In 1954, the Federal Power Commission, now the Federal Energy
Regulatory Commission, issued a certificate of public convenience
and necessity authorizing the sale to petitioner United Gas Pipe
Line Co. (United) of natural gas produced from a leased tract of
land. After the lease had been assigned several times and a
replacement certificate issued, the lessee-producer notified United
in 1966 that the existing wells were depleted and that no other gas
was available at that time. Despite a warning from the Commission,
the lessee never sought the Commission's authorization, pursuant to
§ 7(b) of the Natural Gas Act (Act), for abandoning the service in
interstate commerce. The lease was subsequently assigned to a group
headed by respondent McCombs, which group discovered new gas
reserves underlying the tract and contracted to sell the gas to
respondent E. I. du Pont de Nemours & Co. for uses in
intrastate commerce. Upon learning of the renewed production,
United asserted its contractual right to purchase the newly
discovered gas and filed a complaint with the Commission. The
Commission upheld the Administrative Law Judge's determination that
the McCombs group could not divert the gas from the interstate
market, because the gas had been dedicated to interstate commerce
and the agency had never authorized an abandonment of service. In
addition, the Commission refused to grant its approval
retroactively, since the supply of gas was not, in fact, depleted.
Accordingly, the Commission ordered delivery to United of all gas
derived from the tract. The Court of Appeals set aside the
Commission's order, holding that "strict compliance" with § 7(b)'s
approval requirement was unnecessary in this case, the abandonment
having been accomplished
"as a matter of law, when all of the parties recognized that the
then known natural gas reserves were depleted in 1966 followed by
failure to provide any service . . . for a period of five
years."
Held:
1. Section 7(b) requires producers to continue supplying in
interstate
Page 442 U. S. 530
commerce all gas produced from a dedicated leasehold until they
obtain permission for abandonment from the Commission. Pp.
442 U. S.
535-539.
(a) Congress could not have been more explicit in establishing
Commission approval as a prerequisite for lawful abandonment of
service within its jurisdiction. The statutory language simply does
not admit of any exception to the procedure set forth in § 7(b), as
this Court's previous decisions have recognized. Pp.
442 U. S.
535-538.
(b) The Commission's control over the continuation of service is
a fundamental component of the regulatory scheme, and to deprive
the Commission of this authority, even in limited circumstances,
would conflict with basic policies underlying the Act. Requiring
Commission approval of abandonment, "after due hearing," permits
all interested parties to be heard, and therefore facilitates full
presentation of the facts necessary to determine whether § 7(b)'s
criteria have been met. Moreover, the obligation to obtain
Commission approval promotes certainty and reliability in the
regulatory scheme. Pp.
442 U. S.
538-539.
2. It need not be determined whether § 7(b) allows the
Commission to approve an abandonment retroactively and disregard
evidence of subsequent production, since the Commission did not
abuse its discretion in declining to do so here. Given the
potential for retroactive approvals to disrupt the regulatory
scheme, it was within the Commission's discretion to reject
allegations of good faith in failing to seek Commission approval as
a sufficient justification, by itself, for determining whether the
evidence available in 1966 warranted granting an abandonment. Pp.
442 U. S.
539-541.
3. Respondents' contention that the current production of gas is
not subject to § 7(b)'s requirements is without merit. The
Commission properly found that the certificates of public
convenience and necessity cover all reservoirs located on the
tract. And initiation of interstate service pursuant to the
certificates dedicated all fields subject to the certificates.
California v. Southland Royalty Co., 436 U.
S. 519,
436 U. S. 525.
Once so dedicated, there can be no withdrawal of that supply from
the interstate market absent Commission approval.
Sunray
Mid-Continent Oil Co. v. FPC, 364 U.
S. 137,
364 U. S. 156.
Pp.
442 U. S.
541-543.
570 F.2d 1376, reversed.
MARSHALL, J., delivered the opinion of the Court, in which all
other Members joined, except STEWART, J., who took no part in the
consideration or decision of the cases.
Page 442 U. S. 531
MR. JUSTICE MARSHALL delivered the opinion of the Court.
Under § 7(c) of the Natural Gas Act, producers who sell natural
gas to pipelines for resale in interstate commerce must obtain a
certificate of public convenience and necessity from the Federal
Energy Regulatory Commission. [
Footnote 1] Section 7(b) of the Act obligates these
producers to continue supplying gas in the interstate market until
the Commission authorizes an "abandonment." [
Footnote 2] The principal issue presented by this
case is whether a producer may, consistent with § 7(b), ever
terminate this service obligation without obtaining the agency's
express approval.
I
The natural gas involved in this case is produced from a
163-acre tract of land located in Karnes County, Tex., and
Page 442 U. S. 532
known as the Butler B tract. In 1948, the owner of this land, B.
C. Butler, Sr., executed an oil and gas lease with W. R. Quin as
the lessee. Quin's widow contracted in 1953 to sell petitioner
United Gas Pipe Line Co. (United), for a 10-year period, all
"merchantable natural gas . . . now or hereafter" produced from the
Butler B tract. App. 7A. Because United was an interstate pipeline
company, Ms. Quin applied to the Commission for a certificate of
public convenience and necessity authorizing this sale. The
certificate issued by the Commission contained neither a time
limitation nor any designation of the depths from which the gas
would be produced.
After United installed gathering facilities on the property and
began receiving gas from a well 2,960 feet deep, the Butler B lease
was assigned several times. H. A. Pagenkopf eventually obtained the
leasehold, and, in 1961, he agreed to extend the term of United's
gas purchase contract through February 7, 1981. Upon Pagenkopf's
application, the Commission issued a new certificate in 1963,
authorizing continued service to United under the same terms as the
earlier certificate. In March, 1966, Pagenkopf assigned the Butler
B lease to a group headed by L. H. Haring, [
Footnote 3] and, shortly thereafter, the only
successful well on the property stopped producing. Haring's
operator, Bay Rock Corp., notified United some months later that
the existing wells were depleted and no other gas would be
available at that time. United replied that it would remove its
metering equipment for use elsewhere, but would reinstall the
equipment
"if, at some future date, you have further gas to deliver to us
at the above delivery point, which will be subject to the terms of
the above-captioned contract."
App. 8A-9A. Despite the Commission's subsequent warning that §
7(b) required the filing
Page 442 U. S. 533
of an abandonment application if no further sales were
contemplated, Haring never sought the Commission's authorization
for abandoning service to United. [
Footnote 4]
During 1971 and 1972, Haring divided the Butler B leasehold
horizontally and vertically, and he assigned to a group headed by
respondent McCombs a working interest in the eastern 113 acres of
the tract between the depths of 6,500 and 8,653 feet. A few months
later, the group acquired a similar interest in the entire Butler B
tract from depths of 8,700 to 9,700 feet. Drilling to these deeper
horizons, the McCombs group discovered new gas reserves. [
Footnote 5] In 1972, they contracted to
sell this gas to respondent E. I. du Pont de Nemours & Co. for
industrial uses in intrastate commerce. Upon learning of the
renewed production, however, United asserted its rights under the
1953 contract, as extended in 1961, to purchase all gas produced
from the property. When the McCombs group rejected this claim,
United filed a complaint with the Commission.
The Commission upheld the Administrative Law Judge's
determination that the McCombs group could not sell the
Page 442 U. S. 534
Butler B gas in intrastate commerce, at least through February
7, 1981. Opinion No. 740, App. to Pet. for Cert. in No. 7817, pp.
A-32 to A-33. In particular, the Commission found that the
certificates issued to the group's predecessors covered all gas
produced from the property, including the reserves discovered in
1971 and 1972. [
Footnote 6]
Because these predecessors had commenced deliveries pursuant to the
certificates, the Commission ruled that all reserves embraced by
the certificates were "dedicated" to interstate commerce, and could
not be diverted from that market without obtaining the agency's
approval under § 7(b). Noting that it had not authorized
abandonment during the 5-year interruption in service, the
Commission refused to grant its approval retroactively where, as
here, the supply of natural gas was not, in fact, depleted.
Accordingly, the Commission declared the sales in intrastate
commerce violative of the Act, and ordered delivery to United of
all gas derived from the Butler B leasehold. [
Footnote 7]
Page 442 U. S. 535
A divided panel of the Court of Appeals for the Tenth Circuit
set aside the Commission's order. 570 F.2d 1376 (1978). [
Footnote 8] The court did not dispute
the Commission's determination that all gas underlying the Butler B
tract had been dedicated to interstate commerce. However, while
acknowledging that § 7(b) expressly requires Commission approval
before a producer may withdraw dedicated natural gas from the
interstate market, the majority held that "strict compliance" with
this requirement was unnecessary here. 570 F.2d at 1381. In the
court's view, "there was no need for the formality of a Section
7(b) hearing,"
ibid., because
"the abandonment of the service in the instant case was
accomplished, as a matter of law, when all of the parties
recognized that the then known natural gas reserves were depleted
in 1966, followed by failure to provide any service under the
certificates for a period of five years, during which time there
was no evidence of other estimated gas reserves recoverable from
the subject leaseholds."
Id. at 1382 In sum, the Court of Appeals considered the
facts so clear that the abandonment issue was no longer "within the
expertise of the Commission."
Id. at 1381. The dissenting
judge found this conclusion "directly contrary to the plain terms
of § 7(b)," which mandate approval by the Commission as the sole
means of effectuating a valid abandonment.
Id. at
1382.
We granted certiorari, 439 U.S. 892 (1978), and now reverse.
II
Congress could not have been more explicit in establishing
Commission approval as a prerequisite for lawful abandonment
Page 442 U. S. 536
of service within its jurisdiction. Section 7(b) provides:
"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
abandonment."
52 Stat. 824, 15 U.S.C. § 717f(b). Not only does the statute
require companies to obtain the "approval of the Commission . . .
after due hearing," but it also prohibits abandonment absent
specific findings by the Commission. The language of § 7(b) simply
does not admit of any exception to the statutory procedure.
[
Footnote 9]
This plain meaning has been acknowledged in several of our
previous decisions. Emphasizing that the Natural Gas Act's
fundamental purpose was to assure the public a reliable supply of
gas at reasonable prices, the Court noted in
Atlantic Refining
Co. v. Public Service Comm'n, 360 U.
S. 378 (1959), that, once gas has been dedicated to
interstate commerce, "there can be
no withdrawal of that
supply from continued interstate movement
without Commission
approval."
Id. at
360 U. S. 388,
360 U. S. 389,
360 U. S. 392
(emphasis added). The Court again addressed the necessity
Page 442 U. S. 537
of obtaining the agency's permission in
Sunray Mid-Continent
Oil Co. v. FPC, 364 U. S. 137
(1960). There, the Court upheld the Commission's authority to
insist upon issuing permanent certificates of convenience and
necessity, reasoning that this power was essential to prevent
companies from circumventing the regulatory scheme. For if
producers could demand certificates of limited duration, and
thereby escape federal regulation when the certificates expire, the
abandonment procedures of § 7(b) would be rendered meaningless. 364
U.S. at
364 U. S.
142-144,
364 U. S. 148.
Of particular importance here, the Court specifically considered
the impact that depletion of gas supplies would have on a company's
obligation to seek abandonment permission. Approving the
Commission's practice of issuing certificates that extend beyond
the expected life of a given reserve, the Court stressed:
"[I]f the companies, failing to find new sources of gas supply,
desired to abandon service because of a depletion of supply, they
would have to make proof thereof before the Commission, under §
7(b). The Commission thus, even though there may be physical
problems beyond its control, [keeps] legal control over the
continuation of service by the applicants."
Id. at
364 U. S. 158
n. 25. In short,
Sunray makes clear that producers must
secure Commission approval to abandon service even when there is
little or no doubt that gas supplies are exhausted.
This Court expressed a similar understanding of the abandonment
provision in
United Gas Pipe Line Co. v. FPC, 385 U. S.
83 (1966), which upheld the Commission's determination
that a company had violated § 7(b) of the Act by unilaterally
abandoning jurisdictional facilities to avoid paying increased gas
prices. In so holding, the Court reiterated that the "statutory
necessity of
prior Commission approval, with its
underlying findings,
cannot be escaped." 385 U.S. at
385 U. S. 89
(emphasis added). We reaffirmed this interpretation of § 7(b) just
last Term in
California v. Southland
Royalty
Page 442 U. S. 538
Co., 436 U. S. 519
(1978). The lessees in
Southland had dedicated to
interstate commerce gas produced from a particular tract, but, when
the lease expired, the lessors to whom the oil and gas rights had
reverted arranged to sell the remaining gas in the intrastate
market. This Court held that even expiration of the lease did not
terminate the obligation to continue selling the gas in interstate
commerce. To conclude otherwise, we reasoned, would enable private
parties to circumvent the Commission's authority over abandonments.
And evasion of federal jurisdiction by this means could not be
reconciled with the principle that,
"[o]nce the gas commenced to flow into interstate commerce from
the facilities used by the lessees, § 7(b) require[s] that the
Commission's permission be obtained prior to the
discontinuance of 'any service rendered by means of such
facilities.'"
Id. at
436 U. S. 527
(emphasis added).
Thus, we have consistently recognized that the Commission's
"legal control over the continuation of service,"
Sunray,
supra at
364 U. S. 158
n. 25, is a fundamental component of the regulatory scheme. To
deprive the Commission of this authority, even in limited
circumstances, would conflict with basic policies underlying the
Act.
Requiring Commission approval, "after due hearing," permits all
interested parties to be heard, and therefore facilitates full
presentation of the facts necessary to determine whether § 7(b)'s
criteria have been met. Contrary to respondents' assumption,
see Brief for Respondents 221, the Commission does not
automatically approve abandonments whenever production has ceased.
Indeed, the agency recently refused to grant an application where
the producer had not adequately tested for new gas reserves.
[
Footnote 10] Had the
lessees in the instant case filed an application for abandonment
between 1966 and 1971, United might well have demonstrated that
exploration
Page 442 U. S. 539
of the leasehold had been insufficient to justify finding "the
available supply of natural gas . . . depleted to the extent that
the continuance of service [was] unwarranted. . . ." § 7(b). And
the Commission might have concluded that production from deeper
reserves or other measures to restore service were feasible.
Permitting natural gas companies to bypass abandonment proceedings
simply because known reserves appear depleted would obviously
foreclose these factual inquiries. Consequently, the abandonment
determination would rest, as a practical matter, in the producer's
control, a result clearly at odds with Congress' purpose to
regulate the supply and price of natural gas.
See California v.
Southland Royalty Co., supra at
436 U. S.
526-527,
436 U. S.
529-530;
Sunray Mid-Continent Oil Co. v. FPC,
supra, at
364 U. S.
142-147.
Moreover, the obligation to obtain Commission approval promotes
certainty and reliability in the regulatory scheme. Knowledge that
termination of service is lawful only if authorized by the
Commission enables producers, prospective assignees, and other
interested parties to determine with assurance whether a particular
tract remains dedicated to interstate commerce. In contrast, the
Court of Appeals' test for
de facto abandonment would
invite speculation regarding the extent of the Commission's
jurisdiction. The confusion that would inevitably result from the
lack of clear standards as to when producers must seek Commission
approval fortifies our conclusion that Congress intended agency
supervision of all abandonments
III
Respondents maintain that, even if producers must always obtain
Commission approval for abandonment, the decision below should
nevertheless be affirmed. In their view, the Court of Appeals
actually concluded that the Commission had erred as a matter of law
by refusing to authorize an abandonment retroactively. Assuming
this was the true purport of the decision below, we believe the
Court of Appeals lacked
Page 442 U. S. 540
authority to set aside the Commission's order on this ground.
Although respondents urged the agency to authorize an abandonment
of service from Butler B, the Administrative Law Judge and the
Commission rejected this suggestion in light of the clear evidence
that the leasehold was still capable of production. Respondents,
however, contend that, because Haring acted in good faith in
failing to seek agency approval, the Commission was obligated to
treat their answer to United's complaint as if it were an
abandonment application filed in 1966. Thus, according to
respondents, the Court of Appeals was entitled to conclude that the
Commission should have ignored the evidence of subsequent
production and authorized an abandonment based on the evidence
available in 1966.
We need not determine whether § 7(b) allows the Commission to
approve an abandonment retroactively and disregard evidence of
subsequent production. [
Footnote
11] For the agency certainly did not abuse its discretion in
declining to do so here. Authorizing abandonments retroactively
would often deprive interested parties of the opportunity to be
heard at a meaningful time and to present evidence on the
likelihood of renewing gas production in the future. Thus, the
Commission would be required to determine on a hypothetical set of
facts what action it would have taken had an application been
timely filed. Additionally, the jurisdictional status of all
dedicated acreage would become uncertain, since the property would
be subject to retroactive Commission pronouncements in the
indefinite future. Frequent retroactive action would
Page 442 U. S. 541
also undermine the statutory scheme by creating an incentive for
producers to delay seeking agency approval in the hope that they
could later establish good faith. Given this potential for
disruption of § 7(b)'s approval procedure, we believe it is within
the Commission's discretion to reject good faith alone as a
sufficient justification for determining whether the evidence
available in 1966 warranted granting an abandonment. [
Footnote 12]
IV
Finally, respondents defend the judgment below on the ground
that only the depleted shallow reserves underlying Butler B, as
opposed to the newly discovered gas, were subject
Page 442 U. S. 542
to the approval requirements of § 7(b). In their view, the
deliveries actually made in interstate commerce, rather than the
certificates of public convenience and necessity, define the
"service" that may not be abandoned without Commission approval.
Although deliveries were once made from a reservoir approximately
2,900 feet deep, the "separate and distinct" gas from the deeper
reservoirs was never delivered into interstate commerce. Thus,
according to respondents, the current production is not subject to
the requirements of § 7(b), even though the certificates of public
convenience and necessity cover all reservoirs located on Butler B.
[
Footnote 13]
Our prior decisions compel rejection of this narrow statutory
interpretation. In
California v. Southland Royalty Co., we
expressly agreed with the Commission that the "initiation of
interstate service pursuant to the certificate
dedicated all
fields subject to that certificate." 436 U.S. at
436 U. S. 525
(emphasis added). And as the Court emphasized in
Sunray
Mid-Continent Oil Co. v. FPC, "
once so dedicated, there
can be no withdrawal of that supply from continued interstate
movement without Commission approval.'" 364 U.S. at 364 U. S. 156,
quoting Atlantic Refining Co. v. Public Service Comm'n,
360 U.S. at 360 U. S. 39.
[Footnote 14]
Page 442 U. S. 543
Applying these principles, the Commission determined that all
reserves underlying Butler B were dedicated to interstate commerce
pursuant to the certificates it had issued in 1954 and 1963,
see supra at
442 U. S. 534,
and n. 6, and therefore were subject to the requirements of § 7(b).
There being ample factual and legal justification for the
Commission's conclusions,
see Sun Oil Co. v. FPC,
364 U. S. 170
(1960), we hold that § 7(b) requires respondents to continue
supplying in interstate commerce all gas produced from the
leasehold until they properly obtain permission for
abandonment.
The judgment of the Court of Appeals is
Reversed.
MR. JUSTICE STEWART took no part in the consideration or
decision of these cases.
* Together with No. 78-249,
Federal Energy Regulatory
Commission v. McCombs et al., also on certiorari to the same
court.
[
Footnote 1]
52 Stat. 825, as amended, 15 U.S.C. § 717f(c).
See Phillips
Petroleum Co. v. Wisconsin, 347 U. S. 672
(1954). Pursuant to the Department of Energy Organization Act, 91
Stat. 565, the regulatory functions at issue here were transferred
from the Federal Power Commission to the Federal Energy Regulatory
Commission, effective October 1, 1977.
[
Footnote 2]
Section 7(b), 52 Stat. 824, 15 U.S.C. § 717f(b), provides:
"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
abandonment."
[
Footnote 3]
Although Haring advised United that he would apply to the
Commission for a successor producer certificate, no application was
ever filed. App. to Pet. for Cert. in No. 717, pp. A-6 to A-7.
[
Footnote 4]
The Secretary of the Commission wrote Bay Rock in January, 1971,
that it would be necessary to file an application for permission to
abandon service and a notice of cancellation of rate schedule.
Id. at A-100 to A-101. This letter also directed the
lessee to submit either a copy of any agreement with United
canceling the gas purchase contract or a statement from United
"indicating its position with respect to the proposed abandonment."
Ibid. The Secretary had written a similar letter to
Pagenkopf in August, 1968, but he, too, failed to respond.
Id. at A-97 to A-98.
[
Footnote 5]
In addition to the Butler B interests, the McCombs group also
owned an interest in an adjoining tract of land. In order to
operate both tracts as a single entity, the group "unitized," or
combined, their interests in Butler B with those in the
corresponding depths of the adjacent tract. As a result, a fraction
of the production from each of four successful wells located on the
total unitized acreage is attributable to the Butler B leasehold
for purposes of the gas purchase contract and the Commission's
certificates.
Id. at A-8 to A-10.
See generally 6
H. Williams & C. Meyers, Oil & Gas Law 2-3 (1977 ed.).
[
Footnote 6]
In determining the scope of Pagenkopf's certificate, the
Commission analyzed separately the depths covered and the duration
of the obligation to sell gas in interstate commerce. The
Commission based its conclusion that the certificates encompassed
all reservoirs on the absence of any reference to particular depths
in either the applications for certification, which incorporated
the contract with United, or in the certificates issued Pagenkopf
and Ms. Quin. App. to Pet. for Cert. in No. 78-17, pp. A-29 to A35.
Referring to the same documents, the Commission interpreted
Pagenkopf's certificate to encompass all gas produced from wells
drilled before the contract's expiration date, even if the gas is
extracted after February 7, 1981.
Ibid. However, the
Commission refused to consider whether the certificate also covered
gas produced from wells drilled after the contract's expiration
date.
Id. at A-33, and n. 28;
see Sun Oil Co. v.
FPC, 364 U. S. 170
(1960). Since the parties have not challenged here these findings
on duration, we express no view on the Commission's ruling
concerning production beyond 1981.
[
Footnote 7]
The Commission did not address the validity of United's gas
purchase contract. McCombs has raised that issue in a separate
suit, which is being held in abeyance pending completion of this
litigation.
McCombs v. United Cas Pipe Line Co., No.
SA-73-CA-210 (WD Tex., filed Aug. 2, 1973).
[
Footnote 8]
The Court of Appeals rendered this decision on rehearing after
withdrawing an earlier opinion by a different panel.
See
542 F.2d 1144 (1976).
[
Footnote 9]
Although Congress has recently revised the federal scheme for
regulating natural gas,
see the Natural Gas Policy Act of
1978, 92 Stat. 3351, that legislation does not affect the outcome
of this case. With certain exceptions not relevant here, gas
reserves dedicated to interstate commerce before November 8, 1978,
remain subject to § 7(b) of the Natural Gas Act.
See §§
2(18), 104, 106(a), and 601(a) of the Natural Gas Policy Act, 92
Stat. 3354, 3362, 3365, 3409, 15 U.S.C. §§ 3301(18), 3314, 3316(a),
3431(a) (1976 ed., Supp. III); S.Conf.Rep. No. 95-1126, pp. 71-72,
82, 84 85, 123-124 (1978); H.R.Conf.Rep. No. 95-1752, pp. 71-72,
82, 84-85, 123-124 (1978).
[
Footnote 10]
See Texaco, Inc., FERC, Docket Nos. G-8820
et
al., Order Granting Petition for Reconsideration and Modifying
Prior Order (Nov. 1, 1977).
[
Footnote 11]
Respondents contend that the Commission recently approved a
retroactive § 7(b) abandonment in
Arkansas Louisiana Gas
Co., FPC Docket No. CP76-329 (Mar. 8, 1977). In that case, a
certificated pipeline had agreed to sell excess gas, but its supply
became depleted in 1971. Although the pipeline did not seek
abandonment permission until 1977, the Commission approved the
abandonment because the supply of excess gas was still depleted,
and there was no likelihood of obtaining additional gas. The
agency's decision therefore had no retroactive impact.
[
Footnote 12]
Relying on four lower court decisions that did not involve §
7(b), respondents argue that the Commission was required to approve
abandonment retroactively here. None of these cases, however,
supports respondents' contention that the Commission abused its
discretion in this suit. In
Ellwood City v. FERC, 583 F.2d
642 (CA3 1978),
cert. denied, 440 U.S. 946 (1979), and
Niagara Mohawk Power Corp. v. FPC, 126 U.S.App.D.C. 376,
379 F.2d 153 (1967), the Courts of Appeals found no abuse of
discretion in the Commission's decision to give retroactive effect
to certain rate schedules and licensing orders. Accordingly,
neither decision addresses whether the Commission was required to
exercise its discretion in this manner. Moreover, retrospective
action was taken in
Niagara Mohawk to prevent the utility
from benefiting by its failure to comply with the law, a
consideration that militates against granting retroactive approval
in the instant action.
Plaquemines Oil Gas Co. v. FPC, 146 U.S.App.D.C. 287,
450 F.2d 1334 (1971), merely held that, once the Commission chooses
"to regard as being done that which should have been done,"
id. at 290, 450 F.2d at 1337, it must apply this principle
consistently within the same case. Finally,
Highland Resources,
Inc. v. FPC, 537 F.2d 1336 (CA5 1976), involved a producer
that, relying on a published order of the Commission, failed to
submit certain rate applications. After the agency changed its
filing requirements, the producer promptly tendered the appropriate
papers. The Commission nevertheless refused to give the application
retroactive effect. The Court of Appeals set aside this aspect of
the Commission's order, holding that a producer should not be
penalized for its reliance on the agency's own pronouncements.
There was no such reliance, however, in the present litigation.
See n 4,
supra.
[
Footnote 13]
Since the Commission and lower federal courts have held that §
7(b) prohibits abandonment of service without agency approval even
where the producer has not obtained a certificate,
see, e.g.,
Cumberland Natural Gas Co., 34 F.P.C. 132 (1965);
Mesa
Petroleum Co. v. FPC, 441 F.2d 182 (CA5 1971), respondents
contend that § 7(b)'s reference to "service rendered" can never be
measured by the certificate of public convenience and necessity.
See n 2,
supra. Respondents, however, misperceive the basis for
these decisions. Because a company may not circumvent the
regulatory scheme by failing to comply with the certification
requirement, the Commission must, in such cases, rely on sources
other than a certificate to ascertain the scope of a dedication in
interstate commerce. These cases obviously do not preclude the
agency from referring to certificates when they exist.
[
Footnote 14]
The agency's decisions have reflected a similar understanding of
§ 7(b). For example, in
Cumberland Natural Gas Co., supra,
where the producer had not yet obtained a certificate of
convenience and necessity, the Commission held that "dedication of
reserves for sale in interstate commerce occur[red] at least as
soon as deliveries commenc[ed]" from any part of the 9,000-acre
leasehold contractually committed to an interstate pipeline. 34
F.P.C. at 136. Accordingly, the agency required that all gas
subsequently produced from the entire dedicated leasehold, even if
discovered after the dedication, be sold in interstate commerce
until the Commission approved an abandonment.
Id. at
136-137.
See also Pioneer Gathering System, Inc., 23
F.P.C. 260, 263 (1960);
Murphy Oil Corp. v. FERC, 589 F.2d
944 (CA8 1978);
Mitchell Energy Corp. v. FPC, 533 F.2d 258
(CA5 1976).