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05/13/58 Midwestern Gas v. Federal Power Commission

May 13, 1958




Before REED, Associate Justice of the Supreme Court, retired,* and EDGERTON, Chief Judge, and BAZELON, Circuit Judge.



Pipeline Company, Coicago District Pipeline

Company, Colorado Interstate Gas Company,

Pacific Northwest Pipeline

Corporation, Intervenors.

No. 13954 1958.CDC.74

Petition for Rehearing Denied June 18, 1958.



Review is sought, pursuant to ยง 19(b) of the Natural Gas Act, *fn1 of two orders of the Federal Power Commission, one a severance order issued March 13, 1957, and the other a consolidation order issued March 29, 1957. I The Application

Petitioners Midwestern Gas Transmission Company (Midwestern) and Tennessee Gas Transmission Company (Tennessee) are proponents of a new pipeline system designed to supply natural gas to the Chicago-Gary area of northern Illinois-Indiana, the states of Wisconsion and Minnesota, eastern North Dakota and western Michigan. Intervenors Natural Gas Pipeline Company (Natural), Texas Illinois Natural Gas Pipeline Company (Texas Illinois), and Chicago District Pipeline Company (Chicago District) are subsidiaries of Peoples Gas Light and Coke Company (Peoples), the distributor of natural gas in the Chicago area. Natural and Texas Illinois are the suppliers in Peoples system. Chicago District operates a short line transporting the gas from the Natural and Texas Illinois lines into Peoples' distribution lines.

The Peoples system operates a substantial monopoly in the natural gas business in northern Illinois-Indiana. *fn2 Despite the large quantities of gas brought into the area by the Peoples system, there is a large demand which cannot be met with the system's present capacity. In the city of Chicago alone, for example, there was a waiting list of 154,800 applicants for gas service as of the end of 1956.

Gas demand beyond existing capacity is a problem not only in the area served by the Peoples system, but all through the middle west. Serious gas shortages are experienced, for example, in the state of Wisconsin, which is served principally by the Michigan Wisconsin Pipe Line Company (Michigan Wisconsin), and in the state of Minnesota, which is served only by the Northern Natural Gas Company (Northern).

On October 10, 1955, Midwestern filed an application for a certificate of public convenience and necessity for a new pipeline system to run from a connection with Tennessee's system at Portland, Tennessee, to a connection with the system of Trans-Canada Pipe Lines Limited (Trans-Canada) at the Canadian border, near Emerson, Manitoba. Midwestern has contracts with both Tennessee and Trans-Canada for the purchase from each of 204,000 m.c.f. *fn3 of gas per day. The contract with Trans-Canada also gives Midwestern the right to purchase an additional 200,000 m.c.f. per day depending upon availability. *fn4 And the southern portion of Midwestern's proposed line, though designed to carry northward only the 204,000 m.c.f. to be purchased from Tennessee, "could, without additional looping but simply with added compression, carry as much as 350,000 m.c.f a day to the Chicago area . . .." *fn5 Midwestern's proposed line is to be so located as to be able to deliver gas to the shortage areas in northern Illinois-Indiana now served by the Peoples system, as well as to those in Wisconsin, Minnesota, western Michigan, and eastern North Dakota. And Midwestern made clear to the Commission that its intention is to serve all of the areas within economic reach of its line and that "if certificated it will, in the future, in the course of normal growth and development, serve, like all other pipelines and distributors, any available loads for which authorization can be obtained." *fn6

In its original application, Midwestern specified the customers to whom it would deliver 315,202 m.c.f. per day and left 86,372 m.c.f. per day as a reserve for additional sales. In its first supplement to its application on November 2, 1955, Midwestern stated that this reserve was designed to supply other customers within reach of its line who are presently without gas or receiving short supplies. It stated further that specification of some distributors was made difficult by their fear of the displeasure of their present suppliers. In a further supplement on December 1, 1955, Midwestern proposed to sell its reserved gas to the existing pipelines, including those in the Peoples system, for resale by them to their distributors. *fn7 If those pipelines declined to buy the reserved gas, Midwestern proposed to sell it directly to their distributors and to industries located within economic reach.

On December 22, 1955, Peoples and its subsidiaries petitioned to intervene in the proceeding on Midwestern's application. Both Natural and Texas Illinois, in their petitions, declared that they have "no intention of purchasing gas from Midwestern"; and Peoples, in its own petition, stated that "all natural gas sold by Peoples Gas . . . is purchased by it from Natural . . . and Texas Illinois . . . and it is contemplated that said companies will continue to supply Peoples Gas' requirements of flow gas in increased volumes as the orderly development of Peoples Gas' markets shall, from time to time, require." Being thus informed that the Peoples system would not purchase its reserved gas, *fn8 Midwestern, on February 7, 1956, filed a further supplement to its application specifying all the customers to whom it proposed to sell 395,998 m.c.f. of gas per day. *fn9 It named the various distributors who would receive 280,998 m.c.f. per day and resell it to customers in Wisconsin, Minnesota, western Michigan and eastern North Dakota. The only customers named in the northern Illinois-Indiana area were the United States Steel Corporation and the Inland Steel Company, to whom direct sales of 115,000 m.c.f. per day would be made. Obviously, no further specification could be made of proposed sales in the area served by the Peoples system in view of the latter's control of the distribution system and its refusal to buy from Midwestern. *fn10 But a Midwestern officer testified:

". . . we are not seeking to serve only a portion of these markets for a short time. We intend to serve all of the markets and meet every reasonable service demand from them.

"Midwestern is seeking to serve all those areas which are economically feasible to serve all the way from its line from Emerson, Manitoba, to Kankakee, Illinois . . ..

". . . as a policy, Midwestern will propose to render service to substantially all areas within economic distance of its lines.

". . . In Chicago and Northern Indiana, north of Kankakee, Peoples Gas Light and Coke Company and their subsidiary pipeline companies have been serving under a policy of scarcity ...

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