Sunray Mid-Continent Oil Company v. Federal Power Commission – Oral Argument – April 27, 1960

Media for Sunray Mid-Continent Oil Company v. Federal Power Commission

Audio Transcription for Oral Argument – April 26, 1960 in Sunray Mid-Continent Oil Company v. Federal Power Commission

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Earl Warren:

— Commission.

Mr. Wahrenbrock.

Howard E. Wahrenbrock:

May (Inaudible).

I would like to address myself to a question which arouse during the argument of these two Federal Power Commission certificate cases yesterday, that I think presents a good point of departure.

And that is, how does Section 7 (b) affect the Commission’s certificating power?

And I — I would answer that further by saying that it makes clear that there are two questions for the Commission to answer in considering an application for a certificate limited to the term of the contract.

The first question is, does public convenience and necessity require the sale?

And the second question is, does public convenience and necessity permit its termination at the end of the contract?

There was evidence in this Sunray case, that the Pipeline United needed the gas.

Pipeline sells 1,247,000,000,000 cubic feet of gas each year.

To maintain its reserves of gas, it has to acquire additional reserves each year equal in amount to that, that it sells each year.

This gas involved in these contracts represents an estimated reserve of about 123,300,000,000 cubic feet and that’s about one-tenth of what United needs each year, if it’s to keep its reserves up to where they have been.

Now, that was the nature of the evidence that was in this record as to the need for the gas, need for the sale.

But what was the evidence as to the — that the public convenience and necessity would require or permit the termination of the sale?

Was there any evidence?

The answer is substantially, none.

The examiner described the testimony of the witnesses on that point and he summarized that in the — in the following language, the factual accuracy of which has not been challenged.

He said that it might fairly be summarized by saying that those applicants and he was referring to Sunray and another, that has not perfected a review that those applicants would prefer not to be subject to regulation.

That was the sum and substance of their testimony.

But the Commission instead of denying the whole package because there had not been any evidentiary showing in support of the termination of the sale, which it could have done, as Mr. Justice Whittaker pointed out in some of his questions, instead of doing that and just taking a negative attitude allowing the applicant to come back and come back and come back until they found out something that could be granted, the Commission said, “We will grant an — an indefinite term certificate.”

And it granted it.

Meaning, that the applicant was free to accept it or not.Under the Commission’s regulation, the applicant has a period of time within which to accept the certificate.

It doesn’t have to.

It wasn’t compelled to.

And under protest, it did here, under protest, in reserving its right to question this, raise this question.

It did actually accept and has — and the sale has started, reserving its right to question.

And the Commission accepted that acceptance or acquiesced in that acceptance upon the specific understanding that if the Commission’s order was not set aside, Sunray could not abandon that sale at any time.

It could not abandon it without complying with 7 (b).

So that gas is now being sold.

Sunray says that there aren’t two questions.

Howard E. Wahrenbrock:

There’s only one question.

That question is, if we understand its argument, is the sale required by public convenience and necessity?

That is, is it required for whatever term the applicant has contracted and proposes in its application?

Is — is that sale required?

The Commission says that the sale which is authorized to be certificated is this — because of 7 (b), is a — a continuing flow, the continuing open-ended selling of the gas.

That’s — that’s what can be granted.

That’s what is applied for.

That was — is what must be considered to be applied for.

That is what it will pass on, if there is anything more, if there is determination, then that must be separately passed on either — and you can analyze it either way you want to by saying that it’s an anticipation of the 7 (b) permission to terminate, or you can say that it’s a condition which the Commission is authorized to impose under Section 7 (e), the terms of which provide that the Commission may impose any conditions it finds required by the public convenience and necessity.

So, in the Commission’s point of view, two things had to be proved, had to be shown.Only one was, it offered the kind of certificate that that permitted.

Now, the question then was also asked, whether what difference it would make if the Commission’s position which it here took was not affirmed, if the Commission could not do what it purported to do in these cases.

And Mr. Justice Black’s questions about the procedural disadvantages to rate regulation if the — particularly, if a shorter term contract were involved and particularly if it got down to one that could be terminated on 30 days notice, the impossibility of effectively regulating rates and particularly even in middle length term contracts of using Section 5 (a) instead of 4 (d) with its more effective protection to consumers.

That’s — that’s a large part of our answer to the question of what difference it would make.

But beyond that, even if all of the contracts continued, that were sought, brought before the Commission, continued to be 20-year term contracts, even if Mr. Richter is right in his estimate of how large a proportion of the contracts that are presently under certificate are 20-year contracts.

Still, the 20-year contract presents a very serious — further difficulty.

If applicants like Sunray can obtain 20-year contracts, limited term certificates, under such circumstances or if companies like Sun in the preceding case could treat their indefinite terms certificates for 10 or 20 years as limited term certificates, it would mean that at the end of the term, they do not have to comply with 7 (b).

They’ve already received their authorization.

And if they do not have to comply with 7 (b) at that type, if they may then may automatically terminate, that means that their purchaser, their pipeline with its fixed obligations is left without that future supply of gas, what gas remains there until those reserves have been completely depleted.

A natural gas is an exhaustible resource, of course.

And while pipelines are growing, new discoveries of gas are not increasing as rapidly as would be necessary to maintain the ratio of reserves to net production.

And a continuance of the trend of the last two or three years of new discoveries in relation to net production could make pipelines hard to fill long before the end of 20 years.

If Sunray and others are free to abandon their sales such as this to United from the — from the production properties involved here, where United has built its pipeline in to take the gas, United will have to go out into the market and compete with others for the continuation of that supply or for a substitution for that supply and compete in a market which is bound at the end of — by — before the end of 20 years to be a short-supply market, unless we cannot rely upon present trends.

That market will include sellers who are free of federal regulation and the demand for gas will make it extremely difficult for a regulation to keep prices down.

Capital type of price conditions can be imposed when the applications are brought before us.

But if the sellers can sell their market elsewhere for high prices, those conditions will merely drive the gas out of the interstate market.

Sunray’s arguments in this case with amazing frankness tend strongly to confirm this.

For Sunray frankly espouses its business interest, its legitimate business interest as it calls it, its business interest in being free at the expiration of its contract term to reconsider whether it will continue to sell its gas.

It is scarcely an exaggeration to say that this is a polite way of saying it wants to be free to use its economic power to the fullest.

Charles E. Whittaker:

(Inaudible)

Howard E. Wahrenbrock:

Not if the Commission is wrong in the position it took here.

Howard E. Wahrenbrock:

They would be completely free if — if Sunray can abandon at the termination of its contract, then Sunray is completely free to sell in intrastate commerce without the let or leave of the Federal Power Commission.

Charles E. Whittaker:

Have you (Inaudible) the supply to resale to interstate commerce and not leave the whole of the supply?

Howard E. Wahrenbrock:

It means until they can get 7 (b) permission and the two criteria, the alternative criteria for giving them 7 (b) permission to abandon — are — the two criteria are.

First, that the available supply of gas has become depleted.

And second or alternatively, that the public convenience and necessity permit the abandonment.

There is nothing to prevent them under the Commission’s theory from coming in a year or 20 or 50 years later in asking for permission under those circumstances, if they can make either of those showings.

Charles E. Whittaker:

(Inaudible)

Howard E. Wahrenbrock:

Not to sell the same gas, of course, but they could sell different quantities from the same field certainly, certainly.

Charles E. Whittaker:

(Inaudible) so that once you have permitted some gas to resale in (Inaudible) if you stop it.

Howard E. Wahrenbrock:

I’m — I’m glad to understand what was — it’s — it is the continuance of the kind of sale that is being made, the continuance of that sale in this place of — of the — of the gas that can be produced from the acreage that is here involved, from that acreage.

This contract was to sell the gas that could be produced from that acreage.

Now, I — I don’t want to be held to all of these because of the complicated definition, but whatever the definition of gas being sold, it’s that sale which is committed and not whatever else they may have elsewhere.

Charles E. Whittaker:

It couldn’t sell from the same, say (Inaudible) the gas from (Inaudible)

Howard E. Wahrenbrock:

Certainly, take the — the simplest kind of — of a contract that I can think of at the spur of the moment.

A producer says, “I’ll sell you 10,000 cubic feet of gas per day or hour,” whatever it is.

That’s all that’s committed to interstate commerce.

He can sell it to somebody else out of the same well, 10,000 cubic feet of gas per day or hour, whatever it is.

Nothing to prevent.

It’s the gas which he has contracted to sell, that sale which is committed to the public service.

Hugo L. Black:

Your idea is, as I gather, is — is the Commission or statute —

Howard E. Wahrenbrock:

That the Commission —

Hugo L. Black:

— gives the — the statute gives that power in order to provide for stability to the interstate people who have bought the gas and then otherwise, they’re likely completely cut off.

Howard E. Wahrenbrock:

Exactly, exactly.

Hugo L. Black:

Well, now, that’s — that’s —

Howard E. Wahrenbrock:

The public has become dependent upon that supply.

Hugo L. Black:

That’s a good argument so far as the merits of it is concerned.

I’m sure.

What is the basis of it in the statute that authorize it, from your standpoint —

Howard E. Wahrenbrock:

7 — 7 —

Hugo L. Black:

(Voice Overlap)

Howard E. Wahrenbrock:

— Section 7 (b) which says that no facilities subject to the jurisdiction of the Commission or service rendered by means thereof shall be abandoned without having first obtained the Commission’s permission and approval.

Hugo L. Black:

And, of course, if after 10 years, the local demand should become such that they could withdraw all that was then in interstate commerce, I presume that people who had — industries and the people who are dependent on gas, through interstate commerce, would be left with pipelines with no gas to feed the — feed the customers.

Howard E. Wahrenbrock:

Exactly.

And even if gas could be bought at the same price, that would mean that the pipelines that have been laid to take that gas represent a waste investment.

And that was — the basis of Judge McLaughlin’s statement in the Huber case, which we quote in our brief in which he points out the — the losses that would be involved in that duplication of facilities and the pipeline having to go elsewhere to get a supply to continue to carry its public utility.

Hugo L. Black:

Do you depend entirely on 7 (b) or do you depend at all on the general plan and purpose of the Act to provide for continuity of service at reasonable rates in the interstate commerce?

Howard E. Wahrenbrock:

Well, I think that 7 (b) represents the apex of that — the implementation of that policy.

We think that policy is consistent with the policy declaration in Section 1 (a) and with the — the provisions of Section 1 (b) which state what is subject to the Commission’s jurisdiction, both of which make the regulation dependent upon and applied to the sale, for resale, for ultimate distribution to the public.

It is that concept of the ultimate use that’s being made of the gas that seems to inform the general provisions and the specific provision about not abandoning service.

Hugo L. Black:

The same argument you’re making, of course, I don’t know whether it fits this statute.

It’s the same type of argument that has been made in connection with street railway service, bus service, railroad service and other public utility services where the — the matter is taken over under regulations by the Government.

(Voice Overlap) —

Howard E. Wahrenbrock:

That — that is what I was attempting to suggest earlier in my argument when I said it’s this usual utility, public utility concept of dedication to the public service.

Felix Frankfurter:

I might say I don’t quite understand because the power to — the requirement or the — the considerations for securing an abandonment within the desired 20 years isn’t shut off because they have a certificate for 20 years, is it?

What’s the bar —

Howard E. Wahrenbrock:

If they —

Felix Frankfurter:

— the bar abandonment within 20 years if that’s what the Commission thinks is desirable or publicly important although they gave it for 20 years?

Howard E. Wahrenbrock:

There is nothing so —

Felix Frankfurter:

The same section that you rely on allowing abandonment.

Howard E. Wahrenbrock:

There is — there is nothing in the statute which prohibits abandonment.

They may still have some contractual questions.

Felix Frankfurter:

That’s — that’s not your concern.

Howard E. Wahrenbrock:

No.

That’s why this issuance of a — of a certificate does not mean that it — so far as the Power Commission may not be abandoned.

That question is not foreclosed one way or the other.

Now, that question is open and remains open.

The fact that the Commission has —

Felix Frankfurter:

But it bears on the argument that they can grant a certificate for 20 years.

If your argument is that this cuts in to the power of the — the public interest in securing abandonment within the 20 years, I don’t follow the argument, if that’s your argument.

That you say this all derives from the — the Section 7 relating to abandonment.

Felix Frankfurter:

Is that right?

Howard E. Wahrenbrock:

Yes, sir.

Felix Frankfurter:

Well, how does it?

Howard E. Wahrenbrock:

In this.

That if the Commission were to grant a limited term certificate as claimed by our opponent, then that would carry with it, that’s what they claimed, the — the right to abandon without having to comply with 7 (b) at the end.

Felix Frankfurter:

Well, but you don’t have to yield to that argument in order to yield with the other part of the argument.

Howard E. Wahrenbrock:

We — we may not have to but we do regard, if we grant a limited term certificate, it carries with it the right to terminate.

The finding is the same, we feel, in either case.

If we’re going to grant a limited term certificate, we have to find first that the sale is necessary.

Second, that its termination is permitted by the public convenience and the necessity which to say that you’ve already made the finding which 7 (b) would have required in any event.

So, you’ve already committed yourself in that (Voice Overlap) —

Felix Frankfurter:

Well, I understand that — that I quite appreciate that you may find as a fact in a particular situation, the public interest does not recommend or make desirable a 20-year certificate.

I understand that, but that isn’t the position of the Commission.

As I understand it, your position is that you will not, as a matter of rule, grant a term firmly, unless some very special consideration is shown in a particular case or do I misconceive your argument, what you told us yesterday?

Howard E. Wahrenbrock:

I tried [Laughs] — express that in terms of — that’s been perhaps the net effect of what the Commission has been doing.

But in each case, the Commission has not excluded evidence as permitted evidence that would show that the termination at the time requested, 20 years, 10 years that —

Felix Frankfurter:

That if they ask of the applicant has to show.

Howard E. Wahrenbrock:

That’s right.

Felix Frankfurter:

Now, therefore, the starting point, the — the postulate with which the controversy begins is that you will not grant it.

And that must presuppose some rule of policy by the Commission.

Howard E. Wahrenbrock:

Because the burden is on the applicant who seeks an authorization, and this is a dual authorization, to make the sale and to stop the sale.

The burden is on — upon an applicant who seeks such authorization to support it to the extent of showing that the public convenience and necessity require the sale and the termination.

Felix Frankfurter:

Yes, but you — but implied in this case is a doctrine by you or a rule by the Commission that, we will not grant this application for 20 years unless you show us some special consideration.

And therefore, I say —

Howard E. Wahrenbrock:

I don’t see —

Felix Frankfurter:

— the real question in this case, as I understand it, is whether you have the right under that statute to make such a rule when the statute doesn’t make such a rule.

Howard E. Wahrenbrock:

I — I cannot accept the imputation of a — of a doctrine or a necessity for a special showing.

There’s no — there’s nothing more than there is in — in the case of any other authorization that is being sought (Voice Overlap) —

Felix Frankfurter:

I didn’t mean that you discriminated against the —

Howard E. Wahrenbrock:

No.

Felix Frankfurter:

— particular —

Howard E. Wahrenbrock:

No.

Felix Frankfurter:

— applicant —

Howard E. Wahrenbrock:

No.

Felix Frankfurter:

— there was no (Voice Overlap) —

Howard E. Wahrenbrock:

No, I’m — I’m not trying to — I’m not suggesting that.

Felix Frankfurter:

All I meant to say is that as I understand this, if a commission says when a fellow applies to his certificate, show us a good reason why it should be 20 years that that presupposes a general doctrine or general rule or general practice, call it what you will, by the Commission not to grant a term certificate.

How can it be not?

Howard E. Wahrenbrock:

I suppose I’m missing something in the language between this because it seems to me that when the Commission recognizes that if it grants a limited term certificate now, it will be deciding now that the service may be abandoned 20 years hence.

Hence, it should have the showing now, which it would otherwise get 20 years hence.

Felix Frankfurter:

I don’t intend to interrupt.

Why does it imply that if you say the law disallows them to abandon, no matter what the term is, as the previous case indicates.

No matter what the new contract is.

They cannot divest themselves of the dedication which they undertook when they got a certificate.

Howard E. Wahrenbrock:

They cannot divest themselves, except by a finding at the — either at the time they want to terminate or a finding in advance if they want it now, that the public convenience and necessity will permit that abandonment.

Let’s — we leave out depletion for the moment.

Public convenience and necessity will permit that abandonment.

If they want it —

Felix Frankfurter:

The statute says they can’t abandon it unless you — their undertaking, unless you give them permission, at any time.

Howard E. Wahrenbrock:

That’s right but —

Felix Frankfurter:

I mean it is —

Howard E. Wahrenbrock:

That’s right, but — but we must give them that permission, if they showed that the public convenience and necessity permit it.

And it is only that which we may — whether we consider it then or now may use as a basis for granting that permission.

If we grant it now, we grant it without having enough facts to really know if we wait and we say, “We don’t have enough facts.

You haven’t made the showing now,” and that’s what most of these cases are, you haven’t made the showing, but that’s — you’re still free to come in at the end of your term or anytime during your term and say, “Now, you can show it.”

“All right, if you can show it then you get it.”

Hugo L. Black:

If you grant them the kind of certificate — I’m not — I’m a little confused now by the question of Justice Frankfurter and your answer.

If you — I understood that they wanted the right or limited terms squared on the theory that when that was over with, you could not compel them to continue.

They would have fully performed their agreement upon the basis on which you permitted them to have the services to make this contract temporary in nature.

Howard E. Wahrenbrock:

Yes.

Hugo L. Black:

Now, is it your idea that at the end of the 20 years, that they might — what their position they are holding, might be held to be the correct one under the statute?

That if you grant them that limited term right, they own this contract.

And when they get through, they can say, “Well, now, we’re not going to let you — you don’t have any more unless you accept the contract that if we won’t pay —

Howard E. Wahrenbrock:

If —

Hugo L. Black:

— as in the public interest.

Is that your position?

Howard E. Wahrenbrock:

— if at the time the application were filed, they were asking for, as Sunray clearly is, a limited term certificate to expire at a given date and the Commission granted it, which it refused to do here, then at that time, that date arrived, they would be free to stop selling without getting any further permission or approval.

They’ve already gotten that permission.

Felix Frankfurter:

I don’t understand that.

I mean — I don’t understand that in light of your yesterday’s argument.

Howard E. Wahrenbrock:

Well, that’s what I was trying to say, if Your Honor, please.

And that’s —

Felix Frankfurter:

(Voice Overlap) —

Howard E. Wahrenbrock:

— the reason I came back to this question because I felt I’ve left that obscure and —

Felix Frankfurter:

I thought — I thought that your argument was that Section 7 involves a dedication not limited in time or not dependent on the voluntary determination of the certificate holder.

Howard E. Wahrenbrock:

Yes.

Felix Frankfurter:

That once he embarks upon supplying natural gas, you’ve got to stick to it unless the Commission, no matter his arrangement is — what is — either see arrangement with the producer or with the — that he is — he must continue in the enterprise of furnishing gas unless he gets leave of the Commission to say no.

Howard E. Wahrenbrock:

Yes.

Felix Frankfurter:

Is that right?

Howard E. Wahrenbrock:

That’s right.

Felix Frankfurter:

So why doesn’t that answer Justice Black’s question?

Howard E. Wahrenbrock:

Because —

Hugo L. Black:

I assume — maybe I — I don’t want to interrupt but I want to get counted —

Felix Frankfurter:

Quite true.

Hugo L. Black:

As I understand it, I don’t know if there’s any disagreement between you.

You’re taking the position that you do have the right under the public convenience and necessity clause to pass at the beginning on whether the public convenience and necessity justifies the making of the contract the — and the service in which they are entering.

Is that right?

Howard E. Wahrenbrock:

Yes.

Hugo L. Black:

And that when people apply on the basis of public convenience and necessity, it’s up to them to show you that the public convenience and necessity requires what they ask.

Howard E. Wahrenbrock:

Yes, sir.

Hugo L. Black:

Then as I understand it, you are careful, at least, maybe I’m wrong, maybe that’s wrong, that if having decided that the public convenience and necessity justifies you in giving them the right to operate for 20 years only that that cuts you off thereafter from your right to claim an abandon —

Howard E. Wahrenbrock:

From our right —

Hugo L. Black:

From — or to prevent an abandonment.

Howard E. Wahrenbrock:

Yes.

It cuts us off at the end of 20 years from our power to say, “You’ve got to get our approval now before you can stop.”

You —

Hugo L. Black:

You — you are careful that it will be held that your action then finally and irrevocably settles that — that public necessity question so that they can quit if they want to.

Howard E. Wahrenbrock:

Exactly.

Felix Frankfurter:

Right.

Howard E. Wahrenbrock:

Now, does that leave me [Laughs] not in the clear —

Felix Frankfurter:

Well, I understand what was — what you agreed to but it — I must — I must disabuse my mind of what I heard all day yesterday —

Howard E. Wahrenbrock:

Well, I’m afraid from —

Felix Frankfurter:

— that —

Howard E. Wahrenbrock:

— some of your questions of opposing counsel but I — that I created a misapprehension, and I’m sorry.

Felix Frankfurter:

I thought that the statute, the statute created an obligation which is not terminable by the free act of the parties no matter what agreement they’ve entered into or what the terms of the certificate under which they were operating.

Howard E. Wahrenbrock:

That much is true.

Yes, sir.

That —

Felix Frankfurter:

Well, if that much is true, then they — then they can’t cut off at — at the end of 20 years.

Howard E. Wahrenbrock:

By — they can, sir, by — if Your Honor, please.

They can do it by making and showing that the public convenience and necessity permits.

Felix Frankfurter:

Well, but they can do that, they can always come to you and ask you to abandon at any time that the public convenience necessity permits or requires — suggest or makes desirable that they should quit.

Howard E. Wahrenbrock:

That’s right.

But without such a showing, they cannot — never quit and yet if we had granted a limited term certificate, they could.

Felix Frankfurter:

But that’s where I — all right.

I’ve — I’ve had my — I don’t seem to understand that.

I do not understand why, if by statute, they must go on whether they’ve got 20 years or indefinite years unless you give them permission to quit.

Howard E. Wahrenbrock:

Because we feel that when you have — we have authorized a sale for 20 years and its stoppage at end of 20 years, we have thereby authorized its stoppage.

And when we’ve authorized its stoppage, we’ve done just what 7 (b) would have required them to come in then, but we have freed them from the necessity of doing so.

Felix Frankfurter:

Let’s see if I can understand that.

Felix Frankfurter:

Does that mean that if you — if you grant a 20-year certificate, you impliedly authorize a prospective abandonment?

Howard E. Wahrenbrock:

Yes, sir.

Felix Frankfurter:

Well, why that?

That what is English language means to me.

Howard E. Wahrenbrock:

Because that is what they explicitly asked for by the question — by —

Felix Frankfurter:

Well, that’s a — that’s a — then I have misunderstood the case and the fault is all mine.

I didn’t understand that they said, “You give us a 20-year certificate and by so doing, we now ask you to let us quit at the end of 20 years.”

Howard E. Wahrenbrock:

May I just, if the Court please —

Earl Warren:

You — you may —

Howard E. Wahrenbrock:

— call attention to page 2 of our brief.

At the bottom of the page where we quote the language from the application which Sunray filed here and should have done this earlier, obviously.

Hugo L. Black:

Page 2?

Howard E. Wahrenbrock:

Page 2 of our brief, on the — the top of the page is a question presented.

At the bottom of the page is a quotation from the application.

The application requested a certificate authorizing the sale of gas covered by the contract, “To the extent and only to the extent that such gas is transported in interstate commerce for resale for the remainder of the term of said contract and as it may be renewed or extended.

And that said certificate provide for its own expiration on the expiration of the said contract term so as to authorize applicant to seize the delivery and sale of gas thereunder at that time.”

Felix Frankfurter:

Now, let me ask you this question.

Suppose that last clause were omitted, would the nature of the case before us change?

Howard E. Wahrenbrock:

The big thing becomes less clear until you get back to the kind of an application which was filed by Sun, in the first case, which they are now attempting to say, did ask for just what this explicitly asked for.

Felix Frankfurter:

I should say — I have a further problem with these provisions, Chief Justice’s permission, that if the statute — Section 7 reads as you read it, then I think no agreement between the Commission and parties can change the obligation of the statute.

Hugo L. Black:

If that were held, that would solve your problem, as I understand it, would it not?

Howard E. Wahrenbrock:

I think not, for this reason.

Hugo L. Black:

Why not?

Howard E. Wahrenbrock:

I suggested that the —

Hugo L. Black:

Suppose it were held, as to Justice Frankfurter’s suggestion, that you can’t give them a certificate that deprives of the right to — to —

Felix Frankfurter:

Require abandonment.

Hugo L. Black:

To prevent abandonment.

Why wouldn’t that get precisely what you’ve been arguing for although it might not reach it by the exact formula that you have devised?[Laughter]

Howard E. Wahrenbrock:

Well, maybe so.[Laughs]

I’m — I’m not prepared to say so.

Hugo L. Black:

It seems to me, I — I may be wrong.

Howard E. Wahrenbrock:

That may — it — it sounds —

Hugo L. Black:

I thought that it would (Voice Overlap) —

Howard E. Wahrenbrock:

— it sounds so.

Hugo L. Black:

— between you.

Howard E. Wahrenbrock:

It sounds so.[Laughs]

Hugo L. Black:

Now, as I understand it, the other side do exist.

They will have the right to abandon, notwithstanding number 7 under — under an application of this kind which is approved.

Howard E. Wahrenbrock:

Yes, sir.

Hugo L. Black:

That’s your — what you believe about it.

Howard E. Wahrenbrock:

That’s my understanding.

Felix Frankfurter:

But then that makes this a particular case.

They have not raised all the general questions but most of the times, you’ve been talking about it.

Howard E. Wahrenbrock:

Pardon?

Felix Frankfurter:

Because you say that the question isn’t before us, if they do not imply the — if by granting their request you thereby give away their duty to go on at the end of 20 years if that’s allowable under the statute.

Howard E. Wahrenbrock:

There is — there is nothing on the face of it that prevents that language I read to you from being analyzed as being a request now under 7 (b) for termination —

Felix Frankfurter:

Yes, I understand that.

Howard E. Wahrenbrock:

— 20 years in advance.

And if we did not make it explicit that we were denying it, it might be construed as being that.

Felix Frankfurter:

But my suggestion is if I were on the Commission, I would say I’d grant the certificate but cut off the last clause.

Howard E. Wahrenbrock:

Well, that is what we did.

Hugo L. Black:

You construe it as being an application for a 20-year franchise to serve the public in interstate gas with the understanding between you and the — and them.

At the end of that time, they have no more obligation and they can quit when they get ready.

Is that what you’re (Voice Overlap) —

Howard E. Wahrenbrock:

That’s what they applied.

That’s what they —

Hugo L. Black:

That’s what they are insisting.

Howard E. Wahrenbrock:

That’s what they applied for and that’s what we refused to gave them — gave them and said, “You can have a certificate —

Hugo L. Black:

You’re claiming —

Howard E. Wahrenbrock:

— but it’s an unlimited term.”

Hugo L. Black:

You’re claiming you don’t have to give that —

Howard E. Wahrenbrock:

Exactly, exactly.

Hugo L. Black:

— for whatever reason that (Voice Overlap) —

Howard E. Wahrenbrock:

And by whatever rubric you describe it or whatever analysis you reach that and so.

Felix Frankfurter:

Then, you haven’t taken care of my — or attend my third, my (Inaudible), namely, “Yes, I’ll grant it you for 20 years but I’ll cut off the provision and the certificate.

At the end of 20 years, you can quit”.

Howard E. Wahrenbrock:

Well —

Felix Frankfurter:

You have to take care of that situation.

Howard E. Wahrenbrock:

I — I think that is another way of describing what we did do.

Felix Frankfurter:

You wouldn’t have to do that in the other case, would you, because they didn’t apply for it?

They are claiming that without a — without that language, they’re entitled to get what (Voice Overlap) —

Howard E. Wahrenbrock:

That’s right and we say we did not do it then, that they didn’t really ask us for it there.

Felix Frankfurter:

Well, then this case should be decided that by saying, the certificate, as it was asked, both for 20 years and for a committed abandonment at the end of 20 years, was properly disallowed.

Howard E. Wahrenbrock:

Exactly.

Felix Frankfurter:

I mean just at that?

Let me —

Howard E. Wahrenbrock:

Exactly, but we felt —

Felix Frankfurter:

Let me take care of the situation I put to you.

Howard E. Wahrenbrock:

Now, let me say this reason —

Felix Frankfurter:

That’s all right then.

Howard E. Wahrenbrock:

— for granting the certificate that we did.

These people had gas.

They wanted to sell it.

It was a newly developed field.

I don’t know whether there might have been leakage or drainage, if they hadn’t enough.

So the Commission gave them what it thought it could and they went ahead and acted under it.

Thank you.

Earl Warren:

Very well, Mr. Wahrenbrock.

Mr. Richter.

Hugo L. Black:

Mr. Richter, would you mind stating at the beginning whether the position he attributes to you in connection with this application as to its effect —

Melvin Richter:

Well —

Hugo L. Black:

— is correct or not?

Melvin Richter:

— our position is that we have applied for a certificate for 20 years in accordance with the terms of the contract.

That under Section 7 (e) of the Natural Gas Act that the — we have — which provides for the — the Commissioner to consider the whole or grant applications as a whole or in part, that the entire part of our application, the entirety of our application is for a certificate for 20 years.

And that the Commission here denied such an — such a certificate and instead gave us one of indefinite duration.

We go on and say further that Section 7 (b) is inapplicable here.

We have undertaken in our — we are — we will provide service for 20 years and we — we concede that Section 7 (b) does apply if we wanted this service short of 20 years.

But at the end of the 20 years, that is the term of which we have applied for and we are — that’s our — our understanding is we could terminate service.

Hugo L. Black:

You can quit?

Melvin Richter:

We can quit.

Hugo L. Black:

Go on or not if you choose.

Melvin Richter:

That’s right.

Felix Frankfurter:

Now, suppose — suppose the — the last clause, that — the one we’ve read, the one we’ve read on page 2 or 3 of his brief were out to the extent and only to the extent that (Inaudible) —

Melvin Richter:

Well, that won’t make — that’s just there for —

Felix Frankfurter:

Now, do you —

Melvin Richter:

— repetitive language.

We — we have — oh, I’m sorry.

Felix Frankfurter:

Do you say that if you were granted a certificate for 20 years, nothing is said about expiration, but that by a force of the limitation of 20 years, you could quit at the end of 20 years and not require and it would not entail an abandonment proceeding under 7?

Melvin Richter:

That’s right, sir.

Felix Frankfurter:

Because you say that 7, that are not made, make it a continuous duty once you’ve begun to go on until you get permission to stop.

Melvin Richter:

That’s right.

That 7 (b), it’s — well, actually, a much more limited provision than Mr. Wahrenbrock would make it out to be.

In this connection, I would —

Felix Frankfurter:

But suppose that turns on what 7 (b) means.

Melvin Richter:

That’s right.

Felix Frankfurter:

Suppose he is right that 7 (b) means that you can’t quit, except by leave of the Commission.

Suppose it means that.

Then it might make a difference whether the certificate is granted, allowing quitting at the expiration of 20 years or not allowing quitting, wouldn’t it?

Melvin Richter:

Yes.

I — I won’t — then — I’m sorry.

Melvin Richter:

I don’t — I — I’m little lost.

Felix Frankfurter:

You — you construe 7 (b) not the way he construed it, the Commission —

Melvin Richter:

That’s right.

Felix Frankfurter:

— to construe it, the duty to go on no matter what the term under which you hold.

Melvin Richter:

Well, we concede that we have to provide service during —

Felix Frankfurter:

During the term.

Melvin Richter:

— the 20 years of the — of the —

Felix Frankfurter:

Yes, I understand.

Melvin Richter:

— certificate that we have.

We can’t discontinue service shy of the 20 years —

Felix Frankfurter:

I understand that.

Melvin Richter:

— without getting commission approval under Section 7 (b).

Felix Frankfurter:

But after 20 years, you disagree with the construction of 7 (b) by the Commission.

That 7 (b) disallows abandonment by certificate holder at any time no matter what period, definite or indefinite, he’s operating under, without leave of the Commission.

You contest that reading of 7 (b).

Melvin Richter:

Well, we say Section 7 (b) is not applicable here at all.

We don’t — we’re not asking for advanced authorization, as Mr. Wahrenbrock would have here to suggest, to discontinue service at the end of 20 years.

We are here under Section 7 (e) of the Act.

And Section — well, that’s the certificate provision, not 7 (b).

7 (b), the Commission — I may quote from an earlier Sunray case with the Commission’s own language, “Although Section 7 (b) precludes abandonment of service rendered by facility subject to the Commission’s jurisdiction without compliance to procedures, they have set out.”

There is nothing in that Section or its legislative history or in Section 7 (e) or 7 (c) or 7 (e) or their legislative history, to require a ruling that Section 7 (b), in anyway, restricts the power of the Commission under Section 7 (e) and 7 (c) to issue certificates of limited duration.

Felix Frankfurter:

Where is that?

Melvin Richter:

That’s in a memorandum filed by the Commission in number 814, October 10, 1956, an earlier Sunray case.

Felix Frankfurter:

You mean this is an argument they made?

Melvin Richter:

It’s in acquiescing —

Felix Frankfurter:

But we —

Melvin Richter:

Well, may I go, for a moment, back —

Felix Frankfurter:

I myself take (Inaudible) what lawyers constantly do here, dig out some old brief by — when — an opposing side, when it suited him to make an ad hoc argument one way as against what they make now.

Melvin Richter:

No.

Felix Frankfurter:

I think that’s, myself, very bad professional practice, if you want to know that.

Melvin Richter:

Well, sir, may I go into the history of this — that case just for a moment?

In that case, the — that was the first Sunray case in which the Commission — Sunray signed a certificate of limited duration.

The Commission in that case held flatly that they had no authority to issue a certificate of unlimited — of — of limited duration.

They said 7 (b) precluded them from doing it.Sunray took them to the Tenth Circuit and demonstrated, beyond any doubt, that the Commission had in the past been issuing certificates of limited duration.

The various cases they now cite to the Court has demonstrating a consistently practice on the matter.

The Tenth Circuit went ahead and held that the Commission does have authority to issue certificates of limited duration and then affirmed the Commission’s order on other grounds.

Sunray applied for certiorari and the document I just read from is a memorandum, submitted by the Solicitor General, acquiescing in reversal of the — of this Tenth Circuit’s opinion.

You don’t have no right to continue after the expiration of your certificate.

Melvin Richter:

No.

After it’s — it’s a new transaction after the 20 years.

And what if the Commission is saying in effect, as I understand it, is that in order to keep you in the business under Section 7 (b), they must give you an unlimited certificate so that they can prevent your getting out of the business —

Melvin Richter:

Yes, and they —

— at any time in the future?

Melvin Richter:

And a time that Mr. Wahrenbrock has just painted a — a very black picture about the discoveries of gas and how at the end of the 20 years, that we are free to discontinue.

There’ll be — there’ll be all sorts of people without gas and how bad it’ll be on the consumers.

Yet at the same time, yet at the same time, as recently as last August, August 10, 1959, in the Transwestern Pipeline Company case, the Commission authorized the construction and operation of $192,000,000 project, $192,000,000 project whether the reserves at the — the pipeline could show it only for 13 years.

And yet, they’re complaining here when we’re willing to commit ourselves for 20 years.

In another case, in the Truck Line case, issued — an opinion issued on May 22nd, 1959.

The Commission granted a certificate for an $80,000,000 project with the — the reserves that they could show was a maximum of 13 years and a minimum of 11 and a half years.

And that’s not — I — those aren’t isolated instances.

On pages 26 and 27 of our brief, we have others, with the Commission and pipeline cases.

Although they’re complaining, they’re crying here how gas is getting scarcer and how they needed an indefinite commitment from us and a 20-year commitment is not enough.

They’re issuing in pipeline cases, certificates where the gas supply is shown.

And there’s no obligation on the pipeline to get more gas.

That’s a voluntary matter so far as the pipeline is concerned.

Well, they’re issuing certificates where the gas reserves at 10, 12 years of duration.

Thank you very much, sir.