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Central West Utility Co. v. Federal Power Commission

decided: August 6, 1957.


Author: Maris

Before MARIS, McLAUGHLIN and KALODNER, Circuit Judges.

MARIS, Circuit Judge.

In this case the Central West Utility Company seeks review of an order of the Federal Power Commission issued June 30, 1956 insofar as it granted a certificate of public convenience and necessity to Panhandle Eastern Pipe Line Company without attaching to the issuance thereof a condition sought by Central West.

The basic background facts with respect to Panhandle's proposed expansion program are set out in our opinion in Michigan Consolidated Gas Company v. Federal Power Commission, 1957, 246 F.2d 904, in which we considered other parts of the order here under review. Suffice it to say that Panhandle and its affiliate, Trunkline Gas Company, natural-gas companies, filed several applications for certificates of public convenience and necessity under section 7(c) of the Natural Gas Act.*fn1 Among these was an application filed by Panhandle on May 18, 1954,*fn2 for authority to construct and operate facilities designed to increase its pipe line capacity. Included in the proposal described in this application was a plan to enlarge 10 of the 18 laterals on the Panhandle system and to deliver additional volumes of gas to the customers served by those laterals. It is with this phase of Panhandle's application that we are here concerned.

Central West, a utility company engaged in the purchase and sale of natural gas in Clay County, Missouri, to the north of Kansas City, has been supplied since 1936 from a lateral on Panhandle's system known as the Liberty lateral. Central West, which was granted leave to intervene in opposition in the certificate proceedings, claimed that for a long time past Panhandle had practiced unlawful discrimination in its service to certain of its utility customers served on the Liberty lateral as distinguished from the service provided, and proposed to be provided, to others of its utility customers being served from its other laterals, particularly those customers on the 10 laterals which Panhandle sought authority to enlarge. Central West asked that the certificate sought by Panhandle should not issue unless it was conditioned with the requirement that Panhandle deliver increased volumes of gas to Central West on the Liberty lateral.

On March 6, 1956, the presiding examiner filed his decision finding that the certificate of public convenience and necessity sought by Panhandle should be granted but that it should be conditioned on the elimination within 90 days of the discrimination in service practiced against Central West by providing the latter with service comparable to that of other Panhandle customers being served from laterals which Panhandle had voluntarily undertaken to improve and that Panhandle should afford Central West a contract demand of 12,000 Mcf of natural gas per day. On exceptions thereto filed by Panhandle these conclusions were rejected by the Commission in its Opinion No. 292 and accompanying order, issued June 30, 1956. 15 F.P.C. 46. An application for rehearing was filed by Central West upon the denial of which this petition for review followed.*fn3

This is the third time that this controversy between Central West and Panhandle has come before this court. In the first case to come before us*fn4 it appeared that Panhaldle had contracted with 47 of its customers for gas deliveries aggregating approximately 39,000 Mcf per day less than its designed capacity. It refused to contract with Central West and three other customers, one of whom was also served from the Liberty lateral. Nonetheless these four customers filed contract demands with the Commission for a total of 275,000 Mcf of gas per day. The Commission found that these customers would be unduly prejudiced and unreasonably discriminated against in violation of section 4(b) of the Act*fn5 by the refusal of Panhandle to meet their reasonable requirements. Accordingly it put into force the 47 service agreements voluntarily entered into by Panhandle, continued in force the four prior contracts with the four customers, including Central West, which Panhandle had refused to negotiate, and ordered Panhandle to take appropriate steps to provide those four customers with maximum daily deliveries of 196,049 Mcf to which the Commission had found them to be entitled within 45 days of the issuance of its order.

Upon review sought by Panhandle this court set aside the Commission's order, holding that it was beyond the power of the Commission to order Panhandle to enlarge the facilities of the Liberty lateral and to direct it to deliver gas to customers on that lateral in excess of the designed or existing capacity of the lateral, even though the purpose of the order was to eliminate discrimination between customers. On petition for rehearing we said that the Commission did have authority, if necessary or desirable in the public interest, to require Panhandle to restore the Liberty lateral to the capacity for which it was originally designed and approved or which it may have actually had in the past and that the Commission was free to reconsider the extent to which it might thus lawfully require Panhandle to improve, and thereby to increase the present capacity of, the Liberty lateral.*fn6

The Commission thereafter considered this question and the matter came before us a second time upon a petition by Central West to review the Commission's opinion and order issued June 7, 1955, in which it found that there was no evidence that the designed or actual capacity of the Liberty lateral was ever greater than its present capacity. We affirmed this order.*fn7

The Liberty lateral runs from a compressor station on Panhandle's main pipe line at Louisburg, Kansas, to a terminus near Liberty, Missouri. It had been built in 1928 and was acquired by Panhandle in 1936. It is a comparatively low pressure pipe line and the maximum volume of gas which Panhandle had been able to deliver through it on the peak day January 20, 1954 was about 25,475 Mcf,*fn8 of which about 5,249 Mcf was delivered to Central West. The combined resale requirements from that lateral were estimated to be 31,517 Mcf. Hence, the maximum performance of the Liberty lateral on that peak day was about 6,042 Mcf short of the estimated demand therefrom. The presiding examiner found the total peak-day estimated requirements for utility customers on that lateral in the winter of 1955-1956 to be 38,290 Mcf, a deficiency of about 13,683 Mcf.

On January 8, 1954 Panhandle had addressed a letter to each of its utility customers served from the 10 laterals which it proposed to enlarge in which it solicited from them agreements for additional deliveries of gas commencing November 1, 1955. Under the proposed expansion, Panhandle would be able to deliver increased volumes of gas to these customers. Since 1951 Panhandle has refused to contract with Central West, however. Central West was willing, as of November 1, 1955, to contract for 12,000 Mcf, which is an excess of some 6,500 Mcf over its present authorized peak-day delivery, but no provision was made in Panhandle's application for the enlargement of the Liberty lateral so as to supply Central West's requirements. The proposal which Central West advances is that adequate service from the Liberty lateral could be provided by the construction of about 24 miles of new 10-inch pipe line interconnecting with Panhandle's main line near Harrisonville, Missouri, thereby increasing the capacity of the Liberty lateral by 22,189 Mcf per day at an estimated cost of $619,000.Panhandle proposed to spend approximately $4,474,896 on the enlargement program for the 10 other laterals.

Central West's position is that this case is materially distinguishable from the first case because here Panhandle has voluntarily sought a certificate of public convenience and necessity for its enlargement program. It contends that the Commission in order to enforce the mandate of section 4(b) of the Act,*fn9 that there may not be any undue prejudice or advantage to any person, was required under section 7(e) of the Act*fn10 to attach a condition to the issuance of Panhandle's certificate requiring Panhandle to bear the cost of eliminating the discrimination it has practiced and proposes to continue to practice against Central West. The Commission rejected these contentions upon the authority of our opinion in the first case, Panhandle Eastern Pipe Line Co. v. Federal Power Com'n, 1953, 204 F.2d 675. In its opinion accompanying the order here under review the Commission said:

"We consider that the decision of the court in the Panhandle case cited above governs this case, and requires the reversal of the Examiner on this issue. The circumstances of that decision closely parallel the circumstances of the present case. Both involve the same companies, the same lateral, and the same claimed discrimination; and the requirement we imposed in the earlier case was, in language and effect, practically identical to the requirement which the Examiner would impose here. In the earlier case the court held that we have no authority to compel the enlargement of transportation facilities even though the purpose is to eliminate discrimination; and that this prohibition extends to an order which, although it does not in so many words require a company to enlarge its facilities, in effect compels it to do so. As the court there said (204 F.2d at page 680):

'* * * it was beyond the power of the Commission to order Panhandle within 45 days to take steps to eliminate discrimination in the service between the customers on its Liberty lateral and those on its other ...

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