Florida Economic Advisory Council v. Federal Power Commission

251 F.2d 643

• Court: Court of Appeals for the D.C. Circuit
• Decided: December 4, 1957
• Docket: Nos. 13833, 13952
• Status: Published

Opinions

BURGER, Circuit Judge.

This is a petition to vacate Federal Power Commission orders approving a plan to pipe natural gas to Florida.¹ Petitioner is an association of various organizations engaged in the petroleum product (chiefly fuel oil) business, whose economic activities will be adversely affected by competition of natural gas.² Opposing petitioner in this court are respondent Federal Power Commission and four intervenors; viz., the two pipeline companies who jointly propose to bring natural gas to Florida,³ and two official agencies of the Florida state government.⁴

Houston and Coastal, the two pipeline companies, desired to build and operate a natural gas pipeline running from Texas and Louisiana fields along the Gulf shore, and down the Florida peninsula to Miami. Coastal would buy gas from various Texas and Louisiana suppliers, and carry it to Baton Rouge. Houston would buy the gas from Coastal, pick it up in Baton Rouge, and carry it to Florida, where it would be resold to Houston’s customers. This plan of sale and resale accounted for 40% of the gas to flow through the pipeline. The rest of the gas was to be merely transportation gas, not resale gas. That is, two Florida power companies ⁵ would buy gas direct from suppliers in the field, and Coastal and Houston would merely transport the gas for the power companies.⁶ The power companies would pay Houston for this transportation service, and Houston would reimburse Coastal for its share of the costs.

Hearings were begun on July 9, 1956, before a Commission hearing examiner, to determine whether the proposal merited a certificate of public convenience and necessity.⁷ Petitioner, having been granted leave to intervene, actively participated in these hearings. The hearings ended on November 28. On December 6, the Commission, concluding there was a need for haste, called for briefs and oral arguments from the parties, including petitioner, and on December 28 decided the case itself ⁸ without any intermediate decision by the hearing examiner. The decision granted the certificate, subject to certain conditions. Some of these conditions were later modified or removed without petitioner being heard.

Petitioner’s attempts to persuade the Commission to change its mind, to be heard further, and to intervene in subsequent proceedings, were denied, and petitioner appealed to this court.⁹ Its claims fall into two categories, substantive and procedural. Substantively, it claims the Commission’s decision should be reversed (1) because not based on substantial evidence; (2) because there was no power to attach curative conditions to a defective proposal; and (3) because certain key issues were raised before but not decided by the Commission. Proeedurally, petitioner claims it was denied a fair hearing in that (1) the intermediate decision by a hearing examiner was omitted; (2) the whole proceedings after the hearings were completed were infected by undue haste; and (3) petitioner should have been heard when the conditions were imposed on the pipeline companies, and later when they were relaxed. We find none of petitioner’s contentions of sufficient merit to warrant reversal.

I The Alleged Substantive Errors

Public Convenience. Petitioner claims there was no substantial evidence to support the Commission’s decision that the proposal, as modified by conditions, was required by public convenience and necessity. We need not dwell on this, for we find in a voluminous record ample evidence supporting this conclusion. The pipeline will, for the first time, bring natural gas to peninsular Florida, and will reduce Florida’s almost complete dependence on fuel oil. Florida wants the. pipeline, and obviously needs it. Indeed, it would be fair to argue that aside from mechanics, public convenience and necessity are self-evident. It is true that the finding of public convenience and necessity was conditioned on certain deficiencies being corrected, but, as conditioned, the finding is supported by substantial evidence.

Conditions. Next, petitioner questions whether the Commission has authority to transform a defective proposal ¹⁰ into a valid one by the addition of curative conditions. The argument is made that the Commission may attach conditions to valid proposals, but not to invalid proposals such as the present one would be, but for the conditions. It is sufficient to say that the Natural Gas Act specifically authorizes the grant of a certificate subject to “such reasonable terms and conditions as the public convenience and necessity may require.” ¹¹ We see no error here.

Suppliers’ Rates. Petitioner claims the Commission should have held a rate hearing to determine the lawfulness of the rates to be charged by the gas suppliers. But this inquiry may be resolved in a rate proceeding rather than in a proceeding for a certificate of public convenience and necessity, and the Commission did not abuse its discretion in declining to consider the matter in the instant proceeding.¹² The rates are subject to the Commission’s continuing jurisdiction, and, whenever sufficient reason appears, they may be taken up. Petitioner cites City of Pittsburgh v. F. P. C.¹³ as requiring the Commission to consider these rates now. That case is not applicable because future correction of the alleged defects was not possible under the circumstances presented in that case. Here, the rates in question may always be corrected, if need be.

The Power Companies. Petitioner claims that one of the power companies and its suppliers fall under Commission jurisdiction, and must be certificated. The assertion is that the matter must be decided now, and not later, because it is possible that certification of the power company or its suppliers would lead to cancellation of the power company’s promise to use 20% of the capacity of the pipeline, and without this promise, the basis of the grant of the certificate would fall. It is true that the original contract between the power company and Houston contained a cancellation clause which lends color to petitioner’s assertion that the danger of cancellation would be great if the Commission did exert jurisdiction. But this cancellation clause no longer exists; it has been deleted in accordance with the Commission’s conditions. The Commission therefore thought the present facts did not warrant deciding whether it had jurisdiction over the power company or its suppliers, and we are not inclined to disagree.

Unfair Trade Practices. Petitioner claims the proposal was infected by a violation of the unfair trade practices and anti-trust law's. The price to be paid by the power companies for the delivered gas was composed of two elements ; the price paid direct to the suppliers for the gas itself, and the price paid to Houston for transporting it. The transportation price was subject to Commission jurisdiction, but the gas price was not. The gas price was initially set at such a level that it, plus the transportation price, was competitive with fuel oil. The gas price was subject to an escalator clause, and would go up or down in a fixed proportion to the amount fuel oil prices went up or down. That is, the gas price was based, not on cost, but upon fuel oil prices. It may not be lawful to make sales at prices based not on cost but on a competitor’s price, “for the purpose of * * * eliminating a competitor.” ¹⁴ But even if not, the acts complained of occurred in an independent contract between the power company and its suppliers, none of whom are subject to Commission jurisdiction. Moreover, the price arrangement may in the light of factors not now before us be found reasonable. In these circumstances the public interest is best served by awaiting, rather than anticipating, th occurrence of a violation which can be dealt with adequately only in a proceeding in which the alleged violator is a party.

II The Alleged Procedural Errors

There remains the question whether petitioner was accorded an opportunity to be heard, and to have its contentions considered.

Omission of the Intermediate Decision. Ordinarily, a hearing examiner hears the evidence, and makes findings of fact and a recommended conclusion; the Commissioners then pass upon the recommendations. But this procedure, while desirable and usually followed, is not inflexibly required. Section 8(a) of the Administrative Procedure Act¹⁵ provides that the intermediate decision may be omitted “in any case in which the agency finds upon the record that due and timely execution of its functions imperatively and unavoidably so requires.” The Commission found that unless a decision were reached by December 31, 1956, the whole proposal might fail through exercise of suppliers’ options to cancel their obligations if the project were not certified by December 31.¹⁶ There was substantial evidence to support this finding.¹⁷ The Commission’s holding that this circumstance warranted omission of the intermediate decision was not an abuse of discretion.¹⁸

The Expedited Proceedings. Petitioner claims that two defects resulted from the speed in which the hearings were concluded and a decision reached. First, it claims it had an unduly short amount of time in which to brief and argue its case. After the hearings had been in progress for over four months, with petitioner present and actively participating, petitioner on December 6 was asked to submit briefs by December 15 (actually December 17, as the 15th was a Saturday), and on December 13 was asked to submit oral argument on December 21. We do not find this so short a time, considering the need for dispatch, as to amount to a denial of substantial rights. There is no showing that due to the speed, petitioner overlooked any important points or was otherwise adversely affected.

Second, petitioner complains that the Commission decided the case too fast; that in the time available the Commissioners could not have read all the evidence and pondered all the issues.¹⁹ It is not for the courts, short of flagrant extremes, to tell the administrative agencies how long they must ponder before coming to a decision. The time spent in considering the evidence cannot be held by us to be too little if it appears that the Commission has spent the time required to satisfy itself as to its findings and conclusions. We cannot say that either the statute or the Constitution was violated by the Commission in not consuming a longer time in considering and deciding the case. The vigorous dissent by the Commissioners Connole ²⁰ and Kline serves to emphasize the close scrutiny given by the Commission. Errors, whether induced by haste or other factors, are always reviewable on appeal.

Conditions. The Commission found that the plan was defective as it then stood, but it found that if certain conditions were complied with, the defects would be cured. It granted the certificate subject to these curative conditions, without hearing what petitioner had to say about them. Petitioner says it should have been heard, because the conditions transformed the proposal into an entirely new proposition.²¹ We think not. The conditions only resolved issues raised, argued and briefed in the hearing. They involved no surprises except insofar as they may have gone farther or not so far as petitioner would ha wished.²² For example, in the hearing, all parties, including petitioner, were heard on the issue of how much equity-capital should be required. Later, the Commission decided the level should be 15%, and conditioned the grant of the certificate on meeting this requirement. No useful purpose would have been served by reopening the proceedings to hear petitioner argue that 15% was not proper.

Petitioner also protests that the Commission, without hearing petitioner, later modified some of these conditions. The Natural Gas Act²³ grants the Commission discretion to modify its orders without further hearings. On this record, we see no important issue on which petitioner was not heard.

While petitioner’s business will no doubt be affected by the advent of natural gas, both petitioner and the pipeline companies can do business in Florida²⁴ and both are needed to serve the growing population and expanding economy of Florida. The “injury” to petitioner is that it must share what has heretofore amounted to a power monopoly. Moreover, the injury to petitioner is not likely to be substantial. As petitioner’s brief says, “as against the overall fuel needs of the State of Florida, the volume of gas brought in would be meager.” In addition, the record discloses a legitimate need for expedition, and thus some abridgement of usual procedures would be justified. Of course, the need for speed, however important to vital economic interests in Florida, would not justify denial of protected rights of the petitioner. This record discloses nothing which warrants our disturbing the Commission’s action and the orders of the Commission are

Affirmed.

1 . Florida (except the northernmost parts) is the last remaining state of comparable size and importance without a supply of natural gas. It is dependent almost entirely on petroleum products (chiefly fuel oil) for its power needs.

2 . One of the purposes for which petitioner was organized was “to fight this case.”

3 . Coastal Transmission Corp., and Houston Texas Gas & Oil Corp.

4 . Florida Railroad and Public Utilities Commission, and Florida Development Commission. These agencies argued strenuously in favor of the pipeline, because it would favor industrial development in Florida, and because it would reduce Florida’s dependence upon a single fuel, which could, in emergencies, be cut off.

5 . Florida Power & Light Co., and Florida Power Corp.

6 . In so doing the power companies and their suppliers could avoid Commission jurisdiction, and hence supervision of tlieir activities.

7 . Section 7(c) of the Natural Gas Act, 15 U.S.C.A. § 717c(c).

8 . F.P.C. Opinion 301, decided three to two. One of the dissenters later joined the majority.

9 . 15 U.S.C.A. § 717r(b).

10 . The Commission found the proposal defective as it then stood, in respect to transportation gas arrangements and financing plans. The Commission found no disqualifying inadequacy in respect to gas supply, markets, facilities and economic feasibility.

11 . 15 U.S.C.A. § 717f(e).

12 . See Panhandle Eastern Pipe Line Co. v. F. P. C., 1948, 83 U.S.App.D.C. 297, 169 F.2d 881, certiorari denied 335 U.S. 854, 69 S.Ct. 81, 94 L.Ed. 402.

13 . City of Pittsburgh v. F. P. C., 1956, 99 U.S.App.D.C. 113, 237 F.2d 741.

14 . See, e. g. 15 U.S.C.A. § 13a.

15 . 5 U.S.C.A. § 1007(a).

16 . There were 47 contracts with 33 suppliers of gas, each with this termination option.

17 . So sought after is natural gas that the pipeline companies were fortunate to secure contracts for as much gas as they did. The record suggests that obtaining extensions beyond December 31 would have been touch and go, and if obtained at all, would have been at a higher cost. Our dissenting colleague says “The lack of basis for the Commission’s action [in omitting the intermediate procedure! is shown by subsequent events. The Commission found that the contracts would be subject to cancellation ‘unless final action is taken by the Commission prior to December 31, 1956.’ ” He then correctly points out that there was in fact no “final action” for almost three months after December 31, and yet none of the suppliers cancelled their contracts. This, he implies, shows there was no real danger of cancellation. This does not follow. Th fact that the time limit was not met and no one cancelled does not show there never was any danger of this happening. Moreover, it would appear that the time limit was met. The contracts were conditioned not, as suggested, on “final action” being had by December 31, but upon “the obtaining * * * on or before December 31, 1956 * * * of a Certificate of Public Convenience and Necessity.” The certificate was in fact granted on December 28.

18 . See R. C. A. Communications, Inc., v. F. C. C., 1956, 99 U.S.App.D.C. 163, 238 F.2d 24, certiorari denied 352 U.S. 1004, 77 S.Ct. 563, 1 L.Ed.2d 549; cf. Channel 16 of Rhode Island v. F. C. C., 1956, 97 U.S.App.D.C. 179, 229 F.2d 520; Chotin Towing Corp. v. F. P. C., 101 U.S.App. D.C.—, 250 F.2d 394, wherein we held that the intermediate decision procedure could not be abridged in an application not involving an initial license.

19 . The record was first certified to the Commission on November 16, and briefs and oral argument were submitted by December 21. The decision was handed down on December 28.

20 . In February, 1957, Commissioner Connole joined the majority in approving the application.

21 . McClatchy Broadcasting Co. v. F. C. C., 1956, 99 U.S.App.D.C. 199, 239 F.2d 19, certiorari denied 353 U.S. 918, 77 S.Ct. 664, 1 L.Ed.2d 665. That case allowed further hearings because there, modification of the construction permit was so substantial as to amount to issuance of a new and different permit, in regard to which McClatchy had not yet been heard. See Civil Aeronautics Board v. State Airlines, 1950, 338 U.S. 572, 70 S.Ct. 379, 94 L.Ed. 353, for a case upholding award of a certificate differing materially from that sought.

22 . See Interstate Power Co. v. F. P. C., 8 Cir., 1956, 236 F.2d 372, certiorari denied 852 U.S. 967, 77 S.Ct. 352, 1 L.Ed. 2d 321.

23 . 15 U.S.C.A. § 717r(a).

24 . The Commission’s opinion stated “although it may be that [certain competitors] * * * may initially suffer economic losses, it reasonably appears that increased industrial and other activity in Florida resulting from the introduction of natural gas will yield offsetting benefits in the long run. We therefore conclude that the need and desire of the public in Florida for natural gas turns the scales against these competing interests.”