SUNRAY OIL CO. v. F. P. C.

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Argument of Melvin Richter

Chief Justice Earl Warren: Number 335, Sunray Mid-Continent Oil Company, Petitioner, versus Federal Power Commission.

Mr. Melvin Richter: May it --

Chief Justice Earl Warren: Mr. Richter.

Mr. Melvin Richter: May it please the Court.

This is case is here on certiorari to the Court of Appeals for the Tenth Circuit.

It involves the question which is similar to one of the issues which was discussed in the Sun Oil case in which argument has just been concluded.

The question here relates to the Commission's authority under Section 7 (e) of the Natural Gas Act, generally, to issue certificates of unlimited duration where the applicant has explicitly sought a certificate, coextensive in duration with the term of his gas sales contract.

There is no question in this case as there was in Sun Oil as to rates whether initial rates, the rates changes.

Nor there is any question here, again if there was in Sun Oil, as to the scope of a certificate that was issued earlier or the propriety of issuing a second certificate.

In this case, there's been no previous sale of the gas involved in interstate commerce.

If here, Sunray applied for certificate to sell the gas in interstate commerce for the first time, its application unequivocally requested that the certificate be coextensive with the term of his gas sales contract.

Justice Felix Frankfurter: And what was that, Mr. Richter?

Mr. Melvin Richter: 20 years.

Justice Felix Frankfurter: 20 years.

Mr. Melvin Richter: Basic term to 20 years.

And the Commission clearly so understood.

Briefly, the facts in this case are these.

Sun Ray is an integrated company engaged in virtually all spaces of the oil business.

In addition at present, it is producing and selling natural gas under about a 160 long term contracts, most of which offer terms of 20 years or more.

And I might add by the way at this point that about 85% of the gap produces contracts in the industry offer terms of 20 years or more.

Sun Ray also produces substantial qualities of crude oil and frequently in conjunction with natural gas.

Sun Ray refines the crude oil into fuel oil, to gasoline and other products and sell these various products to the public and to the Government.

By contract dated February -- January 1, 1957, Sunray agreed to sell United Gas Pipeline Company gas produced from certain lands and acreage owned by it in Lafayette and Vermilion Parishes in Louisiana.

At present, Sunray is only known of proving gas reserves in this area are in a small portion thereof known as the “Ridge Field,” and this is in Lafayette Parish.

The total area involved here that's dedicated to this contract about 33 square miles of which Sunray owns about 7000 acres.

A very small proportion of those 7 --- 7000 acres have been developed and have proven to have gas reserves.

Under the contract, Sunray is to deliver in United's tank annual minimum quantities about 4.5% of the estimated reserves.

The United in addition is to have a further right, annually to take up to an additional 50% of this, amounted about 6 close to 7%, just right 7%.

That's the maximum take of United.

As I mentioned before, this acreage is in the haul of a ballistic gas fields in South Louisiana and it's expected for the great deal of confidence that additional gas will be discovered in this dedicated area.

Subject to certain conditions not here relevant, these additional reserves are to be included under the contract.

However, such inclusion is only for the remainder of the 20-year term from the time when these additional reserves are discovered.

In other words, if a -- if an additional reserve is discovered, say 10 years from now, that reserve goes into under the contract only perspectively.

And under the term of the contract will definitely be gas left at the end of the 20-year period.

These specific quantities of gas as -- are to be sold and delivered for a basic term of 20 years.

Highlighting the fact that the contract is for the specific quantity of gas, is the provision that of Sunray should use any of the gas for re-pressuring or recycling operations so that it cannot deliver the fourth or annual minimum to United in any specific year, the contract is to be extended for a sufficient period of time to make up to deficiency.

In other words, United has a guarantee, they will get the annual minimum for 20 years and it can take up to 50% additional.

That is the range under with -- of gas that's sold and under this contract.

On March 11, 1957, Sunray applied to the Commission for authority to sell this gas under this contract to United under Section 7 (a) of the Natural Gas Act.

That Section provides impertinent power set out on page 12 of our brief, among other places, in full it's set out on page 57 and 58 of our brief but the pertinent language with which we're concerned here is set out on page 12.

And that provides that a certificate shall be issued to any qualified applicant, authorizing the whole or any part of the sale, on the leading language we cluster out as the sales service operation, construction etcetera, but the -- we're -- we're concerned with the hearsay.

Covered by the application if it is found that the applicant is willing -- is able and willing properly to do the acts and to perform the service proposed and that the proposed sale and again I'm leading some words, to the extent required by the certificate is or will be required by the present of future public convenience necessity.

And then this -- it goes on, “Otherwise, such application shall be denied.”

The Commission can't make an affirmative finding that -- that the application is -- the terms and conditions of which the application is made accords with the public interest that has the authority absolutely to deny the application.

There are further provisions in the statute in Section 7 (e) relating to a conditioning but it's not involved in this case with no rate condition problem here.

The application as I mentioned initially, specifically requested a certificate coextensive in term with the contract.

That as for the contract -- the certificate being for the basic term of 20 years.

After hearing and which the only evidence introduced with regard to the duration of the certificate was by Sunray.

The Commission, despite -- despite Sunray's specific request issued a certificate of unlimited duration.

The Commission, with the approval of the court below, assumed that the act established a presumption that certificates are to be unlimited in duration.

Based on this presumption, the Commission ruled that Sunray had not made out a case justifying the issuance of a limited certificate.

In other words, so far as the Commission was concerned, all certificates are -- are to be of unlimited duration unless there is a showing of special circumstances justifying initial in service certificate of limited duration.

It's our position that the -- that exactly the converse is true.

This presumption --

Justice Felix Frankfurter: Well, was this, Mr. Richter?

Mr. Melvin Richter: Sir.

Justice Felix Frankfurter: Was this based on a general rule by the Commission or regarding the specific circumstances presented by your contract?

Mr. Melvin Richter: No, sir.

It was the general presumption that the Commission indulges in presumably as Mr. Wahrenbrock has indicated in his argument in the Sun Oil case, the statute is a -- as a broad public utility ramifications and one of the necessary obligations under a public utility statute is a presumption of indefinite service.

Justice Felix Frankfurter: When I indicated that the Commission has the power of not being bound by a specific contract, indicate that to my ignorance, he seem to not welcome that suggestion?

Mr. Melvin Richter: Well, I would assume not -- I -- for obvious reasons.

It's Commissions with --

Justice Felix Frankfurter: Well, I thought -- as you thought I -- as I gather from you, that's what the Commission did in this case.

Mr. Melvin Richter: Commission ignored the contract.

Justice Felix Frankfurter: No, no, no.

But the Commission here said, we don't -- we don't want a term contract -- a term certificate --

Mr. Melvin Richter: That's right.

Justice Felix Frankfurter: -- we'll give you indefinite certificate.

Mr. Melvin Richter: We'll give you a -- presumptively, the certificates ought of be of an indefinite duration.

Justice Felix Frankfurter: Perhaps that -- this is my talent, has come within but I got the impression that he was not welcome to that suggestion when I made it.

Mr. Melvin Richter: Well, maybe you might have --

Justice Felix Frankfurter: Alright.

I do it again.

Justice Charles E. Whittaker: How then does that nature of language, the last three words forwards the application shall be denied?

Mr. Melvin Richter: They -- the Commission's view apparently is and I have limited time and I prefer trust of the addressed question, well, I'm quite -- as -- as I understand the Commission's view, I would like -- is that this nature of the statute inherent in the very nature of the statute.

The mere fact that Congress in act of the Natural Gas Act with various rate provisions, certificate provisions etcetera that that carried with it a presumption that all certificates issued out of the -- of indefinite duration unless special circumstances were shown, justifying the issuance of a special certificate.

We come back to Mobile.

In Mobile, the Commission's position was some -- substantially the same.

In Mobile they said, “Sure, the contracts are entitled to or preserved under the statute but the Act by virtue of public utility filed rate procedures,” the terminology they used.

That -- that the -- that the statute permits the overriding freely of contracts and the Court rejected them then.

And we think they ought to reject them here again.

But basically this presumption which they have involved appears to be have founded upon three erroneous premises, that we understand it.

One is an asserted purpose and policy of the Act to assure indefinite continuity of service.

Second, a cargo of policy derived from the provisions of Section 7 (b) of the Act relating to abandonment.

And third, an alleged the -- they're contrary result or enable applicants to “dictate” the terms on which they will sell their gas in interstate commerce.

Now, in light of the limitations of time, I'm not going to be able to go in a great detail into the various ramifications of our position.

I would like to just hit some of the highlights here.

As I say, it's our position that where an applicant applies for authority to sell gas for a period coextensive with the sales contract, the Commission's authority is limited generally or I say generally, to issuing a certificate for that term.

Section 7 (e) of the Act which I've just read expressly so states as we read it, as the Court recall, that Section provides for the issuance of a certificate authorizing the whole or any part of the sale covered by the application.

When as in the case, such as we have here, the whole of the application is for a certificate of a -- for a limited period, the issuance of a certificate for longer period of time or if indefinite duration exceeds the bounds of the application and the contract enhances not within the Commission's authority under Section 7 (e).

Now, this reading of Section 7 (e), we think does not mean that the applicant is able to dictate the terms and conditions under which he'll sell his gas in interstate commerce.

This Court that latter in so called capital Atlantic Refining case last term, held flatly that there was nothing in the Natural Gas Act that precluded an applicant from standing firm on his terms and conditions from making a sale provided he haven't sold this gas yet, and this is that type of case.

At the same time however, the Commission is not required to authorize a new sale unless it finds that the applicants proposed terms and conditions are in the public interest.

If the Commission finds that they are on a public interest they issue us a certificate.

If they find that is not, they deny the certificate.

And in the course of making that determination, there's no reason why they cannot take into account the term for which the sale was being made.

They do that everyday in the pipeline cases.

One of the most important factor in the pipeline certificate case is the adequacy of reserves.

And the Commission looks to the reserves and if its for less than of prescribed minimum, they'll deny the certificate.

If it's for -- meets their standards for of minimum -- of minimum requirements, they'll grant it.

And I might point out in addition that whereas here, we -- we're willing to sell the gas for 20 years.

In the pipeline cases, the Commission is now accepting reserves down to 10 and 11 years as is being adequate as in the public interest.

Now, we want to point out further that this reading of the Section 7 (e) is nowhere conflicts with Section 7 (b) of the Act.

In order to create a conflict, Mr. Wahrenbrock in the Sun Oil case and he'll probably argue here again, seeks to read into Section 7 (b), a general congressional mandate to assure indefinite continuity of service.

But Section 7 (b) is not that broad.

The only abandonment authority granted by -- to the Commission by that Section is lower and I'm quoting.

“Facilities subject to the jurisdiction of the Commission or any sale rendered by means of such facilities, it's limited to certain kind of service assuming that what Sunray is doing here is making a service.

It's providing a service rather than just selling gas.”

Now, we can go back in that point to 7 (e) which has -- says, sale common service and as Sunray applied for was authority to make a sale, not to render a service.

But assuming that Sunray is engaged in providing a service, there would still be -- or even get to whether or not this is subject to 7 (b), it says facility subject to the jurisdiction of the Commission.

That is the prerequisite, is that you stop there first and if you -- you find facilities, then you go on and service, but if you don't find facilities, you don't have any service.

The same broad reading of Section 7 (b), I might add, that the Commission have the case here was advanced by it in the Panhandle case in 337 U.S.

And with respect -- as -- as expressly rejected by this Court, properly read as far as we see it, Section 7 (b) is in complete harmony with our reading of Section 7 (e).

As we see it, a certificate issued under Section 7 (e) defines the period definite or indefinite.

But it defines the period that the sale is to be made of the service rendered.

We applied for a certificate of limited duration and that defines the scope of the Commission's jurisdiction to issue a certificate.

Section 7 (b) in turn applied only when there is an attempt to abandon service short of the period set out in the contract.

In other words, assuming that Sunray is making a sale of serve -- providing a service here and it has jurisdictional facilities so it's subject to 7 (b).

Then Sections -- sale we -- and we applied for a certificate of limited duration and we obtained it, the Commission gives it to us.

Then Sunray cannot discontinue that self-service of sale within the period so it's covered by the certificate, i.e. for 20 years unless of course it has to get a Commission approval.

It's in no way free to discontinue as it wishes.

Now, apart from Section 7 (b), the Commission appoints that no provision in the Natural Gas Act vesting it the general responsibility to assure indefinite continuity of service.

Section 7 (a) on which the court below rely is very limited in scope and indeed as the Commission concedes in it's brief in this case, does not reach sales of gas by a producer to a pipeline company.

At this point, I'd like to pause for a moment.

Mr. Wahrenbrock mentioned the legislative history in Sun Oil of Section 7 (b).

And he referred to John -- Mr. Benton as being one of the most eminent authorities on that.

If we pause for a minute and read the language of the amendment that Mr. Benton proposed which is set out on page 30, in the footnote of the Commission's brief.

It says, “No gas company which is supplying gas to a public utility company engaged in distributing such gas to the public shall discontinue service to such public utility company without first obtaining from the Commission a certificate that probably convenient and necessity permits such abandonment.

This on its -- this on its face, doesn't reach a -- a sale of gas by a producer but obviously was only intended to relay to a pipeline providing service to a distributing company.

I might point out in that connection to that read in context, Mr. Benton was talking about 7 (a).

And as I pointed out before, 7 (a) clearly, and the Commission concedes, does not apply to sales by a producer.

In urging that the Natural Gas Act nevertheless should be construed as imposing such a broad responsibility upon the -- it -- the Commissioner asserts that this is necessary in order to protect the consumers.

This argument however fails to give any effect to the provision of Section 1 (b) exempting from the Commission jurisdiction, language which Mr. Wahrenbrock in Sun Oil, were characterized as irrelevant, the production and gathering of natural gas.

Section 1 (b), it has an affirmative grant of jurisdiction and goes on to exclude from the Commission's jurisdiction.

Among those items excluded from the Commission's jurisdiction is the production and gathering of natural gas.

This exemption as this Court has already recognized in Panhandle case and other cases, Mobile and Memphis, reflects a Congressional reconciliation of the interest of the consumers on the one end and those of natural gas companies on the other.

To stress as the Commission does in this case, a need for an indefinite continuity of service is underway to the consumer's interest and results of invasion of a production in gathering exemption.

In contrast, we believe that our position results from an a reasonable accommodation of the needs and legitimate interest of both the producers and the consumers as to this Congress had intended.

Justice John M. Harlan: Could I ask you a question --

Mr. Melvin Richter: Yes, sir.

Justice John M. Harlan: -- born of curiosity?

Why did you go to the precaution of applying for a limited certificate?

Mr. Melvin Richter: Because we -- that's been the practice of Sunray.

Justice John M. Harlan: Has it?

Mr. Melvin Richter: Yes, sir.

Right -- Sunray has from the outset written, make sure that there was no question that -- as to what the scope of certificate there were applying for.

Justice John M. Harlan: In other words, you don't think it's as clear as you have here (Voice Overlap) --

Mr. Melvin Richter: Well, I'm not (Voice Overlap) take any position on that but Sunray left no question and it's cleared.

Thus, as I say, the position that we're at -- we're just taking here provides in reasonable accommodation of the interest of all the consumers and the -- well, natural gas company.

Justice William O. Douglas: I suppose, you would you say that the Commission couldn't deny then a certificated to you?

Mr. Melvin Richter: No, no.

We say the Commission adopted the wrong standards and --

Justice William O. Douglas: Well, but you -- I suppose you would say that the Commission couldn't deny you a certificate?

Mr. Melvin Richter: Well, we say -- we -- we --

Justice William O. Douglas: And they -- they would have to give you one for --

Mr. Melvin Richter: We think, that the -- we are -- are -- application for a basic term of 20 years meets the standards, that should be applicable.

Justice William O. Douglas: Yes.

But suppose the Commission said, “We don't want any of these limited term certificates --

Mr. Melvin Richter: If they can --

Justice William O. Douglas: And therefore, we'll --

Mr. Melvin Richter: If --

Justice William O. Douglas: -- we'll deny your application.”

Mr. Melvin Richter: Presumably, if we could -- we could take that to the Court and if that's not an arbitrary and capricious action by the Commission.

We would be forced off from selling the gas.

Justice William O. Douglas: That's what -- you -- you maintain that they -- you maintain that -- that they have that one choice there and that is the -- to grant this (Voice Overlap) --

Mr. Melvin Richter: No.

Not at -- at the present posture of the case, I think, the -- the Commission qualified the -- the wrong standard, that they assumed that there was a presumption and that -- that the certificates should be of definite duration and that on special circumstances justify this.

They didn't apply the right standard and that is to look at the certificate application of the contract for a term of 20 years and look at that and say, “Does this meet the public interest?”

They didn't do that, they did the other way around.

Justice Felix Frankfurter: Well, suppose the -- suppose they set forth what they haven't set froth, I take it, reasons of the inadvisability of trying himself without perfect experience.

Suppose they say --

Mr. Melvin Richter: Well, then --

Justice Felix Frankfurter: -- and not this [Inaudible] of things whatever it is, 35 whatever it is.

Mr. Melvin Richter: Well, they haven't undertaken with -- just to issue any -- give any reasons why they think they -- while there is a presumption.

They say it's a statutory -- they read into the statute basically and they don't have to give reasons because that's what the law provides as from -- from their point of view.

I'd -- I'd like to just make one more point and I'd like to reserve the remaining remainder of my time.

As I was just about to say that the -- our position results in a reasonable accommodation of interest of both the consumer and the producer, on the one hand, the 20 years gas supply of gas such as involved here, provides to the consumer a highly reasonable assurance of continuity of service.

And I -- true, this is not a supply for an definite period but it barely -- very nearly approximate such a supply as far as the needs of most consumers are concerned.

The Commission as I said, has never insisted upon a supply for longer period of time in the pipeline cases and indeed has been satisfied with very much less, down to 11 years.

On the other hand, the producers, we think have the legitimate need, periodically to reappraise their gas commitments.

Like Sunray, most producers of necessity are in the oil business as well as in the natural gas business.

The oil business, I might point out, is not federally regulated.

This is so because frequently, oil and natural gas are produced from a single well is a joint product.

It's result of geological factor.

In addition, in the drilling wells of new fields, it's frequently not known in advance what of anything will come out of the well.

Now, not only as oil and gas joint products but they are competing products as well because the oil is used for feeding typically about 40% of the production of crude oil that goes into fuel oil and natural gas' major use is for each place heating.

Justice John M. Harlan: Has the Commission given you other limited certificates in other instances?

Mr. Melvin Richter: No, sir.

They've turned us down consistently.

We have other cases pending in Court.

Chief Justice Earl Warren: Have they issued any -- any limited certificates to anyone?

Mr. Melvin Richter: Oh, they have in long sense, in some pipe line cases, not in the producer cases.

Chief Justice Earl Warren: Not in the produces.

Mr. Melvin Richter: But they originally took the position, I might say, in the Oil Sunray case for instance, they had no authority and all the issuance of certificates on limited duration.

Then Sunray took them to the Court of Appeals, the Court of Appeals held that they had authority to issue certificates to limited duration and Sunray and -- then when came up to this Court, the Commission then confessed that they had made a mistake, they can issue a certificates to limited duration.

In language, which if I would have time, I would like very much to read to you.

I'd like to reserve the remainder of my time --

Chief Justice Earl Warren: You may.

Mr. Melvin Richter: -- for rebuttal.

Chief Justice Earl Warren: You may.

Mr. Wahrenbrock.

Argument of Howard E. Wahrenbrock

Mr. Howard E. Wahrenbrock: In the few minutes that remain today, I would like to address myself first to this question of the scope of the Commission's action here whether it regarded itself as bound by the statute not to do this or whether it exercised its jurist -- its discretion in deciding that it would not grant a limited term certificate.

Justice Felix Frankfurter: Well, not granted ad hoc with reference to the particular situation or as a general guiding principal with.

Mr. Howard E. Wahrenbrock: The Commission has not been granting limited term certificates in the absence of a showing that the public convenience and necessity permit the limitation of the term.

Justice Felix Frankfurter: And what were the criteria for determining whether the public interest does?

Mr. Howard E. Wahrenbrock: Well, it has not spelled out the general criteria.

In the pipeline cases in which it has granted limited terms certificates there were as I attempted to say earlier, special circumstances which called for them, or conditions which -- which created an -- an -- a clearly temporary need for gas than to which are temporary supply was given.

Justice Felix Frankfurter: Well even as the pipeline didn't have a general quality against term grant?

Mr. Howard E. Wahrenbrock: As indicated by the results and only as indicated by the results.

Justice Felix Frankfurter: Not as an --

Mr. Howard E. Wahrenbrock: Yes.

Justice Felix Frankfurter: -- explicit declaration of its doctrine.

Mr. Howard E. Wahrenbrock: That's right.

It has not -- in here or any place, made an explicit determination were bound by this as a doctrine.

Justice Felix Frankfurter: Not done but just this will guide us and will guide everybody to be equally treated like that.

Mr. Howard E. Wahrenbrock: But looking at the result, it has required in every case that there be a showing or that the claim of a right to stop shall have a support the effects will support.

And the Commission has expressly said in some occasions that it -- it cannot speculate as to what the situation will be 20 years hence as to whether the public convenience and necessity will then permit.

That it can now look at the need for gas and see that the gas is need.

Regarding the need for the gas as now existing, it authorizes the content -- the starting of the service.

Justice Felix Frankfurter: Well, in the Sun Oil case, there was a term certificate, wasn't it?

Mr. Howard E. Wahrenbrock: No, sir.

In the one that was -- just our argument today?

Justice Felix Frankfurter: Yes.

Is there a 10-year contract?

Mr. Howard E. Wahrenbrock: There was a 10 year contract which the Commission -- but the Commission used only the standard language which it had used here, used the same language in granting this certificate as it used in the Sun case.

Justice Felix Frankfurter: Well, then in response --

Mr. Howard E. Wahrenbrock: An indefinite term.

Justice Felix Frankfurter: Then for the new contract, there's no need of asking for a certificate on -- is there?

In the Sun case.

If it's an undefined and none determinable --

Mr. Howard E. Wahrenbrock: That is our position.

Justice Felix Frankfurter: Yes.

Mr. Howard E. Wahrenbrock: -- that there was -- there was an outstanding --

Justice Felix Frankfurter: I don't mean to say that there couldn't be but there -- that to give the certificate.

Why do you come us if you still have a certificate?

Mr. Howard E. Wahrenbrock: That was the Commission's position when it said it was duplication of an outstanding certificate which was of indefinite term.

It used the same language there as it used here where there was before it a specific -- a request for a limited term.

And here, the finding of the examiner was that there had been no showing in support of the request for that limitation on term which would warrant the -- would warrant a finding that the public convenience and necessity required that.

Justice Felix Frankfurter: But in the Sun case, you also had an outstanding 10-year contract.

I suppose people would assume that the certificate will last as long as the contract was operated?

Mr. Howard E. Wahrenbrock: In -- in practically every case, the Commission has an outstanding limited term contract that, I'd say, 999 out of a 1000, without having account of them.

So, having that kind of a contract before it, it has always issued this what -- what we regard or we argue in the Sun Case, we argue here, is non-limited term certificate and which is here treated as an unlimited term certificate.

Chief Justice Earl Warren: We'll recess now.

Print this transcript Transcript: 

Argument of Howard E. Wahrenbrock

Chief Justice Earl Warren: -- Commission.

Mr. Wahrenbrock.

Mr. Howard E. Wahrenbrock: May (Inaudible).

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

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

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

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

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

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

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

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

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

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

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

Was there any evidence?

The answer is substantially, none.

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

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

That was the sum and substance of their testimony.

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

And it granted it.

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

It doesn't have to.

It wasn't compelled to.

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

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

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

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

So that gas is now being sold.

Sunray says that there aren't two questions.

There's only one question.

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

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

Is -- is that sale required?

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

That's -- that's what can be granted.

That's what is applied for.

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

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

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

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

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

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

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

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

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

They've already received their authorization.

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

A natural gas is an exhaustible resource, of course.

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

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

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

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

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

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

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

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

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

Justice Charles E. Whittaker: (Inaudible)

Mr. Howard E. Wahrenbrock: Not if the Commission is wrong in the position it took here.

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

Justice Charles E. Whittaker: Have you (Inaudible) the supply to resale to interstate commerce and not leave the whole of the supply?

Mr. Howard E. Wahrenbrock: It means until they can get 7 (b) permission and the two criteria, the alternative criteria for giving them 7 (b) permission to abandon -- are -- the two criteria are.

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

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

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

Justice Charles E. Whittaker: (Inaudible)

Mr. Howard E. Wahrenbrock: Not to sell the same gas, of course, but they could sell different quantities from the same field certainly, certainly.

Justice Charles E. Whittaker: (Inaudible) so that once you have permitted some gas to resale in (Inaudible) if you stop it.

Mr. Howard E. Wahrenbrock: I'm -- I'm glad to understand what was -- it's -- it is the continuance of the kind of sale that is being made, the continuance of that sale in this place of -- of the -- of the gas that can be produced from the acreage that is here involved, from that acreage.

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

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

Justice Charles E. Whittaker: It couldn't sell from the same, say (Inaudible) the gas from (Inaudible)

Mr. Howard E. Wahrenbrock: Certainly, take the -- the simplest kind of -- of a contract that I can think of at the spur of the moment.

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

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

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

Nothing to prevent.

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

Justice Hugo L. Black: Your idea is, as I gather, is -- is the Commission or statute --

Mr. Howard E. Wahrenbrock: That the Commission --

Justice Hugo L. Black: -- gives the -- the statute gives that power in order to provide for stability to the interstate people who have bought the gas and then otherwise, they're likely completely cut off.

Mr. Howard E. Wahrenbrock: Exactly, exactly.

Justice Hugo L. Black: Well, now, that's -- that's --

Mr. Howard E. Wahrenbrock: The public has become dependent upon that supply.

Justice Hugo L. Black: That's a good argument so far as the merits of it is concerned.

I'm sure.

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

Mr. Howard E. Wahrenbrock: 7 -- 7 --

Justice Hugo L. Black: (Voice Overlap)

Mr. Howard E. Wahrenbrock: -- Section 7 (b) which says that no facilities subject to the jurisdiction of the Commission or service rendered by means thereof shall be abandoned without having first obtained the Commission's permission and approval.

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

Mr. Howard E. Wahrenbrock: Exactly.

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

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

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

Mr. Howard E. Wahrenbrock: Well, I think that 7 (b) represents the apex of that -- the implementation of that policy.

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

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

Justice Hugo L. Black: The same argument you're making, of course, I don't know whether it fits this statute.

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

(Voice Overlap) --

Mr. Howard E. Wahrenbrock: That -- that is what I was attempting to suggest earlier in my argument when I said it's this usual utility, public utility concept of dedication to the public service.

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

What's the bar --

Mr. Howard E. Wahrenbrock: If they --

Justice Felix Frankfurter: -- the bar abandonment within 20 years if that's what the Commission thinks is desirable or publicly important although they gave it for 20 years?

Mr. Howard E. Wahrenbrock: There is nothing so --

Justice Felix Frankfurter: The same section that you rely on allowing abandonment.

Mr. Howard E. Wahrenbrock: There is -- there is nothing in the statute which prohibits abandonment.

They may still have some contractual questions.

Justice Felix Frankfurter: That's -- that's not your concern.

Mr. Howard E. Wahrenbrock: No.

No.

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

That question is not foreclosed one way or the other.

Now, that question is open and remains open.

The fact that the Commission has --

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

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

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

Is that right?

Mr. Howard E. Wahrenbrock: Yes, sir.

Justice Felix Frankfurter: Well, how does it?

Mr. Howard E. Wahrenbrock: In this.

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

Justice Felix Frankfurter: Well, but you don't have to yield to that argument in order to yield with the other part of the argument.

Mr. Howard E. Wahrenbrock: We -- we may not have to but we do regard, if we grant a limited term certificate, it carries with it the right to terminate.

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

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

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

So, you've already committed yourself in that (Voice Overlap) --

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

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

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

Mr. Howard E. Wahrenbrock: I tried [Laughs] -- express that in terms of -- that's been perhaps the net effect of what the Commission has been doing.

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

Justice Felix Frankfurter: That if they ask of the applicant has to show.

Mr. Howard E. Wahrenbrock: That's right.

Justice Felix Frankfurter: Now, therefore, the starting point, the -- the postulate with which the controversy begins is that you will not grant it.

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

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

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

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

And therefore, I say --

Mr. Howard E. Wahrenbrock: I don't see --

Justice Felix Frankfurter: -- the real question in this case, as I understand it, is whether you have the right under that statute to make such a rule when the statute doesn't make such a rule.

Mr. Howard E. Wahrenbrock: I -- I cannot accept the imputation of a -- of a doctrine or a necessity for a special showing.

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

Justice Felix Frankfurter: I didn't mean that you discriminated against the --

Mr. Howard E. Wahrenbrock: No.

Justice Felix Frankfurter: -- particular --

Mr. Howard E. Wahrenbrock: No.

Justice Felix Frankfurter: -- applicant --

Mr. Howard E. Wahrenbrock: No.

Justice Felix Frankfurter: -- there was no (Voice Overlap) --

Mr. Howard E. Wahrenbrock: No, I'm -- I'm not trying to -- I'm not suggesting that.

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

How can it be not?

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

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

Justice Felix Frankfurter: I don't intend to interrupt.

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

No matter what the new contract is.

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

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

Let's -- we leave out depletion for the moment.

Public convenience and necessity will permit that abandonment.

If they want it --

Justice Felix Frankfurter: The statute says they can't abandon it unless you -- their undertaking, unless you give them permission, at any time.

Mr. Howard E. Wahrenbrock: That's right but --

Justice Felix Frankfurter: I mean it is --

Mr. Howard E. Wahrenbrock: That's right, but -- but we must give them that permission, if they showed that the public convenience and necessity permit it.

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

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

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

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

Justice Hugo L. Black: If you grant them the kind of certificate -- I'm not -- I'm a little confused now by the question of Justice Frankfurter and your answer.

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

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

Mr. Howard E. Wahrenbrock: Yes.

Justice Hugo L. Black: Now, is it your idea that at the end of the 20 years, that they might -- what their position they are holding, might be held to be the correct one under the statute?

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

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

Mr. Howard E. Wahrenbrock: If --

Justice Hugo L. Black: -- as in the public interest.

Is that your position?

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

They've already gotten that permission.

Justice Felix Frankfurter: I don't understand that.

I mean -- I don't understand that in light of your yesterday's argument.

Mr. Howard E. Wahrenbrock: Well, that's what I was trying to say, if Your Honor, please.

And that's --

Justice Felix Frankfurter: (Voice Overlap) --

Mr. Howard E. Wahrenbrock: -- the reason I came back to this question because I felt I've left that obscure and --

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

Mr. Howard E. Wahrenbrock: Yes.

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

Mr. Howard E. Wahrenbrock: Yes.

Justice Felix Frankfurter: Is that right?

Mr. Howard E. Wahrenbrock: That's right.

Justice Felix Frankfurter: So why doesn't that answer Justice Black's question?

Mr. Howard E. Wahrenbrock: Because --

Justice Hugo L. Black: I assume -- maybe I -- I don't want to interrupt but I want to get counted --

Justice Felix Frankfurter: Quite true.

Justice Hugo L. Black: As I understand it, I don't know if there's any disagreement between you.

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

Is that right?

Mr. Howard E. Wahrenbrock: Yes.

Justice Hugo L. Black: And that when people apply on the basis of public convenience and necessity, it's up to them to show you that the public convenience and necessity requires what they ask.

Mr. Howard E. Wahrenbrock: Yes, sir.

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

Mr. Howard E. Wahrenbrock: From our right --

Justice Hugo L. Black: From -- or to prevent an abandonment.

Mr. Howard E. Wahrenbrock: Yes.

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

You --

Justice Hugo L. Black: You -- you are careful that it will be held that your action then finally and irrevocably settles that -- that public necessity question so that they can quit if they want to.

Mr. Howard E. Wahrenbrock: Exactly.

Justice Felix Frankfurter: Right.

Mr. Howard E. Wahrenbrock: Now, does that leave me [Laughs] not in the clear --

Justice Felix Frankfurter: Well, I understand what was -- what you agreed to but it -- I must -- I must disabuse my mind of what I heard all day yesterday --

Mr. Howard E. Wahrenbrock: Well, I'm afraid from --

Justice Felix Frankfurter: -- that --

Mr. Howard E. Wahrenbrock: -- some of your questions of opposing counsel but I -- that I created a misapprehension, and I'm sorry.

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

Mr. Howard E. Wahrenbrock: That much is true.

Yes, sir.

That --

Justice Felix Frankfurter: Well, if that much is true, then they -- then they can't cut off at -- at the end of 20 years.

Mr. Howard E. Wahrenbrock: By -- they can, sir, by -- if Your Honor, please.

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

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

Mr. Howard E. Wahrenbrock: That's right.

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

Justice Felix Frankfurter: But that's where I -- all right.

I've -- I've had my -- I don't seem to understand that.

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

Mr. Howard E. Wahrenbrock: Because we feel that when you have -- we have authorized a sale for 20 years and its stoppage at end of 20 years, we have thereby authorized its stoppage.

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

Justice Felix Frankfurter: Let's see if I can understand that.

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

Mr. Howard E. Wahrenbrock: Yes, sir.

Justice Felix Frankfurter: Well, why that?

That what is English language means to me.

Mr. Howard E. Wahrenbrock: Because that is what they explicitly asked for by the question -- by --

Justice Felix Frankfurter: Well, that's a -- that's a -- then I have misunderstood the case and the fault is all mine.

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

Mr. Howard E. Wahrenbrock: May I just, if the Court please --

Chief Justice Earl Warren: You -- you may --

Mr. Howard E. Wahrenbrock: -- call attention to page 2 of our brief.

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

Justice Hugo L. Black: Page 2?

Mr. Howard E. Wahrenbrock: Page 2 of our brief, on the -- the top of the page is a question presented.

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

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

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

Justice Felix Frankfurter: Now, let me ask you this question.

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

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

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

Justice Hugo L. Black: If that were held, that would solve your problem, as I understand it, would it not?

Mr. Howard E. Wahrenbrock: I think not, for this reason.

Justice Hugo L. Black: Why not?

Mr. Howard E. Wahrenbrock: I suggested that the --

Justice Hugo L. Black: Suppose it were held, as to Justice Frankfurter's suggestion, that you can't give them a certificate that deprives of the right to -- to --

Justice Felix Frankfurter: Require abandonment.

Justice Hugo L. Black: To prevent abandonment.

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

Mr. Howard E. Wahrenbrock: Well, maybe so.[Laughs]

I'm -- I'm not prepared to say so.

Justice Hugo L. Black: It seems to me, I -- I may be wrong.

Mr. Howard E. Wahrenbrock: That may -- it -- it sounds --

Justice Hugo L. Black: I thought that it would (Voice Overlap) --

Mr. Howard E. Wahrenbrock: -- it sounds so.

Justice Hugo L. Black: -- between you.

Mr. Howard E. Wahrenbrock: It sounds so.[Laughs]

Justice Hugo L. Black: Now, as I understand it, the other side do exist.

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

Mr. Howard E. Wahrenbrock: Yes, sir.

Justice Hugo L. Black: That's your -- what you believe about it.

Mr. Howard E. Wahrenbrock: That's my understanding.

Justice Felix Frankfurter: But then that makes this a particular case.

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

Mr. Howard E. Wahrenbrock: Pardon?

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

Mr. Howard E. Wahrenbrock: There is -- there is nothing on the face of it that prevents that language I read to you from being analyzed as being a request now under 7 (b) for termination --

Justice Felix Frankfurter: Yes, I understand that.

Mr. Howard E. Wahrenbrock: -- 20 years in advance.

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

Justice Felix Frankfurter: But my suggestion is if I were on the Commission, I would say I'd grant the certificate but cut off the last clause.

Mr. Howard E. Wahrenbrock: Well, that is what we did.

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

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

Is that what you're (Voice Overlap) --

Mr. Howard E. Wahrenbrock: That's what they applied.

That's what they --

Justice Hugo L. Black: That's what they are insisting.

Mr. Howard E. Wahrenbrock: That's what they applied for and that's what we refused to gave them -- gave them and said, “You can have a certificate --

Justice Hugo L. Black: You're claiming --

Mr. Howard E. Wahrenbrock: -- but it's an unlimited term.”

Justice Hugo L. Black: You're claiming you don't have to give that --

Mr. Howard E. Wahrenbrock: Exactly, exactly.

Justice Hugo L. Black: -- for whatever reason that (Voice Overlap) --

Mr. Howard E. Wahrenbrock: And by whatever rubric you describe it or whatever analysis you reach that and so.

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

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

Mr. Howard E. Wahrenbrock: Well --

Justice Felix Frankfurter: You have to take care of that situation.

Mr. Howard E. Wahrenbrock: I -- I think that is another way of describing what we did do.

Justice Felix Frankfurter: You wouldn't have to do that in the other case, would you, because they didn't apply for it?

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

Mr. Howard E. Wahrenbrock: That's right and we say we did not do it then, that they didn't really ask us for it there.

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

Mr. Howard E. Wahrenbrock: Exactly.

Justice Felix Frankfurter: I mean just at that?

Let me --

Mr. Howard E. Wahrenbrock: Exactly, but we felt --

Justice Felix Frankfurter: Let me take care of the situation I put to you.

Mr. Howard E. Wahrenbrock: Now, let me say this reason --

Justice Felix Frankfurter: That's all right then.

Mr. Howard E. Wahrenbrock: -- for granting the certificate that we did.

These people had gas.

They wanted to sell it.

It was a newly developed field.

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

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

Thank you.

Chief Justice Earl Warren: Very well, Mr. Wahrenbrock.

Mr. Richter.

Justice Hugo L. Black: Mr. Richter, would you mind stating at the beginning whether the position he attributes to you in connection with this application as to its effect --

Argument of Melvin Richter

Mr. Melvin Richter: Well --

Justice Hugo L. Black: -- is correct or not?

Mr. Melvin Richter: -- our position is that we have applied for a certificate for 20 years in accordance with the terms of the contract.

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

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

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

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

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

Justice Hugo L. Black: You can quit?

Mr. Melvin Richter: We can quit.

Justice Hugo L. Black: Go on or not if you choose.

Mr. Melvin Richter: That's right.

Justice Felix Frankfurter: Now, suppose -- suppose the -- the last clause, that -- the one we've read, the one we've read on page 2 or 3 of his brief were out to the extent and only to the extent that (Inaudible) --

Mr. Melvin Richter: Well, that won't make -- that's just there for --

Justice Felix Frankfurter: Now, do you --

Mr. Melvin Richter: -- repetitive language.

We -- we have -- oh, I'm sorry.

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

Mr. Melvin Richter: That's right, sir.

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

Mr. Melvin Richter: That's right.

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

In this connection, I would --

Justice Felix Frankfurter: But suppose that turns on what 7 (b) means.

Mr. Melvin Richter: That's right.

Justice Felix Frankfurter: Suppose he is right that 7 (b) means that you can't quit, except by leave of the Commission.

Suppose it means that.

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

Mr. Melvin Richter: Yes.

I -- I won't -- then -- I'm sorry.

I don't -- I -- I'm little lost.

Justice Felix Frankfurter: You -- you construe 7 (b) not the way he construed it, the Commission --

Mr. Melvin Richter: That's right.

Justice Felix Frankfurter: -- to construe it, the duty to go on no matter what the term under which you hold.

Mr. Melvin Richter: Well, we concede that we have to provide service during --

Justice Felix Frankfurter: During the term.

Mr. Melvin Richter: -- the 20 years of the -- of the --

Justice Felix Frankfurter: Yes, I understand.

Mr. Melvin Richter: -- certificate that we have.

We can't discontinue service shy of the 20 years --

Justice Felix Frankfurter: I understand that.

Mr. Melvin Richter: -- without getting commission approval under Section 7 (b).

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

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

You contest that reading of 7 (b).

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

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

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

And Section -- well, that's the certificate provision, not 7 (b).

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

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

Justice Felix Frankfurter: Where is that?

Mr. Melvin Richter: That's in a memorandum filed by the Commission in number 814, October 10, 1956, an earlier Sunray case.

Justice Felix Frankfurter: You mean this is an argument they made?

Mr. Melvin Richter: It's in acquiescing --

Justice Felix Frankfurter: But we --

Mr. Melvin Richter: Well, may I go, for a moment, back --

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

Mr. Melvin Richter: No.

Justice Felix Frankfurter: I think that's, myself, very bad professional practice, if you want to know that.

Mr. Melvin Richter: Well, sir, may I go into the history of this -- that case just for a moment?

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

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

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

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

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

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

Justice John M. Harlan: You don't have no right to continue after the expiration of your certificate.

Mr. Melvin Richter: No.

After it's -- it's a new transaction after the 20 years.

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

Mr. Melvin Richter: Yes, and they --

Justice John M. Harlan: -- at any time in the future?

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

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

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

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

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

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

And that's not -- I -- those aren't isolated instances.

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

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

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

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

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

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

Thank you very much, sir.