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J. M. Huber Corp. v. Federal Power Commission

September 14, 1961

J. M. HUBER CORPORATION, PETITIONER,
v.
FEDERAL POWER COMMISSION, RESPONDENT.



Author: Mclaughlin

Before GOODRICH, McLAUGHLIN and KALODNER, Circuit Judges.

McLAUGHLIN, Circuit Judge.

J. M. Huber Corporation, the petitioner, is an independent producer selling natural gas in interstate commerce subject to the jurisdiction of the Federal Power Commission. After acquiring acreage in the Laverne Field, located in the Oklahoma Panhandle Area, Huber entered into a contract to sell gas from those holdings to the Michigan Wisconsin Pipe Line Company.

In accordance with the Natural Gas Act and the regulations issued pursuant thereto, on July 7, 1960, Huber applied to the Commission for a certificate of public convenience and necessity under Section 7 of the Act. 15 U.S.C.A. § 717f; 18 C.F.R. § 153.23 et seq. In the same application, it also sought a temporary certificate under Section 7(c). 15 U.S.C.A. § 717f(c); 18 C.F.R. § 157.28. Huber tendered as its gas rate schedule, the contract with Michigan Wisconsin, which provided for a price of 17› per Mcf, plus 1/100 of 1› for each Btu in excess of 100 Btu content per cubic foot.

On November 8, 1960, the Commission granted Huber temporary authority to sell the natural gas to Michigan Wisconsin, subject to the condition that the upward Btu clause be eliminated pending utlimate determination of the rate in the final hearing. Huber's application for rehearing on the temporary certificate was denied by the Commission on December 20, 1960.

We are satisfied that we have jurisdiction to pass upon the Commission's issuance of a temporary certificate. The granting of the temporary certificate with its attached condition aggrieved petitioner and is reviewable. 15 U.S.C.A. § 717r; Sunray Mid-Continent Oil Co. v. Federal Power Commission, 10 Cir., 1959, 270 F.2d 404, 407; Texaco, Inc. v. Federal Power Commission, 5 Cir., 1961, 290 F.2d 149, 157; The Pure Oil Company v. Federal Power Commission, 7 Cir., 1961, 292 F.2d 350.

Section 7(c) of the Natural Gas Act which allows the issuance of temporary certificates provides:

"Provided, however, That the Commission may issue a temporary certificate in cases of emergency, to assure maintenance of adequate service or to serve particular customers, without notice or hearing, pending the determination of an application for a certificate * * *."

Although this section does not specifically permit the Commission to condition the issuance of temporary certificates, that power has been held to be implicit in its language. Sunray Mid-Continent Oil Co. v. Federal Power Commission, supra; Texaco, Inc. v. Federal Power Commission, supra; The Pure Oil Company v. Federal Power Commission, supra. So the threshold question, as correctly stated by petitioner, is: "By what standard or standards is the lawfulness of a condition attached to a temporary certificate to be measured?"

Petitioner asserts that under the language in Sunray, supra, 270 F.2d at page 409, the conditioning of a temporary certificate "* * * must be in accord with the provisions of the Act * * *." From this, it is argued that the Commission's action in granting a temporary certificate under Section 7(c) must be circumscribed by all the standards imposed by the various sections of the Act.*fn1 We disagree. By its very nature, the issuance of a temporary certificate under Section 7(c) is a summary matter. It is an emergency provision. Under it, the Commission has discretion to either grant, grant conditionally or deny applications for temporary certificates. And, in contradistinction to the other sections of the Act, 7(c) contains no specific standard that the Commission must follow in fixing rates. However, the Commission's discretion under 7(c) is not unfettered. It is always subject to judicial review for an abuse of it. That is, where the Commission acts arbitrarily, capriciously, or not in accordance with the avowed purpose of the Act, judicial intervention is warranted.

In the case at bar, the conditioning of Huber's temporary certificate by eliminating the Btu adjustment clause from its contract with Michigan Wisconsin was in accord with the latest declared policy of the Commission. Following the admonition of the Supreme Court in Catco (Atlantic Refining Co. v. Public Service Commission, 1959, 360 U.S. 378, 391, 79 S. Ct. 1246, 1255, 3 L. Ed. 2d 1312, that: "* * * the inordinate delay presently existing in the processing of § 5 proceedings requires a most careful scrutiny and responsible reaction to initial price proposals of producers under § 7" the Commission on September 28, 1960, issued its Policy Statement No. 61-1, listing approved initial prices for the various marketing areas. This statement was no haphazard idea of the Commission, but a mature, carefully considered and presented plan. It declares at the outset: "This statement establishing rate standards for independent producers of natural gas is issued on our own motion and is based on our experience gained after six years of regulation of independent producers under the Natural Gas Act." (Emphasis supplied.) Outlining its support for the rates, the Commission said:

"In arriving at the price levels for the various areas set forth in the appendix to this statement, we have considered all of the relevant facts available to us. Such consideration included cost information from all decided and pending cases, existing and historical price structures, volumes of production, trends in production, price trends in the various areas over a number of years, trends in exploration and development, trends in demands, and the available markets for the gas."

The statement is expressly and properly premised upon the expertise of the Commission. The elimination of the Btu adjustment from the price as allowed under the temporary certificate was merely the necessary follow through on the by then established price policy for the particular field. We are required to accept this statement if it is reasonably supported in the record. Texas Gas Transmission Corporation v. Shell Oil Co., 1959, 363 U.S. 263, 268, 80 S. Ct. 1122, 4 L. Ed. 2d 1208. Prima facie it provides an adequate foundation for the price condition imposed. Petitioner sought emergency relief through a temporary certificate to prevent probable drainage of the reserves involved. In the circumstances that relief was granted without a hearing. By the time the certificate was allowed the new price policy relating to the Oklahoma Panhandle Area was in effect and is reflected in the certificate condition.*fn2

That price policy as already noted was arrived at after consideration of "all the relevant facts available to us (the Commission)." Those facts included "cost information from all decided and pending cases, existing and historical price structures, volumes of production, trends in production, price trends in the various areas over a number of years, trends in exploration and development, trends in demands, and the available markets for the gas." In the statement the rule was laid down that the price levels determined "are for the purpose of guidance and initial action by the Commission and their use will not deprive any party of substantive rights or fix the ultimate justness and reasonableness of any rate level." (Emphasis ...


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