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Public Service Electric and Gas Co. v. Federal Power Commission

decided: January 18, 1967.

PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PETITIONER,
v.
FEDERAL POWER COMMISSION, RESPONDENT. TEXACO, INC. AND TRANSCONTINENTAL GAS PIPE LINE CORPORATION, INTERVENORS



Hastie and Smith, Circuit Judges, and Kirkpatrick, District Judge.

Author: Smith

Opinion OF THE COURT

SMITH, Circuit Judge.

This matter is before the Court on a petition to review the action of the Federal Power Commission in granting a certificate of public convenience and necessity to Transcontinental Gas Pipe Line Corporation (Transcon) under § 7 (c) and (e) of the Natural Gas Act as amended, 15 U.S.C.A. § 717f(c) and (e). The petitioner assigns as error not only the granting of the said certificate but also the Commission's disclaimer of jurisdiction over Texaco, Inc., (Texaco). The questions raised are not entirely free from difficulty. It should be noted that the position of the petitioner is supported by six utility companies, granted leave to appear amicus curiae.

RELATIONSHIP OF PARTIES

Transcon is a "natural-gas company" within the meaning of § 2(6) of the Act, 15 U.S.C.A. § 717a(6), and as such is engaged in the transportation of natural gas in interstate commerce. It maintains transmission lines which extend from the Gulf Coast area of Texas and Louisiana to a terminus in New York. Texaco is a producer of natural gas and the owner of reserves located in the said area and in close proximity to Transcon's lines. It is also the owner and operator of an oil refinery in West Deptford, New Jersey, in close proximity to Transcon's lines. Public Service Electric and Gas Company (Public Service), a contract customer of Transcon, is a public utility engaged in the distribution and sale of natural gas. Its service territory includes West Deptford.

The primary interest of Public Service is in the alleged intrusion of Transcon into its territory and the possible loss of Texaco as a contract customer. The only interest of the other utility companies is the precedent allegedly established by the Commission's action and its possible impact on their future operations. Their common concern is economically motivated.

FACTS

Contemplating a conversion of its refinery operations so as to permit the utilization of natural gas instead of oil as an industrial fuel, Texaco entered into a contract with Transcon pursuant to the terms of which the latter agreed to transport natural gas owned by the former from mutually acceptable points in Texas and Louisiana to a point approximately four miles from the former's refinery in New Jersey. At this point Texaco would accept delivery and then transport the gas through its own pipeline to its plant facility. Transcon agreed to bear the risk of loss while the gas was in its possession in transit, except for loss due to force majeure as defined by the contract. The proposed transportation service was made subject to such authorizations as were required by applicable law, including the Natural Gas Act.

Under the terms of the contract Texaco would make available to Transcon at the delivery points up to 8000 MCF (thousand cubic feet) per day for firm transportation and up to 16,000 MCF per day for interruptible transportation. However, Transcon would not be required to receive at the Texas delivery points a daily volume in excess of 10,000 MCF. It was contemplated by the parties, and their contract in effect so provided, that daily deliveries by Texaco at the said points would approximate daily redeliveries by Transcon at the specified point in New Jersey, operating conditions permitting. The proposed rate for the transportation of gas on an interruptible basis was 22 cents per MCF, the same rate charged to Sun Oil Company for a similar service. Since no issue is here made as to the rate for the transportation of gas on a firm basis it becomes irrelevant.

It was recognized by the parties, and their contract so provided, "that the natural gas delivered by Texaco for transportation * * * [would] necessarily be commingled in Transcon's pipeline system with gas received from other sources, and that the specific gas delivered to Transcon by Texaco [could not] be redelivered to Texaco." It was further agreed that gas redelivered by Transcon would be of merchantable quality and comparable to the gas delivered by Texaco to Transcon in the field.

Pursuant to the applicable provisions of the Act, Transcon made application to the Commission for authority to construct, install and operate additional pipelines, facilities and equipment necessary to the performance of the proposed transportation service covered by the contract. After extensive hearings the certificate of public convenience and necessity here in question was granted. Texaco filed no application and the failure of the Commission to require it to do so is a principal issue in this case.

NATURE OF TRANSACTION

The first question for decision is whether Texaco was required by § 7(c) of the Act, 15 U.S.C.A. § 717f(c), to obtain a certificate of public convenience and necessity. The answer depends upon the nature of the transaction. If the contract is construed as contemplating a "sale in interstate commerce of natural gas for resale" within the meaning of § 1(b) of the Act, 15 U.S.C.A. § 717(b), then such a certificate was required. If the contract is construed as covering nothing more than a conventional arrangement for the transportation of natural gas for hire then the only aspect of the ...


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