Petitioner, United Gas Pipe Line Co. (United), contracted to buy
gas produced by respondent Continental Oil Co. (Continental) from
the Johnson Bayou Field in Louisiana. Continental constructed
delivery facilities, and United provided facilities to receive the
gas into its interstate system. The contract parties, on
application to respondent Federal Power Commission (FPC), were
granted certificates of public convenience and necessity.
Continental's certificate covered sale of Johnson Bayou gas;
United's certificated covered construction of its facilities and
continued transportation of the gas. Continental elected to
terminate at the end of the contract's primary term, refused
United's offer to continue purchasing on a day-to-day basis at the
old contract rate, and filed with the FPC a rate increase effective
on the contract expiration date which was accepted over United's
protest. United, after notice to Continental, ceased purchasing
Johnson Bayou gas on the contract expiration date. Following
Continental's petition for a show cause order and a full hearing,
the FPC found United's ceasing to take gas from that field an
abandonment of its facilities for that purpose and of its service
rendered thereby, in violation of § 7(b) of the Natural Gas Act,
which forbids such abandonments without the FPC's prior consent.
The FPC issued an order, thereafter upheld by the Court of Appeals,
that United renew operation of its Johnson Bayou facilities and buy
gas at Continental's new rate.
Petitioner's refusal to continue receiving
Johnson Bayou gas for transportation in interstate commerce
constituted an abandonment of "facilities" and "service" which,
under § 7(b) of the Act, required FPC approval. Pp. 385 U. S.
(a) The "facilities subject to the jurisdiction" of the FPC to
which § 7(b) applies are those required for the interstate
transportation of natural gas and for the interstate sale of gas
for resale to the ultimate consumer. P. 385 U. S.
Page 385 U. S. 84
(b) "Abandonment" of facilities does not require their physical
alteration, but can be accomplished, as here, by allowing them to
become operationally dormant for an indefinite time. Pp.
385 U. S.
(c) "Service" includes the taking and transportation of gas from
a particular field as well as its sale. Pp. 385 U. S.
(d) The FPC has power to regulate the purchase of gas where
necessary to the exercise of its authority over the transportation
and sale thereof. Pp. 385 U. S.
(e) Though United must reactivate its Johnson Bayou facilities
and restore service, it may ask the FPC to permit abandonment upon
a proper showing of justification therefore. P. 385 U. S.
350 F.2d 689.
MR. JUSTICE WHITE delivered the opinion of the Court.
United Gas Pipe Line Company and Continental Oil Company
executed a contract effective January 31, 1953, providing for the
sale by Continental and the purchase by United of gas produced from
the Johnson Bayou Field in the State of Louisiana, at prices stated
in the contract. The contract was to run for 10 years and from year
to year thereafter unless terminated by either party on 90 days'
notice. To effectuate delivery to United's nearby Mud Lake
transmission line for transportation of the gas into the Beaumont,
Texas, area, Continental constructed several thousand feet of
pipeline, separators and storage tanks. United, for its part,
Page 385 U. S. 85
short length of pipeline, a separator, a meter station, and
valves. United sought, was granted, and accepted a certificate of
public convenience and necessity authorizing the continued
transportation of gas from the Johnson Bayou Field and the
construction and operation of the facilities necessary therefor. 14
F.P.C. 582. Likewise, Continental was issued a certificate
authorizing the sale of gas to United under the terms of the
contract. 15 F.P.C. 1650.
In October, 1962, Continental elected to terminate the contract
at the end of the primary term. Negotiations for a new contract
were fruitless. Continental, after refusing United's offer to
continue purchasing on a day-to-day basis at the old contract rate,
filed a rate increase with the Commission asking for an effective
date of January 31, 1963. The Commission accepted the filing over
United's protest. [Footnote 1
United, after advance notice to Continental, then ceased purchasing
gas from the Johnson Bayou Field on January 31, 1963, and has since
refused to purchase gas from that source. Following a petition by
Continental, an order to show cause issued by the Commission to
United, and a full hearing, the Commission found that United, by
ceasing to take gas from the Johnson Bayou Field, had abandoned its
facilities used for this purpose, as well as the service rendered
by these facilities, contrary to the provisions of § 7(b) of the
Natural Gas Act which forbid such abandonment without the consent
of the Commission being first obtained. [Footnote 2
] Accordingly, the Commission ordered
Page 385 U. S. 86
to "renew operation of its Johnson Bayou Field facilities used
to purchase gas from Continental" and directed that the purchases
by United were to be at Continental's new rate and in volumes
consistent with the terms of the contract previously in force. 31
F.P.C. 1079, 1086. The Court of Appeals upheld the Commission's
order, and we granted certiorari, 383 U.S. 924, because the case
involved an important question concerning the Commission's
jurisdiction under the Natural Gas Act. We affirm.
We agree with the Commission and the Court of Appeals that
United's refusal to continue receiving gas from the Johnson Bayou
Field constituted an abandonment of "facilities" and a "service" to
which § 7(b) applies. That section places conditions on the
abandonment of facilities or of any service rendered thereby. The
facilities covered by the section are those "subject to the
jurisdiction of the Commission," the further identification of
which requires resort to other sections of the Act. Section 1(b)
] declares that the
provisions of the Act are to apply to: (1) the transportation of
natural gas in interstate commerce, (2) the sale in interstate
commerce of natural gas for resale for ultimate public consumption
and (3) natural gas companies engaged
Page 385 U. S. 87
in such transportation or sale. Under § 7(c), [Footnote 4
] no natural gas company is
permitted to engage in the transportation or sale of natural gas,
or to undertake the construction or extension of facilities
therefor without a certificate of public convenience and necessity
authorizing such acts or operations. Thus, the "facilities subject
to the jurisdiction of the Commission" which are reached by the
abandonment provisions of § 7(b) are those facilities required for
the interstate transportation of natural gas and for the interstate
sale of gas for resale to the ultimate consumer. Conversely, it
would seem beyond argument that the proscription of abandoning "any
service" rendered by those facilities would include both
transportation and sale, the twin functions which subject the
facilities to the provisions of the Act.
We are convinced that United's Johnson Bayou Field facilities
were subject to the jurisdiction of the Commission. They were
constructed solely for the purpose of the taking and interstate
transportation of Johnson Bayou gas. They could not, therefore, be
abandoned without the consent of the Commission, and we do not
understand United's position in this Court to be otherwise. United,
however, insists that there has not in fact been a § 7(b)
"abandonment." It is true that the Johnson Bayou Field facilities
were neither removed nor disconnected. Their use could have been
Page 385 U. S. 88
any time had United so desired. But the physical alteration of
facilities is not a sine qua non
Commission's jurisdiction under § 7(b). Here, United ceased taking
and transporting gas from the Johnson Bayou Field on January 31,
1963, has not taken that gas or used its facilities constructed for
that purpose since that time, and has no intention of doing so as
long as Continental's present rates continue in effect. United, the
Commission found, had by its own action rendered its facilities
"operationally dormant for a period of indefinite duration." 31
F.P.C. 1079, 1083. In addition, the Commission found that its
interest went beyond the physical alteration of facilities.
"We have a regulatory responsibility to assure that gas once
dedicated to the interstate market will continue to be available to
that market so long as the public interest demands. . . ."
31 F.P.C. 1079, 1082. As the instant proceeding unmistakably
revealed, the responsibility of the Commission could not adequately
be met if it were powerless to assure that facilities "certificated
to transport this gas," ibid.,
continued to operate. To
hold United's conduct an abandonment within the meaning of § 7(b)
is a reasonable interpretation of the Act, and we shall not disturb
The corollary conclusion, inescapably presented on the face of
the Act itself, is that the consent of the Commission is necessary
before United can cease taking and transporting Johnson Bayou gas,
since this is a service United rendered through the facilities it
constructed for that very purpose. United, however, contends that
the words "any service" in § 7(b) include only the sale of natural
gas, not the taking and transportation of gas from any particular
field. In its view, it is free at any time to abandon the
interstate transportation of gas from the Johnson Bayou Field, and
to decide for itself wholly apart from the Commission what gas it
will continue to transport interstate. But nothing in the Act,
Page 385 U. S. 89
legislative history or in our cases has been called to our
attention which persuasively supports this narrow view or which
would justify recognizing the sale of gas as a service but not the
preceding transportation without which there would be no sale at
The Act gives the Commission jurisdiction over interstate
transportation of natural gas as a separate and distinct matter,
whether the transportation is for hire or for sale and whether the
sale is for consumption or resale. FPC v. East Ohio Gas
Co., 338 U. S. 464
FPC v. Transcontinental Gas Pipe Line Corp., 365 U. S.
; Panhandle Eastern Pipe Line Co. v. FPC,
F.2d 675. Here, of course, the transportation is not for hire, but
for sale, some for consumption and some for resale. What is more,
in Sunray Mid-Continent Oil Co. v. FPC, 364 U.
, 364 U. S.
-150, the Court clearly recognized that the term
"service" is not confined to sales, but extends to the "movement of
gas in interstate commerce," and that one who engages in either the
sale or the transportation of gas is performing a service within
the meaning of both §§ 7(e) and 7(b). It could not be more clear
that United here abandoned a "service," the taking of Johnson Bayou
Field gas and its transportation in interstate commerce. The
statutory necessity of prior Commission approval, with its
underlying findings, cannot be escaped.
Even so, United argues that the Act gives the Commission no
authority over the purchase of natural gas, and that the Commission
therefore exceeded its jurisdiction in ordering United to continue
purchasing gas from Continental in amounts specified in an expired
contract and at prices set unilaterally by Continental. It is true
that the Act does not, in so many words, grant the same express
authority over purchases to the Commission that it does over sales.
Neither is there a blanket exemption of Commission jurisdiction
over the purchase of
Page 385 U. S. 90
gas, and there is express authority over transportation as well
as sale. Under § 16, the Commission has the power
"to perform any and all acts, and to . . . issue . . . such
orders, rules, and regulations as it may find necessary or
appropriate to carry out the provisions of this Act."
52 Stat. 830, 15 U.S.C. § 717o
. Where it is necessary
to regulate the purchase of gas in some respects to carry out its
expressly granted authority over transportation and sale, the
Commission must have the power to do so. In the case before us,
there has been a § 7(b) abandonment of facilities or services
without Commission consent. It is therefore quite proper for the
Commission to order the facilities reactivated and the abandoned
service restored, even though the resumption by United of the
transportation of gas from the Johnson Bayou Field will entail the
purchase of gas from Continental at the legally established price.
Undoubtedly, the continued purchase of gas has been ordered, but
only as an incident to regulating transportation or sale. This is
no more than the Act authorizes, and no more than United undertook
to do when it sought and received certification for the service it
sought to perform. [Footnote
After United had begun to purchase gas from the Johnson Bayou
Field in 1953 and to transport it to markets in the State of Texas,
United sought a certificate of public convenience and necessity
authorizing the construction and use of the facilities it had built
and the continued transportation of the Johnson Bayou gas. United
then asserted that the public convenience and necessity required
the issuance of such a certificate.6 [Footnote 6
Page 385 U. S. 91
Both the construction and operation of the facilities and the
of gas by means thereof were found by the
Commission to be required by the public convenience and necessity.
United was found "able and willing . . . to perform the
. . . " for which it had volunteered. [Footnote 7
] A certificate was
accordingly issued and formally accepted by United. United now
wishes to abandon the express service it agreed to perform -- the
continued transportation of Johnson Bayou gas -- without a § 7(b)
finding by the Commission "that the present or future public
convenience or necessity permit[s] such abandonment." This is
precisely what the Act forbids.
United claims that it does not need the Johnson Bayou gas to
serve its customers, and that the forced purchase of gas at prices
set by Continental and approved by the Commission without regard to
the prices at which United under contract or competition is bound
to sell the gas deprives it of property without due process of law.
In our view, these claims are premature. We do not hold that it
would be inappropriate for the Commission to permit abandonment in
this case if it is asked to do so and the necessary findings are
made. We hold only that United has abandoned facilities and service
without the consent of the Commission, and that it must reactivate
those facilities and restore the service until and unless the
statutory consent is obtained. If United now resorts to the
Commission, it will have every opportunity to present its economic
and constitutional grounds for abandonment.
For the reasons herein stated, the judgment of the Court of
Appeals is affirmed.
It is so ordered.
United unsuccessfully petitioned for rehearing of the
Commission's order approving the rate increase, 29 F.P.C. 525, but
did not seek judicial review of the order.
Section 7(b) of the Act provides that
"No natural gas company shall abandon all or any portion of its
facilities subject to the jurisdiction of the Commission, or any
service rendered by means of such facilities, without the
permission and approval of the Commission first had and obtained,
after due hearing, and a finding by the Commission that the
available supply of natural gas is depleted to the extent that the
continuance of service is unwarranted, or that the present or
future public convenience or necessity permit such
52 Stat. 824, 15 U.S.C. § 717f(b).
The text of the section provides:
"The provisions of this Act shall apply to the transportation of
natural gas in interstate commerce, to the sale in interstate
commerce of natural gas for resale for ultimate public consumption
for domestic, commercial, industrial, or any other use, and to
natural gas companies engaged in such transportation or sale, but
shall not apply to any other transportation or sale of natural gas
or to the local distribution of natural gas or to the facilities
used for such distribution or to the production or gathering of
52 Stat. 821, 15 U.S.C. § 717(b).
The text of the section, in relevant part, provides that
"No natural gas company or person which will be a natural gas
company upon completion of any proposed construction or extension
shall engage in the transportation or sale of natural gas, subject
to the jurisdiction of the Commission, or undertake the
construction or extension of any facilities therefor, or acquire or
operate any such facilities or extensions thereof, unless there is
in force with respect to such natural gas company a certificate of
public convenience and necessity issued by the Commission
authorizing such acts or operations. . . ."
Added by the Act of February 7, 1942, 56 Stat. 83, 15 U.S.C. §
What we have said, of course, does not imply that the Commission
has the power to compel initial purchases of gas. We reach only the
question of the Commission's power under § 7(b) to order
reactivation of abandoned facilities and service.
United's application for the certificate, docketed September 20,
1954, appears in FPC Docket No. G-2818, United Gas Pipe Line
The Commission's complete order appears in Docket G-2818,
abbreviated version appears in 14 F.P.C. 582. (Emphasis added.)