author: MERRILL, Circuit Judge:

text:
    TITLE INSURANCE AND TRUST CO., as Trustee of the Robert Tollin Greenspan Trust, et al., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    No. 71-2291.
    United States Court of Appeals, Ninth Circuit.
    Aug. 23, 1973.

      J. Howard Sturman (argued), of Bal-ter & Sturman, Los Angeles, Cal., for plaintiff-appellant.
    Gilbert E. Andrews (argued), Fred B. Ugast, Acting Asst. Atty. Gen., Tax Div., Dept, of Justice, Washington, D. C., Robert L. Meyer, U. S. Atty., Mason C. Lewis, Asst. U. S. Atty., Los Angeles, Cal., Meyer T. Rothwacks, William Mas-sar, Wesley J. Filer, Tax Div., Dept, of Justice, Washington, D. C., for defendant-appellee.
    Before MERRILL and CHOY, Circuit Judges, and CONTI, District Judge.

       Honorable Samuel Conti, United States District Judge for the Northern District of California, sitting by designation.

   MERRILL, Circuit Judge:

This appeal presents the question whether a redemption of stock by a corporation is, as to the shareholder, subject to capital-gain treatment or is to be treated as a dividend.

Section 302 of the Internal Revenue Code, 26 U.S.C. § 302, governs. Section 302(a) provides that if conditions set forth in § 302(d) apply, a redemption of stock shall “be treated as a distribution in part or full of payment in exchange for stock.” The only condition arguably applicable is that provided by § 302(b)(1): “Subsection (a) shall apply if the redemption is not essentially equivalent to a dividend.” The question thus presented here is whether the redemption was “essentially equivalent to a dividend.” Section 302(c)(1) provides that “section 318(a) shall apply in determining the ownership of stock for purposes of this section.” The applicable provisions of § 318(a) referred to here as the “attribution rules,” are set forth in the margin. The question arises on the following facts.

Sidney and Helen Greenspan were the sole owners of the common stock of Rob-illwayne Corporation [the corporation]. On October 17, 1957, they created trusts for each of their three children. The corpus of each trust consisted of 450 shares of the stock of the corporation, being 15 percent of the then total of 3,-000 outstanding shares, with an aggregate of 45 percent owned by the three trusts.

In 1965 the corporation’s board of directors resolved to exercise an option reserved under the terms of the trust instruments and redeem the stock held by the trusts so that corporate plans for a possible merger and the election of “Subchapter S” tax status could be pursued. The redemption was consummated and the proceeds were retained and reinvested by the trustee for the sole benefit of the trust beneficiaries. Following the redemption, Sidney and Helen Greenspan once again owned 100 percent of the stock of the corporation, now reduced, however, to 1650 shares.

On its 1965 federal income tax returns for each of the trusts, the trustee reported the redemptions as sales or exchanges giving rise to capital gain. The Internal Revenue Service determined that the entire redemption proceeds were essentially equivalent to a dividend and taxable as ordinary income. A deficiency of $13,024.39 plus interest was assessed as to each trust. These sums were paid and this suit for refund was brought by the trustee.

The District Court ruled in favor of the United States, holding that once the ownership of corporate stock is determined pursuant to the attribution rules, see note 1, supra, the result is that the redemption was essentially equivalent to a dividend. The court relied on United States v. Davis, 397 U.S. 301, 90 S.Ct. 1041, 25 L.Ed.2d 323 (1970). We affirm.

Application of the attribution rules produces this remarkable result. Under § 318(a)(1)(A) the beneficiary of each trust is to be considered as owning the stock of his parents, Sidney and Helen Greenspan. Under § 318(a)(3)(B) each trust is to be considered as owning the stock owned directly or indirectly by the beneficiary. Thus, prior to redemption each trust owned 70 percent of the stock of the corporation. After redemption, however, with stock reduced to 1650 shares, all actually owned by Sidney and Helen Greenspan, each trust, under the attribution rules, owned 100 percent of the stock. There was no reduction in the stockholders’ interests as the consequence of redemption. To the contrary, there was an increase.

As stated in United States v. Davis, supra, 397 U.S. at 307, 90 S.Ct. at 1045:

“After application of the stock ownership attribution rules, this case viewed most simply involves a sole stockholder who causes part of his shares to be redeemed by the corporation. We conclude that such a redemption is always ‘essentially equivalent to a dividend’ within the meaning of that phrase in § 302(b)(1) * *

Appellant protests against the unreality of this result. It struggles to distinguish Davis on several grounds: that that case involved preferred stock rather than common stock; that in Davis the taxpayer himself was in control of the corporation and in control of the redemption ; that under the economic realities it is absurd to say that after parting with their entire stock holdings, the trusts are deemed to have increased their proportionate interests in the corporation.

But this is only to protest that the attribution rules do not appropriately apply to a determination under § 302(b)(1). Such protest is in vain for on this point Davis is clear:

“However, the plain language of the statute compels rejection of the argument. In subsection (c) of § 302, the attribution rules are made specifically applicable ‘in determining the ownership of stock for purposes of this section.’ Applying this language, both courts below held that § 318(a) applies to all of § 302, including § 302(b)(1) — a view in accord with the decisions of the other courts of appeals, a longstanding treasury regulation, and the opinion of the leading commentators.”

397 U.S. at 306, 90 S.Ct. at 1044. What the rules do is attribute unity and entity to a family. Whether the taxpayer be the parent, child or grandchild, for tax purposes he represents the family interest and the extent of family control. Whether the redemption is essentially equivalent to a dividend does not depend on how it affects the taxpayer in his own holdings or control, but on how it affects the hypothetical family entity. As to that hypothetical entity, the redempion here was essentially equivalent to a dividend.

Judgment affirmed.

      . Section 318(a) (1) (A) (ii) provides: “An individual shall be considered as owning the stock owned, directly or indirectly, by or for * * * his children, grandchildren, and parents.” Section 318(a)(3)(B) provides:
      “Stock owned, directly or indirectly, by or for a beneficiary of a trust * * * shall be considered as owned by the trust * Section 318(a)(5)(A) provides: “Stock constructively owned by a person by reason. of the application of paragraphs (1), (2), (3), or (4), shall, for purposes of applying paragraphs (1), (2), (3), and (4), be considered as actually owned by such person.”

      . Grabowski Trust v. Commissioner, 58 T.C. 650 (1972), now provides further support.

      . Mr. Justice Douglas, in dissent, construes the result in this fashion: “[T]he Court says that in the case of closely held or one-man corporations a redemption of stock is ‘always’ equivalent to a dividend. * * * ” 397 U.S. at 314, 90 S.Ct. at 1048.

      . Such assumptions may, indeed, prove awkward or unfair in cases where families do not behave as the rules assume they will, and intra-family disputes exist as to who should control and how. However, we do not have such problems here.


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    TEXPORTS STEVEDORE COMPANY, INC., Petitioner, v. SECRETARY OF LABOR, U. S. DEPARTMENT OF LABOR, and Occupational Safety and Health Review Commission, Respondents.
    No. 73-1630
    Summary Calendar.

    United' States Court of Appeals, Fifth Circuit.
    Sept. 20, 1973.
    Rehearing and Rehearing En Banc Denied Nov. 13, 1973.
    Neil Martin, Owen W. Cecil, Houston, Tex., for petitioner.
    William S. McLaughlin, Executive Sec., Occupational Safety & Health Review Commission, Washington, D. C., Major J. Parmenter, Regional Sol., U. S. Dept, of Labor, Dallas, Tex., Jean A.

      Staudt, Walter H. Fleischer, Dept, of Justice, Washington, D. C., for respondents.
    David H. Burrow, Houston, Tex., for other interested parties.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I.

   PER CURIAM:

Texports Stevedore Company, Inc. seeks a review of the Occupational Safety and Health Review Commission’s determination that Texports violated the Occupational Safety and Health Act of 1970, 29 U.S.C.A. 651 et seq., by failing to take the necessary precautions to prevent cargo from falling during unloading.

In June, 1971, the cargo barge MBL 880 was tied alongside the vessel SUCRE in the Houston, Texas Ship Channel. The barge was loaded with rectangular bales of pulp wood, consisting of eight bundles banded together, weighing approximately 4,200 pounds. They were stacked in tiers two bales high with open areas of 15 feet in the fore and aft ends of the barge to accommodate a fork lift truck used in the unloading operation.

Texports’ stevedoring superintendent made a two minute inspection of the cargo by standing on the deck of the SUCRE and looking down about 12 feet through the hatch of the barge where he could see 12 bales on the top tier. He determined that the bales were not leaning. None of the dunnage was visible to the Superintendent.

Four stevedores began the unloading operation in the after end of the barge. When the bales were being unloaded from the top tier, one of the blades of the fork lift went under the metal band around a bale while the other blade went outside of the band, causing the bale to fall upon and disable the fork lift. No one was hurt at that time.

Mechanic Quinn, who was called to repair the fork lift, climbed down into the barge and while he was engaged in the repair work, a bale from the upper tier fell down and severely injured him. Tug boats had passed by in the channel and may have rocked the barge during the unloading process. After the stevedores had left the after end of the barge, another bale fell from the top tier.

Inspections by OSHA officials following the accident disclosed that the bales of cargo were leaning and were not interlocked. Moreover, the dunnage was short and no dunnage had been used to stabilize the top layer.

Texports was cited by the Secretary of Labor for a serious violation of the Act for failing to comply with the provisions of 29 C.F.R. 1918.83(b) which required it to take sufficient precautions when necessary to prevent the remaining cargo from falling. After a hearing, Texports was found guilty and assessed a penalty of $800.00. The Review Commission, one Commissioner dissenting, affirmed and this petition for review ensued.

The entire thrust of petitioner’s argument is that the after-the-fact observations and investigation made by the OSHA officials, being contrary to the testimony of the Superintendent, crew members and Quinn, should not be given any weight. We reject this argument.

The cursory look through the open hatch of the SUCRE from 12 feet above by the Superintendent cannot be dignified as an inspection. Equally unimpressive is the crew members’ testimony that the tiers appeared to be straight. They neither inspected them nor were they under any obligation to do so. Moreover, it is undisputed that three bales fell, that the dunnage was short and that no dunnage was used on the top tier. The inspection and photographs taken after the accident disclosed that the stacks of bales were leaning and, since the cargo was untouched by either the employer or employees from the time the first bale fell to the time when the inspection was made, the unsafe condition of the cargo was known or should have been known by Texports.

Finally, we are at a loss to understand Texports’ argument that tugs passing in the Channel may have rocked the barge and dislodged the bales. Surely it cannot be seriously contended that this was an unexpected, untoward incident.

After a careful review of the record we are convinced that the findings of the Commission are based upon substantial evidence viewed as a whole, taking into consideration the evidence against the Commission’s view. The petition for review is therefore denied.

Denied.

      . The Regulation provides: “In breaking down, precautions shall be taken, when necessary, to prevent the remaining cargo from falling.”
      A “serious” violation under the Act is “deemed to exist ... if there is a substantial probability that death or serious physical harm could result from a condition which exists . . . unless the employer did not, and could not with the exercise of reasonable diligence, know of the presence of the violation.” 29 U.S.C.A. § 666(j).


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Thomas Lee SIMPSON, Defendant-Appellant.
    No. 73-1447
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Sept. 19, 1973.
    Joseph N. Marcal, III, New Orleans, La., court appointed, for defendant-appellant.

      Gerald Gallinghouse, U. S. Atty., Mary Williams Cazalas, Asst. U. S. Atty., New Orleans, La., for plaintiff-appellee.
    Before GEWIN, COLEMAN and MORGAN, Circuit Judges.

       Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al„ 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

In a jury trial in the Eastern District of Louisiana, appellant was convicted of violating 18 U.S.C. § 1201, the federal kidnaping statute, and was sentenced to life imprisonment. On appeal, he makes three specifications of error, all of which we find to be without merit.

First, appellant claims that the district court erred in not granting his motion to suppress a confession made to police officers shortly after his arrest. The grounds for the motion were that the arrest itself was illegal and the confession was coerced. The record shows that on October 15, 1972, a woman appeared at the Slidell, Louisiana, sheriff’s office, and told the sheriff’s deputies that she had been kidnapped, assaulted and raped. She described appellant and a trailer park where he might be found. Acting upon this information, a deputy contacted two mobile units and instructed them to go to the trailer park and arrest appellant. The victim told her story to the officer at the station, and the officer had probable cause to arrest appellant. The fact that other officers carried out his instructions does not violate appellant’s Fourth Amendment rights. Whitely v. Warden of Wyoming State Penitentiary (1971), 401 U.S. 560, 91 S.Ct. 1031, 28 L.Ed.2d 306; United States v. Impson, 5th Cir. 1973, 482 F.2d 197.

Appellant also alleges that the interrogating officers told him that he and his common-law wife (who had also been arrested for participating in the kidnapping) would lose their baby if he did not confess. The arresting officers, on the other hand, testified that they merely explained to appellant that because his wife was in custody, she could not keep the baby, and it was being taken care of by someone else. The district court found the officers' testimony to be more credible than appellant’s, and this finding is not clearly erroneous.

Appellant also alleges that the district court erred in failing to declare a mistrial because an alternate juror scowled at the defendant or made some “rather menacing gestures” towards him in the courtroom. The district court, however, found that there was no possibility that this incident affected the jury’s verdict. We see no reason to disturb this finding. Even assuming the incident occurred, it would not be grounds for reversal. United States v. Blackburn (5 Cir. 1971), 446 F.2d 1089.

In his “Statement of Facts” appellant alleges that the district court committed error with respect to character testimony introduced by the prosecution. However, this error is not listed in appellant’s specification of errors, nor is it argued in his brief. The government discusses this matter in its brief, however, and we are convinced that no error occurred.

Because we can find no error committed by the district court in this case, its judgment is hereby

Affirmed.


author: JOHN R. BROWN, Chief Judge:

text:
    In re other SOUTHWEST AREA RATE CASE (OSWA I). SHELL OIL COMPANY et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent.
    Nos. 72-1114, 72-1215, 72-1288, 72-1310 and 72-1541.
    United States Court of Appeals, Fifth Circuit.
    June 8, 1973.
    Thomas G. Johnson, Dan A. Bruce, William G. Riddoch, Houston, Tex., for Shell Oil Co.
    J. P. Hammond, W. H. Emerson, Tulsa, Okl., for Amoco Production Co.
    Woollen H. Walshe, New Orleans, La., Justin R. Wolf, Paul W. Wright, Washington, D. C., for The California Co.
    Thomas H. Burton, Houston, Tex., for Continental Oil Co.
    Warren M. Sparks, B. James McGraw, Tulsa, Okl., for Gulf Oil Corp.
    Martin N. Erck, John R. Rebman, J. Kirby Ellis, Houston, Tex., for Humble Oil & Refining Co.

      Tom P. Smith, Marion R. Froehlich, Houston, Tex., Bernard A. Foster, III, James D. McKinney, Jr., Washington, D. C., Norman G. Kuch, Los Angeles, Cal., for Signal Oil & Gas Co.
    H. W. Varner, Pat Timmons, Houston, Tex., Frank P. Saponaro, Jr., Washington, D. C., for Superior Oil Co.
    Kirk W. Weinert, John M. Young, C. Fielding Early, Jr., Houston, Tex., J. Donald Annett, Washington, D. C., for Texaco, Inc.
    Edwin S. Nail, Tulsa, Okl., for Amer-ada Hess Corp.'
    John T, McMahon, Houston, Tex., Richard F. Generelly, Washington, D. C., for Asland Oil, Inc.
    Edward J. Kremer, Jr., Dallas, Tex., Charles E. McGee, John T. Ketcham, Robert J. Haggerty, Washington, D. C., for Atlantic Richfield Co.
    William A. Sackmann, Findlay, Ohio, for Marathon Oil Co.
    H. Y. Rowe, El Dorado, Ark., for Murphy Oil Corp.
    Ronald J. Jacobs, Tulsa, Okl., for Skelly Oil Co.
    Francis H. Caskin, Washington, D. C., for Sun Oil Co.
    Douglas C. Gregg, George C. Bond, Dee H. Richardson, Los Angeles, Cal., for Union Oil Co. of California.
    John E. Watson, Houston, Tex., for Tenneco Oil Co.
    Raymond N. Shibley, Louis Flax, Edward A. Caine, Washington, D. C., for Pipeline Purchaser Group.
    Peter H. Schiff, Joseph J. Klovekorn, Albany, N. Y., Richard A. Solomon, Michael H. Rosenbloom, Washington, D. C., for N. Y. Public Service Commission.
    Tom P. Hamill, Robert D. Haworth, Houston, Tex., Carroll L. Gilliam, Philip R. Ehrenkranz, Washington, D. C„ for Mobil Oil Corp.
    John E. Holtzinger, Jr., Frederick Moring, Joseph B. Centifanti, Washington, D. C., for Associated Gas Distributors.
    Crawford C. Martin, Atty. Gen., Linwood Shivers, Asst. Atty. Gen., Austin, Tex., for State of Texas.
    Leo E. Forquer, J. Richard Tiano, George W. McHenry, Jr., Michael J. Manning, Washington, D. C., for Federal Power Commission.
    Before JOHN R. BROWN, Chief Judge, BELL and MORGAN, Circuit Judges.
   JOHN R. BROWN, Chief Judge:

This case involves rates fixed by FPC on October 29, 1971, for the so-called Other Southwest Area, and now joins SoLa I and SoLa II as OSWA I.

Following the mandate of the United States Supreme Court in Phillips Petroleum Co. v. Wisconsin, 1954, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (Phillips I), FPC began its long and winding journey toward the effective regulation of the rates at which producers of natural gas in interstate commerce may sell their gas at the well-head. After several years’ attempts to regulate producers individually based upon their individual costs-of-service, FPC determined to establish the “just and reasonable” maximum rates for the well-head sales of gas on an area-by-area basis. See Wisconsin v. FPC, 1963, 373 U.S. 294, 83 S.Ct. 1266, 10 L.Ed.2d 357 (Phillips II). This method was explicitly approved by the Supreme Court in The Permian Basin Area Rate Cases, 1968, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312, and by us in Austral Oil Co. v. FPC, 5 Cir., 1970, 428 F.2d 407 (SoLa I), and again in Placid Oil Co. v. FPC, 5 Cir., 1973, 483 F.2d 880 (SoLa II), Accord, Hugoton-Ana-darko Area Rate Case, California v. FPC, 9 Cir., 1972, 466 F.2d 974.

And before the last slug falls in the St. Paul linotype on this opinion area rate regulation may too be forgotten if not abandoned. For FPC has very recently announced its hopeful purpose to set uniform rates for the nation as a whole under its rule-making powers. So though we write with the realization that the regulatory approach may soon change, we are nevertheless mindful that we must play our role.

In the present case, we are called upon to, review FPC Opinion 607 (Op: 707) which purports to establish the “just and reasonable” rate ceilings for the so-called “Other Southwest Area” (OSWA). Because of the similarity in proceedings and heavy reliance by FPC on its SoLa II approach in Op: 607, many of the legal issues which we are required to decide to effectively review this case are controlled by our decision in SoLa II. Yet, OSWA’s lack of total homogeneity in the various geographical production areas and FPC’s approach to them compels us to examine several aspects of Op: 607 in detail.

The Op: 607 Rate Structure

The maximum rates at which natural gas may be sold in OSWA, according to the terms of Op: 607, depend on two factors: the “vintage” of the gas and the particular OSWA sub-area from which it is produced. There are three vintages of gas based upon the date of the contract under which the gas is committed to the interstate market — pre-1961 gas, 1961-68 gas, and post-1968, “new” gas. Within these categories the maximum gas rates for OSWA may vary according to the sub-area of production as follows:

—pre-1961: 14.4^,/Mcf to 19.0^/Mcf

-1961-68: 17.250/Mcf to 19.00/Mcf

—post-1968: 22.5^/Mcf to 25.00/Mcf

. Of course rates are the major work-produet of a rate case. But in OSWA, as in all of FPC’s other rate cases, there were a number of administrative appendages to the rate structure. These included :

—a program to allow producers owing refunds to work off this obligation by committing new reserves to the interstate market,
—a moratorium on increased rate filings under Section 4(e) of the Natural Gas Act for OSWA until July 1, 1976,
—a 1.0 to 1.5(4/Mef adjustment for ungathered gas,
—quality adjustments according to Btu content, and
—“small producer” exemptions and special dispensation procedures.

Our review of the case convinces us that these provisions should be sustained in full.

Yet, we must confess our bewilderment in light of FPC’s current approach to rate regulations, especially its actions in SoLa II and Texas Gulf Coast, with the rates established for “flowing” gas. As some of the producer-petitioners point out, unlike SoLa II which was based entirely on 1969 cost data, most — if not all — of these rates were established on the basis of 1962 cost data. Although on an examination of quality-pressure-geographic differentials we are convinced that in so doing FPC acted within the “zone of reasonableness”, which we accord to administrative action, we must in light of this evidence cast our enforcement of this aspect of Op: 607 — as we did in SoLa I: 5 Cir., 444 F.2d 125 (on rehearing) — in a manner which gives FPC maximum flexibility to alter the rates established for flowing gas by Op: 607 both prospectively and retroactively as it deems necessary in light of existing market data. With this emphasis we give full enforcement to Op: 607.

Supply and Demand in OSWA

In SoLa II we chronicled the details of our current critical supply shortage of natural gas and other energy sources. As we pointed out, the proliferating national demand for natural gas has already outstripped available supply. One need not consult an oracle to determine that, unless severe steps are taken to encourage exploitation of domestic reserves of natural gas, the future portends an even greater supply deficit. When it concluded its regulatory undertaking for OSWA in October 1971, FPC was conscious from its prior rate cases of the magnitude of this supply crisis.

Recognizing the applicability of national and other area data to OSWA, FPC began by carefully assessing OSWA.

“Other Southwest” is not a homogeneous area. Each of the four areas covered by previous area rate proceedings was generally similar throughout, with some deviations, in geology, pricing history and markets served by the gas produced in the area concerned.
Other Southwest, on the other hand, has a variety of pricing histories in its different sub-areas, the geology varies in different sub-areas, and the gas produced in Texas District 9, Other Oklahoma and northwestern Arkansas goes to different markets than gas produced in other sub-areas. The importance of the intrastate market varies in the various sub-areas. The age of development and the potential for future development also differ widely throughout the Other Southwest area. For these reasons, we shall consider the various sub-areas separately, stating in each instance the facts relevant to our particular determination.

Op: 607, fl 4.

Annual production from OSWA has remained relatively constant at about 1.2 Tcf since 1956. But, because of the increasing national consumption of natural gas since that time, OSWA’s percentage share of the national market declined from 19.6% in 1956 to 13% in 1963, and 9% in 1969. Exploratory efforts have decreased significantly in the last decade, though the potential for the area gives cause for hope.

The quality of the gas in OSWA is generally inferior to that of the other major producing areas by any parameter —Btu, pressure, or purity. Also of major significance is the fact that at least 40-45% of production in OSWA is diverted to the intrastate market. Based upon this data, FPC set rates for the various sub-areas of OSWA.

A Closer Look at Op: 607

In SoLa II FPC targeted a goal of 45 Tcf production from the Southern Louisiana Area for a five year period. It then established a rate structure which it believed would be a reasonable incentive to motivate producers to produce and dedicate that particular amount. In OSWA, on the other hand, FPC began from the premise that OSWA production would never meet demand:

“While we cannot expect that this area will be able to supply the potential demand upon it, it is important that its potential be fully utilized in this time of national need for all available gas.”

Op: 607, |f 10. FPC projected that 11 Tcf of new reserve additions would be required over the next five years to meet the extrapolated demand for inter and intrastate gas. As in SoLa II, FPC was unable or unwilling to quantify the relationship between the rates it established and the likely response of market forces.

There is no reliable evidence to indicate the amount of new gas reserves that would be discovered as the result of any specific change in rates, nor evidence as to the amount of such reserves that would be dedicated to the interstate market. We estimate that this area has probable reserves of from 15 to 18 trillion cubic feet still to be discovered. The prices established herein provide incentives, however, to the producers in this marginal area to find gas and dedicate it to interstate commerce. The prices established will enable the interstate market to compete in price with the present and potential intrastate buyers in the area.

Op: 607, If 13.

In spite of the strenuous arguments of several producers to the contrary, it is clear that FPC — in line with the approach it has taken in SoLa II and the Texas Gulf Coast Area Rate Case — used the average cost determinations for the production of natural gas in OSWA as a flexible point of departure. Op: 607 U 16. In both SoLa II and Texas Gulf Coast, FPC held that this point of departure would “flex” about 4^/Mcf. See SoLa II: 483 F.2d p. 902 n. 23. And, as FPC pointed out, that point of departure is even harder to ascertain when the administrative agency has to compute costs on the basis of an area which is a heterogeneous amalgamation of separate sub-areas:

Cost computations are notoriously imprecise. Where the districts on which the computations are based are as small as they are here, it becomes even more questionable whether the computed costs are representative.

Op: 607, If 34.

Basically, FPC used the same approach here as in SoLa II, that is, to price new gas on the basis of national, published data, but to price flowing gas on the basis of regional, historic data. In addition to the supply and demand information available to it and the costing data for the area as a whole, FPC also established as points of reference the various sub-area costs, the levels of both inter and intrastate prices, and the

prices of gas in the adjacent producing areas. See Op: 607, f[ 16.

Taking all of these factors into account it established a three-tiered rate structure as approved by the Supreme Court in Permian. There were two “vintages” of flowing gas — the first being composed of gas committed to the interstate market under a contract signed prior to January 1, 1961, and the second being gas committed to the interstate market by a contract dated between January 1, 1961 and September 30, 1968. All gas committed under a contract dated after October 1, 1968 was third vintage or so-called “new” gas.

The rates established for pre-1961 gas varied from 14.4?!/Mcf to 19.0?!/Mcf (with periodic, automatic escalations) depending on the sub-area of production. The maximum permissible rates for 1961-68 gas ranged from 17.25?!/ Mcf to 19.0?!/Mcf (with half-penny escalations on January 1, 1965 and October 1, 1968). The rates for post-1968 “new” gas ranged from 22.5^/Mcf to 2E.O0/Mcf. These three sets of rates comprise the entire rate structure for OSWA.

What’s Wrong With The Rates

The major producers vigorously attack the Op: 607 rate structure set by FPC for OSWA. Their principal complaint is that the rates are not high enough. Groping for a legal theory on which to base this economic lamentation, they raise several issues. First, the majority of the major producer-protesters, the “Shell Protestants,” suggest that FPC’s continued use of cost-of-serviee as a point of departure can no longer be justified. Mobil joins this group in making its second argument that FPC has failed to take full account of the competitive effect of intrastate prices in establishing the permissible ceilings for OSWA interstate rates. Finally, the entire array of producers makes the general assertion that in several particulars the rate structure is not supported by the evidence in the record.

Cost-of-service: A Point Of Departure

The thrust of the Shell Protestants’ first argument is that because of the current supply shortage, it is administratively inappropriate for FPC to continue to use the “lowest reasonable level” method of determining “just and reasonable” rates. In this context they argue that the reasonability of rates should be determined by comparison to the rates for alternative, substitute or competitive fuels rather than from calculations based upon a cost-of-service with a rate of return sufficient to serve as an incentive for new production. In short, the producers apparently call for regulation of rates by market forces alone- — -the law of the jungle!

We recognized in SoLa I that market conditions might well justify FPC in adding non-cost incremental incentives to the rate structure. But the mere presence of a supply crisis does not compel FPC to wholly abandon a costing methodology as it carries out its responsibility to determine “just and reasonable” rates. What the producers assert as an economic proposition (and then seek as a principle of law) is that total freedom from any effective administrative regulation of rates is the only solution for the energy crisis at hand.

In SoLa II we examined at length FPC’s current approach to costing methodology. SoLa II: notes 6, 19, 23. We recognized and sanctioned FPC’s administrative discretion in fixing a particular rate which falls within the “zone of reasonableness” of the entire matrix of cost components. But in focusing on the “end result” and according appropriate deference to the administrative choice in light of the great flux in cost determinations, we will not allow our scrutinizing of the whole to eclipse a consideration of the parts. Administrative discretion is not tantamount to synergistic legerdemain. We must decide whether FPC has erred in including, excluding, or evaluating components of the rate structure to determine if the particular error washes out in the “zone of reasonableness,” or has such significance that the result is unacceptable.

Competitive Rates: Op: 607 and The Intrastate Market

The first of these factors is the producers’ contention that FPC has failed to take adequate account of the effect of intrastate rates, as updated with new data — on the OSWA rate structure.

Using the table taken from the Shell Protestants’ initial brief the current weighted average of intrastate sale prices is 25.21^/Mef. The sub-area breakdown of intrastate rates for OSWA provides a further basis for comparisons with the rates set by PPC in Op: 607.

A careful examination of these rates shows that the “new” gas rates established by Op: 607 exceed the weighted average of current intrastate sales in every sub-area except Other Oklahoma. In response to this cold hard fact, the Shell Protestants suggest in their reply brief that while this may be true, FPC-determined interstate rate ceilings should correlate with maximum rather than weighted average intrastate rates. No court has held — and we do not hold today — that intrastate rate levels are a mandatory component of the interstate rate scheme. Nor do any of the producers claim that, as a matter of law, they are. FPC obviously considers this one of the relevant factors since the competition from non-federally regulated intrastate purchases affects quite directly the total available supply for both intra and inter state gas. From an administrative point of view, buttressed as it would be by business practices, the use of maxima might well be both unmanageable and distorted.

The time has come for courts to recognize that there is a myth in much of the figures. Weighted averages are certainly permissible. In Op: 607 FPC took a realistic look at intrastate rate levels, and we can find no great incongruity between the rates set for OSWA and the prevailing rates in the intrastate market.

New Rates For New Gas

As to the contention of the producers that there is no record evidence to support the rates established by Op: 607 for new gas in OSWA, we must say that our reading of the record does not leave this impression. FPC was entitled to consider national cost data available to it and offered in the context of other area rate proceedings when it fashioned a rate schedule for OSWA. Two of these other rate schedules have already been sustained on judicial review. See SoLa II; Hugoton-Anadarko Area Rate Case: California v. FPC, 9 Cir., 1972, 466 F.2d 974. Given the experienced judgment which came from dealing with these cases as well as the record evidence of the instant proceeding, FPC was empowered to make a choice of costs from the permissible zone.

In SoLa II, Part VII, we examined several alternative channels of relief for a producer whose special circumstances warranted higher rates than the maximum allowed by the area rate proceeding which served as anchors-to-windward. Of course all of those special relief procedures are equally applicable here. And there is a substantial indication that they are being exploited. But we are also aware that — as far as the future pricing of “new” gas is concerned — area rate regulation as a regulatory method may be near to an end. For as we have previously noted FPC has issued a notice of a proposed rule-making to establish “just and reasonable” rates for the well-head sales of natural gas on a national basis. While neither the terms nor the validity of this proposal are before us now, all must be aware of the administrative decision to exercise the prospective powers of § 5 of the Natural Gas Act, 15 U.S.C.A. § 717d, within a healthy regulatory framework to elicit necessary supply. In announcing its decision FPC expounded somewhat on its current approach:

“We use cost as a basis for departure, as suggested in City of Detroit, although we recognize the inherent im-precisions contained in such an approach. We will look toward a range of just and reasonable costs and rates of return. We will likewise consider numerous noncost factors, including supply and demand and consequences upon the producing industry of the rate order. We will also consider the capital required to conduct the necessary exploration and development effort, prices of alternative fuels, prices of supplemental gas sources, intrastate contract rates, and the commodity value of natural gas. The end re-suit will be a just and reasonable rate designed to maintain and assure adequate service to consumers and to attract the necessary capital to maintain gas exploration, . . . and production, at a level which will serve consumer needs.”

Our review of the costing evidence in the record, the correlation between new gas rates and intrastate rates, the levels of substitute fuel prices, and other factors leads us to conclude that FPC has set new gas rate ceilings at a permissible point within the “zone of reasonableness”. The availability of individual relief and the possibility of FPC action setting national rates for new gas, while not a basis for our enforcement of Op: 607, do furnish solace to the Court. The Op: 607 rate structure for “new” gas is sustained in full.

Flowing Gas

Both Mobil and the Shell Protestants raise essentially three points to contest the rates for flowing gas: (i) FPC adopted the Administrative Law Judge’s proposed rates for flowing gas without adjusting the rate of return component from 10.5% to 15.0% as it had done for new gas; (ii) FPC failed to include an exploration and development adjustment and (iii) FPC returned to the Btu method of allocating expenses between oil and gas produced in association.

Using cost merely as a point of departure minimizes the importance of a rate of return figure. But if one is to be used in this matrix, we find it difficult to see why FPC would consider it important enough to adjust upward for new gas but not to any degree for flowing. The rate of return approved by the Supreme Court in Permian was 12%. The SoLa II return was 15%. While we tend to defer to administrative expertise to determine the appropriate rate there is much bewilderment with FPC’s rote adherence to the 10.5% figure in OSWA.

Mobil expresses dismay with FPC’s failure to provide some additional exploration and development component to flowing gas rates. In SoLa II we held that FPC may decide that gas committed under old contracts should bear its fair share of the burden for development of new resources to meet total demand. We did not hold there that it had to do so. Nor do we now. Yet it does seem administratively incongruous to allow major interstate producers to recoup exploration and development expenses from gas which they sell under old contracts if it is produced in SoLa, but not if it is produced in OSWA, especially that portion which is in North Louisiana. Certainly that is so in the absence of explanation and the fact that Op: 607 was handed down on October 29, 1971, several months after SoLa II and Texas Gulf Coast decisions. See note 6, supra.

The producers also complain of FPC’s use of the Btu allocation method of assigning costs between jointly produced oil and gas. Making this allocation has been a problem for some time. In SoLa I FPC used the Btu method and determined that a ratio of 3.5:1 oil to gas would be appropriate in apportioning expenses. Then in SoLa II it determined to abandon this method in favor of a direct assignment of expenses based upon producer-furnished data. But to tally the proceedings and court sanctions on one side or the other is fruitless.

We may assume that either method may be a permissible method of allocating the expenses, but in view of the Shell Protestants’ factual allegation that use of the direct assignment method would have made a 6.17^/Mef difference in the flowing gas rate for OSWA, we cannot lightly cast the point aside. This is especially true since FPC, on Staff’s recommendation, did abandon the Btu method in SoLa II in favor of direct assignments. Op: 598, |f/153. And in so doing it recognized the inherent judgmental factor in the Btu allocation.

On reading this segment of Op: 607 one might well conclude that it hailed from the pre-SoLa I era. But Op: 607 was issued in the wake of SoLa II. See note 6, supra. FPC’s failure to take account of this very serious factual allegation remains unexplained.

Of course a significant fact which permeates the flowing gas structure is that FPC acted upon a 1962 cost basis in establishing these rates. Since then a lot of water has gone under the bridge and a lot of gas through the pipes. But what are we to do ?

In SoLa I, 444 F.2d 125, 126-127 (on rehearing) we observed:

Under section 19(b) of the Natural Gas Act, this Court has the broad remedial powers that inhere in a court of equity, and pursuant to our equitable powers we make it part of the remedy in this case that the authority of the Commission to reopen any part of its orders, including those affecting revenues from gas already delivered, is left intact. The Commission can make retrospective as well as prospective adjustments in this case if it finds that it is in the public interest to do so.

Again we find it desirable to employ these flexible powers of equity to enable FPC to deal effectively with the public interest as it may see the need. Therefore, although we attach the label “enforced” to the end of this opinion, we emphasize that under our decree FPC has the authority — just as it did after SoLa I and subsequently reaffirmed by us in SoLa II — to alter or modify the maximum rates prospectively or retroactively which it established in Op: 607 for flowing, pre-October 1, 1968, gas if it believes that such a change would be in the public interest.

Refunds

In SoLa II we approved FPC’s implementation of an incentive program which permitted producers owing refund obligations to discharge them — not in cash — but rather at the rate of 1^/Mcf through the commitment of new reserves to the interstate market. Initially FPC declined to allow this refund credit for OSWA claiming that the “refunds here ordered are of such small amount that a refund credit would not provide an incentive to any materially increased exploration and development program.” Op: 607, 47. But on rehearing it recanted. “While the estimated amount of $5,000,000 (the Major Producers’ estimate) is small by comparison with total dollar revenues of the industry in this area, and although the resulting stimulus may not be great, in this time of increasing gas supply stringency every incentive should be applied which may help to alleviate the situation.” Op: 607A, jf 4.

Mobil attacks the refund credit system as being unduly discriminatory and preferential. Its basic premise seems to be that FPC adopted this incentive in lieu of a higher rate which might have been obtained if the refund credit had not been put into effect. This is without merit.

As to the charge that the refund credit program discriminates, we enforce it on the basis of our lengthy discussion of the matter in SoLa II.

We refuse to fault FPC for coping with the gas shortage in every possible way. The refund credit program is fully sustained.

Moratoria

FPC has imposed a moratorium until July 1, 1976 on increased rate filings under § 4 of the Act which are above the area rates prescribed by Op: 607. It is vigorously attacked by all producers in this proceeding.

Moratoria are not new to area rate cases. They were sustained by the Supreme Court in Permian and by us in both SoLa I and SoLa II. Several factors prompted this action. Foremost among the justifications was the fact that some stability and rate certainty is needed if the industry is to be effectively regulated at all. Also, we cited and approved various alternative methods by which producers who are uniquely aggrieved by area rate ceilings may seek special, individualized relief. If that were all, we could merely enforce these moratoria provisions without further comment. But because our sanction in SoLa II was predicated in large measure upon factors not present here, we believe that some further comment is necessary.

In SoLa II, we said:

There are also other substantial reasons for rejecting the producers’ attack on the moratoria provisions. The marrow of their argument is that due to inflation and other economic factors, costs are very likely to rise substantially during the term of the moratorium. But two safeguards convince us that, if and when that contingency occurs, FPC is ready, willing, and able to make appropriate adjustments. First, the costing on 1969 data was relatively current and to a significant degree, the incentives established by Op: 598 apart from the rates themselves serve to bolster the financial position of the producers and protect them against rising costs. These are, of course, the provisions providing for the retention of large amounts of capital through the refund discharge program and the periodic and contingent escalations. Second, there are several alternative methods by which a single aggrieved producer may establish higher rates as his circumstances warrant.

483 F.2d at 909.

Not all of these factors are present here. While the new gas rates for OSWA are in parity with those adopted in SoLa II, the flowing gas ceilings here were not adopted on the basis of 1969 data, but rather on the basis of a stale 1962 record. Likewise, the amount 'of capital which will be retained via the refund credit program is substantially less significant in OSWA, and there are no contingent escalation provisions. Therefore, piecemeal relief on a company-by-company basis may not be effective with respect to the industry’s need for higher rates on flowing gas.

So, in keeping with the flexible approach which we are adopting with respect to flowing gas rates, we do not frame our decree for all time. Rather we hold that FPC may, in light of its evaluation of the gravity of our national energy crisis and the evidence concerning flowing gas rates for OSWA, modify or rescind the moratorium if the need arises.

Enforced.

      . See Notice of Proposed Rulemaking (April 11, 1973), Docket No. R-389B, 38 Fed.Reg. 10014 (April 23, 1973), [Foster Associates Report No. 891].

        PPC first used the abbreviated technique of rule-making for gas rate regulation in the Rocky Mountain Area. After the Tenth Circuit approved the procedure in Phillips Petroleum Co. v. PPC, 10 Cir., 1973, 475 F.2d 842, PPC established rates for that area in The Rocky Mountain Area Rate Case, Op: 658 (April 11, 1973), 49 F.P.C. -, 38 Fed.Reg. 9802 (April 20, 1973). On the same day it announced its intention of setting maximum “just and reasonable” rates for the wellhead sales of natural gas for the nation as a whole by July 1, 1973.
      Significantly, PPC declined to set new gas rates for the Rocky Mountain Area in Op: 658 in deference to its intent to cover that subject nationally in Docket No. R-389B.
      PPC’s announced purpose of using rule-making was to avoid the unnecessary delay and rate uncertainty which is attendant upon “protracted adjudicatory proceedings and subsequent court litigation”. PPC hopes the new procedure will provide the needed flexibility to effectively cope with major changes and national problems — like the current gas shortage crisis.

      . Actually, not only is OSWA not “Other” Southwest, it is not “Southwest” at all.
      OSWA is a heterogeneous amalgamation of six geographically, geologically, and economically distinct sub-areas lumped together by PPC for administrative, regulatory convenience. It includes all of (1) Arkansas and (2) Mississippi, (3) “Other” Oklahoma (the 56 counties in southern and eastern Oklahoma not covered by PPC’s order in the Hugoton-Anadarko Area Rate Cáse), (4) Texas Railroad Commission Districts Nos. 5, 6 and 9, (5) four counties in northwest Alabama, and (6) all of Louisiana north of the 31° parallel (that part not' covered by PPC’s order in SoLa II).

      Separate “sub-area” treatment was also given to Mississippi’s offshore reserves. See note 5, infra.

      The major geological feature of OSWA is the Ouachita Front, a fault in the earth arcing northward from northeastern Mississippi into Arkansas and then westward and southerly to the Big Bend area of Texas. Oil and gas above the fault are produced from the ancient rocks of the Paleozoic era, while production below the fault comes from the relatively young rocks of the Mesozoic and Cenozoic periods.
      And the geological distinctions do not even divide themselves at this juncture, for within these two categories there are a myriad of uplifts, basins, synclines, and the like.

      . Specifically, several of the petitioners have challenged (i) PPO’s establishment of October 1, 1968 as the division date between so-called “flowing” gas and “new” gas, (ii) PPC’s determination that casinghead gas, i. e., gas produced in conjunction with oil, is to be treated the same way for regulatory purposes as gas-well gas of the same vintage, and (iii) PPC’s failure to make special provisions for producers whose Brie-uncontrollable royalty obligations might exceed PPC’s current projections, see Mobil Oil Corp. v. FPC, 1972, 149 U.S.App.D.C. 310, 463 F.2d 256, cert, denied sub nom., 1972, 406 U.S. 976, 92 S.Ct. 2409, 32 L.Ed.2d 676, reversing FPC’s ruling after our initial primary jurisdiction reference’ to it, J. M. Huber Corp. v. Denman, 5 Cir., 1966, 367 F.2d 104; Weymouth v. Colorado Interstate Gas Co., 5 Cir., 1966, 367 F.2d 84. Because of the extended review which we gave these matters in SoLa II, these provisions of Op: 607 are enforced without further discussion.
      Of course, SoLa II is also helpful in our determination of the other legal issues presented in this case, including the costing methodology employed by PPC to determine both new and flowing gas rates, the provision which allows for a refund discharge through the commitment of new reserves to the interstate market, and the Op: 607 moratorium on increased rate filings under § 4(e) of the Act until October 1, 1976. But we shall speak more of these anon.

      . We discussed the anomaly of determining the vintage on the basis of the date of sale in SoLa II: 483 F.2d p. 892 n. 9. Interestingly, the “vintage” of casinghead gas is determined, not by the date of the contract first committing it to the interstate market, but rather by the date of discovery. See Op: 607A, If 2.
      In its recent Appalachian and Illinois Basin Area Rate Case, Op: 639, - F. P.C. -, now pending review in the Fifth Circuit, Docket No. 73-1329, FPC took steps to eliminate the “vintaging” of gas by providing that new gas rates shall be applicable, to the extent allowed by contract, to successor contracts between previously contracting parties. Both Order 455 and the proposed rule-making in Docket No. R-389B, see note 1, supra, also abandon the date of contract anomaly by tying the maximum permissible rate to the date of the well. But these administrative decisions must run the course of judicial review, and we note them only in passing.

      . OSWA includes the as yet untapped gas potential of the offshore federal domain contiguous to the Mississippi shoreline. In order to maintain parity with production from the federal domain lying off the southern shores of Louisiana, FPC established the same rates — 26f!/Mcf with a l^/Mcf escalation on October 1, 1974 — for the Mississippi off-shore domain as in SoLa II. For the reasons we stated in SoLa II: 483 F.2d p. 902 and n. 24, we enforce this determination without further discussion.

      . Rates for the prolific Texas Gulf Coast Area were established by FPC on May 6, 1971, in Op: 595, 1971, 45 F.P.C. 674, now pending review in the D.C. Circuit, New York Public Service Commission v. FPC, Docket No. 71-1828.
      FPC’s opinion in SoLa II followed close on its heels. Op: 598, 1971, 46 F.P.C. 86, ' was rendered on July 16, 1971.
      It is important to put OSWA into this temporal perspective. Op: 607, 1971, 46 F.P.C. 900, was issued on October 29, 1971, just 71 days after SoLa II and only 176 days after Texas Gulf Coast.

      . The Reserves-to-Production (R/P) ratio for OSWA declined from 11.0 in 1964 to 9.8 in 1969. This decline was largely due to inadequate findings. The Findings-to-Produc-tiou (F/P) ratio has been below unity since 1965. Staff’s projections indicate that this trend will continue:
      OTHER SOUTHWEST PRODUCTION, RESERVE ADDITIONS AND R/P RATIO

      Year
      Staff Report No. 2, “National Gas Supply and Demand, 1971-1990,” (February 1972).
      CA75207

      . Several producers contend that FPC has failed to take a full account of the potential for natural gas production from OSWA. Staff credits the data of the Potential Gas Committee (PGC) which makes the following projections for OSWA. There are about 86 Tcf of potential natural gas reserves. This figure is about four times the proven reserves of the area and comprises approximately 10.1% of the reserve potential for the lower 48 contiguous states.
      The amount is estimated by PGC to be divided into two depth categories so that 73 Tcf are above 15,000 feet with only the remaining 13 Tcf between 15,000 and 30,000 feet. The real uncertainty which enshrouds OSWA’s potential becomes apparent from the categorization of these reserves: (i) only 10 Tcf (about 11.6% of the potential) are in the “probable” category, while (ii) 23 Tcf (about 26.8%) are “possible”, and (iii) 53 Tcf (61.6%) are “speculative”.
      The producers, however, suggest that even this somewhat optimistic view fails to include all of the areas encompassed within OSWA. According to their approximations, based upon data from the Potential Gas Agency at the Colorado School of Mines, OSWA has a total potential of some 164 Tcf — 13 probable, 40 possible, and 111 speculative. Given this substantial deviation from FPC’s factual premise, these producers conclude, “To the extent that the Commission’s unduly low area ceiling rates were predicated on the assumption that the area contains a minimal potential, clearly such finding is erroneous and must be set aside.” While we are pleased to hear that OSWA’s potential might exceed current estimations by FPC, we fail to see how this makes any difference in our review of the case since FPC established a rate structure which according to its own words would “fully utilize” the resources of OSWA.

      . And even this broad statement is somewhat misleading. Focusing on this one particular aspect of OSWA’s total factual picture gives some indication of the wide variances from sub-area to sub-area within OSWA.
      FPC acted on the basis of the following data with respect to intrastate sales:
      7 Reports (Form 15) filed by pipelines with the Commission indicate jurisdictional sales of 1.210 trillion cubic feet in 1969, or 56.2 percent of the 2.152 trillion feet of production reported by the American Gas Association (AGA) for 1969 in the Other Southwest Area.
      By sub-areas, the comparable figures in billions of cubic feet are:
      AGA Form 15
      Production Sales Percent;
      Other Oklahoma 592 260 44
      Texas R.R. Dist. 9 181 60 33
      Arkansas 166 138 83
      Texas R.R. Dist. 6 437 217 50
      Northern Louisiana 488 410 84
      Mississippi 166 125 75

        All sales in Texas B..R. District 5 were intrastate in 1969, although there have been some interstate sales this year. No statistics are available for Alabama, but the volume is very small. The percentages are subject to a slight distortion because AGA production includes gas used in the field and never sold.
      Thus, the competitive effect of intrastate rates on interstate ceilings would be a critical factor in Texas or Oklahoma where the intrastate market claimed from 50-100% or 56% of production respectively, but relatively insignificant in Northern Louisiana or Mississippi where only 16% or 25% of production was diverted to intrastate consumption.
      These factual deviations are indicative of the complexity of FPC’s task in OSWA. It is because of such matters that reviewing courts assess administrative actions under such rubrics as “end result,” “zone of reasonableness,” and even “kid gloves.” See generally, SoLa II; 483 F.2d pp. 888-890.

      . FPC adopted a triumvirate of incentives in SoLa II. First, the rate structure itself —particularly the 26^/Mcf. rate for off-shore gas — was calculated to bring forth 15 Tcf. Second, FPC adopted a program by which producers could work-off the $150,000,000 refund obligation at the rate of l£ Mcf for each new Mcf of gas committed to the interstate market, in hope of producing another 15 Tcf. Third, FPC allowed for a contingent serial escalation of 1%^ Mcf on flowing gas rates in half-penny intervals when the industry as a whole committed 7%, 11}4, and 15 Tcf of SoLa production to the jurisdictional market.
      In Op: 607 FPC initially put all the eggs in the rate basket for OSWA. But on rehearing it decided to allow the same credit against refund obligations which it had used in SoLa II. Op: 607A, $4.

      . Actually, with respect to the Mississippi and Alabama sub-areas of OSWA, there was only one vintage of “flowing” gas. The rate for that gas was 19.0^/Mcf, but it was subject to half-penny automatic escalations on January 1, 1965 and again on October 1, 1968.

      . Prior to January 1, 1965 From January 1, 1965 Through September 30, 1968 From October 1, 1968
      Other Oklahoma 17.5 18.4 19.4
      Texas Railroad District No. 9 17.8 18.7 19.7
      Northern Arkansas 17.0 17.9 18.8
      Texas Railroad District No. 6 15.0 17.0 19.1
      Northern Louisiana (at 15.025 psia) 16.7 18.6 20.6
      Southern Arkansas 14.4 16.25 18.25
      Mississippi and Alabama (at 15.025 psia) 19.0 19.5 20.0

      . Prior to January 1, 1965 From January 1, 1965 Through September 30, 1968 From October 1, 1968 Until January 1, 1972
      Other Oklahoma 18.4 18.9 19.4
      Texas Railroad District No. 9 18.7 19.2 19.7
      Northern Arkansas 17.8 18.3 18.8
      Texas Railroad District No. 6 18.1 18.6 19.1
      Northern Louisiana (at 15.025 psia) 19.6 20.1 20.6
      Southern Arkansas 17.25 17.75 18.25
      Mississippi and Alabama (at 15.025 psia) 19.0 19.50 20.0

      . Texas District 9 24
      Northern Arkansas 23
      Other Oklahoma 23.75
      Texas Districts 5 and 6 23.5
      Southern Arkansas 22.5
      Northern Louisiana 25
      Mississippi and Alabama 18 25

      . Led by the named petitioner, the Shell Oil Company, the primary group of producers challenging the Op: 607 rate scheme includes the Amoco Production Co., the California Co., Continental Oil Co., Gulf Oil Corp., Humble Oil & Refining Co. (now Exxon), Signal Oil & Gas Co., the Superior Oil Co., and Texaco, Inc.
      Aligned on the brief with these petitioners are intervenors Amerada Hess Corp., Ash-land Oil, Inc., Atlantic Richfield Co., the Marathon Oil Co., Murphy Oil Corp., Skelly Oil Co., Sun Oil Co., Tenneco Oil Co., and the Union Oil Co. of California.
      Eor convenience’s sake we shall refer to this group as the “Shell Protestants.”
      “Mobil appears as a loner challenging virtually every utterance of FPC.
      Shell, Signal, the California Co., and all of their intervenor-friends — on the other hand —have intervened against Mobil’s petition to the extent that it challenges (i) the refund-discharge provisions of Op: 607A, (ii) FPC’s decision to price casinghead gas on par with contemporary gas-well gas, and (iii) the “new” gas division date of October 1, 1968.
      From FPC’s point of view Exxon may have changed its stripes along with its name. See SoLa II: 483 F.2d p. 903 n. 27. In SoLa II, with the exception of Mobil and Amoco, nearly all of these producers supported FPC’s holding. Here they attack it. Of course the difference may lie largely in the fact that SoLa II was written according to the terms of a settlement compromise.

      . FPC has also rejected the notion that it should use “lowest reasonable cost.” In George Mitchell and Associates, Op: 649, “Opinion and order granting special relief and terminating proceedings, - F.P.C. - (Feb. 21, 1973) it said:
      “Lowest reasonable cost” has no meaning in regulation unless its determination encompasses consideration of reliability and adequacy of supply. If we are so concerned with price as a measure of profit that we ignore the effect of price on supply, we fail in our essential function.
      FPC is using cost-of-service, but only as a point of departure.

      . We do not mean to intimate, however, that the level of substitute or competitive fuel prices is not a probative factor in making the required determination of the propriety of the “end result.” See FPC v. Hope Natural Gas Co., 1944, 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333; The Permian Basin Area Rate Cases, 1968, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312; SoLa II.

      Nor do we hold that FPC could not, under the structure of the Act conclude that, in the light of record evidence, rates at the level of those for competitive fuels would be “just and reasonable.” This is far from the contention that on this episodic record covering a heterogeneous amalgamation of geographically unrelated areas FPC was compelled as a matter of law to do so. But these are matters for another day.
      FPC is charged by the Natural Gas Act with the responsibility for regulating the wellhead sales of gas. Of course it would be possible to amend the act in favor of total deregulation, and the current administration has proposed a bill to do just that with respect to new gas. See H.R. 7507, 93rd Cong., 1st Sess. (1973) (Introduced by Congressman Staggers on April 18, 1973). But until this obligation is lifted from FPC, it must determine as an administrative matter, the manner in which it will regulate.

      . FPC has repeatedly recognized the imprecision of costing calculations. In SoLa II; 483 F.2d p. 902 n. 23 we quoted from FPC’s Texas Gulf Coast Area Rate Case, Op: 595, 1971, 45 F.P.C. 674, 687. It bears repeating:
      “The cost computations used in this and other area rate proceedings seem to be mathematically precise. They are not. Allocations of costs are by nature matters requiring a substantial amount of judgment.”
      See also, SoLa II; 483 F.2d p. 899 n. 19.

      . 1969 First Half 1970_ _7/1/70 And Later
      Current Price a/ Current Price a/ Current Price a/
      Area Annual Volume Wtd. Avg. Range Annual Volume Wtd. Avg. Annual Range Volume Wtd. Avg. Range
      (Bcf) ... .(4/Mcf)______ (Bcf) _ _(4/Mcf)_ (Bcf) -.....W/Mcf)_____
      Permian Basin 146 14.57 8.26-23.99 103 21.47 15.60-23.07 137 23.90 8.96-28.50
      South Louisiana 10 20.38 19.50-23.68 72 22.98 20.50-30.00 25 26.22 20.25-39.56
      Texas Gulf Coast 148 19.39 12.05-22.13 38 18.39 10.50-24.38 75 22.19 11.00-30.11
      Hugoton-Anadarko 6 17.32 15.00-19.33 13 21.55 18.00-24.04 45 22.65 9.25-35.36
      Other Southwest 7 17.85 12.27-21.45 12 18.69 14.00-21.53 52 25.21 4.40-28.92
      Rocky Mountain 0.7 11.57 9.75-12.00 8 18.05 6.83-19.01 20 17.32 6.00-25.00
      California 9 31.26 25.00-35.25 1 30.43 25.00-31.00 11 34.09 27.00-37.00
      Michigan 1 38.00 35.70-43.72 4 36.00 36.00 19 40.87 36.00-48.30
      a. Inclusive of tax reimbursement, additive and deductive adjustments for gathering and Btu. The prices for the contracts dated in 1969 and the first half of 1970 are as of August 1970; the prices for subsequent sales are as of September 1971.
      CA91281

      . 1969 First Half 1970 7/1/70 And Later
      Current Price a/ Current Price a/ Current Price a/
      Annual Area Volume Wtd. Avg. Range Annual Volume Wtd. Avg. Range Annual Volume Wtd. Avg. Range
      (Bcf) _____W/Mcf)______ (Bcf) _____W/Mcf)_..... (Bcf) .....(<S/Mcf)_.....
      Arkansas 0.2 16.00 16.00 0.2 18.75 18.75
      North Louisiana 2.7 21.45 21.45 0.3 20.58 19.50-21.45
      Mississippi 1.0 20.96 20.96 _
      Oklahoma 0.5 16.06 15.00-18.27 1.6 15.86 14.00-16.00 37.8 27.13 11.17-28.92
      Texas District 5 1.9 13.91 12.27-17.64 1.0 18.50 18.50 9.9 21.80 18.00-27.45
      Texas District 6 1.6 17.14 16.08-17.64 7.1 18.67 17.50-19.00 4.0 15.72 4.40-18.30
      Texas District 9 0.9 21.53 21.53 -- -- --
      a. Inclusive of tax reimbursement, additive and deductive adjustments for gathering and Btu. The prices for the contracts dated in 1969 and the first half of 1970 are as of August 1970; the prices for subsequent sales are as of September 1971.
      EA9129]

      . As we have previously pointed out, the weight which this factor has, from a purely economic standpoint, varies drastically from sub-area to sub-area within OSWA. See note 9, supra.

      . George Mitchell and Associates, Op: 649, “Opinion and order granting special relief and terminating proceedings,” -F.P.C.(Feb. 21, 1973) was such a proceeding granting special relief to a producer in OSWA. The readiness of FPO to entertain such petitions and the effectiveness with which they are processed bolsters the reassurance which we expressed in SoLa II, Part VII.

      . Of course, we make no intimations as to the validity of the rule-making process as a ■ procedural issue or the national rate concept as a legal issue at this juncture. We note that our Brothers of the Tenth Circuit have sanctioned the informal rule-making device as an acceptable procedural mechanism for the determination of “just and reasonable” rates for the Rocky Mountain Area. See Phillips Petroleum Co. v. FPC, 10 Cir., 1973, 475 F.2d 842. See note 1, supra.

      Rule-making was also used in Op: 639,-F.P.C.-■, now pending review in Fifth Circuit Docket No. 73-1329, relegating producers in the Appalachian and Illinois Basin Area to the optional procedures of FPC Order No. 455, “Statement of Policy Relating To Optional Procedure for Certificating New Producer Sales of Natural Gas,” promulgating 18 C.F.R. § 2.75 (August 3, 1972), now pending judicial review in the D.C. Circuit, Moss v. FPC, [No. 72-1837] and APGA v. FPC [No. 72-1846], for increased rates on new gas.

      . Notice of Proposed Rulemaking (April 11, 1973). Docket No. R-389B, 38 Fed.Reg. 10014 (April 23, 1973) [Foster Associates Report No. 891 at 3].

      . For example, one major cost component is the drilling data — cost and yield per foot. In SoLa II FPC found that “drilling costs per foot should range upward from about $25.00 per foot,” and that “productivity estimates should cluster around 600 Mcf per foot drilled.” Op: 598, flf 120-21. No one challenges the additional finding that drilling costs vary greatly with the depth.
      The producers suggest, however, that $30.-OO/foot would be the appropriate drilling cost figure to use for OSWA. [Shell initial brief, at p. 50]. There is no compelling record evidence that a different figure should be used for OSWA than for SoLa. This is especially true when one considers the fact that 73 Tcf of the FPC estimated 86 Tcf reserve potential of OSWA are above 15,000 feet. See note 8, supra.

      . Exxon has filed a helpful supplemental memorandum detailing the Btu methodology. The problem is essentially this. Many dry holes are drilled in the course of the search for oil and gas. We are informed that 10,800 such holes were drilled in 1970 at a cost of approximately $873,000,000. Insofar as gas and oil are produced conjunctively, and the search is made for both, these expenses call for some allocation against the revenues of each. Likewise, exploration and development expenses for successful efforts must be apportioned.
      Eschewing volumetric comparison FPC has in the past allocated these costs based upon the relative production of energy, measured in Btu’s, of each fuel. See SoLa I, 428 F.2d 407, 422 n. 30. The thermodynamic breakdown yields a ratio of 4:1, but a further adjustment to account for the industry’s geographical technological ability to drill directionally solely for gas reduces the ratio to 3.5.
      To illustrate, if 10 Btu’s of liquids and 10 Btu’s of gas are produced in the test year and if $100 was expended in unsuccessful E&D, the calculation would be as follows :
      (a) 10 Btu (Liquids) X 3.5=35 10 Btu (Gas) X 1.0=10
      (b) Ratio of 35 to 45=0.78 Ratio of 10 to 45=0.22
      (c) 0.78 X $100=$78 (Allocated to Liq-quids)
      0.22 x $100=$22 (Allocated to Gas)

      . Our discussion of FPO’s use of the Btu method of allocating exploration and development expenses between jointly produced oil and gas in no way pertains to the Shell Protestants’ challenge to the so-called Btu “gap” in quality adjustments. See Shell initial brief at pp. 60-63. That argument has not been neglected — only rejected.

      . Naturally since fund orders are obtained derivatively from the flowing gas rates this flexibility also extends to allow FPO to alter the total refund obligations accordingly if it chooses to modify flowing gas rates.

        The same flexibility applies to any changes which FPC might want to make regarding the moratoria provisions.

      . The New York Public Service Commission also points out that the refund credit program may be somewhat of a disincentive since producers who desire to elect the benefits under the new Optional Procedure for Certificating New Sales promulgated by Order 455. (See SoLa II; Part VII), must discharge all due refunds in cash. Thus, the incentives cancel out.
      We think this is a matter within the judgment of FPC. The refund discharge program of OSWA is not to be discarded merely because it affords the producers an opportunity to choose which of two incentive plans, one perhaps more attractive than the other, will be selected.

      . See note 28 and related text, supra.


author: WALLACE, Circuit Judge

text:
    UNITED STATES of America, Appellee, v. Trunnell Levett PRICE and Arnold Lewis Coffey, Appellants.
    Nos. 71-3038, 71-3039.
    United States Court of Appeals, Ninth Circuit.
    Aug. 17, 1973.
    Rehearing Denied in No. 71-3039 Aug. 17, 1973.
    Artie Henderson, Huntington, Bryans, Harper, Henderson, Burney & Newman-Crawford, San Diego, Cal., for appellants.
    Harry D. Steward, U. S. Atty., James W. Meyers, Robert H. Filsinger, Asst. U. S. Attys., San Diego, Cal., for appel-lee.
    Before ELY and HUFSTEDLER, Circuit Judges, and D. WILLIAMS, District Judges.

       Central District of California, sitting by designation.

   ORDER

On request of a member of the court who was not a member of the panel, proceedings were commenced in April 1973 to obtain a vote of the court to consider the case en banc.

All members of the court in active service have considered the request for en banc consideration. A majority of the court has rejected the request.

Judge Wallace, with whom Judges Wright Trask, Choy, and Goodwin concur, files an opinion dissenting from the rejection of en banc consideration. Chief Judge Chambers files a special concurrence in the refusal to consider the case en banc.

WALLACE, Circuit Judge

(dissent-

ing), in which Circuit Judges WRIGHT, TRASK, CHOY and GOODWIN concur:

I respectfully dissent from our decision not to take these cases en banc. I fear this decision not only embarks us on uncharted waters fraught with yet unseen shoals, but leaves our local ships’ captains in the district court without the necessary use of the rudder to avert day-to-day collisions.

I

We have held the right to proceed pro se is of constitutional dimensions. Arnold v. United States, 414 F.2d 1056, 1058 (9th Cir. 1969), cert, denied, 396 U.S. 1021, 90 S.Ct. 593, 24 L.Ed.2d 514 (1970); Bayless v. United States, 381 F.2d 67, 71 (9th Cir. 1967). But see Brown v. United States, 105 U.S.App. D.C. 77, 264 F.2d 363, 365, cert, denied, 360 U.S. 911, 79 S.Ct. 1299, 3 L.Ed.2d 1262 (1959); People v. Sharp, 7 Cal. 3d 448, 103 Cal.Rptr. 233, 499 P.2d 489 (1972). See also Comment, Self-Representation in Criminal Trials: The Dilemma of the Pro Se Defendant, 59 Cal.L.Rev. 1479, 1487-89 (1971).

After the jury had been selected and the district judge had set aside the time necessary to try two defendants for the $122,700 gunpoint robbery of a post office, one of the two defendants demanded to represent himself. The opinion in this case makes the judge’s denial reversible constitutional error. It attempts to justify this decision by the fact that the trial judge, when he denied the motion, referred only to Coffey’s lack of ability to defend himself properly. That the judge, who was in the best position to assess the situation, believed Coffey would have a fairer trial with the representation of counsel is brushed aside. The off-the-cuff comments of the trial judge now become a trap by our studied hindsight. Had he stated no reasons for denial of the motion, we would have reviewed the record to determine if they existed. The opinion’s reliance upon the judge’s failure to mention other obvious facts before him seems to me to be seizing upon form and disregarding substance. For example, the very day before, the district judge was faced with such reprehensible and disrespectful conduct that only his extraordinary patience and judicial temperance kept Coffey from immediate consequences. Coffey was not only flagrantly disrespectful in open court, but exercised his four-letter vocabulary.

Further, although the judge did not mention that the trial had already commenced, this too was an obvious fact to consider. I concur with the analysis of our brothers in the Second Circuit that once the trial has begun,

There must be a showing that the prejudice to the legitimate interests of the defendant overbalances the potential disruption of proceedings already in progress, with considerable weight being given to the trial judge’s assessment of this balance.

United States ex rel. Maldonado v. Den-no, 348 F.2d 12, 15 (2d Cir. 1965) (citations omitted).

It seems obvious to me there is no absolute constitutional right to represent one’s self if the trial court may take appropriate steps to quiet or remove obstreperous defendants, including binding and gagging if necessary. See Illinois v. Allen, 397 U.S. 337, 90 S.Ct. 1057, 25 L.Ed.2d 353 (1970). This being so, the trial judge must decide when and under what circumstances an unruly defendant may represent himself. We must give the district judge wide latitude in this decision. It is he who observes the complete demeanor of the defendant — he is not limited, as we are, to the cold record. He is aware of actions not reflected in the record. It is he who is charged not only to provide a climate as fair as practical for trial, but with the protection of those in the courtroom. It is he upon whom we must rely for the efficient administration of justice. Given the total facts before him, I would hold this judge did not abuse his discretion and there was no constitutional violation.

II

Only Price moved to have a reporter present at the grand jury proceedings at government expense. As Coffey did not make any motion, I do not see why the ease should be remanded to allow him to show prejudice due to lack of recordation. I would hold he has no standing now to object.

Further, I believe the opinion’s rule concerning grand jury recordation motions is overly broad. The discretion of Fed.R.Crim.P. 6(d), which uses the permissive term “may,” is virtually eliminated by a holding that the motion must be granted unless the government proves a legitimate and compelling interest. That to me is not the same discretion we formerly allowed the district court. See Reyes v. United States, 417 F.2d 916, 918 (9th Cir. 1969); Jack v. United States, 409 F.2d 522, 524 (9th Cir. 1969) ; Loux v. United States, 389 F.2d 911, 916 (9th Cir.), cert, denied, 393 U. S. 867, 89 S.Ct. 151, 21 L.Ed.2d 135 (1968). We held in United States v. Thoresen, 428 F.2d 654, 666 (9th Cir. 1970) , that the permission may not be arbitrarily denied. See also United States v. King, 478 F.2d 494 (9th Cir., 1973). But now to set such a precise burden on the government seems to me to strip from the district court the discretion it should have in ruling on a motion to record the testimony. If it is felt that rule 6(d) should be amended, I would prefer that it be done in the normal manner rather than by judicial decision.

CHAMBERS, Circuit Judge, concurring in the refusal to take the cases en banc:

In my view, Price and Coffey are wrongly decided. But we simply cannot take en banc each case that we think is wrongly decided. Additionally, I feel that the issues in Price and Coffey cannot be long delayed in resolution by the Supreme Court of the United States.

So I vote against en banc because I favor getting on with other business of the court. If we were the ultimate authority, I would vote otherwise. But about every other Monday we get proof that we are not the ultimate authority.

      . The government’s Petition for .Rehearing recounts his escapades:
      During the calling of the jury, Coffey stated: “I am telling you, man, I am through with this__” The jury was then impaneled. Codefendant Price loudly objected to the entire jury panel and refused to be seated despite several requests by the court. Coffey shouted among other things that: “I concur with Mr. Price that this is a ‘gargantuan amount of hypocrisy.’ ” “You’re devils, that’s what you are.” “Hypocritical eloquence in your black robe, huh? Why don’t you put on a white robe? It is more symbolic of your nature— treachery.” “That is all it is, a conspiracy, a tyrannical conspiracy.”
      After codefendant Price stated he refused to be tried and asked to be taken to the holding room, Coffey suggested that he too be taken out of the courtroom and announced : “There is no justice, none whatsoever.” Then after the court ordered the defendants removed from the courtroom, Coffey exclaimed that: “It is a lot of __and brainwash, that’s what it is.”
      After a recess Coffey stated he agreed with Price not to go through with these “processes” and asked to be excused from the proceedings to follow.
      The record discloses that thereafter Price attempted to leave the courtroom and he and Coffey had to be forcibly restrained by the Marshals. The court adjourned the trial and stated that it would attempt to persuade the defendants to attend the trial.
      Petition for Rehearing at 2-3 (citations omitted).

      . The government further stated:
      Although not completely evidenced from the record, (except inferentially by the court stating, “Mr. Price. All right. Bring him back here. Mr. Coffey, sit down”), Price had walked to the door to the immediate left of the bench and exited with a deputy United States Marshal in pursuit; Coffey moved to a position between counsel table and the bench where he was strenuously taken into physical custody by a deputy marshal. Price still resisting, was returned to the courtroom by a deputy
      Further, the record is silent as to: 1) the necessity of enforcing order bringing the marshals to using chokeholds and threatening the use of a blackjack; and 2) the continued presence, after the second day of trial, of heavyweight deputy U. S. Marshals positioned to the rear of each of the seated defendants.
      Petition for Rehearing at 3 n.3 (citations omitted).


author: ALMOND, Senior Judge.

text:
    Application of Cecil GREER.
    Patent Appeal No. 9080.
    United States Court of Customs and Patent Appeals.
    Sept. 20, 1973.
    Robert C. Garber, Harvey B. Jacobson, Washington, D. C., attys. of record, for appellant.
    S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. Jack E. Armore, Washington, D. C., of counsel.
    Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge.
   ALMOND, Senior Judge.

This is an appeal from the decision of the Patent Office Board of Appeals affirming the examiner’s rejections under 35 U.S.C. §§ 102 and 112 of the claim in appellant’s application for a plant patent entitled “Bermuda Grass Plant.” We affirm that decision insofar as it is based on § 112.

Invention

Appellant’s invention relates to a variety of Bermuda grass found growing in a bed of, and allegedly distinct from, a variety of Bermuda grass known as Zimmerly Select. The particular characteristics relied upon by appellant to distinguish his grass from known varieties of Bermuda grass are set forth in the claim which reads as follows:

1. A new and distinct variety of BERMUDA GRASS PLANT, substantially as shown and described, characterized particularly by its outstanding reproductive properties, its large, glossy rhizomes, its high level of resistance to common Bermuda grass diseases and the large percentage of above ground stolons which remain green in freezing weather.

In support of these characteristics, a number ^ of observations were made in the specification and it is around the nature of these observations that the controversy in this ease revolves.

With regard to the “outstanding reproductive” characteristics of the claimed grass, the specification, in substance, indicates that when the stolons of the grass are planted they cover the soil ' surface as quickly as do the rhizomes2 when planted (in fact faster).

In support of the claim that the plant produces “large, glossy rhizomes” the specification states that “some are almost as large in diameter as a lead pencil.” Additionally it states that they “penetrated the soil from one inch to two and one-half inches deeper than Coastal Bermuda rhizomes grown under identical conditions.” The specification also indicates that by visual observation of rhizomes, it could be seen that the rhizomes of the claimed grass were larger than those of other Bermuda grasses grown the same way. However, no actual measurements are reported.

To support the claim that the new grass is distinct from others because of the large percentage of stolons remaining green in freezing weather, the specification indicates that a test plot of the claimed grass remained green under the same winter conditions where Zimmerly Select, Coastal Bermuda, and native Bermuda had become dormant.

The claim that the grass is disease resistant is based on the failure of the applicant and other growers of his grass to observe disease in plots of the grass. However, the specification also reveals that other varieties of Bermuda grass grown at the same locations also remained free of disease.

Rejection

jn conformance with the usual proce-¿ure for the examination of applications -for p]ant patents, the application was submitted by the Patent Office to the Department of Agriculture for its evaluation of the assertions made in the specification supporting the claim that the grass was a distinct and new variety of plant. In due course a report was provided by the Department of Agriculture to the Patent Office. It is reproduced in full below:

1. The claimed grass is reported as superior to five other varieties of ber-mudagrass in its ability to withstand freezing weather. No comparative data were included in the application to show the relative winter survival of the claimed grass vs. other varieties. In addition to the lack of survival data, it [is] not clear from the application that all varieties were planted and managed in the same fashion.
2. The claimed grass is reported to have a high level of resistance to common bermudagrass diseases. It is stated, however, that no disease was noted on bermudagrass varieties grown at the same locations as the claimed grass. This information does not support the claim for disease resistance as the named varieties differ greatly in their reaction to disease (from highly susceptible to highly resistant) .
3. It is stated that the rhizomes of the claimed grass penetrate to a greater depth than those of Coastal bermudagrass. This comparison should include Zimmerly Select as this was the original source of the claimed grass.
4. No comparative measurements of rhizome diameters are included because comparable material was not available in test plots. Since diameter of rhizomes is a distinguishing characteristic of the claimed grass, comparative plots should be established to obtain these data.
5. A larger percentage of stolons of the claimed grass apparently stay green in freezing weather, in comparison with widely distributed bermuda-grass varieties. The conditions under which these observations were made should be described. All varieties must be grown under comparable conditions, i. e., age of stand, irrigation, soil fertility, and clipping or grazing practice. Information on stolen color for the claimed grass and bermuda-grass varieties could be given either as a percentage of stolon length or as percentage of stolons that remain green. The description of the claimed grass is not adequate to determine if it differs from other named bermuda-grasses.

This report and the examiner’s own observation that the reproductive characteristics of the grass were not compared to those of any known Bermuda grass led him to conclude that the claim should be rejected under § 112 for the reason that it is:

* * * unsupported by a clear and complete disclosure with respect to the allegedly distinguishing characteristics of (1) faster reproduction, (2) frost and disease resistance, (3) rhizome penetration, (4) rhizome diameter and (5) rhizome color in freezing weather.

The claim was also rejected under 35 U.S.C. § 102(a) for the reason that it was:

* * * drawn to a variety of bermu-dagrass which is patentably indistinguishable from common bermuda-grass. In the absence of a complete botanical description of the instant variety, and detailed comparisons with common as well as known varieties, it cannot possibly be determined that patentable novelty exists.

The board in affirming the rejection under § 102(a) gave, in substance, the same reason as the examiner. In support of its conclusion that the rejection under § 112 should also be affirmed the board cited the following excerpt from the legislative history of the Plant Patent Act of 1930:

Modern methods of identification, together with such amplification thereof as may reasonably be expected, will render it possible and practicable to describe clearly and precisely the characteristics of a particular variety. When this can not be done by an applicant for a patent, the variety is not clearly distinguishable as a distinct variety, and no patent would issue.

Prom it the board reasoned as follows:

Accordingly, we believe it to be clear that the instant failure to adequately differentiate the claimed grass from other known varieties of Bermuda grass must result in the denial of a patent. We will sustain the rejection.

Opinion

Appellant has attacked the soundness of the board’s decision principally on the ground that § 162 relieves the applicant for a plant patent of the strict requirements of § 112. Pertinent to this argument, § 162 reads, in part, as follows:

No plant patent shall be declared invalid for noncompliance with section 112 of this title if the description is as complete as is reasonably possible.

In view of the statute, we must agree with appellant that a disclosure containing a description not fully in compliance with § 112 might still be adequate under § 162. In this regard this court, recognizing present technological limitations, has concluded that there is no requirement for a how-to-make disclosure in a plant patent application. See In re Le-Grice, 301 F.2d 929 at 944, 49 CCPA 1124 at 1145, 133 USPQ 365 at 378 (1962).

Nevertheless, we do not agree that it was contemplated by Congress that its incorporation into R.S. 4888 of the matter which is the statutory predecessor to § 162 would operate to allow an applicant to allege characteristics which might be capable of distinguishing one variety of plant from another without sufficient disclosure to establish that these characteristics are indeed present in the claimed plant and absent in the varieties to which it is most closely related. In fact, the portion of the legislative history relied upon by the board makes it clear that the applicant bears the burden of clearly and precisely describing those characteristics which define the new variety.

In the instant case we do not doubt that Bermuda grass having different reproductive properties, disease resistance, etc., when compared to the same properties of known varieties, would be a distinct variety of Bermuda grass. However, if, as is true in this case, the characteristics chosen to define the new plant are meaningless unless compared with predecessor plant varieties, it is incumbent upon the applicant to provide information of such a character that a meaningful comparison can be made. It is our view that the Patent Office in this case was justified in its conclusion that the criteria used to support the claim did not allow for such a meaningful comparison.

In view of our determination that appellant’s claim was properly rejected under § 112, we do not reach the merits of the board’s decision relative to the rejection under § 102. For the foregoing reasons the decision of the board is affirmed

Affirmed.

      . Serial No. 731,663 filed May 23, 1068.

      . Webster’s Third New International Dictionary, 1971 edition, provides the following definitions : stolen — a horizontal branch from the base of a plant that is either above or below ground and produces new plants from buds at its tip or nodes (as in the strawberry) ; rhizome — a more or less elongate stem or branch of a plant that is often thickened or tuber shaped as a result of deposits of reserve food material, is usu. horizontal and underground, produces shoots above and roots below, and is distinguished from a true root in possessing buds, nodes and usu. scalelike leaves — called also rootstalh.

      . Another variety of Bermuda grass.

      . Senate Committee Report, Plant Patents, April 2,1930, 71st Congress, 2d Session.