United Gas Improvement Company v. Callery Properties, Inc.

PETITIONER: United Gas Improvement Company
RESPONDENT: Callery Properties, Inc.
LOCATION: Antinook Mill

DOCKET NO.: 21
DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 382 US 223 (1965)
ARGUED: Oct 18, 1965 / Oct 19, 1965
DECIDED: Dec 07, 1965

Facts of the case

Question

Media for United Gas Improvement Company v. Callery Properties, Inc.

Audio Transcription for Oral Argument - October 19, 1965 in United Gas Improvement Company v. Callery Properties, Inc.

Audio Transcription for Oral Argument - October 18, 1965 in United Gas Improvement Company v. Callery Properties, Inc.

Earl Warren:

Number 21, United Gas Improvement Company, Petitioner, versus Callery Properties Incorporated et al., Number 22, Public Service Commission of the State of New York, Petitioner, versus Callery Properties Incorporated et al., Number 26, Ocean Drilling & Exploration Company, Petitioner, versus Federal Power Commission et al. and Number 32, Federal Power Commission, Petitioner versus Callery Properties Incorporated.

Mr. Solomon.

Richard A. Solomon:

Mr. Chief Justice, members of the Court.

These cases are here on certiorari from a decision of the Fifth Circuit Court of Appeals which in three separate respects has invalidated the established procedure and practices of the Commission in issuing certificates public convenience and necessity to natural gas producers.

These policies which were invalidated were in turn developed and adopted by the Commission in order to afford consumers the adequate protection from spiraling prices during the period required to determine just and reasonable prices and of course this was done at the directive of this Court in what I will refer to as the CATCO case but which goes under the official style of Atlantic Refining Company versus Public Service Commission and appears in Volume 360 -- starting page 378.

Now, as the Court will remember the problem arises because of the necessary considerable period of time it takes to determine the just and reasonable rates under which natural gas is to be sold by producers in the field to interstate pipelines.

In the meantime the Court said in CATCO, the Commission must take appropriate action under its certificate powers under Section 7 of the Act to prevent a runaway price bargain.

I'm pleased to advise this Court that since this matter was last before you, there has been a very great deal of progress in the area rate program itself.

The Commission has decided and is now in the courts, lower courts of course, the first major area price decision which involves the Permian Basin.

The second major case which involves the Southern Louisiana area where these particular cases happen to arise is in its final -- certainly months and I think almost days of hearing before the examiner and two other cases which when combined with the other two will account for approximately 3 quarters of all the gas moving in interstate commerce have been started and are well on their way.

But the fact that we have this progress does not mean that the interim problem which this Court dealt with in CATCO has ceased to be important.

Progress yes, but we're not at the end of this line of fixing just and reasonable prices by any means and its -- remains today just as before important that the Commission perform the function that the Court told it to perform.

Now what the Commission has done and what the lower court has told us we cannot do is two things.

In the first place we said natural gas may not enter the interstate market except at an initial starting price which is in line with the other prices paid for substantial quantities of gas at the same periods in the same area.

Leaving aside of course prices which are themselves suspect because they were in litigation at the time or subject to Commission review.

And the second part of the Commission's essential package for holding the line is that we have said while once the initial price is set you may normally exercise your authority to file for contractually authorized rate increases.

At least until we can decide the area rate proceedings.

At least until to that time or as a matter of fact the Commission has added to that a further definite cutoff but at least for a limited period.

You may not file a rate increase.

If it is above the rate which the Commissioners found would start the triggering activity with respect to all the other rates in the area.

Now the Court of Appeals upset both of these determinations.

It held the Commission couldn't fix the initial price which gas could enter the interstate market at an in line level below that called for in the producer's contracts unless we first considered a mass of material which had been presented by this in this case in which it had been presented in a number of other cases of exactly the type which is involved in the area rate case which is intended to show individual company cost and group cost and economic trends in the area all of which are calculated to show the eventual needs for a just and reasonable price level for the industry.

The Court said we have to consider all of that information in the certificate proceeding itself before we can say you can't offer it -- you can't enter the market at an in line rate.

We didn't say that you had to consider that to carry over the standpoint just to meeting the prices (Inaudible) from the standpoint of (Inaudible).

Richard A. Solomon:

That's right.

They said -- they suggest that the nature of the consideration maybe different but the weight of the problem is the same.

It's an over (Inaudible)

Richard A. Solomon:

Exactly, yes.

The standard presumably would be public interest but the work involved would be the same.

And the second thing the court held was that under the statutory scheme the Commission has no power whatsoever no matter valid or useful or valuable the reason to exercise it's conditioning authority under Section 7 of the Act to prevent even for a short time anybody from filing any rate if they have a contractual authority filed.