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- Subject: MOBIL OIL EXPLORATION v. UNITED DISTRIBUTION, Syllabus
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-
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- NOTE: Where it is feasible, a syllabus (headnote) will be released, as
- is being done in connection with this case, at the time the opinion is
- issued. The syllabus constitutes no part of the opinion of the Court but
- has been prepared by the Reporter of Decisions for the convenience of the
- reader. See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
- SUPREME COURT OF THE UNITED STATES
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-
- Syllabus
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- MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC., et al. v. UNITED
- DISTRIBUTION COS. et al.
-
- certiorari to the united states court of appeals for the fifth circuit
-
- No. 89-1452. Argued November 5, 1990 -- Decided January 8, 1991 {1}
-
- In response to ongoing natural gas shortages, Congress enacted the Natural
- Gas Policy Act of 1978 (NGPA), which, inter alia, established higher price
- ceilings for "new" gas in order to encourage production and carried over
- the pre-existing system of "vintage" price ceilings for "old" gas in order
- to protect consumers. However, recognizing that some of the vintage
- ceilings might be too low, Congress, in MDRV 104(b)(2) of the NGPA,
- authorized the Federal Energy Regulatory Commission to raise them whenever
- traditional pricing principles under the Natural Gas Act of 1938 (NGA)
- would dictate a higher price. After the new production incentives resulted
- in serious market distortions, the Commission issued its Order No. 451,
- which, among other things, collapsed the existing vintage price categories
- into a single classification and set forth a single new ceiling that
- exceeded the then-current market price for old gas; established a "Good
- Faith Negotiation" (GFN) procedure that producers must follow before they
- can collect a higher price from current pipeline customers, whereby
- producers may in certain circumstances abandon their existing obligations
- if the parties cannot come to terms; and rejected suggestions that the
- Commission undertake to resolve in the Order No. 451 proceeding the issue
- of take-or-pay provisions in certain gas contracts. Such provisions
- obligate a pipeline to purchase a specified volume of gas at a specified
- price, and, if it is unable to do so, to pay for that volume. They have
- caused significant hardships for gas purchasers under current market
- conditions. On review, the Court of Appeals vacated Order No. 451, ruling
- that the Commission lacked authority to set a single ceiling price for old
- gas under MDRV 104(b)(2) of the NGPA; that the ceiling price actually set
- was unreasonable; that the Commission lacked authority to provide for
- across the board, preauthor ized abandonment under MDRV 7(b) of the NGA;
- and that the Commission should have addressed the take-or-pay issue in this
- proceeding, even though it was considering the matter in a separate
- proceeding.
-
- Held: Order No. 451 does not exceed the Commission's authority under the
- NGPA. Pp. 8-18.
-
- (a) Section 104(b)(2) of the NGPA -- which authorizes the Commission to
- prescribe "a . . . ceiling price, applicable to . . . any natural gas (or
- category thereof, as determined by the Commission) . . . , if such price"
- is (1) "higher than" the old vintage ceilings, and (2) "just and
- reasonable" under the NGA (emphasis added) -- clearly and unambiguously
- gives the Commission authority to set a single ceiling price for old gas.
- The NGPA's structure -- which created detailed incentives for new gas, but
- carefully preserved the old gas vintaging scheme -- does not require a
- contrary conclusion, since the statute's bifurcated approach implies no
- more than that Congress found the need to encourage new gas production
- sufficiently pressing to deal with the matter directly, but was content to
- leave old gas pricing within the Commission's discretion to alter as
- conditions warranted. Further, the Commission's decision to set a single
- ceiling fully accords with the two restrictions MDRV 104(b)(2) does
- establish, since the "higher than" requirement does nothing to prevent the
- Commission from consolidating existing categories and setting one price,
- and since the "just and reasonable" requirement preserves the pricing
- flexibility that the Commission historically exercised and accords the
- Commission broad ratemaking authority that its decision to set a single
- ceiling does not exceed. Respondents' contention that the Commission's
- institution of the GFN process amounts to an acknowledgment of the
- unreasonableness of the new ceiling price is rejected, since there is
- nothing incompatible in the belief that a price is reasonable and the
- belief that it ought not to be imposed without prior negotiations. An
- otherwise lawful rate should not be disallowed because additional
- safeguards accompany it. Respondents' objection that no order
- "deregulating" the price of old gas can be deemed just and reasonable is
- also rejected, since Order No. 451 does not deregulate in any legally
- relevant sense, and it cannot be concluded that deregulation results simply
- because a given ceiling price may be above the market price. Pp. 8-13.
-
- (b) Order No. 451's abandonment procedures fully comport with the
- requirements of MDRV 7(b) of the NGA, which, inter alia, prohibits a gas
- producer from abandoning its contractual service obligations to a purchaser
- unless the Commission has (1) granted its "permission and approval" of the
- abandonment; (2) made a "finding" that "present or future public
- convenience or necessity permit such abandonment"; and (3) held a "hearing"
- that is "due." First, although Order No. 451's approval of the abandonment
- at issue is not specific to any single abandonment but is instead general,
- prospective, and conditional, nothing in MDRV 7(b) prevents the Commission
- from giving advance approval or mandates individualized proceedings
- involving interested parties before a specific abandonment can take place.
- Second, in reviewing "all relevant factors involved in determining the
- overall public interest," and in finding that preauthorized abandonment
- under the GFN regime would generally protect purchasers, safeguard
- producers, and serve the market by releasing previously unused reserves of
- old gas, the Commission made the necessary "finding" required by MDRV 7(b),
- which does not compel the agency to make "specific findings" with regard to
- every abandonment when the issues involved are general. Finally, the
- Commission discharged its MDRV 7(b) duty to hold a "due hearing," since,
- before promulgating Order No. 451, it held a notice and comment hearing and
- an oral hearing. See, e. g., Heckler v. Campbell, 461 U. S. 458, 467.
- United Gas Pipe Line Co. v. McCombs, 442 U. S. 529, distinguished.
- Respondents cannot claim that the Commission made no provision for
- individual determinations under its abandonment procedures where
- appropriate, since Order No. 451 authorizes a purchaser objecting to a
- given abandonment on the grounds that the conditions the agency has set
- forth have not been met to file a complaint with the Commission. Pp.
- 13-16.
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- (c) The Court of Appeals erred in ruling that the Commission had a duty
- to address the take-or-pay problem more fully in this proceeding. The
- court clearly overshot its mark if it meant to order the Commission to
- resolve the problem, since an agency enjoys broad discretion in de
- termining how best to handle related yet discrete issues in terms of
- procedures, and it is likely that the Commission's separate proceeding
- addressing the matter will generate relevant data more effectively. The
- court likewise erred if it meant that the Commission should have addressed
- the take-or-pay problem insofar as Order No. 451 "exacerbated" it, since an
- agency need not solve every problem before it in the same proceeding, and
- the Commission has articulated rational grounds for concluding that the
- order would do more to ameliorate the problem than worsen it. This Court
- is neither inclined nor prepared to secondguess the Commission's reasoned
- determination in this complex area. Pp. 16-18.
-
- 885 F. 2d 209, reversed.
-
- White, J., delivered the opinion of the Court, in which all other Members
- joined, except Kennedy, J., who took no part in the decision of the case.
-
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- Together with No. 89-1453, Federal Energy Regulatory Commission v.
- United Distribution Cos. et al., also on certiorari to the same court.
-