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U.S. Supreme Court

Atlantic Refining Co. v. Pub. Serv. Comm'n, 360 U.S. 378 (1959)

Atlantic Refining Co. v. Public Service Commission of New York

No. 518

Argued May 20-21, 1959

Decided June 22, 1959*

360 U.S. 378


Four independent producers applied to the Federal Power Commission under § 7(e) of the Natural Gas Act for a certificate of convenience and necessity authorizing the sale to an interstate pipeline company of an enormous quantity of natural gas from wells in the Gulf of Mexico off the shore of Louisiana at a much higher rate than the pipeline company was then paying for gas. The pipeline company intervened, as did some of its distributor customers and other interested parties, the latter urging a lower rate. After twice refusing to issue the certificate on the ground that the record was insufficient to support a finding that public convenience and necessity required the sale at the proposed rate, the Commission was told that the producers would not dedicate the gas to the interstate market unless a permanent certificate was granted unconditionally and at the rate proposed. Upon rehearing, but without additional evidence, the Commission then issued such a certificate.


1. The facts that the producers limited their application to a firm price agreed upon between them and the pipeline company, refused to accept certification at a lower price, and threatened to cancel the contract and withhold the gas from interstate commerce did not deprive the Commission of jurisdiction. Pp. 360 U. S. 387-388.

2. The order of the Commission granting the certificates was in error, and it must be vacated and the case remanded to the Commission for further proceedings. Pp. 360 U. S. 382, 360 U. S. 388-394.

(a) In view of the framework in which the Commission is authorized and directed to act and the inordinate delay presently existing in proceedings under § 5 to review rates initially certificated, the initial certificating of a proposal under § 7(e) as being

Page 360 U. S. 379

required by public convenience and necessity is crucial, and a permanent certificate should not be issued unless the proposed rate has been shown to be in the public interest. Pp. 360 U. S. 388-391.

(b) When the price proposed in an application under § 7(e) is not in keeping with the public interest because it is out of line or because its approval might trigger general price rises or an increase in the applicant's existing rates, the Commission, in the exercise of its discretion, may attach such conditions as it may deem necessary. P. 360 U. S. 391.

(c) In granting such conditional certificates, the Commission does not determine initial prices, nor does it overturn those agreed upon by the parties. Rather it so conditions the certificates that the consuming public may be protected while the justness and reasonableness of the prices fixed by the parties are being determined under other sections of the Act. Pp. 360 U. S. 391-392.

(d) If unconditional certificates are issued where the rate is not clearly shown to be required by the public convenience and necessity, relief is limited to § 5 proceedings, and full protection of the public interest is not afforded. P. 360 U. S. 392.

(e) The record contains insufficient evidence to support a finding of public convenience and necessity prerequisite to the issuance of permanent certificates. Pp. 360 U. S. 392-394.

257 F.2d 717 affirmed on different grounds.

Page 360 U. S. 380

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