,.any Delaware or Pennsylvania cor-

poration can tzke advantage of the decision of the Third Cir-

- cuit, The possibility of avoiding conflict, between circuits will

thus be ‘subjected to control by the industry if industrial gas

consumers wishing to follow the practice in this case choose

to deal only with such pipelines. Approximately 50% of the

natural gas companies subject to Commission jurisdiction (not __

including independent 3 are incorporated within the

Third Cocett.

11

would permit consideration not of the total situa-

on’’, but merely of those narrow requirements which

relate to the particular applicant’s ability to perform

the proposed service. These limited factors—of tech-

nical and economic feasibility of the proposal, ade-

quacy of a gas supply to the applicant, existence of a

market for the gas, and the rates to be charged for its

transportation—essentially measure little more than

whether the proposal is fair to Transco, its investors,

and Con Edison. While the stability of the venture

in these terms is important to the public interest, it

certainly does not exhaust that interest.

In certificate cases the Commission’s judgment must

be brought to bear on its analysis of the total situa-

tion'' in determining both the present and the. future

publie needs, and all of those needs whic! are relevant. *

In narrowly reading the Act’s broad standard to ex-

clude any factor not directly related to the present:

transportation of the gas, the court below permits con-

sideration only of one segment of the public’s interest

and only of present. interests. Yet this Court, in

Detroit Navigation, stressed that under this standard

* * * Forecasts as to the future are necessary

to the decision. * * * It may be that the public

interest requires that future * * needs be

assured rather than left uncertain. The Com-

mission has the diseretion_se—te-decide * * * |

1326 U.S. 236, 241.“

The public convenience and necessity for which e

agencies issue certificates are the convenience and necessity of

the future. The needs of yesterday require no fulfillment if

they be not the needs of tomorrow. They may require recom-

Se oe ee ee Every new bus route, new

12

Unless 38 ů — Oe vei range

of Commission inquiry can properly include areas

within the industry which the Commission cannot di-

rectly” regulate. See Nutional Broadcasting Company

v. United States, 319 U.S. 190, 215-220; Interstate

Commerce Commission v. Railway Labor Executwes

Association, 315 U.S. 373; United States v. Lowden,

2308 U.S. 225; Federal Power Commission v. Hope Na-

tural Gas Co., 320 U.S. 591. 660 (dissent of Jackson

J.). This general principle has already been applied

by the Court to this Commission and to the Gas Act.

In Colorado Interstate Gas Co. v. Federal Power Com-

mission, 324 U.S. 581, 602-608, 604, a rate case, the

contention had been raised, on the assumption that

the statute’s terms precluded Commission control over

production and gathering, that it was improper for

the Commission to include such facilities in a

natural gas. company’s rate base, and improper

to determine. the expenses incident to such facilities

for the purpose of determining the reasonableness of

the company’s rates. This Court rejected that con-

tention, concluding that the Commission was not pre-

vented from taking these matters into account. Simi-

x 1 Federal Power Commission, 287

F. 4 741, 752 (C. A. D.C.).

t is clear from the grant of power in the original Section 7

and in the 1942 amendment (infra, pp. 15 /) that Congress hae

not done so here.

—

——

— is

larly, it should be able to take into aceount the

economic realities peculiar to the natural gas industry

which bear here on the public interest in issuing or

denying a certificate. The affirmative duty of the

Commission not to blind itself to relevant considera-

tions was most recently emphasized by this Court’s

statement in Atlantic Refining Co. v. Public Service

Commission, 360 U.S. 378, 391, that Section 7(e)

requires the Commission to eyaluate all factors bear-

ing on the, publie interest“ (emphasis. added).

2. The price consequences, the availability, and Ur-

end-use of natural gas resulting from the proposed

transaction are clearly factors bearing on the public in-

terest. Indeed, denial of Traneo’s application could

have been predicated upon price considerations alone. —

In treating of price in its initial order, the Commission

regarded raised prices in the future, as a result of au-

thorizing this proposal, te be ‘“éertain’ and not

merely likely. The facts of the natural gas business

fully support this Commission judgment. For it is

clear that many gas producers prefer to remain un-

regulated. There is nothing illegal in this preference.

The Court pointed out in the Atlantic Refining case

ence by representatives of the industry on their desire for a

— a

4

(360 U.S. 378, at 388) that a producer can initially re-

fuse to sell gas to any one except on his own terms; and

no one has a legal complaint under the Gas Act if a pro-

~ ducer chooses to sell in a regulated or an unregulated

market, or prefers to leave his gas in the ground. If

the decision of the- court below stands, purchases of

this kind by industrial consumers from producers in

the field—purcliases unregulated as to price—will be

sharply encouraged and rises in price are almost in-

evitable because of the ne bids of these indus-

trial purchasers."

This is the point of the matter, and the crux of the

Commission’s concern in this case for the public in-

_terest—the propensity of unregulated sales to drive

up the price of gas. Congress would hardly hayé in-

tended the Commission to exereise its certificate juris-

diction in such fashion as ta permit, through the use

of regulated interstate facilities, the creation of a new

interstate unregulated market which would have a de-

vastating imfmence on prices in the interstate regu-

lated market. And the fact that Congress did not em-

power the Commission to regulate intrastate sales is

no basis for arguing that it intended the creation of

an additional, interstate, unregulated market. There

are obvious geographical. limits on the extension of

intrastate sales which sufficiently limit ‘their possible

impact on federally- regulated transactions. It is in-

compatible with the Congressional design to protect

For 4 graphic statement of this problem, from the view-

point of local gas distributing compunies, see the Brief Amicus

Curia ofthe Southern Califia‘ Ge Company and Southern

* Counties Gas Company of California, in support of this

&>

—5

natural gas consumers from exploitation, which this

15

Court has noted as the prime motivation of the Act,“

to permit this use of regulated facilities to undermine

the very scheme of regulation which Congress devised.

. As we have pointed out (supra, pp. 10-13), Congress -

granted ample power in the terms of Section 7(e) for

the Commission ta consider fully the public interest

involved in applications to transport natural gas

through regulated interstate facilities. The curtail-

ment of that power by the court below merits this

Court’s review.

3. The Court of Appeals also erred in its ruling

that the Commission could not consider conservation.

or end-use factorx. In this connection, the court mis-

interpreted the 1942 amendment of Section 7 of the

Federal Power 2 v. Hope Natuial Gas Co., 320

U.S. 591, 610.

10 The "Court of . insistence that conservation not be

considered becomes all-inclusive when it equatés the relatively

independent factor of price’ with conservation. The necessary

result of this equivalence is that, aside from “conventional re-

quirements,” nothing: more can be considered in the certificate

‘proceeding since everything. else is “conservation.” Any grant

or denial of a certificate on any basis will have some effect on

conservation to the extent that it either fosters the production

of gas, or fosters leaving it in the ground. In this sense, the

approval of rates by the Commission, and indeed the setting

of unrégulated prices by pioducers, have an effect on conserva-

tion. The incentive for taking natural gas out of the ground is

to sell it for use. While this process can be regarded in sepa-

rate phases, such as production, transportation, distribution and

as @ practical matter these are closely interrelated

steps in a single process. It should not be surprising that af-

fecting one step will have impact on other stages in the process.

But the fact that relationships of this kind exist (does not permit

fusing with conservation the independent factors the Commis-

sion also considered.

\

| „ ; |

Gas Act and paid too little heed to this Court’s state-

ment of the meaning of the 1942 modification in the.

_ statute. The court also, misread certain legislative

and Commission materials as meaning that Congress

had granted no power at all to the Commission to

consider end-use, when the most these materials show is

that Congress did not grant the. Commission compre-

bensive and direct power over the conservation and ;

allocation of natural gas, both in its end-use and in oe

the gas fields."

(a). In Federal Power 7 v. Hope Natural

Gas Company, 320 U.S. 591, this Court refused to

require the Commission to effect end-use conservation

objectives. in exercising its jurisdiction under Sections

40a). and. 5 (a) of the Act to regulate rates. But with

— to certificate cases, the Court stated 0 d. at 612):

*** [W]e may assume that, apart from the

express exemptions contained in 5 7, consider-.

ations of conservation are material to the issu-

ance of · certificates of public convenience and

necessity. at |

The Court also said (Id. at 616-617): a

** * The Act of February 7, 1942, by broadening

57. gave the Commission some additional au-

Section 11 of the Act, 15 U.S.C. 717), essentially leaves field

conservation to estates, and contemplates state compacts,

aided by Commissidn-obtained information, to facilitate this

purpose.

v Jnstices Frankfurter and Jackson dissented. They would

have read the “just and reasonable” rate standard as embracing

— ee renee: 320 US. at 624, 628.

17

thority to deal with the conservation aspects of

the problem.” * * *

ee

conservation in its administration of the Act. It has

indeed suggested that it might be wise to restrict the

use of natural gas “by functions rather than by areas.”

Annual Report (1940) p. 79.

The Commissiag stated in that connection that —

gas was particularly adapted to certain industrial uses.

But it added that the general use of such gas “under

Boilers for the production of steam” is “under most a.

cumstances of very questionable social economy.”

Ibid. [Emphasis added.)

Subsequently, in Federal Power Commission v. East .

Ohio Gas Company, 338 U.S. 464, 468-469, the Court

confirmed its interpretation of the 1942 amendment, as

follows:,

Moreover, the initial interest of Congress in

regulation of transportation facilities was re-

emphasized in 1942 by passage of an amend-

ment to §7(c) of the “Act broadening the

Commission’s powers over the construction or

extension of pipe lines. 56 Stat. 83. This

amendment followed a report of the Commis-

sion to Congress pointing out that without

amendment the Act vested the Commission with .

* inadequate power to make any serious effort

to control the unplanned construction of natu-

ral-gas pipe lines with a view to conserving one

of the country’s s valuable but exhaustible energy

_ resources.” [The Court’s footnote is omitted. ]

(b). This interpretation of the 1942 amendment

is fully supported, at least as to end-use conservation

‘through the consideration of competing fuels, by the

1 18 1

legislative history of the Act. Prior to the 1942

amendment, Section 7(e) limited the Commission’s

jurisdiction over the proposed construction of facili-

ties to those which would transport gas to a market

in which natural gas was already being served by

another natural gas company. In view of this limita-

tion, the Conimission was of the view that it should

_ consider. only competition between natural gas com-

panies, and that Congress did not intend that it should

generally weigh the broad social and economic effects

of the use of various competing fuels. Kansas Pipe

Line and Gas Co. and North Dakota Consumers Gas

Company, 2 F. P. C. 29, 57 (1939). During the hear-

ings which led to the 1942 amendment, Commissioner

Manly testified to the Commission's view that it should

not permit full rights of intervention to coal, labor

and railroad interests in iis hearings, on the basis that

Congress (in view of the limitation noted above) had

not intended it to weigh the social and economic inter-

ests in competitive fuels and competitive methods of

transportation.“ Stressing the unsatisfactory ad-

ministration of Section 7 (e) which contained these limi-

— the House report on the amendment stated :

The hill, as amended, eliminates the objec-

tions to the present section 7(c) above men-

tioned. By this legislation the door is

opened to the consideration by the Commis-

sion of the effect of construction and exten-

sions upon the interests of producers of com-

___ peting fuels and competitive transportation:

"38 Hearings before the House Committee on Interstate and For-

eign Commerce on H.R. 5249, 77th Cong, ist Sees., p. 5.

1

f 19 : :

interests. HL, Rep. No. 1290, 77th 8 Ist

Sess., p.. KJ]

Thus, Section 7 (e), as amended (15 U.S. 0. 717f(e)),

broadened the Commission’s jurisdi¢tion over the con-

struetion and extension of pipeline facilities and em-

powered the Commission to consider in this Connection

the use of gas and competitive fuels, and ä

tive methods of transportation.

Any consideration of competition between fuels,

or competition between methods of transportation,

involves a judgment as to which fuel or method

of transportation should be used in the eireum-

‘stances of the particular case. This judgment as

to use is what Congress entrusted to the Commis-

sion by the 1942 amendment. The fact that a certifi-

cated pipeline extension will displace the transpor-

tation of oil by river barges is the critical fact which

gives the ‘barge operators standing’ to challenge the

grant of the certificate,“ and it exposes the crucial .

fact that the use of one means of transportation,

rather than another, may constitute the heart of the

controversy which must be resolved. Similarly; the

displacement of coal by gas, and the. resultant dis-

placement of railrpad transportation for the coal,“

show that consideration of this competition and of

which fuel: shall be used are virtually indistinguish-

able. As the Court of Appeals for the District of

* See City of Pittsbrirgh v. Federal Feuer Commission, 237 |

F. 2d 741, 746-748 (C. A B. C.

1 [bid., pp. 758-754.

10 National Coal An v. Federal Power Commission, 191 F.

2d 462, 466-467 (C. A. D. C.); Charleston & W. C. Ry. v. Fed-

eral Power Commission, 234 F. 2d 62 (C. A. D. C).

ot the Senate Committee on Interstate and

20

Coiumbia Circuit has noted, It Ihe corollary of [the

Commission’s] authority to allow intervention ig the

duty to explore all pertinent aspects of an inter- 8

venor's relationship to the matter under consider-

ation“, including the desirability of burning gas

under boilers when coal is readily and economically

available, or preserving the less abundant premium

fuel—gas— for superior uses. It is difficult, in short,

to see how the statutory authority to consider competi-

tion among fiiels can rationally be divorced from con-

sideration of the use to which the fuels are put.“

(c). The Commission’ s traditional concern with use

considerations: in certificate cases is thus reasonable,

necessary, and responsive to Congressional direction.

Its labeling as “ inferior“ the use of gas as boiler fuel

Simply recognizes the competition of a more abun-

dant fuel—coal ; and its attempts to limit inferior-uses

are compelled by the single most critical factor of

present and future public interest in natural gas,

namely, the exhaustability of its supply. The cases

cited by the court below which show Commission im-

plementation: of its boiler fuel policy reflect no un-

| discriminating hostility to.all industrial consumption

11 National Coal Ass'n v. Federal Power Commission, 191 F.

2d at 466 (C. A. D. C.).

1 Charleston & W. C. Ry. v. Federal Power Commission, 234

Fi. 2d at 64 (C. A. D. C.).

„

Commission from denying a certificate bec use con

siderations, Chairman Smith of the testified : “Just

how public convenience and necessity could be determined with-

out any consideration of the market and the nature of the

demand for gas is hard to see.” re ee eee

Commerce on

S. 734, Soth Cong., 1st Sees., 60. The bill died in 1

”

. 7 ie

21°

(App., infra, pp. 39-41). On the contrary, they

show a careful selection of circumstances in which

the public interest may require such consumption.

The Commission has adopted a flexible, not a rigid,

approach to the problem.“

Industrial consumption on an interruptible basis, as a a de-

vice for increasing the “load factor” in pipeline facilities, is a

pattern of the industry. Suth consumption in warm periods,

when the demands of smaller domestic and commercial con-

sumers are reduced, permits optimum year-round use of pipe-

line facilities, thereby making it possible to provide gas serv-

_ ice to domestic consumers who would not otherwise be served,

or to do so at lower unit costs than would otherwise beru-

quired. The benefits of this pattern would be lost to the en-

tent that large industrial consumers cease buying from dis

tributing companies, buying instead directly from producers

in the field. The decision of the court below opens the door

to the loss of these benefits.

Protection of these and other consumers from price and

availability disadvantages of the X-20 type operation cannot

be expected from the states. The interstate character of the

transaction would. prevent the producing states from exercising

_ jurisdiction. See Phillips Petrolewm Co. v. Wisconsin, 347 U.S.

672, 682-685. The hopelessness of the position of the consuming -

state is demonstrated by the. opinion of Chairman Maltbie of

the New York Public Service Commission in a “boiler-fuel

case”. Ne Cabot Gas Corporation, 16 PUR (NS) 443, 445-

446 (1936):

Our natural gas resources ought to be conserved and

there is probably no field where the Federal government

“acting in the interests of the entire country and to pro-

tect the welfare of the future could accomplish more than

in the natural gas industry. From a conservation view-

point, I thoroughly agree with Commissioner Burritt, and

if I could see how a denial of the present petition would

work to this end, I would vote to refuse the application;

but will such denial produce the desired results?

The field from which gas is to be taken by the petitioner

is in northern Pennsylvania and southern New Tork.

841463—00—

a

Moreover, each of these cases is a concrete instance

of the Commission’s belief that it has power to con-

sider end-use. The Court of Appeals’ reliance on a

1944 Commission report which it believes contains

“the Commission’s own concession of lack -of such

_ power’’ is incorrect (App., infra, p. 38). For one

thing, the question of power can only be resolved -by

examination of what Congress intended to give, and

-not by what the Commission, thought it had received.

But if the latter inquiry is made, it reveals the Com-

mission’s belief that it had some - power to deal with

end-use gomservation, but did not have- full, specific

and comprehensive power to deal directly with con-

. servation. This understanding is explicit even in

the portions of the reports of 1940 and 1944 —

by the court below.” :

It is possible for Pennsylvania companies to take all of

the gas from this field unless the New York companies

remove the gas before the field is exhausted. * * * If re-

<<.

go to Pennsylvania * *.

Thus, the state gust either permit inferior use, or lose the gas

entirely. In most cases, therefore; X-20 type proposals are be-

yond effective state regulation. Where effective state regula-

tion can be applied to such a transaction, however, the Com-

mission can condition the transportation tertificate to permit

it. This was recently done in EI Paso Natural Gas Company,

FPO Opinion No 838, November 27, 1959, rehearing denied, Jan -

uary 26, 1960.

It is noteworthy that the New York Public Service Com-

mission, an active party in other phases of the proceeding before

the Commission, remained. mute as to the X-20 proposal, ex-

pressing neither support not opposition. :

Note the implications of “treat fully” (line 5, footnote 20) ;

“broadened” (second from last line, footnote 20); “comprehen-

sive powers” and “specific powers” (second and eighth lines, last

paragraph, footnote 24) ; App., infra, pp. 37-38, 39,

2B .

The Commission .in another report in 1944 made

crystal clear its understanding of its power to con-

sider end-use as a result of the 1942 amendment of

Section 7. In that year, the Senate Committee on

Interstate Comme#te was concerned, in Senate Joint

Resolution 92," with the need for possible further

legislation to restrict unnecessary waste or depletion

of natural-gas reserves or the utilization of natural

gas for inferior or otherwise undesirable purposes in

competition with other fuels. (S. Rep. No. 1234, 78th

Cong., 2d Sess., P. 3.) The Committee recognized that

Wn administering the Natural Gas Act, par-

ticularly section 7(e) thereof, as amended,

the Commission is directly concerned

with the problem of conservation of natural

gas. [Jd.,p.2.]._

Similarly, in its report to the Chairman of the Senate

Committee on S. J. Res. 92 (Id., pp, 3-6), the Commis-

sion noted the need for wise conservation practices in

the production and use of natural gas if premature ex-

baustion of this great natural resource was to be

avoided, and noted that the work which the Com-

mission is doing under [the Natural Gas Act] should

be considered as a first step in dealing with the con-

sérvation of one of the country’s exhaustible re-

This resolution proposed a comprehensive study to be con-

ducted by the Commission to secure for Congress information

to guide it in further legislation for the conservation of natural

gas. The need for directing such an investigation evaporated

when the Commission issued its own order instituting the Natural

Gas Investigation. 4 FPC 725-727. See aleo the Commission's

Twenty-Sixth Annual Report (1946), pp. 66-69.

2⁴

sources. Ia, p. 5 (emphasis added). Speaking of

the 1942 amendment, the Commission’s report stated

The amendment to section 7 of the Natural

Gas Act [in 1942] removed the statutory im-

pediment to consideration by the Commission

of the social and economic effects of the use

| of. natural gas and competing fuels in eerti-

| ficate cases, which existed prior to the amend-

ment; but the consideration of such interests

in particular cases only makes more neceSsary

| @ general investigation inquiring into the sub- .

| ject ‘matter on a national basis such as that

| proposed by the joint resolution. [Id., p. 6.]

4. We have noted (supra, pp. 19, 20) the decisions

of the Court of Appeals for the District of Columbia

Circuit which state that the Commission not only

may, but must, consider gnd-use coriservation where

applicable in certificate cases. The court below.(App.,

infra, p. 43) found no conflict with these de-

cisions on the ground that the District of Columbia

Cireuit had merely found the Commission's end-use

considerations not controlling, whereas here the

question was whether such matters may be considered

at all.“ But in the National Coal case the District of

Columbia court squarely declared that the Commission

„properly assessed great weight” to the public interest

in the use of gas as boiler fuel in the Atomic Energy

plant at Dak Ridge (191 F. 2d at 467). If that factor

may not be considered at all, it would be error to as-

cribe to it any weight. The holding of the court

2

below thus conflicts, at least in principle, with the

views of the District of Columbia Circuit.” . :

5. The Court of Appeals also erred in remanding

the ‘case to the Commission’ “with directions to issue

the certificate applied for“ (App., infra, pp. 49, 50).

Under the repeated and uniform decisions of, this

Court, the power of the reviewing court “to affirm,

modify, or set aside” a Commission order in whole

or in part” (Natural Gas Act, Section 19(b), 15

U.S.C. 717r(b)) does not authorize it to exereise an

essentially. administrative function. Judicial review

3 when an error of law is laid bare; the matter

must then be returned to the agency for reconsidera-

tion. Sunray Mid-Continent Oil Co. v. Federal Power

*The Court of Appeals below commented unfavorably on

the Commission’s consideration of the use of gas for boiler

fuel as an “inferior” and undesirable -use in this case, and

observed that the Commission had completely ignored the

fact that the industrial boilers in question generated steam to

be used for space-heating and lighting (App., infra, pp 48-49).

However, this factor did not control the court’s decision, and is

irrelevant to the more impdrtant questions concerning consider-

ation of end-use and of other factors which did control the

decision of the Commission and that of the court. More-

over, no matter what use is made of the steam, the proper

focus can only be on the competing fuels which fire the steam

boilers, and their relative abundance, convenience, and effi-.

ciency for this purpose.

The court below concedes that “[i]f the Commission has au-

thority to regulate end use as a part of a conservation plan it

certainly has the authority to balance the factory in each

individual case as its arises” (App., infra, p. 42); and in its

brief discussion of the air pollution problem, it repeats that

“the weighing of factors of this kind, if within the jurisdic-

tion of a body, is a matter in which a reviewing tribunal will

‘not interfere if a rational conclusion has been reached” (App.,

infra, p. 48).

Commission, 353 U.S. 944; Federal Power Commie-

sion v. Idaho Power Co., 344 U.S. 17, 20-21; Secu-

. rities and Exchange Commission v. Chenery’ Corp.,

332 U.S. 194, 196.

The Third Cireuit regarded the 1 con:

. sideration of end-use as the controlling determinant in

its decision, despite the Commission's assertion in its

order denying rehearing (21 FPC 399, 401) that:

Contrary to applicants’ contentions, we do not

view the proposed end use of the gas involved

in this case as of decisive importance. In ac-

cordance with the National Coal Ass n case, it is

but one factor, and that not of determinative

importance, which we consider in the exercise

of our judgment on all the facts.

Thus, aside from the Commission’s employment of the

end-use factor, we think the court below was bound to

accept the Commission’s judgment on the other con-

siderations it took into account. And even if the

court were correct in believing that Congress had

precluded the Commission from considering .end-use,

‘the court’s proper role would have been to remand

the case to the Commission for reconsideration, with

directions not to consider end-use. The ultimate de-

termination of the public interest, in the light of the

court’s opinion and perhaps other factors which the.

Commission had earlier felt need not be’ weighed,

would be for the Commission and not for the court.

27

CONCLUSION

For the foregoing reasons, this petition for a writ

of certiorari should be granted. ;

* submitted.

* J. Lez RAN RI N

Solicitor Generel.

Grondk CocHRAN Dove, -

Assistant Attorney Geyeral.

Saur; P. Slax,

Axrnoxv I.. MON DH.

. Attorneys.

Witiarp W. iene: ee |

_ General Counsel,

” Howarp E. WaHRENBROCK,

Rosert L. Russen,

Assistant General Counsel,

Davm J. Barprn,

+ Attorney,

Federal Power Commission,

Feprcary 1960.

APPENDIX.

In the United States Court of Appeals for the Third

Circuit

Nos. 12908, 12929 and 12930

Consotipatep Epon Company or New York, Inc.,

. PETITIONER IN No. 12908

THe Crry or New York, PETITIONER IN No. 12929

TRANSCONTINENTAL Gas Pipe Line CorPoRATION, Pri-

TIONER IN No. 12900 |

v.

Fepenat PowER CoMMISSION, RESPONDENT

Nationa. Coal. ASsociaTION, Unirep Mine Workers

or America, Fueis Restarcu Covncn,, Inc., IN-

TERVENORS ee |

SouTHERN CALIFORNIA Gas CoMPANY AND SOUTHERN

Counties Gas ComPaNy or CALIFORNIA, INTER-

vxxons

On Petition fer Review of Orders of the Federal

4 Power Commission

Argued September 25, 1959

Before d,, STALey, and Hastie, Circuit Judges

OPINIon or THE Court |

(Filed November 3, 1959)

By Goopricn, Circuit Judge: We have before us

three cases which were consolidated for argument.

. (28) “4

>"

—

29

The main case is a petition by Transcontinental Gas

Pipe Line Corporation (Transco) to set aside an

order of the Federal Power Commission which re-

fused to issue it a-certificate of public convenience and

necessity. Another case is a petition by Consolidated

Edison Company of New York, Ine. (Con Edison)

seeking. the same relief. The same is true of the

petition brought by the City of New York. Joining

with the Commission are intervenors National Coal

Association, United Mine Workers of America and

Fuels Research Council, Ine. Filing a brief also as

amiei curiae are Southern California Gas Company

and Southern Counties Gas Company of California. .

For the opinior{.and order below see Transcontinental

Gas Pipe Line Cor Pn 3 21 F. P. C. 138, rehearing denied

21 F. P. C. 399 (1959).

The essential facts can be briefly stated. Con Edison

went into Texas and mace a contract with producers

for the purchase of natural gas in tle Texas field.

Then it made an agreement with Transco providing

for what is called: X-20 service.“ Transco agreed

to transport the gas to New York and deliver it there.

te Con Edison. Included in the agreement was a

provision for a sixty-day-a-year service which Transco

agreed to render Con Edison from its own gas reserves

and during the time this service was furnished the

Con Edison supply from Texas would not be used,

Con Edison agreed with the producers not t6 sell this

Las at retail in New York. It is to be used to fire two

of the ten boilers in Con Edison’s Waterside plant

near 42nd Street and East River in New York City.

The City of New York is interested in the litigation

because by the substitution of gas for coal, now beirig

used to fire the boilers which Con Edison has at this

plant, the very considerable amount of fly ash and the

very considerable amount of sulfur dioxide poured

0

at 30

into the air in this densely populated portion of New

York City will be greatly reduced. .

In the epinion and order denying the. certificate the

Commission agreed that the conventional require-

ments of public convenience and necessity had been

satisfied by the showing made.“ The matter of mar-

kets, facilities, gas supply and rates are included in

these conventional requirements.“ The Commission,

however, overruling its presiding~examiner, denied

the certificate and gave five policy reasons for doing

so. Since the soundness of these reasons is the heart

of the controversy, we set them out in full in the Com-

mission's language. Here they are:

1, “Certainly, if we were to grant this request

we would soon be confronted with many re-

quests of the same general character ; and grant-

ing the X-20 proposal, we would have no fair

or rational basis for denying similar such.

uests.”’

. “Likewise, the authorization of this and like

proposals would pre-empt for this usage capac-

= which would otherwise be available to meet

more urgent and widely beneficial public needs“

21 F.P.C. at 141.

The Commission noted in its order that a minor portion of

the rate structure, dealing with the rate for the transportation

of the “displaced” gas had not, in its opinion, been substantiated

on the record. 21 F. P. C. at 141 n. 3. The petitioners dispute

this finding) . However, all concerned agree-“that the Commis-

sion did not rely upon that deficiency as a ground for denying

the certificate. Had the Commission otherwise been able to

grant the certificate, it would presumably have remedied the

defect by a condition.” Brief for the FFC, p. 5 n. 10.

*In its Order Denying Application for Rehearing, the Com-

mission stated that “of course there can be no preemption of

capacity not already built; but

ü

31

even though the bare authorization here sought

would not of itself entirely nullify the Leidy .

Storage project.” 0

3. The impact of large demand on relatively

limited supply is certain enough to raise rates

and fieli prices if only one bidder is bringing

that demand to bear on the supply.. How much

more serious is that impact when it is in the

form of multiple bidders, each attempting to

reserve to itself a firm supply. Inevitably,

there would be upward pressure on rate leyels

in the fields. We do not believe we ought to en-

courage such When it is -unnecessary.’’

4. La purchasers of gas, like Consoli-

dated Edison, can readily compete with pipe-

lines for gas purchases. * * * But the smaller

purchaser may not be as fortunate. He will

have to rely on the pipeline supplier. And how

long the pipeline can continue to buy in com-

petition with nonjurisdictional, large volume

purchasers, or indeed, how willing it might be

to undertake such less desirable service, is at

‘least a question.”’ |

5. “These are all factors that weigh against

-the grant. They would confound and make

more difficult a decision in such a case as this

even if the gas were to be used for a demon-

strably superior use. But when the purpose for

which the sale would be made is something less

than desirable, they take on more serious, even

controlling, signifleanee. =

When the basis of the controversy is understood it

gets down to a point Which is easily stated although

difficult to answer. It is agreed by all parties that the

purchase by Con Edison of the gas in Texas is not sub-

ject to the jurisdiction of the Commission. Con Edison

can buy as much gas as it can pay for in Texas and

accordancés with the requirements of public convenience and

necessity.” 91 F. P. C. at 402. :

+21 F.. C. at 141.

2

there is nothing the Commission can do about it. The

same is true of the use which Con Edison makes of

this gas when it gets to New York. Since it is not to

be the subject of re-sale in that state, the Commission

has nothing to say about its use either.

Section 1(b) of the Natural Gas Act * sets out

specifically its coverage as follows:

„The provisions of this chapter ‘shall apply

to the transportation of natural .gas in inter-

state commerce, to the sale in interstate com-

_ meree of natural gas for resale for ultimate

public ‘consumption for domestic, commercial,

industrial, or any other use, and to natural-gas

companies engaged in such transportation or

sale, but shall not apply to any other transpor-

tation or sale of natural gas or to the local dis-

tribution of natural gas or to the facilities used

for such distribution or to the production

or gathering of natural gas. 15 U.S.C.A.

§717(b).

As the presiding examiner pointed out in his opin-

ion, if Con Edison eould liquefy this gas and: trans-

port it by truck or by ship to New York City there

would be nothing for the Commission to take hold of.

The question, therefore, comes down to the scope of

the authority of the Commission given by Section 7

of the Act which provides for the certificate of con-

venience and necessity.’ How far r do this phrase let

the Commission go? :

*15 U.S.C. § ire.

* Transcontinental Gas Pipe Line Corp., 20 F. P. C. 303, 816

\ “No natural gas company * * * shall engage in the trans

or sale of natural gas, subject to the jurisdiction of___

the Commission, or undertake the construetion or extension of

any facilities therefor, or acquire or opérate any such facilities

or extensions thereof, unless there is in force with respect, to

7

such natural-gas company a certificate of public convenience

33

Anyone can see that the phrase is a vague one, some-

thing like due process of law, out of which one can

get what he cares to put in. It is, obviously, the kind .

of a phrase where experience through the years builds

up criteria which must be met in. determining its

content. Such experience-built criteria were what the 4

Commission looked at when it saw that the conven-

tional requirements” for convenience and necessity

Our conclusion in these cases is that the Commission

has gone beyond its authority in denying the certifi-

. cate here. We think that what the Commission has in

. effect done is to assert, by its examination and dis-

approval of the end use to be made of this gas, a

general allocation and conservation authority over the

natural gas fields of the United States. Inspection of

the reasons assigned by the Commission for its denial

shows clearly, we think, that it disapproves of the use

to be made of this gas in New York City as boiler fuel,

and necessity issued by the Commission authorizing such acts or

operations. 15 U.S.C.A. § 717f(c). .

“Except in the cases governed by the provisos contained in

subsection (e) of this section, à certificate shall be issued to any

qualified applicant therefor, authorizing the whole or any part

of the operation, sale, service, construction, extension, or acquisi-

tion covered by the application, if it is found that the applicant

is able and willing properly to do the acts and to perform the

service proposed and to conform to the provisions of this chap-

ter and the requirements, rules, and regulations of the Commis-

sion thereunder, and that the proposed service, sale, operation,

construction, extension, or acquisition, to the extent authorized

by the certificate, is or will be required by the present or future

public convenience and ity; otherwise such application

shall be denied, The ission shal] have the power to attach

to the issuance of the certificate and to the exercise of the rights

granted thereunder such reasonable terms and conditions as the

public convenience and necessity may require.” 15 U.S.C.A.

§ 717f(e). . |

34 n

as contrasted with the use possibly to be made of it

were it to be devoted, at some future time, to house

heating and domestic use,

The Commission’s argument, to this Court talks

abaut interstitial legislative authority to be exercised

by à regulatory body. This is quite all right; we

agree that the administrative process may clothe the

skeleton of a statute with flesh, as the Commission

argues. But the interstitial process cannot put new

provisions into a "statute. That general statement

everybody would agree upon. The question is, has it

done so here? ; .

The Commission’s brief talks about the inadequacy

of state power to reconcile conflicting state inter-

ests. . This bold assertion requires us to examine

carefully the legislative history behind the statute.

The 1936 report of the Federal Trade Commission

to the Senate, which is specifically singled out in the

_ introductory clause of section 1(a) of the Natural Gas

Act as a source, of the policy of the Act,“ is relied on

by the Commission as authority for its consideration

of the end use to be made of the gas in exercising its

certificating jurisdiction. It cannot be disputed that

the report, which runs over 600 pages, makes a brief

mention of the conflict between industrial and house-

* Brief for the FPC, p, 40.

As disclosed in reports of the Federal Trade 8

made pursuant to S. Res. 83 (Seventieth Congress, first session)

and other reports made pursuant to the authority of Congress, it

is declared that the business of transporting and selling natural

gas for ultimate distribution to the public is affected with a public

interest, and that Federal regulation in matters relating to the

transportatgep of natural gas and the sale thereof in interstate

UACL iO ee, 1

US. CA. 5 5 a).

4

35

hold uses.“ But it is only a brief mention that is

made; in neither its summary of findings“ nor in its

conclusions and recommendations“ does the report

make, any mention of the matter. It is true that in its

enumerated conclusions the report refers to “conser-

vation.” But a closer reading of that ,conclusion, to-

gether with the emphasis of the rest of the report,

reveals that what. was really being referred to was

physical waste in the production aspects and the use

of gas in gasoline extraction and the manufacture of

carbon black.” In its listing of.16 specific evils in

10 “The present transportation of natural gas in the.large pipe-

line systems is intimately concerned with the sale of large or major

portions of the gas so transported to industries of the" general

type outlined above. [This refers to use of gas for electric power

plants, firing of large boilers and furnaces, brick kilns, steel mills,

etc.) The gas industry claims that the supply ‘to general con-

sumers at prevailing prices is only made possible by the quan-

tity sales to industry in direct competition with coal and oil.

Whether such a situation is essential to maintain service at mod-

erate prices is one problem, but it doeg not eliminate the fact that

every thousand feet used to replace coal in large operations has

dimirlished the future supply of natural gas available for the

householder and other retail consumers, which may be considered

the highest grade of service to which natural gas may be put.”

Federal Trade Commission, Final Report to the Senate of the

United States, S. Doc. No. 92, Part 84-A, 70th Cong., Ist Sess.

125 (1936). eh |

™ Td. at 581-606.

. Jd. at 607-17.

is 41. Conservation is the first problem that demands attention.

' Vast acréage is being drained and natural gas is being subjected

to profligate and wanton waste and uneconomical uses. This hws

been estimated to amount to as much as a billion and a quarter

cubic feet per day in one field. Witnesses having expert knowl-

edge testified that this amount of daily waste is sufficient to supply

the entire present needs of the domestic and commercial users of

natural gas in the United States.” 7d. at 608 (emphasis sup-

plied.) This is clearly referring to the waste type problems dis-

cussed earlier in the report. Id. at 92-101.

_—

36

. +

the industry the report refers to “a great waste of

natural gas in production,’’ but nowhere refers to end

use problems.“ .

The sole recommendation of the report with respeet

to conservation“ was that the producing states enter

into interstate compacts with each other with ac-

companying ‘‘Federal legislation prohibiting the

transportation in interstate or foreign commerce of

natural gas produced or released from storage in

excess of the State’s quota or produced in violation

of other State conservation laws and regulations.“

It also recommended — agency be em-

powered to investigate the supply of and demand

for natural gas throughout the country, to keep such

information current, and to advise and reeommend

to State regulatory boards regarding the proper

amount to be fixed by them from time to time as

the several State qugtas. The result of this ad-

vice was the enactmént of Section 11 of the Natural

Gas Act which empowered the Federal Power Com-

mission to assemble information and report to Con-

gress with respect to interstate compacts,” and noth-

ing more. sies Congutenmen 2

IId. at 615-16 (emphasis —

0 Jd. at 612.

0 Jd. at 613 (emphasis supplied).

1" id. :

*“(a) In case two or more States propose to the Congress

compacts dealing with the -conservation, production, transpor-

tation, or distribution of natural gas it shall be the duty of the

Commission to assemble pertinent information relative to the

matters covered in any such proposed compact, to make public

and to report to the Congress information so obtained, together

with such recommendations for further legislation as may ap-

pear to be appropriate or necessary to carry out the purposes of

such proposed compact and to aid in the conservation of

natural-gas resources within the United States and in the

&

0 0

the House Interstate and Foreign Commerce Com-

mittee which drafted the bill, was able to state to

the House, sitting as the Committee of the Whole,

that “the only provision of the bill [which was even-

tually enacted] which seems to look to the conserva-

tion of the natural gas resources of the country is

contained in the provision relating to the State

compacts.” ”

. That the 1938 Act.did not give the Commission

power to deal with conservation considerations was

well recognized by the Commission itself in its 1940

Annual Report in which it recommended a broadening

of the Act to give it power to resolve conservation

problems.“

orderly, equitable, and economic production, transportation, and

distribution of naturaPgas. :

“(b) It shall be the duty of the Commission to assemble and

keep current pertinent information relative to the effect and

operation of any compact between two or more States hereto-

fore or hereafter: approved by the Congress, to make such in-

formation public, and to report to the Congress, from time to

time, the information so obtained, together with such recom-

‘mendations as may: appear to be appropriate or necessary to

promote the purposes of such compact.

“(c) In carrying out the purposes of this chapter, the Com-

mission ‘shall, so far as practicable, avail itself of the services,

records, reports, and information of the executive departments

and «ther agencies of the Government, and the President may,

from time to time, direct that such services and facilities be

made available to the Commission.“ 15 U.S.C.A. 67717.

81 Cong. Rec. 6726 (1937). ‘

A proposal “to tap the Southwestern reserves of naturah

gas to supply the tremendous markets available in the North- -

eastern States poses the country with a serious problem of

energy resource conservation. The Natural Gas Act as pres-

ently ‘drafted does not enable the Commission to treat fully the

serious implications of such a problem. Tho question should

be raised as to whether the proposed use of natural gas would

not result in displacing a less valuable fuel and create hard-

~

The statute was umended in 1942.“ But that the

1942 amendments did not give the isfion its

requested power is also apparent. Neither the com-

mittee hearings” nor the committee reports“ make

any mention of the Commission’s concern with respect

to conservation. But even more important is the

Commission’s own concession of lack of such power

which appears in its 1944 report to Congress; this

ships i in the industry already supplying the market, while at the

same time rapidly depleting the country’s natural gas resources.

“Careful study of the entire problem may lead to the con-

clusion that use of natural gas should be restricted by func-

tions rather than by areas. General use of natural gas

under boilers for the production of steam is * * * under most

circumstances of very questionable social economy.

“ns @ s s,

“The: Commission is convinced that these conservation prob-

lems are of such preeminent importance, especially in the pres-

ent world situation, that the Natural Gas Act should be

immediately broadened to give the Commission adequate power

to resolve them in the public interest.” 20 FPC Ann. Rep.

79-80 (1940).

A 56 Stat. 83-84 (1942). a g

= Hearings on H.R. 5249 Before the House Committee on

Interstate and Foreign Commerce, 77th Cong., Ist Sess. gna

H.R. Rep. No. 1290, 77th Cong., Ist Sess. (1941); S. Rep.

No. 948; 77th Cong., 2d Sess. (1942).

*“The Commission is keenly aware of the importance of

conservation and the serious ‘problems raised by the continued

construction of large natural-gas pipe lines and the accelerated

depletion of our natural-gas reserves due to war activities.

In its annual report to Congress for the year 1940 the Com-

mission discussed this question at some length. In that re-

port a number of important questions were raised, but it would

appear that further studies and investigations must be con-

ducted before satisfactory answers to these important and dif-

ficult questions can be formulated. .

| “In its hearings on certificate cases, under section 7(c) of

the act, as amended, the Commission has freely permitted the

‘intervention of representatives of coal, railroad, labor, and

report followed closely on the heels of the Ho

decision on which the Commission so heavily relies.

This Court does not say that the interstate compact

was, or is, the best way to handle the conservation

problem. What we do say is that this is what the

Congress provided. YY

In 1944, the same year as the Cammiasien’ s report

to Congress, considerations of the end use to which

the gas was to be applied began fo appear in the

Commission’s orders and opinions in certificate pro-

ceedings. Although in the initial case the Commis-

sion refused, because of the pendency of its Natural

Gas Investigation, to give any weight to the conten-. '

tion that use of gas for boiler fuel purposes was un-

desirable,” in later cases such a contention was clearly

other interests concerned with the production or transporta-

tion of competing fuels. These interests have presented ex-

tensive evidence on the economic, sociological, and technologica

aspects of fuel competition, and their representatives have

strongly urged the Commission either to deny certificates. on

the general grounds of conservation or to attach restrietions

which would severely limit the uses for which natural gs

might be sold.

“It has the unanimous view of the Commission that,

inasmuch as the Congress had not given it comprehensive

powers to deal with the end uses for which natural gas is con-

* sumed, and had granted the Commission no authority to regu-

late rates for the direct sales of natural gas to ‘industry, it

was the duty of the Commission not to seek to exercise such

authority until the Congress amended the Natural Gas Act

td confer on the Commission such specific powers as Congress

desired it to exercise.” Federal Power Commission, The First

Five Years Under the Natural Gas Act 15 (1944). The

Commission itself thought these paragraphs important enough

to quote in full in its own five-page press release on the report.

See EPC Release No. 2342, January 23, 1944.

* v. Hope Natural Gas Co., 320 U.S. 591 (1944).

Memphis Natural Gas Co., 4 FPC. 197 (1944), d sub

nom., Department of Conservation v. FPC, 16 F. 2d 7/46 (5th

Pie Line Co. v. FPO, 282 F ad 467 (

40

considered as a factor weighing against the granting

of @ certificate.” Other factors weighing for or

against the proposed boiler fuel use in these cases

included such matters as national defense, discrimina- .

tion against other industrial customers, effect on

existing customers, whether the service was to be part

Cir.), cert. denied, 826 U.S. 717 (1945). The Comumiasion also

pointed out in its opinion that the application involved: exten-

sion of facilities adequately to supply present customers rather

than to supply new customers.

* Northern Natural Gas Co., 4 F.P.C. 1099 (1045), 7 F. F.C.

296 (1948) (use as boiler fuel by s power company); East

Tennessee Natural Gas Co., 8 F.P.C. 836 (1949), affd ub

nom., National Coal Ass'n. v. FC, 191 F. 2d 462 (DC. Cir.

1951). (use as boiler fuel by Atomic Energy Commission).

Piedmont. Natural Gas Corp., 9 F.P.C. 629, 70, 83-90 (1950)

(use as boiler fuel by a power company); Teuas Gas Trans-

mission Corp., 10 F.P.C. 301 (1951) (use as boiler fuel by

Tennessee Valley Authority and by power company):

Transcontinental Gas Pipe Line Corp., 11 F.P.C. 605, 615

(1952) (use as boiler fuel by a power company); Teras Gas

Transmission Corp., 12 F. P. C. 658 (1953) (use as boiler fuel

by a power company); Mississippi River Fuel Corp., 12 F. P. C.

109, 114 (1953) (use as boiler fuel by.a power company):

Panhandle Eastern Pipe Line Co., F.P.C. Opinion No. 274

(1954), afd on other grownds sub nom., Panhandle Eastern

3d

352 US. 801 (1956) (use as boiler fuel by a paper company

and three others); Southern Natural Gas Co., 14 F.P.C. 243

{1955), aff'd sub nom., Charleston & . C. v.

F. 2d 62 (D.C. Cir. 1956) (use as boiler fuel by power com-

pany serving three customers one of which devotes all power

obtained to an Atomic Energy Commission project); Northern

aff'd sub nom., National Coal Ass'n v.

(D.C. Cir. 1957) (use aa boiler fuel by a

Houston Tewas Gad O Corp., 16 F. P. C. 118 (1956) (use

as a boiler fuel by two Florida power companies); Cities Serv-

io Gas Co., 17 F. P. C. 516 (1987) W ee

power company).

25]

41

time or full time, proximity of the proposed cus-

tomer to coal fields, effect on the pipe line’s revenues,

and the relative demand for natural gas by domestic

and other industrial consumers in the area to be

served. .

In only four of these cases was the application for

a certificate actually denied, and in one of them, the

certificate was eventually granted on a rehearing a

few years later.“ In another case, the customer

seeking to purchase the gas for boiler fuel was even-

‘ tually suce ssful in obtaining it, although in smaller

amuints, em another pipe line subject to the Com-

mission’s jurisdiction.” In still another instance a

pipe line's application to supply gas to two customers

for boiler fuel use was deniéd,” but that same pipe

line was eventually granted a certificate to supply one?

of the two customers." In the fourth case, the denial

remained unchanged.” , |

* Northern: Natural Gas Co. 1 F.P.C. 10% (1945), 7 F. P. C.

296 (1948). ,

„ Piedmont Natural Gas Corp. 9 FP. 629, 70, 88-90 (1950). .

See Pranscontinental Gas Pipe Line Corp., 11 F. P. C. 605, 615

(1952).

Teras Gas Transmission Corp., 10 F. P. C. 391 (1951) (Mis-

sissippi Power & Light Co. and Tennessee Valley Authority).

* Teras Gas * 2 Corp.. 12 F. P. C. 658 (1953) (Mis-

sigsippi Power & Light Co.)

* Panhandle Eastern Pipe Line Co., F. P. C. Opinion No. 274

(4954), aff'd on other grownds, sub nom., Panhandle Eastern

Pipe Line Co. v. FPC, 232 F. 2d 467 (3d Cir.), cert. denied

352 U.S. 891 (1956). Certificates were granted for service to

three industrial companies and were denied for service to 3

fourth, a paper company. The latter had complained about

fly ash trouble but the Commission. concluded that the evi-

dence therein indicated that the problem could be abated with-

out resort to natural gas as boiler fuel. ‘

fe

42

All of these cases are quite distinguishable from

the facts ‘Presented in the New York situation before

us.

We have no decided court case to give us a prece-

dent or guidance in the matter here under discussion.

Counsel for the Commission 80 stated and we think

accurately.

In Department of ä v. FPO, 148 F. od

746 (5th Cir.), cert. denied 326 U.S. 717 (1945),

Memphis. Natural Gas Company had been granted a

certificate of public convenience and necessity. The

Louisiana Department of Conservation petitioned the

court for an order vacating the Commission’s action,

contending that the application should have been de-

nied because the as was to be used for boiler. fuel,

an inferior“ use. The court in upholding the Com-

mission’s action stated: “Assuming, without deciding, .

that the commission could properly ‘consider as one of

the facts. entering into the granting or denial of the

certificates the uses to which the gas was to be put,

that is, that considerations of conservation had a place

in such granting or refusal, we think it quite plain

that the statute does not make such matters determi-

native. 99 „

In National Coal Ass’n v. FPC, 191 F. 24 462 (D.C.

Cir. 1951),East Tennessee Natural Gas Company had

been granted a certificate of public convenience and

necessity. This time it was the coal and railroad

interests who asked for a vacating order on the

ground f that the Commission had not considered the

oe do not think that any of these cases are sufficiently sig-

nificant to require detailed analysis. If the Commission has

authority to regulate end use as part of a conservation plan it

certainly has the authority to balance the factors in each indi-

vidual case as it arises. ;

* 148 F. 2d at 740-50 (emphasis supplied).

43

effect of the issuance of the certificate on competing

fuels and transportation and had not considered the

relation of the project to conservation of natural gas.

Judge Bazelon; for Judge Fahy and himself; in up-

holding the: action of the Commission stated: Al-

though considerations such as those suggested by pe-

titioners may well be part of the complex out of

which the Commission’s judgment as to ‘public con-

venience and necessity’ arises, they are nowhere made

standards governing the issuance or denial of cer-

tificates.

In Charleston a W. C. Ry. v. FPC, 234 F. 2d 62

D.C. Cir. 1956), Southern Natural Gas Company

had been granted a certificate of public. convenience

and nécessity. The coal and rail interests peti-

tioned for a vacating order. Two commissioners had

dissented from the order below on conservation

grounds. The court in affirming’ the Commission’s -

order stated: “Had the decision initially been for us

we might have reached a different conclusion, on the

ground of the dissent or on other grounds. But the

judgment of the Commission was within its legal eom-

petence. 99 96

It is apparent that none of these three cases is

helpful here. Each dealt with a situation where a

certificate had been granted by the Commission; the

court’s only concern in each was whether the Com-

mission had failed to consider a matter of controlling

significance. To say that considerations of conserva-

tion are not controlling does not aid in deciding

whether or not such matters may be considered at

all. In none of these cases is there any indication

of a search of the legislative’ history to determine

whether the Commission had the authority to employ

* 191 F. 2d at 467 a applied).

* 934 F. 2d at 64.

a

9

li

44

such considerations in dealing with applications for

certificates; obviously there was no need to make such

a search. Finally, it should be mentioned that, in all

three cases, the pipe line company involved was both

selling and transporting the gas. That is not true

here. f

Nor does the Supreme Court decision in FPC v.

Hope Natural Gas Co., 320 U.S. 591 (1944), shed any

more light ‘on the matter. Although in that case, a

rate- making proceeding; the State of West Virginia

argued that the Commission should have considered,

among other things, the effect of its rate order on con-

servation of West Virginia's natural gas supplies, Mr.

Justice Douglas, - speaking for the majority, stated:

We have searched the legislative history of the Nat-

ural Gas Act for any indication that Congress

entrusted to the. Commission the various considera-

tions. which West Virginia has advanced here. And

our conclusion is that Congress did not.“ On the

other hand, he did go on fo say that when it comes to

cases of abandonment or of extensions of facilities or

service, we may assume that, apart from the éxpress

exemptions contained in § 7, considerations of ¢onser-

vation are material to the isstance of certificates of

| public convenience and necessity. But the Commis-

sion was not asked here for a certificate of public con-

venience, and necessity under §7 for any proposed

construction or extension.“ Thus this rate case has

been used as authority by both sides in the present

opinion of Mr. Justice Jackson goes far in stating

reasons of public policy for a strong conservation pro-

gram by way of husbanding our natural gas resources.

But that does not put anything new into the statute.

920 U.S. at 609.

** Jd. at 612 (emphasis supplied),

45

The Commission, during the fifties, has recom-

mended to Congress that it be given increased author-

ity in allocation of natural gas supplies. From 1951

through 1953, the Commission requested that the Act

be amended to provide specifically for control by the

Commission of the end-use of natural gas when re-

quired for national defense or to safeguard the avail-:

able supply.“ In 1954 and later years that request

was tempered somewhat to a request to provide spe-

cifically for control by the Commission of the alloca-

tion of natural gas when required for national defense

or to safeguard the available supply in emergency

situations.“ So far these recommendations have not

been adopted. Whether they should be, or whether

they should not be, and what the arguments are for

each position has no bearing on our job in these cases.

What we are sure of is that interstitial administrative

action cannot be substituted for asked-for legislation

if that legislation is not forthcoming.

Some of the argument made on behalf of Transco

goes pretty far and it is worth taking the space to

point out that we are not agreeing with it. It is said

that the Commission can only go on what is in the

record before it. That statement is too broad. Fact

conclusions, of course, must be supported by testi-

‘mony, but considerations of policy are open to com-

missions as well as to courts. A commission may call

upon its administrative experience just as a court

calls upon its judicial experience. But each, it may

be added, must stay within the limits of its authority.

31 FPC Ann. Rep. 145 (1951); 32 FPC Ann. Rep. 152

(1952); 33 FPC Ann. Rep. 154 (1953).

“34 FPC Ann. Rep. 170 (1954); 35 FPC Ann. Rep. 182

(1955); 36 FPC Ann. Rep. 18 (1956); 37 FPO Ann. Rep. 24

(1957) ; 36 FPC Ann. Rep. 16 (1958).

46 : \

Let us now turn to the reasons given by the Com.

mission for its denial of this certificate. 5

The first one was to the effect that if the requested 0

eertificate was granted the Commission would be con-

fronted with many requests of the same general

character; if this particular one was approved it

would have no “fair or rational basis for denying |

similar such requests.“ *

This reason is not open to tlie criticism that there

were no facts to prove it. It is open to the criticism,

however, that it is a denial of the discriminatory |

process vhich any judicial body must exercise. If

the Commission has authority to act on a matter at

all, it must, just as a court must, make its choice and

pick oft what it deems the most important deter-

minative factors. Reason one, therefore, we think a

denial of the very thing that a Commission acting

semi-judicially must do.

The second reason given is that the authorization

of this and similar proposals “would pre-empt for this

usage capacity which would otherwise be available to

meet more urgent and widely beneficial public needs

.“ If this is not a frank expression of an asser-

tion of authority for general conservation, we do not 7

- see how one could be expressed. We do not see any

significant change in the opinion on denial of rehear-

ing, quoted earlier. If what is said above in this

-apinion is correct, this reason is obviously a bad

reason. |

Transco makes . point in connection with —

this ground which we think has substance to it. The

Commission ‘talks of preemption of facilities.

Transco says the Commission should have had evi-

dence on preemption of facilities before it made such

a statement. Transco argued orally to the Court

47

that its own depreciation situation is such that it

must keep on expanding facilities. Business-wise and

depreciation-wise, it says, it is to its advantage to

do so and for the Commission to talk about „pre-

emption’’ without giving Transco a chance to demon-

strate the truth of its argument is not fair adminis-

trative procedure.

Reason three is likewise an implicit ausertion of the

authority to conserve and allocate natural gas re-

sources. The Commission · points out that the impact

of large demand on limited supply of gas is certain

to raise rates even if only one bidder is bringing de-

mand to bear on the supply. If more bidders come

into the field the tendency will be increased to raise

prices. In other words, the Commission wishes to

discourage such bids as Con Edison made and is going

to discourage them by not giving a certificate to get

the gas out of the field where it has been purchased.

Here again is an implicit assertion of authority to

~ conserve and allocate supplies. .

The fourth factor or policy ü is a bit

different. This points out that while Con Edison.

can compete with pipe lines for gas purchases, small

purchasers will not be so fortunate. “And then it ex-

presses the possibility that a: pipe line may not be

able or willing to continue to buy in competition with

individual large purchasers. In other words, only

| pipe lines should purchase gas for only they engage

in interstate transportation and thereby come under

authority of the Commission. This puts a considera-

tion into the statute which the Congress did not en-

visage. See § 1(b) of the Act. ö

Ending up, the Commission says that these factors

would weigh against the grant even if the gas were

to be used for a demonstrably superior use.“ It then

7

48

; says, in effect, that the purpose for which these sales

would be made is something less than desirable.

There was plenty of evidence in these cases from,

the City of, New York and Con Edison that Con

Edison was confronted with a very ult problem.

There was testimony that the fly ash scharge from

the boilers in question at this Waterside plant was

_. 15,000 pounds a day and the sulfur dioxide discharge

42,000 pounds daily. There was testimony that the

substitution of gas to fire these two boilers in this

“populous section of the City would eli te both the

sulfur dioxide and the fly ash. To us it does not seem

important that elimination of the smoke from these

two boilers would not solve all the air pdllution prob-

lems of the City of New York. There was reliable tes-

_ timony that the situation would be helped, especially

in the area of the United Nations Building and Tudor ,

City.

Of course the weighing of factors of this kind, if

within the jurisdiction of a body, is a matter in which

a reviewing tribunal will not interfere if a ration

conclusion has been reached.

More serious, however, is the assun., tion which the

Commission makes that the proposed use was in-

y ferior.“ It is true that the gas, under the agreement,

Was not to be sold and it was.established that it was

to be used to fire boilers. But these boilers, according

to the evidence, generate power for electricity and

3 steam for heating. We do not see that using gas

ke steam to heat an apartment house is inferior

7 he use of gas to heat a single family residence

whether by steam, hot water or whatnot. The cases

the Commission had here were not those of the use of

gas for industrial. purposes only. There was involved

also the use of gas in a step for space heating and

}

described 1 in footnote (2). 0

49

lighting. That factor was completely ignored by the

Commission so far as its opinion reveals.

The « . -lusion df the Court is that this order must

he set aside and the cases returned to the Commission

with directions to issue the certificate applied for, sub-

ject to further hearing on the minor question of rates

vw

In the United States Court of Appeals ‘for the

, Third Cireuit 0

Nos. 12908, 12929, and 12930

ConsoLipaTED Epison Company OT NEw York, INC.,

PETITIONER IN No. 12908 |

Tue Crty or New York, PETITIONER IN No. 12929

"TRANSCONTINENTAL, Gas Pipe LINE ConPoRATION, :

. | PETITIONER IN No. 12930 -

v.

FEDERAL Powyn COMMISSION, RESPONDENT

NaTionaL Coal. ASSOCIATION, UNITED Mixn WorkERS

or America, Fuers Research Counc, Inc.,

Sour HERRN Catirornia Gas Company, SOUTHERN ,

Counties Gas COMPANY OF CALIFORN IA, INTERVENORS

Present: GoopricuH, STALEY and Hastie,

Circuit Judges

Judgment

mis cause came on to be heard on the-record from

the Federal Power Commission, and was argued by:

auge 7

On consideration whereof, it is now here ordered

and adjudged by this Court that the order of Janu-

50

ary 30, 1959 of the Federal Power Commission be,

and the same is hereby set uside, and the cause re-

| rr

the applied for, subject to further bear-

r

note (2) of the opinion of this Court.

Attest:

10a O. Cnorr, Clerk.

NoveMBER 3, 1959. 8

a

0.8. COVEQUEEET PRIETING OFFICE 1980