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Michigan Consol. Gas Co. v. Federal Power Commission .

decided: April 30, 1953.


Author: Maris

Before MARIS, McLAUGHLIN and KALODNER, Circuit Judges.

MARIS, Circuit Judge.

Michigan Consolidated Gas Company in these consolidated petitions for review asks this court to set aside two orders issued by the Federal Power Commission in consolidated proceedings involving Panhandle Eastern Pipe Line Company in which proceedings Michigan Consolidated was permitted by the Commission to intervene. The orders under attack prescribed Panhandle's obligation to deliver natural gas to Michigan Consolidated at Detroit and limited its obligation to 125,000 Mcf per day, the amount then currently being delivered, although Michigan Consolidated had claimed the right to receive an additional 75,000 Mcf per day of natural gas from a additional capacity which Panhandle had acquired with the approval of the commission.

Panhandle Eastern Pipe Line Company produces and purchases natural gas in the Panhandle and Hogoton fields of Texas, Oklahoma and Kansas. It also owns and operates a pipeline system extending through Oklahoma, Kansas, Missouri, Illinois, Indiana and Ohio to northern termini in Michigan and is engaged in the transportation and sale of natural gas in interstate commerce to distributing utilities located along its pipeline system and directly to industries and others for their own use. Panhandle is a natural gas company within the meaning of the Natural Gas Act, 15 U.S.C.A. ยง 717 et seq.

In January, 1950, Panhandle filed an application with the Commission for a certificate of public convenience and necessity under Section 7(c) of the Act authorizing the construction and operation of additional pipeline and compressor facilities whereby it could receive, transport and deliver 250,000 Mcf per day of additional natural gas to be obtained from Trunkline Gas Supply Company upon completion of the pipeline of the latter extending from the gulf coast of Texas to a point of connection with the Panhandle system near Tuscola, Illinois. The application also requested authority for Panhandle to construct and operate certain appurtenant facilities to permit Panhandle as a part of its expansion program to deliver and sell and additional 50,000 Mcf per day of gas from its own supplies.

Following hearings the Commission on May 4, 1950, issued a certificate of public convenience and necessity to Panhandle for the principal pipeline facilities requested. Further hearings were scheduled with respect to other issues involved in the proceedings, including the proper form of tariff, the rate level to be applicable to Panhandle after the introduction of Trunkline gas, and the question of a fair, reasonable and equitable distribution among present and prospective customers of the volume of natural gas which would be available upon completion of the authorized Trunkline and Panhandle facilities.

The Commission, following further hearings, issued its Opinion No. 214 on June 13, 1951 finding that the rate schedules contained in Panhandle's then existing contracts with its utility customers were not uniform with respect to service and volumetric obligations, and prescribing a tariff containing new rate schedules and related forms of service agreements to become applicable to the operations of Panhandle after the introduction of the Trunkline gas into its system. The rates thus prescribed were "rates which are sometimes referred to as 'rolledin', whereby the cost of Trunkline gas in included along with Panhandle's other costs; in other words, for all customers these rates should be based upon the total cost of Panhandle for rendering natural gas service." On August 17, 1951 Penhandle filed with the Commission a tariff in the form prescribed by Opinion No. 214 and the accompanying order. Upon applications for rehearing the Commission after further hearings issued its Opinion No. 214-A and accompanying order on August 23, 1951, directing that certain minor modifications and revisions be made in the form of the tariff. Thereafter Panhandle amended its proposed tariff to comply with Opinion No. 214-A, except as to one matter not presently pertinent.

The Commission's Opinion No. 214 provided that during the following period of thirty days Panhandle and its customers would be given the opportunity to negotiate contracts under the new form of tariff and to file them as exhibits with the Commission; that customers who did not negotiate such contracts were to file as exhibits with the Commission within ten days thereafter sworn statements of the amounts of natural gas which they would be willing to purchase from Panhandle under the form of service agreement contained in the tariff, and that thereafter the Commission would consider and determine the remaining issues in the proceedings including the issue of the equitable distribution of gas among Panhandle's customers. Accordingly during the course of the hearings which were resumed July 23, 1951 Panhandle filed as exhibits newly executed service agreements which it had entered into with all but eight of the resale interstate customers which it served. The latter customers filed as exhibits swron statements specifying the volumes of gas desired which statements were modified and supplemented at the hearing by testimony and statements of counsel. Among the latter customers was Michigan Consolidated, which filed a statement specifying 200,000 Mcf per day at Detroit and 2,000 Mcf per day at Ann Arbor as its desired volume.

On August 31, 1951 the Commission issued its Opinion No. 218, later modified by Opinion No. 218-A issued October 15, 1951, in which the Commission determined Panhandle's designed capacity to be $850,000 Mcf*fn1 per day and found that such capacity would be insufficient to meet the firm requirements of Panhandle's customers during the winter of 1951-1952. It, therefore, allocated the capacity of Panhandle's system among its customers, prescribing the minimum daily volumes which Panhandle would be required to deliver to each customer on days when the total requirements of all customers exceeded 850,000 Mcf. The orders accompanying these opinions directed Panhandle to operate its pipeline system and to make deliveries of gas to its customers in accordance with the terms of the opinions during the period in question pending the effectiveness of a new tariff and service agreements executed thereunder.

In Opinion No. 218 the Commission stated:

"Michigan Consolidated Gas Company has shown a willingness to contract for 202,000 Mcf, or 75,000 Mcf more than its existing contract volume heretofore approved by the Commission. Panhandle has applied for permission to abandon some 37,500 Mcf of this service at the end of 1951.Subject to further order when the abandonment proceeding, after being heard, is before the Commission, it is determined that the 1951-1952 peak delivery allowable is 127,000 Mcf."

Thus by Opinion No. 218 and its accompanying order the Commission denied Michigan Consolidated's request for 75,000 Mcf of Panhandle's additional capacity and limited it for the winter of 1951-1952 to its existing contract volume. It is this order which Michigan Consolidated seeks to have set aside as to it by its petition for review filed to No. 10,589.

Panhandle's proposed tariff was not made effective by the Commission upon the introduction of Trunkline gas into the Panhandle system as requested by Panhandle. Instead the tariff was suspended by order issued September 5, 1951 until February 20, 1952, pending hearing as to the lawfulness of the proposed increased rates and other matters contained therein. On March 5, 1952, the proceeding not having been concluded and an order made, the Commission upon motion of Panhandle filed pursuant to the mandatory provisions of Section 4(e) of the Act, issued an order directing the tariff and service agreements executed thereunder to become effective as of February 20, 1952 upon the execution by Panhandle and approval by the Commission of a surety bond in the sum of $2,000,000 conditioned upon the repayment by Panhandle to those entitled thereto of any portion of the increased rates and charges which might ultimately be found unjustified, together with interest. Such a bond was filed by Panhandle. Accordingly the new tariff and the service agreements which had then been executed thereunder with 45 of Panhandle's 49 resale interstate customers*fn2 went into effect as of February 20, 1952.

The Commission further found in its order issued March 5, 1952 that it was necessary and desirable in the public interest to continue in effect "as executed service agreements" the "present contracts on file with the Commission" between Panhandle and the four customers which had not executed service agreements under the new tariff, namely, Michigan Consolidated Gas Company, Gas Service Company, Texas Gas Transmission Corporation and Central West Utility Company, as modified by the appendices of the order; that such contracts, as thus modified, constituted "just and reasonable executed service agreements for the period they may be effective"; and that the volumes prescribed in the appendices of the order should constitute firm volumetric obligations of Panhandle for said companies during the months April through October, 1952 and for subsequent years until super-seded by new service agreements or otherwise changed by the Commission. Accordingly the Commission ordered that such "present contracts" as modified by the ...

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