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FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1 (1961)

Federal Power Commission v.

Transcontinental Gas Pipe Line Corp.

No. 45

Argued November 15, 1960

Decided January 23, 1961*

365 U.S. 1


A public utility company in New York City contracted for the direct purchase of natural gas from producers in Texas, not for resale but for consumption under its own boilers, and it arranged with a pipeline company for transportation of the gas to New York City. The pipeline company applied to the Federal Power Commission for a certificate of public convenience and necessity under § 7(e) of the Natural Gas Act, and offered proof, which was not challenged, that its application met all the conventional tests. The Commission denied the certificate after considering, inter alia, the desirability of the particular end use to which this gas would be put, the possibility of preemption of pipeline capacity and gas reserves by sales to industrial users, the price agreed upon, and the effect of this and similar future transactions on the price and availability of natural gas generally.

Held: the Commission did not exceed its authority or abuse its discretion in denying the certificate on the basis of these considerations. Pp. 365 U. S. 3-31.

(a) The desirability of the use to which the gas would be put and the possibility of preemption of pipeline capacity and gas

Page 365 U. S. 2

reserves by sales to industrial users were properly of concern to the Commission in passing on this application. Pp. 365 U. S. 8-22.

(b) In considering this application, it was proper for the Commission to consider the effect which the high price charged in the sale here involved would have on future field prices for natural gas. Pp. 365 U. S. 23-28

(c) The Commission did not err by taking cognizance of considerations dehors the record in concluding that widespread direct sales at high prices probably would result in price increases. Pp. 365 U. S. 28-30.

(d) It cannot be said that the Commission acted irrationally in concluding that the evidence offered by the purchaser was insufficient to establish that its use of the gas was justified by the need to reduce air pollution. P. 365 U. S. 30.

271 F.2d 942 reversed.

Page 365 U. S. 3

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