# Reply Brief for the Federal Power Commission — FPC v. Transcontinental Gas Pipe Line Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0318%3A18 ## Record - **Collection:** Supreme Court brief - **Document type:** Reply Brief for the Federal Power Commission - **Published:** January 1, 1961 - **Citation:** 365 U.S. 1 ## Text INDEX I. Wholly unregulated interstate sales to- industry will ae inflate natural gas prices to all consumers-_-_------ II. The transportation of X-20 gas for use in the Con Edison plant would.be a first step to endangering the available supply of natural gas for the future. -__-_- 1. The deliverability life of our Nation’ 8 gas supply is continuously dwindling. ---_------ 2: The Commission’s efforts to get Transco to ’. provide for underground storage - - - -- - --- . III. The legislative history of the Natural Gas Act, as amended, and conternporaneous Commission state- ments: indicaté that the Commission has the power 4o consider end-use in certificate proceedings under TU hia cichinr a aldiacinian nia hinda nutes akon _IV. It was not error for the Commission to weigh all the factors evidencing air pollution at Waterside against the other considerations militating against the X-20 service and conclude by denying the certificate. -_. 1. The smoke stack could have been built higher_. . 2. The boilers could have been reijoved from the system and the _ transferred to other — 4. Non-X-20 gas already, used in other stations could have been transferred to Waterside for use in the offending boilers.__-.---.--- os iii. 2 i i ee ee e ‘CITATIONS 9 Atlantic Refining on v. Public Service Commis- sion, 360 U.S. 378. RPE Ee EIT il BFA CEG. inh eecendiancemnrea teen 10 13 Casee—Continued ~ Fiahandle Mastire Pige fine Vo: 3 v. Public Service . Commission of Indiana, 332 US. 507---.--------- "a Peoples Gulf Coast Natural Gas Pipe Line Company, *. 98 PPG, 106. occncncvecccaccccocencoseqeses os Phillipe Petroleum Company v. State of Wisconsin, 347 2) ee 2, 14 . Phillipe Petroleum Company, F.P.C. Opinion No. 338, - iasued September 28, 1960, Docket Nos. G-1148, 2 ee re 2 Tennessee Gas Tranemission.Co., 13 P.P.C. 311....... 8 Transcontinental Gas Pipe Line Corp., 7 F.P.C. 24... 10, 12 Transcontinental Gas Pipe Line Corp.,7 F.P.C. 139... 12 Transcontinental Gas Pipe Line Corp., 9 F.P.C. 32_ 10, 12, 13 Transcontinental Gas Pipe Corp., 9 F.P.C. 1269... 13. Transcontinental Gas Pipe Corp., 9 F.P.C. 1327.. 13 acme yt al bY 10 F.P.C. 469,. — 10 Transcontinental Gas Pipe Line Corp., A F.P.C.005.. 13 Transcontinental Gas Pipe Line Corp., 11 F.P.C. 500. 13 _ Transcontinental Gas Pipe Line Corp., F.P.C. Opinion 279, issued December 28, 1954----------..-------- 10. Transcontinental Gas Pipe Line Corp., 14 F.P.C. 1... 10,.13 Transcontinental Gas Pipe Line Corp., 17 F.P.C. 333. 10, 13 | Transcontinental Gas Pipe Line Corp.,18 F.P.C.710. 10 Transcontinental Gas Pipe Line Corp., 20 F.P.C. A. 13 Statutes: . Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. . FETs . it Mt. . cccnenquscenbibaskeredeeuseee 19, 20, 21 tae RIL none in ea 16, 17 Bet. FO cccencccowcccccascscaccecescoccese 13, %4 Miscellaneous : . American Gas Association, Gas Facts (1960), p. 5... 8 ACT EET body can escape it that the conservation aspects, ’ the competitive fuel aspects, of the natural gas industry, were to be considered by the Commis- sion in handling its certificates of convenience ° and necessity cases [p. 173}. 7 « e e *. ° . Mr. Woopwarp. Does the Commission have . that authority now, under the Natural Gas Act, to regulate the use of gas? } Mr. Ops. I. think the Commission has the _ r authority to determine what the public interest . © requires when it issues a certificate of conven- ience and necessity. | _ Mr. Woopwarp. And for what use? + Mr. Ops. That is right, I think it can condi- tion it. | Representative Carson. Is that not exactly contrary to the intent of Congress in section 1(b) of the Natural Gas Act, that you shall not control the end use of gas or the processing and athering in the fields? , Mr. Ops. I think if you will examine the isidtive history of the.amendment * * *, I the thing I am talking about is fully pro- ded in the amendment of February 1942, to e act, and the legislative history indicates j that one of the concerns of Congress in adapt- tng that amendment was to provide a basis on which the Commission could consider that ques- tion of wise use in coal areas [pp. 190-191; em- . phasis added]. Nothing more is iivolved in the present case than the Commission’s response to the “question of wise use”’ in a particular area where coal is being used. The wisdom of its response is measurable directly by the 23 reasonableness of its decision involving o way of . complex factors. | 5. At the same session of Congress in which the four bills which would. have prevented the Commission from restricting end-uses of gas were introduced, there was also introduced H.R. 2569, which sought to. estublish a national policy with respect to the trans- portation of natural gas in interstate commerce. This bill would have authorized the Commission to “[.c]on- serve the reserves of natural gas for utilization which affords the highest social. benefits to the public, con- sistent with reasonable rates and adequate service.” | This bill was considered in the same hearings which were held on H.R. 2185, H.R. 2235, H.R. 2292, and H.R. 2956, discussed supra, pp. 19-21. : A bill with a provision identical to H.R. 2569 was subsequently introduced as H.R. 982, 81st Cong., 1st Sess. (1949). In the hearings on this bill and others (H.R. 79, H.R. 1758, and H.R. 982) before a subcom- mittee of the House Committee on Interstate and For- eign Commerce, 81st Cong., Ist Sess. (1949), the Fed- eral Power Commission recommended against its pas- sage. Its report explains that the great bulk of gas _ sold for inferior industrial uses is in the intrastate market excluded from Commission jurisdiction, and that, for the bill to be fully effective, Commission ju- risdiction would have to be extended” (House Hear- * This comment is an obvious reference to the exclusion from Commission jurisdiction of (1) rate regulation over natural gas sold directly to industrial consumers, and (2) rate suspension over indirect sales of natural gas for industrial purposes. See The First Five Years Under the Natural Gas Act, p. 15, Janu- ary, 1944; Panhandle Eastern Pipe Line Co. v. Public Service ings, pp. 164-166). With respect. to the bill’s pro- posed authority to limit the purposes for which gas may be used, however, the Commission’ ~ — states (id., at p. 165, emphasis added) : ‘The Commission, however, is’ aware of the problem ‘and in certificate cases it does give con- sideration to the proposed uses of the gas in question. The Commission believes that, under the present Act, it may give proper considera- tion to this matter in certificate proceedings. It can thus be seen that neither the Commission nor the individual Commissioners have ever conceded a - lack of power to consider end-use.” 6. In our main brief (pp. 39-40) we have described the Court’s interpretation, i in Federal Power Commis- sion Vv. East Ohio Gas Company, 338 US. 464, 468-469, of the 1942 amendment’s broadening of the Commis- sion’s power under Section 7(c) to control pipe line . construction “with a view to conserving one of the Commission of Indiana, 332 U.S. 507, 516-517. The court of sppeals’ chief error in finding = “concession” in the Commis sion’s statement in its First Five Years report resulted from its ignoring the Commission’s footnote, to the report which pointed out that, precisely because it lacked this power over direct in- dustrial sales, it-therefore did not have “complete” and “com- prehensive” power to deal with conservation. This point is more fully developed in the National Coal Association brief, in No. 46, at pp. 20-22. ; i gale wemecenihey Ue trite the Mistery of this Cominic- sion’s legislative recommendations and the bills it has drafted from 1951 through 1959 (see Con Edison Br., pp. 52-53), since the broader power to “allocate the available sipply of natural gas,” at apparently any time after issuance ‘ofa certificate, is’ markedly different in both content and breadth from the power ‘to consider end-use in a certificate- , which is all that is involved inthe present case. ~ aia, 25 country’s valuable but ‘euiitil energy resources.” "The Congress had a readily available opportunity to _know of this’ interpretation: since the Court’s opinions in East Ohio were reproduced in-full as appendices to the virtually identical committee reports on the bill which became the 1954 amendment to the Act, the . Hinshaw amendment (S. Rept. No. 817, H. Rept. No. . 899,83d Cong., Ist Sess. (1953) ). Both committee re- . ports expressly reaffirmed “the original intent of the Congress in enacting the Natural Gas Act; namely, that the Act was to supplement, and not supplant State regulation”’ (#d., at p. 1). ; In reporting to the committees its approval of the Hinshaw amendment, the Commission pointed out that previous legislative attempts in the same direction had gone too far.and would have created regulatory . gaps—which it described as the removal of federal jurisdiction without at the same time providing for ~ effective state regulation (id., at p. 4). The Commis- Sion then stated (sbid.) :. | Manifestly, either Federal or State regulation ° is essential if this important monopolistic ‘in- ’ dustry is to be properly supervised and- the broad interests of the general public—including the interests of consumers and investors—are to be adequately protected. . | el he Hinshaw amendment, which left undisturbed the-rationale in East Ohio that the Act must be. read as supplementing: and not supplanting state regula- tion, although it reversed the particular result.in Kast Ohio, is ially significant here, since X-20 type transactions cannot effectively be regulated by the 26 states (see our Main Br., pp. 78-79, note 71), and approval of such transactions will create a gap in recalation which may ‘undertyine the effectiveness of ‘ Federal Power Commission regulation of the industry. No warrant exists anywhere in the legislative his- tory of the Act, the proposed legislation affecting it, or in Commission statements, for creating a regulatory gap by denying to the Commission the limited power to consider end-use—denial which, as we have stressed, _ forbodes results directly contrary to explicit Congres- sional design. o | IV. ; . IT WAS NOT ERROR FOR THE COMMISSION TO WEIGH ALI. THE FACTORS EVIDENCING AIR POLLUTION AT WATERSIDE AGAINST THE OTHER CONSIDERATIONS - MILITATING AGAINST THE X-20 SERVICE AND CONCLUDE BY DENYING THE CERTIFICATE. . In order to prove that the proposed use of the X-20 gas is in the public interest, Transco would have this Court believe that Con Edison’s major concern in con- tracting for the gas was “suppressing the acute air pollution problem caused by two of the boilers in its Waterside Station * * *” (Transco Br., p. 2; see also id., p. 27). And, at the certificate hearing, Con Edi- son maintained that its purpose was to reduce the stack emissions from its Waterside plant in order to. '~ eyt.the air pollution (see, ¢.g., R. 166a-167a ; our Main Br., p.5). Yet during the hearing it became clear that of the 50000 Mef of X-20 service per day which Con Edison originally contracted for and the 120,000 Mef of X-20 service per day which Con Edison was to ob- tain within a two-year period (see, ¢.g., R. 5a, 98a- . — (R. 83a). When pressed, however, Mr. Manz had to admit that Con Edison was “transferring some of the electric gen- eration over to the steam,”’ and that therefore, to the extent that some of the load was being taken “away from the electric generation,” the electria generation has to be made up—at least in “moderate amounts”— “by transferring the load | over to another station” (R. 85a—Sfa ). When asked how much. “a moderate amount” was, Mr. Manz averred that it was “probably less” than 2 percent, but did not know whether it was “between ' 1 and 2” (R. 86a). Dater, i in comment- ing on Mr. Manz’ equivocal answers, the’ presiding = examiner observed that Consolidated Edison had avoided “ the claim that the steam heating load can- not be carried by inoffensive equipment by shifting . that equipment’s loading to the exclusive production of steam for heating, if riecessary” (R. 172a). Probably the most difficult problem with transfer- ring the load from Boilers 71 and 72, however, was the amount of time necessary to carry out the plans for _ retiring the boilers, Mr. Manz estimated that it would take “four years of so-called lead-time from the time you make the decision and get approval to - 34 install generating capacity until it goes into service” and ‘18 months to two years to get transmission facil- ities into service from the time you make the decision to take such a step * * * and it might take as much as 6 to 10 years * * * after the decision had been “made” (R. 101a). What Mr. Manz neglected to say, however, and what Mr. Thomas of-Con Edison added, was that, despite the fact that Con Edison had long been concerned with the emissions frofn the Water- side plant, the company had developed no plans to , shift the load to other stations (R. 107a). 3. The boilers could have been rebuilt. Another ‘alternative suggested at the proceeding was to: re- ” build the boilers to hold the smoke within satisfactory limits while still using coal as a fnel (R, 15a—16).” _ Con Edison, however, estimated that ‘‘the rebuilding job would take-two years for each boiler’? (R. 16a) although the boilers would not be out of: service for the entire time period (see R..50a) as opposed to “within a 12-month period’ for the conversion to natural gas (R. 52a-53a). Rebuilding one boiler at a time, however, would only mean a system loss of at most 1 percent (see R. 81a), whereas Mr. Manz testi- fied that the constant transfer of electric generation to steam meant a normal lodd transfer to other sta- 27In our main brief (p. 77), we ote Orning, Industriel - Sources of: Air Pollution—Electric Power Plants (Coal Fuel), in Proceedings, National Conference on Air Pollution, Public Health Service (1958), p. 155, as stating that the emission of smoke and organi¢ gases from smoke stacks is the “result of © - faulty design or poor operation,” and that “no significant quantities of these products are emitted from well-designed and properly operated coal-fired electric powerplants.” 35 , tions of “probably less’ than 2 percent (see R. 85a- 86a) ; thus, the system loss of only one boiler at a time would be at least within the system’s normal load _ transfer and certainly “well within what most utili- ties have as reserve capacity” (R.1724). Another impediment to rebuilding the boilers, ac- cording ta Con Edison, was the estimated cost of $12 million for rebuilding (¢.g., R. 16a, 33a, 50a) as op- posed to ‘$1,850,000 ‘ta convert eight boilers to gas burners”’ and $1 million to extend “the high pressure ‘main. down First Avenue * * *, half of which is - chargeable * * * to the Waterside installation” (R. 33a.). But the alternative of/rebuilding the boilers, as against converting to. gas, — reasonably be ex- | ts NN pected to raise Con Edison’s by no more than . _ $1,641,000 in the first year.* The annual costs would | , ™The base figure in our computation is $9,650,000 (the dif- ference between the cost of the boilers and the cost of convert- ing the eight boilers and the allocated cost to Waterside of extending the high pressure main) (see R. 143a). Public utility experience ‘indicates the reasonable range of annual cost to be 14 to 17 percent of net plant investment. We have used the maxi- mum figure of 17%. ‘This covers return on net investment, depreciation, income and other taxes. We do not include an allowance for operating expenses (some 2%) since they would be incurred in approximately the same amount whether the two boilers are rebuilt or not. Nor is it appropriate to includathe — operating savings claimed by Con Edison to result from the X-20 service (R. 144a). The gas system savings do not result from burning gas under boilers 71 and 72 for air pollution purposes; they rather stem from the use of 60-day peaking gas in lieu of ‘manufactured gas. The electric system savings assumed gas would be a cheaper fuel than coal under boilers 71 and 72; Con Edison now says events have proved otherwise (Con Edison Br. 62). . 36 : decline thereafter because of the Neaiulatias invest-. : ment involved. This increase in annual cost due to rebuilding the boilers would be ejquivaleni to about .0093¢ per kilowatt-hour.” If one compares the above cost ta Con Ediso with ~ the annual costs to ; gas consumers—both Con E ’g and gas consumers generally—of. ingreased gas ‘prices assuming only a 1¢ rise of pipeline rate per Mcf due to the price impact of direct producer-industry sales . (see supra, pp. 1-7), the result is highly illuminating. Thus, on the basis of Con Edison’s estimated gas pur- chases for 1960, exclusive of X-20 service, the cost. to Con Edison’s gas consumers would be $465,600 for a 1¢ ‘increment with an additional $153,940 allocated to — Con Edison’s electric system, or a total of $619,540.” Moreover, if the X-20 sales were to cause pipeline gas purchase costs to rigg in the field by aa average of 1¢ per Mef, the total cost for Texas gas alone based on the increment of gas sold in 1959 over the’ gas sold in 1958 would be $1, 899,£30," and for the United States, These figures are based ‘on Con Edison’s 1959 Annual Re- port in which the Electric Department reports sales of 17,653," 913,344 Kwh for 1959. The figure also assumes that Con Edi- son’s steam customers bear none of the cost. "Con Edison’s estimated 1960. gas supply, derived from - Transco CD-3, Tennessee CD-5, Transco storage, and Tennes- see storage, is 61,954,000 Mcf (R. 147a, lines 3, 8). Con Edi- son’s annual gas sales are, 46,560,000 Mcf (R. 147a, line 18) or $465,600 for a 1¢ inerement. The difference. between, the total supply and the gas sales is equivalent to the allocation of gas to Con Edison's electric system, ie, 15,394,000 Mef, or $153, 940 for a 1¢ ‘increment. "The following data is based on F.P.C. Form 2 reports of pipeline companies to be published in F.P.C., Direct Sales by > ; 37 - $6,629,600." In these circumstances, respondents can hardly claim that the Commission acted. arbitrarily _when it decided that the vast potential inflationary eftect that the certificating for transportation of the X-20 type service could have outweighed such matters | as costs associated with’ replacing the boilers (see R. 179a; our Main Br., pp..62-67; supra, pp. 1-7). 4. Non-X-20 gas already used in other stations could have been tragsferred to Waterside. for use in the offending boilers. Bit even granting that conver- * sion to natural gas is less expensive and less time-con- suming, X-20 service is hardly necessary to provide sufficient gas to alleviate the pollution problem with respect to'Boilers 71 and 72 at Waterside. The pre- siding examiner observed that “substantial volumes of - valley gas have been used in other stations on the sys- tem ever since the company commenced takiag naturai. gas from Transco in 1951,’’ but “no natural gas has been’ burned .in the Waterside station’ (R. 167a- 168a). At-the hearing it was disclosed that, in 1957, Con Edison used 28,669,000 Mef* of valley'gas (78,578. Mef per day) for. boiler fuel use at its various stations (R..74a, 89a). At the Hell Gate station alone, where the boilers do not present the same’air pollution prob- Producers of Natural as to Interstate Pipeline Companies— « 1959 (1960), In Texas, 3,494,382,000 Mcf were sold in 1959, and 3,304,429,000 Mecf in 1958, or a difference of 189,953,000 Mef. | hehe Wi as In the United States, 7,519,990,000 Mof were sold in 1959 ang ,6,857,030,000 Mcf in 1958, or a difference of 662,960,000 Mef. “In later testimony this figure was erroneously referred to as 28,559,000 Mcf (R. 89a). © GS « *. 38 re Con on used 17,789,000 Mef of valley gas for © 1957 (R. 74a, 91a). . Yet Con Edison testified that only 25,000 Mcf per day (or 9,125,000 Mef per year) of - natural gas were necessary to. convert Boilers 71 and - 72 at the Waterside station (R. 91a, 98a). Thus, the gas from Hell Gate alone could provide Con Edison - with well in excess of what was venanarand year to convert the boilers. Con Edjson agreed that “nt could be done,” t but pointed out that since this was valley- gas, it would have to be eliminated or curtailed at the peak period during the winter (R, 91a). ‘At most, however, there would have been an interruption of about 95 to 100 days a year (R. 92a, 107a).* Despite this fact, Mr. Manz, when asked why “‘a clean staék for nine months p out.of the year [wouldn't] * * * be better than none at ali,’? answered, “Because I do not believe that the Air Pollution Control Commission of the City of New York will accept three months pollution’? (R? 92a). ‘Despite the reluctance of Con Edison to admit the ease by Which the air pollution at Waterside could be alle- -viated by the valley gas, its most recent annual report to. the Commission indicates that it finally has taken the step—in 1959, without any X-20 gas, it managed | ‘to-burn 10,437,005 Mef at the Waterside station (F.P.C. Form No. L, }. 86-1; see our Main Br., p. 8, n. 10), Finatty, “it is impossible to find any suggestion in’. “the record that the air pollution problem ean be allevi- __» “But see the chart on the Use of Natural Gas, (R. 13a) a Which indicates that, even during the “peak” period, some gag would be ay ailable for air pollution control. 3Y ated by X-20 gas any better din i ep-3 gas supply. Of the 50,000 Mef of X-20 service planned for. the first year, only 25,000 Mef would be used at the Waterside _piant for Boilers 71 and 72 on a year-round basis. The other 25,000 Mef would be used only on- an interruptible basis; during the peak period of ‘95 to 100 days a year,” the 60-day gas (and presumably some CD-3 gas) would be used in the Con Edison gas distribution system, rather _ than under boilers to alleviate air pollution (R. 98a). If Con Edison finally were to obtain 120,000 Mef per day of the X-20 service, it would still usé only 25,000 Mef at Waterside for Boilers 71 and 72 on a year- round basis; it would use the other 95,000 Mef on an interruptible basis. During the peak period, the plan calls for the substitution of oil for gas, Con Edison ‘indicating plans for “spending $7,250,000 for alter- nate oil burning equipment at East River” (R. 7a).° Con Edison did not indicate, however, how it intends to eliminate the fumes of high sulphur dioxide con- tent from the burning of the oil, which would merely ~ substitute one form of air pollution for another during the winter peak period. In light of all the alternative ees of alley iating the air pollution problem at Waterside, which the record contains, it can hardly be considered arbitrary for the Commission to have weighed thesé factors in the balance with the other factors involved and to have denied the certificate. Moreover, in light of whet is now. actually being done at Waterside, the x » ‘ 40 , lack of subibeigiennin in the’ Commission’ 8 action ap- pears a fortiori. CONCLUSION For the foregoing reasons, and for the reasons discussed in our main brief, it is respectfully sub- mitted that the judgment of the court of appeals should be reversed and the order of the Commission should be affirmed. P sae ° . - J. Lee Rankin, Solicitor General. GerorceE CocHran Dovs, . Assistant Attorney General. RIcHARD J. MEDAL, ~ - ALAN §. RosENTHAL, ANTHONY L. MonpDELLO, ; | Attorneys... 'JoHN C. Mason, , | General Counsel, Howarp E. WAHRENBROCK, . errs Solicitor, 7 Rosert L. RUSSELL, . . Assistant General Counsel, Davip J. Barbi, sy Attorney, . . Poderal Power Commission. NOVEMBER 1960. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0318%3A18. Public record. Not legal advice.