Mobil Oil Corporation, failure to deliver natural gas to the interstate market

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Title:
Mobil Oil Corporation, failure to deliver natural gas to the interstate market report
Physical Description:
iii, 31 p. : 24 cm.
Language:
English
Creator:
United States -- Congress. -- House. -- Committee on Interstate and Foreign Commerce. -- Subcommittee on Oversight and Investigations
Publisher:
U.S. Govt. Print. Off.
Place of Publication:
Washington
Publication Date:

Subjects

Subjects / Keywords:
Natural gas -- United States   ( lcsh )
Natural gas -- Marketing -- United States   ( lcsh )
Genre:
federal government publication   ( marcgt )
non-fiction   ( marcgt )

Notes

General Note:
At head of title: Subcommittee print.
Statement of Responsibility:
by Subcommittee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce, House of Representatives, Ninety-fourth Congress, second session, February 1976.

Record Information

Source Institution:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 025741100
oclc - 02027273
lccn - 76601141
System ID:
AA00022543:00001

Full Text


[SUBCOMMITTEE PRINT]





MOBIL OIL CORPORATION: FAILURE TO
DELIVER NATURAL GAS TO THE
INTERSTATE MARKET




REPORT
BY TIIE
SUBCOMMITTEE ON OVERSIGHT AND
INVESTIGATIONS
OF TIHE

COMMITTEE ON INTERSTATE AND
FOREIGN COMMERCE
HOUSE OF REPRESENTATIVES
NINETY-FOURTH CONGRESS
SECOND SESSION








FEBRUARY 1976




U.S. GOVERNMENT PRINTING OFFICE 65-593 0 WASHINGTON : 1976














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11. : maimm I. muNnut, Np"- York
HENRY A. "'ANNIAN, (Wif"riih W 011011' Ib Ili JORIAMER, Texas sprain uh mu'rii, (Wirado PHILIP H. 1 11AHP Indimia NN' 11, 11 IA M M. 11 W I A 110% 1), Al iclogan NV. G, ( B I IT i IT F FN IM, Mot h ( i ndina JAMES T F110M), Nim- Jormy 170BY NI1H0WT7r Connecticut um swuna, mutdo, AMMEW MAGUIRE, New Tpra,

W. E. WILIT.\M,()N. IKE XNETIR J. I" INTER, As, Ot a" I C&A



SUBCOMMITTIJ: Oil (WASICTIT Aili) T.NVIESTIGATIWNS J()II!j 11 AJOSS, ('allfornin, Chairman

()IFTINGIM, Ntw Y(,rk JA,N11"S 'M. COLLINS. Texa,:-;
(130131 KRVEG EA',. Ttxi-:-; NORMAN P. LENT, New YiIrk
AN'FlI()N)' 'D)BY AMFFE.TT, Cozmecticut I-A)WARD It, MADIGAN, Illinois
AIA'I"I'llEW T. RINAJ,1 0, New Jersey W s f 1,1fiji S'I'VCKEY. G( om,i;ii SANIVEL L. DEVINE, Ohio
New York (ex ooido)
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l'. Counsel
j('IIN It. '-;pccial A" BENJAMIN .\J. spcci(il Axxi.,dant
WILLIAm K. LYW,'s, Auditor UP










LETTER OF TRANSMITTAL


CONGRESSS OF TIE I UNITED F\TES.
ITOL->E OF ITEPES EN-TATIVIL,
SrUB(,ri) [11T'TEE ()N OVE I ;I" A NIT I ()N S.
C()[MITTEE ON INTE]"STATE AND iac{, N (' C)MEP('CE.

Ifon. HTARLEY O. STA;n G RS,


I)EAR ME. IIL IR3L N, I am tral)slittil (r herew th a Report of the Subcomi uittee on Oversislht and In vestigations regardiig the Grand Isle 95 Field. operated by Mobil Oil Corporation. The Report conchides that the actions of Mobil, in refusing to accept a permit from the FPC and deliver gas to consumers this winter, were unreasonable. contrary to the Outer Continental Shelf Lands Act (43 U.S.C. A 1331 et seq.) and contrary to the public interest. The Report concludes that because this gas could have been available this winter to two severely curtailed pipelines. Mobil's actions may well contribute to any gas shortage in New Jersey. Ohio. and other areas.
The Report notes that this field contains at least 350 billion cubic feet of gas. could have been producing by November 1. 1975. and could have supplied some 120 to 220 million cubic feet per day to Texas Eastern Pipeline and Trunkline Pipeline. This gas could have substantially alleviated the curtailment problems of these pipelines and thus could have materially aided their customers in avoiding any problems due to lack of gas.
The Subcommittee was extremely concerned by this situation. in which Mobil was able to withhold substantial gas from the interstate market merely because it would not agree to conditions imposed by the FPC in order to protect the customer. Further. Mobil was unwilling to begin to deliver this gas while it. was contesting those conditions before the FPC and the Courts.
Sincerely,
JOHix E. Moss,
Ch ai r Oa ersght aid In iestigatons Sub corm,ittee.
(III)













I



Digitized by the Internet Archive
in 2013












http://archive.org/details/mobratOOu nit












MOBIL OIL CORPORATION: FAILURE TO DELIVER
NATURAL GAJS TO THE INTERSTATE MARKET


During the summer of 1975 the Federal Power Commission and the Federal Energy Administration. both of which are supporters of elimination of Federal price controls on interstate gas. reported that the as sl outfall would be 1.3 trillion cubic feet (18.6%) for the 1975-7; heating season (November to March) and 2.9 trillion cubic feet (19.39%) for thle period April 1975 through March 1970. However. the C(ongress-ional Office of Technology Assessment on November 4. 19)75 disputed the FPCs and FEA's method of calculating the "shortage" because both agencies used contracted quantities and( did not allow for lessened actual d(lemand. Therefore. the OTA estimate, the yearly shortfall at 1.0 trillion cubic feet (Tcf) instead of 2.9 Tcf. In a report to the House Government Operations Committee on October 81. 197. the General Acmounting Office found the same weakness in the FPC FEA analysis:
... requirements data submitted (which can be based on entitlemnents or contract demands) could be overstated. Since curtailments generally are requirements less deliveries, the quantities
reported as curtailed would also be overstated.
Thus, the natural gra "shortage" will not be as severe this winter as had originally been projected. Several major interstate pipelines have curtailed substantial amounts of gas, however, and several areas of the country, notably New Jersevy, Ohio and North Carolina could still be adversely affected this winter due to a lack of gras. The oil coinpanies attribute the natural ras shortage to Federal price regulation. A recent ad by Mobil Oil Corporation. for instance, called priice regulation "A 21-year fiasco" and attributed the shortage to the "governmnent' s focus on low prices to the consumer . ."
The Subcommittee conducted several investigations last year and issued three reports 2 dealing with the industry's failure to develop known and available gas supplies. One of these reports (Cities Service) concerned a delay in doing a needed workover. The other two reports (Bastian Bay and Garden City) found inadequate drilling in two large fields with the result of declining production. The current Subcommittee investigation has focused on the question of whether producers are producing all that they can in good faith or whether they are withholding gas from the interstate market for sale at a much higher price in the event that Congress should remove the Federal price ceiling.
I GAO RPnort to the House Committee on Government Operations. The Economi ao Environmental Impact on Natural Gas Curtailment During the Winter of 1975-76, October 31. 1975. at p. S.
2 Preliminary Staff Report ('oncerning Delawo in natural l Gas Production bh Cities Service Oil Company (Julv 1975) : Natural Ga.s Supplie: I)eclining Ielirerability at Garden City, La. (October 1975) : and Natural Gas Supplies: Declining Deli'era ability at Bastian Bay Field, La. (November 1975).
(1)






2

T'lle )11 1111itt (,(, Invest *L:lted tile G rimid Isle 9, -) Fith 1. :1 1:11-ge
ofTAlore Lmll,- Plwa 1WH wilicil (11wi-Aed bY A1()hI1 00 alid 1W()V(1d
kl I'V(1,4 Of (It least billion ci 11)], f(,et () f It Is I ikoly t h'1 I re1,111.1-cill I \- -prol),thh", could 111:11 c ('vell lilore
aldk, fr()111 tlli- hold. Till, fi(dd cmild 11:1V(, 1)(1071 ON pi'millct MIl hy Nov ,Illlwr 1. 1971- (111d could 1 4 1 w o () f
t1w 11"It M n I I 1 ()-4 v 1,(,l v c 111 -1 : I I I ( (1 1) i 1) (' I I I I h x, Is E n rv I I I N w I k, I I I I (i 0111 11 id Tr I I I I I I I I v i Il (r (AI i o th ro I I _(rh
its p'.11-wit colllplaiiy. Panhaii(Ilt, 1"astern). (3':l- frotil this field )Ilc co I I I (I I I I I -edl iced bot I I 11(,.x (i < I" -i A (, I i i *< i i i d "I"ru ii k I i ne's c i i r I-(, I i t 11(1 llt III-" CIlrt(aibiwnf hv : miw 71' to 14(' with even larger effects N6 1('11 tile ll()](, field i pl-m illcm
T1 i Is is pm-f of t1w F(,(1Wrfl Outer Contlneitt-.il Shelf and as such
Ilk, sold ill commerce. A Certific:ito of Public ConV(111 10] k T 4111( I 1. from the Power Comm'< fol. a sale. A Certitlc:itc is 4also tw(Acd for any new pipeline
c0list ruct Ioll to t r"Insport. tile (r, S.
Vie Mitlal Afobll applicatiou to the FPC oil Afinreb 10, 197.5, estiIwit".(I it- -41are of t1w ) "At 120 millioll clll ic feet per dp y. 3
ml tills calcul-Ition. G'ulf" A.-)% ;Iiare Nvould be approximately 10o i-nil1l()n cul)ic fcm per day. Trimkliiw'- current ciiitallmAit is 8,50 millioll clinic feet jwr dcav '1- -Ilpplie,, ; f rom tills field coul(I thus have redlice d its cllrt (illliellt bv about, 11 !. Texas E.t -4i(irc) coidd thus 11, ve reduced its curi, ilm( <
,-;illce its oricr*11. I applic, tion, Afol.)iI has, reduced its, estimate for Diltit'd deliveries from 120 million cubic feet per dav to 60 or 70 indl'on cul)ic feet per day.'! It is not cle-Ir, however. if any part of this lowered e ,tllllate is (Ne to delav caused b-v a sloxvin(r of drilling effort lintil t1w ,Ije is approved.
III of t1w national need for cras and the availability of this gas
(flic, Wells are drilled and one, producinct, platforin is complete), the ".11s. is not flowiiicr because the operator, Mobil Oil Corporation. inIS"Isted OT1. thne conditions in its application to the Federal Power CMTIIT'W- 1011 An option to use of the (r-is foi- its refinery in
T'Wmmont. Texas: (2) A 10-year conti-fict with the pipeline even 111ollt-rh th., (_r"Is re +rve are estim,,ited to be, produced over 20 years; 11111 the commitment to tbe interstate iiuii ket of only some cras,
DI-411,V011's of' all available cr,,is ill the Grand Tsle 9.5 Field.
)n fliree, seplinite occa ioiis (Aii (rust 2-2. 197.5, October 3.1975. an (I DOk'(111114'r 19. 197.-)). Afol)ll refu, zed to accept Tc-iliportir v or Pernianent
(rj,,,Ajjt(qj J)v t1le FP(" to --,ell tills (Y,,us becaw--e the FPC deto w'-opt- AfobIl*s coiidifioii 4 Nvitliout ,I fill] livariii(Y oil t1wir
11de effi,(.ts. (-)II 'J"Ilmarv 2")). 19,('. the S116-011111littee lield a lwariii(r ml tills nuitter. 1,11is Rcport 1,, ; oil t1l'It llearilig and other evidence developed bY tll(, Iibcollllilittee.
i C..I' t i I i-n to of Pit b I ic ',mvoiiii.neo an (I Necezsit y, 'Marell 10, 1975,
Sq I tors, ( 'n ze '.\fit it a ge r.
I- 14) 1), oil i it it it r v 22. 1 ri 76.
111, r l ti'm T141
-f T: 1 f N;ii ioiwl ( ,as T:\ 11 Prodiletimi
1': rl tho 'Soll wfmi w i t t ''e oll )vor-i -,h I ;I it (I In vf-f t
C-If 111it to.f. (111 1: Tf, :M (l Coninw rvo, T;inim r.\ 220, 19-1 C, at Tr. 1




3


Mobil's actions III to ac(tel)t aliv Certifi(tat(, to cra, :
f rom Grand Isle 9 -) Avere unrea enable aild Nveiv (,1*,i-(,(.t]A- contrai-Y to I)oth to Federal I)ol*(-A- oil Outer Mental helf ( as and to the
public intem,- f. there was co1Ifl1(.t11l1_(r evidence as to the I'llotivation of Mobil, those actions, constitute intentional withlin'diii2r of cras supplies from the mterz tate market.
(2) Afobil"S actimis wen, pai-ti(lularly In itillatlojl
where it ; development (,osts (sonle .--:)7 millimi to were supplie(I
under an advance pavii-.ents al(rivement with the p1peline-In effect. consumers have already paid for this (ras.
Mob'I"s aet'ons have r(- iflted making, ul)staiitalIv le cra-- z
available to two severel-v curtailed illtel'SILC I dpelmes.
(4) If factory and s(-hool (Aosin,tars (lo w-tem, 'III __'N-ew Jer, ,ey and 01110 this wiliter. they are ut lea; t partly attributable to -Mobil"s- ref ii., al tt) accept a Cei-tificate f(w Gi'and Isle
11. JT. fopy 0 fb(, 7d
TJw Grano-1 91-) Fieldt 1 Clolllpo, Z (,(l of Tom, le l 21- -111 ooks 9'. 94.
)5 and some 4--) miles otl' zhore Loiil *(-Ina. lllcwks .9-1 aild 9.were a(-o-pured jointly by Mol-)Il ('mpoi atlon mcl Gulf Oil ('()I,i)orat mi n the optenil)er 197--) ale for million. III November 19.72. Mol)IJ. as operator. drilled a Nvll(l(,at well In Block 9;5 iand discovered ,j natiiral _(raz, reS(qtN-0I 1..7 111 Decemlwr. two additional ivelb: were drille(l III Tlloc-ks 94- and 9.5 to define tlic, of the re,.- zervoir.'s
follolvilicr vdiiell MOI)II instituted a plan of (-Tevelw, for flils field.
In March 191'). __Nfo])Il ordere(l (I -21-well III,,_,tioll platfoi m-desll_(rnated Platform '-A**-an(l int talb,1_ it In 9,5 in SepIt
tember 197* Betwpen Octobei- 197:)) and 1174. ,Ix produo-tioll
ivell.,- wei-e, drilled from fld z platfc)rm. Platform also 21-slot z;.
was set III Plock 14 111, April 1974. and eleven prodivtion wells weve drilled by _. -Vpril 197,55. L
In Mai-cli 1()t4. Mobil ancl Giilf iointl v aequiretl G'rand Isle
93 mi(I 0C. for a total of million. A 1-2-, Iot Platform C- w a s
111 4allc,(l in Bloo:'k Man-h 197.5. To (Tate. five production Ayells hav( been di illed from thl* -- platform. a sixth -well 011111'elItIv beincr drilled. and Two more are Wanned. Produo--tion f:J'''ities 'were oompleted oil Phtforili la, t -November and an, a-waitinz hook-up -with a pipe, iuiilai- facilities are s(,I,(,diil(,d for on 131atforms "B"'
I III Febmiarv and Septemberr 1976.
Oil March 4. 197J.-. Mobil exeemed with Titunkline Ga Compaliv. all mtcn-4tate pipeline. an advamte payment .-I grr(, ,ment for Grand ls)e
Field." 1-nder ( oiitnac-ts. Trinkline azitee(l to advaiwe to
Mot)ll aii amomit eqiial to Mc)hil's total -Z11aiv of tll(' cto t, of aild developln, r t1w fiel(I ((,x(--Iu(lM Lr A-fav .1)1. 191.5. Tln amomited to (-I total of Tminklille a()T(_1(1d to advance to Vol)II seml-ann,,iallv zlmomit : equal. to) \fol)il*s sliare of additional developmellt of the field III-) to a total sum of 111*11*
1 1011.
Propnrod tatoment- of Jack E,. Earn(-zt, -M; i m -,,(,r. 'Na ti 1 F ,Xp I on I tic) n a "1(-, (Illetitin D ivisiOll, )1()hiI ()i] (01"T 01%iti( 11, t 11 11 N- 11 1 r T it vos4i c-,ati()n, Committee, t- Tntoi-tato i nt i it ai,
T (7.
Id., Exhibit A. at 1). 1
Id. at 1). ",





A
4

fill(,. T 1,1111i%1,1w 111(1 M (d)II old 11 cm it ract
4,4W e I, I I I- L I)M I M 11, I'll[ II()t all, ()f tit(, (- I Illial('d r('-w r\ (,< III I, 1w G ram l 1-1t, F ield. I'm it'l. I Ile (.(.)lit 1-tact. AI( )h] I ''M I III I it I t,(,( I ()III v (v rt '1111 ()f
I 1w I[. \\.Tl W F- to Trillildilie", Mod III 1)(11,0111t Of the
i I d fr( )I I I 'I II()I To th is (1p t P)II Illit I,, I III v L 19-C. 'I'lle thrill ()f
''()III I 0 1 \\ 1 1 11 k,;t I I) w II I It(. kilt, ()f H ill i(II d kd Iverles."2 'I'lle III, cw I I I.,I Ct \\ I c(AII Iw r I Ilm l- ,llid fect
lit, I I I st t ;l r. \\ it 11 1 perck-111 11 "1111111:111Y .I T h e c()Iltract Imis o(III;1I I() Pmvt r ( mlill), I I ( FPC
Q C111k[ t*()I* t11 FedvI criti I II(I t M It III t Iw evcut ()f ( I(, tv _(rulat 1011.
)if Mzt i-(- I I P 197.7). 1 a ( crt I fic"Ite
I() sell ill(, -:I-z III tit(, Gralid Field ( D(wiO M(A)ll's
tPP!Ic;It i'm -I t-11:11 TrIlid"ll It('. I Iw pl-()Iml- cd plllvh"ts( r. luld "c?Ire / 0 1)
lo I//, /,/(7f(, Ow
elf ;P Ct, ?w awl
/,e(/
1,111ph S*s 1(1(1( d
M(),bil t1lat tit(' mt( riiiediate decision procedure N, (-milt-ted
;M(i 111,11 t1w (,rtificate 1w mider ,tit expedited proc(,(Iiire. Mobil
1 1:11 Ihcm It s (-ents pq- it
to wctpl :lit mil ia I i-ate -,is tI(,t(,mwiwd mid( r FPC ( )pinlmi, _-1o. 6991-T,
pt'l. Mcf. It fill-I lier lwled t 11:0 would not
to it-( I-vt,' perccill (4 t1w o-'as f(w its mvil Pill, )OSes
al cl ll time. Mobil C-1*111,lt 'd HIO v(dijitie to Trifid-linc (a o
.111)ic feet of g.
()f laml lict ]cm) at I)ilfioll ( (I
per illoiltil ()r appr()XIIII(ately 1.20 Illillioll cubic feet per da-v.
)it March 17. 197-5 Trunk1lia applied to the FPC for a Certificato:,
t ? :1 p1p,111w I() trxi ) ) 'I'lic I"I -wild not proceed with this
t pp! ](.,IT ]()It II III I I it IIa(1 (I (Mit lomal iiiim-ni(it ion f rom Trmiklitie re0',ID I I I) I 1w I rI )ort 111
III :111(01wr Illattel. -wheiv tit(" is-;uv ()f 111,11ito'd dedic"Itiolls had
raised. ( yetty 011 0-mipany. ct (d.. Dwlket No. ("1 7.-)-.')19. the FPC
ISSIRld MI (Wder ( )Ii Julle i97,-). At flitit Time. the Collllliis- l oil (yralited
CcI.tlfIc:II(, to 11 (*()]1 lp ,t I ii(- involved all(] sm for Iwarill"'. tjl(, Of Iiiiw ,d dedicii md pro(liw(,r reservist ions.
( )it Tit] v 1.). 197.), the FPC ivywstcd additimal information from
its :ipplication. mid Alohd. although disputintry f1w '111111w.11 v t(") rcqIw--:1 life data. Ilblllltted it, Oil JuIV filill ()% Mobil estimated Its share of the proved. and. llesel*Ves (be4,0111 at billion Cubic feet for
Ill:- pm l field. II()t-(:-,d Il1 lt,,- letter illat:
p lrt IcIlk I'lY (.011ceriled Over d(+I N-S in this partlellial, wc:l Us(, It is mll. 1111derst.11)(1111 (r tll lt tit(, pipel.1m, certificate '(m f(w f"wilitiIc'-; I() collect. 11111<1 1w is,;1w([ vem- -- (-)Oll ()r

71,-mpirary Certifiev ( Iltwl ot '.Nog. CPT.5-






else we will have mnissed tile construction season to enable conmencement of production in about Noveiitber of this year. We feel very strongly that there is no need for such a delay. WVe are quite aware of the needs of the pipeline company in meeting its
customIers' 17T5-,0 winter needs.
()n August 1), 197,). the FPC( issued a Temnporary Certificate to both MIobil and Trunkline. The Comnission ordered that the Mobil case be consolidated with the (ietty matter for the purpose of deciding the depth limitation, limited term and producer reservation issues 1)ecause of (in the FPC's words) "tlie national shortage of natural gas and the declining gas reserves of interstate pipelines . ." 14
On August 2-. Mobil notified the (oni1ission that it was I',e jectingc the Temporary Certificate which had been offered. Mobil offered at that time to deplete )both its 2.5 percent produce re-ervation and the depth limitation in its contract with Trunkline if the (,oinnission, would grant it a Pernlanent (Certifi(cate by)v September 5. 1975. (O)n September 10. 197). the FP(-' granted a Permanent (ertificate to Mobil. However, the C(ommission ordered that:
Mobil's I)permawint certification will be (comditimnled on either
substitution of a 20-year ter1I in thle c01t1at alleldment to be filed as part of the rate schedule. or deletion of the delivery term entirely and substitution thereof of a life-of-tie-lease (or equivalent) term, whichever is preferal)le to the parties. In this regard.
the (Conmission notes that Marathon. Texaco. Louisiana Land Offshore Exploration and Texas Eastern Exploration. each of which has received permanent certificates in this consolidated proceeding. filed 20-year tern contracts as rate schedules for sales
of gas.15
On October 3. 1975. Mobil notified the (Comm' mission that it was rejecting the Permanent ('Certificate. Mobil argued that the C(ommission had no authority to "dictate" the terms of a (as sales contract and attempted to withdraw totally its application for a Certificate.
The FPC issued a third (Certificate to Mobil on November 21. 19715. In that Order, the ( commission ()ranted either a IPern.anlent or a Temporarv Certificate. at Mobil's option. The ('on mission accepted Mobil's 10-year contract. The Commission also ordered that in compliance with Order No. 53( (issued October 14. 1975, and applicable to all producers). Mobil establish a minimum daily quantity of gas to be delivered and be prepared to explain any shortfalls.
The importance of ()rder 539 (reprinted as Appendix A) to the consuming public was summarized by Morton L. ,imons. a Washington. D.C. attorney with extensive experience before the FPC. in his testimony before the Subcommittee:
Mr. Lemov (Subcommittee Chief Comunsel). D)o von feel that
Order No. 539 is in the public interest ?
Mr. Simons. Very definitely.
Mr. Lemov. Do you think that 539 would tend to insure adequate gas supplies to the consull ing 1)ulli i
Mr. Simons. It would certainly give the (Coniission or
through the Comulission,. the public a b)ettev handle on what the
supplies are.
14 d r.
'5Federal Power Commission Findings and Order, September 10, 1975, at p. S.
6: -75 1:- () -1 ; 2






6

)j1p of tllit pj cddlelj IQ i,- th:11 11011 VMI L-() l)1Ck INto tlwl-- e (,oilN'(111 :Ire "-wn". ]ill() ;I hmvl (4 11111-41. F)w1v re,111N.
1)1Iji-,M i(Iji lit d(.h %(,I. lil) dch vt,,J j(HQ 0 11
(1.1 Im w IT I< 1('F j : hill th;lt 1- 11'11-- l The w ay it,
I I T -c c lil- ll lilt, !) (I lit,
.1" 'I Il I ( I'll-cd I :w ctj 0 (,I.t
M(dill I
(rt,- 1111 1 1i Iv( I :I I I tot I ( )11 fo l. a lv h(il I I it a lld I -t ;I v () f t I I e
n It, r. A I ol ) I I I I I it I.(. f I 1.- a I I I I I I t S I t 1 11 t I I )it ,j,llljla rN, tilt, 1-' 1)( (rra llt( ( j fj lJt*1' NJ j )I )II J'(
1_ I 1, 1 e: I To
(htv. Iioi)il lit, I is declilled to, accept ml v Certilic,11 ( fill, the ill lilt k 1'1_ l 0 H l I
HL W 11 p/ 1 (Ifl(
'1111C Fk'd('T'A1 PMV(T ('01111i il< ,-4WlW tillie :0 )1 )111 )-c'111ed --I 111111 (id" (1( d Wal D )11-. whelcill producer
:I I I tillp t- i I ) (I(,( I ic;ttc to I 1w 'I lltev T ;11 il, Im l I.kct 1(,-- -'l- t ll;l Il w t Itally .1% adahl( T! li. I., I )( "S collc( l 1. :
t I I t (INphillifid by "Mm-1 (ill L. S*
Tlw ,I 1 1 I lcil-'re to Mol)ll prop() -cvvnd ol.(I(,I.-" aril'. from the "t'llidp(mit of the conslim 11-- pilhi'o.. 111de( 4 1111port'llit. 1'()I- every 11lI11,1((,ItIwI-Wl1etllcr
it I- ill(, percent Iv-ervatiml (4 lv -(,rvils prolm T 11,11i I 1W I I'ZI(liti(Mal '2( Vk'(Ir COlitract- Illemis that t1w ImMic will
(nu'. w- N-ill paN- 11jore fo!- t )I(, (r-I *t
1)( it 11.17
A, a re- lllt of tll(, T"N."S concern. it consolidated variou-, applicatpql- cojjt,jjjljIl(r 1111111('ki (ledicatiolis Into one la"CIrill" 1111der 1)ocket
'No. (11 7,7)-319. Gett.v 011. ef (//. TweiitV-one producer applicatiolis
have l p;) I-t ()f thi- Of those. for 20 of the application.c;. the
producer" ('111w], :w(lklPt(ld ;t I )("I'll lanent Certiflil"Ite (alld N-vith(Irew file; lillilted dediclitH)II Or (1lC(TpT-(,d ,I Temporary Certificate
alld lw(,-;Il1 to d(ilivel. the pending lv< I t Oil of the Gettv case .
For f0m. (d, aPplIi1;ItI()Il1_ -" the producers attenipte(I (i -con(litiolial acc(TI NN-111ch wa,- not accepted by the Coullill:,.sloll. Tllw-c
folir 1)(,(rllll to llljll e (lei* f (ra., to tile Intenstate
0111v Mobil has (lechlied to accept aliv Certificate. i,, ppendix B lists
1"or Outer Continental Shelf (Ta ; such a:-, Gnm(l Tsle 9.5, the, Outer
1 1),) 1, t1mt
Continental lielf Lands Act. 4*-') USIC 1) se tl. niand;ite.
Ill].-; (ras must flow In Intcirstate coulmerce. Thei-efore, Nfobil has, jio
.1,10we blit to sell this gas to the interstatp Ill'(11,11ket subject to detornlM,)tIr)ii of the FPC mA the ("mirts as to the le(nillity of its proposed 0011d 't ()I )1-(re I A, s jst, ral ( ollll.-el of the Fedw-al
explained The situation in Ills testiniony: Mr. Lelw) -. AN'liv do, voll thhlk that t1le-e 00 other CoIi1pllllo,. -;.
all of Nvhch are c )m4ol*dated th*', lie:11-111cr ()It tlle ie all
n I I v of N I r T ,n L i m ill-, F -, 1. 114 fI i TJI t 11
t ;Ili,] Forcl;:ii ('w im w rc,,,
:it :"'l
T (if '0 1, T, I i1w iil,4 ()nim itteo on lnvf !- tiC-Ti 1, 197(1, at 1). 3
!o i- 1,i, hlield WI 75-411 ), Contiiii-ni:tl (')it CI




7

accep~ted1 cetr~ icates (,I11(1 prestim1 aly movedl the ilas in terstalte
C 01l1 1Cer~e, wh1ille iiMobl idi 111t Whlat is von i view onl fhat I
Mr*. Lexvnes. I ti nk the other pi). lIwrs, recogn ized(l11n(l accepted the state of the lawN\ which Mr. S;IlIIis s1UCc(inctly set fourth that there is only one( wa V inl which this gas i< III move and it 111114t
move via cer]fification by this (1oinil. ssiol. 11' the (1omiijion(0
cond(it ions, thu at arie il1 p( sed l (,I a (ranlt ()f' a' tempo ~ra r-v or- Pennanient are testedj inl ('011 t and1( fon 11(1 to be I Wxv l lc. ti e ye j1 rt 1oa(t 1 ve
relief. but there was 110 other recourse foi- these pi'odies."~
IT'. I?((( htt/'/(cod~'IY i0'(p(/ 11t
Ill recelit, vealS. 11 iulll lv t'enil has developed i i1 the( leui(rtll 01' ter-n of contracts. 1In 1970 for exiimple, out of 424 gas cont racts; siibinitutedl to the VlP( % onlyv eIjii colit Ihts, or 1.9 1W cenlt. were for lezs than -20 years-i 1974. however. ST of 194 ('oit ract s slibinlittedl. 0or
-14.8 Qb were for less tliti -20 years."' AndI (11111hg thle Iii-st To1 n~iotus, of 1975, t,00) &olitfl.Ict5 Aveie sitinitted to tile FN"'(. L.5 of which. or 51.7%r were fot- less than 2i) Ie rs5 \- a I.S.x is all alalvsi s Of conLt i-act terms by a, conlsul ta t which wa-(s submitted for the (+ettv case m~enltion~ed albOVe.
Thie nIpact of this tl'endl is eva I iated by Aforton IL. ion.as fllows
Why. then, was there all this (lei.,ate and(l dipte over whether
ia should 1w~ tenl year> or- twenty years? T he answer lies, I think.
and~ lpeinps thle Mlobil witness canl explai i t further andI ill (rl'eatel' retaill. hot the a,(nswver lies,- in the (leregul 1at ion bills that, are niow pendllng ill ("olnrresS. _V nmajor1 thi-rust of many of those bills is that they will deregulate only new sales. Those bills define new sales to lincle oW1(1 as after the contract, expires and so the difference bet ween a 10-year' termi andI a -20-year termn is simply thlis: I nder xistinuu law, no dlifference, if the new gas (leregulatdion bill p)aSses. however, at the end of the. contract termn this gras would become new gYas and would be deregulated and could be priced at, whatever price Mlobil is able, to price it, at. fre from
regulatoryv rest i'ainit.
This is a situation then in which tihe prospect of a deregulation bill wvhch is prom-oted in terms of being' desir'able to elicit newv gas suiplies is pro ducingr a conitroversy whose verY effect is
to etrdnew(rs uplp)ies, to0 )rclude the delivery of oiw as

(Georg(_e A. Lewvnes, Assistant General ( ounsel of the F~edleral Power ('onlnll-ssion, voicedl a similar' view and added fute that
There is one other factor, I think, that no0 one ha>, tomulhe(l upon
and that is that if you started accepting the five-year conit acts.
the fou-r-yea r coiracts. the 10-year contracts. mas1(1~ the longrterm- 20-year contracts start expir-ing, you have aI pipeline withl shiort-termn gas supply contracts. Pipelines have come1 before, the
"~Testimiony of George Lewiie, AssisAtant General Comnsel, Federal POweor Commission. before the 'Subcommittee on Oversight and investigations of ti he Committee on Iuterstate and1 Foreign Commerce, .J;Inmarv 2.3, 1976, Tr. at 55 56. 20 See Appendix C to this Report.
21J4
22I.
2 Testimony of Morton L. Simnons, Fsq., s upra n. 16, at Tr. 27-28.








C011111111:41_ P)11 alid lllve dwr I te of depreciatIOTI-in,
otlit'l. \v()rds. I shorter, 1wriml (4 deprecl'itiml lw(-111.- c they t011 Its. -.1 wily lmvc W Yc:lv (4 left to till III v facilitle-.- That, obvlm l- Iv. w 1w il tr"111-d'11,11ILY to I rllc ("I -c /'( SI///'N /-p rell(s
to /i (.1"Allphasis addod.)
( omi1"i1'e'1f.(; J1obt'1-T1'1j1j14,1;j1t ( to () Ihrr
III wA(,I. to the t1j]'(1c cim(litimis ill the 61-alld Me
9", applic'm(m Ill Ihe cwll( Xt of other lvco, 111 (1pplic;ltimls. t1w Sit))cM 11111'Ittec -t:111' ()11,711(we Louil-- I IW I T ldlcatioll- Iiblllltted
lw1weell '11111t, 1. PIT :111d 1. 1 )' l,'X(-ljI& jl(r the applications
CM11-4)II(I'll ("I ill t 1w I, Illelit lwlc l above this cons 4s (4 -" G a ppli c a t i oils. Of only 1111-ee colltra( +4 (()I- conf-1111ed :111 three colldltioll ;. Appendix D Zull ill 1:lrlz( 4 1111 stild v. FillT1101-11101-0. ti)(1,S(I thiVe !'()I- sim ill rc crvc 12 Bcf. 46.6
M.f. '111d Bcf. 'HwIV NV(T(' 110 applicationsns ill the )i ()400 lict, l1all"(11 (;It-; i 'rand 1-de 9 -)) which coI&Iined all three cmiditiolls. It is Clear, t1wre6 1-0. thit the Mobil, request Nv(ls all Illiprecedented Olle for a larcre field.
Furtherillore. the request was mii(pi(' for a contract where all advance 11:1 vilwilt I-; 111volved. George LewllcS. FPC' Assistant G'eiieral Counsel lc -title(l as follows:
Mr. I'villov. .111'. LeNN-lies. -Minority Comv- (,l rtli- cd the question
of whether the Comillission, 11ad I L!T'(1(1d ill tile pIst to other contracts ,inlll:lr to the one requested b v Mobil. I would like to ask 1,011. havc Own, bek'll ally sltlultioll- you ki-loxv of where an appliCation InClude(I -,I cw1tract with t1w a 1) 1) ro v (' (I
M r. LeNviles. And, with a 10-year limitation ?
Mr. Leulov. Yes.
M r. LeNvnes. To the best of my ImONN-ledge, the answer is no.
Mr. Lemov. What period of time are you talking about. AIr.
Lewlle ? What is your experience
Mr. L( Nviies. 11 )iave heen with the Con-itnission since 1. )0. 1
1970 1 1wcame A -sistant Geiieral Counsel and that covers the period sii-ice I have I)eell IN-it], tile ( 1onIln iSSioII.2;5
Jfob;/,, /*/,/, llf;oii to w-W11107d sllpp7ics
"FlIC ('1111tic.-Il questioll is Whether -Mobil's actions amounted to a, withholdilicr of sllpplie from the interstate market. Mobil*s es-- mental argumelit i,-; tilat it could not, accept a Temporari Certificate because it would not kii(-)-\N- t1w exact conditions of the Permanent Cerfificate mitil later. All.. J:Ick 1%. Earlle ;t. 1fanager of the Nahiral ("as F,'xploral-1011 and Productioll Divisioll. Mobil ("M Corpol-ti t i 011. testified as follows:
-Now. with all deference to Air. Simons. NN-ho is all excellent
pract It ioner alld kiloNv's a IN-11010 lot more aboilt proceedillas hefore the Fed( ral PoNvel. (-,()mmj-;- lm-t than I do. it is quite difficult for l1w t how IN-(, could have accepted that temporary authoriz:lt M11 ;I Ild Illailltaille(I our rio'llts to appe'd. How do You cliall(re
T, im, TO (11- Lw\ 11,-. XIpra n. 19. at Tr. 57.
Id Tr.




9

your contract, which is the basis for your certificate apl)lie(atioI,
and still maintain yvouir rights to a ppeal ?
Mobil has several times accepted other types of conditions on
certificate authorization ; noItal)ly, the ones that limit u) to certain price levels that the (Couiiinissioin has under consideration or in the process iat some point. We have accepted the outcome of those proceedings and gone ahead under a temporary.
At any rate, we were very hesitant to accept a telpl)orary authorization when we (lid not know the conditions of the contract
under which we would be selling 01our gas."
This armllient is unpersuasive for two reasons. First, all other producers in the Getty (ase have accepted either a Permanent or a Temporary Certificate and there appears to be no material difference in Mobil's position. Second, Mobil's rights are fully preserved if it begins deliveries pending a hearing on the issues. Morton L. Simons testified that:
In looking at the practice before the FPC, in looking in part
at what the other 2(0 of the 21 companies did, in trying to examine what the governing laiw really is, it is difficult to perceive any rational basis for Mobil's refusal to commence service reserves, its right to litigate before the Conmmnission and the courts as to one or
two or three of thle conditions that it wanted.-2
The staff of the Federal Power Commission prepared a draft order for this case which was submitted to the Commission on October 24, 1975. That draft order, which was not issued by the Commission, stated:
There appears to be, therefore, no direct incentive on Mobil to
initiate the production of gas since all of its expenses are financed by the general public served by Trunkline. There is thereby raised a rebuttable presumption that Mobil is de7libcrately and i;nten tioallyq withholding supplies of natiurltl ga, from~ the interstate market by its refusal to initiate sales of gas from production p)rop)erties which are now financed by the general public. (Emphasis
added).
This remains the position of the FPC staff, as shown by this testimony
Mr. Lemov. Does that rebuttable presumption remain your position. today ?
Mr. Lewvnes. (FPC) In my view, it does remain.
Mr. Lemov. Mr. Mamone, you were involved in the drafting of
this order, too. Do you continue to believe there is that presuml)ption ?
Mr. Mamnione. (FPC) Yes, sir.In view of the above evidence, the Subcommittee must come to the same conclusion as the staff of the Federal Power Commission. While there was conflicting evidence as to the motivation of Mobil. the actions of Mobil were unreasonable, deprived the public of urgently needed gas, and amounted to an intentional withholding of gas from the interstate market.
26 Testimony of Jack E. Earnest. s~upra n. 6, at Tr. 83-84. 27 Testimony of Morton I,. Simons. Esq.. supra n. 16, at Tr. 27.
2 Testimony of George Lewnes, Assistant General Counsel. FPC, and Russell Mamone. Supervisory Trial Attorney, FPC, before the Subcommittee on Oversight and Investigations of the Committee on Interstate and Foreign Commerce, January 23, 1976. at Tr. 61.

















APPENDIX A

United States of America
Federal Power Commission

(18 CFR 2.83)

NATURALL GAS CO'PANY- (CERiTIFICA ES)

Before Commissioners: John N. Nassikas, Chairman; Don S. Smith, and John H. Holloman III.
DOCKET NO. RM76-8

POLICY WITH RESPECT TO ENFORCEMENT OF DELIVTERABILITY AND RENDITION OF
NATURAL GAS SERVICES UNDER CERTIFICATED ARRANGEMENTS

ORDER NO. 539

PROMUJLGATING STATEMENT OF POLICY

(Issued October 14, 1975)
The Commission has concluded that it should formally reiterate its policies with respect to the enforcement of requirements of the Natural Gas Act, 15 U.S.C. 71T(a) et seq., as they relate to deliverability and the rendition of natural gas service under certificated arrangements pursuant to that Act.
Events relative to natural gas supplies and demands for natural gas service currently, and over recent past periods, warrant our doing so at this time. Questions concerning deliverability and supply obligations of natural gas producers and natural gas pipelines have arisen in connection with numerous Congressional hearings involving the Natural Gas Act,' as well as in the day-to-day administration of the provisions of the Natural Gas Act by this agency.
It is the policy of this Commission to enforce all delivery and supply obligations of jurisdictional natural gas producers and jurisdictional natural gas pipelines, as they may be occasioned by applicable regulations of the Commission and the statutory standards of the Natural Gas Act, which govern-and, therefore, which are incorporated within-the certificates for all certificated arrangements authorized pursuant to the Act. In addition to these standards, there are numerous delivery and supply obligations arising from contractual obligations extant among natural gas producers, pipelines or distributors. It is the policy of the Commission that each affected producer, pipeline or distributor shall take all appropriate actions to enforce those obligations, in the appropriate administrative or judicial forum at Federal, state or local levels. The constraints of private contracts operate in conjunction with and subject to public regulatory power.

1See. for example: Preliminary Staff Report of the Subcommittee on Oversight and Investigations, House Committee on Interstate and Foreign Commerce, 04th Congre's,. 1st Session. July 1-, 1975; Hearings on Natural Gas Supplies Before the Subcommittee on Oversight and Investigations. House Committee on Interstate and Foreign Commrerce. 4th Congress. 1st Ses.sion, June 9, 13. 26 and 27, July 14 and 21, 1975, Serial Nos. 94-23 and 94-24: Federal Preparedness to Deal With the Natural Gas Shortage Emer--nc Thi< Coming Winter: Third Report by the Iouze Co:nmittee on Government Operatlons. 94th Congress, 1st Sesslon, July 25, 1975, pp. 24 and 35: Federal Preparedness to Deal With the United States Natural Gas Shortage: Hearings Before the Subeommittee on Conservation. Energy and Natural Resources. Houe Committee on Government Operation. 94th Congress, 1st Session. June 12 and 26, 1975 ; Federal Power ConmmisslIon Oversizht Hearings. Committee on Commerce, United States Senate. 93d Congress. 2nd Seasion, August 20 and 22, 1974, Part 2. pp. 331-33S: and Hearings on Natural Gas and Oil ReguItory Bills Before the Committe on Commerce, United States Senate, October 10, 11 and 24, 1973, Part I, pp. 209-211.

(11)







12



We bliee ~r at ton w ill bet helpful to provide ('~t n~yflega;l Witlos
a ridreguat~ reforcemni-t plicy. :i lidl to prov id-I rc U A as rvic-e to thenat~~~~~~~~~~~~~~~ nr a dKrln im ~sC 1 uirFdmltIt re d locall govern',xx1i i 'I the 1,eu~ n elia I dl i t I, L1atll II% ga plites u a izdl -Ir\icc t hi rough,, niit

N7 *V I c a r ea hm-i f v fo r t 1e reijdl it in ofj(I a jurisd1iial
5lVor service of natu I]ral ga I liltt'r'4tp Conmec undea r th NaIturA (.5 A ct 15 U. S. (". 717T. ist ItI e i (-, 0 1, : 11pro) ria telv is 'It:d ter i tic Ie of thi Coinnils s iot puirsuaint to 'Section 7 o-f that Act.,- 1 .'S.C. '-17f, 1and appjro)priatelV effect iv 1p ;tt I cediies vu Ustia l ~i SetIo4 and 5 of that A 1t.-i 1.S.C. 717 c- -Ind di. WAi thout Co(,nin lavsion -~tlliai nl (-mturilgs nh):w (y r person~i %liili
vill bep a, natuirl-gas coM npanyi upon coniplerifrn of anty propwose(l construction op etens;ion s-hall engag e in the rnsrtto or sale (if natural gas, subject ~ i i-~~tin u~theC~~nmision* nales tereiS in forl W th repc 4 SiT- 1-1 71I 1S f~ 11pn YtiiCi~ tpbi ovne anld neces-ir
v~sle~ bythe Comission authorizing such acts or operations *.".7' 15 U.,S.C. 717f ( c). badnetof j1uri1-zdiction:il fatcilities or services is proh!ib1itedl unlets the Colnsio as found *** * that the available supply of natural ga.s is
deplete'd to the extent thr)t the~ continuance of ,ervice is ullwarrinttd, or that the, presenPt or future public convenience or necessity permit such abandonmentt"
1.5 U Il.C. 7 1Tf ( h) .
Amtong the conditions of every Section 7 certification are the requiirements of
sulsecion7(e0 that the applicant is able andI willing properly inter alia:
To (10 the acts and to perform the service proposed;
To conform to the provisi-ons of the Act and the requirements, rules, and
reg-tilations, of the Commission:, and
That the proposed service, sale. operation. construction, extension or acquisition, to the extent authorized by the certificate. is or will be required by
t1he pres,-ent or future public convenience and necessity.
Sec,,tions 4 and 5 of the 'Natural Gas Act obliglate each natural gas company to renrder jur-isdictional sales or services which are jufst and reasonable and ,without iindue discrimination or preference: all in accordance with rates,
chrgs.classifications, rules,. regulations, practices or contracts which are jut.t r(-asonable and not unduly discriminatory or preferential. See FPC v. Lvuisiana llwrr Co,, tractisal rnennt~Cn atii relations between juris;dictional suppliers,. of natural gas, juirisdiotional pipeline or non-jun; ldictional distributors of natural zasz are circumscribed by, and arlp, themselves sub ,ject to. the statutory stfa n (ards, of the Natural Ga3 Act. As the Supremie Court statedd in Sitnray MiffContin-nt Oil Co. v. FPC, 34 U, .S. 137. 1.53, 155-9 (1960)
* The Power Comiscsion has from an early date taken the view that
there is a continuin-g obligation to perform "service- imposed by the Act Nvhich oiis the ternis of a seller*.s orig-inal contract of -sale (at 1p. V5:)
* Mob ile recognized that there were two oucsof price and supply
!ztaliility inherent in the regla-2tory system established by the Natural Gas Act-the proviso, inns of private contracts and the public rezu-tlatory power * An initial application of an independent producer. to make 'movements of natural gas in interState commerce, leads to a certiflenlte of public convenienc and necessity under which the Commission controls the basis, on which 'zas; may be initially detlirtat(ed to interstate use. *Moreover, once so d(odwated,, there can be no withdrawal of that suiply from continued intersztate mioxement without Commission approvall. The gas nperator. althou~zh to this, extent a captive ubject to the jurisdliction o f the Commi,-7ion. i.,, not without remedy to protect himselff" T60 .S.. ait 3'4'). That remedy hie his.
ais the, Court there said, in the "change" pow er under 4(d) when hig contmrct- has expired or where ik contract permits its uise diirin- its term).
Un I ,r a- -similar Act, this Court has held to the samne eiect as wo hold toda.tv I'enns',l7aia .j Water & Pow1er Co. v. Federal Powcer Cornim'n. 343 U.S. 414,
423)-42.1 (,qt pp. l5~)
Wilhi Tt reforfence d cited bodin- of the Suipremeo Court in the Penns~ylvania
(:5,the Siipreme Couirt held. .343 11.5S. 422:
** To the extent that Penn Water is being- controlled, it i. by the
Commission acting- under statutory authority, not by Consoli-dated acting










under the authority of private contract terms "legalized by the Commission.
The duty of Penn Water to continue its coordinated operations with Consolidated springs from the Commission's authority, not from the law of
private contracts.
En' forceability of Certificated Arrangements-Upon commencement of jurisdictional sales or services," this Commission has full authority to enforce the rendition of, inter alia, natural gas services, sales or operations, as certificated by the Commis ion, including as a part thereof, necessary deliverability of production of natural gas to meet, inter alia, certificated operations, services, developments, quantities, volumes or sales.
As certificated, such factors may or may not accord with the termnis of sales or other contractual arr:ngemeaut among natural gas prltuwers, ppelin es or distributors in seeking Commission authority to enga-e in jurisdictional sales or services. To the extent that contractual obligations coincide with the certification authority, these factors are thus also enforceable as a matter of private contract law. However, it is the statutory standards of the Natural Gas Act which ultimately control the terms under which natural gas companies may operate jurisdictional facilities and engage in jurisdictional transactions. Certificated obligations are enforceable by pipelines as a matter of the private law of contracts as well as by this Commission as a matter of public regulatory law.
Subsection 7(e) of that Act, 13 U.S.C. 717f (e). provides "* * The Coinission 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. *" This conditioning authority is a broad authorization, as pointed out by the Supreme Court in Atlantic Ref. Co. v. Pub. Serve. Comm'n, 360 U.S. 37S. 389 (1959) :
* Section 7(e) vests in the Commission control over the conditions
under which gas may be initially dedicated to interstate use. Moreover, once so dedicated there can be no withdrawal of that supply from continued
interstate movement without Commission approval. * '
In addition to Commission initiated proceedings, certificate, rate schedule or contractual obligations of any natural gas company producer or natural gas company pipeline may be made the subject of appropriate complaint proceeding.s before the Commission. Section 1.6 of the Commiss.ion's Rules of Practice and Procedure provides in part, 18 CFR 1.6(a) :
Any person, including any State or local commission, complaining of anything done or omitted to be done by any * natural gas company in contravention of an act, rule, regulation or order administered or issued by
the Commission, may file a complaint with the Commission.
Section 16 of the Natural Gas Act, 15 U.S.C. 717o. confers upon the Conimmissilon "* * power to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules and regulations as it may find necessary or appropriate to carry out the provisions of this act. * *" This is a most board authority. FPC v. Louisiana Power & Light Co.. Cpra. p. 642, J.ludicial enforcement authority attains for Commission u.e pursuant to Section 20 of the Natural Gas Act, 15 U.S.C. 717s; criminal penalty provisions are set forth in Section 21 of the Act, 15 U.S.C. 717t.
In addition to the foregoini provisions, affected parties may well have numerous judicial remedies available to enforce certificate rate schedule or contr;crual oligations of any natural gas company producer. natural gas compa p pipeline or natural gas distributor.
The ('ommissioner frtlhcr fihd.s:
(1) Prior notice and opportunity for public participation in this proceeding promulgating this Statement of Policy is not required either pursuant to the

2 The exclusion of the production and antherine functions from the juridictional coverage of the Natural Gas Act. 15 U.S.C. 717(b), does n-it deP.feat the Commislon's plenwiry regulatory authority over * (1) the transporta-inn of natural as In Interstate commerce; (2) Its sale in interstate corn mree for re<': end 42) natural :sn company enga_-d in such trainspt)rt rian or sala * *". FP( v. Lro,.iona Power Liqbht,. supra. p. 630: or preclude th Commisriniion trom consideri'ne production and gathering wheln relevant to the exercise of the, ('ominiiion's authority to regulate su'h tranportation. snle, or co nipnie-. FP( v. Transcontinental Gas Corp.. 305 I'.S. 1. 2") (11d11).
3 Sep also. Mitchell Enerri" Corpnrtion. Onion \1 72, i\7d 4.o 1 1975. -FPC ----. (appeal pondin-. .1ithell Fncirqi Corporrtion v. FPP', C.\5. No. 75-t110. n,l
I Pry.o Natura(Tl (GaC ? ('ompa)Y, et al., O ini-on No. 7:17. ie ,d .lT y 11 1:75, - Fr (appeal pendiin sub noma. otl,ut lnd RooIt!! ('o., Ct 11. v. FP C\5. No. 75--"851.

65-593 0 76 3






14


provisions of the Natural Gas Act, 15 U.S.C. 717(a) et scq., or the provisions of the Administrative Procedure Act, 5 U.S.C. Subchapter II, 553. Moreover, compliance with the effective date requirements of 5 U.S.C. 553(d), is not required since this Statement of Policy does not prescribe an added duty or restriction.
(2), It is necessary and appropriate for purposes of administration of the provisions of the Natural Gas Act, 15 U.S.C. 717(a) et seq., to amend Part 2; General Policy andl Interpretations, Subchapter A, General Rules. Chapter I, Title 18, Code of Federal Regulations, by the inclusion therein of Section 2.83. Policy With Respect To Enforcemnent of Deliverability And Rendition Of Natural Gas Services Under ('ertiicated Arrangements, all in the manner hereinafter directed.
The Commission, acting pursuant to the provisions of the Natural Gas Act. i ar 1 ua rly Sections 4. .5, 7, I6. 20 and 21 thereof (72 Stat. 822. F23. S24, 825. 5.3 N2, 633; Z6 Stat. 63, 84; 61 Stat. 459; TO Stat. I2; and 1( U.S.C. T1Ic, d, f, 0, s and t. orders:
(A) Part 2, General Policy and Interpretations, Subchapter A, General Rules, Chapter I, Title 18, Code of Federal Regulations, is hereby amended by adding a new Section 2.83 to read as follows:
2.,83 Policy With Resict To Enforcement Of Deliverability And Rendition Of Natural Gas Services Under Certificated Arrangements.
(a) Natural gas companies within the meaning of Section 2(6) of the Natural Gas Act (whether producers or pipelines) shall comply with all deliverability or production of natural gas requirements to meet, inter alia, certificated operations, services, developments, quantities, volumes or sales. The standards of compliance shall be the controlling statutory standards of the Natural Gas Act, chiefly those of Sections 4, 5 and 7 thereof. The certificate of the Commission authorizing jurisdictional transactions under the Natural Gas Act shall be deemed evidence of those requirements, whether or not specifically reproduced within the certificate document or order. Natural gas pipeline companies and natural gas producers have olbliZations arising from the Natural Gas Act with respect to. inter aria, deliverability and receipt of certificated volumes of natural gas supplies, violation of which obligations will subject either to the sanction and/or penalty provisions of that Act. While this Commission is charged with responsibility for the administration of the Natural Gas Act, regulated pipelines and producers have affirmative obligations to enforce delivery of certificated volumes of natural gas supplies by reason of the requirements of that Act.
(b) The Commission, acting upon its own motion, will undertake appropriate enforcement proceedings either before the Commission or the Courts to ensure compliance with all delivery or production of natural gas requirements to meet certificated operations, services, developments, quantities, volumes or sales as referred to in paragraph (a) supra.
(c) The Commission invites, and will entertain, complaints pursuant to Section 1.0 of the Conmmission's Rules of Practice and Procedure seeking enforcement of certificate, rate schedule or contractual obligations of any natural gas company producer or natural gas company pipeline with reference to matters set forth in paragraph (a) supra.
(d) The Commission shall include, subsequent to the dflat# of Order No. 5'9. the followint general language within the Commission's Order Issuing Such Certificate Temlprary or Permanent:
Applicant natural gas company's attention is directed to Commission
Order No. 539. issued October 14. 1975--F.R.-and to the provisions of Seetion 2.83 Geiineral Policy and Interpretations. 18 CFR 2.83. Moreover. issuance of this certificate authorization is conditioned to require Applicant, within 30 days of the initial reserve determination or any subsequent redetermination thereof, to report the result< of each such initial or redetermination study to the Conmission. The certificate ,ed mniinium daily delivery obligation of the seller (1) shall he determined in accordance with applicable provisions specifically set forth in seller's contract unless otherwise changed by the certificate authorization. (2) shall he without regard to any contractual reservations contrary to the certificate authorization. (3) and shall remain in full force and effect unless and until changed by appropriate certificate authorization amendment based upon Applicant's full documentation of, inter (lia. the reasons for any such proposed amendment, the sales production history, the amount of remaininz connected reserves of Applicant dedicated under the contract and the status of Applicant's nondeveloped






15


reserves dedicated under the contract. The certificate authorization is further conditioned to require that Applicant, if it has not secured an appropriate certificate amendment and there are circumstances resulting in the delivery of a lesser quantity of natural gas than any certificated delivery obligation, Applicant shall file for each contract year quarter, a verified report setting out the circumstances of such lesser deliveries and the corrective actions which Applicant proposes to undertake in order to meet any experienced delivery deficiency, such verified reports to be filed within
10 calendar days after expiration of each contract year quarter.
(e) Nothing herein contained shall be deemed to preclude the exercise of any other administrative or judicial remedies which might otherwise obtain to any person.
(f) Nothing herein amends., modifies or change aity exi sting uthrization for jurisdictional transactions as now certified or authorized by the Coinmission pursuant to the provisions of the Natural Gas Acr. Section, 4, 5 or 7 thereof.
(B) The amendment provided for herein shall be effective as of the date of issuance of this order.
(C) The Secretary of the Commission shall cause prompt publication of this order to be made in the Federal Register.
By the Commission:
(SEAT] KENNETH F. PLUMB,
Secretary.















APPI'END)IX B

FEDERAL POWER COMMISSION DOCKETS CONSOLIDATED IN GETTY OIL CO., FT AL. (DOCKET NOS. C175-319, ET AL.)

Estimated Contract
contract term Certificate Date ceitifiDocket No. Seller Field volume (MCF) (yr) issued cate accepted

CI-75 319__ _ -- - Getty Oil Co - - - --_ .. _- --Eugene Island Block 217 - - -- -- - - 450,000 5 June 3,1975 'Aug. 11, 1975

CI-75-493_ - - - Continental Oil Co~ - -- - - -- - - --. -do - - -_- --- - -- - - - - --3,600,000 5 oDo.
CI1 75-516 ---- ------ Getty Oil Co - --- --------- ----West Cameron Block 177L -------- 86, 540, 000 20 Sept. 9, 1975 Sept. 29, 1975
C1-75-538 - - - - Mobil Oil Co -------_ - - - - - - --Grand Isle Block 95 -- - -- - _.- -- - 322,300,000 10 Aug. 15, 1975 (2)
CI -75-558- _--- ---- Cities Service Oil Co ------Eugene Island Block 217 ------- ----- 900, 000 5 June 3, 1975'1 Aug. 7, 1975
SCI-75-614 . --- -- --Texaco, lnc - -- -_ - -- - - --- - Eugene Island Block 205 - -- --_ - --7,800,000 20 Sept. 9, 1975 Sept. 29, 1975
0* CI-75-651 -- - -- --- Atl antic- Richfield Co - - - -- - - --West Cameron Block 177 - - --- - -- _2,160,000 20 -- -d -- Do.
C 7 5680 ----- Texaco Inc-..------------ ---- Eugene Island Block 342 ---- -------- 216,000,000 20 Sept. 10, 1975 Oct. 6,1975
CI -75- 717 ----- Tenneco Exploration Ltd- ----------- Eugene Island Block 208_ ----_ ----- 54,000,000 10 Oct. 14, 1975 Nov. 13, 1975
CI-75-719 - - -_- - -- Tenneco Oil Co -- - - - - - do -- -_- - --- (3) 10 - d o Do.
CI-75-746-- - - - - do,, - -- - - - - - - - East Cameron Block 281 -------------- --248,400,000 10 July 24, 1975 Aug. 21, 1975

CI-75-748 -- - - Tenneco Exploration Ltd. -- - - - - - - do -- - - - - -295,920,000 20 -. ..o --0 Do.
CI-75-761 -- ----Continental Oil Co --------- ---- ," South Marsh Island Block 261 ---_---------5,400,000 20 Sept. 9, 1975 Sept. 17, 1975
CI-75-769 -- - Getty Oil Co.- -- -- -- -- -- -- - .....do ---24,000,000 20 doSept. 19, 1975
CI-76-2_-- ---- Atlantic-Rich field Co ------------------------------------- ------------------ ------- ------- 5,400,000 20 -d Sept~ 30, 1975
CI-76-18 --------- Cities Service Oil Co---------------------- -----------------_---------------5,400,000 20 ,,,do ..... Sept 22, 1975
CI-76-41 -- ------- Continental Oil Co ---------------------------- West Cameron Block 177 -------------------7,200,000 20 __do....... Sept. 19, 1975
CI-76-58 ---- Cities Service Oil Co -------------- _----- -------- -do ----_------- ---------------- ---- 7,200,000 20 --.do.,.-. Sept 22, 1975
CI-76--74--------- ------_Texaco, Inc. -------------------------------- East Cameron Block 281- - ---------------------- 124,200,000 5 Sept. 22, 1975 Oct. 21, 1975

I Conditional acceptance filed by the producers but rejected by the FPC. The Subcommittee has 2 Rejected.
been advised by the FPC that the certificates are deemed accepted as service has commenced. 3' Resal e of gas in CI-75-717.
















APPENDIX C


In the Matter of


GErTY OIL COMPANYY, ET AL.

Federal Power Commission


DOCKET No. CI175-319, ET AL.


EXHIBIT TO ACCOMPANY TESTIMONY OF

MARY JANE KLIPPLE

SCHEDULE 1
CONTRACTS FOR INTERSTATE SALES OF NATURAL GAS TO INTERSTATE PIPELINE COMPANIES

[Contracts with specific depth limitations]

Number of contracts
with depth limitations as percent of
South Louisiana, offshore United States total contracts

Some No Some No
depth depth depth depth South
limita- limita- iimita- limita- Louisi- United
tion tion Total tion tion Total ana States

Year:
1970 ------------------ 32 2 34 220 204 424 94 52
1971 ------------------ 33 16 49 161 117 278 67 58
1972 -------------------45 14 59 173 123 296 76 58
1973 ------------------ 31 7 38 87 63 150 82 58
1974 ------------------ 34 7 41 114 80 194 83 59
1975 (10 mo) ------------ 49 31 80 182 118 300 61 60

Source: Contracts on file with the Federal Power Commission as rate schedules, or as applications for certificates of public convenience and necessity through October 1975. All contracts dated 1970-74 are sales for which certificates of public convenience and necessity have been issued. 129 of 300 contracts included in 1975 have not as yet received certificates.

SCHEDULE 2
CONTRACTS FOR INTERSTATE SALE OF NATURAL GAS TO INTERSTATE PIPELINE COMPANIES
[Number cf contracts by term of ccntract

Scuth Louisiana, offshore-Term of United States-Term of
contract (years) contract (years)
20 yr or 20 yr or
Year more 15-19 10-14 5-9 1-4 Total more 15-19 10-14 5-9 1-4 Total

1970 ------------- 34 ------------------------------ 34 416 7 1 ------ 424
1971 ------------- 48 1------------------------ 49 252 6 18 2 -------278
1972 ------------- 56 2 1 -----------------59 240 31 20 5 -------296
1973 ------------- 33 4 1-------1 38 102 6 24 16 2 150
1974 ------------- 28 2 8 2 1 41 107 8 22 50 7 194
1975 (10 rr.o) ----- 47 3 18 12 --------- 80 145 9 42 55 49 300

Source: See schedule 1.
(17)











APP1ENI)IX I)

SUBCOMMITTEE STAFF STUDY SUMMARY OF OFFSHORE LOUISIANA GAS SALES APPLICATIONS BY PRODUCERS, JUNE 1 TO OCT. 31, 1975
[36 contracts

Contracts Percent

Limited dedication of reserves ................. ... . ... . ... .. 19 52.8
Producer reservation of reserves ....... - - . . . . . . 7 19.4
Limited term contracts (less than 20 yr) .........-- - - - - 15 41.7
Contracts with all 3 of the above conditions .. .. . .......1..- - ..... .... . 3 8.3

1 These 3 contracts had the following estimated reserves: (1) 12.0 BCF; (2) 48.6 BCF; (3) 59.4 BCF. The estimated reserves for Grand Isle block 95 field according to Mobil are 322.3 BCF.
(18)












MINORITY VIEWS
In these views, it is our intent to take strong exception to the conclusions reached in the Subcommittee's repot espeially that conclusion which specifies that Mobil intetionolya1/ withheld gas from the interstate market. This is anvthino but a case of withholding. The Subcommittee in our opinion could have hardly picked a poorer choice to demonstrate withholding than this one involving Grand Isle 95 Field.
The record of the Subcommittee and the Federal Power Commission demonstrates not an .intent on Mobil's part to withhold, but quite to the contrary, an effort by Mobil to bringr gas into production and on line as quickly as they could. To illustrate this point graphically, we present the following facts. First, Mobil and Gulf acquired interests in Blocks 94 and 95, Grand Isle area. in the 1972 lease sale. In the 1974 lease sale, Gulf and Mobil acquired Blocks 93 and 96. Mobil has a 5/C interest in this field and Gulf a 45% interest. As of September 1975, only one field. Main Pass 140 (also owned by Gulf and Mobil), acquired in the 1972 lease sale was in production. Grand Isle 95 was ready to go into production as early as November of 1975. If Mobil was intent upon withholding gas, why then we ask did it develop the field so rapidly so as to be ready for production ahead of all but one other tract acquired in the same 1972 lease. This certainly does not appear to us to be the actions of a company that is intent upon keeping gas from the interstate market. but quite to the contrary, it illustrates an example of a company that is striving earnestly and in good faith to produce gas for the interstate market.
Second, Mobil and Trunkline Gas Company entered into a gas sales contract for the gas produced at Grand Isle 95 on March 4, 1975, and s;x days later on March 10, 1975, Mobil applied for a certificate from the FPC to sell gas to Trunkline in accordance with that contract. This chain of events hardly reflects a company that is intent upon using dilatory tactics to withhold gas from the interstate market. Mobil was seeking to sell their ras to the interstate market. They wanted Trunkline to obtain the production from this field. Does entering into a contract to sell gas and seeking promptly an FPC certification illustrate an intent to withhold?
Third, Mobil's application for a certificate further illustrates that there was no intent on their part to withhold. As a matter of fact. in that application Mobil stressed and we re-emphasize stressed that they would like rompt action on this application for certificate so as to enable pipeline construction during the sunWer of 1975. If prompt action had been taken on this application, gas would have been available to consumers during the 1975-1976 winter heating season. Again we must ask the question, do these actions sound like those of a company intent upon withholding gas?
(19)






20

'I'le prl't l NNl111 lv ji rej ect I () ( ra lIst' (lid lnt be_'iin to develop. I lowevxer, un til tili i' app) 1)1i~t i if 1'(w) a 'el-I ict'a lc ra 1 e t he FIP( The( > iii )' 1 III utt,( rcepor ~HI1l:get p1:iii liaois 111)01t fac that1 Mobil%; co ,l 1r.- IJ cot it a ii u' It tree- 1W cOW tic',_ 1 I_* pWohsi x ichul~ r at thbe hecart of tI lie oiji troversv-Y IV-(, r 1'\vat Iol d 1I Iept I I 1111iit1t Min. an1( 10(-ye a r Icni. W e ('1 1as eu I ) lit ( uiit ho ev r. t 1i at Ii I \ a Iri 1975 I! whIIenI
oI aI leI ftins cert I icate tIhe F1( ha:1d not in aiV w\aV mldiI I Ie I I Iat the wo l I noIIt rf'l~ lit a ('e It I ticat o ( a eolit 1"'a1c t ano
FThIe Itae of t Ie la a :1\-IIt th at ti ic wa Ic I h N I1111a t tbe t :V1)es o)f proviS I0 I-~ were eVn t i rely* aet able. In! fac (t. on 'Ma trch 8 1915 .-.M1obIlI filIed( aa I'Ip ditat 11(OVn'1 aI sle to I nlitevd ("ias Pipe Line( (CornpallNyfo the West ( 11110e,0n Block .-),7 Fiel(d whichl inNvolv-e aulvance pa yments,
detll limit at loll, a tenl-year term Iii ~ipxiinudrw ih Mobil could res erve. gas- for its own use. The FP( la(d no) trIoule in acting~ fa voi iy lanprmtyol apiainIIMac197.te P
atel Iipora l'V t'ti't ificatt' which (lid not object to anly of these c-.ont Pact terms. Why was it reaIsonlabl e to accept the West Cameron Block .5,1 contract terms bult reject the GrIandl Isle. Block 95 contract with the s ame ess ential terms ? A dditionally, the ('ontract. with Trunkline~~~~~~~ w n"rslnt"tascinacepted by the pipeline and executlted byV them. Ihie, pipeline' also ask1\ed the FPC to take prompt action onl its application for certlification of this conr'act so that they could( coliiliien'e 'osti'tofo their pi)elfie. We cannot accept as
unresonbleMobls effort to have its conti'act- certificated when there w\,as -I Iot hing f to( prohibit the certification of suc11h a contract.
We note that, in spite of the fact, that Mobil submitted its applicati in March asking for exp~editious action they did not hear from the FPC until July 19*75. or midway thiroughi thie summer construction Seaonin the offshore. The July, notification was not an offer to certifi('t1)ut onl y a request, in the formn of a letter, for additional information. Mobijl IpromIptlV supp)lied the requested information to the Coinnu11_smon. No4 mention was, made in this letter of any FPC objection to the terms of the contract.
lIt was not until June 1975 that it became apparent to anyone applyinl,( for a. ('ertificate that, the. FP(1 was reconsidering its policy on any of the thm'ee types of c'ondlitions containedl in the 'Mobil-Trunkline contract. The adv-ent of the( case of (ietty Oil Company et al., Docket No. ('I-75-819 dealing with limited dedications was_ thie first, inkling- that co)~nrcts containing such provisions inay not he certificated. It certain] v ("an be said thiat Mlobil and Trunkline offic-ials Nwn executing their c'ont ract lacked prescience about prospective FPC actions. but this S(enario biardlv evidences llnreasonallness- on the part of Mobil in see kincr certification of this contract.
Onl Augumst 15. 1975., the FPC issued a1 temporary certificate to Mobil and Tr'inkline. This certificate e wvas- offered to Miobil a full five 1uiiov01bs after 'Mobil's; al )plication fomr certification on Mfarch 10, 1975. Recall, that when Mfobil sulbmittedl itsiaplli('ation, it. .asked for prompt action oil its certificate. Mobil did, in fact, rej.et this offer of a Tempoi'aiw Certificate offered in Auguist. InI issuling~ that Temporary CerI iae to MAobil the IFIC ordlem'ed that the 'Mobil case be. (onsoliated withl the G~etty case in order to decide the questions of depth limita-






21

tions. limited term and producer reservation. Almost immediately upon receipt of this offer of Temporary Certification Mobil contacted Trunkline who according to the testimony of Mobil's Manager of Natural Gas. Jack E. Earnest, had been advising (Aobil that because of the inordinate delay in certification that it "was getting terribly late in the season to hope to get (a pipeline) built." Trunkline at this time advised Mobil according to Mr. Earnest's sworn testimony "that September 5th was about the last date they (Trunkline) had about completing the pipeline" in time for the winter heating season.
Mobil then in an effort to get this gas flowing rejected the Temporary Certificate. but in the alternative asked for a rehearing offering also to eliminate two provisions of their contract. namely the 25% reservation and the depth limitation if the Commission would grant them a permanent certificate by September 5. 1975. which was the last date that Trunkline indicated theY could act. Mobil did not relent on its ten-year contract term. So. the Commission in response to Mtobils rejection of the Temporarv Certificate and Application for Rehearin including its offer to delete two of the three contract provisions in controversy offered Mobil a permanent certificate on Septemher 1, 1975 (5 days after Trunkline's last date and that date requested by Mobil) but specifying that Mobil would be required to revise its contract to provide for a 20 year or "life of lease" term. On this very noint of term of contract. we must note here parenthetically that in November 1975 the FPC reversed itself and offered Mobil a 10-year contract.
On the basis of these facts, we ask ourselves who is the malefactor here ? Surely, it is not Mobil. They submitted an application in March asking for )rompt certification but did not hear from the FPC until July and then only a letter asking for more information. They were offered a Temporary Certificate on August 15. but were advised that three of their contract provisions required further consideration by the Commission. Mobil offered to eliminate two of those provisions and the third was later adiudzed to be something that they were entitled to in the first place. Does that chain of events sound as if Mobil acted unreasonably ? We think not. What we find here is the ever prevalent morass of bureaucratic "red tape". changing rules in the middle of the name and failure to act with dispatch.
It is this and other similar fact situations that have made us call for less government regulation. This is an example of what happens when the Federal Government seeks to implicate itself in the free market system. It appears that two parties cannot even enter into a contract which they believe is fair. iust and reasonable and which is consistent with the present state of the law without the Federal Government requiring them to change three of its provisions. We ask whatever happened to the centuries old common law tradition of "sanctity of contract".
The saga of Grand Isle 95 does not end on September 10. because on October 3. 1975. Mobil rejected the FPC offer of a permanent certificate. Recall. that by granting this last certificate on September 10. 1975. the last day for Trunkline to start construction for the winter heating season had passed. The weather and hirh seas in the Gulf of Mexico during October and November virtually preclude pipeline construction. This period of the year we must also point out is the








ill the South Lwil -4i:lna (W,<11(we 'll.c.-I :111d there xva 4
I f I -t I I I I T. I I I 1 -41 --:t v I r I I I I I I I I I f t 'I T I 10

11) 7 lwn T he '()Ili-111:1 Iw ill ce rl 1,c :11 il :111i
h I I I ()I I :I )"I : I I I 'I 1 111W NVO 11(6 ,d
to) I 1w I)- vem, cwll r;11-1. '111, PI*()hh1I11 however.
I 1 0 11 1 r I I I I I I v F 1 1.( 1 1
S t I i ( -n t
del I ve v v I d r l I I I I I.( I I -c I I I I I I I I est I
'It d jwfmv I 11 ]VAl v dt) nw y6te know AN-11:1t ( )rder'):),
Illd 11wv Ilope that 11 dn("- 1101 weill w1l'(11t t-liev thiuk it mav

If it that 1[1114 w al-rallt t1l'if :1 11JI1111111111 (11M IltitY
f -:1- 1w di llvclvd (1:111 v 11 v Ill(' pr(.)dllC0]% '11111)l v
CZ11111f)t 11w ('t a rel lit i 1,0111011t. F ir-4 a-- tit(, M 11)(w il v to t-110
I I I 'I (I IV T t oil t I I T I I., Ie I I I f v F lel ( I I I I r I I t I I I I a 11mv,11L- G. w1wil one exwllllw t1w 1),Itllre of W11111'J! F(1SC11*VWI*-. 1w,"all"e of tlW 111"ITIN, 11"Wel '111d vm-,111:11T, ,Mlplv 11111\-.1lown whell a project 1.141k:illl -tl )f tiw, c unceitainties simply cannot (ril-al-allfee tll(at a field will
I)]'()' I Ili .(, I ( ri VO 11 1111 lit i t v () f A ca. -;V 111 1 MI Dt W I I 'I I W IlCd I)fII I heT-P. Tillf )11 entered into a contract Avith 'Tex;1 4 Ea4erli Y IpelIIA( 1 SOA-01"(11 Y (I (I I I xi(I theY Nval-i-allte(I that tll(' V WOUld IWON-ide I ('011',lill,
.11nollilt- ot, -(Y'Is to Te\,a- E I-;terli fl-mil ,I field knowil -,is We-t Delt l -27. It turns (,.)tit witil t( Tlii-; field that Gulf had sub'stant 1,111 v over
c ,f I,, I In ted re,- ervc t,()I. hll tiel(l. The tiel(I till-Iled out to he 1111wil
f11,111 (Tillf tjjml- rlif and thev could not lilect 0)(1.
o*llarillltee that tll(-, N (-rave to 1'exa-; E"Ist-el-11. GIllf applied to the FPC f0l, from thi- but I.O(TIV("Id nolle With the FIT instructm-'r Gillt, tll(-It they Avould have to Illeet thell. ob] il-(Ta t loll 1111der tlli-, rlllf*S
front (411011 ;OIIIT(Is. 11 v a 41In Grand 1- le 9.-) is (1011111litted to T(,xa-;1 Eo -tern fnr just thit purlm-4-1
to lwakc 111) (1( 'ficlellcie' 111 -(r",Is 110t tivailtable lit AV(,- t Delta 27.
We wmild now like to treat certaill Items ill the Ilb(-mlllllittce's lvport \v lich Zpeclflcallv lwar clo -,er crutinv. Fir-4. Mohll P-: (--rlti(-ize(1
111 1 It(' 1-kiport f or reducill 0, 1 T,- ill it ial del ('10111-:1 ilwd 11) 1 ts orl Lri 11(i I
from 1-20 111*11ion cubic fect per hv to 01 or 1111111011
cill)]'' feet per day. The 1',wt of the matter Is th:tt Mobil ii i 4 not re(luced I I I'll a t (I from G'rand 1-de Field 9.). The 120 1111111011 clinic feet, I)e-t'
(i lv rate AV, not for Initial deliver. "' I *t*-Il (lelivel-le-: will
MIlY front Mobil"s platform A whl,,h NN-111 induce it'a rite of
'PilOxillit"ItelY W- In'Mon cufi*,. f(,tit per (tav.
The 1-20 illilli(m cubic feet fi (rmv is -lfo1)11*s Share for both p1,11 form
A md 11. Platform 11 lva llot '-whedide(I to be available for pro(Illetl(w (1111,111(s. the Initial delivel-Y pllao (,. ,-;econd. the "-;ubcontillittee report lvaclw- t he concl usion that
actiOlls WHIC, p;lI-t*cIllaI-1Y lit this sitil"Ition
lt.- development -0111C 7 mII 1 *1 on t o (1(1 Nvere Sum)]
all advallce ptyllwllt "I_(,Tc(, it 10111' With pipel!ne-Ill cffe( 't, coilthillo's 110(41 to he sald Obout 1111,- Of e-NIminditure of
("Wital ill order to brillfr this Into -dim-per focw with re-






23

sjpect to the advance paymnen t 1)v Irtinkli ne, thiis was lot. a 2ri ft L~v Trunl e to Mobil. bult was inl fact a loan by the jpipel1 me to Afl )1 Which Mlobil will have to repay to 1.1 1i me. We believe the 'Sn bcomiinlittee, report leaves onle with the imlpression1 thatf Truiikine, plaid for aill of the development costs ando that, the ir eXpllo, ]iurers wol not,) be recovered. Second, dlevelopment costs (are not the onl 'y expenses that gro inito brinogiiuo' a field ilt( pirlductioni lbe(aile first vonl mnust aU1,1i10 the field. Mobil (and Gunlf spent, jointly 1$60{ iiiih11l to (acquire the, field which wvo1il mean Mobil's 55~share of the lease acqulisit ioll costs WvOul( come to K'~i3 million01.
Third( Mobil is condlemned1 iin the report for not accepting- the Tenplorary Certificate on Atigust 1,77. 197~5, and 1ecrinnn1110 (leliveries of ,gas p)efding, a hearing on tlime Issues in (ontrove-sy. T1he epIort cointendls that.i Mobil hiadl (lone this that. its legal rights would have, been fuilv protectel 1. -E vi( ent Iv there is, dis(IagreetiIitn concerning( whether Mobil's rights would have b een fully protected if they hiad A1doptedl such* ail app)froach. The ahlctlLwfil o(,rv,4jo 1kcexvmcz. (iil iani arnd ( obert pr-epa red, a legal opinion onl this verve point and comichided:
'111i1it. it1 011ou opinion that Mobil's Judicial review posture Could1( have been severely pre'ludiced had1 Mobil conmm enced ihverie-, under
aim horzat i l i )el eveti to be In valIid ; that Mol Ii acted prudently i
prsring ts lIrights to r-eviewV byA not inlitiating deliveriess ; that for practical reas ons it would hove bvel n wise to coimiienee deliveries without, knoxvin2g the subtmtieconditions of service ; andl thiat otherwise, Mobil did all it could 4 o0 ill order to exp~edi tiouisly secure a rea-sonal-)le and Lawful certihecate."
Ave "Ire tatta'ching14 as a.n1 Appendix to our views, the full text of the, al)ove referenced letter.
J~x~s M. COLLINS.
)BmiiTr Kiuum-:Gv.
(.~ ~TAu. EIN 1(xvZ, z.TLl.TAAM AND) (Conir.
11 (I./I i/Ifjtonu, 1).C( ., uu u 29, 197(;.
Re Mobil (il Corp., FP' I )ocket No. ClT5-3 ( Applicatfion fiur certificate. sale
to Trunkliiie ("Gas Co., Cranod Isle Bloc)(k !)5 Field, o)ffshiore IALlisiUalU ROBERT D). HAWORTHI,
Scn~ior Attorncey, 31obil Oil C1orp.
Houston, Te.
IDEAR B1OB: You have requested our opinion as, to) erlta in qulestions, raised ill connection Nvith the captione( matter. The 'pnroedurn1 history of Dw)oket No). C175-538 is summarized in thle Jlanuary 23, ]!)T(;, Sfttenient o)f Jack E. Earnest. Managl.er. -Natural G as Exploraltion and lProducin, D ivision, Motbil O il1 C'orp~matioll, before the House, Subconim~ittee on )eswi anl JInveshtiga s oflS the (Committee onl Interstate and Foreign Cmninerce. and~ need no~t lie repeated. A Subcommnittee Staff mnemiorandumi also) summarized pr-ocedural events in the pro)ceedings before the ('urn lissioll.
It Was suggrestedl during the Subcommlittee hearings that "AoIfsefuisal to sell is unwa rranltedl, contrary to the purposes ()f thle ( )uter. ( 'il i entla Shlf Lands Act," alil ('oltra my to the jiilic jit er-est because *'eveii hand it f Mobil] comnmencedl the sale subJect to onle or amiother. if tile FVP( orders, ill Ihis caIse. it wild have remlainled free to, challenge, IN it Ii befi ire tlie ('milali ii andU 1 the Courts. the propriety (4f. ...ta ida rds ()n thih Ile or-ders w ere ha sell. S e ileent of Morton L, 1i)ns 4, .1 a uarv 21. 1 )T(;) lit ()ilir 0)1111011l)V'e' Mobil has taken a reasonable positill based up11)1 soiiid legal, tactical1, 111d( business colisiderati1011.







24

AtI th lit' ust~esol oimt out ti Ia Ithis lit t~q mr doe It ce(,It rally invollve Itflit 1leion of) wh v~etherthe tepoar cetiiat ffered by th1( olrder[ of A\ut
gust\;I 15.111-1 1975 w rqie tobhalene Iltdit l- or1etleimoiditions4
eN~ Ir'e thri I til bI chi IeIgdv I Ii Ii er iIt. q. uji nisa fI

t Ih ~ Izi aiIe un 1a 1.(ii cod t l mus lie Isesi in I' ofwevhrsc


InI addit i n to Ittloe Augst I- 15. 197 r d r, wi\ ichtI gra lt d a co(iditioil tenmrary c iiiatIt'(f Ileiso aI I.< isue irders.- dat114d Sepllttlier 10 anld N-'\)
veniber *-I1,I! 17,5. grning conI d itIIinal imerii. He! et it III icat tis The hi tteor ( rder

1*I(ders. it is mir ( Pjmiion t hat uiqualitied accept lllie oit t he cert i ea e ad cminnlielce'1itient of deieiswouild have 1el Ioln 1)(i:a iiteiI I aI lv ilw II m .It \ wIth 1)1 atI et I t 1i see 11ci 1' evv of o ,rders n isI ig s c co I(I I Ia t e I Iml s ,taIted.
itl is( c trry to concetit o f '*aggrieveinent for -, Ill rsOI i to aclt n c
in a I I Io wvit It, illi irder which he( c.a I lins- to iniiure himnt a iid Ithe courts have SO50 -r gI I Z( d tIs i.; iI I I Ast eilcy.
Iomn exampl11e. inl Iulq 1id-Con tinct ia Oil C'o. r. P, 270 F. 2d 44 ( 10th C in. 1959,). thef (outi was- asked by a produer to re-view two C commission order '. grantjing~ wtmorary certilicales-. Within respect to thev first order, the 1)rD(lucer hatd initijated (leliverieos purs uant to( the tetiipora ry a uhorizal ion. liithi c11"ontext, the ( 'ort rioted 270 F.2d ait 407 ) t hat:
'Terighit of this colunt to review orders of the 1iedlera1 P'ower ( commissionn is 11imi1ted h y Sec. 1901)bfit, the Natural (as Act to inlst a noes where the petitioner is peetyaggivdby thle Iimposi tion of suIcli orders. . .Sumnray is currently soIl ig' its sand has ade no talliria tive t'tto(rt to cease. The C'ommnissionhs made6t 110 oh ctioti to the stathUs (1110.
Thel( Court thoereulpon hvl(1 that the "present l)et ition is, hrernature, and disniisse-ild the s.
Ili sh41arp ontrast to this situnationi, the producer had1 not initiled de~liveries, under the second order. As tom this order, tie. (,1ourt 1101(1 that thle producer was out-it led to review, stating, (270 F. 2(1 at 40):
SiticIle accep~tanice order of t he Comlmissioni is clearly and unequivocally conditiotledillt suich a mannliler. as to i ninediat ely affect Sunra y if that company should initiate temporary Service it is a ppa rentf that pot it ioller call lireselitly questoti1 the right of the 4" 'ottlsiol t4 m (f1ition t emiporariy certlicates at all tand, ill particular, as donor ill the istantf case-.
Againl, in Texaco Inc. v. ITC', 290) F. 2d 149, 157 (5SthI Cii'. 1961) the Court s4a id with regard to timeliness of petitions for review of conditional temporary ce~rtificates that, "'We thlinkj theii, tme for thle produlcers to raise thits questions I as to validity of conditions] w as before they accepted the (ertiticates with t'w coniditionts attachled." Andi in H~unt Oil Co. v. FPIC, 884 F. 2(d 474 ( 5th Cmr. 19(4), although -Ig-grievvmciiit issues were 11(t there, under review, the C1ourt noted inl flist Ilngi siing the( decision on tHie merits ill Stint-all Mid-Continent that (8834 F. 2d at 479)
''There, unlike here, the producer hiad not yet dledicated its gas to the interstate market. Where operIat ion had cotimmenced under a tempIorary a uthorization, the Tenthi Circuit iii the same casec dismissed 'I petition to, review its conditions. 2970 F. 2(1 at 407."
Rlefe~rence is made above to anl unqlualified1 acelpta lce of the cert itic:ilfs als 1 millng inlconsistenit with Mtobil's posture as aIn "agg-rieved party' seekjniti 1(1ivial recview\. All implicit quest ion this is Nvhli-ther Mlobil could have protected its apjlocal1 right's imy t endering "'qualified"' accept anvtos. which reserved rights to cdiallenge the (irdlers. aind other a11ppropria to reserve itions. Tit sinmila r situnat ions. (luiah1ifie(1 acceptances" have 1)been attemnpted1. buit were rejected by the Co 'olmiss.ionl. fly ordIer issued JTune 3. 197-5, temporary certificates woere issued to four pro(1 icers2 ea ci (of which filed1 a five-year contract (ont1a iing (depth It iniftIiotts On

I it 'Icqc nc. v. PC, 290 F. 2d 149 (.$ti ('ii'. I 961 ), Ili he('nirt held thitt :it ;I"(irripvedl prooliucer mw t seek review oif a t empoora r erti fica te -withlin Go 60o- dasfteIr reliwogrinu i is (1eniIed byv t he C oin In i.," sof), In FPIC v. S' et mm ret t 1) V o)ii Co., :')!1 TS 9. .44 (1968) IP SijrflP(oilrt rioted( that it d11d not have "O(ccaioii.. tow pa, on t he o'orreetiisxs of 1 halt de'i~iol.Ge(;,itv oil Con. D o('kt4'No, CT75_-:l :~ 19. htl('i Richfield C'o., Docket 'No. ('175 Al1: I iin a] (IiM Co., D ocket N\o. ( 175--198 :('it its -Servjcv Oil 'o. I)cket No. C'175- 558.







25

dedication. All filed qualified acceptances between August 7 and 11, 1975. By letter dated August 19. 1975 (a copy oft which is attached hereto tlie (ommission rejected the attempted acceptance. There is no reason to believe a similar attempt by Mobil would have been treated differently.' Ii dissentinag to the August 19th letter. Commissioner Smith labeled the Conminissions' action -a pointless exercise in jurisdictional gainesmanship," stating:
"If the *rejection of acceptance' is issued here because the producers reserve their rights to seek judicial review of the Conimission's earlier Orders, the rejection denies due process. and I dissent thereto."
It consequently is aparent that there was not any way Mobil could have conmnenced deliveries and Simultaiieonsly maintained a viable (--hallenge to the certificate orders. Assuredly, if deliveries could not be coninienced because reservations of rights to review were unacceptable to the Commissionl, and only by relinquishing such reservations would deliveries be permitted to conience, then the inJconsistency between initiation of deliveries based upon an unqualified acceptance. and institution of review proceedings. is obvious.
Moreover, it appears that it was the Commission's intent at every stage of the proceedings to cast its orders is such a way as to preclude or delay judicial review-even if deliveries did not commence. Thus., on August 22. 1975, Mobil filed an application for rehearing of the August 15th order. However, in the responsive order issued September 10. 1975, the Commsision held (p. 1. fn. 1):
"The orders issuing temporary certificates and consolidating the applications of Texaco and Mobil for hearing are not final orders of the Commisioi: therefore, the applications for rehearing will be treated as petitions for reconsideration.
Under Section 19(a ) of the Natural Gas Act, an application for rehearing is a prerequisite for judicial review : and although the Courts have determined that an order does not have to be "final" for purposes of review,' the Comission's treatment here indicates strongly that the Commission presumably would have maintained in any subsequent judicial proceeding that a Court of Appeals does not have jurisdiction to review an interlocutory order of a procedural nature, particularly where a "petition for reconsideration," rather than an "application for rehearing" was filed despite the label applied to the document by the producer.
Further, there is no question when the September 10th order issued a permanent certificate, the previously-isue(d temporary certificate ceased to exist. Consequently. even if Mobil desired to challenge judicially the temporary certifiCate, it could not have done so because there was no order from which to appeal. Likewise, upon issuance of the order of November 21. 1975, the certificate tendered by the September 10th order was cancelled since two certificates for the same -;ale cannot exist. 4)n December 19, 1975. Mobil applied for rehearing of the November 21st order, thereby taking the first statutorily required step to judicial review. On January 13, 197(, the Commission granted rehearing. but solely for purposes of further consideration. The latter action swiiply affords the ('mmission an indefinite amount of time within which to act upon the merits of Mobil's application for rehearing. Until the Commission does so act, judicial review proceedings cannot be instituted.
In addition to legal factors, there are relevant practical considerations to be taken into account in assessing the reasonableness of Mobil's position in this instance. Mobil has drawn attention to the fact that the Commission issued a temporary certificate on August 15th, despite the fact that Mobil did not request a temporary certificate. In so doing, we do not believe that M4Inhil wNas calling into question the ( 'ommission's power to issue temporary authority in the absence of a request therefor. earlyrl, the Commission has such power. What is relevant in this connection is that in practical terms there is a vigniticant difference between situations where a producer has applied for temporary authorization aid where he has not. In FPC v. Yunrou DX Oil ('.. 291 U.S. 9

3 Indped. the Connission believed there wero similarities< hotwen the Get ty, et al. apnlieation< and Mobil's nplie;tion in Docket No. (IT7-3.14 vtihcient to eonualiate them for hearing farder issued Au'nst 15. 1975.
See, e.q., CitieR Serrice Gas 0a. v. FP' 2355 F. 2d (10 10th fir. 15Sv
As stated by the Cmnission in Placid Oil Co., %0 FP(' 252. 292 (1962) ''. .ne we raD O t I PJPY 11T1 nt cPrtifica to .. the 11 e fAmTrr alithorii iatiml ce;1 tO 11,110 0an prosnective noplication and 'was, in fflect aua tomartica llv elled.
See, Hunt Oil Co. v. FPC, 144 1. 2d 474, 479-4< 4s0 h Cir 11,(4 ).







2 6

P H the slw l .1111 1 to J I I I i I I I t
I T i I i i f r(
I I I j j I
I t I I I I I I I I I t I t 1 0 1 to I I f T I I I I I I Y i I t I I t I I I I I t I I n I ( ( I ( i I I I ( I I I : 1 .1 1 to l I \\ : I I ( l 4 1* < r i ( I I ( Xv i I I I i
0 w :11 q to :I I I )1 1-11 to I 111 (-I 11w C m irl s: i i (I I :' 9 1 i 1 -11 4.5 )
NN, I I I I I I r( l( I I I -t r i ; I n li I I 1 44 1 11 1 1 1 1 1 1 1 ( l '-' I I I I V I- V 1 s r i ( ) r t
1 4 1 f I I I r I I I : i r t I I I t I I I r( to -t l( I I I n I I I I I (l IIICY NN* ( l I I I I k I I
I ; I I I I I l't I I I I I C( ) r I I I I I I I I I I S,- I I I I I- I k t I 1 :1 t I I t I I c I v r ii I )w lerills hY It 111,1.\ he r(ltr()SIK'ctiveIy
allen'd to (-fit, will 1() 1 1w puldic 1111en'st."
NN, I I 1- hei'e. ;I 111-mhwer dml., il()l ;[Ifil-Illat ivel v rc( I I I tt-mp(Irar v autll()rity, I I I tll(. I Irl w('(III res I'm pel-Ill"Illent certification he hvalld tjwI-(4m.( thfn is liop I-Isk t(l, p)teliti.111 v miller(' 1101 iCtl. ( ( lit\ er I)v forni:i I I Ird,,r \vI t It fiffl ImlIlic II(It lc(" t he pr(-)(111cer ills 0111y I he risk I hat III(' ternis 1 It' I lit, tempor:i I- cert I fic;i te v he ret I-( )si wct i vel v i 11( red'* by I It(- lwrlilaliclut cllrt i lii.;Ite. Fn III, t "Itl III-I )(11wer's N-,Illt 'I're pm Ilt i f clea rly III, y )f be prudent to (-olluilellce 1111der tellipm"IT, v (IlithmiZatioll pending rcs ()Illtioli (If
plrinanemr cert III-ml-11 c()III 1111,11cellielit ()f deliveries It(,
will he ilidelillitt'lY (.oulllnitthig his gas to ilitcr ,tate service wifliolit knowilig the cmiditiwi-; of 1wriwinent service. As is the c.is(, with all temp(mary certificate-, is- Tled 11Y file C(millw-40n. t1w Au?,11,'iust 15th m-der provide( ,"d thlat once hegun, the
Ill:,,ly Imt be di cmltilllivd witholit permission of the C'mmili.ssi (Ill is"411HI piir-- u.mt t o the provi.sitrtis (of Seetion 7(b) ()f the N.itural G'as Act whether the cmitr:ict term h.i.s or not. "I"he i!- stvincc, III' temp),rtary certificltv risj
with(lut prejudi(v tf) siw.'i final di spositioii ()f The applicatJon fi r certificate, as tli(-rec()rd may required."' (Orderfii.,z Paragraph ( E, I
,-;imilar o'nisiderntions ()f prudence, als;() nmy apply to and support :I produeer",q deckion to refrain from initiating service mider a permanent certificate. where that certilic;ttti, (Ijws ivA inake clear fit(, cwtditions t)f permment service. This is pm-ticularly to the Cmilinissimi's order of X( v( inher 21, 1975, which
ached the now-st, ndard "Order .539 condition," (,s-entially requirin- .11(ilhil to accede ill advance to a non-cmitnactually based "certi flea ted iniminuill dailY dMivery obli.-ation" to lie determinfld ill the fixture. '\I()I)il wall, ill a
pc)!- tlire \vlwre it could eitllel- (If ('rucial
(,(nidition (d ;ervice,-Iater to be formulated 1) v the ()r rofr(iin from
commenchil- d(,liveries at lea.,;t until all emiditions ()f service were defillite. Ill this context, it is our vievv that ,let(,(] hm-fully, reason,,iblY mid prudelitlY in
choosing t1w hatter course. Our view is has(-d Ilot (only (III the filctu'll c(ml-ext illV(Aveld, but also on express ions; and actii)n s (Itf tAliers, illcludim" the (-mlrls.
Relevant ?.'rollild nul(-, were establish( d toy the Supreme Court in CA TCO.,riwre file ("ourt dotermitied, aniong other things. (1) that the filing t f applic(1tions for ( certificates "did not. constitilto I dedic'Itif)II to tile ilifvrstnh 111,11-ket ( f the recoverable under these Ie;i,-,es- : (2) there Nva,, im d(Iubt "that the producers Nvere Cat liberty to rvlfll- (, cmiditional certi1i(-a1(-," : and (3 1 lh,it there wi"nothin- illegal*' in the producers' rejection (tf tho altemitative -propwed hy the 0)jimilsion (and their standing firm (m their ol-m-ii.- (:;0'0 U.S. at 387-2,",S).
It I(-, CA TC'O, I h e Courts I If Appei I I ild (wo--,i ,ii)n i () (-tml-zider
in.cT pr(,41,ucer- refm als to conmieiwe (lellveri(ls where (,,widil Imis (11' -(lrvkle WeI'll
indffinife. lit Oil Co. _2,70F.2d 404 (10th Cir, D591,
the C(mi-f 1,, CATCO determinations cited ahlriove, and
2 70 F. 2 d t 109 1 :
"The AO cmit-vinplates thit the (.7minnis,lldon need 11(itt avc(lilt Ill(, tanned ill all application, Sunray .1lid-Contino, W Oil v. 1.,cdt /.0 mi.lI;.0on, Silijilla : it lil (lwisv cmit villplates that the applicant 11(d ;w4vil"
C(Jllditiofl- iI11Ij()'T(l ))v tilt, Cimlillissioll ill it ; itliti,'ll M-COWMWO. W11("'('
1) the applicant 11;Is the free lot'
his lor(l1w rt v I() pliblic so-i-vice ()I- to ret'll
AtI(Intic Refining Co, v. Public "-,crI ce Commision f V.S 37S W,







27

later tell you if you call keep) your collections :if we decide, you caliit, von Inw sure refund by bond'l
Similarly, in Soh io I'ctroil(uin C'o. v. FIT. ~ 2!'s F. 2d 46 5 l10th ( ir., Yi) wer
a producer resisted acep tance of a tempj~wary certiticate oin term-,i to whichI ot!er Jpro(iucers lhad agriee1. t& ("ourt stated, "We believe petitioner's- position to hv merit. 298 Y. 2d 'at 46,1 J.
Reatedl diss-emitingc Opinions by ('onunissioner 'Smith to similar orders issuTimal temporary and( permianentf (ertific-ates (including(- eachi of the three Molil orders" well states the producers* (ileminia. For instance, in disse-nting to the, order ise .July 24, 1975 in -11"aathoon Oil C'o. et ait., Docket -No. C(175-641, ert ait., (onlinissioller Smith stated
"Tepro(Iucers here (irc offered temporary certiticates that purport to ultimately binid the produc-ers to sale parameters that are currentlyv unknown and unknowable. The producers are a.sk-ed to submit to the p~ossibility of perianeint certitmcates tliat would be conditioned uptin the saeof .,,as that is not vet known to exist for a contract termn of unknown duration. The only way in wich"l the producers could learn the extent of their blgtosbe-fore icurring them would be by rejecting the tempor-ary certificates and awaJiing hearing and linal on mission decision onl the reserved issues, a roesthawcul take severalmots and oniCwhc Nv liii is e'nm anth ~nltdi ie to allow construictif
of the pipeline for- this winterr"
Further, in dissenting to tbe action of Aun.,ust 1 ), 19~75, rejecting the conditional acceptances of G3etty, ot (il., ('onilissioner Smith declared
"The C mission hias indicated that the producer conr I'ats undlerlyig the instant applications contain limitations which, after hearing, may be deemed:ie unacceptable for incorporation into lpermalleiit c ertificates. If so). certihicates
-which contain service obligation and~ rese<(rve dedication more extensive than those set out in the contract,, will be proffered. and the Iroducers canl either reject or accept them. Ar this stage. howmev-er, it is impossible to) decipher just what the Secretary letter puirports to do. Temporary cei'tiflicates to tho lproducers cannot authorize or compel service, thme diniensii ins of which are t i h~e determined at a future hearing.S, and hence cannot I 'e ac(epted by the producers until someone tells, them what they aire to accept.

"If the 'rejection (if acceptance' is issued here bec-aise, the producer reserve their r-ights, to seek Judicial review of the tommissiou s earlier Orders, the rejec,tion denies due process. amid I dissent thereto. If this; action i. action.'
It now appears that Conimissit~iner 'Smithi is, not alone in his- viewsamn Commission members. InI (a separate opinbin to a-n order issued Jan-ia r 2G 1976,. in Naitioral (fiN Pipctin, (0). of -- in ricai. -f ai1., D~ ick- -No. (1174-14, ( t a l..
Commissioner James, G. Watt stated:
"Comm issoer Smllith, o)n !June 2.1975, isene in the -Tetty Oil (npn
case, lead IDocker -No. ('17-5-310, andl on Noebr21, -1075, in the -Natura,;l a' Pipeline company of Amei(ca case, lead Dock~et -No. C1176-14 . H lie prTo erlly raised questiono ns about the authorities if the Federal Powe C %m '>I i to restrict 0-1, expand in individual initial sale certificcctior napiatosthe obligatiin-4 of the producers-. I share soeof the cti inerns,- he ice.
**.
*'I am co ncerned oi yet antither isseienlwod iedl iii tis i'c'.O Nvmie 2, 19)75, the C imnhis.,4oll issi ied anl Order grnigm'cnmerrw t re I
531tx1 There are sev-eral policy andl leg-al ju1,ti 1--Tri~iid g idi No. 2 ha
must be addressed by this- miew oimsl i.Bc8l- (If these jeti msIhv
reservations reg-ariding the advise abfi 11rv and t lirult t oi niicding. rej-ireen from Order -No-. 531 ,Sc 2.- ()f' the (''ma111ei i ciera 11ilic m d11 pretationsi in certilicates .''
Order -No. -5.30" alsoi has. pronipi ed (ither dlicetl'IS 1-i Ie~et alid n'tiinI
con mlenci ngI deli x'eries t] a] er cellifftic tte 11 ui ghe inmmdailly deliverly biig io'cIidiT*i 1U See J"Ii ex:1111pleIx~ IDocket -No. ('174 '?5:2-, order issued January1,: i~ 2, 197G.

T 1his al.,( i theird Muli# r.
~Isr'iued 0rtober 14. 11-'T- I mckwkq -No. I" 0-










It sh, iild he ipp;irotit fnini %N-11 v (-"Is is III)t limv
heill- delivel-ed to M 'dill Ille W -t-k ')5 Villd I i. Illip ki I i(m t)f t liv ( )r(](-r
(.''Ild i! I oil 1, 11:11- 10 1111111,11 14) (11, NvIIII Ihe It v the C lm l1111<.<11oll III he it* A ll,_rusl 15111 ;11111 Sept('1111H.I. ]W ll. Ill tills I-espect M (thil
c, Qll Pl' 111 Is(ld 11 111 oil m i th i'(4, Iticm it : is p (-t i I' i I :- (-, ii I I ra (-t ( price.
Dill. :Illd i'm id, 1,()I. it < ()\x 11 11 ,e I .111d the Colnpl-()IIi Is(-(] (oil iiiii, ilp(,(-t I I I I,; I ii t erin i. It ik ,) Is evidew th :tt M -0111 j1,4 llw flit' -)Itl. 111.(idlicei- ;idhei-iii- 1,, its km fiil ri,_,ht i ) i-ef'rniii frm n cm nIl-l, (it'll PlIFS11:111t 11) :1 cei-lific:11t, N\11-14.11 it helie\es to) he ille-alh. (.()I)d lliw w d : :11111 tII;II Ill 11 ill llig, ?1(' 1111", C m Itillent'll 'Shelf
A (.I 11:11< h ee ll (.i 111111iltit'd .
1 ) Ille 1:11 It'I I I I I I I I I I, I N I w ih- eT. \ ed 111 "1 t 'M r. I i I I ()I I s' t est i ill (m y ;i ccur;I I el v 1111(itt's I p!1I'I Pill (it' "'I ) lot* ilic (W SLA ( 13 V .S.C 1337(a i ), I.C., 11mi the Secietm,\ 1)1* lweri,,r 1, mithiiilzed to, "Ill (mler tt) meet
I I I I t,(,i I t) 11* f'ti r t, he r e,, I r I t i I I n Ild ( it v e I I I I e I I t 4)f the m iter Cm itiShelf . 'I'llm the c1ler--v 11(4 41,s (d, thek pilh1h, 111i"Alt he illet ill I timely
I I I I an pli-pw4e 1)f the, ("Y'SLA; and tll(' I(Itellivilt ()f Jack E.
r I I I ill liell,111, 14 M ,-hil the O versi, J it 'S1Ih(-;)IIillilII(,e cle:11-1 v (Iellim ls II-;, t 1 11:11 _M(dill I \v i I I I -ieiter than deliberatee sp-ed I i I expl(iring and
its ill iep,;itedly im,,iftig the Cmimilssl( ill I() exlwdite action
1111ioill ]Is ;Il1p1I1-;IIl''lI I".1. ;I (,(,riifivale to 4ell gas to T ruilkIiiie fr(im tlii)se leas-es. aild ill ( i )III 1 )1.1 its pt) t1w iiew ( )rder -No. -):i!) cmidition, Mr. Eni-nest's testillMli V that NI(A)il
\\-;Is Iwep;ll-t4l, 1() c(illillielwe deliveries ininiediitely np,)ii iii-- tillatimn ()f Trunklilit"s pipelille facililiq- .
Ill tlle,- e 1'espects. it b(as heen held that the OCSLA and the Natural C,as, Act are t(, he ipplie(l reciprocally ((.'oWiwntal Oil Co. v. FP(,,. 370 F. 2d 5T (5th Cir. 1966 : tImt refusal by a producer to (1(41icate to interstate conimerce ",.IS
from le:iscs &)es not in and of it-self (--mistitute, a violation tlierH)f ( Public
I C mi(l that
Scrvif-( '(,mmissiooii of X.Y. v. FPC, 463 1'. 2d ('-,24 ( DA' Cir. D72
the ( *(iininl zsi4)u (.,I nimt direct-IN. require a pro(lucer to dedicate its gas to interst:lle ( ibirl. -it ,-,29 1 ) Finally. in C, I TC0, which inv(dved ( W'S
and which Nvas decided six years after tho ( WSLA xv i- enacted, the C(inrt ;ttated th, t the pi-mbicers involved had tli(, ri-lit to reject conditimial cei-tificates which were not in sul)staiitive accord Nvith their contracts,
aNvtlil Ille coll(.111sion of proceediiii-s bef( re committim- their -.I.s to interand .% r!, Pstate o,20) U.S. at 387-3 ,' ). 'Mobil's rights are no less tlim the CATCO
1) ro d i i c f, I i) (I i t < 1) ( i < i t i ( i i i n o I es s r (,,, I s () na bl e.
Ill S11111. it is wil. ()pillion 01tif Ah0lifi* s; judicial review po!-4tiire, mild have been s(,verel v preju(Hced liad M(O)i] (,mimienced delivf: ries witler authorize t ions it
IwIleved to be invAi(l : that Al()hil aeted prudentlY in preserving its right. to
hv not initiItill" deliveries : that for pr- cticil reasons, it would have been 1I1lNvi<(, to comillence 4 lel i series without knmvii)g the iihst.mtive condition.", of service( ,: and thlit othemvis(,, Ab0ffl did all it could do in ()rdvr to exlWitio 1.
, (,cure (,I ible ,in(] 1. iwfvl certificlAte.
Sincerely yours,
PHILIP R. EIIRENKRANZ.









ADDITIONAL VIEWS OF HON. W. S. (BILL) sTT(KEY
I take exception to the contentions that Mobil. through its acts regarding the G(rand Isle 95 Field, has been solely responsible for the delays in field production and delivery.
The responsibility for the (irand isle controversy should be shared by the Federal Power Commission as well as Mobil. While they both acted within legal limits, they neglected the probability of an emergency during the 1976 winter season.
The FPC showed that their procedural mechanism was both unreliable and inefficient when they neglected to expediate consideration of Mobifl's certification. On the other hand. Mobil. although genuinely interested in protecting their legal rights over some vital issues under litigation. did not act responsibly in seekinlr to expediate production from Grand Isle 95..
The apparent loser in this entire controversy was Trunkline Gas Company and through them the consumers who had contracted for the gas and invested S37 million toward its production and delivery. Without the construction of a pipeline from the field to the delivery lines. natural gras could not be transported during this winter season. Trunkline was delayed to the point that construction was not possible to achieve delivery for the winter season.
As to Mobil. it seems to me that profit incentives should not be blinders to the exclusion of public welfare. A reduction in supply could adversely effect agricultural production, industrial output and its concomitant unemployment, and more importantly public health. Such a disregard is inexcusable.
Finally,. while I am acutely aware of the intricacies of the legal issues involved and can appreciate the care which must be taken so as not to jeopardize one's position. it appears that this case demonstrates the bureaucratic ineptitude of the Federal Power Commission. The inability of the FPC to make a timely determination that would result in increased natural gas production and delivery demonstrates a total insensitivity for the public health and welfare.
W. S. (BILL) STUCKEY. Jr.
(29)







ADDITIONAL VIFAV--;
'1111- report tho to)tfll 111dillcivi1cc (4 a Ilia ]()IP1,0; I I It'(, I- to 11w ililer-1:11(, c( )jI.<1I III(,]*'Q,. rfl le A nw ric.,111
1 )111)1 W has n r I_(dIt 1() (,\p(1cI 111:11 Fvt1(,IIl1 V -( I \\ I W d 0 I It cr (",()I It III e I It a S I I I I I i e I i v( I I I I I c *1ItcIv --4 lt( 111,11,ket
Nvit I I I 1w pul I I I c i 11 t t, IV I III I I I I I I d. f I I r (I I )nd llc( r 1-diould be ab le 111:11-o I 1':I*r p l,(d 't III (1-;(<.
1, 1,011 w1wil the pl-miuccl. I:- ahle
to w it I L"-,I< frm ll Ilw I I I:t :111d ill-1_4 IIPW I (III (-Xc(,,, IVo profit.

AV(, woubl, Ilote at I lic ow -et 111;11 jloll(, of tll(, NftqjIj)(,I-S Wll() S*(rll(,(l the 111111oritv A-10AVS NVW-; actlmllv A thc 11c,11.111(r oil tlli!- iiiatter.
-IS St-IT(,d In tli(, 11fillorltv view-, iQ it I ally t1l'IT Its lw- Itloll wcmld Pic Atinoritv cmitemls th.at "there is di--:.urivement cmiceriiingy wfiether .\I ob*F,-- r*(rhts would have beeii fulIv protected'", if Arobil ll ld colllllwm ,ed deliveries of cras pemlin,Z .-I hearincr on the issues in colltrciver v. Mobil aroriivs that its tI iew Posture cOil
( 1, judici- I revi 7d
have beeii severely preiii(liced had Afobil commenced deliveries (emphasis supplic(l). The Alecred exi-- telice ()f this "di<(i(rr(wmei-lt" over the (--m-rei-It st.ite of the ]a-\v oil matter is (,ited bv the AfilloritY as sufficieiit reasoii for Afot)il to refuse to commence deliverw,-, to iiiter4ate commorce-its lle(rative impact oil the cmisumin(r public. nohvithstawlinLr.
The filet i Mobil -would iiot be prejudiced iii tbo ultimate disposit imi of t1w (-witested loural is-:iies regrar(liii(r its ittempted contract r( <(,rvatiow 1)v coilmlencinor deliveries of iiatiu,,t] (Xas. Elemoiifarv 1-111c.'s of proc('dural (Ne proces-, ninke it clem- 64(it Mobil's ricrhts in this 111(atter (are fully pr(--,( Iwed in both the ;idniiiiistrative and judicial cmitexts.
Mobil's lecral memoraii(lum t1l, t ts judicial review position
Nvill be I)IT, Jildiced if it collimenced dvliverles mider I temporary v cerT- ifi(I I ]lot Support this proposi- ite. How(,ver. the c-fls("-; (.,ted 1) v Vol)il (10
tioll. Mobil cit(-- ,wowy /,/ 0 i7 Co. v. FPC, 2 70 F. 2d
1,4 (1001 ("ir. V-9) S alith(wit v for _\rob*I"-, alle(Ted prejudice if it 1!(111,11IS deliveriv, wider (A temporary certificate. III th.8t ("I'<(1. 110WOVel" I !w comply h:)d :1 choice NOwther or licit to dedicate The (ras to
-Iate (.4milm:rce aiid the FP( conditiciii at ISQMV Wtls 011C Which required
( r,,IS pI-o(jIl(-III(r CoMpally to colitillm, deliveries once service ('0111111('11cod. Here the situat-IMI i (111flrelv different hec,"Ill!- e Mobll*s olefivci.I(- of gas from Ole 0('S Illw-t flow ill illtvn; f(lfe collimerce.,
14,111-t 1wrillore. ill FPC v. Sililiwq PX 0;/ Co.. 391 () 1 196"), Ow
(,ollrt ill o-o1I (30)




yNIVERSTr OF F ORIDA

31
3 1262 04567 7092
ditions. The fact that Superior had begun deliveries under a tenmporarv certificate was in no way a prejudice to the full and fair consideration of the issues. (See 391 U.5. at 32-36). In addition, the Temporary Certificate may be subject to inunediate judicial review. See Pu re Oi Co. v. FPC. '292 F. 2d 35 0 (7th Ci(ir. 1961) : 8oho Pitrol0utl (o. v. FPC, 298 F. 92d 465 (10th Cir. 1961).
The important point is that Mobil will be able to challenge the propriety of any condition attached to its certificate by the FPC(' before a Federal appellate court, either by cThallenging the conditions of the Temporary Certificate immediately or by seeking review of the Permanent Certificate later. And any resolution of those issues will have retroactive effect. See Public (e'ne ('ommission of the kat( of o A' York v. FPC. 399 F. 2d 242. oert. denied. 377 .S. 963 (1914) : Public Se Ce Conm.i8sion of the State of TYet' York' v. FPC'. 327 F. 2d 893 (D. C. Cir. 1964) Aine wcai Libe ety 01 Co. v. FP. 301 F. 2d(1 15 (5th Cir. 1962) : J. MI. Hlibeu Corp. v. FPCF. 294 F. 2d 568 (3rd Cir. 1961).
What the Minority also neglects to answer is why Mobil's position was any different from the positions of producers in the other 20 applications consolidated in the Getty case and explained in the Report.
Mobil could have commenced deliveries of gas to interstate consumers and then fully litigated the lego-al issues raised by its attempted contract reservations. Instead. Mobil chose to withhold its gas from the interstate market where OCS gas must eventually be sold under conditions established by the Federal Power Commission, subject to court review.2
It was irresponsible for Mobil to withhold its gas from interstate consumers faced with serious shortages of natural gas this winter when deliveries from Grand Isle 95 could have significantly reduced curtailments to Trunkline and Texas Eastern. Mobil's withholding helped make its advertisements proclaiming a natural g(as shortage of selffulfilling prophecy.
The report also demonstrates the lack of logic in the recently terminated FPC program of advance payments. There simply was little economic pressure on Mobil to begin delivering this gas because it was proceeding under an advance payments agreement. Under this agreement, it has no interest charges and repayment of the loan is deferred until debe/rges begin. Though it is true that Mobil had spent substantial sums on acquiring the OCS leases, the fact that the '37 million development cost had been advanced to Mobil reduced the pressure on Mobil to proceed as quickly as possible. Mobil was therefore content to wait until it obtained the conditions it wanted.
MAlobil's behavior should not be tolerated by the FPC. Congress. or the consuming public. The use of natural g(as deposits on Federal lands as an economic bargaining tool by the natural gas industry at consumer expense must be ended.
,Jianx E. Moss.
ANTHONY Toi, MOFFETT.
HENRY A. WAX3MAN.
ANDREWV NfAGUTRE.
Axnnr: w M.\rumeK.
Orders of the Federal Power Commission are subject to review by a Federal Court of An)eals and if required by the Supreme (Court. The findings of the F'C may be reversed if not supported by "substantial evidence." 15 V.S.(C. 717r(hi. Sec FPC v. How' Natutral Gas Co., 320 ,.q. 591 (1944) : Interstate Natural Gas Co. v. Southern California Gas Co, 102 F. Supp 685 (D. Calif. 1952) J. M11 Huber Corp. v. FPC, 294 F. 2d 568 (3rd Cir. 1961).
0