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Panhandle Eastern Pipe Line Co. v. Federal Power Commission

decided: July 25, 1956.


Author: Maris

Before MARIS, McLAUGHLIN and HASTIE, Circuit Judges.

MARIS, Circuit Judge.

Panhandle Eastern Pipe Line Company, a natural gas company, seeks review of that part of an order of the Federal Power Commission issued on June 7, 1955*fn1 which denied Panhandle's application to reduce its natural gas service to Michigan Consolidated Gas Company, a local public utility serving the metropolitan area of Detroit, Michigan, and other communities in that state. Michigan Consolidated, the City of Detroit and the County of Wayne, Michigan, have intervened in support of the Commission's order. The order here under review stems from proceedings conducted by the Commission pursuant to this court's remand. Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 3 Cir., 1953, 204 F.2d 675; 3 Cir., 204 F.2d 925. The pertinent background facts are as follows:

Panhandle produces and purchases natural gas in the states of Texas, Oklahoma and Kansas, which is transported through its pipeline system from those states into Missouri, Illinois, Indiana, Ohio and Michigan. Its gas is sold to distributing utilities for resale and directly to industries located along the route of the pipeline. Since 1936 Panhandle has delivered to Michigan Consolidated up to 125,000 Mcf of gas per day at Detroit under a contract originally entered into on August 31, 1935. By its terms this contract expired on December 31, 1951 and by letter dated May 25, 1950, Panhandle served notice on Michigan Consolidated that it was cancelling the contract effective on its expiration date.

On June 21, 1951 Panhandle had filed an application with the Commission for leave to reduce its service from 125,000 Mcf per day to 87,500 Mcf per day to Michigan Consolidated at Detroit. In another proceeding before the Commission involving the allocation of all of Panhandle's gas among its customers Michigan Consolidated had requested an increase to 200,000 Mcf per day in the deliveries to it at Detroit. The Commission in that proceeding, in its Opinions Nos. 218 and 218-A and accompanying orders issued on August 31 and October 15, 1951,*fn2 respectively, rejected Michigan Consolidated's request for delivery of gas in excess of 125,000 Mcf per day*fn3 and provided that Panhandle should make deliveries totaling 1,007,683 Mcf of natural gas per day to all its customers although the designed peak day capacity of its pipeline was only 850,000 Mcf. On June 20, 1952, some months after the issuance of these orders the Commission issued its Opinion No. 229 and accompanying order in which authorization was denied to Panhandle partially to abandon its service to Michigan Consolidated as proposed.*fn4

A petition to review each order was filed by Panhandle in this court. In respect to the order directing Panhandle to deliver to all its customers more than its designed peak day capacity this court held that the Commission, while purporting merely to eliminate discrimination among Panhandle's customers, in effect required Panhandle to enlarge its pipeline facilities, an action not authorized by the Natural Gas Act, 15 U.S.C.A. ยง 717 et seq. The cause was accordingly remanded to the Commission for determination of the proper allocation of Panhandle's existing capacity among its customers. Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 3 Cir., 1953, 204 F.2d 675. In respect to Panhandle's petition for review of the order denying its request for partial abandonment of service to Michigan Consolidated the Commission's order was vacated and the cause remanded to the Commission for reconsideration in the light of existing circumstances, since this issue was directly related to the issues involved in the other case. Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 3 Cir., 1953, 204 F.2d 925.

Upon remand the Commission consolidated the allocation and abandonment proceedings and certain other related matters then pending before it. Hearings were held before an examiner who filed his decision on April 19, 1955. Exceptions were filed to this decision by Panhandle, the Commission Staff and certain intervenors. The Commission by its order issued on June 7, 1955 which is here under review modified the examiner's decision and affirmed it as modified. The Commission's order, inter alia, denied Panhandle's application to reduce its service to Michigan Consolidated. It is this part of the order which Panhandle contends was erroneous and which we are here asked to set aside.

The principal contentions of Panhandle are based upon the premise that, as it asserts, the Commission had in 1947 authorized the partial abandonment of its service to Michigan Consolidated and had determined Panhandle's obligations to that company in proceedings which involved the issuance of a certificate of public convenience and necessity to Michigan-Wisconsin Pipe Line Company,*fn5 an affiliate of Michigan Consolidated in the American Natural Gas Company System. It strenuously argues that the action of the Commission in those proceedings must be given effect in this proceeding upon principles of res judicata. The contentions of Panhandle in this regard we find to be wholly without merit.

In the first place the doctrine of res judicata can have no application to a proceeding, such as this, which involves a determination of the present or future public convenience or necessity with respect to the continuance or abandonment of natural gas service. For, as Judge Learned Hand said in a somewhat analogous situation in United States Feldspar Corporation v. United States, D.C.N.Y.1930, 38 F.2d 91, 95, "No estoppel is relevant upon that inquiry, no inconsistency important, except as it helps to ascertain the very truth; the inquiry is not to be assimilated to the ordinary suit inter partes, where no more is at stake than the settlement of a private dispute." In a situation such as this the Commission is exercising delegated legislative power to make a rule to guide the conduct of the parties in the future. It is not exercising quasi-judicial power to determine past or present rights or liabilities, as was done in the case of In re Federal Water & Gas Corp., 3 Cir., 1951, 188 F.2d 100, certiorari denied Cherney Corp. v. Securities & Exchange Comm., 341 U.S. 953, 71 S. Ct. 1018, 95 L. Ed. 1375, in which this court did apply the doctrine of res judicata. That case, upon which Panhandle relies, has no relevance here.

Moreover the premise upon which Panhandle handle bases its argument cannot survive examination. For it is apparent upon examining the record in the proceedings to which Panhandle refers that the Commission did not there determine that the public convenience or necessity permitted the partial abandonment of its service to Michigan Consolidated at Detroit, nor grant Panhandle permission to abandon such service. Those proceedings involved the right of a new pipeline company, Michigan-Wisconsin, to enter the Detroit area to supply natural gas to Michigan Consolidated. Its entry was strongly contested by Panhandle which had theretofore been the sole supplier and which sought, by defeating Michigan-Wisconsin in that proceeding, to remain so. Michigan-Wisconsin, on the other hand, sought to supply all of Michigan Consolidated's requirements above 125,000 Mcf per day up to December 31, 1951, the date of the termination of Panhandle's contract, and to become its sole supplier, to the exclusion of Panhandle, after that date. Thus the application, if granted in the terms requested, would have eliminated Panhandle entirely from the Detroit area, a market in which it had pioneered and in which it had so-called grandfather's rights.

It was thus in the setting of a proceeding in which a competitor was seeking to compel Panhandle ultimately to abandon all service to the Detroit area, an abandonment to which Panhandle was then bitterly opposed, that the Commission made the determinations upon which Panhandle now seeks to rely. The purpose of those determinations, however, was merely to clarify Panhandle's continuing rights in the Detroit area as against the rights then being granted to Michigan-Wisconsin. It was for this reason that the Commission ultimately conditioned the certificate which it had granted to Michigan-Wisconsin by providing that Panhandle should be permitted to deliver to Michigan Consolidated during the life of their contract the gas called for thereby and upon the termination of the contract should be "afforded reasonable opportunity to deliver and sell to Michigan Consolidated not less than the annual volumes of gas delivered and sold by it for either the years 1942 or 1945 or the average delivered for the five-year period 1942 through 1946." The Commission furthermore provided in its order that "Panhandle shall have the right to participate in the future growth of the Detroit and Ann Arbor markets by being given the opportunity to deliver and sell such additional volumes of gas to Michigan Consolidated as the latter may require in excess of the volumes of gas then being contractually purchased by it from Panhandle and Michigan-Wisconsin, in order to maintain adequate service to consumers in the Detroit and Ann Arbor districts."*fn6

In Opinion No. 147-A which accompanied this formulation of the conditions imposed upon Michigan-Wisconsin, the Commission said:

"Commissioner Olds in his dissenting opinion, at page 43, states that our order of November 30, 1946, is fundamentally defective to the extent that if fails to make a definitive finding as to Panhandle's rights in the market served by Michigan Consolidated. In considering the rights of Panhandle in this matter we have at all times attempted to recognize among other things that managerial discretion plays an important role in the operation of a large pipeline system. A forecast of what the future will bring must, or necessity, be clothed with some uncertainty. The markets may develop to a greater extent than supposed. Further, Panhandle's future plans are not absolutely certain. It hopes to render service to Canada, increase supplies in other markets and serve new customers. However, until Panhandle is able to do what it believes it must in rendering such public service, we believe it most unwise in the meantime to place the company in an unfair or unfortunate position. Therefore, a finding relating to what will happen many years in the future can be no more definitive than the future itself.

"The evidence which was offered by Michigan-Wisconsin and received in this reopened proceeding relates directly to the main interest of the intervenor, Panhandle, in the entire proceedings - namely, in what manner, if any, it will be affected by the ...

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