CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES

AT

OCTOBER TERM, 1960.

FEDERAL POWER COMMISSION v. TRANSCONTINENTAL GAS PIPE LINE CORP. ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT.

No. 45. Argued November 15, 1960.-Decided January 23, 1961.* A public utility company in New York City contracted for the direct purchase of natural gas from producers in Texas, not for resale but for consumption under its own boilers, and it arranged with a pipeline company for transportation of the gas to New York City. The pipeline company applied to the Federal Power Commission for a certificate of public convenience and necessity under § 7 (e) of the Natural Gas Act and offered proof, which was not challenged, that its application met all the conventional tests. The Commission denied the certificate after considering, inter alia, the desirability of the particular end use to which this gas would be put, the possibility of pre-emption of pipeline capacity and gas reserves by sales to industrial users, the price agreed upon, and the effect of this and similar future transactions on the price and availability of natural gas generally. Held: The Commission did not exceed its authority or abuse its discretion in denying the certificate on the basis of these considerations. Pp. 3-31.

(a) The desirability of the use to which the gas would be put and the possibility of pre-emption of pipeline capacity and gas

*Together with No. 46, National Coal Association et al. v. Transcontinental Gas Pipe Line Corp. et al., also on certiorari to the same

court.

1

reserves by sales to industrial users were properly of concern to the Commission in passing on this application. Pp. 8-22.

(b) In considering this application, it was proper for the Commission to consider the effect which the high price charged in the sale here involved would have on future field prices for natural gas. Pp. 23-28.

(c) The Commission did not err by taking cognizance of considerations dehors the record in concluding that widespread direct sales at high prices probably would result in price increases. Pp. 28-30.

(d) It cannot be said that the Commission acted irrationally in concluding that the evidence offered by the purchaser was insufficient to establish that its use of the gas was justified by the need to reduce air pollution. P. 30.

271 F. 2d 942, reversed.

Solicitor General Rankin argued the cause for petitioner in No. 45. With him on the briefs were Assistant Attorney General Doub, Alan S. Rosenthal, Anthony L. Mondello, John C. Mason, Howard E. Wahrenbrock, Robert L. Russell, David J. Bardin, Samuel D. Slade and Willard W. Gatchell.

Jerome J. McGrath argued the cause for petitioners in No. 46. With him on the brief were Robert M. Landis, Robert E. Lee Hall and Welly K. Hopkins.

Randall J. LeBoeuf, Jr. and Richard J. Connor argued the cause for respondents. With them on the briefs were John T. Miller, Jr., James B. Henderson, William N. Bonner, Jr., Thomas F. Brosnan, Seymour B. Quel and Francis I. Howley.

Briefs of amici curiae, urging reversal in No. 45, were filed by William M. Bennett for the State of California et al.; T. J. Reynolds, L. T. Rice, Henry F. Lippitt II, Milford Springer, Joseph R. Rensch, W. James MacIntosh, J. David Mann, Jr. and William W. Ross for the Southern California Gas Co. et al.; Paul L. Adams, Attorney General of Michigan, Samuel J. Torina, Solicitor

General, and A. C. Stoddard, Assistant Attorney General, for the Michigan Public Service Commission; and John W. Reynolds, Attorney General of Wisconsin, and William E. Torkelson for the State of Wisconsin et al.

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

The question in these cases is whether the Federal Power Commission has gone beyond the scope of its delegated authority in denying a certificate of public convenience and necessity under § 7 (e) of the Natural Gas Act of 1938, 52 Stat. 821, as amended, 15 U. S. C. § 717 et seq.1 The principal respondents 2 are Transcontinental Gas Pipe Line Corp. (Transco), a pipeline company

1 Section 7 (e), 15 U. S. C. § 717f (e), provides:

"(e) Except in the cases governed by the provisos contained in subsection (c) of this section, a certificate shall be issued to any qualified applicant therefor, authorizing the whole or any part of the operation, sale, service, construction, extension, or acquisition covered by the application, if it is found that the applicant is able and willing properly to do the acts and to perform the service proposed and to conform to the provisions of the Act and the requirements, rules, and regulations of the Commission thereunder, and that the proposed service, sale, operation, construction, extension, or acquisition, to the extent authorized by the certificate, is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied. The Commission shall have the power to attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require.”

2 In addition to the petitioning Federal Power Commission and respondents Transco and Con. Ed., several other parties have been involved in this litigation. The City of New York is a named respondent and the petitioners in No. 46 include the National Coal Association, the United Mine Workers of America, and the Fuels Research Council, Inc. Several parties have filed briefs as amici curiae in this Court, including the regulatory commissions of California, Michigan, and Wisconsin. These state commissions have argued in support of the Federal Power Commission's position.