These cases present questions arising out of the issuance by the Federal Power Commission, pursuant to § 7 of the Natural Gas Act, 52 Stat. 824, as amended, 15 U.S.C. § 717f, of 'permanent' certificates authorizing producers to sell natural gas to pipelines for transportation and resale in interstate commerce.
An understanding of the issues requires some background. Section 7(c) of the Natural Gas Act provides that a natural gas company may engage in a sale of natural gas subject to the Commission's jurisdiction only if it has obtained from the Commission a certificate of public convenience and necessity. Such a 'permanent' certificate may issue only after notice and hearing to interested parties, although a proviso to § 7(c) enables the Commission in cases of emergency to issue temporary certificates without notice and hearing, pending the determination of an application for a permanent certificate. Section 7(e) states that permanent certificates are to be granted if, and only if, the Commission finds that the proposed sale 'is or will be required by the present or future public convenience and necessity * * *.' That section further provides that the Commission may attach to certificates 'such reasonable terms and conditions as the public convenience and necessity may require.'
Prior to 1954, the Commission construed the Natural Gas Act as empowering it to regulate only sales of gas by pipelines and not sales by producers. This Court held to the contrary in Phillips Petroleum Co. v. State of Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035. Since then, the Commission has been engaged in a continuing effort to adapt the provisions of the Act to regulation of producer sales. The method finally resolved upon for determining the 'just and reasonable' rate at which § 4 of the Act requires that natural gas be sold was to conduct a number of area rate proceedings, looking to the establishment of maximum producer rates within each producing area. This method of regulation has recently been approved by us in the Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312. Other area rate proceedings are underway, and they will eventually encompass areas accounting for some 90% of all the gas sold in interstate commerce. See 390 U.S., at 758, n. 18, 88 S.Ct. at 1355.
The decision to rely on area rate regulation as the means for establishing just and reasonable rates under §§ 4 and 5 of the Act, and its implementation, have thus far occupied more than a decade. During this period, the Commission was obliged to rest interim producer rate regulation on § 7. In the early years following this Court's first Phillips decision, supra, the Commission took a narrow view of its § 7 powers, and the field price of natural gas began to soar. Matters came to a head in the so-called CATCO proceeding, in which the Commission certificated the sale of the largest quantity of natural gas theretofore dedicated to interstate commerce at a price above those then prevailing, on the ground that if it denied the certificate the refusal of producers to dedicate the gas might result in an eventual shortage in supply. This Court held in Atlantic Refining Co. v. Public Service Commission (CATCO), 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d 1312, that the Commission should have done more.
The Court began in CATCO by stating that the Natural Gas Act 'was so framed as to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges.' 360 U.S., at 388, 79 S.Ct., at 1253. The Court then noted that the Act required that all rates charged be 'just and reasonable.' However, the Court stated that the determination of just and reasonable rates under §§ 4 and 5 was proving to be inordinately time-consuming, and that, because those rates became effective only prospectively, the consumer had no protection from excess charges collected during the pendency of those proceedings. The Court said: