author: BAZELON, Chief Judge:

text:
    AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., et al. AIR LINE DISPATCHERS’ ASSOCIATION et al., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., et al.
    Nos. 73-1214, 73-1229.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Feb. 27, 1974.
    Decided Aug. 8, 1974.

      Robert S. Savelson, New York City, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, with whom Donald J. Capuáno, Washington, D. C., was on the brief, for petitioner in No. 73-1214. Patrick C. O’Donoghue and Martin F. O’Donoghue, Jr., Washington, D. C., also entered appearances for petitioner in No. 73-1214.
    . William G. Mahoney, Washington, D. C., for petitioners in No. 73-1229.
    Martin C. Seham, New York City, of the bar of the Supreme Court of the United States, pro hac vice, by special leave of court for intervenor, Allied Pilots Association and Aircraft Mechanics Benevolent Association. Richard Hibey and James P. Davenport, Washington, D. C., entered appearances for interve-nors Allied Pilots Assn, and Aircraft Mechanics Benevolent Assn.
    Glen M. Bendixsen, Atty., C. A. B., for respondent. Richard Littell, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, Robert L. Toomey, Acting Associate Gen. Counsel, Litigation and Research, C. A. B., and Robert B. Nicholson, Atty., Dept, of Justice, were on the brief for respondent. R. Tenny Johnson, Gen. Counsel, and Warren L. Sharfman, Associate Gen. Counsel, C. A. B., at the time the record was filed, also entered appearances for respondent. Howard E. Shapiro, Atty., Dept, of Justice, also entered an appearance for respondent.
    Charles A. Miller, Washington, D. C., with whom Robert N. Sayler and Eugene D. Gulland, Washington, D. C., were on the brief, for intervenors trunk-line carriers.
    Raymond J. Rasenberger and James L. Devall, Washington, D. C., were on the brief for intervenors, Frontier Airlines, Inc., et al.
    Before BAZELON, Chief Judge, MacKINNON, Circuit Judge, and CHRISTENSEN United States Senior District Judge for the District of Utah.

       Sitting by designation pursuant to 28 U.S.O. § 294(d).

   BAZELON, Chief Judge:

Petitioners, who are various groups of airline employees, challenge the CAB’s approval of the airlines’ Mutual Aid Pact, as amended. They contend that the Pact, as approved violates the national labor policy, the Railway Labor Act (RLA) and the antitrust laws; and that there is no substantial evidence to support the CAB’s finding that the Pact is not adverse to the public interest.

I.

Created in 1958 by six airlines, the Mutual Aid Pact represented a joint effort to soften the impact of strikes against individual companies. At its inception, the Pact provided only for “windfall payments.” A strikebound company received payments from other Pact members equal to their increase in revenues resulting from the strike minus their added operating expenses in servicing the new business. The Pact was soon amended to provide for “supplemental payments.” This feature enabled a carrier member to receive 25% of its normal air transport operating expenses for operations shut down by the strike. A 1969 amendment to the Pact raised that figure to 50% during the first fourteen days of the strike, dropping by stages to 35% after a strike period of four weeks or longer. The additional payments over windfall to meet this allotment were to be contributed by each member in the proportion which its air transport operating revenues bore to the total revenue for all members. Individual carrier liability for supplemental payments was limited at first to one-half of one percent of the carrier’s intake for the prior year. That limitation was upped in 1969 to one percent by agreement of the Pact members.

Both the increase in supplemental payments rates and the higher ceiling on individual carrier liability were approved in the Board’s 1973 order, which followed an initial decision by the Administrative Law Judge refusing to allow the escalations. These elements of the amended Pact are the primary focus of the unions’ attack on the Board’s action. Petitioners also contest the CAB’s consent to a 1971 amendment to the Pact authorizing the participation of local service carriers.

II.

The Supreme Court has recognized the responsibility of transportation agencies like the CAB to make decisions consistent 'with national labor policy. Burlington Truck Lines v. United States, 371 U.S. 156, 173, 83 S.Ct. 239, 9 L.Ed.2d 207. This responsibility was explicitly recognized in the Board’s opinion and is not a matter of dispute on appeal. What is in dispute is the substance of national labor policy relevant to this case. ^

The national labor policy rests on the principle that parties should be free to marshall the economic resources at their disposal in the resolution of a labor dispute, consistent with the specific rights and prohibitions established by the labor statutes. It is not generally given to government agencies to “regulate what economic weapons- a party might summon to its aid.” And this principle, of course, underlies the RLA, which is made applicable to air carriers by 45 U.S.C. § 181 and by section 401 (k).(4) of the Federal Aviation Act, 49 U.S.C. § 1371(k) (4). That Act does establish certain procedures that must be followed in the direct bargaining process, but once these procedures are exhausted without a settlement, either side is free to resort to economic self-help in an attempt to force a settlement most favorable to it.

This is not to suggest that warfare between unions and the airlines may rage uninhibited under the RLA. Like other substantive labor legislation, the RLA imposes a duty on both employers and employees to bargain in good faith, and it recognizes the right of employees to organize without employer interference. But in this case the CAB specifically noted that “the record is replete with evidence of the earnest and consistent good faith efforts of [the Mutual Aid Pact Members] to find a resolution to their strikes throughout the course of difficult labor negotiations.” The Board also points to evidence refuting any notion that the Pact functions as an employer device to control the formation of bargaining units.

The permissibility of the Mutual Aid Pact under the RLA is supported by Kennedy v. Long Island R.R., 319 F.2d 366 (2d Cir.), cert. denied, 375 U.S. 830, 84 S.Ct. 75, 11 L.Ed.2d 61 (1963). The case involved a union attack on a strike insurance plan in the railroad industry, a device whose similarity to the Mutual Aid Pact in the airlines industry was specifically noted in the Second Circuit’s opinion. In upholding the plan, the court began with the principle set out above and found further support for its result in section 20 of the Clayton Act and section 4 of the Norris-La Guardia Act, which sanction the payment of benefits to parties engaged in a labor dispute. Petitioners’ efforts to undermine the rationale of the Kennedy decision are unconvincing. We find the Board’s approval of the Pact, as amended, fully consistent with the national labor policy and the RLA.

III.

There is no indication either in the initial opinion of the Administrative Law Judge or in the CAB’s opinion that the unions presented their antitrust objections to the Pact in the proceedings before the agency. As a technical matter, therefore, we are precluded from considering the antitrust attack absent any reasonable grounds for failure to pursue that attack before. the CAB. As a practical matter, we cannot exercise an appellate function in the review of administrative matters unless the problems have been fully aired and focused in the proceedings below. The Federal Aviation Act (FAA) specifically exempts agreements approved by the CAB from the operation of the antitrust laws. The initial forum in which to raise antitrust objections remains the agency which is charged with the primary determination of the public interest.

No objection to an order of the Board . . . shall be considered by the court unless such objection shall have been urged before the Board ... or, if it was not so urged, unless there were reasonable grounds for failure to do so.

IV.

In passing on agreements among air carriers under 49 U.S.C. § 1382, the CAB is required to disapprove any agreements which it finds to be “adverse to the public interest.” The courts may not overturn the CAB’s findings of fact unless they are unsupported by substantial evidence on the record. Nor may they" upset the final judgments of the CAB unless they fall outside a zone of reasonableness. It is urged, however, that because the CAB lacks expertise in labor matters, its decisions impinging on the activities of unions in the airlines industry are to be accorded less weight than these standards imply, although petitioners fail even to articulate an alternative standard.

The CAB is not a labor board, of course, as it is first to concede. Yet we have already concluded that its decision in this case is consistent with national labor policy, such as it may be discerned. Beyond that, a proper evaluation of the Pact’s effect on the unions and their members necessarily involves a firm grasp of industry practices under the agreement, and the CAB’s grasp has reason to be firm. Against a background knowledge of the industry’s economic structure, the CAB has monitored the Pact since its inception sixteen years ago and has the benefit of three full evidentiary hearings conducted on the Pact in 1962, 1966 and 1970.

Despite the CAB’s experience with the Pact, we would not affirm, of course, if issues of employee welfare had been ignored or slighted. This court has previously pointed out “the Board’s duty to consider the welfare of carrier employees under the public interest standard when it approves agreements under Section 412.” But in a finding that the unions do not dispute, the Board in this case declared

that the employees retain substantial and effective bargaining power regardless of the Mutual Aid Agreement. Thus, the record shows that air carrier wages . . . are higher than, and . . . have increased faster than, wages in other industries, including other transportation industries.

We do not think the Board need have gone further in this respect.

In assessing the net impact of the Pact and its new amendments, the CAB also took into account, inter alia: the industry’s vulnerability to strikes; the tendency of the Pact, as amended, to promote or prolong strikes; and the impact which the agreement has on the viability of marginal companies. Since the basis of the CAB’s findings on each of these points is vigorously attacked by the unions, we will review in some detail the evidence on which the Board bases its findings.

The Board found that the air transport industry “suffers a greater impact by strike than do other industries, and is therefore more vulnerable to strike[s] than are .other industries.” The unions claim that this finding is based on a misreading of the testimony of Dr. Herbert R. Northrup of the Wharton School of the University of Pennsylvania. On our reading of the statement, Dr. Northrup seems quite explicit that airlines — like other service industries in which the ability to stockpile is limited — are particularly vulnerable to strikes and furthermore that they are more vulnerable to strikes than other transportation industries with a higher percentage of freight traffic, which can be stored pending settlement. In defending the peculiar suitability of the Mutual Aid Pact for the airlines industry, the Board did not purport to find that air carriers were more sensitive to work stoppages than all other transport industries; nor was such a finding necessary.

The two remaining findings of the Board which come under special fire are: (1) that the Pact, as amended, is not likely to have a serious impact on the willingness of companies to sustain or prolong strikes; (2) that the payments required by the Act do not and are not likely to affect the viability of small or economically marginal airlines. These findings are defensive in nature. They are central to the Board’s answer to allegations that the Pact poses risks to the stability and smooth operation of the airlines system which outweigh the benefits on which we have touched. If either finding were unsupported, we would have difficulty in countenancing the Board’s decision. But we do not so conclude.

Although the CAB followed the Administrative Law Judge’s view that “the record does not establish that any carrier has incurred or prolonged a strike because of the increased level of mutual aid,” it differed from his assessment of a substantial danger that the amended Pact would result in significantly longer and more frequent work stoppages. In concluding that this risk was not substantial, the Board noted the relative infrequency with which negotiations in the airlines industry have erupted into strikes in recent years. The statistics cited cover the period from 1968-1971, during at least part of which the new amendments were actually in effect.

The CAB’s finding on the prolongation issue is further supported by the Board’s determination that significant financial pressures to settle remain on the airlines despite their participation in the Pact. The unions point out that in 1970 some airlines actually experienced operating profits during periods of strike when supplemental payments under the Pact were taken into account. But the Board reasonably believed that in assessing the dynamics of the companies' position during strikes, operating profits should be compared to “normal profits” for a similar period — profits which the company would have enjoyed if it had not sustained a strike. Similarly, it included in its model “post-strike losses.” These take in the cost of resuming operations, losses attributable to the absence of advance bookings and “the long-term loss of traffic attributable to the loss of carrier identity in the market . . . . ”

Clearly “normal profits” and “post.-strike losses” are based to some degree, as petitioners assert, on “speculation and hypothecation,” but the absence of certainty does not preclude the Board from making a considered judgment on the best information available. One could wish that the Board had addressed itself to the methodological problems inherent in estimating these loss factors: it simply stated that it considered the companies’ figures to have been “reasonably estimated” and adopted them as its own. Yet the unions do not point to evidence that the companies reached their estimates by misguided or meritricious methods. And the CAB did seek to control the risk of error by limiting its approval of the agreement to a period of five years. Thus, if the CAB’s “hypothecations” prove wrong, they may be corrected.

The Board also found that the Pact offers no significant threat to the financial stability of its members. Although the Administrative Law Judge reached a different assessment of the risk involved, he believed the record did not “demonstrate that the viability of any carrier has been critically threatened because of the higher level of contributions required under the amended agreement.” The CAB reinforced its own evaluation by reference to the amounts paid out by various airlines as compared with strike losses incurred. These statistics cover the period from January 1970 to June 30, 1971, when the new higher ceilings were in effect. The Board concluded, not unreasonably, that the payments are not out of proportion to the gains from the protection offered. The balance of costs and benefits in favor of allowing the agreement was found to be particularly true for financially weak carriers, which stand to lose most from strikes or threats of strike. This line of justification also supports the Board’s approval of the 1971 amendment allowing local service carriers to join the Pact, for these carriers, as a group, are likely to be less stable, and therefore more vulnerable to strikes than trunk-line carriers.

Of course, the ceiling imposed by the Pact provides some safeguard against oppressive payments. And although liability for windfall payments may bring a carrier’s total obligation to more than one percent of its operating revenues, the Board argues correctly that the windfall payments represent no added burden to the company which must pay them, because they represent only profits which the company could not have expected to enjoy absent the strike suffered by its competitor.

We conclude that the findings on which the Board rests its decision are adequately supported and that the result reached is a reasonable one.

V.

We have carefully considered the unions’ remaining contentions. We believe that only one warrants discussion. The unions say the CAB erred in failing to adopt a condition that would have precluded consideration of amounts paid out under the Pact as expenses for the purpose of establishing rates. As the CAB recognized, the petitioners are seeking to pursue this issue in the wrong procedural context. The authority of the Board to review and prescribe air carrier rates is exercised in distinct proceedings under the FAA. If the unions feel that the rates charged by the airlines are unreasonable because they include allowances for payments under the Pact, they may institute proceedings before the CAB under 49 U.S.C. § 1482(d). Petitioners suggest that their objection would be “buried” in a rate-making proceeding. If this should happen, and if the unions are so advised, they may seek judicial review.

Affirmed.

      . CAB Order 73-2-110, Feb. 27, 1973, Joint App. 268a.

      . Initial Decision of Examiner Arthur S. Present, Joint App. 271a.

      . NLRB v. Insurance Agents’ Int’l Union, 361 U.S. 477, 490, 80 S.Ct. 419, 427, 4 L.Ed.2d 454 (1960).

      . See 45 U.S.C. §§ 154-163, 183-185.

      . See Brotherhood of R.R. Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 378-379, 89 S.Ct. 1109, 22 L.Ed.2d 344.

      . 45 U.S.C. § 152 First.

      . Id. § 152 Fourth.

      . Opinion of the CAB, Feb. 27, 1973, Joint App. 240a-41a.
      One instance of an alleged RLA violation by an airline is noted, but it was not shown to have any connection to carrier membership in the Pact. Id., Joint App. 241a.

      . See id., Joint App. 240a n. 14.

      . 29 U.S.C. §52.

      . 29 U.S.C. § 104.

      . Petitioners’ argument is based in part on a later holding of the Second Circuit, NLRB v. A. & P. Stores Inc., 340 F.2d 690, that a lockout by employers who were not in the same bargaining unit as the company being struck was violative of the National Labor Relations Act. Petitioners urge that this case implies that multiemployer aid is impermissible except in the context of multiem-ployer bargaining units, which presently do not exist in the airlines industry. A. & P. is easily distinguished from Kennedy in that the court’s result in A. & P. turned on a finding that the lockout violated section 8(a)(1) of the NLRA as a device to force the unions to accept multiemployer bargaining units. As we have noted, text accompanying note 9 supra, the Pact does not appear to have such coercive tendencies.
      The unions also resort to Brotherhood of Railway & Steamship Clerks v. Florida East Coast R. Y., 384 Ü.S. 238, 86 S.Ct. 1420, 16 L.Ed.2d 501 (1966), which held that during a strike period a railroad could make some alterations in its contracts with the unions without submitting these alterations to the lengthy negotiations procedures required by the Act. The unions attempt to read into this case a principle limiting the use of employer self-help whose effect is to prolong strikes. In fact, the decision vindicates the right of self-help in the face of the technical requirements of the Act by allowing the employer to make adjustments necessary for continued operations during the strike subject only to approval by the district court.

      . 49 U.S.C. § 1486(e) provides :

      . 49 U.S.C. § 1384.

      . In prior rulings, the CAB has dealt with antitrust objections to the Pact. See, e. g., Opinion of the CAB, July 10, 1964, Joint App. 44a, 66a-67a. It concluded that the Pact “has not operated in restraint of trade or lessened competition between air carriers . ” However, we do not consider these i)rior rulings, or the findings which they contain, to be proper subjects of review at this juncture. See 49 U.S.C. § 1486(a) (precluding appeals from orders of the CAB after 60 days of decision except by leave of court on a showing of reasonable grounds for failure to file in timely fashion).

      . 49 U.S.C. § 1486(e) : “The findings of fact by the Board . . ., if supported by substantial evidence, shall be conclusive.”

      . See, e. g., American Airlines, Inc. v. CAB, 98 U.S.App.D.C. 348, 354, 235 F.2d 845, 851 (1956).

      . Brief for Petitioner Air Line Pilots Ass’n, Int’l at 8-9.

      . Brief for Respondent CAB at 16.

      . Cf. National Aviation Trades Ass’n v. CAB, 136 U.S.App.D.C. 367, 372, 420 F.2d 209, 214 (1969) (endorsing CAB’s competence to make findings relevant to antitrust factors despite its lack of expertise as such in the antitrust field).

      . Air Line Pilots Ass’n, Int’l v. CAB, 154 U.S.App.D.C. 316, 321, 475 F.2d 900, 905 (1973).

      . Opinion of the OAB, Feb. 27, 1973, Joint App. 234a-35a.

      . • Trunkline Carrier Exhibit No. 80.

      . Id. 11-12.

      . Initial Decision of Examiner Arthur S. Present, Joint App. 301a.

      . Ironically, the unions cite the same statistics in their attempts to refute the CAB’s findings on the strike vulnerability issue. Brief of Petitioner Air Line Dispatchers’ Ass’n at 40. This would seem to ignore that the Pact was in effect during the entire period covered by the figures.

      . Opinion of the CAB, Peb. 27, 1973, Joint App. 236a.

      . Brief of Petitioner Air Line Dispatchers’ Ass’n at 30.

      . These methodological problems do receive extensive treatment by company experts on the record. See Trunkline Carrier Exhibit Nos. 50-52. Presumably these discussions provided the basis of the CAB’s acceptance of the estimates.

      . Initial Decision of Examiner Arthur S. Present, Joint App. 301a.

      . Opinion of the CAB, Feb. 27, 1973, Joint App. 243a-44a.

      . Id., Joint App. 245a.

      . These include a claim of bias on the part of CAB, which we deem without substantial foundation.

      . The OAB refused to take evidence on this point. Brief of Petitioner Air Line Pilots Ass’n, Int’l at 72.

      . 49 U.S.C. § 1482(d).

      . See Brief of Petitioner Air Line Pilots Ass’n, Int’l at 73.

      . See 49 U.S.C. § 1486(a).


source: Caselaw Access Project

author: ROBB, Circuit Judge:

license: Public Domain

text:
    John E. MOSS et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Mobil Oil Corporation et al., Intervenors. AMERICAN PUBLIC GAS ASSOCIATION et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Mobil Oil Corporation and Associated Gas Distributors, City of Chicago, Intervenors. AMOCO PRODUCTION COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Continental Oil Company and Mobil Oil Corporation, Intervenors.
    Nos. 72-1837, 72-1846, 72-1892.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Sept. 25, 1973.
    Decided Aug. 15, 1974.
    Rehearing Denied Sept. 19, 1974.

      Morton L. Simons, Washington, D. C., with whom Barbara M. Simons, Washington, D. C., was on the brief for petitioners in Nos. 72-1837 and 72-1846.
    William H. Emerson, Tulsa, Okl., for petitioner in No. 72-1892.
    George W. McHenry, Jr., Acting Sol., Federal Power Commission, with whom Leo E. Forquer, Gen. Counsel, Michael J. Manning and Joan E. Heimbigner, Attys., Federal Power Commission, were on the brief for respondent.
    Charles F. Wheatley, Jr., William T. Miller and Edward Berlin, Washingtqn, D. C., were on the brief for petitioners in No. 72-1846.
    Tom P. Hamill, Houston, Tex., Carroll L. Gilliam and Philip R. Ehrenkranz, Washington, D. C., were on the brief for intervenor, Mobil Oil Corp.
    Peter H. Schuck and Marsha N. Cohen, Washington, D. C., were on the brief for intervenor, Consumers Union of United States, Inc.
    Hamilton Treadway filed a brief as amicus curiae urging reversal.
    Tom Burton, Houston, Tex., entered an appearance for intervenor, Continental Oil Co.
    John E. Holtzinger, Jr., Washington, D. C., entered an appearance for interve-nor, Associated Gas Distributors.
    Richard A. Solomon, Washington, D. C., entered an appearance for interve-nor, Public Service Commission, for the State of New York.
    Before TAMM, MacKINNON and ROBB, Circuit Judges.
   ROBB, Circuit Judge:

The petitioners challenge a rule issued by the Federal Power Commission by Orders Nos. 455 and 455-A, pursuant to a rulemaking procedure in Commission Docket No. R-441.

I.

The notice of proposed rulemaking in Docket No. R-441 proposed to amend the Commission’s General Rules of Practice and Procedure by inserting a new “Section 2.75 Optional Procedure for Certificating New Producer Sales of Natural Gas”. In the notice the Commission disclaimed any intention to supersede existing area rate procedures or decisions. The notice referred to the gap between the supply of natural gas and the demand, and the damaging impact of this shortage on the environment, economic growth, and costs to consumers. The proposed amendments to the Commission’s rules were then set forth in full.

The proposed new Section 2.75 provided that “applications for certification of future sales of natural gas produced within the United States may, at the option of the signatory parties to sales contracts, be submitted in accordance with the provision [sic] of this Section.” The proposal set up a procedure whereby the Commission would certificate new sales of natural gas under contracts executed on or after April 6, 1972. Under this procedure applications for certification of such new sales might be tendered by parties to a contract, and would “be considered for permanent certification, either with or without pregranted abandonment, notwithstanding that the contract rate [might] be in excess of an area ceiling rate established in a prior opinion or order of this Commission.” The rates thus established would not be subject to change in later proceedings, and the certification would “constitute a final determination, under Section 7 of .the Natural Gas Act, that the rates and services therein specified are required by the present and future public conven-ienee and necessity”. Deliveries could commence pending review of an application by the Commission and if the Commission had not entered its final order in six months the seller could charge the contract price.

The Commission called for written comments from any interested persons, and ninety-three written submittals were received. These included comments from independent producers, interstate pipeline companies, distribution companies, state regulatory agencies, other federal agencies, United States Senators and Congressmen, and trade and consumer organizations. Our petitioners were among those who submitted comments, objecting on grounds now asserted before us.

On August 3, 1972 the Commission issued Order No. 455, entitled “Statement of Policy Relating to Optional Procedure for Certificating New Producer Sales of Natural Gas”. In its Statement the Commission reviewed “data available to the Commission [that] indicates a worsening of the gap between natural gas demand and supply.” “The assurance of adequate supplies of natural gas”, said the Commission, “can mitigate the damage being done to the nation’s environment”, and “further aggravation of the gas supply problem also portends grave implications for the nation’s economic objectives.” In light of these considerations the Commission concluded that:

Our responsibility to the consumers of natural gas, to assure reliable and adequate supplies at the lowest reasonable cost, impels us to that course of action best calculated to spur domestic exploration and development. To this end, we seek to provide two incentives to domestic production, both fully congruous with consumer protection. First, we will certificate sales of gas not previously deliverable to the interstate market at prices which are shown to be in the public interest. Second, to the extent possible, we will lessen rate uncertainty which has prevailed since the early 1960’s.

The Commission emphasized that its policy statement and the optional procedures established were “directed at supplies of gas not available to the interstate market prior to April 6, 1972”: that “consumers will not pay higher rates except for new supplies, and then only to that extent that the contracting parties establish on the record that the price to be paid is required by the public interest.” The Commission said that domestic gas exploration and development were impeded by rate uncertainty, since “there is no assurance at the present time that a producer may not ultimately have to refund some of an initial rate based on a just and reasonable determination and upon which the producer relied when it dedicated a new gas supply to the interstate market.” Recognizing “the supremacy of Section 5” of the Natural Gas Act, “that Section 5 . prevents the Commission from granting sanctity of contract” and that it could not “bind a future Commission not to invoke the prospective operation of Section 5” the Commission announced its “policy to examine the justness and reasonableness of proposed rates in Section 7 proceedings instituted under this Section, thus avoiding the uncertainty of reserving rate determinations for subsequent Section 4 or Section 5 action.” With this preface the Commission promulgated the new Section 2.75 of its Rules of Practice and Procedure, General Policy and Interpretations. We reproduce the Rule in full in the appendix, and we shall examine in particular the provisions on which the petitioners center their attack.

On applications for rehearing and a motion for stay of its Order No. 455 the Commission on September 8, 1972 issued Order No. 455-A entitled “Order Clarifying Order, and Denying Applications for Rehearing and Stay”.

In this court the petitioners, except for the petitioner Amoco Production Company, contend that the optional procedure of Section 2.75 is a method of deregulating natural gas by certifying contract rates, without regard to the standards of Sections 4 and 5 of the Act. They attack the findings of the Commission that the shortage of natural gas requires the new program and justifies its estimated costs; and they argue that they were entitled to an evidentiary hearing on this matter. They challenge the provision of the new rule that the Commission may review and by one decision at the outset approve both an initial price and fixed rate escalations provided in the sales contract for future periods. They also challenge as “contrary to the consumer-protection objectives of the Natural Gas Act” the provision of the new rule that if the Commission has not acted on an application within six months a producer may collect contract rates without liability to refund. Finally, they contend that the Natural Gas Act prohibits pregranted abandonment, which the new rule would authorize.

Amoco Production Corporation (Amoco) argues that the Commission by its Orders Nos. 455 and 455-A has established rates without an adequate record or an opportunity for hearing. In addition, Amoco challenges the requirements that producers waive contingent escalations and that indefinite pricing clauses be excluded from their contracts.

The intervenor Mobil Oil Corporation supports the Commission’s orders and urges that the petitions for review be denied.

II.

The Commission’s order is premised on its finding of a shortage of available domestic gas reserves. Although the petitioners question this premise we cannot reject the Commission’s finding. The existence of a shortage of natural gas has been recognized by the Supreme Court and by this court. See F. P. C. v. Louisiana Power & Light Co., 406 U.S. 621, 626, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972); City of Chicago v. F. P. C., 147 U.S.App.D.C. 312, 458 F.2d 731 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972); Public Service Commission of N. Y. v. F. P. C., 151 U.S.App.D.C. 307, 467 F.2d 361 (1972). As the Commission said in Order No. 455-A the petitioners’ argument ignores “the curtailments of firm gas customers by seven major interstate pipelines during the 1971-1972 heating season. Twenty-eight pipelines have now filed curtailment plans. Firm requirement deficiencies during the 1972-1973 heating season are expected to be even more severe. In other words, new customers are being denied gas service and the service to existing customers is being reduced. The salient fact is that there is a shortage in deliverable gas reserves contrary to the national interest.” [Footnote omitted.]

Since this was a rulemaking proceeding in which all interested persons were afforded an opportunity to make their views known by written comments, in accordance with Section 4 of the Administrative Procedure Act, 5 U.S.C. § 553, a formal evidentiary hearing was not necessary. United States v. Florida East Coast Rwy. Co., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973); City of Chicago v. F. P. C., 147 U.S.App.D.C. 312, 458 F.2d 731 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972); American Public Gas Association v. F. P. C., 162 U.S.App.D.C.-, 498 F.2d 718 (1974). The Commission was entitled to act, as it did, on the data available to it and from other proceedings before the Commission, and the information furnished in the comments submitted.

III.

The petitioners contend that the Commission by its new rule has attempted to substitute contract prices negotiated between producers and pipelines for established just and reasonable rates —in other words, the petitioners say that contract rates will be automatically approved. If this were the meaning and effect of the Commission’s Order it would of course be invalid, for “just and reasonable” rates may not be determined solely and conclusively upon the basis of market or contract prices. F. P. C. v. Texaco, Inc., 417 U.S. 380, 94 S.Ct. 2315, 41 L.Ed.2d 141 (1974); F. P. C. v. Sunray DX Oil Co., 391 U.S. 9, 25, 88 S.Ct. 1526, 20 L.Ed.2d 388 (1968). Equally true however is that the contract or market price of gas may be taken into account, along with other non-cost factors, in the setting of just and reasonable rates. Thus under both Section 4 and Section 7 of the Act the Commission properly proposed to consider economic and market conditions, the adequacy of allowances for exploration and development, and the inadequacy of the supply of natural gas. F. P. C. v. Texaco, Inc., supra; Permian Basin Area Rate Cases, 390 U.S. 747, 793-795, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968); Atlantic Refining Co. v. Public Service Commission, 360 U.S. 378, 391, 79 S.Ct. 1246, 3 L.Ed.2d 1312 (1959); Southern La. Area Rate Cases (Austral Oil Co. v. F. P. C.), 428 F.2d 407, 441 (5th Cir.), cert. denied, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257 (1970).

A respectable argument can be made that Section 2.75 on its face fails to disclose with sufficient clarity the purpose and determination of the Commission, in issuing certificates thereunder, to consider all factors — including producers’ costs — relevant to the fixing of just and reasonable rates. The Rule itself is ambiguous. It fails to specify the factors the Commission will consider in deciding whether contract rates are just and reasonable, and it is open to the construction that contract rates will be certified automatically as just and reasonable. Cf., F. P. C. v. Texaco, Inc., supra. We think however that the rule must be interpreted in the context of the gloss placed upon it by the Commission in Orders Nos. 455 and 455-A, and when it is so interpreted we are convinced that it can be sustained.

As we have said the Commission in Order No. 455 announced its “policy to examine the justness and reasonableness of proposed rates in Section 7 proceedings instituted under this Section, thus avoiding the uncertainty of reserving rate determinations for subsequent Section 4 or Section 5 action.” In its examination of proposed rates, said the Commission, “each contract filed under the alternative procedure must be considered on the merits of the terms and provisions within each contract. There certainly must be some evidentiary basis proffered by the seller-applicant upon which we can judge whether the contract rate is just and reasonable. We will, absent a showing of special circumstance, accept as conclusive the cost findings embodied in our area rate decisions, as such may be supplemented from time to time by appropriate Commission order.” Thus, the Commission’s review will include consideration of costs; and since all applications are subject to notice, intervention and hearings, all parties are free, upon a “showing of special circumstances” to challenge the cost findings embodied in area rate decisions.

In Order No. 455-A, clarifying Order No. 455, the Commission pointed out that no rates were prescribed by Order No. 455 and asserted that “individual hearings will be held on each certificate application so filed at which time any interested party, including petitioners, may intervene and present evidence.” Responding to the charge that by issuing Order No. 455 “we have deregulated natural gas producers” the Commission said:

Contrary to the “Concerned Congressmen’s” contention, this procedure is not without standards. Certification will be subject to the standards of “just and reasonable” in Section 4 and “present and future public convenience and necessity” of Section 7. We will apply those standards of the Natural Gas Act as interpreted by the courts. In other words, only after a hearing, and Commission findings, subject to Section [sic] 4 and 7, will such a certificate be granted. This is not decontrol. ******
Section 2.75 1 specifically states that the rates, charges and services to be certificated under the optional procedure shall be just and reasonable and required by the present and future public convenience and necessity. In other words, such certification shall conform to the standards of Sections 4 and 7 of the Natural Gas Act.

We agree with the Commission that when considered and construed in the light of these positive statements the Commission’s Rule does not abandon the standards of Section 4 of the Act, and we have previously noted the Commission’s recognition that Section 5(a) of the Act will remain applicable to all rates. Atlantic Refining Co. v. Public Service Commission, (CATCO), 360 U.S. 378, 391, 79 S.Ct. 1246, 3 L.Ed.2d 1312 (1959); Permian Basin Area Rate Cases, supra; Austral Oil Co. v. F. P. C., supra. What the Commission proposes is to combine proceedings under Sections 4 and 7. In the single combined proceeding, says the Commission, the substantive standards of both Sections 4 and 7, as established by the courts, will be applied to the evidence produced by the applicant. If in weighing the evidence the Commission violates those substantive standards, the aggrieved party will have a remedy in the courts. On the present record, however, we must assume that the Commission will abide by the standards of the statute and the promises it has made. We cannot condemn the Commission on the theory that it may not do what it has promised to do.

IV.

Section 2.75 provides that the Commission may review and by one decision at the outset approve both an initial price and fixed rate escalations provided in the sales contract for future periods. The petitioners contend that review of fixed price escalations during the certificate proceedings, in advance of their effective date, violates Sections 4(d) and 4(e) of the Act, 15 U.S.C. §§ 717c(d) and 717c(e) which provide in pertinent part:

Unless the Commission otherwise orders, no change shall be made by any natural-gas company in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, except after thirty days’ notice to the Commission and to the public. ******
Whenever any such new schedule is filed the Commission shall have authority, ... to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, . . . may suspend the operation of such schedule and defer the use of such rate, charge, classification, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect. ...

In Order No. 455-A the Commission commented on its provision for advance approval of contract rate escalations.

We have also been asked to clarify whether or not contract escalations approved by the Commission in a Section 2.75 proceeding would be self-operative or whether such would necessarily be subject to rate change filings under Section 4(e) of the Natural Gas Act. We believe that this inquiry is answered by Episcopal Theological Seminary of the Southwest v. F. P. C. [106 U.S.App.D.C. 37], 269 F.2d 228 (CADC), cert. denied sub nom., Pan American Petroleum Corp. v. F. P. C., 361 U.S. 895 [80 S.Ct. 197, 4 L.Ed.2d 151] (1959), wherein it was held that no rate change could become effective without a 4(e) filing. This is not to say, however, that the Commission recedes from the basic position expressed in Order No. 455 that it intends to grant sanctity of contract to the full extent that the Commission can, absent amendment of the Natural Gas Act by Congress. It is our intention to consider applications under Section 2.75 and make a one time determination of the public convenience and necessity aspects of the certificate application and the justness and reasonableness of the rates therein proposed, both as to initial rates and as to definite escalations which might be embodied in the contract. For future definite escalations to become effective without a 4(e) filing will require amendment of the Natural Gas Act, through legislation such as that now pending before Congress. [Emphasis in original.]

Thus, the seller-applicant will be required to make a change in rate filing with the Commission at the time any escalation is scheduled to take effect. The Commission and the public will be placed on notice that the escalation is about to become effective, and the provisions of Section 4(e) will come into play. The Commission may also invoke Section 5 to investigate any rates, charges, or terms of service contained in the contract; and any rates which appear to be unreasonable may be reduced in proceedings under Section 5(a).

According to the petitioners it is impossible for the Commission, in advance, to determine the “reasonableness” of future rate escalations in Section 4 proceedings.

In area rate proceedings the Commission may impose a moratorium or ceiling, setting a just and reasonable rate that will obtain for a number of years. Permian Basin Area Rate Cases, supra; Southern Louisiana Area Rate Cases, supra. Such ceilings are imposed on the basis of projections of future conditions. Here, we have fixed escalations in contract rates, based upon applicants’ projections of conditions over the life of a contract. The Commission will consider the escalations against its own projections and may of course modify the proposed rate increases. Section 2.75 provides a procedure for this consideration under Section 4 of the Act. Any increases initially approved remain subject to review in future proceedings under Section 4(e) and Section 5(a). We conclude that this procedure does not violate the Act.

We cannot say as an abstract proposition of law that it is impossible for the Commission to make an advance determination of “reasonableness” in proceedings under Section 4. Although as a practical matter one may be skeptical about the ability of the Commission to succeed in this endeavor, we think it may make the attempt. Whether it succeeds will depend upon the evidentiary basis for the escalations proposed in a given contract and the reasonableness of Commission findings and projections supporting and approving such escalations. The question is one of proof which can be answered only on a record setting out a particular proposal and the evidence supporting it.

V.

The new Section 2.75 provides in paragraph (o) that upon filing an application for certification a seller may commence deliveries “at rates no higher than the prevailing area ceiling rate”, and may continue such deliveries for six months unless the Commission at an earlier date enters its final order on the application. If the Commission does not issue its final order within six months the seller, upon filing a notice of change in rate, may collect the contract rate, without refund obligation, and may continue to collect the contract rate until the Commission takes final action.

The petitioners contend that (1) the Commission may not permit the contract rates to go into effect before the completion of the certificate proceedings, and (2) any rate above the area rate which is charged before it is determined to be just and reasonable must be subject to refund. We are not persuaded by the petitioners’ contentions.

When Section 2.75(o) is examined in the context of the applicable provisions of the Act and the Commission’s rule-making authority under Section 16 it will be seen that the effect of the Rule is this:

(1) When an applicant files for certification of a sale at a rate above the area rate he will be granted a temporary certificate to sell at the applicable area rate, with the condition under Section 7 (e) that he not file for an increase for six months, if a permanent certificate is not issued within that period;

(2) If a permanent certificate is not issued within six months the producers may file for a rate increase up to the contract rate under Section 4(d); and

(3) Upon such filing the Commission will exercise its discretion under Section 4(e) not to suspend the increase and not to order refunds if the just and reasonable rate is later determined to be lower than the contract rate. We think these procedures are within the Commission’s statutory authority.

Pending the issuance of a permanent certificate the Commission under Section 7(e) of the Act may issue a temporary certificate containing such reasonable terms and conditions as the public convenience and necessity may require. Atlantic Refining Co. v. Public Service Commission (CATCO), supra, 360 U.S. at 391, 79 S.Ct. 1246; F. P. C. v. Hunt, 376 U.S. 515, 520-521, 84 S.Ct. 861, 11 L.Ed.2d 878 (1964). There can be no question therefore that the Commission may issue temporary authorizations to permit deliveries at area rate ceilings pending final action on applications ; and the Commission is not bound to order refunds of rates collected on an interim basis under a temporary authorization issued under Section 7, even if the final order upon a certificate application contains a finding that a lower rate must be collected prospectively. Public Service Commission of N. Y. v. F. P. C., 117 U.S.App.D.C. 287, 329 F.2d 242, cert. denied, 377 U.S. 963, 84 S.Ct. 1644, 12 L.Ed.2d 735 (1964); Continental Oil Co. v. F. P. C., 378 F.2d 510, 532 (5th Cir. 1967).

Section 4(e) provides only that refunds “may” be ordered and the Commission has discretion to find that the objectives of the Act may not require refunds. Hugoton-Anadarko Area Rate Case, 466 F.2d 974, 990-991 (9th Cir. 1972). Moreover, the Commission may order refunds under Section 4(e). only after suspension, Mobile Gas Service Corp. v. F. P. C., 215 F.2d 883 (3rd Cir. 1954), aff’d sub nom., United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956); and refusal to suspend a filed rate is a nonreviewable exercise of the agency’s discretion. Arrow Transportation Co. v. Southern Ry., 372 U.S. 658, 83 S.Ct. 984, 10 L.Ed.2d 52 (1963); Municipal Light Boards of Reading and Wakefield, Mass. v. F. P. C., 146 U.S.App.D.C. 294, 304, 450 F.2d 1341, 1351 (1971), cert. denied, 405 U.S. 989, 92 S.Ct. 1251, 31 L.Ed.2d 445 (1972). Since the Commission in the exercise of its nonreviewable discretion has decided that it will not suspend the applicants’ contract rates we think it must follow that it may lawfully refuse to require refunds.

VI.

Section 2.75 provides that by accepting, a certificate under the optional procedure the seller-applicant unconditionally agrees to waive all rights to contingent adjustment of flowing gas rates as provided by the Commission in area rate decisions (Southern Louisiana II and Texas Gulf Coast) for flowing gas which the seller-applicant produces in the same geographical pricing area as the pricing area of the production covered by the application.

Amoco attacks the waiver requirement upon the grounds that (1) no interrelationship exists between area rate orders and applications for certification under the new procedures and (2) the differences in rate treatment create a discriminatory preference.- Amoco says “The new gas incentive that is the objective of Order No. 455 will be greater in producing regions other than Southern Louisiana and the Texas Gulf Coast that are not affected by this waiver requirement. Pipeline companies and consumers of gas are affected in that some may be forced to pay higher prices for gas certificated under Order No. 455 because such prices must overcome the economic effect of waiver of contingent escalations in area rates covering gas sold to others.” We think these arguments must fail.

The Commission’s explanation satisfies us that the provisions of the challenged paragraph are reasonable. The Commission said:

Our reasons for imposing the conditions [of the paragraph] are two-fold: First contingent escalations are a component of area rates. Flowing and new gas prices were established in Southern Louisiana and Texas Gulf Coast with due regard to the incentives which these escalations provided.
Secondly, but of equal importance, we offer the procedures herein adopted as an optional procedure to function in parallel with area rate regulation. Were we to cast aside the waiver required in [the] paragraph . , consumers would be injured, and producers in Southern Louisiana and in Texas Gulf Coast (the only producers affected by this waiver) would be afforded an unfair position over producers in all other areas. Such unacceptable results would occur because applications under this Section would operate, in the absence of [the] paragraph . . . , not only on new gas sales but would also operate to escalate old gas prices as well.
By retaining [the] paragraph we require, in effect, an election by producers with flowing gas in Southern Louisiana and Texas Gulf Coast; they must choose whether contingent escalations on flowing gas provide a sufficient incentive to seek and sell new gas to the interstate market, at area rates, or whether a greater degree of market freedom in the pricing of new supplies offsets the benefit of contingent escalation of flowing gas prices. Requiring this election protects the consumer, as we must, from escalation of both flowing and new gas rates.
We cannot, in equity, permit a producer with flowing gas in Southern Louisiana or Texas Gulf to achieve higher-than-area rate prices for its own new deliveries and still receive price escalations on its flowing gas through the efforts of other producers who elect to remain on area rate pricing for new dedications.

Thus, the Commission points out that the contingent escalation provisions are integral parts of the area rate orders, offering incentives to encourage producers to explore for and develop additional supplies of gas. If no additional, supplies are developed then the contingent escalations do not become effective. The Commission’s new rule provides different incentives to encourage exploration, development and immediate dedication of gas to the interstate market. The rule does not supersede the area rate orders but gives the producer a choice: he may dedicate his new gas under the procedure that is most beneficial to him. If he elects to file under the new procedure it is reasonable to provide that he may not enjoy the contingent escalations provided in the area rate orders. He may benefit under one procedure but not under both.

VIL

Section 2.75 provides that with certain exceptions contracts including any type of indefinte pricing clause will not be accepted for filing. Explaining this provision the Commission said, in Order No. 455:

We have determined that so-called “area rate clauses” should not be allowed because area ceiling rates might then become a floor for all future contracts to be certificated'under the optional procedure. Further, redetermi-nation and renegotiation clauses will not be permitted because rates under the optional procedure would, perforce, be continually changing. Other types of clauses should be allowed, and, therefore, the following language is adopted.
No contract shall be accepted for filing if it includes any type of indefinite pricing clause except Btu price adjustment clauses, clauses to reflect changes in state production taxes, and clauses allowing for the recovery of compression and dehydration charges. Indefinite pricing clauses shall include, but are not limited to “area rate or FPC clauses”, a “price redetermination or renegotiation clause” or a “special escalation clause.”

Amoco argues that this prohibition is arbitrary and is an invalid repeal of Section 154.93 of the Commission’s Rules and Regulations. Section 154.93, 18 C.F.R., Subchapter E, Part 154, describes the type of price change provisions which may appear in a rate schedule to be certificated by the Commission.

We think the Commission’s prohibition must be sustained.

If the new rule repeals or modifies Section 154.93 this action is a proper exercise of the Commission’s authority to amend its regulations as it deems necessary and appropriate. Nor can we say that the action was arbitrary. The Commission may of course make rules prohibiting certain pricing clauses in contracts to be certificated, Texaco v. F. P. C., 377 U.S. 33, 84 S.Ct. 1105, 12 L.Ed.2d 112 (1964); and the Commission has consistently held that indefinite pricing clauses are contrary to the public interest. See Pure Oil Co., 25 F. P. C. 383 (1961), aff’d Pure Oil Co. v. F. P. C., 299 F.2d 370 (7th Cir. 1962).

Here the Commission is endeavoring to provide the producers with some measure of price certainty and stability. To accomplish that end the Commission offers an optional procedure under which producers may elect not to adhere to area price ceilings. It is reasonable to make the “area rate” clauses unavailable to a producer who by exercising this option elects not to adhere to the area ceilings. As the Commission explained in Order No. 455-A:

. We are particularly urged to permit the inclusion of so-called “FPC clauses” or “area rate clauses” in contracts tendered for certification under Section 2.75.
If we did not intend to afford sanctity of contract to the fullest extent available to this Commission, we would be inclined toward sympathy with the producers’ view. However, we think it inappropriate for us to sanctify a contract in the sense of guaranteeing that the price will not go down but deny the reciprocal sanctity that a certificated contract price will not rise.

VIII.

We come finally to the provision of the new Section 2.75(e) providing:

Applications presented hereunder will be considered for permanent certification, either with or without pre-granted abandonment, notwithstanding that the contract rate may be in excess of an area ceiling rate established in a prior opinion or order of this Commission.

The petitioners contend that this provision violates Section 7(b) of the Act, 15 U.S.C. § 717f(b) which provides:

No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.
We think the petitioners are right.

Pregranted abandonment would leave a producer free to discontinue service to the interstate market, perhaps years after the original certification, with no contemporaneous obligation on the producer to justify withdrawal of service as consistent with the public convenience and necessity. We think Section 7(b) does not contemplate or authorize such procedure.

Attempting to justify its provision for pregranted abandonment the Commission says only, in Order No. 455-A, “Certainly, when an application for pre-granted abandonment is before it for determination as to its certification, the Commission may make the necessary findings required by Section 7(b) of the Act.” We find this conclusory assertion unpersuasive. We have expressed skepticism as to the ability of the Commission to make advance determination of the reasonableness of price escalations, but we have explained that the Commission may be able to do so upon the basis of projections of conditions over the life of a contract, and subject to future proceedings under Sections 4(e) and 5(a) of the Act. It appears to us however that pregranted abandonment requires more clairvoyance than even the Commission’s expertise reasonably encompasses. Furthermore, abandonment will not be subject to future review but will be completely untrammeled.

We are fortified in our conclusion by Sunray Oil Co. v. F. P. C., 364 U.S. 137, 80 S.Ct. 1392, 4 L.Ed.2d 1623 (1960). In that case the Supreme Court rejected the contention that the Commission lacked authority to grant a permanent certificate when one of limited duration had been applied for. The Court said:

If petitioner’s contentions . were to be sustained, the way would be clear for every independent producer of natural gas to seek certification only for the limited period of its initial contract with the transmission company, and thus automatically be free at a future date, untrammeled by Commission regulation, to reassess whether it desired to continue serving the interstate market.

364 U.S. 142, 80 S.Ct. 1396.

The Commission’s proposal for pre-granted abandonment would have the same effect as the proposition contended for in the Sunray ease, with the same potentiality of prejudice to consumers which the Supreme Court pointed out in that case.

We conclude that Section 2.75(e) of the Commission’s Rule is unlawful and must be set aside. In all other respects the Commission’s orders are affirmed. So ordered.

APPENDIX

The Commission, acting pursuant to the provisions of the Natural Gas Act, as amended, particularly Sections 4, 5, 7 and 16 thereof (52 Stat. 822, 823, 824, 825 and 830; 56 Stat. 83, 84; 61 Stat. 459; 76 Stat. 72, 15 U.S.C. 717c, 717d, 717f, and 717o) orders:

(A) Part 2 of the Commission’s General Rules of Practice and Procedure, General Policy and Interpretations, Sub-chapter A, Chapter I, Title 18 of the Code of Federal Regulations is amended by adding new Section 2.75, as follows:

2.75 Optional Procedure for Certificating New Producer Sales of Natural Gas
a. Notwithstanding any other provisions in the General Rules of Practice and Procedure of the Federal Power Commission, or the Regulations Under the Natural Gas Act of the Federal Power Commission, applications for certification of future sales of natural gas produced within the United States may, at the option of the signatory parties to sales contracts, be submitted in accordance with the provisions of this Section. To the extent that any Federal Power Commission General Rules of Practice and Procedure or Regulations under the Natural Gas Act are inconsistent herewith, the same are hereby amended to permit the optional procedure herein set forth.

b. The provisions of this Section shall be available if each of the following conditions exists:

1. A contract covering the sale of natural gas in interstate commerce has been executed for gas produced from a well or wells commenced after April 6, 1972; or a contract covering the sale of natural gas in interstate commerce has been executed for gas not previously sold in interstate commerce except under the provisions of Orders 402, 418 or 431 issued May 6, and December 10, 1970; April 15, 1971, respectively.
2. All parties whose gas is to be sold under the terms and conditions of such contract, except for the royalty interest therein, must agree to the submission of the same for certification in accord with the provision of this Section.
3. The purchaser under such contract is a jurisdictional pipeline.
4. The seller under such contract established that he has discharged, or is prepared by plan or program to discharge, refund obligations [in the geographical pricing area in which the seller would commit gas under such contract,] prescribed by prior orders or opinion of this Commission. It is provided, however, that any such seller may make the showing here required without prejudice to his claim in any case now pending on judicial review that such obligations were unlawfully imposed by the Commission. [Bracketed language added by Order No. 455-A, September 8, 1972, 37 Fed.Reg. 18723.]
5. The gas covered by the contract offered for certification is produced from a well or wells commenced on or after April 6, 1972; or the gas offered for certification has not been previously sold in the interstate market (unless abandonment has been previously granted or a sale was made under Orders 402, 418 or 431), nor has an application been previously filed with the Commission for certification of the sale of such gas, except for an emergency sale under Orders 402, 418 or 431.

c. If all of foregoing conditions precedent exist, the parties to the contract may tender the same to the Commission and request the issuance of a certificate of public convenience and necessity to the seller for sales of natural gas thereunder. Each party to the application shall certify to his portion that all parties to the contract, except those having a royalty interest only, desire certification in accordance with the terms and provisions of this Section, that the seller expressly agrees to the waivers and elections hereinafter provided for in sub-sections m and 0 of this Section, and that all conditions precedent as set forth in sub-section b of this Section are met.

d. A certificate of public convenience and necessity issued and accepted under this Section shall not be subject to change by determinations or orders whether heretofore made or hereafter to be made in producer or pipeline rate proceedings initiated under Section 4 of the Act, and orders issued hereunder shall not constitute establishment of an area rate; provided, however, that nothing herein shall limit the applicability of Section 5 of the Natural Gas Act. Nothing done hereunder shall be recognized by the Commission as triggering any existing contract escalation clauses.

e. Applications presented, hereunder will be considered for permanent certification, either with or without pregranted, abandonment, notwithstanding that the contract rate may be in excess of an area ceiling rate established in a prior opinion or order of this Commission.

f. No contract shall be accepted for filing if it includes any type of indefinite pricing clause except Btu price adjustment clauses, clauses to reflect changes in state production taxes, and clauses allowing for the recovery of compression and dehydration charges. Indefinite pricing clauses shall include, but are not limited to “area rate or FPC clauses”, a “price redetermination or renegotiation clause” or a “special escalation clause.”

g. A seller-applicant under this Section shall state the ground for claiming that the present or future public convenience and necessity require issuance of a certificate on the terms proposed in the application, and shall provide factual support for such claims. The application shall contain a contract summary as prescribed in Sec. 250.5 of our Regulations Under the Natural Gas Act.

h. The purchaser under a contract filed under this Section shall certify that the present or future public convenience and necessity require issuance of a certificate to the seller, and shall provide information in support of such certification with respect to the purchaser’s (1) system-wide supply, (2) present and estimated 3-year peak day and average day demands, (3) present and estimated 3-year requirements of customers on its system, (4) deliverability life, (5) implementation, if any of curtailment plans, (6) emergency purchases of gas under Order 431, or 157.22 or 157.29 of these Regulations, and (7) purchases of LNG or attachment of other supplemental supplies.

i. The information required by sub-section g. and h. may be submitted by cross-reference and incorporation of information already on file with the Commission.

j. Applications requesting issuance of certificates of public convenience and necessity as authorized in this Section shall be processed in accordance with the procedural requirements, including those relating to notice, intervention and hearing, set out in Part 157 of the Commission’s Regulations Under the Natural Gas Act.

k. Pursuant to the authority contained in and subject to the jurisdiction conferred upon the Federal Power Commission by Sections 7 and 15 of the Natural Gas Act and the Commission’s Rules of Practice and Procedure, a statutory hearing will be held before the Commission without further notice on all applications for certificates under this Section in which no petition to intervene in opposition is filed within the time required, if the Commission on its own review of the matter believes that a grant of a certificate is required by the public convenience and necessity. Where the Commission believes that a formal hearing is required notice of such hearing will be duly given.

l. A final order of this Commission, issuing a certificate as applied for, or issuing .a conditioned certificate acceptable to the applicants, shall constitute a final determination that the rates, charges and services therein specified are just, reasonable and required by the present and future public convenience and necessity.

m. By acceptance of a certificate issued hereunder, the seller-applicant unconditionally agrees to (1) waive all rights to seek future rate increases under Section 4 of the Natural Gas Act with respect to the contract submitted, other than price escalations, if any, as certificated by the Commission; and (2) waive all rights to contingent adjustment of flowing gas rates as provided by the Commission in area rate decisions heretofore decided, for flowing gas which the seller-applicant produces in the same geographical pricing area as the pricing area of the production covered by the application made under this Section.

n. Upon the filing of an application under this Section, deliveries pursuant to the provisions of the tendered contract may be commenced, pending review of such application by the Commission. Notice of commencement of deliveries shall be given to the Commission within ten days after deliveries first commence, and shall include all pertinent information concerning the deliveries. Any such deliveries so commenced may be terminated (1) if such contract for any reason shall terminate or be terminated prior to the issuance by the Commission of a final order upon review of such application, or (2) upon the issuance of a certificate containing conditions unacceptable to the party adversely affected. If the Commission by final order shall deny such application, or if the party or parties to the contract adversely affected shall not accept the terms and conditions prescribed by the Commission, deliveries thereunder shall be terminated. Within thirty days after termination of deliveries, the seller shall notify the Commission of such termination, and shall report the date of termination, volumes delivered, and revenues received.

o. If the parties elect to commence deliveries as set forth in subsection n., such deliveries will be made at rates no higher than the prevailing area ceiling rate and shall so continue for six months unless the Commission has made its final orders on the application at an earlier date; at the end of such six-month period (if the Commission has not made its final order), the seller upon the filing of a notice of change in rate pursuant to Section 154.94 of the Commission’s Regulations shall be entitled to receive without refund obligation and the purchaser shall be entitled to pay, the rates specified in the contract, and such contract rates shall continue as the effective rates until the Commission enters its final order on the certificate application.

(B) The amendment provided for herein shall be effective as of the date of issuance of this order.

(C) The Secretary of the Commission shall cause prompt publication of this order to be made in the Federal Register.

By the Commission.

MARY B. KIDD, Acting Secretary.

(seal)

      . Hamilton Treadway, Esquire, filed a brief amicus curiae contending that the orders are invalid because (1) no hearing was held by the Commission and the orders are based on inadequate statements of fact and questionable conclusions; (2) the Commission failed to comj)ly with the requirements of the National Environmental Policy Act; and (3) the Commission’s orders are a step in the process of deregulation. Wei are not persuaded by these arguments.


text:
    GREENSBORO TELEVISION COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.
    No. 72-2017.
    United States Court of Appeals, District of Columbia Circuit.
    Argued Oct. 19, 1973.
    Decided Aug. 16, 1974.

      Charles O. Verrill, Jr., Washington, D. C., for petitioner.
    Lawrence W. Secrest, III, Counsel, Federal Communications Commission with whom John W. Pettit, Gen. Counsel and Joseph A. Marino, Associate Gen. Counsel, Federal Communications Commission, were on the brief, for respondents. Howard E. Shapiro, Atty., Dept, of Justice, entered an appearance for respondent, United States of America.
    Before LEVENTHAL and ROBB, Circuit Judges, and MATTHEWS,  Senior United States District Judge for the United States District Court for the District of Columbia.

       Sitting by designation pursuant to 28 U.S.C. § 294(c).

   ROBB, Circuit Judge:

WFMY Television Corporation (WFMY) applied to the Federal Communications Commission (Commission) for renewal of the license of television broadcasting station WFMY-TV, Channel 2, Greensboro, North Carolina. The appellant, Greensboro Television Company (Greensboro) filed a competing application for a construction permit for a new television broadcasting station to operate on the same channel. Thereafter, following developments which we shall discuss later in this opinion, Greensboro and WFMY submitted to the Commission an agreement whereby Greensboro would dismiss its application and in return would be reimbursed for its expenses, not to exceed $44,195.00 by WFMY. The Commission refused to approve the agreement on the ground that it was not consistent with the public interest. 33 FCC2d 857, reconsideration denied, 37 FCC2d 339. Greensboro appeals, contending that the Commission’s refusal was arbitrary. The case comes to this court pursuant to 47 U.S.C. § 402(b). See Tomah-Mauston Broadcasting Co. v. FCC, 113 U.S.App.D.C. 204, 306 F.2d 811 (1962). We affirm the Commission.

I.

A chronblogical recital of relevant events will clarify the issue before us.

1. Greensboro filed its application on November 3, 1969.

2. On January 15, 1970 the Commission issued its Policy Statement on Corn-parative Hearings Involving Regular Renewal Applicants. 22 FCC2d 424 (1970). In that Statement the Commission announced its policy to be: “that if the applicant for renewal of license shows in a hearing with a competing applicant that its program service during the preceding license term has been substantially attuned to meeting the needs and interests of its area, and that the operation of the station has not otherwise been characterized by serious deficiencies, he will be preferred over the newcomer and his application for renewal will be granted.” [footnote omitted.] Under this policy, said the Commission, “If the Examiner, at the conclusion of the initial phase of a hearing dealing with a renewal applicant’s past record, has no doubt that the existing licensee’s record of service to the public is a substantial one, without serious deficiencies, he should, either on his own motion or that of the renewal applicant, halt the proceeding at this point and issue an initial decision based upon that determination.” The Statement also announced that “as a general matter, the renewal process is not an appropriate way to restructure the broadcast industry” by bringing about a diversification of the media of mass communications. The Commission’s view was that the question of diversification should be the subject of general rulemaking proceedings rather than ad hoc decisions in renewal hearings. This view was emphasized by the Commission when on April 6, 1970 it issued a Further Notice of Proposed Rulemaking (Docket No. 18, 110) which concerned the divestiture of broadcast properties by commonly owned newspapers in the same market.

3. On March 18, 1970 Greensboro filed a petition to designate as issues for hearing whether WFMY had failed to ascertain the needs and interests of the area it served and whether the grant of WFMY's application would result in undue concentration of control of the regional media by the parent company of WFMY. The Commission took no action on this petition.

4. On July 7, 1970 the Commission released its decision in National Broadcasting Co., Inc., 24 FCC2d 218 (1970), approving an agreement for the withdrawal of a new application, with payment by the renewal applicant of the expenses of the challenger. On November 16, 1970 the Commission released a similar decision in Post-Newsweek Stations, Fla., Inc., 26 FCC2d 982 (1970).

■5. On May 28, 1971 Greensboro and WFMY filed their joint petition for approval of their agreement for the withdrawal of the Greensboro application upon payment of Greensboro’s expenses by WFMY. The joint petition averred that Greensboro had filed its competing application on the assumption that it would be accorded a comparative hearing in which such factors as ascertainment of community needs, diversification of media ownership, integration of ownership and management, and local management would be litigated. On this premise also, said the petition, Greensboro had filed its petition of March 18, 1970 to designate issues for hearing; but Greensboro had now decided that its case had been substantially weakened by the Commission’s Policy Statement of January 15, 1970, and by extensive amendment to WFMY’s application. Accordingly, in the light of the Commission’s decisions in National Broadcasting Co., Inc., supra, and Post-Newsweek Stations, Fla., Inc., supra, the petition submitted that reimbursement of Greensboro should be approved.

The petition referred to the statement in n. 7 in the Commission’s Policy Statement “that barring extraordinary circumstances, the challenger to a renewal cannot be reimbursed in any amount for his expenditures in preparing and prosecuting his application.” The petitioners submitted that the Commission’s Policy Statement of January 15, 1970 was an “extraordinary circumstance” justifying approval of the agreement for reimbursement.

6. While the Greensboro-WFMY petition was pending, on June 11, 1971 this court held that the Commission’s Policy Statement of January 15, 1970 was invalid. Citizens Communications Center v. FCC, 145 U.S.App.D.C. 32, 447 F.2d 1201 (1971).

7. On March 2, 1972 the Commission denied the petition for withdrawal and reimbursement.

II.

For many years the Commission has looked with disfavor on any agreement between an applicant for renewal and a competing applicant for a construction permit whereby the challenger withdraws in return for the payment of his expenses by the renewal applicant. The Commission formulated this principle in National Broadcasting Co., Inc., 25 RR 67 (1963). See Office of Communication of United Ch. of Christ v. FCC, 150 U.S.App.D.C. 339, 345-346, 465 F.2d 519, 525-526 (1972). In the National Broadcasting case the Commission refused to approve an agreement between Philco and NBC whereby Philco would withdraw its application for a channel then licensed to NBC and NBC would reimburse Philco for its expenses in the prosecution of its application. In keeping with the policy of section 311(c) of the Communications Act, 47 U.S.C. § 311(c) the Commission reasoned that such an agreement should be approved only after the Commission determined that it was consistent with the public interest. Applying this principle the Commission held that in the absence of unique circumstances a withdrawal agreement between a renewal applicant and an applicant for a construction permit is inconsistent with the public interest, since it deprives the Commission and the public of a choice between the existing licensee and the challenging applicant.

The appellant Greesboro argues that unique circumstances existed in this case, so that the Commission’s refusal to approve the payment of Greensboro’s expenses was arbitrary. Specifically, Greensboro points to (1) the Commission’s Policy Statement of January 15, 1970, which undercut the application for a construction permit, and (2) the Commission’s 1970 decisions in National Broadcasting Co., Inc., and Post-Newsweek Stations, Fla., Inc., approving agreements for the withdrawal of applications with payment by the renewal applicant of the expenses of the challenger. Greensboro says:

The Commission’s retroactive application of the determination to discontinue waiving the policy of the 1963 NBC decision was arbitrary when applied to Greensboro, since Greensboro changed position in reliance on factually similar decisions in which waivers were granted.

We find this argument unpersuasive.

When Greensboro filed its application it assumed that a comparative hearing would follow and it was charged with notice that under the doctrine of the 1963 NBC case an agreement for its withdrawal and the payment of its expenses by WFMY would be approved only in unique circumstances. The Commission’s 1970 decisions in National Broadcasting Co., Inc., and Post-Newsweek Stations, Fla., Inc., held that the Policy Statement of January 15, 1970 was such a unique circumstance. Accordingly, since the Policy Statement was in effect when those decisions were rendered, the .Commission permitted withdrawal and reimbursement. When the Greensboro-WFMY joint petition was denied however the Policy Statement had been invalidated by this court. In other words, the “unique circumstance” had been eliminated and the status quo ante had been restored. In this situation we think it was reasonable for the Commission to weigh the petition against the standard established by its 1963 NBC decision.

The Commission’s 1970 decisions in National Broadcasting Co., Inc., and Post-Newsweek Stations, Fla., Inc., were premised upon the existence and validity of its Policy Statement of January 15, 1970; and the Commission considered that the Policy Statement constituted an unusual or unique circumstance justifying withdrawal and reimbursement in those cases. In Greensboro’s case however the Commission reasonably concluded that the elimination of the Policy Statement also eliminated both the “unique circumstance” and any controlling effect of the previous 1970 decisions allowing reimbursement. The 1970 cases were not, as Greensboro contends, “factually similar” to its case.

Greensboro argues in its brief that “prior Commission precedent clearly establishes the principle that the mere filing of the Withdrawal Agreement substantially reduced Greensboro’s chances of success in a comparative hearing.” In support of this proposition Greensboro cites National Broadcasting Co., Inc. (Philco), 2 RR2d 921 (1964). That case, says Greensboro, established “that the mere filing of a withdrawal agreement by a competing applicant in a renewal situation, disqualifies that applicant from receiving a grant, even though the Commission decides to reject the withdrawal agreement on the grounds that the public interest demands a choice of applicants.” Greensboro concludes that it was unfairly prejudiced because it filed the withdrawal agreement in reliance upon the Policy Statement of 1970 and the two Commission decisions allowing reimbursement.

The Commission’s decision in the NBC-Philco ease was based on facts and circumstances and a pattern of conduct by Philco which are not found in Greensboro’s case. See 2 RR2d 921, 942-943 (1964). In any event, without pausing to consider the precedential value of the NBC-Philco decision in this case, we think there was no reliance by Greensboro to its prejudice. We read the Commission’s order providing that Greensboro will be entitled to a comparative hearing to mean that it is entitled to a fair hearing. A fair hearing must be one in which Greensboro will not be prejudiced in any way because in good faith it filed a withdrawal agreement at a time when the Policy Statement was in effect and decisions relying upon it had been issued. We are reinforced in this conclusion by the formal statement of the Commission’s General Counsel filed in this court: “The Commission has specifically authorized me to inform the Court that Greensboro Television Company’s attempt to withdraw its license application and be reimbursed for its expenses will in no way affect consideration of its application.” We therefore conclude and hold, as a matter of law, that there must and will be no prejudice to Greensboro because of the withdrawal petition if Greensboro wishes to persevere in its application.

The Commission’s Order is

Affirmed.

      . We think also that the Commission reasonably rejected the contention that approval of the withdrawal agreement would serve the public interest by eliminating the need for a protracted comparative hearing which would burden the Commission and its staff and require the expenditure of substantial funds by WFMY. Such considerations are present in the case of every comparative hearing.