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ADVERSE PERSONNEL ACTIONS AGAINST
PROFESSIONAL STAFF MEMBERS AT THE
FEDERAL POWER COMMISSION
77~o~1S4~
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON
INTERSTATE AND FOREIGN COMMERCE
HOUSE OF REPRESENTATIVES
NINETY-FIFTH CONGRESS
FIRST SESSION
MARCH 9, 10, 14, 18, 23, AND 24, 1977
Serial No. 95-16
J?rinted for the use of the
Committee on Interstate and Foreign Commerce
0
U.S. GOVERNMENT PRINTING OFFICE
87-292 0 WASHINGTON: 1977
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COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
JOHN E. MOSS, California
JOHN D. DINGELL, Michigan
PAUL G. ROGERS, Florida
LIONEL VAN DEERLIN, California
FRED B. ROONEY, Pennsylvania
JOHN M. MURPHY, New York
DAVID E. SATTERFIELD III, Virginia
BOB ECKHARDT, Texas
RICHARDSON PREYER, North Carolina
CHARLES J. CARNEY, Ohio
RALPH H. METCALFE, Illinois
JAMES H. SCHEUER, New York
RICHARD L OTTINGER, New York
HENRY A. WAXMAN, California
ROBERT (BOB) KRUEGER, Texas
TIMOTHY E. WIRTH, Colorado
PHILIP R. SHARP, Indiana
JAMES J. FLORIO, New Jersey
ANTHONY TOBY MOFFETT, Connecticut
JIM SANTINI, Nevada
ANDREW MAGUIRE, New Jersey
MARTY RUSSO, Illinois
EDWARD J. MARKEIY; Massachusetts
THOMAS A. LUKEN, Ohio
DOUG WALGREN, Pennsylvania
BOB GAMMAGE, Texas
ALBERT GORE, JR., Tennessee
BARBARA A. MIKULSKI, Maryland
JIM SANTINI, Nevada
THOMAS A. LUKEN, Ohio
DOUG WALGREN, Pennsylvania
ALBERT GORE, JR., Tennessee
CHARLES J. CARNEY, Ohio
JAMES H. SCHEUER, New York
HENRY A. WAXMAN. California
PHILIP R. SHARP, Indiana
ANTHONY TOBY MOFFETT, Connecticut
ANDREW MAGUIRE, New Jersey
ROBERT (BOB) KRUEGER, Texas
HARLEY 0. STAGGERS, West Virginia
(Ex officio)
SAMUEL L. DEVINE, Ohio
JAMES T. BROYHILL, North Carolina
TIM LEE CARTER, Kentucky
CLARENCE J. BROWN, Ohio
JOE SKTJBITZ, Kansas
JAMES M. COLLINS, Texas
LOUIS FREY, JR., Florida
NORMAN F. LENT, New York
EDWARD R. MADIGAN, Illinois
CARLOS J. MOORHEAD, California
MATTHEW J. RINALDO, New Jersey
W. HENSON MOORE, Louisiana
DAVE STOCKMAN, Michigan
MARC L. MARKS, Pennsylvania
HARLEY 0. STAGGERS, West Virginia, Chairman
W. E. WILLIAMSON, Chief Clerk and staff Director
KENNETH J. PAINTER, First Assistant Clerk
ELEANOR A. DINKINS, Assistant Clerk
FRANK W. MAHON, Printing Editor
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
JOHN E. MOSS, California, Chairman
JAMES M. COLLINS, Texas
NORMAN F. LENT, New York
MATTHEW J. RINALDO, New Jersey
DAVID STOCKMAN, Michigan
MARC L. MARKS, Pennsylvania
SAMUEL L. DEVINE, Ohio (Ex officio)
MICHAEL R. LEMOV, Chief Counsel
JAMES L. NELLIGAN, Operations Director
FRANCES WHITE, Deputy Chief Counsel
JOHN R. GALLOWAY, Energy Task Force Director
STEPHEN F. SIMS, special Assistant
WILLIAM D. BRAUN, Counsel
MARIAN SUSAN LEAL, Counsel
BENJAMIN M. SMETHURST, special Assistant
J. THOMAS GREENE, Counsel to the Chairman
BERNARD J. WUNDER, Jr., Minority Counsel
(II)
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CONTENTS ~
Hearings held on- Page
March 9, 1977 1
March 10, 1977 83
March 14, 1977 201
March 18, 1977 309
March 23, 1977 513
March 24, 1977 681
Testimony of-
Aher, Robert E., former trial attorney, Office of the General Counsel,
Federal Power Commission 130
Dunham, Hon. Richard L., Chairman, Federal Power Commission_ 310, 311
Fee, J. Curtis, Executive Director, Federal Power Commission 202, 310
Journey, Drexel D., General Counsel, Federal Power Commission - 310, 312
Lewnes, George P., Administrative Law Judge, Federal Power
Commission 84, 109, 681
Lotis, Jon G., assistant litigation counsel, Federal Power Commission - - - 252
681, 684
Mamone, Russell B., supervisory trial attorney, Office of the General
Counsel, Federal Power Commission 2, 108, 681
Minor, Edward R., assistant to the General Counsel, Office of the
General Counsel, Federal Power Commission 71
Smith, Don S., Commissioner, Federal Power Commission 514
Watt, James G., Vice Chairman, Federal Power Commission 539
Wofsy, Cyril S., trial attorney, Federal Power Commission_... 109, 681, 733
Additional material submitted for the record by-
Federal Power Commission:
Attachments to Mr. Fee's prepared statement of March 14, 1977:
Statement of position by Federal agencies with regard to the
preparation of an environmental impact statement on the
crude oil project proposed by El Paso Natural Gas Co 396
Memorandum of understanding for preparation of Long
Beach to Midland Pipeline System (SOHIO) environ-
mental impact statement 397
Attachment to Mr. Journey's prepared statement of March 18,
1977: Letter dated March 8, 1977, to Michael R. Lemov, Chief
Counsel, Oversight' and Investigations Subcommittee from
Mr. Journey with attached statement of Mr. Journey dated
March10, 1977, withattachments 319
Attachments to Mr. Lotis' prepared statement of March 14, 1977:
Attachment I-Memorandum dated October 28, 1976, to
FPC Chairman and Commissioners Smith, Springer, and
Holloman from Mr. Lotis re training program for legal and
nonlegal personnel in the Pipeline `~ and Electric Rate
Section 257
Attachment TI-Memorandum dated September 17, 1976
from Mr. Lotis, re attrition in his office 259
Forms pertaining to ingrade and grade promotions of Jon G.
Lotis 264
Memorandum dated June 17,' 1975, from Mr. Journey to
Mr. Lotis re conversation with Richard M. Dicke, Ohio
Electric Co., and Ohio Power Co., docket No. E-8888_ - - - 262
Memorandum dated June 19, 1975, from Mr. Lotis to Mr.
Journey re conversations with Richard M. Dicke, Ohio
Electric Co., docket No. E-8888 263
Attachment to Mr. Lotis' prepared statement of March 24,
1977, Appendix A-Electric rate cases terminated, October to
December 1976 687
(III)
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Iv
Additional material submitted for the record by-Continued
Federal Power Commission-Continued Page
Attachments to Mr. Mamone's prepared statement of March
9, 1977:
Background data, Russell B. Mamone 7
Appendix A-Cases assigned to Russell Mamone, October
13, 1976 7
Appendix B-Hydroelectric cases assigned to Russell
Mamone, February 4, 1977 8
Appendix C-Major responsibility cases and areas of Russell
Mamone, 1965-76 8
Position description, supervisory trial attorney (Pub. tJtil.) 10
Charts indicating FP.C meeting room seating arrangements 760
FPC summary of actions regarding proposed sale of gas from
Grand Isle 95 Field 410
Letter dated September 30, 1976, from Robert E. Aber, trial
attorney, FPC, to Drexel D. Journey, General Counsel, FPC
re resignation~ 163
Letter dated April 5, 1977, from John R. Griffin III, Admin-
istrative Officer, FPC, to Chairman Moss re staffing of the
Office of General Counsel, FPC 209
Letter dated May 23, 1977, from Jon G. Lotis to Chairman Moss
re meetings with Potomac Electric Power Co 763
Letter of resignation of Robert~ E. Aber dated September 30,
1976 451
Memorandum dated February 11, 1976, from Mr. Journey to
Mr. Lotis re American Electric Power Co., Inc 305
Memorandum dated March 28, 1977, from Drexel D. Journey,
General Counsel, FPC, to Daniel Goldstein, Assistant Litiga-
tion Counsel, FPC re question relating to Nevada Power's
refund reporting obligation in E-8721 posed by Congressman
Santini at Moss subcommittee hearing on March 18 444
Memorandum dated March 29, 1977, from Daniel Goldstein,
assistant litigation counsel, to Mr. Journey, FPC re question
on number of rate cases posed by Chairman Moss on March
18, 1977 506
Memorandum dated March 29, 1977, from Mr. Journey to
Kenneth E. Richardson, Kenneth R. Plumb, Gordon Grant,
Frank Gilmore, Jack L. Weiss, and S. William Yost re memo-
randum dated March 28, 1977, from Daniel Goldstein 445
Memorandum dated March 29, 1977, from Mr. Journey to OGC
Administrative Officer re rating action and procedures with
attached memorandum dated March 28, 1977 471
Memorandum dated March 29, 1977, from Ruth Van Cleve,
assistant litigation counsel, to Mr. Journey re transcript addi-
tions, hydroelectric cases and corporate regulation cases as of
June 30, 1976 486
Opinion and order requiring the filing of amended applications,
granting temporary and permanent certificates and other relief
in consolidated proceedings, March 7, 1977, docket No.
CI75-45, et al., Tenneco Oil Co., et al 695
Order requiring additional briefs, February 28, 1977, docket No.
CP 74-329, Atlanta Gas Light Co. v. Southern Natural Gas Co~ 690
Report of final interview of Robert E. Aber, dated October 15,
1976 with covering letter of March 21, 1977, from Mr. Griffin- 449
Statement re Commission action requiring Mobil to dedicate
Block 95 Field, Grand Isle area 450
Oversight and Investigations Subcommittee, Interstate and Foreign
Commerce Committee:
Affidavit of Patricia Saitta, dated March 17, 1977 475
Appendix A-Cases assigned to Russell Mamone, October 13,
1976 663
Appendix B-Hydroelectric cases assigned to Russell Mamone,
February 4, 1977 664
Appendix C-Major responsibility cases and areas of Russell
Mamone, 1965-76 664
Article by Jack Anderson and Les Whitten from the Saturday,
October 16, 1976, Washington Post containing a report of a
preelection purge at the Federal Power Commission 69
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V
Additional material submitted for the record by-Continued
Oversight and Investigations Subcommittee, Interstate and Foreign
Commerce Committee-Coatinued Page
Article from the January 24, 1976, Washington Post entitled,
"Mobil Oil Blames FPC for Delay in New Field Gas Pro-
duction" 408
Compendium of form 81 performance evaluations 464
Correspondence between Chairman Moss and Commissioner
Watt re reference to Administrative Order 160 during the
March 24, 1977, hearings 667
Documents pertinent to the HIOS proposal 164
Draft order dated May 10, 1976, prepared by Robert Aber,
findings and order after statutory hearing issuing conditioned
certificate of public convenience and necessity and granting
petitions to intervene-docket Nos. CP75-104, CP75-81, and
CP75-16 and papers pertaining thereto 136
Excerpt from the Rouche Ross & Co. study, summary of key
processing measurements (fiscal years) 1970-76 53
Exhibit A-Ingrade and grade promotion records of Russell B.
Mamone 13
Exhibit B-FPC employee performance evaluation, annual
rating dated March 31, 1976, of Russell B. Mamone 17
Exhibit C-Motion of Tenneco Oil Co. for oral argument, docket
No. C175-466 21
Exhibit D-Letter dated January 20, 1976, from Chairman
Dingell of the Energy and Power Subcommittee to Chairman
Dunham, FPC, advising of the testimony of Mr. Mamone and
other witnesses, and requesting that they not be discriminated
against in any way 25
Exhibit G-Excerpts from notes of Touche Ross study (July
1976) of Federal Power Commission, Office of General CounseL 272
Exhibit H-Rate of and comparison promotions by section,
Office of the General Counsel, FPC 216, 278
Exhibit I-Memorandum dated January 31, 1977, re conversa-
tion between Allan Abbot Tuttle, Solicitor, FPC, and Stephen
Sims, special assistant, Oversighi~ and Investigations Subcom-
mittee 275
Exhibit K-Excerpts from the Touche Ross report, I B. Sum-
mary of findings and I C. Summary of recommendations 46
Federal Power Commission employees who testified before the
Energy and Power Subcommittee in the 94th Congress SO
Interview of Eugene N. Scallon, Deputy Assistant Gēneral
Counsel, Civil Service Commission-August 9, 1976 78
Letter dated March 13, 1977, from Patricia Curran to Chairman
Moss re Miss Curran's role as staff attorney, FPC, in the Ohio
Electric Co., proceeding 477
Memorandum dated March 29, 1976, from Commissioner Smith
to Chief Judge Zwerdling re George P. Lewnes 438
Memorandum dated October 3, 1976, to Mrs. Van Cleve, Messrs.
Perdue, Tuttle, Goldstein, Grant, Gilmore, Lotis, Minor,
Keeley, and Griffin from Drexel D. Journey re redistribution of
OGC workload with attached memorandum of August 2, 1976,
organizational charts, and FPC administrative order No. 146A
dated October 7, 1976 31
Memorandum dated March 16, 1977, from Susan Leal and Ben
Smethurst to Michat~l R. Lemov, Chief Counsel, Oversight and
Investigations Subcommittee re FPC adverse personnel ac-
tions, interviews with Commissioner Smith concerning Mr.
Fee's testimony 435
Memorandum dated March 16, 1977, from Susan Leal, counsel,
and Benjamin M. Smethurst, special assistant to Michael R.
Lemov, Chief Counsel, Oversight and Investigations Subcom-
mittee re interview with Commissioner Watt concerning Mr.
Fee's testimony 491
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VI
Additional material submitted for the record by-Continued
Oversight and Investigations Subcommittee, Interstate and Foreign
Commerce Committee-Continued Page
Memorandum dated March 17, 1977, from Mr. Rosenberg,
counsel, Oversight and Investigations Subcommittee to Chair-
man Moss re review of the personnel file of Jon G. Lotis,
Assistant General Counsel, FPC 401
Memorandum dated March 17, 1977, from Mr. Rosenberg,
counsel, Oversight and Investigations Subcommittee to Chair-
man Moss re review of the personnel file of Russell B. Mamone,
FPC 401
Memorandum dated March 17, 1977, from Mr. Smethurst,
Special Assistant, Oversight and Investigations Subcommittee
to Mr. Lemov, Chief Counsel re review of personnel file of
George P. Lewnes 402
Memorandum dated March 22, 1977, from Stephen Sims, special
assistant, to Chairman Moss re memorandum of conversation
between John Nassikas, former Chairman, FPC and Mr. Sims - 546
Memorandum dated March 23, 1977, from Susan Leal, counsel, to
Michael R. Lemov, Chief Counsel, Oversight and Investigations
Subcommittee re telephone interview with former General
Counsel Leo Forquer, FPC, March23, 1977 552
Memorandum dated April 1, 1977, from William D. Braun,
counsel, Oversight and Investigations Subcommittee re af-
fidavit of one Robert Williamson Perdue, dated March 17, 1977,
and attached to Mr. Drexel Journey's prepared statement of
March 18, 1977, as Appendix A 269
Memorandum of conversation between Ed Mark, trial attorney,
Office of the General Counsel, FPC and Stephen F. Sims, staff
member, Oversight and Investigations Subcommittee-March
11, 1977 428
Memorandums dated November 4, 1975, January 15, 1976,
January 16, 1976, March 18, 1976, and March 26, 1976, between
Mr. Journey and various other FPC personnel re shortage of
personnel
Minor interview-August 6, 1976 76
Opinion and order directing repayment of imbalance, opinion
No. 755, docket No. CI75-466, dated March 1, 1976, Tenneco
Oil Co
Opinion and order on rehearing with respect to certificate condi-
tion, opinion No. 766, docket No. CI74-734, et al., dated June
29, 1976, Superior Oil Co., et al 585
Opinion and order granting certification, limited remanding and
reopening of record, opinion No. 767, docket No. CI75-319,
et al, dated June 29, 1976, Getty Oil Co., et al 600
Opinion and order requiring the filing of amended applications,
granting temporary and permanent certificates and other relief
in consolidated proceedings, opinion No. 789 docket No.
C175-45, et al., dated March 7,1977, Tenneco Oil Co., et al 61~S
Reassignments made pursuant to the General Counsel's (FPC)
memorandum dated October 8, 1976 42, 414
Statement of Lynn Hargis, dated March 11, 1977 291
Letter dated April 20, 1977 from John G. Howard re above
statement 293
Letter dated April 21, 1977 from Edward A. Caine re above
statement 297
Letter dated April 26, 1977, from Lynn Hargis re Mr.
Howard's and Mr. Caine's letters 300
Subpena for the appearance of Russell B. Mamone, trial attorney,
FPC
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ADVERSE PERSONNEL ACTIONS AGAINST PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION
WEDNESDAY, MARCH 9, 1977
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON INTERSTATE AND F0nsIGN COMMERCE,
Washington, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room
2212,. Rayburn House Office Building, Hon. John E. Moss (chair-
man) presiding.
Mr. MOSS. The subcommittee will be in order.
The subcommittee meets this morning to review some very serious
allegations. In the next 2 days we shall hear testimony from cur-
rent and former professional staff members of the Federal Power
Commission regarding manipulation of gas pipeline and rate cases,
discriminatory personnel actions, and allegedly unjustified transfers.
After we hear these charges, the Federal Power Commission's gen-
eral counsel and its chairman will be called to respond.
These hearings also have direct relevance to the proposed execu-
tive branch energy department, which stands poised to absorb the
FPC. I have long been concerned with the integrity of the regulatory
process and particularly with the independence from improper influ-
ence of the agencies that carry out the regulation. Crucial to the
work of the FPC is the determination of prices, or ratemaking. The
Commission sets the price producers may charge for natural gas
sold for resale in interstate commerce, tariffs for interstate pipe-
lines, and rates charged for. about 10 percent of the Nation's electric
power. The FPC staff mem;bcrs from whom we will hear were all
concerned with rates in some fashion. In their testimony there may
well be some lessons as regards the fragile nature of ratemaking,
even in an independent body such as the FPC.
A second general point to which I would like to direct the sub-
committee's attention concerns natural gas regulation. As we know,
the issue of whether or not to deregulate some or all gas, which was
rejected by the 94th Congress, remains before us. The subcommittee
has expended considerable effort attempting to improve FPC regula-
tion of natural gas producers and pipelines under existing statutes.
In the last Congress, for example, the subcormnittee found the FPC
seriously deficient in enforcing producer delivery obligations such
as in the Gulf-Texas Eastern, Mobil Grand Isle 95, and other cases;
in the collection of reliable and independent data essential for effec-
tive regulation; and in its decision in Opinion 770 to effectively
(1)
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2
abandon cost-based pricing. All these actions caused the subcom-
mittee to conclude in its October 1976 regulatory reform chapter
on the FPC that:
The FPO, in recent years, has demonstrated a conscious disregard of its
statutory duties, extending in varying degrees to all facets of its regulatory
responsibilities. We believe the case studies discussed in this report graphically
illustrate the agency's neglect of its congressional mandate to protect con-
sumers from price and supply exploitation by the companies it regulates.
We will, therefore, examine carefully the personnel transfer pat-
terns and other actions that transpired in the FPC's Office of the
General Counsel to see if the end result was to further undermine
effective regulation of natural gas producers or pipelines.
A third and no less relevant concern is whether or not any of the
witnesses suffered tecause of testimony at or involvement in hear-
ings of a committee of the Congress. If such were found to `be the
case, the provisions of 18 U.S.C. 1505 could apply:
Whoever corruptly, or by threats or force, or by any threatening letter or
communication, endeavors to influence, intimidate, or impede any witness in
any proceeding pending before any department or agency of the United States,
or in connection with any inquiry or investigation being had by either House,
or any committee of either House, or any joint committee of the Oongress; or
Whoever injures any party or witness in his person or property on account
of his attending or having attended such proceeding, inquiry, or investigation,
or on account of his testifying or having testified to any matter pending therein;
* * * shall be fined not more than $5,000 or imprisoned not more than five
years, or both.
A fourth and overriding point is: Did the personnel transfers and
other `actions serve and protect the public interest which, after all,
is the Federal Power Commission's fundamental concern and, in-
deed, the very purpose for which it was created.
One of our witnesses today is Mr. Russell B. Mamone, trial at-
torney, Office of the General Counsel, Federal Power Commission.
Mr. Mamone, will you come forward and be sworn, please?
Do you solemnly swear to tell the truth, the whole truth, and noth-
ing but the truth, so help you God?.
Mr. MAMONE. Yes.
Mr. Moss. Will you identify yourself to the reporter please?
TESTIMONY OF RUSSELL B. MAMONE, SUPERVISORY TRIAL AT-
TORNEY, OFFICE OF THE GENERAL COUNSEL, FEDERAL POWER
COMMISSION
Mr. MAMONE. My name is Russell B. Mamone.
Mr. Moss. Mr. Mamone?
Mr. LEMOV. Do you want to read your statement or summarize it,
Mr. Mamone?
Mr. Moss. Mr. Mamone is here is response to a subpena issued by
the Committee on Interstate and Foreign Commerce which required
his attendance here today for the purpose of giving testimony.
Is that correct?
Mr. MAMONE. That is correct, Mr. Chairman. I received your sub-
pena this morning.
Mr. Moss. The subpena will be entered in the record at this point
without objection.
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3
[The sixbpena referred to follows:]
95-1-2
ORIGINAL
BY AUTHORITY OF THE HOUSE OF REPRESENTATIVES OF THE CONGRESS OF THE
UNITED STATES OF AMERICA
To ~ ~1ims ~r~L~m-~' t
You are hereby commanded to summon J~Us Manio J~cIRPy,
~Federa1j~q~rConsiii NpLth ap~thQ
Subcommittee on Oversight and Investigations (under the
to be and appear before the ~
of Representatives, 95th Congress) of the Interstate and Foreign Commerce
Committee of the House of Representatives of the United States, of which the Hon.
~__~9_~_5 ---- - is chairman ~
concerning tra~isfer £ professional taffmémbers theap~propriatenesso
the handling certain gas pipeline ma ters and rate cases, and related
natters
in their chamber in the city of Washington, on ~ ~zN~Ji~,J~Z7 ~tLRm 323,
, at the hour of _JPi~Q~:~h~
then and there to testify touching matters of inquiry committed to said Committee; and he is
not to depart without leave of said Committee.
Herein fail not, and make return of this summons.
p Witness my hand and the seal of the House of Representatives
of the United States, at the city of Washington, this
~ day of J~ia~ch ,191'7
Attest:
~ ~
Clerk.
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4
Mr. Moss. Mr. Mamone, do you have a statement?
Mr. MAMONE. Yes, I have a prepared statement, Mr. Chairman.
Mr. Moss. You may proceed.
Mr. MAMONE. Mr. Chairman, I am Russell B. Mamone, a super-
visory trial attorney, Office of the General Counsel, Federal Power
Commission, Washington, D.C.
Suhcommit.tee counsel has requested that I submit a statement ex-
plaining the reorganization of the Office of the General Counsel as
it affected my assignment, together with my duties, experience, and
qualifications.
*This statement. was prepared and submitted so that the subcom-
mittee can better understand the organizational framework of the
general counsel's office and the events leading up to this hearing, and
in response to your letter of March 3 inviting me to appear. Further-
more, this statement is being prepared and submitted upon the
advice of subcommittee counsel that I would be served with a sub-
pena requiring my attendance and testimony at the March 9, 1977
hearings.
My background is as follows:
From August 1965 to October 1976, I was continuously assigned
to the Commission's trial staff responsible ~for certificates of public
convenience and necessity, abandonments, exports and imports of
natural gas, construction and operation facilities used for the trans-
portation and sale of natural gas in interstate commerce. In short,
these responsibilities went to all matters affecting service by natural
gas pipelines and natural gas producers. Appendix C of this state-
ment lists many of the matters to which I was assigned.
From the beginning of `my career at FPC I have `been assigned to
offshore gas supply projects. Since 1971, on being promoted to the
level of a principal attorney, I have been assigned to supervise or
review all major pipeline gas supply projects in the Gulf of Mexico,
at. the direction of t.he Assistant. General Counsel responsible for
such work. Appendix D is a more specific description of the duties
I performed pursuant to the administration of the Natural Gas Act,
15 TJ.S.C. 717.
REORGANIZATION
On October 8, 1976, General Counsel Drexel D. Journey orally
informed me that I had `been transferred out of the Natural Gas
Certificate Section to the Hydroelectric Licensing Section. It was
explained that this was necessary due to the reorganization order of
the Commission, Administrative Order No. 146A, issued October 7,
1976 the Chairman Dunham memorandum of August 2, 1976; a
management reorganization study by Touche Ross and Co.; and the
Redistribution Workload memorandum of the General Counsel of
October 8, 1976.
The sole reason given for my specific transfer was the need for an
additiona.l senior attorney in the Hydroelectric License Section tnal
staff, administering part I of the Federal Power Act, as the creation
of a new section to handle part II and part Ill-principally electric
interconnecfons and electric rate work-had drained senior attorneys
from the license, trial staff.
Upon review of the above-referred-to documents, it was my opin-
ion that the General Counsel was authorized `by the chairman to
PAGENO="0011"
5
direct such reorganization and reassignments, regardless of the pos-
siNe existence of any other factors or motivations.
The reorganization also transferred all offshore gas pipeline proj-
ects from my former supervisor, Mr. Grant, to Mr. Gilmore, whose
section handled producer rate work.
Due to the general personnel conditions in the Office of the Gen-
eral Counsel and particularly in the natural gas ares, which I will
more fully describe subsequently, I decided to accept the transfer
order without objection or appealing to higher authorities.
Appendix A to this statement sets forth the matters to which I
was assigned at the time of my physical transfer from the Natural
Gas Certificate Section. By mutual agreement of the Assistant Gen-
eral Counsels, I am concluding the work in gas cases in which a
large investment of effort existed.
Appendix B to this statement shows the license project cases to
which I am assigned. I have no complaint concerning my work as
part of the trial staff of the Hydroelectric License Section.
In order to properly understand personnel matters relating to the
career employees, such as myself, I will explain briefly my under-
standing of the purpose of the Natural Gas Act, the intention of
Congress in enacting the Natural Gas Act, and employment of at-
torneys to represent the public interest. These matters are a neces-
sary backdrop to understanding the people involved.
NATURAL GAS ACT
"The primary aim of this legislation"-the Natural Gas Actt-
"was to protect consumers against exploitation at the hands of
natural gas* companies," Justice Douglas, speaking for the Supreme
Court in the opinion, FPU v. Hope Natural Ga$ Go., 320 U.S. 591,
January 3, 1944. "Unreasonable charges exacted at this stage"-sales
to ~ipelines-"of the interstate movement become perpetuated in
large part in the fixed items of cost which must be covered by rates
charged subsequent purchasers of the gas, including the ultimate
consumer. It was to avoid such situations that the Natural Gas Act
was passed." So said Chief Justice Vinson, speaking for the Supreme
Court in Interstate Natural Gas Go. v. FPU, 331 U.S. 682, 692-3,
June 6, 1947.
Section 20(c) of the Natural Gas Act, 15 U.S.C. 717(s), authorizes
the Commission to employ such attorneys as it finds necessary for
proper legal aid and service of the Commission or its members in
the conduct of their work, or for proper representation of the pub-
lic interest in investigations made. by it, or cases or proceedings
pending before it.
The intention of Congress is that natural gas shall be sold in
interstate commerce for resale for ultimate public consumption at
the lowest possible rate consistent with the maintenance of ade-
quate service in the public interest. See section 7(c), Natural Gas
Act, 52 Stat. 825, the original certificate section of the Natural Gas
Act.
The Commission has instructed its employees to forcefully carry
out the will of the majority of the people as expressed in the laws
of the United States, and the rules and regulations thereunder, which
govern our actions. The General Counsel has stated that the views
of consumers affected by Commission actions and representation of
PAGENO="0012"
6
the public interest are functions. performed by the Commis~on staff.
See the remarks of the General Counsel, September 16, 1976, to the
Federal Bar Association.
The Natural Gas Act, therefore, places the responsibility for
advocating the public interest position on Commission staff at-
torneys. During my 11 years of service, these responsibilities have
always been at the base of our conduct. Mr. Robert L. Russell, the
Assistant General Counsel from 1956 to 1970, under whom I served,
repeatedly directed us to this standard of conduct. Moreover, he
indicated during our training that such had been the uniform prac-
tice during his service as an attorney with the Commission beginning
in 1938. These policies remained in effect during the years 1970-1976
during which Mr. Lewnes was the Assistant General Counsel.
PRIOR TESTIMONY
On January 15, 1976, I testified before the Energy and Power
Subcommittee, at the request of Chairman Dingell, on diversion of
natural gas by Tenneco Oil Co. from gas fields in the Federal domain
in the Gulf of Mexico, and other gas producers' attempts to divert
gas from interstate resale markets to their own markets or plants.
The reference here is hearings before the Subcommittee on Energy
and Power, 94th Congress, 2d Session, "Long-Term Natural Gas
Issues," Serial No. 94-87, pages 641-711.
On January 23, 1976, I testified before this subcommittee on the
withholding of gas production by Mobil Oil Corp. from Federal
domain leases in Grand Isle Block 95 field in the Gulf of Mexico.
The reference here is hearings before the Subcommittee on Over-
sight and Investigations, 94th Congress, 2d Session, "Natural Gas
Supplies," Serial No. 94-88, pages 116-127.
CERTIFICATE SECTION, LEGAL STAFF
On April 1, 1976, Mr. George P. Lewnes, Assistant General Coun-
sel in charge of the Gas Certificate Section, left the office to become
an administrative law judge.
Between April 1 and May 10, Mr. Cyril S. Wofsy was acting head
of the. section. On Ma.y 10, Mr. Wofsy asked to be relieved of the
duties. I believe Mr. Wofsy is here this morning and wjll tell you
why he felt compelled to make that request. From May 10 to June
3, Mr. John J. Kea.tir~g was acting head of the Certificate Section,
at which time Mr. Gordon M. Grant was appointed acting head of
the section. Mr. Grant remains as acting head. I understand that
there has been an intention not to fill that position on a permanent
basis.
Since September 1974, the career certificate legal staff has been
drasticaily diminished. Between that date and January 1977, only
8 of the 26 original attorneys remain in this section. Of this, 18 de-
parted, 12 resigned from the Commission, and 6 transferred else-
where in the Commission. This represents an extraordinary rate of
attrition.
Three of these vacancies were filled by persons previously holding
schedule C positions, indicating a further downgrading of the prior
nonpolitical professional career orientation of personnel policies.
PAGENO="0013"
7
The attrition in personnel in September 1976 was so acute that
attorneys were ordered into overtime work. As a point of reference,
there were approximately 25 attorneys assigned to Mr. Russell in
1965. Additionally, the curtailment and extraordinary relief cases
were added to the duties of the Certificate Section in 1970. Together
with the increased workload in the Section 7 area, these substantial
added duties imposed further demands on the staff. The num~ber of
OGC-filled positions in August 1974 was 137; it increased to 151 in
December 1975; and it rose to 159 in December of 1976. The actions
and nonactions in allocating resources to the Certificate Section
indicated a negative staffing posture toward natural gas producer
supply and price cases, although, as shown by the statistics, adequate
resources were available in OGC.
As I stated earlier, all of these circumstances indicated that I
should accept the transfer from the Natural Gas Certificate Section.
Mr. Chairman, that concludes my statement.
I have a sheet with background data and I have the four appen-
dixes as referred to. I ask that they be made part of the record.
Mr. Moss. Without objection, all attachments to your statement
will be included in the record at. this point..
[The material referred to follows:]
BACKGROUND DATA OF RUSSELL B. MAMONE
Position: Supervisory Trial Attorney, Office of General Counsel, Federal
Power Commission, Washington, D.C.
Date of Employment: August 1965 to present.
Date of Birth: December 20, 1929.
Place of Birth: Cleveland, Ohio.
College: Ohio State University, Columbus, Ohio.
Degree: Bachelor of Mechanical Engineering.
Law Degree: Western Reserve University, Cleveland, Ohio, Juris Doctor.
Member: Bar of the Supreme Court of Ohio.
APPENDIX A.-CASES ASSIGNED TO RUSSELL MAMONE, OCTOBER 13, 1976
Name Docket No. Date of order Subject
Superior Oil Co., et at Cl74-734~~ June 29, 1976; Limitations by producers on volumes of gas
Opinion No. sold to pipeline.
766.
Cities Service Oil Co., et at C175-479 June 25, 1976~ Abandonment of gas sale; rate for sales to
and Tennessee Gas Pipeline Co., East Cameron
C175-489. BI. 135.
Gas Gathering Corp C175-34 July 2, 1975.... Classification of gathering company.
Investigation of Tennessee Gas Pipeline RP75-45 Jan. 19, 1976_... Investigation of 1974-75 curtailment and gas
Co. shortage.
Exxon Pipeline Co. of California CP74-35 July 20, 1976 Santa Barbara Channel offshore pipeline.
Southern Natural Gas Co RP74-71-2...._ Apr. 15, 1975.... Over-run of gas by Atlanta Gas Light Co. of
boiler fuel for use by Georgia Power Co.
Michigan Gas Storage, et at CP74-322_.... Jan. 11, 1977.... Use of offshore Louisiana gas by Consumers
Power Co.
Shell Oil Co C176-3 and Apr. 12, 1976 - Warranty sale to Southern Natural Gas Co.
Cl67-808.
Transcontinental Gas Pipeline Co CP72-135__.... Sept. 26, 1975__ Storage and exchange with Sun Oil Co.
Natural Gas Pipeline Co CP72-233....... Aug. 21, 1975_ - Transportation of Texaco's gas from off.
shore Texas.
Do CP76-14 Sept 8, 1976~ - Reservation by producers of offshore Loui-
siana gas.
Gulf Oil Corp Cl76-105 -- - Aug. 15, 1975 - Jurisdiction over Gulf's pipelines in offshore
Louisiana. .
Tenneco Oil Co., et at Cl75-45 May 14, 1975 - Transportation of offshore Louisiana gas for
producers use.
Columbia Gulf Transmission, et al CP75-359....... June 28, 1976 - Gas supply for new pipelines offshore
CP75-262._... Aug. 13, 1976 Louisiana.
PAGENO="0014"
8
APPENDIX A.-CASES ASSIGNED TO RUSSELL MANONE, OCTOBER 13, 1976--Continued
Name Docket No. Date of order Subject
Continental Oil Co., et aI C175-76L - - - Dec. 22, 1975 - Exceeding 60 days under emergency sales
regulations.
Hilda B. Wienert, et al G-2730 Mar. 3, 1976; Price for rollover of producers sales con-
Opinion tracts. -
No. 655.
Natural Gas Pipeline Co CP76-14 Nov. 21, 1975_ - West Cameron B1. 543 gas supply prolect.
Exxon Corp Rl-75-46 June 1, 1976_ - Rate increase on warranty sale to Columbia
and Gas Transmission Corp.
R175-76.
Tennessee Gas Pipeline, et al CP72-6 June 13, 1975; Transportation of offshore Louisiana gas for
Opinion No. producers.
727.
Rosarlo Production Co., et al Cl66-776 -- - Nov. 8, 1976; Refund of excess charges to Lone Star by
Opinion No. producers.
781.
Mobil Oil Corp Rl72-250 - - - May 18, 1976~ Diversion of interstate gas to local customer,
Oct. 3, 1975... TCB Field.
Getty Oil Co., et aI C175-319 - - - Sept. 17, 1976~ Reservations by producers on offshore sales
pipelines.
Mobil Oil Corp Cl75-538 -- - Sept. 8, 1976~ - Sales to Trunkline from offshore Louisiana
Trunkline Gas Co CP175-273~ Aug. 15, 1975.... i~rand Isle B1.95 Field.
Texas Eastern Transmission Corp., et al_ - - G-12446 Sept. 14, 1976~ Refund of excess charges by Rayne Field
producers.
Felmont Oil Corp. Case Pomeroy Oil Co -- - C176-318 Transportation of offshore Louisiana gas for
producers.
Black Marlin Pipeline Co CP75-93 June 7, 1976~ - Transportation of offshore Texas gas to
Union Carbide Corp.
APPENDIX B-HYDROELECTRIC CASES ASSIGNED TO RUSSELL MAMONE, FEBRUARY 4, 1977
Name Docket No. Date of order Subject
Alabama Water Imp.; Commission v. E-7440 Feb. 2, 1977.~ Water quality at I-bIt and Smith Projects
Alabama Power Co. Black Warrior River.
Alabama Power Co P-2165 and Feb. 11, 1977 - General hydro matters.
P-2230.
Pacific Power & Light Co P-935 Feb. 3, 1977... Relicensing Merwin proiect.
Clark.Cowlitz Joint Op. Agency P-2791 Feb. 18, 197T. - License application for Merwin proiect.
APPENDIX C--MAJOR RESPONSIBILITY CASES AND AREAS OF RUSSELL MAMONE, 1965-76
Name Docket No. Date of order Subject
Transwestern Pipeline Co. and Cities Serv. CP67-22o~_ Opinion No. Sales by Transwestern Pipeline to Cities
ice Gas Co. 574; Mar. 11, Service Gas Co.
1970.
George Despot, et al C165-974 - - - Oct. 16, 1969~_ Unauthorized sales by producers.
Pacific Gas Transmission Co., et al CP69-34&._.. Mar. 13, 1970~ Imports of Canadian gas.
William G.Webb,etal G-6887 Opinion No. Abandonment of gas sales and acquisition
642;Jan.4, by El Paso Natural Gas Co.
1973.
Spencer Gas Co Rl69-2 (None) Complaint on excessive gas rates.
United States Pipe Line Co CP69-284~. Sept.24, 1969.._ Expanded boiler fuel sales to Mississippi
Power & Light and Gulf Power companies.
Columbia Gulf Transmission Co., etal CP65-102 Opinion No. New market expansions for competitive
et al. 512; Jan. 24, markets.
1967.
Transcontinental Gas Pipeline Corp CP65-18L.~ Opinion No. Boiler fuel sales to Consolidated Edison of
532. New York.
Panhandle Eastern Pipeline Co CPC6-50 Opinion No. Direct sales by local utility to industrial
510; Dec. 23, customer.
1966.
Do do Opinion No. Industrial sale certificate.
539; May 1,
1969.
Do CP68-214~. Opinion No. Export sales to Canada.
566 Sept. 5,
* 196k
Cities Service Gas Co., et al CP66-226 Opinion No. Major pipeline expansion and producer
527; Aug. 15, abandonments.
* * 1967
Cities Service Gas Co. and El Paso Natural CP66-226 Sept. 17, 1968, Joint gathering facilities in Hugoton Field,
Gas Co. and (40 FPC Kans.
CP65-384 463).
Harry C. Boggs Cl67-719~~ Nov. 7, 1967~ Producer abandonment to United Fuel Gas
Co.
PAGENO="0015"
PPPENDIX C-MAJOR RESPONSIBILITY CASES AND AREAS OF RUSSELL MAMONE, 1965-76--Ccntinued
Name Docket No. Date of order Subject
Shenandoah Gas Co CP68-196.._ Sept. 30, 1968... Right-of-way of pipeline.
South Texas Natural Gas Co CP67-349~ Aug. 23, 1969 Rates of sales to Transcontinental Gas Pipe-
(42 FPC line Corp.
200).
(Study) (None) Apr. 12, 1966 - FPC jurisdiction over sales.
Do do Dec. 20, 1966 - FPC jurIsdiction of direct sales by producers
to consumers.
Do do Jan. 27, 1969.. FPC jurisdiction over natural gas companies,
sec. 1(c) of the act
Cities Services Gas Co CP67-150........ Jan. 27, 1967~ Powerplant gas sale to Kansas Gas & Electric
Co.
Atlantic Seaboard Corp CP66-235....... Jan. 25, 1966~... Unauthorized construction and operation of
facilities.
Biddiford and Saco Gas Co lN-997 May 5, 1967 - - Jurisdiction over facilities.
Transcontinental Gas Pipeline Corp CP63-228~. July 2, 1968...... LNG tank sitting, New Jersey.
Michigan-Wisconsin Pipeline Co CP66-65 Dec. 23, 1965.... Merger of pipelines.
General American Oil Co. of Texas, et al. - - Rl65-281_.... Apr. 19, 1966 - Escrow of producer refunds in Federal
Domain disputed zone.
Atlantic Seaboard Corp CP66-390....... Sept. 20, 1966~ Pipeline safety, materials.
Northern Natural Gas Co., et al CP66-247_.... Oct 28, 1966~ - Import of gas from Canada.
Northern Natural Gas Co CP67-295~.... Nov. 14, 1967 - Sale of gas to fertilizer plant.
East Tennessee Gas Co CP66-375_ - - Nov. 14, 1966.~. Service levels to customers.
Tennessee Gas Transmission Co CP68-166 - - Mar. 21, 1968~ Right-of-way dispute.
South Georgia Natural Gas Co (None) Jan. 26, 1966 - Right-of-way problems.
(Study) do May 20, 1966 - Natural Gas Pipeline Safety Act
Excess capacity of pipelines R-293 Feb. 11, 1966_ - Rulemaking.
Curtailment reports of pipelines R-368 June 25, 1969_ Do.
5-year forecast pipeline companies R-317 Jan. 24, 1969 - Do.
Texas Eastern Transmission Corp CP72-21L._ May 1, 1972 -- Transportation rate for Mobil from offshore
Louisiana.
Consolidated Gas Supply Corp., et al CP73-158 -- Sept. 15, 1972; Exchange and storage of gas.
Opinion No.
675.
Navarro Gas Producing Co., et al C171-834 and Sept. 20, 1972; Transportation and sale of gas.
CP72-274. Opinfon No.
689.
Natural Gas Pipeline Co. Phillips Petro- CP71-50 Jan. 30, 1973_ - Transportation and exchange of proiucer's
leum Co. gas.
Natural Gas Pipeline Co., and Amoco Pro- CP72-105 May 1, 1972_ - - Exchange and transportation of gas, Florida
duction Co. and Power & Light Co.
C172-129.
Missouri Edison Co CP70-161~_ Opinion No. Service to industrial customer.
614; Mar. 10,
1972.
Tennessee Gas Pipeline Co CP65-352__ Opinion No. Abandonment of LNG facilities.
624 July 26,
1972.
El Paso Natural Gas Co., et al CP71-6 Opinion No. Joint operation of storage.
620; June 19,
1972.
Arkansas-Louisiana Gas Co CP71-31L~ Opinion No. Acquisition of industrial gas pipeline latera I.
53; Mar. 14,
1973.
Atlanta Gas Light Co CP71-221___ Oct 4, 1971_~ Jurisdiction over facilities at Tennessee-
Georgia border. -
Tennessee Gas Pipeline Co., et al CP68-23L.~... Mar. 6, 1969.... Offshore leasing pipeline proposal.
Panhandle Eastern Pipeline CP75-50 July 20, 1976_ - Increase in budget limit for compression
facilities.
South Texas Natural Gas Gathering Co CP76-272__~ Oct 19, 1976___ Deliveries under an imbalance.
Arkansas Gas Exploration, et al C176-319__ Oct 27, 1976__ Certificate for new sales.
Texas Gas Transmission Corp CP76-367...~ Oct 19 1976 - Abandonment of lateral land.
Tenneco Oil Co., et al C175-466 -- - Mar. 1, 1976; Show-cause on imbalance of deliveries not
Opinion 755. authorized.
Sea Robin Pipeline Co., et al CP73-87 Apr. 5, 1974 Producer reserves behind new pipeline.
(51 FPC
Tennessee Gas Pipeline Co CP73-243...~~ No~21~ 1973 - Pipeline expansion, Grand Isle Bloc 41-43,
West Delta Bloc 35-41 offshore Louisiana.
Texas Eastern Transmission Corp CP66-43 Mar. 2, 1973 - - Investigation of Staten Island, N.Y. ING
facility.
High Island Offshore System CP75-104........ July 30, 1976; Pipeline construction offshore Texas and
June 4, 1976. Louisiana.
Tennessee Gas Pipeline Co CP73-48 June 4, 1973_ - Pipeline offshore Louisiana East Cameron
271-273.
AtlticRkhfield~~::::::::::::::::: ~J~j~'----} Aug. 29, 1973~tSouth Pass 61 pipeline gas supply.
Natural Gas Pipeline Co CP74-101...~ Apr. 18, 1974; Pipeline construction, Eugene Island 330
Sept 24, 1974. offshore, Louisiana.
Chevron Oil Co C174-425___ Feb. 14, 1975.. Gas supply, bloc 28 field WestCamercn~rea,
offshore Louisiana.
Natural Gas Pipeline Co CP74-25&..... Oct 5, 1976......~ Excess storage withdrawals 1975-76 winter.
Columbia Gulf Transmission Co., et al CP76-66 Apr. 2, 1976~_ South Marsh bloc 58 field pipeline.
Exchange Oil and Gas Cl76-12 and Mar. 22, 1976.. Emergency gas sales to United Gas Pipeline
C176-27. and Columbia Gas Transmission Co.
Southern Natural Gas Co CP76-76 Apr. 12, 1976_ - West Delta Bloc 133 offshore pipeline.
Public Service of North Carolina Co RP76-103...... June 2, 1976 -- Diversion of royalty gas by Texas.
PAGENO="0016"
10
4. A *flk~N~.
o u _~~~-_ __J~Jiaz~_1_PJ___ __JI( 2..
POSITION DESCRIPTION ~ __________________
..C,I&,t C!t,m'
g~n~gy~ry~ Tr~ia1 Atto~rnmy~jI~ub.JltiLL -Ge--- -SD-I i-I--- ~
I__________ ~u~n~ory TH al At tnrnny~nh~iThfl-) ~ ~(~f 13
.~==i=~j=
~
1du~gl~1'owQr-..Coe,siaRiOfl---- ~ -~
hi Ctmd~tbd!'tth'4 ~. Filth ~tbd~L'hn
;i jj~ ~rt~d~O~...'d ~.5il1tk..,f t~Tt~,~d'~" tb.,fth,dtfrs
~
~ fljr,~j~ns ~Qff.i c.e~ af l~armonaoL.gXucrL1a~L
Under the general administrative direction of the Assistant General Counsei
~n c~iarge of nate-al gas certificates, and, on occasion, special assignment by ~he
cenclral Counsel', he d'~.ities of this position are: to be rcspcnsible for the prepara-
`:ionj for trial c trial or argument of cases involved in the Cornission's adrn.ini-
4tra1tion of that ortion of the Natural Gas Act concerned wifh the issuance of
I,1atural ~as cert icates; rulemaking matters; end independent producers enpaged in1
~.nte1rstate opera, ens; rulemaking matters'; and questions of procedure and gtatutor~
interpretation. i~mcumbent will be responsible for processing cases which involve
tntters of unusua difficulty, national importance and significance, requiring
great responsibilty and extended training and experience which has demonstrated
exceptional bade ship and attainments in the trial of cases, legal research and
at ministration.
More specifically: to represent the Commission at hearings before the Commission
tting en bane, including joint hearings with State cot=tissions, and in tr:talu end
i gumenta in the Courts in cases involving unusually difficult and corplicated fact8;
toting to the issuance of natural gas csrtificntes pursuant to the provisions, of
tie Natural Gas Act; to be responsible for the initial preparation, and review or
PAGENO="0017"
11
-2- D-2
r~writing o~ briefs, pleadings, and other legal documents for Subnission to the
C Ermission a}~d the Courts, in the above types of cases and in proceedings tof
r view such cases in higher courts, including preparation, or review or rewr~iting
o petitions for certiorari, briefs in opppsition to petitions for certiorari,
a d briefs in proceedings on certiorari, in the United States Supreme Court;
b~ renpongible for the preparation and making of oral argur-ents in the
Appellate courts on assignments by the General Counsel, principally the
U. . Court of Appeals. To be rc~ponsible for giving legal `advice and assis...
tar cc (boib em]. lnd written) in renponse to requests from the Comerfrmion, mdi-
~`i us]. CuerrsIrrrrlo~iema, the General Counsel, tcrr;iatant General Counsels, Bureau,
f ico, and Div4ion Chiefs, and where necessary or appropriate to the dis-
Ii rge of the Commission's duties, preparation of responses to requests from
ti em Federal agencIes, members of Congress, Stat~s, and municipalities and
o requent consultations with and among the General Counsel, the Assistant
0 5 al Counsels, and other staff methers of the Office of General Counsel, on
ua t rs of general interest or concern, To supervise, direct, and review the
o k of a group ol ~Ittomnoys of lower grade assigned in particular cases and
a aged in prelimin~rry activities relating to hearings, the conduct of hearings
n arguments, the ?rcparation of briefs, orders license instruments, corro-
p ndcnce, and memoranda of law. To perform such related comparable legal
u iee Cs assigned including, when required, the preparation end argument of
7 en, cr the supervisIon of lower grade attorneys engaged in preliminary
,~i~jivitji~es relating to hearings snd the preparation of legal documents thereon
in casc~ involved in the Commission's administration of (a). the Federal Power
Act, (t~)I the Natural Gas Act, and (c) Executive Order No. 10485; and certain
I Jii~ortions of the Bonneville, Fort Peck, T,V.A. Acts and the Flood Control
Act of 1944,
Mr. Moss. Mr. Lemov?
Mr. LEMOY. You worked 11 years for the Federal Power Commis-
sion and during that period of time you worked primarily, or ex-
clusively, on natural gas producer rate and certificate matters; is
that correct?
Mr. MAMONE. Not so much rate matters, Mr. L~mov. The initial
rates were before our section but actual rate setting personnel in
OGC were in another section.
Mr. LEMOV. You worked on certificates of producers and pipelines
relating to the production `and delivery of natural gas in interstate
commerce. Is that right?
Mr. MAMONE. Yes.
Mr. LAMOY. That is the heart of the Commission's natural gas
regulatory function at this time. Is that not correct?
Mr. MAMONE. That is correct.
Mr. LEMOV. Over that period of time you gained considerable ex-
pertise, did you not, in that type of ease?
Mr. MAMONE. Yes, sir.
Mr. LEMOV. About how many natural gas producer and pipeline
cases would you estimate you handled over that period of years?
Mr. MAMONE. It certainly must have exceeded 100 cases, Mr.
Lemov. I tried to taibulate some of them in my appendix but I did
not have~'time to do a complete job.
Mr. LEMOV. In all those years did you ever receive an official repri-
mand or criticism in regard to your work?
Mr. MAMONE. No, sir.
Mr. LEM0v. Never did. In faet,~ you were promoted pretty regu-
larly, were you not-?
Mr. MAMONE. Yes, sir.
Mr. LEM0v. I went through some of the materials we obtained
from the Federal Power Commission personnel office and we counted
87-292 0 - 77 - 2
PAGENO="0018"
12
nine promotions ingrade and four grade promotions, nine ingrade
raises and four grade promotions. Does that sound about right?
Mr. MAMONE. Yes, sir.
Mr. LEMOV. You rose steadily throughout those 11 years?
Mr. MAMONE. Yes, sir.
Mr. LEM0v. Mr. Chairman, I would appreciate it at this point if
the record could include as exhibit A the ingrade and grade promo-
tions of Mr. Mamone throughout this period of 11 years with the
Federal Power Commission.
Mr. Moss. Is there objection?
[No response.]
Mr. Moss. Hearing none, it will be inserted.
[Exhibit A referred to follows. See also memorandum from sub-
committee staff to Chairman Moss dated March 17, 1977, p. 401.]
PAGENO="0019"
13
RBTUB~ TTIS FOPS~1 ¶tO TPR OPRICE OP PPRSCBBRL PRO-RAMS iT LEAST ~T DAIS PRIOR
TO TIR DAB~ Oif WRI~ TIB i~-~pr~x~ Is ra~ ~ .~ ~ ~
Sigcat~ire end Title o~ Certif~-~a~- Off iclel
~
PC ~or~ - E~I~IT A -
E~(lO-cd)
PPRZBAL PC'M~PR ~
TPRICATIOE ~ `~IBBII G?X2 PAT' ICPR~SR
~ ~ Santechea- 231975
Ruzzeii B. ~~eno~e or or-~i--~. CC-C
* ~ Trial Attorney (Pu) - G-al~- GS-9-35--15/l~
- . ~5-o~E~32,t~
I certify thet the abc-re caned e l-yee s ~rrze ban been
e~r.eted aej~t the a~orc~-jate elenects c~ tts rat~.~ ēiiide on the
-~--~ree side at tci3 rorm. This anplcye&e ?~_~O~e.cca: - -
* LI__I is not or an accept.able 1e~e2. c~ cc~etence ror . . -
rea~cns r3hcwn belay. I reoc~cd recocei eratio~ c~
or an accept.aole lev~1 cr c~-~ec~-e end w-ea~ a
- uithin grade inereese. .~ - ~.. . - -
:~L 7p.e~~ . *. I_aI_--I_ a:..
stgaature cad Title or Re lewicg Offlc~a1
Sigoature and Title oZ Btirean or Office * Date
-- ~. *~
*~p~r~at ~ &~ ()ffi~ E~az1Tjs rec-c~--ed oaly if the reccn~endation
in to vithhold,tbc ~`!thin grade increase.
L
PAGENO="0020"
14
FT~For~95T . -
P~~AL ~`i~ ~ - - -.
- cr~'IcATIcT FO~ W~IZ PAZ ~?~AS~
* - : : * ~ O9-29-7~
* p~e~ Buoseli B. ~OO~ - ~ Cff~cn: CGC
1 * Titin: Ti-i1 Attorney (ptr) = - Gr~_e: C-S-505-15/3
~29,2C5 To: ~3O,1i~7. :..;-:
I I Cert_f3? t~at tb~ EtbG7e naned e~.n~&s p ~or=~nce ~ ~
I e-r~ntet agnin~t the aporoprlste elene~z the ~a~ia~ guite an the -
i reveree elte Cf thin form. Thin eal_ye& a ~erfo~aa~ce: * -
- * -. - - J~~J In not of an acceptable level of CCz~~eace fur the --
* * - - . * - reasons ehown be1c~. I r-eo~~rd. re~anideratton an *
* *-. J~ in of en acceptable level of a et~re eat r~entn a - -
-. : *-. * *. ~ithia grade increane. * - - - --
- £~7 Reeark3 -
BHTU~ TBIS FOIT1 TO THE OETICE 0? PHEZC3~L PR0~P_~)'3 AT L~AS~ THE DAZS PRICE-
`10 ~s flA~ azi wsicir THE ~ ts ______ ~ (Shcwr~ Above).
Si~ature Title - Certifying Cl~~cl~l Date
~ ~6~J / ~ 7/v
ant tie of Reviewing 0 Da e -
Signature and Title of Bureau of C~lee leat* Date
- General Caaasel -
9 / y -* 7L
*Apprcy~al of puz4au or Office Heat in renaired only if the recc~o~endetid
In to witbhol~ tb' `Ithin grate ireaae.
PAGENO="0021"
(~) S.'L (3>"!, `,~P~"'" "`". ~
Prozot~oi
9/ii~/73
(fl ~ (Si'"!, ~ ~ ~ - . - - ~ L ~
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-
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~ P~a ~o4-io,J
~`~-"~` 11. (F,,' C-SC ~.)
1
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5. FROM~ P'SSITI9I$ TITSZAbD NUM~1.9~ - . - - - - - -
~ f
~;;~` ~ pa ~
9. NAM~A99 LCCATIC$ CF OYtMGcF~ce - .
FederaL Power Cor~iseon -: -** - - -~- .--. - -
Of~1c'' o~ tb~ C-eit~.'-ai Couosel
825 North Cap~to1 Street D. E., Wasb.i~gtco, DC. - ~ . - - = .~ -
2). ~ ~
~~~es) GS-5C5 L 2 p~. ~2'~ `795
I.
FederaL Power CcoaLosic~ *- - -- .:: - - -
O~ice OP th~ Ge~ ~. Cci~ el
825 North Ca~ito1 Stroet N. N., ~ah~iigtoo, D.C. -- - - - 1:
23.CUT?STATIOM (C-~...',.-.O...) - - , ~iTJ~iTe*CCDE
Z1.A?PRO?RI9T)O$ . ~-s~ic.'~ ser~se
21!~ ~--~ .: H~ H ~ t2P_~I STATe
R(99993 ~
9 PTeSTST9GQFflc~ ~
F.. ,.,-~,, ~ ?(~~7)
- . -
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15
- It epphceSh~ eb~e 99%.4999A3e
ieA9E(cAp5) L~T-flRST-MWaZ MR-MOS-~
(9)
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C)9?PRoe~o~y~ Dir. ~ --~ -
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C) 99'.~e (.V,,~ io..
~
PAGENO="0022"
16
Mr. LEMOV. On or about March 31, 1976, there was a document
called "FPC Employment Performance Evaluation, Annual Rating."
Are you familiar with that, Mr. Mamone.
Mr. MAMONE. Yes, I am.
Mr. LEMOV. In that rating your direct supervisor, Mr. George P.
Lewnes, Assistant General Counsel, made the following evaluation
of you. If I may, I would like to read it..
Mr. Moss. Certainly.
Mr. LEMOV. "The incumbent's work performance is above average in
both quality and quantity. The mcnrnbent has handled his workload in
a professional manner and has shown initiative in the preparation and
execution of his responsibilities.
"Additionally, incumbent writes and speaks clearly and succinctly.
Incumbent is able to derive maximum efforts from his technical staff
and is well thought of by all persons associated with his cases."
Mr. Chairman, I would like to have this incorporated in the
record as exhibit B.
Mr. Moss. Without objection so ordered.
[Exhibit B referred to follows:]
PAGENO="0023"
FPC EMPLOYEE PERFORMANCE EVALUATION - ANNUAL RATING LOHBIT B
HART CF EMPLOYEE DATE CF TAuNt - FERIOD CIVERTA -
Russell B. Nanone . 3/31/76 4/1/75 - 3/31/76
6CR/OFF [DI VIIICN/IECTION TITLE IF FRACTAl P0111111 60016 [~IEI
ccc Trial Attorney (Pub.Util.) GS-15 905
IHITRUCTIOTIS,
1. Cnnidna.aoh ftnnpa&-at.ly and ind.p.nd.ntly of 4. 1f fonts,- I. not a icala', to job b.ing coaioat,d,
all. nth,nn. do not it.
2. Dcc' t 1.6 yooaaE ng on onn footon infla.no. yooc 5. Fo-oopa--ai no~~ ~ 13-19 on
tiogn on oth. faoton. An e.pioyn.aay 1. otnd opplioabl..
ic on on. footor and high as aYoEh.r. 6. CircE. tO. ra*b.r of th. ~;p1io~b1. fcotss ohich yoao
3. Don't alias on. .o,nt otypioal ooidnnt to scAly f.nl ac-c- ao.ot oilnifioant ion to job.
nfla.oo. tic, oo.pl.t. piotoaC Tin lanals ia .oa a foc-Lac- an. noplainaci in FF0 For,, 811.
f112 3
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Ii
CLIEVAI FACTORS
Kcca1~dc,
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CTAEAVISOAr FACTOCVU
J3~Fonloc,, RninVio.n
.
2. 0tiiI~otion of Tin,
.icb Attitod.
-
~/f
-
.14. Eaplaynn R,nngnitiaa V lco.lop.cnt
15. Planning
1'-°
-
~
-
-
~
banning Ability
Cnp.ndability
~6 Initiation-
~r
-
-
-
- -
14. Onganioing
17. Dirnoting Op.,-otionn
15. ContrnUiog Oa.rotioa0
p
- lad
i-t~
-
- -
- -
- -
- -
- -~
-
.1dgno 6
0 1 E ~ ,
1vT
I cap yocn
AIR FA011AC
9. Biting Ability
l~~T
-
21.
- -
-
10. lcdcp.nd.no.
11. Qcality of
- ~VV
V1
22.
23.
1
1 -i
-
- 12. Coopacotioo
vi
21. ~~1111111
1
It -
TIATItTIRR-CCIIMEN1 (In addition to oo.o,ntn on noaloatio, facto-a, o co.pl.tn coalsVation ohold coapa-n p.rfcrnanc,s
Dl! EJALUATlOj~.- - oith oritt.nVna--aofa~4-g~,O p.rfcc-.ono,oto,dVOrd, far th. nnplcyea'n position. Is, book if n..dcd.)
~.
The: incinthent's work performance is abo~re average in both quality
and quantity. Incumbent has handled his work load in a professional
V
manner and has shown initiative in the preparation and execution of V
his responsthiljties Additional, incumbent writes and speaks clearly
arid succinctly. Incumbent is able to derive maximum efforts from
his technical staff and is well thought of by all persons associated
wath his cases.
V
.
i
NOTED WITNOUT co'VcURRE\c~ DUE TO I\2DEQUATE ~STIFIcA~roN~(noJ)
CASED EN IRE ABOVE EVALUATION I CUE RATED THIS Et?LTTEEa
L0b0um0R00t0~ flEnootiofootny EI'~alot,nding ~JPnnfarnanc. Potin5 Pastpon,d V
-
~
RIVIEVER RTRIEVCR IPTAEVITiC OFFICIAL
17
I.
TUPERVISO, - V I
SICRATARE / - j~? DREXEi 0. iOUR~;ry
TITlE . / £~.J ~
[DAVE RU 3/~.l~m V V I~ur I R 1~7S
PAGENO="0024"
18
Mr. LEMov. Attached to your direct statement is a description of
the nature of your duties as a supervisory trial attorney with the
Federal Power Commission, signed by Mr. Leo Forquer, General
Counsel of the Federal Power Commission, September 13, 1973.
Mr. MAMONE. That is correct.
Mr. LEM0v. That job description includes the following statement:
Incumbent will be responsible for processing eases which involve matters
of unusual difficulty, national importance and significance, requiring great
responsibility and extended training and experience which has demonstrated
exceptional leadership and attainments in the trial of cases, legal research, and
administration.
Did you find the job you were promoted to in 1973, in fact, in-
volved cases to that degree of complexity and difficulty?
Mr. MAMONE. Yes.
Mr. LEMOV. Again, you never were criticized, reprimanded, or in
a.ny way questioned in the handling of those cases. Is that correct?
Mr. MAMONE. That is correct.
Mr. LEM0v. In fact, you were commended well after that period,
as late as last year, by Mr. Lewnes, your direct supervisor. Is that
correct?
Mr. MAMONE. Yes, sir.
Mr. LEMov. It is also true, is it not., that in October 1976 you were
abruptly transferred from your position t.o a job in the Hydroelectric
Sečtion. Is that correct?
Mr. MAMONE. Yes, sir.
Mr. LEMOY. Did you have any experience in hydroelectric work?
Mr. MAMONE. No, sir..
Mr. LEMov. No experience at all in hydroelectric work?
Mr. MAMONE. No, sir.
Mr. LEMOV. To whom did you talk at. the time you were told
about this transfer?
Mr. MAMONE. Mr. Journey personally gave me that position.
Mr. LEMOV. Wha.t did he say to you about the transfer and what
did you say to him?
Mr~ MAMONE. As I st.ated in my prepared statement, it was essen-
tially that he needed to redistribute the senior attorneys within the
Office of the General Counsel pursuant to the reorganization, that
it was required, and therefore I was being removed from the Gas
Certificate Section to the Hydroelectric Section.
Mr. L.EMOV. Were there any attorneys in the Gas Certificate Sec-
tion who had your degree of experience?
Mr. MAMONE. Perhaps one other attorney.
Mr. LEMOV. Perhaps 1 out of 18?
Mr. MAMONE. Eighteen or twenty.
Mr. LEMov. One out of eighteen or twenty?
Mr. MAMONE. Yes.
Mr. LEMov. Had your years of experience?
Mr. MAMONE. Yes. .
Mr. LEMOV. Did Mr. Journey know that you had testified in Janu-
ary of 1976 before the Subcommittee on Energy and Power of this
committee? Was he aware of that fact?
Mr. MAMONE. Yes, sir.
Mr. LEMOV. How do you know that?
PAGENO="0025"
19
Mr. MAMONE. I believe he was either there or informed of it. In
addition, prior to that appearance there was a meeting held in Mr.
Journey's office to review or preview what would take place at the
hearings.
Mr. LEMOV. So you are certain Mr. Journey was aware of your
testimony before Mr. Dingell's subcommittee?
Mr. MAMONE. Yes. In fact, subsequent to the hearing, we were re-
quested to supply a report to Chairman Dingell.
Mr. LEMOV. Really?
Mr. MAMONE. We supplied the report and a copy was reviewed by
Mr. Journey prior to the time it was transmitted to the Subcom-
mittee on Energy and Power. He was fully aware of everything
that was going on in connect.ion with that.
Mr. LEMOV. What was the report about?
Mr. MAMONE. The report was about the contracts on file with the
Federal Power Commission in which the gas producers were re-
serving quantities of gas for their own use or for future disposition.
Mr. LEMov. That is a major issue, is it not?
Mr. MAMONE. Yes.
Mr. LEMOv. Producers can reserve offshore gas and neve*r move
it in interstate commerce. That is the issue that the Commission has
been grappling with in the Tenneco matter, Docket C175-466. Is
that correct?
Mr. MAMONE. Yes.
Mr. LEM0v. Is it correct that Tenneco complained a~bout. your ap-
pearance before Mr. Dingell's subcommittee in papers filed with the
Commission? The industry complained about it, did it not? Are
you aware of that?
Mr. MAMONE. Yes; I am aware Tenneco Oil Co. made several
filings with the Commission indicating a certain displeasure or dis-
satisfaction with members of the staff of the Federal Power Com-
mission appearing before Chairman Dingeil in his hearings involving
Tenneco Oil Co. and other producers' operations involved in Mexico.
They filed at least two documents I know of relating to this one, in
the show cause case involving Tenneco Oil Co. as well.
They there advised the Commission they had problems with the
reports emanating from the hearings of the subcommittee and, there-
fore, they insisted on having oral argument before the Federal Power
Commission.
In another case they filed a brief criticizing the staff of the Federal
Power Commission for taking their case to Congress.
Mr. LEMOV. That `brief was filed about 6 months before you were
transferred out of the section. Is that right?
Mr. MAMONE. Yes, the brief was filed on February 10, 1976.
Mr. LEMOY. Mr. Chairman, I would ask exhibit `C, a motion of
Tenneco Oil Co., be incorporated in the record at this point.
Mr. Moss. Is there objection?
Mr. LENT. I have no objection, but can I just inquire whether
Mr. Mamone is identified in this report in any way, identified by
Tenneco?
Mr. Moss. The answer is that it refers to the testimony given hut
does not identify the person giving the testimony.
PAGENO="0026"
20
Mr. LENT. Was Mr. Mamone the only representative of the FPC
who gave testimony or were there others?
Mr. Moss. I believe there were ot.her representatives of the FPC.
Mr. MAMONE. There were others, yes.
Mr. LENT. Might I inquire as to the numbe.r we are talking about?
Mr. LEM0v. Who was with you that day before. Mr. Dingeil?
Mr. MAMONE. There were actually about a half dozen staff persons
there.
Mr. LEMOV. The principal witnesses were you a.nd Mr. Lewnes. Is
that right?
Mr. MAMONE. Yes. I was the only person at the hearing before
Chairman Dingell who was assigned to this particular docket.
Mr. LEMOV. It was your case?
Mr. MAMONE. It was a case I and anot.her attorney were handling
before the Federal Power Commission.
Mr. GORE. Are you familiar with the press reports that caine out
after the testimony?
Mr. MAMONE. I think there were some before or after. I am not
intimately familiar with that.
Mr. GORE. It would be. difficult to gather them all up, hut the
brief for oral argument refers to those who testified and those who
were mentioned in the press reports. I am trying to get a fix on that
just as you are.
I am wondering whether you and Mr. Lewnes were the only ones
mentioned in the press report.
Mr. MAMONE. As I recall, Mr. Gore, I was the only person speci-
fically mentioned in one newspaper article that affected this matter.
Mr. GORE. Not a scientific procedure, Mr. Chairman, but I think it
helps pin it down.
Mr. Moss. Is there objection to the insertion?
Mr. LENT. I have no objection.
Mr. Moss. Then it. will `be entered in the. record at. this point.
[Exhibit C referred to follows:]
PAGENO="0027"
21
* UNITED STATES OF AMERICA EXHIBIT C
FEDERAL POWER COMMISSION
1~
Tenneco Oil Company * )
Tennessee Gas Pipeline ) Docket No. C175-466
Company, a Division of )
Tenneco, Inc. )
NOTION OF TENNECO OIL COMPANY
FOR ORAL ARG~1ENT
Tenneco Oil Company (Tenneco Oil) hereby moves
that the Federal Power Commission (Commission) immediately
set for oral argument the issues raised in the above-
referenced proceeding. In support of its motion, Tenneco
Oil states as follows:
I.
* The above-referenced proceeding involves, inter
alia, an imbalance in receipts and deliveries of naturaigas
between Tenneįc CII and Tennessee Gas Pipeline Company, a
* Division of Tenneco~ Inc. (Tennessee).. This imbalance was
first brought to the Commission's attention in applications
filed by Tenneco Oil on July 23, 1974 in Docket No. C175-45
and by Tennessee on July 29, 1974 in Docket No. CP7S-23.
The applications were noticed to the public by the.
Commission on August 7, 1974 and have been the subject of:
(a) Commission orders in the DOcket No. CI75-46~,
record testimony, briefs and an initial decision by
Presiding Administrative Judge Convisser, briefs on
exceptions and proposed resolution of the imbalance
filed by Tenneco Oil.
(b) Commission orders in Docket No. C175-45, and
an initial decision by Presiding Administrative Law
Judge Southworth.
PAGENO="0028"
22
- II.
Since the close of the hearing record and briefing
in the above-cases, Tenneco P11, however, S k~QD.e_-~
of press articles which attribu~e ~
Staff certain representations and allegations concerning the
above-referenced proceeding.
Tenneco Oil also is aware of testimony by mernb~rs
of the Commission Staff before the Sub
and Power o~ tne Corr~aittee on Interstate and Foreign Commerce
at a hearing on January 15, 1976, which testimony demonstrably
is inaccurate and incomplete.
Because certain of the Commission Staff who ar~
referred tom the oress articles and ~
the House Subcommittee on Enercy and Power were not active
participaCts in the hearing in Docket No. C175-466 and have
numerous other responsibilities with the Co=~~ission~, i~js
understandable that commlete and accurate kn~wle&ce~of~ o~...._
* familiarity with, the record and mleadincs in that cas~may~
not be possible.
* In order to assure that the Commission has a
complete and accurate presentation of the -record, Tenneco
Oil requests that the Commission set the proceeding in
Docket No. c175-466 for oral argient on the record. At
oral argument, all the facts and arguments with respect to
the instant proceeding can be made directly to the Cornmis-
sion by counsel for Tenneco Oil and counsel for the Comrais-
sion Staff..
Also at such an oral argument, any Commission
inquiry into the proceeding or disagreements among the
parties about the record can forthrightly be addressed by
Tenneco Oil, Tennessee and. the Cormission Staff.
III.
In addition, in light of the above publicity and
attention of a congressional Coinzaittee into the adjudicative
functions of the Commission in this case, and to assure that
Tenneco Oil and Tennessee receive the fair and impartial
judicial hearing and decision required by Pillsbury Company
V. FTC, 354 F.2d 952, 5th Cir. 1966 and D.C. Federation of Civic
Assoc., et al. v. Vo1~e, 459 F.2d 1231 (1972), Tenneco Oil~
submits that oral argument is necessary.
-2-
PAGENO="0029"
23
WHEREFORE, for the foregoing reas3ns, Tenneco Oil
respectfully requests that the Conrnission set the issue of
the irn~a1ance in Docket No. C175-466 for oral arguaent~
Respectfully subrzaitted,
Gordon Gooch
BAKER & BOTTS Bruce P. Kiely
1701 Pennsylvania Ave., N.W.
Washington, D. C. 20006 -
Of Counsel: Attorneys for
TENNECO OIL COMPANY
Vernon M. Turner
Michael B. Silva
Tenneco Oil Company
P.O. ~cx 2511
Hct~i~ TeX~S 77~D~
-3-
PAGENO="0030"
24
UNITED STATES OF AMERICA §
§
DISTRICT OF COLUMBIA §
BEFORE ME, the undersigned authority, on this day
personally appeared in said DistriCt BRUCE F. KIELY, who
after first being duly sworn, on his oath deposed and said:
That he is an attorney for TENNECO OIL COMPANY; that as such
has signed the foregoing document; that he is authorized to
do so~ that. he has read said document and is familiar with
the contents thereof; and that the matters and things set
forth therein are true and correct to the best of his
knowledge, information and belief.
~rZ
tJCE F. KIELY7'
SUBSCRIBED and SWORN TO BEFORE ME this 21st day of
January, 1976. -
votary Public In and F~r
Irh~ District of Columbia
- 1
My Commission expireS: June 14, 1978
CERTIFICATE OF SERVICE -
I hereby certify that the foregoirg document has
* been served this date upon each person designated on the
* official service list compiled by the Secretary in this
proceeding in accordance with the requirements of §1.17 of
the Rules of Practice and Procedure.
Dated at Washington, D. C., this 21st day of
January, 1976. * -
~5CEF.KIEL~~m7
-4-
PAGENO="0031"
25
Mr. LEMOV. I would ask at this point that exhibit D a letter dated
January 20, 1976, from the Honorable John Dingell, Chairman of
the Energy and Power Subcommittee to the Honorable Richard L.
Dunham, Chairman of the Federal Power Commission, advising of
the testimony of Mr. Mamomie and other witnesses, and requesting
that they not `be discriminated against in any way, be placed in the
record at this point..
Mr. Moss. Is there objection to placing the letter from Chairman
Dingell to the Chairman of the Commission in the record at this
point?
Hearing none, it is so ordered.
[Exhibit D referred to follows:]
EXHIBIT D
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
SUBCOMMITTEE ON ENERGY AND POWER,
Washington, D.C., January 20, 1976.
Hon. RICHARD L. DUNHAM,
Chairman, Federal Power Commission,
Washington, D.C.
DEAR MR. CHAIRMAN: As I am sure you know, our Subcommittee has been
holding hearings recently on the subject of the discharge of the responsibilities
assigned tQ the FPC under the Natural Gas Act.
In the course of these hearings, it became necessary to consider testimony
from FPC staff witnesses. A number of them were invited `to testify in this
Subcommittee's hearings and have done so at the specific request of the Chair.
The witnesses who appeared are as follows:
Lundy Wright, Chief, Pipeline and Producer Rates Division
Blair Stover, Head, Producer Rate Section
Louis J. Engel, Supervising Regulatory Utility Specialist
Russell Thorell, Deputy Chief, Bureau of Natural Gas
Hayden Bryan, Industry Economist
Drexel Journey, General Counsel
George Lewnes, Assistant General Counsel
Robert Aber, Trial Attorney, Office of the General Counsel
Russell B. Mamone, Trial Attorney, Office of the General Counsel
Robert Szekely, Head, Market Section, Bureau of Natural Gas
Joseph Solters, Case Manager, Bureau of Natural Gas
Victor H. Zabel, Head, Reserves Evaluation Section
Jeffrey B. Smith, Geologist, Reserves Evaluation Section, Planning and De-
velopment Division
I would like you to know that the cooperation of these witnesses and of
the Commission in this regard is very much appreciated. I recognize that these
witnesses were testifying in areas which may seem highly sensitive, and I want
`to be certain that the fact that they testified will not put them at any kind of
disadvantage, now or at any later date. Other agencies have been known to
retaliate upon witnesses who have `testified to facts which their superiors would
have just as soon not disclosed in the public record and I would not `wish `this
to occur here.
I am confident that I have your support in this regard, but I would appreciate
it if you would have a copy of this letter put in the personnel files of each of
the employees under concern. In the event that any retaliation did occur, the
Subcommittee would have to treat that as a matter of extreme gravity, which
could be a painful experience for everyone involved.
Wi'th every good wish,
Sincerely,
JOHN D. DINGELL,
Chairman.
PAGENO="0032"
26
Mr. LEMOV. After you testified before chairman Dingeil's sub-
committee, you appeared before this subcommittee did you not?
Mr. MAMONE Yes, sir.
Mr. LEMOV. The subject of that testimony was the Mobil Oil Co.
and its failure t.o dedicate the Grand Isle field 95 to the interstate
market during the winter of 1974-75. Is that correct?
Mr. MAMONE. 1975-76.
Mr. LEMOV. Thank you.
Mr. MAMONE. I think the record of the hearing will reflect pre-
c.isely what was stated there. Specifically, my recollection is that
Mobil Oil Corp. was refusing to initiate service prior to the onset
of that winter.
Mr. LE~Iov. You prepared a memorandum, I think either with Mr.
Lewnes or for his signature, which stated that you had the presump-
tive. opinion at that time that. Mobil was withholdings gas from the
interstate market.. Is that correct?
Mr. MAMONE. The testimony was that there was a rebuttable pre.-
sumption that Mobil Oil Corp. was withholding gas supplies from
Grand Isle Block 95 field.
Mr. LEM0v. And you recommended to the Commission that it
exercise its authority under the Natural Gas Act aiid tell Mobil
to dedicate that gas to the interstate market. The draft order you
prepared actually would have directed Mobil to in one form or an-
other deliver the gas to the public. Isn't that right?
Mr. MAMONE. Deliver, I think, is the correct word.
Mr. LEMOV. It is a question of whether or not gas was already
dedicated.
Mr. MAMONE. It was a question of getting the gas moving and at
the direction of Mr. Lewnes, the Assistant General Counsel, I pre-
pared the draft order which is part of the recoi-d of the hearings of
this subcommittee.
Mr. LEM0v. Mobil opposed that, I presume.
Mr. MAMONE. Yes.
Mr. LEMOV. Vigorously, I presume.
Mr. MAMONE. ~es
Mr. LEM0V. And the draft order, in fact, never was signed by
the Commission, was it?
Mr. MAMONE. It was never issued by the Commission.
Mr. LEMOV. They issued a different order, did they not?
Mr. MAM0NE. Yes.
Mr. LEM0v. Briefly what order did they ultimately issue?
Mr. MAMONE. On November 21 the Commission issued an order
which, in effect, told Mobil Oil Corp. that they would be permitted
to have a 10-year contract rather than a longer term contract, or a
contract covering all available gas reserves in Grand Isle 95 field.
Mr. LEM0v. You say they folded on that issue or is that too strong
a word?
Mr. MAMONE. I wouldn't.-
Mr. LE1~1ov. I withdraw the question, if I may, Mr. Chairman.
Mr. Moss. Yes.
Mr. LEM0v. After your testimony before the two subcommittees,
ycu had additional disagreements on matters of policy with the Gen-
PAGENO="0033"
27
eral Counsel, Mr. Journey, in the HIOS matter, and regarding the
Shell Oil Co.'s warranty contract with, I believe it was, Texas
Eastern?
Mr. MAMONE. Southern Natural Gas.
Mr. LEMOV. Is it correct that in the HIOS case, which I believe
you indicated is one of the largest pipelines ever constructed in the
Gulf of Mexico, the staff of the Commission was anxious to have
signed contracts from the producers `before the pipeline was certi-
ficated. Is that right?
Mr. MAMONE. Yes; it was our view that the requirements of the
Natural Gas Act made it necessary that there `be gas, supply con-
tracts, that there `be assured an adequate supply of natural gas to
support the operation of the proposed pipeline, and that in order
for a certificate to be properly issued the applicant must. be willing'
and able to perform the service proposed.
In. the legislative history of the Natural Gas Act it is specifically
pointed out the necessity for the scrutiny of the adequacy of gas
supplies `behind proposed pipelines as one of the major objectives of
Congress in passing the Natural Gas Act, the section 7' amendment
of 1942.
This was a crucial point in the so-called HIOS proposal, namely.,
the authorization for construction of over $400 million worth of new
pipeline facilities.
There was serious question by the technical staff of the Commis-
sion over the reliability and the volume of available reserves.
There was a deep concern this pipeline would be constructed and
that the rates associated with the cost of `building and operating that
pipeline would then be flowed through to the consumers without the
consumers getting the natural gas that was proposed to be be-
hind this gas pipeline project..
Mr. LEMOv. The reason the consumers might not obtain the gas
or on a delayed `basis was the absence of signed contracts?
Mr. MAMONE. And further, Mr. Lemov, absence of certificate ap-
plications a.nd the acceptance of those certificates by the natural gas
producers.
As indicated to this subcommittee in the Grand Isle 95 field case,
even though the producer signs a contract, he can still not be com-
pelled to start production until he accepts a certificate of public con-
venience and necessity.
The Commission takes the position it has no authority to compel
the acceptance of a certificate by either a pipeline or a producer, and
as shown by the record in Grand Isle 95, the producer can wait until
he is satisfied with the conditions attached to that. certificate before
lie accepts the certificate.
The High Island situation was even further removed in tha.t not
only were there no certificates accepted, but there were no certificates
to be issued. There were no contracts for the sale of gas by those
natural gas producers.
Mr. LEMOV. This was a major change in the Commission's past
policy authorizing a pipeline like HIOS without signed contracts
and certificates for the producer. Is that right?
Mr. MAMONE. It was, Mr. Le.mov. I might add that subsequent to
the HIOS case the Commission has reverted to the policy of requiring
87-292 0 - 77 - 3
PAGENO="0034"
28
producers to accept certificates prior t.o construction of new pipelines
in the Gulf of Mexico.
Mr. LEM0v. You were taken off the HIOS ca~e, were you not?
Mr. MAMONE. I was one of the attorneys assigned to the case a'id
apparently Mr. Wofsy, the acting head of the section, as I described
in my statement, was directed ~by the General Counsel to remove
me from participation in the case.
Mr. LEMOV. What reason was given for your removal from par-
ticipation in that case?
Mr. MAMONE. Well, the reasons were given to Mr. Wofsy. I think
he will more adequately explain that to you directly.
Mr. LEMOV. Who ultimately presented the case?
Mr. MARKS. Can we get an answer to the question? I think it is a
good question.
Was he personally given some reason?
Mr. MAMONE. A number of reasons were stated informally, Mr.
Marks.
I think you can really get a. more comprehensive understanding~
though, of the personnel situation between the General Counsel a.nd
the head of our section from Mr. Wofsy.
Mr. Moss. We will have him before us. We had best go to the most
reliable source for that information.
If the gentleman does not object., we shall defer this until we have
that witness before us.
Mr. MARKS. Thank you.
Mr. LEM0v. Who argued this major case before the Commission
ultimately?
Mr. MAMONE. The Commission set the HIOS case for oral argu-
ment in July, or late June, the argument taking place in July of 1976.
The oral argument in behalf of the staff of the Commission was
made by Mr. Keeley.
Mr. LEMOY. Mr. Keeley presented the case for the Commission
staff?
Mr. MAMONE. Yes.
Mr. LEM0v. Did he argue the contract point at all?
Mr. MAMONE. My recollection, Mr. Lemov, is that he did not feel
that was necessary.
Mr. Li~xtov. He didn't feel it was necessary?
Mr. MAMONE. That is right.
Mr. LEM0v. This wasn't a little pipeline, was it? It was a big one.
There was a lot of gas out there.
Mr. MAMONE. Yes; an extremely large diameter pipeline. The main
part would be 42 inches in diameter. Very few pipelines are that
size. It. was designed to transport approximately 1 million Mcf per
day.
Mr. LEMOV. Mr. Keeley, who took your place in arguing that case
before the Commission, he was a very experienced attorney, I
presume?
Mr. MAMONE. My understanding, Mr. Lemov, is that Mr. Keeley,
who was an assistant to Mr. Journey, was approximately 1 year out
of law school. However, I could be wrong about that.
Mr. LEMOV. One year out of law school.
PAGENO="0035"
29
Mr. MAMONE. Yes, sir. He not only replaced me in the case, but I
understand he replaced all the other attorneys who had worked on
the case under the direction of Mr. Lewnes and Mr. Wofsy.
Mr. LEMOV. In October of 1976, less than 1 year after your testi-
mony before the Dingell subcommittee, less than 1 year after your
testimony before this subcommittee, and relatively shortly after your
removal from the HIOS case, you were transferred completely out~
of the division you had worked in for 11 years. That is correct, is
it not?
Mr. MAMONE. That is correct.
Mr. LEM0V. Who told you about that transfer?
Mr. MAMONE. Mr. Journey.
Mr. LEMOV. So in October of 1976 you we're suddenly called to the
office of Mr. Journey?
Mr. MAMONE. That is correct.
Mr. LEM0v. What did he say and what did you say?
Mr. MAMONE. Well, I think I have described substantially what
Mr. Journey said. My reaction was simply that. I would con~sult with
the Assistant General Counsels to whom I was assigned and to whom
I was being transferred and discuss the matter with them.
Mr. LEM0v. Did he give you any reason why you were being taken out
of this work you had done for 11 years?
Mr. MAMONE. Nothing specific relating to any work I had done with
the Commission, no.
Mr. LEMOV. Did he reassure you in any way that your congressional
testimony had noeffect on your transfer?
Mr. MAMONE. No, there was no mention whatsoever.
Mr. LEM0v. I think it is clear from the answers you have already
given that you had extensive experience in natural gas work.
Mr. MAMONE. Yes, sir.
Mr. LEMOV. That you had given testimony which could be inter-
preted to be critical of the Commission, or at least that it should
be more vigorous in at least two areas, before two subcommittees
of the Congress; that you had no bad performance rating of any
kind at any time, in fact had outstanding performance ratings; that
you were suddenly transferred out of your specialty at a time when
there was a tremendous backlog of work in your section and a tre-
mendous attrition rate in your section.
I have this question: Why were you transferred? What is your
opinion as to why you were transferred?
Mr. MAMONE. My opinion, Mr. Lemov, is that there were two fac-
tors involved in my transfer. Specifically, I had testified before the
subcommittees. I had explained to the Members of Congress what was
going on in connection with `these operations of gas producers and
pipelines in the Gulf of Mexico. Second, `because of my persistent
advocacy of public interst in these gas supply cases.
Mr. LEMoV. No further questions, Mr. Chairman.
M'r. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
Mr. Mamone, you are familiar with the Touche Ross & Co. report
for reorganization of the Federal Power Commission which was
issued, as I understand it, in July of 1976?
PAGENO="0036"
30
Mr. MAMONE. Mr. Lent, the employees of the Commission were
never shown that report.
Mr. LENT. You are aware that there was a major reorganization
of the Federal Power Commission in the months following July of
1976 when that report was issued?
Mr. MAMONE. I am aware of that, yes.
Mr. LENT. Do you have any idea how many employees of the Fed-
eral Power Commission were actually transferred or shuffled around
as a result of that massive reorganization besides yourself?
Mr. MAMONE. There were quite a few.
Mr. LENT. Would you say it was several hundred?
Mr. MAMONE. I don't know whether that would be true or not.
Mr. LENT. You never received a memo from the Chairman of the
Federal Power Commission, Richard Dunham, dated August 2, 1976,
addressed to all employees, subject: "Organizational Procedural
Changes?"
The document is attache.d to Mr. Journey's proposed statement.
I ask, Mr. Chairman, that this document be added to the record.
Mr. Moss. Without objection, the document eRtitied "Memorandum
to: Mrs. Van Cleve, Messrs. Perdue, Tuttle, Goldstein, Grant, Gil-
more, Lotis, Minor, Keeley, Grifin"-this memorandum to all employ-
ees is attached. Do you want the other?
Mr. LENT. Just the other.
Mr. Moss. A memorandum to all employees from Mr. Dunhan
dated August of 1976 will be inserted in the record at this point.
Mr. LENT. With the organization charts, and so forth, which are
annexed to it.
[The memorandum and attachments referred to follow:]
PAGENO="0037"
31
fl~ `~r
V ~
~flT ~
1~uI ~ ~
~)iT 2
~MORANDUM TO: Mrs. Van Cleve, ~essrs. Perdue, Tuttle,
Goldstein, Grant, Gilnore, Lotis, i4inor,
* : :~ Keeley, Griffin
Drexel D. Journey
SUBJECT: Redistribution of 0CC Workload
* This* memorandum implements pOrtions of the organization
of OGC reflected in Chairman Dunham' a memorandum of August 2,
1976 (copy attached). Attached hereto is the organization
~c~rt or OGC re fle cting the work load re diS~ ibutior~
is being made at this time bas unori th~/Touche Ross
*yesandrecornmendations.
Consistent with this redistribution of workload, work
schedule assignments will be changed effective Tuesday,
October 12, 1976. (1) The pipeline certifichte and rate
work will be under the supervision c~1Cordcn Grnnt in the
role of Assistant Litigation Counsel~actinq); (2) the
producer rate arid certificate work, includinc all off-
shore pipeline work, will be the resnonsibility of Francis
Gilmore filling.the role of Assistant Litigation Counsel;
(3) all Part. I electric work, including license project
accounting, iiill be handled under the supervision of Ruth
Van Cleve filling the role of Assistant Litigation Counsel;
and, (4) all Part II and III electric work, including
Federal power rates, will be handled under the super-
vision of Daniel Goldstein (now Assistant Litigation
Counsel-Legislation) as Assistant Litigation Counsel
(acting) for these matters.
In discharging the dual position of Deputy General
Counsel and Acting Litigation Counsel, Robert W. Perdue
will coordinate materials for the agenda from the various
Assistants Litigation Counsel under the general sucervision
of the General Counsel. The work oi the Solicitor will
continue under the immediate sunervision of the Solicitor
and under the general supervision of the General Counsel.
Additionally, the work of the Office of the General Counsel
in the legislative area will continue as prcaentlv conducted
under the general supervision of James Wood filling the role
of Assistant Litigation Counsel-Legislation (acting).
1/ Assisteits LiticiaLion ~ounse1 formerly titled
`Assis~ants General Counsel
PAGENO="0038"
32
The position of Assistant Litigation Counsel and the
two positions of Assistant, to the General Counsel will be
occupied by ~iessrs. Lotis, Minor, and Keeley, respectively.
Assignments in the nature of those presently handled by
Mr. Minor will continue under the supervision of the
General Counsel. Assignments to Messrs. Lotis and Keeley
will be at the direction of the Getieral Counsel. Adminis-
trative work in OGC will continue under the supervision of
Mr. Griffin.
As you will note from the overall interim organization
chart and the potential long-range reorganization proposal
prepared by Touche Ross (copies attached), the work of the
General Counsel's office may be further subdivided at some
future time. Recognizing that future organizational changes
may occur, the positions of Acting Litigation Counsel and
Deputy General Counsel are currently combined but have
distinct roles in the organizational framework.
I do not know, at the present time, when further
reorganizational steps will be directed by the Chairman.
It is my understanding that various other staff offices will
be undergoing changes and that as such changes occur, OGC
may be affected at the direction of the Chairman through
the Executive Director, including further changes in the
workload and assignments as specified herein. Phase II of
the OGC Reorganization Task Force will study this matter.
Your cooperation in implementing the new procedure
will ensure a smooth transition. The Administrative Officer,
John Griffin, will be in consulation with each of you
concerning changes in office space, telephones, furniture,
and other physical factors. It is contemplated that,, with.
the workload restructuring, physical relocations will be
completed as soon as possible. As he has in the past, John
will do his best to serve everybody's interests inthat
regard. .
I am attaching for your information a copy of the
Executive Director's memorandum of October 7, 1976, and
Administrative Order No. l46A. Because I consider this
matter of general interest throughout OGC, copies of this
memorandum will be available to all OGC personnel. .
1'~
Approved:
Attachments
PAGENO="0039"
33
FEDERAL POWER Co~IssION
WASHINGTON. D.C. SC~8
411( ~
OFFICS OF THC CHAIRMAN
I~MORANDUN TO: All Employees -.
FROM: Richard L. Dunham
SUBJECT: Organization Procedural Changes
As you know, Touche Ross & Co. has Derformed an
administrative management survey for imDroving the
organization, functions and management process of the
FPC. The reasons for the suriey were clear. Complex
pressures have placed new and more extensive regulatory
requirements on the FPC. They have and will continue
to require an expeditious, orderly and equitable handling
of the FPC's regulatory and decision-making functions.
The first section of the study has been completed.
It has resulted in recommendations for organization and
procedural changes designed to provide a more effective
organization.
I have personally monitored the study activities
and reviewed its recommendations, and it is now ready
for discussion and consideration by the Commission
and staff.
A series of long-term recorr~endations are currently
being reviewed. However, several interim activities should
be commenced immediately. I have instructed Touche Ross
to contact all affected units of the F?C to review study
findings and recommendations. I have also requested that
the Executive Director initiate several task forces to
implement appropriate changes in a timely manner.
Selected personnel will be contacted -in the near future.
PAGENO="0040"
34
The Coi~nission has taken the initiative in surfacing
problems in our current organization and identifying
desired solutions. This first step in an overall improvement
program was of critical importance to the FTC. I wish to
thank the entire Commission staff for your cooperation
and solicit your continuing contribution in improving our
operations.
/
DC-104
PAGENO="0041"
_ iI~IIJ~iiii~
~ ~ ~`r) &~A~t:~'
~ I
~z~LJ ~ ~ ~
I ~ ~
_LL~~~ ~ ~
~ c~~i C~o~3se.(
PAGENO="0042"
CA~
Proposed by Touche Ross &.Co.
C42
t~T~r~ OflO T~O~i ~~~VOTU~E
PAGENO="0043"
Proposed by Toucbe ~oss & Co.
I C.1
LONG TEfl~1 O~1GANIZATION ST~WCTU~~
I ~
* R~1 ___i~r'~' ~ 7~EEi LI~i
flct Jft-~TIJ [iJL:~J L~~~J}fLiIJ L~ ~~~1LrT~rJ ~ L~Ti 11
[~t°t~c: A)iJ ~ E~L~JL1IE0Ei1 S L~IIJ
PAGENO="0044"
38
UNITED STATES OF ~NERICA
FEDERAL POWER COM!~ISSION
Before Commissioners: Richard L, Dunham, Chairman;
Don S. Smith, John H. Holloman III
and James G~ Watt,
Administrative Order No. l46A
ORGANIZATION AND FUNCTIONS
OF THE OFFICE OF THE GENERAL COUNSEL
(October 7, 1976)
This administrative order reestablishes the Office
of the General Counsel and restates the division of
responsibilities between the Office of the General Counsel
(OGC) and the Office of Special Assistants as to the
preparation of opinions and orders generally and in
response to applications for rehearing or reconsideration
in meeting separation of function responsibilities.
1. ORGANIZATION. The Office of the General Counsel
consists of a single -organizational unit without divisions
or sections.
2. RESPONSIBILITIES.
a. The Office of the General Cotinsel is re-
sponsible for the legal phases of all staff work.required
-in the performance of the Commission's functions.
b. In addition to the foregoing organizational
responsibility, the General Counsel has personal respon-
sibility for providing advice and counsel to the Chairman
and the Commission with respect to legal, legislative,
and other Commission matters as requested. -
- 3. FUNCTIONS. Studies and analyzes applications
and formal and informal communications, filings, and
submittals; prepares statutory notices of Commission
proceedings for publication and service; prepares corre-
spondence, memoranda, and reports, on legal aspects of
such proceedings; advises members of the staff and the
Commission on legal questions; and prepares proposed
Commission orders. Serves as staff counsel in hearings
PAGENO="0045"
39
and in oral arqmment before the Cmm-Csjon, Presenting
evidence, examining witnesses? prev~ring and submitting
motions, stipulations, briefs, excertions and other
pleadings, and presenting oral argmerit on behalf of
the staff bafore administrative la-: judces and before
the Commission,
Advises the Secretary and the Commission's Records
Officer on the certification of Commission records to
reviewing courts; represents the Commission, and indi-
vidual Commissioners in the dischacce of their official
duties, in the courts, preparing and filing motions,
stipulations, briefs, and other pleadings, and present-
ing oral argument in the lower courts and, in association
with the Department of Justice, in the Supreme Court of
the United States. Consults with. bureaus and offices
concerned and drafts legislative croposals initiated by
the Commission, Commission coramencs on legislative
proposals prepared outside the agency, and proposed
changes in the Commission's rules and reculations;
advises the Commission concerning the legal effect and
significance of such proposals. As directed, represents
the Commission before committees of the Congress, before
other governmental agencies, and elsewhere. Compiles and
prepares headnotes for, edits, and supervises publication
of the Commission's opinions and orders; and is responsible
both for the maintenance of .a work-flow processing system and
for providing case status information to the Commissioners
and other Commission personnel.
Senibr members of OGC, to the extent stated in the
position description held by each individual and as assigned,
are responsible for the training of less experienced
attorneys in the routine legal work which is the
responsibility of OGC so as to assist them in becoming
more effective members of the Commission staff.
Subject to the provisions of the Administrative
Procedure Act, advises the Commission in the preparation
of its opinions and orders. As a division of administrative
Work load, OGC personnel will handle applications for
rehearing or reconsideration in any proceeding where
such applications have been filed before the commencement
of the hearing and 0CC has drafted the order. OGC personnel
PAGENO="0046"
40
will handle any applications, petitions, motions, or other
filings, other than settlements, exceot where 0CC has
filed a pleading in opposition to the rnovant or any other
party. 0CC personnel will handle settlement proposals
before.or after a hearing has been set, where the Staff
has not opposed the settlement. Additionally, OSA will
furnish to 0CC such information arid assistance as is
required both to maintain the work flow processing
system and to provide case status reporting data in a
systematic manner.
All of the above stated functions in OGC will be
performed under priorities established by the General
Counsel, as required.
4. SUPERSESSION. This order supersedes Administrative
Order No. 146 dated February 24, 1975.
By the Commission.
(SEAL)
Kenneth P. Plumb,
Secretary.
PAGENO="0047"
41
Mr. LENT. In the Office of General Counsel to which you were at-
tached, were not other members of that office transferred as well as
yourself?
Mr. MAM0NE. You are correct, Mr. Lent. There were other persons
transferred. However, I know of no other attorney who was ordered
to be moved from section A to section B.
Mr. LENT. As a matter of fact, on October 8, 1976, the day you
were transferred, there were 22 other attorneys in the Office of the
General Counsel who were also transferred pursuant to this organi-
zational report. Is that corrcet?
Mr. MAMONE. I would not dispute that number.
Mr. LENT. Do you know a Mr. Goldstein in your office?
Mr. MAMONE. Yes, sir.
Mr. LENT. He was transferred that date., too, was he not?
Mr. MAMONE. That is right.
Mr. LENT. Mr. Diaz, he was transferred from hydro to legislation.
Mr. MAMONE. Yes.
Mr. LENT. And Mr. Everett, Mr. Marshall, Mr. Schifter, Mr.
Pendley, Mr. Stiles, Mr. Thmke, Mr. Stafford, Mr. Woods, Mr.
Chrysikos, Mr. Feilds, Mr. Reiter, Mr. Lotis, Mr. Mattingly, Mr.
Wofsy, Mr. Bullock, Mr. Hargis, Mr. Pederson, and Mr. Stough.
Are all those names familiar to you?
Mr. MAMONE. Yes, they are.
Mr. LENT. They are your coworkers in the Office of General
Counsel?
Mr. MAMONE. Yes.
Mr. LENT. They were transferred to different divisions the same
day you received your transfer; is that correct?
Mr. MAMONE. They were transferred to new divisions and new
divisions were created to assign them to.
Mr. LENT. In your statement you indicated tha.t the Federal Power
Commission General Counsel-
Mr. Moss. May we for the purpose of the record have the list?
Mr. LENT. Yes, I shall furnish a photocopy for the record.
Mr. Moss. Without objection, we shall hold the record open at
this point to receive that.
[The material referred to follows:]
PAGENO="0048"
42
FEDERAL POWER COMMISSION Office of the General Counsel
Reassignments made pursuant to the General
Counsel's memorandum dated October 8, 1976
7
NAME GRADE FROM - TO
REMARKS
Goldstein, Daniel GS-l6 Lesiglati~ Rates & Corporations
(1),(2)
Schifter, Lilo GS-l2 Legislation Rates & Corporations
(1)
Marshall, Susan* GS-l2 Legislation Rates & Corporations
(1)
Pendley, Elisabeth GS-ll Legislation Producers
(l),(2)
Stiles, Joseph* GS-l2 Rates Solicitor
Lamke, Daniel GS-l5 Hydro Rates & Corporations
(1)
(3)
Stafford, John GS-15 Hydro Rates & Corporations
(1)
Everett, John GS-l4 Hydro Legislation
Diaz, Romulo GS-l4 Hydro Lesiglation
(1)
(l)(2.)
Crones, Bernard GS-l3 Hydro Rates & Corporations
(3)
Woods, Robert GS-l3 Hydro Rates & Corporations
(3)
Chryssikos, Telemac GS-l2 Hydro Rates & Corporations
Fields, Rhodell GS-ll Hydro Rates & Corporations
(3)
(3)
Reiter, Harvey GS-ll Hydro Rates & Corporations
(3)
7~is, Jon GS-l6 Rates mmcd. Ofc. of the
General Counsel
.
(1)
Mattingly, Richard GS-l5 Rates Pipelines
Wofsy, Cyril CS-iS Rates Rates & Corporations
(3)
(3)
Bullock, Charles GS-14 Rates Rates & Corporations
(3)
(4)
Hargis, Lynn GS-l2 Rates Rates & Corporations
,
(3)
McManus, Jarnes* GS-12 Rates Rates & Corporations
(3)
Nygaard, Karen GS-12 Rates Rates & Corporations
(3),(4)
Pederson, Norman* GS-l2 Rates Pipelines
(3)
Stough, John GS-12 Rates Pipelines
(3),(5)
Lane, Dennis CS-li Rates Pipelines
(3)
Melvin, Dennis GS-ll Rates Rates & Corporations
(3),(5)
Elrod, Dennis CS-li Rates Pipelines
(3),(5)
Weller, Barbara GS-ll Rates Pipelines
(3),(5)
Mamone, Russell GS-15 Pipelines Hydro
(1)
Konski, Luis* GS-l2 mmcd. Ofc. Rates & Corporations
(l),(2)
ofthe -
General
Counsel
29 Professional staff were reassigned. In addition, eight clerical
staff
were reassigned. -
Remarks
(1) Employee reassigned to a subject area different
from the previous assignment
(2) Employee requested transfer to a new area
(3) No change in subject area assignment
(4) Subsequently, employee voluntarily left the
Office of the General Counsel -
(5) Subsequently, employee voluntarily left the
Federal Power Commission
*Indjcates promotion to that grade ocCurred after
October 8, 1976.
PAGENO="0049"
43
Mr. LENT. In your statement you indicated General Counsel Drexel
Journey advised you that you would be transferred.
At. that time, or any time subsequent to that date, did you voice
any complaint to Mr. Journey about your transfer?
Mr. MAMONE. Absolutely none.
Mr. LENT. Have you ever voiced a complaint to Mr. Journey?
Mr. MAMONE. No, sir, and I have not today, Mr. Lent.
Mr. LENT. Have you ever voiced a complaint to Chairman Dunham
or any of the other Commissioners?
Mr. MAMONE. No, I have not.
Mr. LENT. Have you ever complained to Mr. Curtis Fee, the
Executive Director of the Federal Power Commission?
Mr. MAMONE. No.
Mr. LENT. Have you ever attempted to bring this matter before
the Commission as a group?
Mr. MAMONE. No, sir.
Mr. LENT. That is your right as a senior employee, as I under-
stand it?
Mr. MAMONE. Yes.
Mr. LENT. And you did not exercise that right?
Mr. MAMONE. That is correct.
Mr. LENT. Have you ever filed a grievance with the union, whose
contract with the FPC allows for such a filing?
Mr. MAMONE. No, I have not.
Mr. LENT. Have you ever filed-
Mr. Moss. Is he a member of the union?
Mr. MAMONE. You don't have to be a member of the union to file
a grievance, Mr. Chairman. Anybody can do it.
Mr. LENT. You have not exercised that right?
Mr. MAMONE. No, I have not.
Mr. LENT. Have you ever filed a grievance with the Federal Civil
Service Commission, as is your right?
Mr. MAMONE. No, sir.
Mr. LENT. Did you dispute in any way the need for additional
senior trial attorneys in the Hydroelectric Licensing Division?
Mr. MAMONE. As I stated to Mr. Lemov, Mr. Lent, I have never
worked in the Hydroelectric Section and I was not familiar with
their personnel situation, and I had to accept the word of the Gen-
eral Counsel that it was his decision to make this transfer.
Mr. LENT. You are there now?
Mr.' MAMONE. Yes.
Mr. LENT. Can you tell us whether there was a backlog of some
500 pending cases when you arrived there?
Mr. MAMONE. I am not familiar wit.h that fact, Mr. Lent. I will
accept it, though, as your statement of the backlog.
Mr. LENT. I have `before me the record of hearings before the
Subcommittee on Public Works of the Committee on Appropriation,
Joe L. Evins of Tennessee, Chairman.
These hearings took place on March 3, 1976.
At page 177 of those hearings Mr. Evins said to Mr. Dunham,
who was testifying:
Phe FPC has a backlog of about 500 pending applications for licensing amend-
ments. It is stated in the GAO report that a percent of FPC is not fulfilling its
responsibilities as the decisionmaker.
87-292 0 - 77 - 4
PAGENO="0050"
44
Mr. DUNHAM. We took that into account in submitting our budget request.
We have asked for additional positions in the hydro-electric field. We have
asked for 16 positions.
Then Mr. Evins said:
Explain how such an incredible backlog of applications accumulated.
Further, on page 178, Mr. Evins said:
At this rate, with your 500 applications, it will take about 15 years to com-
plete action on existing backlog of 244 major applications for project renewals
according to GAO.
Mr. DUNHAM. You are absolutely right.
Mr. EvINs. You are going to beat that target?
Mr. DUNHAM. I hope so.
So that you do not deny the fact that the division to which you
were sent is a division which has a very severe backlog situation, and
you are there trying to break that backlog; is that not correct?
Mr. MAMONE. You are correct, Congressman.
Mr. LENT. Has the backlog been reduced since your attendance
to it?
Mr. MAMONE. I can't answer that `because f am not in the ad-
ministrative part of the section, Mr. Lent.
Mr. LENT. Do you believe that the reorganization that we were
discussing earlier has served to increase productivity in general in
the general counsel's office?
Mr. MAMONE. Mr. Lent, I respectfully suggest that this kind of a
question more properly should be addressed to an administrator. I
am not in the administrative part of the Office of the General
Counsel as I concentrate on the substantive work of the Commission.
Mr. LENT. I understand your reluctance, but you have voiced your
opinion and have been asked your opinion by counsel.
I am simply doing the same thing. I am asking your opinion as
the senior attorney in the general counsel's office-whether you feel
this reorganization in general has had a beneficial effect on reducing
some of these backlogs.
Mr. MAMONE. Mr. Lent, I am really not qualified to answer. I
apologize.
I will be glad to try to find out if you wish.
Mr. LENT. Do you know whether. since your transfer out of the
Certificate Section the docket backlog in that section has been
reduced?
Mr. MAMONE. I doubt it, Mr. Lent.
Mr. LENT. And when you were transferred from the certificate
section, was it not with the understanding that all the work that you
had been involved in in pending cases you would be permitted to
retain?
Mr. MAMONE. You are correct, Mr. Lent; yes, sir. There was a
large*. investment in time in many cases and I was to complete the
work in those cases.
Mr. LENT. In the Federal Personnel Manual, section 412, appendix
A, instruction 203, it states in part:
Since much development is accomplished best on the job, departments and
agencies are urged to consider setting up organizational and occupational
mobility programs.
PAGENO="0051"
45
And the Federal Personnel Manual seems to encourage the rota-
tion of staff at Federal commissions, such as major corporations
transfer employees among their offices. This is designed specifically
to further the objectives of the Federal bureaucracy.
Do you agree that job rotation, as urged in the Federal Personnel
Manual, in general is a good policy?
Mr. MAM0NE. Yes, I would agree with that, Mr. Lent.
Mr. LENT. In fact, you were transferred with 22 other employees
or attorneys from the General Counsel's office.
Mr. MAMONE. Mr. Lent, you should understand that the 22 attor-
neys you are talking about were not transferred to different kinds
of work.
Mr. LENT. Nine of them were. Mr. Goldstein was transferred from
AGC legislation to ALC rates and corporations, was he not?
Mr. MAMONE. Yes.
Mr. LENT. Mr. Diaz was transferred from hydro to legislation.
Mr. Everett was transferred in the same way.
Mr. MarshaJi from legislation to R&C.
- The same with Mr. Schifter and Mr. Pendley.
Mr. Stiles was changed from rates to solicitor.
Mr. Lamke was changed from hydro to R&C.
Mr. Stafford was changed from hydro to R&C.
So these were all changes-
Mr.Moss. What is "R&C"?
Mr. LENT. I don't know.
Mr. Moss. Let's have an explanation. In order to have the record
clear, we should have that.
Mr. LENT. Can you enlighten as to what R&C means?
Mr. MAMONE. A rate section, electric rates.
Mr. Moss. In other words, we should know this. We are asserting
there are transfers to unrelated functions. We should know whether
or not they were in fact transferred to unrelated functions or whether
they were transferred to duties substantively similar, at least similar
in a significant degree to duties they previously performed.
Mr. MAMONE. I would say, Mr. Chairman-
Mr. Moss. There is no relevance to just a recitation of transfers.
They must. be related in the record to some point of reference which
gives validity to the argument.
Mr. LENT. I would certainly agree with the chairman on that.
My point, and perhaps I did not make it very well, was simply t.o
demonstrate that Mr. Mamone was not the only employee in the
General Counsel's office who, pursuant to the Touche Ross reorganiza-
tional plan, was assigned to other duties.
One final question, Mr. Mamone. In terms of your own career
development within the Commission, would it not be beneficial to
you to have experience in some other division, such as the Hydro-
electric Division, as well as in the Gas Division?
Mr. MAMONE. As I stated before, Mr. Lent, in connection with
the Federal personnel policy which you have read, I think a diversity
of experience is desirable for all professional employees.
Mr. LENT. I have no further questions.
Mr. Moss. I have just a couple of questions here `before 1 recog-
nize the gentleman from Tennessee.
PAGENO="0052"
46
Do you know whether the Touche Ross report and recommenda-
tions were fully implemented by the Commission?
Mr. MAMONE. It is my understanding, Mr. Chairman, that they
were not fully implemented.
Mr. Moss. Do you understand that the extent to which there was
reorganization was consistent with the Touche Ross report?
Mr. MAMONE. My understanding is that the specific transfers and
rearrangements in the Office of the General Counsel were not specifi-
cally contained in the Touche Ross report.
Mr. Moss. One of the recommendations in the Touche Ross re-
port-and I shall place this in the record as exhibit K without. ob-
jection-contains this language:
Personnel assignment to cases should be revised so that their experience and
skill level are more appropriate for the task requirements and more effective
supervision, delegation, and training are required.
[Exhibit K referred to follows:]
EXHIBIT K
I B. SUMMARY OF FINDINGs
The FPC is presently organized into 17 offices and Bureaus, including the
offices of the Chairman, of the Commissioners, and of the Executive Director.
The latest organization chart of February, 1976, (Exhibit I B-i) shows the
formal reporting relationship and staffing of these units. The three additional
advisory positions of Chief Engineer, Chief Accountant, and General Counsel
also are shown in the chart. The present chart shows that 11 of the Office and
Bureau units report to the Executive Director. Three of the units are shown
as reporting to the Commissioners directly, along with the three advisory
positions.
The units reporting to the Commissioners and Executive Director are or-
ganized principally along lines of FPC legislative responsibility (BNG and
PWR) and by professional discipline. That is, legal, finance, accounting, eco-
nomic, engineering, and environmental units. (Exhibit I B-2)
Many of the principal regulatory functions require the participation of sev-
eral professional skill units in order to complete a regulatory activity. The
approximate man years expended by the various organizational units for the
major application and regulatory functions are summarized on Exhibit I B-3
In addition to the organization units shown on the table, some regulatory func-
tions require the participation of more than one division of an Office or Bureau
and more than one section of a division.
A number of conclusions may be drawn from an overall analysis of the or-
ganizational relationships and work flow. These include:
The number of organizational units involved in completing the major regu-
latory functions should be reduced. For example, the processing of a gas rate
application requires involvement from four or more sections in two divisions
of the Bureau of Natural Gas, as well as from *the OAF, OBO, AU, and the
OSA.
Scheduling problems exist in meeting independently established scheduled
dates for such common activities a~s staff investigation completion, settlement
conferences, and memo preparation.
Delays result from differing office, division and section priorities, imbalances
in section skill levels and workloads, and individual staff workloads within the
various sections.
Managerial accountability for major regulatory functions and cases should
be improved.
The overall pattern of organization is not by type of regulatory function
(i.e., rate cases, research, compliance), but by specialized skill grouping which
jointly contribute to completion of the funtcion. There is no emphasis on or
ability to measure productivity.
No single area (or office) can he held accountable for processing delays, ef-
ficiency, or overall work performance in the key regulatory areas.
PAGENO="0053"
47
The judicial role of the Commissioners should be distinguished from and
supported independently of `the investigative role of the staff. Several situations
exist which are of concern:
The OGC serves as advisor to the Commissioners and has responsibility for
legal aspects of staff investigations. This dual role could jeopardize due process.
Additional staff argument on litigated matters is often discussed in the
presence of Commissioners and Special Assistants.
Legal precedents are inadequately documented and are not formally distri-
buted to the staff for policy direction. Lacking clear policy, the Commissioners
and staff are forced to conduct all matters on a case-by-case basis.
Personnel assignment to cases should be revised so that their experience
and skill level are more appropriate for the task requirements and more effec-
tive `supervision, delegation and training are required.
Typically, one individual performs all activities associated with a case or
function and the more routine or non-complex `tasks are not delegated to junior
or intermediate personnel.
Senior personnel with high GS levels are assigned to a case and perform
all case tasks including nominal tasks such as review of filings, form compli-
ance checking, detail data gathering, data and scheduling preparation, and
other tasks which could be performed by less experienced (and less expensive)
personnel.
Commission and Executive Office management have no effective management
reporting mechanisms for redirec'ting or evaluating effort other than on a case-
by-case basis.
Many senior personnel with high GS levels have received position titles
which imply significantly increased responsibilities, but which in practice in-
volve no significant change in the type or character of the duties performed.
Section supervisors generally direct most day to day activities of section
staff since intermediate levels of supervision are not established within many
`organizational units. Sections frequently have from 10 to 20 staff with three
to five cases assigned per staff analyst. A section supervisor can do little more
than review principal documents such as testimony or overall exhibits.
Relatively junior analysts are `assigned to perform all activities including
testimony preparation and testifying.
The workload management `systems should be improved to coordinate the
processing of activities and provide necessary information for identifying prob-
lems end evaluating potential solutions.
The Offices and Bureaus which do have workload information systems op-
erate `them independently of systems in other areas.
Activities on filings are scheduled independently by numerous sections.
Reporting systems do not cross divisional or Bureau/Office lines.
The present systems are of limited usefulness, even on an intra-organization~~
use basis.
The systems which exist provide only nominal information such as listings of
who is assigned to a case in a particular area.
Reporting systems generally do no't provide key schedule dates, actual com-
pletion dates, planned hours, actual hours, or variance information.
Summarizations of activity-to-date by individual, section, and type of appli-
cation are not provided from these systems.
Simple case inventory `listings such as receipts, backlog and completions by
`processing phase are `not consistently maintained and statistics between areas
do not always agree when `they are maintained.
Controls over the recording and changing of reported application informa-
`tion are not effective and in some instances do not exist.
Current systems are used primarily to provide historical information (such
as for annual reports), not as management tools.
Compliance and Investigation functions `should receive increased emphasis.
Utility rate refund plans are no't evaluated against actual refunds.
Electric rate adjustments (fuel adjustment clauses) are not filed with, nor
monitored by, the FPC.
Pipeline gas rate adjustments are only spotcheckecl.
Five year audits of major utilities are focused on issues of accounting
treatment `and procedure and overall `analysis of utility profitability and per-
formance are not addressed, nor are audits synchronized with general rate case
increase investigations.
PAGENO="0054"
48
Staff rate investigations are effectively initiated only by the utility at the
time of filing for a rate increase.
Personnel conducting field compliance activities are assigned to the Washing-
ton and field offices inconsistently. For example, hydroelectric personnel are
in Regional offices and gas reserve personnel conducting similar activities are
in the Washington Office.
The FPC's research and special study efforts should be coordinated and
managed more effectively.
Research is conducted in some instances within application (case processing)
sections. These studies compete with work on cases.
Research projects need improved management planning control.
There is little overall coordination of the priority, sequence, or allocation of
resources to research.
The organization and control of the FPC's Public Use Forms filing func-
tions should be improved.
There is wide dispersion and inadequate identification of input control,
editing, filing and eventual use of responsibilities.
Input control, editing and filing activities are often staffed with high level
personnel such as researchers and statisticians who have application or re-
search responsibilities.
Form filing information requirements tend to be developed independently
by the various specialized units with little overall coordination. The automation
of Public Use Forms will have little impact upon operations in the short-term.
Regulatory support activities, involving non-technical processing and legal
processing from initial receipt to eventual resolution, can be a critical factor in
Commission effectiveness and should be improved.
Lack of accountability, overlap of functional responsibilities and two different
processes of receipt, logging, docketing, and distribution of filings result in
incomplete or delayed copies of filings being received by designated offices.
Absenteeism and lack of supervision, procedures and accurate distribution
lists contribute to a messenger service that is unresponsive to Commission
needs for a timely, efficient distribution process.
The central files operation has no standard format, document control, access,
storage, or purging procedures. This situation has produced a lack of confidence
resulting in duplication of files throughout the Commission.
Lack of standardized procedures, training, and a key precedents manual,
cause legal case assignment management, and processing difficulties and delays.
The Office of Regulatory Information Systems' development efforts should
be more responsive to user needs. The RIS System has received substantial re-
source commitn~iient over~ a four-year time frame, and is still in a preliminary
stage from an information use standpoint.
The primary system development effort appears to be based upon the develop-
ment of a general purpose data base rather than upon specific organizational
needs in the input and output areas.
Regulatory staff is not convinced that public use data will be useable in a
computerized form.
The majority of RIS development efforts have focused on the on-line storage
and retrieval of public use information rather than on the more critical prob-
lems of workload processing *and control. Recent development efforts in the
case control area have been inadequately defined and planned.
I C. SUMMARY OF RECOMMENDATIONS
We recommend that the FPC implement an organization which is more
responsive to the principal FPC missions of:
Ratemaking-assuriflg that rates of regulated industries are reasonable,
equitable and adequate;
Licensing and certification-assuring that services rendered by public utilities
are needed, adequate and effectively serve the public interest;
Information collection, research and ~i~semination-asSUring that the Com-
missioners are provided adequate information about the industries they regulate
and that necessary information is provided to Congress, the public, and other
governmental agencies:
Compliance-assuring that regulatory laws and Commission decisions are
complied with and that the information supplied by utilities is reliable and
complies with the intended purpose;
PAGENO="0055"
49
Administrative and legal discharge of duties-assuring that its missions
are effectively administered and discharged in a legal and efficient manner.
LONG-TERM ORGANIZATION STRUCTURE
As has previously been discussed in the Summary of Findings, the current
organization structure is principally organized along the lines of FPC legisla-
tive responsibility and professional discipline. In addition, to perform the above
mentioned principal FPC missions currently requires the participation of
numerous organizational units. Such a structure limits effective internal
communication, flexibility to adapt to changing priorities, and ability to respond
to increased workload.
The recommended organization structure, which is based on functional rela-
tionships, is geared to provide the flexibility required by the current missions
and workload of the FPC. Moreover, it should be clearly understood that there
iii no perfect organization structure, and any responsibility relationship will
perform only as well as underlying systems and controls and personnel capabili-
ties permit.
The recommended long term organization structure is shown in Exhibit I C-i
and the suggested disposition of principal current FPC organization units is
shown in Exhibt I C-2 and discussed in the Implementation Process. For the
most part, complete work units such as divisions and sections can be trans-
ferred to functional areas with nominal internal changes in structure. In some
cases, multifunction units must be split and distributed to several functions.
These relationships are shown on the exhibit. The major functions and organi-
zation structure and principal responsibilty for carrying out these functions
are:
Rat einaking
We recommend that a Rate Regulation Unit be established. The principal
responsibilities of this unit should be the processing of minor rate matters,
corporate regulatory matters, and the analysis of electric, gas pipeline and gas
producer rate matters which have been recommended for in-depth investigation.
The staff level of the recommended unit is approximately 269 man-years.
We recommend that this unit be established with four principal divisions:
Division of Electric Rate Regulation.
Division of Pipeline Rate Regulation.
Division of Producer Rate Regulation.
Division of Legal Analysis.
Licensing and (Jertification
We recommend that a License Regulation Unit be established. The principal
responsibilities of this unit should be the processing of minor certification mat-
ters, project evaluations, and the analysis of license and certification matters
which have been recommended for in-depth investigation. The staff level for
the recommended organization is approximately 267 man-years.
We recommend `that this unit be established with four principal divisions:
Division of Pipeline and Producer Certification.
Division of Electric License Evaluation.
Division of Environmental Analysis.
Division of Legal Analysis.
Research
We recommend that a Research Unit be established. The principal responsi-
bility of this unit is to assure that Oongress, the public, the Commisisoners and
the staff are provided adequate information and analysis. This unit will serve
as a support arm to the Commission on board national issues rein-ted to overall
policy development. The staff level for the recommended ,organization is ap-
proximately 97 man-years.
We recommend `that this unit be established initially with two principal
divisions:
Division of Energy Research.
Division of Special Studies.
Information Collection, Processing and Dissemination
We recommend that an Information Unit be established. The principal re-
sponsibility of -this unit is to assure that FPC information processes are reliable
PAGENO="0056"
50
and adequate to support both internal and external information needs. The
staff level for the recommended organization is approximately 156 man-years.
We recommend that this unit be established with three principal divisions:
Division of Management Systems.
Division of Forms Processing.
Division of Consumer Affairs.
Compliance
We recommend that a Regulatory Compliance Unit be established. The
principal responsibilities of this unit are to conduct periodic audits, inspections
and special investigations directed or programmed by the Commission. The
staff level of the recommended unit is approximately 229 man-years.
We recommend that this unit be established initially with three principal
divisions:
Utility Audits and Evaluations.
Special Field Compliance.
Hydroelectric Inspection.
Administration
We recommend that an Administration Unit be established to provide ef-
ficient and effective administrative support services to the FPC. The staff level
for the recommended organization is approximately 171 man-years.
We recommend that this unit be established with four principal divisions:
Division of Comptroller.
Division of Personnel Programs.
Division of Regulatory Support Services.
Division of Administrative Support Services.
Commission Counsel
We recommend the establishment of a Commission Counsel Unit to provide
overall legal advice to the Commission on matters before the Commission and
on matters of interest in Congress or the courts. The staff level for the recom-
mended organization is approximately 46 man-years.
We recommend that this unit be established with four principal divisions:
Division of Commission Counsel Staff.
Division of Solicitor.
Division of Legislative Affairs.
Division of Special Assistants.
Office of the ASecretary
We recommend that the current Office of the Secretary be retained with
its present responsibilities with the exception of the Secretary Annex Function
which should be transferred to the new Regulatory Support Services Unit.
We recognize the above organization structure will require significant reor-
ganization ,which will take time to formulate in detail and implement. In the
interim, there are specific organization changes which we believe can provide
immediate benefit to the Commission, as well as facilitate the implementation
of our recommended long-term organization structure. These interim changes
are specifically identified below.
INTERIM oRGANIzATION STRUCTURE
The recommended interim changes represent significant steps in terms of
improvement and in moving towards the longer term functional structure, and
will result in the organization structure shown in Exhibit I C-3. This organi-
zation includes the changes necessary to establish the recommended function's
for:
Administrative Support,
Office of Secretary, and
Commission Counsel.
In addition, three other recommended functional organizations can be par-
tially implemented:
Research
The nucleus of the recommended Research unit would be formed through
the consolidation of OEC with research elements of OES and OAF. Further,
consolidation of research functions within the bureau would contribute to im-
prove control and coordination of major special studies.
PAGENO="0057"
Infornvation
The unit to perform the Information function, with the exception of forms
processing, would result from the consolidation of ORIS and OPI. The
forms processing function would be transferred from the bureaus to this unit
at a later time when RIS staff plans are finalized.
Compliance
The initial phase in the development of the Regulatory Compliance unit would
be implemented by designating the field audit and corporate regualtion func-
tions of OAF to this role.
The remaining interim organization changes involve internal refinements
and the streamlining of the rates and certification functions in the `two Bureaus
and the Office of `the General Oounsel.
Bureau of Natural Gas
Interim refinements in this bureau would include the following:
Develop a financial unit to provide rate of return analytical capability ac-
countable to the Chief of the Division of Pipeline and Producer Rates. This
could be accomplished by `transfer of personnel from OAF.
Develop a small, multidisciplinary unit within the Division of Systems Op-
eration to process pipeline certificates that are not complex or do not require
litigation.
Consolidate `the environmental evaluation capability for disposition of cer-
tificate and license matters within the Division of Systems Operation. This
would be accomplished by transfer of OAF personnel.
Consolidate the forms filing function into the Division of Planning and
Development. This could include the transfer of five personnel from OAF.
Bureau of Power
Interim refinements in this bureau would consist of the following:
Develop a financial unit to be responsible for rate of return analyses and
testimony in the Division of Rates and Corporate Regulation. This could be
accomplish&j by transfer of personnel from OAF.
Develop a small multidisciplinary unit within the Division of Licensed
Projects to process well-prepared applications which require minimal analysis
(no environmental impact statement).
Consolidate forms filing functions currently performed by the Division of'
Power Surveys and Analysis and the Division of Power Supply and Reliability
into a single Division of Surveys and Reports. This could `include the transfer
of `two personnel from OAF.
Consolidate research and special studies functions currently performed in the
Division of Power Surveys and Analysis and `the Division of Power Supply and
Reliability into a `single Division of Research and Reliability Analysis.
Office of Litigation
This new office would consist of the litigation function currently performed
by the Office of General Counsel. It would operate with `a realignment of func-
tion responsibilities into four categories:
Pipeline certificates and rates,
Producer certificates and rates,
Part I of the Federal Power Act (FPA),
Parts II and III of the EPA.
OPERATIONS AND OTHER RECOMMENDATIONS
During the course of the organizational analysis a number of problems were
identified not related to the structure of the organization. Recommendations
relating to these problems are discussed in the detailed findings and recommen-
dations cover a variety of matters and are summarized below:
Specific recommendations are made for improving various application flows;
The development of improved procedures for management coordination and
control,
The modification of rules which add unnecessary processing steps or inap-
propriately restrict staff options,
The modification of restrictive and inappropriate legislative provisions,
Revision to application filing requirements,
Procedures for pro-filing conferences.
PAGENO="0058"
52
Specific recommendations are made for improving various administrative
flow areas which affect application flows:
Revised responsibilities and procedures for mail receipts and registry,
Revised procedures for hand-served items, docketing and distribution,
Revised central file procedures,
Revised reporting relationships and procedures for the messenger service.
Specific recommendations are made to increase staffing and better utilize
existing personnel: -
The development and implementation of an experimental program for syn-
chronizing audit examination and rate investigation activities
Revised supervisory responsibilities' including broadened coordination re-
* sponsibilities for senior personnel and the developme'~t of task specialization
* Evaluation of GS levels in certain areas to determine if less experienced per-
sonnel can perform specified function.
Specific recommendations are made for improving the various information
systems in a number of operational areas and for implementation of:
Oase status reporting;
Operational control~, procedures and summary workload reporting.
Specific recommendations are made for improving internal communications:
Standardization of agenda format and revised procedures for agenda prep-
aration and distribution;
Development of "unofficial operational minutes" to provide staff with timely
information; and
ORIS briefings on RIS and Case Status System projects.
Specific recommendations to strengthen compliance capabilities:
Recommended action for encouraging delinquent information filings;
Monitoring of fuel adjustment clauses;
Improved control over form filings through centralization and procedure de-
vekypment; and
Development of more effective field audit programs.
Mr. Moss. In the case of your transfer did the Commission achieve
that result?
Mr. MAMONE. I don't think they did. I don't think the General
Counsel did, Chairman Moss.
Mr. Moss. Were you more experienced and did you have a greater
level of skill in hydroelectric work than you had in gas regulation?
Mr. MAMONE. It was a black-and-white situation, Mr. Chairman.
I had no experience in hydroelectric whatsoever.
Mr. Moss. Thank you.
Mr. Gore?
Mr. GORE. Thank you, Mr. Chairman.
I would like to follow this line of questioning concerning the
Touche Ross study briefly.
Looking at the study itself, it does indicate that there was a back-
log of cases in the Hydroelectric Division.
It also indicates that there is a much larger backlog in the Pro-
ducer Certificate Division.
Is that consistent with your knowledge of both of those divisions?
Mr. MAMONE. Yes, there was a substantial `backlog of work to be
performed in the Natural Gas Regulation Section.
Mr. GORE. Pursuing this a littJe bit further, over the period 1970-
76, the backlog in the Hydroelectric Division grew, calculated by
months, by approximately. 70 percent over that 6-year period. Yet
the backlog in the Producer Certificate Division, according to my
figures, grew 460 percent.
You earlier stated this is consistent with your knowledge of
those two areas.
Mr. LENT. If the gentleman will yield, it was my recollection that
the witness testified, No. 1, that he was not familiar with the Touche
PAGENO="0059"
53
Ross study; No. 2, he had no idea as to what the backlog was in
the Hydroelectric Division.
Therefore, I don't know how he could properly draw a conclusion,
having made that statement earlier.
Mr. GORE. I thought that you asked him when he arrived at the
division did he not encounter a backlog of 238 cases as of 1976
compared with 4,423 cases in the Producer Certificate Division.
I was simply comparing the backlog which he left with the back-
log whic.h he went to.
I would like to insert this page in the record with unanimous con-
sent. It is the summary of key processing measurements from the
Touche Ross study itself.
[The summary referred to follows:]
[From the Touche Ross & `Co. studyj
SUMMARY OF KEY PROCESSING MEASUREMENTS (FISCAL YEARS)
Electri
c rates
Hydroelectric
licenses
Producer
certificates
Pipeline
certificates
1970
1976
1970 - 1976
(2) (2)
24 6
17 14
166 174
116
1970 1976 1970 1976
(3) (3)
13 103
16 79
32 169
Formal matters (i)
Received during year 7
Completed during year 7
Backlog end of year 28
Backlog in months 4
48
(1)
141
92
228
30
Process time in months
24
149
24 26
Other mailers (5)
Received during year 2, 272
Completed during year 1, 768
Backlog end of year 706
Backlog in months 4.8
()
3, 145
3, 042
659
2.6
81
(6) (6)
119 81
99 68
242 238
29.3 42.0
18
(7) (7)
2, 489 1, 838 455 438
2, 290 1, 189 487 359
1,812 4,423 147 398
9.5 44.6 3.6 13.3
I Formal matter numbers include some nonrate matters.
2 Major licenses (about 8 pct involved hearings).
3 Few producer matters involve hearings and were not sampled.
4 Backlog in months is defined as the time required to eliminate the end of year backlog using the latest completions
per year as the measure of work rates.
Total electric filings.
6 Minor licenses, preliminary permits and amendments.
7 Permanent certificates only.
Source: FPC data extracted from tables in secs. II, Ill, and IV.
Mr. GORE. I shall, look forward to seeing a list of other transfers
which -have been submitted for the record, also, because a cursory
reading of it indicated there were a lot of transfers from the Hydro-
electric Division at the same time that this took place.
Mr. MAMONE. That is correct, Congressman Gore.
Mr. Goiu~. You talked in general terms about the attrition in
personnel in the Producer Certificate Division. Were the slots that
were opened up by the departure of experienced personnel all filled
by completely new people or were some of those slots simply left
open and the workload increased on a fewer number of people?
Mr. MAMONE. It `is the latter part of your question, `Congressman
Gore-the slots were filled by younger and more inexperienced people.
Mr. GORE. I think that is interesting. If the justification for trans-
ferring you to the Hydroelectric Division is that there was a `backlog
in the Hydroelectric Division, we have a much worse backlog in the
`division from which you were transferred. It had `been that the back-
log had been increasing at a much faster rate. You were not replaced,
or at least the number of people transferred out were not replaced,
PAGENO="0060"
54
by a similar number, and the workload was increased on those re-
maining in the Division. Is that correct?
Mr. MAMONE. That is correct, Congressman Gore; not only myself
but the loss of Mr. Lewnes who became an administrative law judge,
and Mr. Wofsy, who transferred to the Electric Rate Section. There
was a loss in the. aggregate of at least 50 or 60 years' experience in
natural gas regulation, all in a very short period. It was not just my
transfer but the loss of a number, a substantial number, of key per-
sonnel, plus the others who resigned and left the Commission.
Mr. GORE. The chairman has already read one of the conclusions of
the Touche Ross study calling for better utilization of the experience
of personnel within the various divisions in the Federal Power
Commission.
I would just like to ask you a policy question whether you think
there is justification for the competing policy of transferring people
around to let them dabble in all of the various areas within the FPC?
Mr. MAMONE. I think there is a very strong competing policy for
keeping the experienced people working at what they know best,
particularly in times of a natural gas shortage crisis. I don't think
the hydroelectric industry is in anything which could be characterized
as a crisis situation.
Mr. GORE. As we address the entire policy area of natural gas reg-
ulation, one of the background issues is the quality of regulation by
the Federal Power Commission, and those who are in favor of
deregulation constantly point to the ineptitude of the FPC.
Do you think that your transfer and the other transfers with
which you are familiar have contributed to the ability of the FPC
to regulate natural gas in an intelligent manner?
Mr. MAMONE. They have not contributed to that objective, Con-
gressman Gore. I will tell you that in the latter part of last year,
where I mention in my testimony that the attorneys were ordered
to work overtime, probably the first time that happened in anybody's
memory, there were untold numbers of requests to the Commission
pleading for action on pending gas matters that were backlogged in
the Certificate Section due to the unavailability of personnel to
handle that work, and it was important to these people to get their
authorizations in the fall of 1976 in order to construct and operate
facilities for the forthcoming winter, which we now know was ex-
tremely severe, and these companies, representatives of these com-
panies, made untold visits to the staffs virtually pleading for action
on their pending matters.
That is why, as I said, it came to the point where overtime was
ordered. People were not asked to work overtime but they were told
they had to do it.
Mr. GORE. So the FPC's ability to regulate in an intelligent man-
ner has been hampered not only by the policy of transferring people,
*but also by the lack of staff in key areas, such as the producer certifi-
cate area?
Mr. MAMONE. Producers and pipelines both, Congressman Gore;
yes.
Mr. GOR~ I am trying to get a clear overview of what this hearing
is all about in my opinion. It seems to me there are a couple of things
involved.
PAGENO="0061"
55
First: `Whether or not there is any retribution involved for your
testimony in early 1976.
Second: Whether the policies as revealed by your transfer have
contributed to the inability of the FPC to regulat&in a wise manner.
Third: What are the implications for future policy which comes
out of these hearings?
One of the proposals that we are going to be considering shortly
is the reorganization of the energy funct.ions within the executive
branch.
Based upon your experience within the Federal Power Commission,
do you think there are dangers in combining regulatory functions
and the other functions of the executive branch? Do you think that
it heightens the danger that political pressure can be used to influ-
ence the formation of public policy?
Mr. MAHONE. In my opinion I think you have a valid point of
inquiry, Mr. Congressman, that there is a possibility of quasi-judicial
regulatory functions being dominated by administrative decisions
based on other considerations.
Mr. GORE. I will conclude now, but I would just like to say briefly
for the record that in at least Some of the cases upon which you
expressed disagreement with your superiors, your view has been
subsequently shown to have contained some foresight.
The news accounts yesterday of the shift of natural gas by Ten-
neco pipeline to the Channel Industries Gas Co. is very similar to
the case that you were working on when you testified in 1976 and
from which you were subsequently transferred.
The new policy in today's paper concerning the ability of natural*
gas companies to reserve nondedicated amounts of natural gas for
their own use again is very similar to the viewpoint you presented
in the Mobil case in your testimony `before this subcommittee in early
1976.
Therefore, I simply say that your performance, according to my
analysis, within the FPC was in the public interest. I would be very
interested to see what the response of the other witnesses will be
concerning the very serious questions raised by this case~.
Mr. Moss. Mr. Marks?
Mr. MARKS. Thank you, Mr. Chairman.
Mr. Mamone, it is the purpose of this inquiry, as I understand it,
to determine whether or not your transfer, or anyone else's, was due
to your or their testimony in January of 1976 and/or your efficacy
of the public interest. So far the only testimony we have to that
effect is your statement to the effect that you believe it was.
I would like to ask you some particular questions as concern the
time you were transferred.
First of all, as I understand it, Mr. Journey came to you, or you
went to Mr. Journey-
Mr. MAMONE. I was in his office.
Mr. MARKS. In his office.
Mr. MAMONE. Yes.
Mr. MARKS. And he suggested to you on October 8 that you were
going to be transferred. Is that correct?
Mr. MAMONE. No, it was not a suggestion.
Mr. MARKS. He stated you would be transferred?
PAGENO="0062"
56
Mr. MAMONE. It was an accomplished fact. I had been transferred.
Mr. MARKS. What did you say to him at that point?
Mr. MAMONE. You mean did I argue about it?
Mr. MARKS. No, I am asking you.
Mr. MAMONE. I simply inquired as to the circumstances requiring
this.
Mr. MARKS. Why?
Mr. MAMONE. Because at that point the staff had not seen the
memorandum on reorganization. The staff had not seen the Commis-
sion order delegating the Gēneral Counsel to make the reorgani-
zation. We simply didn't know what was gOing on at that point.
Mr. MARKS. Did you ask him why?
Mr. MAMONE. Certainly.
He explained, as I said in my statement, the reorganization order
of the Commission. He explained the Touche Ross recommendations.
He explained what was in his memorandum, which he also did not
give to us. We did not see it at that time. We didn't know who was
being transferred.
Mr. MARKS. Were you there by yourself?
Mr. MAMONE. Yes, sir.
Mr. MARKS. After he had given you these reasons, then did you
say to him, "But, Mr. Journey, I shouldn't be transferred" or "I am
really more valuable where I am" or "My experience is such that I
ought to stay" or "You are doing this or somebody is doing this
because of my testimony"? Did.you say any of those things or make
any inquiry whatsoever at that time?
Mr. MAMONE. No, sir, I did not make any comment about the
congressional testimony or anything that you have related.
Mr. MARKS. Did it come to your mind at that time that perhaps
you were being transferred as a result of the reasons you gave us
today, at that moment?
Mr. MAMONE. I don't think those things were in my mind, no. I
concentrating on Mr. Journey's instruction-s.
Mr MARKS. So that from January of 1976 until October, when
you were transferred, I then want to ask you this question: Was
there any pressure applied to you during that period of time after
your testimony and before your transfer, or any discussions that
you might have had with anyone concerning your testimony, or your
advocacy of the public interest?
Mr. MAMONE. That is extremely broad, Mr. Marks. I can't-
Mr. MARKS. It is calling for specifics.
Mr. MAMONE. I cannot give a specific example of where I was put
on hold and told, "You have done something undesirable in testify-
ing." I couldn't do that.
Mr. MARKS. Your answer, then, is that no one came to you and
chastised or criticized you for your testimony. Is that correct?
Mr. MAMONE. You are correct, yes.
Mr. MARKS. In a roundabout way, in some indirect way, Mr.
Mamone, did word get back to you that perhaps that was not being
looked upon very favorably?
Mr. MAMONE. I think through the grapevine, as it might be called,
there were indications that this was not the most desirable thing
to be doing.
PAGENO="0063"
57
Mr. MARKS. Where did that grapevine end as far as you were con-
cerned? Who was it that passed that information on to you?
Mr. MAMONE. As I say, that is very nebulous and really not worthy
of cons1dera.tion. As I say, it is just sort of a grapevine thing you
hear. We have no access to decisions on policy like this.
The Touche Ross report that the chairman has just given us a copy
of here is the first time that the employees or the associations repre-
senting employees have ever seen any part of the Touche Ross report.
In fact, the organization representing the employees filed a griev-
ance because the management would not let them see it.
Mr. MARKS. My question is really a very simple one. Between the
time you testified in January and October 8, when you were trans-
ferred, was there any pressure applied to you, or did anyone come
to you and chastise you or criticize you or even indicate that they
might want to as a result of your testimony?
Mr. MAM0NE. No, sir.
Mr. MARKS. None? So that on October 8, when you were sitting
in Mr. Journey's office, and he said you were going to be transferred,
as I understand your answer before, you didn't even consider the
fact at that point that you were being transferred because of your
testimony. Is that right?
Mr. MAMONE. That is right.
Mr. MARKS. So, then, you accepted your transfer for reasons, as
you state here-well, I can't find it at the moment, `but the point is
that you accepted your transfer as such and you went about your
work. Is that correct?
Mr. MAMONE. That is correct. I decided not to take it up with
the `executive director or the Commission.
Mr. M~xs. I assume it was because you felt `at that time it was
in the best interest of yourself and the Commission for you to be
transferred.
Mr. MAMONE. Under the circumstances that existed, yes; that was
my judgment.
Mr. MARKS. What do you mean `by the circumstances that existed?
Mr. MAMONE. The circumstances existed as I described them in
my testimony-the diminished personnel available to work in the
Certificate Section; and the general atmosphere as Congressman
Gore mentioned, the fact that backlog was increasing; the number
of personnel was declining; and experienced personnel were in the
process of leaving the section.
Those are some of the circumstances which persuaded me to con-
clude that it was in the `best interest of all involved for me to accept
this transfer.
Mr. MARKS. When was the first time that you began to question in
your own mind the circumstances that surround your being trans-
ferred? How long after October 8, 1976?
Mr. MAMONE. Well, I don't know if I can pin it down. I know that
I did have a private discussion with one of the Commissioners about
the matter.
Mr. MARKS. Who was that?
Mr. MAMONE. Commissioner Don Smith.
Mr. MARKS. Don Smith?
Mr. MAMONE. Yes.
Mr. MARKS. Approximately when was that?
PAGENO="0064"
58
Mr. MAMONE. It was shortly after October 8.
Mr. MARKS. November?
Mr. MAMONE. No; it was within a few days.
Mr. MARKS. A few days?
Mr. MAMONE. Yes, sir.
Mr. MARKS. When you went to him, did you go to him because
then you had already begun to think that your transfer was due to
reasons other than the ones that were given to you?
Mr. MAMONE. Congressman, I did not approach the Crnmrnissioner.
Mr. MARKS. He approached you?
Mr. MAMONE. He came and asked me about what was going on.
Mr. MARKS. I see.
Mr. MOMONE. I explained to him what was going on, and we just
had a general discussion of the situation.
Mr. MARKS. Did Mr. Smith then suggest to you that your transfer
might be for reasons other than the ones that were given to you?
Mr. MAMONE. No; he didn't imply or express any view as to the
propriety of what was being done. It was simply a personal discus-
sion of what was going on because, from'hiS comments, it indicated
he was unaware that there were any transfers of any substance, that
the transfers were simply reorganization of existing personnel into
different units.
Mr. MARKS. Then when was that you first felt, or began to feel,
that your transfer was for reasons other `than the reasons that were
given you?
Mr. MAMONE. Well, I can't give you a date that would be worth-
while, Mr. Marks. There has been a period of some 5 months now
since that happened. I don't make it policy to record these personal
considerations.
Mr. MARKS. I am suggesting it was only 5 months ago. It `hap-
pened in December. Did you begin to concern yourself in the month
of December of 1976 that perhaps you had been moved for reasons
other than what you were given?
Mr. MAMONE. I would say, congressman Marks, it was principally
in the period immediately after my meeting with Mr. Journey that
these considerations appeared to me to be a factor in that decision,
because, as I say, I had never, seen the documentation prior to my
meeting with Mr. Journey on the 8th, and I didn't know what else
was going on.
Mr. MARKS. So as I understand your testimony, then, you first
began to be concerned about this aspect of it probably during the
month of October of 1976. Is that right?
Mr. MAMONE. Yes, sir.
Mr. MARKS. At that particular point, sir, who did you go to in
order to complain about this situation? Who did you go to and
say, "I think I was pushed here for reasons other than `those given
tome"?
Mr. MAMONE. I never complained to any official anywhere a,s to
the transfer. I am' not complaining `today. I am merely explaining
what in my opinion happened and the reasons for these things
happening.
Look. I am not here comnlaining. I have never complained to
this subcommittee or `to Chairman Drngell's subcommittee .about it.
Mr. MARKS. There was an article which appeared in the news-
PAGENO="0065"
59'
paper, I am informed, sometime in October concerning `this transfer.
Is that correct?
Mr. MAMONE. Ye's, sir.
Mr. MARKS. W'as that article prompted by something that you
did or that you said?
Mr. MAMONE. I made no statement. I know nothing of it except
what I read in the paper after it was printed.
Mr. MARKS. I see.
Mr. MAMONE. It had nothing to do with my conclusions that I
submitted here as opinions as to the reasons and motivations for
these actions.
Mr. MARKS. We have then established that up to October 8, the
day you were transferred, you had no concern about any retribution
as far as your testimony was concerned, and that on October 8, when
you were transferred, you were not concerned about that being the
issue either; is that correct?
Mr. MAMONE. On that occasion, on the 8th, in discussing the mat-
ter with Mr. Journey, you are correct; I had no concern about it.
Mr. MARKS. But sometime between that date and the end of
October you became concerned that th'e reason you are giving us
today might be `the issue. Is that correct?
Mr. MAMONE. Yes.
Mr. MARKS. What prompted that though in your mind?
Mr. MAMONE. All the circumstances, Mr. Marks. As I explained
to you, Mr. Lewnes, Mr. Wofsy, and myself were three of the four
most experienced attorneys in the natural gas certificate regulation
area of the Office of the General Counsel. These people, either
voluntarily or involuntarily, `left the section. They were replaced,
over a course of time in the 5-months period, with people who were
not career people. By that~, I mean they were not people who started
at entry grade level as attorneys, who gained experience, whO worked
themselves up t'hrough the organization to become more experienced
and capable to handle cases.
These factors, as I define here in my statement, have led me to'
this conclusion. It wasn't a 1-day event.'
Mr. MARKS. Between the time of October 8 and the end of the
month of October?
Mr. MAMONE. Yes; you have `to understand it is a very large
organization.
Mr. MARKS. Is there any memoranda, that you are aware of,
which suggests that your transfer was for any reason other than
what you were given?
Mr. MAM0NE. I don't know of any.
Mr. MARKS. And you never talked with Mr. Journey about it?
Mr. MAMONE. That is correct.
Mr. MARKS. Or Mr. Dunham?
Mr. MAMONE. That is correct.
Mr. MARKS. Is tha't correct?
Mr. MAMONE. Yes.
Mr. MARKS. Did you come to the committee or did we come to
you about this question?
Mr. MAMONE. The staff members-
Mr. Moss. The committee sought out Mr. M'amone under my
direct order. ` `
87-292 0 - 77 -
PAGENO="0066"
60
Mr. MARKS. Might I ask when that was, Mr. Chairman?
Mr. Moss. It was in about mid-October of 1976. Let me explain
why.
It has been my policy during some 22 years, almost 23 years, of
chairing congressional investigative committees, to make it my busi-
ness to see that witnesses appearing before the committee at the
request of the committee are protected.
When I start to pick up a little buzzing over here which might
suggest that there could be a case of either harassment or some
form of retaliation, then I promptly order inquiry to be made by
staff. I did that in this case.
The staff has been working on it. We then talked with the wit-
nesses you will hear today and tomorrow, and we will look to the
General Counsel's office and the Chairmn~n"s office to respond to
the concerns which I, as chairman, pursued in the interviewing of
these witnesses and the scheduling of this hearing.
Mr. MARKS. I thank you for that explanation, Mr. Chairman.
I have but one other question, except perhaps a statement.
I notice that the letter from the Chairman, from Chairman Din-
gell to Mr. Dunham, was January 20, 1976. Your transfer took
place in October of 1976, as I understand it.
Mr. MAMONE. Yes.
Mr. MARKS. So the commission was certainly put on notice by
Chairman Dingell that `there was to be no fooling around as far
as anyone was. concerned.
There is only one other question that I have of you at the moment,
sir. Do you `have any information to give us today, specific infor-
mation to give us today, other than what is in your prepared
statement concerning the basis for your feeling as to why you
were transferred?
Mr. MAMONE. No, sir; I have nothing further.
Mr. MARKS. Thank you, sir.
Mr. LENT. Mr. Chairman, minority counsel has asked whether at
the appropriate time he might address just a few questions.
Mr. Moss. Indeed, he may.
You may proceed at this point.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Marnone, you testified that you are an experienced attorney.
With respect to `the work that you have been assigned in the Hydro
Section, can you describe the nature of that work?
Mr. MAMONE. Yes, sir; I believe I can.
The one project that we are currently having a hearing on rn-
volved the Alabama Power Co. It involves three darns on the Black
Warrior River near Tuscaloosa, ATa. There is a hearing for the
purpose of determining the necessary modification of the structures
to improve the quality of the water downstream of these hydro-
electric projects.
I am also. assigned to a case-
Mr. WUNDER. Is that a. cass you would conclude to be important,
a case of first impression, perhaps, before the Commission?
Mr. MAMONE. It is an important case and it may or may not be
a ease of first impression. I don't know `that much about the details
of `all the other pending cases. It is not an inconsequential case,
Mr. Wunder.
PAGENO="0067"
61
Mr. WTUNDER. This is a fairly important case?
Mr. MAMONE. Yes, sir.
Mr. WUNDER. Please proceed.
Mr. MAMONE. I am also assigned to the Merwin project, which
is located in the State of Oregon on the Lewis River. There is an
application there by the power company for a 50-year license to
~ontinue operating the project. There is an application by a local
governmental power authority for that license.
Mr. WUNDER. Important case?
Mr. MAMONE. A very important case.
I have other incidental matters in connection with all of these
projects which, when they occur, are directed to me for processing
and whatever work is required.
Mr. WUNDER. We talked about the backlog when you left the
Certificate Section.
Mr. MAMONE. Yes, sir.
Mr. WUNDER. Do you have any idea as to how many certificates
backlogged were statutory certificate' applications where there was
no contest?
Mr. MAMONE. I do not have the breakdown. I do know that in
the period of August and September of 1976, when all the attorneys,
including trial attorneys and myself, were called in to work on
those statutory matters, because there were insufficient personnel
to handle them-
Mr. WUNDER. There was a backlog in those types at that time?
Mr. MAMONE. As well as the trial work, yes.
Mr. WUNDER. I called the Federal Power Commission this morn-
ing and spoke to Mr. John Griffin, `the Administrator. He told me
that the backlog has been reduced to zero as of October 8. The
statement Mr. Journey has provided to the committee is that 605
now is zero.
Let me go to one other matter Mr. Gore raised with respect to
Tenneco.
Mr. GORE. The caseload that was reduced from 605 to zero, were
these producer certificate cases?
Mr. WtJNDER. Statutory certificates within that section.
Mr. GORE. Was that the total backlog?
Mr. WUNDER. As I understand it. The total backlog wit'hin the
section?
Mr. GORE. Yes.
Mr. WUNDER. No.
Mr. GORE. What was the category of 605? Were they uncontested?
Mr. WUNDER. Yes.
Mr. GORE. TJncontes~ed. These were not the kinds of cases about
which there was dispute between Mr. Mamone and his superiors
within the Commission.
Mr. WUNDER. I couldn't testify to thaf.
What Mr. Mamone testified to, Mr. Gore. is `that there was a
backlog of these cases. He further `testified in August and September
of 1976 there was such a backlog and t.h~t he and other. `attorneys
were called in to work on that backlog, `and the comment I received
from the Federal Power Commission was that. these had been com-
pletely eliminated.
PAGENO="0068"
62
With respect to other portions of the backlog, Mr. Journey's
statement further indicates that productivity in all areas of the legai
counsel's office, the General Counsel's office, have shown an increase
as a result of the reorganization, and I assume he will testify to
that when he appears.
Mr. GORE. That is a valuable addition to the record. I am simply
seeking clarification of what you mean by these cases.
Mr. WUNDER. Uncontested pipeline certificate cases.
Mr. MAMONE. Congressman Gore, if I might explain, the Certi-
ficate Section, in effect, really has two subsections, a trial section
and another section that handles statutory work. I was in the trial
section handling contested matters before administrative law judges
and before the Commission itself.
The statutory subsections had been so diminished during the
summer of 1976 that personnel from the trial section were required
to go over and work on those statutory matters to make some pro-
gress on them. That was my testimony.
Whether they have since assigned lawyers, law clerks, secretaries,
et cetera, to the statutory subsection to clean up the backlog is
another matter.
Mr. GORE. Are these essentially routine cases?
Mr. MAMONE. Yes; essentially routine cases.
Mr. GORE. So experienced personnel would not necessarily be re-
quired to clean up a backlog of that nature?
Mr. MAMONE. That is right; it would not be the same experience
level as required to go to hearing on contested matters.
Mr. Goirs. Or to work on the backlog in the other division.
Mr. MAMONE. That is right.
Mr. GORE. Thank you.
Mr. WUNDER. Thank you, Mr. Chairman.
The attorneys working in the Certificate Section now are without
experience or have a limited degree of experience in all cases?
Mr. MAMONE. No, sir; I never intended to state that.
Mr. WUNDER. I am asking a question.
Mr. MAMONE. I was asked about the replacement of the existing
personnel. I believe my testimony was that two things happened:
Some of the slots were not filled and some of the slots were filled
with less experienced people, new people who were recently hired.
Mr. WUNDER. Let me ask you a question about the attrition rate.
Of that attrition rate, how many were attorneys with less than
3 years of experience?
Mr. MAMONE. I don't have a breakdown statistically. You will
have to get Mr. Griffin and ask him to make an analysis of the
Certificate Section, Hydro Section, and Rate Section and show you
exactly what happened to all the personnel to have a comprehensive
view of what was going on.
As I testified to Congressman Marks before, I am not in the
administrative position and I do not have the statistics on this. I
merely gave you my estimates of the numbers of ~eople involved.
The 26 attorneys in the Certificate Section as of late 1974 I knew
all personally and well. I trained some of them. I worked with
many of them.
As a consequence, I know what happened to those people..
PAGENO="0069"
Mr. WtJNDER. What is the relevant number of attorneys with less
than 3 years with regard to those?
Mr. MAMONE. There was a substantial number with less than 3
years. There was a substantial number with more than 3 years who
left.
Mr. Moss. So that the record is accurate, hold it at this point.
The staff will be instructed to get the precise figures in each of
the sections.
[See letter dated April 5, 1977, p. 2O~, this hearing.]
Mr. Moss. The Chair does not like to have a record that is fuzzy.
We are talking about serious matters and we want to have the exact
figures. I do not want guesstimates.
Mr. WUNDER. Thank you, Mr. Chairman.
I have a final question for you, Mr. Mamone.
You expressed an opinion as to why you were transferred.
Mr. MAMONE. Yes.
Mr. WUNDER. Ordinarily people form opinions and usually do it
on the basis of fact.
Can you identify one salient. fac.t or salient group of facts that
lead you to this conclusion?
Mr. MAMONE. I think I laid, out the fact.s in my statement, Mr.
Wunder. As I think I have indicated in the questioning, I don't
believe any attorney was transferred during the course of the Octo-
ber reorganization who did not request a transfer or who did not
go to a similar function in a different box or block, whichever way
you want to look at it, on a table of organization. People did move
t.o different functions. Several people who were in the Hydroelectric
Section to which I moved, as I understand it, desired to leave the
Hydroelectric Section and go to other kinds of work, and they were
permitted to do so by the General Counsel.
I have no objection to that, but I am stating that is my under-
standing of their moves.
Mr. WUNDER.' Tha.t is the fact on which you base that opinion?
Mr. MAMONE. That is one fact., yes.
Mr. WUNDER. Are there others?
Mr. MAMONE. The loss of Mr. Lewnes as an Assistant General
Counsel; the loss of Mr. Wofsy as head of the section; the loss of
the large number of experienced personnel within a very short
period of time from the Certificate Section, people resigning or
asking to be transferred; the replacement of these people by per~ons
who were not career people; nonrepiacernent. of some of them; and
the replacement of other spot.s by inexperienced people who were
coming in at the bottom of the career ~nd had to be trained. They
did not have experience in this work.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Moss. Mr. Gore?
Mr. GORE. One brief final question. Mr. Chairman.
On page 4 of your statement. you indicated that it is your under-
standing that there is an intention not. to name a permanent head
of the Certificate Section.
Unon what do you base that understanding?
Mr. MAMONE. I believe that was in my discussions with Mr.
Journey, t.he indication that `the Certificate Section was going to
PAGENO="0070"
64
be merged or abolished or transferred in some way so that these
positions probably would not exist on a permanent basis.
The Touche Ross study which was made on the long-term reorgani-
zation indicated that the certificates and licenses would be formed
into a single unit. I think those were the underlying reasons that
position has not been filled, and `the intention at that time was that
it would not be filled.
it is very unusual to have acting heads of sections for this length
of time. It has been almost a year now where that section has nb
permanent head.
Mr. GORE. Thank you, Mr. Chairman.
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
When the chairman opened the hearing this morning, he read
from 18 U.S.C. section 1505, which talks about the substance and
penalties for the offense of corruptly or by threat of force, or by
any threatening ]etter or communication, endeavoring to influence,
intimidate, or impede any witness in any proceeding before either
a court or before a committee of the House of Representatives.
I have listened very carefully to your statement, with particular
reference to this section. I do not believe you have testified that
you have ever been intimidated or given any threat of force, any
threatening letter or communication which endeavored to influence
or intimidate or impede you in your testimony or in the work you
do at the Commission.
Can you just give us a yes or no-
Mr. Moss. The Chair will not permit that question. That is a
judgment for the committee. The Chair was reading for the purpose
of *the persons in attendance a;t this hearing. I am not going to
permit a witness to prejudice any rights he might have by respond-
ing to that.
Mr. LENT. All right.
Mr. Moss. The witness is instructed by the Chair not to respond
to that. The Chair would suggest strongly that the gentleman
withdraw the question.
Mr. LENT. I thank the chairman.
Has the witness any intention of filing a complaint based on
this particular statute?
Mr. MAMONE. No, sir; I do not have any intention to file a
comnlaint.
Mr. LENT. You indicated that you had this opinion, I believe you
testified~ that your transfer was a retaliatory transfer.
Mr. MAMONE. I did not use the word "retaliatory."
Mr. LENT. What is the allegation that you are making? Where
is the wrong-doing?
Mr. Moss. Mr. Lent, the gentleman made no allegation. The Chair
summoned the witnesses, sought subpoenas for the purpose of insur-
ing their attendance in order that the Chair could carry out his
responsibilities to determine whether, in fact, there apnears to be
~ pattern which would constitute retaliation ~tgainst witnesses ap-
pearing either before this committee or the Subcommittee on Energy
~nd Power because, if' there has been, it is not up to the witness
to seek the remedies afforded by law but it is up to the contmittee to
PAGENO="0071"
05
enforce the rights of the committee to obtain testimony from any~
person within the Government without that person fearing any form
of retaliatory treatment.
Mr. MARKS. If the gentleman would yield.
Mr. Chairman, the statement that the witness has not made such
a statement, as I understand it he has made the statement. His testi-
mony is that he was transferred as the result of the fact he did
testify before the committees.
In that sense, I believe he has made these very serious allegations.
Mr. Moss. I believe there might be an inference drawn but I do
not think the statement is made at any point.
Mr. MARKS. I agree with the chairman that the mere fact he
senses it does not mean anything if it is not backed up by fact.
However, on the other hand, he made the statement.
Mr. LENT. We can clear the atmosphere here if we ask the re-
porter, if he can find it, to read the last question by Mr. Lemov
and the witness's last answer to it, because it was my impression
that he did make such an allegation.
Mr. Moss. The question was:
Why do you think you were transferred? Do you think it is because you had
testified before thts committee?
The witness indicated that. he thought that was quite possible.
Mr. LENT. That is my recollection as well.
Mr. Moss. That is far different from a legal conclusion that a
case of retaliation has been made.
Mr. LENT. The witness, as I recall, did testify that he thought
that was the reason that he was transferred, because of the fact
that lie had testified on one or more occasions before congressional
committees.
My question is, then: What facts do you predicate the giving
of that opinion on other than the fact that you were extremely
experienced and you thought you were doing a good job in the
division that you were originally assigned to?
I don't believe you have cited one indicia of evidence which would
help you substantiate that opinion which you have given to the
committee.
Can you help us out now by giving us any factual situation, or
anything that happened, anything anyone said to you in your talks
with the Commission-you said you had no talks with the Commis-
sion-in your talks with your chief counsel, in your talks with
Commissioner Smith, or in any of your other conversations which
would lead you to this opinion, which leads our chairman, at least,
to cite a very serious section of the Criminal Code?
Mr. MAMONE. If I may, Mr. Lent, I think the chairman was
making a general statement here as to th~ criminal statute. I don't
think the statement that I made in response to the question of Mr.
Lemov as to my opinion had a.ny direct connection with the state-
ment by the chairman when he opened this session.
Mr. Moss. The Chair can clarify the record because it is up to
the Chair at this point to make that cla.rificatioii. .
The Chair determined, after receiving reports from the investi-
gators he assigned, that lie was of the opinion that a strong case
PAGENO="0072"
66
was certainly legitimately to be deduced from the information
which he had received suggesting the possibility that there had
been retaliatory action taken. It was the Chair's conclusion and not
that of the witness.
The Chair, in response to that conclusion, in his opening state-
ment this morning cited the pertinent sections of the U.S. Code for
the benefit of all. I have no doubt that the Federal Power Commis-
sion, has its representatives here to report back to them, and the
Chairman and General Counsel will be afforded an opportunity at
a subsequent hearing before the committee to respond to the chair-
man's concern.
The chairman, as a result of those concerns, has summoned wit-
nesses to lay upon this record all of their views, and then it will
be up to the committee to reach a conclusion based upon their
testimony.
If we then find that that conclusion coincides with the initial view
of the chairman, then the matter will be referred to the Department
of Justice.
Mr. LENT. Mr. Chairman, if you would yield, the line of ques-
tioning that I am pursuing is simply an effort on my part to try
to learn, to tr to search your mind, if you will, through the wit-
ness-because I would not presume to ask you because you are not
a witness but the chairman of the committee-to try to search the
witness's mind to find the evidence, or a scintilla of the evidence,
or some indication which might lead the committee to find there
might possibly have been a violation of 18 U.S.C. 1505.
I am asking the witness whether he will enlighten me so that
perhaps I can come to the sarr~e conclusion you have come to.
I am frank to admit that thus far this morning I have not really
be9n enlightened to that degree.
Mr. Moss. The witness does not have all of the testimony that
will he placed before this committee. He has only his own view.
The Chair's tentative conclusions are based upon a larger body
of information, and a pattern, in the Chair's judgment, tends to
emerge. It is either a number of unusual coincidences or incredibly
bad judgment, oi' a possible retaliation against the witness before
this committee or before the Subcommittee on Energy and Power.
Until the totality of the information upon which the testimony
is based is in the record, the Chain' has arrived a.t. the conclusion
the Chair has tentatively stated, an4 that is his own.
Mr. LENT. I have nothing further.
Mr. GORE. I want to interpose a~ brief question.
Do you feel a little more apprehensive about. that this time than
last time?
Mr. MAMONE. No; I really don't, Congressman Gore.
Mr. GORE. Thank you. Mr. Chairman.
Mr. Moss. Mr. Marks?
Mr. MARKS. One question. Are you prepared to tell us this morning
who in the Commission was responsible, or who the people were who
were responsible, for your transfer, the reason you gave us this
morning that you believe you were questioned. It is a poor question.
What I am really asking is this: Are you able this morning to
give us a statement, backed up by some fact, where you can pin-
PAGENO="0073"
point the person or persons responsible for your being transferred
for the reason you say you were transferred?
Mr. MAMONE. I am not able to give you any additional facts on
that question, Congressman Marks.
Mr. MARKS. Do you know anyone who can?
Mr. MAMONE. I think that some of the subsequent witnesses might
have more information inasmuch as they were in the management
end of the agency.
Mr. MARKS. Have you discussed your testimony today with any
of the people who will be testifying here during the course of these
hearings?
Mr. MAMONE. Congressman Marks, I showed my prepared state-
ment, the one I read, to Mr. Lewnes and Mr. Wofsy.
Mr. MARKS. When was that?
Mr. MAMONE. That was within the last few days. The written
statement is what I am referring to now.
Mr. MARKS. When did you meet with these two gentlemen and
where?
Mr. MAMONE. It was in the offices of the Commission within the
last few days, since we got the letter from ~Chairman Moss asking
us to testify.
Mr. MARKS. At that time, sir, did they show you copies of their
statements?
Mr. MAMONE. I don't believe they had statements. I believe Mr.
Wofsy has a very short statement.. Judge Lewnes, I believe, has
no statement.
Mr. MARKS. Did they discuss with you what their testimony was
going to be and what your testimony was going to be?
Mr. MAMONE. My testimony was the prepared statement.
Mr. MARKS. Yes.
Mr. MAMONE. Their testimony, as I have explained, either as my
supervisors or my colleagues, the purpose of their testimony being
to corroborate and perhaps to explain some of the things I talked
about.
*Mr. MARKS. Did either of these gentlemen tell you what they were
going to testify to?
Mr. MAMONE. They are going to answer questions in response to
the subpoena of Chairman Moss, issued by authority of the corn-
mittee. I don't know what they are going to say.
Mr. MARKS. They didn't discuss with you-.
Mr. MAMONE. They have no statement. Presumably, like any
witness, they will answer the questions asked by the committee.
Mr. MARKS. Did they discuss with you or did they state their
opinion coincided with your opinion?
Mr. MAMONE. I did not submit my opinion to these two gentlemen.
Mr. MARKS. You submitted your statement..
Mr. MAMONE. The written statement, yes.
Mr. MARKS. You did not tell them you were going to testify today
that. you were transferred for reasons other than given you on
October 8? You didn't tell them that?
Mr. MAMONE. I didn't discuss that specific item with them. All
we really looked at was the prepared statement.
Mr. MARKS. I want to be sure of that.
PAGENO="0074"
68
Mr. MAMONE. They didn't cross examine me as to what I was
going to do.
Mr. MARKS. I can appreciate that. It was a friendly conversation?
Mr. MAMONE. It was simply for the purpose of making certain
that some of `the dates and numbers in the prepared statement were
accurate.
Mr. MARKS. My specific question to you is this: Did the question
come up, or d1d the discussion come up, as to what you were going
to tell this committee as to the reason you felt you were transferred?
Did that particular subject come up?
Mr. MAMONE. No, sir.
Mr. MARKS. It did not?
Mr. MAMONE. No, sir.
Mr. MARKS. Did they bring it up to you?
Mr. MAMONE. I don't recall any discussion of that particular item
at all.
Mr. MARKS. All right. Then might I ask you why are you so
sure, then, that their testimony will be so enlightening to us?
Mr. MAMONE. Because, as I said, they were part of the manage-
ment of the Office of the General Counsel and they `had more direct
contacts with `the management, specifically, the Executive Director,
the Chairman, and the Commissioners as `to administrative matters.
I ho'pe `they will be more helpful to you.
Mr. MARKS. My understanding was, from your testimony, that
what `they were going to say would, in fact, back up with more
detail and fact the reason that you gave us today for being trans-
ferred. is that not correct.
Mr. MAMONE. No; that is not correct, Congressman Marks.
Mr. Moss. I selected the witnesses. The gentleman before us `is
merely one of `those selected. I don't think we communicated to the
witnesses who the other witnesses would be at the `time of selection.
I never make it a policy to do that.
Mr. MARKS. Thank you, Mr. Ohairmnan.
I was not suggesting that that happened, of course.
What I was trying to get at was a statement I thought the witness
had made that these two gentlemen that lie had `met with the other
day, and given a copy of his statement, would, in fact, back up
what he was telling us today a~s to why he was transferred.
You don't know whether they will or not?
Mr. MAMONE. I don't know.
Mr. MARKS. And they didn't discuss that with you at the time?
Mr. MAMONE. We didn't discuss that. We discussed the specifics
of the onening statement that I prenared.
Mr. MARKS. One last question. Have you in the past., other than
a few days ago, discussed this narticular situation with them?
Mr. MAMONE. The statement in relation to the testimony?
Mr. MARKS. Particularly the. reason that you gave us today for
why you were transferred, because of your testimony here.
Mr. MAMONE. I can't recall that being discussed. Their reco~léc-
tion may be different from mine. but I don't recall discussing it.
Mr. MARKS. You don't recall discussing it with them?
Mr. MAMONE. No.
Mr. MARKS. Thank you very much.
Mr. Moss. Mr. Lemov?
PAGENO="0075"
69
Mr. LEM0v. Mr. Mainone, Congressman Marks spent quite a b'it
of time questioning you about the fact that you did not go to Mr.
Dunham to complain about your transfer, `and you did not go to the
General Counsel, Mr. Journey, to complain about your transfer in
October of 1976.
Mr. MAMONE. Yes, sir.
Mr. LEMOV. That is correct, is it not?
Mr. MAMONE. Yes; that is correct.
Mr. LEMOY. About when did this subcommittee investigate or
contact you?
Mr. MAMONE. It was in the month of October.
Mr. LEMOV. So there would be no reason for you to talk to anyone
else inasmuch as you were talking to the subcommittee staff, were
you not, at the direction of the chairman?
Mr. MAMONE. That is correct.
Mr. LEM0v. No further questions, Mr. Chairman.
Mr. Moss. Mr. Gore, have you anything further?
Mr. GORE. No.
Mr. Moss. Mr. Lent., have you anything further?
Mr. LENT. Yes; I do, Mr. Chairman.
C'an you tefl us what happened first? Was the Jack Anderson
column printed in the Washington Post, date of which is October
16, 1976, or did this committee's representatives contact you?
Mr. MAMONE. I cannot answer that question, Mr. Lent. I would
have to look at my notes back in the office. I really don't recall.
Mr. LENT. Preliminary `to the Jack Anderson column of October
16, 1976, did you speak to anyone, either Jack Anderson or anyone
from his staff?
Mr. MAMONE. No, sir; I did not.
Mr. LENT. So this article which appeared in the Anderson col-
umn on October 16, you were in no way involved with it?
Mr. MAMONE. Th'at is right.
Mr. LENT. I have nothing further.
Mr. Moss. We shall place the Jack Anderson cotumn in the record
at this point.
The Chair would caution members and counsel that when a docu-
ment is referred `to, or u'sed for the purpose of soliciting testimony,
or as the basis for a question, that it is the custom of the House that
the document be placed in the hearing record so that the relevance
of it may be carefully considered at the time of `the drafting of the
necessary report and printing of the hearings.
The Chair will ask, then, that the Anderson column of Saturday,
October 16, 1976, which has been referred to, an article which
appeared in the Washington Post, be placed in the record at this
point.
[The column referred to follows:]
[From the Washington Post, Saturday, October ic 19761
A REPORT ON VIET PRISON CAMPS
(by Jack Anderson and Les Whitten)
The Oommunists who have taken over Vietnam reportedly are holding be-
`tween 200,000 and 300,000 political prisoners in "re-education camps."
Not only former officials of the fallen Saigon regime, but some of its most
outspoken opponents, have been hereded into the pri'son camps. Among them
are some of the militant Buddhists, Hoa Hao leaders and Third Force parlia.
PAGENO="0076"
70
mentarians who gave ex-President Nguyen Van Thieu so much trouble during
the Vietnam war.
Many of these critics of Thieu, once hailed by the Communists in the north,
have now been jailed by the Communists. Their offense: they are not only anti-
Thieu but anti-Communist as well.
The intelligence about the political prisoners in Vietnam comes from an un-
expected source-the liberal group, called SANE, which vigorously opposed
U.S. participation in the Vietnam war. SANE was accused during the Nixon
years of being soft on the Vietnamese Communists.
But SANE'.s executive director, Sanford Gottlieb, has taken the Communists
to task in a private letter to `the Vietnam government's observer at the United
Nations, Dinh Ba Thi.
Citing private reports "from Vietnamese inside and outside their native
land," SANE accuses `the Communist regime of detaining up to 300,000 "poli-
tical prisoners in your country"-a number which he alleges is "far in excess
of those military and civilian officials who formerly served the Saigon regime."
Adds SANE sternly: "We are distressed to learn that some of the `detainees'
have been deprived of all contact with their families. Hopes for normalization
and justice cannot suppress our concern for the human rights of those your
government finds in need of `re-education.'"
The letter points out that the new Vietnam government often speaks of
"human rights" and "reconciliation." It is all the more important, therefore, for
Vietnam to "issue a complete accounting of all political detainees . . . and to
facilitate inspection by an international agency," SANE declared.
Footnote: The Vietnam government has insisted that only those who were
active in `the Saigon regime or who had developed "negative" attitudes were
locked up in the re-education camps.
Pre-election Purge-The federal regulatory agency which is supposed to pro-
tect the public from excessive fuel profits, is going through a brutal pro-elec-
tion purge of consumer advocates.
In one of the most cynical moves in recant memory, four of the top pro-con-
sumers lawyers at the Federal Power Commission have been `sent to the block.
The FPC influences the price consumers must pay for natural gas and, to a
lesser extent, oil, coal and other fuels.
The downgrading of one attorney, Russell Mamone, appears directly related
to his congressional testimony against Mobil, Gulf and Tenneco. He is an ex-
pert on the offshore `oil and gas fields that `the oil industry covets. By favoring
the public interest over the oil interests, he antagonized the powerful oil crowd.
He has now been relegated to the FPC's bureaucratic Siberia, a lowly post
dealing with hydroelectric power.
Another tough, pro-consumer man, Jon Loti's, an assistant general counsel,
has been ousted from the position where he fought vainly to hold down pipe-
line and electricity rates. His title remains the same, but his power is gone.
Cyril Wofsy, whose legs had to be amputated after be was injured in a
World War II raid over Germany, fought just as bravely for the consumers on
the bureacruatic battlefield. He became an acting assistant counsel, but then
was hounded back to a lower status by `the commissioners who serve the oil
interests. Now he will be reduced to handling minor electricity cases.
Joel Cockrell, a trial attorney who fought the giant El Paso Natural Gas con-
glomerate, has suddenly been pulled off `the case. He has been replaced by a
lawyer who i's identified with the FPC's pro-industry forces.
Our sources say `the purge was carried out by Chairman Richard Dunham
in order to present the next President with a commission that is already stacked
in favor of the gas and oil tycoons.
Footnote: Dunham couldn't be reached. Vice Chairman John Holloman said
the FPO had delegated broad administrative power's `to Dunham, who, appar-
ently, is making the most of them.
Mr. Moss. The Chair might point out that the initia' contact, not
with the witness before us but members of the staff of the Federal
Power Commission, commenced in August of 1976 at the' Chair's
direction.
Mr. Mamone, we want to thank you very much for your appear-
ance here today.
You are excused.
PAGENO="0077"
71
Mr. MAMONE. Thank you.
Mr. Moss. We shall now call as the next witness Mr. Edward
Minor.
Mr. Minor, you are here in response to `the subpena issued by this
subcommittee for your attendance?
Mr. MINoR. Yes.
Mr. Moss. Do you solemnly swear that the testimony you are
about to give the subcommittee shall be the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. MINOR. I do.
Mr. Moss. Identify yourself for the reporter for the committee
record.
TESTIMONY OF EDWARD R. MINOR, ASSISTANT TO THE GENERAL
COUNSEL, OFFICE OF THE GENERAL COUNSEL, FEDERAL POWER
COMMISSION
Mr. MINOR. My name is Edward R. Minor.
Mr. Moss. Do you have a statement?
Mr. MINOR. No; I do not, Mr. Chairman.
Mr. Moss. Mr. Lemov?
Mr. LEMOV. What is your position at *the Federal Power
Commission?
Mr. MINOR. I am Assistant to the General Counsel.
Mr. LEM0v. How long have you served with the Federal Power
Commission?
Mr. MINOR. Approximately 6½ years.
Mr. LEMOV. You are Assistant to `the General Counsel now, did
you say?
Mr. MINOR. Yes, sir.
Mr. LEM0v. In that capacity, were you involved in the plans of
reorganization of the General Counsel's office?
Mr. MINOR. I was not involved in the plans, no, sir.
Mr. LEMOv. Were you familiar with the plans?
Mr. MINOR. Generally familiar with them.
Mr. LEM0v. What did you do for the General Counsel?
Mr. MINOR. My areas of responsibility are to handle all EEO
complaints which go to hearing, conflicts of interest, contract work,
that is contracts entered into by the Commission or the agency with
outsiders.
Mr. LEMov. Are you familiar with personnel matters as well?
Mr. MINOR. To some degree, yes, sir.
Mr. LEMOV. Last August you were interviewed by the staff of this
subcommittee, I believe; is that correct?
Mr. MINOR. Yes.
Mr. Li~mrov. Who interviewed you from the subcommittee?
Mr. MINOR. Mr. Braun, and I have forgotten the name of the
other gentleman.
Mr. LEM0v. Mr. Smethurst?
Mr. MINOR. Yes.
Mr. LEM0v. Did they discuss with you an assignment you had
received, or a direction you had received, regarding Mr. George
PAGENO="0078"
72
Lewnes, who at that time as an Assistant General Counsel of the
Federal Power Conimission?
Mr. MINOR. Yes, Mr. Lemov.
Mr. LEM0v. They did do that?
Mr. MINOR. Yes, sir.
Mr. LEMOV. From whom was that assignment? Who gave you
that assignment?
Mr. MINOR. The assignment came from the Executive Director,
Mr. Fee.
Mr. Lii~iov. And Mr. Fee is the Executive Director of the Federal
Power Commission?
Mr. MINOR. Yes.
Mr. LEMOv. He was in charge of this reorga.nization we have
heard discussed this morning?
Mr. MiNOR. That is correct.
Mr. LEM0v. Implementing the reorganization?
Mr. MINOR. That is correct.
Mr. LEMOY. What did Mr. Fee say to you?
Mr. MINoR. He asked me to look into the procedures to be fol-
lowed in separating an attorney from service.
Mr. LEMOv. Separating-firing?
Mr. MINOR. Yes, sir; firing.
Mr. LEMOV. Firing an attorney?
Mr. MINOR. Yes.
Mr. LEMOV. Did he give you any reasons?
Mr. MINOR. No; he did not.
Mr. LEM0v. No reasons at all?
Mr. MINOR. No reasons.
Mr. LEM0v. Who was the attorney involved in this?
Mr. MINOR. Mr. Lewne's.
Mr. LEM0v. Mr. Fee asked you how to go about firing Mr.
Lewnes?
Mr. MINOR. Correct.
Mr. LEMOv. When did he `ask you?
Mr. MINOR. I would say this came about the latter part of Febru-
ary or early March of 1976.
Mr. LEMOV. Right after Mr. Lewnes's testimony before `this sub-
committee and the Subcommittee on Energy and Power;~ `is that
correct?
Mr. MINOR. I don't know what the dates were with respect to
Mr. Lewnes's testimony.
Mr. LEM0v. I think it was within a few days.
Mr. Moss. We shall place in the :hearing record the dates of the
appearance of Mr. Lewnes before this committee and also before
the Subcommittee on Energy and Power.
[The information referred to follows:]
Mr. Lewnes appeared before the Energy and Power Subcommittee on January
14, 1976, and January 15, 1976; and before the Oversight and Investigations
Subcommittee on January 23, 1976.
Mr. LEM0v. Did you consult with Mr. Fee and Mr. Journey, the
General Counsel, about this assignment during the next few weeks?
Mr. MINOR. On one or two occasiOns I spoke to Mr. Fee. I `also
advised Mr. Journey of my assignment in this matter.
PAGENO="0079"
73
Mr. LEMOY. There was never any indication from Mr. Fee or Mr.
Journey as to why they wanted to fire Mr. Lewnes?
Mr. MINOR. Well, Mr. Journey did not, had no part in the instruc-
tions that I received from Mr. Fee. I merely advised Mr. Journey
that I was researching the question as to how you go about dismiss-
ing an attorney.
Mr. LEMOY. This is the same Mr. Lewnes that was shortly there-
after promoted to an Administrative Law Judge?
Mr. MINoR. That is correct.
Mr. LEMOY. Did you check with the Civil Service Commission on
how one goes about firing an attorney?
Mr. MINOR. Yes; as part of my research into this question I dis-
cussed it with `the Office of General Counsel at the Civil Service
Oommission.
Mr. LEM0v. What did you conclude about the po~sibility or the
grounds for any adverse personnel action against the~'Assistant Gen-
eral Counsel Lewnes?
Mr. MINOR. First of all, an attorney is in the excepted service.
His position `is a little bit different from the career service employee.
An `attorney, unless he has veteran's preference, is not entitled to
all the due process rights which a career employee would be, such
things as notice, hearing, and so forth.
I subsequently `advised Mr. Fee that Mr. Lewnes was a veteran;
he did have the due process rights accorded to any employee at the
Commission.
The matter then was just dropped because meanwhile Mr. Lewnes
was being considered for the position of Administrative Law Judge.
Mr. LEMOY. Did you find any grounds for adverse personnel action
against Mr. Lewnes because of his record with the Commission over
the years?
Mr. MINOR. No; one, I did not know w'hat the grounds on which
they were going to base this dismissal were. I did advise them, how-
ever, `that grounds for dismissal of an attorney would constitute such
things as insubordination, incompetence.. Neither one of those
grounds was present in this case.
I also added, however, that in the case of an attorney the ground
that you would need to dismiss him could be of such a nature, in
other words, a profound philosophical difference, or differences
over policy and policy matters, to `the extent that it would interfere
with the effective operation of the Office of General Counsel or of
the Commission.
Mr. LEM0v. Did you come up with a suggestion regarding the
reorganization and its effect on Mr. Lewnes?
Mr. MINOR. No; I had no suggestion, although I did mention that
Mr. Lewnes was interested in becoming `an Administrative Law
Judge.
Mr. LE~Iov. Did you suggest that Mr. Lewnes `could possibly be
reorganized out of his position as well as fired?
Mr.. MINOR. Yes; that is another possibility. You may reorganize
someone out of a position. .
However, you would have to est;~h1ish that the reorganization was
not for the benefit or in the best interest Of the Office of General
Counsel or of the Commission.
PAGENO="0080"
74
Mr~ LEM0v. Was not in the best interest?
Mr. MINOR. Yes, sir.
Mr. Moss. Why?
Mr. MINoR. It is possible to take anyone out of his position
through a reorganization, which is what has occurred in this in-
stance. But for an employee to effectively complain he would have
to establish the reorganization was not in the best interest of the
Office of General Counsel or of the agency.
Mr. LEMOY. Would that be a hard or easy thing to establish for
a transferred employee in your opinion?
Mr. MINOR. My opinion would be that it would not be an easy
thing.
Mr. LEMOY. Thereafter, though, Mr. Lewnes was promoted to
administrative law judge and, therefore, this question was dropped,
I gather. Is that correct?
Mr. MINOR. That is correct.
Mr. LEMOV. Were you personally relieved as to this development?
Mr. MINOR. I just don't know.
Mr. Moss. That calls for a conclusion which is not overly relevant
to this inquiry.
Mr. LEM0v. I have no further questions of this witness.
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
Mr. Minor, I think you indicated that you were Assistant to the
General Counsel and in that capacity to some degree were familiar
with personnel matters?
Mr. MINOR. Yes, sir.
Mr. LENT. You were present this morning during the testimony
of Mr. Mamone?
Mr. MINOR. Yes.
* Mr. LENT. Were you familiar with the transfer which is the
subject of this hearing today regarding Mr. Mainone?
Mr. MINOR. I am not familiar with the specifics. I do know and
I am generally aware of that transfer.
Mr. LENT. Are you aware of the fact that on October 8, 1976,
23 attorneys in the Office of General Counsel were transferred in
one way or another?
Mr. MINOR. Yes.
Mr. LENT. As part of the so-called reorganization program?
Mr. MINOR. Yes~ I am.
Mr. LENT. And that Mr. Mamone was 1 of those 23 who was so
transferred?
Mr. MINOR. .Yes, sir.
Mr. LENT. Do you have anything by way of background which
could enlighten the committee to either substantiate or undermine
the reasons which have been suggested here as to the reason for Mr.
Mamone's transfer; that is, that he had given testamony before one
or two committees or subcommittees of the House of Representatives?
Mr. MINoR. No, Congressman Lent; I just could not enlighten you
on that.
Mr. LENT. Have you ever heard or seen anything in writang
which would substantiate what appears to be the claim of Mr.
Mamone-that he was transferred because `of his testimony before
committees of the Congress?
PAGENO="0081"
75
Mr. MINOR. No; I have not.
Mr. LENT. Have you ever heard anything that would suggest that
he was transferred instead as part of the general reorganization of
the Federal Power Coimnission?
Mr. MINOR. Well, I have heard that that transfer was part of
the reorganization as a result of the Touche Ross report.
Mr. LENT. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Gore?
Mr. Gons. Under the statute as I read it, Mr. Chairman, it might
~ concluded a crime to put it in writing, so it might not be sur-
prising that there are no such memoranda laying around.
Mr. Minor, when you were interviewed by the staff last August,
did you indicate that you were aware of the testimony of Mr.
Lewnes before the subcommittee and that it was your belief this
might have been a factor in the request which you received?
Mr. MINoR. No; I don't recall saying that.
Mr. Moss. Mr. Braun, will you come forward and be sworn?
Mr. Braun, do you solemnly swear that the testimony you are
about to give to this subcommittee shall be the truth, the whole
truth, and nothing but the truth, so help you God?
Mr. B1iAUN. I do.
Mr. Moss. Will you identify yourself to the reporter and for the
record?
Mr. BRAUN. I am William D. Braun.
Mr. Moss. Mr. Braun, you are an investigator employed by this
subcommittee who participated in the investigation of this matter
at the direction of the Chair for this subcommittee?
Mr. BRAUN. Yes; I am, Mr. Chairman.
Mr. Moss. Now, Mr. Gore, you may proceed with your questioning.
Mr. Gons. Referring to your notes, if you would, with regard to
the interview which you conducted with Mr. Minor last August 6,
do you recall asking Mr. Minor about his knowledge of the investi-~
gation of Mr. Lewnes, of the testimony of Mr. Lewnes before the
subcommittee?
Mr. BRAUN. My summary of the interview with Mr. Minor indi-
cates that Mr. Minor stated that he had heard rumors about Mr.
Lewnes' testimony before the Subcommittee on Oversight and In-
vestigations, and that this could have entered into the decision by
the people that Mr. Minor has specified to get rid of Mr. Lewnes.
Mr. Minor stated that his understanding was that Mr. Lewnes'
testimony was at variance with the FPC Commissioners.
Mr. GORE. Mr. Minor, would you like to respond to that? Does
that conflict with your memory of the interview?
Mr. MINoR. No; I do not recall that specific statement now that
he has read it. It is conceivable there were all sorts of rumors
flying around at that time and it is conceivable that I did hear
that that might have been one of the considerations which entered
into the proposed dismissal of Mr. Lewnes.
Again, I never saw anything in writing to that effect nor was I
ever advised of that by my superiors, the people who asked me to
look into this question.
Mr. GORE. Thank you, Mr. Braun.
Mr. Moss. Mr. Braun, for the record, the memorandum that you
have consulted in connection with your response to the question put
87-292 0 - 77 - 6
PAGENO="0082"
76
by Representative Gore, was that a contemporaneous memorandum
placed in the files immediately following the interview with this
witness?
Mr. BRAUN. Yes; Mr. Chairman, it was.
Mr. LENT. In keeping with your suggestion earlier, perhaps that
memorandum ought-
Mr. Moss. That memorandum will be typewritten and incorpo-
rated in the record at this point. That is why the Chair wanted to
establish the fact it was a contemporaneous memorandum, for the
purpose of authenticating it for this record.
It will be reduced to typewritten form and signed by Mr. Braun
and placed in the hearing record at this point.
[The memorandum referred to follows:]
MINoR INTERVIEW-AuguSt 6, 1976
EM was asked orally how to go about getting rid of G. Lewnes.
They never told EM the basis or grounds for wanting to get rid of Lewnes
and EM didn't ask.
However, EM heard rumors about Lewnes' testimony before this Subcom-
mittee and "this could have entered into it [decision to get rid of Lwnesj too."
Lewnes' testimony was" at variance with FPC Commissioners."
EM says this decision must have come from a higher authority than Journey
or Fee and that this was something that came up suddenly-something done
impulsively.
EM discussed this matter with a Civil Service attorney. EM took notes at
his meeting with Civil Service attorney. EM concluded that there weren't any
grounds and no justification to institute an adverse action leading to dismissal.
The time from the date of the request to EM's reply was abou.t 2 weeks.
EM says he had conversations with Journey and Fee only about this matter.
EM asked for the source of the request but was not told.
EM came up with suggestion to reorganize Lewnes out of his position.
Mr. Moss. Mr. Gore, you may continue.
Mr. GORE. Mr. Minor, is this type of request unusual in your ex-
perience, to be asked to find ways to separate someone from the
Commission?
Mr. MINOR. It is not common. It does not happen every day.
Mr. GORE. Has it ever happened to you before?
Mr. MINOR. No, it has not.
Mr. GORE. Thank you, Mr. Chairman. That is aU.
Mr. Moss. Mr. Marks?
Mr. MARKS. I have no questions of this gentleman except to state
that the testimony we heard a moment ago is the worse type of
hearsay.
Mr. Moss. The witnesses are sworn. The matter is not hearsay.
Counsel for the subcommittee relates a personal interview and re-
fers to a contemporaneous memorandum.
The House rules, of course, are not the same as the rules which
would apply in a court of law. We are a body of inquiry here and we
attempt to have rules which accommodate the needs of the House
in order to elicit testimony and develop a record upon which to make
our legislative judgment.
Mr. MARKS. If I may-
Mr. Moss. Of course.
Mr. MARKS. I refer to it as the worst kind of hearsay ever heard
coming from the witness and not Mr. Braun. His hemg brought for-
PAGENO="0083"
77
ward and asked whether or not somebody said somthing is one
thing. The witness's comment that he might have heard something
around the hail is very-
Mr. Moss. In the opinion of the Chair, it is highly relevant be-
cause the Chair heard things out in the hall, and that is why he
ordered the staff to go to work.
* As I pointed out, we do not operate under the rules of evidence
as applied in a court of law. Thank God we don't or we would not be
able to be an effective body of inquiry.
The Chair always will enforce the rules under which the committee
does operate and assure the gentleman and every other member of the
committee that those rules will be impartially imposed.
I think quick reference will establish the fact that the Chair does
impartially enforce these rules.
Mr. MARKS. I am sure of that.
Mr. GoRE. I sympathize with the complaint registered by Mr.
Marks. However, I would reemphasize that this is a difficult proce-
dure to reconstruct, what the motivations of the people in the Fed-
eral Power Commission were at the time in question. I think it is
relevant to probe the perspectives and viewpoints and opinions of
those who were intimately involved with these events to determine
what their interpretation of these events were and what they felt
might be involved.
Because it is aga.inst the law to put down in writing a memorandum
stating, "I want to fire such and such an employee because of such
and such," it is unlikely that that kind of memorandum ever will
show up in the files of a Government executive who has any brains.
Therefore, I think the difficulty of the inquiry itself forces us to
look for all the evidence available.
Mr. Moss. The Chair would just like to make this observation. I
think every member of this subcommittee ought to jealously guard
the prerogatives of this House. This is a body of inquiry Its historical
antecedents go back several centuries to the British Parliament which
was, first of all, a grand inquest of the Nation before it became
a lawmaking body in the sense it exists today. This is a grand inquest
of the Nation.
Its ability to inquire and to receive meaningful testimony depend
upon its willingness to enforce the law and the rules against intimida-
tion or coercion of witnesses in any manner, shape, or form.
My personal pride in chairing committees for over 22 years is that
I have not tolerated tampering in any manner with witnesses before
a committee on which I serve. I gave warning `here, as I gave warn-
ing in the hearings that the gentleman from New York recalls we
held last year with the Interstate Commerce Commission. We did
not intend to permit them to take any retaliatory `action against our
witnesses.
I reemphasized that today in connection with the appearance of
each of the witnesses here now. The slightest hint, the slightest rumor
buzzing around the corridors, and there will he an investigator dis-
patched form this committee and it might well end up with hearings
here before this committee, `and we will follow them through as far
as necessary to determine whether or not in fa~t there was an effort
PAGENO="0084"
78
to retaliate against a person because of testimony given here. Con-
gress cannot operate under any other condition.
We shall rely upon hearsay, opinion, and everything eJse which
enables us to make a reasonable `and rational reconstruction.
If there are no further questions-
Mr. GORE. Mr. Chairman, I am unclear how much time passed be-
tween the testimony and `the request made to Mr. Minor.
Mr. Moss. If Mr. Minor has a date as to when the request was made
of him, we can then establish it, because the date of the testimony is
a matter of public record, the testimony both before the Subcom-
mittee on Energy and Power and the Subcommittee oii Oversight and
Investigations.
I believe that the month of January of 1976 was the month when
hearings were held before both the Energy and Power Subcoininit;tee
and the Subcommittee on Oversight and Investigations.
I believe Mr. Minor indicated a February time frame with regard
to his contact with Mr. Fee.
Mr. MINOR. That is correct, Mr. Chairman, the latter part of
February or early March.
Mr. Moss. Could you more precisely fix that by refreshing your
memory from any contemporaneous memorandum you might have
made?
Mr. MINOR. I have tried that. I kept no notes, made no mnemoran-
dum or anything of record which would help me refresh my
recollection.
Mr. Moss. So that `to `the best of your recollection it would be
February or the. first part of March of 1976?
Mr. MINOR. That is correct.
Mr. Moss. Which would be subsequent to the appearance of the
witnesses before the two named subcommittees of the Congress.
Mr. GORE. That coincidence alone would certainly constitute prob-
able cause for an investigation of this nature, Mr. Chairman.
Mr. Moss. Mr. Braun indicates he has a memorandum.
Mr. BRAtIN. I have some information relevant t.o your question
concerning w'h'en Mr. Minor received his instruction.
Mr. Smethurst and I also interviewed the gentleman at t.he Civil
Service Commission that Mr. Minor spoke with. He has notes of two
telephone conversations from Mr. Minor, one dated March 15, 1976,
`and another dated March 18, 1976, which should fairly well estab-
lish the dates Mr. Minor was actively pursuing-
Mr. Moss. Who are the people interviewed there?
Mr. BRA1~N. Mr. Scallon.
Mr. Moss. Do you `have his title?
Mr. BRAUN. Not on this sheet of paper.
Mr. Moss. Will you secure his title and reduce `those notes *int.o
t.ynewritten form and incorporate them in the record at this point?
Mr. BRAUN. Yes, I shall.
[The memorandum referred to follows:]
INTERVIEW OF EUGENE N. SCALLON, DEPUTY ASSISTANT GENERAL COUNSEL, CIVIL
SggvIcE COMMISSION-AUGUST 9, 1976
He doesn't remember Ed Minor's visit.
However, Scallon's notes show:
1. On March 15, 1976 he received a telephone call from Ed Minor.
2. On March 18, 1976 he received another call from Ed Minor.
PAGENO="0085"
79
Scallon~s notes of this call read: "Removal of excepted service attorney who
is not a preference eligible for conduct verging on insubordination."
Mr. Scallon says "insubordination" means contemptuous disobedience, one
who was contemptuous of authority and frustrated authority.
Insubordination is so closely related to work that one would not normally
expect the individual to get or receive an in-grade raise.
Mr. Moss. Further questions?
Mr. LENT. Referring to the letter of January 20 from Chairman
Dingell of the Subcommittee on Energy and Power to Chairman
Dunham of the FPC, in which there is a listing of witnesses who
testified before the Dingell subcommittee, I note there `are 12 other
witnesses who testified in addition to George Lewnes.
It might be appropriate to ask Mr. Minor whether any of these
other witnesses received transfer.
I know that Mr. Mamone, who is on this list, did. Lundy E. Wright,
Ohief of the Pipeline and Producer Rates Division, who was a wit-
ness before Dingell's committee, has he been transferred?
Mr. MINoR. I am not sure.
Mr. LENT. Blair Stover, head of the Producer Rate Section?
Mr. MINOR. I don't know.
Mr. LENT. Luis J.
Mr. Moss. Would you yield?
Mr. LENT. Yes.
Mr. Moss. We have not established they gave testimony. The list
includes those who appeared.
Mr. LENT. I see.
Mr. Moss. It is not necessarily a person who testified.
As the gentleman recalls, at the time of Mr. Mamone's appearance,
a substantial number of employees of the Federal Power Commission
were present, were sworn, and their names appear on the hearing
record. However, they did not give testimony. They were available
in the event questions would be asked which might require their
participation.
If the gentleman desires, we will have the record of the Energy and
Power Subcommittee searched and establish which of the named per-
sons gave testimony, and also the nature of the testimony, and also
whether or not they were subsequently tiansferied.
Mr. LENT. I don't know whether we want to put the committee
to that trouble.
Mr. Moss. It is no trouble at `all but it is a filling out of the hear-~
ing record.
Mr. LENT. The letter of January 20 signed by Chairman Dingell
says on its face, "I would like you to know"-addressed `to Chairman
Dun'ham-"that the cooperation of these witnesses and of the Com-
mission in this regard is very much appreciated. I recognize that these
witnesses were testifying in areas which may seem highly sensitive,
and I want `to be certain `that the fact. that they testified will not put
them in any kind of a disadvantage."
I would assume from this letter, without checking the recordS that
these witnesses or these employees did~ in fact, testify. We know
that. `there was an effort made `to dismiss George Lewnes.
I wonder whether the FPC always retaliates by. making them ad-
ministrative law judges. I know we do that. in our county when we
*have public officials not doing so well-we make them judges.
PAGENO="0086"
80
I think it would be well to inquire whether these other employees
were transferred as well as whether they were, in fact, witnesses. It
might just be a coincidence.
Mr. Moss. For this hearing record we shall search the Diiigell sub-
committee records in order to determine which of those in the list
here gave testimony, the nature of their testimony, and the nature
of any subsequent personnel action involving them.
Mr. LENT. Thank you, Mr. Ohairmnan.
Mr. Moss. The staff shall do that promptly.
[The following table was received for the record:]
FEDERAL POWER COMM1SSION EMPLOYEES WHO TESTIFIED BEFORE THE ENERGY AND POWER SUBCOMMITTEE
IN THE 94TH CONGRESS
Name and title Date Subiect Current status
Aber, Robert, trial attorney, OGC_._ Jan. 15, 1976 Inadequacies of the Transco inves- Replaced in HIOS case; re-
tigation. signed October 1976.
Allen, Frances C., Chief, BNG Oct. 24, 1975 Transco investigation Removed as chief of BNG after
Jan. 14, 1976 Suppression of BNG staff study on January 1976, became an aid
proposed national rate, opinion to Commissioner Watt.
699.
Dunham, Richard, Chairman, FPC__ Nov. 11, 1975 Impact of curtailments, winter Do.
1975-76.
Engle, Louis J., Producer Rate Divi- Jan. 14, 1976 BNG staff study on proposed na- Chief, Formal Rate Branch.
sion, BNG. tional rate.
Frandsen, Richard A., trial attorney, Oct. 24, 1975 FPC's behind the pipe investiga- Do.
OGC. tion.
Holloman, John H., Commissioner, do Deliverability Do.
FPC.
Lewnes, George, Assistant General Jan. 14, 1976 Gulf warranty Became AU in May 1976.
Counsel, OGC. Jan. 15, 1976 Tenneco Diversion of gas; reserva-
tion of gas.
Mamone, Russell B., supervisory do Tenneco diversion of gas; reserva- Taken off HIOS case, later re-
trial attorney, OGC tion of offshore gas. assigned out of gas regula-
tion.
Perdue, Robert W., Deputy General Oct. 24, 1975 Curtailment contracts Do.
Counsel, OGC.
Smith, Don S., Commissioner, FPC do Deliverability Do.
Smith Jeffery, geolist, Reserves Oct. 24, 1975 Transco 1Left rPC-Februar 1976
Evaluation Section, BNG. Jan. 14, 1976 Tenneco
Solters, Joseph, case manager, BNG_ Jan. 14, 1976 Tenneco Do.
Stover, Blair, Head, Producer Rate do Supervision of study on National Retired-November 1976.
Section, BNG. Rate, Opinion 699.
Szekely, Robert, Head, Market do do Chief, Curtailment Branch
Section, BNG. BNG.1
Thompson, Wayne, Head, Gas Sup- Oct. 24, 1975 Tenneco Chief, Interstate Supply
ply and Production Section, BNG. Branch.'
Wright, Lundy, Chief, Pipeline and Jan. 14, 1976 Supervision of study on National Do.
Producer Rates Division, BNG. Rate, Opinion 699.
Zabel, Victor, Head, Reserves do Tenneco Chief of branch with same
Evaluation Section, BNG. name.'
Part of Feb. 28, 1977, reorganization of BNG.
Mr. Gon~. I know the hour is growing late.
I want to register the fact that it is my understanding there were
only three of the witnesses who were in the Office of the General
Counsel.
The first witness testified as to the importance of the Counsel's
office in the regulatory schema. Of those three witnesses, one has been
transferred to the Hydroelectric Division, one was the subject of an
inquiry on how he could be separated from the division and later was
promoted upstairs, and the third is going to be one of the witnesses
before this subcommittee in the current series of hearings.
I think we will get elucidation later on.
PAGENO="0087"
81
Mr. Moss. We will have material as the Chair directed placed in
the hearing record.
Because of `the schedule we have before us, we shall adjourn the
hearing to reconvene at 10 o'clock tomorrow morning. At that time
we shall hear from Mr. George Lewnes, Mr. Cyril Wofsy, and then
on either Friday or Monday-we shall firm that up today so the
members have noticed of it-we shall have Mr. Robert Aber, Mr.
Jon Lotis, Ms. Lynn Hargis, Mr. Joseph Stiles, Mr. James Mc-
Manus, and then we will have Mr. Richard Dunham and Mr. Drexel
Journey.
The committee will now stand adjourned until 10 o'clock tomorrow
morning, and the hearing room number will be made available to
members as promtply as it is established.
[Whereupon, at 12:45 p.m., the he.aring adjourned to reconvene
Thursday, March 10, at 10 p.m.]
PAGENO="0088"
PAGENO="0089"
ADVERSE PERSONNEL ACTIONS AGAINST. PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION
* THURSDAY, MARCH 10, 1976
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room 2325,
Rayburn House Office Building, Hon. John E. Moss, chairman,
presiding.
Mr. MOSS. The subcommittee will be in order.
Yesterday the subcommittee received sworn testimony regarding
efforts to go about firing Mr. George Lewnes, a former assistant to the
General Counsel of the Federal Power Commission, several weeks
after his testifying before this subcommittee and the Subcommittee
on Energy and Power.
In addition, we heard at length from Mr. Russell Mamone, who
before he was transferred to hydroelectric licensing-where, inci-
dentally, he had no particular expertise-was assigned to review or
supervise all major pipeline gas supply projects in the Gulf of
Mexico.
Like one of our witnesses today, Mr. Aber, Mr. Mamone worked un-
der the supervision of Mr. Lewnes. All three of these attorneys
worked on the controversial High Island Offshore System pipeline.
application, in which case the Commission reversed longstanding
precedent by approving construction of this~ $400 million project
without insisting on signed gas purchase. contracts between the pro-
ducers and the pipeline. None of these attorneys were actively work-
ing on the 11105 case when it was finally approved by the FPC in
July 1976. That distinction went to a Mr. Keeley, who, approximately
1 year out of law school, was assigned to argues this precedent-setting
case before the Commission.
Our witnesses this morning will be Mr. George Lewnes, Adminis-
*trative Law Judge, Federal Power Commission, and Mr. Cyril S.
Wofsy, Trial Attorney, Federal Power Commission.
Gentlemen, would you come forward and be sworn?
Do you solemnly swear that the testimony you are about to give
the subcommittee shall be the truth, the whole truth, and nothing
but the truth, so help you God?
Mr. WOFSY. I do.
Mr. LEWNES. I do.
Mr. Moss. Identify yourselves to the reporter for the hearing
record.
(83)
PAGENO="0090"
84
TESTIMONY OF GEORGE P. LEWNES, ADMINISTRATIVE LAW ~1UDGE,
AND' CYRIL S. WOFSY, TRIAL ATTORNEY, FEDERAL POWER
COMMISSION
Mr. LEWNES. I am George P. Lewnes, Administrative Law Judge,
Federal Power Commission.
Mr. Wopsy. I am Cyril S. Wofsy. I am presently trial attorney
with the Federal Power Commission.
Mr. Moss. Do you have any prepared statements, gentlemen t
Mr. LEWNES. I do not.
Mr. WOFSY. I do, Mr. Chairman.
Mr. Moss. All right.
Mr. Worsy. My name is Cyril S. Wofsy, and I am a trial attorney
with the Federal Power Commission. My employment with the Fed-
eral Power Commission commenced in September of 1958.
I was assigned as a trial attorney in the Gas Rate Section, which
involved rate hearings for producers on a company-wide basis, the
method used before the area-rate concept was adopted, and for
natural gas pipeline companies.
Next, I was assigned to the Solicitor's Office where I wrote court
briefs and presented oral arguments before Courts of Appeal.
My next assignment was' with the Electric Rate Section, where I
was a trial attorney dealing with electric rate matters.
In 1969 or 1970, I was assigned to the Gas Certificates Section
where Mr. George Lewnes was `Assistant General Counsel. During
my work in that section, I acted as Mr. Lewries's deputy and also
was responsible for all curtailment cases.
When Mr. Lewnes left in the spring of 1976, I was placed `in the
position of Acting Assistant General Counsel. After 1 month, I
requested Mr. Journey to remove me from that position. I was then
assigned to participate in the Alaskan pipeline proceeding on the
limited issues of tariffs and financing.
Thereafter, I was assigned to my present position as trial attorney
dealing with electric rate matters.
Mr. Moss. Both of you gentlemen are here in response to a sup-
pena issued by this committee requiring your appearance this morn-
ing. Is that correct?
Mr. LEWNES. Yes.
Mr. Worsy. That is correct.
Mr. Moss. Mr. Lemov?
Mr. LEMOV. Mr. Lewnes, you are currently an administrative law
judge at the Federal Power Commission. Is that correct?
Mr. LEw1~s. That is correct.
Mr. LE~rov. Tell us when you bega.n your Government service, what
year. .
Mr. LEWNES. Approximately March of 1955. 1 accepted civilian
Federal enrnloyrnent as a special investigator for the Foreign Service
of the U.S. Department of State.
If you want me to proceed on that-
Mr. LEM0v. Yes: run down by years your jobs with the Govern-
ment and then tell us when you started with the Federal Power
Commission.
PAGENO="0091"
85
Mr. LEWNES. Then in October of 1956, at the termination of the
program I was involved in overseas for the Government, I became an
attorney advisor in the Fraud and Litigation Branch of the Legal
Division of the Passport Office, Department of State.
In March of 1955 I. became a trial attorney at the Federal Power
Commission.
Between the years 1959 and 1970, I received promotions on a con-
tinual basis until I became a GS-15 supervisory trial attorney.
In June of 1970, I was appointed Assistant General Counsel.
In April of 1976, I accepted an appointment as an administrative
law judge at the Federal Power Commission.
I would like to make it clear, though, that I qualified and was put
on an administrative judges' roster at the Civil Service Commission
in 1969. At the time I was appointed to Assistant General Counsel
in 1970, I asked them to put me on the inactive list.
Sometime, I believe, in February of 1976, I called them and asked
them to put me on the active roster. Shortly thereafter, the roster was
certified to the various agencies and the Chief Administrative Law
Judge interviewed me at the Federal Power Commission, as did
some other judges at other agencies, and told me lie had selected me
for that position.
Mr. LEMOV. Let me break in for a moment.
February of 1976 you wanted to go back on the active AU Roster?
Mr. LEWNES. Yes.
Mr. LEMOV. You testified before Mr. Dingell's Subcommittee on
Energy and Power when?
Mr. LEWNES. I think the last time was sometime in January.
Mr. LEMOV. And you testified before this subcommittee on the
Mobil Oil case when?
Mr. LEWNES. In January of the same year.
Mr. LEMOV. Did that have anything to do with your request to go
back on the active roster for AU?
Mr. LEWNES. Well, I would say circumstances were such at the Fed-
eral Power Commission that I felt in the capacity of Assistant Gen-
eral Counsel I could no longer do what I deem to be faithfully per-
forming `the duties of my office.
Mr. LEMOV. Go ahead with your professional background.
Mr. LEWNES. I wanted to say that when the Chief Administrative
Law Judge advised me `he had selected me off of the roster because
I had been one of the top three names, I told him I would accept
an appointment there even though I felt there were opportunities
in other agencies. I `had an expertise at the Federal Power Commis-
sion and I thought working for `the Chief Law Judge of the Federal
Power Commission would be a great experience because I think he is
one of the best judges in the Federal service.
I will add that at such time as he selected me, the Chairman of
the Federal Power Commission, as is usually the case, it is his ad-
ministrative decision, did certify and sign and approve and thereby
appoint me to the Federal Power Commission.
Mr. LEMOV. That would he the Chief Law Judge?
Mr. LEwNE5. No: the Chief Law Judge selects-.
Mr. LEMOV. The Chairman, you say ~
Mr. LEWNES. And the Chairman approves. The Chairman did
approve.
PAGENO="0092"
86
Mr. LEMOY. When was that?
Mr. LEWNES. He was aware of the fact I wanted to become a judge.
Mr. LEMOY. When was that?
Mr. LEWNES. April of 1976. It was in the early part of April.
Mr. LEMOY. You served as a trial attorney at the Federal Power
Commission from 1959 through 1970, and from 1970 through 1976
you were Assistant General Counsel?
Mr. LEWNES. That is right.
Mr. LEMOY. In your capacity as trial attorney, did you handle
natural gas producer and pipeline certificate matters?
Mr. LEWNES. My whole experience was on the natural gas side.
I handled some of the major precedent-making natural gas cases
to come before the Commission.
The Rayne Field and Bast.ian Bay; these were cases where the
producers sought through subtleties of a contractual form to avoid
Commission jurisdiction. My position was that we had jurisdiction
and the Supreme Court sustained it all t.he way.
Mr. LEMOY. When you became Assistant General Counsel, your
area of responsibility included what?
Mr. LEWNES. Well, during my tenure as Assistant General Counsel
in the Office of General Counsel I assumed direct supervision over
such matters as natural gas imports and exports; LNG coal gasifica-
tion and synthetic gas projects; natural gas pipeline construction ap-
plications for certicates, along with related producer applications for
sales authorizations; and, among other things, all work relating to
pipeline allocation of gas supplies, c.urtailments, and tariff provisions.
At one time I also had, in addition to the above, supervision over
all pipeline and electric utility rates for a short period in 1971.
Mr. LEM0v. So, in other words, it is correct to say you were the
Assistant General Counsel who had primary responsibility for regu-
lation of the natural gas production industry and the natural gas
pipeline industry?
Mr. LEWNES. I would say generally yes; except for one area where
if a producer filed for rate increases under the national rate, I had no
jurisdiction over that. I had no jurisdiction over some other pro-
ducer-related applications. But basically, if `there was a pipeline ap-
plication seeking construction and authorization, and there was gas
supply which had to be attached to that construction, those particu-
lar applications of producers were consolidated with the pipeline ap-
plication `and it fell within my jurisdiction.
Mr. LEM0v. Ove.r that period of time you and your staff-how many
people did you have under your supervision?
Mr. LEWNES. I would say attorneys ranged somewhere between
20 and 26, roughly. Don't hold me to those figures. We had secretarial
and clerical help, perhaps eight.
Mr. LEMOV. How many professionals?
Mr. LEWNES. Twenty to twenty-six. .
Mr. LEMOv. Over this period of time when you were Assistant Gen-
eral Counsel from 1970 through 1976, you had occasion to take posi-
tions which were in opposition to those of the natural gas industry
and nroducers. Is that correct?
Mr. LEWNES. I would say that is correct..
Mr. LEM0v. In several cases?
PAGENO="0093"
87
Mr. LEWNES. Yes.
Mr. LEMOV. In many cases?
Mr. LEWNES. I would say a substantial number of important cases.
Mr. LEMOV. And when you testified before the Subcommittee on
Energy and Power in January of 1976, tell us about the two major
areas on which you testified before that subcommittee.
Mr. LEWNES. Again, my recollection-because I attempted to blot
a lot of this past experience out of the way-my recollection was that
Mr. LEMOV. You attempted to blot a lot of it out of the way?
Mr. LEWNES. Yes, sir. I don't like to think about the past experi-
ence. I am in a new job; I like it; it is a good challenge; and I don't
want to look backwards.
Mr. LEMOV. I know you are now an administrative law judge. If
any question I ask you tends to touch upon any matters which are
before you now in your adjudicatory capacity, I wish you would ad-
vise the Chairman so he can act accordingly.
Mr. LEWNES. Very well.
I think the record speaks for itself. I testified basically to the
withholding of gas by various producers, that they had not lived up
to the certificates the Commission issued. I think that was the general
purport of my testimony.
Mr. LEMOV. There was the Tenneco matter.
Mr. LEWNES. Yes.
Mr. LEMOV. You were one of the primary witnesses who referred
to the fact that Tenneco had a leaking of gas from the interstate
market without a certificate-
Mr. LEWNES. That is right.
Mr. LEMOV [continuing]. By Tenneco on to the intrastate market.
Is that right?
Mr. LEWNES. Yes.
Mr. LEM0v. Mr. Mamone, from whom we heard yesterday, who was
subsequently transferred to hydroelectric licenses, he also testified on
the Tenneco matter. Is that correct?
Mr. LEWNES. That is right.
Mr. LEM0v. Is that the same case that was in the paper a few days
ago where Tenneco filed papers with the FPC conceding that gas had
been improperly diverted from the interstate market?
Mr. LEWNES. I saw the article in the paper. I don't think it was
related directly to what we had testified to but it involved the same
company.
Mr. LEM0v. Same practice?
Mr. LEWNES. Well, again I don't want to comment on a newspaper
article.
Mr. LEMOV. You also testified about the sigrnficant issue of producer
reservations of offshore Federal gas.
Mr. LEWNE5. Yes.
Mr. LEMOV. WEat is a producer reservation of this gas?
Mr. LEWNES. There were several types of reservations. Obviously,
our position was that if a producer got a certificate for gas, to pro-
duce gas, from the offshore FederaT domain, all of that gas should
be under Commission jurisdiction and should be sold for resale in
interstate commerce.
PAGENO="0094"
88
Mr. LEMOY. Because it had to cross state lines?
Mr. LEWNES. That is right.
Mr. LEMOV. It was interstate gas and it would go to the consumers
of the interstate pipeline. Is that right?
Mr. LEWNES. It should be sold for resale in interstate commerce as
opposed to allowing the producer to reserve a portion of it to be used
at his discretion or other conditions the Commission might want to
impose insofar as to end use.
Mr. LEMOV. When the producers reserve this gas-I gather a lot
of it is reserved these days-what do they use it for?
Mr. LEWNES. My recollection again in some instances is that it
was being used in their own petrochemical plants. It was being used
for priorities which under the Commission's curtailment plans would
be low priority use as opposed to the high priority household use.
Mr. LEMov. Not residential use?
Mr. LEWNES. That is right.
Mr. LEMOV. Not for residences which are priority one category?
Mr. LEWNES. No; except to the extent it might have been sold to
a pipeline under one of the emergency provisions over and above
whatever the area rates were and the pipeline then used it.
Mr. LEMOV. When producers reserved this gas, if they sold it to
someone else, they sold it at the intrastate rate and not the regulated
interstate rate. Is that right?
Mr. LEWNES. Obviously, if there were going to be a sale by the
producer who rese.rved it in the intrastate market, obviously he could
ask whatever price he wanted because it was not under FPC control.
My recollection was that in most instances they were using it in
their own refineries. Again, Mr. Mamone has most of the details on
that because it was his responsibility that if those cases went to trial
he would be the trial attorney or supervise attorneys in that regard.
Mr. LEMOY. Were many companies involved in this producer res-
ervation practice?
Mr. LEWNES. Well, at first I would say no; but then there was the
Chandeleur case where the Commission had in essence said, "This is
the Commission policy," that they thought under certain circum-
stances it was an incentive to the producer to go out and look for the
gas that he retain a portion of it. That was an incentive.
I think more and more producers rightfully said if that is the
Commission policy, why not?
Mr. LEMOV. Chandeleur was decided in 1963? There was no gas
shortage then. Is that correct?
Mr. LEWNES. That is correct.
Mr. LEMOV. In any event, more and more producers began to do
this and it is correct that the percentage of reservations in the con-
tracts started increasing?
Mr. LEwNES. Yes, that is generally correct.
Mr. LEMOV. Some got as high as 50 percent?
Mr. LEWNES. I think that is correct, and in some instances it got up
as high as 50 percent.
Mr. LEMOV. Resulting in a shortage of gas in the interstate markt
in your opinion?
Mr. LEWNES. That. inference could be drawn. If gas ms uot going to
the interstate market, it is going some place else.
PAGENO="0095"
89
Mr. LEMOV. You testified about this to the Dingell subcommittee
in January of 1976?
Mr. LEWNES. That is correct.
Mr. LEMOV. And then you caine before this subcommittee and
testified on the Mobil Grand Isle 95 field, as I recall it, Mr. Lewnes.
Mr. LEWNES. I think that is correct.
Mr. LEM0v. And again your testimony was consistent with that
of Mr. Mamnone that the staff of the Commission believed that there
was a presumption that Mobil was withholding that field from the
interstate market, a rebuttable presumption?
Mr. LEWNES, That is correct.. Terminology was specifically, when
that memorandum was prepared, worded in such a fashion as not
to prejudice Mobil in any fashion whatsoever but merely to say it is
a rebuttable presumption, come in and show us.
Mr. LEMOV. And you proposed an order which would have required
Mobil to dedicate the field in that winter?
Mr. LEWNES. I think it was a show cause order.
Mr. LEMOv. They were a curtailed pipeline at that time?
Mr. LEWNES. Pipelines were being curtailed.
Mr. LEMOV. The Commission did not do that.
Mr. LEWNES. T:hat is right.
Mr. LEMOV. They gave Mobil what they wanted?
Mr. LEWNES. They issued an order inconsistent with what we
recommended.
Mr. LEMOv. In all the years you were with the Federal Power Com-
mission as a trial attorney `and Assistant General Counsel in charge
of natural gas matters, what kind of efficiency ratings did you get?
Mr. LEWNES. I think Congressman Lent made a statement yester-
day, and I would like-
Mr. LEM0v. If you would just answer my question.
Mr. LEWNES. I want to disabuse Congressman Lent's inference in
answering the question. I think it was said in jest.
Throughout my entire career in Government I have never received
a bad efficiency report. I always received a satisfactory report.
In 1973 and again in 1974, I was nominated by the Federal Power
Commission to be a nominee for receipt of the Justice Tom Clark
Award, the highest award that any attorney in Federal service can
receive.
I was nominated in 1973. In 1974 again I was nominated along with
the then-General Counsel. Unfortunately, neither one of us was
selected but it was an honor to be nominated for that.
I might add, and I will read directly from this, and I am not
trying to sound my own horn, but I think it is necessary to be aware
of `the kind of scrutiny people get who get on the administrative law
judge's rosters.
Throughout the course of this period
the period in which I was at the Commission
he earned the respect of the legal profession as an outstanding trial attorney by
virtue of his pre-trail preparation, incisive cross examination, schqlarly briefs
and persuasive oral arguments. At the Federal Power Commission and through-
out the utilities, bar association, and the affected industry his name has become
synonymoths with an unrelenting consumer advocacy and devotion to fair
regulation.
PAGENO="0096"
9Q
That same kind of language is contained in the 1974 nomination.
Last, the most relevant thing concerning my capabilities, in the
last year at the Federal Power Commission under the General Coun-
sel, he filed with the office of personnel, on August 2, 1976, an evalua-
tion of my performance for the period April 1, 1975 through March
31, 1976-this is a little blurred but that is what it is. It is shown as
satisfactory.
Mr. LEM0v. Thank you, Mr. Lewnes.
To summarize, did you ever `have a bad efficiency rating, a repri-
mand or criticism in your years as trial attorney and Assistant Gen-
eral Counsel on natural gas matters?
Mr. LEWNES. No. Pethaps the only criticism I got was that
I was too vocal.
Mr. LEM0v. Too what?
Mr. LEWNES. Vocal.
Mr. LEMOV. A trial attorney does have to do a bit of talking. Most
lawyers do.
Mr. LEWNES. I have to curb that as an administrative law judge.
Mr. LEM0v. A common failing among lawyers.
In the HIOS case, a major case of the Commission-was it not?
Mr. LEWNE5. Absolutely.
Mr. LEMOV. I understand it relates to the construction of the largest
pipeline ever constructed in the Gulf of Mexico.
Mr. LEWNE5. Yes, sir.
Mr. LEMOV. The staff had some position in the HIOS case, the in-
dustry vigorously opposed it, and you asserted the staff position, did
you not, within the Commission?
Mr. LEWNES. If I may, Mr. Lemov, let me give you some backgroud
of the whole HIOS case because it was a very important project. The
staff did not want to see that project go by the boards.
Initially there had been, I believe, about three different applica-
tions which were filed. There were competitive applications.
Under the antitrust laws the companies did not want to talk to
each other for fear someone would say there was collusion and ex-
cluded somebody.
The technical staff and I in reviewing this thought that perhaps we
could get one joint venture so we wouldn't go through a long hear-
ing process under the Asehbaeker case of comparative applications
which could take years and years. The staff then called meetings. We
looked at these and said. "Perhaps you can put one trunkline to-
gether." Th~ companies did .They were very cooperative. Eventually
they agreed upon a particular trunkline, which then brought the is-
sues down to really two.
The first issue, which was one that we had taken at the very outset
and everyone involved in this proceeding knew it, it was staff's posi-
tion, both from an economic feasibility standpoint and from a legal
standpoint, that no certificate to construct that pipeline would issue
at least with the support of the staff unless and until there were pro-
ducer contracts signed and applications filed with the Commission
which would support the project. That was the one issue.
The other issue was that once having gotten the project, whatever
it would be, we would have to make an analysis between that project
~and existing facilities to see how best the gas should come on.
PAGENO="0097"
91
Obviously if there were existing facilities, it might be more in the
public interest to let the gas go through there, but that would have
to be weighted against the long term as to whether we wanted a line
out there. But these were basically the issues.
Mr. LEMoY. Did you handle this case yourself?
Mr. LEWNES. I personally got involved in this case and I was in-
volved in it up until the time I left.
Mr. LEMOV. Because of the importance?
Mr. LEWNES. Absolutely.
Mr. LEMOV. And you put one of your best trial attorneys on it,
also?
Mr. LEWNES. Initially-I don't like to use the term "best"-initi'ally
I assigned Mr. Bob Aber, a comparatively new attorney at the Fed-
eral Power Commission, but he had some experience, and he is a
witness here, and I asked him to `assist me in all the meetings and to
be prepared to go forward if this went to trial because I felt this was
a good case for a good, bright, capable attorney to get involved in,
and he was involved in it and he did prove very capable.
However, when we got to the point and stage in that proceeding
where we now had the pipeline but we were talking about gas
reserves and gas contracts, I brought Mr. Mamone into the case, who
had been involved in so many other things he just didn't have time
to be brought in at the initial step. But I brought him in at that
crucial point and told him it was his responsibility `to assure the gas
supply issue.
Mr. LEMov. The key to the staff?s position in HIOS was producers
must sign contracts to assure delivery of the gas before the pipeline
was certificated. Is that correct?
Mr. LEWNES. Again, I am not competent to state what the staff
position was when it came before the Commission. I am saying what
my position was there, and it was a consistent position of every staff
member in that case, including the technical staff, that no certificates
`to construct should issue, or could in fact issue, unless there were
valid `applications filed before the Commission `by the producers for
the gas supply back in the project.
Mr. LEMOV. With a signed contract?
Mr. LEWNES. That is right.
Mr. LE1~1ov. Why a signed contract? Tell us about that.
Mr. LEWNES. You know, the consumers could be buying a pig in
a poke. You give somebody authorization to build a facility, ullow
them to move those costs to the rate base, and what not., `to the con-
sumers. There is no assurance gas will come through.
Sure, you have the promise of the producers they will diligently do
this. There were arguments `that some of the producers had received
`advance payments; but even those had terms in them where we felt
there was no assurance that you had a bird in the hand.
Mr. LEi~rov. In other words, you could have another Grand Isle
95 situation where the producer said the pipeline was built, you
tendered us this pipeline and it is not good enough. We will sit on
the gas a year or two.
Mr. LEWNES. From the producers' standpoint it wa.s a valid busi-
ness judgment. They felt., I think, that the Commission is raising
prices. Why should we come in and sign a contract today when that
87-292 0 - 77 -
PAGENO="0098"
92
pipeline will not be ready to move the gas until 2 years hence? Why
sign it? Let's sit hack and wait until the price is right and then
we will sign.
Mr. LEM0v. Mr. Mamone testified yesterday lie was abruptly re-
moved from the HIOS case. Do you know about that?
Mr. LEWNES. I am not competent to testify on anything that hap-
pened after I left the Office of General Counsel.
Mr. LEMOY. He also testified a young attorney with 1 year's ex-
perience out of law school argued that case before the Commission.
Do you know anything about that?
Mr. LEWNES. I have `heard that.
Mr. LEMOV. Mr. Wofsy, you took over for Mr. Lewnes as Acting
Assistant General Counsel. Can you help us on that one?
Mr. WOFSY. Just up to a certain point. In the early part of the
time I took over from Mr. Lewnes, I went over to Mr. Journey's of-
fice. Durng the course of our conversation he said to me, "We have
to remove Russ"-mea.ning Mr. Marnone-"from the HIOS case."
I asked why. He said, "The people upstairs have lost confidence
in him."
Mr. LEMov. The people upstairs lost confidence in him?
Mr. WOFSY. Yes.
Mr. LEM0v. Who are the people upstairs?
Mr. WOFSY. I did not feel it incumbent to pursue this. Perhaps you
can ask Mr. Journey that question.
Mr. LEM0v. Who is upstairs?
Mr. WOFSY. Upstairs meant the Commission, the Executive Di-
rector. The ninth floor is where the Commissioners are. I assumed,
without asking, it is strictly an assumption, that he was talking
about some of the Commissioners.
Mr. LEM0v. The dat.e of this conversation?
Mr. WOFSY. This would have been prior to April 15.
Mr. LEM0v. Again, after Mr. Mamone's testimony before the En-
ergy and Power Subcommittee?
Mr. WOFSY. Yes.
Mr. LEMOv. And right after his testimony before this subcommittee
in January. Is that right?
Mr. WOFSY. Yes.
Mr. LEMov. Was any reason given for this loss of confidence?
Mr. WOFSY. No. However, let me explain what then went on.
I then suggested to Mr. Journey two things: No. 1, I suggested it
was impolitic to remove Russ because of the congressional investiga-
tions and ongoing concerns with the Federal Power Commission,
and I suggested that the loss of confidence may have been only in his
dealing with producers and not with the pipelines, so I suggested that
his better procedure would be to get somebody from the Producer
Rate Section to handle the producer aspect of the HIOS ease and
let Mr. Mamone stay on.
That was the way we resolved that issue.
I, of course, knew that there were no producer issues involved and
that Mr. Mamone in my own thinking would have continued to stay
on in the HIOS case.
Mr. LEMOV. You tried to keep him on the case?
Mr. WoFsY. In this subterfuge fashion, I guess; yes.
PAGENO="0099"
93.
Mr. LEMOV. Why did you do that?
Mr. WOFSY. I did it because I have `a great deal of respect for Mr.
Mamone, No. 1. No. 2, I have to shave in the morning. I cannot pro-
ceed to do something that I think is wrong and is not warranted.
I believe that the staff attorneys should be able to present their posi-
tions to the Commission without being impeded in any manner,
shape, or form.
Mr. LEMOV. You felt they were being impeded in this case?
Mr. WOFSY. I felt if Mr. Mamone were removed, it would have
been that.
Mr. LEM0v. In response to what?
Mr. WOFSY. In response to the public interest consideration.
Mr. LE~rov. In response to what reason was he being impeded?
Mr. WOFSY. Not that Mr. Marnone would have been impeded. I
think the case would be if he were removed from the case.
Mr. LEMOV. The case would have been impeded?
Mr. WOFSY. Yes.
Mr. LEM0v. The removal was in response to what?
Mr. WOFSY. I was not Acting Assistant General Counsel at the
time Mr. Mamone was actually removed.
Mr. L~i'ov. How long did you remain as Acting Assistant General
Counsel of the Natural Gas Section?
Mr. WOFSY. Up until May I.
Mr. LEM0v. About a month?
Mr. WOFSY. Yes.
Mr. LEMOV. Why did you leave?
Mr. WOFSY. Mr. Journey called me into `his office and told me that
I was `to take Joel Cockrell off the case he had worked on. I asked
why.
The only reason he gave me was that the people upstairs, again,
lost confidence in his ability.
I spoke with Mr. Cockrell, this was late Friday afternoon,' about it.
I discerned a great hard feeling on his part for being removed.
I discussed over the weekend with my wife how I should react
to this.
I had set up a meeting with Mr. Journey early on Monday morn-
ing to discuss it and to see whether or not I could have him rescind
the order.
He cancelled that meeting. I went into him and said, I can't pro-
ceed and work in this fashion. Therefore, I request that you remove
me from my position.
Mr. LEMOv. In your opinion did the loss of Mr. Mamone from the
Natural Gas Section ultimately `and the loss of Mr. Lewnes affect
`the efficiency of the section and its ability to handle its work?
Mr. Worst. There is no questio'n in my mind that it affected the
efficiency of the operations of the Natural Gas Section, that is, the
Certificate Section.
I have spoken to a number of the attorneys that are still there.
They are young attorneys, very competent, but they need schooling.
They are not getting the supervision arid they are complaining and
talking to me that they do not ge't supervision, proper supervision.
They do not know how to proceed in certain matters.
Mr. LEM0v. Let me summarize this for a moment..
PAGENO="0100"
94
In the middle of a natural gas shortage, where there are issues of
delivery and production before the Oommission of great significance,
the General Counsel, and perhaps others at the Commission, per-
mitted the two senior men in the natural gas field to leave that
kind of work at the Commission. Is that right?
Mr. WOFSY. If you are talking about Mr. Mamone and if you are
talking about Mr. Lewnes-
Mr. LEMOV. That is right.
Mr. WOFSY [continuing]. The answer is "Yes."
Mr. LEWNES. You said two senior `attorneys. I consider Mr. Wofsy
to be one of the top senior attorneys in that division.
Mr. LEMOY. So that would be the third senior attorney.
Mr. LEWNES. Absolutely.
Mr. LEM0v. He is out of that division as well.
Mr. LEWNES. Yes.
Mr. LEM0v. After you dropped out as Acting General Counsel, you
left the section, too.
Mr. WOFSY. I thought my statement made it clear. I did participate
in the Alaska pipeline proceedings on limited issues of financing and
tariff matters.
When that was concluded, I was shifted over to the Electric Rate
Section, which is where I am now.
Mr. LEM0v. You were shifted over.
Mr. Worsy. Well, I was transferred.
Mr. LEM0v. You were transferred?
Mr. Worsy. Yes.
Mr. LEM0v. Did they tell you why?
Mr. WOFSY. Yes. Mr. Journey has a great deal of regard for me
because he told me, when I asked him what I was going to do after
I asked to be removed from the job, he said, well, I need your exper-
tise and your experience in the Gas Pipeline Section. They were
just instituting a new procedure of `trying to get a lot of settlements
but they needed some experienced lawyers to go right into the hear-
ing room, and he wanted me to do that.
I was never `assigned to any of those gas pipeline cases.
I then was told that there was a great backlog of electric matters,'
and I had worked for Mr. Journey before in the Electric Rate Sec-
tion, and he then put me there.
Mr. LEM0v. Mr. Lewnes, coming back to you, and I have only a
few more questions, after 6 years as Assistant General Counsel in
charge of natural gas matters, you told them to reactivate your appli-
cation as administrative law judge right after testifying before this
committee?
Mr. LEWNES. Yes, sir.
Mr. LEM0v. And right after testifying before Mr. Dingell's sub-
committee?
Mr. LEWNES. Yes, sir.
Mr. LEMOv. Why did you decide to quit?
Mr. LEWNES. Well, as I indicated previously, I felt that certain
manifestations indicated that I could nn longer perform the duties
that I thought were necessary to faithfully perform in my position
of public trust.
Mr. LEM0v. What manifestations?
PAGENO="0101"
95
Mr. LEWNES. it is unlike a corporation where you come in some
morning and your name is scraped off the door.
The thing that sort of broke the camel's back, so to speak, hap-
pened after that. I had activated the application, I thought things
were escalating-again we had rumors.
Mr. LEMOV. What kinds of rumors?
Mr. LEWNES. "Hey, you are getting canned."
"They will wash out your section. You will aU be moved out."
"They are out to get you."
"They are out to get the people involved with you and pushing
certain positions."
Who, what., were? God knows who. Rumors are all over.
Mr. LEM0v. Those rumors were based on conversations you had
with people?
Mr. LEWNES. That is right.
Mr. LEMOV. Go ahead.
Mr. LEWNES. At that particular time, when they-
Mr. LEMOV. Can you recall some of the people you talked to about
those rumors?
Mr. LEWNES. There was a lot of people. At~that time I had gotten
the flu, back to back,-in other words, twice. Needless to say, my
blood pressure was rising fast. When you feel you cannot do the job
you are being paid for, it affects you.
In the latter part of February, my application was activated, my
recollection is that it was in February, 1 took off for Florida a couple
of days to look back objectively at what was happening.
When I came back, then the straw that broke the camel's back
occurred. The first Commission meeting I went to there was a whole
rearrangement of the situation, which was a clear indication to me
that my presence there was not necessarily wanted nor my views de-
sired by the physical setup. If you want me to, I will explain it.
Mr. LEMov. Go ahead.
Mr. LEWNES. At Commission meetings normally we have a great
big oval setup with tables and the Commissioners sit where you~ are,
the staff on the side, and we here-the General Counsel, Deputy and
Assistant General Counsels. That has prevailed for as long as I can
recall. You sit there and when a topic comes up which deals with
something you are involved in, you speak your peace.
The General Counsel, when we had this independence of function,
could obviously say, I disagree. I think he is wrong. Even though it
is in his purview, he is wrong. The Commissioners decided what they
wanted to do.
When I came back from vacation, people said, you are about sit-
ting out in the hall.
Mr. LEM0v. They moved your desk into the hall?
Mr. LEWNES. What it was was that they rearranged the situation.
I guess you would call it the demeaning process.
The General Counsel and Deputy sat basically where they should
sit but Mr. Lotis and I were moved practically to the door in the
back; no table to nut your stuff on, sitting there with your books in
your hands. Obviously, you were to speak-although no one said
it, but it was obvious at least to me in my view-speak when spoken
`to `and net. when you feel you should.
PAGENO="0102"
96
No one. said that, but that was my impression. Coupling that with
rumors and other manifestations I had previously experienced, again
more or less the same kinds of problems Mr. Wofsy encountered when
he was `acting, I decided you just can't perform.
Mr. LEM0v. In March of 1976 did you talk to the Executive. Direc-
tor, Mr. Curtis Fee?
Mr. LEWNES. Yes.
Mr. LEM0v. About what you perceived to be the problem?
Mr. LEWNES. Yes. Again I think it was right after the reshuffling
in the Commission meeting.
I think my first conversation with Mr. Fee `at the Commission-I
had met him previously *hen `he was not with the Commission. I went
in to see him. It was him and me, and *he was very helpful and
cooperative.
I said, Curt, look, I can read the signs. Give it to me straight.
In essence he said, George, some people have problems with you.
That's all. I didn't ask him for any more.
I said, Curt, based on this, and my own feelings, I have activated
my name to become a law judge. I want to pursue it.
He said, if `that's what you want to do, take your time, find what
you want. If I can be of any assistance, I will.
He subsequently did give me some leads.
When the Chief Law Judge did select me, I asked him, Mr. Fee,
to expedite the papers `as rapidly as he could because I wanted to get
out of there as fast as I could. He did that.
Obvious]y, subsequent to that conversation, I saw him a few times
to report to him `that, lo&k, I have been interviewed. I appreciate
the names you gave me. I told him the Chief Law Judge selected me.
If, in fact, the Chairma.n sees fit to confirm me, I would appreciate
expedition.
Mr. LE1~rov. With the chairman's permission, I would like to read
one or two quotes from yesterday's testimony by Mr. Minor and ask
Mr. Lewnes a question based upon these.
Mr. Moss. Very well.
Mr. LEMOV. Yesterday, Mr. Lewnes, Mr. Minor, the attorney at
the Federal Power Commission who did personnel work at this par-
ticular time, testified as follows:
Mr. LEMOV. Did they discuss with you an assignment you had received or
a direction you had received regarding Mr. George Lewnes, who was at that
time an Assistant General Counsel of the Federal Power Commission?
Mr. MINoR. Yes, Mr. Lemov.
1~ir. LEMOV. They did do that?
Mr. MINoR. Yes~ sir.
Mr. LEMOV. From whom was that assignment? Who gave you that
assignment?
Mr. MINOR The assignment came from the Executive Director, Mr. Fee.
Mr. LEMOY. And Mr. Fee is the Executive Director of the Federal Power
Commission?
Mr. MINOR. Yes.
Mr. LEMOV. He was in charge of this reorganization we have heard diséussed
this morning?
Mr. MINOR. That is correct.
Mr. LEMOV. Implementing the reorganization?
Mr. MINOR. That is correct.
Mr. LEMOV. What did Mr. Fee say to you?
Mr. MINOR. He asked me to look into the procedures to he followed in
separating an attorney from service.
PAGENO="0103"
Mr. LEMOV. Separating-firing?
Mr. MINoR. Yes, sir; firing.
Mr. LEMOV. Firing an attorney?
Mr. MINOR. Yes.
Mr. LEMOY. Did he give you any reasons?
Mr. MINOR. No; he did not.
Mr. LEMOY. No reasons at all?
Mr. MINOR. No reasons.
Mr. LEMOV. Who was the attorney involved in this?
Mr. MINOR. Mr. Lewnes.
Mr. LEMOY. Mr. Fee asked you how to go about firing Mr. Lewnes?
Mr. MINOR. Correct.
I would like to ask you, Mr. Lawnes, did you ever know that
there was an instruction given by the Executive Director to go about
finding a way to fire you?
Mr. LEWNES. That was the first time that I heard a public admis-
sion that that was the case. Obviously, this was part of the rumors
that I picked up.
As a preliminary, I know Mr. Minor. I consider him to be an
excellent person. I helped hire him. He did a credible job in the
assignment he was given.
I was very dismayed to he.ar that a bureaucrat would attempt to
ruin a career Government official without grounds.
On the other hand, I was heartened to see that the system works
because Mr. Minor came back, `and in essence I thought he said,
"No way." But yes, I was shocked.
Mr. LEMOV. He also gave him an alternative.
Mr. LEWNES. Reorganization.
Mr. LEMOY. Reorganizing you out of your job rather than firing
you.
Mr. LEWNES. That is what I perceived. I heard rumors about fir-
ing. I never thought that really would have been an edict handed
down.
But I knew through Government experience with reorganization
you could wind up in the hallway doing on paper something that.
looks good but really is not. I perceived that `might occur. That was
one of the considerations that entered my mind in deciding to leave.
Mr. LEMOV. Thank you.
I have no further questions.
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
Judge Lewnes, as I understand the purpose of this hearing, it. is
to try to determine whether any retaliation has been taken or pro-
posed against anyone who testified `before this committee or before
the Dingell subcommittee. I would like to `ask you whether, in your
capacity as Assitanct General Counsel, you have testified before
other committees of the Congress as well.
Mr. LEWNES. No. I think I testified before this committee once
prior to my appearing before the Dingell committee and then coming
baok here again. That was during the tenure of Chairman Nassikas
in the summer of 1975.
Mr. LENT. How many times in your career with the Federal Power
Commission have you testified before one or another committee of
Congress?
PAGENO="0104"
98
Mr. LEWNES. As a member of the Federal Power Commission
never, except the three times I mentioned.
Mr. LENT. Three times?
Mr. LEWNES. That is right.
Mr. LENT. Have you ever suffered in any way in your job as a
result of this testimony? Have you ever been demoted? Have you
ever had a dimunition in your salary?
Mr. LEWNE5. If you are asking whether I ever received a bad
efficiency report, whether I have been demoted have I ever been
censored-no.
Mr. LENT. OK.
Mr. :LEwNEs. Have I been decimated, yes. Whether there was a
causal relationship, I am not saying.
Mr. LENT. Has anyone ever criticized you, anyone from the Com-
mission ever criticized you, because of what you testified to before
either this committee or the Dingell committee?
Mr. LEwNE5. No.
Mr. LENT. Was any influence ever used on you to try to get you
to modify or change your testimony or not to show up to testify?
Mr. LEWNE5. No. I think people know better.
Mr. LENT. Has anyone in the Commission ever tried to intimidate
you?
Mr. LEWNES. Well, intimidation is a rather loose word. I say if
your people are decimated, if you do not get replacements, if you do
not get promotions, if cases are reassigned out of your section, some-
body is trying to tell you something.
You want to call it intimidation, you don't want to call it intimi-
dat.ion, use whatever term you want. These things occurred.
Mr. LENT. Let?s talk about any communication, either verbal or
in writing. Was either ever delivered to you which would have the
effect of intimidating you?
Mr. LEWNES. I recall in one instance, if you want. to use the term
"intimidation," where Mr. Journey told me to keep my mouth shut
in a given matter coming up before the Commission.
Mr. LENT. I am talking about whether you were ever asked to
"keep your mouth shut" with respect to testimony before a com-
mittee of this Congress.
Mr. LEWNES. Absolutely not.
Mr. LENT. And you are now an administrative law judge..
Mr. LEWNES. That is correct.
Mr. LENT. This is considered a step up from the position you
formerly held. Is that not correct?
Mr. LEwNES. Moneywise, no.. From my standpoint, I think it is a
much more prestigious position.
Mr.. LENT. As a matter of fact, your appointment as judge had to
be approved by the Chairman of the Federal Power Commission.
Mr. LEwNES. That is correct.
* Mr. LENT. He could have, had he ~been so inclined, put the kibosh
on that.
Mr. LEwNES. Absolutely.
Mr. LENT. He did not?
Mr. LEWNES. He did not.
Mr. LENT. Because you are now a judge.
PAGENO="0105"
99
Mr. LEWNES. That is right.
Mr. LENT. Did you ever have any conversations or discussions
with Mr. Curtis Fee prior to your becoming a judge about your
work performance?
Mr. LEWNES. No. Again, my recollection, aside from the one time
that I had met Mr. Fee outside of the Commission, totally unrelated,
was when I initiated and went up and saw him and we had that
discussion.
Mr. LENT. You said earlier in your testimony that you never
received any criticism for your work performance. Is that correct?
Mr. LEWNES. That is correct.
Mr. LENT. Now you are under oath. It is your testimony that the
only time you were ever called on the carpet by Mr. Curtis Fee was
on one occasion?
Mr. LEwNES. He didn't call me on the carpet.
Mr. LENT. He discussed your work performance with you?
Mr.. LEWNES. NO, he did not.
Mr. LENT. What did he discuss with you?
Mr. LEWNES. We discussed what I said we. discussed. I went in and
saw `him and I told him that I felt there was a problem going on and
what was happening.
He said basically that the people, some people, "have a problem
with you."
I said, "OK, if that is the situation, Curt., I am opting to become
a law judge."
Mr. LENT. Did you ever have a conversation with Mr. Fee about
the qualitative aspects of your work performance?
Mr. LEWNES. No, sir.
Mr. LENT. Did you ever have a discussion with Mr. Fee about the
lack of quantity of your work?.
Mr. LEWNES. No, sir.
Mr. LENT. All right.
Mr. LEWNES. Wait a minute. There was a meeting in which, a staff
meeting in which, he was discussing some of the recordkeeping and
whatnot. There may have been just a general overall discussion as
to why we had to do it, but I recall no instance of any criticism.
Mr. LENT. Did you ever have a discussion with Mr. Fee about
your deportment as an assistant trial counsel?
Mr. LEWNES. No, sir.
Mr. LENT. At one point you gave Mr. Mamone, our witness yester-
day, an outstanding performance rating on his FPC employee-
performance evaluation.
Mr. LEWNES. That is correct.
Mr. LENT. I will `ask the chairman whether he will put in the
record a rating sheet dated March 31, 1976, with the rating given
Mr. Mamone by George P. Lewnes as outstanding, with a statement
that, "The incumbent's work performance is above average in both
quality and quantity." Then there is additional language.
This annual rating statement contains the initials "DDJ," stand-
ing for Drexel D. Journey, with the annotation typed in "Noted
without concurrence due to inadequate justification."
[The rating sheet referred to was previously placed in the record
as Exhibit B, see p. 17.] . . .
PAGENO="0106"
190
Mr. LENT~ You are aware, Judge, that the Federal Power Oom-
mission Administrative Manual, instruction No. 4-X--50.1, issued
December 30, 1975, requires that whenever a superior seeks to as-
sign an outstanding rating to an employee, it must be justified in
wrtting and should include written statements to support that out-
standing rating.
Can you tell us why, when you gave an outstanding rating to Mr.
Mamone, you did not furnish supporting data?
Mr. LEWNES. My recollection at the time I wrote that was that
that was pretty much the type of format that had been followed in
other cases. That was my recollection.
Incidentally, the first time I saw that with Mr. Journey's initials
on it was whew I was interviewed by staff investigators, and I don't
recall the date, when they asked me whether I had seen it. I said no.
I would have assumed-what was the date of my signature?
Mr. LENT. Your signature was March 22, 1976. The administrative
manual instruction is dated December 30, 1975.
Mr. LEWNES. What was Mr. Journey's date?
Mr. LENT. Mr. Journey's date is August 18, 1976.
Mr. LEWNES. I can only perceive that had I not left Mr. Journey
would have returned it to me and then I would have filled it out.
Apparently, I left shortly after he received it and as a consequence
I never got a chance to rewrite it. If it did not comply with what-
ever the regulations were, I would have been pleased to rearrange it
so it would have met conditions.
Mr. LENT. To summarize your testimony today, then, and viewed
from the criterion here of whether or not you were ever retaliated
against by reason of your testimony before a committee of Congress,
it is your testimony that you never ~eceive.d an oral or a written
threat from any of your superiors. Is that correct?
Mr. LEWNES. It is correct..
Mr. LENT. And no force was used?
Mr. LEWNES. I want to make it. clear that I am accusing no one of
any coercive force or any attempt to influence me overtly.
I am saying that the circumstances surrounding my performance
at the Commission, that is, the loss of people and the other things
I have indicated, I concluded that it was time to move on.
Mr. LENT. You say the surrounding circumstances caused you to
conclude it was time to move on. Outside of the fact that your chair
was moved . from one position to another position at the meetings of
the Commission, and outside of the fact. that you "heard rumors,"
do you have any factual basis with which you can enlighten the corn-
mittee which would substantiate this opinion of yours that you were
unwanted by reason of your testimony before. a committee of the
Congress?
Mr. LEWNES. To me the rearrangement in the Commission meeting
room in such a manner was sufficient for me to conclude that neither
I nor Mr. Lotis, I would say, were really wanted from the stand-
point. of performing in the manner in which we had performed.
Mr. LENT. All right.. So we will accept the rearrangement of the
chair. My mother-in-law has t.he same problem. She wants to sit at
the head of the table.
PAGENO="0107"
1W.
Mr. LEWNES. it is not a question of sitting at the head of the table
but at that point in the room where you can't even hear whatthe hell
is going on, if you pardon my expression.
Again, I don't know who rearranged the chairs. I have no idea.
Mr. LENT. Other than the rearrangement of the chairs?
Mr. LEWNES. All right. We have loss of people, no replacements.
You ask for promotions for your people, no promotions.
Cases reassigned out of your section.
I wrote Mr. Drexel Journey innumerable memorandums on this
saying, "Drex, you have to do something" to the point that before I
left I wrote him a memo saying, "Look, the public interest is ill-
served if we cannot get these cases out.. We will get a backlog. If
worse comes to worse, transfer some of the functions out of my shop
into another shop just so we can get the work out."
I say cumulatively, as far as I was concerned, cumulatively I was
get.ting a message that things were going to change, there would be
a restructuring, there would be a rearrangement, there would be a
reorganization, that I felt you wouldn't be able to operate the way
my predecessor had operated and I had operated under innumerable
General Counsels.
Mr. LENT. Mr. Wofsy, I have several questions of you.
As I understand your testimony, or at least part of it, you were
involved in the High Island Offshore System case, and it was your
contention that you wanted to condition certification of those pipe-
lines on prOducer contracts.
Mr. WoFsY. Let me stop you there, if I may, Congressman.
Mr. LENT. All right..
Mr. WOFSY. I had taken over as Acting Assistant General Counsel
when Mr. Lewnes left. I did not get into the substantive aspects of
that case.
I had assumed that if I stayed on as Acting Assistant General
Counsel when the ti~ne came to get into the substantive aspects of
it, Mr. Mamone would have discussed it with me and we would have
gone into it.
I do not know, aside from what Mr. Lewnes has said here, what
Mr. Mamone has said here. Also knowing what went on previously
just from a peripheral standpoint., I did know that that was the staff
positiOn. I was not focusing on that position and I would not have
changed it if I had.
Mr. LENT. The fact is that in the Alaskan Pipeline case, as I
understand it, the Federal Power Commission took the position
that issuance of certificates would be made without the necessity for
`production, of these produced contracts. Is that correct?
Mr. WOFSY. That is correct, Congressman, but let me finish.
That specific problem h'as created an immense problem in the trial
Of that case. It has precluded the staff, the applicants, the inter-
venors, and everybody from determining just what is up in Alaska;
what can we do up there; what kind of gas is `available; where
it is going to go and what it is going to do.
Mr. LENT. You disagreed with that policy of the Commission to
issue pipeline permits without benefit of producer contracts? That
is an `honest disagreement that you had with the Commission?
Mr. WOFSY. I feel that it was wrong.
PAGENO="0108"
1Q2
Let me say this, though: I am not involved in that aspect, or was
not involved in that aspect, of the Alaska case during the trial. My
issue was strictly financing and tariff matters because I was knowl-
edgeable in those matters due to my past experience with the
Commission.
I do feel that there may have been more justification for going
that route with Alaska than there would have been possibly with
HIOS. The reason for that is because of the more time required up
in Alaska `to get a pipeline down here, and there may be more justi-
fication for it. I just didn't get into it.
Mr. LENT. Because my time `is limited, I would ask you to give
this a little shorter response.
Mr. WOFSY. I am sorry.
Mr. LENT. So, if it was, in your opinion, wrong in the Alaska
case to issue these permits without producer contracts-you feel it
was even more wrong in the HIOS case.
Mr. WOFSY. Yes, sir.
Mr. LENT. But it was, nonetheless, the position of your superiors,
the Commissioners, `that these permits be issued without the pro-
ducer contracts. Is that not the fact?
Mr. WOFSY. No; it is that the trial be held and a determination
made as to which applicant is appropriate.
Mr. LENT. And that policy of the Federal Power Commission has
the effect, d~s it not, of expediting `the development of that gas
field?
Mr. WOFSY. That is where-
Mr. LENT. Is that true?
Mr. Worsy. That is where I am not quite sure it does.
Let me say this: I never challenged that once the `Commission
came out in the Alas1~a case. I never did challenge that after the
Commission made the determination.
Mr. GORE. If the gentleman would yield, is it not true that the
pipeline can begin passing the cost of the pipeline construction on
to the consumers prior to the `delivery of the natural gas?
Mr. WOFSY. Normally, the normal ratem'aking concept is that `the
facilities have to be what we call used and useful in the rendering
of service.
In the Alaska case they `are seeking modification of `that principle,
and I `have challenged that to a certain extent.
Mr. Gom~. In the HIOS case were they not allowed to pass along
the cost of `the pipeline to the consumers before the gas from that
field was actually deliverable to the consumers?
Mr. WOFSY. Congressman Gore, I just don't know whether they
have requested that type of tariff provision. I just can~t answer you.
Mr. GORE. The gentleman has been generous with `his time. The
point I am trying `to get to is `that, according to my understanding
of this case, to choose the producer `and give him permission to go
ahead with construction `of `the pip'eline without an existing contract
in place might not necessarily sneed up the delivery of natural gas
to the consumers but may, in fact, provide an economic incentive
to slow down the delivery of natural gas to the ultimate consumers
while the cost of the pipeline is amortized on existing rate base.
I shall look forward to exploring that question as these hearings
continue. That is my understanding of it.
PAGENO="0109"
los
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you.
Mr. Wofsy, you indicated earlier that you had a conversation with
Mr. Journey about the removal of a Mr. Cockrell from the HIOS
ease.
Mr. WOFSY. Not the HIOS case. It was another case.
Mr. LENT. Another case?
Mr. WOFSY. Yes, sir.
Mr. LENT. Do you know why, either from your own knowledge
or from your conversation with Mr. Journey, Mr. Cockrell was
removed from the case?
Mr. WOFSY. Mr. Journey gave me the same reason, that is, that
the people upstairs had lost confidence in Mr. Cockrell. I did not
pursue it.
Mr. LENT. Had you heard Mr. Cockrell was being removed because
he had entered into an unauthorized agreement with the Interior
Department?
Mr. WOFSY. This is the first I have heard of that.
Mr. Moss. For the record here, I don't know what the member is
using. There is no material in this record to indicate such conversa-
*tion took place. I would hope the gentleman would extend the cour-
tesy to his colleagues and to the record giving us the substance
of what he is now addressing himself to.
Mr. LENT. Mr. Chairman, I will be happy to ait the appropriate
time ask Mr. Journey as to the substance of that conversation.
Mr. Moss. We are going to know about the visit before, too. This
Chair will not have surprises thrown on him here and material
which is not in this hearing record referred to by any member.
The Chair instructs counsel of this subcommittee to make avail-
able to the minority all of the documentation, and he expects the
same courtesy from the minority. In fact, he shall insist upon the
same courtesy from the minority.
Mr. LENT. Mr. Chairman, I am not making any charge here. I
am merely asking a question. I don't think it is incumbent upon
me to tell you where I get my information any more than I expect
you-
Mr. Moss. It is not incumbent upon you-
Mr. LENT. About your investigation.
Mr. Moss. Yes; you do expect it, Mr. Lent.
Mr. LENT. I would like to know what the hearing is about in a
general way.
Mr. Moss. And I would like to know what the meeting is about
where this unlawful contract that he entered into with Interior was
involved. What contract?
Mr. LENT. I don't really know the details of that, Mr. Ohairman.
Mr. Moss. It is interesting that you examine the witness on some-
thing where you don't have the details.
Mr. LENT. I asked him a question. I see no reason why I am not
permitted to ask him.
Mr. Moss. You are permitted to ask him, but I would hone the
record reflects the inadequacy of the information upon which the
question is asked.
PAGENO="0110"
1,04
Mr. LENT. I confess I have nothing to back it up other than
information that my counsel here has given to me in helping me to
prepare for this hearing.
Mr. Moss. You may proceed.
Mr. LENT. As far as rumors are concerned, we have had rumors
rampant throughout this entire hearing. These witnesses have testi-
fled as to nothing but rumors. Somebody moved the chair.
Mr. Moss. In any event, you have referred to a meeting and to a
contract. There is nothing in this record bearing either.
Mr. LENT. The question is no more amorphous than some of the
testimony coming from these witnesses.
.Just to conclude, Mr. Wofsy, I have asked all of the witnesses
who have testified these questions because they involve the statute
which the chairman has referred to in his opening statement of
yesterday, 18 U.S.C. 1505.
I will ask you the same questions. Were you ever, because of your
testimony before this committee or any other committee of the
House of Representatives-
Mr. WOFSY. May I interrupt you?
Mr. LENT. No.
Were you ever threatened, was force used against you, were you
ever intimidated or impeded in any way by your superiors in the
Federal Power Commission?
Mr. WOFSY. This is the first time I have ever testified before
this subcommittee or any other committee of Congress.
Mr. LENT. Have you ever been threatened or has force been used
against you or have you been intimidated or impeded in any other
way by any member of the Federal Power Commission or any of
your superiors?
Mr. WOFSY. You-
Mr. LENT. For cooperating wit;h the Congress?
Mr. WOFSY. I have never-Mr. Lent, my problem is this, and I
am not trying to be cute about this-but this is the first time I have
ever appeared before a congressional committee.
The only cooperation I have had, I guess, or which has been
given~ was being interviewed by certain investigators here and cer-
tain FBI people in dealing with other matters, and I don't believe
anybody has told me or said I shouldn't do it.
Mr. LENT. And the removal from your position which you say
occurred was at your own request?
Mr. WOFSY. Yes, sir.
Mr. LENT. And no one forced that removal upon you?
Mr. WOFSY. Again, circumstances forced me. I wanted that job.
I thought I was suitable for the job, hut I also felt that I could not
handle it in the manner that it was shaping up.
Mr. LENT. Can you give us a little more meat to chew on?
* Mr. WOFSY. Sure.
Mr. LENT. Whet happened to you that caused you to request re-
moval from your nosi.tion? That. is what this hearing is all about.
Mr. WOPSY. I felt. that. if I were t.o stay on as Assistant General
Counsel-
Mr. LENT. If I may interrupt. Mr. Wofsy, I don't. really think it
is germane how you felt.
PAGENO="0111"
Mr. Worst. I believe it is very germane.
Mr. LENT. What I am looking for is objective evidence, just a
scintilla or two in order to back up the thrust of this hearing, which
is that witnesses and officials of the Federal Power Commission were
somehow shuffled around, willy nilly, because of their degree of
cooperation with the Congress. If that is the case, I want to know
about it.
Mr. WOFSY. Mr. Congressman, I believe that the General Counsel
telling me to remove a person from a case is a very substantial
interference with the duties and performance of an Assistant Geii-
oral Counsel in his job.
I felt if I acceded to that request, that there would be other
requests coming down the road whith would prevent me from doing
the job properly, and I could not function in that fashion.
Mr. LENT. Other than removing one of your subordinates from a
case, is there anything else you can show us?
Mr. WOFSY. No, sir.
Mr. LENT. I have no further questions.
Mr. Moss. The Chair is going to correct the record here for the
benefit of everyone.
The Chair in his opening statement of yesterday morning enumer-
ated three purposes or objectives of this committee. I shall read
them:
The subcommittee meets this morning to review some very serious
allegations.
In the next two days we shali hear testimony from current and former
professional staff members of the Federal Power Commission regarding
manipulation of gas pipeline and rate cases, discriminatory personnel actions,
and allegedly unjustified transfers.
After we hear these charges, the Federal Power Commission's General
Counsel and Its Chairman will be called upon.
Then I stated:
A second general point to which I would like to direct the subcommittee's
attention concerns natural gas regulation. As we know, the issue of whether
or not to deregulate some or all gas, which was rejected by the 94th Congress,
remains before us. The subcommittee has expended considerable effort attempt-
ing to improve FPC regulation of natural gas producers and pipelines under
existing statutes.
"In :the last Congress, for example, the subcommittee found"-
and I state what it found.
Then, finally, I stated not the only purpose of the meeting, Mr.
Lent., but the third purpose:
A third and no less relevant concern is whether or not any of the witnesses
suffered because. of testimony at or involvement in hearings of a committee
of the Congress. If such were found to be the case, the provisions of 18 11.8.0.
1505 could apply.
Then I cite the relevant statutes.
Finally, I said:
A fourth and overriding point is: Did the personnel transfers and other
actions serve and protect the public interest which, after all, in the Federal
Power Commission's fundamental concern and, Indeed, the very purpose for
which it was created.
I ~1o not want this record to reflect that. this hearing is narrowly
predicated.
PAGENO="0112"
10.6
The charge, as is consistent with the Rules of the House for
investigating committees, was set forth very fully by the Chair at
the commencement of the hearings yesterday.
Just very briefly, Mr. Lewnes, you had something more than
just rumor. You had the conversation with Mr. Fee where he said,
George, some people have problems with you.
Mr. LEWNES. That is correct.
Mr. Moss. In other words, you asked him to lay it on the table,
and he laid it on the table, and you said, all right, I want to get
out. I want to be an administrative law judge.
Mr. LEWNES. The answer is clear. The only two people in the
room were Mr. Fee and myself. That is the way it was. It was a
straight-off-the-shoulder conversation. He was straightforward and
frank about it. He was very courteous and helpful thereafter.
Mr. Moss. You stated you addressed innumerable memos to Mr.
Journey.
Mr. LEWNES. Yes, sir.
Mr. Moss. I am informed the committee was not supplied copies of
those memos.
The representative of the Federal Power Commission who is pres-
ent-w'ho is present here in the hearing room?
[No response.]
Mr. Moss. Unusual. You mean we are not being monitored?
The staff is instructed to secure copies of each one of the innumer-
able memos addressed to Mr. Journey.
[See p. 552, this hearing.]
Mr. Luken?
Mr. LUKEN. With regard to the HIOS case, were there serious
unresolved questions? What were the unresolved questions? In what
area?
Mr. LEWNES. Again, I will testify only up to the point of April
of 1976 when I was there. What happened after that, I am not
competent.
Mr. LUKEN. Just in those areas.
Mr. LEWNES. Normally, when a pipeline files an application to
build a massive pipeline this size, unless you have gas moving into
it, all you have is cost and no profit, so the name of the game on
a feasibility standpoint is you have to have enough gas moving
through to recoup costs plus a fair rate of return.
In some instances, when a pipeline is built, in the first couple of
years you don't expect them to operate on a pure profit basis. You
can anticipate that the pipeline will not build up its maximum
capacity.
In fact, there is a regulation in the Commission's rules which
states, I think it is a 60-percent rule, as long as you can show 60
percent of reserves the first year, the Commission will countenance
granting it as long as there is anticipation of sufficient reserves down
the road.
So, when the HIOS case came in, we had no contract up until
the time I left. There were no contracts, no gas contracts.
My interpretation of the law at that time was that under section
7(e) a pipeline must be able and willing to perform the functions
for which it is certificated.
PAGENO="0113"
107
The function of the line was to move gas. How can you be able
to move gas unless you have contracts to buy gas to put in the line?
That is sort of in a nutshell, then.
Mr. LUKEN. We are talking about contracts and reserves.
Mr. LEWNES. Contracts would dedicate the reserves and would
indicate the type of deliverability that was anticipated in the initial
stage.
Mr. LUKEN. It is your interpretation of the Natural Gas Act that
these questions were unresolved as to its application?
Mr. LEWNES. In my experience at the Federal Power Commission,
to my knowledge that had always been the case-unless you have
the gas to move, you cannot grant the section 7(e) application
because of the way the Natural Gas Act was written.
Mr. LUKEN. Willing and able is the language from the statute?
Mr. LEWNES. Able and willing, yes, sir.~
I understood the Commission took a different position. Obviously,
lawyers might disagree.
Mr. LUKEN. We are talking `about your interpretation.
Mr. LEWNES. That is correct.
Mr. LUKEN. Your interpretation of this act.
Mr. LEWNES. That is correct. As a law judge now, though, I would
have to hold to the contrary if the case came before me based on
Commission precedent.
Mr. LUKEN. The change in counsel took place after you left.
Mr. LEWNES. That is correct.
Mr. LUKEN. Mr. Mamone was taken off?
Mr. LEWNES. Again, I am not competent to testify on those
matters. -
Mr. LUKEN. First, I would like to ask this question: You were
Assistant General Counsel. Is that right?
`Mr. LEWNES. Yes.
Mr. LUKEN. For how long?
Mr. LEWNES. From 1970 up until 1976.
Mr. LUKEN. Is it standard practice for Assistant General Counsels
to control the assignment of attorneys to cases?
Mr. LEWNES. Absolutely. Up until the time Mr. Journey had
become General Counsel, I had never been interfered with insofar
as the assignment of cases.
Mr. LUKEN. Never?
Mr. LEWNES. Never.
Mr. LUKEN. Not even for policy reasons?
Mr. LEWNES. Never. I assigned the cases and I was never called
in by a General Counsel saying, take him off the case.
I know my predecessor, Mr. Robert Russell, followed the same
practice. No one would countenance having an attorney taken off a
case.
What you have to realize is what we consider a method of separa-
tion of functions.
The Assistant General Counsel's control the trial of the cases
through their attorneys.
Because we still participate in Commission meetings, at tjmes it
may seem unfair to litigants that the Assistant General Counsel
who controls the attorney who tried the case for the staff is some-
how in the Commission meetingS so the General Counsel usually
87-292 0 - 77 - 8
PAGENO="0114"
`Os
holds himself apart from these cases so that he can disagree with
anything the Assistant General Counsels `have said.
Mr. LUKEN. Airight, so in this case the experienced people were
taken off the case. Who was put on the case?
Mr. Wofsy, do you know?
Mr. WOFSY. No; I don't, Congressman Luken.
I was not there when Mr. Mamone was taken off the case.
Mr. Mamone can probably tell you.
Mr. LUKEN. Mr. Mamone, who was put on the case?
Mr. GORE. [presiding]. The record shows the witness was sworn
yesterday. You are still un4er oath.
Go ahead.
FURTHER TESTIMONY OF RUSSELL B. MAMONE, SUPERVISORY
TRIAL ATTORNEY, OFFICE OF THE GENERAL COUNSEL, FEDERAL
POWER COMMISSION
Mr. MAMONE. A Mr. Keeley was put on the case. Mr. Rob Aber
and myself were shunted aside and no longer `had `anything to do
with the case after approximately the middle or late April of 1976.
Mr. LUKEN. What was your relationship to the case at that time?
Mr. MAMONE. I was one of the staff counsel assigned to the
HIOS case.
Mr. LUKEN. What is your experience in `this field?
Mr. MAMONE. As I testified yesterday, Mr. Luken, I had been
assigned `to this type of work for a period of 11 years beginning
in 1965.
Mr. LTJKEN. Mr. Keeley was assigned. Do you know what his
experience was at that time?
Mr. MAMONE. My understanding was that he `had never handled
any trial. He had not appeared in any hearing or any oral argument.
HA was an assistant to Mr. Journey. He was not in the trial staff.
Mr. LUKEN. Do you know the number of years of experience he
had as a lawyer?
Mr. MAMONE. It was my understanding he was approximately a
year out of law school.
Mr. LTTKEN. Do you know who was on the other side of this case?
Mr. MAMONE. The chief attorney for the HIOS group, Mr.
Boland, had practiced before the Commission for at least 30 years.
His partner in the law firm had been General Counsel at the Federal
Power Commission back in 1940.
Mr. LUKEN. Who was his partner?
Mr. MAMONE. Mr. Connor.
Mr. LIJKEN. Is there a Mr. Harrington in this firm?
Mr. MAMONE. I believe Mr. Harrington is there.
Mr. LUKEN. Was there any connection, to your knowledge, be-
tween Mr. Harrin~ton and Mr. Keely?
Mr. MAMONE. Of my own knowledge~ I do not know the relation-
shin. I understand there is some family relationship.
Mr. J4UTCEN. Do you know? Is Mr. Harrington Mr. Keely's
hro~her-in-law?
Mr. MAMONE. Of my knowledge~ I dOn't know the family rela-
PAGENO="0115"
~pQ9
tionship. I understand that is true. You would have to check with
Mr. Journey on the specifics of that relationship.
Mr. Moss. Has the staff determined whether that is the case?
We shall hold the record open to have that point confirmed.
[See p. 53O~]
Mr. Moss. We shall take a break of 15 minutes to permit members
to respond to this roll call and we shall be back here at 11 :45.
[Brief recess.]
Mr. Moss. The committee will be in order.
The Chair recognizes Mr. Marks at this time.
Mr. MARKS. Thknk you, Mr. Chairman.
Judge, if I remember your testimony, in February of 1976, it
was shortly after your testimony before the congressional commit-
tees, you decided at that time to reactivate your status as an admin-
istrative law judge; is that correct?
TESTIMO~IY OP GEORGE P. LEWNES, CYRIL S. WOPSY, AND RUSSELL
B. MAMONE-Resunied
Mr. LEWNES. Yes; again to the best of my recollection, it was
February. It might have run into March, but that is correct.
Mr. MARKS. I think your testimony was that that was at least
a month or so before you had a conversation with Mr. Fee?
Mr. LEWNES. Whether it was a month or so, I don't know, but it
was before I had the conversation with Mr. Fee.
Mr. MARKS. Was it, sir, in February of 1976 that you decided at
that particular point, before your conversation with Mr. Fee, and
perhaps before your chair was set aside, that you had decided to
go back on active status?
Mr. LEWNES. I' had decided that I `had better open up that option.
Mr. MARKS. Are you saying maybe-'I had decided'-or-'I am
not sure?'
Mr. LEWNES. If you perceive things were happening, if you hear
a rumor that maybe somebody is trying to fire you, maybe, I say
you open an option and at some point in time you decide: I am going
to go full blast on that option.
By opening an option what happens is that when you are put on
the ,active list, you will get inquiries from agencies.
If an agency offers you a job, I think you can turn down the first
two or something but, if you turn down the third, you are out.
I figured, well, if I got a good offer, I might take it, depending
on the full circumstances surrounding it.
I think in my own mind I pretty much convinced myself that if
I got an offer I would go even before I had the conversation with
Mr. Fee~ yes, sir.
Mr. MARKS. All right.
And before your chair was moved around in the conference?
Mr. LEWNES. Yes, sir.
Mr. MARKS. What was it that prompted you, then-perhaps the
question ou~'ht to be: Was there any more than just rumor that
prompted this decision that you made in February of 1976?
Mr. LEWNES. Well, again it was the general manner in which we
were being forced to one.rate~ if I can use the term "forced" loosely.
PAGENO="0116"
1~19
Aside from what the considerations were, one, I was losing people
in normal attrition. I was not getting replacements.
Mr. MARKS. Excuse me-
Mr. LEWNES. Attorneys were leaving.
Mr. 1\'Lu~Ks. This attrition you speak about, did that take place
since the time of your testimony up to this point in February where
you made up your mind or before your testimony?
Mr. LEWNES. There was an attrition going on even before the
testimony in January.
Mr. MARKS. All right.
Mr. LEWNES. The memoranda that I was writing-I was losing
people; I wasn't getting replacements; some of my people were not
getting promotions; they were unhappy; the work is piling up-
Mr. MARKS. Excuse me, Judge.
Would it be fair to say that really you had decided for reasons
other than attributable to your testimony to leave since you made
that decision in February?
Mr. LEWNES. No; I would say that the culmination of an absolute
decision, the absolute decision to go was after I gave the testimony.
The testimony was in January. In Febniar~ I activated, so it had to
be subsequent to my testimony.
Mr. MARKS. From the time of your testimony to this point in
February when you decided you were going to leave, all you heard
was some rumor that what you had testified to was not looked upon
favorably. Is that the idea?
Mr. LEWNES. No; absolutely not. The rumor was not that because
I testified that is why they are trying to get rid of me. The rumor
was that for whatever reason, no one knew, there were machinations
to remove people and that I was one of the guys on the list.
Mr. MARKS. The point I am interested in mostly is your own
feeling. I gather it is that, whatever the reasons might have been,
is it not your opinion that the reason matters went as they did was
because of your testimony?
Mr. LEWNES. I would want to be candid with you. At the time
that the chairs were moved, at the time after I spoke with Mr.
Fee, I have to admit that I felt there was a causal relationship
between what I felt was someone being unhappy with me and the
fact I testified. I had no proof. I said as a reasonable person that
based upon my experience in the Government and the years I have
had no problems, all of a sudden I testify and it is what I felt,
people just don't seem to want you around.
Mr. MARKS. This is in February. In your particular case this is
important because at that time you made up your mind you would
make a move.
Mr. LEWNES. Certainly.
Mr. MARKS. Tip to that particular time you were not attributing
your desire to move to the fact you had testified and there was
feeling against you?
Mr. LEWNES. No; I am saying that is one of the things that came
into mny mind.
Mr. MARKS. In February?
Mr. LEWNES. Sure. You know, when you make a dec.ision to move
after being in an agency that long a time, you take all matters into
consideration. For example, you take your association with the
PAGENO="0117"
lii
General Counsel. I don't want to imply that one had precedent over
anOther.
Your general relationship with the General Counsel insofar as
the maimer in which you peform your functions as Assistant Gen-
eral Counsel, the fact that you testified, sundry things come into
your mind at that particular point when you make a decision to
move.
Mr. MARKS. Judge, would you tell me, purely for my information,
what was so terrible about this testimony you gave and that Mr.
Mamone gave which would want anybody to come down on you?
Mr. LEWNES. I haven't the slighte.st idea. I thought we gave
straightforward and honest testimony. I think what we said has
been proven. No one criticized us for the testimony.
I can't say that something in particular that I said culminated
in this. I can only say that the events as they transpired appeared
to me at that time to have some causal relation.
What it might be or who it might be, I have absolutely-and
don't to this day have-no idea.
Mr. GonE. If the gentleman would yield, my understanding of
the testimony yesterday was that Tenneco had criticized those who
testified.
Mr. LEWNES. Mr. Mamone testified to that. I never even saw the
briefs. As I said, I put this behind me and I don't get involved.
Mr. MARKS. That certainly was not part of your opinion, the
decision, the fact Tenneco objected?
Mr. LEWNES. I didn't even know about it.
Mr. MARKS. The reason I ask that question is that the Chairman
pointed out one of the reasons for this hearing is to determine
whether or not as a direct result of testimony that you and others
might have given certain repercussions took place which made it
either untenable for you to `continue or some of you were moved
to other departments.
That is why I asked the question of what was so terrible about
this testimony. Was it so terribly embarrassing to the Federal
Power Commission; so terribly embarrassing to the Chief Counsel?
Was there anything embarrassing `about it in your opinion?
Mr. LEWNES. I would say that the position we stated in the
testimony was contrary, if you will, to the `actions taicen by the
Commission.
Mr. MARKS. That wasn't the first time that had ever happened?
Mr. LEWNES. No, sir. Wihether that was embarrassing to the
individual concerned, I `have no idea, nor did I care. The fact is
that we gave truthful testimony.
Mr. MARKS. Certainly. And, as you just indicated again, in the
past that has hapuened and there were no repercussions on people
as a result of their testifying as to their own nersonal feelings?
Mr. LEWNES. No. I testified, the only time I ever testified, and
I `am talking only about my own experience, was the three tunes-
twice before this committee and once before Dingell. I have no
knowledge of what may or may not have transpired with regard
to anyone else.
Mr. MARKS. Judge, this `c~nversation you had with Mr. Fee-
Mr. LEWNES. Yes, sir.
PAGENO="0118"
112
* M~i~Ks [cQntinuing]. I think you stated that Mr. Fee said,
"Some people have problems with you."?
Mr. LEWNES. Yes, sir.
Mr. MARKS. Was that his statement?
Mr. LEWNES. That is my best; recollection without putting words
in his mouth; yes, sir.
Mr. MARKS. The two of you were there together alone?
Mr. LEWNES. That is correct.
Mi'. MARKS. You had gone to see him, as I recall your testimony?
Mr. LEWNES. That is correct.
Mr. MARKS. He had not called you?
Mr. LEWNES. I went up to see him.
Mr. MARKS. At that time did you have occasion to say to him,
"Who are these people"?
Mr. LEWNES. No; because at that point I didn't care. I think he
gave me the answer that I thought I would get bec.au~ this is the
feeling I was developing.
I think if Mr. Fee had said, "NQ, George, it is all a figment of
your imagination. Stick around. We need you," I think that my
future course might well have been different.. I don't know what it
would have been.
Mr. MARKS. Did you ask him, sir, what these problem's were?
Mr. LEWNES. No.
Mr. MARKS. You didn't ask him who the people were?
Mr. LEWNES. No.
Mr. MARKS. Did you ask about the problems?
Mr. LEWNES. No.
Mr. MARKS. I assume you were curious at that time.
Mr. LEWNES. No, I wasn't. At that, particular time I felt I had
done what I felt was a credible job as a steward of the public
trust. If people felt they didn't want me there, for whatever reason,
fine. I will go to something else where I felt I could still perform as
a civil servent, which I did.
Mr. MARKS. Judge, did you make any inquiries subsequent to
your conversation with Fee or anyone else as to who the people
might have been and/or what the problem might have been?
Mr. LEWNES. No. I might have spoken once to the Chairman just
generally. I don't know whether it was before or after Mr. Fee. I
think it was something like, "I get the feeling maybe somebody
is peeved at me."
I think the Chairman said. "It is really nothing. There is some
reorganization going on."
It was nothing you could put your finger on and say we had a
de~m discussion about anything.
Mr. MARKS. So when you had this conversation with the Chair-
man, which you do not recollect, as I understandS which took place
on or after your conversation with Mr. FeeS the Chairman indicated
to you there was nothing wrong but that there would be some sort
of reormmnization?
Mr. LEWNES. He certainly didn't. tell me somebody had put out,
if you will, a "hit" contract~ "Fire this guy," absolutely not.
Mr. MARKS. That is the point of my ciuestion. Your conversation
with the Ohairm:an is somewhat important.
PAGENO="0119"
113
I woncl~r whether ~QU xwght try to recolle'~>t that an4 be as
specific as you can about that.
Mr. LEWNES. I would `say it was within that gener~l area: I ca~ri-
not tell you whether it was before or after. I was obviously dis-
turbed, having served so long at the Connnission, that I would be
getting these vibes. I just don't remember whether I spcke to him
before or after.
Again, I have given you an indication of what I thought was
the date. I don't keep notes. I honestly can't help you on it, Mr.
Marks.
The general conversation was a friendly, `amiable conversation.
Mr. MARKS. Can you recollect whether this conversation with the
Chairman took place before the date in February where you had
made up your mind to go back as administrative judge actively?
Mr. LEWNES. I would say, again trying to think back as to my
frame of mind as to what I was trying to accomplish, I would say
it had to be after I activated my application.
Mr. MARKS. After?
Mr. LEWNES. Yes, sir.
Mr. MARKS. And that conversation with the Chairman did re-
late, at least to some extent, to whether or not your work was satis-
factory and/or circumstance surrounding your employment?
Mr. LEWNES. No, sir; I think I said something to the effect-
and, again, the Chairman has not be~n very accessible to the law-
yers, but at this particular time I had gone up to see him-I asked
him something to the effect: "Mr. `Chairman, I get the impression
maybe perhaps my actions or something I `have done have dis-
pleased people around this Commission."
He just `pushed it off and said, "There is nothing."
Mr. MARKS. Was there anyone else?
Mr. LEWNES. No; just the Chairman and I. Whether hi's secretary
kept a note as to the date, I don't know. That is the only time I
visited with him, I think.
Mr. MARKS. Other than the Chairman, was there anyone else you
discussed this problem with, other than M'r. Fee?
Mr. LEWNES. I think at the time I decided to accept the `ad-
ministrative law judge, and it was being worked on-
Mr. MARKS. Was that in April?
Mr. LEWNES. Yes; just before it was confirmed. It was just before
I went. I think when the Chief Judge told me I was selected. I
may `have visited Commissioner Smith and Commissioner Hollo-
man just to tell them that I had decided to take this job and I am
going.
I think each of them registered surprise.
Mr. MARKS. Judge, did you have any conversation with anyone
from the period of time the testimony took place in January up
to the time you left concerning Mr. Ma.mone and his being trans-
ferred other than with Mr. Mamone himself? I understand you
`did discuss this with him.
Mr.' LEWNES. No. When I left., Mr. Mamone was on the case.
No one had ever talked to me, to my recollection, about this. In
fact., I think he got on the case pretty close to the time I was
departing.
PAGENO="0120"
114
Mr. MARKS. Is there anything that you can add to the testimony
that Mr. Mamone gave us concerning Mr. M:ainone's transfer-
Mr. LEWNES. No, sir.
Mr. MARKS [continuing]. Which might be helpful?
Mr. LEWNES. No. I know you asked the question about review-
ing his statement yesterday, the inference being that we were in full
acquiesce with what he said.
No; Mr. Mamone showed me his prepared statement and said,
"Wall you look at it to see whether what I have said in that as it
deals with when I was working for you is accurate?"
It was a handwritten thing. I scanned over everything. I didn~t
read it until I got to the point in 19-so-and-so, whatever the year
was, I was working for Lewnes.
I said this looks pretty much like it was and that was it.
I did not discuss with him nor have I discussed with him why
he was transferred. I have no knowledge of that whatsoever.
Mr. MARKS. Did you `discuss with anyone else or did anyone else
discuss with you up to this time *any particular factual matters
that dealt with Mr. Mamone's transfer?
Mr. LEWNES. No. I believe perhaps the conunittee investigators,
when they-I don't know whether they asked me questions on that
or not. No, I just can~t recall having talked with anybody. It wasn't
my concern at that point.
Mr. MARKS. Thank you very much.
I have a question of Mr. Wofsy now.
Sir, do you have any personal knowledge as to information con-
cerning Mr. Mamone's transfer which you have not already given
to us?
Mr. Worsy. Nothing further.
Mr. MARKS. Nothing further?
Mr. WOFSY. That is right.
Mr. MARKS. Did you have any specific conversations with anyone
in the Commission concerning Mr. Mamone's transfer?
Mr. WOFSY. No. The only conversation I had was after I had
spoken with Mr. Journey and we had agreed to put somebody on
from the Producer Rate Section.. I then discussed with Mr. Mamone
and Mr. Aber the fact that this was going to be a fact. I think 1
said Russ would still be in charge and have full control over what
happened as far as the pipelines were concerned.
Mr. MARKS. Did Mr. Mamone or anyone else suggest to you that
the reason foi~ the shifting had to do with the previous testimony
he had given?
Mr. WOFSY. No, sir.
Mr. MARKS. He did not?
Mr. WOFSY. Nobody suggested that at all. That was not part of
the conversation other than, I guess, my talk with Mr. Journey.
I suggested to him that it would not be politic to remove Russ
from the HIOS case because, at that particular time, of the in-
vestigations into the Commission.
Mr. MARKS. At the time you spoke to Mr. Journey--
Mr. WOFSY. It was in April.
Mr. MARKS. Yes, April.
PAGENO="0121"
1~
At the time you spoke to Mr. Journey was anything specifically
said about the testimony of January and how it related to what was
going on?
Mr. WOFSY. No, sir.
Mr. MARKS. You did not mention it?
Mr. WOFSY. No, sir. I might have mentioned that my advice to
Mr. Journey was not to take him off, predicated on the fact that
Mr. Mamone had testified previously. I am not sure whether I
said that or whether I just spoke about the `overall climate insofar
as it existed in the `agency at that particular time.
Mr. MARKS. You talk about the politics of it.
Mr. Worst. Yes, sir.
Mr. MARKS. Can you think back to your conversation with Mr.
Journey, as you. reflected a moment ago, and tell us whether or not
it was specifically discussed, w'hether the question was specifically
discussed, about the transferring of Mr. Mamone as a result of his
testimony?
Mr. Worst. Mr. Journey never suggested that the transfer was
predicated on Mr. Mamone's testimony. My advice to him was that
it would not be appropriate to transfer him because of the legisla-
`tive climate, and I am not quite sure whether or not I suggested
that part of the legislative climate dealt with the testimony before
the Dingel'l committee or this committee.
I `do know I was aware of the Di'ngel'l letter that had gone to
the General Counsel in reference to the testimony.
Mr. MARKS. T'hank you very .mucl~, sir.
Mr. WOFSY. You are welcome.
Mr. Moss. The Chair recognizes the gentleman from Tennessee,
Mr. Gore.
Mr. GORE. Thank you, Mr. Chairman.
Mr. Wofsy, you took the place of Mr. Lewnes after Judge Lewnes
was appointed an administrative law judge. Is that correct?
Mr. Worst. Yes, sir.
Mr. GORE. Reconstructing these events in my own mind, I see,
first of all, an escalating conflict between members of the Federal
Power Commission staff and those highe.r up in the Federal Power
Commission concerning the vigor with which the public interest
should be `advocated and the way the public interest should be
advocated.
I am unclear as to whether the hearings in January were a
symbol or example of this attention reaching the boiling point or
whether the personnel action's subseauently taken were in direct
retaliation. That is one of the several nurposes of this hearing.
I think an equally important line of inquiry is whether or not
these personnel t.rarsfers were in resnonse to your advocacy, what
I believe is your `advocacy, of the nublic interest.
Was it unusual in your exnerience to be asked to remove an at-
torney from a case without being given any reason why other than
the fact that confidence had been lost in that attorney?
Mr~ WOFSY. It is the first time I have ever `heard of any instance
where an attorney was removed from a case because of that. I am
trying to think hack into `the `early 1960's where. I believe, there
PAGENO="0122"
116
may have been certain talks about attorneys being either removed
from .a case or being asked to present a case in a certain manner,
but that was back in the 1960's.
At that particular time I was rather young and I don't know of
anything that would be concrete evidence `to that effect.
The latter part of my experience with the Commission, during
this time it was wholly unthought of and not utilized at all in any
shape, manner, or form.
I believe Mr. Lewnes testified, and properly so, that there was an
ability of the Assistant General Counsel to structure his staff and
utilize his staff in any manner that he saw fit and that there was a
separation between the Assistant General Counsel `and the General
Counsel.
Mr. GORE. There used to be that separation, in `other words?
Mr. Worsv. Yes, sir.
Mr. GORE. Aside from the other questions raised by this really
rather startling evidence, I think it raises serious questions about
the politicization of what is supposed to be an independent regula-
tory commission. We are now considering, in conjunction with the
reorganization proposal in the energy field, how we are going to
insulate the regulatory functions from the administrative func-
tions. I think these are very serious questions.
It appears to me that those who were handling not only the HIOS
case, but some others were removed withou.t good reason. At least
I have yet to see a good reason in this case.
Do you think that the public interest was served by Mr. Mamone's
dismissal from the HIOS case?
Mr. Worsy. No. It always has `been my contention that the Com-
mission, as a commission, was a policy body and also a quasi-
judicial body, and that i~t was in their interest for all facets of all
issues to be presented to them because I thought that in that manner
they could better execute their function. I felt that the removal of
Mr. Mamone would have nrecluded that function of presenting an
issue to the Commission that they should consider.
Mr. `Goiu~. You were asked to remove others from the HIOS case,
also; is that correct?
Mr. Wovsv. No, sir.
The other person I testified to was Mr. Cockrell, and I was told
to remove `him from the El Petso Gas abandonment case.
Mr. GORE. Were you given any reason why?
Mr. Worsv. Only the same reason I can recall, that the people
upstairs have no confidence in Mr. Cockrell.
Mr. GORE. The people upstairs?
Mr. Worsv. Yes, sir.
Mr. Goii~. Some of the people upstairs will be testifying before
this subcommittee shortly. We shall pursue that at that time.
After Mr. Journey asked to have Mr. Mamone removed from
the case, you told Mr. Journey that you wanted to leave the division.
Was that primarily because you felt your integrity was threatened?
Mr. Worsv. Yes, sir.
Mr. GORE. Maybe that is a bad way to word it.
Mr. Worsv. It is not really the proner way. I felt at that par-
ticujar tim&-it was with Mr. Oockrell's removal-
Mr. GORE. Yes.
PAGENO="0123"
117
Mr. WOFSY. I felt that I could not function and do a credible
job, and I did not ask to be removed from that division. All I did
was ask to be relieved of that one position I was in.
I believe Mr. Journey characterized it as a caretaker.
Mr. GORE. Did you feel that you were being asked to be a con-
duit for improperly influencing the progress of that case?
Mr. WOPSY. I felt that it would start a precedent which would
lead to that. It is like you take one thing here, and all of a sudden
you are taking two things, and three things, and it becomes easier.
I am not a man who can live that way.
Mr. Gong. I think you are to be commended. I think that several
of the witnesses who have testified before this subcommittee are
examples of public servants we need more of.
Did we establish, Mr. Ohairman, the reAa~tionship which was
mentioned earlier during Mr. Luken's questioning?
Mr. Moss. I have instructed the staff *to make that determina-
tion.
Mr. Gon~. I shall reserve questions about that until that is deter-
mined, then.
.Judge Lewnes, I think you testified as to your reasons for as-
signing Mr. Mam.one to this case. Do you think that the public
interest was served by his being replaced with a relatively young
and inexperienced attorney?
Mr. LEWNES. Again, this was an occurrence `after I departed; but,
if I were to be asked in a case of that size, if I had an experienced
attorney on the case such as Mr. Mamone, and I put someone on
whom I don't even know but had only 1 year out of law school,
and no `experience, I think the obvious answer would be no, to the
extent that this individual did not have the background and he
couldn't fully protect whatever the public interest was in that case.
I am not saying that someone that young could not do it. I am
saying that I don't think he could do it as competently and as
effectively as someone with Mr. Mamone's experience.
Mr. GORE. Mr. Chairman, I have no further questions.
Mr. Moss. Are there further questions at this time?
Mr. LENT. I think minority counsel would like to ask some ques-
tions following one or two questions by me, if I might.
Mr. Moss. Very well.
Mr. LENT. Mr. Wofsv, on the point of the young and inexperi-
enced attorney. Pat Keele.y-
Mr. Worst. Yes.
Mr. LENT. How is that spelled?
Mr. Worst. K-e-e-l-e-y, I believe it is.
Mr. LENT. Is it a fact that he was a~signed-you are familiar with
him and his work?
Mr. WOFSY. I know Mr. Keeley, yes.
Mr. LENT. Is he considered one of the bright young men of the
Federal Power Commission or would you say that is overstating
the case?
Mr. Worsr. I don't know of his capabilities. I know him as a
person. I have snoken with him. He is a very personable person
and I like him, but I also like a lot of people.
I don't know of his capability as a lawyer.
PAGENO="0124"
118
Mr. LENT. Do you know whether ihe \vas asked, and in fact did
argue, to argue case No. 770, the new national rate for natural gas,
or that he is going to argue that case on appeal?
Mr. Worsr. I don't know that as a fact.
Mr. LENT. Do you know whether he wrote `the opinion for the
Federal Power Oommission in case No. 770?
Mr. WOFSY. It is my understanding that he did writ~ one of the
nationwide cases. I am not sure which one.
Mr. LENT. What about 770(a)? Are you aware of the fact he
wrote that opinion as well?
Mr. Worsy. As I say, I have had only `personal relations with
him, that is, meeting with him. I don't know of his capability or
of his professional experience.
I believe he did say to me at one stage of `the game that `he was
cooped up in an office writing a nationwide opinion. That is as
much as I know.
Mr. LENT. He has now been asked to `handle the oral argument
on the appeal of case No. 770, as I understand it. Do you know
whether `that is so? -
Mr. Worst. I don't know.
Mr. LENT. He is not a senior attorney certainly in the Counsel's
office.
Mr. Worsr. That is correct.
Mr. LENT. it would be rather unusual for a junior `attorney to be
asked to handle the oral argument on appeal, would it not? Is that
not a fact?
Mr. Worst. If I were administering the `agency, it would be very
unusual, yes.
Mr. LENT. Would it not as well be unusual for such a young at-
torney to write an opinion in a case having the great magnitude of
No. 770?
Mr. Worsy. If I were the administrator of the agency, I don't
know whether I would have assigned him that task without having
a supervisory attornay helping him.
Mr. LENT. But in this case he did, in fact, write that opinion?
Mr. WOFSY. You tell me. I don't know, Mr. Lent.
Mr. LENT. I shall now yield to the minority counsel.
Mr. Moss. The Chair will recognize the minority counsel.
Mr. WUNDER. Thank you, Mr. Ohairman.
I would like to go back into the HIOS matter.
When exactly was `it that Mr. Aber and Mr. Mamone were re-
moved from that case? -
Mr. WOFSY. I believe Mr. Mamone erroneously stated `this morn-
ing it was sometime in the latter part of April. It must have been
in May because I was no longer acting at that time.
Mr. WUNDER. Let me ask this question, then: Was an order pre-
pared, a draft order prepared, for the Commission in `that proceed-
ing by Mr. Aber?
Mr. WOFSY. I believe that it was, but I believe that it was als&-
I am not sure as to the chronology of it because I have not seen
it in my capacity as Acting Assistant General Counsel. I don't
know whether it was for a commission meeting subsequent-iit must
have been subsequent to my leaving.
PAGENO="0125"
119
Mr. WUNDER. I wonder whether I might ask that same question of
Mr. Mamoiie?
Mr. Moss. Yes, indeed.
Mr. Mamone?
Mr. WUNDER. Did you hear the question?
Mr. MAMONE. Please `restate it.
[Question is read by the reporter.]
Mr. M~&Mo~. Yes, sir.
Mr. WUNDER. Did that order include in it the requirement that
there be producer contracts? Do you recall?
Mr. MAMONE. Yes.
Mr. WUNDER. It did?
Mr. MAMONE. Yes.
Mr. WUNDER. Was that order acc~epted or rejected by' the Com-
mission?
Mr. MAMONE. I don't know what became of the draft order. it
was dispatched forward from our section. I don't know whether
the General Counsel or the Commission disposed of it. It did not
issue as an offi~ial order of the Federal Power Commission.
Mr. WUNDER. At that stage Mr. Aber and you were still on the
case; isthatright?
Mr. MAMONE. At the time the draft order went forward we were
still working on the case; that is correct.
Mr. WUNDER. Then did the scenario rim something like this: The
Commission issued its order in June?
Mr. MAMONE. In June, yes.
Mr. WTJNDER. And then `that order did not include the require-
ment for producer contracts? Is that your recollection?
Mr. MAMONE. The order of June 4 did not require producer
contracts.
Mr. WUNDER. Then there was a petition for rehearing?
Mr. MAMONE. That is correct.
Mr. WUNDER. And it was at this stage that Mr. Keeley was brought
into the matter.-Is that your recollection?
Mr. MAMONE. It was at that time that Mr. Keeley was exclusively
handling the matters that were being considered by the Office of
General Counsel, and in preparation for the oral argument Mr.
Journey sent out a memorandum directing the technical people to
coordinate their matters with him.
I want to make it clear. Mr. Wunder, that at no specific time was
there `an express order removing either Mr. Aber or myself that I
know of from participation in the case. It wa.s simply a matter that
from a certain point on all the matters were being handled within
the office of Mr. Journey. Mr. Keeley now is not part of the trial
staff. He was never physically located in our area.
As a `consequence, we did not know `the day-to-day goings on in
connection with the HIOS case because presumably they are all
being handl'ed within Mr. Journey's immediate physical office.
Mr. WUNDER. So when Mr. Keeley took' exclusive control, a de-
cision had `already been made by the Commission not to require
producer contracts. Is that correct?
Mr. MAMONE. It could have been before that, Mr. Wunder. I
don't know whether it was before or after June 4.
PAGENO="0126"
120
In any event, after the draft order you referred to was sent fQr-
ward from our section for consideration, either by the General
Counsel or the Commission, at that point we began to be phased out
of active participation.
Mr. WUNDER. Was Mr. Keeley the man who made the oral argu-
ment in the HIOS case?
Mr. MAMONE. Yes.
Mr. WUNDER. Could you or Mr. Aber or anyone eise in the Gen-
ereJ Counsel's office, with a point of view on that matter with re-
spect to producer contracts or other matters, have submitted those
to the Commission?
Mr. MAMONE. Certainly, because the applicants told the Commis-
sion they could not accept the June 4 certificate. The whole matter
was up for reconsideration. In fact, Mr. Wunder, the Commission
specifically ordered on reconsideration that there be considered
* alternate means of transporting available gas onshore. That was the
main focus of the oral argument, as the Commission directed in
their order on rehearing-because the applicant had refused to ac-.
cept the June 4th order.
Mr. WUNDER. Did you then submit anything to the Commission
for the purpose of consideration at this stage, the rehearing stage?
Mr. MAMONE. No, sir.
Mr. WUNDER. Why was that. Were you too busy?
Mr. MAMONE. Because Mr. Keeley was handling everything. He
was the one that was meeting with the attorney for HIOS. He was
conducting all the negotiations with them. We were no longer in-
volved in the proceeding.
Mr. WUNDER. Maybe I don't make myself clear.
In addition to what Mr. Keeley was doing, could you not have
also submitted to the Commission as part of that proceeding your.
personal views or your joint views with Mr. Aber?
Mr. MAMONE. Theoretically, that is possible, Mr. Wunder, but we
don't do business that way.
Mr. WUNDER. That has never happened?
Mr. MAMONE. We do not interfere when General Counsel is
directing his assistant to handle matters and go over his head to
the Commission and say, we want you to consider this, that, and so
forth. This is not an ordinary course of business at the Commission.
As I pointed out before, it is not an ordinary course of conduct-
ing business for an assistant to the General Counsel to be handling
a matter at the trial level, so it was a very unorthodox situation.
Mr. WUNDER. Do you know of your own knowledge whether
the issue of the producer contracts came up at the oral argument?
Mr. MAMONE. Certainly.
Mr. WUNDER. It was broached?
Mr. MAMONE. It was raised, yes.
Mr. WUNDER. By whom was it raised?
Mr. MAMONE. It was raised by the staff counsel.
Mr. WUNDER. Mr. Keeley?
Mr. MAMONE. Mr. Keeley, presenting `in the record a memorandum
prepared by the technical personnel of the staff of the Commis-
sion, several of them-I don't remember how many there were,
probably five or six of them-in which it was stated there are no
PAGENO="0127"
121
gas supply contraets; there is no assurance of a gas supply; there is
uncertainty as to volume of gas availahie; that the alternate pro-
posed by the staff could be put in place at less cost than the proposal
of HIOS applicant. All these considerations were contained in the
memoranda which were placed in the record at the oral argument.
Mr. Moss. If there are further questions of this gentleman, he
can come forward and take a seat at the table. If we are to have
prolonged testimony, I want the gentleman to have a seat at the
table.
Mr. WtTNDER. I apologize, Mr. Ohairman.
I have one other questIon.
How was the issue resolved, the final decision as a result of the
rehearing and final order? Did it come forward, do you know?
Mr. ~ Yes. On July 30, 1976, there was an ~order issued
by the Commission.
Mr. WUNDER. Did that require producer contracts?
Mr. MAMONE. No, it did not.
Mr. WUNDER. Thank you very much, Mr. Chairman.
Mr. Moss. Mr. Lemov?
Mr. LEMov. Mr. Mamone, while you are sitting here a~t the table,
Mr. Lent raised a couple of points about Mr. Keiley. I would like to
pursue this with a couple questions about the manner in which
HIOS was handled.
That case had been going on for quite a time, had it not?
Mr. MAMONE. Yes, sir.
Mr. LEMov. When did it start, approximately?
Mr. MAMONE. As Mr. Lewnes explained, there were three separate
applications for three separate pipelines.
Mr. LEM0v. Give me the opening date of the HIOS proceeding.
Mr. MAMONE. The first conference that I attended was on January
30, 1976. It was a public conference with all the parties involved.
Mr. LEMOV. Had there been work on that case before the
conference?
Mr. MAMONE. Yes.
Mr. LEMOV. The first date when you begin working on the case?
Mr. MAMONE. That was the first date I attended the conference.
Mr. LEMov. Did you do any work on the case before the
conference?
Mr. Moss. Who worked on it and at what dates?
Mr. LEWNES. I am advised by Mr. Aber, who had been assisting
me at that time, it was July 24, 1974.
Mr. ABER. July 23. 1974 was the date of the initial application in
docket number CP-75-16.
Mr. LEWNES. Inasmuch as he is not sworn, I can verify that.
Mr. Moss. You can verify it?
Mr. LEWNES. Yes.
Mr. LEM0v. This case had been pendin~ for almost 2 years at
the time that young Mr. Keeley began getting all ti~e naner and
handling the oral argument in the case. Is that right? Is it not, Mr.
Mamone?
Mr. MAMONE. Yes.
PAGENO="0128"
122
Mr. LEMOV. So as taiented as he might have been, it is correct
that he was put into this case suddenly in the midst of the case just
before the Commission heard oral argument in July. Is that right?
Mr. MAMONE. Well, one modification on that, Mr. Lemov. Mr..
Keeley did attend some of the conferences.
As I recall, the first time he had anything to do with the case
was at a public conference on April 1, 1976.
Mr. LEM0v. But from July 23, 1974 through April 1, 1976, Mr.
Keeley had nothing to do with this major case. Is that right?
Mr. MAMONE. That is right.
Mr. LEM0v. Then he was put hito the case and he became the
principal attorney. Is that right?
Mr. MAMONE. That is right.
Mr. LEMOv. When he argued the case before the Commission, I
want to talk about that for a moment.
I think you and Mr. Lewnes testified previously that one of the
key issues there was whether this major pipeline was going to be
constructed without producer contracts being executed as to price
and supply. The staff was arguing vigorously with you all the way
up to this point that there must be contracts by the producers. Is
that correct?
Mr. MAMONE. That is right.
Mr. LEM0v. When Mr. Keeley handled the ora1 argument on this,
how did he handle that issue?
Mr. MAMONE. My recollection of tile oral argument, and you can
get the transcript and read it, is that he did not advocate a require-
ment for gas supply contracts. In fact, I believe he stated to the
Commission that gas supply contracts were not necessary.
Mr. LEMOV. The producers were arguing vigorously that gas con-
tracts were not necessary. Is that right?
Mr. MAMONE. Mr. Lemov, the producers never appeared at the
oral argument. The pipeline companies were the only applioants
then before the Commission.
Mr. LEM0v. What did they say about it?
Mr. MAMONE. Of course, they argued gas supply contracts were
not necessary because they had no contracts. If they admitted a
contract was necessary, their apnl.ications would have been void.
Mr. LEMOv. So the result of Mr. Keeley's able presentation of
this case Mr. Lent referred to is that no one argued the contract
point before the Commission, did they?
* Mr. MAMONE. That is right.
Mr. LEMOV. Let's talk about opinion 770 which Mr. Keeley alleg-
edly wrote. I don't know whether you are aware of it but the staff of
this subcommittee issued a study in October of 1976.
Mr. Chairman, I merely ask ~e.garding that opinion 770 that I
be permitted to read one or two sentences from a summary of that
* staff report.
Mr. Moss. Yes, indeed.
Mr. LEMOv.
In the largest rate increase ever granted by a U.S. regulatory agency, the
Federal Power Commission in Opinion 770, issued July 27, 1976, raised the ps-ice
PAGENO="0129"
128
of new natural gas sold in interstate commerce from 52~ to $1.42 per thousand
cubic feet. The Commission estimated the first year consumer cost of this increase
to be $1.5 billion.
Skipping down to the next paragraph:
The Commission cited as a cornerstone of its dramatic increase in the price
of natural gas declining productivity.
The summary continues:
The use of an artificially low productivity factor, therefore, will yield a
higher, non-cost based price in. violation of the Act.
Later, `the subcommittee obtained from the Commission previously unused
Form 64 and Form 40 data which had been submitted to the Commission,
under oath, by various natural gas producers, and which permitted the sub-
committee staff to determine a productivity factor independently of industry
published data.
This new data, when incorporated into the productivity formula employed
by the Commission in Opinion 770, yields a productivity factor of 411 and
resultant new gas price of $1 per Met. But under the subcommittee staff's
productivity formula, this same data results in a productivity factor of at
least 680 and a new gas price of 55~ per Mcf. Elimination of the Commission's
controversial Federal income tax allowance yields even lower prices-84~ per
Mef under the Commission's productivity formula and 46ē~ per Mcf under the
staff's alternative methodology.
in producing this opinion referred to, No. 770, do you think Mr.
Keeley was the author, as Mr. Lent suggests, and do you think he
might have found and told the Commission about it before he wrote
that Opinion, Mr. Mamone?
Mr. MAMONE. I would have assumed so.
Mr. LEM0v. Do you think he should at least have told the Com-
mission about that information before he wrote the opinion?
Mr. LEWNES. This is a matter which occurred after I left. I
wouldn't want to comment on it.
Mr. LEMOV. If you were the opinion writer in 1970, would you
advise the Commission they had sworn data which would have con-
traidicted their own figures in-house?
Mr. MAMONE. I would have present~ed everything reasonable to
the Commission. I think th~is would have been reasonable to present
to the Commission.
Mr. Moss. Mr. Lewnes, you were Assistant General Counsel for
quite a number of years.
Mr. LEwi~s. Yes, sir.
Mr. Moss. One of the very senior trial attorneys.
Mr. LEWNES. Yes, sir.
Mr. Moss. While this might have happened after you left; if it
had happened before you left, would you have felt it appropriate?
Mr. LEWNES. Absolutely.
Mr. Moss. Would you have felt it essential?
Mr. LEWNES. Sir?
Mr. Moss. Would you have felt it essential?
Mr. LEWNES. Well, I think it is essential that the COmmission be
presented with all the information. It is essential even if it is con-
troversial and even if it is information that someone may feel that
a particular Commissioner might not want to see. I am not saying
that is the case.
Mr. LEMov. I am not suggesting by my questions that the Com-
mission may not have been aware of this data, but it did not utilize
87-292 0 - 77 - 9
PAGENO="0130"
124
it in the opinion, and the opinion writer did not utilize it in drawing
the opinion. That w.as the only thrust of that question.
Mr. LEWNES. In fairness, though, we do not know what oral
representations the opinion writer makes to a Commission or a
Commissioner.
Mr. LEMOV. I am suggesting that the Opinion 770, which Mr.
Lent referred to as one of Mr. Keeley's products, was not something
to boast about based on the report to this subcommittee rand its staff
report.
Mr. LEWNES. I don't know whether that is correct. That may have
been stayed by the court.
Mr. LEMOV. That is correct.
I have nothing further.
Mr. Moss. Are there further questions at this time?
Mr. LENT. Mr. Chairman, I would like to ask Mr. Wofsy and/or
Mr. Mamone, whoever wants to answer it, whether they can fix a
date when the handling of the HIOS case was taken over by Mr.
Keeley from them, just an approximate date.
Mr. MAMONE. After the draft order went fot~wa~rd from our office,
as I explained to Mr. Wunder.
Mr. LENT. When would that be?
Mr. MAMONE. Late April or early May.
Mr. LENT. 1976?
Mr. MAMONE. Mr. Wunder can ascertain that from the docu-,
ments he has. There was a process where we were being replaced
effectively.
Mr. LENT. So roughly in April of 1976 Mr. Keeley took this case
over from you and Mr. Wofsy, who were handling it?
Mr. MAMONE. Mr. Aber.
Mr. LENT. How long had this case been dragging on in the Fed-
eral Power Commission?.
Mr. MAMONE. Dragging on is really an unfair characterization of
everybody involved. The fact of the matter is that even though
applications were filed in 1974, there were competitive applications.
by three pipeline companies to build roughly the same facilities in
the same part of the Gulf of Mexico.
As Mr. Lewnes told you, in the. Aschbacker case, a competitive
case, Pipeline A versus Pipeline B versus Pipeline C, it was not
until late 1975 that pipeline companies joined together and pro-
posed a single large pipeline. At that point pipeline facilities were
now ready to be considered in relation to the `available gas supply.
It was subsequent to that that Mr. Lewnes asked me to partici-
pate as one of staff counsel in the consideration of this case.
Mr. LENT. How long had the case been in the. shop? We shall
not use the words "dragging on." How long had it been in the shop
before Mr. Keeley took over in April of 1976?
Mr. MAMONE. The combined proposal-
Mr. LENT. A couple years? I think you said 2 yeai~?
Mr. MAMONE. That is irrelevant, the fact that the applications
were filed in 1974. The relevant date was late 1975 when three pipe-
line companies came in with a joint proposal. It was from that point
forward that a feasible project was now worth considering.
PAGENO="0131"
125
Mr. LENT. So that Mr. Keeiey, the young attorney, took the case
over in April of 1976, approximately. It was argued in Juiy of 1976
by Mr. Keeley. Is that correct?
Mr. MAMONE. Yes, sir.
Mr. LENT. In the argument, he took the position that producer
contracts should not be required?
Mr. MAMONE. That is my recollection. The oral argument before
the Commission will verify that.
Mr. LENT. Is it not a fact that that position, that is, that producer
contracts not be required, was the position of the Federal Power
Commission itself?
Mr. MAMONE. Mr. Lentr-
Mr. LENT. Is that true?
Mr. MAMONE. It would have to be explained. In the June 4 order
issuing a certificate to the HIOS partners it was a type of certificate
that placed the risk of nonavailability of gas on the pipeline com-
panies and it was for this reason that the pipeline companies told
the Commission they could not accept the certificate. The banks, the
~lnance companies, and the insurance companies would not finance
the project under that certificate.
Mr. LENT. I have a copy of the June 4 order in my hand. On
page 11 the Commission says:
Based on these circumstances, the Commission finds that the absence of
the related producers' filings for the appropriate certificate authorization does
not by itself preclude the issuance of a certificate to HIOS. Although this
Oomm.ission normally will not certificate the construction of pipeline facilities
without the interrelated producer contracts and certificate filings, in order to
assure an adequate supply of gas for the proposed facilities, the specific facts
of this proceeding warrant a change in this policy,
and it continues.
Therefore, when Mr. Keeley argued this case a month later, on
July 7, 1976, and did not argue for the existence of producer con-
tracts before the certification of the pipeline, was he not in fact
defending the position of his superiors, the Federal Power
Commission?
Mr. MAMONE. Yes; that is correct, Mr. Lent.
Mr. LEx'r. All right.
Mr. MAMONE. He was defending this entire certificate order. He
was not defending just this paragraph that you read. This order
required that the pipeline take the risk of nonavailability of gas
reserves for failure to have a contract and certificate with the
producers.
They refused to accept it. If this was such a good proposal and
in the public interest, why didn't the pipelines accept it? Why did
the finance companies and banks say it couldn't be financed?
Mr. LENT. I don't know.
Mr. MAMONE. Inquire into that and you will have a full answer
as to why the policy of requiring gas supply contracts is essential
in these major pipeline proposals.
Mr. GORE. If the gentleman would yield.
Mr. LENT. I will be glad to yieid.
Mr. GORE. Is it the function of the attorney in the case to present
the policy of the Commission or the viewpoint o~ the staff as an
PAGENO="0132"
126
adversary to the producers or other parties to the proceeding before,
the Commission?
Judge Lewnes, can you respond to that?
Mr. LEWNES. The normal procedure followed is that staff counsel
who tries the case gets an opinion from the administrative law
judge. If exceptions are taken, staff counsel who tried the case argues
before the Commission either in support or against the initial deci-
sion of the law judge.
As I understand it in this case, it was a rather unusual situation
where the Commission issued an order and then had taken someone
who had worked `at the trial level, and apparently to argue in sup-.
port of the ~ominission order.
If that is the case, then all I would ask `is who was arguing the
staff position?
Mr. GonE. Apparently no one was. There was never a trial in the
case. There was never an evidentiarv record.
Mr. MAMONE. If I might add to what Mr. Lewnes said, in the June
24 order of the Commission which followed the June 4 order which
Mr. Lent and I were discussing, the Commission says specifically that
because the pipeline company cannot accept the June 4 certificate
that it became necessary that there be consideration of an alternative.
and less expensive transportation system.
I am reading from page 3 of the Commission's order.
This is the order noticing the oral argument.
Mr. Moss. Mr. Lent has the floor.
Mr. LENT. Thank you.
Will the witness `turn now in the June 24 order to page 4, para-.
graph (d), and read that section?
Mr. MAMONE. "Any interested person may submit to the Federal,
Power Commission"--
Mr. LENT. Can you speak up a little?
Mr. MAMONE.
Any interested person may submit to the Federal Power Commission, 825
North Capitol Street NE., Washington, D.C., not later than July 1, 1976, data,
views, and comments or suggestions in writing concerning the issues raised by~
HIOS in its application for rehearing.
Mr. LENT. Do you understand that provision to permit the staff to
submit alternate, views?
Mr. MAMONE. No, sir. This was not addressed to the staff of the
Federal Power Commission. This was addressed to the people on the
outside of the Commission.
Mr. LENT. Would the staff not be an interested party within the
ambit of this?
Mr. MAMONE. We are not an interested person in the terminology
of the Federal Power Commission. "Persons" means outside.
Mr. Moss. If the gentleman will yield, it is quite clear and obvious
that the staff works for the Commission and performs specific duties
and are not free to roam at will and determine when to intervene or
state an independent position.
Mr. MAMONE. That is right.
Mr. Moss. I think that is so fundamental that I am rather shocked
the question is even raised.
PAGENO="0133"
127
Mr. LENT. Mr. Chairman, before I vote on a complicated issue on
the floor of the House, I might have two or three opinions from my
staff people, but we ultimately decide on only one vote and that is
the way the vote is cast.
I see nothing wrong with Mr. Keeley advocating at the rehearing
the position of his superiors, the Federal Power Commission.
Yet there. seems to be. something in the line of questioning here that
there was something unusual, that~ the staff position did not prevail
or was not advanced more forcefully.
My response to that is this: Once a decision has been made by the
Commissioners, as they made it apparently in their June 4 order,
that was the position, t~iat there be no contracts produced.
That might have been a right decision or a wrong decision, but the
fact is that men who work in the General Counsel's office are stuck
with it and they must defend that position.
Do I have it wrong?
Mr. Moss. I think you have it wrong.
Mr. LE~NT. Do they file a dissenting opinion? I am curious.
Mr. Moss. You have the General Counsel who performs one func-
tion. You had the Associate Counsel handling the natural gas issue
who is supposed to pre.sent the views of the Commission staff as they
(letermine. the issues to be, and rather consistent with the practice
before the Commission over a great many years-was there ever
another case where they granted a certificate without having commit-
ments for gas to the line?
Mr. MAMONE. No, sir, Chairman Moss. As I testified yesterday,
subsequent to the HIOS case, the staff recommended and the Com-
mission adopted orders requiring gas supply contracts in offshore
projects.
Mr. Moss. That is the position of the staff of this subcommittee.
I might invite witnesses, but I am damned if I will have my staff
independently promote testimony or file a brief. They are here to
do the work of the committee under direction. They are not here to
roam at will and do as they might want in any matter which might
prove, interesting or intriguing to them.
Of course, the staff of the Commission is in no different position.
Mr. LENT. I agree.
Mr. Moss. I think the questions do not so indicate.
Are there further questions?
If not, I have a few.
Was this, and we will take the case of the staffing changes which
occurred subsequent to the testimony in January, the personnel change
or were the changes made by the Commission in the judgment of,
anyone of the three witnesses reflective of the public interest?
Mr. LEWNES. I don't know whether the Commission itself made
any changes. The changes we talked about-
Mr. Moss. Were made in the Commission. I am using the term to
define the Office of the General Counsel under his direction, who is,
I think, answerable to the Commission through the Chairman of the
Commission. Is that correct?
Mr. MAMONE. That is correct.
Mr. Moss. Were the changes in the public interest?
PAGENO="0134"
1~8'
Mr. WOFSY. If I may answer on my own way, I believe it was not.
I believe the public interest is best served by an experienced staff
that develops and submits to the Commission all of the issues sur-
rounding the case and then makes a judgment based on their
experience.
I believe that the changes that have occurred in the Office of the
General Counsel have shifted people around to get them out of their
expert fields, and I believe that is detrimental to the public interest.
Mr. Moss. Let us take Mr. Keeley. He had been with the
Co~nmission how long?
Mr. Wo~sy. I believe Mr. Keeley was with the Commission maybe
2 years in June, maybe 3 years coming in .June.
Mr. Moss. How long had he been out of law school?
Mr. Worsy. I don't know that, sir. I don't believe very long.
Mr. Moss. Does anyone know how long he had been out of law
school?
Mr. MAMONE. At the time of the HIOS case it was approximately
1 year.
Mr. Moss. Approximately 1 year out of law school. This was a
major case?
Mr. MAMONE. Yes.
Mr. Moss. Fifty-eight percent of the money in that case was front
money put up by the users, the customers, of the pipeline. Is that
correct?
Mr. MAMONE. That is right.
Mr. Moss. It is a substantial amount of money that the ratepayers
are faced with having to underwrite.
Mr. MAMONE. Over $400 million, Mr. Chairman.
Mr. Moss. Whether or not there is a cubic foot of gas delivered
from that pipeline, the ratepayers along that system are going to
have to pick up the tab, at least 58 percent of it, with the front money
on the line. Is that correct?
Mr. MAMONE. That is correct, Mr. Chairman.
Mr. Moss. And it, therefore. becomes almost irresponsible not to
assure, before the issuance of a certificate, that there is sufficient gas
to make that a feasible and economic operation. Would that be true?
Mr. MAMONE. The ultimate question, Chairman Moss, of that type
is one that you and the members of your committee will have to make
based on the facts after you hear from all people.
Mr. Moss. Is that not the position that the Commission historically
has taken?
Mr. MAMONE. The Commission has historically required, pursuant
to the reqmrements of the Natural Gas Act, that there be an adequate
supply of gas to back up all new pipelines, and I believe in my direct
statement yesterday I quoted the specific language of the Congress
in enacting the 1942 amendment to the statute calling for an assurance
of an adequate supply of gas behind the pipeline.
Mr. Moss. That was my recollection of the function.
They are always charged with protecting the public interest?
Mr. MAMONE. Yes, sir.
Mr. Moss. Is the public interest adequately protected when a bright
young man 1 year out of law school is assigned the task of arguing
a major case?
PAGENO="0135"
129
Mr. MAMONE. I think Mr. Wofsy has given you a very adequate
answer on that, Mr. Chairman. Ultimately, you and the Members of
Congress will have to make a judgment on that.
Mr. Moss. As experienced attorneys, would you have wanted to
undertake such an assignment in your first year?
Mr. MAMONE. No, sir, I would not.
Mr. LEWNES. I don't think you send a boy to do a man's job. If you
have a man available, and we had good men available, they were the
people I would assign.
Whatever the reasons were for putting "a boy"-and I don't mean
this demeaningly in any sense-as Mr. Mamone says, that is for the
committee to decide.
Mr. Moss. The Chair wants to have the dates of the assignment of
Mr. Keeley to this matter as determined by the records of the
Commission.
[Commission records indicate that Mr. Keeley attended a conference
on HIOS in April 1976. In mid May, he worked closely on draft HIOS
orders with Mr. Aber. Mr. Keeley's role continued to expand and he
was selected tO present oral argument on the case to the Commission,
which he did in July.]
Mr. GORE. If I might pursue one point.
Mr. Moss. Yes.
Mr. Goiu~. A question asked by minority counsel would help my
understanding of this case. It is not only the fact that he was young
~tnd inexperienced, but I take it that his position within the office
was also unusual. Am I wrong here?
Mr. MAMONE. You are right, Congressman Gore.
Mr. GORE. He was an assistant in tha office of Mr. Journey?
Mr. MAMONE. That is right.
Mr. GORE. And this case was taken away from the trial staff and
taken into Mr. Journey's personal office to be handled by his assistant.
Is that correct?
Mr. MAMONE. That is right.
Mr. GonE. Is that unprecedented or is that sometimes done?
Mr. MAMONE. In certificate matters I have never seen such a thing.
Mr. GORE. It is unprecedented in certificate matters? This case was
taken out of the trial section, taken away from the experienced
attorneys who had developed the case and were handling it. They
were subsequently summarily assigned elsewhere. They tried to find
out how to fire them, some quit, kicked upstairs, and it was taken
into the office of the head of the department and handled by his
personal assistant.
You say that was an unprecedented assignment in and of itself?
Mr. MAMONE. Yes, Congressman Gore.
Mr. GORE. Thank you, Mr. Chairman.
Mr. Moss. Is there any disagreement on that?
Mr. LENT. I would like to reserve judgment until I have heard
from Mr. Journey and-
Mr. Moss. I mean among the witnesses.
Mr. LEwNES. I think Mr. Mamone correctly stated this. In all the
years I was Assistant General Counsel and in all the years I served
under Mr. Russell, my predecessor, who died in 19~9,, and I was
PAGENO="0136"
130
there since 1959, I know of no instance where this particular proce-
dure was followed.
Mr. Moss. I would say to my good friend, the gentleman from
New York, that I shall also be most interested in the statements
of Mr. Journey.
Mr. LEWNES. Mr. Lent, I am pleased to hear you are from
New York. I am a neighbor of yours from Kings County.
Mr. LENT. I can tell from the accent.
Mr. Moss. I think we have adequately covered this matter this
morning-rather, early afternoon.
We shall break for the roll call now in progress and reconvene at
2 o'clock in room 2322, when we will hear from Mr. Aber, who is the
last witness scheduled for today.
Mr. LEWNES. Are we to appear?
Mr. Moss. You are excused. However, counsel will be in touch
with you for any further requirement.
Mr. LEWNES. Thank you.
Mr. Wopsr. Thank you.
[Whereupon, the subcommittee recessed to reconvene at 2 p.m.,
the same day.]
AFTER RECESS
[The subcommittee reconvened at 3 p.m., Hon. John E. Moss,
(chairman) presiding.]
Mr. Moss. The subcommittee will be in order.
The Chair does want to extend its apologies to you, Mr. Aber, for
the unusual delay in taking your testimony.
Would you rise and be sworn?
Do you solemnly swear that the testimony you are aboRt to give
this subcommittee shall be the truth, the whole truth, and nthing,
but the truth, so help you God?
Mr. ABER. I do, Mr. Chairman.
Mr. Moss. Will you identify yourself for the hearing record?
TESTIMONY OF ROBERT E. ABER, FORMER TRIAL ATTORNEY, OF-
FICE OF THE GENERAL COUNSEL, FEDERAL POWER COMMISSION
Mr. ABER. I am Robert E. Aber.
Mr. Moss. Do you have a statement, Mr. Aber?
Mr. ABER. No, Mr. Chairman, I do not.
Mr. Moss. Proceed.
Mr. SIMS. Thank you, Mr. Chairman.
Mr. Abet, would you briefly describe for the record your employ-
ment history with the Federal Power Commission?
Mr. AT3EE. With respect to the Federal Power Commission, I was
originally employed on April 1, 1975. I terminated my employment
on October 15, 1976.
During that period of time, the major direction of my professional
activity there was in the area of gas. It involved the various Transco
pro~eedings and the High Island proceedings.
Mr. SIMS. You worked for Mr. Lewnes in his section?
Mr. ABEL That is correct.
PAGENO="0137"
Mr. Srz~is. And you were the original attorney that he assigned to
the HIOS case. Is that correct?
Mr. ABER. That is correct.
Mr. Sm~ts. And on the ff105 case you were subsequently joined
by Mr. Mamone?
Mr. ABBE. That is correct.
Mr. SIMS. On this ff105 case you worked both with Mr. Lewnes
and with Mr. Mamone?
Mr. ABER. Yes, sir.
Mr. Smrs. What is your professional opinion of Mr. Mamone's work
insofar as your experience with him on this case is concerned?
Mr. ABER. I have the highest regard for Mr. Mamone. I think he
is extremely qualified as an attorney in the areas of gas pipeline
regulation, and particularly in the offshore area of the gas pipehhe
regulatiou.
Mr. SIMS. Thank you.
Did you learn a considerable amount from Mr. Mamone while you
were at the Federal Power Commission?
Mr. ABER. Yes, I did.
Mr. SIMS. He was, in fact, assigned to supervise certain of the
younger attorneys, such as yourself, on these matters; is that correct?
Mr. ABER. That is correct. When I first went to the Commission,
Mr. Mamone was responsible for a good deal, a good portion of the
training which I received. The remaining was received, perhaps the
greater amount was received, from Mr. Lewnes.
Mr. Smis. Thank you.
Now I would like to make a point for the record concerning your
testimony before congressional subcommittees.
Did you testify, along with Mr. Lewnes and Mr. Mamone, in
January of 1976 before the Energy and Power Subcommittee chaired
by Mr. Dingell?
Mr. ABER. Yes, sir, I did.
Mr. SIMs. And I believe the record is clear with regard to the
subjects of that testimony. I do not think we need repeat it at this
point.
I simply wanted to establish the fact you were part of this group.
According to the hearing record and the testimony before the
Energy and Power Subcommittee, others who were sworn on that
day included Mr. Robert Szekley, Mr. Joseph Solters, Mr. Victor
Zable, and Mr. Jeffrey Smith.
At that time all of those individuals were members of the Bureau of
Natural Gas, were they not?
Mr. ABBE. That is correct. They were all technical people. They
were not attorneys.
Mr. Srisis. They were not subject to the direction or supervision of
the General Counsel, Mr. Journey, were they?
Mr. ABER. I th]nk that also would be a correct statement. They were
not subject to his jurisdiction.
Mr. 51315. The attorneys in the Office of the General Counsel work
with the professional staff of the bureaus. Is that correct?
Mr. ABER. That is correct. The attorneys rely to a considerable
degree on the advice, on the technical data which is provided to us
by the engineering staff.
PAGENO="0138"
132
Mr. Smrs. I just wanted to clear up that question because earlier
in the record I believe it was Mr. Lent who read quite a list of
members. There was possibly some confusion as to which were
attorneys and which were not attorneys and, therefore, not subject to
any possibility of retaliation on the part of Mr. Journey or any other
persons exercising influence within the Office of the General Counsel.
So. then, of these three attorneys, yourself included, who tes~ifled
on that day concerning subjects already identified, none of you work
on gas matters at the Commission any longer, for whatever reason?
Mr. ABER. That is correct.
Mr. Smis. I would like now to explore your own participation in
the High Island Offshore case.
Were there serious unresolved issues involved between the Federal
Power Commission staff or elements of the FPC staff and the HIOS
applicants?
Mr. ABEL Yes, there most definitely were. Throughout the course
of consideration of the particular applications these problems were
made manifest and clearly made. known to the particular applicants.
As you may be aware-for purposes of record, let's make it clear
that I became involved with the HIOS matter, I think the approxi-
mate date is, June of 1975.
At that time there was an order which was issued by the Commis-
sion which set up public informal conferences. I think Mr. Lewnes
mentioned this morning there were certain concerns with respect
to the antitrust laws, so these conferences were held, which were open
to the public, where problems surrounding the competing applications
were discussed.
There was a series of these over the course of the next 10 or 11
months.
At each of these meetings, I think it is fair to say, at almost every
one of the meetings it was made clear to the particular applicants
that gas producer contracts were absolutely essential `to Commission
action.
Now, as these public conferences evolved and as additional informa-
tion became available, the technical staff formulated its views on this
project and the deficiencies of the application as it was set up, in the
form it was, let's say, in March or April.
We on the legal staff, of course, myself and Mr. Mamone, were
advised of the various technical deficiencies of this application.
Mr. SIMS. So the entire conduct of the HIOS application and the
staff reaction and the Commission decision as it evolved from three
separate applications merged into one application which then became
known as High Island Offshore Systems, and eventually became
decided upon by the Commission, was all done without any sworn
testimony under oath and subject to cross examination. Is that
correct?
Mr. ABEL That is absolutely correct.
Mr. SIMS. Not one single day nor one word under oath in all the
allegations concerning the adequacy or inadequacy of reserves, the
issue of contracts, possible issues of reservations of gas, the absence
or presence of lay barges to lay the pipelines, which was a major
contention of the applicants, and all the matters in dispute, and
PAGENO="0139"
*183
there were considerable, these were never resolved under oath and
subject to cross examination?
Mr. ABBE. That is correct. That also involves one of the major
documents which I think perhaps the Commission relied on in formu-
lating the final word.
As you may be aware, there was a document put out by the Bureau
of Natural Gas which went into the deficiencies of the particular
application, and I think that was prepared in around April. Please
don't hold me to that date.
There was a response filed by the applicants and it was entitled
"Response to a BNG~ Staff Feasibility Study." That document was
not attested to, either.
Mr. Smrs. So whatever the factual disputes, such as reserves and
others mentioned, were they really resolved or were they more
accurately simply decided by the Commission?
Mr. ABBE. If I have to rely on the two terms used, I would have to
choose the term decided.
Mr. Sii~is. In your opinion they were not really resolved, in a
stronger sense and legal sense of that word, insofar as being subject
to sworn testimony and cross examination?
Mr. ABER. That. is correct.
Mr. Snis. Do you find that unusual for a project of this size?
Mr. ABEL Yes, especially because of the magnitude of the project.
Mr. SI]srS. We have entered into the record numbers of all magni-
tudes of backlogs involving rate cases, certificate cases, and all kinds
of cases, many of which involve litigation. Yet this particular appli-
cation for the largest pipeline in the Gulf of Mexico never had a
single day of sworn testimony.
Did the staff ask for such?
Mr. ABEL Oh, yes. There was a specific request made for a limited
hearing process. That was prepared by the BNG staff and it was for
the purpose of obtaining additional information with respect to the
gas reserves available and also the contract questions and other issues.
I don't have the document before me so I cannot specify them all.
Mr. SIMS. As I undetstand the staff position on proved reserves
in the High Island Offshore area, an investigation by staff found
9.53 trillion cubic feet. That contrasted rather greatly with two
studies done for the applicants by consultants, both of which showed
approximately 8 trillion cubic feet.
Mr. ABER. That is correct.
Mr. SIMS. How, absent sworn testimony, could the Commission
possibly resolve a gap of such magnitude-or did they to your
knowledge?
Mr. ABBE. It would appear it was not resolved.
Mr. SIMs. The. order in HIOS set a figure of 5 Tcf, or trillion cubic
feet. that the pipeline was designed to deliver over a 14-year period.
Do you know how the Commission arrived at that figure? Did they
simply split the difference or was there some evidentiary basis on
which they selected that number?
Mr. ABBE. Mr. Sims, that particular figure in the portion of the
order you are referring to, I am not familiar with the figure. There
were various figures which came into being.
PAGENO="0140"
134
There was another figure which was worked up by the staff, a
separate section of the staff, as I remember.
There was also another figure used by the applicants at a later
date. I think that was in connection with a rehearing where they
utilized a lower figure in substantiation, I think, of their position at
that point.
I am afraid I cannot respond to your question.
Mr. SIMS. I think, if necessary, we can go back to the orders them-
selves and double check the figures. I believe those are the figures
in the final Commission orders in the case.
Mr. Moss. We shall hold the record open in the event correct
figures have to be reflected.
INo correction is necessary.]
Mr. SIMs. Thank you, Mr. Chairman.
I would like to question you now about your personal involvement
in the draft order for the HIOS application which went to the
Commission.
Were you ordered, on or about April 30, to prepare a draft order
for the Commission approving the HIOS application?
Mr. ABEL Yes, I was, through an intermediary.
Mr. SIMS. Who was the ultimate source of that order?
Mr. ABEI~. The source of the order was Mr. Journey, the General
Counsel.
Mr. SIMS. Who was the intermediary?
Mr. ABER. The intermediary, in this case, as I remember, was
Mr. Cyril Wofsy.
Mr. SIMS. He was then acting in place of Mr. Lewnes at that time?
Mr. ABEL That is correct. I think he furnished me with the actual
memorandum at that time.
Mr. SIMS. But you have no confusion about the ultimate source of
the order, Mr. Journey?
Mr. ABER. No, no confusion whatsoever.
Mr. SIMs. Was that not April 30, more or less, on or about April 30,
was that not before the Commission had issued its preliminary order.
or its first order? Wasn't that at a time when there were substantial
issues in dispute?
Mr. ABER. That is a fair representation.
Mr. SIMS. The technical experts in the Bureau of Natural Gas, for
example, still had serious problems regarding the adequacy of reserves
to justify this pipeline project, did they not?
Mr. ABER. That is~orrect.
Mr. SIMS. And yet Mr. Journey ordered you, despite their objec-
tions, even in the face of these objections, to draft an order for the
Commission approving HIOS.
Mr. ABER. You are saying despite. This seems to connote knowledge
by Mr. Journey of the BNG staff objections. I cannot give you that
link. I have no knowledge of that.
At the same time there were staff objections to this particular
project, I was ordered by Mr. Journey to prepare the draft.
Mr. 51315. So you are not saying i.t is possible Mr. Journey was
unaware of the objections. You are simply saying that you have no
knowledge of his awareness.
PAGENO="0141"
135
Mr. ABER. That is correct.
Mr. SIMs. So it may prove to be subsequently the case, that
Mr. .Journey was aware. I just wanted to make absolutely clear what
your point was, sir.
Did you prepare this order?
Mr. ABER. Yes, I did.
Mr. SIMS. Approximately what date did you submit this draft order
up through the chain of command?
Mr. ABER. To the best of. my recollection, the order was submitted
on May 10, 1976.
Mr. SIMs. May 10.
Did you put any conditions relative to contracts between the
producers and the pipeline applicants into this draft order which
you sent up on May 10?
Mr. ABER. Yes, I did, Mr. Sims.
Mr. SIMS. What were those conditions?
Mr. ABER. Perhaps it would be best if I actually read the conditions,
or would that unduly belabor the record?
Mr. Moss. Go ahead. As a matter of fact, we shall enter it. Is that
the original draft you prepared?
Mr. ABEL Yes.
Mr. Moss. We shall enter it into the record at this point, without
objection.
[The following material was supplied for the record:]
PAGENO="0142"
136
10 MAY 1976 DRAFT ORDER PREPARED BY ROBERT ABER
IJdITED STAi~S OF AMEFICA
FEDERAL PO~!~~ CO~O~1ISSION
Before Commissioners:
High Island Offshore System ) Docket Nos. CP75-104,
(Successor in interest to ) CP75-81,
Texas Offshore Pipeline Sys- ) CP75-16
ten, Inc., Aintex Offshore
Pipeline Company and Natural
Gas Pipe Line Company of
America )
FINDINGS AND ORDER AFTER STAFIJTORY Z~ARING ISSUING
CERTIFICATE OF PUBLIC CONVENIENCE ~i) NECESSITY AND
GRANTING PETITIONS TO INFERVENE
The above-captioned dockets involve an application for
the construction and operation of major pipeline facilities
in the Gulf of Mexico, to transport gas onshore from various
segments of the offshore area. The application pertains to
the High Island Offshore System (BIOS) which constitutes a
hybrid project of origin derivative from three competing
projects originally proposed by members of the present BIOS
group. A background summarization of the various proposals
and applications related thereto is as follows.
On July 23, 1974, Natural Gas Pipeline Company of
America (Natural) filed in Docket No. CP75-l6 an application
pursuant to Section 7(c) of the Natural Gas Act for a certifi-
cate of public convenience and necessity authorizing Natural
toconstruct and operate facilities for the receipt into its
pipeline system of supplies of natural gas produced in the
High Island Area offshore Texas and the West Cameron Area,
offshore Louisiana.
Natural proposed to construct approximately 96 miles of
30-inch pipeline from a point of connection with its existing
30-inch pipeline in Jefferson County, Texas, offshore to Block
A-443, High Island Area, South Addition, together with approxi-
mately 80 miles of 12, 16, and 20-inch pipeline and gathering
facilities to connect nine federal offshore Texas blocks and
PAGENO="0143"
137
W~st Cameron Block 612, offshore Louisiana, to the 30-inch
pipeline.. Natural also sought authorization for platform
f.acilides, onshore compression facilities and other appur-
tenant facilities. This pipeline system, termed the Manta Ray
Pipeline, was to be constructed at a cost of approximately
$89 million.
Natural planned to purchase and transport gas through
its pipeline which it claims had been committed, to it by
Burmah Oil Development, Inc., (Burmah) pursuant to four
exploration and development advance payment agreements. Under
these agreements Natural had advanced approximately $42 million
of a maximum obligation of $250 million, in exchange for the
purchase rights on Burmah's interest in approximately 50,0)0
gross acres.
Natural maintained in its application that total proven,
probable and potential gas reserves, in the subject acreage
approximates 377 million Mcf and that maximum daily avail-
ability of gas to be transported from the subject acreage will
~e approximately 148,000 Mcf at 14.65 psia for the first two
years, declining thereafter. Initial capacity of the proposed
pipeline would be 148,000 Mcf per day with a maximum capability
of 236,000 Mcf per day.
On September 9, 1974, Texas Offshore Pipeline System,
Inc., (TOPSI), a wholly-owned subsidiary of United, filed in
Docket No. CP75-81 an application pursuant to Section 7(c)
of the Natural Gas Act for a certificate of public convenience
and necessity authorizing TOPSI to construct and operate a
pipeline system to transport `onshore gas supplies to be pur-
chased by United in the High Island Area, offshore Texas.
TOPSI proposed to construct approximately 97 miles of
30-inch pipeline, 36.3 miles of 36-inch pipeline and 98 miles
of 42-inch pipeline from a point of connection with the 30-inch
pipeline of Tennessee Gas Pipeline Company in Calcasieu Parish,
Louisiana, to Blocks A-332, A-442, A-555 and A-57O in the
High Island area. TOPSI also sought authorization for various
gathering, separation, storage, dehydration, measuring and
regulating facilities. This pipeline system, with related
facilities was to be constructed at a cost of approximately
$312 million.
TOPSI planned to transport gas which United expected to
purchase from Pennzoil Offshore Gas Operators, Inc., (Pogo),
Pennzoil Louisiana and Texas Offshore, Inc. (Plato) and Penn-
PAGENO="0144"
138
zoil Company (Pennzoil) covering the ~s reserves o~ned or
controlled by these companies in 30 offshore Texas blocks, and
gas which is cormaitted for purchase by united through int~reSc
reimbursement agreements with Louisiana Land Offshore Explora-
tion Company, Inc., ECEE, Inc., Pinto, Inc., VSEA, Inc., Texas
Production Company and TBP Offshore Company in 11 offshore
Texas blocks. TOPSI maintained at the time of filing its
application, that, of the total gas reserves underlying the
blocks initially to be connected to the proposed pipeline
system, 27 percent are expected to be coimnitted to United, 33
percent coimnitted to purchasers other than United, with the
remaining 43 percent uncommitted.
TOPSI maintained that initial caprrity of the propo:~d
pipeline system would be 5O,000 Mcf pr day and that the
maximum capability would arpro:mhate l~ ~ million Ircf par day.
On September 27, 1974, Antam Offslre Pipeline Crmpmsy
(Amtex) filed in Docket No. Cs75-l04 an application pursmant
to Section 7(c) of the Natural Gas Act for a c~rtific~te of
public convenience and necassity author4;~ing the consmm:ccion
and operation of a pipeline s:. a man to facilitate cransforta-
tion onshore of natural gas pmvchased by Michigan Wisconsin
Pipe Line Company (Michigan Wisconsin) end Texas Gas Trans-
mission Corporation (Texas Gas) from the High Island Area
offshore Texas, and Block 171, West Cameron Area, offshore
Louisiana.
Amtex proposed to construct approximately 100.3 miles of
36 inch piepline, 34 miles of 30-inch pipeline and 42.4 miles
of 24-inch pipeline from an interconnection with Michigan
Wisconsin's existing 30-inch pipeline in Block 171, West
Cameron Area, offshore Louisiana, to Block 264 High Island
Area, where the connecting segmants of pipeline from the various
High Island Blocks will intersect. Amtex also sought author-
ization for construction of a compression platform and two
manifold platforms in connection with its proposed system,
which would result in a total project cost of approximately
$216 million.
Amtex stated that the proposed pipeline system would
have had initial capacity of 565,500 Mcf per day which could
be expanded to 1.2 million Mcf per day, At the time of
Amtex's filing, Michigan Wisconsin had obtained a commitment
of reserves in 21 High Island blocks and one block in the
adjacent Galveston Area, and Texas Gas had obtained commit-
ments in 9 High Island blocks. The total reserves attributable
to these commitments are alleged to be between 2.5 and 5.4
billion Mcf of gas.
PAGENO="0145"
139
The above described applications presented problems
which initially appeared to preclude the grant of certificates
of public convenience and necessity. These apparent probirms
included the competitive nature of the applications under
consideration, the absence of any gas reserve information to
support their respective proposals and the lack of any rslated
producer applications. The recognition of these problems
prompted the Commission's letter order's to applicants dated
March 25, 1975 where-in each applicant was specifically advised
(a) that its application was deficient in that it did not
contain gas reserve information and would be held in abeyance
pending receipt of such information, (b) that since no
related producer applications had been filed no further act~ons
could be taken pending the filiu~ of such applications, ~ud
(c) that in view of the apparent compatitive nature of sse
applications, the staff was directed to convene a public
conference of all parties and iuta-rvanors to ~ockat Nos.
CP75-l6, CP75-8l and CP75-l04 for the prcpose of exploring
the possibility of the construction of one or more projects
with transportation arrangements for the othar applicant-s.
In accordance with the above letter orders, a public
informal conference was convened on May 22, 1975, between
Staff, Applicants and persons who had filed petitions to
intervene, for "discussion of a possible alternative joint
approach to the three projects now contemplated." At this
conference preliminary technical presentations of the pro-
posed pipeline projects were made for purposes of discussion
by representatives of Amtex in Docket No. C?75-104 and Topsi
in Docket No. CP75-8l. Upon conclusion of the presentations,
Staff reiterated the Commission's finding of deficiency with
the applications as set forth in its letter order of March 25,
1975, and reminded Applicants that no further action could
be taken with respect to any of the applications until the
required gas reserve information and related producer certifi-
cate applications were filed. However, pending compliance
with these threshold requirements, Staff advised Applicants
of its interest in continuing efforts to resolve the technical
aspects of obtaining a noncompetitive project. The informa-
tion and discussion generated by these presentations prompted
the recess of the conference to enable the Applicants to
engage in a cooperative analysis of the technical data avail-
able for purposes of developing a proposal for multi-utilization
of exisiting and/or new facilities to be constructed.
Thereafter, a number of technical conferences involving
Applicant's personnel were held in Houston, Texas, in addition
to the three scheduled informal public conference's held in
87-292 0 - 77 - 10
PAGENO="0146"
140
Washington to June 12 and 27, and August 22, 1975, ~or tha
purpose of discussion and development of a u~ified pcoposn.l.
On September 8, 1975, Figh Island Offshore System (PbS),
successor in interest to Arntex and Topsi, flied in Docket
Nos. CP75-104 and CP75-81, an amendment to the applications
for certificates of public convenience and necessity filed
in said dockets. The amendment states that BIOS is a
general partnership formed by ANG Offshore Company, Texam
Offshore Gas Transmission, Thc., Trat~sco Offshore Pipeline
Company and Topsi, who are stated to be affiliated with
Michigan WisconsinPipe Li~e CoEpany, Texas Gas Transmission
Corporation, Transcontiner~:a1 Gas Pipe Line Corporation and
United Gas Pipe Line Comp~ny.
The project proposed in t-~e -naendr:.eoc was described as
the construction and operations of a pipeline system to
transport gas reserves which will be purchased in the Hi~h
Island Area, offshore Texas, a.~d is said to be in lieu o.~ ~be
projects formerly proposed in applications in Docket Nos.
CP75-81 and CP75-l04.
BIOS proposed to construct and operate approximately 67
miles of 42-inch pipeline between Block 264, High Island Area
and Block 167, West Cameron Area; 26 miles of 36-inch pipe-
line between Block 264 and 343, High Island Area; 15 miles of
30-inch pipeline between Block 343 and 330, High Island Area;
41 miles of 30-inch pipeline between Block 264 and 573, High
Island Area; 54.5 miles of 30-inch pipeline between Block
264 and 582, High Island Area, a 37,050 horsepower offshore
compression station and related facilities. The facilities
described above are to be operated by Michigan Wisconsin under
the direction of a management committee comprised of repre-
sentatives of the partners.
BIOS stated in its amendment that Ryder Scott Company
Petroleum Engineers and Ralph H. Davis Associates, Inc.
estimate total natural gas reserves in the High Island Area
at 8.640 and 8.500 Tcf, respectively. BIOS further stated
that the initial system was developed to transport and deliver
988,000 Mcf of gas per day (less fuel) to Block 157, West
Cameron Area, offshore Louisiana, and would include an inter-
connection with Stingray Pipeline Company at Block 330, High
Island Area, where Stingray would have the ability to receive
230,000 Mcf of gas. per day.: HIOS stated the total estimated
cost of the proposed facilities is approximately $353,414,000,
and that with an additional cost of $14,231,000 the capacity
of the system can be increased to approximately 2 million Mcf
PAGENO="0147"
141
per day by the addition of compresrion. t'IOS noted that the
proposed facilities would not exte~d to all High Island Area
hlocks in which reserves had been committed, but that con-
necting facilities would be the subject of appropriate appli-
cations to be filed with the Conmission at a later date. HIOS
siso requested authorization to transport up to 247,000 Mcf
of gas per day each for Michigan Wisconsin, Texas Gas, Transco
and United.
On September 24, 1975 a further request for gas supply
information was made with respect to the amended application.
Thereafter on January 30, 1976 an informal public con-
f~rence uns held, with producers in ataw Pence and participat-
~g, at ~hich time the problem of s~cc i: ~ gas purchase
tracts with producers was aired, $~a P reiterated its
~`.~Perstunding of the Commission's po1icy iith respect to
~`re filing of related proPucer gee :.~:ci~ ~e contracts as
a-numerated in Section 157.14(a)(lc:)(m). A progress report on
the HIOS proposal and negotiations with ~atural for inclusion
in the project was also provided participants at the confer-
once. S
On February 18, 1976, HIOS. filed to amend the amended
application previously filed in Docket Nos. CP75-l04 and
CP75~8l which involve construction and operation of the above
c~escribed pipeline project, to include the transportation of
natural gas for Natural Gas Pipeline Company of America in
the aforementioned project facilities which were the subject
of the original amendment. This latest amendment shows that
NATOCO, Inc., an affiliate of Natural, has been admitted to
the general partnership known as the HIOS group. Consequently
HIOS now requests authorization to transport up to 197,600
Mcf of gas per day each, or one-fifth of the proposed initial
delivery capacity of the system, for Michigan Wisconsin,
Texas Gas, Transco, United and Natural.
On April 1, 1976 a public informal conference was held in
Houston, Texas wherein Staff, in accordance with the mandate
embodied in Section 2,65 of the Commission's General Policy
and Interpretations presented various feasibility studies
showing alternate means of transporting the gas asserted to
be available to the onshore area, with a view toward the pro-
motlon of joint use arrangements that will assure the full
utilization of existing large capacity facilities in the
Outer-Continental Shelf area.
PAGENO="0148"
142
On April 13, 1976 the latest public informal conference
W;IS held in Washington, D. C., wherein BIOS informally responded
to Staff's 26 feasibility studies. HIOS presented specific
analysis and criticism of one of the studies, with very general
criticism of all the studies dealing with technical, operational,
regulatory and cost problems for any single or group of altern-
ative proposals. A formal response was filed by HIOS on
~April 30, 1976.
The Commission in reaching its decision with respect to
the certificate sought herein has relied upon the informati~~n
contained in the application, as amended, as well as the
April 30, 1976, information submitted by BIOS in the non-
attested document entitled "Response to BNG Staff Feasibility
Study", which reflects the oral presentation to Staff of ~pri1 13,
1976, and HIOS's endeavor to supplement the instant application
to provide justification for prompt certification and corn-
i~anceuent of construction of the project.
Generally, BIOS has represented to the Commission, by
virtue of the foregoing, that the three major requirements
embodied in the Commission's letter-order of March 25, 1975
for action on the above-described project, have been actually
or constructively fulfilled, as evidenced by the assertions
set forth below. The basic contentions of BIOS are that (a)
the present proposed unified project obviates the issue of
competing applications, (b) the information made available to
Staff on gas reserves is sufficient to demonstrate an adequate
gas supply to justify construction and operation of the project,
and (c) that the information submitted with respect to gas
committed in the High Island Area to affiliates of the BIOS
partners,' and other pipeline companies, under advance pay-
ment agreements, is sufficient to obviate the need for the
filing of related producer gas purchase contracts.
In support of the foregoing, BIOS has asserted to the
Commission that the partners and affiliates have expended
$336.3 million to date in advance payments in the High Island
Area with substantial additional amounts to be expended under
contracts executed prior to December 31, 1975 in this area
and that i5ursuant to these contractual agreements the pro-
ducers have committed all gas discovered within the limits
of the areas covered by the agreements. Producers have
leased 185 blocks in' the High Island Area for $2.6 billion in
lease bonuses and `more than 200 wells have been drilled on
160 of these blocks with 9 platforms in place with develop
ment drilling underway, 8 platforms ordered and 8 additional
PAGENO="0149"
143
interest to have this gas available at the earliest possible
time. 1/ Since all competing applications for such a transpor-
tation system were amended and unified to create the proposed
HIOS system, the public interest requires the issuance of an
adequately conditioned certificate of public convenience and
necessity for construction and operation of this project.
As to the issue of the sufficiency of reserves, the
Commission recognizes the judgmental nature of assessing the
total reserves to be ultimately produced from the High Island
area. Studies have been prepared by two independent consulting
firms. These studies conclude as follows:
"Schedule 5 of the revised Schedule H of the applica-
tion for the High Island Offshore System lists certain
field areas for which drilling platforms are scheduled
for installation. Our estimates of. the reserves of these
field areas indicate proved and probable reserves of
approximately 3,194 billion cubic feet and additional
potential reserves of 1,831 billion cubic feet for a
total of 5,025 billion cubic feet. These estimates
include 632 billion cubic feet of proved and probable
reserves and 156 billion cubic feet of potential re-
serves estimated by Ryder-Scott." 2/
Staff, .however, has estimated proved and probable reserves in
the High Island area to be only 2.53 trillion cubic feet.
If the reserves are as great as those estimated by the
Applicants, then a delay, or a possible alternate method of
transporting the gas, would prove to be more expensive to the
consumer and not in the public interest. It is not unrealistic
for the Commission to assume, as the industry has not only
assumed but sunk considerable investment on the strength
1/ The Staff has made a preliminary analysis of the Form 16
filings presented by the five HIOS partners and Columbia
Gas Transmission~ (which has requested a non-affiliated
shippers contract with HIOS).
Company Degree of Curtailment
Columbia Gas Transmission 70% into Priority 2
Michigan-Wisconsin P/L some low priority loads only
Natural Gas P/L some low priority loads only
Texas Gas Transmission 51% into Priority 2 during
heating season
Transcontinental Gas P/L 7% into Priority 1 during
heating season
United Gas P/L 9% into Priority 1 during
heating season
Source: Form 16 Filings, Preliminary BNG Analysis for
1976-1977.
2/ See Exhibit H (Revised), Schedule 3-A, p. 1, of Amendments
To Application For Certificate Of Public Convenience And
Necessity, filed February 18, 1976, Docket No. CP75-l04, et al.
PAGENO="0150"
144
Inasmuch as the proposed transportation includes the
obligation to transport associated liquids ue shall require
HIOS to submit appropriate rate schedules covering charges
for such transportation together with supporting cost of
service exhibit.
The construction and operation of the proposed project
would create only limited effects on the environment. The
Commission finds that the proposed project does not constitute
a major Federal action having any significant effect on she
environment.
After due notice by publication in the Federal Register
on August 12, 1974 (39 FR 28943), Septai~er 24, 1974 (39 Yi
34336), October 23, 1974 (39 ~R 37673), Cctoher 7, 1975 (40 FR
46353), and March 19, 1976 (~l ~`R 11619), she .T~1lowing
petitions to intervene and nocices of intervention have been
filed in these proceedings:
Docket No. c~l6
Associated Gas Distributors
Columbia Gas Transmission Corporation *
Consolidated Gas Supply Corporation *
Illinois Power Company
Iowa-Illinois Gas and Electric Company
Iowa Power and Light Company *
Iowa Southern Utilities Company
Wisconsin Pipe Line Company
Mississippi River Transmission Corporation
North Shore Gas Company
Northern Indiana Public Service Company *
Public Service Commission of the State of New York
Southern Natural Gas Company *
Texas Eastern Transmission Corporation *
Texas Gas Transmission Corporation
Texas Offshore Pipeline System, Inc.
The Peoples Gas Light and Coke Company
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company
United Gas Pipe Line Company
Wisconsin Fuel and Light Company
Wisconsin Southern Gas Company, Inc.
* Late
PAGENO="0151"
145
Docket Fo, C~75-8l
Lmtex Offshore Pipe Line Conpany
Associatod Gas Distributors
Carolina Pipeline Company
City G~s Company
Co1imbi~ Gas Transmission Corporation
Consolidated Gas Supply Corporation
Elizabethtown Gas Company *
Iowa Southern Uuilitios Company
Laclede Gas Company
Michigan Wisconsin Pipe Line Ccmpany
Mississippi Power & Light Comm~ny
Mississippi River Trans:~ission Corporation
Natural Gas Pipeline Conpany of America
New Orleans Public SerJice Inc.
North Shore Gas Company
Northern Indiana Public Service Company *
Northern Natural Gas Company
Southern Natural Gas Company *
State of Louisiana *
Stingray Pipeline Company *
Tennessee Gas Pipeline Company,.a Division of
Tenneco Inc. *
Texas Eastern Transmission Corporation
Texas Gas Transmission Corporation
The Peoples Gas Light and Coke Company
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company
United Gas Pipe Line Company
Williams Exploration Company
Wisconsin Fuel and Light Company
Wisconsin Nighican Power Company and
Wisconsin Natural Gas Company
Wisconsin Southern Gas Company, Inc.
Docket No. CP75-l04
Arkansas-Missouri Power Company and
Associated Natural Gas Company
Associated Gas Distributors
City Gas Company
Columbia Gas Transmission Corporation
Consolidated Gas Supply Corporation
* Late
PAGENO="0152"
146
Docket No. 0P75-104 (Cc~Yd.)
Elizabethtown Gas Company *
Illinois Power Company *
Iowa Southern Utilities Company
Keokuk Gas Service Company *
Madison Gas and Electric Company
Michigan Consolidated Gas Company
Michigan Gas Utilities Company
Michigan Power Company *
Michigan Public Service Conan~s s~on
Michigan Wisconsin Pipe Line Company
Mississippi River Transmission Corporation
Mobile Oil Corporation
Natural Gas Pipeline Company of Amer~ca
North Shore Gas Company
North Central Publice Service Co., Divis5-on of
Donovan Companies, Inc.
Northern Indiana Public Service Company *
Northern Natural Gas Company
Ohio VAlley Gas Cocporation and Ohio Valley Gas, Too.
Public Service Commission of Wisconsin *
Stingray Pipeline Company *
Southern Natural Gas Company
Tennessee Gas Pipeline Company, a Division of
Tenneco, Inc.
Texas Gas Transmission Corporation
Texas Eastern Transmission Corporation
Texas Offshore Pipeline System, Inc.
The Peoples Gas Light and Coke Company
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company *
United Gas Pipe Line Company
Williams Exploration Company *
Wisconsin Fuel and Light Company
Wisconsin Gas Company
Wisconsin Mighigan Power Company and Wisconsin
Natural Gas Company
Wisconsin Power and Light Company
Wisconsin Public Service Corporation
Wisconsin Southern Gas Company, Inc.
* Late
PAGENO="0153"
147
The Commission finds that a v~ry li~ited number of
persons and/or their affiliat~s had initially requested a
hearing with respect to the competing applications, but that
their subsequent entrance into the HIOS partership has
effectively rescinded such requests.
No further petition to intervene, further notice of
intervention, or protest to the granting of the applications
and amendments has been filed
At a hearing held on the Commission
on its own motion received and made a part of the record in
these dockets all evidence, including the applications as
supplemented and amended, and exhibits thereto, sub~iitted in
support of the authorizations sought hereii, and upon o~n-
sideratjon of the record.
The Commission finds:
(1) Applicant, High Island Offshore System, Inc., a
general partnership formed under the laws of Delaware and
having its principal place of business in Detroit, Michigan,
will be a "natural gas company" within the meaning of Section
7(c) of the Natural Gas Act upon commencement of the con-
struction proposed.
(2) The facilities hereinbefore described, as more fully
described in the applications, as amended and supplemented,
are to be used in the transportation and delivery of natural
gas in interstate commerce, subject to the jurisdiction of the
Commission, and the construction and operation thereof and the
proposed transportation and delivery of natural gas by Appli-
cant is subject to the requirements of Subsections (c) and (e)
of Section 7 of the Natural Gas Act.
(3) Applicant is ab~a~n~1 willing properly to do the
acts and to perform the services proposed and to conform to
the provisions of the Natural Gas Act ;and the requirements,
rules and regulations of the Commission thereunder with the
exception of those matters discussed in paragraph (4) below.
(4) It is necessary and appropriate for the Commission
to grant a certificate covering the instant application,
with appropriate conditions, although certain aspects of said
application do not fully comply with the requirements of the
Commission's Regulations, inter alia, l57.14(a)(lO) Exhibit H,
for the following reasons ~i 7eE~the instant matter:
PAGENO="0154"
148
(a) The attachment of additional gas supplies are
required to help ~1leviate the critical gas supply
shortage on the systems to be supplied by HIOS and
through supplemental information cubmitted, HIOS asserts
with support statements from such pipelines, that no
other offshore pipeline system will have sufficient
available capacity to transport this needed gas onshore.
(b) The HIOS project constitutes a "keystone"
facility to the comprehensive proposal for a HIOS "project"
which will include various related facilities for which
applications have been filed and are currently pending.
The construction of this "keystone" project is asserted
to be in jeopardy owing to the unavailability of required
vital equipment absent immediate issuance of a cer~ ~i-
cate. Accordingly, we find it necescary and aoprop~ate
to act on the instant applications to provide thre~hc~'~d
authorization sufficient to enable t.nely coiencmsflt
of construction.
(c) The major public interest consideration with
respect to the authorization to construct the H1OS
project is assurance, reliability and timeliness of gas
supply and the ultimate resultant cost of the project to
the consumer. The certificate, as hereinafter conditioned,
assures that the consumer be assured an adequate and
reliable gas supply and will not be required to pay for
the cost of this system if in fact it should prove to be
under utilized. Conversely, acceptance would pose no
problem to HIOS in view of their position with respect.
to the existence and availability of the requisite gas
supply.
(5) The construction and operation of the proposed
facilities and the proposed transportation and delivery of
natural gas by Applicant is required by the public convenience
and necessity as hereinafter ordered and conditioned.
(6) None of the related producers have yet filed for
appropriate certificate authorization in order to justify the
construction of the facilities proposed in the instant docket.
(7) The ApplLcant has not demonstrated that in view of
the paragraph (5) above its proposed facilities will be util-
ized at a minimum annual load factor of 60 percent of the
facilities annual capacity.
PAGENO="0155"
149
(8) In light of the foregoing we find that a certificate
authorizing Applicant to undertake construction and operatibn
should be granted but not become effective, until related pro-
ducer gas purchases contracts and applications have been filed,
and certificates accepted for an amount of daily gas deliveries
totalling 607~ of the daily load factor capacity of the pro-
posed pipeline.
(9) A supplemental order will be issued by the Com-
mission finding that the requisite number of producer certifi-
cates have been accepted within 10 days of receipt of the fL~al
certificate acceptance necessary to effectuate the
project certificate. ,,~
(10) The magnitude of the c~~lspect of this ~oject
taken in conjunction with the lank of related produc~r gas
purchase contracts requires that~oad factor required, to
assure that no purchaser of the gas transported by HIOS be
required to absorb the fixed costs of the facility should the
volumes of gas transported by HIOS prove to be less than
presently asserted by HIOS.
(11) Appropriate rate schedules are required to be
filed by HIOS 30 days prior to initiation of transportation
of liquids from any of the fields connected to the HIOS system
together with a supporting cost-of-service exhibit.
(12) Within 60 days after completion of 12 months of
service from the date transportation actually begins, HIOS
shall file further cost support of its transportation rates,
which information shall include total annual revenues, total
cost of service, allocation of cost-of-service, details in
support of each item, and provide reasons why, if any, the
Commission should not prescribe a cost-of-service formula
rate herein.
(13) Participation of all the petitioners to intervene
in this proceeding may be in the public interest.
The Commission orders:
(A) Upon the terms and conditions of this order, a
certificate of public convenience and necessity is issued
authorizing Applicant to construct and operate the proposed
facilities as hereinbefore described and as more fully des-
cribed in the application in this proceeding.
PAGENO="0156"
150
(.~) The certificate issued by paragraph (A) abcie eni
the rights granted thereunder are conditioned on Applicant's
coiipl*ence with all applicable Coumission Regulations under
the N~::ural Gas Act and particularly the terms and conditions
set forth in paragraphs (a), (c) (3), (c) (4), (e), (f), and
(g) of Section 157.20 of such Regulations.
(C) The construction authorized by paragraph (A) above
shall not cournence until, and is conditioned upon the issuance
of a supplemental order finding that the requisite number of
related producer gas purchase contracts have been filed,
certificates issued and accepted by the requisite number of
producers.
(D) With respect to the project authorized by paragraph
(A) above, unless all conditions of this order are complied
with and construction of the facilities proposed are conpleted
within t~~o years from the date of this order, the authorization
for said project granted by this order shall expire.
(E) With respect to the supplemental order made a
cedition to the grant of a certificate by Peragraph (C) above,
such order shall not issue until certificates, permanent or
teuporary, covering related producer gas purchase contracts
for an amount of daily gas deliveries totalling 607~
of the daily load factor capacity of the pipeline, have issued,
and been accepted.
(F) The cost of service of the Applicant in any future
rate case shall be computed at an average rate utilizing a
minimupi load factor of 607~ operation of these facilities.~*'~~~
L~fIt~'-tA~V~ ,J
(G) Appropr~iate rate schedules are required to be filed
by HIOS 30 days prior to initiation of transportation of
liquids from any of the fields connected to the HIOS system
together with a supporting cost-of-service exhibit.
(H) Within 60 days after completion of 12 months of
service from the date transportation actually begins, RIOS
shall file further cost support of its transportation rates,
which information shall include total annual revenues, total
cost of service details in support of each item, and provide
reasons why, if any, the Commission should not prescribe a
cost-of-service formula rate herein.
(I) The above named petitioners are permitted to inter-
vene in these proceedings subject to the rules and regulations
of the Commission; Provided, however, that the participation
PAGENO="0157"
151
of such interveners shall be limited to oatters sffect'cLg
asserted rights and interests as specifically set forth in
their petitions to intervene; and, Provided, further, that
the admission of said interveners s~aiT not be construed as
recognition by the Commission that they might be aggrieved
because of any order of the Commission entered in these
proceedings.
By the Commission.
Secretary
0CC
Aber, R.E. :ea
5-10-76
PAGENO="0158"
152
ABER DRAFT OF MAY 1O, 1976, WITH HANDWRITTEN CHANGES BY PATRICK
KEELEY ET AL.
(a) The attachment of additional gas supplies are
required to help alleviate the critical gas supply
shortage on the systems to be supplied by HIOS and
through supplemental information submitted, HIOS asserts
with support statements from such pipelines, that no
other offshore pipeline system will have sufficient
available capacity to transport this needed gas onshore.
(b) The HIOS project ccnsi:itutas a `keystone"
facility to the co~iproheisive o~:oposal for a HIOS "project"
which will include vaoio~s rel~:ad facilities for which
applications have been filed ~d are curre~~tly pending.
The cqnstruction of this "keystone" :ojact is asserted
to he in jeopardy aoing to the unava ~abiliLy of required
vital equipment absent immediate is~ nce of a certifi-
cate. Accovdingly, we find it nece ~ry and appropriate
to act on the instant applice~ions to provide threshold
authorization suft~cient to enable tmmly commencement
of construction.
(c) The major public interest consideration with
respect to the authorization to construct the HIOS
project is assurance, reliability and timeliness of gas
supply and the ultimate resultant cost of the project to
the consumer. The certificate, as hereinafter conditioned,
assures that the consumer be assured an adequate and
reliable gas supply and will not be required to pay for
the cost of this system if in fact it should prove to be
under utilized. Conversely, acceptance would pose no
problem to HIOS in view of their position with respect
to the existence and availability of the requisite gas
supply.
(5) The construction and operation of the proposed
facilities and the proposed transportation and delivery of
natural gas by Applicant is required by the public convenience
and necessity as hereinafqer ordered and conditioned.
(6) None of the related producers have yet filed for
appropriate certificate authorization in order to justify the
ccnstruction of the facilities proposed in the instant docket.
j\~, (7)a\The AT~.iLca ~ has~no~ d&~eorstr!=t thac~ ~i~w~o4
PAGENO="0159"
153
ABER MAY 12, 1976 CHANGES TO KEELEY ET AL CHANGES1
~/` ~
~ ~ ~A~!J~i ~
V, (i~ In light of ~he foregoing we find that a certificate
/ authorizing Applicant Ito undertake construction and operation
/ should be granted ~ related pro-
ducer gas purchase~ contracts and applications have been filed~
~
~ (9)/JA s~plį~en~į1 order~will $ iss~ied,by ēhe 9~m-/ /
/ blisstonffl~nd~ng~tbatjthd requisite nurn~er of/~roducer/c~rtifi-
~ate~ hai.~e Veen~ a~c~ptec~ withid~l0 ~ay~' of /eceipt'~/chefinhiT1~ -`
~. ?certificat~/ acc~pt~n9e necessary~ tq',effect1iate~.-the ~imst~nt
v;°~t c~tifi~~~/ ~
~) ~ 4&i ~ this .rroj cc: \\ -&s~
/
/ ~ requires that~oad factor~~uTfea., to J
assure that no purchaser of the gas transported by HrOS be
required to absorb the fixed costs of the facility shouldth
volumes of gas transported by HIOS prove to be less than
~presently ~e~by HIOS.-
(~` (Lt~l~ Appropriate rate schedules are required to be
filed by HIOS 30 days prior to initiation of transportation
of liquids from any of the fields coanected to the HIOS system
together with a supporting cost-of-service exhibit.
~`11 ~ Within 60 days after corpletion of 12 months of
service from the date transportation actually begins, HIOS
shall file further cost support of its transportation rates,
which information shall include total annual revenues, total
cost of service, allocation of cost-of-service, details in
support of each item, and provide reasons why, if any, the
Commission should not prescribe a cost-of-service formula
rate herein.
Participation of all the petitioners to intervene
in this proceeding may b~ in the public interest.
The Commission orders:
(A) Upon the terms and conditions of this order, a
certificate of public convenience and necessity is issued
authorizing Applicant to construct and operate the proposed
facilities as hereinbefore described and as more fully des-
cribed in the application in this proceeding.
1 Puts back into order requirement that contracts be filed in an aggregate amount equal to 60% of the
capacity of the pipeline.
PAGENO="0160"
154
(B) The certificate it sued by paragcaph (A) above ;5nd
the rights granted thereunder are conditioned on Applic~ it's
compliance with all applicable Commission Regulations uider
the Natural Gas Act and particularly the terrna and conditions
set forth in paragraphs (a), (c) (3), (c) (4), (e), (f), and . -~
(g) of Sect5~t~ 157.20 of such Regulations. . .
/ (C) The construction authorized by paragraph -(Ky above
/ shall not coumonce until, and is conditioned upon thc--~aur~nca
G/ f cf ~ ~ ~
~ ~ r-r' ted- pia~ ~.~cr-gac --pa'rcha Se~ee-~ tra 1 have ~e:n--~-i
c~r~ifj~cate -s~emi-iacvgpt~ t-hc--r-es~-:~o-m. ~
~ 0 \p:cducexs. fA~ 4'11df `~ ~ - .. S~5 ē~ pyr-.: c,s ce, ~
u-I-- 30 -- Iic-h~-t 1-c(&+C~&--~ ~(:.~t ~-"t(- or
I r" (- - I ~ C.L
~f~t ~ith respect to the ,projuct authdti ;~e~ by ~:cagra~h
-(A~ above, un~essąll conditions of this o~or qi~e c.plied `.~
wi h ~nd const~uctibn of ti-a ~ cil s prd~os~4 ~ro c mpl~te1
within t o y'bsrs~ros the d~tq of us ord~r t a ~etjori~ u
fd~ sai~d~ project\~r~ni-~d~ by this o~der sh'm-ll expire.5-J -`
c~~' Wit~'\respect-'.to the supp~mental o,rdpr made a
dondi'tion to the grant of a certificate by Paragraph ~C) aboye,
such/order shall not issue until certificates, ~pernanent or
t~npbrar~', covering related producer. gas purchase contracts
for bn ampun~ of dai)y gas deliveries totalling tO7~ \ 7
o~ t~ie daily) load factor capacity of the pipeline, have i~sued,
and~baen acce' ted.
ē~ rate ~
miu'l~.mi Ld~1 fa~61ofL60~ o~t~at~n-6f th~f~ fabff~ties.
:~L'~~ ~ Appropriate rate schedules are required to be filed
by HIOS 30 days prior to initiation of transportation of.
liquids from any of the fields connected to the HIOS system
together with a supporting cost-of-service exhibit.
..~)` Within 60 days after completion of 12 months of
service from the date trar~sportation actually begins, HIOS
shall file further cost support of its transportation rates,
which information shall include total annual revenues, total
cost of service details in support of each item, and provide
reasons why, if any, the Commission should not prescribe a
cost-of-service formula rate herein.
(~`~`) ~ The above named petitioners -are permitted to inter-
vene in these proceedings subject to the rules and regulations
of the Commission; Provided, however, that the participation
PAGENO="0161"
155
of such interveriers shall be 1:~~ited to matters affecting
asserted rights and interests as specifically set forth in
their petitions to intervene; and, Provided, further, that
the admission of said interveners shalT not be construed as
recognition by the Corrmiission that they might be aggrieved
because of any order of the Commission entered in these.
proceedings.
By the Commission. -
Secretary
CGC
Aber, R.E. :ea
5-10-76
87-292 0 - 77 - 11
PAGENO="0162"
156
COVERING MEMORANDUM TO REVISED DRAFT HIOS ORDER PREPARED BY
ROBERT ABER
May 12, ..~i6
MEMORANDUM TO: The Commission
FROM : Office of General Counsel
SUBJECT : High Island Offshore System,
Docket Nos, CP75-104, CP75-8l and CP75-16
NATURE OF CASE:
High Island Offshore System (HIOS) filed an app1~ ition,
as amended and supplemented, for a certificate of puhi.c
convenience and necessity authorizing the constructie~ ond
operation of a $353 million pipeline system ~n the O:kO~2
Federal domain, HIOS seeks immediate action en the e~.1i-
cation despite certain deficiences therein under the Cemmi~-
sion's regulation, in order to immediately co~:nence co:'st~: e~L:~Jfl,
thus obviating threatened equipment unavailability and loss
of critically needed gas supplies,
ISSUE:
Whether the deficiences in the applicatiop, inter ails,
lack of any related producer contracts and applications,
can be overridden by appropriate conditions ii~ a certificate
authorizing the commencement of construction and operation of
this project,
SIGNIFICANT FINDINGS OF FACT:
A conditioned certificate should be granted despite such
deficiences for the following reasons:
(a) The attachment of additional gas supplies are
required to help alleviate the critical gas supply shortage\
on the systems to be supplied by HIOS and through supple-
mental information submitted, HIOS asserts with support state~
ments from such pipelines, that no other offshore pi~eline
system will have sufficient available capacity to trans~ort
this needed gas onshore,
(b) The HIOS project constitutes a "keystone" facility
to the comprehensive proposal for a HIOS "project", which
will include various related facilities for which applications
have been filed and are currently pending. The construction
of this "keystone" project is asserted to be in jeopardy owing
to the unavailability of required vital equipment absent
PAGENO="0163"
157
immediate issuance of a certificate. Accordingly, we find it
necessary and appropriate to act on the instant applications
to provide threshold authorization sufficient to enable timely
commencement of construction,
(c) The major public interest consideration with respect
to the authorization to construct the HIOS project is assur-
ance, reliability, and timeliness of gas supply and the ultimate
resultant cost of the project to the consumer. The certifi-
cate, as hereinafter conditioned, assures that the consumer
be assured an adequate and reliable gas supply and will not
be required to pay for the cost of this system if, in fact,
it should prove to be under-utilized, Conversely, acceptance
~~ould pose no problem to HIOS in view of their representa-
tion with respect to the existence and 3vailability of the
requisite gas supply,
SIGNIF1CANT POLICY/CONSIDERATION:
The issuance of this certificate would create a compelling
precedent for the authorization of pipeline construction pro-
posals without the filings heretofore required by Commission
regulations. Furthermore, issuance of this order may have a
significant impact on a number of major applications involving
gas supply acquisitions now pending before the Commission
where no producer contracts or applications are now on file,
including the Alaskan project.
R.E,Aber
PAGENO="0164"
158
Mr. ABER. I am trying to maintain a flow. May I note I am cur-
rently reading from page 13 of the draft order? I am in the fourth
finding paragraph, subpart (b) thereof, the last sentence.
Accordingly, we find it necessary and appropriate to act on the instant appli-
cations to provide this authorization sufficient to enable timely commencement
of construction.
I think that paragraph fairly summarizes what the conditions were.
There is apparently need to quickly move with respect to a lay
barge and procuring of equipment, something of that nature.
The actual finding paragraphs go on:
The construction and operation of the proposed facilities and the proposed
transportation and delivery of natural gas by applicant are required by the
public convenience and necessity as hereinafter ordered and conditioned.
None of the related producers have yet filed for appropriate certificate
authorization in order to justify the construction of the facilities proposed in
the instant docket.
The applicant has not demonstrated that in view of the paragraph 5 above
its proposed facilities will be utilized at a minimum annual load factor of
60 percent of the facilities' annual capacity.
In light of the foregoing, we find that a certificate authorizing applicant to
undertake construction and operation should be granted but not become effective
until related producer gas purchase contracts and applications have been filed,
and certificates accepted for an amount of daily gas deliveries totaling 60 percent
of the daily load factor capacity of the proposed pipeline.
A supplemental order will be issued by the Commission finding that the
requisite number of producer certificates have been accepted within 10 days of
reset of the final certificate acceptance necessary to effectuate the instant
project certificate.
Those are the relevant finding paragraphs which are mirrored by
the ordering paragraphs.
Mr. SIMS. So, in other words, you proposed in your draft to give
approval in principle for the applicants to go out and contract for
the lay barges that they considered necessary for the project and to do
those other things which were necessary, but yet reserved final ap-
proval contingent upon these contracts?
Mr. ABER. That is correct.
One point here: Throughout at least some of the public informal
conferences statements were made by the applicants, or some repre-
sentative thereof, and I am paraphrasing:
Look, we have gas out there. You know we are going to get those contracts
sooner or later. There is a likelihood. Let us move ahead. We have time
constraints. We need the barge and pipes.
It was this type of thing.
It appeared to me that what they really needed was some form of
commitment, I think, by the Commission which would enable them
to go ahead with their project because, based on their representations,
I think if they were not able to get the lay barge, they represented
that it would cause something like a 2-year delay of the project, I
think. They needed this for planning purposes.
Mr. Sn~ts. And the applicants' claim regarding the need of the lay
barge was never checked, but this was sort of taken on its face as
probably true. You had no reason to doubt, but it was never
established?
Mr. ABBE. It was subsequently checked but not in a timely manner.
Information did come into the staff's hands at a subsequent time as to
PAGENO="0165"
159
the availability of lay barges necessary to lay in the Gulf 40-inch
pipe. It is not a matter of record before the Commission.
Mr. SIMS. Is it your personal understanding that that contention
was correct?
Mr. ABER. That is correct.
Mr. SIMS. And what then happened to the draft, or more specifi-
cally, to the condition imposed therein after it went up the chain?
Mr. ABEL The draft document, together with a covering memo-
randum to the draft, which was directed to the Commission, under-
lying what the real issue was and what the significant findings of fact
were, and what the significant policy considerations were, which
really involved the Alaskan project and the impact of this precedent,
this original precedent, on other projects such as the Alaska project,
all went forward `to Mr. ~Journey.
Mr. SI3f s. Could you explain your reference to the impact on the
Alaskan project? What was the point to be made there?
Mr. ABER. This is very short:
Significant policy consideration. The issuance of this certificate would create
a compelling precedent for the authorization of pipeline construction proposals
without the filings heretofore required by Commission regulations. Furthermore,
issuance of this order may have a significant impact on a number of major
applications involving gas supply acquisitions now pending before `the Com-
mission where no producer contracts or applications are now on file, Including
the Alaskan project.
Mr. SIMS. You were afraid this precedent might be applied to
the Alaskan project, among other things?
Mr. ABER. That is correct.
Mr. SIMS. So then what happened to the covering memo and to
the draft order?
Mr. ABER. At that point, again I have no personal knowledge of
what I assumed to be Mr. Journey's actions, I do know that the
draft itself wound up in `the hands of a Mr. Keeley, who was an
attorney employed `by Mr. Journey in `his office.
Mr. Keeley discussed the draft with me. He showed me at that
time, and later provided to me, a copy of the finding page with
handwritten noteis which he `at that point indicated to me were at
the-I `am using the term "direction" because I am not sure of the
precise language used by Mr. Keeley `at that time, but to paraphrase,
"These changes were at the direction of Mr. Journey."
Mr. `SIMS. I see.
Is it quite possible that being an `attorney, no matter how bright,
but one with limited experience, he might well cheek with the boss
on something like this. In other words, it is quite possible he would
seek direction from Mr. Journey, or even Mr. Perdue?
Mr. ABER. I would assume that is entirely possible, Mr. Sims.
Mr. SIMS. But `he did not seek `any guidance from you?
Mr. ABER. We did have discussions, Mr. Keeley and I. Our view-
points were-we were, I think, at loggerheads over the proper form
of the order.
Mr. SIMS. But the point I really want to make is `that he probably
did not come to his conclusion regarding the contract issue on
his own.
PAGENO="0166"
160
Mr. ABER. Again, I have no personal knowledge. That may be
the case.
Mr. SIMS. So what happened, then, after the draft went up to
Mr. Keeley?
Mr. ABER. I think there were a number of changes which took
place in the draft in those finding paragraphs apparently consistent
with whatever direction was received.
I was then out of the picture altogether. I received no further
communication, as I remember, once this draft had been redone and
apparently moved forward. I just received no further information
on it at all from the General Counsel's office.
Mr. SIMs. You spoke to i\Ir. Keeley `but you never saw the draft
again?
Mr. ABER. That is correct.
Mr. SIMS. Nor the covering memo?
Mr. ABEE. The draft which went out I was never provided at that
time, referring to the final draft that went out.
Mr. SIMs. While you never received a formal notification, either
verbally or orally-
Mr. ABER. Excuse me.
Contemporaneously with its movement forward at some later time
I did get hold of a copy of the draft.
Mr. SIMS. While you never received formal notice, either verbeily
or in written form from the General Counsel, you were in effect
taken off the case?
Mr. ABER. That is correct. I was never removed from the case as
sucth. However, I was simply never consulted after that point nor
supplied any information in connection with the case after that point.
Mr. SIMS. So whatever changes were made after the draft left your
hands in your office, you have to assume this took place in the
Office of the General Counsel itself?
Mr. Moss. Do you so assume?
Mr. SIMS. Do you know of any other place that the draft would go?
Mr. ABER. Yes; perhaps there may `have `been one period of minor
change in the draft after it originally left my hands on the 10th,
and perhaps that would have been on the 11th or 1~th. However,
beyond that point of a minor change, all other change which cul-
minated in the final order I imagine was done in the Office of the
General Counsel.
Mr. SIMs~ is this regular procedure, when you send a draft forward
and changes are made. that you never see the changes or the draft
again?
Mr. ABEL I would assume the originator of the document would
be consulted for his views on it prior to finalization of the document.
Perhaps someone else mi.ght miss a point which is important, some-
thing the second draft might not pick up. It is always good to go
over it fully.
Mr. SIMS. After you were removed from the case, Mr. Keeley
picked up the case. apparently on a full-time basis?
Mr. ABBR. I think that is correct.
Mr. SIMS. Looking at the HTOS episode as a whole, do you think
th~ method of handling the HIOS case, and, indeed, the absence of
the contract condition in this case, was in the public interest?
PAGENO="0167"
161
Mr. ABER. As an attorney at the FPC, I had considerable problems
with it. First off, I considered it a serious departure from precedent,
the creation of a new precedent which could be applied to projects of
previously unknown magnitude, I guess you could say, with respect
to the Alaskan project. It departed from~ a precedent in existence
before.
There was information available, whether it be right or wrong, by
the technical staff raising serious questions about the propriety of
the particular form of the project, whether or not there could be
alternate means of delivering the gas in the Stingray system, whether
or not enough reserves were out there, et cetera.
As an attorney, I had considerable problems with it.
Mr. SIMS. As Mr. Mamone testified earlier, you as an attorney in
the Office of the. General Counsel were required by the Natural Gas
Act itself to protect and serve the public interest, were you not, if I
can paraphrase that section of the Act?
Mr. ABER. Yes.
Mr. SIMS. And in your opinion these actions did not achieve that
goal.
Mr. ABER. That is correct.
Mr. SIMS. Did the handling of the HIOS case, and more specific-
ally your own removal from this case, adversely `affect your morale?
`Mr. ABI~R. Yes; most definitely.
Mr. SIMS. Was it a serious factor in your later decision to leave
the Federal Power Commission?
Mr. ABER. I think it was one of the factors. There is no question
aboust it. It was one of the more important factors.
Mr. SIMS. I have just two substantive questions and then I would
like to return to this more general point, if I may.
The first question concerns the alternative proposal for the trans-
portation of gas reserves in the High Island area and the fact that
the Oommission staff recommended that at least some of that gas
could flow through alternate means.
Mr. ABER. That is correct; the technical staff, as I understand it,
ran a battery of-I don't know the correct terrninology-computer
runs `and computer studies. Apparently they prepared something like
a matrix-that is perhaps a good way to describe it-of alternative
means of delivering gas and cost-benefit rations. That is the type of
analysis they di'd. These were presented, as I understand it, to the
applicants. That is why the response that I mentioned earlier in the
record of the applicants was filed. They had the view there were
feasible means of delivering this gas onshore in a timely manner
other than that embodied in the HIOS project, other than that means.
Mr. SIMS. So if, assuming for the purpose of argument, one or
more of these~lternaitives were `accepted, is `it possible that some of
the gas in the High Island area could have been on line for this
winter? It is a possibility~ is it not?
Mr. AMER. Mr. Sims, that would really be an opinion on my part
which I do not think I am qualified to give. I really thinl~ you siiould
talk to a technical person for that.
Mr. SIMS. Do you know when the earliest gas could come on line
from the HIOS pipeline itself?
Mr. ABER. As I remember from tJhe discussions, it would take at
least 2 years to get the project on line, the HIOS projech
PAGENO="0168"
-162
Mr. SIMS. It strikes me that the Commission's decision was a kind
of all-or-nothing tIling. They would wait until the pipeline is -built
befr~re we get any of those reserves.
It strikes me that the Commission, either rightly or wrongly,
passed up an opportunity to bring on line in a more `timely fashion
at least a portion of those reserves through existing facilities and
allow the larger pipeline to be built.
Do you think that is a fair summary of the Commission's action?
Mr. ABER. I would say there is no doubt evidence now in the
record and evidence available to your conunittee and to the Federal
Power Commission which could lend substantial substantiation to
your view.
I hate to venture merely a personal opinion. I don~t know whether
T am properly qualified to offer it.
Mr. SIMs. We have a situation in which the pipeline is literally
being built out to where the reserves are alleged to exist in the
absence of signed contracts.
In your opinion might this not `be literally an invitation to the
producers to sit on those reserves in hopes of deregulation?
Mr. ABER. Well, whether or not it would be an invitation, I have
no idea whatsoever. However, the opportunity could arise, I am sure,
because the contracts will be filed at a later point. They could include
reservation clauses, perhaps 50 percent, and `this may not be accept-
able to the Commission. They may not get the certificate and, there-
fore, not move the reserves at all. Therefore, it is possible.
Mr. SIMS. If the contracts, when signed, included a reservation of
some degree of gas, does that not in effect mean that the consumers,
through advance payments and other payments, are subsidizing the
transportation, at least in part. of gas from the Federal domain to
the producer's own use onshore?
Mr. ABER. I would `think that someone who is fully familiar with
rates would be fully qualified to answer that question. However, my
nonqualifled answer would be yes; I think you are correct.
Mr. SIMS. At least this bears further investigation.
Mr. ABER. I would think so.
Mr. SIMS. And if a significant quantity of the gas were to be
reserved for the producers' own use, this would further reduce the
amount of gas available to the pipeline for resale in interstate
commerce; is that correct.
Mr. ABER. That would be correct, yes.
Mr. SIMs. So whatever the reserves, the reservation would lessen
the amount.
Mr. ABEL That is correct.
Mr. SIMS. And the total reserves were already in question, as to
whether they were enough for the pipeline in the first place.
Mr. ABER. Yes.
Mr. SIMS. Thank you.
I have a final ciuestion.
In your oi~inion, your nersonal view, could von summarize for the
subcommittee the reasons von left the Federal Power Commission?
Mr. ABEL If I may. could I read from my letter of resignation? It
fairly summarizes my view.
Mr. Moss. Without objection, the letter will `be part of the record.
[The letter referred to follows :J
PAGENO="0169"
* 16$
FEDERAL POWER COMMISSION,
Washington, D.C., September 30, 1976.
DREXEL D. JOURNEY,
General Counsel,
Federal Power Commission,
Washington, D.C.
DEAR Mn. JOURNEY: This letter concerns termination of my employment with
the Certificate Section of the Federal Power Commission, effective October 15,
1976. It is with a personal sense of regret that this step is being taken, especially
in view of the past challenges presented, leadership displayed and satisfaction
derived from protection of the public interest during my tenure in this section.
These challenges have abated, however, with the emerging emphasis on settle-
~nents and adjudication by means of the statutory hearing process. In view of
the foregoing, I have chosen to pursue my interest in regulatory practice
through a shift in orientation from oversight of the oil and gas industry to
that of the securities industry.
I trust that the notice provided herein will prove sufficient to assure a smooth
transition in the functions for which I am currently responsible. As you are
aware, my duties include sole responsibility for litigation in the Transco investi-
gation. As I feel both a strong professional and personal responsibility for the
substantive resolution of this matter, you can rely on my continuing gratis post-
termination assistance to my successor.
Very truly yours,
ROBERT E. ABER,
Trial Attorney.
Mr. ABER. This is dated November 30, 1976 to Mr. Drexel Journey.
DEAR Mn. JOURNEY: This letter concerns termination of my employment with
the Certificate Section of the Federal Power Commission, effective October 15,
1976. It is with a personal sense of regret that this step is being taken, especially
in view of the past challenges presented, leadership displayed, and satisfaction
derived from protection of the public interest during my tenure in this section.
These challenges have abated, however, with the emerging emphasis on settle-
ments and adjudication by means of the statutory hearing process. In view
of the foregoing, I have chosen to pursue my interest in regulatory practice
through a shift in orientation from oversight of the oil and gas industry to
that of the securities industry.
The rest I don't think is relevant.
Mr. Si~is. I have nothing further.
Mr. Moss. Mr. Santini?
Mr. SAN'CINI. I have nothing further.
Mr. Moss. Mr. Wunder?
Mr. WUNDER. When did you graduate from law school?
Mr. ABEL I graduated from law school in 1973. I had, prior to
coining to the Federal Power Commission, work experience of 3 years
with the National Association of Securities Dealers. I was an attorney
at the Association.
Further professional experience was with the dean of the
Georgetown School of Business.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Moss. Mr. Lemov?
Mr. LEMOV. I have no questions, Mr. Chairman.
Mr. Moss. I think we have completed the record on this point.
I do want to express the appreciation of the subcommittee for your
patience. We have intruded on your time and we regret that.
Thank you for your appearance, and you are dismissed with the
thanks of the subcommittee.
[The following pertinent documents were received for the record:]
PAGENO="0170"
164
UNITED STATES GOVERNMENT
Memorandum
TO : Cy Wofsy DATE: April 30, 1976
PROM : General Counsel
SUBJECT: BIOS Proposal
As you are aware the sole remaining issue in the
BIOS proceeding was whether the proposed project was
- warranted and necessary because of the volumes of gas
reserves to be transported. I have been advised today
that following a field examination and study of the
quantity of gas reserves by members of the staff of BNG,
Dr. Yost and his gas reserve staff are satisfied that the
proposed BIOS project is required and necessary.
Consequently, please have an order prepared granting
the necessary authority to the BIOS applicants as soon
as possible. Because of the current supply situation on
each of the pipelines involved I request that you give
the preparation and submission of the proposed order
your section's top priority.
DREXEL D. JOURNEY
Drexel D. Journey
General Counsel
BUJ U.S. Savings Bonds Re~gularly on the Payroll Savints Plan
PAGENO="0171"
165
/
UNITED STATES OF/AMERICA
FEDERAL POWER COMMISSION
BefoYe Commissioners: Richard L, Dunham, Chairman;
Don S. Smith, and James G. Watt,
High Island Offshore System ) Docket Nos, CP75-1O4,
(Successor in interest to ) CP75-81,
Texas Offshore Pipeline Sys- ) CP75-16
tern, Inc., Amtex Offshore )
Pipeline Company and Natural )
Gas Pipe Line Company of -
America
FINDINGS AND ORDER AFTER STATUTORY HEARING ISSUING CONDITICNED
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND
GRANTING PETITIONS TO INTERVENE
(Issued June 4, 1976)
The above-captioned dockets involve an application for
the construction and operation of major pipeline facilities
in the Gulf of Mexico, to transport gas onshore from various
segments of the offshore area. The application pertains to
the High Island Offshore System (HIOS) which constitutes a
hybrid project of origin derivative from three competing
projects origtnally proposed by members of the present HIOS
group. A background summarization of the various proposals
and applications related thereto is as follows.
On July 23, 1974, Natural Gas Pipeline Company of
America (Natural) filed in Docket No. CP75-16 an application
pursuant to Section 7(c) of the Natural Gas Act for a certifi-
cate of public convenience and necessity authorizing Natural
to construct and operate facilities for the receipt into its
pipeline system of supplies of natural gas produced in the
High Island Area offshore Texas and the West Cameron Area,
offshore Louisiana.
Natural proposed to construct approximately 96 miles of
30-inch pipeline from a point of connection with its existing
30-inch pipeline in Jefferson County, Texas, offshore to Block
A-443, High Island Area, South Addition, together with approxi-
mately 80 miles of 12, 16, and 20-inch pipeline and gathering
facilities to connect nine federal orfshore Texas blocks and
DC-29
PAGENO="0172"
166
West Cameron Block 612, offshore Louisiana, to the 30-inch
pipeline. Natural also sought authorization for platform
facilities, onshore compression facilities and other appur-
tenant facilities., This pipeline system, termed the Manta Ray
Pipeline, was to be constructed at a cost of approximately
$89 million,
Natural planned to purchase and transport gas through
its pipeline which it claims had been committed to it by
Burmah Oil Development, Inc., (Burmah) pursuant to four
exploration and development advance payment agreements. Under
these agreements Natural had advanced approximately $42 million
of a maximum obligation of $250 million, in exchange for the
purchase rights on Burmah's interest in approximately 50,000
gross acres,
Natural maintained in its application that total proven,
probable and potential gas reserves, in the subject acreage
approximated 377 million Mcf and that maximum daily avail-
ability of gas to be transported from the subject acreage would
be approximately 148,000 Mcf at 14.65 psia for the first two
years, declining thereafter. Initial capacity of the proposed
pipeline would be 148,000 Mcf per day with a maximum capability
of 236,000 Mcf per day,
On September 9, 1974, Texas Offshore Pipeline System,
Inc~, (TOPSI), a wholly-owned subsidiary of United, filed in
Docket No. CP75-8l an application pursuant to Section 7(c)
of the NAtural Gas Act for a certificate of public convenience
and necessity authorizing TOPSI to construct and operate a
pipeline system to transport onshore gas supplies to be pur-
chased by United in the High Island Area, offshore Texas,
TOPSI proposed to construct approximately 97 miles of
30-inch pipeline, 36,3 miles of 36-inch pipeline and 98 miles
of 42-inch pipeline from a point of connection with the 30-inch
pipeline of Tennessee Gas Pipeline Company in Calcasieu P~.rish,
Louisiana, to Blocks A-332, A-442, A-555 and A-570 in the
High Island area. TOPSI also sought authorization for various
gathering, separation, storage, dehydration, measuring and
regulating facilities, This pipeline system, with related
facilities was to be constructed at a cost of approximately
$312 million,
TOPSI planned to transport gas which United expected to
purchase from Pennzoil Offshore Gas Operators, Inc., (Pogo),
Pennzoil Louisiana and Texas Offshore, mc, (Plato) and Penn-
PAGENO="0173"
167
zoil Company (Pennzoil) covering the gas reserves owned or
controlled by these companies in 30 offshore Texas blocks, and
gas which is committed for purchase by United through interest
reimbursement agreements with Louisiana Land Offshore Explora-
tion Company, Inc., ECEE, mc,, Pinto, Inc., VSEA, Inc., Texas
Production Company and TBP Offshore Company in 11 offshore
Texas blocks. TOPSI maintained at the time of filing its
application, that, of the total gas reserves underlying the
blocks initially to be connected to the proposed pipeline
system, 27 percent were expected to be committed to United, 30
percent committed to purchasers other than United, with the
remaining 43 percent uncommitted.
TOPSI maintained that initial capacity of the proposed
pipeline system would be 600,000 Mcf per day and that the
maximum capability would approximate 1.6 million Mcf per day.
On September 27, 1974, Amtex Offshore Pipeline Company
(Amtex) filed in Docket No, CP75-l04 an application pursuant
to Section 7(c) of the Natural Gas Act for a certificate of
public convenience and necessity authorizing the construction
and operation of a pipeline system to facilitate transporta-
tion onshore of natural gas purchased by Michigan Wisconsin
Pipe Line Company (Michigan Wisconsin) and Texas Gas Trans-
mission Corporation (Texas Gas) from the High Island Area
offshore Texas, and Block 171, West Cameron Area, offshore
Louisiana.
Amtex proposed to construct approximately 100.3 miles of
36 inch pipeline, 34 miles of 30-inch pipeline and 42,4 miles
of 24-inch pipeline from an interconnection with Michigan
Wisconsin's existing 30-inch pipeline in Block 171, West
Cameron Area, offshore Louisiana, to Block 264 High Island
Area, where the connecting segments of pipeline from the various
High Island Blocks would intersect. Amtex also sought author-
ization for construction of a compression platform and two
manifold platforms in connection with its proposed system,
which would result in a total project cost of approximately
$216 million,
Amtex stated that the proposed pipeline system would
have had initial capacity of 565,500 Mcf per day which could
be expanded to 1,2 million Mcf per day, At the tine of
Amtexs filing, Michigan Wisconsin had obtained a commitment
of reserves in 21 High Island blocks and one block in the
adjacent Galveston Area, and Texas Gas had obtained commit-
ments in 9 High Island blocks. The total reserves attributable
to these commitments were alleged to be between 2.5 and 5.4
billion Mcf of gas,
PAGENO="0174"
168
The above described applications presented problems
which initially appeared to preclude the grant of certificates
of public convenience and necessity. These apparent problems
included the competitive nature of the applications under
consideration, the absence of any gas reserve information to
support their respective proposals and the lack of any related
producer applications. The recognition of these problems
prompted the Commission's letter orders to applicants dated
March 25, 1975 wherein each applicant was specifically advised
(a) that its application was deficient in that it did not
contain gas reserve information and would be held in abeyance
pending receipt of such information, (b) that since no
related producer applications had been. filed no further actions
could be taken pending the filing of such applications, and
(c) that in view of the apparent competitive nature of these
applications, the staff was directed to convene a public
conference of all parties and intervenors to Docket Nos.
CP75-16, CP75-8l and CP75-l04 for the purpose of exploring
the possibility of the construction of one or more projects
with transportation arrangements for the other applicants.
In accordance with the above letter orders, a public
informal conference was convened on May 22, 1975, between
Staff, Applicants and persons who had filed petitions to
intervene, for "discussion of a possible alternative joint
approach to the three projects now contemplated." At this
conference preliminary technical presentations of the pro-
posed pipeline projects were made for purposes of discussion
by representatives of Amtex in Docket No. CP75-104 and Topsi
in Docket No. CP75-8l. Upon conclusion of the presentations,
Staff reiterated the Commission prior findings of deficiency with
the applications as set forth in its letter orders of Ilarch 25,
1975, and reminded Applicants that no further action would
be taken with respect to any of the applications until the
required gas reserve information and related producer certifi-
cate applications were filed. However, pending compliance
with these threshold requirements, Staff advised Applicants
of its interest in continuing efforts to resolve, the technical
aspects of obtaining a noncompetitive project. The informa-
tion and discussion generated by these presentations prompted
the recess of the conference to enable the Applicants to
engage in a cooperative analysLs of the technical data avail-
able for purposes of developir~g a proposal for multi-party
utilization of existing and/nr new facilities to be. constructed.
Thereafter, a number of technical conferences involving
Applicants' personnel were held in Houston, Texas, in addition
to the three scheduled informal public noriferonces held in
PAGENO="0175"
169
Washington on June 12 and 27, and August 22, 1975, for the
purpose of discussion and development of a unified proposal.
On September 8, 1975, High Island Offshore System (HIOS),
successor in interest to Amtex and TOPSI, filed in Docket
Nos. CP75-104 and CP75-8l, an amendment to the applications
for certificates of public convenience and necessity filed
in said dockets. The amendment states that BIOS is a
general partnership formed by ANG Offshore Company, Texas
Offshore Gas Transmission, Inc., Transco Offshore Pipeline
Company and TOPSI, who are stated to be affiliated with
Michigan Wisconsin Pipe Line Company, Texas Gas Transmission
Corporation, Transcontinental Gas Pipe Line Corporation and
United Gas Pipe Line Company.
The project proposed in the amendment was described as
the construction and operation of a pipeline system to
transport gas reserves which will be purchased in the High
Island Area, offshore Texas, and the West Cameron Area, offshore
Louisiana, and is said to be in lieu of the proiect.s fnrmerly
proposed in applications in Docket Nos. CP75-81 and CP75-l04.
BIOS proposed to construct and operate approximately 67
miles of 42-inch pipeline between Block 264, High Island Area
and Block 167, West Cameron Area; 26 miles of 36-inch pipe-
line between Block 264 and 343, High Island Area; 15 miles of
3O-i~c~i pipeline between Block 343 and 330, High Island Area;
41 miles of 30-inch pipeline between Block 264 and 573, High
Island Area; 54.5 miles of 30-inch pipeline between Block
264 and 582, High Island Area, a 37,050 horsepower offshore
compression station and related facilities. The facilities
described above are to be operated by Michigan Wisconsin under
the direction of a management committee comprised of repre-
sentatives of the partners.
HIOS. stated in its amendment that Ryder Scott Company
Petroleum Engineers and Ralph E. Davis Associates, Inc.
estimate total natural gas reserves in the High Island Area
`~at 8.640 and 8.500 Tcf, respectively. HIOS further stated
that the initial system was developed to transport and deliver
988,000 Mcf of gas per day (less fuel) to Block 157, West
Cameron Area, offshore Louisiana, and would include an inter-
connection with Stingray Pipeline Company at Block 330, High
Island Area, where Stingray would have the ability to receive
230,000 Mcf of gas per day. HIOS stated the total estimated
cost of the proposed facilities is approximately $353,414,000,
and that with an additional investment of $14,231,000 the canaci
of the system can be increased to approximately 2 million Mcf
PAGENO="0176"
170
per day by the addition of compression. HIOS noted that the
proposed facilities would not extend to all High Island Area
Blocks in which reserves had been committed, but that con-
necting facilities would be the subject of appropriate appli-
cations to be filed with the Commission at a later date. HIOS
also requested authorization to transport up to 247,000 Mcf
of gas per day each for Michigan Wisconsin, Texas Gas, Transco
and United.
On September 24, l975,a further request for gas supply
information was made with respect to the amended application.
Thereafter on January 30, 1976, an informal public con-
ference was held, with producers in attendance and participat-
ing, at which time the problem of securing gas purchase
contracts with producers was aired. Staff reiterated its
understanding of the Commission's policy with respect to
the filing of related producer gas purchase contracts as
enwnerated in Section l57.14(a)(1O)(v). A progress report on
the HIOS proposal and negotiations with Natural for inclusion
in the project was also provided participants at the confer-
ence.
On February 18, 1976, HIOS filed to amend the previously
amended application in Docket Nos. CP75-104 and CP75-81, to
include the transportation of natural gas for Natural Gas
Pipeline Company of America in the aforementioned project
facilities which ~iere the subject of the original amendment.
This latest amendment shows that NATOCO, Inc., an affiliate
of Natural, has been admitted to the general partnership known
as the 11103 group. Consequently HIOS now requests authorization
to transport up to 197,600 Mcf of gas per day each, or one-fifth
of the proposed initial delivery capacity of the system, for
Michigan Wisconsin, Texas Gas, Transco, United and Natural.
On April 1, 1976, a public informal conference was held
in Houston, Texas wherein Staff, in accordance with the policy
embodied in Section 2.65 of the Commission's General Policy
and Interpretations, presented various feasibility studies
showing alternate means of transporting the gas asserted to
be available to the onshore area, with a view toward the pro-
motion of joint use arrangements that will assure the full
utilization of existing large capacity facilities in the
Outer-Continental Shelf area.
PAGENO="0177"
171
On April 13, 1976, the latest public informal conference
was held in Washington, D. C., wherein HIOS informally responded
to Staff's 26 feasibility studies. HIOS presented specific
analysis and criticism of one "f the studies, with very general
criticism of all the studies dealing with technical, operational,
regulatory and cost problems for any single or group of alterna-
tive proposals. A formal response was filed by HIOS on April 30,
1976.
The Commission in reaching its decision with respect to
the certificate sought herein has relied upon the information
contained in the application, as amended, and supplemented, as
well as the April 30, 1976, information submitted by HIOS in
the "Response to BNG Staff Feasibility Study", which reflects
the oral presentation of Staff on April 13, 1976, and HIOS's
filings to supplement the instant application to provide
justification for prompt certification and commencement of
construction of the project.
HIOS has committed in excess of $100 million to date for
the purchase of facilities and must make firm committments
"very soon" for equipment which is in limited supply to lay a
42-inch line and must begin construction this season so that
deliveries will not be delayed for two years. Accordingly,
HIOS maintains that a certificate is necessary by May 1, 1976,
or immediately thereafter.
Generally, HIOS has represented to the Commission, by
virtue of the foregoing, that the three major requirements
embodied in the Commission's letter-order of March 25, 1975
for action on the above-descrir~ed project, have been actually
or constructively fulfilled, as evidenced by the assertions
set forth below. The basic contentions of HIOS are that
(a) the present proposed unified project obviates the issue of
competing applications, (b) the information made available to
Staff on gas reserves is sufficient to demonstrate an adequate
gas supply to justify construction and operation of the project,
and (c) that the information submitted with respect to gas
committed in the High Island Area to affiliates of the HIOS
partners, and other pipeline companies, under advance pay-
ment agreements, is sufficient to obviate the need for the
filing of related producer gas purchase contracts.
With respect to the first contention of HIOS that the
proposed project obviates the issue of competing applications,
the Commission must consider the exigency of transporting gas
from the High Island area. It is certainly in the public
87-292 0 - 77 - 12
PAGENO="0178"
172
interest to have this gas available at the earliest possible
time. 1/ Since all competing applications for such a transpor-
tation system were amended and unified to create the proposed
HIOS system, the public interest requires the issuance of an
adequately conditioned certificate of public convenience and
necessity for construction and operation of this project.
As to the issue of the sufficiency of reserves, the
Commission recognizes the judgmental nature of assessing the
total reserves to be ultimately produced from the High Island
area. Studies have been prepared by two independent consulting
firms. These studies conclude as follows:
Schedule 5 of the revised Schedule H of the applica-
tion for the High Island Offshore System lists certain
field areas for which drilling platforms are scheduled
for installation. Our estimates of. the reserves of these
field areas indicate proved and probable reserves of
approximately 3,194 billion cubic feet and additional
potential reserves of 1,831 billion cubic feet for a
total of 5,025 billion cubic feet. These estimates
include 632 billion cubic feet of proved and probable
reserves and 156 billion cubic feet of potential re-
serves estimated by Ryder-Scott." 2/
Staff, however, has estimated proved and probable reserves in
the High Island area to be only 2.53 trillion cubic feet.
If the reserves are as great as those estimated by the
Applicants, then a delay, or a possible alternate method of
transporting the gas, would prove to be more expensive to the
consumer and not in the public interest. It is not unrealistic
for the Commission to assume, as the industry has not only
assumed but sunk considerable investment on the strength
1/ The Staff has made a preliminary analysis of the Form 16
filings presented by the five HIOS partners and Columbia
Gas Transmission (which has requested a non-affiliated
shippers contract with HIOS).
Company Degree of Curtailment
Columbia Gas Transmission 70% into Priority 2
Michigan-Wisconsin P/L some low priority loads only
Natural Gas P/L some low priority loads only
Texas Gas Transmission 51% into Priority 2 during
heating season
Transcontinental Gas P/L 7% into Priority 1 during
heating season
United Gas P/L 9% into Priority 1 during
heating season
Source: Form 16 Filings, Preliminary ENG Analysis for
1976-1977.
2/ See Exhibit H (Revised), Schedule 3-A, p. 1, of Amendments
To Application For Certificate Of Public Convenience And
Necessity, filed February 18, 1976, Docket No. CP75-104, et al.
PAGENO="0179"
173
thereof, that further commercial production may exist in the
area not covered by Staff verification, not only in smaller High
Island structures, but also in the Garden Banks Area and the Bay
City Area immediately beyond High Island in deeper water. These
additional reserves, if present could be transported by an exten-
tion of the HIOS project.
In any event, the accelerated production of the reserves
estimated by applicants in support of the project would be in
the public interest.
HIOS proposes to charge a monthly demand rate of $7.94 per
Mcf of contract demand to cover the estimated cost-of-service
involving the transportation service. The demand rate is based
on a 8.33 percent depreciation rate, return at 12.0 percent and
a contract demand quantity of 988,00~ Mcf. The depreciation
rate is predicated on an estimated 12-year depletion of reserves.
The 12.0 percent return utilizes a 75-25 capitalization ratio
(75% debt-25% equity) with an 11.0 precent cost of debt and
15.0 percent return on equity. The 988,000 Mcf contract demand
quantity reflects initial design capability of the project.
If the Commission were to approve the proposed monthly
demand rate of $7.94 per Mcf and the reserves are substantially
less than those estimated by the Applicants, higher costs than
those estimated would ultimately be borne by the consumer. To
prevent this the Commission has decided that the charge to each
shipper should be determined on a unit of production basis
rather than on ademand charge basis. BIOS will be required
to determine annual costs of service which will be recovered
through volumes estimated to be transported during each year
based upon a production schedule designed to deplete total
recoverable reserves of 5.0 Tcf using a design capacity of
938.0 MNcfd. We are therefore using for rate purposes the
5.0 Tcf of recoverable reserves included in independent
reserve studies supplied by applicants in support of the
project. 3/
We recognize deliverability will decline with deple-
tion of reserves and the production schedule should reflect
declining throughput in the later years. We will also
require that the company develop costs of service for each
year of the production schedule which will then be used to
determinea unit cost to be applied against the volumes
3/ See note 2, ~
PAGENO="0180"
174
transported for individual shippers. This approach will enable
HIOS to recover its costs on an annual basis and on a total
basis provided the 5.0 Tcf of reserves are ultimately transported.
We will require that HIOS recover its investment on a unit of pro-
duction basis rather than on the straight-line remaining life basis
included in HIOS' filing. Preliminarily, we will permit computa-
tion of the return allowance using the proposed 12% overall rate
of return. However, we will require that prior to the commencement
of service and after financing has been arranged, HIOS shall adjust
the 12% overall rate of return to reflect actual capital structure
and actual debt cost. HIOS shall also adjust its ratefor AFUDC
to reflect actual capital structure and actual debt cost. The
return allowances included in the cost studies shall reflect
the effect of changes in the rate of return and actual investment.
HIOS has proposed a 15% return on common equity. We are
unable to determine the appropriateness of this rate based upon the
record before us. Therefore, we will permit the utilization of the
15% return on equity and the 12% overall return on rate base until
such time as financing has been arranged and information has been
supplied for purposes of supporting the proposed rate of return.
In the event a determination hat; not been made as to the appro-
priate return prior to the commencement of service, that portion
of the rate collected will be subject to adjustment and refund.
It is also noted that since HIOS is a partnership, it will
not pay Federal income taxes as an entity but instead the tax-
able gains and losses will be reflected in the tax returns of
each partner. During the construction period it is expected
that substantial tax losses will be generated by HIOS and will
serve to reduc~ the tax liabilities of the individual partners.
Since ultimately, the general public is going to pay through
rates the cost of constructing and operating HIOS, fairness
requires that the rates collected by HIOS give recognition to
the tax benefits resulting from construction. Therefore, we will
require that the comp'itation of the costs of service reflect the
effect of the interperiod tax allocation.
Inasmuch as the proposed transportation includes the
obligation to transport associated liquids we shall require
HIOS to file copies of any conLract providing for the transpor-
tation of liquids and liquifiables. Revenues and charges for
the transportation service should be compensatory based upon the
cost allocated to this service in the development of the annual
cost of service studies previously dencribed.
HIOS has stated to the Commission that the partners and
affiliates have expended $336.3 million to date in advance pay-
ments in the High Island Area with substantial additional amounts
to be expended in this area under contracts executed prior to
PAGENO="0181"
175
December 31, 1975. Pursuant to these contractual agreements the
producers have committed all gas discovered within the limits of
the areas covered by the agreements. Producers subject to these
advance paymentagreements have leased 185 blocks in the High
Island Area for $2.6 billion in lease bonuses. More than 200
wells 4/ have been drilled on 160 of these blocks with 9 platforms
in place with development drilling under way, 8 platforms ordered
and 8 additional platforms planned. Based on these circumstances,
the Commission finds that the absence of the related producers
filings for the appropriate certificate authorization does not
by itself preclude the issuance of a certificate to HIOS. Although
this Commission normally will not certificate the construction
of pipeline facilities without the interrelated producer contracts
and certificate filings in order to assure an adequate supply of
gas for the proposed facilities, the specific facts of this pro-
ceeding warrant a change in this policy, particularly where it
is able to promulgate a rate structure, as it does in this order,
which not only provides incentive for the applicants to aggressively
pursue the finalization of producer committals, but also places
upon the applicants the risk of their failure to do so. The
potential supplies of gas behind this project are tied to the
project by virtue of the advance payment agreements. 5/ Moreover,
as stated previously, the HIOS partners have advanced over
$336 million to producers in the High Island area and such advance
payment agreements will account for approximately 58% of these pro-
ducers' interests in this area. An examination of all advance
payment agreements,filed to date, which constitutes the bulk of the
advance payments supporting the project, by our staff reveals that
few of the agreements in question contain escape clauses which
woUld permit termination of the advance payment contracts in the
event rate base treatment is disallowed. Second, this Commission
can adequately assure, through its authority under the Natural Gas
Act, that any uncommitted supplies in the High Island Area and any
surrounding areas will be transported through these proposed facil-
ities and any necessary extensions thereto.
The construction and operation of the proposed project would
create only limited effects on the environment. The Commission
finds that the proposed project does not constitute a major Federal
action having any significant effect on the environment.
After due notice by publication in the Federal Register on
August 12, 1974 (39 FR 28943) , September 24, 1974 (39 FR 34336)
October 23, 1974 (39 FR 37673), October 7, 1975 (40 FR 46353), and
March 19, 1976 (41 FR 11619), the following petitions to intervene
and notices of intervention have been filed in these proceedings.
4/ Not all of these wells are capable of production since
many were drilled merely to test reserves.
5/ The Commission's reliance herein on the advance payment
agreements should not be construed as precluding the
Commission from examining in the future the propriety
of rate base treatment to be afforded for such advances.
PAGENO="0182"
176
Docket No. CP75-46
Associated Gas Distributors
Columbia Gas Transmission Corporation *
Consolidated Gas Supply Corporation
Illinois Power Company
Iowa-Illinois Gas and Electric Company
Iowa Power and Light Company `~
Iowa Southern Utilities Company
Wisconsin Pipe Line Company
Mississippi River Transmission Corporation
North Shore Gas Company
Northern Indiana Public Service Company *
Public Service Commission of the State of New York *
Southern Natural Gas Company *
Texas Eastern Transmission Corporation *
Texas Gas Transmission Corporation
Texas Offshore Pipeline System, Inc.
The Peoples Gas Light and Coke Company
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company
United Gas Pipe Line Compar.y
Wisconsin Fuel and Light Company
Wisconsin Southern Gas Company, Inc.
Docket ITo. CP75-8l
Amtex Offshore Pipe Line Company
Associated Gas Distributors
Carolina Pipeline Company
City Gas Company
Columbia Gas Transmission Corporation
Consolidated Gas Supply Corporation
Elizabethtown Gas Company
Iowa Southern Utilities Company
Laclede Gas Company
Michigan Wisconsin Pipe Line Company
Mississippi Power & LiGht Compan
Mississippi Rii.er Tra:~:;rni.ss ion Corporation
Natural Gas PipeUne. C~mnany of America
New Orleans Public ~ei:v~cc Inc.
North Shore Gas Company
Northern Indiana Public Service Company *
Northern Natural Gas Company
Southern Natural Gas Company *
State of Louisiana *
Stingray Pipeline Cercpany
Tennessee Gas Pipcliae Company, a Division cf
Tenneco Inc. *
PAGENO="0183"
177
Texas Eastern Transmission Corporation
Texas Gas Transmission Corporation
The Peoples Gas Light and Coke Company
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company
United Gas Pipe Line Company
Williams Exploration Company
Wisconsin Fuel and Light Company
Wisconsin Mighican Power Company and
Wisconsin Natural Gas Company
Wisconsin Southern Gas Company, Inc.
Docket No. CP75-l04
Arkansas-Missouri Power Company and
Associated Natural Cas Company
Associated Gas Distributors
City Gas Company
Columbia Gas Transmission Corporation
Consolidated Gas Supply Corporation
Elizabethtowti Gas Company *
Illinois Power Conpany *
Iowa Southern Utilities Company
Keokuk Gas Service Company
Madison Gas and Electric Company
Michigan Consolidated Gas Company
Michigan Gas Utilities Company
Michigan Power Company *
Michigan Public Service Commission
Michigan Wisconsin Pipe Line Company
Mississippi River Transmission Corporation
Mobile Oil Corporation
Natural Gas Pipeline Company of America
North Shore Gas Company
North Central Publice Service Co., Division of
~Donovan Companies, Inc.
Northern Indiana Public Service Company *
Northern Natural Gas Company
Ohio VAlley Gas Corporation and Ohio Valley Gas, Inc.
Public Service Commission of Wisconsin *
Stingray Pipeline Company
Southern Natural Gas Comoany
Tennessee Gas Pipeline Company, a Division of
Thnneco, Inc.
Texas Gas Transmission Corporation
Texas Eastern Transmission Corporation
Texas Offshore Pipeline System, Inc.
The Peoples Gas Light and Coke Company
* Late
PAGENO="0184"
178
Transcontinental Gas Pipe Line Corporation
Trunkline Gas Company *
United Gas Pipe Line Company
Williams Exploration Company *
Wisconsin Fuel and Light Company
Wisconsin Gas Company
Wisconsin Mighigan Power Company and Wisconsin
Natural Gas Company
Wisconsin Power and Light Company
Wisconsin Public Service Corporation
Wisconsin Southern Gas Company, Inc..
The Commission finds that a very limited number of
persons and/or their affiliates had initially requested a
hearing with respect to the competing applications, but all
such persons ore now members of the PlOt partnership,
effectively rescinding their requests.
No further petition to intervene, further notice of
intervention, or protest to the granting of the applications
and amendments has been filed,
At a hearing held on June 4, 1976, the Commission
on its oua motion received and made a part of the record in
these dockets all evidence, including the applications as
supplemented and amended, and exhibits thereto, submitted in
support of the authorizations sought herein. and uson con-
sideration of the record, in which the Commission incorporates
the material donsidered by the parties at the conferences, and
the formal response filed, all hercinbefore mentioned.~
The Commission further finds:
(1) Applicant, High Island Offshore System, Inc., a
general partacrahip formed under the lows of Delaware and
having its principsi jiau,~ of ~ in Detroit, ~ichigam,
will be a "natural gas company" within the meaning of Section
7(c) of the Natural Gas Act upon commencement of the con-
struction proposed.
* Late
PAGENO="0185"
179
(2) The facilities hereinbefore described, as more fully
described in the applications, as amended and supplemented,
are to be used in the transportation and delivery of natural
gas in interstate commerce, subject to the jurisdiction of the
Cot~ission, and the construction and operation thereof and the
proposed transportation and delivery of natural gas by Appli-
cant is subjsct to the requirements of Subsections (c) and (e)
of Sectian 7 of the Natural Gas Act.
(3) Applicant is willing and able properly to do the
acts and to perform the services proposed and to conform to
the provisions of the Natural Gas Act and the requirements,
rules and regulations of the Commission thereunder with the
exception of those matters discussed in paragraph (4) below.
(4) It is necessary and appropriate for the Commission
to grant a certificate covering the instant app~ication,
with appropriate conditions, although certain aspects of said
applicaticn do not fully comply with the requirements of the
Connniesioh's Regulations, inter olin, 157.l4(a)(lO) Exhibit H,
for the following reasons u~i~c to the instant matter:
(a) The attachment of additional gas supplies are
required to help alleviate the critical gas supply
shortage on the systems to be supplied by F~IOS and
through supplemental information submitted, lbS asserts
with support stotements from such pipelines, that no
other offshoro pipeline system will have sufficient
available capacity to transport this needed gas onshore.
(b) The HIOS project constitutes a "keystone"
facility to the comprehensive proposal for a 1105 "project"
which will include various related facilities for which
applications have been filed and are currently pending.
The construction of this "keystone" project is asserted
to be in jeopardy owing to the unavailability of required
vital equipnenc absent inrnediate issuance of a certifi-
cate. Accordingly, we find it necessary and appropriate
to act on the instant applications to provide threshold
aut1iori~ation sufficient to enable timely commencement
of construction.
(c) The major public interest consideration with
respect to the eutho r~'i~oo Co eonstrtict the HIOS
project iS d `o~iiOe, i~i~~iifty aed timaliassa of gas
supply at a reasonable coat of the project to
the consumer. The certificate, as hereinafter conditioned,
assures that the consumer be assured an adequate and
reliable gas supply at a reasonable cost.
PAGENO="0186"
180
(5) The construction and operation of the proposed
facilities and the proposed transportation and delivery of
natural gas by Applicant are required by the public convenience
and necessity as hereinafter ordered and conditioned.
(6) None of the related producers has yet filed for
appropriate certificate authorization. Nevertheless, in
light of the foregoing we find that a certificate authorizing
Applicant to undertake construction and operation should be
granted.
(7) The charge to each shipper shall be the product of
volumes transported multiplied by a commodity charge expressed
on a unit of production basis. HIOS shall determine annual cost
of service and allocation thereof which will enable it to recoup
its expenses, recover its investment, earn a 12.0 percent overall
return on average rate base, and recover the associated taxes
over volumes estimated to be transported during each year from
total recoverable reserves of 5.0 Tcf. HIOS shall file for
Commission approval a study showing a production schedule which
will enable it to deplete the 5.0 Tcf of recoverable reserves
using the design capacity of 988 MMcfd. The study shall also
show on an annual basis its computation of operating and main-
tenance expenses, average rate base, return, taxes [giving
effect to Paragraph (10)] and costs allocated to the tranrportatiOn
of liquids and liquefiables. At such time as the 5.0 Tcf of
reserves are produced and transported HIOS will be required to
file a commodity charge which will enable it to recover the
costs associated with the transportation of the remaining reserves.
(8) The commodity charge will be subject to adjustment after
actual financing has been arranged and the facilities have been
constructed and are ready for service. HIOS shall file revisions
to the study in Paragraph (7) to give effect to the actual capital
structure, the cost of debt financing, the actual cost of facili-
ties, and a rate for AFUDC based upon actual capital structure
and the related financing costs. Moreover, HIOS shall file
detailed support for the 15.0 percent return on equity and the
l2.07~ overall return on rate base, giving particular attention to
the situation in the money market at the tine of financing and the
arrangements under which equity funds were made available. In the
event the Commission does not rule upon the appropriateness of, the
15.0 percent return on equity and the l2.07~ overall return on rate
base prior to the commencement of service, that portion of the
commodity charge shall be collected subject to refund, and the
proposed initial rate shall be accepted subject to the foregoing.
(9) HIOS shall file copies of any contracts providing for
the transportation of liquids and liquefiables. These copies
PAGENO="0187"
181
shall be filed 30 days prior to the commencement of such
transportation service. BIOS shall file information to
show that charges for the transportation service are con-
sistent with the allocated cost included in the Paragraph (C)
study.
(10) For accounting and rate purposes, BIOS, a partner-
ship, will be treated as if it were a corporation and compre-
hensive tax allocation procedures will be required. Compre-
hensive tax allocation accounting procedures shall mean those
procedures which ~equire recording a full provision for all
income tax effects of the timing differences between recorded
amounts on the books of BIOS and amounts reported for income
tax purposes on the tax returns of the individual partners
including (a) interest, taxes and pension cost capitalized per
books and expensed currently for tax purposes, (b) all difference
between book and tax depreciation and (c) any other timing
difference between the recording of other revenues and expenses
for book and tax purposes.
(11) Participation of all the petitioners to intervene
in this proceeding may be in the public interest.
The Commission orders:
(A) Upon the terms and conditions of this order, a
certificate of public convenience and nocessity is issued
authorizing Applicant to construct and operate the proposed
facilities as hereinbefore described and as more fully des-
cribed in the application in this proceeding.
(B) The certificate issued by Paragraph (A) above and
the rights granted thereunder are conditioned on Applicant's
compliance with all applicable Commission Regulations under
the Natural Gas Act and particularly the terms and conditions
set forth in Paragraphs (a) , (c) (3) , (c) (4) , (e), (f) , and
(g) of Section 157.20 and Section 154 of such Regulations.
(C) The charge to each shipper shall be the product
of volumes transported multiplied by a commodity charge
expressed on a unit of production basis. BIOS shall determine
annual costs of service and allocations thereof which will
enable it to recoup its expenses, recover its investment,
earn a 12.0 percent overall return on average rate base,
and recover the associated taxes Over volumes estimated to be
PAGENO="0188"
182
transported during each year from total recoverable reserves
of 5.0 Tcf. HIOS shall file for Commission approval a study
showing a production schedule which will enable it to deplete
the 5.0 Tcf of recoverable reserves using the design capacity
of 988 MMcfd. The study shall also show on an annual basis
its computation of operating and maintenance expenses, average
rate base, return, taxes /giving effect to Paragraph (F)7 and
costs allocated to the transportation of liquids and lique-
fiables. At such time as the 5.0 Tcf of reserves are produced
and transported HIOS will be required to file a commodity
charge which will enable it to recover the costs associated
with the transportation of the remaining reserves.
(D) The commodity charge shall be subject to adjustment
after actual financing has been arranged and the facilities have
been constructed and are ready for service. HIOS shall file
revisions to the study in Paragraph (C) to give effect to the
actual capital structure, the cost of debt financing, the actual
cost of facilities, and a rate for AFUDC based upon actual capital
structure and the related financing costs. Moreover, HIOS shall
file detailed support for the 15.0% return on equity and the
12% overall return on rate base, giving particular attention
to the situation in the money market at the time of financing and
the arrangements under which equity funds were made available. In
the event the Commission does not rule upon the appropriateness
of the 15.0% return on equity and the 12.0% overall return
on rate base prior to the commencement of service, that portion
of the commodity charge shall be collected subject to refund and
the proposed initial rate shall be accepted subject to the
foregoing.
(E) HIOS shall file copies of any contracts providing
for the transportation of liquids and liquefiables. These
copies shall be filed 30 days prior to the commencement of
such transportation service. HIOS shall file information
to show that charges for the transportation of service are
consistent with the allocated cost included in the Para-
graph (C) study.
(F) For accounting and rate purposes, HIOS, a partner-
ship, will be treated as if it were a corporation and compre-
hensive tax allocation procedures will be required. Compre-
hensive tax allocation accounting procedures shall mean those
procedures which require recording a full provision for all
income tax effects of the timing differences between recorded
amounts on the books of HIOS and amounts reported for income
tax purposes on the tax returns of the individual partners
PAGENO="0189"
183
including (a) interest, taxes and pension cost capitalized
per books and expensed currently for tax purposes, (b) all
difference between book and tax depreciation and (c) any other
timing difference between the recording of other revenues and
expenses for book and tax purposes.
(G) The above named petitioners are permitted to inter-
vene in these proceedings subject to the rules and regulations
of the Commission; Provided, however, that the participation
of such interveners shall be limited to matters affecting
asserted rights and interests as specifically set forth in
their petitions to intervene; and, Provided, further, that
the admission of said interveners shall n5E be construed as
recognition by the Commission that they might be aggrieved
because of any order of the Commission entered in these pro-
ceedings.
By the Commission.
(SEAL)
Kenneth F. Plumb,
Secretary.
PAGENO="0190"
184
UNITED STATES OF AMERICA
FEDERAL POWER CONNISSION
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John H. Holloman III,
and James G. Watt.
High Island Offshore System
(Successor in interest to
Texas Offshore Pipeline System, ) Docket Nos. cP75-l04
Inc., Amtex Offshore Pipeline ) CP75-81
Company and Natural Gas Pipe ) cP75-l6
Line Company of America
ORDER GRANTING REHEARING AND
NOTICING OF ORAL ARGUMENT
(Issued June 24, 1976)
On June 4, 1976, the Coi~mission issued an order in
the above-captioned proceeding entitled "Findings and~
Order after Statutory Hearing Issuing Conditioned Certi-
ficate of Public Convenience and Necessity and Granting
Petitions to Intervene." This order granted a certificate
of public convenience and necessity to the High Island
Offshore System (HIOS) for the construction and operation
of major pipeline facilities in the Gulf of Mexico to
transport gas reserves from the High Island Area, offshore
Texas, and the West Cameron Area, offshore Louisiana.
In that order the Commission determined that the
proposed monthly demand~ charge of $7.94 per Mcf, as
reflected in the amended HIOS application filed on
September 8, 1975, would not be approved due to the
uncertainty of the reserve estimates made by the Applicants,
and in order to protect the consumer from higher costs
in the event such reserves were lower than those estimated.
In lieu of this demand charge, the Commission determined
that the charge to each shipper should be determined on a
unit of production basis. HIOS was required to determine
annual costs of service which would be recovered through
estimated annual volumes based upon a production schedule
DC-29
PAGENO="0191"
185
designed to deplete the estimated recoverable reserves
of 5.0 Tcf using the design capacity of 988.0 MMcf per
day proposed by HIOS.
In its application for rehearing and oral argument,
HIOS argues that financing of the project cannot be
obtained without modification of the "unit-of-production"
rate basis and without the C6rnrnissiOn's guarantee of
minimum revenues. HIOS further contends that the Commission's
use of the 5.0 Tcf reserve estimate as the divisor in
obtaining a unit rate is unreasonable since the staff esti-
mates of "proved and probable" reserves in the High Island
area are only 2.53 Tcf. HIOS argues that this treatment
puts HIOS in the position of guaranteeing 5.0 Tcf even
though precise volumes are unknown and the volumes to be
transported are not within its control.
HIOS suggests three alternatives to the "unit-of-
production" rate. First, HIOS recommends reinstatement
of the capacity demand rate to assure recovery of the
HIOS' cost of serviće and to apportion the risks between
affiliated and non-affiliated shippers. As a second
alternative, HIOS suggests a "cost-of-service" form of
rate schedule whereby cost of service would be determined
Periodically based upon estimated volumes to be transported
during the ensuing period. Such cost-of-service would be
based upon a predetermined depreciation rate and return
on equity. Thirdly, HIOS has proposed a modified unit-of-
production rate under which a cost of service would be
computed periodically. A demand charge, based upon reserved
capacity, would be determined each year which would be
sufficient to cover the interest and sinking fund require-
ments of the debt. The remainder of the cost of service
would ~be a commodity charge to each shipper determined by
volumes transported multiplied by a commodity charge using
a unit of production method based on 3.2 Tof of reserves.
PAGENO="0192"
186
Despite the Applicant's contention that the unit-
of-production rate approach makes financing of the HIOS
project unobtainable, we must again reiterate our inten-
tion to protect the consumer from unreasonably high
transportation charges. HIOS, in its application for
rehearing, admits that the unit investment and trans-
portation costs will be higher if the reserv&s are less than
those estimated. By the computation submitted by HIOS
in its application for rehearing, the difference between
the 5.0 Tcf of proved, probable and potential reserves
estimated by BIOS and the 2.53 Tcf of proved and probable
reserves estimated by the Staff would result in an addi-
tional 7 cents per Mcf for investmentalone. ~J
Our decision to utilize the unit-of-production rate
charge rather than the proposed demand charge was based
upon the unce.rtai-nty surrounding the estimates of reserves~
in the High Island Area. Th~ record in this proceeding
was not sufficient to justify approval of the project
under the terms proposed by BIOS. Accordingly, the unit-
of-production basis was devised to relieve the consumer
of the risk of uncertainty of reserves and deliverability
and to place this burden on the proposer of the project.
We are aware of the urgent need to transport these
reserves of natural gas from the High Island Area. The
issue with which we ~are confronted is whether such
reserves could be transported by an alternative and less
expensive transportation system. The issuance of the
certificate on June 4, 1976, represented a recognition
of the absence of presently feasible alternatives and a
recognition of the detailed and extensive planning that
has been undertaken by BIOS in submitting this unified
project. However, to utilize a reserve estimate of less
than the 5.0 Tcf requires that this issue of alternative
transportation systems be further explbred. -
For these reasons, we have determined that it is in
the public interest to grai~t rehearing of the June 4, 1976
1/ Applicant's computations evidently are based on the
estimated investment f~ the HOIS applications alone.
Fulfillment of the overall project will require later
Commission approval of related applications estimated to
cost an additional $63.7 million; thus the total unit
investment cosi difference is approximately 9.6 cents
per Mcf.
PAGENO="0193"
187
order and to permit oral argument before the Commission.
HIOS and any intervenor giving notice of its intent to
present argument will be permitted to address those
issues raised in the application for rehearing and any
questions raised by the Commission. In addition, HIOS
will be required to furnish the Commission with certain~
information that will be requested in a Notice, subsequent
to the issuance of this order.
The Commission orders:
(A) The application for rehearing of the June 4, 1976
order in this proceeding is hereby granted.
(B) The request for oral argument upon the issues
raised in the application for rehearing is granted. On
or before July 1, 1976, any party to this proceeding
~may notify the Secretary of its intention to appear for
oral argument and the amount of time desired to present
its argument. Subsequently, the Secretary will publish
a notice stating the order of argument and the time
allotted each participant. Oral argument as to those
issues, plus any questions raised by the Commission, will
commence before the Commission on July 7, 1976, at
2:00 a.m., E.D.T., in a Hearing Room of the Federal Power
Commission at 825 N. Capitol Street, N.E., Washington,
D.C. 20426.
(C) The Secretary is directed to issue a Notice
containing the requests for additional information sought
by the Commission, subsequent to the issuance of this order.
(D) Any interested person may submit to the Federal
Power Commission, 825 N. C~pitol Street, N.E., Washington,
D.C. 20426, not later than July 1, 1976, data, views
and comments or suggestions in writing concerning the
issues raised by HIOS in its application for rehearing.
87-292 0 - 77 - 13
PAGENO="0194"
188
The Commission will consider all such written submittals
before acting on the matters herein discussed. An
original and 14 conformed copies should be filed with the
Secretary of the Commission. Submissions to the Commission
should indicate the name, title and mailing address of the
person filing such comments.
(E) The Secretary is directed to publish this order
in the Federal Register.
By the Commission.
(SEAL) *
Kenneth F. Plumb,
Secretary.
PAGENO="0195"
189
FEDERAL POWER COMMISSION
NEWS RELEASE WASHINGTON, DC. 20426
IMMEDIATE RELEASE
TUNE 24, 1976 No. 22450
Docket Nos. CP75-104, et al.
High Island Offshore System
FP C GRANTS REHEARING, SCHEDU LES ORAL ARGUMENT
IN HIGH ISLAND PIPELINE CASE
The Federal Power Commission today granted rehearing
of an earlier order approving construction of a $353.4 million
natural gas pipeline system to attach new gas supplies off-
shore Texas and Louisiana, and scheduled an oral argument
for July 7.
The Commission last June 4 authorized construction and
operation by High Island Offshore System (HIOS). However,
it did not approve the proposed monthly demand charge for
transportation of the gas. It instead prescribed a unit-of-
production basis, which ties the charge to the amount of gas
reserves found to be available.
The Commission said its decision to use the unit-of-
production rate wa~s based on the uncertainty surrounding
the reserve estimates for the High Island area. It was
devised to relieve the consumer of the risk of overestimation
of reserves and place this burden on the project participants,
the FPC said.
11105 asked for rehearing, arguing that the project cannot
be financed without modification of the rate basis and without
guarantee of minimuth revenues. H1OS suggested three
alternatives to the unit-of-production rate.
In today's order, the Commission reiterated its intention
to protect the consumer from unreasonably high transportation
charges. It said it is aware of the urgent need to transport
these zeserves from the High Is land area. The issue con-
PAGENO="0196"
190
fronting it, the Commission stated, is whether these
reserves could be transported by an alternative and less
expensive transportation system. To use a reserve estimate
of less than 5 trillion cubic feet requires that this issue of
alternative transportation systems be explored further, the
FPC said.
It therefore granted rehearing and scheduled the oral
argument, to be held in a hearing room at the Commissionts
offices in Washington, D. C. Comments on the issues raised
in HIOS' application for rehearing are due by June 1.
For further information
call 275..4006(Arča Code 202) DC-114
PAGENO="0197"
191
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: ~ &rr2 L. ~ ~oi r:.sr~
~ r. ~ ::i,
~ ~ ~.
High Island Offshore System ) Docket Nos. CP7S-104,
(Successor in interest to ) CP75-8l,
Texas Offshore Pipeline ) CP75-16
System, Inc., Arntex Offshore
Pipeline Company and Natural
Gas Pipeline Company of
America)
ORDER ON REHEARING
AFFIRMING ISSUANCE OF CERTIFICATE
AND PRESCRIBING RATE £Ot~UTATION
~ ~ ~ZO, l7
High Island Off shore System (HIOS) on June 17, 1976,
filed an application for rehearing of the Commission's order
of June 4, 1976, granting a conditioned certificate of public
convenience and necessity to HIOS for the construction and
operation of pipeline facilities in the Gulf of Mexico to
transport gas onshore from various segments of the offshore
area. On June 24, 1976, the Commission granted rehearing
and provided for oral argument and the filing of comments.
Such comments were filed by Trunkline Gas Company (Trunkline)
and the Federal Energy Administration (FEA). Oral argument
was held on July 7, 1976. On July 9, 1976, HIOS filed a
response to the memoranda of Fred Cornelius, Chief of the
Systems Operations Division (SOD) of the Bureau of Natural
Gas (BNG) and Jeanne M. Zabel, also of SOD, which had been
introduced into the record at the oral argument.
As explained in the certificate order, HIOS represents
a partnership of three predecessors. Texas Offshore Pipeline
System, Inc. (TOPSI), Amtex Offshore Pipeline Company (Amtex)
and Natoco, Inc., an affiliate of Natural Gas Pipeline Company
of America. The applications 1/ estimate that the project
1/ Filed September 8, 1975 to cover Amtex and Topsi and
amended February 18, 1976, to bring in Natural. 29
PAGENO="0198"
192
will ōost $353,414,000 and will be financed 75 percent by
debt ($265,000,000) at a cost of 11 percent and 25 percent
by equity contributions. The applications state that the
Ryder Scott Company, petroleum engineers, concludes that
a volume of 8.6 Tcf represents a reasonable estimate of gas
resources which will be developed in the area and that
Ralph E. Davis Associates, Inc. concludes that the potential
resources in this area are in the order of 8.5 Tcf. In a
letter dated February 6, 1976, attached to the application,
Davis stated that its estimates indicated proved and probable
reserves of approximately 3.2 Tcf and additional potential
reserves of 1.8 Tcf for a total of 5.0 Mcf, but no reserves
are included for two blocks because reserve data are being
held confidential. Davis added that when other areas leased
and yet to be leased are drilled and evaluated it concluded
that its analysis of 8.5 Tcf of ultimate reserves for the
area remains a reasonable estimate.
For rate purposes HIOS used a contract demand quantity
of gas in the amount of 988,000 Mcf per day. In its amended
application of February 11, 1976, HIOS stated that recent
data from the producers in the High Island area show that
platforms now scheduled for construction will have the
capability of delivering 1,644,000 Mcf per day by the end
of 1978, of which 950,176 Mcf per day would be available to
the HIOS group, 230,214 Mcf per day would be available to
others and 463,610 Mc~ per day is uncommitted.
As set forth in the certificate order HIOS proposed a
monthly demand rate of $7.94 based on a 8.33 percent depre-
ciation rate (12 years), an overall return of 12.0 percent
and a contract demand quantity of 988,000 Mcf per day.
The Commission rejected this rate pointing out that if the
reserves are substantially less than those estimated higher
costs would ultimately be bprne by the consumer. The Com-
mission conditioned the cextificate, instead, on HIOS filing
a commodity charge determined on a unit-of-production basis.
This would be based on a production schedule which would
enable HIOS to deplete 5.0 Tcf of recoverable reserves using
the design capacity of 988.000 Mcf per day.
irr its application for rehearing HIOS alleges that the
project cannot be financed under the Commission's rate
approach. HIOS quotes from a letter (attached in an affidavit)
from Kidder, Peabody & Co. dated June 14, 1976, that financing
would require an assured stream of revenue to be payable by
shippers under the applicable transportation agreements,
without regard to the volumes transported, equal to the debt
service requirements with adequate provision for operating
and maintenance expenses of the project.
PAGENO="0199"
193
Fu~her, HIOS objects to the Commission's use of the
5.0 Tcf reserve as the divisor in obtaining a unit rate
pointing out that this includes potential reserves amounting
to 1.8 Tcf and proved reserves of 3.2 Tcf. The proved and
probable reserves according to Staff study were 2.53 Tcf and
the possible reserves were 0.7 Tcf. This, HIOS says, put it
in the position of guaranteeing 5.0 Tcf even though no one
knows the precise volume and the volumes to be transported are
not within its control. It adds that a shortfall in qas
deliveries could also come about because of inability of the
producers to deliver the volumes or the shimmer's failure
to schedule them. On oral argument Counsel for HIOS said
that it was unwilling to accept 5.0 Tcf in fixing rates,
and that there was a real distinction between a reserve
figure which is used in fixing rates and a reserve figure
which is used to design capacity (Tr. 14).
HIOS suggests three alternatives to the Commission's
unit-of-production rate: (A) Reinstate the capacity demand
charge orginally proposed; (B) Prescribe a cost-of-service
tariff in which the cost of service would be determined
periodically based upon estimated volumes with adjustments
to be made in the following period; (C) Modify the unit-of-
production rate under which a cost of service would be computed
periodically. A demand charge would be determined each year,
which would be sufficient .to cover the interest and sinking
fund requirements of the debt, and would be the minimum bill.
The remainder of the cost of service would be covered by a
commodity charge expressed on the unit-of-production basis
set forth in ordering paragraph (C) of the Commission's
certificate order, substituting 3.2 Tcf for 5.0 Tcf as the
amount of reserves.
Oral argument was presented in this case by Commission Staff
Counsel. In addition, Mr. Cornelius, Chief of SOD in BNG, in his
memorandum of July 7, 1976, found HIOS' three alternatives defective.
On (A) the original demand rate proposal, he noted that the full
burden of inadequate reserves or non-performance by the pro-
ducers would be borne by the shippers and their customers;
On (B), the cost of service tariff, Mr. Cornelius saw an
opportunity to adjust the depreciation upward, based on a
smaller amount of proved and probable reserves, without Com-
mission approval. On (C), the modified unit-of-production
rate, Mr. Cornelius said the practical result of this pro-
posal is nothing more than a modification of the level of
the consumer's exposure to pay amounts which the Commission
has found unwarranted. If the HIOS project is non-f inanceable,
PAGENO="0200"
194
he says, it is because of the uncertain status of the gas
reserves.
After stating the major problems sought to be mitigated
by the Commission, Mr. Cornelius discussed a series of staff
studies on alternative means of moving gas to shore from the
High Island Area, utilizing existing facilities as much as
possible. tinder one assumption total facility costs to trans-
port 500 MMcf per day from the same region proposed to be
reached by the HIOS project would be $146,000,000. Mr. Cornelius
concluded that the Commission should not consider modifying its
certificate order to impose a greater burden on consumers unless
it is satisfied lower cost alternative transportation is not
available, or that additional developments will show greater
proven and probable reserves than the 2.53 Tcf estimated by
the Staff.
Ms. Zabel of SOD contends that in view of the large in-
vestment, the lack of producer gas purchase contracts and the
uncertainty surrounding the gas reserve estimates the Com-
mission's order should not be modified except on the basis
of sworn testimony subject to cross examination.
In its oral argument and in its response to the Cornelius
and Zabel memoranda, HIOS says that it would be willing to
work out an interim rate during the buildup period so that the
burden of the investiment will not fall on small volumes of
less than 988,000 Mcf per day (Tr. 93). HIOS states that its
proposal calls for a predeterminated depreciation rate and
that such rate could not be changed except with Commission
approval. HIOS attempts to refute some mathematical compari-
Sons on the modified unit-of-production rate introduced by
Staff Counsel in the oral argument. In connection with this
proposal HIOS shows what reser~ves are required to cover the
cost of servicing the debt. Thus, it computes a demand rate
as follows: 2/
Interest $29,150 3/
Sinking Fund $26,500 4/
Operating Expenses $ 6,255 5/
$61,905
Contract Demand 988,000 Mcf per day
Demand Rate (per month per
Mcf of contract demand) $5.22
2/ 000's
3/ 11 percent of $265,000,000. (Ex L-9 to application February 11,
1976)
4/ $265,000,000 an~ortized over 10 years. (Ex. L-9).
5/ Ex. L-9.
PAGENO="0201"
195
HIOS states that the commodity rate is obtained by
dividing the difference between the total cost of service
and th~ total demand revenues by the volumes projected to
be transported for such year.
With respect to the staff's alternative transportation
systems, HIOS contends that such alternatives are not based
upon cost data, that they would not handle the volumes of gas
available, and that they would delay delivery of gas to the
ultimate consumers. Further, existing pipelines in the general
area which might be used for transporting gas from the High
Island Area filed letters stating that either there was no
capacity available or that present plans involve the commit-
ment of any unused capacity. (See Tr. 7,8,10). With respect
to the memorandum of Ms. Zabel, HIOS stated that the large
investment involved herein is not a basis to deny modification
of the June 4 order, that the lack of gas purchase contracts
has been covered by the Commission in the June 4 order, and
that HIOS has not disavowed its reserve estimate of 5 Tcf.
At the oral argument counsel for HIOS summed up its
position that in the rate calculation it recommended sub-
stituting 3.2 Tcf for 5.0 Tcf, andneeded a minimum bill Or
a demand charge to assure the financing (Tr. 95). HIOS
further emphasized the importance to consumers of delivering
the gas, which he compared to the much higher prices of oil,
coal gasification, SNG and LNG.
Upon reconsideration of this matter, we are impressed
with the need for this gas in the light of the national gas
shortages, the high price of alternate fuels, and the lack of
opposition and participation by the numerous intervenors.
A new element has been introduced: the HIOS contention that
the project cannot be financed on the basis of the unit-of-
production rate prescribed in our order of June 4, 1976.
Nevertheless, we shall not adopt the 100 percent contract--
demand rate proposed by HIOS, in order to prevent the entire
burden of the cost of low volumes being transported to be
placed on the shippers of gas and the ultimate consumers.
For the same reason the cost of service rate proposed by
IIIOS is inappropriate. We find that the rate should be a
modified unit-of-transportation rate with a demand charge.
This will provide a sufficient revenue to cover service on
the debt and operating expenses but will not place the entire
risk upon the shipper.
PAGENO="0202"
196
One of the most important elements in designing such a
rate is the aIm~unt of available gas reserves. HIOS' consultants
estirn~ted ultimate reserves to be 8.5 Tcf or 8.6 Tcf, and that
proved ~nd probable reserves amounted to 3.2 Tcf with additional
potential reserves. In its estimated cost of service ~ICS
utilized a depreciation rate 8.33 percent which at the delivery
rate of 988,000 Mcf per day reflects a production life of
12 years. However, their estimates did not include two areas
where the reserve data was confidential and apparently did not
cover other areas leased and to be leased which could bring the
amount up to 8.5 Tcf. While we do not believe that the amount
of reserves claimed for certificate purposes must be the same
as that used for rate purposes, the amount of 5.0 Tcf is rea-
sonable in view of the expert opinions and the data in the
record. We shall, therefore, use 5.0 Tcf. Of course, HIOS
has the right to file for changed rates under Section 4
of the Natural Gas Act to reflect lesser reserves if future
estimates so indicate.
However, if reserves of 5.0 Tcf are used, the production
life of the reserves would be approximately 14 years. We
find the 14 year life to be proper and have used it in computing
depreciation of $25,244,000 and a. total cost of service of
$89,913,000. 6/ In computing the cost of service we utilize
a 12 percent rate of return with related income taxes, for the
purposes of this certificate proceeding.
HIOS proposes to amortize its debt over a 10 year period,
which is two years less than its depreciation period of twelve
years. We are of the opinion that this differential is rea-
sonable for the protection of the debt holders. Therefore,
using a depreciation period of 14 years the debt should be
amortized over twelve years and the demand charge computed
as follows:
Interest $29,150 7/
Sinking Fund $22,083 ~/
Operating Expenses ________
Total Demand Cost of Service $57,488
Contract Demand 988,000 Mcf per day
Demand Rate (Per month per Mc~ of contract demand) $4~85
(000)
6/ Operating Expenses $ 6,255 (Ex. P to Application)
-. Depreciation $353,414/14 25,244
Federal Income Tax 15,851 (Ex. P)
Return 42,563 (Ex. P)
$89,913
7/ $265,000,000 x 11 percent.
L' $265,000,000/l2
PAGENO="0203"
197
As noted above, HIOS would determine the commodity rate
by dividing the difference between the total cost of service
and the total demand revenues by the volumes projected to be
transported for such year. However, this formula places the
risk of transporting less than the projected volumes of
988,00 Mcf per day on the shippers and consumers. This has
the same effect as the original proposal of covering all costs
through a demand charge.
We shall assume that 988,000 Mcf per day will be trans-
ported for the purpose of computing the commodity rate. If
less than that is transported, the demand charge will remain
the same. However, the commodity charge will be computed
on the basis of the assumed 988,000 Mcf per day regardless of
the volumes actually transported. Consequently, in our estimated
cost of service, $57,488,000 will be covered by the demand charge
and $32,425,000 will be covered by the commodity charge. Assuming
a flow of 988,000 Mcf per day, the commodity charge will be 8.99
cents per Mcf. 9/ This does not give effect to the tax deductions
that would be available in the first years of operation and would
be subject to adjustment therefor.
We find a rate computed in t)vis manner will permit a
sharing of the risks by the HIOS partners. In contrast, a rate
that is entirely a demand charge would not do so. Nor would
a rate with a commodity charge computed on the basis of volumes
projected to be transported in any given year. Under the rates
prescribed above, HIOS will have its financial costs and operat-
ing expenses covered regardless of the amount of gas delivered
but it will bear the risk of less than 988,000 Mcf flowing
each day. The fact that the return to equity will depend on
the actual volumes transported through the facilities should
provide an incentive to the pipeline-owners of the project to
encouraqe dedications and the commencement of flow of dedicated
gas.
In its comments Trunkline expresses its concern with
respect to the form of rate and tariff which would be applied
to non-affiliated shippers. Trunkline explains that it has
an interest in reserves located close to the proposed connection
between HIOS and Stingray and proposes to utilize the Stingray
System rather than the transmission facilities of HIOS. It
contendsthat the length of haul should be given effect in
prescribing the rate for HIOS' services especially where trans-
mission will be performed by another connecting offshore pipe-
line. It attached correspondence between Trunkline and HIOS
in which HIOS says that shipper~ whose gas will be transported
9/ 32,425 = .0899 Compare computation submitted by
365 x 988 Staff Counsel (Tr. 89).
PAGENO="0204"
198
only in the mainline laterals south of the High Island Block
A-26-4 junction platform will contract to pay a charge designed
to recover HIOS' cost of service on such laterals. HIOS also
says that a prospective shipper must make arrangements with
Michigan Wisconsin Pipeline Company, operator for HIOS, which
will conform to the requirements of HIOS' Management Committee.
In reply Trunkline asks for opportunity to discuss contractual
arrangements with HIOS. The Commission can understand that
particular arrangements may be necessary or desirable for
shippers using only part of the HIOS system. The order as
amended below in effect provides for the filing of rate
schedules with an appropriate allocation of costs, subject,
of course, to the approval of the Commission. This should
meet the needs of Trunkline and others making use of only
part of the HIOS system. -
FEA in its letter to Chairman Dunham agrees with this
Commission that domestic sources of natural gas should be
expeditiously developed to alleviate current and projected
curtailments. It is hopeful that the matters in contro-
versy can be clarified and resolved promptly although it
shares the FPC's concern regarding the necessity to insure
reasonable prices to the consumer. The Commission realizes
the importance of this proceeding in view of the shortage
of gas and other fuels and has sought to bring this
proceeding to a close as rapidly as possible. In view
of the various submissions by Commission staff and the
lack of objections froi~ intervenors it has been possible
to proceed without an evidentiary hearing before an
Administrative Law Judge, but with oral and written
presentations directly to the Commission, and it is hoped
that this order will resolve the very legitimate questions
raised by SOD and ENG and permit the project to go forward
and, at the same time, protect the shippers and consumers.
Because of the importance of the HIOS project in the
development of additional gas supplies the Commission is requiring
that the certificate issued to HIOS shall be accepted within 10
days of issuance of this order instead of 30 days as provided in
Section 157.20(a) of the Commission's Regulations. If not
accepted within ten days, subject to the provisions of Section
157.20(a), the Commission will set a hearing in the proceeding
for a full evidentiary presentation.
The Commission further finds:
Subject to the above discussion and as provided below
the Commission's order issued June 4, 1976, issuing a
certificate of public convenience and necessity to the HIOS
Project and granting interventions should be confirmed as the
decision of the (ornmission.
PAGENO="0205"
199
The Commission orders;
(A) Finding paragraph (7) and ordering paragraph (C) of
the Commissions order of June 4, 1976, shall be amended to
read as follows:
"Within 60 days of the issuance of this order
HIOS shall file rate schedules for the transporta-
tion of natural gas by its proposed project as
discussed above subject to the approval of the
Commission. The rate to each shipper shall con-
sist of a demand charge designed to recover on
its debt and operating expenses and a commmodity
charge designed to cover the remaining cost of
service based upon transportation of 988,000 Mcf
per day. This charge shall be applied to the volumes
actually transported. Within 60 days HIOS shall
also file a study to cover annual costs of
service and allocations thereof which will
enable it to recoup its expenses, recover its
investment, earn a 12.0 percent overall return
on average rate base, and recorer the associated
taxes over volumes estimated to be transported
during each year from total recoverable reserves
of 5.0 Tcf. HIOS shall file for Commission
approval a study showing a production schedule
which will enable it to deplete the 5.0 Tcf of
recoverable reserves- using the design capacity
of 988 MMcfd. The study shall also show on an
annual basis its computation of operating and
maintenance expenses, rate base, return, taxes
[giving effect to Paragraph (F)] 10/ and costs
allocated to the transportation of liquids and
liquefiables. At such time as the 5.0 Tcf of
reserves are produced and transported HIOS will
be required to file rates which will enable it
to recover the costs assoc'iated with the trans-
portation of the remaining reserves."
10/ The reference in finding paragraph (7) shall be to
- paragraph (10).
PAGENO="0206"
200
Mr. Moss. We shall resume at 10 o'clock on Monday morning next.
[Whereupon, at 3:40 p.m., the hearing adjourned, to reconvene
Monday, March 14, 19~7.]
PAGENO="0207"
ADVERSE PERSONNEL ACTIONS AGAINST PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION ______
MONDAY, MARCH 14, 1977
HOUSE OP REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITrEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington~, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room 2325,
Rayburn House Office Building, Hon. John E. Moss, chairman,
presiding.
Mr. Moss. The subcommittee will be in order.
This morning we will hear from Mr. Curtis Fee, Executive Director
of the Federal Power Commission, and Mr. Jon G. Lotis, Assistant
Litigation Counsel of the same agency.
According to the March 9 testimony of Mr. Edward Minor, an
attorney in the Office of the General Counsel of the FPC, within a few
weeks after testimony by then Assistant General Counsel Lewnes
before the Subcommittee on Energy and Power and this subcom-
mittee, he was ordered by Mr. Fee to find a way to fire Mr. Lewnes.
On that same day we heard how another attorney with 11 years of
special expertise in the important area of offshore gas supply,
Mr. Russell Mamone, who had also testified before both subcommit-
tees, was suddenly transferred to hydroelectric licensing, an area in
which he had no particular expertise.
Mr. Lewnes and Mr. Mamone had testified before the Subcommittee
on Energy and Power on January 15, 1976, regarding a diversion of
natural ga's from the interstate market by Tenneco Oil Co.
T~vo weeks later they appeared before this subcommittee and testi-
fied that Mobil Oil Co. should have delivered natural gas to the
interstate market during the winter of 1975 and 1976 and that there
was a rebuttable presumption that Mobil was withholding natural
gas from the interstate market.
The subcommittee subsequently learned that these and other ex-
amples of apparent personnel manipulation may have been related
to the High Island Offshore pipeline application and to the congres-
sional testimony of certain of the witnesses which was embarrassing
to the FPO and contrary to the interests of the producers of natural
gas.
These lines of inquiry will be continued. In addition, the subcom-
mittee will explore events in a new and equally important substantive
area within the FPC. and particularly in the Office of the General
Counsel, the handling of gas and pipeline rates. Such cases represent
(201)
PAGENO="0208"
202
about 70 percent of the litigation at the FPC and determine an
important portion of many consumers' utility bills.
Rate case backlogs and what to do about them have been the subject
of subcommittee hearings and a management survey performed on
the FPC by Touche Ross and Co.. which has become a part of the
alleged justification for the questionable personnel actions we are
* investigating.
We will now hear from Mr. Fee.
Mr. Fec, will you stand and be sworn?
* Do you solemnly swear that the testimony you are about to give
to this subcommittee shall he the `truth, the whole truth, and nothing
but the truth, so help you God?
Mr. FEE. I do.
Mr. Moss. Will you identify yourself. for the reporter and for
the record?
TESTIIIONY OP J~. CURTIS PEE, EXECUTIVE DIRECTOR,
FEDERAL POWER COMMISSION
Mr. FEE. I am ,J. Curtis Fee. I am Executive Director of the.
Federal Power Commission.
Mr. Chairman, thank you for the opportunity to appear before
the subcommittee. I brought a written statement.
If it pleases the subcommittee, I would like to read it at this time..
Mr. Moss. Mr. Fee, I think at this time we shall proceed with
counsel's examination of you. We will permit the formal statement
when you return on Friday with Mr. Dunham and after we have
had an opportunity to review the personnel files `the subcommittee
requested on Friday and again thi.s morning at 8:30.
Mr. FEE. Sure,-if that is your pleasure.
Mr. Moss. I think at that time the two would be matters relevant
to each other, and we shall be pleased to receive the statement then.
Mr. FEE. Fine.
I also brought a small entourage of staff specialists with me to help
the committee in developing a record.
Mr. Moss. Will any of them be testifying?
Mr. FEE. Only if the question is asked that I cannot answer and to
which you would like the answer immediately.
Mr. Moss. Then you can introduce them to `the subcommittee for
the purpose of the record. and, if they are subsequently called upon
to testify, they will at that time be sworn.
Mr. FEE. Thank you.
The `Assistant Executive Director, Mr. Joseph DiMarino.
My special assistant, Mr. Paul Feine.
A Commission lawyer, Danny Boggs.
I also have Director of Personnel Operations, Lois Schutte.
Mr. Moss. Mr. Lemov?
Mr. LEM0V. How long have you been with the Federal Power
Commission?
Mr. FEE. Fourteen months roiie~h1y.
Mr. LE~srov. In the position of Executive Director?
Mr. FEE. Yes. sir.
PAGENO="0209"
203
Mr. LEMOV. What was your previous job?
Mr. FEE. I was the assistant director of the Presidential personnel
office, that is, on the administrative staff of the President.
Mr. LEMOY. The White House personnel office?
Mr. FEE. Yes.
Mr. LEMOV. Did you handle general personnel assignments for the
White House in that position?
Mr. FEE. My responsibilities were, I guess, best defined as respon-
sible for the Presidential anpointees across about 25 percent of
Government in the energy and natural resources part of Government.
Mr. LEMOV. When you considered the appropriateness of a person
for a Government position you considered his past experience and
his qualifications, I presume.
Mr. FEE. Yes.
Mr. LEi~rov. Did you aiso consider his political compatibility with
administration position?
Mr. FEE. Without question.
Mr. LEMOV. That was a requirement, was it not?
Mr. FEE. It depended on the job. But certainly in most high-
level policy jobs.
Mr. LEMOV. Did you ever work for an independent regulatory
commission before?
Mr. FEE. No, I have not.
Mr. LEMOV. When you came to .the Federal Power Commission the
first job you took there was as Executive Director?
Mr. FEE. Yes.
Mr. LEMov. Who appointed you?
Mr. FEE. The Chairman.
Mr. LEM0V. Did the Chairman instruct you on the nature of an
independent regulatory commission?
Mr. FEE. He did.
Mr. LEMOV. What did he tell you?
Mr. FEE. He told me that it was an independent regulatory agency
and, as such, we would conduct ourselves accordingly.
Mr. LEMOV. Anything else?
Mr. FEE. I can't recall the exact conversation now.
Mr. LEMOY. By the way, your professional background is what in
terms of training?
Mr. FEE. Well, I am essentiall.y a businessman. I came to Govern-
ment from the Aluminum Co. of America. I worked there in the
professional employment office. I was an industrial sales representa-
tive. I was a college recruiter. I was the personnel manager of a
subsidiary. -
Basically it is that type of business, corporate staff, personnel.
Mr. LEMOV. How many years did you have in corporate personnel
work before going to the White House?
Mr. FEE. Five and one-half years.
Mr. LEMOY. How many years in the White House in the political
personnel area?
Mr. FEE. I was there 18 months.
Mr. LEMOY. Did Chairman Dunham say anything about the tradi-
tion of independent handling of cases by the Federal Power Commis-
sion legal staff when he appointed you as Executive Director?
87-292 0 - 77 - 14
PAGENO="0210"
204
Mr. FEE. I don't remember a specific conversation in that regard.
However, that certainly was implied.
Mr. LEMOV. Why do you say it is implied?
Mr. FEE. Just an understanding that I have always had.
Mr. LEM0v. When you were with corporations for which you.
worked-who did you say you worked for?
Mr. FEE. Aluminum Co. of America.
Mr. LE~Iov. Alcoa?
Mr. FEE. Alcoa.
Mr. LEMOV. Their lawyers did not have any statutory provisions
applicable to their functioning as attorneys, did they?
Mr. FEE. Not that I would be aware of.
Mr. LEMOV. The Federal Power Commission attorneys are referred
to in the Federal Power Act and the Natural Gas Act?
Mr. FEE. That is correct.
Mr. LEM0v. And at the White House, if you were considering the
appointment of an attorney you would consider his political com-
patibility with the administration position? You told me that that
was so in all cases.
Mr. FEE. The only jobs we would deal with in the White House
were jobs which were. high level policy type jobs-not all high level
hut all policy jobs. That certainly was not a requisite but a desirable
characteristic of a political appointee in an administration.
Mr. LEMOV. Did Chairman Dunham point out to you when he
appointed you as Executive Director that political considerations had
no relationship whatsoever to the staff of an independent regulatory
agency?
Mr. FEE. I believe he did.
Mr. LEMOV. You believe lie did?
Mr. FEE. Yes.
Mr. LEMOV. What did he say to you?
Mr. FEE. I don't recall the specific conversation or if there were
conversations, but it was certainly implied.
I recall also when I was in the White House.we had a memorandum
from White House counsel that was strict instructions to White House
staff about our conduct in relation to independent regulatory agencies.
Mr. Limrov. You were in charge of the implementation of the reor-
ganization of the Federal Power Commission staff pursuant to the
Touche Ross study?
Mr. FEE. That is correct.
Mr. LEMOV. And that included, the reorganization of the legal staff
which already has been discussed at these hearings?
Mr. FEE. That is correct.
Mr. LEMOV. Is there anything in the Touche Ross study that recom-
mended a reassi~nmen.t of attorneys who had specialized in natural
gas work to hydroelectric work?
Mr. FEE. No.
Mr. LEMOV. Is there anything in the Touche Ross study regarding
reorganization of the Office of the General Counsel?
Mr. FEE. Yes.
Mr. LEMOV. What was that?
Mr. FEE. Two comments, two observations that the consultants
made,. one of which we pursued and one of which we did not.
PAGENO="0211"
205
The first was to preserve the distinction between the trial attorneys
and the attorneys who would eventually be advising the commission
on matters before them. It was recommended that these should be
separated.
The study recommended that we set up a commission counsel and a
separate litigation office to enforce that distinction.
Second, that the work flow and the accountability within OGC was
riot particularly good, did not reflect the other organizations which it
served, and I think their exact words were that "it should be reahned
to mirror the organizations they serve."
Mr. LEMOV. Do you remember a comment in the Touche Ross
study that "personnel assigned to cases should be revised so that
their experience and skill level are more appropriate for the task
requirements?"
Mr. FEE. Yes, that is an exact quote.
Mr. LEMOV. That would suggest that experienced personnel in any
area should be used commensurate with their experience and not
transferred to other areas, wouldn't you say?
Mr. FEE. I would not agree with that wholesalely There are cer-
tainly instances where a senior attorney, just by virtue of the fact
that he had been in the agency for many years, was used to the work,
was used to the tenor of the order writing-I suspect you refer to the
Mamone transfer from one place to another?
Mr. LEMOV. That is correct, that andthe Wofsy transfer.
Mr. Moss. Let us discuss the underlying policy which is implicit in
the question which was asked and not personalize it by getting into
a specific case.
Mr. FEE. Certainly. I apologize.
I am sorry. I lost the question.
Mr. Moss. Let us have the question read.
[Question read.]
Mr. FEE. I think my answer was th~t as a general rule you could
not make that statement. I think you would have to examine each case
individually and leave a lot to the judgment of the General Counsel
who is held responsible for the productivity of the Office of General
Counsel.
Mr. LE3rov. There is no question at this time that there is a major
natural gas shortage in this Nation; is that correct?
Mr. FEE. That is correct.
Mr. LEMOv. And that shortage existed on October of 1976 when
these transfers took place?
Mr. FEE. The shortage existed.
Mr. LEM0v. And it existed in the spring of 1976 when Mr. Lewnes
was permitted to leave as Assistant General Counsel and become an
administrative law judge?
Mr. FEE. it existed.
Mr. LEM0v. Mr. Lewnes was the most experienced lawyer at the
Federal Power Commission in natural gas producer ana pipeline
matters; was he not?
Mr. FEE. I am not competent to make that judgment.
Mr. LEMOV. You are not?
Mr. FEE. I am not.
Mr. LEMOV. Were you not instrumental in the reorganization?
PAGENO="0212"
206
Mr. FEE. I was technical director of the Touche Ross study.
Mr. LEMOV. You do not know who the most competent natural gas
lawyer was?
Mr. FEE. That is correct.
Mr. LEMOV. He certainly was a ranking lawyer in terms of his
position; was he not?
Mr. FEE. If you are equating seniority and competence, yes.
Mr. LEMOY. Assistant General Counsel in charge of natural gas
producer and pipeline, certificate matters; is that correct?
Mr. FEE. Yes.
Mr. LEMOV. That is the area of the shortage; is that correct?
Mr. FEE. That is correct.
Mr. LEMOV. Mr. Wofsy, the man who moved in right after him and
who quit, was also extraordinarily knowledgeable in these matters
having worked on them for many years. Is that correct?
Mr. FEE. That is my understanding.
Mr. L~Mov. And he went to the Electric Rates Section?
Mr. FEE. Yes, sir.
Mr. LEMov. And Mr. Mamone, who testified he had 11 years of
specialized work on natural gas producer and pipeline certificate
matters, was shifted during the same period of time to the Hydro-
electric Section. Is that correct?
Mr. FEE. Yes.
Mr. Lr~rov. Mr. Mamone would b? one of the two most experienced
trial lawyers in the Natural Gas Producer and the Pipeline Rate
Section: is that right?
Mr. FEE. That is correct.
Mr. LEMOV. Do you think that is good personnel management, at a
t]me of natural gas shortage and crisis, to move three of your top four
men who were staffing that area?
Mr. FEE. That is a judgment for the General Counsel. I could not
second guess the General Counsel's actions on that.
Mr. LEi~rov. On March 9, Mr. Mamone testified that since September
1974. also during a period of natural gas crisis, the career certificate
legal staff had been drastically diminished. Between that date and
January 1977 only 8 of the 26 original attorneys remained in this
section. Of these 18 departed: 12 resigned from the Commission, 6
transferred elsewhere in the Commission. This represents an extraor-
dinary rate or attrition.
Do you think that is a significant management problem when the
Natural Gas Section is subject to an extraordinary rate of attrition hi
the middle of a natural gas crisis?
Mr. FEE. Number-
Mr. LEM0v. Excuse me. The gentleman in the first row seems to be
whispering to the witness. He is not under oath.
Mr. Moss. Are you counsel for the witness?
Mr. FEE. He is counsel forme.
Mr. BOCGS. I was asked to serve in that capacity.
Mr. Moss. You are counsel. for the witness. Why don't you accom-
pany him to the counsel table?
Mr. BOGGS. If the Chair chooses.
PAGENO="0213"
207
Mr. Moss. The Chair does choose. The gentleman has been before
committees of Congress enough to know that you are supposed to be
identified and if you are going to testify that you are to be sworn. If
you are going to act as counsel you have a rule book before you which
tells you the role you are to fulfill as counsel.
Are you familiar with those rules?
Mr. Bocas. I have seen them; yes, sir.
Mr. Moss. Are you familiar with them? That is the question I
asked you. I want an exact answer.
If you are not familiar with them, then take the book and familiar-
ize yourself with them.
Mr. BOGGS. I am familiar with them.
Mr. Moss. You are familiar with them. Very well.
Then you are supposed to respond to the request of the witness for
your advice on matters when he seeks it. You are not to volunteer.
Mr. Bo~as. I do not find that statement in the rules.
Mr. Moss. Let us put it to you very promptly, then, my friend. You
said you were familiar with the rules.
Mr. Bocos. It states I may advise him on matters of his constitu-
tional rights. It does not say he has to ask me about it first.
Mr. Moss. Were you advising him on a constitutional question?
Mr. BOGUS. That would be a matter between myself and him.
Mr. Moss. Were you advising him on a constitutional question?
Mr. BoGUS. That would be a matter between myself and him.
Mr. Moss. Let us just see whether that is so. You are directed to
respond to that question. Were you advising on a constitutional
matter?
Mr. BoGUs. That is a matter between myself and him;
Mr. Moss. It, is not a matter between you. That is the only matter
that these rules permit you to advise him on. Then he has to seek
your advice.
I am asking you whether you were advising him, in view of the
fact no constitutional question was before us, were you advising him
on a constitutional matter?
Mr. BOGUS. If I am his counsel that is a matter between myself
and him.
Mr. Moss. That is not a matter between him and you. I have not
asked you what you advised him on. I have asked you only the area.
That is a permissible area of inquiry by this Chair.
Let me point out to you, my friend, I have chaired committees for
23 years with witnesses far more skillful than you, and you will
answer that question.
Mr. BOGUS. I recognize that, your Honor.
Mr. Moss. You will answer that question.
Mr. BOGUS. My-
Mr. Moss [Rapping his gavel]. You will answer the question and
you will do it promptly.
Mr. BOGUS. I believe that to the extent Mr. Fee asked me to
serve~-
Mr. Moss [Rapping his gavel]. You will answer the question
promptly. You will do it now.
Mr. BOGUS. The subject of the conversation between-
PAGENO="0214"
208
Mr. Moss [Rapping his gavel]. You will get up and you will leave
this hearing room and you will not come back until you come back
prepared to answer to this committee.
You are not, first of all, the counsel to the gentleman seated here.
You are an assistant to the. Chairman of the Federal Power Commis-
sion. You are acting here in an extra-legal manner and irregular
manner, and you are acting in an impertinent manner.
You will now leave this hearing room and we shall discuss our
disposal of your situation at a later date.
You will leave the hearing room.
[Chairman raps his gavel.]
You will leave the hearing room, and you will leave promptly.
Mr. MARKS. I wonder whether we might have a recess for just a
moment or two so we can discuss this problem.
Mr. Moss. No. The Chair has exercised his prerogative. The Chair
is required to enforce the rules. He has done so.
Mr. MARKS. May I have permission to speak with the Chairman for
a moment?
Mr. Moss. When the hearing is over this morning you may speak
with me personally.
We shall continue with the witness.
Mr. FEE. I apologize for the pause in the response to your question.
The reason I am pausing is that when we saw that statement in the
record we tried to research the personnel situation in that section and
it did not comport with the testimony. I think the document before
me shows that not to be true.
Mr. LE~fov. You are speaking now, Mr. Fee, that there was not an
attrition in the producer a.nd pipeline certificate section?
Mr. FEE. I would like to enter in the record, if it pleases the com-
mittee, a chart which was put together which shows over a period of
time what th.e manning level in that section was.
There were changes but they were not drastic changes at all.
Mr. LDMov. What section are you talking about now?
Mr. FEE. The Office of General Counsel certificate group. Onboard
professional staff at the end of pay periods designated here.
Mr. LEM0v. What pay periods are you talking about?
Mr. FEE. The chart starts with fiscal 1975-1976 and goes through to
the first quarter of 1977.
Mr. LE~rov. Does it include 1974 as well?
Mr. FEE. It includes most of the. calendar year of 1974.
Mr. LEM0V. How about 1973?
Mr. FEE. It does not.
Mr. Li~rov. Mr. Chairman, in response to the witnesses' request
that the chart be incorporated in the record, I would ask that a chart
should go back a.t least for a period of 5 years to 1970 to show staffing
of the Certificate Section before it goes into the record.
That would be a fair evaluation of the gas regulatory function
rather than the last 2 years. The last 2 years are the very years when
the attrition is asserted to have taken place, so a chart showing 1975
and 1976 substantially will show just what the existing management
PAGENO="0215"
2ē~9
of the Federal Power Commission chose to be the staffing for that
section.
Mr. Moss. We shall receive the chart and have the updated mate-
rial submitted and included in the record at this point.
[The following letter and attachments were received for the
record:]
FEDERAL POWER COMMISSION,
Washington, D.C., April 5, 1977.
Hon. JOHN E. Moss,
Chairman, Snbcommittee en Oversight and Investigations, Committee on Inter-
state and Foreign Commerce, House of Representatives, Wash4ngton, D.C.
DEAR MR. CHAIRMAN: The General Counsel indicated in his letter to you dated
March 29, 1977 that I would be providing additional information to the Subcom-
mittee. Attached are the following:
Attachment 1.-The on-board professional staff in the Office of the General
Counsel for Fiscal Years 1970 through the second quarter of 1977.
Attachment 11.-Attrition in the Office of the General Counsel for Fiscal
Years 1970 through the second quarter of 1977.
Attachment 111.-Promotions in the Office of the General Counsel for Fiscal
Years :1970 through the second quarter of 1977.
Attachment IV.-Replacements and new hires in the Office of the General
Counsel for Fiscal Years 1970 through the second quarter of 197'T.
This data is provided pursuant to Mr. Lemov's request during the March 14,
1977 Hearings before the Subcommittee (TR 18). Since none of this data was
available in mechanized form, the above attachments had to be developed from
whatever manual records were available. In particular, transfers from one
section to another in the Office of the General Counsel had not been documented;
therefore, those records were constructed from the collective memory in the
Office of the General Counsel. Also, the following assumptions were necessary
in order to construct a consistent record:
1. A "professional" is considered to be either an attorney who is a member
of the bar or a law clerk (trainee) who is not a member of the bar but who
has been employed less than 15 months.'
2. All data is as of the close of business of the indicated pay period.
Since this data had to be hand-compiled, involved over 300 individuals, and
was partially dependent on memory, some inaccuracies may result. I estimate
the overall data to be 95% accurate, with greater accuracy attained in
FY-1975, 76, and 77, and less accuracy in earlier years. I believe this data to be
sufficiently accurate to permit assessments of trends. Moreover, because of time
constraints, the average tenure and average grade trend charts were not
developed. The average tenure chart would require approximately 61,000
separate calculations, and the average grade chart would require approximately
15,000 separate calculations.
So that this data may be audited, the following is also attached:
Attachment V.-~Personnel Action Record in the Office of the General Counsel
from FY-70 through the first two quarters of FY-77. [Retained in subcommittee
files.J
Attachment V is the basic data from which Attachments I, II, III, and IV
were extracted. In addition, average tenure, average grade, and employees
eligible for promotion can be ascertained from Attachment V.
I hope this data will provide the most accurate information possible to the
Subcommittee. If I may be of further assistance, please let me know.
A copy of this letter has been sent to the Subcommittee's Chief Counsel,
Michael R. Lemov and to the Minority Counsel, Bernard Wunder.
Sincerely,
JOHN R. GRIFFIN III,
Administrative Officer.
`At the end of 14 months' service, a law clerk (trainee) who has not passed the bar is
converted to a non-professional job until such time as bar membership is attained.
PAGENO="0216"
210
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PAGENO="0217"
211
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PAGENO="0218"
212
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PAGENO="0219"
213
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~~2/Jon G Lotis
PAGENO="0265"
259
I ATTACHNENT II
September 17, 1976
FROM : Jon G. Lotis
Assistant General Counsel
In the past 3 months, I have lost 113 of my attorneys
(6 out of 18). In order to handre the situation, I
requested replacements or at least the use cf attorneys
from other sections who had the time and would be more
than willing to handle a rate case. Mr. Journey told
me that new attorneys would not be assigned me and that
attorneys from other sections would not be available
because of the work-load in other areas. Since my dis-
cussion with Mr. Journey, July 30, 1976, he has assigned
all new electric rate filings, which will require formal
hearing, tc the hydro-electric section of t Office of
General Counsel and has made 2 reassignments of pending
cases in my section. (See attached memoranda).
In the past year, I have lost 3 out of 7 secretary!
clerical (secretaries) personnel. ~y requests to Mr. Journey
for replacements have been denied. If this situation is
permitted to persist, I will lose my remaining 4 secretaries.
The work in my area of responsibility is increasing,
not declining. My formal case assignments as of September 1,
1976, are shown on the attachment. 1/
]~7 This listing dočs not include what I refer to as
"ankle-biters' i.e., those matters which require the
time and attention of attorneys which are not formal
hearing matters. Items falling into this category
are PGA and fuel adjustment compliance filings, all
other rate filings which are accepted within the thirty
day period, refund compliance matters, answering Con-
gressional mail and other correspondence, preparation
of notices, etc.
PAGENO="0266"
260
One of the three secretaries (Ms. Ross) lost in the
last year was assigned to the electric rate settlement task
force on June 11, 1976. Ms. Ross estinates that she has
only about 2 hours of work per day to do since joining
the task force; before she worked a solid 8 hour day.
Ms. Ross and the undersigned would greatly appreciate if
she could be reassigned back to ray section. if the task
force needs typing to he done it could be sent to my
section. In this manner the agency would receive the full
benefit of the services of Ms. Rc~s cn an 8 hour vs. 2 hour
basis.
/
/ :.~T
/
/ 5 -
Jon C. Lotis
PAGENO="0267"
261
Mr. Moss. Thank you, Mr. Lotis.
Mr. Sims?
Mr. SIMs. .Just a couple of housekeeping matters, if I may.
I see that the attachments are not, in fact, attached to the copies
of the opening statement which the members have before them. This
is a clerical oversight and we are trying to get. these attachments now.
I would also like to put into the record at this point exhibit F,
which I believe the members do have.
Mr. Moss. Without objection, it is so ordered.
[Exhibit F referred to follows :1
PAGENO="0268"
262
~xhibit F
U.S. GOVETtNMENT MEMORaNaUM
JuNE ~. 1973.
To: Jon G. Lotis.
From: General Counsel.
Subject: Conversation with Richard M. Dicke. Ob~o E~r~c Cora~any and
Ohio Power Company, Docket No. E-SSSS.
I suggested that Ohio Electric treat Mr. Dickeb J~oe ~, 1975. ie~cr as a
settlement proposal, if that is what it was intended as. I ..~z~stod th~t request
a public conference and that if additional data r~dred by st:tJ that he be
advised. He requested that the public conference be h~:d he~cre the end of June
1975. I told him I saw no reason why that could net ~::e orrar~zed.
Please follow through on that timing. I believe that yea should attend the
conference along with Mr. Ellis. Also, I would like Mr. Lanz~e in attendance. See
my remarks before on Westernconference of June 11. 3273. I would anticipate
that Bureau of Power and OAF would he repre nzed also.
I told Mr. Dicke that if staff had problems with the Company's pronesal, they
should say what they would prefer and why. As I stated, I se~ this case as having
regional power plant siting overtones.
DREXEL D. Joru~y.
PAGENO="0269"
263
Jt-~%~ 19, 19Th.
Memorandum to: Drexel D. Journey, General Counsel.
From: Jon G. Lotis, Assistant General Counsel.
Subject: Your conversations with Richard M. Dicke, Ohio EIctrc Company.
Docket No. E-888S (See Appendix A).
This is in response to your memorandum of June 17, 1975. to mao cc nrerning
procedure you recommend be followed with respect to the Semi: a 2ld rate in-
vestigation instituted by the Commission against Ohio Electric Comoany.
For the reasons hereinafter discussed I urge that the attached n::i:.n (Appen-
dix B) be issued immediately, that such motion be served on all customers of Onto
Power Company and the Ohio Commission along with the eetttoment letter sub-
mitted to you by Mr. Dicke, counsel for Ohio Electric and Ohio Power. The a
for investigation and for service of notice of these proceedines en tvhciesale ens-
tomers of Ohio Power Company in this case is especially important because the
proposed transaction is between affiliated companies and therefore the protec-
tions normally afforded by arms-length bargaining may not. be present.
At the June 17 meeting in your office of staff personnel associated with the
lab Electric rate investigation, I indicated the background of this proceedIng
and advised you of the consistent blatant refusal of Ohio Electric to respond to
staff's repeated requests for technical data and information necessary to pursue
this Commission's authorized investigation. I recommended that this matter he
turned back to trial staff for action along the lines recommended in staff's motion.
Upon conclusion of that meeting, I, as well as the other staff members involved.
were under the impression that you had no objection to the fling of a staff motion
to compel disclosure and that thereafter this matter would be aermitted to be
pursued through the formal investigative process. However, your June 17 meat-
orandum to me indicates that after conferring with staff you engaced in further
discussions with Mr. Dicke and advised him of' the procedures which you now
direct me to observe. For the reasons hereinafter discussed, I am unable to do eo~
I will outline once again the relevant procedural history of this case. A series
of conferences covering various dates between December, 1974, a March, 1975,
have already been held involving staff and Ohio Electric in attempts by the staff to
secure the information necessary to properly evaluate Ohio Electric's rate ~rc~
posal. These attempts were to no avail. Ohio Electric continued to refuse to ole-
close information necessary for staff to pursue its investigation. Most recently,
staff counsel had been advised by counsel for Ohio Electric, Mr. Conrad K. Harper,
that the situation was out of his hands and that the data would not be forth-
coming. Ohio Electric's apparent attempt to frustrate this Comatfssica's author-
ized investigation by its steadfast defiance of trial staff's effort to secure disclosure
is compounded by the fact that until such investigation is comnlets-d Ohio Electric
will continue to collect rates which maybe excessive and therefore unlawful. Since
this is an investigation of an initial rate, no refund obligation exists a::d relief to
the consuming public can only be afforded after completion of the investigation
and Commission decision.
A conference, as you recommend would serve no useful purpose until technira.
staff received the information necessary to evaluate the original oressotation ci
Ohio Electric and the settlement letter sent to you. I have contacted the snaer-
visory technical personnel responsible for this investigation (i.e.. William Lindsay
and Georgia LeDakis), and they are in agreement that it would he unwise to pursue
further conferences with Ohio Electric until staff is in receipt of the data which it
seeks through the attached motion.
Upon receipt of the information necessary to evaluate the original proposal and
subsequent settlement letter trial staff would pursue this matter as they would in
any other case. Trial staff has never refused to discuss the possibilities of stipula-
tion and settlement in any rate proceeding. However, the time is not ripe for such
discussion in this case.
I am personally distressed at what appears to me to be an atiem~t by Ohio
Electric to circumvent the normal and established rate investinatien prc-cess.
Equally disturbing to me is any suggestion that I participate in su rh maneuveriac.
I will not do so. I have made it my policy and have directed all atm :nevs under ma-
supervision to pursue discovery with the objective of disclosure cf all relevant.
facts in every case. If the information sought by staff's motion is no; discics-ed.
Ohio Electric remains in the driver's seat-collecting monies which may be ulti-
mately found to he unlawful.
In conclusion, I urge that (1) authorization for release of the attached motion
be granted (2) that no further conferences with Ohio Electric b-s cc-evened until
the information sought in the motion is furnished and (3) that no further conversa-
tions with Mr. Dicke related to these "procedural" matters take tiace. If these
recommendations are not acceptable, it will he necessary to restive this matter
through the Executive Director inasmuch as the technical bureaus supervisory
personnel involved in this investigation concur in my disarreenoent with your
June 17 directives to me.
Copies of this memorandum have been sent to those persons and offices listed
in your June 17, memorandum to me.
dcx G. Lorxs
PAGENO="0270"
264
157
~S)
~ PC'~IR OSSICI
~ ~ ~
Dats ~t~:s: - 20, 1975
J0~ G~ tO Bureau Cff1cs~ ____________
Tit1~ Supv. Trial ?~ttorney Grads: C1)-5~5-I5/!~ -
(1~zsianaan tenera~ LOU se1)~ Frci:a
I certLfy that the abcrve naned emnloyeet ~ ~
e~aluened aainnt the aunrcpz±ate elenente of the rnttng gofie on the
sifa of this ~cir=~ This enuloyee's ~
117 is non of an acceptable le-~el of c~nenanrs in-- The
reason3 ah~~ be1~. I rec~ead ~~~ii~t±cn an
_____ is ci an acoeritable lev~1 of ccnn tenon and ~emranta a
~1thin grade iacrea~e -
1T7 Penarl3
RETUPI TRIS OP~ T'3 TE~ 0271CR OP PZRSO~ RCG?~S AT L7AS~ `171 DAYS PRIOR
TO `123 DA17 OR WRIC~ `121 t~PLO14~ IS ILIGIRLI P~R `112 12C21A12 .~Shc-~tn Abcrre)
Sigca~.ure and T1~1e of Certifying OfficIal Date
Signa~ur~ and £i~,le o~. -r1e-~iiag O~cnnl
V
a an~ o~
*~pp~n-~j of Bureau or OffIce Head is rec-uji-ed call if the n-ear ~~aadnt~on
is to ~ii1theo1d the vlthin grade increase.
PAGENO="0271"
265
951 - )
,-68)
FEDERAL POWER CO~iISSIC~
CFICATEOI FOR WtTIEDT GRADE PAD ~EAD?
I
Date ~~_n: --
Eane: Jon G. Lotis BUI~U ~ coo
Title: S~~ea-eieor~r Tri?~l Attorney (Pu) Grade- G5-15J3
~aat ~.ene~aL Coi..n~el) Fron ~a ~ ~o G~j
= ~r~f~- that the above .nene~. enoloyeet a ~aane baa been
evaloarad agn~inat the arnrour~ate elanenta of tba ra~tog guine on the -
r~ierne sIde of thin forn. This ennloyee'a p~orn.anca; - -
[ J is not of an aceeptable level of c~euance for
* reaeon~ shown below. I. reecneth neorosineratjc~ c~
\ /
- /~ ~ZJ is of en accentable level of cor~etonc~ ant warrants a
/ ~Thiitbin grade incre&~e.
f_~J/ P~ner~a
BETUP3 TRIG FOP~! TO TEE OF~ICE OF PEESCEREL PECORAbE AT LT~S2 TEE DAYS PRICE
TO TEE DkLE O~j WHITE TEE ~LO~E IS ELIGIBLE FOR LEE ERASE .(Sho-na Above).
Signature and Title of Certifying Official
tale
Signature end Title of Re-viewing OfficIal
te-~.e
Signature and Ottle of Bureau of Office ffead~ fate
GE~E~LCC~J~SEL
*Ap~p:o-thf of~B eani~ sad is r c-Tr-T ~he re ocaceendatlon
1s tO-withhold tba w4thin grade increase. -
PAGENO="0272"
Porn 95T
~ev(lO-68)
~t1ER~~L PC'~TR C~4ISSIC~ . -
~ ~ ~ GRAD3 ?A~ i~._~sT -
- ~nte ~l~ihla: C~_2~-7k
- Jon G. Lotis - - - T -
__________________________ Bureau or C~_ne: O'~C
~ervisorv Trial Attornev(?U) Grade: -
:-~eraL Cou~seL - - -
Frc: ~32,CC6 To: ~33,~99
I certify that the above naned ant~loyee' a pr~- .anae b~s been
evaluated against the aDorourmate elerents of tha ratios guite ozi t~s
revaree aide of thia forn. This enolcyee'z3 ~e_~o~uance:
_____ is not of an acceptable level of cc=etence for the -*
reaeon~ abci~n belcri. I reccanend recroaiderat~.oa on -.
_____ Ic of en acceptable level of c tence and yarn-ants a
ulthin grade increase.
f 7 Eenar~: - -: -~ - -~
/
BETUR~ THIS FORM TO TEH OPZTCE 0? PlRSORIHI~ PRC~-~A~4S i~T L~r TR~T DXfS PI~I0R
TO TES lATH OS ~BICI THE EEPWISE IS ELIC-IRLE ~O? THE HECP-EASE .(Shc~n ~Thove).
Signature and Title of Certifyic C~ficisl
Dane
Signature and Title of Revieving Off~c1aL
Daze
266
SS l65_31~_56l9
* Signature a~d Title or 5ureau of Office Eeazt~-
* ~ ~-. ~c i/is 77~.
A~orovalofBureat(' )ffice Eead is reqnired caly 1i ~ha reccnaendation
PAGENO="0273"
f~EQ~*ESi FG? F SC~EL I~TW?Z
QU~ST~HCOFFlCZ2 UC1C~
If ~pp c~b1~, ~ r d
MR.-SS-CCS. 2. (F?~~J s~) 1E;~~kE
Mr~ 09-16-41
!L~Z~~
PROMOTION
~C?1ZCC2C~SC
1-3-73
? £F~2CTr(C
~?r.OTh~ :ii~~ ~
C? ~ (F ~CC~#)
ATURCCC~
pa
eder~lPoerCoflIn1ss1orL -c ~
23 ~TIO~C~C~
~ ~ I
IC (22 2~2C ILICO ~ .C~d ~ ~
i~i~ ~
ccc c~_'~-,.,/);/ (-2-).( /
(~C ~ 6-,3~?3
Cc~aac Ccra-~r
267
LACI-FI3ST-14W2L2
LOTIS, JON G.
4. SCLCEc23(Ty~
165 -34--5 619
87-292 0 - 77 - 18
PAGENO="0274"
268
Mr. Sn~is. This contains the memoranda between Mr. Lotis and
Mr. ,Journey, General Counsel, which were the subject of a subcom-
mittee field hearing in Indiana last year.1
Appended thereto are some of the more recent fitness reports and
pay increases which have been accorded Mr. Lotis.
Mr. Lotis, soon after Drexel ~Journey became the General Counsel,
did he discuss anything with you concerning Mr. George Lewnes, who
was then an Assistant General Counsel?
Mr. LoTis. Yes, he did. Shortly after being named General Counsel
on a permanent basis. Mr. ,Journey came into my office and told me
that he thought I was doing very good work.
What he wanted to do, he said, was to transfer curtailment cases
which had been under Mr. Lewnes into my section and to put the
electric rate work which I had been handling back into the Hydro-
electric Sectioii where it once was~ several years back.
Personally, I thought this in terms of my development would be
a good thing because at that time there weren't that many electric
rate cases pending and curtailment cases were just beginning to come
on the scene.
I didn't say anything, however, because the matter was not carried
any further than that, Mr. Journey's suggestion that he was thinking
of that possibility.
He then stated, however, that what he needed to know was whether
I had anything on Mr. Lewnes.
I told him that George and I have had professional differences ir.
the past on substantive issues. hut that is as far as it went.
He said, "Think about it. Think a minute. Do you have anything
on him?"
Well, I thought a minute but I wasn't thinking what I might have
had on George Lewnes. I was thinking of the statement that was
being asked me. I was just furious. This occurred shortly, within
weeks, after his appointment as General Counsel.
I said nothing to him after thinking a minute.
Then he said, "Well, if you get anything on him, my door is always
open." That ended the conversation.
Mr. SIMS. So, Mr. Lotis. literally one of the first moves Mr. Journey
made after he became General Counsel was to come to you and offer
you a significant portion of Mr. Lewnes' jurisdiction in return for any
dirt that you might have had on him. Is that a fair summary?
Mr. L0TIS. I think that is exactly how I construed Mr. Journey's
remarks to me, how I construed them then and how I construe them
today.
Mr. Si~rs. And you have already stated to us what your reaction
was.
Did Mr. Journey's deputy, Mr. Robert Perdue, say anything to
you concerning Mr. Lewnes around this same time period?
Mr. LOTTS. Sometime after the conversation with Mr. Journey,
Mr. Perdue told me that lie had hired a GS-44 for the purpose of
blocking promotions in Mr. Lewnes' shop. At that time there were
a number of attorneys at the GS-14 level in Mr. Lewnes' shop, and
1 See Regulatory Reform-Volume VT, Serial No. 94-85. pp. 455-665 (wholesale Power:
The Federal Regulatory Process), hearings before the Subcommittee on Oversight and
Investigations, Committee on Interstate and Foreign Commerce. 94th Congress.
PAGENO="0275"
269
bringing someone on at that level would, he felt, block some of those
attorneys from getting that GS-15 position.
I asked him whether he had advised Mr. Journey of this. He said
he did. Mr. Journey just laughed.
[The following memorandum was received for the record :J
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
WASHINGTON, D.C., April 1, 1977.
Subject: Affidavit of one Robert Williamson Perdue, dated March 17, 1977, and
attached to Mr. Drexel Journey's prepared statement of March 18, 1977, as
Appendix A1
Mr. Perdue's affidavit states that Mr. Lotis' testimony regarding Mr. Perdue
represents a falsehood. Mr. Lotis testified that Mr. Perdue had told him that
he had hired a GS-14 attorney for the purpose of blocking the promotion to
GS-15 of attorneys at the GS-14 level in Mr. Lewnes' section.
I was a trial attorney in the office of General Counsel at the Federal Power
Commission from 1971 to 1975. In a private conversation with me in the Spring
of 1975, Mr. Perdue said that a GS-14 attorney working under his supervision
had been hired for the purpose of blocking the promotion to GS-15 of attorneys
at the GS-14 level in Mr. Lewnes' section.
WILLIAM D. BRAUN,
Coun~sel.
Mr. SIMS. Mr. Chairman, I will note for the record that a briaf
survey of the promotion, hiring, and firing charts that Mr. Fee put
in the record did not seem to reflect any category for promotions
which were blocked.
I would like to ask you now about your current assignment. Do you
consider that your current assignment is an increase or even a continu-
ance of your previous level of responsibility?
Mr. Lo~ns. There is no question in my mind, or that of my profesS
sional colleagues in the utility business, both inside and outside the
Government, that I have received a demotion. I have had many
expressions of sympathy and condolences from professional people
both inside and outside Government. I have received no congratula-
tions on my new assignment.
Mr. SIMS. Do you know of anyone who considers your assignment
an increase in responsibility?
Mr. LoTrs. Perhaps the General Counsel.
Mr. SIMS. But no one else?
Mr. LOTIS. I don't know.
Mr. SIMs. Has your new assignment, which until quite reeentl.y i
understand consisted of handling two appellate cases, kept you
completely occupied?
Mr. LOTIS. No, it has not. I considered that I could have handled
those two appellate cases at the same time I was performing my
responsibilities as Assistant General Counsel, and that would be
required. I certainly don't believe it is commensurate with my ability
and it certainly hasn't taken up my full time.
A lot of my time has been spent advising my old staff, which comes
quite frequently to my office asking for advice on both technical and
legal matters.
Mr. SIMs. Do you believe, the Touche Ross management study was
the basis for your reassignment?
1 See p. 347, this hearing.
PAGENO="0276"
270
Mr. Loris. I believe it was absolutely not.
Mr. SIMS. Why not?
Mr. Loris. For a number ąf reasons.
One, about a month after the Touche Ross, after the October 12
reorganization took place, an article appeared in a FPC news digest
which indicated that the changes which had occurred in OGO on
October 12 were the result of the Touche Ross study.
I played the game up to this point because at that point I viewed
the action as strictly political in nature.
I became very concerned when the agency began issuing press
releases saying that my change was the result of a management study.
I immediately got on the phone to the Office of Public Information,
Bill Webb, the Director, and asked him whether he confirmed those
facts that he was reporting.
Bill said that he woulcj g~t bitck to me.
He did get back to ~ne later, and he said that the report came
from the Executive Director's office but that it had been. edited and
revised by the General Counsel.
I asked him if he took any steps to verify the facts contained in
the release. He said he had not.
I then called Paul Burke, who was on the Touche Ross staff. He
was the principal liaison man for Touche Ross with the Office of
General Counsel.
I asked, "Paul, did you read the article?"
He said he had not, but I read it to him. He was very upset. He
said he was very tired of the agency taking actions and then using
the names of Touche Ross for the justification.
I asked what about that particular precise article referred to. He
said he was upset by that.
I asked, "Would you be willing to go on the record on that so I
could have a retraction printed?"
He said yes, he would be happy to say something which would, in
effect, remove Touche Ross from responsibility for the change which
had occurred.
I called Bill Webb back and I said, "Bill, Touche Ross would be
willing to make the change. Would you print it?"
He said he would, but he said, "Jack, you have to realize there
will be a problem in that it has to receive the clearance of the
Executive. Director."
I then became concerned. I called another individual with Touche
Ross. with whom I had dealt quite frequently during the course of
their study.. His name is Thomas Doyle.
I asked Mr. Doyle, explained to Mr. Doyle the situation, and I
asked mm what his views were. He said, "Jack, as a personal friend,
don't pursue this matter any further. You're going to get hurt."
I said to Mr. Doyle, "What further can they do to me but to damage
me by printing such an article for publication?"
But, based on Mr. Doyle's advice, I thought that maybe in my best
interest at that time I wouldn't pursue it.
I knew the election was right around the corner and I was hoping
that the top management of the agency would be immediately
removed. I did nothing at that time.
I had other reasons to believe that my removal was not based on
the Touche Ross study.
PAGENO="0277"
271
During the course of their study, as I said, I met quite frequently
with Mr. Doyle. I told Mr. Doyle I was quite concerned because the
Chairman was going around the country quite frequently and speak-
ing of a backlog of rate cases at the agency, and it seemed to me, at
least, that the finger was being pointed at the attorneys in the agency.
I asked him whether he believed the same. He said he didn't find
any deficiency on that score in my department, and he thought highly
of our operation.
He also referred me to the GAO report which did not indicate that
I or my office was responsible for any of the backlog which existed
at the agency.
As a matter of fact, Mr. Doyle subsequently told me that upon
looking at the backlog a little closer, Touche Ross determined that
the Commission itself was largely responsible for that backlog on
electric rate cases.
Mr. SIMS. In other words, the time between an administrative
law judge's decision or some other decision and a Commission decision
was the largest single factor?
Mr. LOTIS. Yes. I am not sure he said the largest single factor, but
he said that was one of the principal ~factors.
Mr. SIMS. That was the time period he was referring to.
Mr. LOTIS. Yes.
Mr. SIMS. I would just like to note for the record the GAO report
to which you referred. I believe the members have a copy of it, or
certain pages. It is dated September 7, 1976. It is entitled "Manage-
ment Improvements Needed in the Federal Power Commission's
Processing of Electric. Rate Increase. Cases."
On page 14 of that report the GAO lists the four primary causes
for backlogs. Mention of backlog in the General Counsel's office is
not one of those four.
I wanted to note that in order to confirm what you just repeated
in your testimony and mentioned in your opening statement.
So you were able, despite your shrinking professional staff, to k~ep
up with the electric rate backlog. Do you know how many persons
have now been thrown. into this struggle to decrease the backlog? /
Mr. Lopis, I. know in terms of the electric rates I had a total of
12 attorneys. Six were assigned to electric cases and six to pipelines.
The electric rate cases now consist of 17 attorneys with authoriza-
tion for 3 more, I understand.
Mr. SIMS. Of the 12 attorneys that you were finally reduced to,
about half of those did electric rate work.
Mr. LOTIS. Yes.
Mr. Sii~rs. So they now have as many as 17 or more doing whwf~
6 attorneys did at one point?
Mr. LTIS. Yes. .
Mr. SIMS. Mr. Chairman, I would like to introduce into the record
something which already has been referred to. This is entitled
exhibit G.
This consists of excerpts from notes compiled by Touche Ross
concerning the Office of the General Counsel of the Federal Power
Commission.
Mr. Moss. If there is no objection, it is so ordered.
[Exhibit G referred to follows :1
PAGENO="0278"
272
EXHIBIT G
EXCERPTS FROM NOTES OF TOUCTIE Ross STUDY (JULY 1976) OF FEDERAL POWER
COMMISSION, OFFICE OF GENERAL COUNSEL
I. GAS AND ELECTRIC RATES (LOTIS)
Cas? management and control function smoothly. Training programs by
Assistant General Counsel Lotis and monitoring of case status for timely
completion of major activities and quality assurance reviews contribute to the
operating effectiveness of this section.
Lotis conducts intensive training `sessions for all new attorneys and secre-
taries. Each attorney is implicitly "on probation" until he has demonstrated `to
Lotis the ability to conduct each case type. Attorneys in Lotis' section rarely
remain at the commission long enough to make significant advances in grade
level. Most leave to go with outside law firms. Highly `sought after by law
firms. Intensive learning experience at FPC under Lotis.
II. LEGISLATION
There is no system of assignment of activities. No review of current inventory
of assignments. No review of completion status of assigned activities. There is
no system for status reporting nor performance monitoring of assigned work
activities. There are no section management controls over quality of work
product and consistency of approach consistent with commission policies.
III. HYDROELECTRIC
Status reporting (of cases) process is informal. Review process and controls
over quality and timeliness of work product do not appear to exi'st.
Experience for the most part is the only training process. The Hydro unit has
a compendium of forms and copies of precedent setting cases, but has not been
updated in years, nor organized by subject matter.
There is an unusually large percentage of grades 13 to 15 attorneys in this
section.
Significant effort is devoted to processing activities unrelated to hydroelectric
case backlog.
Lack of an effective system for orientation and training affects an increasingly
longer learning curve and inhibits the transferability of section attorneys among
case assignments.
IV. GAS PRODUCERS
There is no training program for attorneys. There is limited cross fertilization
of attorneys into other technical areas. No attorney has ever handled a curtail-
ment case and a pipeline case. No consistent review process. Revise case assign-
ment/management procedures.
V. CERTIFICATES
Section is unable to document actual case load. Case management procedures
in the past have been nonexistent. Lack of training contributes `to technical
knowledge deficiencies.
Mr. SIMs. The text of the notes are available for inspection in the
subcommittee offices. These are fairly extensive excerpts from those
notes.
I would like to read what Touche Ross, the independent manage-
ment group hired by the Commission, had to say about the Gas and.
Electric Rate Section headed by Mr. Lotis.
Case management and control functions smoothly. Training programs by
Assistant General Counsel Lotis and monitoring of case status for timely
completion of major activities and quality assurance reviews contribute to the
operating effectiveness of this section. Each attorney is implicitly on probation
until he has demonstrated to Lotis the ability to conduct each case type.
Attorneys in Lotis's section rarely remain at the Commission' long enough to
make significant advances in grade level. Most leave to go with outside law
PAGENO="0279"
273
firms, highly sought after by law firms. Intensive learning experience at FPC
under Lotis.
Those are rather favorable remarks and they contrast very greatly
with the unfavorable remarks that Touche Ross had about all of the
other sections in the Office of the General Counsel.
For example, in the Gas Producers and Certificate Section, and I
believe those are the two sections to which your responsibilities have
been assigned--
Mr. L0TIS. Legislation and Certificates.
Mr. SIMs. The former head of Legislation is now head of a section
which handles electric rates?
Mr. Loris. Former head of Legislation now handles my electric
rat.e work.
Mr. Sr~rs. In Legislation Touche Ross notes:
The~e is no system of assigning activities, no review of current inventory of
assignments, no review of completion status. There are no section management
controls over quality of work product so far as gas certificates. Section is unable
to document actual caseload. Case management procedures in the past have been
non-existent. Lack of training contributes to technical knowledge deficiencies.
These are merely the highlights.
From these statements it sounds as though you should have been
given additional managerial responsibilities rather than having them
removed from you.
Was not your office even moved from the eighth floor down to
the fourth floor?
Mr. LOTIS. Yes. At the time my office was moved, I called the
Executive Director and I asked, `Would you please not do that if I
was going to work on appellate work? At least keep me close to the
law library."
He said he thought he had done enough for me already and he
was going to do no more. I had asked him to intervene with the
General Counsel to leave me close to the library at least.
Mr. SIMS. The Executive Director has testified that whenever he
didn't want to answer a question or couldn't remember, or for what-
ever reason, he often referred the questioner to Mr. Journey, who he
said supervised attorneys such as yourself.
What did the Executive Director mean by the statement he couldn't
help you out any more?
Mr. LoTIs. I think he was referring to the fact-I am certain he
was referring to the fact-that on the day of the reorganization,
before it was officially announced, which was about 4 o'clock that
afternoon, it was fairly well known that the reorganization was going
to take place that day.
I went to the Chairman's office early that morning and I asked
the Chairman if he could tell me what was going to occur. He said
he couldn't.
I told him that I have reason to believe that I was going to be
removed from my position.
I told him that I realized that management had certain preroga-
tives, and I told him then that I would agree to sign a statement,
which would be a statement of my withdrawal, or leaving, of the
agency after the elections if Mr. Ford was reelected, but if the
PAGENO="0280"
274
Democrats were voted into office, I wanted him to give me some
assurance that I would stay on.
He gave me no response but said to please see Mr. Journey and he
will give you any information that can be given as to your position.
I went to Journey's office. Mr. Journey said he was working on
it at the time and couldn't talk to me about it.
I went to the Executive Director and I said to Mr. Fee could he
please give me some help on this. I know fairly well now that the
intention is to remove me. I said:
If you want me out, probably the best way is not to remove my title and
position. Keep my title and position. It would be much easier for me to get a
job and `to avoid a lot of hassle as to what happened on October 12.
I was trying to avoid that. I see now that I haven't.,
Mr. Fee was kind enough to say he would look into this and see
what he could do, that he would talk to Mr. Journey and call me
hack.
He later called me back and said although Mr. Journey was very
reluctant since a lot of papers relating to the reorganization already
had been drafted, he was able to convince Mr. Journey that I should
be placed back on the organization chart with a title.
I thank3d him and that was the end of the conversation.
Mr. Sn~ts. At this point I would like to introduce into the record
exhibit I, a memorandum of conversation between myself and
Mr. Allen Tuttle, the Solicitor of the Federal Power Commission.
Mr. Moss. Is there objection?
Hearing none, it is so ordered.
[Exhibit I referred to follows:]
PAGENO="0281"
275
Exhibit I
FEDERAL POWER COMMISSION
WASHINGTON. D.C. 20426
DATE: January 31, 1977
SUBJECT: Memorandum of Conversation between Allan Abbot
Tuttle, Solicitor, FPC, and Stephen Sims, Special
Assistant, Oversight Subcommittee
The conversation, initiated at the request of Mr. Sims,
concerned (1) handling of cases by the Solicitor's Office
generally and (2) the cases currently assigned to Assistant
Litigation Counsel Lotis.
The two cases assigned Mr. Lotis were selected by the
General Counsel from a list prepared by Mr. Tuttle. The
General Counsel asked Mr. Tuttle to prepare this list on
the day in October 1976 when the reorganization of the Office
of the General Counsel was announced. The actual assignment
of cases to Mr. Lotis was made later that day.
Assigning of appeals cases to attorneys outside the
Solicitor's Office is not routine, but is not unprecedented.
Sometimes an attorney outside the Solicitor's Office will
ask for and get an appeals case. In other instances,
attorneys or sections will possess unusual expertise or be
so conversant as regards a given case that they will be
assigned to handle or assist with the appeal. The procedure
in the case of Mr. Lotis differed, in that he did not request
the Solicitor for the assignment, nor did he have prior
exposure to the FPC proceeding.
The two cases assigned Mr. Lotis (a Transco case and
a Panhandle case) are major cases. Mr. Tuttle had a lawyer
from the Solicitor's Office in mind for the Panhandle case
before it was assigned to Mr. Lotis. In the instance of
Transco, the Solicitor had received a request from a lawyer
outside the Solicitor's Office who had special knowledge
in the case and was interested in working on it.
Q~UTIoI1
(*)
7)761916
PAGENO="0282"
276
-2
If the cases had not been assianed to Mr. Lotis,
the Solicitor1 s Office was prepared to ~iandle them.
Stephen F. Si=s
This memorandum substantially reflects a conversation
I had with Mr. Sims, at his request, on January 31, 1977W
1 an ADbot Turtle
PAGENO="0283"
277
Mr. SIMS. Paragraph 2 of this memorandum, which is signed and
attested to by. Mr. `Tuttle, states as follows:
The two cases assigned Mi. Lotis were selected by the General Counsel from
a list prepared by Mr. Tuttle. The General Counsel asked Mr. Tuttle to prepare
this list on the day in October 1976 when the reorganization of the Office of the
General Counsel was announced. The actual assignment of cases to Mr. Lotis
was made later in the day.
Is there anywhere stated in the Touche Ross study that this is a
style of management to be emulated?
Mr. L0TIS. As I testified, I don't believe Touche Ross touched on
my position other than in a complimentary manner.
Mr. SIMs. This was, in fact, a rather hasty attempt by Mr. Journey
to find something for you to do, was it not?
Mr. LOTTS. That is my judgment.
Mr. S~IS. Mr. Lotis, the Touche, Ross notes say that your attorneys
were very well trained compared to the rest of the Office of the
General Counsel. Do you believe they were treated equally and fairly
in promotion?
Mr. L0TIS. In terms of promotions, we were at the bottom, the very
bottom fling, of the ladder. While promotions on occasion were given
to attorneys under my supervision, in the main they were the very
last to receive promotions.
Mr. Smrs. Mr. Chairman. I would like to introduce into the record
at this point exhibit H which depicts figures provided to subcommit-
tee staff by the Federal Power Commission. It shows the rate of
promotion by section within the Office of the General Counsel.
Mr. Moss. Is there objection? Hearing none, it is so ordered.
[Exhibit H, referred to, follows:]
PAGENO="0284"
278
EXHIBIT H
March 7, 1977
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
Rate of Promotion by Section, Office of
General Counsel
(From FPC Data)
The Rates section, which Lotis headed, had the lowest rate
of mromotions of any of the sections headed by an Assistant.
General Counsel in the General Counselts Office between
October 1975-October 1976:
Promotion No. No.
Rate Promoted Eligible
Section
Solicitor
40%
2
5
Certificates
46.2%
6
13
Legislation
25%
. 1
4
Hydroelectric
38.5%
5
13
Producers
100%
7
7
Rates
.20%
2
10
Comparison
of Promotions in
October 1975-76
Grades 9-13
.
Section
Promotion
Rate
No.
Promoted
No.
Eligible
Solicitor
33%
1
3
Certificates
75%
6
8
Legislation
33%
1
3
Hydrolectric
50%
4
8
Producers
100%
4
4
Rates
22%
2
9
Note: Personnel Data Tabulated from Information Supplied
by the Federal Power Commission.
PAGENO="0285"
279
Mr. Sii~rs. Mr. Lotis, I note that for the period of October 1975 to
October 1976, which is when the reorganization occurred, the promo-
tion rate in the section you headed was approximately 20 percent, only
2 out of 10 eligible being promoted.
I also note that that is the lowest of all the operating sections. In
fact, one of the sections, the Producer Section, had 100 percent
promotion rate, 7 out of 7.
Does this seem to confirm your fears and suspicions which you
just expressed?
Mr. L0TIS. Yes. I had never seen the documentation of it before,
but it certainly confirms what I believe to be the case.
Mr. SIMS. Just to be sure we did not run into some statistical quirk,
such as high GS ratings, or the absence of a slot into which they could
be promoted-in other words, no head room-we looked at attorneys
simply in grades 9 through 13.
I just note that once again the Rate Section comes out dead last
among the operating sections.
Mr. LoTIs. Yes. Let me say on that point that I was quite familiar
with what was going on at the agency. When I hired attorneys, I
advised them of that fact.
I said their best opportunity is to acquire as much knowledge about
the work as possible and leave the agency because promotions-
because our section was not favored and their best opportunity and
best chance was to learn as much as they could and get out of
Government.
Mr. SIMS. Do you think Mr. Journey may have had a few laughs
about this, also?
Mr. L0TIS. I have no idea.
Mr. SIMS. In your statement you said you indicated to the solicitor
~tnd Chairman Dunham, among others, that you were considering
leaving the Commission. What exactly did you say to Chairman
Dunham and the others regarding your intentions on this score?
Mr. LoTrs. Yes. I think the situation has to be straightened out.
I had applied for the position of administrative law judge in mid-
April of 1976. I applied because I was very concerned about my own
position in light of what had been happening with Mr. Lewnes.
Sometime after I had taken the examination, between mid-April
and June 4, and the way my calendar shows it it was June 4 at 9 a.m.,
T was called to the Chairman's office.
The Chairman had said to me that he had heard rumors that I
was thinking of leaving the agency and taking the position of
administrative law judge, and he asked me what the status of that
application was.
I told him that while I had originally intended, when I had filed the
application, to leave by .July 1, that at that time, which was June 4,
I believe, there was no possibility that that could occur, and the way
the program was set up at the Civil Service Commission it would be
the fall before I could obtain any status on the roster.
I told him that would be so close to the election that I may very
well not leave this agency.
He said that he had no problem with that decision. I had asked him
at that time whether he thought any changes would occur as a result
PAGENO="0286"
280
of the Touche Ross study prior to the election. He said other than
some housekeeping matters, he thought not because we would be
coming too close to th~e election.
He also said to me at that time that if any differences occurred
between myself and the General Counsel between now and then, that
I should advise him of that and he would create a higher position
for me within the agency.
Mr. Si~is. Does that strike you as something that Touche Ross
might endorse?
Mr. LoTIS. I have no idea of that. I was quite surprised at the time
because, while I had had differences with Mr. Journey in the past, I
could not anticipate any differences between then and the election
which could cause him to make the statement, so 1 was quite surprised.
I said nothing and the meeting ended.
Later that same day, at 4 p.m. on June 4, I was called in to a
meeting with the General Counsel and the Executive Director of the
agency. The subject of the meeting was the electric settlement task
force which was just getting off the ground.
The. Executive Director handed the meeting over to Mr. Journey,
who was iii the midst of explaining what was intended with the elec-
tric settlement task force.
I was asked for my cooperation. I told them they would get it but
I thought they would fail, that the task force would fail.
Mr. Journey then received a call and. left his office.
At that time the Executive Director said to me:
Jack, let Mr. Journey do whatever he wants to with this task force. Let him
alone. If any problem arises between you and Mr. Journey, we will have a
position for you. I have taken care of this. I have spoken to the Chairman
about it and he has cleared it.
Mr. SIMS. Before we get into the electric rate settlement task force,
I want to make it clear that there was nothing in your application for
an administrative law judge or in your conversations with Mr. Dun-
ham or any of the other senior decisionmakers at the Commission
which made it clear that you were going to leave before the election.
Itthatthe case?
Mr. Lo~ris. No. Prior to June 4, and I think that was the date the
Chairman called me to his office, prior to June 4, I think the impres-
sion might have been conveyed by myself and by others that I was
definitely leaving and was going to leave by July 1, but I clarified
that with time Chairman at the June 4th meeting.
Mr. SIMS. So there was no reason to exclude you from the reor-
ganized Office of General Counsel, was there?
Mr. LoTTs. No.
Mr. SIMS. Thank you.
Could you describe briefly what the electric settlement task force is?
Mr. L0TIS. The electric rate settlement task force was created, as
best I can determine, by memorandum from the Executive Director
dated June 28, 1976.
It consisted of about four to six personnel. Its principal objective,
in terms of significant aspects of what it should be doing, was that it
had the authority to overrule the investigatory staff in any case pend-
ing before time Commission in terms of the final position that the staff
would take for settlement.
PAGENO="0287"
281
Mr. SIMS. So the task force had the authority to overrule the staff
which would be acting under the procedures you described in your
opening statement; is that correct?
Mr. LOTIS. They had the authority to overrule a staff position for
settlement which was developed on the basis of my settlement ground
rules, which I previously testified to.
Mr. Smis. Are you aware of any instances where the task force over-
ruled the staff and had a case settled at a level different from the staff
position?
Mr. LoTIs. No.
Mr. SLMS. Did this authority concern you?
Mr. LOTI5. It concerned me very much.
Mr. SIMs. What was the danger therein?
Mr. LOTIS. I was very much concerned because the technical staff
which conducts these investigations must certify that settlements are
in the public interest and are just and reasonable. The law is that a
settlement is a disposition on the merits.
My ground rules for settlement reflected that fact. I was very much
concerned with a technical witness being coerced by a supervisor to
change his position to achieve settlement against his better judgment.
Mr. SIMS. Did you speak to the chief of the task force about this?
Mr. LoTIs. Yes; and let me finish the remainder of my concern re-
lating to the prior question.
Justified or not, my concern was also the statements made about my
receiving a higher position if I had any disagreement between June 4
and the election. That was another aspect of my concern.
Mr. SrMs. Prior to speaking to the task force director, did you give
any special instructions to your staff which reflected this concern?
Mr. Lo~ris. Yes. Right after the June 4th meeting, I called a meet-
ing of my staff and I told them to be particularly careful in all settle-
ments to follow my instructions, settlement and negotiating instruc-
tions, carefully, and particularly with respect to rate of return.
I also at about the same time talked to Mr. Lindsey, heading up the
settlement. task force of the Commission. I told Mr. Lindsey how I
construed the June 28th memo of the Executive Director giving him
authority to overrule the staff position. Mr. Lindsey agreed with me.
I told him under those circumstances, while I respected that posi-
tion, I also had an obligation that I felt I must fulfill, and I told
him that if ever that occurred, I would call the task force member
to the witness stand at the time the settlement to the Commission was
certified to testify under oath, or to verify by means of affidavit, fhat
the settlement agreed to by him was just, reasonable, and in the public
interest.
I also told him that if the technical staff man who had spent weeks,
maybe months, investigating this matter thought differently in his
professional judgment, then I was also planning or thinking of call-
ing him to the stand to present his views.
Mr. SIMs. Did you discuss the operations of the task force with
representatives of Touche Ross?
Mr. LoTIs. Yes; in September I did.
I told Touche Ross I was very much concerned for the same reasons
I have just expressed. I also told Touche Ross that they had not been
PAGENO="0288"
282
effective, they had never overruled one staff position, perhaps because
of my instructions which I thought was fairly well-known by that
time. I thought it. was a waste of money and staff.
Mr. Lindsey was a very good man and I thought he should be per-
forming the responsibilities under his job title, which was the Deputy
Chief of the Bureau of Economics.
Mr. Si~ts. What was Touche Ross's response?
Mr. Loris. Touche Ross's representative told me that they would
investigate this matter independently.
Later they came back-I should say the Touche Ross representative
who at that time was a Mr. Doyle came back-to my office. I asked
him whether he had investigated it. He said he had. He said he agreed
with me, and that Touche Ross would recommend to the Commission
that the task force he dissolved.
Mr. Sr~rs. Do you know what happened to that recommendation?
Mr. LoTIs. Mr. Doyle came back to me a few days later and told
me that he had met with either the Executive Director, the Chair-
man, or both-I am not sure of the precise number of people he met
with, but I thought it was either or both of them-and discussed the
matter with them.
They thought that in light of the Chairman's public statements as
to the efficiency and the wort.hwhi.leness of the task force, that it
should be continued for the time being and phased out rather than
immediately dissolved.
Mr. Snis. So this was clearly a Touche Ross recommendation that
was not taken.
Mr. LoTIs. It was decided it would be phased out. The task force is
still in existence today.
Mr. Snrs. Mi. Chairman, I would simply like to note for the record
what Touche Ross did say about this task force.
On page ii-9 of the October 1976 study entitled "Phase IT-B----
Mr. GORE [presiding]. Is there objection?
Mr. SIMs. They say:
The settlement task force constitutes an additional organizational element
which must be coordinated and scheduled by staff. Additional staff effort must
be expended in familiarizing the task force with each case and the staff position
in each case.
They add:
On the other hand, the settlement task force is composed of experienced FPO
personnel who may *be increasing the effectiveness of the informal settlement
discussions. We recommend that the effectiveness of the settlement task force
be evaluated to determine if a continued specialized settlement function is
warranted.
I submit that Touche Ross printed in their final report exactly what
you suggested they were going to do, exactly what they told you.
I imagine that the events that. you have just recounted have
bothered you a great deal. Could you summarize your feelings about
all this for the committee?
Mr. LOTIS. Yes. They are very intense, so I thought I would read
them to you.
I understand from Mr. Journey's statement to the committee that
he is relying on the Touche Ross report to support the changes made
in the October 12, 1976 reorganization.
PAGENO="0289"
283
Touche Ross' notes are before you. I urge you to read them
carefully.
"Intensive learning experience at FPC under Lotis," says Touche
Ross. The General Counsel's response is to remove all attorneys out
from under my supervision.
Touche Ross says I did my job and they say I did it exceptionally
well, better than any other division in the Office of the General
Counsel.
But that is precisely the point: I succeeded with the help of many
dedicated and capable attorneys and secretaries in making the regula-
tory process function smoothly, efficiently, and speedily in my area of
responsibility at minimal cost to the taxpayer. Obviously, this cannot
be tolerated.
I also made recommendations for cost and manpower savings which
Touche Ross agreed could be achieved only to find out that it would
be better that such savings be delayed to avoid embarrassment to
officials whose public statements would prove to be wrong.
I carried out my responsibilities to the public interest in the AEP
case in docket No. E-8888 against significant obstacles only to find out
that I was not expected to do that good a job.
The Natural Gas and Federal Power Acts say that consumers are
entitled to adequate and reliable utility service at the lowest reason-
able rate. Achievement of that objective, whether through an inde-
pendent regulatory agency or through an executive branch officer, can
be attained only if the price-setting process is handled with care by
public officials selected on the basis of their sensitivity to the rights
0. consumers who must ultimately foot the bill but who are not
~present and participating in the process. They must rely on public
officials to protect their interest.
These same public officials should also realize the need for a strong
healthy utility industry if the country's energy needs are to be served.
The rights of consumers and the financial requirements of the utility
are not incompatible-a balance can be struck.
Last, but not least, public officials must be selected on the basis of
their competence and high ethical standards which will be necessary
to restore public confidence in the utility price-setting process.
Mr. SIMs. Have you become clear in your own mind as to the motive*
for your reassignment on the part of Mr. Journey or any of the
Commissioners?
Mr. Lo'ris. No. I know I have done my job. No one has said other-
wise.
Mr. SIMs. You know of no justification is what you are saying. Is
that right?
Mr. Loris. None.
Mr. Smrs. Thank you very much.
I have no further questions.
Mr. GonE. Mr. Lent?
Mr. LENT. Thank you very much, Mr. Chairman.
Mr. Lotis, you indicated in your recent answer that you know of no
motive or justification for your change of position. Were you one of
those officials of the Federal Power Commission who testified at one
tune or another before a conmmnjttee or subcommittee of the House of
87-292 0 - 77 - 19
PAGENO="0290"
284
Representatives and do you feel your change in assignment was a
result of active retaliation?
Mr. LoTis. I have never testified before a House or Senate com-
mittee.
Mr. LENT. So you do not fit into the same category as Mr. Mamone
or Mr. Lewnes or any of the others?
Mr. LoTIs. If that category means whether I testified before, the
answer is: No, I have not testified before.
Mr. LENT. I am a. little curious. Perhaps you can straighten me out,
Mr. Lotis.
What is it that you think you did that would have brought about
your transfer?
Mr. L0TIS. I think I did my job.
Mr. LENT. Was there anything that was ever said to you about the
way in which you did your job that would give us some clue as to
why this transfer occurred?
Mr. LoTIs. I outlined in my prepared statement how I did my job.
What precise facets of how I performed my responsibilities which
might have caused anxiety or disagreement by top management, I
don't know.
Mr. LENT. You did say during questioning by counsel that prior to
the 4th of June you may have conveyed the impression that you were
going to leave the Federal Power Commission.
Mr. LOTIS. I am certain of that. I am certain that I must have had
discussions, perhaps with the Executive Director and perhaps the
Chairman indicating that I was going to take an AU position by
July 1 and I thought at that time things would work through.
Mr. LENT. Did you ever say anything else that might have con-
veyed that impression to your superiors that you were a short-timer?
Mr. LoTIs. Yes. Right a.fte~ I applied in April, I went to see
Mr. Journey and I told him that, because I expected Civil Service to
contact him.
The point of the fact is, though, that on June 4 at my meeting
with the Chairman I told hini that I may very well stay until the
election. He recognized that.
Mr. LENT. Through the election.
Mr. LoTIs. Through the. national election in November.
Mr. LENT. In 1976?
Mr. L0TIS. Yes.
Mr. LENT. So that this reorganization took place in October of 1976
and you had previously indicated to the Chairman that you were
thinking of leaving after the election of 1976.
Mr. LOTIS. No. I told him in our conversation that I was going to
stay, it could very well be that I would stay on, because by the time
I would be put) on the Civil Service roster it would be about October.
By `that time, I wanted to see what the outcome of the election was
and whether the administration changed and I would have any future
with the agency.
Mr. LENT. Is it not a fact that you had on several occasions sought
out other employment?
Mr. LoTIs. During what period?
Mr. LEN~I. Prior to the reorganization? I mean other than the
application for administrative law judge.
PAGENO="0291"
285
Mr. Loias. During what time frame?
Mr. LENT. During any period that you had worked for the Federal
Power Commission and prior to the October 1976 reorganization.
Mr. LoTIs. I am trying to think of the last discussion.
Mr. LENT. Let me ask some specific questions.
Did you ever go to another Federal agency looking for a job?
Mr. L0TIS. Ever?
Mr. LENT. Ever before the October 1976 reorganization.
Mr. L0TIS. I don't believe so.
Mr. LENT. You asked for a job. This is sort of a monumental thing
in most people's lives. They would remember whether they ever
sought out a job.
Mr. Loias. I did not to the best of my knowledge.
Mr. LENT. No one else would have done it under your name for you,
would they?
Mr. LOTIS. I am saying I did not.
Mr. LENT. Did you ever interview for a position with any other
agency or with a private law firm or with any other potential
employer?
Mr. Loris. Prior to the October 12th reorganization-no govern-
mental agency. In terms of private, I think my last discussion was
with a firm which was not engaged in the utility practice of law, but
that was in 1975, late 1975.
Mr. LENT. Wasn't it a matter of common knowledge around the
General Counsel's office that you were utthappy and you were inter-
ested in finding some other employment, either as a AU or in some
other capacity.
Mr. L0TIS. There is no question about it, that prior to the meeting
with the Chairman, which I believe was June 4, I had conveyed the
impression that I would leave, that I thought I would leave if I could
get something I liked.
Mr. LENT. So when the reorganization day of reckoning came,
you were assigned to handle some cases under the direct supervision
of Mr. Journey-is that right?
Mr. Lopis. Yes.
Mr. LENT. Is it fair to say you became, in effect, Mr. Journey's
ass~ta1it?
Mr. Loris. No. Technically that may appear on the organization
chart. but since the reorganization Mr. Journey has never spoken to
me. I would hardly call that an assistant-type relationship.
Mr. LENT. One of these cases you were asked to handle was the so-
called Panhandle case.
Mr. L0TIS. Yes, sir.
Mr. LENT. The other one was the so-called Transco case.
Mr. Loris. Compensation case, yes, sir.
Mr. LENT. You were put on preparing briefs for these two cases.
Mr. Loris. Yes, sir.
Mr. LENT. And these two cases ultimately would be argued before
the U.S. Supreme Court?
Mr. LOTIS. I have no way of knowing. They were in D.C. Circuit.
Whether they would get t~ the Supreme Court, I don't know.
Mr. LENT. They are at the Court of Appeals level now?
Mr. Loris. Yes, sir.
PAGENO="0292"
286
Mr. LENT. It is generally assumed they will ultimately reach the
U.S. Supreme Court.
Mr. LoTIs. No.
Mr. LENT. It is assumed they are not going to reach the Supreme
Court?
Mr. LOTIS. I don't know whether the Supreme Court would grant
ceriorari on those cases or not..
Mr. LENT. Is it not a fact that both the Panhandle and the
Transco cases are deemed to be very important cases in the Federal
Power Commission, major cases?
Mr. LoTIs. Yes.
Mr. LENT. So you consider it a demotion that you were transferred
from the job you previously had to work on briefs for these two very
important cases and to defend the position of the Federal Power
Commission possibly before the U.S. Supreme Court?
Mr. LoTIs. Absolutely yes. Before I had jurisdiction over 200 pend-
ing cases before the Commission to determine not only how the cases
were tried, but because of the Commission's rules of practice I also
advised the Commission on the disposition of those cases. I was in a
policymaking position.
I am not now. I am working as a trial attorney at the appellate
level on two cases, albeit important ones.
Mr. LENT. You were told or advised by Mr. Dunham during one of
your conversations with him, as I recall your earlier testimony, that
if any problems were to arise between you and Mr. Journey you
should come and see him, meaning Chairman Dunham?
Mr. Lo~ris. Yes,sir.
Mr. LENT. I ask you now-following the October reorganization
did you seek out Chairman Dunham as he had suggested earlier?
Mr. Lo'rrs. He said if I have any problems between that time of the
conversation, which was June 4, and the election, to see him. I didn't
consider the reorganization when it occurred-maybe I do on subse-
quent reflection-a problem to meet. I don't know why I was reor-
ganized down in my position.
Mr. LENT. You say reorganized down. You suffered no diminution
in salary level?
Mr. Lo'ris. That is about the only thing, but that is not the im-
portant thing to me.
Mr. LENT. Your testimony is that you don't really know why you
~vere transferred down.
Mr. Lo'ris. That is correct.
Mr. LENT. It had nothing to do with your cooperation with a com-
inittee of the House of Representatives?
Mr. L0TIS. Your are right. I have never testified before a House
committee.
Mr. LENT. Is i.t not true that if an individual feels he has been
wronged by an administrative action such as transfer, that that mdi-
vidual has the right to file a grievance with the Civil Service Corn-
irnssion? Is that true?
Mr. LoTIS. That is true.
Mr. LENT. Did you take advantage of that right which you have as
u Federal employee? .
PAGENO="0293"
287
Mr. LouuIs. I did not because I believed that process to be very
demeaning and also because we were 1 month away from the national
election and I expected, my expectations were that the Democrats
would come into office, and the people I would be filing grievances
against would be. long gone and have little interest in this case and at
that time I was hoping I would have little interest.
Mr. LENT. You would also have a right to file a grievance with the
union. Is that correct?
Mr. Louuis. I believe you are right.
Mr. LENT. You didn't exercise that right?
Mr. LOTIS. `For the same reason.
Mr. LENT. For the same reason?
Mr. LoTIs. Yes.
Mr. LENT. You also have a right, I believe, to take your grievance
to the full Commission and present it. Is that correct?
Mr. Louuis. I wasn't aware of that, but, I may have that right.
Mr. LENT. You did not exercise that right?
Mr. Moss. Let's first establish whether there is such a right.
Mr. LENT. You did not take your grievance before the full Corn-.
mission? Is that correct or not?
Mr. LOTI5. That was no big secret. The Commissioners personally
knew what my grievance was. They agreed with me. Other than the
Chairman, whose thoughts I did not know, everyone was expressing
sympathy for what had happened. There was no question that the
way the reorganization took place was under the auspices of .the
Chairman under authority delegated to him. I just couldn't see that
recourse to the full Commission, if that was available, would get me
anywhere because the individual responsible for the action was the
Chairman, as I understood it.
Mr. LENT. You cannot help me out of my confusion, then. I am
trying to figure out why you are a witness before this committee
because you were not one of those who cooperated with the committee
and you can't really tell us why it is you were transferred other than
simply to say you were doing your job. Maybe the chairman will
enlighten me.
Mr. Moss. The witnesses do not elect to come before this committee.
The Chair determines the witness he feels necessary to develop a case
on the record.
The witness is before the committee because we subpenaed him. I
wanted hini before us because the handling of his case by the Com-
mission demonstrates, in my opinion, a degree of incompetency on the
part of the Commission in carrying out its responsibilities to protect
the public interest in the disposition of these cases. That is why he
is here.
He could not possibly tell you why he was here because I didn't tell
him.
Mr. LENT. It is a mystery to several of us, then.
Mr. GoRE. Mr. Chairman?
Mr. LENT. I understood in his opening remarks the chairman indi-
cated that the purpose of the hearing was to study whether or not
retaliatory actions had been taken against FPC employees who coop-
erated with the committees or subcommittees of the House.
PAGENO="0294"
288
This one obviously does not fit into that pigeon hole. I am trying
to figure out what pigeon hole lie does fit into.
Mr. Moss. Let the Chair again explain.
The other day I went to the extreme of reading into the record for
the second time my opening statement where I laid out three reasons
we were inquiring. The last reason was the one which seems to
intrigue the gentleman from New York: A third, and no less relevant,
concern is whether or not any of the witnesses suffered because of
testimony at or involvement in hearings of a committee of the
Congress.
I continue on to cite the relevant portions of title 18.
But I also started out by saying these hearings also have direct
relevance to the proposed executive branch reorganization.
"Then a second general point to which I would like to direct the
subcommittee's attention concerns"-and then: "The regulations and
the change in the operations of the respective units, to render them in
my opinion less competent to carry out their assignments."
Therefore, there are three reasons.
Mr. LENT. Does the witness have exhibit G before him?
Mr. LoTIs. Yes, sir.
Mr. LENT. Would you refer to the second paragraph?
Mr. GORE. Would the gentleman from New York yield?
Mr. LENT. I will yield as soon as I finish with this one question.
The. statement is made. and these are the notes of the Touche Ross
study:
Attorneys in Lotis' section rarely remain at the Commission long enough to
make significant advances in grade level. Most leave to go with outside law firms.
Do you agree with that statement which is in the Touche Ross
study?
Mr. LOTIS. Yes.
Mr. LENT. If you will refer to exhibit H. which was previously put
into evidence, this is the exhibit which indicates that the promotion
rate in your section was only 20 percent.
Mr. LOTTS. Yes.
Mr. LENT. Is it not perfectly understandable that the promotion
rate would be only 20 percent in your division in light of the findings
of the. Touche Ross study that attorneys rarely remain at the Commis-
sion long enough to make significant advances in grade level?
Mr. LOTTS. No. I am not sure there is a correlation between the two.
only because I don't know the basis on which exhibit H was prepared.
I don't know how the percentages were calculated and what precisely
was done to arrive at those percentages, so I cannot agree with that
at this point.
Mr. LENT. Exhibit H was prepared by the staff of this subcom-
mittee. The point of exhibit H is to demonstrate that the Rate Sec-
tion. which you head, had the lowest rate of promotions of any of
the sectTons hea iled by an Assistant General Counsel in the General
Counsel's office between the dates October 1975 and October 1976.
You will see that of the number of eligible men and women in your
division, only 2 were promoted for a promotion rate of 20 percent. 2
out of 10.
PAGENO="0295"
289
Now I ask you whether that is not explainable by the finding of the
Touche Ross study which is that there is a high turnover in your
particular division.
Mr. LoTIs. No, for this reason: Attorneys coming into my section
will come in at about a GS-11 level. They can remain at that level
for about 2 years while another attorney coming in at the same level
in another section would be promoted in 1 year.
My attorneys would leave rather rapidly, as Touche Ross explains,
leave in 2 or 3 years, and that is usually the case.
That perhaps explains these figures. I am sure they will, because
there are many attorneys at the low grade levels who had not been
promoted in my section. 1 assume that is why I say these figures do
not need to correlate with the Touche Ross statement. They are apples
and oranges.
Mr. LENT. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Gore?
Mr. GonE. Thank you, Mr. Chairman.
I w~inted to pursue the why of the reorganization concerning you,
Mr. Lotis, just briefly.
It is true that you have never appeared as a witness before this
subcommittee or any other subcommittee; but is it not also true that
communications from you to Mr. Journey have been included in the
proceedings of this subcommittee.?
Mr. L0TIS. Yes, I believe they have.
Mr. Gonn. If I am not mistaken, some communications which might
have been very embarrassing to Mr. Journey were included as part
of the record of this subcommittee last July in hearings in Indiana.
They related to conversations between you and Mr. Journey concern-
ing an electric rate case that involved Ohio Electric. Is that correct.
Mr. L0TIS. Yes.
Mr. GORE. Ohio Electric is a subsidiary or an affiliate of the
American Electric Power Holding Co. Is that correct?
Mr. LOTIS. Yes.
Mr. GORE. You were involved in this rate case and involved in
negot.iations with the attorneys for Ohio Electric during the time
that these memoranda refer to. Is that correct?
Mr. LOTIS. Not personally, but I supervised the negotiations.
Mr. GORE. According to the record of this subcommittee last July,
and I do not believe that has to be entered into the record-
Mr. Sn~rs. It already has been.
Mr. GORE. Let the record show this is included in the proceedings of
this subcommittee of last July.
You were the recipient of a memorandum from Mr. Journey sug-
gesting that you speed up settlement in this case, or that those work-
ing under your direction speed up the settlement in this case. Is that
correct?
Mr. LoTIS. Yes.
Mr. GonE. You wrote a memorandum back to Mr. Journey advising
him again of the "consistent blatent refusal of Ohio Electric to
respond to staffs repeated requests for technical data and information
necessar to pursue this Commission's authorized investigations."
Skipping down somewhat in the memorandum, you continue:
PAGENO="0296"
290
Ohio Electric's apparent attempt to frustrate this Commission's authorized
investigation by steadfast defiance of trial staff's efforts to secure disclosure is
compounded by the fact that until such investigation is completed Ohio Electric
will continue to collect rates which may be excessive and, therefore, unlawful.
Skipping further, you continue:
I am personally distressed at what appears to me to be an attempt by Ohio
Electric to circumvent the normal and established rate process. Equally disturb-
ing is any suggestion that I participate in such maneuvering. I will not do so.
Do you have any comment?
Mr. LoTIs. I might say about that one point. Those views were not
only my views, but that memo had been looked at very closely and had
been concurred in by the Chief of the Rate Division of the Bureau of
Power and Chief of the Rate. of Return Division within the Office of
Accounting and Finance.
Mr. GORE. As a result of continued pressure from Mr. Journey, this
case was settled in a way that staff disagreed with?
Mr. LoTIs. I wouldn't say that. I would like to fill in the gaps
leading up to the settlement, if I may.
Mr. GoRE. Fine.
Mr. LoTIs. After I sent the memo to Mr. Journey which you just
described, Mr. Journey said to me that unless I conducted the settle-
ment conference which he was ordering me to conduct, I would be
removed from the case.
I suggested what amounted to a compromise-that I would meet
and have the technical staff meet with the Ohio Electric people on
the day he had indicated provided we were given the opportunity to
compel Ohio Electric to disclose the data we needed at that conference.
Mr. GORE. After the settlement were there any further unusual
actions on the part of Mr. Journey regarding this case?
Mr. LoTIs. After the case was settled, Mr. Journey called me into
his office and said he wanted an order prepared approving that
settlement..
I told him I didn't see the hurry because we first had the notice of
settlement, and the usual notice time was 2 weeks.
He said he didn't want the settlement notice.
Mr. GORE. He didn't want the public informed of it?
Mr. LoTIs. That is the only conclusion I can draw. He did not want
the settlement noticed.
I said to him that I could not do that and I would not do that.
He reneged and said, "Settle. Put imp a notice but make it for about
a 2- or 3-day common period."
~ ~ see I was running into another problem with him, and I
advised the staff counsel in the case to prepare a notice, put 2 or 3
(lays in there, but to take it to the Secretary of the Commission, tell
the Secretary specifically, "Do you agree with 2 or 3 days being
proper notice?" The Secretary did not agree, and he put the standard
2-week notice in.
Mr. GORE. Did you ever get feedback from Mr. Journey about your
action in circumventing that request regarding this brief notice?
Mr. LOTIS. I reveived no notification from him as to that.
Mr. GORE. Did he ever tell you why he was in such a hurry about
the Ohio Electric case?
PAGENO="0297"
291
Mr. LoTIs. I asked him about that, what the rush was in approving
this settlement since the company itself drafted the settlement docu-
ment, and in the document-this was about July of 1975-rn the
document itself drafted by Ohio Electric, they provided that as long
as the settlement was approved by the Commission by October 1, its
provisions would remain in effect and it would be an effective disposi-
tion of all issues in the case.
He. told me that he. knew more about this case than appeared rn
the public files.
At that point I didn't want to heai anything more.
Mr. GoRE. In other words, he indicated that he was basing his
actions on information that did not appear in the hearings or before
the Commission in a formal manner but that he had knowledge that
you were not privy to, and you did not pursue that matter with him.
Mr. LoTIs. Yes.
Mr. GOI~E. In summary on that matter, it is fair to say you did not
object to the final settlement in the case, but rather the manner in
which it was conducted by Mr. Journey?
Mr. LOTIS. Yes.
Mr. GORE Does he intervene so intensively in every case coming
before the FPC?
Mr. LOTIS. No.
Mr. Goiu~. Mr. Chairman, at this point I would like to introduce
into the record a statement prepared and signed by Ms. Lynn Hargis,
which I believe the staff has available.
Mr. Moss. Without objection, the item will be made part of the
record.
[The statement referred to follows:]
STATEMENT OF.LYNN HARGIs
I am a trial attorney in the electric rate section of the Federal Power
Commission. In that capacity, I was interviewed by the Subcommittee on Over-
sight and Investigations of the Committee on Interstate and Foreign Commerce
of the House of Representatives and subpoenaed to give testimony at the
hearings to be held beginning March 9, 1977. Subsequently, I was told that
there would not be time for me to appear as a witness, and the Subcommittee
staff requested that I submit an affidavit describing a conversation they had
learned of in a prior interview.
On February 15, 1977, I participated as Staff Counsel in a settlement confer-
ence convened in a case involving one of the American Electric Power Company
affiliates, Michigan Power Company. After a day-long session of sometimes
difficult negotiations, a settlement was reached. During the course of the
negotiations I had firmly defended the Staff rate of return witness' recom-
mendation for return on common equity which seemed low relative to other
recent returns approved by the Commission. I explained to the Company that
I had checked with members of the Office of General Counsel who had assured
me that-under the special circumstances present in this case-the rate of
return recommendation was reasonable.
At the conclusion of the negotiations, I was in conversation with American
Electric Company's new in-house counsel, Mr. Edward Caine, when we were
joined by Mr. John G. Howard, Senior Vice President in charge of rates of the
American Electric Power Service Corporation. Mr. Howard first restated his
views on the importance of an `adequate rate of return to a utility, and then
asked if the member of the Office of the General Counsel with whom I had
conferred was Drexel Journey. I replied that I had not spoken to Mr. Journey
and explained that staff counsel did not usually go so high up for advice on
routine rate cases.
PAGENO="0298"
292
Mr. Caine then remarked as a pleasantry that when he became counsel for
AEP, Mr. Journey told him to feel free to come to him whenever he needed
anything. Mr. Caine added jokingly that be had missed his opportunity by not
going to Mr. Journey over the present case (since the Company finally settled
on Staff's rate of return).
Mr. Howard then said, seriously, "You have changed the way these settlement
negotiations are handled," or words to that effect. I asked what he meant. He
answered that in the past a lot more had been accomplished by "quiet talks."
"When we had a rate case, we would go to Drex Journey's office and discuss
things," he said (or similar words), "then later we would, have a settlement
conference." Mr. Howard added in words that I believe are almost verbatim,
since they impressed me strongly at the time: "It may not have been democratic,
but at least you knew where you stood."
At that point the implications of what he was saying to me began to sink in,
and-not knowing how to deal with it-I changed the subject. However, realizing
it might become important that I remember the conversation as accurately
as possible, I made a careful mental review of it later that day and repeated
it to my roommate.
Signed: LYNN HARGI5,
March 11, 1977.
[The following additional material was received for the record:]
PAGENO="0299"
293
AMERICA ~LE9~IC POWER Service Corporation
sfa~c~~--- i~
2 Broadway, New York, N Y. 10004
(212) 422 4800
JOhN RHO WARD -
S,nwr Vie,President -Rates
April 20, 1977
Hon. John E. Moss, Chairman
Subcommittee On Oversight And Investigation
Interstate and Foreign Commerce Committee
House of Representatives
Congress Of The United States
House Office Building
Washington, D. C. 20426
Dear Sir:
On April 6, 1977, I received a telphone call from
Mr. Bernard Wunder a staff attorney with the Subcommittee On
Oversight And Investigations of The Cornmitte On Interstate
And Foreign Commerce of The House of Representatives. Mr.
Wunder advised me that Lynn Hargis, Esquire of the legal staff
of the Federal Power Commission had filed with your Subcommittee
a statement relating to certain comments allegedly made by me
and by Edward A. Caine, Esquire, Senior Rate Counsel of American
Electric Power Service Corporation at a settlement conference
held at the Federal Power Commission on February 15, 1977. I
asked Mr. Wunder to send me a copy of Ms. Hargis' statement.
On April 12, during my absence from my office, a copy of the
statement was received. I read the statement upon my return to
the office on April 13, 1977 and I hereby submit my response to
the allegations and implications contained therein, and I do so
to the best of my knowledge, information and belief:
1. I am a Senior Vice President of American Electric
Power Service Corporation having as my areas of responsibility
matters including rates, interconnection arrangements and special
contracts. In that capacity I, together with a number of other
people,represented Michigan Power Company, an American Electric
Power System Company, at a settlement conference involving FPC
Docket No. ER76-78l. At the settlement conference, held at the
offices of the FPC, there were in addition to the representatives
of the Company, representatives of the Company's wholesale for
resale customers and the Staff of the Commission.
2. Ms. Hargis has alleged that at the conclusion of the
negotiations, in the presence of Mr. Caine, I "restated" my
views with respect to the importance of an adequate rate of
PAGENO="0300"
294
1~Lon.John E. Moss, Chairman -2- 4/20/77
return to a utility and then asked if the member of the Office
of the General Counsel with whom she had conferred (regarding
the propriety of the rate of return on common equity reflected
in the Staff's "top sheets", which constit~tea summary cost
of service study) was Drexel Journey.
There were no conversations between Ms. Hargis and me
relating to any matter of substance which did not take place in
the presence of all of the participants at the conference. In-
sofar as the discussion regarding rate of return is concerned, my
position was that the rate of return on common equity, which was
reflected in the Staff's "top sheets" was considerably below that
which had been reflected in other recently issued "top sheets".
I sought to determine whether this was the result of some change
in Commission policy or whether it was solely the point of view of
Ms. Hargis and the members of the Technical Staff who were assist-
ing her. It was in pursuit of this inquiry that I asked whether
or not the Staff's position had been approved by any of Ms. Hargis'
superiors. I do not know on what basis she drew any inference of
impropriety from my question and I deny that any such implication
was contained in my question.
3. Ms. Hargis has also alleged that I had a discussion with
her in Mr. Caine's presence in which I stated that:
(a) "You have changed the way these settlement negotiations are
handled."
(b) "A lot more had been accomplished by `quiet talks' ."
(c) "When we had a rate case, we would go to Drex Journey's office
and discuss things - - then later we would have a settlement
conference."
(d) "It may not have been democratic but at least you knew where
you stood."
I did not make any of these or similar statements to
Ms. Hargis or to anyone else. To the best of my knowledge and
belief I have not seen or talked with Mr. Journey for three or
four years. On earlier occasions, perhaps as long ago as ten years,
I did meet with Mr. Journey and other FPC Staff members and repre-
sentatives of am AEP System Company's affected wholesale customers
in settlement conferences which related to those cases. Such
meetings were held in public rooms of the Commission, never in
anyone's private office. In particular, to the best of my recollec-
tion I have never been on any occasion in Mr. Journey's office nor
have I said to anyone that I had been. There were no improprieties
on any occasion of past settlement conferences and I have never said
to anyone that there were any.
PAGENO="0301"
295
~Jon. ~Tohn E. Moss -3- 4/20/77
4. Finally, Ms. Hargis alleges that Edward A. Caine,
Senior Rate Counsel of AEPSC, in conversation with her in my
presence stated that Drexel Journey told him "to feel free to
cone to him whenever he needed anything" and that Mr. Caine
jokingly stated that he had missed his opportunity by not going
to see Mr. Journey relative to the Michigan Power wholesale case.
I have no recollection of Mr. *Caine having said these things or
similar ones to Ms. Hargis or to anyone else.
In the telephone conversation with Mr. Wunder on
April 6 when he told me about Ms. Hargis' statement he asked
whether her statement was true. My statement above is in re-
sponse to that questi~m. I request that this letter be made a
part of your Subcommittee's Report.
I have taken the liberty of sending copies of this
letter to all members of your Subcommittee, to Mr. Wunder and
to Ms. Hargis.
Yours very truly,
G. Howard
JGH:cc //
PAGENO="0302"
296
STATE OF NEW YORK
SS
COUNTY OF NEW YORK
Before me, the undersigned, a Notary Public in and for
the State and County aforesaid, personally appeared
John G. Howard, who being by me first duly sworn, doth depose
and say: the said JohnG. Howard that he is Senior Vice
President - Rates of American Electric Power Service Corporation,
and that he has read the foregoing letter signed by him and
knows the contents thereof, and that the statements therein
made are true and correct to the best of his knowledge,
information and belief.
4 ~
Jo G. Howard
Sworn to and subscribed before me
this 20th day of April, 1977
~ I
Notar~"Public
WILLJAM J. PROCHASKA
Nnta~y Pnb'in S~nt~ Nn~n Yo~k
Rn. 43-4636o90
Q~nlifind in Rinhnnnnd Cnnn~y
Cnni~in,tn fii~d in Nn%n Ynnk Cnunty
conunisninn Expires March 30, 1978
PAGENO="0303"
297
Edward A. Caine -
Senior Rate Counsel'
American ElectricPOWer
Service corporatiOn
2 Broadway, 5. 1159 ,``
New York, New York. 1O~XO4
April 21, 1977
Honorable John E. Moss, Chairman
Subcommittee on Oversight and Investigation
Interstate and Foreign Commerce Committee
House of Representatives
Congress of the United States
`House Office Building
Washington, D. C. 20426
Dear Sir:
I have, on April 11, 1977, been apprised of the fact
that a statement, dated March 11, 1977, has been filed by Lynn
Hargis, Esquire of the legal staff of the Federal Power Com-
mission, which relates to certain comments alleged to have been
made to her by me and by Mr. John G. Howard in my presence.
Having read a copy of the statement, I hereby submit my response
to the allegations and implications therein contained, and I do
so to the best of my knowledge, information and belief:
1. On January 3, 1977, I became Senior Rate Counsel of
American Electric Power Service Corporation. In that capacity, -
i represented Michigan Power Company. an affiliated utility, in
its FPC Docket No. ER76-78l settlement conference with its
wholesale for resale customers and the staff of the Commission,
which conference occurred at a hearing room of the Commission
in Washington, D. C. on February 15, 1977, pursuant to the
Commission's Rules and Regulations. `
2. Lynn Hargis, Esquire has alleged that, after the
conclusion of the conference, I "as a pleasantry" mentioned
to her that upon my becoming employed by the American Electric
power Service Corporation, Drexel Journey, Esquire (General
Counsel of the Commission) told me "to feel free to come to
him whenever [II needed anything."
PAGENO="0304"
298
Honorable John E. Moss, Chairman
Subcommittee~ on Oversight and Investigation
WashingEon April 21, 1977
a. I have no recollection whatever of making this
or any similar comment to Lynn Hargis, Esquire at any time.
b. Upon my new employment, I in fact made a courtesy
telephone call to Mr. Journey in his capacity as General Counsel
of the commission; I informed him that I had been so employed
and that I would represent the AEP companies before the com-
mission; Mr. Journey thanked me for my courtesy and congratulated
me upon my new employment.
c. At no time has Mr. Journey ever discussed any
substantive matter with me involving American Electric Power
company, Inc., or any of its subsidiaries, or any other company;
nor has Mr. Journey ever offered to do anything for me; nor to
the best of my knowledge, information and belief has he ever
offered to do anything for American Electric Power Company, Inc.,
or any of its subsidiaries, or any other company.
3. Lynn Hargis, Esquirehas also alleged that, after
the conclusion of the conference, I "jokingly" commented that
I "had missed (my] opportunity by not going to Mr. Journey
over the present case" * I have no recollection whatever of
making this or any similar comment to Lynn Hargis, Esquire and
to the best of my knowledge, information and belief, I have
never made this or any similar comment to anyone at any time.
4. Lynn Hargis, Esquire has also alleged that, after
the conclusion of the conference, Mr. Howard asked whether
Mr. Journey had reviewed the staff position regarding rate
of return on equity; I specifically recall the question and
the answer.
a. To the best of my knowledge, information and
belief, the question and answer occurred during the course
of the conference and the question asked was whether her
position relating to return on equity was the position of the
particular staff members present at the conference, or whether
her position had been taken or reviewed at the highest legal
staff level, that is by Mr. Journey; Mr. Howard clearly stated
that the reason for the question related to the fact that the
PAGENO="0305"
299
Honorable John E. Moss, Chairman
Subcommittee on Oversight and Investigation
Washington April 21, 1977
staff position as to rate of return on equity had been
substantially higher in many recent proceedings.
b. To the best of my knowledge, information and
belief, nothing improper was implied by the question and
nothing improper should be inferred from Mr. Howard's asking it.
5. Lynn Hargis, Esquire has also alleged that, after
the conclusion of the conference, Mr. Howard made certain
other comments to her in my presence. To the best of my
knowledge, information and belief, neither Mr. Howard nor
anyone else has ever made these or any similar comments to
me or in my presence.
I have concurrently sent a copy of this letter to
each member of the Subcommittee and to Lynn Hargis, Esquire.
EAC/bh
STATE OF NEW YORK
) SS
COUNTY OF NEW YORK
Before me, the undersigned, a Notary Public in and for
the State and County aforesaid, personally appeared Edward A. Caine,
who being by me first duly sworn, doth depose and say: the said
Edward A. Caine that he is Senior Rate Counsel of American Electric
Power Service Corporation, and that he has read the foregoing letter
signed by him and knows the contents thereof, and that the statements
therein made are true and correc the be t of his knowledge,
information and belief.
Sworn to and subscribed before me
this 21st day of April,l977
~ ~
r~j,~ary Public
J. PROCHASKP
t4otary Public, Slate 1~ Now York
No. 434636690
qualified in Richmond County
Cert~ficatn bled in Now York County
commission Expires March 30, 1978
87-292 0 - 77 - 20
PAGENO="0306"
300
April 26, 1977
Lynn Hargis
Office. of the General
Counsel
Federal Power Gormnission
825 Northt1Cį~i~ol Street
Washington, D. C. 20426
Honorable John E. Moss, Chairman /
Subcommittee on Oversight and Investigation
Interstate and Foreign Commerce Committee
House of Representatives
Congress of the United States
House Office Building
Washington, D. C. 20426
Dear Chairman Moss:
I have received copies of affidavits from Mr. John G.
Howard and Mr. Edward A. Caine relating to the statement I
submitted to your Subcommittee.
Mr. Howard is not telling the truth regarding his re-
marks about past settlement conference practices. It is
possible that Mr. Caine did not hear those remarks, but I
believe he did. By inference, Mr. Howard has indicated that
I was not telling the truth in my statement. I consider
this to be a very serious charge against my personal integrity.
I ask that Mr. Howard, Mr. Caine and I be called to give
testimony under oath before your Subcommittee. I also ask that
the Subcommittee call as secondary witnesses those persons
to whom I repeated the conversation at the time that it
occurred.
I did not intend in my statement that any implications
of impropriety be drawn from the parts of the conversation
relating to rate of return or Mr. Caine's remarks about
Mr. Journey, which I clearly indicated were made as a "pleasantry"
and said "jokingly." By repeating these remarks I was merely
trying to establish the context in which the later remarks
about past settlement conferences--which I consider to have
very serious implications of impropriety.-were made.
PAGENO="0307"
301
Similarly, I repeated as a background remark the question
Mr. Howard asked about whether Mr. Journey had been the member
of the Office of General Counsel to whom I referred during
the conference. The question particularly struck me because
I was surprised to hear the General Counsel mentioned by name
in such a context (since, as my reply indicated, he normally
had no input in an ordinary rate case), but I drew no implica-
tion of impropriety from the question by itself.
The remarks which I consider to have very serious impli-
cations of impropriety are those referring to the conduct of
past settlement conferences. Mr. Howard has flatly denied
making these remarks. Mr. Caine has said that to the best of
his knowledge they were not made in his presence. (Since I
cannot be certain of what he did or did not hear, I cannot
speak to the truthfulness of his statement).
I hereby swear on affidavit that the entire conversation
occurred as I reported it in my statement, that I made a con-
scious effort at the time to recall it carefully and that I
repeated it to a number of people, most of them attorneys at
the Federal Power Commission, on or near the date it occurred.
The fact that Mr. Howard, at least, has chosen not to
tell the truth on affidavit casts this matter.in a very grave
light. I urge your Subcommittee to look into the subject
carefully and to take sworn testimony as requested above.
Respectfully,
c~Yu~QkcYL0)~
Lynr(~argi5 (~
cc: SubcommitteeMembers
Bernard Wunder
John~ C. `Howard
Edward A. Caine
Drexel D. Journey
Sworn to and subscribed before me this 26th day of April, 1977.
~~ary Public ~" .
in and tot the District of Columbiz
!xpirO~ T~bm~! t4. 1*~~
PAGENO="0308"
302
Mr. Moss. I would ask unanimous consent that all items referred
to today during the course of the hearings be included in the record
at the appropriate place.
is there objection?
Hearing none, it is so ordered.
Mr. GORE. Mr. Lotis, this involves Michigan Power. To your
knowledge is this another affiliate of the American Electric Power
IToldingCo.?
Mr. LOTI~S. Yes.
Mr. Goiu~. Let inc read briefly from this lne1no. Let's identify
her first.
Could you identify her for the record?
Mr. LoTIs. Miss Hargis was an attorney in the Gas Pipeline-
Electric Rate Section and was a trial attorney working under my
direction and supervision. Upon reorganization, she was transferred
to the newly-formed Electric Rate Section.
Mr. Goiu~. She indicates in this memo, and this is a conversation
which took place following the reaching of a settlement, that she was
in conversation with the lawyer for the American Electric Power Co.
when they were joined by the senior vice president in charge of rates
for the same company. The senior vice president asked whether a
member of the Office of the General Counsel with whom I-meaning
Hargis-had conferred was Drexel Journey.
I. am quoting from her now:
I replied that I had not spoken to Mr. Journey and explained that staff
counsel did not usually go so high up for advice on routine rate cases.
Mr. Caine then remarked as a pleasantry that when he became counsel for
AEP, Mr. Journey told him to feel free to come to him whenever he needed
anything. Mr. Caine added jokingly that he had missed his opportunity by not
going to Mr. Journey over the present ease since the company ~1nally settled on
staff's rate of return.
Mr. Howard then said, seriously, `You have changed the way these settlement
negotiations are handled," or words to that effect. I asked what he meant. He
answered that in the past a lot more had been accomplished by "quiet talks."
~When we had a rate case, we would go to Drex Journey's office and discuss
things," he said, or similar words, "then later we would have a settlement
conference."
Mr. Howard added in words that I believe are almost verbatim, since they
impressed me strongly at the time: "It may not have been democratic, but at
least you knew where you stood."
From your testimony of this afternoon it occurs to me that this
procedure outlined by an official of the American Electric Power Co.
is consistent with the impression of the procedure you believed might
have been followed in the Ohio Electric ease, or at least you got that
impression from the remark by Mr. .Journey which you did not
choose to follow up on. Is that true.
Mr. LoTIs. Yes.
Mr. GORE. Mi. Chairman. I think that `if employees of the Federal
Power `Commission `seeking to advocate bh~ public interest as strongly
as `possible come to the attention of this subcommittee, either b being
called as a witness or by word of their advocacy coming to the
knowledge of the subcommittee and then evidence including their
advocacy is inserted in `the record, and that results in embarrassment
to those who are higher up in the Commission, that any action taken
PAGENO="0309"
303
adversely regarding such employee immediately after their advocacy
of the public interest has come to the attention of the Congress. it is
indeed a `serious `matter and it is of the same `cloth as the other cases
and people that these hearings concern.
I would just like `to take this `opportunity, Mr. Loti's, to add my
congratulations to you on the way you conducted yourself in the
Federal Power Commission. I wish we had more public servants like
you and some of the other peop'le who have testified before this
subcommittee.
I hope that you and those like you iii the Federal agencies will not
be deterred by what is the appearance of adverse personnel actioi~
after vigorously advocating the public interest.
Mr. L0TIS. Thank you.
Mr. Moss. Mr. Sharp?
Mr. SHARP. Thank you, Mr. Chairman.
I wanted to ask whether there were other significant areas where
you differed with Mr. Journey and what were the proper procedures
to `be handled by the Commission in `deciding these cases. Had you
had other basic `differences with him?
Mr. LoTIs. Yes; I had basic differences which were, of course in
several categories. One happen's to be legitimate professional differ-
ences as `to how certain issues should be handled, an'd the other I
would refer to as ethical practices, including AEP-type cases.
The request made of me by Mr. Journey to see what I could get on
Mr. Lewnes, other than the AEP example we highlighted and one
Miss Hargi's highlighted, there was at least one other AEP case
which I am n'ot `sure is part of this record to date. Basically it was
the handling `of people.
I had very munch respect for attorneys in my office, and whether
you call it `personality differences or otherwise, I don't believe
General Counsel shared my respect and enthusiasm for the way
they d'id their jobs.
Mr. SHARP. Substantive or professional differences as you call them.
in your view did Mr. Journey come `d'own on the side of the utility.
a position which would he more economically advantageous t'o the
utility?
Mr. LOTIS. I would say he was very uneven in that. Certainly with
particular `companies there would seem to be a trend, but in the
aggregate I cannot say that he came down on the utility side versus
the customers' si'de except for the electric cases where he did in my
belief come down on the utility side.
Mr. SHARP. And in the first case you talked about, the AEP case
where he directed an early settlement.
Mr. L0TIS. Yes. The subsequent case which is of significance-
Mr. SHARP. That is what I was to ask next.
Mr. L0TIS. A subsequent case was around the latter part of Novem-
ber. At a Commission meeting there was discussion concerning news*
paper reports on threats by American Electric Power to cut off
wholesale service to customers.
The Commission asked the Bureau of Power to `look into this and
prepare a report to the Commission;
PAGENO="0310"
304
Such a report was prepared by the Bureau of Power and it was b)
way of a memorandum dated December 1, 1975.
I had some input into that memorandum with Mr. Jack Weiss, of
the Bureau of Power, ~ho was Acting Chief at that time.
My input was essentially on what we should do about it. I sug-
gested to Jack, and we both reached agreement, that `the commission
should immnediate.ly issue aji order and investigate the threat of
wholesale curtailments on the system and not wait for a complaini
to be received.
The memo went to the Commission. At a Commission meeting it is
my understanding that it was decided `to issue an order instituting
an investigation.
At the time it was decided, Mr. Journey at the meeting indicated
he wanted to coordinate this matter with some of the other Bureaus
involved. 1-le indicated the Hydroelectric Section.
I knew at that point I might have very little input into the future
course of that investigation. I could have `had an order prepared and
to the Commission within a week instituting an investigation. The
coordination period took some time, however, and it never did reach
a formal Commission agenda. It was placed on the administrative
agenda, which is a housekeeping-type of agenda of the Commission,
by the General Counsel.
My understanding is that the order was prepared the day before
that particular meeting.
I had no knowledge of it until I got a call from one of the assistants
to the Commissioners. The assistant said, "Jack, have you seen the
order concerning that case?"
He had thought I had been working on it, or I had been responsible
for it.
At that time I thought I was, `too. I indicated that I thought it
should be brought up at the Commission meeting because it was a
substantive action which should not. be on the administrative agenda.
By th.at time the meeting already had taken place.
I immediately sent a memo, I think dated February 10, 1976, to
the Commission saying to them that the proposed order which had
been on the agenda which was prepared and dictated by Mr. Journey
the night before in his office, with the help of Mr. Lampke of the
Hdroelectiic Section. was inadequate. While it institutes an investi-
gation, the. investigation would be so broad, since it would be con-
ducted on a national basis, that he could never pinpoint AEP, never
get to the AEP problem, and the threat of curtailments on the AEP
system would remain with us because that investigation could take
years and years and we need quick action.
The day afterwards I received a memorandum from the General
Counsel, February 11., telling me that I had essentially disobeyed in-
structions, I never was on the case to start with, and I was off `the case.
The way he worded the memo, I wish I had it, it was in terms that
he had previously told me I was taken off the case and I had no
business sending that memo to the Commission, which was untrue.
Mr. Moss. We will hold the record open for a copy of that
memorandum.
Mr. Loi~is. I can supply it.
F The memorandum referred to follows:]
PAGENO="0311"
305
MEMORANDUM
FEBRUARY 11, 1976.
To: Mr. Lotis.
From: General Counsel.
Subject: American Electric Power Company, Inc.
I have read your memorandum of February 10, 1976, concerning complaints
filed against American Electric Power Company, Inc.
As I have previously instructed you, the immediate supervision of these cases
is to be undertaken by Richard Mattingly. It was my further instruction that
Richard Mattingly in turn is to coordinate with Dan Lamke and Charlie Reusch
in all matters which may relate to bulk power supply development and utiliza-
tion, geneially.
To facilitate overall policy coordination and legal guidance, the cases referred
to in your memorandum ara to be assigned as of today to Richard Mattingly,
who will in turn report directly to me. I will coordinate all affected matters
for OGO.
Please have the staff counsel involved report to me today along with Richard
Mattingly.
DREXEL D. JOURNRY.
Mr. SHARP. Mr. Lotis, if I may pursue that AEP question further,
one of the issues in the hearing we had at Richmond, md., was raised
by city officials at Anderson, md. who buy wholesale from an affiliate
of AEP. I believe it was shortly thereafter that some kind of decision
was made at the Federal Power Commission to begin an investigation.
I would like to go back and ask you to give me the time sequence of
what was the initial order to investigate this.
The. initial action which led to your memorandum was when?
Mr. Lo~rrs. The staff was given instructions in November of 1975.
The staff was given instructions by the Commission at a formal
Commission meeting to investigate newspaper reports that were
appearing in the paper t.hat American Electric Power intended to
curtail wholesale electric service. There were other allegations similar
in nature.
The Bureau of Power was given responsibility for preparation of
that memo. Mr. Weiss, the Acting Chief of the Bureau of Power,
investigated the matter. He then discussed it with me, what should be
done. We both agreed that the. Commission should issue immediately
an order instituting an investigation to ascertain the facts relative to
those allegations.
The memorandum was sent to the Commission by way of a report
dated December 1, 1975.
At the Commission meeting following the December 1st memo, the
Commission decided to adopt its recommendations and investigate
the AEP matter.
A.t that meeting, Mi. Journey immediately said, because I immedi-
ately said once they decided to go ahead, I would get an order im-
mediately out on that, Mr. Journey said he wanted to coordinate
it with the Hydroelectric Section since it involved, I think he said,
powerplant sitings, and other things, which I did not understand in
terms of their relevance to this particular question.
In early February of 1976, an order was prepared. I am not sure
whether there was a signature on that order, but it is my understand-
ing an order was prepared by Mr. Journey. I know this fact only
from a conversation I had with a Mr. Lamke, who indicated that the
night before the special administrative meeting where this item ap-
PAGENO="0312"
306
peared that Mr. Journey was in his office with Mr. Lamke dictating
that order to his secretary.
Mr. SHARP. Who is Mr. Lamke.?
Mr. L0TIs. At that time he was one of the attorneys in the Hydro-
electric Section. He indicated he was assisting in the preparation of
that order. The order was prepared by Mr. Journey.
it made the administrative agenda. I got notification of it only
through a call from the assistant to one of the Commissioners who
asked me whether I read it and agreed with it.
By that time the meeting took place. I think it was the. day after,
or the day of, the special agenda meeting.
I immediately sent the memo to the. Commission saying that order
was inadequate. It was too broad in scope. It would never get to the
heart of the ALP matter. It would take years to investigate the types
of issues raised by the order. I suggested a more limited investigation
directed exclusively to ALP.
The day after that memo-my memo was February 10-I received
a memorandum dated February 11, I believe, from Mr. Journey in~-
eating that I wasn't following hi~ instructions and that I was not on
the case. The way the memo was worded, apparently he thought I
had been removed from the case at some previous time.
Mr. SHARP. Have you any idea of the status of that study now? Is
it still going on?
Mr. L0TIS. Whether the Commission issued Mr. Journey's order or
not, its purpose was achieved. I am not familiar with any action taken
to investigate precisely the ALP matter by the Commission.
Subsequently, customers flied complaints with the Commission, and
then the Commissioti responded in instituting an investigation based
on customer complaints. Therefore, there was a type of action taken,
but it was delayed substantially.
Mr. SHARP. On the first AEP case where you were directed to speed
up consideration of the rate, the action taken by Mr. Journey, does
that violate specific rules of the Commission in your judgment?
Mr. Lo~ns. I think as a matter of due process, customers are guaran-
teed to have notice of proposed settlements. I thought, and still believe
today, that had we not taken the steps we did in enforcing the noticing
provisions against Mr. Journey's wishes, I think the customer would
be perfectly within his rights to say that that decision might be
tainted.
Mr. SHARP. Is indication that he was making the judgment on
information beyond the hearing record in any way a violation of the
Commission rules or generally-accepted ethical practices of regula-
tory commissions?
Mr. LOTTS. It is absolutely against my best judgment as to what
should be done in that type of situation. It is against my ethical
practices.
In terms of whether it violated a specific Commission rule, I am not
sure.
Mr. SHARP. it suggests there were ex parte communications.
Mr. LOTIS. "Lx parte" is a word of art. It has to be used carefully.
It was certainly borderline. That is the only reason I did not say it
violated the Commission's ex parto rules. It is very borderline.
PAGENO="0313"
307
I say borderline for this reason: That no customer at that point
had formally intervened in the case. It appeared that the settlement
going up to the Commission had the concurrence of everyone, at least
everyone who participated. Therefore, at least it might have met the
technical requirements of the ex parte rules in terms of being outside
the rules.
Mr. SIrAu~r. That made it all the more important with regard to
the notice requirement, that due process would be fulfilled inasmuch
as you did not have intervenors. or people who were perhaps aware
of what was going to happen.
Mr. LOTIS. These are the most important cases, the cases where you
do not have intervenor representation. These are the cases easiest for
executives, for management, or anyone associated with the case to
wheel and deal or make private agreements which would not be sub-
ject to public scrutiny. This is why noticing is so important.
Mr. SHARP. Thank you, Mr. Chairman.
Mr. Moss. You have before you, Mr. Lotis, the memorandum you
referred to dated February 11 from Mr. Journey to you, in effect
removing you from this case, the American Electric Power case.
He states in paragraph No. 2: "As 1 have previously instructed
you." Had lie previously instructed you?
Mr. Lopis. To the best of my knowledge, he had not.
Mr. Moss. Would such an instruction have been oral or by appro-
priate memorandum?
Mr. LoTIs. Mr. Jouruey usually operates by memorandum. On
occasion he operates orally. I couldn't say whether one or the other
is most common.
Mr. Moss. Does any such memorandum exist?
Mr. L0TIS. Not to my knowledge.
Mr. Moss. I will have the staff get in touch with the Commission to
see whether they can produce any such memorandum limiting you in
matters and cases of this type.
Are there further questions?
Mr. GORE. I have one, Mr. Chairman.
Mr. Moss. Mr. Gore?
Mr. GoRE. When your request for additional staff was denied by
Mr. Journey, did he give an explanation for denying that request?
Mr. Loris. He indicated that everyone. had problems. There was a
workload in all sections, and if he transferred and gave me assistance,
it would just hurt another section.
But the irony of that was that while he took the cases from me, he
gave them to another group of attorneys in the Hydroelectric Section
who obviously had the time and were available to do the work. That
is all I was requesting.
Mr. GoRE. Thank you, Mr. Chairman.
Mr. Moss. There being no further questions, we want to thank you
for your appearance, your testimony, and your cooperation.
The committee now will stand adjourned. We shall reconvene Mon-
(lay morning at 10 o'clock.
The committee now stands adjourned.
[Whereupon, at 2:45 p.m.. the hearing adjourned, to reconvene
Monday, March 18, 1977.]
PAGENO="0314"
PAGENO="0315"
ADVERSE PERSONNEL ACTIONS AGAINST PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION
FRIDAY, MARCH 18, 1977
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS~
Co~rMrr1TE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room 2322,
Rayburn House Office Building, Hon. John E. Moss (chairman)
presiding.
Mr. Moss. The subcommittee will he in order.
We convene this morning seeking answers-answers to the very
serious questions raised during 3 previous days of hearings. We have
heard how Mr. Lewnes' section, which was responsible for nearly all
matters relating to natural gas supply, lost its three most experienced
attorneys in a period of 6 months-shortly after two attorneys,
Assistant General Counsel George Lewnes and supervisory trial attor-
ney Russell Mamone, testified before this subcommittee and our sister
subcommittee, Energy arid Power.
We have heard that the top trial attorney in offshore gas pipeline
matters, Mr. Mamone, was transferred to hydroelectric relicensing,
an area i.n which he had no experience whatsoever.
His colleague. Mr. Wofsy, quit as Acting Assistant General Counsel
after unprecedented orders to remove ~an attorney from a major case
by the General Counsel because, as he put it, he had to face himself
when he shaved in the morning.
There can be no question that these transfers undermined effective
regulation of the natural gas industry.
We have also heard that another Assistant General Counsel,
Mr. Jon Lotis, who had an outstanding record of achievement with
the Federal Power Commission, was reorganized out of his responsi-
bility for gas and electric rate work in October 1976. This was
obviously not mandated by Touche Ross aird Co., who will be paid
~457,686 for their management improvement survey. It appears to
have had much more to do with Mr. Lotis' determination to protect
the public interest in ratemaking and his disinclination to go along
with efforts to improperly rush a rate settlement with the Ohio
Electric Power Co.
Even more disturbing than that was the testimony that the Execu-
tive Director of the FPC in February or March 1976 ordered an FPC
personnel attorney to find a way to fire Mr. Lewnes. We know that
there were probably differences in regulatory approach between
(309)
PAGENO="0316"
310
Mr. Journey and Mr Lewnes before this, but the effort to get rid
of Mr. Lewnes did not develop until just after the January 1976
congressional testimony of Mr. Lewnes, and after a brief was filed
with the Commissioners by Tenneco sharply critical of this testimony.
We may well ask if not congressional testimony, what was the
catalyst that triggered the effort to fire Mr. Lewnes?
Persons who can shed light on these and other questions-Chairman
Dunham; Mr. Fee, the Executive Director; and General Counsel
Journey-are about to come before us.
Before they are sworn, however, I wish to state that our previous
witnesses-Mr. Lewnes, Mr. Lotis, Mr. Mamone, and Mr. Wofsy-
each having had long service with the Federal Power Commission,
each having had a personnel file that reflected no adverse action or
unsatisfactory ratings, will be accorded an opportunity if they desire
to rebut any testimony touching directly on them which, if true,
should have been reflected in normal personnel flies.
The Chair does not intend to permit the records of achievements
of career civil servants to be unjustly maligned. At the same time, I
can assure all of our witnesses and those `present that if, after a
review of the record of these hearings, the `subcommittee determines
that witnesses before any committee of this House have been impeded,
intimidated, or injured, very prompt and appropriate action will
be taken.
I understand from counsel that this matter has been discussed with
the witnesses and that appearing en banc would be preferable.
Chairman Dunham, General Counsel Journey, `and Executive
Director Fee, would you gentlemen come forward to be sworn?
Do you and each of you solemnly swear that the testimony you are
about `to give th'is subcommittee will be t'he truth, the whole `truth,
and nothing but `the truth, so help you `God?
Mr. DUNHAM. I do.
Mr. JOURNEY. I do.
Mr. FEE. I do.
Mr. Moss. Will you identify yourselves to the reporter?
TESTIMONY OF HON. RICHARD L. DUNHAM, CHAIRMAN, FEDERAL
POWER COMMISSION; DREXEL D. JOURNEY, GENERAL COUNSEL;
AND J. CURTIS FEE, EXECUTIVE DIRECTOR
Mr. DUNHAM. Richard Dunham.
Mr. JOURNEY. Drexel Journey, General Counsel.
Mr. FEE. Curtis Fee, Executive Director.
Mr. Moss. Which of you gentlemen would prefer `to lead off?
Mr. Chairman, you `have a statement of 10 pages together with a
rather large number
Mr. DUNHAM. No. Mr. Chairman. I have a statement of one page.
Mr. Moss. You submitted as of this morning this other document?
Mr. DUNHAM. No, I have not.
Mr. JOURNEY. I have submitted that, Mr. Chairman.
Mr. Moss. Very well. Is that, then, t'o be your statement?
Mr. JOURNEY. That plus two others I submitted to Mr. Lemov.
Mr. Moss. We will discuss them later, then.
You may proceed, Mr. Dunham.
PAGENO="0317"
311
STATEMENT OF RICHARD L. DUNHAM
Mr. DUNHAM. Mr. Chairman, in regard to your letter to me with
respect to alleged adverse personnel actions, I have a very brief
statement to read at this time.
I have never at any time taken any action or directed any action
to be taken adverse to a Commission employee because of testimony
before Congress or because of the content of positions taken in hear-
ings or Commission meetings.
During my term as Chairman, no professional employees have been
removed, suspended, furloughed, or reduced in pay or rank.
No grievance procedures have been undertaken under either
Civil Service or union contract procedures by any of the professional
staff for matters occurring during my term. No employee has
appealed to me about any alleged discriminatory practice's by me or
by a section `head. In fact, therefore, no "adverse personnel actions"
have occurred.
I have taken many actions designed to improve the management,
produc'tivity, and workflow of the Commission. These actions were
within my authority and in my opinion were absolutely necessary.
I have never at any time taken any action to impede the free dis-
cussion of opposing viewpoints before the Commission. I have, in
fact, encouraged structure's that would enable such positions to be
clearly and directly presented..
I have discouraged mere delay due to unspecified problems with
matters and have attempted to require that matters be brought to a
head and resolved.
Mr. Moss. Mr. Journey?
I wonder whether we can first get the statements in order?
Mr. JOURNEY. All right.
Mr. Moss. I have before me a `statement of March 10, 1977.
Mr. JOURNEY. That has a cover letter of March 8, Mr. Chairman?
Mr. Moss. That is correct.
Mr. JOURNEY. That is one I would like to have in t'he record.
Mr. Moss. Without objection, then, that statement will be en'tered
in the record at the appropriate place [see p. 319].
Mr. JOURNEY. Next, Mr. Chairman, I sent `to Mr. Lemov a letter of
March 14 with six enclosures. I ask that that letter and those
enclosures be made part of the record.
Enclosure 1, Mr. Chairman, deals with the HIOS matter.
Enclosures 2, 3, and 4 deal with the Ohio Electric matter.
Enclosure 5 is a document which deals with t'he Electric Rate
Settlement Task Force.
Enclosure No. 6, Mr. Chairman, is a document which deals with
the adequacy and reliability of electric bulk supply and complaints
before the FPC. These are background materials.
I sent much of this data to Mr. Lernov earlier. T'he committee
has `them.
These are basically the statistical materials and things out of t'he
FPC files, sir.
Mr. Moss. This material at this time will be received for review~
with a reservation for subsequent inclusion in the record after
examination of it,
PAGENO="0318"
312
[See hearings before the Subcommittee on Oversight and Investiga-
tions of the Comittee on Interstate and Foreign Commerce, 94th
Congresss, 2d session, Serial No. 94-85-Regulatory Reform-
Volume VI.]
Mr. JouI~NEY. Part of it, Mr. Chairman, and I think this should
be clear-when I was in Indiana before the subcommittee chaired by
Mi'. Sharp, I submitted a miumber of documents which I had re-
quested in my August 11, 1976, letter to you be included in the
record. They dealt with the Ohio Electric matter and they dealt with
American Electric, the bulk power supply problems of Americami
Electric Power.
You will find theni in that committee print, pages 616 to 618, and
sonie at page 592.
These materials offered today seek to give you, in capsulized and
updated form, the materials I previously submitted which did not
get into the record.
Mi'. Moss. That is why I feel it is appropriate we accept temn for
review and with a reservation to include them after we have viewed
those portions which are not felt to be redundant, as you can well
recognize. I think you can see much of it could be redundant.
Mr. JOURNEY. The next one, Mr. Chairman, is the one which I Sub-
mitted this morning. It has a cover letter to Mr. Lemov. It is a
12-page statement.
With your permission, I would like to read that statement.
Mr. Moss. That statement you may read, and with regard to
appendixes we shall make the same reservation as previously until
we have had an opportunity to review the statement, which was
received at 9:25 this morning. We have not had an opportunity to
review it.
[See p. 319 for attachments printed in record. All other attachments,
or parts thereof, referred to in Mr. Journey's statement may be found
in the subcommittee's files.]
Mr. Moss. You may proceed. You may read your statement.
STATEMENT OP DREXEL D. J'OURNEY
Mr. JOURNEY. Mr. Chairman and members of the subcommittee,
your chief counsel has the prior submissions which I forwarded for
inclusion in the record. Mv anpenrance has been rescheduled by the
subcommittee several times. I ask that those submissions-letter of
March 8, 1977, with attached statement and letter of March 14, 1977,
with enclosures be incorporated in this hearing record along with this
statement.
1 shall be direct. What I have to say now restates the cumulative
thrust of testimony which this subcommittee heard on March 9. 1O~
and 14. 1977. as it relates to the Office of the General Counsel of
the FPC.
Fundamentally, what you have heard are pent-up frustrations of
persons who disagree with substantive, structural, and personnel deci-
sions which have been made at the FPC. Ventilation is good. It is
necessary. It has been accomplished before this subcommittee, as it
had been accomplished innumerable times heretofore before other
PAGENO="0319"
313
committees of the Congress. I am going on my 25th year as an FPC
employee and have seen many congressional inquiries of the agency.
At the outset, several matters merit comment. Mr. Lotis has set
forth testimony relative to "dirt" on George Lewnes (TR 119-120,
169). I do not, and never have, dealt in smut. Mr. Lotis' recollection is
faulty. I have never made any such comment.
The Deputy General Counsel has reviewed Mr. Lotis' testimony as
it relates to him (TR 121). He has advised me that he made no such
comments. An affidavit of the Deputy General Counsel is attached
heret.o as appendix A.
Mr. Lotis' comments with respect to Mr. Lainke (TR 170-177) have
been reviewed by the latter. Attached to this statement is the affidavit
of Daniel C. Lamke showing the facts as they arose, not as Mr. Lotis
recites. The affidavit and appendices thereto are attached as appen-
dix B.
The appendices include the FPC's Secretary's notes covering the
Commissioners' review of the bulk service complaint matters about
which Mr. Lotis testified. The documents are those which appear
in FPC files.
This matter is also covered in my letter to the subcommittee's chief
counsel dated March 14, 1977, pages 3, 4, and 10, and enclosure 6
thereto.
I invite the subcommittee's attention to appendix B hereto, and
the various Commissioner's comments which show how the Commis-
sion, itself, wished to get into the bulk service questions-broadly or
narrowly. My prior testimony on this matter appears in the printed
hearings of the subcommittee, Serial No. 94-85, Regulatory Reform,
volume VT. Richmond, md., committee print pages 616-618, and 634.
Tn my March 14, 1977 letter to the subcommittee's chief counsel, page
10, I extracted the substance of that testimony as follows:
* ~ * what the Commission was looking at was service questions in Nevada,
in Virginia, West Virginia, Ohio and Indiana and, as I understand it, they
wanted a coordinated review of it overall * * * I was then instructed to sit
down and look at this thing in terms of not just `the Indiana utilities but
everybody to see what could be done. * * *
Mr. Lotis' comments fail to recognize that the Commissioners, not
the General Counsel, decided how electric service complaints were to
be handled.
Legal work in this area has been split historically between Mr. Lotis
and Mr. Lamke. As between the two, Mr. Lamke had the broader
responsibilities, since he conducted all electric interconnection cases
and he is responsible for the presentation of FPC testimony on elec-
tric 1)111k power supply needs in all cases before the Nuclear Regula-
tory Commission and before the State Public Service Commissions.
Mr. Lotis had sought to try bulk power supply cutoff as a "one
issue" aspect of an FPC rate case involving the American Electric
System. His recommendations were presented to the Commission but
have not been accepted by it.
The Chairman, Richard L. Dunham, by his memorandum of April
15, 1976, attached hereto as appendix C, set the final format of an
FPC Bureau of Power study of service needs and economic require-
ments which the Commission wished to be completed. That was done.
PAGENO="0320"
314
rfhe study is enclosure No. 6 to my March 14, 1977, letter to the
subcommittee's chief counsel.
At the present time, the Bureau of Power study is being used in
the trial of the only service case which is still in the trial phase
before the FPC's Administrative Law Judge. It involves Mishawaka,
et aZ., v. AEP, et al., FPC docket Nos. E-9548 and 9549. All other
service cases involving the American Electric System companies or
other utilities have been tried or have been resolved. According to
FPC records, legal arguments in specific cases have gone forward.
Turning to Mr. Lotis' comments on docket No. E-8888, Ohio
Electric (T1R 160-464), the Commission's Secretary has advised me
that he has no recollection of the conversation which Mr. Lotis
attributes to the. Secretary and a staff counsel (TR 163). An affi-
davit to this effect is attached hereto as appendix D.
As will he. noted from the Secretary's affidavit, the public notice
of settlement about which Mr. Lotis testified (TR 163) does not in-
clude the 2-week period to which Mr. Lotis testified but an 8-day
period. As the Secretary notes, 1 week is not an unusual FPC practice
for noticing documents filed with the agency.
The files of the Office of the General Counsel indicate that in 1975
there was a forthcoming security issuance matter of Ohio Electric
before the Securities and Exchange Commission and the company
wished to conclude its rate proceeding before the FPC by early
August 1975, if possible. A letter of Richard M. Dicke to FPC staff
counsel James Ellis, dated June 18, 1975, is attached hereto as appen-
dix E.
Mr. Lotis' comments relative to the public notice (TR 163, 177-178)
and the notice to wholesale customers of Ohio Electric are difficult
to understand. in addition to being in error. As this subcommittee's
hearings show, serial No. 94-85, committee print, page 586, the pur-
chaser of the entire output of Ohio Electric's Gavin Plant, Ohio
Power Co., is a corporate affiliate. The FPC initiated docket No.
E-8888 in September 1974 essentially to review a rate of return
question in a cost-of-service-type rate schedule.
See my March 14, 1977, letter to the subcommittee's chief counsel,
pages 3-6 and enclosure Nos. 2, 3, and 4 for the background of this
case. See, also, the subcommittee's prior hearings, serial No. 94-85,
committee print pages 585-592. There were no intervenors in docket
No. E-8888.
At no time did I enter into the substantive aspects of this case.
What I did do was to direct Mr. Lotis to convene a public settlement
conference on the matter. Under the FPC's Rules of Practice and
Procedure, 18 CFR 1.18, any person, at any time, has a right to
request a settlement conference. See my March 14 letter to the sub-
committee's chief counsel, pages 6-7, outlining these rules. Mr. Lotis
apparently regards that as an intrusion. The memorandum directive
which I sent to Mr. Lotis is designated enclosure No. 4 to that letteit
and it appears at committee print pages 590-1. For present continuity
purposes, it bears repeating:
I suggested that Ohio Electric treat Mr. Dicke's June 13, 1975 letter as a
settlement proposal, if that is what it was intended as. I suggested that he
request a public conference and that, if additional data is required by staff,
PAGENO="0321"
S15
that he be advised. He requested that the public conference be held before the
end of June 1975. I told him I saw no reason why that could not be arranged.
Please follow through .011 that timing. I believe that you should attend the
conference along with Mr. Ellis. Also, I would like Mr. Lamke in attendance.
See my remarks before on Western Conference o June 11, 1975.
That was a conference before the Western Conference of Public
Service Commissioners, which I attended at the direction of former
Chairman Nassikas. I shall speak to that later because it is relevant.
I would anticipate that Bureau of Power and OAF would be represented
also.
I told Mr. Dicke that if staff had problems with the company's proposal, they
should say what they would prefer and why. As I stated, I see this case as
having regional power plant siting overtones.
Following the oil embargo of 1973-74, .1 had been instructed by
former FPC Chairman John N. Nassikas to attempt to keep all
proceedings moving where large bulk power supply plants were
involved, whether at the Federal or State level. Ohio Electric's Gavin
Plant, the subject matter of E-8888, is such a plant-a 2,600,000 kW
installation baseloaded plant in the east central area reliability coun-
cil area. See committee print, page 586. That is why I became in-
volved in E-8888 and that is the only reason. Mr. Lotis would have
preferred to have conducted the case according to his timing pattern
for handling rate proceedings. Committee print, pages 591-2.
Company counsel directed my attention to the plant and the FPC
docket, all as set out in his letter of June 12, 1975. Committee print,
pages 585-590. Under established FPC rules, 18 CFR 1.18, counsel
had the legal right to do so.
Mr. Lotis' testimony sets forth his ethical judgments relative to the
FPC's cx parte rules (`TR 177-9), and he recognizes, albeit reluc-
tantly because of his best judgment (TR 177-78), that the General
Counsel must be available to regulated utilities and must carry out
procedural functions, such as I discharged in Docket No. E-8888.
As the subcommittee may or may not know, my involvement in
general FPC work includes work of the Electric Reliability Councils,
which is conducted under 202(a) of the Federal Power Act, 16 U.S.C.
824a (a), in coordination with State Public. Service Commissions,
the National Electric Reliability Council, and nine regional councils.
See Order No. 383 issued June 25, 1969, 41 FPC 846, 34 FR
11200; Order No. 383-1 issued January 13, 1970, 43 FPC 37, 35 FR
3240; Order No. 383-2 issued April 10, 1970, 43 FPC 515; 35 FR
6121; Order No. 383-3 issued .March 15, 1973, 49 FPC 700, 38 FR
7455; Order No. 383-4 issued December 13, 1976, no FPC citation yet
but it appears at 41 FR 55174.
My knowledge of Ohio Electric and the Gavin plant, and countless
other plants across the country to which Mr. Lotis refers (TR 164),
relates to bulk power supply planning and power plant operation.
That work is not conducted in individual FPC rate case dockets
with which Mr. Lotis is familiar. Mr. Lamke is familiar with bulk
power supply operations throughout the country, and that is why I
asked him to work `on the docket as needed, all pursuant to my June
17, 1975 memorandum to Mr. Lotis.
Mr. Lotis' testimony alleging unusual actions infers that I did not
wish to follow 18 CFR 2.1 of the Commission's statements of general
87-292 0 - 77 -21
PAGENO="0322"
:316
policy and interpretation and inform the general public of the nature
of the seftiement proposal which the company and FPC staff counsel,
operating under the direct supervision and guidance of Mr. Lotis,
had worked out.
Under my supervision as General Counsel, I have always required
my attorneys to make the public interest their foremost concern.
Since there were no other parties in docket No. E-8888, I welcomed
the public exposure element.
Moreover, since I was the principal staff lawyer that drafted 18
CFR 2.1, I find it difficult to understand why I would seek to avoid
public notice. I did not.
The subcommittee may wish to question the persons mentioned in
Ms. Hargis' memorandum (TR 166-167). I have no knowledge of
what is reported there. Ms. Hargis has never discussed the memo-
randum with me, and I have never discussed any regulatory matter
of American Electric Power with Edward Caine.
He telephoned me at the time he became employed by the AEP
System and, as I do with all lawyers-congressional committees,
consumer groups, State commissions, utilities, and the general pub-
lic-I wished him well and told him the FPC legal staff was here to
conduct business of the agency. If he had reasons to contact me, he
could do so. That is courtesy I extend to all practitioners.
To the best of my recollection, the last time I spoke with John
Howard-also mentioned in the Hargis memorandum-was in con-
nection with the FPC's coal-by-wire proceeding in 1974 in which
I negotiated the transfer of coal-fired energy from the Midwest to
the Northeast to prevent blackouts by reason of the oil embargo.
Those discussions were held jointly with FPC's Chief, Bureau of
Power, and are on the public record. The transcripts are on file with
the Commission. I was there acting as Deputy General Counsel and
pursuant to a specific order of the Commission. See appendix F.
Before then, my involvement with the American Electric Power
System was mainly in trying the interstate jurisdiction and account-
ing cases of the FPC against these and other utilities in the 1950's
and 1960's. We won those cases, some of which were pursued to the
U.S. Supreme Court. The FPC's annual reports to the Congress list
all major FPC litigation.
I might point out, Mr. Chairman, just for the purpose of record
continuity, that you will find in 328 Fed 2nd 237 a case called Appa-
lao/dan Power Oo?rtpany v. Federal Power Uonimissiom, cert. denied,
379 US 829. This is the landmark case that I tried against American
Electric Co. You will find that was a case which started in 1959 and
concluded in 1964. An opinion was by Circuit Judges Bell, Sobelov,
and Bryan.
I looked back in my files and I also found another case, Indiana-
Michigan Electric Co., whereunder former Chairman Swidler, along
with other staff counsel, prosecuted the jurisdiction cases against the
American Electric System. We won them.
This is Indiana Michigan Electric Co. opinion 458 and opinion
458(A).
The basic opinion is April 14, 1965 and the opinion on rehearing
is June 11, 1965.
PAGENO="0323"
317
We went to the Court of Appeals and the Supreme Court: 365
F. 2d 180; cert. denied 385 U.S. 972.
I don't know how many other cases I have been involved in con-
cerning AEP companies, but my litigation experience with Chester
Davis, who was counsel for Howard Hughes, and Richard Dicke,
counsel for American Electric, dates back to 1959 when I was slug-
ging it out in the pits with them as a young trial lawyer.
The position of FPC General Counsel is an amorphous one. Being
a noncareer executive appointment, the incumbent serves at the
pleasure of the Chairman. The position is charged with responsi-
bility for actions of subordinates, but does not carry with it the
power to appoint principal assistants. That authority is exercised by
the FPC Chairman, usually in consultation with other Commission
members.
I do not have the right to hire or fire or do anything to an Assis-
tant General Counsel. I do not have authority to do that.
An incumbent General Counsel usually inherits his principal staff
from his predecessor. That was largely true in my case when I suc-
ceeded my immediate predecessor. Because of human nature and
potential internal professional rivalries, the General Counsei selection
tends to be made by an incoming Chairman from outside the FPC
staff. That was not done in my case. My immediate predecessor was
selected by an incumbent Chairman, as was I, when appointed to the
position in 1974.
Assistants may, and usually do, report directly to individual Com-
mission members, as well as to the Commission itself on all matters
of Commission business.
Matters of administration are directed through the `General Coun-
sel and the Executive Director to the Chairman. Under reorganiza-
tion plan No. 9 of 1950, the Chairman is the chief administrative
officer of the agency.
As such, the FPC General Counsel post is a mixed parcel of
accountability, bifurcated authority, limited tenure, and narrowly
defined areas for control over what the agency may do. The position
is a 1930 statutory creation which now satisfies few persons and
frustrates many.
Under 5. 826, the chief legal officer of the Department of Energy
will be a Presidential selection with Senatorial confirmation. There
will be defined accountability to both branches of Government. In
my judgment, that change is needed.
This subcommittee's current hearing record, as I read it, is largely
directed to the methods by which the current system operates; and,
more importantly, to substantive decisions which the Commission has
rendered. I refer particularly to natural gas producer regulation and
the interstate electric utility rate settlement task force.
It involves personnel, secondarily, in that staff witnesses, and
perhaps subcommittee members, believe that those decisions should
* reflect other policies and judgments.
Unfortunately, some of the testimony is personal. That is regretful.
However well intentioned, no one rises by tearing down another
person. Months or years of discord can ensue from insidious personal
comments, inferences, and innuendo.
PAGENO="0324"
318
Mr. Chairman, I have a1~tached as appendix G a memorandum
prepared by the OGC Administrative Officer, John Griffin. Mr.
Griffin is available to discuss the appendix. It is comprised of ma-
terial with which he is intimately familiar.
The transcript pages of the hearings to date do not include copies
of the documents which may have already been entered into the
record. I would anticipate that the subcommittee members would
wish to question Mr. Griffin. He is available. It sets forth statistical
data on staffing, promotions, hiring, et cetera. It should be helpful
to the subcommittee in light of questions that have been raised to
date.
Thank you.
[`The parts of Drexel Journey's attachments to March 18, 1977,
statement to be included in the record. All other attachments, or
parts thereof, referred to may be -found in the subcommittee's files.]
PAGENO="0325"
319
GENERAL COUNSEL
FOERAL POWER COMMISSION
1L\R 8 1977
Michael R. Lemov, Esquire
Chief Counsel
Subcommittee on Oversight and
Investigations
Committee on Interstate and
Foreign Commerce
House of Representatives
Washington, D. C. 20515
Dear Mr. Lemov:
The Oversight Committee has scheduled hearings March
9 and 10, 1977, on the recent Federal Power Commission
agency action restructuring various of its staff bureaus
and offices.
A substantial number of FPC staff personnel are
involved in these workload redistributions and work pattern
reassignments. Affected FPC staff offices include:
- Office of the Commission Secretary
- Office of Administrative Operations
- Office of Economics
- Office of Energy Systems
- Office of Accounting and Finance
- Bureau of Natural Gas
- Bureau of Power
- Office of the General Counsel
The basic recommendations upon which this restructuring
has been accomplished, were formulated in a report rendered
to the Commission by Touche Ross and Co., entitled Federal
Power Commission Administrative Management Survey for Improv
ing: Organization Functions Management Process, Phase I
Report (July 1976).
PAGENO="0326"
320
This activity, an FPC administrative and managerial
function, has been completed under the overall direction
of Chairman Richard L. Dunham, and the immediate supervi-
sion of the Commission's Executive Director, J. Curtis Fee.
The Chairman's duties and responsibilities under Reorganiza-
tion Plan No. 9 of 1950 are to:
***from time to time make such provisions
as he shall deem appropriate authorizing
the performance by any officer, employee,
or administrative unit under his juris-
diction of any function transferred to
the Chairman by the provisions of this
reorganization plan.
The Commission's Executive Director functions as the
delegatee of authority from the Chairman, 18 CFR 3.4(d).
To the extent that the FPC's Office of the General Counsel
has been affected by this internal restructuring, I have
exercised administrative authority, which I possess as
General Counsel of the agency, to implement the Touche Ross
recommendations within OGC.
The Touche Ross Report and what has been done administra-
tively at the FPC by authority of the Chairman under Reor-
ganization Plan No. 9 of 1950, will serve the future.
Along with the five Commissioners Offices, the FPC's
General Counsel's Office, and other circa 1930 statutory
staff offices are soon to be abolished. Under S. 826, the
FPC staff willbe transferred to the new Department of Energy
where all legal work will be conducted under a Presidentially
appointed General Counsel confirmed by the Senate. The
Attorney General will represent the new Department in court
litigation.
I support the Administration's proposed Energy Depart-
ment reorganization.
On March 10, 1977, Chairman Dunham, Executive Direc-
tor Fee, I, and others will be present at the Committee
hearings to discuss the FPC's restructuring of staff offices
and workload.
In advance of that participation and to facilitate
your work as Counsel to the Committee, I thought it might
be helpful for you to have a statement detailing the general
PAGENO="0327"
321
nature of the restructure of FPC staff offices, with parti-
cular reference to OGC's work assignments. I have touched
upon related topics which I understand to be of interest to
the Committee.
The Chairman and the Executive Director plan to use the
attached statement as the basic factual statement of the
agency's position. They wish me to advise you that they
may have brief supplementary oral statements to present at
the March 10th hearings, 10:00 a.m., but essentially this
attached statement is the data they wish to present to the
Committee.
This letter transmits 30 copies of prepared comments
which I will ask to be included within the hearing record
on March 10, 1977. I would appreciate it if your office
would arrange for distribution of the copies to Committee
members and staff.
A copy of this letter is being forwarded to Minority
Counsel, Mr. Bernard Wunder.
Sincerely,
Drexel D. Journey
General Counsel
Enclosures
PAGENO="0328"
322
STATEMENT OF
DREXEL D. JOURNEY
GENERAL COUNSEL
FEDERAL POWER COMMISSION
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
COMMITTEE ON INTERSTATE
AND FOREIGN COMMERCE
UNITED STATES HOUSE
OF REPRESENTATIVES
MARCH 10, 1977
Mr. Chairman, Members of the Committee, Congressional
oversight is a necessary and continuing aspect of adminis-
trative agency work. Over the past 5 years, a substantial
number of FPC-OGC personnel have been called upon to testify
before various Congressional Coirfrnittees, including this
Committee. I have been one of these. This statement will
serve to present the basic position of the FPC,. See my
letter to the Subcommittee's Chief Counsel dated March 8,
1977.
As General Counsel of the Commission, I shall be happy
to respond to questions which you may have relative to
recent internal restructuring of work of the Federal Power
Commission. Where I do not know the answers, I assume you
will direct the questions to others in the room who may know.
In addition to the FPC Chairman, Richard L. Dunham, and
its Executive Director, J. Curtis Fee, other staff office
PAGENO="0329"
323
heads are available to answer questions which you may have.
The Commission's Director of Personnel Programs is also
present.
The purpose of these hearings, as I understand Chairman
Moss's March 3, 1977 letter and comments of the Committee's
Chief Counsel and staffV is to permit various persons to
record their support for, or opposition to, what has become
known as the Touche Ross restructuring of various FPC staff
offices (Touche Ross & Co., Phase I Report, July 1976).
Specifically, it is my understanding that this Committee
wishes to assure itself that no administrative action has
been taken by the FPC which could be said to be retaliatory
or discriminatory against any FPC employee who may have
testified before this or any other Congressional Committee,
or who may have been called upon to supply information to
such Committees or their staffs. I know of no such retal-
iatory or discriminatory action and, if there were such
acts by the FPC, they would be improper. No one may tamper
with First Amendment rights.
1/ Your letter states as follows: "***public hearings***
regarding adverse personnel actions against professional
staff members at the Federal Po~ier Commission." My con-
versation with the Chief Counsel was telephonic and
occurred March 4th. On March 7th, Committee staff met
with Chairman Richard L. Dunham.
PAGENO="0330"
324
Insofar as I understand FPC policy now, and over the
24 years that I have been employed by the agency, FPC
employees supply data and information to Congressional
bodies as those Congressional bodies see fit, and as the
employees desire to do so.
These hearings will be constructive in documenting the
views of all concerned: persons who may. oppose the work-
load - personnel shifts made necessary to implement the
Touche Ross recommendations, as well as those who favor.
what was done. I am among the latter, for budgetary reasons
and because of the dramatic reductions in workload backlogs
which have been accomplished in OGC since the shifts were
completed in October 1976.
Marked increases in productivity have occurred in
virtually all areas of legal work at the Commission. In
just one area, uncontested pipeline certificate dockets have
been reduced from 605 to zero in less than 6 months. Further
improvements, are detailed later in this statement. Thus, in
addition to satisfying the Subcommittee's concern relative
to the absence of any retaliatory action,'the record will
serve to document the positive and constructive steps which
Chairman Dunham has implemented at the FPC.
The Touche Ross proposals for restructuring the FPC
staff work have been the subject of newspaper comment by
syndicated columnist, Jack Anderson.
PAGENO="0331"
325
To facilitate the investigation of this Subcommittee,
Chairman Dunham directed that FPC staff afford access to
all FPC records. That was done. Also, it is my under-
standing that Subcommittee staff personnel have reviewed
Touche Ross's records.
Other than to implement Touche Ross recommendations,
there has been no general reassignment of the FPC Office
of the General Counsel personnel since I became General
Counsel in 1974.. Individual lawyers and clerical personnel
have received specific assignments to handle particular
matters. Most recent examples of this include assignments
of OGC personnel to assist the Administrator of the Emer-
gency Natural Gas Act of 1977, Pub. L. 95-2. Chairman
Dunham is the Administrator and exercises Presidentially
delegated authority pursuant to E.O. 11969. General day-
to-day work assignments are handled by individual Assistants
Counsel or the Solicitor, each within her or his particular
area of immediate supervisory responsibility. The overall
workload in OGC at the present time is about 50-50, natural
gas and electric power. Natural gas work is grouped into
two major areas: pipeline rates, certificates and curtail-
ment; and producer rates and certificates, including offshore
transportation facilities. Electric work is also grouped
into two major areas: hydroelectric licensing and river
basin work; and interstate electric rates, power pooling,
PAGENO="0332"
326
and corporate controls. Legislative work is grouped in a
separate area. Also, there is a separate area of grouped
work including contract and procurement, equal employment
opportunity, labor-management relations, and Civil Service
and related agency housekeeping functions.
Approximately 10 - 15% of the Commission's decided
cases find their way into the courts. The agency's court
litigation calendar is under the day-to-day supervision
of the Solicitor, Allan Abbott Tuttle. The Deputy General
Counsel exercises overall authority coordinating the work
of various Assistants Litigation Counsel. Robert W. Perdue
is the incumbent Deputy General Counsel and the Acting
Litigation Counsel. On occasion, the Deputy General Counsel
and I receive instructions from various Commissioners con-
cerning case assignments and particular OGC personnel.
Being employees of the agency, we do, of course, observe
such instructions.
The Federal Power Commission' s work schedule, budget
and personnel records show the work and assignments handled
by each OGC employee. The Coninittee staff has had access to
all of these materials. The Committee staff also has had
access to all FPC Office of Personnel Programs and OGC
records detailing pertinent FPC staff employment records.
PAGENO="0333"
327
The implementation of the Touche Ross recommendations
did not involve any FPC "adverse actions" against any
employee4" and did not result in the filing of any
"grievance" by any employee~' against the Commission.
And, insofar as I know, it did not result in any employee
complaints to the Commission under the Commission's open
door policy of hearing the views of any employee. Established
rules of the agency~-" provide the means by which staff views
are presented for Commission consideration.
Currently, the FPC's Office of the General Counsel is
comprised of 167 persons. There is 1 vacancy for employment.
There are over 1500 persons with applications on file seek-
ing to join the FPC's OGC legal staff.
During the course of the Committee staff's investiga-
tion of the Touche Ross Matter, I was asked whether I thought
2/ As defined in FPC's Administrative Manual (Instruction
- No. 4X62.l, May 14, 1975), an "adverse action" constitutes
removals, suspensions, furloughs without pay, and re-
duction in rank or pay (5 CFR 752.201).
3/ As defined in FPC's Administrative Manual (Instruction
No. 4X61.l, May 14, 1975), a "grievance" constitutes a
request by an employee, or by a group of employees acting
as individuals, for personal relief in a matter of concern
or dissatisfaction which is subject to the control of
agency management (5 CFR 771. 102).
4/ FPC Administrative Order No. 158, published April 9, 1976,
- 41 FR 15090.
PAGENO="0334"
328
that among the approximately 100 lawyers in the FPC's
Office of the General Counsel, professional or personality
difficulties could and did arise, and if so, could that
result in some employee attrition from the agency. My
answer was yes, but no more than I would expect to find
in any large legal staff, public or private. There are
on the legal staff of the agency employees who have been
hired during all national administrations, starting with
that of President Franklin D. Roosevelt and continuing
up to the current Administration. There are all age groups.
There are all types of backgrounds -- geographic, ethnic,
social, economic and educational. There are all shades of
philosophical persuasions. The lawyers within OGC are a
distinguished group, truly a cross section of the national
legal community.
I bring this to the Committee's attention, only because
I was advised that as a part of the Committee's inquiry into
the Touche Ross study and the staff restructuring, FPC
employee attrition would be reviewed.
The Office of the General Counsel now has an attrition
rate (retirements and voluntary resignations) of approximately
28.6% annually. At the time I became General Counsel, it
was 38%. The overall FPC agency attrition rate for employees
is just under 20% annually at the present time. The higher
rate for OGC reflects a phenomenon which has been going on
PAGENO="0335"
329
for some time among young lawyers with alternate employ-
ment capabilities -- 3-year government service by the
younger lawyers and then voluntary departures to work in
the private sector. It also reflects the fact that cleri-
cal workers, when trained in legal procedures, soon find
higher paid positions in the private sector~ The following
curve shows the 3-~year phenomenon to which I refer:
PAGENO="0336"
Average
FEDE~L PO~R CO~1ISSION
Office of the General Counsel
C I \ Experience Level of Non-supervisory professional Staff
>`
a
C
1-4
0
4)
4)
0-4
a
0'O
---40
~Lfl
O~-4
g
0
___~~~. ~1~\A
-r7~3~ ~ ~ ~ r-o i0~(f /,.I~ /2-i3 i3iq i~is ~ ,ri~ ,`,~ /5-,~ ~~-.2> .1)2/ .7/.ZZ ).Z23 2.~2~/ ~ .~ u.~ ~ ~/-&~ ~4>3I
Years of Experience in FPC1
1Prepared by John Griffin, OGC Administrative Officer, 1 November 1976
PAGENO="0337"
331
Employee reasons for leaving the FPC's payroll are
recorded in exit interviews conducted in the FPC's Office
of Personnel Programs. I understand Committee staff
personnel have had access to those materials. It is my
general impression, from my years of work at the FPC,
that FPC OGC staff personnel leave for financial gain
reasons, for professional or personal reasons, because of
philosophical policy differences with substantive FPC
decisions, or for health or age retirement reasons. I
see no reason why administrative changes to accommodate
workload and personnel shifts of the Touche Ross type
should result in any appreciable increase in staff attri-
tion.
There are and have been in existence adequate pro-
cedures and opportunities for the presentation and open
discussion of differing professional points of view on
matters of policy and practice within the Commission.
Still, as is the case with any Government agency or
private corporation, the policies eventually decided upon,
after input from all concerned, are those of the agency or
firm, and it is up to the employees to follow them.
At the FPC, we have traditionally followed principles
and practices of professional development for legal employees,
including rotation among areas of Commission jurisdiction to
enhance the experience and capability of Commission attorneys.
87-292 0 - 77 - 22
PAGENO="0338"
332
The rotation of staff at the Commission, just as at
major corporations which transfer employees among their
offices, is specifically designed to further the objectives
of the Commission.
The fact remains that work requirements are management
prerogatives. If any Commission staff member, whether in
OGC or elsewhere, feels that those requirements are not
satisfactory, there are well established avenues of review.~/
5/ The Subcommittee's October 1976 Report on Federal Regulation
and Regulatory Reforms states in part (p. 381):
The Federal Power Commission's legislative
mandate consists of two principal statutes cover-
ing three major fields. Part I of the Federal
Power Act ~`~`~` creates the Commission and dele-
gates to it the responsibility for the licensing
of hydroelectric projects on navigable waters or
government lands. Part II of this Act directs
the Commission to regulate the transmission and
sale for resale of electric energy in interstate
commerce.
The second statute, currently a major subject
of debate, is the Natural Gas Act.***
The Federal Personnel Manual requires a policy of rota-
tional opportunity for employees. Section 412, Appendix A,
Instruction 203 states, in part, as follows:
A-3, a. It is not practical or economical to
invest the same development efforts in
everyone who reaches the midmanagement
level.
***
e. Developmental experiences include on-
the-job development, formal training pro-
grams, and self development activities.
** *
A-4 a. Since much development is accomplished
best on the job, departments and agencies
are urged to consider setting up organiza-
tional and occupational mobility programs
* * * both time-limited moves such as de-
tails, and long-term actions involving
job rotation * * ~. There are no legal
restraints on mobility within bureaus or
among bureaus within a department.***
PAGENO="0339"
333
The members of the Commission set the Commission policies
The staff functions to discharge these policies. Individual
assistants to particular Commissioners are responsible to
that particular person (18 CFR 3.4(b)).
The detailed record of why, how and by whom the recent
redistribution of work was accomplished among FPC staff
personnel, including the General Counsel's office, starts
with various FPC appropriations hearings and Chairman Dunham's
announced intention to clean up backlogs when he became Chair-
man of the FPC in November 1975. The Commission's FY 77
appropriations covered an amount for this work which Chairman
Dunham described as follows:
***As I mentioned in my opening statement,
there is a need for a full-scale review
of our total mission and how we are carry-
ing it out. This has never been done.
Such a review could help us unwind some
of the red tape that binds most bureau-
cracies from time to time. No study will
be a panacea but it can help us relieve
regulatory lag.
Insofar as OGC is concerned, the action documents re-
distributing FPC work started with Chairman Dunham's memoran-
dum of August 2, 1976, FPC Administrative Order No. 146-A
6/ Hearings Before a Subcommittee of the Committee on
Appropriations, House of Representatives, Public Works
For Water and Power Development and Energy Research,
Appropriation Bill, 1977 (p. 237).
PAGENO="0340"
I 334
dated October 7, 1976, the Executive Director's memorandum
dated October 7, 1976, and my memorandum of October 8, 1976,
all of which are attached hereto as Appendix A. The sub-
stantive details covered in these documents reflect the basic
recommendations of the Touche Ross report of July 1976 as
they pertain to OGC.
What has the redistribution of work accomplished within
OGC? Based upon a comparison of FY 78 budget materials pre-
pared for submission to the Office of Management and Budget,
which did not reflect the results of the Touche Ross study,
and the FY 78 budget materials prepared for submission to
the House Appropriations Committee, which did reflect the
Touche Ross results, we find that OGC backlogs have decreased
materially, that OGC per capita output has increased, and
that, as a result of these factors, OGC's budget request
was reduced from 276 persons to 168 persons. The impact
of Touche Ross Recommendations on OGC workload has actually
exceeded our expectations. Since the implementation of
Touche Ross, we h :73 reduced projected OGC backlogs in the
area of non-contested statutory certification orders under
the Natural Gas Act, as of the end of FY 77, from 1,050 to
fewer than 100 producer matters; and from 605 to zero pipeline
matters.
PAGENO="0341"
335
In addition, the restructured OGC, as part of the
Commission's overall effort, has assisted in the accelerated
disposition of electric rate filings under Part II of the
Federal Power Act, and the processing of approximately
twice the number of hydroelectric applications within OGC.
The hydroelectric matters include the Commission's processing
of various licensing and related actions which are taken
under Part I of the Federal Power Act. Hydroelectric applica-
tions disposed of in fiscal years prior to the Touche Ross
type changes were averaging about 131 per year. In FY 76,
the number was 209. The reduction in the backlog of electric
cases under Part II of the Federal Power Act is from 156
pending cases in September 1976 to 129 in January 1977, or
a reduction of 17%. Pending electric rate cases now subject
to refund total approximately $580 million on an annualized
basis, or a reduction of almost 10% from the September 1976 total.
In turning this workload processing around, OGC has
reassigned approximately 21.4% of its staff as a result of
implementing the proposals made by Touche Ross. This includes
28 professionals and 8 non-professional or clerical. OGC's
current authorization is 102 professionals and 66 clerical
persons.
The FPC's Office of the General Counsel is comprised of
a fine group of people. The agency can be justly proud of
them. I am.
Thank you. I shall be pleased to respond to questions.
PAGENO="0342"
336
APPENDIX A
FEDERAL POWER COMMISSION
WASHINGTON. 0. C. 20426
OFFICC OF THE CHAIRMAN
?IEMORANDUM TO: All Employees
FROM: Richard L. Dunham
SUBJECT: Organization Procedural Changes
As you know, Touche Ross & Co. has performed an
administrative management survey for improving the
organization, functions and management process of the
FPC. The reasons for the survey were clear. Complex
pressures have placed new and more extensive regulatory
requirements on the FPC. They have and will continue
to require an expeditious, orderly and equitable handling
of the FPC's regulatory and decision-making functions.
The first section of the study has been completed.
It has resulted in recommendations for organization and
procedural changes designed to provide a more effective
organization.
I have personally monitored the study activities
and reviewed its recommendations, and it is now ready
for discussion and consideration by the Commission
and staff.
A series of long-term recommendations are currently
being reviewed. However, several interim activities should
be commenced immediately. I have instructed Touche Ross
to contact all affect~d units of the FPC to review study
findings and recommendations. I have also requested that
the Executive Director initiate several task forces to
implement appropriate changes in a timely manner.
Selected personnel will be contacted in the near future.
PAGENO="0343"
337
The Commission has taken the initiative in surfacing
problems in our current organization and identifying
desired solutions. This first step in an overall improvement
program was of critical importance to the FPC. I wish to
thank the entire Commission staff for your cooperation
and solicit your continuing contribution in improving our
operations.
- ~ /
1. /
- __~*` ~
IDC-104
PAGENO="0344"
4
to-I1~
Deputy Lenerni ]
OLtbI I
(Ų;n%) L4t46n1
CouaSs% J
CAD
CAD
ft A~~w4 Ceneitd Counsel"
PAGENO="0345"
Proposed by Touche Ross & Co.
EXHIBIT I C4
INTERIM ORGANIZATION STRUCTURE
PAGENO="0346"
Proposed by Touche T~oss & Co.
EXHIBIT I C.1
LONG TERM ORGANIZATION STRUCTURE
PAGENO="0347"
341
FEDERAL POWER COMM ISSION
WASHINGTON
OCT7 1976
EXECUTIVE DIRECTOR
MEMORANDUM TO : Bureau and Of ic~('~eads
FROM : J. Curtis Fe1 I /
Executive DJ~ tct
SUBJECT : Reorganizatio of the Office of the
General Coun el
As a result of the Touche Ross Management Study, *the
Commission approved Administrative Order No. 146A, a copy
of which is attached. In order to implement the changes
necessary to implement Administrative Order No. l46A, I
have initiated the Legal Support Task Force. It will
concentrate on the following major efforts:
1. Redistribution of workload in OGC
2. Implementation of work-flow processing and
case management systems
3. Detailed investigation into the positive and
negative factors involved in the proposed long term OGC
reorganization
The Legal Support Task Force is established as of
today under the authority of Mr. Drexel Journey, General
Counsel and under the direction of Mr. Perdue, Deputy
General Counsel. I consider the duties of this task force
to be of high priority to the Commission. You are
requested to give full cooperation to its efforts.
Attachment
PAGENO="0348"
342
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Richard L~ Dunham, Chairman;
Don S. Smith~ John H. Holloman III
and James G~ Watt,
Administrative Order No. 146A
ORGANIZATION AND FUNCTIONS
OF THE OFFICE OF THE GENERAL COUNSEL
(October 7, 1976)
This administrative order reestablishes the Office
of the General Counsel and restates the division of
responsibilities between the Office of the General Counsel
(OGC) and the Office of Special Assistants as to the
preparation of opinions and orders generally and in
response to applications for rehearing or reconsideration
in meeting separation of function responsibilities.
1. ORGANIZATION. The Office of the General Counsel
consists of a single organizational unit without divisions
or sections.
2. RESPONSIBILITIES.
a. The Office of the General Counsel is re-
sponsible for the legal phases"of all staff work required
in the performance of the Commission's functions.
b. In addition to the foregoing organizational
responsibility, the General Counsel has personal respon-
sibility for providing advice and counsel to the Chairman
and the Commission with respect to legal, legislative,
and other Commission matters as requested.
3. FUNCTIONS. Studies and analyzes applications
and formal and informal communications, filings, and
submittals; prepares statutory notices of Commission
proceedings for publication and service; prepares corre-
spondence, memoranda, and reports, on legal aspects of
such proceedings; advises members of the staff and the
Commission on legal questions; and prepares proposed
Commission orders. Serves as staff counsel in hearings
PAGENO="0349"
343
and jn oral argunient before the Commission, presenting
evidence, examining witnesses, preparing and submitting
motions, stipulations, briefs, exceptions and other
pleadings, and presenting oral argument on behalf of
the staff before administrative law judges and before
the Commission,
Advises the Secretary and the Commission's Records
Officer on the certification of Commission records to
reviewing courts; represents the Commission, and indi-
vidual Commissioners in the discharge of their official
duties, in the courts, preparing and'filing motions,
stipulations, briefs, and other pleadings, and present-
ing oral argument in the lower courts and, in association
with the Department of Justice, in the Supreme Court of
the United States. Consults with bureaus and offices
concerned and drafts legislative proposals initiated by
the Commission, Commission comments on legislative
proposals prepared outside the agency, and proposed
changes in the Commission's rules and regulations;
advises the Commission concerning the legal effect and
significance of such proposals. As directed, represents
the Commission before committees of the Congress, before
other governmental agencies, and elsewhere. Compiles and
prepares headnotes for, edits, and supervises publication
of the Commission's opinions and orders; and is responsible
both for the maintenance of a work-flow processing system and
for providing case status information to the Commissioners
and other Commission personnel.
Senior members of OGC, to the extent stated in the
position description held by each individual and as assigned,
are responsible for the training of less experienced
attorneys in the routine legal work which is the
responsibility of OGC so as to assist them in becoming
more effective members of the Commission staff.
Subject to the provisions of the Administrative
Procedure Act, advises the Commission in the preparation
of its opinions and orders. As a division of administrative
work load, OGC personnel will handle applications for
rehearing or reconsideration in any proceeding where
such applications have been filed before the commencement
of the hearing and OGC has drafted the order. OGC personnel
PAGENO="0350"
344
will handle any applications, petitions, motions, or other
filings, other than settlements, except where OGC has
filed a pleading in opposition to the movant or any other
party. OGC personnel will handle settlement proposals
before or after a hearing has been set, where the Staff
has not opposed the settlement. Additionally, OSA will
furnish to OGC such information and assistance as is
required both to maintain the work flow processing
system and to provide case status reporting data in a
systematic manner.
All of the above stated functions in OGC will be
performed under priorities established by the General
Counsel, as required.
4. SUPERSESSIO~. This order supersedes Administrative
Order No. 146 dated February 24, 1975.
By the Commission.
(SEAL)
Kenneth F. Plumb,
Secretary.
PAGENO="0351"
345
~iflT R i~m
MEMORANDUM TO: Mrs. Van Cleve, Messrs. Perdue, Tuttle,
Goldstein, Grant, Gilmore, Lotis, Minor,
Keeley, Griffin
FROM: Drexel D. Journey
SUBJECT: Redistribution of OGC Workload
This memorandum implements portions of the organization
of OGCrefleOted in Chairman Dunham's memorandum of August 2,
1976 (copy attached). Attached hereto is the organization
chart for OGC reflecting the workload redistribution which
is being made at this time based upon the Touche Ross
analyses and recommendations.
Consistent with this redistribution of workload, work
schedule assignments will be changed effective Tuesday,
October 12, 1976. (1) The pipeline certificate and rate
work will be under the supervision o~,Gordon Grant in the
role of Assistant Litigation Counsel-'(acting); (2) the
producer rate and certificate work, including all off-
shore pipeline work, will be the responsibility of Francis
Gilmore filling the role of Assistant Litigation Counsel;
(3) all Part I electric work, including license project
accounting, will be handled under the supervision of Ruth
Van Cleve filling the role of Assistant Litigation Counsel;
and, (4) all Part II and III electric work, including
Federal power rates, will be handled under the super-
vision of Daniel Goldstein (now Assistant Litigation
Counsel-Legislation) as Assistant Litigation Counsel
(acting) for these matters.
In discharging the dual position of Deputy General
Counsel and Acting Litigation Counsel, Robert W. Perdue
will coordinate materials for the agenda from the various
Assistants Litigation Counsel under the general supervision
of the General Counsel. The work of the Solicitor will
continue under the immediate supervision of the Solicitor
and under the general supervision of the General Counsel.
Additionally, the work of the Office of the General Counsel
in the legislative area will continue as presently conducted
under the general supervision of James Wood filling the role
of Assistant Litigation Counsel-Legislation (acting).
1/ Assistants Litigation Counsel formerly titled
"Assistants General Counsel"
PAGENO="0352"
346
The position of Assistant Litigation Counsel and the
two positions of Assistant to the General Counsel will be
occupied by Messrs. Lotis, Minor, and Keeley, respectively.
Assignments in the nature of those presently handled by
Mr. Minor. will continue under the supervision of the
General Counsel. Assignments to Messrs. Lotis and Keeley
will be at the direction of the General Counsel. Adiriinis-
trative work in OGC will continue under the supervision of
Mr. Griffin.
As you will note from the overall interim organization
chart and the potential long-range reorganization proposal
prepared by Touche Ross (copies attached), the work of the
General Counsel's office may be further subdivided at some
future time. Recognizing that future organizational changes
may occur, the positions of Acting Litigation Counsel and
Deputy General Counsel are currently combined but have
distinct roles in the organizational framework.
I do not know, at the present time, when further
reorganizational steps will be directed by the Chairman.
It is my understanding that various other staff offices will
be undergoing changes and that as such changes occur, OGC
may be affected at the direction of the Chairman through
the Executive Director, including further changes in the
workload and assignments as specified herein. Phase II of
the OGC Reorganization Task Force will study this matter.
Your cooperation in implementing the new procedure
will ensure a smooth transition. The Administrative Officer,
John Griffin, will be in consulation with each of you
concerning changes in office space, telephones, furniture,
and other physical factors. It is contemplated that, with
the workload restructuring, physical relocations will be
completed as soon as possible. As he has in the past, John
will do his best to serve everybody's interests in that
regard.
I am attaching for your information a copy of the
Executive Director's memorandum of October 7, 1976, and
Administrative Order No. 146A. Because I consider this
matter of general .interest throughout OGC, copies of this
memorandum will be available to all OGC personnel.
f -~ ~
`I / / General Counsel
Approved: C
~~utive Director
Attachments
PAGENO="0353"
347
APPENDD~ A
City of Washington,
March 17, 1977
District of Columbia
AFFIDAVIT
Now comes Robert Williamson Perdue to, and does make the
following statement and statements regarding certain oral
testimony, statements, allegations and averments given and/or
made by one Jon G. Lotis during the course of proceedings before
the Subcommittee on Oversight and Investigations of the Committee
on Interstate and Foreign Commerce in the City of Washington on March
14th in the year Nineteen Hundred and Seventy Seven, and particularly
that portion of said testimony of the aforenamed Jon G. Lotis as
transcribed, printed and published on page one hundred and twenty-
one (121) of the transcript of the aforesaid proceedings, and in
particular the questions, testimony and comment made at lines
one through sixteen (1-16) of said page. Reference is also
made herein to lines sixteen (16) and seventeen (17) of page
one hundred and twenty of the aforesaid transcript merely to
establish the time frame of the aforementioned testimony of the
said Jon G. Lotis.
At page one hundred twenty (120) of said transcript appears
the following:
"16 Mr. Simms: So, Mr. Lotis, litarally one of the first
17 moves Mr. Journey made after he became General Counsel"
At page one hundred twenty-one (121) of said transcript
appears the following:
"1 Did Mr. Journey's Deputy, Mr. Robert Purdew, say any-
2 thing to you concerning Mr. Lewnes around this same time
3 period?
4 Mr. Lotis. Sometime after the conversation with Mr.
5 Journey, Mr. Purdew told me that he had hired a GS-14 for
6 the purpose of blocking promotion to Mr. Lewnes's shop.
87-292 0 - 77 - 23
PAGENO="0354"
348
7 At that time there were a number of attorneys at the GS-l4
8 level in Mr. Lewnes'~ shop, and bringing someone on at that
9 level would, he felt, block some of those attorneys from
10 getting that position.
11 . I asked hin whether he had advised Mr. Journey of this.
12 He said he did. Mr. Journey just laughed.
13 Mr. Simms. Mr. Chairman, I will note for the record
14 that a brief survey of the promotion, hiring, and.firing
15 charts that Mr. Fee put in the record did not seem to reflect
16 an~y category for promotions which were blocked."
(emphasis added)
The aforementioned testimony of Jon G. Lotis is a reiteration of a
statement or statements he made in my presence of the undersigned,
and others, over one year ago and is, as I personally told him
then and at that time (1) is a mistake on his part, (2) illustrates
a fantasy, or (3) as I told him then and avow now--is a falsehood
deliberated to lend some credence to a perpetration of his of
which I had no knowledge.
The falsehood of Jon G. Lotis appears on its face. He testifies
"***Mr. Purdew told me that he had ~jired a GS-l4 for the purpose of
blocking promotion to Mr. Lewnes's shop. At that time there were
a number of attorneys at the GS-14 level in Mr.. Lewnes's shop, and
bringing someone on at that level would, he felt, block some of
those attorneys from getting that position." Of course, you cannot
1'block" a GS-14 from becoming a GS-l4 by hiring a GS-14.
But more damning, and irrefutable proof of the falsehood of
the aforementioned testimony of Jon C. Lotis are the following facts:
(1) Mr. Drexel D. Journey became acting General Counsel
on September 24, 1974;
(2) Mr. Journey hired Mr. Robert Winters (the GS-l4 which
Mr. Lotis testified was hired by "Mr. Purdew") on December 22, 1974;
PAGENO="0355"
349
(3) Mr. Journey was promoted to General Counsel on Decem-
ber 31, 1974;
(4) Mr. Robert W. Perdue was promoted to Deputy General
Counsel fron Assistant General Counsel on May 11, 1975.
(5) Mr. Robert W. Perdue moved from his office as Assistant
General Counsel to the office occupied by, and he now occupies as
Deputy General Counsel on May 19, 1975.
These facts show that the conversation Mr. Lotis said he had
with "***Mr. Journey's Deputy, Mr. Robert Purdew, ...concerning
Mr. Lewnes around this same time period?" Could never have taken
place as "litarally one of the first moves Mr. Journey made after
he became General Counsel... ." At the least there was over a five
and one-half month time interval between the respective appointments.
Further, Mr. Robert Winters was appointed as a GS-14 almost
six months before Robert Williamson Perdue was promoted to Deputy
General Counsel. Additionally, Mr. Winters would, and could not
at that time, be promoted to a GS-l5 until sometime in December,
1975. Consequently, his being hired by Mr. Journey in December,
1974 and assigned to the Producer Section of the Office of the
General Counsel under Assistant General Counsel Robert Williamson
Perdue could not "block" any pending promotions for anyone.
In edification of the testimony being a similar tale told
by Mr. Jon G. Lotis, at a bi-weekly staff meeting held by the
General Counsel in May 1975, he recounted a similar fabrication
Upon the request of Mr. Perdue, the General Counsel had excused
Mr. Perdue from said meeting because he was preparing for the oral
argument in Docket No. R-389-B, which he was to argue in the
United State Court of Appeals for the Fifth Circuit (National
Rate Cases for New Gas, Case No. 74-3330, et al.). Upon hearing
Mr. Lotis' tale, Mr. Journey sent for the undersigned and asked
Mr. Lotis to recount his story. Mr. Lotis did so, and was
PAGENO="0356"
350
immediately challenged by the undersigned. First, I challenged
that such an incident ever occurred, and secondly, that anything
like it ever occurred. There was a discussion, and then a heated
exchange ensued which was ended by the undersigned personally
telling Mr. Lotis he was telling an untruth. Mr. Lotis did not
challenge that statement and the matter ended.
Robert W. Perdue
Robert Williamson Perdue, being first duly sworn, says:
That he has read the foregoing affidavit and knows the contents
thereof; and that the same is true of his knowledge except as to
the matters which are therein stated upon information furnished
him, and as to those matters that he believe to be true.
Sworn to and subscribed before me,
this the ~ day of March, 1977.
~` Notary Public
c~n~1c~,n E.phes Azt 3~
PAGENO="0357"
351
APPENDIX B
AFFIDAVIT OF DANIEL C. LAMKE
COMES NOW the above-named affiant who deposes and
states as follows:
I, Daniel C. Lamke, an employee of the Federal Power
Commission ("F.P.C.") believe myself to be the Mr. Lampke
(sic) referred to in testimony previously offered before this
Subcommittee on March 14, 1977. More specifically, that testi-
mony offered by Mr. John C. Lotis, Assistant Litigation Counsel,
on pages 172 and 175 of that day's transcript.
I have been employed with the Federal Power Commission
since May, 1970. Since the time of my employment in May of
1970, until today's date, my primary responsibilities have
been related to legal activities including trial and advice to
the members of the F.P.C. and other legal and technical staff
members thereof primarily regarding responsibilities set forth
in the Federal Power Act.
PAGENO="0358"
352
In addition, from time-to-time, I have been requested
by appropriate members of the staff and Commission of the
Federal Power Commission to offer advice with regard to cer-
tain isolated items pursuant to the Natural Gas Act. Further,
during the years since my employment I have upon request per-
formed other internal functions within the F.P.C. such as
acting as a primary draftsman in the now effective Standards
of Conduct for Federal Power Commission employees as well as
F.P.C. special government employees and F.P.C. Commissioners.
It is my recollection that from 1974 until November 1976,
I acted as the Supervisory Attorney in charge of a group of
attorneys that became unofficially refcrred to as the Corporate
Regulation - Electric Section of the Hydroelectric Division of
the General Counsel's Office. I was acting in that capacity
during the period of time that Mr. Lotis referred to in his
testimony (pages 172-175).
PAGENO="0359"
353
Mr. Lotis' testimony as it relates to a particular
matter involving the American Power System, as stated by
him on pages 172 175 of this Subcommittee's Transcript,
March 14, 1977, creates in my mind an innuendo that Mr.
Journey (General Counsel of the Federal Power Commission)
and I acted unjustly and in concert in presenting an order
to the Commission recommending a broad based investigation
of the electric utility industry regarding the alleged need
of the industry to favor retail electric service over whole-
sale electric service.
In my opinion, Mr. Lotis' statement is misleading due
to his lack of presenting the factual background of what I
consider to be a primary issue that was being addressed dur-
ing this period of time.
My review of the papers related to this matter corres-
pond to ray personal recollection of the following facts:
(1) During the latter part of January 1976,
through a conversation with the General Counsel, I
became aware of a Bureau of Power Memo to the Com-
mission dated December 1, 1975 (attached hereto as
PAGENO="0360"
354
Appendix 1 ) that indicated that American
Electric Power Company as well as other com-
panies identified by the memo, had indicated
the possibility of the termination of certain
electric services. More specifically, certain
companies.including American Electric Power Com-
pany ("A.E.P.") or it's subsidiaries had indica-
ted that they might terminate wholesale power
service to certain customers for purposes of
supplying retail electric service.
(2) It is my recollection that during the
primary conversation between Mr. Journey and my-
self, we both expressed concern with regard to the
broad industry-wide repercussions of electric utili-
ty companies curtailing wholesale service to custo-
mers on the single ground that they may unilatterally
prefer to provide service on a retail basis.
(3) Pursuant to our initial conversation,
Mr. Journey and myself felt that the most effective
way of implementing the recommendations of the Bureau
of Power Memo of December 1, 1975, as well as the much
broader concern of a shortfall of electric energy on
PAGENO="0361"
355
industry wide basis, was to present the x~elevant
factors as we knew them at that time along with a
proposed broad based investigation of the electric
industry to determine whether there. was any factual
basis that would indicate the necessity of any pro-
posed curtailment of electric energy whether it be whole-
sale or retail
(4) The conversation between Mr. Journey and
myself, to my recollection, specifically included a
discussion that any allegations raised in any particu-
lar case against any particular company, must be tried
within the confines of the case in which those issues
were raised. This included the allegations regarding
A.E.P. referred to by Mr. Lotis in his testimony or in
any other case which might arise requiring Commission
decision (see Appendix 2). To my knowledge, that con-
versation became fact as represented by the Commission
setting it for hearing in the individual dockets involv-
ing this particular issue. The most recent of which in-
volved the cities of Anderson and Mishawaka, Indiana,
Docket No. E - 9548, et al, which has been presented
before an Administrative Law Judge of the Federal Power
Commission and initial briefs filed as of March 11, 1977.
PAGENO="0362"
356
The matter of curtailment of electric service in any
form by A.E.P. or any other electric utility was a matter
of concern to a great number of the members of the staff of
the Federal Power Commission and, in my opinion, a matter of
great concern to the Commission. The drafting and presenting
of any order to the Commission was not confined to a closely
held group of two (Mr. Journey and myself), as seemingly in-
sinuated by Mr. Lotis' testimony. For instance, I can
identify the order that Mr. Lotis is referring to in his testi-
mony on page 172 and page 175, where he indicates that the pro-
posed order was prepared and dictated by Mr. Journey the night
before Commission presentation, with my help. That state-
ment is true. I might also add, however, that this matter
is not isolated to one day's consideration by the Commission
or the staff of the Commission. I think that this is clearly
indicated by the Secretary of the Commission's prepared agenda
sheets attached hereto as Appendix 3. Those sheets indicated
that the Bureau of Power Memo, dated December 1, 1975, appeared
on the agenda for Commission discussion for December 17, 1975.
Those discussions continued according to the agenda sheets, in
an official manner through April 6, 1976, at which time the
Chairman of the Commission issued a memo to the Chief of the
Bureau of Power to conduct a study with regard to the adequacy
PAGENO="0363"
357
of power supply for utility systems (see Appendix 4). The
Secretary's agenda sheets do not however indicate fully staff
efforts with regard to presenting this matter to the Commission.
For example, my personal file contains eight~ different drafts
of proposed orders representing approaches to the same problem.
To the extent that the orders attached as Appendix 5 A -
do not bear the name of the draftee, I have no independent re-
collection as to who within the Commission specifically pre-
pared them. I can only state that they were prepared by Com-
mission personnel at my request for purposes of informing me
of suggested approaches of addressing the problem of potential
nation-wide electric inadequacies.
I am also including as Appendix 6, a series of memoranda
in my personal file between myself, the General Counsel, Mr.
Lotis or other Commission personnel, regarding this matter.
They are submitted for no other particular purpose than to
indicate that a substantial number of employees of the Federal
Power Commission, in many different divisions, were fully aware
of this matter and expressed opinions regarding it.
PAGENO="0364"
358
While inappropriate to express feelings rather than
facts in affidavit form, I am constrained to take particu-
lar exception to the seeming allegation that an order was
done at night for purposes of presentation to the Commission
the next day, insinuating in my mind that it was an overt
attempt to withhold information for review by any responsible
commission staff member. In my experience, with the F.P.C.
over the last seven (7) years, I, as well as many other mem-
bers of the staff of the F.P.C., to my personal knowledge, have
worked night hours, holiday hours, weekend hours or any other
necessary hours for purposes of developing the required infor-
mation and preparing proposed orders for Commission considera-
tion. In that statement, I include Mr. Lotis who, to my per-
sonal knowledge, has worked as long and as hard in his efforts
as any other member of the Commission staff.
Daniel C. Lamke
Daniel C. Lamke, being first duly sworn, says:
That he has read the foregoing affidavit and knows the
contents thereof; and that the same is true of his knowledge
except as to the matters which are therein stated upon
information furnished him, and as to those matters that he
believes to be true.
Sworn to and subscribed before me,
this the /7~ day of March, 1977.
Notary Public
-~ C~fl1I~0fl Expires Aegrisi 31, 2L'~i
PAGENO="0365"
359
NOTE: THE FOLLOWING LETTER WAS SUBSEQUENTLY RECEIVED FROM FPC.
SEE APPENDIX B, P. , THIS HEARING, FOR TEXT OF MR. LAMKE'S AFFIDAVIT.
FEDERAL POWER COMMISSION
WASHINGTON, D.C. 20426
March 23, 1977
Michael R. Lemov, Esquire
Chief Counsel
Subcommittee on Oversight
and Investigations
Committee on Interstate
and Foreign Commerce
House of Representatives
Washington, D.C. 20515
Dear Mr. Lemov:
Attached to Mr. Drexel D. Journey's statement of March
18, 1977, submitted before the Subcommittee on Oversight
and Investigations Committee on Interstate and Foreign
Commerce there ~as attached an Appendix B which consists
of an Affidavit with Appendicies submitted by myself. The
Affidavit referred to certain testimony made by Mr. John C.
Lotis regarding a Federal Power Commission proceeding. As
indicated by my Affidavit I took exception to what I considered
an innuendo by Mr. Lotis as to my personal integrity in that
matter.
On the morning of March 23, 1977, Mr. Lotis contacted me
in my office at the Federal Power C~onmission and subsequently
in his office we conversed regarding the matter. Mr. Lotis,
during those conversations indicated to me that it was not
his intention to create any insinuation that the matter referred
to by him in his testimony, which was handled by me, was done
in any inappropriate manner. While I think the Affidavit and
Appendicies prepared by me clearly indicate the handling of the
matter, I do appreciate Mr. Lotis personally informing me that
no insinuation was intended.
Mr. Lotis during our conversation of March 23, 1977,
indicated to me that he intended to make a statement before
the Subcommittee on March 24, 1977, clarifying this matter.
On the basis of our conversation and upon Mr. Lotis's
explanation that no such innuendo was intended, we concluded
that my submitted Affidavit may he unnecessary to clarify
any matter in which the Subcommittee is concerned.
PAGENO="0366"
360
In concluding, however, that the Affidavit may be unnecessary
for my purposes I do not mean to indicate that I am withdrawing
the Affidavit in the absence of a specific finding on the part
of the Suhconmittee that it is unnecessary for its purposes.
S cerely,
Daniel C. Lamke
Trial Attorney
DCL dia
PAGENO="0367"
361
APPENDIX D
AFFIDAVIT OF KENNETH F. PLUMB
I, Kenneth F. Plumb, being first duly sworn, depose
and say:
I am Secretary of the Federal Power Commission and I
have been so employed since June 1971.
I have read the testimony of Mr. Jon G. Lotis concerning
the issuance on July 21, 1975, of a notice in Ohio Electric
Company, Docket No. E-8888. Mr. Lotis stated that he had
staff counsel discuss with me the length of the notice period,
and that I apparently disagreed with the General Counsel on
how long the notice period should have been.
I have no recollection of any such conversation. The
only record I have pertaining to the notice is the issued
document itself, a copy of which is attached hereto. I note
that the notice period was eight days, which is not an unusual
period.
Kenneth F. Plumb
Sworn to and subscribed before me,
this the ,~"day of March, 1977.
7)
7/ Notary Public
Ny Con iT~z~j Th~pires Augi~t 31, 1979
PAGENO="0368"
362
APPENDIX G
UNITED STATES GOVERNMENT
Memorandum
TO : General Counsel DAm: March 17, 1977
FROM : OGC Administrative Officer
SUBJECT: Data for the "Hearings on Adverse
Personnel Actions Against Professional
Staff Members at the Federal Power
Commission" held before the Subcommittee
on Oversight and Investigations of the
Committee on Interstate and Foreign
Commerce, U. S. House of Representatives
Pursuant to your request, this memorandum oiitlines
my involvement with these hearings thus far and examines
point-by-point the statistics and other data cited in
statements in the unedited stenographic transcripts. These
statistics w'ill be compared with the data I am preparing
for the Subcommittee.
I have answered numberous requests for data from the
Subcommittee. On July 9, 1976, I provided a response to
Mr. Braun's verbal request concerning OGC assignments on
the HIOS Project, a copy of which is attached as Attach-
ment A. On January 31, 1977, I provided a response
to Mr. Nourse's verbal request concerning OGC actual on-
board personnel count and promotions by pay period and
appropriation code for a time period selected by him, a
copy of which is attached as Attachment B. On February 4,
1977, I drafted a response for the Chairman's signature
to Congressman Moss' written request for a breakdown
ofOGC's on-board personnel by occupational series,
grade level, and months in grade, a copy of which is
attached as Attachment C. On March 10, 1977, I provided
a response to Mr. Wunder's verbal request for an on-
board OGC personnel count for selected time periods,
a copy of which is attached as Attachment D. On that
same day I provided a response to Mr. Sims' verbal
request for a listing of reassignments occasioned by your
October 8, 1976 memorandum. A copy of my response to
Mr. Sims is attached as Attachment E. On March 11, 1977,
I provided to Mr. Sims copies of all promotion/personnel
memoranda written by various Assistants General Counsel
that I found in the files I inherited. A copy of this
Buy U.S. Savings Bonds Regularly on the Payroll Savings Plan
PAGENO="0369"
363
response is attached as Attachment F. Between February 28,
1977 and this morning, I have worked 111.5 hours on this
Subcommittee's inquiries. Fifty of those hours were
either overtime or on weekends.
I informed you and all my contacts on the Subcommittee
that, from March 9, 1977 forward, I would send copies of
all my correspondence with the Subcommittee to both
Mr. Lemov and Mr. Wunder. I also discussed this problem
with Mr. Sims and we agreed that what was needed was
a complete factual record of OGC's personnel actions for
FY-l975, FY-l976, Transition Quarter, and FY-l977. Later,
Mr. Lemov asked during the hearing (March 14, 1977,
Transcript page 18) that this data be compiled for
FY-l970 to the present time. Responding to this request
will take a minimum of one full month of my time.
Acting pursuant to the concurrent requests I received
from you and from Mr. Sims, I have developed certain
data pertaining to the professional staff in Mr. Lewnes'
and Mr. Lotis' sections for FY-1975 and FY-l976. From
these data, I have developed several charts which serve
to illustrate what I believe to be the major points
of concern to me at issue in these hearings. These
charts are not complete because they do not address the
full time period requested by the Subcommittee and
because they do not address all sections of OGC. As
these data are developed further, I will add them to the
charts listed below:
Attachment G*: Comparative average tenure of the
professional staff in OGC.
Attachment 11*: Comparative average grade of the
professional staff in OGC.
* Attachment 1*: Comparative promotions of professional
staff in OGC.
Attachment J*: Comparative attrition of professional
staff in OGC.
Attachment K*: Comparative promotion eligibility
of professional staff in OGC.
* 87-2920-77-24
PAGENO="0370"
364
Attachment L*: Comparative on-hoard professional
staff in OGC
Preliminary analysis is possible, subject to the
caveat that this analysis may require revision upon
examination of the data from FY-l970 through FY-l974.
With that qualification in mind, I'll turn to a specific
point-by-point analysis of the first three days' hearing
transcript.
1. Mr. Mamone (March 9, 1977)
Since September 1974, the career
certificate legal staff has been
drastically diminished. Between that
date and January 1977, only eight of
the 26 original attorneys remain in
this section. Of this, 18 departed,
12 resigned from the Commission, and 6
transferred elsewhere in the Commission.
This represents an extraordinary rate of
attrition [emphasis addedj ,l
I cannot confirm this statement either as to all of its
facts or as to its assertion of the drastic or extra-
ordinary nature of the attrition. In fact, Mr. Lewnes
latter refers to the attrition as "normal" (March 10,
1977 Transcript page 67). As shown in Attachment L,
I can2confirm that there were 26 on-board professional
staff as of September 1974. I cannot confirm that,
in the time period mentioned, 12 of these 26 left the
Commission. My figures indicate that 11 left the Commis-
sion, that one was reassigned outside of OGC, and that
*Eventually, all of these data will be expanded to
include the time period requested by the Subcommittee.
1March 9, 1977 unedited stenographic transcript, p. 13.
2Defined as either Law Clerks (Trainee) or Attorneys,
but not student clerks.
PAGENO="0371"
365
three were transferred within OGC. Neither can I confirm
the "drastic" or "extraordinary' nature of this attrition,
which, based on my figures, is 3 of 26 in FY-75, and 9
of 26 in FY-76, 2 of 26 in FY-TQ, and 1 of 26 in FY-77
(through January 1977). These attrition rates are 11.54,
34.62, 7.69, and 3.84 percent for the fiscal years mentioned.
The composite rate is 15 of 26 or 57.69 percent over
2.25 years, for a yearly rate of 25.64 percent. A coin-
parison of the yearly rate with OGC's overall yearly
attrition rate for professionals in FY-75 (22.45%) and
FY-76 (23.53%) yields a difference of two or three
percentage points, which does not support the use of the3
descriptors "drastic," "extraordinary," or "tremendous."
Additionally, the curtailment and
extraordinary relief cases were added to
the duties of the certificate section
in 1970. Together with the increased
workload in the Section 7 area, these
substantial added duties imposed
further demands on staff. ~
The impression here conveyed is that these demands were
imposed during the same time period as the attrition
rate cited above. I can confirm that this workload was
added, but substantially before the time period mentioned
during Mr. Mamone's discussion of attrition.
The number of filled positions
in August 1974 was 137; it increased
to 151 in December 1975; and it rose
to 159 in December 1976. ~
3Parenthetically, it should be noted that OGC attrl-
tion was only 12 of 26, since the other 3 remain with OGC.
The adjective "tremendous" was used by Mr. Lemov.
4March 9, 1977 unedited stenographic transcript p. 14.
5March 9, 1977 unedited stenographic transcript p. 14.
PAGENO="0372"
366
I cannot confirm these figures exactly, but the difference
is very minor. However, they may mislead the Subcommittee,
since they include all OGC personnel, instead of only
professional staff. In FY-75 and FY-76/77, OGC's pro-
fessional staff was not authorized to exceed 98 and 102,
respectively. My on-board count of professionals (as
opposed to authorized ceiling) is not yet complete.
During the course of the hearing, Mr. Mamone states
that neither the employees nor the Union had been shown
the Touche Ross report.6 I believe he is correct with
respect to large numbers of FPC employees; but I believe he
is incorrect on the Union involvement. The Executive
Director should be able to answer the question.
However, I know of no other attorney who
was ordered to be moved from Section A
to Section B.
* * * *
***I don't believe any attorney was
transferred during the course of the
October reorganization who did not
request a transfer or who did not go
to a similar function in a different
box or block on a table of organization.7
These statements are not accurate. Attachment E provides
the actual reassignments and Attachment M provides a
graphic description of the effect of your October 8, 1976
memorandum.
Finally, during Mr. Mamone's testimony, there was
a discussion of the experience level in the certificate
group. A large reduction in the average experience level
was alleged. Attachment G provides the actual figures.
2. Mr. Lewnes, Mr. Wofsy, Mr. Mamone (March 10, 1977)
I confirm the number of professional staff on board
in Mr. Lewnes' section. Refer to Attachment L. However,
several times during the testimony, reference was made to
6March 9, 1977 unedited stenographic transcript,
pages 36 and 58.
7March 9, 1977 unedited stenographic transcript,
pages 38 and 73.
PAGENO="0373"
367
the "decimation' of his staff and the lack of promotions
(Mr. Lewnes later refers to his attritionas "normal").
Attachments L, I, and K address these issues.
During Mr. Lent's questions,8 the issue of the
justification for Mr. Lewnes' outstanding rating of
Mr. Mamone was raised. The inadequate justification is
not as germane to that discussion as is the fact that
Mr. Lewnes used that same verbiage to recommend several
attorneys for outstanding performance ratings. In my
opinion, outstanding ratings should never be granted on
"boiler plate" justification. Mrs. Schutte can
describe the requirements for justification of outstanding
ratings.
I was loosing people in normal
attrition. I was not getting replace-
ments
Attachment L does demonstrate a lack of replacements, but
I do not believe it to be excessive, especially in view of
the hiring restrictions during that time period.
3. Mr. Fee (March 14, 1977)
Mr. Gore's use of the October 1975 to October 1976
time period is an important point.10 It is repeated
several times during the March 14, 1977 hearings. I have
not attempted to confirm these figures since they refer
to an unrepresentative time period. All government
budgeting (and, therefore, personnel trending) is keyed to
fiscal years. The time period of October 1975 through
October 1976 covers the last three quarters of one fiscal
year (1976) and the transition period between one fiscal
year structure and another. It should be noted that
consideration of the July through September time period
when evaluating promotions is important in the case of OGC
because of two factors: (a) most new hires were made during
that period, which implies that, one year later, they would
be first eligible for promotions; and (b) eligibility is a
key factor in assessing both promotion distribution and
8March 10, 1977 unedited stenographic transcript,
pages 42, 43, and 44.
9March 10, 1977 unedited stenographic transcript, page 67
(Mr. Lewnes)..
3-0March 14, 1977 unedited stenographic transcript,
pages 22 and 23.
PAGENO="0374"
368
1. Attachment A -- July 9, 1976 letter to Mr. Braun
concerning OGC assignments on the
HIOS Project.
2. Attachment B -- January 31, 1977 letter to Mr. Nourse
concerning OGC actual on-board
personnel count and promotions by
pay periods.
3. Attachment C -- February 4, 1977 response to Moss
request for a breakdown of OGCts
on-board personnel by occupational
series, grade level, and months in
grade.
4. Attachment D -- March 10, 1977 letter to Mr. Wunder
concerning his verbal request for an
on-board OGC personnel count for
selected time periods.
5. Attachment E -- March 10, 1977 letter to Mr. Sims
concerning his request for a listing
of reassignments occasioned by your
October 8, 1976 memorandum.
6. Attachment F -- March 11, 1977 letter to Mr. Sims
providing him all promotion/personnel
memoranda written by various Assistants
General Counsel that I found in files.
7. Attachment G -- Comparative average tenure of the
professional staff in OGC.
8. Attachment H -- Comparative average grade of the
professional staff in OGC.
9. Attachment I -- Comparative promotions of professional
staff in OGC.
10. Attachment J -- Comparative attrition of professional
staff in OGC.
11. Attachment K -- Comparative promotion eligibility of
professional staff in OGC.
12. Attachment L -- Comparative OGC on board professional
staff.
PAGENO="0375"
369
attrition in OGC. Attachments I and J supply certain
statistics relating promotions and attrition in OGC, and
Attachment N relates promotion eligibility to attrition.
4. Mr. Lotis (March 14, 1977)
I cannot confirm the status of promotions in the
Rates Section.11 My figures do not agree with those
cited in the transcript, but, since I do not have a copy
of the chart, or a copy of its supporting data, I do
not know the source of the disagreement. See Attachments I
and K. I can suggest that his high attrition rate (and
hence his low promotion rate--the eligibility problem
again) are due in part to his advice to his newly arrived
attorneys.
This concludes the point-by-point analysis. I
believe the main points addressed by the Subcommittee
are:
1. Promotion rates
2. Attrition rates
3. Or~-board professional staff
4. Average experience levels
I hope that the attached material will serve to
explicate further the data I am preparing for the
Subcommittee.
Respectfully submitted,
I A~ ~- 1/
~JOhn P.. Griffin III
11March 14, 1977 unedited stenographic transcript,
pages 135 and 158.
~-2See page 135 of the transcript.
PAGENO="0376"
370
13. Attachment M -- Description of the effect of October 8,
1976 memorandum.
14. Attachment N -- Comparative OGC promotion eligibility
to attrition.
NOTE: Attachments B, C, D, and F fo1low-~all other attachments may be
found in the subcommittee's files.
PAGENO="0377"
371
ATTACHMENT B
FEOERAL POWER COMMISSION
W~SHtNGT0N. D.C. 204Z6
January 31, 1977
Mr. Richard Nourse
House Annex No. 2
Room 3304
Washington, D.C. 20515
Dear Mr. Nourse:
Pursuant to our conversation on January 26, 1976,
enclosed are the following:
1. Actual on-board personnel count by pay period
and by appropriation codes for the Office of the General
Counsel (OGC) for the period July 1, 1975 through
January 29, 1977. Included for comparison purposes is
OGC's authorized personnel staffing pattern for FY-76,
FY-TQ, and FY-77.
2. A listing of OGC's promotions by appropriation
code for the same time period.
As you requested, these data are displayed by each
appropriation code as well as by totals. I wish to
reiterate tha.t the Office of the General Counsel is a
single integrated unit, with no formally established
suborganizational units. The appropriation codes
represent a substructure only for accounting purposes.
This point is particularly germane to any discussion of
OGC promotions at the appropriation code level, since
promotion decisions are made with no reference whatsoever
to these artificial appropriation codes.
PAGENO="0378"
372
If I can be of further assistance in this matter,
please let me know.
Sincerely,
JOHN R. GRIFFIN, Ill
John R. Griffin III
Administrative Officer
Office of the General Counsel
PAGENO="0379"
373
OFFICE OF THE GENERAL COUNSEL
Promotion History
July 1, 1975 through December 31, 1976
S umma~
`The numbers in parentheses indicate the number of those
promotees who have since left the Commission's emcloy.
APP'N
CODE ______
L5000 RATES
OFFICE
TOTAL PRONOTIONS1
Ll000
L2000
L3100
L3200
L3300
L3400
L35 00
IMMEDIATE OFFICE OF
THE GENERAL COUNSEL
SOLICITOR
PIPELINES
PRODUCERS
HYDRO (PART I)
RATES & CORPORATIONS
LEGI SLATION
TOTALS
01 JUL 75 01 OCT 7501 O~T lb
30 ~EP 75 30 SEP 76 31 DEC 76
6 (5) 5 (1)
2 (1) 5 (0) 4 (0)
4 (0) 3 (0) 4 (0)
4 (1) 12 (4) 5 (0)
3 (0) 9 (1) 1 (0)
10 (1) 10 (1) 8 (0)
4 (0)
3 (3) 2 (1) 1 (0)
32 (11) 46 (8) 27 (0)
TOTALS
11 (6)
11 (1)
11
21 (5)
13 (1)
28 (2)
4 (0)
6 (4)
105 (19)
PAGENO="0380"
374
OFFICE OF THE GENERAL. COUNSEL
Promotion History
July 1, 1975 through December 31, 1976
Professional Staff
TOTAL PROMOTIONS1
OFFICE
RATES
IMNEDIATE OFFICE OF
THE GENERAL COUNSEL
SOLICITOR
PIPELINES
L3500 LEGISLATION
TOTALS
01
JUL
i~
30
SEP
76
31
DEC
76 TOTALS
30
SEP
75
1 (0)
3 (0)
10 (3)
9 (0) 1
1 (0) 7
2 (0) 16
3 (0) 9 (1) 1 (0) 13
8 (1) 8 (0) 4 (0) 20
4 (0) 4
0 k~ ~) ~ ~i ~3 (fl
24 (7) 36 (6) 13 (0) 73 (13)
APP'N
CODE
L5000
L1000
L2000
L3l00
L3200
L3300
L3400
0 (0)
3 (0)
4 (1)
PRODUCERS
HYDRO (PART I)
RATES & CORPORATIONS
(0)
(0)
(4)
(1)
(1)
(0)
`The numbers in parentheses indicate the number of those
promotees who have since left the Commission's employ.
PAGENO="0381"
375
OFFICE OF THE GENERAL COUNSEL
Promotion History
July 1, 1975 through December 31, 1976
Non Professional Staff
IMMEDIATE OFFICE OF
THE GENERAL COUNSEL
SOLI CITOR
PIPELINES
PRODUCERS
HYDRO (PART I)
RATES & CORPORATIONS
2 (1) 4 (0)
1 (0) 0 (0)
o (0) 2 (1)
o (0) 0 (0)
2 (0) 2 (1)
01 OCT 76
31 DEC 76 TOTALS
o (0) 2 (0)
4 (0) 10 (1)
3 (0) 4 (0)
3 (0) 5 (1)
0 (0) 0 (0)
4 (0) 8 (1)
0 (0) 0 (0)
0 (0) 3 (3)
14 (0) 32 (6)
`-The numbers in parentheses indicate the number of those
promotees who have since left the Commission's employ.
OFFICE
RATES
TOTAL PROMOTIONS1
01 JUL 75
30 SEP 75
0 (0)
UI OCT 75
30 SEP 76
2 (0)
APP' N
CODE
L5 000
Ll000
L2000
L3100
L3200
L3300
L3400
L3500
LEGISLATION
(3)
0
(0)
TOTALS
8
(4)
10
(2)
PAGENO="0382"
PkY
PEEJOD
r~oi~,
.
USC APPROP2J.ATION CODES~
~00 TOTL
T~f~O~
~Th~ć~TTThO~
J300~I~2O0
IfliOOJL 400 Li
01-03-76
~4
20
to
21
10
01-17-76 25 19
39
10
38
01-31-76
25
19
10
35
16
26 19
02-28-76
25
19
11
35
03-13-76
25
19
11
34
03-27-76
25
19
11
34
08-14-76
21
27
08-28-76
20
27
01-15-77
E
30
13
01-29-77
D
30
13
12
148
11
150
1)
153
11
156
11
157
9. 11 157
7 11 155
*APPROPRIATION CODES ESTABLISHED BY COMPTROLLER FOR
BUDGET AND ACCOUNTING PURPOSES AS FOLLOWS:
L5000 Rates 23
Ll000 Immediate Office of the
General Counsel 26
L2000 Solicitor 13
L3100 Pipeline Matters*** 32
L3200 Producer and all
Offshore Matters 16
L3300 Hydroelectric (Part I)**** 38
L3400 Rates & Corporations
(Parts II & III)
L3500 Legislation
TOTALS
*Autj~orized at end of FY
**Offjce Disestablished 10-09-76
***Named `Certificates" Until 10-08-76
****Included Part II in FY-76 & FY-TQ
*****Not established until
376
OGC ON-DO1\ PA~1~O~N1~) COUNV AS O~ C. (0 s.
(5 I-Us- /~
07-19-75
08-30-75 73
____!i~
24 20 11 37 14 32 12
21
09-13-75 26 21
09-27-75 26
3.0-11-75 26
.10-25-75 26
11 1 38
9 J 30
11-08-75 25
16
19 10
33
11-22-75 25
19 11
19
S
38 17 35
37
11
17
20
20
19
18
37
37
37
37
11
10
10
10
11
02-14-7 6
17
17
17
17
34
34
35
35
35
155
37
10 36
17
11
11
11
11
11
10
155
154
156
156
17
35
154
04-10-76 25
25
25
25
34
34
16 33
16 31
17 31
17 30
14 31
13 29
13 28
0 6-0 5-7 6
22 11
24 11
24 11
23 11
C
T
0
B
25
31
29
29
29
11
10
10
10
10
10
10
10
10
11
22
06-19-76 25
07-03-76 23
07-17-76 22
07-31-76 22
11
153
.151
149
149
147
147
146
144
141
141
13
23
27
26
26 13
30
29
32
32
33
8
13
15
15
15
09-11-76 20
31
36
37
12 143
35
28 13
09-25-76 19
10-09-76 0
10-23-76 I
11-06-76 5
13
31
30
30
31
31
37
34
27
27
28
28
14
14
11-20-76
12-04-76
12-18-76
01-01-77
S
0
L
V
14 38
36 6
34
35
35
36
28 22
27 22
27 22
25 22
26 22
29
29
29
29 13
12 153
11 154
- - 154
11 ~156
11 154
15 ______
16 _______
16 _______ ________
16 ________
16 _______ ________
17
18 _______ ________
16 _______ ________
18
18
38 19 27 21 11 157
26 22 11 158
25 11 162
25 11 163
11 156
19
11 157
11
156
APP'N
CODE
OGC SUPERVISOR IN
CHARSR OF~
MAXIMUM AUTHORI ZEDSTAFF*
FY-76 TO !~22
23
26
13
32
**
29
14
40
16 18
38 28
***** ***** 26
11 11 13
PAGENO="0383"
377
ATTACHMENT C
Honorable John S. Moss
Chairman -
Subcommittee on Oversight and
Inves tigatioiic
~otr~nittee on Interstate and
Foreign Commerce -
house of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
* Ix: response to your letter dated February 2, 1977,
enclosed i~ a brea~:down by appropriation code of the
employees (GS-9 and above) on-board in the Office of the
General Counsel as of July 31, 1976, August 28, 1976, and
September 25, 1976. Included in these data are the
occupational series, the grade level, and the number of
months in grade for each employee listed. If the number
of months in grade exceeds twelve, the employee should
he consideror~ eligible for promotion. Unless otherwise
noted in the "Remarks" column, all of the individuals
listed are still employed in the Office of the General
Counsel.
If I can be of further assistance in this matter,
please let me know.
Sincerely yours,
Richard L. Dunham
Chairman
Enclosure
OGC Control No. 1083
Griffin, J.R:dja
2-4-77
cc: Chairinan(2)/Ea. Comm./secretary/Exec~~i~~ Director/
Mr. Journey/Mr. Wood/OPI/Central Files/Interoffice
Files/OGC/Mr. Griffin
PAGENO="0384"
OFFICE OF TIlE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code Ll000
Immediate Office of the General Counsel
FOR GS-9 AND ABOVE
TO~
[3D
1 JUL
Last Name 76
~~eI X
Perdue L X
As of 07-31-76 As~O~0-/~ As of 09-25-76
MTIIS MT}IS MTJIS
GS IN IN GS IN
SERIES GRD GRD SERIES ORE) ORB SERIES' ORB GRE)
0905 18 - 19 0905 18 20 0905 18 ~2l
16
Remarks
0905 17
14
0905
17
15
0905
17
Minor X
0905 15
15
0905
15
16
0905
15
17
10-8-76
Diaz
0905 14
13
0905
14
14
0905
14
15
To
Griffin X
0341 1 14
04
0341 f
14
05
0341
14
06
Whitfieldj X
0905 1 13
24
0905 J
13
25
0905
13
26
L3400 10-8-76
Konski [ X
Keeley ~ X
Lane, P. X
Rex~pger X_
Steen X
0905 11
0905 11
0341 L09
090~Jj~
08
03
03
08
0905 1~
0905
P~L
Q~_
11
11
P~
fl
09
04
QL
09
0905
0905
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To
0904
11
11
12
Priv
09
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P1
te
05
To
u~~_:J~__.
From L3500 8-29-76
-I
-
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--
--
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---~~
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PAGENO="0385"
0
OFFICE OF TIlE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L3200
Producers
Prrui nr~~
3c n~n~ 12
tUR (iS-9 AND AI3OVE
(1905 12
TO PVt. inci. 1O-~9-7(~-
Last Name
ON
BD
1 JUL
76
As of 07-31-76 As of 03-2~l--76 AsoI~ 09-25-76
MTIIS MTLIS MTIJS
GS IN IN GS IN
~ERIES GRD GRD SERIES GRD GRD SERIES GRJ) GRD
~~~_______
Remarks______
Gilmore
X
0905
16
9
16
10
0905
16
11
Winters
X
0905
14
19
0905
15
01
0905
13
01
-_____
~1ark
X
0905
13
11
0905
13
12
0905
14
01
~~ndsen
X
0905
13
0905
14
01
0905
14
02
Koves
Sledge
X
X
0905
0905
12
12
12
9
0905
0905
12
12
13
10
0905
0905
13.
12
01
11
McMurtrie
P~ics
X
X
0905
0905
11
11
13
13
0905
0905
11
11
14
14
0905
0905
12
12
01
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-
I~1Q~QIntyre
- X
0905
jJ~
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905
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090 5_
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J~L
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0954
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9
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Wright
Kelly,R.
X
0905
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06
01
0904
j~
11
02
From School 8-6-77
1/ U9U5 Li UI
I
-_________
~--
PAGENO="0386"
OFFICE OF THE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L3100
Certificates (Renamed "Pipelines" 10-8-76)
To Pvt. md. 10-15-76
To Pvt. Ind. 10-~-76
FOR US-9 AND ABOVE
ON
80
1 JUL
As of 07-31-76
As of 0-76 As of 09-25-76
GS
MTIIS
IN
GS
MTIIS
IN GS
MTHS
IN
Last Name
76
SERIES GRD
GRD
SERIES
CR0
CR0
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GRD
Remarks
~nt
Drenriari
Iceating
I4amone
Wofsy
X 0905 15
0905 J.5
X 0905 15
X 0905 15
X 0905 15
110
16
28
34
73
T5
0905 15
15
0905 15
111
17
29
35
0905 T5 TH7
0905 15 18
0905 15 30
0905 15 36
.
From OSA 7-4-76
To~L3300 10-8-76
OO0~1-76
Martin
X
0905
15
86
0905
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87
0905
15
88
Heisler
X
0905
14
28
0905
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29
0905
T2V
30
Mark
X
090~
14
51
0905
14
52
0905
14
53
- -_____
.~ii~er son
X
0905
12
13
0905
12
14
0905
13
01
-_________________
CQckrell
X
0905
13
9
0905
13
10
0905 j
13
11
Harris
X
0905
13
73
0905
13
74
0905 1
13
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King
X
0905
12
12
0905
12
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0905 I
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0905
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0905
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19
~~r.t~z_____
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0905
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13
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~_
0905
11
19
0905
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20
0905
11
21
Piroehlich
X
0905
9
11
0905
9
12
0905
11
01
-______
~ube~~
X
0905
9
11
0905
11
01
0905
11
02
.kLiJ-liarns
X
0904
11
05
0904
11
06
0905
11
07
Zipp
ē~
0905
9
11
0905
9
12
0905
11
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A~_____
X
0905
12
16
0905
12
17
0905
13
01
~~ll (C -13)
X
0905 -
12
9 0905
to
12
ecret~y's 0:
10 0905
fice
12
11
7-18-76
- - -
PAGENO="0387"
OFFICE OF THE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L2000
Solicitor
FOR GS-9 AND ABOVE
~ON
BD
As~5f 07-31-76
jAs of 08-2~--76 As of 09-25-76
.
MTIIS
MTIJS
1 JUL
IN
IN GS
MTIIS
Last Name
76
SERIES
GRD
GRD
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GRB
GRD
SERIES i GRD
GRD
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Tuttle
X
0905
16
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0905
16
14
0905
16
DuBoff
X
0905
13
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0905
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13
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0905
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0905
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0905
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0905
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09
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Walsh
X
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0905
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Garten
X
0905
11
10
0905
11.
11
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Lahey
X
0905
11
12
0905
12
01
11
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Tucker
X
0954
09
28
0954
09
~05
0954
~2
Burnes
X
0905
13
9
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:
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PAGENO="0388"
OFFICE OF TILE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L3400
Rates and Corporations
FOR GS-9 AND ADOVE
ON As of 07-31-76
3D MTIIS
1 JUL GS IN
As of 03-2~-76 As of 09-25-76
GS
MTIIS
IN GS
MTII~
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Last Name 76 SERIES I GRD
NOT ESTABL SHED U~TIL 10~8-76
GRD
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~
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GRD
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-
~___
--
-_
-
-~_~__I
PAGENO="0389"
OFFICE OF THE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L3300
Hydro
Phflhir~c~ V
0905 11
0905 11
FOR GS-9 AND ABOVE
118 0905 14 119
0905 14
To Pvt. md. 7-2-76
Fm Law School8-15-76
Everett X
As_of_07-31-76 As of 03-28-76 J As of 09-25-76
MTHS MTHS MTHS
GS IN GS IN GS - IN
SERIES GRD GRD SERIES GRD GRD SERIES GRD GRD Remarks
Last Name
ON
BD
1 JUL
76
Van Cleve
X
0905
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15
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16
Hagenlock
X
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35
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Lajnke
0905
j~_
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0905
5
0905
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36
To L3400 10-8-76
Shepherd
X
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j~_
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0905
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28
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Stafford
0905
15
02
0905
5
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0905
15
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To L3400 10-8-76
~oergers~
Q905
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11
0905
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0905
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120 To L3500 10-8-76
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0905
12
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Lesch
X
0905
-
1
12
0905
13
01
0905
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X
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0905
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N~1~on
X
0905
-
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0905
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X
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98
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~h~~ikos
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clarke
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0904 11 01 0904 11
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PAGENO="0390"
OFFICE OF TUE GENERAL COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L3500
Leg isla Lion
r
11
FOR GS-9 AND ABOVE
0905 11
To Justice 1-1-/7
.~- -~-
joA~f07-~T7~TAsof03-20-76 J As of 09-25-76
BD MTUS MTIIS MTIIS
1 JUL GS IN IN GS IN
Last Name
Goldstein
Wood
76
X
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SERIES GRD
0905 16
0905 15
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74
21
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0905
0905
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16
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75
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0905
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16
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23
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To L34~rTO-8-76
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Gould
Marshall
Ir
X
X
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0905 13
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70
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-
PAGENO="0391"
OFFICE OF THE GENERI\L COUNSEL
Transition Quarter On-Board Staff
Appropriation Code L5000
Rates
01 1~7~
X 0905 13
12
~q~ē 11 I ii
FOR GS-9 ANI) ABOVE
To Pvt. Inth_8~JJ~76
To~ OSA~8~L16~
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* ON
BD
1 JUL
76
As of 07-31-76 ~As of 03-28-76 As of 09-25-76
.
Remarks
GS
SERIES CRD
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X
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PAGENO="0392"
386
ATTACHMENT D
FEDERAL POWER COMMISSION
WASHINGTON. D.C. 20426
March 10, 1977
Mr. Bernard Wunder
Minority Counsel
Subcommittee on Oversight
and Investigations
Committee on Interstate
and Foreign Commerce
House of Representatives
Washington, D.C. 20515
Dear Mr. Wunder:
Confirming our telephone conversation of March 9,
1977, enclosed is the personnel count that we discussed.
If I may be of further assistance, please let me know.
Sincerely,
.1
I., ~` j..
/ ~ ~.L-
/ John R. Griffi~ III
Administrative Officer
Office of the General Counsel
Enclosure
cc: Mr. Lemov
PAGENO="0393"
FEDERAL POWER COMMISSION - Office of the General Counsel
Personnel Count
General Counsel
Solicitor
Pipelines
Producers
Hydroelectric
Rates & Corp.
Legislation
Rates
TOTALS
ON BD 10-1-76
Pro. Other Total
5 20 25
8 5 13
21 11 32
12 4 16
26 11 37
Establ'ished 10-8-76
8 5 13
14 5 19
94 61 155.
*Includes all seven new hires for which firm offers are outstanding:
and 1 other in Pipelines; 2 professionals in Rates & Corporations; 1
Hydroelectric; and 1 professional in Legislation.
2 professional
professional in
ON
BD
10-29-76
ON
BD*
Pro.
Other
Total
Pro.
Other Total
~7
20
27
8
22
30
8
5
13
8
5
13
23
12
35
27
14
41
12
4
16
11
7
18
19
8
27
17
9
26
6 5
11 8
DISSOLVED
OCTOBER 8, 1976
PAGENO="0394"
388
ATTACHMENT F
FEDERAL POWER COMMISSION
WASHINGTON, D.C. 20426
March 11, 1977
Mr. Steven F. Sims
Special Assistant
Subcommittee on Oversight
and Investigations
Committee on Interstate
and Foreign Commerce
House of Representatives
Washington, D.C. 20515
Dear Mr. Sims:
During the Ma~rch 10, 1977 hearings before the
Subcommittee, I believe Chairman Moss requested copies of
the memoranda written by Judge Lewnes concerning various
personnel matters under his purview during his tenure as
Assistant General Counsel. In our phone conversation
this morning, you informed me that this request had been
fulfilled by Judge Lewnes and that I need not find the
copies held in the Office of the General Counsel.
Inasmuch as I had completed the file search before
your call, I perused the material found therein. I believe
it important to the Subcommittee's full understanding of
this matter to have before it the similar memoranda written
by other Assistants General Counsel. Therefore, I am
enclosing copies of all such memoranda I found during my
file search.
If I may be of further assistance, please let me know.
Sincerely,
/ .`)
~\,. ~i- ~
I
John R. Griffin III
Administrative Officer
PAGENO="0395"
389
Mr. Moss. Thank you, Mr. Journey.
The committee will not today question Mr. Griffin. The committee
will, before it concludes its inquiry into this matter, probably desire
to examine Mr. Perdue on the affidavit submitted because the charges
are in an affidavit and because it was put before the committee with-
out the committee having a right to examine the matter of that
affidavit.
The same would be true of Mr. Lamke. The same would be true
for Secretary Plumb. The same will be true for Ms. Hargis. The
same will be true for Mr. Griffin.
We shall have them before us for direct testimony on these matters.
Mr. JOURNEY. If I might say one other thing for housekeeping
purposes, Mr. Chairman, I discussed with you my work with the
Electric Reliability Councils. I have never testified before you on
this program. I testified before Mr. Sharp on it and Mr. Santini. I
am not sure about Mr. Lent.
This is a program-
Mr. Moss. I have read the testimony. As chairman, I have the re-
sponsibility to review the entire record before it is printed.
Mr. JOURNEY. What I meant, sir, is that this type of report, this
Reliability-Council-type report, is the thing referred to in my testi-
mony. This does not appear in individual rate files but it is a public
document. That was what I had reference to.
Mr. Moss. Mr. Journey, you may recall that for many years I
served for a while as chairman and as the ranking member on the
Subcommittee of the Committee on Government Operations which
made an extensive study of the various intertie operations and
various Federal systems of power around this country.
Mr. JOURNEY. Yes, I remember that.
Mr. Moss. And I have a fair degree of familiarity with the work
of the Commission there.
I also served on the Oversight Committee in 1958 when we had the
Federal Power Commission before us for rather extensive hearings
at that time. We have a long acquaintance, therefore, and a long
acquaintance with the work you carried on and which the Commis-
sion carried on.
Mr. JOURNEY. The work I did before the Western Conference,
when I went out in 19Th, was in further answer of that.
Mr. Moss. That, however, at this moment is not the issue before
the subcommittee.
Mr. JOURNEY. I understand that.
Mr. Moss. At a later date as we move into more substantive mat-
ters within the jurisdiction of the Commission, as we undoubtedly
will be doing, particularly in connection with the consideration of
the proposed reorganization creating a Department of Energy, the
committee will be making inquiries into many facets of the Corn-
mission's operations.
Mr. JOURNEY. I would think you would, sir.
Mr. LENT. I have another housekeeping question.
Since the exhibits which have been submitted by Mr. Journey are
referred to in h~s testimony, and since they may be the subject of
cross-examination by counsel or some of the members of the sub-
PAGENO="0396"
390
committee, I wonder whether we can get a ruling from the Chair
now as to whether or not these-
Mr. Moss. We have a ruling that these will be reviewed. This was
delivered to the subcommittee at 9 :~5 this morning. We have not
had an opportunity to review it.
It would amaze me if counsel can, ask any questions on the ex-
hibits in view of the fact that he has not had an opportunity even
to look at the exhibits, much less examine on them. I certainly have
not had an opportunity to look at them, nor am I prepared to
examine on them.
Therefore, the ruling is that the appropriate reservation is made
to receive those portions deemed pertinent after a review of the
material.
Mr. LENT. I would just respectfully point out that without these
materials being included, augmenting Mr. Journey's testimony, it
would be impossible to figure out what his main testimony was about
without having the activity to refer to these documents.
Mr. Moss. The gentleman has never reviewed a report or a hearing
record printed by any committee I have chaired which has not had a
great deal of coherence and order in its production. He will not in
this instance.
Mr. Fee?
Mr. FEE. Mr. `Chairman, on Monday you instructed me to bring
my statement with me on Friday and enter it into the record.
If it pleases the committee, I would choose not to read it. The
material has been covered rather extensively.
Mr. Moss. And it has been entered in the record on Friday.
Mr. FEE. Yes, sir. Thank you.
[Mr. Fee's prepared statement and attachments follow:]
PAGENO="0397"
391
STATEMENT OF
J. CURTIS FEE
EXECUTIVE DIRECTOR
FEDERAL POWER COMMISSION
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
COMMITTEE ON INTERSTATE
AND FOREIGN COMMERCE
UNITED STATES HOUSE
OF REPRESENTATIVES
MARCH 14, 1977
Mr. Chairman: Thank you for the opportunity to testify
before your Subcommittee. I was informed that ny knowledge
of certain events concerning personnel actions at the
Federal Power Commission would be the subject of the important
matters before your Committee today. I have prepared a state-
ment to read into the record about my knowledge of these actions,
discusse~in last week's hearings.
Early last year I became aware of a deteriorating
situation concerning Mr. George Lewnes and assessments of
his performance as Assistant General Counsel. Although my
information was mostly secondhand, I knew that several
members of the Commission were becoming increasingly displeased
with him. The specifics of the problems, as best I understand
them, were rooted in his failure to carry out Commission
instructions in certain matters in a timely and thorough matter.
I was also aware of the incompatibility and strife between
Mr. Lewnes and Mr. Journey. The Chairman's assessment of the
PAGENO="0398"
392
problem was that although Mr. Lewnes seemed to be a very com-
petent and knowledgable attorney, he did not appear to be con-
tributing fully to the ultimate resolution of the Commission's
work.
At some point in early March 1976, I asked Mr. Edward R.
Minor, a lawyer with whom I consult often on administrative
matters, what rights and options management had in such a case
and what rights the individual had. As Mr. Minor has testified,
one facet of this inquiry was to examine the option of removing
Mr. Lewnes from the job.
The result of Mr. Minor's investigations was to identify
certain extreme measures that were available if removal were
the objective. None appeared appropriate to a situation which
I had come to see as a mismatch of talent and job and one in
which Mr. Lewnes did not deserve such harsh treatment. At that
point, I had decided to have a talk with Mr. Lewnes and see if
there was some way to resolve the problem by mutual agreement.
I believe, (and Mr. Lewnes' testimony confirms) that
he came to see me before I had the chance to speak to him.
During our discussions he told me that he had heard there
were some problems, and I said that was true. For the next
hour or so, we talked and decided that a change would be
best for all concerned. I pledged to counsel with him
PAGENO="0399"
393
during his job search and assist him in anyway I properly
could. I knew of his long-standing interest in becoming
an Administrative Law Judge and expressed ny thought,
that it was an excellent idea. That, of course, became
his choice and Chairman Dunham and I fully supported him
for it. We were able to salvage a wealth of experience and
wisdom for the agency and solve a festering personnel problem.
Mr. Lewnes, to the best of my knowledge, is now a happy,
productive, and excellent Administrative Law Judge.
There is a lingering allegation that this series of
events was triggered by, and was a reprisal for, certain
testimony given before Congress. I state here unequivocally
that such allegations are false. I received no instructions
linked to his testimony, nor was I ever under the impression
that these events were a result of any testimony Mr. Lewnes
may have given.
The following is a statement of my knowledge of events
that led up to the reassignment of Mr. Cockrell from the so
called El Paso Abandonment Application (or sometimes referred
to as SOHIO Reverse Flow) CP75-362. My recollection of
this matter ± s based on memory, recent conversations,
and research through my own files to reconstruct the
relevant events, but I would not regard it as definitive.
PAGENO="0400"
394
Sometime in April of 1976, I received instructions
from the Commission in a regular meeting to get involved
in the external matters that would have bearing on
expediting the FPC part of this case. During my review of
the situation, it became apparent that staff did not agree
on the policy question of whether or not the abandonment in
this case constituted a "major Federal action under the
National Environmental Policy Act of 1970, and if a -
full-f ledged Environmental Impact Statement were required
During this review process, I came upon the April 2, 1976
draft statement of agreement which I learned was prepared
by Mr. Cockrell and a junior staff member at the Department
of Interior. I remember being displeased with the fact that
the FPC action was declared to be a "major Federal action,"
a key policy issue not yet decided by the Commission and clearly
central to the FPC's ability to expedite its part of the pro-
ceeding. It was obvious to me that the position of the "State-
ment of Agreement" was not coordinated with appropriate
substantive Commission staff as it should have been. I communi-
cated my displeasure to Mr. Journey, the Agency's General Counsel.
Later, I learned that one or more members of the Commission
expressed similar displeasure with the work of Mr. Cockrell
on this case and asked Mr. Journey to assign a more
experienced attorney to the case.
PAGENO="0401"
395
Attached is the April 2, 1976 `Statement of Agreement"
and the subsequent statement signed by the Secretary of
the Interior and Chairman Dunham. The difference is
significant.
I have no specific knowledge of the circumstances
surrounding Mr. Wofsy's resignation as Acting Assistant
General Counsel, or Mr. Mamone's transfer.
87-292 0 - 77 - 26
PAGENO="0402"
396
-- - STATEMENT OF POSITION BY FEDERAL ~ENCIES WITH
REGARD TO THE PREPARATION OF AN ENVIRONMENTAL
IMP~T STATEMENT ON TEE CRUDE OIL PROJECT
PROPOSED BY EL PASO NATURAL GAS COMPANY
El Paso Natural Gas Company (El Paso) is currently
proposing to abandon approximately 699 miles of natural
gas transmission pipeline and to transfer said facilities
to the Standard Oil Company of Ohio (Sohio) for use in the
transportation of Alaskan crude oil. This proposal is a
major federal action significantl af ec in
~oftheh1aneT1vtr~men . The Crude Oil Project requires
fry~pro~a-l-~fthree federal agencies, the Army ~`-~`-~-~`
Corps of Engineers must evaluate the proposed use of Los
Angeles Harbor. The Department of the Interior must
evaluate the proposed crossing of federal lands. The
Federal Power Commission must evaluate the effect of the
proposed abandonment.
The Department of the Interior and the Corps of
Engineers are currently preparing an environmental impact
statement covering the use of the El Paso pipeline as a
~ crude oil pipeline, additional proposed pipeline construc-
tion over federal lands, and the transportation of oil by
tanker for Valdez, ~aska to California including the effect
on Los Angeles Harbor of transporting the crude oil to- land.
,~ ~. - The Federal Power Commission statement will evaluate the
effect of the proposed abandonment.
It is agreed that both the Interior statement and the
Federal Power statement may be adopted by the other agency
to serve its statutory function. Should either of the
statements be adopted by ~he other agency, witnesses would
be provided, if necessary, to support the statem~nt in any
required administrative proceedings.
For purposes of the lead agency designation required
by the Council on Environmental Quality, the Department of
Interior will be designated as lead agency with respect to
the use of the pipeline as an oil line and the Federal Power
Commission will be designated as lead agency with respect
to t a effect of abandonme t.
APR 2 1976
tinder Secretary of the Interior Date
Chairman, Federal Power Commission Date
PAGENO="0403"
397
MEMORANDUM OF UNDERSTANDING
FOR PREPARATION OF
LONG BEACH TO MIDLAND PIPELINE SYSTEM (SOHIO)
ENVIRONMENTAL I~ACT STATEMENT
Parties:
The parties of this Memorandum are the Federal Power
Commission (FPC) and the U.S. Department of the Interior
(INTERIOR).
Purpose:
The purpose of this Memorandum is to define the responsi-
bilities of FPC staff and INTERIOR in the preparation of an
environmental impact statement (EIS) as required by Section
102(2) (C) of the National Environmental Policy Act of 1969,
42 U.S.C. ~ 4321-4327 (1970) , for the proposed abandonment
of gas transmission facilities and transportation of Alaskan
crude oil from Long Beach California to Midland, Texas.
Prot~osed Action:
On June 11, 1975, El Paso Natural Gas Company (El Paso)
filed an application with the FPC, in Docket No. CP75-362,
pursuant to Section 7(b) of the Natural Gas Act for permission
and approval to abandon and retire from natural gas service
certain mainline transmission pipeline, compression, and
right-of-way tap facilities presently comprising-a part of its
interstate gas pipeline transmission facilities. El Paso
states that if the abandonń~ent is granted, certain of the
abandoned facilities would be converted for the transmission
of crude oil.
On July 30, 1975 the Standard Oil Company of Ohio (Sohio)
filed an application with INTERIOR for a permit authorizing
use of the pipeline proposed for abandonment by El Paso as a
crude oil pipeline. On September 22, 1975, Sohio filed an
application with INTERIOR for a right-of-way permit for new
pipeline construction in California. On May 11, 1976, the
Port of Long Beach applied to the U.S. Army Corps of Engineers
for a permit to construct crude oil storage and terminal
facilities in Long Beach Harbor, California.
Approval of these identified applications for Federal
permits, and other Federal, state, and local permits would
result in a crude oil pipeline system which would extend from
Long Beach, California to Midland, Texas. Implementation of
PAGENO="0404"
398
this project will provide the United States with its first
major crude oil transportation system connecting the west
coast of the lower 48 states to the refining centers located
in the remainder of the country. The proposed crude oil pipe-
line system in its entirety would include the construction of
harbor facilities, a new crude oil pipeline, crude oil pumping
stations, and other appurtenant facilities and also the con-
version of abandoned gas transmission pipeline to crude oil
service.
Existing Responsibilities:
FPC has responsibility for authorization of the proposed
abandonment of El Paso's gas transmission facilities. INTERIOR
has responsibility for the granting of permits for the con-
struction of the crude oil pipeline system where it crosses
Federal lands. INTERIOR has the broadest spectrum of respon-
sibility with respect to the proposed Long Beach to Midland
Pipeline System in that it will evaluate the use of the El Paso
pipeline as a crude oil pipeline and additional proposed
pipeline construction and therefore is the "lead agency' with
respect to the preparation of an appropriate environmental
impact statement (EIS).
A~greement:
In view of the above considerations, FPC and INTERIOR
agree to the following:
1) INTERIOR will have the overall responsibility for
preparation of anEIS concerning the proposed
abandonment of gas transmission pipeline facilities
and the construction and operation of the Long Beach
to Midland, Texas Pipeline System.
2) In order that FPC staff can effectively participate
in the preparation of the INTERIOR DEIS/FEIS, it is
desirable that the FPC staff task force maintain
close communication with the INTERIOR EIS team con-
cerning the analysis of potential environmental
impacts from the proposed abandonment and construc-
tion of facilities, and review and offer comment on
the EIS as it is being prepared.
3) FPC will provide INTERIOR with all available environ-
mental and other data which is submitted to the FPC
by El Paso or Sohio and will provide assistance to
INTERIOR in areas where it has specific expertise.
PAGENO="0405"
399
4) INTERIOR will provide withesses to support the FEIS
in the formal hearings to be conducted at the FPC
relative to El Paso's proposed abandonment of certain
of its pipeline facilities to the extent that the
FPC staff adopts the INTERIOR FEIS.
5) FPC and INTERIOR will each bear the cost of its own
participation, in connection with preparation of
the EIS, out of appropriate funds. However, if
INTERIOR personnel were required to support the EIS
at formal adninistrative proceedings at the FPC, FPC
would pay their expenses related to such participation.
APPROVED:
DEPARTJ~NT OF THE INTER R FEDERAL ~QWER COMMISSION
By~J~~ ~ ~
Secretary Chairman
)~fl/ /~/ /1 Y/(
>7 Date / - Date
PAGENO="0406"
400
Mr. FEE. I have no further statement.
Mr. Moss. Mr. Lemov?
Mr. LEMOY. Chairman Dunham, let's get to the heart of what this
hearing is about. You said in your short opening statement:
I have never at any time taken any action or directed any action to be taken
adverse to a Commission employee because of testimony before Congress or
because of the content of positions taken in hearings or Commission meetings.
Mr. Minor testified before this subcommittee on March 9, 1977.
Mr. Minor, Personnel Attorney on the staff of the Federal Power
Commission, testified that:
Mr. Fee asked me to look into the procedures to be followed in separating
an attorney from. service.
I asked him, "Separating-firing?"
He said:
Yes, sir, firing.
Mr. LEMOV. Firing an attorney?
Mr. MINOR. Yes.
Mr. LEMOV. Did he give you any reasons?
Mr. MINOR. No, he did not.
Mr. LEMOY. No reasons at all?
Mr. MINOR. No reasons.
I said, "Who was the attorney involved in this?"
Mr. Minor said, "Mr. Lewnes."
Mr. Fee, your Executive Director, appointed by you, who came
over from the White House to the Federal Power Commission with
you I believe in October of 1975, he testified on March 14 before
this subcommittee and he said-
Mr. Moss. I wonder whether I can ask Mr. Rosenberg, committee
counsel, to step forward and be sworn because there are two items
I wanted entered in the record which are relevant to the questioning
which is now going on.
Mr. Rosenberg, would you be sworn?
Do you solemnly swear that the testimony you are about to give
this subcommittee is the truth, the whole truth, and nothing but the
truth, so help you God?
Mr. ROSENBERG. I do.
Mr. Moss. Identify yourself for the reporter and the record.
Mr. ROSENBERG. Mark L. Rosenberg, counsel to this subcommittee.
Mr. Moss. You prepared a memorandum dated March 17, 1977,
addressed to me, subject: "Review of the Personnel File of Russell
B. Mamone, Federal Power Commission"?
Mr. ROSENBERG. Yes, I did.
Mr. Moss. You prepared a memorandum dated March 17, 1977,
addressed to me, subject: "Review of the Personnel File of Jon G.
Lotis, Assistant General Counsel, Federal Power Commission"?
Mr. ROSENBERG. Yes, I did.
Mr. Moss. These items, without objection, will be entered in the
record at this point.
[The memorandums referred to follow:]
PAGENO="0407"
401
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
WASHINGTON, D.C., March 17, 1977.
Memorandum
To: Honorable John E. Moss, Chairman.
From: Mark L. Rosenberg, Counsel.
Subject: Review of the Personnel File of Jon G. Lotis, Assistant General
Counsel, Federal Power Commission.
Jon G. Lotis joined the staff of the Federal Power Commission as a Public
Utilities Economist, GS-5, in June, 19(33. Between 1963 and 1968, he received
four step increases and four grade increases and was promoted eventually to
GS-12 in August, 1967. Between 1964 and 1967, he attended the George Wash-
ington University Law School (at night) and received his law degree in
September, 1907.
After being admitted to the D.C. Bar in June, 1968, he was selected as an
attorney (GS-12) by the FPC's Office of General Counsel. He began work in
the General Counsel's Office in October, 1968. Between that time and the pres-
ent, he has received six step increases and four grade increases, and he became
a GS-16 in June, 1973. On January 21, 1975, he was selected as Assistant
General Counsel.
On June 8, 1972, he was nominated by the FPC for the Younger Government
Lawyer's Award. In their nomination letter, the Commission's Chairman (John
Nassikas'), its General Counsel (Gordon Gooch) and its Deputy General Coun-
sel (Drexel Journey) spoke of Mr. Lotis' "exceptional ability as a trial at-
torney." They noted that Mr. Lotis had "performed admirably in a supervisory
capacity" and spoke of his "dedication to the public interest."
There are no adverse comments of any type in Mr. Lotis' personnel record.
CoNGIu~ss OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
WashIngton, D.C. March 17, 1977.
Memorandum to: Hon. John E. Moss, Chairman.
From: Mark L. Rosenberg, Counsel.
Subject: Review of the Personnel Files of Russell B. Marnone, Federal Power
Commission.
Russell B. Mamone joined the ~taff of the Federal Power Com~nission in
August 1965 as a Legal Assistant, GS-9. During his employment, he has received
eight step increases and five grade increases and has been promoted to his
present GS-U5 position. During three calendar years (1967, 1968 and 1973), he
received both step and grade increases in the same year. His personnel record
includes no adverse comments on either the quality or quantity of his work.
Mr. Moss. I ask Mr. Ben Smethurst to come forward.
Do you solemnly swear that the testimony you are about to give
before this subcommittee is the truth, the whole truth, and nothing
but the truth, so help you God?
Mr. SMETHUR5T. I do.
Mr. Moss. Identify yourself to the reporter for the hearing record.
Mr. SMETHTJRST. I am Benjamin Smethurst, special assistant for
the Subcommittee on Oversight and Investigations.
PAGENO="0408"
402
Mr. Moss. I have in my hand here a memorandum dated March
17, 1977, addressed to Michael R. Le.mov, chief counsel, subject: "Re-
view of Personnel File of George P. Lewnes."
Did you make this review of the personnel file?
Mr. SMETHURST. Yes, sir.
Mr. Moss. You prepared this memorandum?
Mr. SMETHURST. I did.
Mr. Moss. You are also excused.
`Without objection, the item will be entered in the record at this
point.
[The memorandum referred to follows:]
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C., March 17, 1977.
Memorandum
To: Michael R. Lemov,. Chief Counsel.
From: Benjamin M. Smethurst, Special Assistant.
Subject: Review of Personnel File of George P. Lewnes.
Lewnes, born November 21, 1923, was employed by the Federal Power
Commission on March 8, 1959, as a Trial Attorney (General) in Grade GS-11.
He was promoted to GS-12 on June 12, 1960. He was reassigned to Trial
Attorney (Public Utilities) on August 21, 1960, and was promoted to Super-
visory Trial Attorney (Public Utilities) on September 3, 1961 at GS-13. He
was promoted to GS-14 on November 11, 1962, and to GS-15 effective January
30, 1966.
Effective May 31, 1970, Lewnes was promoted to Supervisory Trial Attorney
(Public Utilities) (Assistant General Counsel) at GS-16. On April 4, 1976~
he was appointed as an Administrative Law Judge at the FPC at the same
grade and salary.
His personnel file contains no derogatory information or adverse action
taken. He received within grade salary increases each time he was eligible,
the last being on May 25, 1975. Lewnes received a Top Secret security clearance
on May 20, 1975.
jn 1973 and again in 1974, Lewnes was nominated by the FPC to receive
the Justice Tom C. Clark Award of the Federal Bar Association. The following
are excerpts from these nominations:
"During the period 1959-1970, Mr. Lewnes, as a trial attorney in the certifi-
cate section, was assigned the most complex contested cases . . . Throughout
the course of this period he earned the respect of the legal profession as an
outstanding trial attorney by virtue of his pre-trial preparation, incisive cross-
examination, scholarly briefs and persuasive oral arguments. At the FPC and
throughout the utilities bar association and the affected industry his name has
become synonymous with an unrelenting consumer advocacy and devotion to
fair regulation."
* * * * * * *
"As a spokesman for the Commission dealing with members of the public,
representatives of other government agencies and emissaries from foreign
countries, Mr. Lewnes has distinguished himself as a candid exponent of Com-
mission policy. His leadership, legal acumen and unswerving integrity have
strengthened the Federal career Legal service, enhanced its stature in the
eyes of the legal profession and significantly contributed to the security of the
United States Government."
* * * * * * *
"His record and his performance have been superior in all respects and he
is indeed deserving of the award for which he is herein nominated."
Lewnes enlisted in the U. S. Army in 1942 and saw combat service with the
Third Army until honorably discharged in 1945. He was employed by the
PAGENO="0409"
403
Department of State from 1955 to 1959, first as a special investigator in Greece
interrogating escapees from foreign countries who were seeking asylum in
the United States, and later in the Fraud and Litigation Branch, Legal
Division, Passport Office.
Mr. Moss. Proceed, Mr. Lemov.
Mr. LEMov. As long as you have entered those in the record, may
I read for a moment from the memoranda?
Mr. Moss. You may proceed.
Mr. LEMOV. If I may digress for a moment, Mr. Rosenberg's re-
view memorandum dated March 17, 1977, regarding Mr. Lotis, states
no adverse comments of any type are in Mr. Lotis's personnel file,
and that on June 8, 1972, approximately 3~/2 to 4 years before he
was transferred as Assistant General Counsel in charge of electric
rate matters, the then-Chairman of the Commission, Mr. Nassikas;
General Counsel Gordon Gooch; and Deputy General Counsel Drexel
Journey wrote of Mr. Lotis' exceptional ability as a trial attorney.
They noted he had performed admirably in a supervisory capacity
and spoke of his dedication to the public interest.
They nominated him for the Younger Government Lawyer's
Award before the Federal Power Commission. That is Mr. Lotis.
As to Mr. Mamone, Mr. Rosenberg indicates that in the approxi-
mately 11 years with the Federal Power Commission he received 8
in-grade increases and has been promoted several times, 5 grade
increases, and promoted to the high leve' of GS-15 position.
"His personnel record includes no adverse comments on either the
quality or quantity of his work."
Mr. Mamone was, in October of 1976, transferred from natural gas
work on the most major cases before the Commission to the Hydro-
electric Section where he had no experience whatsoever.
Finally, regarding Mr. Lewnes, Mr. Smethurst's memo regarding
his personnel fiie~ and the review thereof details Mr. Lewnes' service,
rising as an attorney on the staff of the Federal Power Commission
from March 1959, and specifically notes that, "In 1973 and again
in 1974, Mr. Lewnes was nominated by the FPC to receive the
Justice Tom C. Clark Award of the Federal Bar Association."
The signatory of that nomination was the Chairman of the Com-
mission at that time, Chairman Nassikas, and General Counsel For-
quer, and they stated with regard to Mr. Lewnes' professional capa-
bility and service at the FPC:
His name has become synonymous with an unrelenting consumer advocacy
and devotion to fair regulation.
Mr. Lewnes has distinguished himself as a candid exponent of Commission
policy.
I shall not read the balance of that.
Returning to my question to you, Mr. Dunham, I had indicated
that Mr. Minor testified before this subcommittee that he had been
given an order to go about firing Mr. Lewnes.
Then Mr. Fee came before this subcommittee 4 days later and I
asked him whether Mr. Minor's recollection, testifying under oath,
was correct or was Mr. Minor lying.
J~v1r. Fee said:
I don't remember my exact words. Mr. Minor's testimony is fairly accurate
except I don't remember my exact words.
PAGENO="0410"
404
Isaid:
Who gave you the order to direct Mr. Minor to look into the procedures for
separating or firing an attorney?
Mr. Fee's mind was unclear again. He said:
My mind is not clear on that. I don't mean to cloud the issue to protect
somebody.
I had conversations with Mr. Braun and Dr. Galloway sometime in August
when they interviewed me on the subject. I don't think my memory was clear
then and it is not now.
I was aware that the Chairman was displeased, the General Counsel was
displeased, at least one of the other Commissioners was displeased. I, either
at the Chairman's direction or at my own initiative, was to be the staff guy
and find out what the remedies could be so I could go to the Chairman with
solutions rather than problems.
My best recollection is that I did this on my own initiative but it was cer-
tainly not without the Chairman's general awareness of the situation.
In view of that, in fact it was under your direction, persons work-
ing for you were taking actions to discharge an Assistant General
Counsel of the Federal Power Commission. That is correct, is it not?
Mr. DUNHAM. Excuse me. I don't know any actions were taken
or undertaken. What actions were taken with regard to discharging
Mr. Lewnes?
Mr. LEMOV. Mr. Fee passed an order on to Mr. Minor.
Mr. DUNHAM. As I recall, the words were to inquire as to what
procedures would be followed.
Mr. Moss. That is all the question asked.
Mr. DUNHAM. Would you restate the question?
Mr. LEMOV. Mr. Fee directed Mr. Minor to take action to deter-
mine how to fire an attorney, an Assistant General Counsel of the
Commission. Is that not Hght?
Mr. DUNHAM. If that is what the testimony says.
Mr. LEMOY. Is tha.t not action?
Mr. DUNHAM. I would deem action to be the compilation of charges
and going through whatever the Civil Service procedures are.
Mr. LEMOV. Then continuing on, "During my term as Chairman
no professional employees have been removed, suspended, furloughed,
or reduced in pay or rank." That is in your opening statement.
Is that a reduction in rank when an Assistant General Counsel,
Mr. Lotis, who served with distinction in that job, had the most out-
standing rating from the Touche Ross firm which you hired, is taken
out of that job and given two appellate cases to handle and no
supervisory duties? Is that a reduction in rank would you say?
Mr. DUNHAM. In the terms of Civil Service it is not a reduction
in rank.
Mr. LEMOV. But it might be in common English; is that right?
Mr. DUNHAM. Depends on the person reviewing it.
Mr. LEM0V. Is it in common English, in your English?
Mr. DUNHAM. That is a matter of opinion.
Mr. LEMOV. What is your opinion?
Mr. DUNHAM. In my opinion that is not a diminution of rank.
That is a change in assignment.
Mr. LEMOV. He went from supervising an entire section with 18
attorneys, and that is not a diminution in rank?
PAGENO="0411"
405
Mr. DUNHAM. If you will examine further into Mr. Lotis' testi-
mony, you will see, as he stated, that he at various times told me that
he wanted to leave the Federal POwer Commission.
At the time that this was being considered was when the reorgani-
zation and reassignment of all bureaus and offices in the Federal
Power Commission was underway, a process which began in the
spring of 1976 and is continuing apace.
When you reorganize an office, when you are considering reassign-
ments, it is a normal administrative procedure not to include in your
planning the allocation of. a person to a position when he has told
you that he is thinking, of leaving, either for private practice or to
become an Administrative Law eJudge. He asked me if I would assist
him and I said I would.
Mr. LEMOY. But your statement says, reading your own words,
"During my term no professional employee has been reduced in pay
or rank," and I said, "Is it not a reduction to lose the title of As-
sistant General Counsel, supervision of 18 employees .and that re-
sponsibility," as Mr. Lotis testified? Is it not in common English
a reduction?
Mr. DUNHAM. The terms I am using here are the Civil Service
rule. Ranking relates to GS level, and that sort of thing.
Assignment of functions is an opinion. In one person's opinion
one assignment is more important than another and one could be
deemed to be diminution or an increase in rank.
I happen to believe that the cases assigned to Mr. Lotis are very
important cases. These are cases which had been before the Com-
mission and before the courts for a number of years. I believe not
a single. curtainment case, which are the most heavily contested cases,
has yet to be resolved in court.
I do not consider that a diminution in rank.
Mr. LEMOY. Your opening statement also goes back to the state-
ment that you never directed any actio.n to be taken adverse to a
Commission employee because of testimony before Congress or
because of the content of positions taken.
Mr. Mamone served 11 years in the natural gas regulatory sec-
tion, the heart of the Commission's natural gas regulatory functions,
the heart of the functions directed at the current natural gas crisis.
He was summarily taken ofF the HIOS case. Thereafter he was
transferred out of the section to the Hydroelectric Section where he
had no experience whatsoever.
Don't you consider that action adverse? Mr. Mamone thought so.
Mr. DUNHAM. That is a position, that shift is a position, of which
I had no knowledge or responsibility.
Mr. LEMOV. But it was under your responsibility. You are the
Chairman.
Mr. DUNHAM. Any action, I suppose in the ultimate sense, is my
responsibility. I had no knowledge of that shift at the time that that
occurred.
The General Counsel raised with me the reassignments of the As-
sistant General Counsels, the reassignments of other positions, I
believe about 30 in total, and this was handled by task forces of
various kinds. I had no knowledge of it.
PAGENO="0412"
406
Mr. LE~rov. We will get to that in a moment.
I have one more question regarding your opening statement.
You say, In fact, therefore, no adverse personnel actions have
occurred.
That is certainly at variance with the testimony of four senior
employees of the Commission before this subcommittee.
Mr. DUNHAM. Excuse me. You said four employees of this Com-
mission have said that the actions of reassignment were adverse
personnel actions?
Mr. LEMOY. Yes, that they considered these to be adverse actions,
whether in the context of Civil Service terminology or their own
understanding of their role at the Federal Power Commission.
If you want to narrow it to the Civil Service regulations, as you
seem to want to do, that is one way to interpret it. You choose to
do that.
Mr. DUNHAM. Yes.
Mr. LEMOY. I want to talk about an 18 U.S. Code 1505 criminal
statute, which does not talk about adverse personnel actions in the
manner you do.
I want to read to you what it states. It applies to you and everyone
under your jurisdiction at the Federal Power Commission.
Whoever, by any threatening letter or communication, endeavors to impede
any witness in a proceeding before a committee of the Congress, or whoever
injures any witness in her person or property on account of his testifying, has
violated that section.
It does not talk about that narrow connotation of adversity which
you seem to relate to. What do you think about that?
Mr. DUNHAM. I will stand on my statement, Mr. Lemov. I have
never at any time taken any action or directed any action to be taken
to a Commission employee because of testimony before Congress or
because of the content of positions taken in hearings or Commission
meetings.
Mr. LEMOV. There is no question, is there, going to a few factual
matters now, there is no question, is there, that Assistant General
Counsel Lewnes and Supervisory Trial Attorney Mamone testified
before the Dingell subcommittee on January 15, 1976? Is that
correct?
Mr. DUNHAM. It was brought to my attention both at this hearing
and there was a letter I received from, I believe, Chairman Dingell.
I was aware of it.
Mr. LEMOV. You got the letter on or about January-the letter is.
dated January 20, so you probably received it shortly thereafter?
Mr. DUNHAM. That is correct. I do recall that.
Mr. LEMOV. So you knew about that testimony.
Mr. DUNHAM. I knew they had testified. I do not, as a practice,
neither have I asked nor do I ever review any testimony given by
any employee before any congressional committee.
In that case I do not believe I read the testimony. I don't at this
stage know what the subject of that testimony was. Nor have I ever
made a comment to anybody in regard to any testimony they gave.
Mr. LEMOV. You knew that the testimony dealt with natural gas
matters?
PAGENO="0413"
407
Mr. DUNHAM. I assume it did, yes. As you know, we testify
before Congress many, many times. I think in a year I have testified
at least 35 to 40 times.
Mr. LEM0V. It was reported in the press.
Mr. DUNHAM. I assume the letter stated what the purpose of the
testimony was.
Mr. LEMOV. The press reported that the testimony indicated gas
was being leached out of the interstate system by Tenneco without
a certificate, something which has come up recently. Is that right?
You didn't know about that?
Mr. DUNHAM. What do you mean?
Mr. LEMOV. The testimony of Mr. Lewnes was that Tenneco was
leaching gas out of the interstate system without a certificate in
violation of law. Chairman Dingell made that point on January 15.
You didn't know about that?
Mr. DUNHAM. Mr. Lemov, I just stated that I was aware of the
testimony. I presume it was brought to my attention in the letter.
You don't lead from that into I wasn't aware of natural gas, either
shortages or other matters involved with natural gas.
Mr. LEMOV. It has been established that you were aware of this
testimony and the general subject of the testimony. That is all. You
said you were.
Mr. DUNHAM. The letter brought it to my attention is what I said.
Mr. LEMOY. Then there was a motion of Tenneco Oil Co., right
after this testimony, they filed it with the Commission and I as-
sume a motion for oral argument before the Commission would be
circulated to you.
Mr. DUNHAM. Yes.
Mr. LEMOY. There was oral argument in the Tenneco case. -Do you
recall that? I think they did get their oral argument.
Mr. DUNHAM. I am not sure. I do not recall.
Mr. Moss. For the record, did they or did they not? Mr. Journey,
do you know?
Mr. JOURNEY. I will have to check. I don't remember.
[The following information was received for the record:]
Tenneco was granted an oral argument before FPO which took place on
Feb. 20, 1976, see FPC Order No. 755.
Mr. LEMOV. My recollection is that they were granted oral argu-
ment.
In that motion Tenneco said:
In addition, in light of the above publicity `and attention of a congi'essional
committee into the adjudicative functions of this case, Tenneco requests oral
argument is necessary.
They also said testimony was demonstrably inaccurate and in-
complete.
So you were aware of Tenneco's criticism. You must have been
aware that the oil industry was criticizing your staff.
Mr. DUNHAM. I will have to check whether that was oral argu-
ment before the Commission or in some other proceedings.
Mr. LEMOY. Do you have any reason to believe that that testimony
was inaccurate at that time before the Dingell subcommittee?
PAGENO="0414"
408
Mr. DUNHAM. I do not recall whether we held oral argument on
that subject. To my recollection, we did not. I remember oral argu-
ment in many cases but I do not remember whether it was on that
issue or the question of testimony.
Mr. LE~rov. But the question of transporting natural gas from
the Federal domain without a certificate is the subject of a show
cause order your Commission issued to either company today or
yesterday. Is that right?
Mr. DUNHAM. Yes, sir; and `Tenneco was, also.
Mr. LE1~rov. Tenneco was involved?
Mr. DUNHAM. Tenneco was a week or 10 days ago, some period
such as that. It was an action that I undertook as a result of the
filing with SEC. I undertook that as administrator under the
Emergency Act.
Mr. LEMOV. Mr. Lewnes and Mr. Mamone were quite perceptive
in January of 1976. They told the Dingell committee and, in effect,
the Commission of a practice which you are now investigating, a
year and a half later, or a year and 3 months later. Is that right?
Mr. DUNHAM. As you well know, by reports that I furnished both
to this committee and to the Dingell committee, we have many in-
vestigations on this subject-behind the pipe and several other in-
vestigations-which I report every month as part of the activities
to the Commission.
Mr. LuMov. I am talking about a specific subject, transportation
of gas from offshore Federal fields to the intrastate market or to a
producer's own refinery without a transportation certificate. I am not
talking about general investigations.
WThen have you investigated that?
Mr. DUNHAM. What I am saying is that what you are dealing with
is not an unusual or occasional occurrence. There are many investiga-
tions in regard to transportation, in regard to dedication, that are
before the Commission at various stages which I report monthly.
Mr. LEMOV. Thereafter, about 2 weeks later, Mr. Mamone and Mr.
Lewnes again, at the request of the committees, I make that clear,
appeared before this subcommittee on the Mobil Oil case, Grand
Isle 95.
I read now from an item which I would like to have incorporated
in the record. It is an article in the Washington Post dated January
24, 1976.
Mr. Moss. Is there objection?
Hearing none, it will be included in the record at this point.
[The article referred to follows:]
[From the Washington Post, Jan. 24, 1976]
MOBIL OIL BLAMES FPC FOR DELAY IN NEW FIELD GAS PRODUCTION
United Press International
Mobile Oil Co. yesterday blamed the Federal Power Commission for delay
in natural ga~ production from a big Louisiana offshore field, saying the FPC
threw an illegal block in the way.
However, two FPC officials asserted there is evidence Mobil deliberately
withheld gas from market.
Jack Earnest, manager of the company's natural gas division, appeared be-
fore the House Subcommittee on Oversight and Investigations. He was asked
PAGENO="0415"
409
about Mobil's interest in "Grand Isle 95," a field in Louisiana coastal waters
estimated to contain hundreds of billions of cubic feet of gas.
Benjamin Smethurst, a committee employee, said Mobil repeatedly turned
down an FPC permit covering first production of gas from the field, insisting
on some terms the FPC would not agree to.
Earnest said Mobil first applied for .FPC certification in March, 1975. The
FPC delayed action until August, he said, and offered Mobil only a temporary
permit with some strings attached.
"The commission's belated action in so conditioning was unprecedented, we
believe, and constituted an unlawful attempt to rewrite the contract. In fact,
the commission order would have required Mobil to accept an open-ended tem-
porary authorization without knowing the concerns pertaining to its gas sale
covered by its certificate application for a long-erm contract. Mobil rejected the
temporary authorization," Earnest said.
Subcommittee chairman Rep. John Moss (D-Calif.), said, "Mobil would not
take any alternative posed for it by the FPC." Moss said that amounted to a
clear intent to suppress production from the Grand Isle field.
Under questioning by subcommittee counsel, FPC lawyers George Lewnes and
Russell Mamone agreed they felt there was evidence of "intentional withhold-
ing" of gas production by Mobil.
Mr. LEMOV. Did you ever see that article, Chairman Dunham?
Mr. DUNHAM. What is the date of it?
Mr. LEMOV. January 24, 1976.
Mr. DUNHAM. Is this the Washington Post?
Mr. LEMOV. Yes.
Mr. DUNHAM. I try to read the Washington Post almost every
day. I assume I did see this article.
Mr. LEMOY. Headline is "Mobil Oil Blames FPC for Delay in
New Field Gas Production."
The last sentence states, "Under questioning by subcommittee
counsel, FPC lawyers George Lewnes and Russell Mamone agreed
they felt there was evidence of `intentional withholding' of gas
production by Mobil."
You were familiar with that hearing, too?
Mr. DUNHAM. I assume from my earlier statement I did see that
article and, if so, my answer would be yes.
Mr. LEMOV. Would you say that article and that testimony were
critical of the Commission itself, implicitly critical?
Mr. DUNHAM. Let me read it.
Mr. LEMOv. They wanted you~ to direct Mobil to deliver the gas
and the Commission didn't do it. They said the gas was already
dedicated, should have come on line that winter, and the Commission
didn't do it.
Mr. DUNHAM. What is your question, then? Is this article critical?
Mr. LEM0v. Is the comment of Lewnes and Mamone implicitly
critical of the Commission for not directing delivery of natural gas?
Mr. DUNHAM. As I read the sentence, it states, "Under question-
ing by subcommittee counsel, FPC lawyers George Lewnes and Rus-
sell Mamone agreed they felt there was evidence of `intentional
withholding' of gas production by Mobil."
Mr. LEMOV. If there was, if that was true, the Commission should
have been pursuing it. Is that right?
Mr. DUNHAM. I assume the Commission was at the time, did, or
has since then.
Mr. LEMOv. You assume that; do you not?
PAGENO="0416"
410
Mr. DUNHAM. I will be glad to submit for the record a list of
many, many investigations. There are processes and procedures where
staff takes positions which come before Law Judges, held in hearing,
then initial decisions, and it is a long and involved process.
Mr. LEMOY. With the consent of the Chair, would you submit a
statement on whether the Commission was taking any action requir-
ing Mobil to dedicate that field to the interstate market in the
winter of 1975-76, please?
Mr. DUNHAM. Yes.
Mr. Moss. Is there objection?
Hearing none, the record will be held open to receive it.
[The following statement was received for the record: ]
FPC SUMMARY OF ACTIONS REGARDING PROPOSED SALE OF GAS FROM
GRAND ISLE 95 FIELD
Mobil Oil Corporation (Mobil) filed on March 10, 1975, in Docket No. C175-
538 an application to sell gas to Trunkline Gas Company (Trunkline) from
Block 95 Field, Grand Isle Area, offshore Louisiana in the Federal Domain.
Trunkline Gas Company filed on March 17, 1975, in Docket No. CP75-273 an
application to construct and operate facilities from the Block 95 Field to its
existing offshore pipeline system. By order issued August 15, 1975, in Trunkline
Gas Company and Mobil Oil Corporation, Docket Nos. CP75-273 and CI75-538,
the Commission issued temporary certificates of public convenience and set
Mobil's application for hearing. The matters set for hearing included Mobil's
reservation of 25 percent of the reserves for its own use, a depth limitation
and limitations on the term of the sale. By letter filed August 22, 1975, Mobil
rejected the temporary certificate and sought reconsideration stating that it
was willing to delete the reserved gas and depth limitation clauses.
On September 10, 1975, the Commission issued an order granting a perma-
nent certificate with conditions to Mobil. The permanent certificate required
that Mobil file an amended gas sales contract with Trunkline deleting any
reservation of gas for Mobil's own use, deleting all depth limitations and de-
leting or amending the provision relating to the term of Mobil's proposed rate
schedule. Mobil then filed a letter on October 9, 1975, rejecting the certificate
and withdrawing its application for certificate.
By order issued November 21, 1975, in Natural Gas Pipel'ine Company of
America, et aL, Docket Nos. CP76-14, et a!., the Commission rejected Mobil's
notice of withdrawal and amended its September 10, 1975 order to permit the
filing of the contract amendment without deletion of the 10-year term.
Mobil applied for rehearing of the November 21, 1975, which was granted
for the limited purpose of further consideration by order issued January 13,
1976. By motion filed March 1, 1976, Mobil requested expedited determination
on its application for rehearing, stating that the only difficulty remaining was
the inclusion of the Commission Order No. 539 conditions in the November 21,
1975 order. In an order issued April 7, 1976, in Natural Gas Pipeline Company
of America, et a!., Docket Nos. CP76-14, et a!., the Commission required the
inclusion in Mobil's certificate of the revised Section 2.83(d) language adopted
in Order No. 539-A.
By order issued June 11, 1976, the Commission granted a motion filed by
Mobil on April 5, 1976, requesting that the Commission issue it a permanent
certificate in Docket No. C175-538 in conformance with the protective provi-
sions of Order No. 539-A and for partial waiver of Section 157.20 of the Com-
mission's regulations to the extent provided in Order No. 539-A. This perma-
nent certificate was accepted by Mobil on June 18, 1976. On September 8, 1976,
the Commission issued an order in Docket NO. C175-538 amending Mobil's cer-
tifi~te as requested in Mobil's May 25, 1976 application. The September 8,
1976 order also accepted Mobil's contract amendment dated May 21, 1976, which
amends the gas sales contract to extend the term of the contract from 10 to
15 years.
Mr. LEMOV. So to summarize, shortly after testimony by Mamone
and Lewnes before two subcommittees of Congress, your Executive
PAGENO="0417"
411
Director, under your instruction, directed that action be taken either
to separate or fire-to see whether Mr. Lewnes could be separated or
fired. Is that right.
Mr. DUNHAM. I never gave the Executive Director instructions to
fire anybody. I have worked for several governments-
Mr. Moss. The question, Mr. Chairman, is whether you gave in-
structions to investigate a method whereby an attorney could be fired.
Mr. DUNHAM. No, I don't believe so. As I was explaining, I have
worked for two State governments, two Federal departments, and
now an independent agency. It has been my experience that to under-
take steps to discharge Civil Service employees is not a fruitful pur-
suit. So even if ,that, which it did not, entered my mind, I would
not, as an administrative matter, attempt that. It is a very lengthy
procedure.
Mr. Moss. What you want this record to reflect, then, is that any
move by any person in the Commission to ascertain the steps or the
method whereby Mr. Lewnes could have been removed from the pay-
roll were not at your instigation; you, were not aware of them; you
would not have condoned them. Am I correct?
Mr. DUNHAM. I cannot imagine circumstances where I would have
pursued that. I certainly had no case in regard to Mr. Lewnes.
Mr. Moss. My question is rather simple. The answer can be either
yes or no.
Mr. DUNHAM. The answer is no, I did not.
Mr. LEM0V. Turning to Mr. Mamone, 6 months, at the most, after
his testimony before this subcommittee, Mr. Journey, you ordered
him off the HIOS case.
Mr. JOURNEY. I did not order him off. the HIOS case, as you can
see from the material, Enclosure No. 1 to my letter to you of March
14, 1977, which sets out all of the drafts and things that were done
and sent to the Commission. I did not order him off.
What I did, Mr. Lemov, was to ask Mr. Gilmore to look at the
producer part of this. I had Mr. Wofsy and Mr. Aber and Mr.
Keeley. There were about seven lawyers.
Mr. Leinov. There is no question that Mr. Mamone testified that
by June 4 he never got another paper on the case. He was out of
the case.
Mr. Keeley, a man 1 year out of law school, took over the case,
your assistant. Is that not right?
Mr. JOURNEY. Mr. Keeley was one of a number of lawyers who
functioned more or less at that time as a clerk for-
Mr. LE1~rov. !I\Jlswer the question.
Mr. Moss. Did he take over the case?
Mr. JOURNEY. No, he did not.
Mr. Moss. All right. He did not take over the case.
Mr. JOURNEY. No.
Mr. LEMOV. Did he argue before the Commission orally?
Mr. JOURNEY. He argued before the Commission but he did not
ake over the case.
* Mr. LEMOV. Did he argue the contract issue?
Mr. JOURNEY. Yes.
Mr. LEMOV. He talked about the contract issue?
Mr. JOURNEY. Yes.
87-292 0 - 77 - 27
PAGENO="0418"
412
Mr. LEMOV. There is testimony on the record it was not considered
important enough to argue whether the producers should sign con-
tracts before the pipeline was built.
Mr. JOURNEY. Mr. Lemov, Enclosure 1 to my March 14 letter is
an FPC file search of what shows up in Commission documents.
Page 4 of that shows, according to the transcript of oral argument,
that he did.
Mr. LEMOV. Do you believe he argued it fully and effectively?
Mr. JoURNEY. I think he did.
Mr. LE1~rOv. All right. We will review that.
Shortly thereafter, after Mr. Mamone, the senior counsel on the
HIOS case, was replaced by this man 1 year out of law school in
the oral argument, Mr. Mamone found himself out of the natural
gas section completely, as did Mr. Wofsy and Mr. Lewnes, three
of the four most experienced lawyers in natural gas matters. Why
was that, Mr. Journey?
Mr. JOURNEY. Mr. Lemov, the HIOS case, the critical element,
producer contracts versus the rate form of protection, was a tech-
nique which was dictated by Commissioners Don S. Smith and James
G. Watt.
Mr. LE~iOv. I am not asking about that.
Mr. JOURNEY. I am trying to give you the answer.
Mr. LEMOV. He was out of the Natural Gas Section in October
when they were the most experienced attorneys and there was a
crisis and a shortage.
Mr. JOURNEY. Mr. Lemov, Mr. Wofsy told me he did not wish to be
Acting Assistant General Counsel after I was asked to take Mr.
Cockrell off from a case.
Mr. LEMOV. But he didn't ask to be taken off natural gas work,
did he?
Mr. JOURNEY. He was put on the rate part of the Ala$ka Pipeline
case, the most important part we had.
Mr. LEM0v. He didn't ask to be taken out of natural gas work,
did he? He was doing producer work.
Mr. JOURNEY. He was not doing producer work.
Mr. LEMOV. Pipeline work.
Mr. JOURNEY. Pipeline work.
We had need for senior trial lawyers in the electric side. Mr.
Wofsy and I have worked together for years. He is a principal part
of electric rate litigation group.
I transferred Mr. Mamone to the hydro side, and I will tell, you
why. I told the committee investigators before.
At the time of Phillips we had very few gas lawyers who could
step in and fill the breach. The Commission threw electric lawyers
into the gas side to make gas lawyers out of them.
We are now entering a phase in the electric side which, as your
report-page 381 of this committee on oversight report of the FPC,
your October 1976, 75-981 report-shows, hydroelectric is one of three
major areas, as you have said.
Now we are entering a phase of work on the hydroelectric side
which would be critical to the development of resources and we need
lawyers with comparative licensing skills.
PAGENO="0419"
413
I want to get as many good certificate lawyers doing hydro licens-
ing as I can because we are moving into this relicensing program on
the electric side.
Mr. LEMOV. All right. So you took two of your most experienced
natural gas lawyers in the middle of the crisis and put them there
because you thought they should learn a new skill because you needed
people over in that area, too; is that right?
Mr. JOURNEY. Mr. Mamone, until lately-I looked at his work
schedules recently-has been doing almost nothing but gas work.
Mr. LEM0v. Trying to finish up the cases he was on?
Mr. JOURNEY. Trying to finish up the cases. He has two of the
most significant hydro cases we have, one iii the West and one in the
South.
Mr. Moss. Is it not a fact that Mr. Mamone in this 29-man transfer
was the single example of a senior trial attorney who was moved
from one area, that of natural gas, to hydroelectric without his re-
questing to be moved, in other words, iii involuntary move?
I have reviewed the matter, Mr. Journey, and I shall place it in
the record at this point.
[The material referred to follows:]
PAGENO="0420"
414
FEDERAL POWER COMMISSION - Office of the General Counsel
Reassignments made pursuant to the General
Counsel's memorandum dated October 8, 1976
NAME
CURRENT
GRADE
GS-l6
REASSIGNMENT
FROM
Lesiglation
TO -
REMARKS
Rates & Corporations
(l),(2)
Goldstein, Daniel
Schifter, Lilo
Marshall, Susan*
GS-l2
GS-l2
Legislation
Legislation
Rates & Corporations
Rates & Corporations
(1)
(1)
Pendley, Elisabeth
Stiles, Joseph*
GS-ll
GS-l2
Legislation
Rates
Producers
Solicitor
(l),(2)
(1)
Lamke, Daniel
Stafford, John
GS-l5
GS-l5
Hydro
Hydro
Rates & Corporations
Rates & Corporations
(3)
(1)
Everett, John
Diaz, Romulo
GS-l4
GS-l4
Hydra
Hydro
Legislation
Lesiglation
(1)
(l)(2.)
Cromes, Bernard
GS-l3
Hydro
Rates & Corporations
(3)
Woods, Robert
Chryssikos, Telemac
Fields, Rhodell
Reiter, Harvey
GS-13
GS-12
GS-ll
OS-li
Hydro
Hydra
Hydra
Mydro
* Rates & Corporations
Rates & Corporations
Rates & Corporations
Rates & Corporations
(3)
(3)
(3)
(3)
~is, Jon
~
GS-l6
Rates
Imrned. Ofc. of the
General Counsel
*
`(1)
Nattingly, Richard
Wofsy, Cyril
Bullock, Charles
GS-l5
GS-l5
GS-14
Rates
Rates
Rates
Pipelines
Rates & Corporations
*Rates & Corporations
(3)
(3)
(3),(4)
Hargis, Lynn
McManus, Jarnes*
Nygaard, Karen
Pederson, Norman*
05-12
GS-l2
GS-12
GS-12
Rates
Rates
Rates
Rates
Rates & Corporations
Rates & Corporations
Rates & Corporations
Pipelines
(3)
(3)
(3),(4)
(3)
Stough, John
GS-l2
Rates
Pipelines
(3),(5)
Lane, Dennis
GS-ll
Rates
Pipelines
(3)
Melvin, Dennis
GS-ll
Rates
Rates & Corporations
(3),(5)
Elrod, Dennis
GS-ll
Rates
Pipelines
(3),(5)
Weller, Barbara
GS-ll
Rates
Pipelines
(3),(5)
Mamone, Russell
Konski, Luis*
GS-15
GS-l2
Pipelines
liaised. Ofc.
Hydra
Rates & COrporations
(1).
(l),(2)
ofthe
General
Counsel
29 Professional staff were
were reassigned.
reassigned. In
.
addition, eight clerical
..
staff
Remarks
(1) Employee reassigned to a subject area different
from the previous assignment
(2) Employee requested transfer to a new area
(3) No change in subject area assignment
(4) Subsequently, employee voluntarily left the
Office of the General Counsel
(5) Subsequently, employee voluntarily left the
Federal Power Commission
*Indicates promotion to that grade ocqurred after
October 8, 1976.
PAGENO="0421"
415
Mr. Moss. A careful review shows that Mr. Mamone was moved
without his consent, and I believe that was true also of Mr. Wofsy
and Mr. Lotis.
The highest were Mamone and Wofsy, Mr. Wofsy being moved
from pipelines to hydro.
You made other transfers but this was the singular example. These
were the senior staff people, Mr. Wofsy and Mr. Mamone, being
moved, Mr. Lotis being affected, without their concurrence.
Mr. JOURNEY. I am not sure what list you are looking at, Mr.
Chairman. I have a list, and I think it is the same one.
Mr. Moss. I am looking at Federal Power Commission, Office of
General Counsel, reassignment made pursuant to General Cour~sel's
memorandum dated October 8, 1976.
Mr. JOURNEY. I am looking at the same one.
Mr. Moss. Twenty-nine professional staff were reassigned. In ad-
dition, eight clerical staff were reassigned.
Mr. JOURNEY. That is correct.
Mr. Moss. Then there are one, employees reassigned different from
previous assignment.
Two, employee requested transfer to new area.
No. 3, no change in subject area assignment. Most of the transfers
involved no change in area assignment.
No. 4, subsequently, employee voluntarily left the Office of the
General Counsel.
No. 5, subsequently, employee voluntary left the Federal Power
Commission.
Mr. JOURNEY. Mr. Mamone is the highest one on there, Mr. Chair-
man.
I notice there is another GS-15, John Stafford, who was trans-
ferred.
I do not see that he had any voluntary request.
Mr. Moss. I believe Mr. Stafford came on board in 1975. There-
fore, there was no extensive experience. Mr. Mamone had been em-
ployed by the Commission for many years; is that correct?
Mr. JOURNEY. Mr. Stafford had substantial experience-
Mr. Moss. At the Commission?
Mr. JOURNEY. No, sir.
Mr. Moss. That is what I am addressing myself to, the Commis-
sion.
Mr. JOURNEY. I see.
Mr. Moss. To look, Mr. Journey, at the subleties when I am try-
ing to make determinations. The witnesses must be protected. If
there is a suggestion they have not been and action adverse to them
has been taken, then it becomes my responsibility, whoever they are,
to see that they are protected. I intend to fully discharge that
responsibility.
Here we do have interesting coincidences, and I mentioned them
to Mr. Fee. I think I have developed a compilation of additional
ones. But here we have these interesting coincidences which occur
subsequent to appearances before two committees of the House, and
I find them disturbing.
Mr. JOURNEY. May I say something, Mr. Chairman?
PAGENO="0422"
41~
Mr. Moss. Indeed, you may say something.
Mr. JOURNEY. In the case of Mr. Mamone, as I said in my pre-
pared testimony which I submitted on March 8, the General Counsei
sometimes receives a request from an individual Commissioner to
have staff lawyers do other work.
In the case of Mr. Mamone, I did receive such a request.
Mr. Moss. From which Commissioner?
Mr. JOURNEY. Commissioner Watt.
Mr. Moss. On what date did you receive this request?
Mr. JOURNEY. Sometime in the spring of 1976.
I believe, Mr. Chairman, as I understood Commissioner Watt,
some of the difficulty that he was having in connection with Mr.
Mamone's work is of a professional type, if I understand the lan-
guage of the Superior Oil Co. opinion No. 766, page 8-
Mr. Moss. Mr. Journey, these are very interesting citings. As I
pointed out, I have the responsibility, the subcommittee has the re-
sponsibility, if there is a suggestion an employee was disciplined
directly or indirectly because of testimony here-Mr. Watt became
a Commissioner in November 1975. Mr. Mamone appeared before this
subcommittee and the Energy and Power Subcommittee in January
1976.
You say in the spring of 1976 he became disenchanted with Mr.
Mamone and wanted him assigned to something else.
Mr. JOURNEY. Yes, sir.
Mr. Moss. He became very familiar with him very quickly; didn't
he? This is another one of the coincidences I point out.
Mr. JOURNEY. Our open public meetings were an example of this.
If you will permit me-
Mr. Moss. I might add a staff investigation interview with Com-
missioner Watt contains no recollection of anything of that type.
Mr. JOURNEY. All I can tell you, Mr. Chairman, is that this is
opinion 766 written by Commissioner Watt dated June 29, 1976.
On page 8 it states:
"We agree with Judge Zwkerdling's evaluation of staff's participation in this
proceeding wherein he stated, "In support of its warranty condition recom-
mendation the staff brief presents a hodgepodge of barely stated doubts, fears,
and conclusions unsupported by any substantial analysis or rationale." In con-
cluding that the staff had provided "no really serious or helpful analysis of
the policy issues" in this proceeding, the Judge suggested that the Commission
should consider these issues in a rulemaking proceeding.
Mr. Moss. What was Commissioner Watt's background?
Mr. JOURNEY. He is a lawyer. He worked for one of the Senators.
He was director of one of the divisions or departments in the De-
partment of the Interior. Beyond that, I don't know.
Mr. Moss. You are saying that this comment in that opinion
caused you to remove Mr. Mamone-
Mr. JOURNEY. Prior to the rendition of this opinion, Mr. Chair-.
man, in one of our open Commission meetings, we operated under
the "Sunshine." before the law became a fact, Commissioner Watt
came over to the table where I was and asked me, in open meeting,
to find areas of work for Mr. Mamone in other parts of OGC.
Mr. Moss. Is the Chairman the director of the operations of the
Commission? As I recall, the reorganization of 1950 made him the
PAGENO="0423"
417
principal executive of the Commission. Did he make any such re-
quest of you?
Mr. JOURNEY. Mr. Dunham did not, sir.
Mr. Moss. In other words, if a single Commissioner expresses dis-
pleasure over the work of a senior lawyer on the staff of the Com-
mission, you will remove him. Is that correct?
Mr. JOURNEY. I am sensitive to the-
Mr. Moss. That is not what I asked you. You will remove him?
1~Ir. JOURNEY. Put in that context, the way Commissioner Watt
put it to me, yes, sir.
Mr. Moss. I think that is the damnest thing I ever heard. We.
didn't give the staff status in order to have any single Commissioner
who might be unhappy with him dispose of him. There is no looking
to see whether the experience of the man would be wasted in one
field or more effectively utilized in the other? That judgment did
not come in. You merely responded to the suggestion of the Com-
missioner. Is that correct?
*Mr. JOURNEY. It was not a question of not putting him to useful
work. I think he is doing work that can be more useful.
Mr. Moss. Again I am looking at something else. Because of the
suggestion that one Commissioner was unhappy with him, it could
also have occurred with the Commissioner being unhappy with testi-
mony he gave before this committee, couldn't it?
Mr. JOURNEY. I don't know.
Mr. Moss. Did you inquire?
Mr. JOURNEY. That was never discussed. I did not ask Commis-
sioner Watt.
Mr. Moss. He said to our investigators that he came to the Com-
mission "green as grass"-that is a direct quote-in November of
1975.
Here this man who is green as grass is responsible for the removal
of a senior man and assigns him to an area where he will be work-
ing at less than optimum effectiveness.
That was very critical of the Federal Power Commission, I might
add, Mr. Dunham and Mr. Journey. I have been keenly disappointed.
I happen not to have approved of the proposal to move this agency
into the new Department of Energy, but I want to see it operate as
an independent and effective body. That is my objective. I don't
think that this record will help my efforts to bring that about.
Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
First of all, I would like to commend the witnesses, particularly
Mr. Journey, for this testimony. It seems to be very detailed and
well backed by affidavits and other, documentary evidence which I
think the members of this subcommittee can get their teeth into.
Thus far this record has been replete with hearsay, innuendo, and
statements, rather vague statements, and personal feelings by the
four witnesses-Mamone, Wofsy. Lewnes, and Lotis-generally pre-
ceded by the two words I feel, and then followed by statements
which are not backed by facts.
I would like to just quote from the previous testimony in the case
of two of the four alledgedly injured parties here, Mr. Mamone and
Judge Lewnes.
PAGENO="0424"
418
On page 46 of the unofficial testimony I asked Mr. Mamone:
One final question, Mr. Mamone. In terms of your own career development
within the Commission, would it not be beneficial to you to have experience
in some other division, such as the Hydroelectric Division, as well as the Gas
Division?
Mr. MAMONE. As I stated before, Mr. Lent, in connection with the Federal
personnel policy which you have read, I think a diversity of experience is
desirable for all professional employees.
Mr. Moss. Mr. Lent, would you briefly yield?
Mr. LENT. I wOuld be glad to.
Mr. Moss. You used the term unofficial testimony. The record
should reflect the fact this is the official testimony taken before this
subcommittee under oath. It is not unofficial.
Mr. LENT. I am sorry; but the page numbers are tentative, as I
understand it.
Mr. Moss. But the testimony is not.
Mr. LENT. All right.
Then, with respect to Judge Lewnes, at page 40 of the official
transcript, I said to Mr. Lewnes:
You are now an Administrative Law Judge.
Mr. LEwNES. That is correct.
Mr. LENT. This is considered a step up from the position you formerly held.
Is that not correct?
Mr. LEWNES. Money-wise, no. From my standpoint, I think it is a much
more prestigious position.
Mr. LENT. As a matter of fact, your appointment as judge had to be ap-
proved, at least it had to pass through the office, by the Chairman of the
Federal Power Commission.
Mr. LEWNES. That is correct.
Mr. LENT. He could have, had he been so inclined, put the cabash on that.
Mr. LEWNES. Absolutely.
Mr. LENT. He did not?
Mr. LEWNES. He did not.
Mr. LENT. Because you are now a judge.
Mr. LEWNES. That is right.
So I think insofar as Mr. Mamone is concerned, he already has
indicated that he thinks the transfer, which was part of a much
larger reassignment and reorganization of some 23 members of the
staff of the Chief Counsel's office, that the transfer has been bene-
ficial to him, and Mr. Lewnes, far from being demoted or prejudiced
in any way, is now an Administrative Law Judge, a position which
he finds himself compatible with.
I would like to ask Chairman Dunham a couple questions.
As to Judge Lewnes, Mr. Chairman, you testified just a few mo-
ments ago that you did not fire Mr. Lewnes. As a matter of fact,
you did not even direct Mr. Fee to find a way to fire Mr. Lewnes;
is that correct?
Mr. DUNHAM. That is correct.
Mr. LENT. As a matter of fact, the testimony of Mr. Lewnes is
that you OKd him for an Administrative Law Judge is correct?
Mr. DUNHAM. That is correct.
Mr. LENT. Might someone else have directed Mr. Fee to find a
way to fire Mr. Lewnes?
Mr. DUNHAM. I do not know; but I do not believe so.
Mr. LENT. Did you ever discuss with Mr. Fee to your knowledge
the possibility of firing Mr. Lewnes?
PAGENO="0425"
419
Mr. DUNHAM. No. I did discuss with Mr. Fee, as a result of what
would seem to be problems in the Commission meeting, the possi-
bility of moving Mr. Lewnes to another assignment. Moving and fir-
ing are two different things.
Mr. LENT. You did advise Mr. Fee that there was a problem, then,
with Mr. Lewnes?
Mr. DUNHAM. That is right.
Mr. LENT. What was the nature, if you will, of that problem?
Mr. DUNHAM. Mr. Lent, when I arrived at the Commission in
late October of 1975, in the Commission meetings that were con-
ducted at that time, and the manner in which they were conducted,
they were to me confusing. There was constant argumentation about
commas, choice of words. it was very difficult for me to ascertain
what the nature of the disputes was. There were always allusions
to, I think there are problems with that case.
Then eyebrows would rise, smirks would appear on various peo-
ple's faces, and I could not get to the bottom of what the problems
were.
`This was typical of many, of several, staff members in the way
the meetings were conducted.
As a result of the way I perceived the problem, I adopted a num-
ber of administrative orders, the Commission adopted orders with
my suggestion, one of which was to hold open meetings.
A second one was, and .1 `think it is important for internal admin-
istrative reasons, that when a particular case was prepared, first
that the person preparing the case was to attach a covering memo-
randum isolating what were the major issues involved in that case.
When cases were sent forward to the Commission, any sta~ff member,
any bureau which had any objections or differences of opinion with
the results of the draft opinion, was to so note them on that memo-
randum. In other words, there was a clearance procedure adopted.
The third change I made was to put out an administrative order,
procedure-and all these I would be glad to put into the record, if
you so desire, because they are all part of the public record now.
Mr. Moss. We have them, Mr. Chairman.
Mr. DUNHAM. The third change I made was to put out an admin-
istrative procedure that anybody who did not agree with the results
of any draft opinion had the right, in fact the responsibility, to come
before the Commission and so state when they were involved in the
case. This was my attempt to organize the meeting in such a way
that at least I could understand to a greater extent what these prob-
lems were.
Several of my colleagues, and I believe the staff has discussed,
the investigators have discussed, with Commissioner Watt and Com-
missioner Smith, and I don't know-
Mr. Moss. We have that.
Mr. DUNHAM. There was brought to my attention by those two
Commissioners, and I was aware as a result of the meeting, the fact
that orders were not being prepared in the time frame that we de-
sired to have them prepared, or perhaps alternatives were not pre-
pared in the way that they were instructed on the part of various
people here.
PAGENO="0426"
420
The way I looked at it in regard to George Lewnes, and this is
true of many other staff members who were subsequently shifted and
reassigned and where assignments were changes, is that in my
opinion and in my experience if a person is not performing in the
way he perhaps should in one position, that does not mean necessarily
that he is not an employee who can perform in a different assignment.
I believe, as President Truman stated many times, there is a lot
of advantage in terms of personal stimulation for change for change's
sake.
I believe that has occurred in the case of Mr. Lewnes. He told me
that he had at various times wanted to become an Administrative
Law Judge; he was on a Civil Service list; he intended to reactivate
that. He asked me what my opinion of him was in that regard, would
I support him, and I told him I would, that his experience should
not be lost to the Federal Power Commission.
I was particularly pleased at his performance, the one as Admin-
istrative Law Judge, in the one case with which I am familiar, the
Public Service Commission of Indiana, I believe, which had been
before the Commission for 3 or 4 years-not before the Commission,
but it had been before the Administrative Law Judge, and two or
three judges had retired from under it.
Judge Lewnes was assigned by Chief Judge Zwerdling in that
case, and within a very short period of a very few months he re-
solved the issues on the basis of the hearing record and brought it
before the Commission and it was resolved.
As you know, Mr. Lent, the Commission, in addition to many
critcisms, has been criticized by virtue of the fact that we have an
enormous backlog and that we take allegedly inordinate amounts
of time in resolving cases.
The whole thrust of the reorganization, the whole thrust of the
reassignment, was to attempt to get issues resolved, and not debated
forever and a day with no apparent ability to get them to the deci-
sion stage.
Therefore, in regard to your specific question, for whatever reason
and for the reasons stated. and I assume the committee will discuss
the reaction of the Commissioners Watt and Smith-as I said. I do
not know what they said to the committee investigators-I deem as
an administrative matter that change in assignment in this case
would be a healthy thing.
I think that judgment has turned out to be correct. To my knowl-
edge, in addition to the one incident I mentioned, George Lewnes
has performed admirably as an Administrative Law Judge. His
experience in these matters and his long experience with the Federal
Power Commission has not been lost to the Federal Power Com-
mission. His expertise has not been lost.
In fact, in the particular time frame we are talking about he has
been more effective.
That is the sum and substance of this.
Mr. LENT. In that statement you did not say-I will put it to you
now-as to whether the reassignment proposed for Mr. Lewnes to
Administrative Law Judge was in any way predicated upon the
prior testimony of Mr. Lewnes before subcommittees of the Congress.
PAGENO="0427"
421
Mr. DUNHAM. Absolutely not. I have toO much respect for the re-
sponsibilities of Congress and the democratic system in this country.
I am deeply dedicated to the question of accountability. That thought
would never have entered my mind.
Mr. LENT. Let's switch over to Mr. Lotis, another one of the people
we are concerned about here.
He testified that he met with you on June 4, 1976, and advised
you that contrary to all of the stories which had been floating around
the Commission prior to that date that he was a short-timer and
was planning on leaving the Commission, on that date he told you
that he planned to stay on at least through the election.
I asked him what election, and he said November of 1976.
Do you recall that conversation?
Mr. DUNHAM. I don't know that I recall the specific date. I have
had several conversations with Mr. Lotis during the past year.
Mr. LENT. Did you advise him at that meeting or at any other time
that, if he had any problems with Mr. Journey, that you would
create a higher position for him at the agency?
Mr. DUNHAM. No, I believe Mr. Lotis-does he not have the high-
est grade? He is a GS-16. There, would be only one other position
available higher, and I assume that would be the General Counsel's
position.
Mr. FEE. Or Deputy.
Mr. DUNHAM. Or Deputy.
Mr. LENT. Mr. Journey, if I may ask you a few questions, referring
first of all to Mr. Mamone's testimony.
Mr. Mamone testified that there had never been any criticism of
his work performance in the handling of any of hi~ cases before the
Federal Power Commission. He indicated to the committee that, in
his opinion, the reason for his transfer was his persistent advocacy
of the public interest.
I ask you whether that was the reason this man was transferred.
Mr. JOURNEY. No, sir. All of the lawyers advocate the public inter-
est. I don't have any nonpublic interest lawyers.
Mr. LENT. Was it you who decided that Mr. Mamone would be
transferred from gas certificates to hydroelectric licensing'?
Mr. JOURNEY. That was my responsibility; yes, sir.
Mr. LENT. And many other employees were transferred in Oc-
tober of 1976 as a result of the Touche Ross reorganization plan;
is that correct?
Mr. JOURNEY. Yes, sir. I believe there were 29 professionals and
8 clericals.
Mr. LENT. And you know that besides Mr. Mamone there was at
least one other individual of similar rank, John Stafford, who was
transferred to a different kind of work; is that correct?
Mr. JOURNEY. Yes, sir.
Mr. LENT. And did all of those others who were transferred to
different work assignments make a request that they be so trans-
ferred?
Mr. JOURNEY. No, sir.
Mr. LENT. Now with respect to Judge Lewnes, Mr. Fee, in his
testimony, described the personnel situation with respect to Mr.
Lewnes as untenable.
PAGENO="0428"
422
As far as you are concerned, was it untenable?
Mr. JOURNEY. George and I had some differences. They were not
differences of regulatory philosophy. I think it was more a question
of what I call the followthrough of drafting, of getting orders out,
of taking the policy guidance from the Commission.
When orders. come down, as I understand the role of the General
Counsel, he is the lawyer of the FPC to follow their instructions
and to defend their actions.
A good example is the HIOS case. When that was in the formative
stages there was a concept developed in an order that I sent up,
which Mr. Aber and Mr. Keeley drafted that there should be pro-
ducer contracts before there was a certificate issued.
In that case, Commissioner Don Smith took the lead. He and
Commissioner Watt changed that policy to a rate form of protection
versus a contract form of protection.
We oftentimes get drafting instructions back down. In responding
to drafting instructions and moving caseload and case work out, that
is where George and I had some differences.
I could not find a systematic record system back in the Pipeline
Certificate Section. I asked the. incumbent `Gordon M. Grant, the
assistant litigation counsel, who took over in June of 1976, to go
in and try to find out what was there and get it moving.
He found 70 cases, 70 dockets, which had been somewhere between
the assistant litigation counsel and the individual lawyers.
As I said in my opening statement, the assistant litigation counsel
does not report directly through the General Counsel to the Com-
mission. The assistant litigation counsel reports to the Commission
and to `the Commissioners.
When there is not followthrough, the button is pushed and nothing
happens, it is generally the telephone of the General Counsel that
rings off the hook. It ~was this kind of thing.
Mr. LENT. I think it was Mr. Lewnes who testified that his seating
arrangement at the Commission hearings was changed. This was one
of the principal evidentiary facts he pointed to in order to back up
his claim that he was, I guess, intimidated, or being intimidated, by
the General Counsel's office.
Can you tell us whether his seat was, in fact, changed and, if so,
what the reason for that was?
Mr. JOURNEY. His seat was changed, as was mine, as were the
seats of most of the other people, and I will tell you how it came
about.
Chairman Dunham, in advance of the Sunshine Law, on April 1,
1976 opened FPC meetings to the public. We have a Commission
meeting room that had to be rearranged to accommodate spectators.
I would guess on some days we might have as many as 200 people
in that room-maybe not that many but we have had an enormous
number in there.
The Chairman's government in the Sunshine activity caused or
made need for a rearrangement of the room. As I understand it, this
was part and parcel of everybody getting switched around in the
FPC meeting room.
We made do with what we had but it was a logistical problem.
PAGENO="0429"
423
As the Chairman has said, he was also attempting to regularize
the presentation of views without stuffing any. He was trying to find
spokesmen for particular positions instead of eight spokesmen for
a position restated. That is really all I know about it.
Mr. LENT. With respect to Mr. Lotis' testimony, I believe at page
162 of the transcript, Mr. Gore asked Mr. Lotis:
After the settlement
Referring to the Ohio Electric cases-
were there any further unusual actions on the part of Mr. Journey regarding
this case?
Mr. LoTIs. Mr. Journey called me in to his office and said he wanted an order
prepared approving that settlement.
I told him I didn't see the hurry.
He said he didn't want the public informed of the settlement notice.
Mr. GORE. He didn't want the public informed of it?
Mr. LoTIs. That is the only conclusion I can draw.
Was it your purpose that the public not be informed of the
decision in this case?
Mr. JOURNEY. No, sir.
Mr. LENT. Or the proposed settlement?
Mr. JOURNEY. No, sir.
Mr. LENT. I think you covered that earlier in your testimony.
Mr. Lotis also said that, "He told me that he knew more about
this case than appeared in the public files."
Can you tell us what did you know that Mr. Lotis did not know
about the Ohio Electric case?
Mr. JOURNEY. Mr. Lent, I am looking at the East Central Re-
liability agreement, April of 1975. The operation of the East Central
area is basically a synchronized bulk power supply network covering
the States of Michigan, Indiana, Ohio, Kentucky, West Virginia,
part of Virginia, and Pennsylvania.
As a unit, the ECAR area has to plan capacity installations and
synchronous operation as a unit because this is all electromagnetically
locked, and as the Northeast blackout shows, when load and gen-
eration become unbalanced, it cascades and you break down.
This area has long range planning under the Reliability Council
program they project 20 years in advance.
Just quoting a couple figures here, it had a power capability in
1975 of 71,946 megawatts, and it had a native load of 55,143.
To keep that machinery operating there are requirements to bring
on plants, according to a preprogrammed schedule.
I am looking at pages 5-8, exhibit 1C and exhibit 1E, of the
ECAR report.
Mr. Moss. Could you respond more succinctly to the member's
question? It is an excellent lecture, but I do not think it is responsive.
The gentleman's time has run out. I do want him to have his
response before I have to drop the gavel.
Mr. JOURNEY. It is in the ECAR book. That is what I knew
about it.
Mr. Moss. Can you briefly summarize it for us so that he has .a
response to his question?
Mr. JOURNEY. It was to bring the capacity on line and ensure that.
it operated at the time and times that it was needed. This is the
PAGENO="0430"
424
work that I had been doing under the Reliability Council program
for a long time, and there had been questions as to the financing of
these units, whether reliability was in any way affected in terms
of being able to refund security issues, and whether there might be
problems on operating units.
This was a 1~300-megawatt unit in a 2,600-megawatt Gavin plant.
Mr. LENT. You were trying to hurry Mr. Lotis along in his
handling of the case?
Mr. JOURNEY. As I have been trying to do this kind of work
before the FPC and State commissions pursuant to what former
Chairman Nassikas told me to do.
Mr. Moss. The time of the gentleman has expired.
The Chair recognizes the gentleman from Tennessee, Mr. Gore.
Mr. GORE. Thank you very much, Mr. Chairman.
I would like to begin by briefly noting for the record that I had
occasion several weeks ago to write a letw.r to Chairman Dunham
concerning a practice which came to my attention of circumventing
emergency price natural gas regulation by the use of what I con-
sider to be a fraudulent finder's fee charged by the producer.
I want to say for the record Chairman iDunhem responded prompt-
ly and issued an order clarifying the Commission's procedure. I
thought it was an excellent response. I am hopeful in the specific
case the consumers and the distribution company will not be stuck
with that particular finder's fee. I understand it is still under review.
Having said that, Mr. Dunham, I believe we have a direct con-
flict in the testimony which has been presented to this subcommittee.
Mr. Fee stated, when he testified last week, that you asked him
to find a way, or to explore procedures to be used, in separating Mr.
Lewnes from the Federal Power Commission.
Mr. LENT. Will the gentleman yield a moment?
Mr. GORE. If I may read the testimony first.
The testimony I am referring to is on page 91 of the temporary
stenographic transcript from Mr. Fee's testimony.
Mr. Moss reviewed the memorandum which was taken down
August 9, 1976, by Mr. Braun as part of the record where this
sentence is contained:
Fee was told by Dunham, "Curt, look into it. See if we can get George Lewines
out of that job."
Mr. Moss asked:
Is that correct?
Mr. FEE. Yes, sir.
Mr. Moss. Then we have established that you were told by Dunham to get
rid of, ir to. get Lewnes out of the job.
Mr. FEE. Yes, sir.
Now, your testimony this morning, Mr. Dunham, is that you did
not say that to Mr. Fee.
Both of you are at the witness table under oath. Is this not a
direct conflict? How can it be explained?
Mr. DUNHAM. Mr. Gore, in my terms "getting somebody out of
a job" is not firing. It is transfer, shifting of a position to other
positions within the agency, methods like that.
As I said earlier, I had no basis, at least I know of none, to sever
a Civil Service employee, this particular employee. I had no reason
PAGENO="0431"
425
to separate him from the Service. I had no charges presented to
me by anyone. But to get him out of that job, if those are the words,
this does not mean to me taking action which is a legal proceeding
to separate somebody from the Service.
As I pointed out, I worked for several governments and I know
the length of time involved, and I don't think that was a good
procedure. I think you lose a lot of a person's talents and services
if he does not fit a particular job at a particular moment-it is like
a square peg in a round hole. It does not necessarily mean that by a
transfer he cannot be a square peg in a square hole.
Mr. GORE. We are not talking about a transfer now. The testimony
of Mr. Minor was that he was asked by `Mr. Fee to explore the ways
available to fire Mr. Lewnes.
Mr. Fee testified that you asked him to pursue that matter with
Mr. Minor, and it was at your instigation that that request of Mr.
Minor was made.
Did you ask Mr. Fee, as he said you did, to pursue that matter?
Mr. DUNHAM. I read Mr. Fee's testimony and I did not see it that
way. The words here were, "Curt, look into it. See if we can get
Georges Lewnes out of that job."
That is not in my terminology, as I said earlier I know the diffi-
culties and I had no inclination to do that with regard to bringing
charges. If I had wanted to do that, I would have asked Curt to
accumulate specific charges or incidents, or something where Civil
Service processes can be undertaken.
I am not trying to argue words here, but to get people out of a
job means to me an assignment transfer, reassignment.
Mr. Goiu~. The scope of this inquiry is not limited to whether or
not you brought official charges.
To refer back again to the context of these hearings, we had three
attorneys in the Office of General Counsel testify before subcommit-
tees of the Commerce Committee relating to matters where their -
evaluation of the public interest differed substantially from the
evaluation of their superiors, including your own, on several matters.
Shortly after this testimony was rendered, the testimony we have
had here in these hearings indicates that shortly after that testimony
was rendered you asked, "How can we get one of those witnesses out
of his job?"
We just heard testimony this morning that another Commissioner
who came to the FPC at the same time you did, a few months before
these events took place, asked how to get another one of three
witnesses out of his, job.
It is not confined to bringing official charges.
If he comes and testifies before a committee of this Congress in
a way which brings embarrassment to you or to anyone else in the
Federal Power Commission, and then, immediately after that, you
ask how can we get this person out of his job, that is a very serious
matter.
Is your testimony now that you did ask Mr. Fee to inquire as to
"how we can get him out of his job"?
Mr. DUNHAM. Well, those words are not the exact words. I don't
know. We are talking about conversations of well' over a year ago.
PAGENO="0432"
426:
The sense of them I might very well have said, "How can we
solve the problem?"
As a previously testified, there is absolutely no connection between
the two matters. The reasons for my suggesting to Curt Fee that
we get him out of the job related to these other matters, procedural
practice, and also my feeling that people changing from one position
to another is a stimulating, creative, helpful position, and that is
true perhaps of many of the 163 people that have been shifted
around. I do not keep a list of who has testified before Congress
when I consider moving people for management reasons or purposes.
It is my testimony there is no connection between the two events.
Mr. GORE. So your testimony is that it is merely a coincidence
that he had testified before Congress in a manner embarrassing to
the Commission immediately before these events took place, that
that was merely a coincidence. What you were really after was to
give him a stimulating and creative experience in transferring him
to another part of the Commission, and also to increase the efficiency
of the Commission.
Mr. DUNHAM. I personally have no feeling of coincidence. My
testimony is that there is no relationship one to the other.
Mr. GORE. Let's explore briefly the second request which came to
Mr. Journey which we heard about just this morning. I find this
rather startling, also.
Mr. Journey, you have been with the Commission for 24 years;
is that correct?
Mr. JOURNEY. Going on 25, yes, sir.
Mr. GORE. When Commissioner Watt asked you to find a way, or
told you he was dissatisfied with Mr. Mamone and wanted you to
get him out of the job he was performing, is that unprecedented in
your experience with the Commission, or is this commonplace?
Mr. JOURNEY. No, sir; that has happened before. I have seen that
dating back into the early 1960's, and before that into the 1950's.
Mr. Goin~. Without reasons being given?
Mr. JOURNEY. The reasons that Commissioner Watt gave me were
that he felt essentially. that these were analytical reasons, presenta-
tion reasons. This is part of the opinion that I read. The things that
happened, what I would call the professional output reasons, as
opposed to substance.
I have never heard any Commissioner say that he wanted any-
body fired or transferred because of what they thought or said on
the Hill or elsewhere. I just have not heard that.
However, in my experience I do not know of a number of di~fferent
Chairmen, and this is the sixth Chairman I have been under, that
people have been transferred at the request of Commissioners. I
cannot give you the names. It is just too long ago to go back.
Mr. GORE. For the record, I want to reiterate that Mr. Mamone
testified that it was his opinion that two factors were involved in
his transfer. One was his persistent advocacy of the public interest,
and the other was his testimony before the subcommittee.
In your opinion, Mr. Journey and Mr. Dunham, I will address this
to both of you, when three senior attorneys were transferred out
PAGENO="0433"
427
of the Certificate Section in the midst of a natural gas crisis, did
this hurt the efficiency of the Section and the Federal Power Com-
mission or did it improve it?
Mr. JOURNEY. I think that the workflow with available people
is tending to improve every day. I believe the answer to that is that
it did not hurt the Commission.
Mr. Goin. We heard a lot about the Touche Ross study in con-
nection, with this investigation. We put into the record the recom-
mendation of Touche Ross that assignments should be changed so
that th~re is more effective supervision, delegation, and training.
You refer, Mr. Journey, your March 10 statement, on page 3
`and again on page 12, that since the implementation of the Touche
Ross study the backlog of uncontested pipeline participant orders
was reduced from 605 to zero.
By "uncontested," do you mean the attorneys working on these
cases would not need as much experience? Is that a fair assumption?
Mr. JOURNEY. No, I would not say they wouldn't need experience.
1 would call it equivalent to what a private law firm would do as
the day-to-day work versus the trial of case work.
Some of the noncontested cases do tend to be routine and you do
grind the crank and you turn them out. However, as General Coun-
sel, if that crank is not ground, I catch criticism from the Commis-
sion. So we have to do work that is not necessarily to everyone's
liking but it is work that has to in done.
Mr. Goin~. You cited the cleaning up of this backlog as evidence
that the actions taken were indeed rational and constituted an
improved functioning.
I have a memo, Mr. Chairman, of a conversation between Ed
Mark, a trial attorney in the Office of the General Counsel, and
Stephen Sims, a member of the staff of this subcommittee.
Without objection, I would like to incorporate this into the record
and ready briefly from it.
Mr. Moss. Without objection.
I would first ask Mr. Sims to come forward and be sworn.
Do you solemnly swear that the testimony you are about to give
this subcommittee is the truth, the whole truth, and nothing but
the truth, so help yOu God?
Mr. SIMS. I do.
Mr. Moss. Identify yourself to the, reporter for the hearing record.
Mr. SIMS. I am Stephen Sims. I am a special investigator employed
by the Oversight and Investigations Subcommittee.
Mr. Moss. I have before me a memorandum of conversation be-
tween Ed Mark, trial attorney, Office of the General Counsel, and
yourself dated March 11, 1977.
Is this a memorandum prepared either by you or in your presence?
Mr. Smrs. Yes, it is, Mr. Chairman.
Mr. MOSS. And accurately reflects the content of the conversation?
Mr. SIMS. Yes, sir.
Mr. Moss. Thank you. You are excused.
[The memorandum referred to follows:]
87-292 0 - 77 - 28
PAGENO="0434"
428
MEMORANDUM OF CONVERSATION BETWEEN ED MARK, TRIAL ATTORNEY, OFFICE OF
THE GENERAL COUNSEL, FEDERAL POWER COMMISSION, AND, STEPHEN F. SIMS,
STAFF MEMBER, OVERSIGHT SUBCOMMITTEE, MARCH 11, 1977
The conversation was initiated at the request of Mr. Sims. Mr. Mark is, and
has been, in charge of the personnel in the Office of the General Counsel who
handle statutory or uncontested pipeline certificate orders.
In page 12 of the prepared statement of Mr. Drexel Journey for the Over-
sight Subcommittee, he refers to a reduction in uncontested pipeline orders
from 605 to zero "since the implementation of Touche Ross."
The backlog, whatever the exact number of cases, had been cleared up com-
pletely before the October 1976 reorganization which implemented Touche
Ross. Mr. Grant, the Certificate Section head, ordered all the attorneys, in-
eluding the trial attorneys who do not normally work on uncontested orders,
into the office on weekends in September 1976. It was this overtime work, and
not anything Touche Ross & Company recommended, that eliminated the back-
log in uncontested pipeline certificate orders.
The backlog itself was created beginning in the summer of 1975 when the
Statutory Order Section was unable to hire replacements for personnel who
left this work for other jobs. Mr. Mark interviewed people for the vacancies
and recommended some to his superiors for hire, but none were actually hired.
Mr. Mark believes that the difference between former Assistant General Counsel
Lewnes, who headed the Certificate Section until April 1976, and General
Counsel Journey, contributed to the inability to hire replacements and thus
the backlog.
Mr. GORE. This attorney, Mr. Mark says:
The backlog, whatever the exact number of cases, had been cleared up com-
pletely before the October 1976 reorganization which implemented Touche Ross.
1~Ir. Grant, the Certificate Section head, ordered all the attorneys, including
the trial attorneys who do not normally work on uncontested orders, into the
office on weekends in September 1976. It was this overtime work, and not any-
thing Touche Ross & Company recommended, that eliminated the backlog in
uncontested pipeline certificate orders.
In fact, Mr. Journey, the backlog of the uncontested matters was
cleared up before the reorganization, and it is not necessarily evi-
dence of the fact that it improved the effectiveness of the section or
that the personnel matters were rational.
Would you comment on that?
Mr. JOLTRNEY. Mr. Gore, the concept of Touche Ross in the re-
distribution of work was to functionalize it in different channels.
Mr. Moss. Mr. Journey, the question was whether the statement
in the memorandum that the backlog was cleared up before the
reorganization of October 1976 is correct.
We are quite familiar with the study.
Mr. JOURNEY. It is hard to answer yes or no. I could say a qualified
yes or a qualified no.
Mr. Moss. Which do you prefer to say?
Mr. JOURNEY. I would say a qualified no.
Mr. Moss. Then you go ahead and explain the qualification.
Mr. JOURNEY. The work was a separation process, Mr. Gore, of
trying to get the producer and the offshore pipeline noncontested
work coordinated over with the producer part of the work in OGC.
That was done in anticipation that Touche Ross would be imple-
mented. I had instructed Mr. Grant and Mr. Gilmore, in July or
August, to start separating that work out in piles.
It was separated out. Pieces were pulled apart, and they were
effectively completed in contemplation of this formal redistribution
taking place. It was a functional workload redistribution.
PAGENO="0435"
429
Mr. GoRI~. Completed before the implementation of the Touche
Ross study?
Mr. JOURNEY. Yes, but in effect, implementing the realignment
of work in Touche Ross.
Mr. GORE. You say, after the statement on page 3, "Further im-
provements which reflect the rationality of the trar~sfer are detailed
later in this statement."
Then on page 13 you pick up this train of thought again and
you say, "Hydroelectric applications disposed of in fiscal years prior
to the Touche Ross type changes were averaging about 131 per year.
In fiscal year 1976 the number was 209." Is that correct?
Mr. JOURNEY. Yes, sir.
Mr. GORE. The T~uche Ross study was implemented in October;
is that correct?
Mr. JOURNEY. You mean when OGC did it? Yes.
Mr. GORE. When did fiscal year 1976 end?
Mr. JOURNEY. When was that, Curt?
Mr. FEE. The transition quarter was October 1, 1976.
Mr. GORE. Fiscal year 1976, according to my information, ended
on June 30, 1976.
Mr. Moss. In order that the record be clear, we had a transition
quarter built into the Federal budget and the administrative plan.
That is considered part of 1976. It extended from July 1 through
September 30.
Mr. GORE. So if the fiscal year, including the transition quarter,
ended on October 1, 1976, this again would be prior to the imple-
mentation of the Touche Ross study; is this correct?
Mr. JOURNEY. It was, but again we had attempted to anticipate
and do some of the work in the hydro the way we had tried to sep-
arate out the piles in the gas side. It was the same kind of work.
Mr. GORE. You testified on the Mamone transfer that he was
transferred to gain expertise in the area and give him a creative
experience, and so forth.
It is my understanding that four experienced attorneys transferred
out of the hydroelectric area within 5 months of Mr. Mamone's
transfer. These were Robert Woods, John Sta~fford, Robert Nelson,
and Romulo Diaz.
If you needed experience in this area, why would you allow these
transfers to take place?
Mr. JOURNEY. May I answer individually on these men?
Mr. GORE. Sure.
Mr. JOURNEY. Mr. Diaz said that he wanted to do legislative work.
He is now working under the assistant litigation counsel.
Mr. Wood, although technically part of what we call the Hydro-
electric Section, was really doing the corporate work and some of
the accounting work which is a part of the interstate part of electric
utility operation. He said he wanted to try some of those kinds of
cases.
What were the other two names you had, Mr. Gore?
Mr. GORE. Robert. Wood, John Stafford, Romulo Diaz, and Robert
Nelson.
Mr. JOURNEY. Robert Nelson. I talked to him and asked him, again
of the experience idea, having had some hydroelectric licensing
PAGENO="0436"
430
experience, would he try some gas certificate cases, because you
want your people able to wOrk under either act.
John Stafford indicated that he wanted to do-he told me he
wanted to do a lot of heavy trial work. He wanted to do economic-
type regulation. I believe he has a degree in economics. He just said
he wanted to do that. C
Mr. `GORE. Did you ask Mr. Mamone what he wanted to do?
Mr. JOURNEY. I did not ask Mr. Mamone what he. wanted to do.
I asked Mr. Mamone if he would undertake this work in the hydro
side after he cleaned up his gas backlog.
Mr. GORE. Counsel informs me that your own exhibit [see p. 42 and
p. 414]; prepared by you, on the personnel reassignments does not in-
dicate that any of the three, either Stafford, Diaz, or Wood, had re-
quested transfer.
If you would like to look this over and submit-
Mr. JOURNEY. I believe this was a sheet that John Griffin put
together for the subcommittee staff. It was put in trying to be
consistent with what your staff had, Mr. Chairman.
If there is an error in it, we will have to put a footnote on it.
Mr. GORE. Moving quickly to the HIOS case, obviously the staff
had serious reservations about this case.
Were there ever any hearings on this case to air the controversy?
Mr. JOURNEY. Yes. The hearings were. not formal certificate hear-
ings because there were no people who were requesting that type
of hearing. The controversy was at staff level, between staff and
Commissioners.
If you will look at enclosure 1, Mr. Gore, to my March 14, 1977
letter, and if you look at the compilation of materials which we took
out of the FPC files in CP-75-104, you will know everything I know
about it and everything any Commissioner knows about it, and you
will see that the controversy was in BNG and there was OGC
controversy.
I asked that the people who had a different point of view to
present their material in oral argument to the Commission. That is
all documented.
Mr. GORE. Was it unusual to put an inexperienced attorney on a
case as important as this one?
Mr. JOURNEY. Gosh, that is a hard thing to say because the fellow
who started it was hired only 5 months before Mr. Keeley. Bob Aber
started in April of 1975 and Keeley in the fall. They weren't the
only two lawyers. There were various people.
Mr. GORE. I think previous testimony indicates that Mr. Aber had
3 years of regulatory experience in another agency and that he was
assigned to the case with the intent that Mr. Mamone be brought in
before it went to the hearing stage in order to give him an oppor-
tunity to make the best use of his talents and experience, that he was
going to take over from the relatively inexperienced attorneys. Is
that not correct?
Mr.. JOURNEY. That is a toughy because Pat Keeley is a very
knowledgeable, I regard~ experienced attorney.
Mr. GORE. How long had he been with the Commission at the
time he was assigned this precedent-setting case?
PAGENO="0437"
431
Mr. JOURNEY. I think Pat came in the fall of 1975. I am not sure.
Mr. GORE. Fall of 1975, and this was a few months later
Mr. JOURNEY. He argued the case in the summer of 1976. But
the points that were made, Mr. Gore, and I want the record to be
crystal clear on this, the difference between the producer contract
and what came out in HIOS and what was before was Commissioner
Don Smith's idea. He directed that that should be done.
These materials will show you, in the various Smith versions and
how all these drafts evolved, that what Keeley and Aber sent up
followed the approach, the routinized approach. That is what I
sent up.
But this had gotten chewed up in about three or six different re-
drafts. That is Commissioner Don Smith's idea.
Mr. GORE. Mr. Keeley was working in your office at the time;
is that correct?
Mr. JOURNEY. Yes, sir.
Mr. GORE. We heard testimony earlier that it was unprecedented
for a case, any case, much less one of this importance, to be taken
out of the office of the trial staff and administered directly within
your office by a member of your personal staff. Is that unprecedented?
Was it unprecedented?
Mr. JOURNEY. No, sir. I know two of my predecessors who did
similar things.
Mr. GORE. Mr. Chairman, we have had several conflicts in the
testimony before this subcommittee. I will just note my feeling as
I have expressed it before. There is more than one way to deregulate
natural gas.
If the Federal Power Commission is staffed with people at the
Commissioner level and on down who believe in a philosophy of
deregulation, who believe that regulation of natural gas is not in
the public interest, then even if Congress does not express itself on
such a change in policy, another way to have de facto regulation
would be to decimate those who are to carry out the policies man-
dated by the Congress under current law.
I think the record of these hearings presents very grave questions.
I just want to conclude by again commending many of the em-
ployees who have testified earlier before this subcommittee for their
advocacy of the public interest.
Mr. Moss. rfhe gentleman's time has expired.
The subcommittee will break now for 1 hour and resume at 1:45.
[~Whereupon, at 12:45 p.m., the hearing recessed to reconvene
at 1:45 p.m.]
AFTER RECESS
[The subcommittee reconvened at 1:45 p.m., Hon. John E. Moss,
chairman, presiding.]
Mr. Moss. The subcommittee will be in order.
At this time the Chair recognizes the gentleman from Pennsyl-
vania, Mr. Walgren.
Mr. WALOREN. Thank you, Mr. Chairman.
We are involved here in some pretty subtle and very important
matters and matters which may not be gotten at directly through
PAGENO="0438"
432
the kinds of evidence that this subcommittee can take and the kinds
of procedures we are able to use.
I am interested, Mr. Dunham-you came to the Federal Power
Commission under President Ford on what date?
Mr. DUNHAM. I believe the date was October 15 of 1975. It was
in October.
Mr. WALGREN. Would you refresh my recollection of the previous
testimony as to your first indications of dissatisfaction with Mr.
Lewnes' work in the position that he was then serving?
Mr. DUNHAM. I don't believe that I referred to dissatisfaction
with his work in the one sense. What I referred to was the confusion
in Commission meetings where there was an inability to find out
who was speaking in what capacity. We had to be very careful that
staff witnesses-witnesses in cases do not appear in the Commission
meeting per se. If they testify in a case, they are excluded under
the rules from talking before the Commission.
Therefore, it rests primarily on my attempt, as I referred earlier,
to reorganize the way in which the Commission considered the mat-
ters before it. This was part of the table rearrangement we talked
about, to have only one person, or the chief bureau head, sitting
at a kind of U-type table. Then the person who is involved in the
case comes forward.
What we had before was a number of attorneys, numbers of staff
from OAF, numbers of staff from OEC, and everybody participating
in a general conversation. It was very difficult for me, as well as my
two other colleagues who were equally new to the Commission, in
other words, names and faces. It takes a while to be sure you know
who is who in one place.
Therefore, it relates primarily to trying to reorganize the way
the Commission conducted its business.
It became apparent to rue that there was constant dispute and
argument, not on matters of the case. It was difficult to ascertain
just exactly what the points were. I think I referred to this earlier.
Mr. WALGREN. When did this kind of consideration come to your
tttention?
Mr. DUNHAM. It became apparent at least after the first month
that I assumed office, which would be December. It was a general
situation. It was not Mr. Lewnes per se or somebody else per se. It
was a general malaise in the way the Commission business itself
was being conducted.
I think, as I mentioned earlier, the Committee has discussed this~
matter with two other Commissioners. As I say, I don't know what
they said there.
Mr. WALGREN. Your reservations at this point, in the first month
you came to the Commission, were general; that is, that there was
a general reaction to the method being carried on. It was certainly
not focused on Mr. Lewnes.
Mr. DUNI-IAM. When you said, dissatisfaction with his work, I
am not a lawyer. I certainly do not have the legal training or back-
ground to judge his legal competence per Se. I was able to judge,
in my opinion, the way issues were set forth, the way the issues of
the case, the key policy issues or actual disputed issues are set forth.
PAGENO="0439"
433
That is true in orders prepared under his responsibility. It was also
true in orders prepared in several other sections. That is why the
new procedure was adopted.
Mr. WALdEN. Although you may not have been dissatisfied per
se with Mr. Lewnes' work, nevertheless, you were displeased. At some
point you became displeased with Mr. Lewnes in the position he was
then working, and this displeasure was communicated to Mr. Fee.
Mr. Fee has indicated that you did communicate your displeasure
with the situation to him.
What I am asking you is this: When did that happen? Was it
within the first month that you came to the Commission?
Mr. DUNHAM. I would guess it was in December. I forget exactly
when Mr. Fee joined the staff. It was soon after I came there, a
couple weeks later.
When we come to situations like this, which was entirely new
to me, it is not my habit to make changes in my first months there.
In fact, if it had been an agency where I had more experience, I
might have done it differently; but it is not my nature to move
hastily so I would guess it was not the first month but more likely
in December or some subsequent period.
Mr. WALGREN. I would just like to call attention at this point in
the record to Mr. Fee's statement which was prepared and submitted
to the committee in which the communication was stated to be early
in 1976.
Mr. Fee stated:
Early last year, being 1976, I became aware of a deteriorating situation con-
cerning Mr. Lewnes and assessments of his performance.
I think it should be noted that at the same point in the record
that that is the month that the congressional committee took hear-
ings and the same month that the Commission received the motion
for oral argument by Tenneco which specifically objected to what
was said to be inaccurate testimony by Commission staff members.
A second area I would like to explore is the area of Commis-
sioner Smith's displeasure with Mr. Lewnes. I take it that when
you came on the Commission, Mr. Dunham, that you would have
conversations with the other Commissioners, particularly those who
had been there for a substantial period of time before you, and that
displeasure with any particular staff person would be the subject of
that kind of conversation. Is that right?
Mr. DUNHAM. I would like to point out, as Chairman Moss pointed
out earlier, that the basic responsibility for administrative matters
rests with the Chairman under that Reorganization Act of 1950.
Based again on my administrative experience, I do not undertake
significant actions in a vacuum with only myself involved, particu-
larly a case like this, as I previously referred to. It was to me a
new administrative experience in a regulatory commission and in
an area of utility regulation, neither of which I had had any direct
experience in before.
I discussed this in general terms with as niany people as I could
within the organization, particularly in regard to changes in organi-
zation or reassignment of personnel. It is possible that in general
PAGENO="0440"
434
terms I discussed moves or individuals with my colleagues on the
Commission.
Mr. WALGREN. In those discussions with Commissioner Smith, to
whose view I know you would give consideration and weight, did
Commissioner Smith at any time indicate that he felt that Mr.
Lewnes should not remain where he was?
Mr. DUNHAM. No. I do not recollect, but, as I said, it is likely
that I did so. I do know that I discussed with Messrs. Smith, Watt,
or Holloman some of the problems in handling the Commission
business
In the Commission meetings, some were referred to recently, state-
ments were made such as: "Why is not an order up? Why was it not
prepared? Why was not an alternative prepared this way instead
of that way?" It was that type of problem. That becomes evident.
I probably discussed situations with Commissioner Smith. I am
~ure he did not say, "Yes, I think that is a good idea" or "No, I
thiiik that is a bad idea," or whatever. That is not the nature of how
I discuss things, if that is your question.
Mr. WALGREN. In your method of approaching this problem,
would Mr. Fee talk directly with Commissioner Smith as regards
the job performance of people like Mr. Lewnes or would you carry
out that function in your conversation with Commissioner Smith?
Mr. DUNHAM. Mr. Fee is the Executive Director of the Commis-
sion. As such, as the General Counsel does, he has responsibilities to
all of the Commissioners.
In regard to whether or not he did or didn't, I don't know, except
that I believe in his testimony he said he did.
Mr. WALGREN. I would like to read into the record at this point
from the transcript of Mr. Fee's testimony designated on page 39 in
which Mr. Fee states at one point that:
I know the most important member of the Commission who was displeased
with Mr. Lewnes was the Chairman.
At one point I believe I had a conversation with Commissioner Smith to the
same effect, and I am vaguely aware that Commissioner Watt had similar
problems.
Mr. Fee goes on to say that:
The impressions that I was given in my conversations with the Chairman
and with Commissioner Smith was that on occasions Mr. Lewnes was given
instructions by the Commission as far as the way certain things should be
drafted, * * *
and so on.
Mr. Fee continued:
My impression is, and the reason I spoke to Commissioner Smith is because
of his additional years on the Commission, that it had been going on for some
time.
The staff has tried to conduct some investigation of its own. I
believe it would be proper to introduce at this point in the record
some memorandum of the staff's considerations with Commissioner
Smith with regard to whether or not and the degree to which he
was displeased with Mr. Lewnes.
Mr. LENT. Would the gentleman yield?
Mr. WALGREN. Yes.
PAGENO="0441"
435
Mr. LENT. I understand there was a similar interview conducted
by the staff with Commissioner Watt, and there is a similar memo-
randum, also dated March 16, 1977.
Perhaps you would agree to put the two in together because they
seem to cover the same testimony.
Mr. Moss. It is up to the member as to whether or not he desires
to put it in on his own time.
Mr. WALOREN. For the purpose of clarity, if we just put in the one,
I am sure the other will fit at some point in the record.
Mr. Moss. Without objection, the item will be included.
[The memorandum referred to follows:]
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, DX]., March 16, 1977.
Memorandum
To: Michael R. Lemov, Chief Counsel.
From: Susan Leal and Ben Smethurst.
Subject: FPC Adverse Personnel Actions.
On 3/15/77, we interviewed FPC Commissioner Smith concerning references
to him by Curtis Fee during his testimony on March 14 relative to the Commis-
sion's efforts to remove George Lewnes from his position as Assistant General
Counsel. Results of this interview are set forth below:
TESTIMONY OF CURTIS FEE
Tr. p. 24.-Fee testified he did not know whether there was a meeting with
Dunham, Watt, Journey and Perdue in January or February 1976 after the
Lewnes and Mamone testimony when the testimony or Chairman Dingell's
letter was discussed.
Concerning those members of the Commission who were displeased with
Lewnes and the reasons therefor, Fee testified as follows:
Tr. p. 39.-"I know the most important member of the Commission who was
displeased with Mr. Lewnes was the Chairman. At one point I believe I had a
conversation with Commissioner Smith to the same effect, and I am vaguely
aware that Commissioner Watt had similar problems."
"The impression that I was given in my conversations with the Chairman
and with Commissioner Smith was that on occasions Mr. Lewnes was given
instructions by the Commission as far as the way certain things should be
drafted, certain things should be done, and he was not complying with those
instructions."
Tr. p. 40.-"My impression is, and the reason I spoke to Commissioner Smith
is because of his additional years on the Commission, that it had been going on
for some time."
Fee also testified that he was aware of the incompatibility and strife between
Lewnes and Journey.
Tr. p. 61.-"My recollection is that at one point I talked with Commissioner
Smith about the problems to see, to corroborate whether there was a problem.
My recollection is that Commissioner Smith saw the same problem."
"Mr. Lent, I am just very certain that the action taken, if you want to u~e
the word `against' Mr. Lewnes, was not linked in any way to the testimony
he gave in front of Congress."
Tr. p. 63.-"I spoke to Commissioner Smith * * * My recollection is that he
corroborated that he was displeased, as was the Chairman, as was Commis-
sioner Watt."
Tr. p. 67.-"I don't remember having a specific conversation with Commis-
sioner Watt."
Tr. p. 78-9.-"I do know of the incompatibility with his superiors." Fee testi-
fied he knew this because of "Specific conversations with the Chairman, specific
conversations with Commissioner Smith, knowledge of the dissatisfaction of
Commissioner Watt, conversations with Mr. Journey."
PAGENO="0442"
436
INTERVIEWS WITH COMMISSIONER SMITH
(1) Smith was initially interviewed about the Lewnes matter on August 19,
1976, by Braun and Smethurst. At that time, he advised as follows:
Shortly after becoming Chairman in November 1975, Dunham discussed with
Smith the administration of the Commission with the view of identifying and
correcting problem areas. Smith mentioned the problem in Lewnes' section
(certificates) pointing out it was the hardest part of the Commission's work.
Smith described certificate work as the storm center of the regulatory process.
Smith's complaint was that Lewnes' section did not "package" the cases
"neatly" but that this was a problem indigenous to the section and that the
problem stemmed from the "nature of the beast" (certificate work). Smith had
voiced similar complaints to former Chairman Nassikas. Smith considered
Lewnes as a friend and his complaints were directed to the nature of the cer-
tificate work, rather than personalities. Smith felt that if Dunham interpreted
his remarks as a dissatisfaction with Lewnes personally, it was probably an
easy transition to make. Smith discussed the problems with certificate work
many times with Lewnes. Under Nassikas, Smith and Lewnes frequently argued
issues at Commission meetings; this type of "free exchange" between staff and
Commission was encouraged by Nassikas. Under Dunham, the composite per-
sonality of the Commission changed-the current Commission does not like the
Lewnes approach.
Smith considered Lewnes qualified to remain where he was. He knows of no
connection between Lewnes' Hill appearances and the effort to remove him as
Assistant General Counsel. To his knowledge, no one ever got together and
said, in effect, "let's remove Lewnes from the Commission." Smith never
participated in any meetings to consider options regarding Lewnes. When Smith
heard of Lewnes' interest in becoming an AU, he talked with Lewnes several
times to determine whether Lewnes wanted to move and Lewnes said lie did.
Smith anticipated that the Subcommittee would be interested in Lewnes' treat-
ment and for this reason probed deeply with Lewnes whether he really wanted
to be an AU. Smith did not pursue the question of whether Lewnes was being
forced out for the wrong reason because Lewnes sought the AUJ position; in
other words, even if it was for the wrong reasons, the ending was something
Lewnes wanted. Smith furnished the chief AU an unqualified written rec-
ommendation supporting Lewnes for the position (copy attached).
(2) On March 15, 1977, Smith was reinterviewed and reviewed Fee's testi-
mony with regard to the references to him (Smith). He stated that while Fee
did discuss Lewnes with him on one occasion sometime shortly before Lewnes
became an AU, he did not recall saying anything to Fee to indicate that he
was dissatisfied with Lewnes because of any noncompliance with drafting in-
structions. He reiterated to us that Lewnes is a friend and that his criticism,
both to Dunham and Fee, centered around the packaging problems indigenous
to Lewnes' section. Smith believes the basis for Fee's testimony may have been
instances where an order was evolving over a period of several weeks and
Lewnes' section would have to make a 1800 turn in the position they were
advocating, based on a request by the Commission. He said that it was under-
standable why Lewnes' section would be unhappy with such a situation.
Smith stated that there were basically three periods which the Commission
underwent after Dunham became Chairman and Fee was first employed. First,
the carry-over from Nassikas wherein discussion and argument by staff was
acceptable at Commission meetings. Second, the transition from the Nassikas
way to the proposed "sunshine" Commission meetings in which Dunham's pro-
clivity to have staff resolve any differences before presenting a matter to the
Commission was initiated. Third, imp~ementatiOfl of the open Commission meet-
ing, wherein staff presents a unified position, with the option maintained for
any staff member to voice dissent if be so chooses.
Smith further advised that he did not recall giving any indication to Fee of
a longstanding problem with Lewnes. Nor could be recall any instances where,
without good reason, Lewnes failed to complete his assignments on time. He
said, "If Dunham ever thought that I wanted Lewnes fired, his impression is
wrong."
Mr. WALGREN. This is a memorandum from Susan Leal and Ben
Smethurst to the chief counsel of the subcommittee.
Mr. Moss. We have sworn Mr. Smethurst. We should swear Susan
Leal on this memorandum as well.
PAGENO="0443"
437
Do you solemnly swear that the testimony you are about to give
this subcommittee will be the truth, the whole truth, and nothing
but the truth, so help you God?
Ms. LEAL. I do.
Mr. Moss. Will you identify yourself to the reporter for the
record?
Ms. LEAL. I am Susan Leal. I am counsel for the Subcommittee
on Oversight and Investigations.
Mr. Moss. Ms. Leal and Mr. Sme.thurst, we have a memorandum
dated March 16, 1977, to Michael R.. Lemov, chief counsel, subject:
"FPC Adverse Personnel Actions."
Was this prepared by the two of you?
Ms. LEAL. Yes, sir.
Mr. SMETHURST. Yes, sir.
Mr. Moss. Does it represent the interviews in which you partici-
pated with the named Commissioner?
Ms. LEAL. Yes, sir.
Mr. SMETHnRST. Yes, sir.
Mr. Moss. Thank you.
Mr. WALGREN. From the memorandum, Commissioner Smith's ver-
sion of these affairs is that:
Shortly after becoming Chairman in November 1975, Dunham discussed with
Smith the administration of the Commission with the view of identifying and
correcting problem areas. Smith mentioned the problem in Lewnes' section,
certificates, pointing out it was the hardest part of the Commission's work.
Smith described certificate work as the storm center of the regulatory process.
Smith's complaint was that Lewnes' section did not "package" the cases
"neatly" but that this was a problem indigenous to the section and that the
problem stemmed from the "nature of the beast," certificate work.
Smith had voiced similar complaints to former Chairman Nassikas. Smith
considered Lewnes as a friend and his complaints were directed to the nature
of the certificate work, rather than personalities. Smith felt that if Dunham
interpreted his remarks as a dissatisfaction with Lewnes personally, it was
probably an easy transition to make.
Smith discussed the problems with certificate work many times with Lewnes.
Under Nassikas, Smith and Lewnes frequently argued issues at Commission
meetings; this type of "free exchange" between staff and Commission was en-
couraged by Nassikas. Under Dunham, the composite personality of the Com-
mission changed-the current Commission does not like the Lewnes approach.
Smith considered Lewnes qualified to remain where he was.
Then the memo says that Commissioner Smith did not recall say-
ing anything to Mr. Fee to indicate that he was dissatisfied with
Lewnes because of any noncompliance with drafting instructions.
Going further:
Smith further advised that he did not recall giving any indication to Fee of
a longstanding problem with Lewnes. Nor could he recall any instances where,
without good reason, Lewnes failed to complete his assignments on time. He
said, "If Dunham ever thought that I wanted Lewnes fired, his impression is
wrong."
In support of that view Mr. Lewnes' work with the Commission,
Commissioner Smith wrote a recommendation for Mr. Lewnes in
his application to become an administrative law judge, which I be-
lieve would be proper to incorporate in the record at this point.
Mr. Moss. Without objection, the item will be incorporated in the
record at this point.
[The memorandum referred to follows:]
PAGENO="0444"
438
MARCH 29, 1976.
Memorandum
To: Chief Judge Zwerdling.
From: Commissioner Smith.
Subject: George P. Lewnes.
I understand that George P. Lewnes has renewed his application to become
an FPC Administrative Law Judge.
Please allow me to give you my unqualified recommendation that he be given
favorable consideration for the post. I think his FPC experience and his personal
qualifications would make him an extremely valuable addition to the dis-
tinguished group of Administrative Law Juc~ges you have assembled.
Mr. WALdEN. It reads:
Please allow me to give you my unqualified recommendation that Mr. Lewnes
be given favorable consideration for the post. I think his FPC experience and
his personal qualifications would make him an extremely valuable addition to
the group of distinguished Administrative Law Judges you have now assembled.
As a third part of whatever I contribute to this hearing, I would
like to address a sort of exploratory question to Mr. Journey.
Mr. Journey, I understand that it was certainly under your re-
sponsibility or supervision that counsel was r~placed on the HIOS
matter and Mr. Keeley became involved in the case, and that par-
ticular part of the case involving the substitution of fee regulation
as opposed to contract guarantees.
Mr. JOURNEY. The answer is yes.
Mr. WALGREN. Did you know at that time that Mr. Keeley was
the brother-in-law of one of the partners in the law firm which was
representing the company which was on the other side of this matter?
Mr. JOURNEY. Our Pat Keeley?
Mr. WALGREN. Yes.
Mr. JOURNEY. Yes, I knew his sister was married to a man who
worked in the law firm here in town.
Mr. WALGREN. Have you had similar cases where lawyers who
argued on behalf of the FPC have been family to or related to
lawyers on the other side or people who they were known to be
closely associated with?
Mr. JOURNEY. Honestly, Mr. Walgren, I don't know because I
never asked that question. I only found out by happenstance that
he was related through marriage.
Mr. WALGREN. But you knew at the time you assigned him to the
case?
Mr. JOURNEY. Yes.
Mr. Moss. Mr. Walgren, would you yield?
Mr. WALGREN. Yes.
Mr. Moss. Would you briefly outline the circumstances of the
happenstance?
Mr. JOURNEY. Mr. Keeley came in when he was going to be hired
at the FPC and said that he had a brother-in-law in town, Mr. Har-
rington. That is as much as I know.
I don't believe I have ever asked any lawyer what their marriage.
relationship was to anyone. I never asked.
Mr. WALOREN. When you assigned Mr. Keeley to this position,
did it enter your mind that that might be something that you should
have some reservations about?
PAGENO="0445"
439
Mr. JOURNEY. Not really. I have two reasons. One, his brother-in-
law was not on the case. The law firm was but not the brother-in-
law. He did not enter an appearance in the case and did not represent
them.
Two, under the FPC rules, 18 Code of Federal Regulations 3.205,
you will find the closest thing we have to this, Mr. Walgren. It is
a concept that if there are obvious family relationships between an
employee and someone on the outside, and it is clear that it is that
kind of a tie which brings them together, that is not the kind of
thing that would cause the Commission to be overly concerned in
terms of sharing of meals, gifts, and-
Mr. WALGREN. At the time you assigned him there was certainly
a possibility that his brother-in-law would enter an appearance on
the other side?
Mr. JOURNEY. Yes.
Mr. WALGREN. There was that possibility?
Mr. JOURNEY. Yes.
Mr. WALGREN. And you knew at that time that the brother-in-
law was a partner in the law firm and not just an associate?
Mr. JOURNEY. I did not and do not now know that the brother-in-
law is a partner. I just don't know.
Mr. WALGREN. In looking back on that kind of a relationship, do
you feel, in view of the public need to have confidence in the total
independence and impartiality of the people representing their in-
terest, do you feel that that kind of relationship should be avoided?
Mr. JOURNEY. In the context of those facts, Mr. Walgren, I saw
nothing wrong, nor in retrospect do I see anything wrong.
Mr. WALGREN. I am not asking you whether you saw something
wrong. This is my problem because I have been amazed at the in-
tensity of the reaction in people to believe that there is a real coin-
bining of interests in the natural gas shortage and to the detriment
or. profit of national gas special interests.
As such, I believe that we draw lines such as this at our peril.
What I am asking is not whether you see anything wrong with it
but do you think it is advisable to have people in that relationship
involved in that kind of a case? I do not mean to attack in any way,
but if anything comes out of these hearings, it can be only a point.ing
out in context of this sort of thing, the ways in which the Govern-
ment has dealt with this already in the hopes that the future would
be better than the past.
I would like to call the attention of the record to the Executive
Order No. 11222 which deals with certain financial relationships be-
tween Government employees and outside interests to prohibit that,
Section 201(c) of Title 18 of the United States Code.
This section states:
It is the intent of this section that employees avoid any action which would
create the appearance of losing complete independence or impartiality of action,
or any action which would create the appearance of affecting adversely the
confidence of the public in the integrity of the Government.
I am afraid that is what has happened here.
Mr. JOURNEY. Mr. Walgren, that standard is in Section 3.205 of
Title 18, Code of Federal Regulations.
PAGENO="0446"
440
When I referred to it, I want the record clear, our rules do not
specifically cover a situation like this. When they speak to questions
of family, they speak to blood relatives and residence in households.
If there is a problem in situations like this, it might be one in
which the Ethics Committee and the Bar should take a look.
Mr. Moss. Or this committee.
Mr. WTALGREN. Or this committee.
Mr. DUNHAM. That is right.
Mr. WALGEEN. Or as someone who is immersed more iii the obli-
gation to being in contact with the public than yourself inasmuch
as I have to go and stand up before community meetings and people
who have nothing to do with the Government whatsoever.
I do not mean this in order to say you have transgressed legal
principles involved here, but I really think it advisable that we take
every step to make sure that this kind of thing, and any appearance
or inference that can be drawn from it, never occurs in a situation
where the result of it can be seen as leading to the denial of heat
in schools and laying off of employees and the like.
Thank you very much.
Mr. Moss. The time of the gentleman has expired.
The Chair recognizes the gentleman from Nevada, Mr. Santini.
Mr. SANTINI. Thank you, Mr. Chairman.
I realize some of the highlights, issues, and concerns of this sub-
committee and the FPC have been examined in the prior ques-
tioning. I shall try to confine myself to somewhat more esoteric
realms and address myself to some general concerns.
First of all, what was Mr. Lewnes' job and how long did he
hold it?
Mr. JOURNEY. Mr. Lewnes was assistant litigation counsel. He
started duty-
Mr. SANTINI. For which aspect?
Mr. JOURNEY. It was then pipeline certificates, curtailments, and
permanent producer certificates.
According to my records, Mr. Santini, George started on duty on
March 8, 1959 as a OS-li.
He was promoted to an Assistant General Counsel-I am sorry. I
cannot tell from these notes.
I see it now.
Mr. SANTINI. There is a waving finger in the background that
might provide you some guidance.
Mr. JOURNEY. May 31, 1970, he was promoted to assistant general
counsel.
Mr. SANTINI. And his area of subject specialty?
Mr. JOURNEY. Pipeline certificates.
Mr. SANTINI. And continued in the curtailment area?
Mr. JOURNEY. Yes.
Mr. SANTINI. How about Mr. Jack Lotis?
Mr. JOURNEY. Mr. Lotis started as a public utility economist, my
records show, on June 5, 1963. He became Assistant General Counsel
on June 24, 1973, according to my records.
Mr. SANTINI. And he remained there until his voluntary retire-
ment-
Mr. JOURNEY. He is still there.
PAGENO="0447"
441
Mr. SANTINL How long did he remain on that job description?
Mr. JOURNEY. He was doing gas pipeline rate work and he was
doing some part of the interstate electric rate work. It takes a
sentence to clarify that.
May I just add a sentence?
Mr. SANTINI. All right. How long did he continue in those two
capacities?
Mr. JOURNEY. Until October 8, 1976, he was performing work on
pipeline rates and in the interstate electric area, exclusive of the
interconnection cases.
Mr. SANTINI. The specific date in October escapes me, but the
October transition point where this internal reorganization was
effected-
Mr. JOURNEY. Yes.
Mr. SANTINI. [continuing] He was transferred to what responsi-
bility?
Mr. JOURNEY. He was assigned by me to work on litigation on
what I considered to be an area where we needed some real help,
curtailments, and compensation. We had been losing cases consist-
ently. I asked him to undertake that work. He is now working on a
petition in the Supreme Court.
Mr. SANTINI. You did not need any real help, to use your expres-
sion, in the two areas in which he had previously been serving?
Mr. JOURNEY. Needed help, Mr. Sant.ini-this is the sentence I
was going to put in before.
The workload was transferred, parts II and III work under the
Power Act came in in a unit. That came in in what we call the
interstate electric part of the Power Act. Part I is the other part.
We took the pipeline rates and transferred that to pipeline certifi-
cates. Therefore., it was a question of moving and functionally re-
assigning resource development work with economic regulations
along the two industry lines, gas and electric. That is what we did.
Mr. SANTINI. If you were to characterize the general purpose or
objective for theh October 1976 internal transformation, in 27 words
or less, how would you describe or characterize the purpose or ob-
jective for this change? You have done it in lengthier terms before.
Mr. JOURNEY. Not facetiously, sir, it was a functional realine-
ment of work, resource development work with economic regulation,
grouping pipeline rates and pipeline certificates, interstate service
and interstate rates of electric companies, producer rates and pro-
ducer certificates.
Mr. SANTINI. If you take issue, please express it-but it was to
improve the internal administrative efficiency?
Mr. JOURNEY. That is what we were trying to do in regrouping
the work. That was one of the things, yes.
Mr. SANTINI. In an aspect of the realm of Mr. Jack Lotis' respon-
sibility, interstate rates, what had been the internal procedures deal-
ing with the problem of refunds before October 1976?
Mr. JOURNEY. I am not sure I grasp your question, sir.
Mr. SANTINI. Assuming the Commission determined a refund was
owed, what had been the implementing procedure to make sure that
the refund was paid prior to October 1976?
PAGENO="0448"
442
Mr. JOURNEY. Commission order.
Mr. SANTINI. What were the mechanisms, the internal mechanisms
in place, to be sure that the Commission order, or whatever other
device, was followed through with once it was determined that a
refund was owed?
Mr. JOURNEY. A not completely satisfactory policing mechanism
in the Secretary's office and in the Bureau of Power, whereby com-
panies would report that they had completed a refund, and then the
rate schedule would be filed. This has not worked as well as it should
have, and in a recent case I recommended the Commission bring an
enforcement action against a company which had failed to make
a refund.
The Commission chose to take it in the court of appeals rather
than in the district court. It was basically Bureau of Power.
Mr. SANTINI. Had it worked well before?
Mr. JoURNEY. It worked well-
Mr. SANTINI. Before October 1976?
Mr. JOURNEY. I can't say that it has really worked well at any
time because engineers and accountants would have to check and
be sure that refunds in fact were paid.
In many instances they were forthcoming, but I do recall during
the 1960's, when we were trying the jusisdiction cases, it did not work
very well. We do have problems.
Mr. SANTINI. Yes, and I would like to specify one of those problem
cases that I am sure you are aware of. Thisparticular case happened
to be a factual circumstance which occurred simultaneously to the
reorganization for efficiency purposes.
The FPC issued opinion No. 768. Since you have memorized all
the opinion numbers, I am sure you will be right with me.
On July 1, 1976, the effect of the FPC decision was to order
Nevada Power to refund approximately $162,000 to CalPac which,
in turn, would have gone back to the utility users.
In September 1976, as you suggested, part of the procedure,
Nevada Power submitted its amended rate schedule.
In December, December 13, the FPC approved Nevada Power's
amended rate schedules. Refunds with interest were therefore re-
quired to be made to CalPac and the utility owners of Henderson,
Nev., by January 12, 1977.
By way of particular highlight, on February 24, a disgruntled
utility customer, Bret Mathewson from Henderson, Nev., came to
Washington, D.C., visited with a sympathetic litigation counsel, and
he said: "Hey, I haven't seen any refund."
The litigation counsel, and I don't mean this facetiously, was most
responsive. He said: "I didn't realize that," and he endeavored to
rectify it; February 24, 1977.
March 1, 1977, approximately 1 week later, the FPC staff prepared
an enforcement paper to the district court.
March 2, approximately 2 months after the brief, the Federal
Power Commission met to consider the course of action, the district
court enforcement action against Nevada Power. Three of the four
Commissioners were present. I believe you had a vacancy.
PAGENO="0449"
443
Counsel recommended approval of the district court action. You
had a majority of the Commission present, and therefore you could
conduct business.
I am advised that the FPC's General Counsel, the Solicitor, and
the Assistant General Counsel recommended approval of the dis-
trict court's action. Commissioner Watt objected.
Then March 3, some 3 months after the stay should have been
applied for, Nevada Power goes in, makes application for stay, and
totally frustrates, in my judgment, the refund proceedings which
have been previously ordered.
There is a 2-month hiatus of action of one kind or another which
seems to involve several administrative culprits.
I would appreciate any thoughts or suggestions you have by way
of explanation.
Why the devil, on January 13, in our instance when the Nevada
utility owners were entitled a rebate of $162,000, they had to wait
2 months, go through almost 2 months of nonaction, and then arrive
at a point where we are stymied or stalemated again simply because
a stay order which, if it had merit, should have been applied for in
December 1976, and was applied for in March 1977?
Mr. JOURNEY. There is a simple answer. It is not satisfactory from
your standpoint or the standpoint of the utilities, but what happened
was that the Commission order, opinion 768, has an error in it. It
did not have a refund reporting requirement.
I don't know how it happened. It was drafted up in the Office of
the Special Assistants. As I understand it, it did not have a require-
ment in, so the clock tolling mechanism didn't operate.
I have not checked the order personally but I have been advised
that that was what was wrong with it.
I know Bret Mathewson and he was concerned, and he should be.
Mr. SANTINI. And did participate in the same forum.
Having been an Italian who survived March 17, this, in our pursuit
of the issue, is the first time that I have heard that there was a re-
fund recording error as an explanation for the, at best, administra-
tive dereliction of 2 months.
You are stating that the opinion 767 in July 1976 did not contain a
direction to make refund?
Mr. JOURNEY. It did not have the triggering policing mechanism
on the reporting of the refund, as I understand it.
I discussed this at a Commission meeting with Jack Weiss and that
is what he advised the Commission. He is the Acting Chief of the
Bureau of Power.
I will go back and doublecheck it, Mr. Santini, but that is what
I was told.
Mr. SANTINI. Mr. Journey, you will have to enlighten me. You
do not have a triggering notice mechanism?
Mr. JOURNEY. Did not have a mechanism there for filing of a-
I don't want to say discharge of the refund obligation-but filing of
the obligation that refunds had been made. Therefore, no one in the
Bureau of Power, who normally would do the policing mechanism,
knew of the lack of refund, the button was not pushed and they
didn't respond. That is the way it was told to me.
87-292 0 - 77 - 29
PAGENO="0450"
444
Mr. SANTINI. In December, Nevada was ordered to make $162,000
of refund. Is that correct?
Mr. JOURNEY. They were told to make the refund. I believe it is
in that December order. I don't have the opinion before me, but I
think it is that opinion with regard to rehearing where the things
were omitted.
Mr. SANTIXI. Was it in the December order that the trigger
mechanism was left out or in the July opinion that it was left out?
Mr. ,JOURNEY. Mr. Goldstein handed me opinion 768. He said it
was left out of the first one, July 7, 1976.
May I provide an answer for the record on this?
Mr. Moss. Would you desire to reserve the record at this point to
get the answer?
Mr. SANTINI. I so move, Mr. Chairman.
Mr. Moss. Without objection, the record will be held open at this
point to receive the answer.
Would you expedite that to the committee?
[The following memoranda were received for the record:]
M~uicn 28, 1977.
MEMORANDUM
To: Drexel D. Journey, General Counsel.
From: Daniel Goldstein, Assistant Litigation Counsel.
Subject: Question relating to Nevada Power's refund reporting obligation in
E-8721 posed by Congressman Santini at Moss Subcommittee hearing on
March 18 (Pr. 120-122).
The opinions in Nevada Power Co., Docket No. E-8721 (Opinions 768 and
768-A) were drafted in the Office of Special Assistants.
Opinion No. 768 had 2 deadlines specified. Ordering paragraph (C) required
the filing of new rate schedules within 60 days and ordering paragraph (D)
required the making of refunds within 30 days of Commission approval of the
substitute tariff sheets. The approval of the substitute tariff sheets was given
by Secretary's letter of December 13, 1976. The deadline for refunds was
thereby set at January 12, 1977.
The pertinent ordering paragraph (D) in Opinion No. 768 read as follows:
"(D) Within 30 days of the Commission's approval of Applicant's substitute
tariff sheets in accordance with Paragraph (C) above, Applicant shall refund
to its customers for the period beginning on November 1, 1974 and ending on
May 19, 1975, all amounts, if any, collected in excess of those which would
have been payable under the rates and charges approved in accordance with
(C) above together with interest at a rate of seven per cent per annum for the
period from November 1, 1974, through November 9, 1974, through May 19,
1975, from the date of payment to Applicant to the date of refund."
The paragraph was badly drafted and did not include language directing the
company to report on refunds such as the language which appeared in ordering
paragraph (0) of Public Service Company of Oklahoma, Opinion No. 788,
Docket No. E-8242. For clarity I have understood the words in Opinion No. 788
which were omitted in Opinion No. 768:
"(C') Within 30 days of the Commission's approval of Applicant's substitute
tariff sheets filed pursuant to Paragraph (B) above, Applicant shafl report to
the Commission refunds made to its customers for the period beginning on
January 1, 1974, when these proposed rates became effective, and ending October
10, 1914, with interest at seven percent per annum from the date of payment
to October 10, 1974, and the period beginning October 10, 1974, with interest
at 9 percent per annum from the date of payment to date of refund, in accord-
ance with the Commission's Rules and Regulations. A copy of the refund report
shall also be sent to the State Commission."
I suggest that OSA review all orders drafted in the last 2 years to compile
a list of any other rate opinions which did not include the refund reporting
language. Such a list should then be turned over by OSA to the Secretary for
policing.
PAGENO="0451"
445
MARCH 29, 1977.
MEMORANDUM
To: Kenneth E. Richardson. Kenneth R. Plumb, Gordon Grant, Frank Gilmore,
Jack L. Weiss, and S. William Yost.
From: General Counsel.
Subject: Memorandum dated March 28, 1977, from Daniel Goldstein.
By memorandum dated March 28, 1977 Assistant Litigation Counsel, Daniel
Goldstein, made recommendations covering, a refund reporting point disclosed
in recent hearings before the House Subcommittee on Oversight and Investiga-
tions. Mr. Goldstein suggests that all more recent FPC orders be reviewed to
ascertain whether similar omissions may be present in other cases and that if
language has been omitted from Commission orders that appropriate correc-
tions be undertaken. I agree that the review should be made. I believe that it
should cover all orders whether drafted in OSA or OGO.
By copy of this memorandum, I am requesting Messrs. Goldstein, Grant and
Gilmore each to assign an appropriate person in OGO to work with your two
offices to ensure that the review is completed promptly.
DREXEL D. JOURNEY.
Mr. SANTINI. I would hope Mr. Goldstein is shortly due for either
promotion or advancement because I will acknowledge, while I am
probing certain administrative deficiencies, that he, if not one of
them, did a hell of a responsive job at a time of important communi-
cation for our office.
Mr. JOURNEY. He located a lot of this.
Mr. SANTINI. As of January 13, 1977, the Nevada Power Co. was
in defiance of a specific order from FPC. Is that correct, Mr.
Journey?
Mr. JOURNEY. I believe they were. I so advised the Commission.
I recommended we go into a district court and get an injunction.
Mr. SANTINI. The problem is, as you can perceive, in terms of a
modest community of less than affluent circumstances in the periphery
of Las Vegas, Nev.-everyone assumes silver dollars are roiling in
the streets, but unfortunately, it is a place where we have the lowest
employment rates in the Nation. You have a depressed community,
economically teetering, which for almost 2 years was wrongfully
denied $162,000 which was theirs. You will never infuse that back
into the community in realistic terms. Many of the rebates never
will be made.
Their feeling is total community exasperation with this case and
also another pending case. They have been done wrong once, done
wrong twice, done wrong three times, and it is compounded each
successive time. They try to cope with the administrative morass
which exists within the existing procedural structure.
Would you concede that is a fair generalization of the frustrations
of at least one community?
Mr. JOURNEY. I know that to be true because, as you know, I testi-
fied there and I could see it. It is heartfelt and I sympathize with
it. I tried to do something.
Mr. SANTINI. What, in terms of the future, are we specifically
going to do to rectify that situation for all communities similarly
situated in the United States?
Mr. JOURNEY. We will have to find a way of enforcing these things
quickly and rapidly by mechanisms which we do not now have in
place.
PAGENO="0452"
446
I concede, Mr. Santini, that we have been working with some
pretty old machinery in the enforcement process. It has to be
changed.
Mr. SANTINI. Are you then inviting legislative solutions for spe-
cific procedural amendments which will make this system respond
more honestly and more expeditiously to the equities, legalities, and
facts of the situation with which you are contending?
Mr. JOURNEY. I am looking at that now, yes, sir. I agree with
you. I think this needs help and I think it needs legislative help.
Mr. SANTINI. What specific legislative help would you recommend?
Mr. JOURNEY. I think that what is needed is some of the ability to
get judicial enforcement, orders, without going through long appeals
on the merits. If we could cut through judicial review procedures the
way the Emergency Natural Gas Act amendments judicial review
procedures were put together, it would help. I think we can do
a lot in terms of cutting out the opportunity for staying Commis-
sion actions. We can get right to the heart of the business.
Mr. SANTINI. Would you support a procedural modification which
eliminated the so-called stacking of one rate application after another
so that in re~litv the utility user never catches un with what is de-
termined by the Commission to be an excessive utility rate?
Mr. JOURNEY. There you have me over the Las Vegas barrel, Mr.
Santini, because I responded to that in the committee records in
volume VI in Las Vegas and I said I thought it was a balancing
judgment. Do you want to shift regulatory lag to the utility or do
you want to shift it to the customer?
I think that if you had an expeditious way of resolving rate
proceedings through using statistical methods in ADP processing,
the way the Power Commission is trying to work, we would finesse
the pancake problem by being able to do almost iqstant ratemaking.
I think therein lies the remedy.
Pancaking is the result of an illness. It is like scar tissue. You have
to get down and cut out what is involved, and part of what is in-
volved is lengthy trial procedures which we have gone through in
the administrative mechanisms. That is in substance what I said in
Las Vegas.
Mr. SANTINI. It is. Is there any other specific recommendation you
would make with regard to amending the existing procedural ap-
paratus for administrative consideration of these issues?
Mr. JOURNEY. I think I would like to see greater use of the APA,
section 4 procedures. I would be pleased to work with you or any
Member of the Congress in making suggestions.
Mr. SANTINI. We are both visited in terms of whisper and in terms
of distinguished physical presence by the chairman of the subcom-
mittee who is addressing these very specific issues right now.
Mr. Chairman, if there is any inquiry that you feel is appropriate
in terms of our visiting committee chairman in this regard, what
specific remedies we will get in place to take care of the existing
problem, I would yield for that kind of inquiry.
Mr. Moss. Some of the proposals have been set forth in the com-
mittee's report of the 94th Congress. Others will inevitably flow
from the inquiry now in progress, both in this committee and in the
PAGENO="0453"
447
subcommittee chaired by my very good friend and distinguished
colleague, John Dingell, of Michigan.
If the gentleman would yield to the gentleman from Michigan, I
would appreciate it.
Mr. SANTINI. I would be happy to, Mr. Chairman.
Mr. IDINGELL. I thank my beloved friend, the gentleman from Cal-
ifornia. I also thank my good friend from Nevada for his kindness.
We in the subcommittee are much concerned with this problem
of pancaking. We will shortly get legislation to come forward to
address the question.
I will see to it that a copy of that legislation is made available to
the gentleman while it is still in the draft stage, so he can give me
his comments.
Last year, the gentleman from California joined me in sponsorship
of matters relating to those matters. This year we intend to gO
forward forcefully on those matters within the subcommittee.
Mr. SANTINI. I am very much encouraged to hear that, Mr. Chair-
man. My people in Henderson continue to stagger over exorbitant
utility rates so we will optimistically look forward to the salutory
benefits of your legislative product.
Mr. DINGELL. Were the Commission to forcefully address these
matters, we would not be here discussing this question of pancaking.
Indeed, we might not be here discussing other matters, for which
I commend the chairman of the subcommittee.
I would like to ask his courtesy and the patience of my colleagues
to direct questions when the chairman and other members of the
subcommittee deem it appropriate.
Mr. Moss. The Chair will recognize the gentleman from Michigan,
Mr. Dingell.
Mr. DTNGEIJ~. Thank you, Mr. Chairman.
I would like to begin by saying that I commend you and the sub-
committee for going into these questions. The business of having
witnesses before congressional committees to face retribution by
executive or other agencies after their testimony before congressional
committees is a matter of great concern to me.
I would like to express to you, Chairman Dunham, and to Mr.
Journey my great displeasure at your apparent behavior down at
the Federal Power Commission.
I would like to indicate to you, Mr. Chairman, my very strong
feelings in this matter and my full determination to see that the
apparent abuses are explored to their ultimate end and laid bare, and
to make it very plain that I propose to work closely with you, Mr.
Chairman (referring to Mr. Moss), and to follow these matters to
their necessary conclusion and see to it that whatever remedies need
be applied by our two subcommittees, working in close cooperation
to redress any wrongs done, are accomplished at the earliest moment.
Chairman Dunham, I sent you a letter on January 20, 1976, with
which I believe you are familiar.
* Mr. DUNHAM. Yes, sir.
Mr. DINGELL. I understand it is now in the records of this sub-
committee.
You are familiar with Mr. George Lewnes?
PAGENO="0454"
448
Mr. DUNHAM. Yes, sir.
Mr. DINGELL. With Mr. Robert Aber?
Mr. DUNHAM. No.
Mr. DINGELL. Trial a~ttorney, Office of the General Counsel?
Mr. DUNHAM. I am not familiar with Mr. Aber.
Mr. DINGELL. Mr. Russell B. Mamone?
Mr. DUNHAM. I know who he is, yes.
Mr. DINGELL. As of the date of that letter, what were their duties
at the Federal Power Commission?
Mr. DUNHAM. In regard to Mr. Lewnes, he was on January 20-
what was the date?
Mr. JOURNEY. Assistant General Counsel.
Mr. I)UNHA~r. Assistant General Counsel.
Mr. DINGELL. You are referring to Mr. Lewnes?
Mr. DUNHAM. Yes.
Mr. DINGELL. Mr. Aber was trial attorney in the Office of General
Counsel?
Mr. DUNHAM. Yes.
Mr. DINGELL. Mr. Mamone was the trial attorney in the Office
of the General Counsel?
Mr. DUNHAM. Yes.
Mr. DINGELL. Have their positions changed since that date?
Mr. DUNHAM. Their assignments have changed since that date.
In the case of George Lewnes, his title has changed.
Mr. DINGELL. What is his title now?
Mr. DUNHAM. Administrative Law Judge, Federal Power Com-
mission.
Mr. DINGELL. Mr. Aber, what is his title?
Mr. DUNHAM. He has resigned. He is in the private sector.
Mr. DINGELL. Why did he resign?
Mr. DUNHAM. I don't know.
Mr. JOURNEY. I don't have his exit interview.
Mr. DINGELL. Did he resign in writing?
Mr. JOURNEY. Yes, he did. There is an exit interview but I don't
have it with me.
Mr. Moss. The record will be held open that that be supplied for
the record.
[The following exit interview and letter of resignation was re-
ceived for the record:]
PAGENO="0455"
449
FEDERAL POWER COMMISSION
WASHINGTON, D.C. 20426
MAR 2 11977
Mr. Steven F. Sims
Special Assistant
Subcommittee on Oversight
and Investigations
Committee on Interstate
and Foreign Commerce
House of Representatives
Washington, D.C. 20515
Dear Mr. Sims:
During the questioning on March 18, 1977, the question
was asked as to the exact dates that Messrs. Aber, Lewnes,
Lotis and Mamone underwent a change in status. Mr. Aber
resigned October 15, 1976 to accept a position with the
National Association of Securities Dealers, Inc. Mr. Lewnes
was appointed an Administrative Law Judge on April 4, 1976.
Messrs. Lotis and Mamone assumed their present assignments
as of the date of Mr. Journey's workload redistribution
memorandum (October 8, 1976).
Enclosed herewith is a copy of Mr. Aber's, exit interview
which was also requested during the hearing.
If I can be of any further assistance to you in this
matter, please let me know.
Sincerely,
~ ~ ~
(7ohn R. Griffin III
Administrative Officer
Office of the General Counsel
Enclosure
PAGENO="0456"
Iwit,st,d byasopo-ossor th. for. to tb. Off,c. of Personnel ProRroes.
by is sployse of hi,
with FPC. 3 The lot eroi,wer in Rh. Offic, of P.rsonn,l Progress
cosplete Port A md foroard will cosplete Port 0.
TITLE GRADE, STEP
Trial Attorney (Pub.Util) GS-1311
a.ER5II~F~~4~ICE DATE OF SEPARATION TYPE SEPARATION
Counsel Fed.ILF~CL 10/15/76. Resignation
IF NOT IMMEDIATE SUPERVISOR EXPLAIN DURATION
RELATIONSHIP
Litigation Counsel
for Seooing, eeployes attitude, value, teseral coeosots.°
RECOMMEND FOR REERPLONT T -
~OTO~U~ flia
1/YPLOTEE'S ~ ,~ )faoing, evaluation of dutiec and position, wupsrvis ion, troining, focilities, will-
i&Rhnsos~.4P sooth~rcapacity, and Osoeral cocoents or sugyestiono.'
Employee is leaving to accept position with private industry. Position held was
very interesting and challenging. Supervision was excellent. No comment on facilities.
Would be willing to return to FF0
450
t~ruao ~COIARIAN REPORT OF FINAL.INTERVIEW I
EMPLOYEE OAT HAS NOT tEEN ADVISES OP REINSTATEMENT RIGHTS, CONTINUATION OF OENEFITS, ETC.
NERO/TITLE OF INTERVIEWER 1 INITIAL DATE
Lavon Watson, Personnel Staffing Specialisl 1W 10-18-76
renes-on side if odditsonal spec. is needed.
FF0 Fore 122 (7-53)
PAGENO="0457"
451
Saptuober 3U,1976
Drexel D. Journey -
General Counsel
P'~dara1 Power Cozais~ion
~25 North Capitol 5tx~et
washington, D.C, 20426
Dear i-.r. ~fourney:
This letter concerns termination of ny amuloynent with
the Certificate Section of the Pederal Power Co~iissjon,
effective October 15, 1~76 It is with a personal sense of
regret that this step is being taken, especially in view of
the past challenges presented, leadershin displayed and
satisfaction derived frost protection of the public interest
during sty tenure in this section. The~e challenges have
abated, however, with the emerging emphasis on settlestenta
and adjudication by means of tiLe statutory hearing process.
In view of the foregoing, I have chosen to pursue my interest
in regulatory practice through a shift in orientation frost
oversight of the Oil and gas industry to that of the cunitie~
industry.
I trust that the notice povidad herein will prove
surSicient to assure a sr~otn z-ransition in the runctions
for which I era currently responsible. As you are aware, ny
duties include sole responsibility for liticatiorr in the
Transco investigation. As I feel both a strong professional
and personal responsibility for the substantive resolution
of this matter, you can rely on rry continuing gratis ~-ost-
termination assistance to my successor.
Very truly yours,
Robert ~. Aher
Trial Attorney
C3~ Gordon Grant, ~cting~ Assistant Conerel Counsel
(iffice of Personnel Programs
PAGENO="0458"
452
Mr. DINGELL. I assume the letter is also in the record?
Mr. Moss. It is in the record.
Mr. DINGELL. What about Mr. Mamone? What is his current
position in your agency?
Mr. JOURNEY. Mr. Mamone is finishing up his work in the Certifi-
cate Section. He has been assigned two of the large hydroelectric
cases that we have, one in the relicensing area in the West, the Pacific
Northwest, and another one, an extremely important hydroelectric
case, water use case, in the South.
He is a QS-45 as he was before.
Mr. DINGELL. He is doing hydroelectric utility work.
Mr. JOURNEY. Hydroelectric versus certification.
Mr. DINGELL. He was previously working on natural gas?
Mr. JOURNEY. He was doing natural gas certification work.
Mr. DINGELL. Had he ever had any work in that natural gas
certification area prior to the time of his transfer?
Mr. JOURNEY. I think you misspoke. You meant hydro.
Mr. DINGELL. He was in natural gas.
Mi~. JOURNEY. Yes.
Mr. DINGELL. Had he ever done hydro work prior to the time
he was transferred?
Mr. JOURNEY. Not that I am aware of.
Mr. DINGELL. How long had he been doing natural gas work?
Mr. JOURNEY. Mr. Mamone came there-I assume from the time
he started in 1965 he started as a legal assistant, GS-9. I can't tell
you from that whether that was in one of the-
Mr. DINGELL. I believe your records show lie had been doing natu-
ial gas work for. 11 years and never had done work in this other
area?
Mr. JOURNEY. All I have are the pay. records here. I just don't
know.
Mr. DINGELL. You don't know? When you come before the com-
mittee t.o testify you don't know?
Mr. JOURNEY. The pay records don't show which of the sections
he was assigned to.
Mr. DINGELL. He worked for you and you didn't apprise yourself
before you caine here?
Mr. JOURNEY. I was saying the records I have before me don't
show whether he worked in one of the various gas sections or
whether he worked in one of-the other sections like opinions and
research. When young lawyers came in, oftentimes they went into
that.
Mr. DINGELL. Who was it who transferred him?
Mr. JOURNEY. I did.
Mr. DINGELL. Did you check to see whether he had ever had any
experience before you transferred him?
Mr. .JOURNEY. I knew that he had not worked in the Hydro Section;
yes, sir.
Mr. DINGELL. He had supervisory responsibilities on natural
gas, did he not, supervising other attorneys?
Mr. JOURNEY. He had some, and he also had trial `responsibility.
PAGENO="0459"
453
Mr. DINGELL. Does he have supervisory responsibility now?
Mr. JOURNEY. He could have because-
Mr. DINGELL. Does he?
Mr. JOURNEY. I can't speak to the particular hydro cases he is on.
He is trying the cases himself. If there is iieed for supervision, he
would do it because he is senior in grade.
Mr. DINGELL. Are you telling me that you don't know or that he
does not have supervisory responsibility?
Mr. JOURNEY. At the moment in these cases he is the lawyer on
them but he is finishing up his gas cases, Mr. Dingeil.
Mr. DINGELL. Is there any derogatory information on any of
the individuals about whom I wrote to Chairnian Dunham with
regard to their behavior, character, integrity, or performance?
Mr. JOURNEY. I don't know of anything derogatory. I did speak
to the question of Mr. Mamone's work on the gas side this morning.
Mr. DINGELL. Is there anything derogatory in the files with regard
to these three men?
Mr. JOURNEY. I don't know how to define derogatory other than
the Commission in its opinion was critical of his handling-
Mr. DINGELL. Is there anything in the personnel files derogatory
of these three men?
Mr. JOURNEY. I don't know of anything in the personnel files, no.
Mr. DINGELL. Have you ever put anything derogatory in the per-
sonnel files on them?
Mr. JOURNEY. I have not.
Mr. DINGELL. Is their character, integrity, or behavior in question
in any fashion?
Mr. JOURNEY. I haven't raised any question as to character.
Mr. DINGELL. Has it been raised within the Commission?
Mr. JOURNEY. There has been raised within the Commission some
criticism of Mr. Mamone's handling of gas work; yes, sir.
Mr. DINGELL. Who raised that?
Mr. JOURNEY. Commissioner Watt.
Mr. DINGELL. I would hope Mr. Watt would have a chance to
enunciate his views more fully.
Mr. Moss. Mr. Watt will be called in the near future.
Mr. DINGELL. Mr. Dunham, as to the points and questions directed
by me, do you have comments or additions?
Mr. DUNHAM. No.
Mr. DINGELL. Do you wish to make changes?
Mr. DUNHAM. No, sir.
Mr. DINGELL. As a matter of fact, as I gather it, these three men
have in large part received exemplary comments in their personnel
file. Am I not correct?
Mr. DUNHAM. Certainly you are.
Mr. DINGELL. Referring to Mr. Lewnes, lie received the Tom Clark
Award of the Federal Bar Association, or a.t least he was nominated
for it. Am I correct?
Mr. DUNhAM. Yes.
Mr. DINGELL. He received top security clearance in May of 1975.
Mr. DUNHAM. Yes.
PAGENO="0460"
454
Mr. DINGELL. I note here with, regard to Mr. Lotis, he is not in
the three mentioned, that he has received a number of commendatory
comments.
I also observe that Mr. Mamone has received eight step increases,
five grade increases. He received step and grade increases in the same
year, no adverse comments on his character~ integrity, or quality of
his work. Is that right?
Mr. JoURNEY. I know of none.
Mr. DINGELL. Can you explain to me, Chairman Dunham, this
very curious fact, that within a very few days after they testified
before my subcommittee the character of their employment was
changed so strikingly?
Mr. DUNHAM. I explained earlier, Mr. Dingell, there have been
shifts of about 163 people in the Federal Power Commission over the
period at least since I have been Chairman.
I will state again there is absolutely no relationship between the
two facts.
Mr. DINGELL. None?
Mr. DUNHAM. None, as far as I am concerned, none.
Mr. DINGELL. Just that they were very close in time.
Mr. DUNHAM. I don't even know which dates the three people
were shifted.
Mr. DINGELL. Maybe you could help us all by submitting those
dates for the record.
Mr. DUNHAM. I am sure they are here somewhere.
I1\'lr. Moss. Without objection, we shall hold the record open at this
point and receive the exact dates.
[The following information was received for the record:]
Mr. Aber resigned October 15, 1976 to accept a position with the National
Association of Securities Dealers, Inc. Mr. Lewnes was appointed an Adminis-
trative Law Judge on April 4, 1976. Messrs. Lotis and Mamone assumed their
present assignments as of the date of Mr. Journey's workload redistribution
memorandum (October 8, 1976). Mr. Wofsy's reassignment to the Rate Section
occurred August 1, 1976, and from there, he was reassigned to the newly created
Rates and Corporation Section, headed by Mr. Goldstein, on October 8, 1976.
Mr. DUNHAM. I believe they were in October, at least one or two
of them, 1976.
Mr. JOURNEY. We will have to do it by pay period.
Mr. LENT.. Would the gentleman yield? I think the table of reorga-
nization was in October of 1976.
Mr. DUNHAM. That is why I mentioned that date.
Mr. LENT. My recollection was that that was the date on which at
least two of the four individuals we are concerned with were trans-
ferred and, as you contend, part of a reorganization plan.
Mr. DINGELL. You advise me, Mr. Dunham-have you ever had
discussion with anybody with regard to the transfer of employment
or employment conditions or responsibilities of these people within
your agency?
Mr. DUNHAM. With anybody?
Mr. DINGELL. Yes.
Mr. DUNHAM. Yes. As I_pointed out earlier, the reorganization,
the general reorganization of the Federal Power Commission has
been discussed with several people, notably the Commissioners them-
PAGENO="0461"
.55
selves. It was discussed with the Touche Ross people who assisted
us in this and they made a.t least one or two presentations. At no
time were individual names or personalities or any of these aspects
discussed. That was not the motivation nor the intent of the reorgani-
zation.
The single. objective of the reorganization of the Commission was
to try to get a handle on the enormous backlogs that were occurring.
and it became apparent to me continued to occur.
The pancaking problem that you were alluding to and to which
Mr. Santini alluded is evidence of that problem.
I testified early on, I think before your subcommittee, sir, that I
considered we were a treadmill going backwards. We just could not
seem to get a handle on the caseload.
It became apparent to me when I first arrived there. One of the
first questions I asked was how many cases are there before the
Federal Power Commission.
The response I got was that nobody had asked that question before,
so we started a caseload system, a management system, attempting to
assign responsibilities for particular cases. That was the single, sole,
only motivation for the total reorganization which has been under-
taken not only in the Office of General Counsel, but in the Bureau of
Power, Bureau of Natural Gas, and other sections.
As I pointed out, there have been many shifts of assignments of
people.
When we got down to names and particular assignments other than
the very top level, this was handled by task forces of the individuals.
Neither I nor the other Commissioners were involved. It was an
alignment of the assignments and tasks which must be undertaken
under the new reorganization and actual assignments of lawyers and
people in the Bureau of Power, Bureau of Natural Gas, accounting
and finance, all of those.
Mr. Moss. Would the gentleman yield?
Mr. DINGELL. I think we are getting far afield. I am delighted to
yield to the chairman of the subcommittee.
Mr. Moss. In June of 1975 this committee sent to the Federal
Power Commission a comprehensive questionnaire. We asked specifi-
cally for all of the details with regard to cases. The preparation for
the response to this subcommittee should have been underway by
the Commission.
Are you aware of that, Mr. Chairman or Mr. Journey?
Mr. JOURNEY. I am, Mr. Chairman.
Mr. Moss. I wanted the record to show that someone had asked
for that. We were very much concerned about it.
Mr. DINGELL. Let me ask you very specifically, Chairman Dunham:
Do you know anything which would reflect unfavorably at all on
Mr. Lewnes as to his character, integrity, or performance at the
Mr. DuNuA~r. No, sir. As a matter of fact, I discussed with him
my attitude regarding him. His recounting of that interview is in
the transcript.
Mr. DINGELL. Your comments on the reorganization were very
interesting. I have here before me a document from Touche Ross,
which I understand is already in the record.
PAGENO="0462"
456
Maybe Mr. Journey can explain to me the reassignment of these
men in light of comments of Touche Ross which apparently advised
you on your reorientation of the Commission structure.
This document says:
Personnel assignment to cases should be revised so that their experience and
skill level are more appropriate to the task requirements and more effective
supervision, delegation and supervision are required.
Can you explain to me how putting a natural gas specialist on
hydroelectric conforms with that policy?
Mr. JOURNEY. To make a broader-gaged lawyer because, as I said
earlier this morning, when we had the Phillips case we used electric
lawyers to try the gas cases.
We are now moving into the relicensing phase. I wanted some
of the expertise out of the gas certificate work to use in Section 10
license cases. We apply the same case law.
When you are a GS-15 level lawyer, you should be able to handle
both gas and electric and be able to it with ease.
Mr. DINGELL. They are identical kinds of cases? It is just that
simple?
Mr. JOURNEY. You apply Asehbaeker in gas certification. It is
really not much di~fferent from hydro licensing. You have the PC&N
section under the Gas Act. You have comprehensive use of resource
under section 10(a) of the Power Act.
Mr. DINGELL. Were any of these three gentlemen about whom I
wrote you and others assigned different offices after their reassign-
ment or did they remain in their offices?
Mr. JOURNEY. I am not ducking the question. I just don't know
which people you have in mind.
Mi. DINGELL. Referring most specifically to Mr. Lewnes.
Mr. JOURNEY. Mr. Lewnes is on the second floor where the admin-
istrative law judges are.
Mr. DINGELL. I-lie was moved way to the back of the hearing room?
Mr. JOURNEY. You are talking about the seats in the Commission
meeting room.
Mr. DINGELL. Yes, seats in the Commission meeting room.
Mr. JOURNEY. Mine was moved, too.
Mr. DINGELL. I didn't ask about yours. As a matter of fact, if
appearances are as they appear, we may be arranging further move-
ments of your desk.
Was there any movement of desks or places of office or places where
business was transacted for any of these three men-Mr. Mamone,
Mr. Lewnes, and Mr.-
Mr. ,JOURNEY. Mr. Lewnes, in terms of office quarters, went where
the AU's are on the second floor.
Mr. Mamone is on the other side of the building with the hydro
lawyers.
Mr. Aber is in private practice. -
Mr. DINGELL. How about Mr. Lotis? What happened to his desk.
Mr. JOURNEY. Mr. Lotis has an office on the fourth floor where
we have another assistant litigation counsel, Jim Wood. We are
split between the eighth and fourth floors. He has one of the biggest
offices for the assistant litigation counsel status.
Mr. DINGELL. Did Mr. Lotis' movement meet with his approval?
PAGENO="0463"
457
Mr. JOURNEY. The physical movement?
Mr. DINGELL. Yes. Did that please him? As a matter of fact, he
asked to remain where he was, did he not?
Mr. JOURNEY. He asked to remain on the eighth floor. We were
regrouping the lawyers, putting the part II and part III lawyers
together and we had limited space.
We were previously on three floors of the building. In the redis-
tribution of office space, Mr. Dingell, we ended up on two floors, so
we consolidated off the ninth floor and some of the eighth floor and
sixth floor and moved to the eighth and fourth floors.
Mr. DINGELL. Have you ever had any discussions with Commis-
sioner Watt regarding Mr. Lewnes?
Mr. JOURNEY. Me?
Mr. DINGELL. Yes, you.
Mr. JOURNEY. No.
Mr. DINGEIL. None? None at all?
Mr. JOURNEY. Other than in the Commission meeting.
Mr. DINGELL. None with regard to his assignment or placement
of his office, what he did, or the fashion in which he performed his
responsibilities, and Mr. Watt's attitude toward this particular
gentleman?
Mr. JOURNEY. In the Commission meeting and in terms, as I
testified earlier this morning, it was communicated to me from Com-
missioner Watt that when redrafts of orders and things were to come
back up, they weren't coming back up in the manner in which the
redrafts had been asked, but I have never discussed anything that I
know of other than that with Commissioner Watt about Mr. Lewnes.
Mr. DINGELL. Chairman Duuham, have you ever had any discus-
sions with Mr. Watt or any other person with regard to Mr. Lewnes?
Mr. DUNHAM. Other than in the Commission meeting with all
Commissioners and other people available, no, I don't believe so,
other than in the sense that names always come up in conversations.
If you are talking about derogatory instructions, "I hope you should
do this or that," the answer is no.
Mr. DINGELL. Did you have any discussions where Mr. Lewnes'
name came up while you were talking to Mr. Watt?
Mr. DUNHAM. I am sure in conversations with Mr. Watt and Mr.
Smith, and probably Mr. Holloman, also, I have been in conversa-
tions where Mr. Lewnes' name has come up. I am sure of that, 11/2
years ago.
Mr. DINGELL. When did those conversations take place and where?
Mr. DUNHAM. Other than the Commission meeting room, the only
other place would be individually with me. We have rules we do
not meet together as a group on matters either before the Commis-
sion-that is, we have to protect the integrity of Commission
meetings.
Mr. DINGELL. I have no quarrel with that. I am not sure it is
responsive to my question.
Mr. DUNHAM. You ask whether I ever talked to Commissioner
Watt or any other Commissioner on George Lewnes. I am sure
at home point, 1 year ago or whenever it was, his name has come up.
Mr. DINGELL. Then I asked you where and when those discussions
took place.
PAGENO="0464"
458
Mr. DUNHAM. I said that other than in the Commission meeting
room the only place I could imagine they would come up would b~
in my office or in Commissioner Watt's office.
Mr. DINGELL. When did these discussions in your office take place?
Mr. DUNHAM: I have no idea whatsoever because we meet and I
discuss items with Commissioners daily.
Mr. DINGELL. What was the subject of the discussion, then, when
they came up in your office?
Mr. DUNHAM. The only thing that I can recall, and part of it may
be as a result of this hearing, or some of the testimony that has come
up, would be in connection with the inability to get orders up to the
Commission in the form in which the Commission asked them to be
.prepared, or in specific cases. That was 1 year ago.
Mr. DINGELL. So you are telling us that there was a discussion
between you, then, and Commissioner Watt involving inability to get
your orders drafted in proper fashion by Mr. Lewnes?
Mr. DUNHAM. I am saying there may have been. There certainly.
was in a Commission meeting. Whether or not there was subsequently
or in some other period when he came into my office and expressed
dissatisfaction, or whatever, I don't recall.
Mr. DINGELL. Did he express dissatisfaction on this point?
Mr. DUNHAM. He did in a Commission meeting. This was referred
to in one of the orders.
Mr. DINGELL. It is pretty clear to m.e that Mr. Lewnes is a very
senior attorney at the Commission? 2
Mr. DUNHAM. Yes.
Mr. DINGELL. It strikes me, then, you would recall this discussion
if it took place in your office, would you not?
Mr. DUNHAM. Perhaps I should have, but we have 150 lawyers. I
am sure at one time or another one lawyer's name or another comes
up.
Mr. DINGELL. Did Mr. Watt complain about 150 of your lawyers
or what? What lawyers has Commissioner Watt complained to you
about down there at the Commission? May I ask to have a list about
Mr. Watt's complaints about lawyers?
Mr. DUNHAM. I don't know. I am sure none other than what took
place in public and open meetings. That is record. We don't record
if somebody says, "I don't like this order prepared this way or
that way." People are aware of it when they hear it, of course.
Mr. DINGELL. Did you ever go to Mr. Watt's office to discuss Mr.
Lewnes with him?
Mr. DUNHAM. In regard to all of the shifts of people, I discussed
generally the reorganization but I do not recall whether I ever went
to Mr. Watt's office or Mr. Smith's office or Mr. Holloman's office to
talk about Mr. Lewnes.
Mr. Lewnes came to me and said, "Do you have any problems
with me?"
I said, "No, I don't."
He said, "I would like to become an administrative law judge. Do
you have any objections ?-since I would participate in the selection
of administrative law judges within the Federal Power Commission.
This is in the sense I am the signing authority.
PAGENO="0465"
459
That is the extent of it.
Mr. DINGELL. Did you ever discuss the assignment of Mr. Lewnes
with Mr. Watt in any fashion or at any place?
Mr. DUNHM. The only recollection I would suspect would be
generally on major appointments, such as administrative Law Judge,
and these are circulated to the other Commissioners for reaction.
Mr. DINGELL. Did Mr. Watt. ever give you any comments as to his
attitude or feeling toward Mr. Lewnes at any place other than in an
open Commission meeting?
Mr. DUNHAM. I just do not recall. This is in the sense that every
once in a while everybody has a remark about somebody. I have no
recollection.
Mr. DINGELL. You would not say it had not occurred?
Mr. DUNHAM. I would not say it had not occurred.
Mr. DINGELL. Have you ever had any discussions with Mr. Watt
about Mr. Lewnes or any of the other three lawyers in whom I am
particularly interested, Mr. Journey?
Mr. JOURNEY. Yes, sir.
Mr. DINGELL. Would you tell me when those discussions took
place, please, and where with regard to each?
Mr. JOURNEY. To the best of my recollection, in the course of
the Commission meetings and in various telephone conversations on
orders that were to be redrafted Commissioner Watt would tell me
that things were not coming back out of the certificate group.
He told me in the case of Mr. Mainone, I know it was after our
"Sunshine" rule on April 21, it was an open Commission meeting,
he came over to the desk where I was seated and said he would like
Mr. Mamone to be put on other work. He found some professional
problems with it. It was all related to matters of drafting things,
as he saw it, and as he thought he made instructions.
I refer you, Chairman Dingell, to Opinion 766, Superior Oil Com-
pany, page 8, written by Commissioner Watt as quoting Judge
Zwerdling as it relates to the trial of the case by Mr. Mamone.
Mr. DINGELL. Is that in the record, Mr. Chairman?
Mr. JOURNEY. It was read in this morning.
Mr. DINGELL. What does it say?
Mr. JOURNEY. It states:
We agree with ~Tudge Zwerdling's evaluation of staff's participation in this
proceeding wherein he stated, "In support of its warranty condition recom-
mendation the staff brief presents a hodgepodge of barely stated doubts, fears,
and conclusions unsupported by any substantial analysis or rationale." In con-
cluding that the staff had provided "no i~eally serious or helpful analysis of
the policy issues" in this proceeding, the judge suggested the Commission
should consider these issues in a rulemaking proceeding. After consideration~
we have concluded that a rulemaking proceeding is unnecessary. The Commis-
sion independently is able to determine whether it has the statutory authority
to impose the suggested condition an dwhether such condition is required by
the public convenience and necessity. The position advocated solely by staff in
this and the Getty proėeeding is contrary to both our statutory authority and
the public interest * *
You will find in opinion 789, page 20, where there is criticism there
that things were used in the staff brief which were not in the record,
and it was critiqued by outside practitioners.
That opinion, page 20, states:
87-292 0 - 77 - 30
PAGENO="0466"
460
We are aware that the Commitsion staff made no attempt to sponsor any
evidence In this proceeding and we concur in the party's position that the ref-
erenced materials have no place in our consideration.
It was this kind of thing, Mr. Dingell, that Mr. Watt was talking
to me about.
Mr. DINGELL. Is that all Mr. Watt talked to you about?
Mr. JOURNEY. In connection with Mr. Mamome, yes.
Mr. DINGELL. With regard to Mr. Mamone?
Mr. JOURNEY. Yes.
Mr. DINGELL. Did he ever suggest that he should be moved to a
different place inside the agency?
Mr. JOURNEY. He suggested to me that he thought it would be
better if Mr. Mamone did other type of work, as I testified this
morning.
Mr. DINGELIJ. When did he make that suggestion?
Mr. JOURNEY. Sometime after our first "Sunshine" meeting, April
21. It was in April, May, or June, somewhere in there.
Mr. DINGELL. Did he make any comments as to Mr. Mamone's
character or how well he got along with him or how well he liked
him?
Mr. JOURNEY. No, sir.
Mr. DINGELL. He did not?
Mr. JOURNEY. Didn't talk about that.
Mr. DINGELL. Didn't talk to you at all about that.
Mr. JOURNEY. No.
Mr. DINGELL. Just suggested he move.
These comments are by~ law judges. They are not Federal judges on
appeal, are they?
Mr. JOURNEY. These are Commission opinions.
Mr. DING~LL. These are Commission opinions?
Mr. JOURNEY. Yes, citing the law judge.
Mr. DINGELL. This is Mr. Watt citing these things in his opinions:?
Is that what you are telling me?
Mr. JOURNEY. Yes.
Mr. DINGELL. How many times did Mr. Watt make critical re-
marks about Mr. Mamone?
Mr. JOURNEY. You might have the committee staff look at opinions
766, 189, 755, and 767.
Mr. DINGELL. He didn't miss many opinions, did he, for a chance
to comment on Mr. Mamone?
Mr. Moss. Let the Chair instruct the staff to take all opinions
after January 20, 1976, drafted by the Commission, opinions where
Mr. Mamone was counsel, and we will examine them as to adverse
comment by the Commission on Mr. Mammone, so that we have a full
record.
Without objection, we shall hold the record open at this point to
receive that material.
Mr. DINGELL. Could we do the same thing with regard to the
other two gentlemen? I refer to Mr. Aber and Mr. Lewnes.
Mr. Moss. We shall do the same thing with Mr. Aber and Mr.
Lewnes.
[No further adverse comment could be found.]
PAGENO="0467"
461
Mr. DINGELL. Did these trigger comments in the personnel ifie?
Mr. JOURNEY. Not that I am aware of.
Mr. DINGELL. With regard to these gentlemen?
Mr. JOURNEY. No.
Mr. DINGELL. We discussed Mr. Mamone. Were there adverse
comments on the part of any Commissioner with regard to Mr. Aber
or Mr. Lewnes or Mr. Lotis with regard to their work?
Mr. JOURNEY. Mr. Aber was counsel, joint counsel, with Mr.
Mamone on one of these cases, opinion `~89.
Mr. DINGELL. Was there any comment made about him?
Mr. JOURNEY. It does not distinguish as to who the counsel was.
It might be one or both.
Mr. DINGELL. How about Mr. Aber and Mr. Lewnes? Are there
any comments in the Commission's records with regard to them sub-
sequent to the 20th?
Mr. JOURNEY. I don't want to use the word "hostile." Regarding
Mr. Lewnes, as I said before, Commissioner Watt asked me, "W1~ere
is this order?" "it is not drafted in the way I want it." That kind
of thing.
Mr. DINGELL. Is there any comment in the records of the Commis-
sion in connection with the opinions?
Mr. JOURNEY. No; this would be internal matters.
Mr. DINGELL. Is there any insert in the personnel records?
Mr. JOURNEY. I am not aware of that.
Mr. DINGELL. It is not uncommon to see the Commissioners make
critical comment~ before the staff, is it, with regard to proceedings?
A nod does not show very well.
Mr. DUNHAM. Excuse me.
-----The answer. I -think, is no. It is not unusual. It occurs in the heat
of debate. "Why did you draft it that way? Why did you come to
that conclusion?"
We have many arguments and words among the four of us where
we are upset one with the other, where a position is taken, the way
a draft was prepared, or whatever, it was not an uncommon thing.
Mr. DINGELL. Who is chief administrative officer at the Commis-
sion.
Mr. DUNHAM. The Chairman.
Mr. DINGELL. Has the Chairman ever had anything presented to
him which would move him to take some personnel action or make
an insert in the personnel files of the three gentlemen about whom I
have been addressing myself which would in any way reflect discredit
upon them?
Mr. DUNHAM. No, sir.
Mr. DINGELL. I want to express my very sincere thanks to you,
Chairman Moss, for the privilege of sitting with you.
I want to make it very clear that I regard a-s a matter- of the
utmost gravity a case, such as this, where there are strong appear-
-ances that ~witnesses who appeared before congressional committees
have suffered some indispOsition -or difficulties by reason of their
appearance here.
I want you three gentlemen to know very clearly that I intend
to be chairman of the Subcommittee- on Energy and Power to the
PAGENO="0468"
462
fullest of my vigor for the remainder of this term and as much
longer as the citizens of the 16th District of Michigan will continue
to elect me.
I want you to know that by reason of these events I shall be look-
ing rather more closely at the fashion in which witnesses who appear
before my subcommittee or this subcommittee are treated by your
agency.
I must confess that I find small comfort in your comments. Indeed,
I find it difficult to give much credibility to the thesis you have
not inconvenienced or otherwise injured these men in their profes-
sional careers by reason of their cooperation with the committee.
If you turn around~ you will note I have two staff members of my
subcommittee sitting here, and they will be shortly looking into this
matter on my behalf and in close cooperation with the staff of this
subcommittee.
I want you to know that both personally and professionally I
cannot tolerate witnesses suffering any disadvantage by reason of
their appearance before congressional committees. I shall not rest
until I have either laid this matter comfortably to rest or seen to it
that any person who has any fault in this matter has enjoyed the
fruits of his labors to the fullest of my ability.
I want you to know. Chairman Dunham, you should not rest easily
tonthht because I do not intend to ,nor for many nights in the future.
The same goes for you~ Mr. Journey, and also Mr. Watt, who I
hope will be before this committee for explanation.
Mr. Moss. Yes.
Mr. DINGELL. If he is not. I give you full assurances that he will
be before my subcommittee for a very adequate explanation.
Mr. DUNHAM. If I may respond?
Mr. DINGELL. Surely.
Mr. DUNHAM. I want to assure this committee, and both of you,
Chairman Moss and Chairman Dingell, that I take these allegations
very, very seriously.
I took an oath of office to uphold the laws of the United States, of
which the particular section cited in Chairman Moss' call for this
hearing is mentioned. I take this extremely seriously.
I have too high a respect for our system of government, for the
Congress of the United States, for the rights of individual commit-
tees to inquire and to know about the proceedings, the practices,
management, personnel as well as substantive matters to in any way
take this at all not seriously or slightly.
In my opening statement I said definitely and absolutely that in my
mind there is absolutely no connection between the two. There is no
association. That thought would not have entered my mind.
I am very cognizant of a letter both of you gentlemen wrote me
at the conclusion of those hearings.
I do want to assure you, Mr. Dingell, in response to your state-
ment, that I do take your remonstrances and the penalty laws and
the morality that is implied there very, very seriously.
I am very disturbed that the question has come up of suspension
or that allegations have come up of suspension.
PAGENO="0469"
463
I have spent too many years in government service in two States
and in two departments of the U.S. Government as well as this
agency, not to take that seriously.
I do want to assure you that I recognize that and I can do little
more than to state, as I did, that there was never any association
between the two factors.
I did not ask the staff to see their testimony before they submitted
it to any committee of Congress. I do not particularly read nor
remonstrate with them afterwards. I made no comments on it after-
wards. I do not keep it in my mind one way or another.
If some were critical of the Commission, they are not the only
people that are critical of the Federal Power Commission. We are
used to that and we understand that. That is part of the process of the
procedure.
However, there is certainly very, very surely no association in my
mind between any of these actions and testimony before congres-
sional committees.
Mr. JOURNEY. Mr. Dingell, I have said earlier this morning that
it would be improper, and I will repeat it again, for anybody to
interfere with any witness before the Congress. I mean that and I
believe it.
I have been before you and Chairman Moss too many times.
This is first amendment stuff. We don't stop people from speaking,
nor, do you pillory them for having spoken. That is not the demo-
cratic way of doing it.
I think when you look at this you will find that is not' what is
presented.
Mr. DINGELL. I hope you are right.
Mr. Moss. I want to thank you, Mr. Dingell, for coming and
participating.
At this time I want to recognize Mr. Sims, of the staff, to complete
some testimony for the record, and then I shall recognize Mr.
Wunder.
Mr. SIMS. Thank you, Mr. Chairman.
Mr. Journey, we put into the record earlier in these hearings FPC
employee performance evaluation, FPC form 81 for Mr. Russell
Mamone.
It was pointed out that despite his rating of outstanding, you"
failed to concur because of inadequate justification. Do you recall
why the justification was inadequate?
Mr. JOURNEY. Yes, sir. As I understand it, you will find this
covered in appendix G, p. 6 to the statement `that I put in today. As
I understand it, there should have been FPC form 915 filed out in
the Office of Personnel. It was a failure to follow OPP rule that
caused me to make that notation. That is the reason.
Mr. SIMS. At this time I would like to ask we put into the record
a compendium of form 81 performance evaluations.
Mr. Moss. Without objection, it `is so ordered.
[The material referred to follows:]
PAGENO="0470"
464
FPC u;PLOYEE PERFORi'i1~CE EV!~LUATIC~! - A1~IUAL RAT!i~G
TIC II EPLAUVE
CITE CF TATtlE PERIOD CC'AFtCO
3/31/76 tt/1/75 - 3/31/76
011161
CS-15 905
Till lACtIC IS
C~~id o- ooo N foot o~ sopo, bOy ood to podoolly of 4. If fooloo io oh oppitoobl, 4~ job tog ,oolootod,
,11 othos. To oot Iso it.
2. loot lot yoootiog footo- iofloo yoo 5. Poop op jobs oloo ose f boo 13- 19 Os
ooliogs othe 4 too. bo ptoyoeooy be ted 0pplioobie.
ooe foobo- oo~d high oo ooothe. 6. Ciole the ~obo of the oppliooblo foot ohiob yoo
3. Too' t ,tloo ooe eooo I etyplool iooideoh to lodoly feel oe os 1 si~oi fooot fo the job.
ifloeooe the oooplete piotoe. The Scoots fo eooh fo oc pleiocd to FPC Fos 811.
~i1~Is
Lt
3~T~
CE1ICITAL FAC001S ,~
1. Job EoooTcdgo - -
2. Utili,olioo of Dice ~1
3. Job Atbibodo [v~
ALgDblty
5. Dopoodobility I~-'i
- -
SUPEFETISARE P0 TIDES 1
- -
14. Eployoo Co:ogoitioo blooolopooot It'
15. P1 oooi-,
17. 01 cooi~ Cpo-oti~os ~-1
6. toitiotioe
-
18. Cootolig Cpoetioos `°
8. loT Eopco~ too
9.8i~ogAb~ity
Jo'
~
~/f -
- -
c ~~ t
OIlIER FAdERS
21. -
-
TO. odepcodcooe
t-'l,
22.
11. QUoTity of Rook
-`~
25.
12.Coopoolioo__
--_____
- -
The incumbent's work perforiance is above average in both qualit
and quantity. Incumbent has handled his work load in a professional
manner and has shown initiative in the prenaration and execution of
his responsibilities. Additional, incumbent writes and speaks cloarl~
and succinctly. Incumbent is able to derive maximum cf forts from
his tochnical staff and is well thought of by all parsons associated
with his cacos.
Russell 13. QIamone
m/OFF 1133islAtJmCTié~ HILt C PLlTETT
0CC Trial Attorney (Puh.Util.)
IMiTATIVE CotmilEti (To odditioo to oooo.eoto 00 eoolootioo Tootos, o oooplote eoolootioo shoold ooopoe p0080o001eo
08 EVALUATION sUb so-itteo oooo itteo pcofooosoosboodoods fo tAo ooployec's posit too. L's~ booN if oeodod
NOTEO WITHOUT CONCURRENCE DUE TO INAOEQU?oTE JUSTIFICiETIOR0/C~TT~y(PoJ)
oTEOPUTIEEAS-OSEEU8IUVTIOE lITRE RATIO TIES C~TLC8VEo --
LJTohbAfbobop Liuosottotootoy {EJo1botoodiT [] Iofo,,ooe Toll,9 I00t10;led
-__1~ ~ S09~[I___ 1iiiIi_4iIit~ti
LIREXEL 0. l;ToVy6~°/Ji1- I
~ 1~ ~ -~ _____ I_~ -
OlE j ~ivr~s7b __
P1°C Foe 81
PAGENO="0471"
FPC EfIPLOYLh VU~URi'~Mi~LL LVI\Lw-ki 1Ui~ - M~iIiUML f\f-t I A~3
NAME OF EMPLOYEE - SATE CF RATIOS PERIOD COVERED
Cyril S. Wofsy 3/31/76 4/1/75 - 3/31J76~
BAR/OFF OIRISIOR/SECIION TITLE OF `RECENT ?CSITIOTI GRADE SERIES
OGC Supervisory Trial Attny.. (P.u.) GS-15 905
INST RUCTIONS~
1. C oid,o,oh ft po~-o bOy ood iodopooHotSy of 4. if footo~ io oot ~ppOioobS~ to job boiog oooloot,d,
oil otho's. do oot it.
2. Ooo't lot yoooootiog oo ooo footo,- ioflooooo yooo- 5. Fo oopo~oioo~y joboolooooo footo,-o 13- 59 oo
otiogs oo otho footo~-o. Ao oopio yooooy bo ot~d opplioobDo.
loo oo ooo footo~ ood high oo ooothor. 6. Ci,-oSo Rho oooho~ of tho oppiiooblo footo,-o oNioN yoo
3. Too' t olloo ooo,-oooot otypiool iooidoot to oodoly fooi o~o ooot si1oifcoot fo,- tho job.
iofluoooo Rho ooopSoto pioOo~-o. Tho booS To~ oooh footo~o~oploiood io FFC Foo-o ROD.
~
GENERAL FACTORS SUPERVISORY FACTORS
1. Job KoooSodgo - - - 13. Eopio-oo RoloRiooo - - -.
2. Otiliootioo of Tioo - - - - 14. E~pTo~o~ R,oo0oitioo & Oooolopooot ~ - -
3. Job Attitodo - - - - - 15. Pio,oiog 0
4. 1. oo~oio g Ability - - - - - 06. O,5,oioiog fr - -
- 5. Oopoodobility 17. DfrooEAog OpooEioos
6. Ioitiotioo OR. CooI,-oSlirg CpO~OSiOOO S - - -
7. Jod~oooot "f'0 F~sto~gEēoR EopSoyooot -
B. 0,-oS Co p,,o, Too - - - OTHER FACTORS - - -
9. ihitiog AhSity 21. - - - -
10. Iodopoodoooo ~ 22.
Dl. Qoolity of Ro~b
~`[ [
23.
12. Coopo~otioo
~tiI1_.[
24. S
J
The incumbent's work performance is above average in both quality
and quantity. Incumbent has handled his work load in a professional
manner and has shown initiative in the preparation and execution of his
responsibilities Additionally, incursbent writes and speaks clearly
and succinctly. Incumbent is able to derive maximum efforts from his
technical staff and is well thought of by all persons associated with
his cases.
465
NARRATIRE COMMENT (I~ odditioo to oo'oooto oo oooToot ioo footo~~, 0 ooopTobo ooo1~ootoo ohoold ooopo~-o poofo~-oooooo
OR ERALARTIOR oith o,itton or oooo- itton porforooooostoodords for Rho oopio0oo'o posiGioo. To~ hook if oo,dod.)
BASED OR TRE ADORE ERALART ION I RARE RATED THIS EF?LCYEE,
Eli Sotiofoobory [Ij0000tiofootory [~"Oo~loIoodiog [I] Porfo,-ooooo Rot I,1 Pootpoood
SUPERVISOR,. REVIRVUR FEVIEVER APPROVIUG OFFICIAL -
SIGrETURE ~ DREXEL 0. iOURN~y
TITLE c~2oo ,~L i~:io_~~O It~~ COUtOSEL
DOTE 3/)i~~ 8 1976 ________________________
FPCForoOO
~io-7s)
13T-4)
PAGENO="0472"
466
ftL U'IVLUILL rceruFu'~'~~o~ LRMOLur,I uls. ,
hARE OF EMPLOYEE SATE CF 000115 F~iS2CCAERED -~
-~ * 3131176 -
EAR/OFF DIAISIGN/SECTIOR TITLE CF PRESENT PCSITISN GRADE SERIES
0CC Trial Attorney (Pub.Util.) CS-iS 905
INSTRUCTIONS:
5. Coooid ,,,:oh i tar poro toSy ad ilodopoodootly of 4. if footor Ao lot opyllooblo to job koilRA ooolootod,
oil othors. do aot oso it.
2. Doo't Sot yoor ootiog oo foator Aafluoooo your 5. For ouporoioor5' jobS oloo ooa footoro l3-l9os
,otiogo os othor 000000. Ao oapioyoo aoy bo rotod oppliaohlo.
So 00 000 footor ood ki5h oa arothor. 6. C,rolo tho aobor of tho opplioobSo footors ohioh You 1
3. Doo' t alloo oooroooot otypiool locidoot to ouduly fool oro oust si;oi fiooot for tho job.
iaflo,ooo tho ooapSoto piotoro. Tho Souols for oooh footororoooploiood a ERG Foro 01*.
~3
-~
1
2~
-
GENERAL FACTORS
1. Job KooTodgo -
- -
.~UPERVISCRT FACTORS
13. Eoaio.oo blot boo -
-~
2.OtiliootIoo of Tb, -
3. Job Altitodo -
- -
- -
14. Eoployoo Rouo~oitboo 0 Oooolopoaot -
15. PSOOI01 -
- -
.
4. L oorobog Ability -
if
- -
16. Orgaoiziog
5.Dopoodob1ty -
/
- -
17. 011001105 Sporot boos
1
6. Iaitiotioo
-
1/
- -
10. Cootrollir.0 C~oootAo~s
-
-
7. Judgoaoat
- -
Ac-al Ooploy~aos
-
- -
8. 0101 Eo prossioo
~A
AIRIER FACCRS
9. Oiitiog RkilIty
20.
1 1
10. Iodopoodaooo
.
22.
SI. Ololity of Work
12. Cooporotioa
i[
23.
~
NARRATIVE COVEERT (To odditioo to aoouooto as oualootioo 4000010, 0 o:rploSo ooolotioo should 0O0~O10 porfooooooos
ON EHALERT 100 otth o-ittoo aro~oo ittoo porforooooo~otoodoRds for tho ooyloyoo'o posit boo. Coo book if o~dod.)
OASEO ER THE ABOVE EVALOAT ION I RAVE RATED THIS EEPLOTEE:
D Sitisfootory D00000isf0000ry / ~O~Ostosdi~g Porfora,s~o Rotiog
SUPER.: OSOR / .,HEEITWER EEVIEEER - AFFROVIVS OFFICIAL
SIGNATURE ē~ ,~.:. LL~VLD.JOUFANE
TITLE ~ ~
DATE ~_,tc. /~` j)J~ 27 1976 _______________________
FtC Fuo 80
10-15)
(37-4)
PAGENO="0473"
2. Otiliootioo of Tioe
3. Mob Attitode
467
FPC EMPLOYEE PERFORMANCE EVALUATION - ANNUAL RAt IN(~
NAME OF EMPLOYEE °TE OF FAIthS PERIOD COVERED
3/31/76 4/1/75 - 3/31/76
EVA/OFF DIVISION/SECTION LTITLE OF~PREOEAT POSITION GRADE SERIES
~upervisory General Attny. (P.U.)
0CC ~ 905
ESTRUCTIONS:
1. Cooo do: coo N foot oe oepo,o tely ood I odepeodeotly of 4. If Too::: Ic eot oy~l I ocble to job betog ooolooted,
cli otheo. dooot:oc it.
2. D:o't let yoeotiog 00 000 bob: ioflooooe yoor 5. F: s eo:o:ey joMo~olooo~e fo:to,-o 13-]9os
eotio~c oo othee footo,o. to eoployee coy be eoted o;y;:oUle.
loo 00 ooe fo:toe ood high 00 ooothee. 6. Cie:le t~e e~,obee of the opplicoble foot oeo ohich yoo
3. too' 0 olioo 0°c oeoeot otypicol iooideot to oodoly fool 0-coos 0 sb: ficoot foe tho job.
Iofloeooe the coopiete piotoee. The leoels foe oooh fo o-oeeoploioed io FF0 Foes 81A.
~
j
~
~
-
4. Leoooio g Ability
5. Oeye:dobility 1.:
6.Ioitiotioe
1. Jod9eoeot
0
8. Tool Eopeeo:Too
-
9. Veitiog Ability
-
10. lodopeodeoce
-
0
11. Qoelity of book
- -
12. Coopeeotioo
NARRATIVE COFRENT (to odditioo to coooeoto 00 e:oloctboo fo:to:o, 0 ::c;ete eoolotioo shoold coopo:e peefoecoocco
ON EVALOAT ION oith oe000eo oruooe itbco peefo:oooce..otoodoedo Roe Eke eopio100's pooitioo. Use book if oceded.)
GENERAL FACTORS
FACTORS
PAGENO="0474"
468
FEDERAL POWER COMMISSION AD~1INISTEATIVE MANUAL
TRANSMITTAL SHEET
NO. AM-9-75
MATERIAL TRANSMITTED:
Instruction No. AM 4X50.1, Employee
Performance Evaluation ( 9 sheets)
MATERIAL SUPERSEDED:
Instruction No. 4X50.l dated October 29, 1957.
Instruction No. 4150.2 dated September 10, 1959.
EFFECT OF MATERIAL TRANSMITTED:
The FPC Employee Performance Evaluation Program has been
revised to bring it into conformance, with requirements of
Federal Personnel Manual Chapter 430.
MAJOR CHANGES:
I. Emphasis has been placed on the following:
a. Performance evaluation is a joint process involving
employee and supervisor.
b. Performance evaluation is a continuing ?rocess
involving continuous on-the-job cot~unication between
supervisors and their employees concerning performance,
goals, and specific work products.
c. Performance evaluation is constructive in approach,
method and purpose.
~`// /~.
xec' ive Director
DISTRIBUTION
DC-AM 4x50.l
DC-l04
PAGENO="0475"
469
[ FPC ADMI~1ISTRAT1VE MM~J~\L tmnc,:,~
to the successful operation of the job. If the weak-
ness is found to persist, the surer-visor will take
appropriate corrective action.
(4) In all cases of performance ratings, the supervisor
will inform the employee of the o?Portunicy to make
written comments which will becora part of the employee's
official personnel record. Our-ira any discussion of
performance including warning notices, ec?loyees covered
by an negotiated agreement berveer a labor organization
and the FPCway have a union representative present.
f. Outstanding Performance Ratinas.
(1) A s~nin~ " u~ aaidin " Rats. An "Outstandint'
rating ma e recommen e a sure vrsor and mu~t be
g It may be awarded on y w~en all
aspects of the performance exceed normal requirements
and are outstanding and deserve s~acial commendation.
FPC Form 915 will be used when recorrrend~ng an out-
standing rating and should include written statements
showing:
(a) performance requirerent~;
(b) reasons for considering each aspect. of the
performance worthy of special commendation.
(2) Processing of Recommendations.
(a) A supervisor's recommendation for an out-
standing rating will be forwarded through super-
visory channels to the head of the bureau or
office.
(b) If the head of the ~ concurs
with recommendation, he should so indicate on FPC
Form 915 and forward it to the Office of Personnel
Programs. If he
~ metom--r~j
~~ervisor with a~propriate r cr-rents.
(c) The Office of Personrel ?rograr-s will evaluate
recommendations for outstard~rg performance ratings
in terms of applicable recuirecents and standards.
The recommendation will b~ referred to the Incentive
Awards Committee for further action.
-8-
PAGENO="0476"
470
Mr. SIMS. Mr. Journey, you will note that the top form is another
copy of Mr. Mamone's.
If you would please turn to the second form, that of Mr. Wolfsy,
I notice that on the. 18th of August, the very same day on which you
failed to concur in Mr. Mamone's you did concur in the outstanding
grading of Mr. Wofsy. Was there a form 915 filed for Mr. Wofsy.
The person who made the ratings, Mr. George Lewnes, was exactly
the same person.
Are you saying he failed to file this form in one case and on the
very same day with another person to whom he gave an identical rat-
ing he did not file the form? Is that your testimony, sir?
Mr. JOURNEY. Mr. Sims, I really don't recall whether there was a
form 915 or not. If you like, I will check it.
Mr. Snis. Can we hold the record open to receive any such form?
Mr. JOURNEY. I shall check it.
Mr. Moss. Please supply that promptly for the record.
[The following memorandum was received for the record:]
PAGENO="0477"
471
UNITED STATES GOVERNMENT
Memorandum
TO : General Counsel DATE: March 29, 1977
FROM : 0CC Administrative Officer
sUBJEcT: Rating Action and Procedures
During the March 18, 1977 hearing before the Subcommittee
on Oversight and Investigations of the House Committee on
Interstate and Foreign Commerce, Mr. Sims raised some
questions concerning performance evaluations (TR 160-162).
Pursuant to your request, I have investigated this matter.
The results of this investigation are in two parts: (1)
responses to specific points raised by Mr. Sims; and (2) a
description of the real problem, of which the performance
evaluations at issue in these hearings are only a symptom.
The performance ratings furnished by Mr. Sims were
for Mr. Mamone, Mr. Wofsy, Mr. Perdue, and Mr. Mattingly.
I have not found an FPC Form 915 for any of these ratings.
I do not know why a nonconcurrence note was not placed on
all of these ratings; suffice it to say that such a note
should have appeared on all such inadequately justified
parformance ratings. The reason why these inadequately
justified performance ratings were not returned to any of
the supervisors is because there were so many inadequately
justified outstanding performance ratings - at least 22
(15 professional and 7 other).
The existence of so many unsubstantiated recommendations
for outstanding ratings is, by itself, symptomatic of a
must larger problem: a lack of understanding on the part
of all OGC supervisors of the performance rating process.
The Director of Personnel, Mrs. Schutte, discovered this in
February, 1977, when she initiated a comprehensive
Commission-wide review of FPC Form 81 ratings for the year
ending March 31, 1976. As a result of this review, all 22
* of OGC's `outstanding" performance ratings were disapproved,
and they will be reflected in official records as "satisfactory"
unless 0CC resubmits them.
Buy U.S. Savings Bonds Regularly on the Payroll Savings Plan
PAGENO="0478"
472
The rationale behind this disapproval was precisely
on point insofar as the basic question raised by Mr. Sims
is concerned. In order to approve an outstanding rating,
OPP would need substantially greater justification. In
her memorandum dated March 28, 1977 (copy attached) which
returns the disapproved ratings to OGC, Mrs. Schutte
states: " . . . In order to approve a rating of outstanding,
we would have to have a copy of performance standards
based upon the official position description and specific
examples showing how the employee exceeded those standards
in every respect. In reviewing recommendations for out-
standing ratings, we need to have evidence rather than
conclusions . .
Since performance ratings for the year ended March 21,
1977 are due soon, I suggest that OGC supervisors be in-
structed to resubmit any of these disapproved ratings as
part of this year's evaluation process, if appropriate.
Otherwise, I believe OGC should let the "satisfactory"
ratings stand. I shall be monitoring this process much
closer this year. By separate correspondence, I will inform
all OGC supervisors of the resubmission requirement.
~rohn R. Grif in III
Concurrence:
Lois Schutte, Director, Date
Off ice of Personnel
Programs
PAGENO="0479"
473
MAR 28 1977
)i~OR.ANDUM TO: General Counsel
FROM : Director, Office of Personnel Programs
SUBJECT : Recommendations for Outstanding Performance
Ratings for period ending March 31, 1976
At the Executive Director's staff meeting in February,
I promised to resurrect the recommendations made last year
by bureaus and offices for outstanding performance ratings
and performance awards and take appropriate action. As you
are undoubtedly aware, the recommendations have been resting
Lu OPP for nearly a year with no action.
I have personally reviewed the recommendations from your
office and find that I am unable to approve any of them based
upon the information submitted. In order to approve a rating
of outstanding, we would have to have a copy of performance
standards based upon the official po8ition description and
specific examples showing how the emmloyee exceeded those
standards in every respect. In reviewing recommendations for
outstanding ratings, we need to have evidence rather than
conclusions. Therefore, the official ratings for the following
named individuals for the rating period from April 1, 1975 to
March 31, 1976, will be reflected in official records as
"satisfactory" unless the recommendations are resubmitted with
sufficient justification.
Stanley J. Harris, Jr. Brian J. Heisler
Cyril S. Wofay Russell B. Mainone
William N. Burchfield John H. Burnes, Jr.
Eugene R. Elrod Allan N. Garten
Patrick J. Keeley Peter C. Leach
Lorraine N. Marrow Richard V. Mattingly, Jr.
Bernadette P. Moore Franklin L. Nusser
Robert W. Perdue Charles F. Reusch
Renee C. Settles -. Roland E. Sledge, Jr.
Philip R. Telleen Ida C. Thomas
Renate C. Tucker Robert L. Winters
PAGENO="0480"
474 -
Should you decide to resubmit any of the recommendations,
please indicate cle~rrly the period covered by the resubmission
and include the elements specified above.
Please accept my personal apologies for not having dis~~
covered this situation sooner and done something about it.
Lois Schutte -
:üpp
Schutte/jdb
3/25/77
cc: OPP
PAGENO="0481"
475
Mr. SIMS. If you would turn to the third page, another outstand-
ing rating, which on the 27th of July you concurred with.
Can you furnish for the record, sir, a form 915 in support of this ~
I would be glad to let you know, I must, the name of the employee
because the name of the employee has been blocked out.
Mr. JOURNEY. I will check it. I don't know.
Mr. SIMS. Would you turn to the fourth?
Mr. Moss. That will be under the same reservation.
Mr. JOURNEY. Yes, sir.
[See p. 471].
Mr. SIMS. I also note that according to the FPC Administrative
Manual X 45 when you do fail to concur in a rating, such as given
Mr. Mamone, you are required to return this notice of nonconcur-
rence to the supervisor, Mr. Lewnes. Did you do that, sir?
Mr. JOURNEY. I don't recall whether-
Mr. SIMs. He testified you did not. Do you recall having done it
specifically?
Mr. JOURNEY. I recall, but there was a period of time after Mr.
Lewnes. left and I really, Mr. Sims, don't know whether he was even
in OGC then. I will just have to check it. I don't know. If it had not
gone to Mr. Lewnes, it should have gone to Mr. Wofsy, Mr. Keating,
or subsequently Mr~ Grant. I just don't know. I will check it.
Mr. SIMS. On page 6 of this morning's statement you say, "At
no time did I enter into the substantive aspect of this case."
The case to which you refer is the Ohio Electric case.
Mr. JOURNEY. Yes.
Mr. Smrs. With which we are all quite familiar, having put into
the record memos between yourself and Mr. Lotis and a good bit of
testimony.
Mr. JOURNEY. Right.
Mr. SIMS. According to page 5 of the same statement, you note that
the FPC initiated this docket in September of 1974.
We have also learned that the attorney in that case, one of the at-
torneys, indeed, the principal attorney for Ohio Electric, was a Mr.
Richard Dicke.
At this point, Mr. Chairman, I will ask to put into the record an
affidavit.
Mr. Moss. Without objection, so ordered.
[The affidavit referred to follows:]
My name is Patricia Saitta. I served as Secretary to the General Counsel of
the Federal Power Commission from 1971 to 1975. I served as Secretary to
General Counsels R. Gordon Gooch, Leo E. Forquer, and Drexel D. Journey.
During my tenure as secretary to Messrs. Gooch and Forquer, to the best of
my knowledge, they never received or made any telephone calls from or to
Mr. Richard Dicke of the law firm of Simpson, Thacker and Bartlett of New
York.
During the time I acted as secretary to Mr. Journey, from September 1974
to March 1975, Mr. Journey received frequent telephone calls from Mr. Richard
Dicke and Mr. Journel placed frequent telephone calls to Mr. Richard Dicke.
Although I cannot be exact in counting the frequency of the calls, I can state
that they often were bunched together.
PATRICIA SAITTA.
Subscribed and sworn to before me, a Notary Public in and for the District
of Columbia, this 17th day of March 1977.
KENNETH JAINTER,
Notary PRb14C, D.C.
My Commission Expires Aug. 31, 1977.
87-292 0 - 77 - 31
PAGENO="0482"
476
Mr. Moss. Do we have the affidavit before the members of the
subcommittee?
Mr. SIMs. No.
It is sworn to by Patricia Saitta.
Since apparently we don't have copies of it, I shall read the last
paragraph of this affidavit.
During the time I acted as secretary to Mr. Journey, from September 1974
to March 1975, Mr. Journey received frequent telephone calls from Mr. Richard
Dicke and Mr. Journey placed frequent telephone calls to Mr. Richard Dicke.
Although I cannot be exact in counting the frequency of the calls, I can state
that they often were bunched together.
What did you and Mr. Dicke talk about so frequently?
Mr. JOURNEY. I would suspect, Mr. Sims, and as you know my office
keeps telephone cards and not a telephone log-there has not been a
log until my present secretary came in-Mr. Dicke has been active
in the ECAR program.
American Electric is a big part of the Reliability Council mech-
anism. I work very closely with the nine councils for bulk power
supply.
Mr. SIMs. Is it your testimony, then, you did not discuss the Ohio
Electric case with him during these telephone calls?
Mr. JOURNEY. Other than procedure in terms of what I can recall
and what I can get out of my files, Mr. Sims, I know of nothing.
Mr. SIMS. What do you mean by the words "other than procedure"?
Mr. JOURNEY. Than that June 12 letter which is in the committee
print, pages 585-590, volume VI.
Mr. SIMs. Did you ever discuss the Ohio Electric case with him
in your office face to face or at any other place?
Mr. JOURNEY. Mr. Sims, other than as part of moving the. settle-
ment along as pursuant to my June 17 memo, I am not aware of
anything.
Mr. SIMS. Moving the settlement along?
We have had testimony that Ohio Electric was interested in mov-
ing the settlements along. Indeed, that was uppermost in their
minds, I would say.
Mr. JOURNEY. The June 12 letter came to me and then I sent my
June 17 memo to Mr. Lotis, asking that a public conference be
convened.
If there is anything else in the files on this, I am not aware of it.
I checked my diary to see whether I had met with Mr. Dicke. I just
don't find a~ything.
Mr. SIMS. Mr. Chairman, at this point I would like to place into
the record a letter to you dated March 12, 1977, from Patricia A.
Curran, a former rate attorney at the Federal Power Commission
who, in fact, was the rate attorney on this particular case.
Mr. Moss. Without objection, the item will be placed in the record
at this point.
[The letter referred to follows:]
PAGENO="0483"
477
March 13, 1977
Honorable John E. Moss
Chairman
Subcommittee an Oversight and Investigations
of the Committee on Interstate and Foreign
Commerce
U.S. House of Representatives
Rayburn Office Building
Room 2323
Washington, D. C. 20515
Dear Congressman Moss:
By letter dated March 11, 1977, which was hand-delivered on
that same day, you requested that, as a former Staff Attorney at the
Federal Power Commission, I appear before your subcommittee on Monday,
March 14, 1977, in connection with your investigation of adverse personnel
actionsagainst professional staff niembers at the Federal Power Commission.
In subsequent telephone conversations with Mr. Stephen Sims of your Staff,
it was determined that it was unnecessary for me to appear personally before
the subcommittee. In lieu thereof I have been requested to provide the
subcommittee with a memorandum into the facts surrounding the settlement of
the Ohio Electric Comoan1 proceeding, FPC Docks: No. E-8888 to which I was
assigned as Staff counsel while employed by the Cormission. Pursuant to
this request I am herewith transmitting to the best of my recollection,
the following facts related to the settlement of that proceeding.
On July 3, 1974, as completed on August 19, 1974, Ohio Electric
Company tendered for filing with the Federal Power Commission an initial
rate schedule setting forth a Power Agreement between itself and its parent
company, Ohio Power Company. The Commission, pursuant to Section 206 of
the Federal Power Act, accepted the filing, but instituted an investigation
into the justness and reasonableness of the pro?osed rate schedule.
In mid-June, 1975, Jon G. Lotis, my i=ediate supervisor, who
at the time was Assistant General Counsel of Pipeline and Electric Rates,
reassigned this case to me. At the same time he informed me that the General
Counsel, Drexel D. Journey, had received a letter, dated June 12, 1975, from
counsel for Ohio Electric Company. I was supplied with a copy of the letter
in which counsel set forth the background of the proceeding, the plan to
issue an amount of $75,000,000 on First Mortgage Bonds in the early part
of the second half of 1975 for its construction program, a settlement pro-
posal, and a request to be afforded an opportunity to further discuss the
matter.
I immediately began to review the case and to inquire what, if
anything, had occurred since its filing. I was informed by members of
the technical staff assigned to the case that very little progress had been
PAGENO="0484"
478
made in Staff's investigation due to the failure of the company to pro-
vide requested data. I requested from them, and was supplied with, a
list of information which had been requested of the company.
I was informed by Hr. Lotis that Mr. Journey was treating the
June 12, 1975 letter as an offer of settlement and that Mr. Journey had
directed a settlement conference be held before the end of June. I was
next informed that Mr. Journey had reque~ted my removal from the case.
Since Mr. Journey did not speak to me directly, I was not informed by
him as to the reason for my proposed removal. After discuasions, of
which I was not in attendance, Mr. Journey directed that two other at-
torneys be assigned as senior co-counsel, Messrs. Richard Nattingly and
Dan Lamke. While Mr. Mattingly was senior counsel he authorized me to
proceed with the case.
Pursuant to Mr. Journey's instructions, I called a settlement
conference for June 26, 1975. In accordance with the usual practice, I
notified the parties to the proceeding, as well as sent to all the whole-
sale customers of Ohio Power Company and affected state commissions a
notice of the conference, a copy of Ohio Electric Company's filing, and
the June 12, 1975 letter to Mr. Journey, in the event they night wish to
participate. I requested the Secretary's office to publicly notice the
conference, which is also the usual practice.
The conference convened on June 26, 1975. In attendance ware
Company representatives, Messrs. Dicke, Schlesinger and Harper, who were
Company's counsel, members of the technical staff of the Commission,
Messrs. Msttingly, Lanka, and myself, as Staff counsel. Melow is an
extract of my notes written contemperaneously with the conference:
The Conference convened at 10:15 with myself relating
what I understood to be the history of the proceeding and a
reiteration that the Staff had reviewed Mr. Dicke's letter
of June 12, 1975 to the General Counsel which is being treated
as a settlement proposal. I further stated that it was Staff's
opinion that, prior to arriving at any conclusion, it had to
be supplied with additional data. To this end I subnitted to
all the attending parties a list of data requests prinarily
involving fuel costs, operation and maintenance costs and data
concerning the proposed "floating equity" return cor=onent V
and Ohio's alleged coverage requirements. -
After reviewing the Staff's list of data requests Hr.
Harper expressed the Company's thought that the present pro-
ceeding could be reduced to just the one issue of return on
common equity. Mr. Dicke, at great length, then explained
the necessity (in the Company's opinion) for settling this
proceeding quickly. He explained that within a few weeks Ohio
Electric Company was publicly going to issue $75 million in
First Mortgage Notes. He pointed out that Ohio Electric is a
PAGENO="0485"
479
new Company, without any "track record" and `that an ongoing
FPC investigation with the Staff taking an adversary position
might have a deleterious effect upon potential investors.
After much discussion I finally managed to extract from Mr.
Dicke that the Company really didn't generally mind an in-
vestigation and responding to Staff's data request but that
this timig~g was inopportune for the Company's financing plans.
What the Company wanted from the Staff was a statement to put
in their prospectus stating that some type of an agreement had
been reached.
On behalf of the Staff I stated that Staff was not able
at this time to agree to any settlement and that we wished
responses to the requested data. At the conclusion of the
conference, a substitute offer on return en equity was given
to Ms. LeDakis who said she would, within 24 hours, respond
to the offer or give a counteroffer. The conference concluded
with little accomplished.
On June 30, 1976, Counsel for the Company submitted a Stipula-
tion to me and asked for concurrence and signature. Since it effectively
limited Staff's investigation, possibly even into the future should Staff
want to later review the Company's operations, and since no data had been
submitted to the Staff, I declined to sign the Stipulation and so noti-
fied Company's counsel, orally and in writing.
The Company's counsel approached nyself and the Staff on numerous
occasions during the next two weeks to discuss settlement. On almost
every occasion counsel stressed the urgency of a quick settlement and
that time was of the essence due to the upcoming debt issuance. On
numerous occasions counsel referred to having spoken with Mr. Journey
on the issues and informed me on nunerous occasions that he was going
in to speak to Mr. Journey. He further emphasized that Mr. Journey under-
stood the importance of this proceeding. On one occasion when I informed
him of what Staff could settle on, he asked me, "What would your position
be if I talked to Drex about this?" I responded that I represented the
S.taff and they must be satisfied before I could agree to anything on
their behalf. I never witnessed any discussions between Company counsel
and Mr. Journey. I did, however, witness Company counsel enter and/or
depart from the General Counsel's office on several occasions during the
period settlement discussions were being held.
Upon the submittal of certain data and a review of it, a set-
tlement agreement was reached. Upon its execution, Company asked if
the public notice and opportunity for conenent could be dispensed with
since time was of the essence. I informed him it was the Cou~nission's
practice, as required by the Federal Register, to notice settlements
and provide for public comment. I commenced to prepare a notice to be
issued by the Secretary's office publicly noticing the filing and pro-
viding time for any interested party to file comments. I was informed
by Mr. Lotis that Mr. Journey wante4 to emit the notice and the comment
-3-
PAGENO="0486"
480
period, but that he relented on the notice so long as a shortened comment
period was provided. The draft notice was subnitted to the Secretary's
office and, pursuant to Mr. Lotis' recommendation, I brou;ht up the sub-
ject of the shortened comment period with the Secretary's office. The
notice was later issued with a change in the cornent peri:d.
I was next instructed to prepare a draft order ~or the Com-
mission accepting and approving the settlecent. It was stheduled to
be on the agenda of the first meeting following the expiration of the
comment period. Although the Commission meeting agenda was not public
information at that time, I received several calls from Chio Electric's
counsel on the matter wherein he indicated that he knew the Commission
was scheduled to vote on the order at the next Commission meeting.
The formal settlement agreement submitted to the Commission
provided that the Company would make refunds £ rota and after August 1,
1975, so long as the Commission approved the settlement aereement prior
to November 1, 1975. Despite this refund protection for the three
month period between the filing and November 1, 1975, the Commission
approved the settlement and issued an order in early August, 1975.
Very truly yours,
~72 o~
Patricia A. Curran
PAC:lkh
-4-
PAGENO="0487"
481
Mr. SIMS. On page 3 of this letter, Patricia Curran is describing
the settlement conference which continues over a period of days and
other events which she personally witnessed.
She said:
I never witnessed any discussions between co-counsel and Mr. Journey. I
did, however, witness co-counsel enter and/or depart from General Counsel's
office on several occasions during the period s~ttlement discussions were being
held.
You certainly were not discussing the weather. It would seem
logical to me that during the period of settlement discussions it
would be very likely that you and Mr. Dicke were, in fact, discussing
the settlement.
Were you discussing the settlement, sir?
Mr. JOURNEY. Mr. Sims, as I said earlier, I do not recall ever
having done anything other than get the settlement publicly noticed.
As far as I was able to ascertain, I was not in any settlement con-
ferences. I just do not recall anything.
Mr. SIMs. I am not saying you were in the settlement conference.
That is exactly my point. These discussions occurred without the
settlement conference.
Mr. JOURNEY. All I can tell you, Mr. Sims, is that, to the best
of my knowledge, what I said this morning I believe to be true. I
just never discussed this thing on the merits with Mr. Dicke.
Mr. SIMS. So we have in~ `the record, do we not, from the July
1976 field hearings in Indiana that you and Mr. Dicke engaged in
telephone conversations. That is reflected in the exchange of letters, is
it not?
Mr. JOURNEY. It is in my memo to Jon Lotis dated June 17, 1975,
directing the settlement conference.
As I said earlier, that came out of the work that had been raised
because of my speech out at the Western Conference. That was a
matter which was discussed with the various Reliability Councils
and I was working with a basedoad plant.
Mr. SIMS. During the period of settlement counsel for Ohio ]~lec-
tric discussed with you the Western Conference and not the settle-
ment case?
Mr. JOURNEY. You asked me about the telephone conversations
and how I got into the Gavin plant and the Ohio Electric matter.
I told you everything I know about it.
Mr. Sr~rs. I would just observe that it seems a little strange to me
that during the period of settlement the principal attorney for the
party, who is negotiating settlement, would discuss with you at the
office and over the phone matters unrelated to the settlement.
Mr. JOURNEY. Over the period of time, as I testified earlier this
morning, he and I have been on opposite sides of the fence many
times, starting in 1959. Mr. Sims, you have my records and my diary.
It was sent over to you yesterday. All I know is what is in there.
I just don't know a thing more about it.
Mr. SIMS. What was Ohio Electric's big hurry? Why were you
trying to expedite this settlement process?
Mr. JOURNEY. As I understood the problem-it is attached as a
letter to my statement, appendix E, which I put into the record
PAGENO="0488"
482
today-they had a security issuance coming up about the end of
August or the end of July. They wanted whatever the problem was
with the FPC resolved so that they could get their security issuance
through at the SEC. It was a question of whether it should be a 15
percent rate of return, 12, or something.
The Bureau of Power originated the case. It was a question of com-
pleting a registration statement. That is as much as I know about it.
But I did get involved in the Gavin plant because of the work I had
done in the coal-by-wire case and the fact I attended a lot of those
Reliability Council meetings.
Mr. Su~is. Let me quote further from this letter, then:
The company's counsel approached myself and the staff on numerous occa-
sions during the next two weeks to discuss settlement. On almost every occasion
counsel stressed the urgency of a quick settlement and that time was of the
essence due to the upcoming debt issuance. On numerous occasions counsel
referred to having spoken with Mr. Journey on the Issues and informed me on
numerous occasions that he was going in to speak to Mr. Journey. He further
emphasized that Mr. Journey understood the importance of this proceeding.
On one occasion when I informed him of what staff could settle on, he asked
me, "What would your position be If I talked to Drex about this?"
Is it still your testimony under oath that you never discussed
during the period of settlement with Mr. Dicke or any other counsel
for Ohio Electric the merits of the case?
Mr. JOURNEY. It is, Mr. Sims. I just do not recall ever talking to
Mr. Dicke about the merits of this at all. I did testify that I have
talked to American Electric on the reliability parts of this thing.
I did get involved because Chairman Nassikas wanted to get these
cases going. Beyond that, I just don't know.
I have checked the records of the Commission to see whether I
signed any orders or anything that had anything to do with the
settlement. I find that I didn't.
Mr. SIMS. Is Mr. Dicke or other counsel from Ohio Electric in
the habit of making up things like this from your long experience
with them?
Mr. JOURNEY. Mr. Sims, in the practice as it is conducted, you will
find many times when people go in and name drop. They say, "I will
do this or I will do that."
I really don't know what Mr. Dicke had in mind or what he did
or what he didn't do.
I would recommend the committee call Mr. Dicke. I just don't
know.
Mr. SIMS. I think the committee has tried to elicit information
from Mr. Dicke before.
Mr. JOURNEY. I don't know.
Mr. SIMS. There is one thing that bothers me in addition to the
fairly clear contradiction between your recollection and at least
the facts or allegations that counsel for Ohio Electric mentioned in
the settlement conference to the attorney, and that is that Ohio Elec-
tric was a newly-formed subsidiary. It was trying to sell bonds.
A very important element in any successful sale of bonds would
be to note in the prospectus that some kind of rate agreement had
been reached between the c.ompany and the Power Commission. Is
that correct? --
Mr. JOURNEY. Sure it would. It was an element in the cost of
service.
PAGENO="0489"
483
Mr. SIMS. And we have had testimony from Mr. Lotis that you
were trying to rush this procedure forward.
It strikes me, sir, that you were in effect trying to help Ohio
Electric sell its bonds.
Mr. JOURNEY. I would hope not. As I said-
Mr. SIMS. Why were you rushing settlement, then? You testified
earlier this afternoon to me that you were well aware of this problem
and they were very desirous of getting these bonds sold and having
a quick settlement.
Mr. JOURNEY. I testified, Mr. Sims, that when Mr. Dicke talked
to me about this he did it in the context of the Reliability Council
material and the fact that the Chairman had me going around the
country, the former Chairman, trying to get plants certificated and
getting them operating. That is why I went to the West. That is
why I have done a lot of work for the past 6 or 7 years.
I also told you that in terms of the Ohio Electric case it was
started in September of 1974. Why it stayed around until May or
June, I don't know.
Mr. Smis. Why didn't you explain to the subcommittee in the
Indiana hearings about the Reliability Council?
Mr. JOURNEY. I did send material out which did not find its way
into the record.
Mr. SIMs. You had a chance to speak into the record, did you not,
at great length there. I read your testimony. You went on for page
after page.
Mr. JOURNEY. Oh, no.
`Mr. SIMs. You did not tell the subcommittee then that your dis-
cussions with Mr. Dicke had to do with the Reliability Council.
Mr. JOURNEY. Mr. Sims, if you will look at my~
Mr. SIMS. I have looked at it, sir.
Mr. JOURNEY. You look at the material as it was developed. The
letters were put in by committee counsel cross examining Mr. Dicke.
I didn't know that that was an issue.
Then, when it came time for me to testify on the matter, committee
counsel-
Mr. SIMs. Can you tell us what page~ of your testimony refers
to the Reliability Council, sir?
Mr. JOURNEY. No. You are asking me whether I had a chance to
speak to this question. What I am telling you is that in Indiana the
material which was developed on the Ohio Electric case starts at
page 585 and goes to page 596. That was committee counsel's dis-
cussion with Mr. Dicke.
`Then I come on at page 597, at which time I am asked by committee
counsel to identify some documents, which I did.
Mr. SIMS. Both you and Mr. Dicke testified at some length on
matters concerning the Ohio Electric case. At any point in either of
your testimony did you cite this example?
Mr. JOURNEY. I tried to get into it at the bottom of page 617.
Mr. SIMS. I am not talking about things that you tried to put
into the record. I am talking about in your direct discussions.
It seems to me to be quite logical that at a time when you were
being questioned about your telephone calls and any other contacts
you had with Mr. Dicke, if the purpose of these telephone calls and
these contacts was of a matter unrelated to the Ohio Electric rate
PAGENO="0490"
484
application, that you could simply have told the subcommittee at
that point.
I am surprised by your current explanation and I am a little
surprised that the same explanation was not given back in July.
Mr. JOURNEY. Mr. Sims, if you look at the way the record de-
veloped and the pages I have cited, you will see how this was
raised. It was in effect put into the record by committee counsel
and I was asked to respond to it.
Then, when I got back, I sent the memo of June 17. I sent the files
that I could find on the matter. I sent Patricia Curran's brief.
As far as I know, it is all in there. I don't know anything more
about it, Mr. Sims.
Mr. SIMS. I see.
I would like to quote one more item from the letter of Patricia
Curran.
She says:
Company asked if the public notice and opportunity for comment could be
dispensed with since time was of the essence.
Further down she says:
I was informed by Mr. Lotis that Mr. Journey wanted to omit the notice and
the comment period, but that he relented on the notice so long as a shortened
comment period was provided. The draft notice was submitted to the Secretary's
office and, pursuant to Mr. Lotis' recommendation, I brought up the subject
of the shortened comment period with the Secretary's office. The notice was
later issued with a change, in the comment period.
I believe Mr. Plumb's affidavit was quite correct. He did not talk
with Miss Curran. However, Miss Curran talked with someone else
in the Secretary's office. I believe that explains the apparent discrep-
ancy in Mr. Lotis' testimony.
Now the question is this: In the light of the stated position of the
company that time was of the essence, were you, in fact, trying to
speed this process?
Mr. JOURNEY. Mr. Sims, I was not doing more than I said.
Mr. Smis. Do you do this in all cases or is this an exceptional
case?
Mr. JOURNEY. This, Mr. Sims, is what I did. I really know nothing
more about it than what I have told you.
Mr. SIMS. Mr. Chairman, I would like to ask Chairman Dunham a
few questions, if I may. I know the hour is getting late.
Mr. Moss. Proceed.
Mr. Si~rs. Mr. Dunham, in your opening statement you state that
no grievance procedures have been undertaken under either Civil
Service or union contract procedures by any of the professional
staff.
Are you aware of the grievance procedure filed on October 8, 1976,
by the American Federation of Government Employees against
you, Mr. Fee, Mr. Journey, and others?
Mr. DUNHAM. Yes.
Mr. SIMS. One of the reasons for the filing was that they were
not given a copy of the Touche Ross reorganization plan. Is that,
correct?
PAGENO="0491"
485
Mr. DUNHAM. I do remember a grievance procedure under that.
Yes, I assume that is it.
Mr. SIMs. If the union had received a copy of this study, would
they have found that Touche Ross recommended the reorganization
of Mr. Lotis out of his responsibilities for electric rates?
Mr. DUNHAM. No, there are no names mentioned in the manage-
ment study at all.
Mr. SIMS. Would they have found that Touche Ross recommended
the removal of Mr. Mamone from the HIOS case and his subse4uent
transfer to the Hydroelectric Relicensing Section?
Mr. DUNHAM. There were no names mentioned in the report.
Mr. SIMS. No, we determined that came from Mr. Watt and that
Mr. Journey was responsible for his ultimate transfer. And they
would not have found any provision which states that Mr. Lewnes
should be reassigned, or whatever it was you said to Mr. Fee
regarding that.
They would have found nothing in the Touche Ross study which
said attorneys could come in during the weekend to clear up the
backlog in uncontested pipeline cases.
The reason I ask these questions is that in Mr. Journey's several
statements and in a good bit of the testimony today the Touche
Ross study has been cited as justifying these changes in reorganiza-
tion. I think that we can establish, in fact, that Touche Ross did not
directly recommend or cause these reassignments of Mr. Lewnes, Mr.
Mamone, and Mr. Lotis.
Mr. DUNHAM. As you yourself have said, the management study
dealt with the reorganization. Bear in mind they were assistants
to us. They are not their recommendations per se but this is a
long and involved process of discussion..
At no place did they talk about names of people.
When you say "directly," you are correct. If you are talking
about shifting bureaus around, taking the Rate of Return Section
out of the Office of Accounting and Finance, of course, that does
involve transferring of personnel, but there were no names.
Mr. SIMS. I wanted that point absolutely clear in the record.
Mr. Journey, we heard a lot about the backlog of hydroelectric
cases.
Mr. JOURNEY. Yes.
Mr. SIMS. Do you know approximately the number of the backlog?
Mr. JOURNEY. The hydro backlog is about 500 dockets.
Mr. SIMS. Do you know how many of these dockets involve appli-
cations to build new dams?
Mr. JOURNEY. How many involve new dams?
Mr. SIMS. Yes. Are there any? Are there a smttll number?
Mr. JOURNEY. Yes. I will give you the answer. It will have to be
in terms of applications, though.
Do you want it for the record?
Mr. SIMS. Yes, may we have that?
Mr. Moss. Without objection, the record will be open at this point
to receive the material.
[The following memorandum and attachment was received for the
record:]
PAGENO="0492"
486
TO: Mr. Journey March 29, 1977
General Counsel
FROM: Ruth Van Cleve
Assistant Litigation Counsel
SUBJECT: Transcript additions
This responds to your oral request of March 28
for information for the record of the Subcommittee on
Oversight and Investigations, House Committee on Inter-
state and Foreign Commerce, with respect to (1) hydro-
electric cases and (2) corporate regulation cases as
of June 30, 1976, when I had general responsibility for
work under Parts II and III of the Federal Power Act.
I attach the information for which the record
was held open, with the information geared to the page
and line of the transcript where it was sought or
offered.
LL~ EL~.
Ruth G. Van Cleve
Assistant Litigation Counsel
RGVC:Ict
Attachment
PAGENO="0493"
487
Page 178, 1ine~24:
As of July 1, 1976, the hydroelectric backlog was
502 applications, of which 31 involved new capacity. Of
those 502 applications, 119 were pending in the General
Counsel's Office, 6 were pending before the Commission,
and the remainder (377) were pending in the Bureau of Power.
As of January 1, 1977, the hydroelectric backlog was
481 applications, of which 30 involved new capacity. Of
*those 481 applications, 78 were pending in the General
Counsel's Office, 7 were pending before the Commission,
and the remainder (396) were pending in the Bureau of Power.
Page 179, following line 14:
As of July 1, 1976, there were 85 relicense applications
pending.
As of January 1, 1977, there were 87 relicense applica-
tions pending.
Page 180, following line 1:
None of the foregoing figures concerning the hydro-
electric backlog include interconnection cases, or any other
cases under Parts II or III of the Federal Power Act.
Page 180, following line 5:
As of June 30, 1976, 35 cases were pending under Parts II & III
(Corporate Regulation) of the Federal Power Act. They were
the following:
FEDERAL RATES
Docket No. Case
E-6943 U.S. Dept. of the Interior,
Southwestern Power Administration
E-7201 U.S. Dept. of the Interior,
Southwestern Power Administration
E-7172 U.S. Dept. of the Interior,
Southwestern Power Administration
E-7l60 U.S. Dept. of the Interior,
Southwestern Power Administration
PAGENO="0494"
SECURITY ISSUES
E-7 658
Case
488
El Paso Electric Co.
INTERCONNECTIONS
E-8137
E-75l2
E-7631
E-7704
(no docket No.)
E-9 558
E-7734
ER76-739
E-9562
E-7534
ER76-678
PRES IDENTIAL
Boston Edison Co., et al.
Illinois Municipal Utilities
Association, U.S. Illinois Power
Co., Central I:Llinois Public
Service Co., & Union Electric
Co., et al.
City of Cleveland
Kentucky Utilities
Central Maine Power Co.
West Texas
Mid-Continent Area Power Pool
Public Service of Indiana
Central Maine Power Co.
Maine Electric Power Co.
Central Maine Power Co.
PERMITS AND EXPORT AUTHORIZATIONS
Bonneville Power Administration
Detroit Edison Co.
Detroit Edison Co.
IT-6027 Maine Public Service Co.
Boise Cascade Corporation
Niagara-Mohawk
INTERLOCKING
DI RECTORATES
IT-5959
E-72 06
E-8308
E-675l,
E-7765
E- 6640
MERGERS & ACQUISITIONS
E-9564
E-9559
Iowa Power & Light
South Carolina Gas & Electric
ID-1709
ID-1309
ID-l424
ID-l776
ID-1758
ID-l759
ID-l398
ID-l723
ID-1686
ID-l779
Willis C. Fitkin
Glen M. Mekibben
Edwin Hatch
W. C. Gerstner
Charles T. Fisher
Richard C. Gerstenberg
George V. Patterson
Frank W. Bien
Robert E. McQuire
R. E. Disbrow
PAGENO="0495"
489
In addition to the foregoing cases, Mr. Lamke and
other attorneys in the Corporate Regulation section have
devoted substantial time to hearings and preparations for
hearings before the Nuclear Regulatory Commission. Pursuant
to an agreement with NRC, the Federal Power Commission
provides expert witnesses in the field of need for power
and loss of load probability studies. These witnesses are
represented by FPC attorneys in the NRC proceedings. It
is estimated that this legal work involves 70 days per year,
or 560 man hours. Similar service is provided to State
Commissions upon their request.
Page 182, line 21:
The information with respect to pending cases is supplied
as of July 1, 1976, rather than June 1, 1976, inasmuch as the
Federal Power Commission's internal reporting system was
then maintained on a quarterly basis, with one of the
reporting dates being the close of business on June 30.
Part I, Federal Power Act (Hydroelectric cases)
Preliminary Permits - New Capacity 15
Licenses - New Capacity 12
Licenses - Constructed Projects 125
Relicenses 85~/
Other 265a/
Total 502
Parts II and III, Federal Power Act (Corporate
Regulation cases)
Federal Rates 4
Security Issues 1
Interconnections 11
Presidential Permits and Export Authorizations 7
Mergers and Acquisitions 2
Interlocking Directorates 10
Total 35
Page 183, following line 16:
As of July 1, 1976, there were 35 hydroelectric cases
in hearing. As of January 1, 1977, there were 29 hydroelectric
cases in hearing.
1/ Four of these involve proposed additions of new capacity.
2/ These include amendments of licenses, transfers and
surrenders of licenses, and authorization for non-project
uses of project lands and waters.
PAGENO="0496"
490
Mr. Snrs. A good number of the dockets in the so-called hydro-
electric backlog involve much moreS mundane matters, such as seeking
permission to string power lines over existing dams?
Mr. JOURNEY. No.
Mr. SIMS. Building roads?
Mr. JOURNEY. No. In the 50-year relicensing now, this is a major
program. The old licenses were issued under the 1920 Act. This
while program has to go forward.
Most of them are west of Kansas City.
Mr. SIMS. How many of these 500-plus involve relicensing of 50-
year licenses?
Mr. JOURNEY. I would say 80 or 90.
[See memorandum dated March 29, 1977, p. 486.]
Mr. SIMS. Eighty or ninety of the 500. So we have quite a number
of other types of cases in this hydroelectric backlog, do we not?
Mr. JOURNEY. No question about it.
Mr. SIMS. How many of these hydroelectric backlog cases fell into
the interconnect section that Mr. Lamke used to head before the
reorganization?
Mr. JOURNEY. He didn't handle the relicense cases. Don Sander
did, and now Van Cleve does. What he handled were interconnections
under 202.
Mr. Smrs. How many of this number refer to such cases?
Mr. JOURNEY. I will have to supply that.
Mr. Smrs. Do you suspect it could be more than 90?
Mr. JOURNEY. I would guess in terms of the-I will guess it is 35
or 40 corporate regulation cases under part II.
Mr. Moss. Why not hold the record open and have it reflected
accurately?
[See memorandum dated March 29, 1977, p. 486.]
Mr. Siirs. What kinds of cases constitute the overwhelming ma-
jority of this type of backlog?
Mr. JOURNEY. I think the best answer I have there is Chairman
Evin's testimony.
Mr. SIMs. I am not asking Chairman Evins.
Mr. JOURNEY. It is in the appropriations record, Public Works
for Water and Power, Appropriation Bill, 1977, Part IV, Federal
Power Commission.
You will find it started on page 177, 178, 179.
Mr. Moss. The Chair would prefer always to have the material we
need for this record to come directly from the Commission.
Mr. JOURNEY. All right.
Mr. SIMS. Is it possible for you to summarize this in a sentence or
two or would you have to read the entire three, four, or five pages?
Mr. JOURNEY. The record showed that the pending applications
grew from 160 in 1962 to more than 467.
Mr. SIMs. I am asking the types of cases.
Mr. LENT. I think you are asking questions and you never seem
to give Mr. Journey an opportunity to complete his answer.
Mr. Moss. It is the Chair's prerogative to take care of the staff.
Mr. LENT. There is a constant interruption.
Mr. Moss. He insists on taking care of the staff. If the gentleman
has a criticism, he should direct it to the Chair.
Mr. LENT. I would like to get the answers.
PAGENO="0497"
49.'
Mr. Moss. We will get the answers to the extent it is necessary to
complete the record.
Mr. SIMs. I am trying to determine whether Mr. Journey can give
a one- or two-sentence answer. If not, he can state so.
Mr. JOURNEY. As of December 31, 1975, 82 `applications for re-
license were pending.
Mr. Surs. I think we have already established that. We are trying
to find out what the other cases deal with.
Mr. Moss. We will ask the Commission to supply us with a de-
tailed breakdown of the character of the caseload as of June 1,
1976.
Mr. Smrs. Thank you, Mr. Chairman.
Mr. JOURNEY. All kinds of hydroelectric and part II cases?
Mr. Moss. And part ~II cases.
[See memorandum dated March 29, 1977, p. 486.]
Mr. SIMS. The backlog was not so pressing but what it prevented
the transfer out of the hydroelectric section of these four experienced
attorneys within 5 months before Mr. Mamone was transferred in.
It struck me that perhaps the backlog in hydroelectric was not
quite as pressing as the numbers suggest. I simply wanted to establish
exactly what kinds of cases were involved.
I have no further questions. You are welcome to respond to my
statement.
Mr. JOURNEY. It is not a question of keeping a lawyer on a
particular case. It is a question of rotating the staff through and
trying to get the work `out.
I would guess that of these we probably had about 200 that were
active trial cases. I will supply it for the record.
Mr. Moss. Mr. Wunder?
Mr. WUNDER. I yield my portion of time to Mr. Lent.
Mr. LENT. Earlier today we had through Mr. Waigren introduced
`a memorandum dated March 16, 1977, directed to Chi'ef Counsel
Lemov from Susan Leal and Ben Smethurst regarding an interview
they conducted with Commissioner Smith concerning references to
him by Curtis Fee during his testimony on March 4.
I would like the record also to indicate a similar memorandum
dated the same day, directed to the same chief counsel from the same
staff members, regarding an interview conducted on March 15, 1977
with Commissioner Watt.
Mr. Moss. Without objection, the Leal and Smethurst memoran-
dum will be inserted at this point.
Mr. LENT. I wonder whether copies of that can be distributed.
Mr. Moss. Indeed, they can.
[The memorandum referred to follows:]
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
WASHINGTON, D.C., March 16, 1977.
Memorandum
To: Michael R. Lemov, Chief Counsel.
From: Susan Leal, Counsel, Benjamin M. Smethurst, Special Assistant.
Subject: FPO Adverse Personnel Action.
On March 15, 1977, we interviewed FPC Commissioner Watt concerning ref-
erences to them by Curtis Fee during his testimony on March 14 relative to
87-292 0 - 77 - 32
PAGENO="0498"
49~
the Commission's efforts to remove George Lewnes from his position as Assist-
ant General Counsel. Results of this interview is set forth below.
TESTIMONY OF CURTIS FEE
Tr. p. 24.-Fee testified he did not know whether there was a meeting with
Dunham, Watt, Journey and Perdue in January or February 1976 after the
Lewnes and Mamone testimony when the testimony or Chairman Dingell's
letter was discussed.
Concerning those members of the Commission who were displeased with
Lewnes and the reasons therefor. Fee testified as follows:
Tr. p. 39.-"I know the most important member of the Commission who was
displeased with Mr. Lewnes was the Chairman. At one point I believe I had
a conversation with Commissioner Smith to the same effect, and I am vaguely
aware that Commissioner Watt bad similar problems."
"The impression that I was given in my conversations with the Chairman
and with Commissioner Smith was that on occasions Mr. Lewnes was given
instructions by the Commission as far as the way certain things should be
drafted, certain things should be done, and he was not complying with those
instructions."
Tr. p. 40.-"My impression is, and the reason I spoke to Commissioner Smith
is because of his additional years on the Commission, that it had been going
on for some time."
Fee also testified that he was aware of the incompatibility and strife between
Lewnes and Journey.
Tr. p. 61.-"My recollection is that at one point I talked with Commissioner
Smith about the problems to see, to corroborate whether there was a problem.
My recollection is that Commissioner Smith saw the same problem."
"Mr. Lent, I am just very certain that the action taken, if you want to use
the word `against' Mr. Lewnes, was not linked in any way to the testimony he
gave in front of Congress."
Ti'. p. 63.-"I spoke to Commissioner Smith . . . My recollection is that he
corroborated that he was disple~ised, as was the Chairman, as was Commis-
sioner Watt."
Tr. p. 67.-"I don't remember having a specific conversation with Commis-
sioner Watt."
Ti-. p. 78-9.-"I do know of the incompatibility with his superiors." Fee testi-
fied he knew this because of "Specific conversations with the Chairman, specific
conversations with Commissioner Smith, knowledge of the dissatisfaction of
Commissioner Watt, conversations with Mr. Journey."
INTERVIEW WITH COMMISSIONER WATT
At the outset of the interview, Watt was reluctant to discuss the Lewnes
matter, stating: "What's the point of this?. . . I don't know what your motives
are . . . administration is not responsibility . . . I don't care about the Subcom-
mittee's hearings" . . . etc. We reiterated that Fee had referred to Watt's
problems with Lewnes during his testimony and that we simply wanted to
develop the facts, to give Watt an opportunity to confirm or clarify Fee's
statements. Watt seemed to be satisfied and the interview proceeded.
Watt was not aware of any meeting held by Dunham to discuss the Lewnes
matter, claiming "It would be out of character for Dick to have such a meet-
ing." He explained that Dunham insists on conducting the Commission's busi-
ness out in the open without any secrets, and that any such meeting would be
inconsistent with Dunham's policy and philosophy.
Watt said he became a Commissioner in November 1975 and was "green as
grass" at that time regarding FPO work. He said he came from the Interior
Department where he was used to delegating responsibility to others and rely-
ing on their competence to furnish him the full facts of a situation, pro and
con. He said he had been at the Commission only a short time when he recog-
nized there were problems with Lewnes' work. Lewnes had a general reputation
at the FPC of being an aggressive advocate and a vindictive person. At Commis-
sion meetings, Lewnes only espoused what he wanted; hence, his strong advo-
cate position. Lewnes was not alone in this; other lawyers at the Commission
were the same way. This situation ultimately led to the "open" Commission
meeting concept, one purpose of which was to make staff people accountable
and to limit the number of staff participating in the meetings.
PAGENO="0499"
.493
Asked whether Lewnes' ad~vocacy was always slanted one way, Watt indi-
cated it was not. The main problem was "We* didn't get all the information.
We couldn't get him to do what we wanted him to do. When I have problems
with lawyers,I call the General Counsel, not a particular lawyer. I don't know
which lawyer is causing the difficulty. It's a matter of accountability." Watt
said he could not recall having discussed the Lewnes problem with Fee, but
assumed Fee would have had every reason to believe that he (Watt) was
displeased with Lewnes because he made no attempt to conceal his dissatis-
faction. Watt said, "Lewnes would eat your lunch if you turned your back." He
said he did not like adversary presentations before the Commission and went
to Dunham on more than one occasion to complain about Lewnes. Dunham told
Watt he was working on the problem, and Watt had to go along with Dunham's
decision to keep Lewnes on for awhile.
Asked if he felt the Commission had benefited by Lewnes' promotion to AU,
Watt replied, "Yes, mainly by being out of this office (Assistant General
Counsel)." Asked if he had endorsed Lewnes for the AU job, Watt said that
he had and was most happy to do so. He said Lewnes stopped by his office to
ask if he would "sign off" on the proposed promotion to AU and Watt indicated
he signed the paper as soon as Lewnes handed it to him. He said Lewnes was
in his office only a few moments and seemed very pleased that Watt approved
his request so promptly. Watt was asked if he had any reservations at the time
that Lewnes, as an AU conducting FPC proceedings and writing decisions
in those cases, might not continue as an "aggressive advocate" of his own posi-
tion. Watt said that that possibility had troubled him at the time and he
gave it a lot of thought. He finally decided that here would be a check and
balance system On Lewnes" decisions as AU because parties to the proceedings
could always file exceptions to his opinions and that Watt would rely on this.
He explained that the difference was that as an AU, Lewnes' opinions and
decisions, would be a matter of public record subject to the scrutiny of all
parties, whereas, as Assistant General Counsel, Lewnes was presenting "in-
house" opinions that were non-public.
Watt concluded by saying that if Dunham is asked the fair and proper ques-
tions and given an opportunity to relate the full story at Friday's hearing his
testimony will prove very embarrassing to Lewnes and also to Mamone. He
declined to elaborate.
Mr. Moss. The Chair announced earlier he intends to call both
Commissioner Smith and Commissioner Watt.
Mr. LENT. I think these memoranda are important to our con-
sideration because the original thrust of the committee's inquiry was
to the effect that these four witnesses, including Mr. Lewnes, suffered
as a result of testimony before this committee and before the sub-
committee of Congressman Dingell.
Mr. Moss. That is correct.
Mr. LENT. These two memoranda seem to give some credence to the
opposite conclusion, that in fact Mr. Lewnes' difficulty personnel-
wise was unrelated to his testimony.
Mr. Fee, I think Mr. Dunham, and Mr. Journey have testified to
conversations that they have had where these iwo Commissioners
have voiced some complaint with the work product or lack thereof
of Mr. Lewnes.
My colleague, Mr. Waigren, today quoted from part. of the first
memorandum regarding the interview with Commissioner Smith, but
I think that he might have left some of the material out.
I would like to have leave just to quote directly from it.
`According to this memorandum, the first interview with Commis-
sioner Smith took place on August 19, 1976. At that time Commis-
sioner Smith said in part, or the memo says in part:
Smith's complaint was that Lewnes' section did not package the cases neatly
but that this was a problem indigenous to the section and that the problem
PAGENO="0500"
494
stemmed from the nature of the beast. Smith had voiced similar complaints to
former Chairman Nassikas.
Then on page 3 of the memo there is another quote out of context:
On March 15, 1977, Smith was re-interviewed and reviewed Fee's testimony
with regard to the references to him. He stated that while Fee did discuss
Lewnes with him on one occasion sometime shortly before Lewiles became an
AU, he did not recall saying anything to Fee to indicate that he was dissatis-
fied with Lewnes because of any non-compliance with drafting instructions.
He reiterated to us that Lewnes is a friend and that his criticism both to
Dunham and Fee centered around the packaging problems indigenous to
Lewnes' section. Smith believes the basis for Fee's testimony may have been
instances where an order was evolving over a period of several weeks and
Lewnes' section would have to make a 180-degree turn in the position they
were advocating based on a request by the Commission. He said that it was
understandable why Lewnes' section would be unhappy with such a situation.
I would like Mr. Journey to clarify for me what, in his opinion,
Commissioner Smith must have been referring to when he talked
about packaging problems indigenous to Lewnes' section."
Mr. JOURNEY. It goes back to the same point I made earlier. When
the orders would come back, I would get a call from someone in
Commissioner Smith's office saying, in effect, "Hey, this is not the
way we told you to do it." or "Where is that order?" or "What
happened to it?" or "How long has it been there?" or "When will you
get this order up?" or "How did it drop out of the line of adminis-
trative control ?"
The packaging problem also dealt with how things were described
factually. There were cases that I was talked to about where the
recitals were not right. They did not reflect the pleadings. They did
not reflect what was in the documents, and that kind of thing. I be~
lieve that is the way I interpret packaging. That is the way it came
down to me.
Mr. LENT. I am referring now to the second memorandum, the in-
terview sheet with respect to Commissioner Watt, which I believe
you have before you.
Mr. JOURNEY. Yes.
Mr. LENT. At page 2, last paragraph down, and again I quote
out of context:
He
meaning Commissioner Watt
said he had been at the Commission only a short time when he recognized
there were problems with Lewnes' work. Lewnes had a general reputation at
the FPC of being an aggressive advocate and a vindictive person. At Com-
mission meetings Lewnes only espoused what he wanted; hence, his strong
advocate position. Lewnes was not alone in this; other lawyers at the Com-
mission were the san~e way.
Then again, quoting out of context, the second paragraph at the
top of page 3:
Watt said he could not recall having discussed the Lewnes problem with
Fee, but assumed Fee would have had every reason to believe that he. Watt,
was displeased with Lewnes because he made no attempt to conceal his dis-
satisfaction. Watt said, "Lewnes would eat your lunch if you turned your
back." He said he did not like adversary presentations before the Commission
and went to Dunham on more than one occasion to complain about Lewnes.
Dunham told Watt he was working on the problem, and Watt had to go along
with Dunham's decision to keep Lewnes on for a while.
PAGENO="0501"
49~5
Asked if he felt the Oommission had benefited by Lewnes' promotion to ALF,
Watt replied, "Yes, mainly by being out of this office."
Then further, at the bottom of page 3, the last paragraph:
Watt concluded by saying that if Dunham is asked the fair and proper ques-
tions and given an opportunity to relate the full story at Friday's hearing, his
testimony will prove very embarrassing to Lewnes and also to Mamone. He
declined to elaborate.
I would like to ask Commissioner Dunham whether this refreshes
his recollection of any conversations that he might have had with
Commissioner Watt about Lewnes' work product.
Mr. DUNHAM. No, it does not particularly refresh my memory.
As I pointed out to Mr. Dingell, it is a common occurrence for one
colleague or another to say, "This lawyer did not do a good job
on this opinion" or "I have a problem with that opinion." That is
part of the process, it appears to me.
I do not dispute the fact that well over a year ago he might
have, but I would qualify it only to the extent that those types of
conversations occur all the time in the public meetings, in the individ-
ual meetings, in the hall, or some other place. There are complaints.
That is normal in any bureaucracy and in any administration. There
are always personality clashes, substantive clashes, disagreements. I
perceive those as management problems to be resolved as well as a
resolution of the substantive difference stated.
However, these are regular occurrences. I don't think there is any-
thing particularly derogatory or anything personal about comments
like that.
Mr. LENT. This is perhaps the last time I will have an opportunity
to question you, Commissioner Dunham, Mr. Journey, or Mr. Fee.
I want to say that I thank you for your testimony. I have found
it very enlightening and complete and certainly well-backed by
evidentiary material which I assume will appear in the permanent
record of this committee.
I had wanted to make a statement, and perhaps I should have
assert~d myself at the time, when Mr. Dingell was here. I would
have said to Mr. Dingell, and I assume he will read the record of this
hearing, that at least to this member it is abundantly clear from
this record, and I have been here throughout the 4 days of hearings,
that these four gentlemen about whom we are concerned have not suf-
fered as a result of testimony before any committee of this Congress.
That is my conclusion.
As a matter of fact, I don't think in the cases of at least two of
these four gentlemen that they have suffered in any way. One of them
is now a judge. The other under oath testified that he thought he was
better off now that he had been transferred to the Hydroelectric
Section and it was better for his career.
I would hope that when Mr. Dingell has an opportunity to review
the record he will review the whole record. I would hope that he
would keep an open mind-I know he will-and come to the same
conclusion I come to.
I wonder whether I might turn the questioning over to Mr. Wunder
at this point.
Mr. Moss. You may.
PAGENO="0502"
496
Mr. WUNDER. One further question, Mr. Fee.
Do you have any specific recollection of Chairman Dunham saying
to you, "I want you to find a way to fire `George Lewnes"?
Mr. FEE. I do not.
Mr. WTJNDER. Do you have any specific recollection of Chairman
Dunham saying, "I want you to find a way to separate George
Lewnes"?
Mr. FEE. I do not.
Mr. WUNDER. Were the discussions you had with Chairman Dun-
ham of a general managerial nature about personnel problems?
Would that be a fair characterization?
Mr. FEE. As I testified before, Mr. Wunder, my recollection of that
conversation with Mr. Dunham is hazy. The best construction of it
available to the committee is the notes taken by Mr. Braun and Dr.
Galloway in my August 6 interview with them.
Mr. WUNDER. This is on page 19 of the transcript, Mr. Fee, March
14:
Fee was told by Dunham, "Curt, look into it. See if we can get George Lewnes
out of that job."
Mr. FEE. That would be my best reconstruction of the conversation
to which I alluded.
Mr. WUNDER. Could it be, Mr. Fee, that you have misinterpreted,
misconstrued, or misunderstood your charge from Chairman Dun-
ham, in that in that, discussion he said, "See if we can get George
Lewnes out of that job"? Could you have misconstrued that to mean
separate Mr. Lewnes and that is why you inquired of Mr. Minor
to find out how you separate a lawyer?
Mr. FEE. No. Separation is not a word that would have been used.
That possibility is rarely open to you. I have been in Government
long enough to know, as has Chairman Dunham, that when you
have personnel problems under the Civil Service protection, you do
not try to separate somebody from the Federal Service except in
extreme cases. It takes an overwhelmingly convincing record, and
even then you are not often successful.
Mr. WUNDER. Do you believe, after hearing Chairman Dunham's
testimony, and having the benefit of that to refresh your memory,
that what Chairman Dunham meant when he said, "See if we can
get George Lewnes out of that job," he meant transfer him?
Mr. FEE. Again my recollection is fuzzy. I inferred from the con-
versation, that the Chairman would like to see Mr. Lewnes at another
job. Things were not going well, as I testified.
Mr. WUNDER. That was your inference. Is that correct?
Mr. FEE. Yes, `that would be my inference.
Mr. WUNDER. Not as the re~ult of any specific language or words
stated by Chairman Dunham. It would be an inference by you.
Mr. Moss. Just a moment. This witness is now being led very care-
fully to directly contradict his sworn testimony of the other day.
You remember that you did give sworn testimony the other day?
Mr. FEE. Yes, I remember.
Mr. Moss. You are now disavowing that testimony, are you?
Mr. FEE. No, I am not.
PAGENO="0503"
497
Mr. Moss. Then let me point this out. I made this direct question
to you:
Just reviewing the contemporaneous memorandum filed with the committee
reflecting an interview with you on August 9, 1976, by Mr. Braun of this com-
mittee, he reports as follows:
Fee was told by Dunham, "Curt, look into it. See if we can get George Lewnes
out of that job." Is that correct?
Mr. FEE. Yes, sir.
Mr. Moss. Then we have established that you were told by Dunham to get
rid of or get Lewnes out of the job.
Mr. FEE. Yes, sir.
Mr. FEE. Unless I misunderstood the question, I do not think I was
contradicting myself.
Mr. Moss. Mr. Fee, if that question I asked could be misunder-
stood by anyone who understands English, I don't see how.
Now, the nuances I am getting as you respond to the questions
of Mr. Wunder are contradictory to that to anyone who understands
English.
Mr. LENT. Mr. Chairman-
Mr. Moss. Yes, indeed, Mr. Lent.
Mr. LENT. I would like the record to show my exception to that.
Mr. Moss. I am very pleased to have the record reflect your ex-
ėeption.
Mr. Reporter, take note of that.
Mr. LENT. The question was: "See if we can get George Lewnes
out of that job."
Mr. Moss. That is correct.
Mr. LENT. You are interpreting that to mean "fire."
Mr. Moss. I went beyond that.
Mr. LENT. Mr. Fee is interpreting that to mean transfer. That is
my interpretation.
Mr. Moss. "Then we have established that you were told by Dun-
ham to get rid of or get Lewnes out of the job"-get rid of or get
him out of.
"Yes, sir."
Mr. LENT. And Mr. Fee is testifying that "get rid of" or "get him
out of a job" means something other than the connotation you have
put on it, which is to fire him.
Mr. Moss. It means something other than "get rid of" or "get him
out of a job."
That is the thing I find difficult to believe.
Mr. LENT. I get rid of employees from a job without firing them
on occasion.
Mr. Moss. You get rid of them without getting rid of them?
Mr. LENT. If I have an Administrative Assistant and I want him
to be a Legislative Assistant, I get rid of him from the job but I
don't fire him.
Mr. Moss. You usually have to downgrade him if you do that.
Mr. LENT. There is no testimony of anybody being dOwngraded
here.
Mr. Moss. We will get into that later. I have a few questions on
that. I don't know of any who got promoted, but we will examine
that later.
PAGENO="0504"
498
Mr. LENT. Mr. Lewnes got promoted.
Mr. Moss. He did not.
Mr. LENT. He said as far as he was concerned it was a promotion.
Mr. Moss. Mr. Lent, you and I can engage in colloquy for some
time. The point is this: Mr. Lewnes was on an administrative law
judge list. He took himself off. Then, after feeling frustrated and
being told very directly, I believe by Mr. Minor, that he was in dis-
favor, he reactivated himself on the list, and it is in that context
and that context only, a very narrow context, that he felt he was
better off by getting out.
He was being relieved of the burden of the kind of abrasive rela-
tionship which was developing between himself and the Commission,
and only in that context.
I can support that by an abundance of testimony.
Mr. LENT. Mr. Chairman, the minority counsel is perfectly within
his rights, is he not?
Mr. Moss. I have not challenged him.
Mr. LENT. I have asked Mr. Fee to explain the testimony.
Mr. Moss. The Chair is most anxious that he do so. The Chair
wants to be certain that Mr. Fee is aware that he is creating some
very interesting ambiguities in this record.
Mr. WUNDER. Thank you, Mr. Chairman.
What I am seeking to establish is this. See whether this is a fair
characterization of what happened.
You had a discussion with Chairman Dunham. You had discussion
with others. You testified that you were aware of an untenable
personnel problem.
On the basis of these discussions, on th,e basis of your discussion
with Chairman Dunham whom you said indicated displeasure with
Mr. Lewnes' performance, you drew an inference from that and
you looked into the options available to you as a result of what you
heard.
Would that be a fair statement?
Mr. FEE. I think we are walking down that very treacherous path
of semantics. It is clear that I had several conversations with the
chairman, as I have testified. I knew that over a period of weeks,
maybe 1 month, the chairman was not pleased with the situation. At
least two other Commissioners were not pleased. That is my impres-
sion.
Clearly, my charge was to find out what the alternatives would be.
If "fire" is the word which is applied to it in the record, so be it;
but as long as fired is not construed to mean separation from the
public payroll, which is clearly unlikely recourse in Mr. Lewnes'
situation.
Mr. WUNDER. You are making a distinction between fire and sep-
arate from service. Fire can mean take out of one job and put into
another?
Mr. FEE. That gets into the semantics. I don't know whether it is
really worth pursuing.
The objective was plain, to get Mr. Lewnes another job. I want to
say again that I stand on the testimony I have given and the notes
of the August 10 interview.
PAGENO="0505"
499
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Moss. Mr. Fee, as long as you are sort of warmed up here, we
will continue.
Mr. FEE. Thank you.
Mr. Moss. Mr. Minor had a discussion with you. His testimony
under oath is as follows
What did Mr. Fee say to you?
Mr. Mixon. He asked me to look into the procedures to be followed in sep-
arating an attorney from service.
Mr. LEMOV. Separating-firing?
Mr. Mixon. Yes, sir, firing.
Mr. LEMOv. Firing an attorney?
Mr. MINoR. Yes.
Mr. LEMOV. Did he give you any reasons?
Mr. MiNoR. No, he did not.
It goes on in that vein.
Then we have your further exchanges with Mr. Gore because, you
may recall, Mr. Fee, this was a significant point in the examination
by this subcommittee of you the other day.
It. was not a matter of a semantic exercise but it was a matter of
attempting to determine hard facts. We cannot lightly dismiss it as
a simple case of semantics.
Mr. GORE. Might I request staff to provide the witness with a copy of the
summary? This is the Fee interview of August 9, 1976.
In the second paragraph I see the statement: "Fee had conversations with
Runham regarding Lewnes-Dunham said there is a problem here."
Then it goes on: "Fee was told by Dunham"-again this direct quote-"Curt,
look into it. See if we can get George Lewnes out of that job."
Dunham asked Fee to talk to Lewnes.
He said:
I skipped a sentence there.
Then it goes on:
Fee came away from the Dunham conversation with a consensus feeling.
Dunham asked Fee to talk to Lewnes. So Fee went to Ed Minor and asked
Minor, "If we want to get rid of George Lewnes, how do we do It?"
This confirms Mr. Minor's statement.
This, of course, was sometime ago. At the time of this interview you seemed
to be a little bit clearer as to whether or not the Chairman, Chairman Dunham,
had requested you to find a way to separate or to fire Mr. Lewnes from his
position.
Could your recollection have been fresher then at the time of this interview?
Mr. FEE. Without question, Mr. Gore. This is the disadvantage I am under.
This was an event which took place over a year ago.
I didn't think about it again until I was interviewed in August. Clearly my
recollection was better then. I have no problem with this statement.
Again you have no problem with the statement which Congress-
man Gore read to you.
A lot hinges on this, again. As I say, it is not semantics but sub-
stance. It goes to the very heart of the issue.
Mr. Chairman, you stated that you had not had specific discussions
with the members of the Commission that you could recall.
Mr. DUNHAM. That is right.
Mr. Moss. Do you recall telling Commissioner Watt that you "were
working on the problem (Lewnes) and Watt had to go along with
your decision to keep Lewnes on for a while?
PAGENO="0506"
500
Mr. DUNHAM. No. I have just seen this and I did not discuss with
either Commissioner Watt or Smith the investigative work of your
committee.
Mr. Moss. To the best of your recollection, this is not an accurate
statement by Commissioner Watt?
Mr. DUNHAM. I don't believe I said that.
Mr. Moss. It is either accurate or it is inaccurate. It cannot be in
a gray area in between.
I only want this record to reflect whether it is accurate or in-
accurate.
Mr. DUNHAM. I will not dispute the statement, if that is what you
mean. You asked whether I recalled it.
Mr. Moss. You do not dispute it and yet you say you d~d not dis-
cuss it. I don't understand.
Mr. LENT. Memo of March 16?
Mr. Moss. The Chair will clear it up.
Watt said he could not recall having discussed the Lewnes problem with
Fee, but assumed Fee would have had every reason to believe that he was dis-
pleased with Lewnes because he made no attempt to conceal his dissatisfaction.
Watt said, "Lewnes would eat your lunch"
This was read into the record.
He said he did not like adversary presentations before the Commission and
went to Dunham on more than one occasion to complain about Lewnes. Dunham
told Watt he was working on the problem, and Watt had to go along with
Dunham's decision to keep Lewnes on for awhile.
The context of that goes beyond just perhaps the mere e~ffort to
transfer. It is to keep him on for awhile.
How do you read it?
Mr. DUNHAM. There are two parts to it?
Mr. Moss. The first paragraph at the top of page 3, the last sen-
tence of that paragraph.
Mr. DUNHAM. Yes. The first part of the last sentence, "He didn't
like adversary presentations before the Commission" is what I
alluded to earlier.
Mr. Moss. I realize that.
Mr. DUNHAM. He was working on the problem. The problem in
that context was the problem of organizing the meetings. As I
stated, it was difficult for any of us, particularly the three of us who
were new, to find out who was representing what position. I discussed
that later on.
"Watt had to go along with Dunham's decision to keep Lewnes
on for awhile."
I don't recall the context of those words.
What I am saying is that I would concur in the first part up to
the comma-the problem being the organization of the meeting so
that the confusion and the argumentation which occurred within
meetings on individual cases could be avoided. I referred to the orders
which were adopted, the administrative and procedural orders.
Mr. Moss. Mr. Lewnes' complaint was not over a simple matter of
relocating but rather the fact of being move f~tr away from the Com-
mission and being denied any kind of a place where books or papers
could be placed, as his testimony shows quite clearly.
PAGENO="0507"
501
Mr. DUNHAM. I am not sure but I think the administrative law
judges have their own libraries.
Mr. Moss. This is not when he was an administrative law judge
but an associate or Assistant General Counsel.
On page 33 of the hearing of March 10 we have:
Mr. LEWNES. What it was was that they rearranged the situation. I guess
you would call it the meeting process.
The General Counsel and Deputy sat basically where they should sit but
Mr. Lotis and I were moved practically to the door in the back, no table to
put your stuff on, sitting there with your books in your hands. Obviously, you
were to speak-although no one said it, but it was obvious at least to me in my
view-speak when spoken to and not when you feel you should.
I think perhaps the committee might have to make a physical ex-
amination of the seating arrangement that was ordered into being on
the date Mr. Lewne.s refers to and then examine the seating arrange-
ment which had existed prior to that time.
You know, I am now in my 30th year of being in elective office.
In all except 2 of those years I have been a member of investigating
committees.
I learned there is great subtlety to the ways departments and
agencies can move against an employee who falls in disfavor.
I have encountered some at State who had an office and no work,
nothing to do. They were not demoted. They were not reprimanded.
They just had nothing to do.
We hear from you, Mr. Journey, that Mr. Lotis had been really
elevated by having his authority over a staff of 18 attorneys taken
away while he was assigned to two certificate cases in the hydro
field. Is that correct?
Mr. JOURNEY. No, Mamone. You said Lotis.
Mr. Moss. Lotis. I am not talking about Mamone but I am talking
about Lotis. There are two appeals cases there.
Mr. JOURNEY. They are key compensation curtailment cases. He
is working-
Mr. Moss. We will examine what he is working on.
Again, I think the committee will have to make some independent
determinations.
It is difficult for me to envision a man being satisfied in a job
where he has responsibility for two cases as contrasted to the much
broader responsibility he had prior to the time that he was relieved.
Let me point out the interesting coincidences which occur here.
We have Mr. Lewnes, a very senior man who worked with you
quite a number of years. -
Mr. JOURNEY. Yes.
Mr. Moss. A competent man. You cannot challenge that because
the official records of this Government say he was a very competent
man. As a matter of fact, he had been recommended for distinguished
recognition of that competency.
After his appearance here, a series of events took place. Maybe it
was just the emergence of Mr. Watt on the scene who found he didn't
like him. Maybe it was the new Chairman. However, he had been
there a long time and had gone through at least four Chairmen,
had he not?
Mr. JOURNEY. Three or four; I don't know.
PAGENO="0508"
502
Mr. Moss. Well, it goes back to the 1950's and we have had at
least four. We have had White-
Mr. JOURNEY. Yes, at least four.
Mr. Moss. So he then finds things are so placid and comfortable
that he reactivates his name on the administraive law judge list and
seeks a way of getting out of the position which he has now found
untenable.
Totally unrelated to the testimony before the two committees of
the House, but an interesting coincidence.
We have another man testifying. He suddenly, again after years
of distinguished service and nomination for a special recommenda-
tion, which was an act in which you concurred, he finds that sud-
denly his talents and his expertise in the gas field are no longer of
value to the Commission but he is going over into hydro, an area
where he is not expert.
Another coincidence: You say it is because you wanted to rotate.
I look at a list of 160-pius attorneys and among the senior ones I
find only a very few, those who appeared before this committee, who
were involuntarily reassigned. This is another interesting coincidence.
Then we have the case of Mr. Lotis. He had been an economist. He
went to law school here in the District of Columbia and qualified for
the District Bar. He also had an assignment, he testified. He finds
that he is relieved of that assignment.
Don't shake your head at me unless you want to be sworn and
testify [referring to Mr. Griffin]. I have had to eject one person
from this hearing room and I will eject another if I have to. If you
want to undertake neck exercises, go out in the hall. The man behind
you knows who I am talking to. I was not talking to you, Chairman
Dunham.
Mr. Lotis is then upgraded. There is no increase in salary but his
responsibility is taken away and he is assigned two cases. This is
another interesting coincidence.
Now, I can believe coincidences. I have encountered them. Any-
one who lives has encountered them. But repeated and repeated and
repeated?
Then we have Mr. Wofsy who goes into the job vacated by Mr.
Lewnes. He gets the kind of order which he finds he cannot accept,
and to use his ~phrase, "He has to shave each morning." Apparently
he has to look into a mirror.
Now are you telling me that this is totally unrelated to a thing
that they did before the committees of Congress?
Mr. JOURNEY. Mr. Chairman, I am not aware that Mr. Lotis has
ever testified before Congress, but let me tell you what I think-
Mr. Moss. Let me qualify that because his memorandums were
placed in the Indiana hearings and were discussed in the Indiana
hearings.
Mr. JOURNEY. As I understand it, Mr. Chairman, and I think you
should address this to Chairman Dunham-in realining the work
under the Touche Ross program-
Mr. Moss. Let me caution you. You are not telling me that these
changes were in response to Touche Ross, are you?
Mr. JOURNEY. I am telling you, Mr. Chairman, that, as I under-
stand what was happening with Mr. Lewnes and Mr. Mamone and
PAGENO="0509"
503
Mr. Wofsy and Mrs. Lotis, if I may speak to those because it is
important-
Mr. Moss. My question to you, Mr. Journey, and it is important
to me that my questions be answered: Are you telling me that the
changes that I have just recited as interesting coincidences were in
response to the Touche Ross study?
Mr. JOURNEY. I am telling you, Mr. Chairman, that with respect
to Mr. Lotis, as I understand it, he had gone to Chairman Dunham
or the Executive Director and said that he wanted to find employ-
ment elsewhere. We went ahead with the redistribution of the work,
finding people to do the jobs.
The Chairman asked for a new face, fresh approach to rate work.
Mr. Moss. Mr. Lotis also told the Chairman that he planned to
remain with the Commission until after the November 1976 election.
Mr. JOURNEY. I can only-
Mr. Moss. Is that correct, Mr. Dunham?
Mr. DUNHAM. Yes, sir.
Mr. Moss. So that is sort of irrelevant.
Mr. JOURNEY. I am just telling you as I understood it, Mr. Chair-
man, as it evolved.
The rate settlement task force, the part II regrouping, the splitting
of the rate work from pipelines and electric, and putting the pipe-
line rates with the pipeline certificates, was one part of Touche Ross.
Another part was to put part II and part III electric together;
another part was to put producer rates and producer certificates
together.
Mr. Moss. Was there not also a part which urged the Commission
to utilize each of the staff to the maximum of their expertise?
Mr. JOURNEY. Yes, sir; and in the selection process I think that
was done, as I understand it.
The man is now doing the part II and part III electric work was
a man who had a history in this over a period of 10 years longer
than Mr. Lotis, Daniel Goldstein. He and Bill Lindsey have turned
the electric rate backlog around.
At the time that Mr. Wofsy asked to be relieved-
Mr~ Moss. Let's look at that backlog now because, frankly, we
cannot have anything on this record that is definitive of what you
accomplished there until I have a breakdown of the kinds of cases.
Many of those, as I understand it, are not adversary proceedings.
They are not unduly complex. They can be disposed of rather
promptly.
What I would want to see is how effectively you ate into the back-
log of the caseload. You stated you would supply that for the record
in a previously reserved section of this hearing.
Mr. JOURNEY. With respect to hydro, it is already in my state-
ment with respect to rates.
Mr. Moss. Let me tell you about the relicensing. I am quite f a-
miliar with that. You may recall I started some inquiries when I
still chaired the Government Operations Subcommittee regarding
the lag is FPC. efforts to relicense as the Federal Power Act of 1925
mandated they be relicensed. Therefore, I am quite familiar with
that.
PAGENO="0510"
504
I assume that the backlog has been there for some time and 1
would not be surprised if I should undertake these hearings 3 to 4
years from now and the backlog will still be there because there does
not seem to be any great drive to get rid of it.
Mr. JO1JRNEY. What I am now directing my attention to, Mr.
Chairman, you will find on page 9 of my letter of March 14, 1977,
to the subcommittee's chief counsel.
There are two paragraphs which sort of summarize what the
electric backlog is now in part II.
If you look at enclosure 5 to that letter, you will see a memo-
randum of January 19 from William Lindsey to the Chairman.
If you look at the chart-
Mr. Moss. We will, of course, do that, Mr. Journey. We will also
look at the quarterly report on electric regulatory activities of De-
cember 1976. This begins just prior to the October reorganization
where we have some figures on electric case backlog. We will have
to relate this one to the other so they become a coherent set of figures
in this record.
Mr. JOuRNEY. All right.
I know Mr. Cockrell is not part of this hearing, Mr. Chairman,
but he is involved-
Mr. Moss. He may well become part of it because we intend to be
very thorough on this.
Mr. JOuRNEY. If I may speak to Mr. Wofsy. As I have testified
before, Commissioner Watt had said by reason of the handling of
the conversion from gas to oil on the El Paso line, the environmental
impact statement, he did not want Mr. Cockrell on the case.
Mr. Wofsy came down and told me about it, or I told Mr. Wofsy
about it. He said-I forget whether it was that day or the next day-
he said, "Drex, if I can't choose my lawyers on the cases, I want to
be relieved."
I then asked Mr. Keating to take over on an acting basis for Mr.
Wofsy because the Chairman had decided he was not going to fill
that assistant's job on a permanent basis pending his consideration
of overall personnel matters.
Mr. ICeating handled it until about June of 1976, at which time
Mr. Grant took it over on an acting basis.
`At that time, sir, we were trying to find out how to put the work
together to get it moving.
Mr. Grant was doing the certificate pipeline work and the curtail-
ment work. Mr. Gilmore was doing the producer work. Mr. Gold-
stein had been selected by the Chairman to work with Mr. Lindsey
on the electric rate settlement task force. He was put on an acting
basis to see whether he could do it.
As I understand it, during the summer of 1976 Danny `Goldstein
proved that he could really run it.
What had been Mr. Lotis' work schedule, which was pipeline rates
and some interstate electric rates but not all interstate electric rates,
because Mr. Lamke had the interconnection cases, was split in the
reorganization where the pipeline rate work was moved. The pipeline
rate work went back to the Gordon Grant area of operations and
the interconnection and corporate regulation under the Power Act
PAGENO="0511"
505
went with the electric rate regulation part, so that the power pooling
and the interstate rates were together.
There was resource planning and development with economic regu-
lation under the Power Act, parts II and III.
There was hydroelectric licensing in a separate section. There was
ce'rtificate work, pipeline and curtailments and rates under one
Gas Act section; and producer rates and certificates and offshore
pipelines, because they tend to be related to producer work, in an-
other section.
As I understand the program, the Chairman did not want to have
a reorganization around people that may or may not be there, and
so he in effect approved these people in these jobs believing that they
were the stationary pivots around which the reorganized work could
flow.
Mr. Moss. Of course, we will review that.
I was looking again at the figures here, Mr. ,Journey.
I find that you stated there was a reduction in pending cases from
156 in September to 129 in January of 1977.
Mr. JOURNEY. Yes, sir.
Mr. Moss. According to the Federal Power Commission quarterly
report on electric regulatory activities, we find that the total number
of electric rate cases pending in September of 1976 was 230. It
declined to only 223 at the December 31, 1976 date.
During the quarter the Commission disposed of 27 cases and re-
ceived 22 new cases, which accounts for reduction by five in the total.
Of the 27 cases disposed of, five were the result of Commission
opinions and 22 were the result of settlements negotiated when Mr.
Lotis was Assistant General Counsel in charge of rates before the
October 1976 reorganization.
Mr. JOURNEY. The settlement task force had taken over in June.
Mr. Moss. I used the date here "before the October 1976 reorga-
nization."
Mr. JOURNEY. Yes, sir. What I am saying-
Mr. Moss. Are you saying the figures I cited are incorrect?
Mr. JOURNEY. I am saying that I think you have misinterpreted
some of the figures because some of the work productive of that was
really under the aegis of the settlement task which was established
in June.
Mr. Moss. We will quickly find out and we will hold the record
open for corrections.
Mr. JOURNEY. They should be reconciled.
Mr. Moss. Yes, they should be.
Which cases did the settlement task force settle?
We will ask the record be held open for that.
Mr. JOURNEY. They all went through the settlement task fOrce, as
I understand it.
Mr. Moss. We will examine that.
[The following memorandum was received for the record:]
PAGENO="0512"
506
March 29, 1977
MEMORANDUM TO: Drexel D. Journey
General Counsel
FROM : Daniel Goldstein
Assistant Litigation Counsel
SUBJECT : Question on number of rate cases posed
by Chairman Moss on March 18, 1977
(Tr. 213-214).
At the hearing Mr. Moss compared the number of cases
pending as of September 30, 1976 as 230 and the number
pending as of December 31, 1976 as 223. Those numbers appear
in FPC News Release No. 22755 and No. 23003.
The quarterly statistics in those news releases cover
all cases under Parts II and III set for hearing. They
include: electric interconnection cases under Section 202,
acquisitions under Section 203, securities under Section 204,
accounting cases under Section 301 and a few rate cases not
assigned to the Bureau of Power's Section of Electric Rate
cases. Those cases breakdown as follows:
Cases Assigned Section
of Electric Rate Cases Other
Bureau of Power Cases Total
September 30, 1976 186 44 230
December 31, 1976 172 53 223
The numbers in Mr. Lindsay' s memo of January 19, 1977
which you submitted to.Chairman Moss are accurate and valid. How-
ever, they are derived from a different data base. Mr. Lindsay
took the total number of cases set for hearing and assigned to
the Section of electric rate investigations and subtracted cases
in which the latest checkpoint was either a topsheet filed or
staff hearing testimony filed. The 129 case figure was derived
from the attached computer sheet showing 172 cases for hearing
disposition less 43 cases (topsheets filed or testimony filed)
for a net total of 129.
Daniel Goldstein
Assistant Litigation Counsel
PAGENO="0513"
ELECTRIC RATE CASES -- FY 1977 CASE LOAD
ISSUE CA! F: 2 `Jā 77
DOCKETS AS
NUMAER OF CASES DOCKETS CC.~saLIoATEa
TOTAL AT 10 01 7b 191 134
OCCKF1 TEMS
ACCEPTED A 3 3
REJECTED, WITHDRAWN, OP. DISMISSED K~D 0 0
PENDIAG P 2 2
CASES INITIATED 11 8
CASES TFRIINATED T 30 20
TRANSFERRED
CASES FOR REARING DISPOSITION
AT HEARIRG CHECKPOINTS
TOPSHEETS FILED
________ PEFOFARING DR IIEARING STAGE
(STAFF 1 ESTIIIO;4y FILEDI
AWAITING COFTIISSION (JPINICN C 27 20
CQRJSS)Ori..E9!~_.4s~uE.o . CC ._. 12~ . .. 6
Sf1TLL7WNT AGITEFTER1 FILED ~ 5 22 14
SflTLEIFTjJ AGREEr~EN1 ACCEPT D SS 9 7
TOTAL 145
CASES IN PREPARATCRY STAGE 27 23
AMCIJNT SUSPENDED 1575, 104, 154
Fc'R' INvESTIGATIoNS LUWLJRDINATE RECORD FILE. PEPGRT FCP.N CONSOLID4TED ENTRY SHOWS A TO IDEi~TIFY
FYT CONS(JL IDA! ED OOCK~T 1TH SAME CFj[CKPUINT SYMIjOL, A TO IDENTIFY KEY CONSOLIDATED DOCKET FIlE
VŲIFERENT CIIELKPUINT SYJISLIL, ANO 9 IC EDETlIFy KcY REFERENCE DOCKET.
87-292 0 - 77 - 33
507
HEARING CONCLUDED
APA1TING JUDGES DECISION
JUDSIS DECISIOT4 ISSUED
x 0 0
172 122
TOP 23 20
H 19~ 11
RH 6
J 23 14
JJ 4 3
PAGENO="0514"
508
~he following was subsequently received for the record~
Page 214 of the transcript of March 18, 1977 includes
two unresolved issues:
(1) Reconciliation of numbers.
(2) Role of the settlement task force, including:
"which cases did the settlement task force settle."
The following paragraphs may be useful in helping to
resolve those issues.
The discrepancy between the sets of figures relating
to pending cases and settlements that appear in the record
stems from the fact that the sources and content of the
two sets are quite different;. The numbers quoted by
Chairman Moss on page 213 of the transcript are taken
from FPC quarterly reports on electric regulatory activi-
ties, whereas the numbers used by Mr. Journey were appar-
ently taken from, a memorandum from William W. Lindsay to
Chaizman Dunham dated January 19, 1977. The latter memo
appears to be the one referred to by Mr. Journey at page 8
as an attachment #5 to his letter of March 14 to Mr. Lemov.
The quarterly report numbers reflect all cases under
Parts II and III of the Federal Power Act, including inter-
connections and power pooling cases, cases involving terms
and conditions of rate schedules, jurisdiction cases,
security issue cases, mergers, and other miscellaneous
matters as well as proposed rate increases. The Lindsay
memorandum dealt only with proposed rate increase cases.
A second major difference is that the quarterly report
does not treat a case as terminated until all of the require-
ments for complete termination have been fulfilled. This
includes the filing of revised rates to reflect requirements
of Commission orders adjudicating specific cases or approv-
ing settlements in specific cases following Staff review.
It also includes ~he filing of the reports of completed
refunds where appropriate. These activities, most of which
PAGENO="0515"
509
are relatively routine, may consume a number of months
during which the quarterly report; would simply continue
to reflect the case as pending.11 The numbers contained
in the Lindsay memorandum appear to stem from an effort
to better reflect substantive activity on a more current
basis. Thus, "backlog" was defined as all pending electric
rate increase cases in which the proposed increases have
been suspended and set for hearing except thOse for which
a Commission order has been issued disposing of the case
or a settlement has been filed. The memorandum indicated
that the "backlogt' so defined had declined from 156 cases
in September 1976 to 133 cases as of January 1977. We are
advised that it has continued to decline steadily so that
as of about the 1st of April (when the Task Force ceased
to exist), it had dropped to 117 cases. This was roughly
the level of the "backlog" as of the end of 1975.
We are advised that during the period from August 1,
1976 through April 1, 1977, representatives of the STF
participated in about 80 settlement conferences. Generally,
these were attended by trial staff and conducted by the
Staff counsel. Among the purposes of this effort was to make
clear that the Commission encouraged settlements in all cases
where mutual agreement could be reached and to be as helpful
as possible in facilitating that agreement. No effort was
made to keep score as to who was most instrumental in bring-
ing about specific settlements. Efforts were also made to
expedite the filings of settlements once reached and to
expedite staff and Commission action on settlements once
filed. The Lindsay memorandum of January 19 indicates that
the electric rate case backlog situation has improved. To
the extent the STF may have contributed to that improvement,
all parties have benefitted. But we are advised that it
should not be concluded that the SIF "took over" settlement
activity after mid-1976. The trial staff continued to perform
the major part of the work and generally did so quite ably.
1/ See Lindsay memo of January 19, page 1, footnote #1.
PAGENO="0516"
510
Mr. Moss. I shall not prolong this. I have one other area where I
want to direct some questions.
Mr. Chairman, I addressed a letter to you following what I believe
was an impropriety committed before this subcommittee by a member
of your staff, an attorney by the name of Danny Boggs.
Mr. DUNHAM. Yes, sir.
Mr. Moss. It was an impropriety on a number of counts, but the
most important one was when he was asked a question, which even
if he had been counsel to Mr. Fee would not have fallen within
privilege. I did not ask him the contents or the substance of his advice
to Mr. Fee. I asked him merely whether he had been advising him on
a constitutional matter.
He declined to respond to that. At that point I exercised my au-
thority under the rules to remove him from this hearing room.
I had a message telephoned to you that he was not to appear again
in this hearing room until he was prepared to answer the question
and to tender proper apology to this subcommittee.
That remains the case. However, it may be necessary to go beyond
that.
I want answered in full the questions I directed to you by letter
of March 15, and I want carefully drafted legal opinions.
Your answer is not adequate, Mr. Chairman. While I recognize
you are not an attorney, neither am I. However, I make it my busi-
ness to know the rules and to know the laws under which I work.
To give me the response that you did in your No. 5 answer is not
at all meeting the needs of this committee nor treating this with the
gravity it deserves.
This is a subcommittee of the House of Representatives of the
United States, and it exercises the powers of the people. To be con-
temptuous of it is not something to be lightly undertaken. I shall not
tolerate it.
I expect to have a fuller explanation from you of the role.
You stated you requested Mr. Boggs to accompany Mr. Fee. That
was not responsive to my question.
My question was, "Did you direct Mr. Boggs to serve as Mr. Fee's
counsel at these hearings V'
Mr. Minor, who I understand is the counsel who would be more
appropriate for that, was in the hearing room. But you did not re-
spond to that.
You stated, "I requested Mr. Boggs to accompany Mr. Fee."
Well, he obviously accompanied him, but in what capacity I don't
know.
Then in No. 3, "Do the rules of the Federal Power Commission
permit counsel of the Commission to serve as counsel to witnesses
who appear before committees."
Is there a complete void in the rules of the Commission ~
Mr. JOURNEY. It is not specific.
Mr. Moss. Is there an inference?
Mr. JOURNEY. I think you could say that the lawyers for the Com-
mission are to do the Commission's work before the Congress or the
courts or before the Commission.
PAGENO="0517"
511
Mr. Moss. There again that is not responsive. You can draw some
inference. Some intent was made when the rules were drafted.
No. 4, "Does Mr. Boggs' job description include serving as counsel
to witnesses appearing before congressional committees?"
The response is not explicit.
Does it in any manner contain that provision? I am entitled to a
fuller response.
Mr. DUNHAM. Mr. Chairman, when I heard of the incident, I
want to assure you I was disturbed. I think I conveyed to your
counsel that I was disturbed when he called me.
He informed me that this letter would be forthcoming, and it did.
He called and we communicated on it.
In terms of the response to the letter, I will be willing and anxious
to withdraw this letter and-
Mr. Moss. Would you prefer to withdraw this letter?
Mr. DUNHAM. Yes, and reply more explicitly.
I apologize if it is not as complete as it should be. I had many
matters yesterday. I had not realized until somebody called, I believe
at 5:30 or 6.
Mr. Moss. I can understand that. Mr. Chairman.
As far as this committee is concerned, the letter does not now exist
and you may replace it with one more appropriate.
Mr. DUNHAM. All right.
Mr. Moss. I recognize this has been a long and a trying day for
each of you. These are not the kinds of hearings I prefer. They are
not the subject matter I find most constructive.
Nevertheless, to avoid them would not be meeting the obligation
that I assumed when I took the chairmanship of this subcommittee
and when I took a membership in the House.
I would ask all material requested be supplied for the record as
promptly as possible.
The committee will now stand adjourned.
[Whereupon, at 5 p.m., the hearing adjourned, subject to the call
of the Chair.]
PAGENO="0518"
PAGENO="0519"
ADVERSE PERSONNEL ACTIONS AGAINST. PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION
WEDNESDAY, MARCH 23, 1977
HousE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Wa$hington, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room
2359, Rayburn House Office Building, Hon. John E. Moss (chair-
man) presiding.
Mr. Moss. The subcommittee will be in order.
This morning we will hear from Commissioners James Watt and
Don Smith of the Federal Power Commission.
According to General Counsel Journey's testimony on March 18,
Commissioner Watt ordered him in the spring of 1976 during a
Commission meeting to "find areas of work for Mr. Mamone in
other parts of the Office of the General Counsel." Mr. Mamone was
then one of the most senior trial attorneys in the Natural Gas
Certificate Section of the Office of the General Counsel, with an
unblemished 11-year record of achievement at the Commission. Mr.
Journey complied.
We will want to question Commissioner Watt closely on this, and
explore with him the chilling e~ffect on FPC staff independence and
integrity any such action would have. An independent regulatory
agency cannot long function if the professional staff must place
conformance with the informal views of the Commissioners over
adherence to statutory requirements and the public interest.
Commissioner Smith, who had been at the FPC for almost 2 years
when the current Chairman and the other Commissioners were ap-
pointed, was quite naturally asked for advice and guidance by the
incoming Commissioners. There appears to be some disagreement
as to exactly what he said regarding Mr. Lewnes and the work of
the Section he headed in the Office of the General Counsel. We will
want to clarify this.
Now, let us hear from the witnesses. Let us hear from Commis-
sioner Smith and then, following Commissioner Smith, Commissioner
Watt.
Commissioner Smith, would you stand and be sworn?
Do you solemnly swear that the testimony you are about to give
this subcommittee is the truth, the whole truth, and nothing but the
truth, so help you God?
Mr. SMITH. I do.
(513)
PAGENO="0520"
514
Mr. Moss. Will you identify yourself to the reporter for the hear-
ing record~
TESTIMOI~TY OF DON S. SMITB:, COMMISSIONER,
FEDERAL POWER COMMISSION
Mr. SMITH. My name is Don S. Smith, I am a member of the
Federal Power Commission.
Mr. Chairman and members of the subcommittee, I appreciate
the opportunity to speak to the Federal Power Commission matters
before the subcommittee.
I have read the transcript of these proceedings and the subcommit-
tee staff memorandum summarizing interviews with me on August 19,
1976 and March 15, 1977. I have not had access to all of the attach-
ments and supplements to the record.
I shall, as your letter requests, give my opinion of the professional
competence of Judge Lewnes, Russell Mamone, Cyril Wofsy, and
Jon Lotis, and give my best recollections of any djscussions with
Chairman Dunham, Executive Director Fee, and `General Counsel
Journey regarding case assignments for the above.
I would like to preface this with a comment on what I conceive
my responsibilities to be as a member of this Commission. I am
responsible and accountable for every order issued by the Com-
mission. 1 have the right to dissent or concur; but, when I do not
do so, I am personally accountable for each action.
Every week. of the year we decide between 50 and 100 cases. A
third of these may be sharply contested matters, and each week a
number of issues must be resolved which impact sigmficantly on the
public interest. Some have broad implications; others have as their
end result the amount of money specific homeowners and businesses
must pay for their natural gas or electric services, and. these cases
must be approached with sensitivity and care.
I conceive it to be my nondelegable obligation to recognize the
implications of these cases, to inform myself of the issues and facts
involved, to discern how the public interest is best served, to decide,
and then to accept the responsibility for that decision.
This must be accomplished within the framework of the statutes
developed by COngress for the functions of the Federal Power
Commission, and~ further controlled by what judicial review has
revealed about congressional intentions and what the courts have
set out and my own beliefs about fairness and due process.
I carry out these responsibilities sometimes well, sometimes not
so well, always seriously, and~ I do not have nor ever will have a
harsher critic than myself.
I do not think it acceptable to cite as an excuse or reason for
any decision the failure of the.Commission's legal or technical staff to
impress upon me a particular point or argument, for it is my job
to perceive what the issues are.
I inflict these views upon the subcommittee because of the interest
it has exhibited during the course of these hearings in several mat-
ters which culminated in Commission decisions, such as the High
Island Offshore System case.
PAGENO="0521"
515
That series of orders was signed by all four Commissioners, in-
cluding me, and the responsibility therefor is ours. In addition, I
did considerable work on the case personally. Not only did the case
by its very nature demand specific attention, but it came before the
Commission after a period of rapid and perhaps unprecedented
turnover on the Commission itself, and following a time when, in
the course of a few months, I went from the Commission's junior
member to its senior member.
Consequently, I found myself looked to by my colleagues and the
Commission staff to expend unusual efforts to review a number of
cases pending Commission decision. HIOS was one of these. It was
decided and, like all opinions, must speak for itself as. to whether
the public interest was served thereby.
If you believe the Commission judgment was wrong, then the
responsibility for the error is the Commission's collectively and mine
personally, and it is because I w'ts unable to perceive and resolve
adequately the case and not because of positions the staff took or
failed to take.
Responsibility for the Commission's administration and its per
sonnel is not mine By law, by tradition, and by good sense, this
responsibility is given to the person designated by the President to
be the Chairman of the Commission. I accept this situation as appro-
priate and, more importantly, one which I cannot change. The Chair-
man, as the person responsible for the way the Commission goes
about its business, is entitled to select the key personnel to carry
out its work
I attempt to keep to the practice of advising the Chairman and
Executive Director on personnel matters only when my advice is
solicited, and I am generally successful in restraining inclinations
to do otherwise. This is not to say that I am not deeply interested
in who does what at the Commission I am
Not only does staffing have a direct impact on the degree of diffi
culty of my work, but over the course of my service on the Com
mission I have developed a number of close relationships with sta4ff
members, which I value professionally and personally.
My assistant, Bill Grealis, served in several sections of the Office
of General Counsel prior to joining my staff, and has also developed
staff insights which we utilize most productively when we need
advice.
I have worked with the men your letter inquired about. My opinion
of Judge Lewnes and Jon Lotis is best reflected in my recommenda-
tions of both of them for positions as Administrative Law Judges.
I believe that while Commission attorneys probably depict to
many observers the spirit and concerns of the agency, the real heart
of the Commission's regulatory process can be found in the corps
of Administrative Law Judges. I believe that the strength of the
component of the Commission, year in and year out, as Commis
sioners and attorneys come and go, is the most critical factor in
effective regulation. I believe that the qualifications for our Admin-
istrative Law Judges should be higher than those required of persons
serving in the OGC positions that Judge Lewnes and Mr. Lotis
occupied.
PAGENO="0522"
516
I have made specific recommendations for only four people for
these posts during the years I have been with `the FPC.
I believe the Federal Power Commission has the finest group of
Administrative Law Judges of any agency in the Government and
that George Lewnes is a fine addition to that group, and that Mr.
Lotis would be also.
I regard Mr. Wofsy and Mr. Mamone as competent men who
enhance the quality of any proceeding in which they participate.
Mr. N'Iamone, in particular, has a most attractive dedication to con-
sumer protection and is willing to fight for his convictions.
`The subcommittee staff's summary of earlier interviews with me,
I believe, fairly ~set out the substance of those interviews as they
related to my discussions with Chairman Dunham as to personnel.
I do not recall a specific conversation with Mr. Fee about Mr. Lewnes,
and I note that Mr. Fee is not too clear about this either, but it
is' quite likely, given the personnel and reorganizational concerns
Mr. Fee had during the period in question, that such an exchange
would have taken place.
I would speculate that impressions of disfavor that might have
been created would come from Commission meeting arguments
between Mr. Lewnes and me; and, in retrospect, such exchanges could
be easily so interpreted by any observer not versed in that technique
of illuminating and deciding controversies.
I have never requested that Mr. Journey remove staff from any
cases, have seriously considered it only once, and believe it to be an
improper interference in the area of his responsibilities.
Thank you, Mr. `Chairman. I shall endeavor to answer any questions
you might have.
Mr. Moss. Thank you, Mr. Smith.
Mr. Lemov?
Mr. LE1~Iov. Commissioner Smith, I have just a few questions.
In your statement you indicated that your opinion of Judge Lewnes
and former Assistant General Counsel Lotis is best reflected in
your recommendations for both of them for positions as Administra-'
tive Law Judges.
I take it by that that you believe they are competent?
Mr. SMmT. Yes.
Mr. LEM0v. And that they served competently in their positions
as Assistant General Counsel with the Commission?
Mr. Si~nTIi. Yes.
Mr. LEM0V. Mr. Lewnes was recommended twice, I think at least
once during your term, for the Federal Power Association's Out-
standing Government Lawyer of the Year Award, and that citation
is in the record and signed by the previous Chairman and General
Counsel, who I believe indicated he was an outstanding attorney,
well above the average in terms of competency and ability.
Would you concur in that?
Mr. SMrrir. I would concur in that.
Mr. LEMOY. As far as Mr. Lotis is concerned, he was in charge of
one of the two major sections of the General Counsel's Office, the Gas
and Electric Rate Section; would you agree with that?
Mr. S1~rITn. I would agree with that. I would think that probably
after Mr. Lewnes' shop, the more difficult cases were litigated by
Mr. Lotis' section.
PAGENO="0523"
517
Mr. LEMOV. How would you characterize Mr. Lotis' performance
in that job?
Mr. SMITH. Mr. Lotis was quite good.
Mr. LEMOY. I notice that the Touche Ross management study
which has been referred to now and again in these hearings, in notes
of the interviewer, indicates his section's training, supervision, and
morale was actually among the highest in the Office of the General
Counsel. Do you recall that?
Mr. SMITH. Yes, sir, I recall the statement, and part of the
Touche Ross process consisted of a number of interviews with Com-
mission personnel, including me. I think that perhaps some of my
comments were reflected in the conclusions at which they ultimately
arrived.
Mr. LEMOV. In other words, it was you who was suggesting they
were pretty well organized and operating rather well in the Electric
Rate Section?
Mr. S~rrrn. Yes, sir. I had always been impressed and continue
to be so with the ability of Mr. Lotis to stimulate enthusiasm on
the part of the staff.
Mr. LEMOv. When he testified before this subcommittee on March
14, Mr. Fee, perhaps correctly or perhaps incorrectly, was asked who
were those members of the Commission who were displeased with
him. They were referring then to Mr. Lewnes.
Mr. Fee said:
I know the most important member of the Commission who was displeased
was -the Chairman.
Continuing he said:
At one point I believe I had a conversation with Commissioner Smith to the
same effect. I am vaguely aware that Commissioner Watt had a similar problem.
From your testimony this morning as to whether or not Mr. Fee
is correct about having that conversation with you and, as stated, he
is vague, you did not have a similar problem and you did not have
a critical conversation about Mr. Lewnes and Mr. Fee?
Mr. SMITH. No, sir, I did not recall that type of personally
critical conversation with Mr. Fee about Mr. Lewnes.
There have been, and I think there always will be, problems with
cases in that section because it is to some extent the cutting edge of
the Commission's regulation. It is that section which will generate the
cases which explore the outer limits of the Commission's jurisdic-
tion under the Natural Gas Act. I would say that perhaps a great
many of the cases which are appealed from the Commission are
generated and initially handled in that particular section.
One of the properties of natural gas regulation is its ability to
polarize everybody who approached a regulatory problem. Appar-
ently it has the same property for Congress.
Consequently, the cases are stormy. Their adversarial aspects are
almost magnified. The positions taken by the staff, staff attorneys,
and Mr. Lewnes' supervisors, almost by the nature of the beast, have
to be strong and firm positions.
They then bring this attitude into Commission meetings and at
Commission decision time; and, quite frankly, we argue like hell.
I enjoyed a great many, I believe somewhat restrained, disagreements
with Mr. Lewnes and other members of this section.
PAGENO="0524"
518
Typically these occurred at the Commission meetings, although
I was never averse to continuing arguments with Mr. Lewnes during
breakfast or at any other time during the work of the Commission.
In. retrospect, as I said in my statement, I think it would be
extremely easy for the Chairman, Mr. Fee, and for the other Com-
missioners to walk into their beginning Commission meetings and
listen to exchange between me, other members of the staff, Mr.
Lewnes, the General Counsel, and believe that this was a very
serious problem.
The fact of the matter is that that is the way we interrelated, and
I think our attorneys are sometimes inclined to do that.
Mr. LEi~rov. Did this interrelation and exchange of ideas operate
effectively?
Mr. S~irm. I think the decisions that were hammered out, either
side, sometimes I capitulated and sometimes Mr. Lewnes would-
not too frequently.
Mr. LEMOv. You had the final vote, though.
Mr. SMITH. Yes. I think they were well-honed and solid decisions.
Mr. Li~mrov. That is the way the Commission had historically op-
erated; is that not right? There were open discussions at meetings?
Mr. SMITH. There certainly were at the time I came. I was told
just the other day that at Chairman Nassikas' first meeting he an-
nounced there would be no all-day town meetings hassling out de-
cisions, and promptly had an all-day meeting at which decisions
were hammered out.
Mr. LEMOV. That was the procedure?
Mr. SMrrII. Yes, sir.
Mr. LEMOY. And three new Commissioners such as Mr. Dunham,
Mr. Holloman, and Mr. Watt coming on the scene in October, Sep-
tember, and November of 19~T5 might have perceived that as some-
what of a personality problem, you think?
Mr. SMITH. I think it would be very easy to do that.
Mr. LEMOV. But you did not.
Mr. SMITH. No, sir.
Mr. LEMOV. You think all four of these men we referred to today
were competent and doing their jobs well; right?
Mr. SMITH. Yes, sir.
Mr. LE~rov. Why, in your opinion, were two of the chief Assistant
General Counsels in this crucial Federal regulatory agency, con-
sistently advocating the public interest, reorganized out of their
positions in one way or another?
Mr. SMrnI. I am not certain how the decision was reached that
there was a problem with Mr. Lewnes. I le~ied at one point that
he was interested again in becoming an administrative law judge.
I had one long conversation with him at my request, and perhaps
more than one, to attempt to determine whether that is what he
wanted to do. I concluded that it was, that this was his desire.
As I said before, I regard this not only as a promotion, but in the
long run a more fundamental~ part of the way the Commission regu-
lates, even than in the job he was in. I concluded that I would assist
him in his task, and did so gladly.
Mr. LEMov. You know the law as well as I do, that due process
of law requires that the members of a court or of an administrative
PAGENO="0525"
519
body be objective and impartial, and not contribute prejudgment de-
cisions in cases.
Mr. SMITH. Yes.
Mr. LEMOV. I `notice that the Court of Appeals in this Circuit
recently said, concerning another Federal commission, and a member
thereof who made a speech at that time and commented on a case:
The test for disqualification has been succinctly stated as being whether "a
disinterested observer may conclude that (the agency) has in some measure
adjudged the facts as well as laws of a particular case in advance of hearing
it."
Do you think it is possible that by removing staff members, trans-
ferring people who advocate a particular position, the members of an
agency can, in effect, prejudge the issues?
Mr. SMITH. It is an interesting legal question. I think the causal
relationship between the removal and the stifling of a particular point
of view, would be difficult to establish.
I think a direct command by a superior that a particular point
not be heard could conceivably amount to that.
Mr. LEMOV. Thank you, Mr. Chairman.
I have no further questions.
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
Mr. Smith, I am interested, first of all, in finding out who it
is who sets the policy in the Federal Power Commission. Is it the
staff or is it the Commissioners?
I would like the witness to give us the benefit of his views on that
particular question.
Mr. SMITH. It is clearly the obligation of the Commissioners to
establish policy and, once established, it is probably the obligation
of the administrative law judges to adhere to the policy set and
decide cases consistent with that policy.
In some instances the Commission, in setting a case for hearing,
deliberately requests that in the context of the facts involved in the
case the administrative law judge hand down an order which includes
undeniable policy implications which the Commission reviews.
Mr. LENT. Is the staff supposed to go along with what the Com-
mission's views are or is the staff expected to continue to exert what
might be in a particular case a contrary view?
Mr. SMITH. The staff is expected to accept `the Commission pro-
nouncement. However, I think there has been instances, if not a
matter of courtesy to the staff, at least in those areas where we have
recognized that there are separate points of view, where the staff's
espousal of a view which is contrary, or at least distinguishable, from
those set out by the Commission is not regarded as reprehensible.
Mr. LENT. In his opening statement Chairman Moss said:
An independent regulatory agency cannot long function if the professional
staff must place conformance with the informal views of the Commissioners
over adherence to statutory requirements and the public interest.
I think that would be a statement that we could all agree with.
Mr. SMITH. Yes.
Mr. LENT. Is there anything which has come to your attention as
a member of the Commission with respect to the four staff members
with whom we have been concerned and to whom you addressed
PAGENO="0526"
520
yourself in your testimony which would indicate that the staff
has been put in the position of having to violate that particular
principle?
Mr. SMITH. Mr. Lent, if I understand your question properly, the
only instance I can recall where that allegation seemed to have
been made is in Mr. Lotis' attitude toward the Chairman's effort
to establish a settlement task force to attempt to go back through the
backlog. It was a policy which Mr. Lotis did not agree with, and I
think in essence refused to be a participant in.
The other gentlemen I think had some instances when there were
Commission policies with which they did not agree and which they
continued to argue but in a very frontal fashion. For example, one
issue was the Commission's Chandeleur incentive policy, as it is
called.
The staff-I believe I have seen briefs which Mr. Mamone signed-
in case after case he argued that the policy, if it was right to begin
with, was outdated, even though there were Commission orders
directly contrary to the position and policy he was arguing, and
finally prevailed. This is the sort of thing that is condoned as far
as staff is concerned.
Mr. LENT. Do you have any reason to believe that any of these
transfers took place as a result of any of these subsequent employees
being out of step with Commission policy?
Mr. SMITH. Mr. Lent, the transfer in this instance could have
been preceded by a decision on the part of our Commission that the
transfers should take place. As to whether the negative aspects of
it, that is, that an employee was a "problem," I do not believe that
the problem, if it existed, was particularly because of disagreement
with the position that employee was taking over a particular Com-
mission policy.
Mr. Lewnes, Mr. Mamone, and I think to a much lesser extent, Mr.
Wofsy, would not enthusiastically go along with Commission policy
with which they disagreed.
Mr. LENT. The $G4 question here is whether any of these individ-
uals were transferred, threatened, intimidated, or in any way impeded
as a result of their testimony before this subcommittee or the sub-
committee headed by Congressman Dingell. That was the initial
reason, as I recall, these hearings were instigated.
Do you have an opinion or do you know whether any of these
individuals were transferred as a result of that testimony?
Mr. SMITH. I do not believe they were, Mr. Lent. I am most
appreciative of the attitude that the Congress has, that this sub-
committee and Mr. Dingell's subcommittee specifically have, toward
adverse actions which result from testimOny. I am also appreciative
of the fact that you regard this as one of the extremely important
areas which allow you to go about your business.
I knew that Mr. Lewnes had testified. I was quite specifically
concerned that it would have that appearance. I felt that if it did,
then some day I would be sitting where I am going through whether
this action took place as a result of the testimony.
I do not believe that it did.
Mr. LENT. Commissioner Dunham testified that prior to the
October 8, 1976 reorganization that Mr. Lotis had mentioned to him
PAGENO="0527"
521
several times the possibility of his-that is Mr. Lotis-leaving the
Commission f~r a job in either industry, private practice, or as an
administrative law judge.
Did Mr. Lotis ever discuss any of these possibilities with you other
than the one you just referred to where he discussed with you the
possibility of becoming an administrative law judge?
Mr. SMITH. Yes, he did. My recollection of the conversations I had
with him are consistent with those that the Chairman related to you.
Mr. LENT. So you were aware of efforts on his part to seek other
employment?
Mr. SMITH. Yes.
Mr. LENT. Was it common knowledge around the Commission that
Mr. Lotis was a short-timer, so to speak?
Mr. SMITH. I can't speak to that.
Mr. LENT. Do you recall the oral argument in the HIOS case?
Mr. SMITH. Yes.
Mr. LENT. Do you recall who presented that oral argument for
the Office of General Counsel?
Mr. SMITH. Yes.
Mr. LENT. Who was that?
Mr. SMITH. Mr. Keeley.
Mr. LENT. How would you rate Mr. Keeley's performance-good,
poor, or how would you describe it?
Mr. SMITH. It was almost a novel situation, Mr. Lent. I would
say. that he conveyed not only. the position that he had come to
accept but also described, I think, adequately the different positions
that the staff may have had.
Mr. LENT. So that he argued the positions that the staff previously
had advanced?
Mr. SMITH. Yes, sir. The reason it was a very novel case is that it
may be the only time the Commission has wound up having oral
argument in a non-contested matter.
It was further complicated by the fact to which I alluded earlier,
that the Commission had in its initial decision in the case stated the
way it thought the case should be handled.
At a later time, if my memory is correct, and I think it is, a
memo was circulated to staff members that they should file their
independent views if they were in disagreement with the position the
Commission had taken during the initial decison.
It was, all in all, a very difficult case, I think, to argue or even to
arrive at the position that should be argued.
I think, given all those factors, Mr. Keeley did a credible job of
presenting alternatives to the Commission.
Mr. LENT. With respect to Mr. Lewnes, Chairman Dunham testi-
fied that orders were not being prepared by his section in the time
frame that the Commission desired to have them prepared, and
that they were not prepared in the way, at least on some occasions,
that the Commission instructed that they be prepared.
Would you agree or disagree with Chairman Dunham on that
point?
Mr. SMITH. As to the time frame, I would agree with Chairman
Dunham because it is this kind of thing to which he is particularly
PAGENO="0528"
522
sensitive and with which he keeps up, and probably whatever
assessment he had would be accurate.
As to whether the orders were redrafted in complh~nce with Com-
mission instructions, there were probably instances when Mr. Lewnes
or members of his section did not do so very happily and did not
show a great deal of enthusiasm by being told to go redraft an
order going the other way.
Mr. LENT. On March 15 of this year, when you were reinterviewed
by committee staff, you indicated that you thought the basis for
Mr. Fee's testimony, which was to the effect that you and he had
conversations about Mr. Lewnes' work, that the basis for that testi-
mony may have been instances, and I am quoting now from the
staff memorandum that you referred to in your testimony, "where an
order was evolving over a period of several weeks and Lewnes'
section would have to make a 180 degree turn in the position they
were advocating based on a request by the Commission."
So that there were occasions where Mr. Lewnes had to make, as
you put it, a 180 degree turn in the preparation of these orders.
Is that correct?
Mr. SMITH. Yes, sir.
Mr. LENT. But it is your judgment that where there is a conflict
between what Mr. Lewnes wanted in the order and what the Com-
mission wanted in the order, that it would be the Commission's will
that would prevail over that of the member of the staff.
Mr. SMITH. Yes.
Mr. LENT. Chairman Dunham also testified that Mr. Lewnes has
been more effective as an administrative~law judge than he ~was as
an Assistant General Counsel. `Would you agree or disagree with that
statement?
Mr. SMITH. I think he has been quite effective as an administrative
law judge.
Mr. LENT. More effective than he was as an Assistant General
Counsel?
Mr. SMITH. I would have a hard time defining effectiveness to
that degree. I believe I have read about three decisions that he has
handed down and they appear to be very competently. done.
Mr~ LENT. There has been some testimony here that there was
a rearrangement of Mr. Lewnes' chair. at Commission meetings.
Chairman Dunham testified that this rearrangement was done pri-
marily to reorganize the way the Commission considered matters
before it.
Would you agree with Mr. Dunham's assessment or with the
claim which has been made that changing the position of Mr.
Lewnes' chair, I believe it was, was an effort to intimidate him and
retaliate against him for the testimony that he had given before this
committee?
Mr. SMITH. I don't think the chairs were maliciously moved with
any intent be directed toward Mr. Lewnes.
Another reason for the rearrangement, which I noted the subcom-
mittee staff will be examining, was in prenaration for what we by
that time had resolved would be public deliberations.
PAGENO="0529"
523
The arrangement which had been in effect ever since I came on
the Commission was a "USE C. 125L10", or rather a circle. It was
necessary to take out the end table so that whoever decided to
attend the Commission meetings would not be confronted with a
solid array of backs. If you take out one table, you have to move some
chairs.
Mr. LENT. Are all points of view still coming before the Com-
mission under this new arrangement of the furniture as far as you
are aware?
Mr. SMITH. Yes, sir; I believe they are. There is no reason, under
the present arrangement, that a dissenting staff member cannot
make his views known and even express them in Commission
meetings.
It is true that the type of argumentation that was once character-
istic of our Commission meetings no longer exists. I think, to a
large extent, this is a function of our going public.
Mr. LENT. I would like to get just one question on one of the
other witnesses.
Mr. Mamone testified that shortly after the October 8, 1976, re-
organization that you approached him and asked: "What was going
on?"
Do you recall that conversation `tnd, if so, wh'it was the substance
of it?
Mr. SMITH. Yes, sir. I had been told, and I do not recall by whom,
that Russ would be working on some hydro cases. I dropped by his
office, as I have done from time to time with other members of the
staff, `tnd asked him whether that w'~s the case He confirmed th'it it
was, that the shifting of personnel had included him
Mr LENT Did he ever mention to you the possibility that his
transfer to hydroelectric was as a result of his congressional
testimony?
Mr. SMITH. Mr. Lent, he did not at that time.
Mr. LENT. Was there a subsequent occasion when Mr. Mamone
voiced this possibility to you?
Mr. SMITH. Yes, sir. I had, I think, a meeting in the elevator
exchange during the peak of the gas crisis when the section that
Mr. Mamone was in was running almost 24-hour-a-day sessions with
a great deal of work and a lot of orders. I had been on somewhat the
same schedule.
I said: "Russ, how do you get out of this and get to go to
hydro?"
Mr. Mamone said he did it via testifying before some subcom-
mittees, and then he didn't laugh.
Mr. LENT. When did he first make that allegation to you?
Mr. SMITH. That would have been probably early February.
Mr. LENT. Of this year?
Mr. SMITH. Yes.
Mr. LENT. In the very bottom paragraph of your testimony you
say that you have never requested~ that Mr. Journey remove staff
from any cases, and you seriously considered it only once, and
87-292 0 - 77 - 34
PAGENO="0530"
524
believe it to be an improper interference in the area of your
responsibility.
I would just ask you whether the only once refers to any of the
four principals with whom we are concerned at these hearings.
Mr. SMITH. No.
Mr. LENT. I have no further questions.
Mr. Moss. Mr. Gore?
Mr. GORE. Thank you, Mr. Chairman.
Welcome, Commissioner Smith.
You came on board as a member of the Commission in December
1973; is that correct?
Mr. SMITH. Yes, sir.
Mr. GORE. We had three new Commissioners appointed in the
latter part of 1975, in September, October, and November; is that
correct?
Mr. SMITH. Yes, sir.
Mr. GORE. Were there only four Commissioners at that time?
Mr. SMITH. Yes, sir.
Mr. GORE. So you were the senior member of the Commission as
of the beginning of the new year in 1976.
Mr. SMITH. Yes, sir.
Mr. GORE. At the time the events we are exploring took place?
Mr. SMITH. Yes.
Mr. GORE. You testified that from that perspective you were con-
cerned about the way Mr. Lewnes' transfer might appear.
Mr. SMITH. Yes.
Mr. GORE. Were you also concerned about the way that Mr.
Mamone's transfer might have appeared in light of the fact that
he had testified before the same hearing?
Mr. SMITH. Perhaps not as much as I should have been. It was at
a considerably later time. There was very general reorganization and
movement of staff in the Office of the General Counsel, which was
also occurring.
Mr. GORE. You said that one of the reasons you were concerned is
that you were very familiar with the fact that Mr. Lewnes and
Mr. Mamone had testified before this subcommittee and Congressman
IDingell's subcommittee.
Mr. SMITH. Yes, sir.
Mr. GORE. Did you make it a practice and do you make it a prac-
tice of being aware of inquiries by Congress about the workings
of the Commission?
Mr. SMITH. Yes, sir.
Mr. GORE. So it is quite natural for you to keep up with news-
paper accounts when employees of the Federal Power Commission
come to Capitol Hill to testify before the Congress. It is quite
natural for you to be aware of that.
Mr. SMITH. Yes, sir.
Mr. GORE. Do you think it is also quite natural for the other Com-
missioners to be aware of that or is this something that you would
learn only by your experience as the senior member of the Com-
mission at that time?
PAGENO="0531"
525
Mr. SMITH. Well, you learn to read newspapers-
Mr. GORE. Pretty early.
Mr. SMITH. Econtinuing] Even before becoming a member of the
Federal Power Commission.
Mr. GORE. That is my impression, too.
Mr. SMITH. Our Office of Public Information does some clippings
which usually come up. Sometimes they run* 2 weeks behind but
usually you get them within 1 week.
Mr. GORE. It is possible, I suppose, that the amount of concern
that you felt was related to the amount of time that you had served
on the Commission. Is it possible that a Commission dominated by
new members, three out of four of them new, would not be as sensi-
tive to these appearances as you were?
Mr. SMITHS I think that is possible.
Mr. GORE. Might it also be possible that a Commission dominated
by new members might not also be as concerned or as aware of
the need to protect the Commission's independence, that they might
not be as aware of the unique position of independent regulatory
agencies?
Mr. SMITH. I am not sure that follows, Mr. Gore. Very early on,
and I think generally prior to going through the appointment
confirmation process, most Commissioners, and the ones with whom
I serve now, get an appreciation of just what an independent regu-
latory agency is relative to the other types of operations they might
have been part of.
Mr. GORE. At the time these events took place there had been a
period of conflict in the confirmation procedure, particularly in the
Senate. Several nominees had been sent up who Senators felt were
pro-producers, and there was great interest throughout the industry
as to who the Commission would be structured around the beginning
of 1976.
It was in that atmosphere that these hearings were held.
Shortly after the hearings the testimony of this subcommittee
indicates an inquiry was made as to "how we could get Mr. Lewnes
Out of his present job."
One of the purposes we have here is to determine whether that was
purely coincidental or not.
You testified that you were concerned about how it might appear.
However, I take it that your testimony is also that from your
perspective within the Commission you do not feel that that
testimony in any way contributed to the inquiry of how Mr. Lewne'~
might be fired.
Mr. SMITH. I do not believe there was a causal relationship be-
tween Mr. Lewnes' testifying and an appreciation of a problem with
him. I think it was related solely to Commission business.
I think even though the awareness on the part of other members
of the Commission of what was happening in your hearings was
probably there, I am not certain that George's testimony was identi-
fled as being specifically critical of the Commission or of us because
it was a very complicated matter.
PAGENO="0532"
526
Mr. GORE. As I remember the account of the testimony, it had
to do with charges of withholding. The Commission was in a
posture of denying that withholding was taking place at that time.
In the context of the public policy position being advocated by
the Commission and the administration which appointed the Com-
mission, this would have been and was extremely embarrassing, and
made it much more difficult to argue in favor of deregulating natural
gas. Is that not an accurate assessment of the situation?
Mr. SMITH. I don't perceive that the late administration nor the
Commissioners have ever postured themselves as advocating with-
holding
Mr GORE No, no, no, not ad~ oc'thng withholding but advocating
the point of view that withholding was not taking place in any ap-
preciable degree.
I assume if you felt it was taking place to an appreciable degree,
you would have taken strong action to do something about it. Maybe
I am jumping to conclusions here.
Mr. SMITH. I think that is right. I am sensitive to charges that
we have not done all we can do in that regard.
Mr. GORE. Let's ask for your opinion.
Do you think there is withholding to an appreciable degree?
Mr. SMITH. If withholding is conceived as a kind of strike, let's
say, with concerted action to deny a particular product, that is,
natural gas to the consumers for the purpose of driving the rates
up, I don't think you will find that kind of withholding.
If withholding is also to be used to describe the anticipation, let's
say, of deregulation or higher prices, I think that does occur.
Mr. GORE. To an appreciable degree?
Mr. SMITH. It would be extremely hard to quantify. You are
asking about how many wells are not drilled. I don't know that. We
are learning more and more about the elasticity of exploration and
development activity to price increases.
Mr~ GORE. And to policy debates.
I do not want to get bogged down in a discussion of that nature.
Let me just state my assumption.
During the time these events were taking place the Commission was
dominated by new appointees who largely held the view that deregu-
lation was in the public interest. I personally believe it is irresson-
sible from a public policy point of view to appoint people to a
regulatory commission who believe that their job is counterproduc-
tive, analogous to the fellow who was appointed to the OEO in the
early days of the Nixon administration with the announced purpose
of dismantling it. However, that is a backdrop to the events which
we are exploring here.
My question was merely this: Against this backdrop was the
testimony of Mr. Lewnes and Mr. Mamone and others not embarras-
sing to the Commission? Your answer was, I take it, you did not
feel it was embarrassing.
Mr. SMITH. I was somewhat embarrassed.
Mr. GORE. All right; that is a candid answer. I think it is a fair
assumption that the other members of the Commission may have
felt in a similar manner.
PAGENO="0533"
527
Mr. SMITH. I think you would have to ask them, Congressman.
They were newly on board. The extent to which they appreciated
what the subject matter of the hearing was, I do not know.
I think it is also possible that if you are a newly appointed Com-
missioner who does not feel responsible for the acts of the Com-
mission in the past that you are not sensitive.
Mr. GORE. I think we have to preserve the right of employees in
the Federal bureaucracy to come before the Congress and embarrass
the big-wigs who are in charge of those agencies. You agree with
that, I am sure.
Mr. SMITH. Sure.
Mr. GORE. Why were you embarrassed?
Mr. SMITH. Well, I think the implication that was drawn, and
which 1 think has been stated, was that a situation had occurred and
that the Commission could have done more than it did.
Mr. GORE. You testified at the end of your statement that you have
never requested Mr. Journey to remove staff from any cases. Mr.
Lent touched on this briefly.
I am curious. When did you seriously consider it?
Mr. SMITH. In the HIOS case, I think having Mr. Keeley argue
the case was a disservice to Mr. Keeley. I thought seriously about
suggesting that and decided not to.
Mr. GORE. This was because of the relationship?
Mr. SMITH. Sure.
Mr. GORE. That is very interesting. I find your testimony extremely
candid.
You go on to say you feel it would be an improper interference
if you did request removal of staff from any cases.
Implicit in that statement, I think, is a judgment on the actions
that some of your colleagues have allegedly taken according to
testimony before this subcommittee. Correct me if I am wrong.
Mr. SMITH. It is not intended to be that, Mr. Gore. As I said,
there was an instance when I got very close to thinking that it was
the proper thing to do. I discussed it with my staff and concluded
that under the circumstances I probably should not do that.
I can conceive of situations where the situation as appreciated by
somebody at the particular time would indicate that it was a
correct thing to do. They would just have to speak to that.
Mr. GORE. Were you aware that an inquiry had been made as to
how Mr. Lewnes could be removed from the Certificate Division?
Mr. SMITH. No.. I read the testimony about what transpired.
Mr. GORE. When was the first time you found out about that?
Mr. SMITH. That the inquiry to Mr. Minor was made and the
way it was made.
Mr. GORE. When you testified earlier that you were concerned
about how this might appear, at the time you were concerned, then,
you had no knowledge that it had been as raw and direct as you
now know it to have been. Would you have been much more concerned
about the appearance of it if you had known that this inquiry had
been made?
Mr. SMITH. Yes, sir. As I read it in the testimony. before this
committee, I also understand that Mr. Fee's position is that this
PAGENO="0534"
528
is sort of the way you approach a problem as a first step, and that
may be. Your conclusions are important and mine are not.
Mr. GORE. I am not sure that is the case. I find your conclusions
very interesting this morning.
I do not want to take up too much time. However, one of the
justifications made for all of these transfers is the Touche Ross
study.
Has the October 1976 reorganization which was undertaken after
the Touche Ross study affected the quality of the work coming from
the staff to your office and to the Commission?
Mr. SMITH. I am more sensitive to the devices which have been
put in which directly affect my particular office and those which have
to do with the way the Office of Special Assistants services us. Some
changes are made and guidelines laid down and timetables set up
and tracking systems for cases which I think have improved effi-
ciency of that operation.
As to whether the changes in the Office of General Counsel and
the way it does its business have resulted in improvements, I cannot
see them yet.
I think the proposal that was made and the direction Chairman
Dunham has been moving is very rational. I have no objections to
that process taking place.
Mr. GORE. You do not believe that the transfers of the four indi-
viduals that we have heard testimony about were mandated by the
Touche Ross study; do you?
Mr. SMITH. No. I think the Touche Ross study did not address
itself to particular personnel. They have good men replacing them.
Mr. GORE. I have a few brief questions about the HIOS case. Do
you believe it was in the public interest to remove Mr. Mamone? You
indicated you were provoked by the assignment of Mr. Keeley to
this case because of your sensitivity to the circumstances involved
there.
Regardless of that aspect of it, do you believe it was in the public
interest to remove Mr. Mamone from that case?
Mr. SMITH. Mr. Gore, in retrospect I never saw a point where Mr.
Mamone was removed, although I understand and I would have
assumed that he had responsibilities relative to the case and I
recognized fairly early on that he had worked on it some because,
as I was trying to collect material, staff studies, and so on, I
wound up with Russ' copy of one of the feasibility studies.
The way a case such as that would have been handled I think
would have been for that section to carry it through the trial stage,
after which time we would have had an Administrative Law Judge's
decision. Such cases are really easier to deal with than noncon-
tested cases.
Af that stage, then, trial staff could, by appropriate Commission
regulations, have nothing more to do with it because their position
had been set out below and they would not be allowed to advise us
on the way to handle the particular decisions.
In HIOS. it not having gone through that stage, to an extent it
wound up with those attorneys who had apparently been in meetings
PAGENO="0535"
529
since 1974 with the parties, in negotiation with them, finally recom-
mending that the order be drafted.
I have not seen it clearly set out. I know of your interest in explor-
ing it with Mr. Journey, but I am still not too clear on just what hap-
pened at particular stages in the development of the case.
I think probably were it being done again the proper procedure
would have been to give the case to the Office of Special Assistants
as far as opinion writing is concerned after the initial recommenda-
tion was made by OGC and then letting OGC argue the case at
Commission meetings, which they did.
Mr. GORE. To clarify my understanding of it and to clarify the
record on this case, you were the architect of the two-tiered price
structure designed in that case; is that correct?
Mr. SMITH. Yes.
Mr. GORE. The July 30 order in this case provided for demand
charge to assure coverage of debt and imposed a burden of reduced
return on equity if gas throughput was less than 988,000 Mft'. This
was designed to prevent the consumers from paying for the pipeline
prior to the flow of gas. Is this correct?
Mr. SMITH. Yes, sir.
Mr. GORE. The Commission, and you correct me if I am wrong, has
before it the HIOS proposal now concerning an interim transporta-
tion rate. Do you know what the impact of that will be?
Mr. SMITH. No, sir, I think that is at issue in the interim proposal.
Mr. GORE. Pardon me?
Mr. SMITH. I think the impact is one of the matters that is at
issue.
Mr. GORE. As I understand it, HIOS recovered cost regardless of
transportation volumes.
Mr. SMITH. I believe staff has or will raise that question.
Mr. GORE. Is it proper for me to ask what action is anticipated?
I have taken too much time. I appreciate your patience and your
testimony.
Thank you, Mr. Chairman.
Mr. Moss. Mr. Luken?
Mr. LIJKEN. Commissioner Smith, I am sorry that I did not hear
all of your testimony. However, I did want to develop one or two
points.
You mentioned that you felt that putting Mr. Keeley on this
particular case was a disservice to him; is that correct?
Mr. SMITH. Yes, sir.
Mr. LTJKEN. I don't know whether you explained that. Is that
because of his lack of experience?
Mr. SMITH. No, sir, it is because allegations would be made, which
have been made, which I think is a real problem on a human, per-
sonal basis, for Mr. Keeley.
Mr. LUKEN. You mean in retrospect it was a disservice to Mr.
Keeley?
Mr. SMITH. Well, prospectively I anticipated that that might
occur and in retrospect my anticipation appears correct.
Mr. LUKEN. In other words, because of the circumstances of Mr.
PAGENO="0536"
530
Lewnes and Mr. Mamone being taken off the case, it had become a
controversial appointment?
Mr. SMITH. No; at the time I did not appreciate the removal as
having occurred, and I am still not entirely clear on just what oc-
curred there, so that was not it.
Mr. LTJKEN. What was it?
Mr. SMITH. Well, I believe Mr. Keeley had related to Mr. Grealis
that the subcommittee staff had explored with him at some length the
fact that he had a brother-in-law with the law firm which was
representing the applicants in that particular case, and the HIOS
proceeding at that point, perhaps because the Commission was learn-
ing how to hold sunshine meetings, was a tense case.
Mr. LUKEN. If I may interrupt, these things happened long after
Mr. Keeley was placed on the case; is that right? I refer to the
subcommittee staff activity with regard to Mr. Keeley.
Is that not right, sir
Mr SMITH No, I believe that had occurred prior to that
Mr LUKEN The subcommittee staff interviewing Mr Keeley was
in connection with this investigation, August of 1976. In any event,
I want to establish that.
Mr. SMITH. Perhaps I can be corrected. It was my understanding,
and I am certain I got it from some place, that a question had been
raised relative to Mr. Keeley's connection.
Mr. LUKEN. You talked to Keeley about it?
Mr. SMITH. No; I don't believe I talked to Keeley.
Mr. LUKEN. That is right. You talked to whom?
Mr. SMITH. I believe Mr. Keeley mentioned it to Mr. Grealis, or
Mr. Perdue, or somebody. It occurred to me it would be preferable
to have somebody else do it because it was a controversial case; it
was bound to be.
Mr. LUKEN. This was back in June or May?
Mr. SMITH. Maybe July.
Mr. LUKEN. So at that time you were aware of the relationship,
the family relationship, of Mr. Keeley and the opposing counsel?
Mr. SMITH. Yes, sir.
Mr. LUKEN. He was active in the case at that time?
Mr. SMITH. Yes, sir.
Mr. LUKEN. Did you express your reservations about Mr. Keeley
being on the case to anyone?
Mr. SMITH. No; other than perhaps Mr. Grealis.
Mr. LUKEN. Did you express it to Mr. Grealis? Is that your recol-
lection?
Mr. SMITH. To the best of my recollection, I did.
Mr. LUKEN. Do you remember under what circumstances and
what you told Mr. Grealis?
Mr. SMITH. My recollection is that after a good bit of work had
been done on the case and oral argument was deemed necessary and
desirable that we issued an order setting oral argument and laying
out some of the issues that the Commission wanted explored.
Mr. Keeley, with whom I had worked in the development of the
case over the preceding weeks, was in the office and informed me
PAGENO="0537"
531
that he was designated by Mr. Journey to deliver the oral argument
on behalf of the staff. It was a fairly short time period. My notes
reflect that on June 24, 1976, the order granting hearing and re-
noticing oral argument was sent.
Mr. LTJKEN. At that time Keeley was on the case?
Mr. SMITH. Mr. Keeley had been working on the case for some
time.
Mr. LUKEN. He was about to argue.
Mr. SMITH. Yes.
Mr. LUKEN. Under your interpretation of your responsibilities in
such a situation, you did not consider it your responsibility to ex-
press those reservations to other members of the Commission or
other employees of the Commission?
Mr. SMITH. I did not.
Mr. LUKEN. You still feel that way?
Mr. SMITH. Yes, sir, I have absolutely no question about Mr.
Keeley's integrity or his capability. I think the fact that his sister
decided to marry somebody should not disqualify him from a career
with the Federal Government or with the Federal Power Commis-
sion.
I think that the problem which has been created for Mr Keeley
and for the Commission is that it is perceived by people as
perhaps having something to do with the degree of enthusi'~sm he
has toward his work. I think it is unfortunate that a young man
has to deal with that, and I don't really know what it is that he
can do about it. *.
Consequently, if I were Mr Journey, I would have designated
somebody else
Mr. LtTKEN. I am asking about what others do about it; namely,
you, the other Commissioners, and the Commissioners who put him
in that situation. Somebody put him in that situation and you had
some. relationship with the~ people who put him in that situation. Is
that correct?
Mr. SMITH. Yes, sir, that is correct.
Mr. LUKEN. So respectfully I am not sure your answer is respon-
sive. I am not asking about what he could do, although if we went
into that, I think some of us might have some reservations about
what he should have done.
However, we are not talking about that. We are talking about what
members of the commission could do, the Chairman, and~ the staff
people with whom you had relationship.
Mr. SMITH. Well, it was open to me to inform the General Counsel
that I thought his designation of Mr. Keeley to argue the case
before the Commission was unwise. I could have done that. I didn't
do it.
Mr. LUKEN. Was this generally known, his relationship?
Mr. SMITH. I don't know. .
Mr. LUKEN. How did you come by the information? Through
your assistant?
Mr. SMITH. Yes, sir, that is my best recollection.
Mr. LUKEN. Mr. Grealis. He came by it through Mr. Keeley?
PAGENO="0538"
532
Mr. SMITH. I assume that. Mr. Grealis is right here.
Mr. LUKEN. While you are testifying, do you have any reason to
think that Mr. Keeley did communicate it to you through your staff
but that he did not communicate it to other Commission members,
the Chairman, the General Counsel? He was concerned, wasn't he?
Mr. SMITH. Yes, sir. I don't know whether he did or not, Mr.
Luken. I don't know to whom he communicated this.
Mr. LUKEN. To explore a little further with regard to your re-
sponsibility for the Commission's administration, I have reference
to reorganization plan No. 9. Are you familiar with that, effective
May 24, 1950, with reference to the Federal Power Commission?
Mr. SMITH. Not by designation.
Mr. LTJKEN. I think you referred to it in your testimony. Section
1 provides for the:
Transfer of functions to the Chairman (a) subject to the provisions of
subsection (b) of this section there are hereby transferred from the Federal
Power Commission, hereinafter referred to as the Commission, to the Chairman
of the Commission, hereinafter referred to as the Chairman, the executive and
administrative functions of the Commission, including functions of the
Commission with respect to (1) the appointment and supervision of personnel
employed under the Commission, (2) the distribution of business among such
personnel and among administrative units of the Commission, and (3) the
use and expenditure of funds.
I believe that is the source of your statement that you thought it
was the Chairman's responsibility.
Mr. SMITH. Yes, sir.
Mr. LUKEN. It is title 16, section 792, I believe.
Mr. SMITH. Yes, sir.
Mr. LUKEN. I would like to get your further interpretation on
this.
Section (b)
In carrying out any of his functions under provisions of this sec-
tion the Chairman shall be governed by general policies of the
Commission.
We might say that the ethical standard to be employed with refer-
ence to Mr. Keeley might be a policy, might it not, or would you
so interpret it?
Mr. SMITH. I think a policy statement by the Commission which
was embodied in its code of conduct and standards which covered
that subject matter would be a permissible exercise of the Commis-
sion's policy-making power. My answer is yes, it could be regarded as
a policy. The policy could be expressed in regulations.
Mr. LUKEN. So if the subject matter was that of regulations by
the Commission, it might also be within the purview of the subject
of your discussion of this particular situation which had come up
with the Chairman.
Mr. S1~IITH. I am free to discuss any matter I want to, I think,
with the Chairman, including that one.
Mr. LUKEN. You chose not to.
Mr. SMITH. Yes, sir.
Mr. LtKEN. Mr. Journey has testified that he was told at a Com-
mission meeting in the spring of 1976 by Commissioner Watt to find
PAGENO="0539"
3
other work for Mr. Mamone. Were you aware of that conversation
other than from the testimony here?
Mr. SMITH. Not of that conversation, no.
Mr. LUKEN. Any similar conversation?
Mr. SMITH. No, sir.
Mr. LUKEN. That subject matter was new to you when you heard
about it through this testimony here?
Mr. SMITH. The fact of that communication was, yes.
Mr. LUKEN. Any other similar communication at another time
that you were aware of from the same parties?
Mr. SMITH. No, sir.
Mr. LTJKEN. I don't know whether you testified to this, but had
Mr. Watt complained to you or made reference to you or the other
Commissioners about the work of Mr. Mamone, any unfavorable
reference?
Mr. SMITH. We had over the course of the first 6 months, I sup-
pose, of Commissioner Watt's service, exchanged complaints about
staff work, and that could have been one of them. I do not recall
any specific discussion. Usually you talk about orders, the way they
were drafted, and not personalities.
Mr. LUKEN. You are now aware of the testimony of Mr. Journey
with reference to that conversation?
Mr. SMITH. Yes, sir.
Mr. LUKEN. If that conversation had occurred as Mr. Journey
has testified, it would not be appropriate under your interpretation
of the Commissioner's responsibility; is that correct?
Mr. SMITH. I would be reluctant to so state when we have just ex-
plored a situation where I had some problems in deciding just what
my responsibilities were. What I am saying is that there can be
circumstances where I think I would. The presumption against doing
it I think is a heavy one.
Mr. LUKEN. It would not be a policy matter, would it, according
tO the testimony?
Mr. SMITH. I don't know whether it was or not.
Mr. LUKEN. Because the grounds were not stated?
Mr. SMITH. Yes, sir.
Mr. LUKEN. You would have tO know more about the grounds in
order to determine whether that would be an appropriate direction
by Mr. Watt?
Mr. SMITH. Yes, sir.
Mr. LUKEN. Thank you, Mr. Smith.
Thank you, Mr. Chairman.
Mr. Moss. Mr. Wunder?
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Smith, with respect to Mr. Mamone, do you believe there
was a causal relationship between his transfer and his congressional
testimony?
Mr. SMITH. I do not, no.
Mr. WUNDER. You testified that the men who replaced those who
were transferred, those under consideration were replaced with some
good men. Do you believe that these transfers-we are talking about
PAGENO="0540"
534
Mr. Wofsy, Mr. Mamone, Mr. Lewnes, and Mr. Lotis-have impeded
the ability of the Commission to regulate in the public interest?
Mr. SMITH. No, sir; I think the Commission is still capable of
doing that.
Mr. WUNDER. With respect to Mr. Lotis, you testified that you were
aware of his efforts to leave the Commission. In your judgment,
knowing that and knowing that others also knew that, was it an
improper administrative decision in your opinion to reassign him?
Mr. SMITH. No, not with knowledge that he might not be there
long.
Mr. WUNDER. With respect to Mr. Keeley, in your opinion and in
light of his relationship ~ hich we have discussed, did that in any
way adversely impact or affect his advocacy of the public interest in
the IIIOS case?
Mr. SMITH. I think it did not.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. Moss. Are there further questions at this time?
Mr. LEM0v?
Mr. Lemov?
Mr. LEMOV. Mr. Wunder just asked you whether you thought the
four transfers' impeded the Commission. You said, as I understand
it, The Commission is still capable of performing. That was not
exactly the question Mr. Wunder asked you and I want to pursue
that with now.
Is the Commission's `natural ` regulatory program better off
because the Assistant General Counsel with ~2~J years' experience was
taken off that kind of work in the middle of a gas crisis or worse
off?
Mr. SMITH. I think we perhaps for a time suffered in that area
because Mr. Lewnes was no longer there. S
Mr. LEM0v. All right. Now let's take Mr. Mamone-li years of
experience exclusively in the natural gas area, rising to a GS-15
supervisory trial attorney, perfect personnel record, repeated promo-
tions. He was handling 29 of the largest natural gas producer and
pipeline certificate cases at the moment of his transfer. You said
that section worked day and night. You said they were overloaded.
Did `it help or hurt the Commission's effectiveness to take a man
like that out of the natural gas work and put him into hydroelectric
in the middle of a gas crisis?
Mr. SMITH. It is my understanding that Russ finished the certificate
cases that he had. It is not my understanding that he dropped any
cases, and I do believe that I have seen additional work in that area.
We certainly could have used him the past few months.
Mr. LEMOv. I would think so.
Mr. SMITH. I confess that I do not appreciate as well as I should
what h~ is doing in hydro and it could be the ultimate long-term and
short-term importance of that exceeds that which he was doing. I
just don't know.
Mr. LEMOV. Given Mr. Lotis' outstanding rating by the Touche
Ross management experts to whom the Commission paid almost a
half million dollars, and the fact that the testimony is that on June
PAGENO="0541"
535
4 he told Chairman Dunham he was not interested in leaving, that
the rumors were false and that he had changed his mind and lie was
going to stay on-given that, was it proper-until November or
beyond, I believe the testimony is-
Mr. SMITH. It was proper for the Chairman.
Mr. LEMOV. Let's concede that. Did it help or impede the effective-
ness of the Commission to take Mr. Lotis off the work in which he
specialized?
Mr. SMITH. I have some difficulty with that because I have been
quite favorably impressed by his replacement's handling of the
cases before him and by his replacement's general philosophy, which
I regard to be very consumer oriented, so I think he is doing a good
job there.
Mr. Lotis' ability to handle those cases was exceptional. I thin~
that the Chairman and the General Counsel have the right to re-
organize that section and to have the people they-
Mr. Moss. Mr. Smith, we concede that. The question is whether or
not it had an adverse impact on the operation of the section.
Mr. SMITH. It probably did. A number of younger people, I think,
left as a direct result of not having the supervisory experience that
they were getting with Mr. Lotis.
Mr. LEMOY. Thank you, Mr. Chairman. I have no further ques-
tions.
Thank you, Mr. Smith.
Mr. Moss. Mr. Lent would like to be recognized.
Mr. LENT. With regard to the questions counsel just put to you,
Mr. Smith, you indicated that the effectiveness of the Commission
was impaired by the transfer of Mr. Lewnes for a time. Can you tell
us how long a time you think the effectiveness was impaired?
Mr. SMITH. I have a great deal of difficulty doing that. I think
that the successor section, which did go through a period when there
was a lot of transfer and change in personnel, had some readjustment
problems. Again, I think that after the shakedown of this winter
their performance to me seems to be quite good.
Mr. LENT. So that right now the change of position of Mr. Lewnes
has been washed out, so to speak?
Mr. SMITH. There is only one George Lewnes. Nobody else is
going to do things the way he did them. It does not necessarily mean
that he was always right about the way he did it.
That particular section is being run by a very capable attorney.
Mr. LENT. Who is that?
Mr. SMITH. Gordan Grant, who had had, I believe, a gap between
his certificate trial and direct contract experience and his taking over
that section. I think it perhaps took him a while to get the kind of
operation he wanted going, but I think he is doing it pretty well.
Mr. LENT. Is it correct to say that Mr. Lewnes was transferred-
he became an Administrative Law Judge? Is that not the fact of
the matter?
Mr. SMITH. Yes, sir.
Mr. LENT. That was a change in position that was at his initiative
rather than at the initiative of the Commission?
PAGENO="0542"
536
Mr. SMITH. Yes, sir.
Mr. LENT. The Commission did not transfer Mr. Lewnes.
Mr. SMITH. No.
Mr. LENT. When we say the efficiency of the Commission suffered
for a time, however long that time may be, because Mr. Lewnes was
no longer there, we don't mean to say that he was transferred by
action of the Commission, do we?
Mr. SMITH. No, sir.
Mr. LENT. Now with respect to Mr. Lotis-
Mr. SMITH. Let me put in an equivocation. The position of ad-
ministrative law judge, which I have always. regarded as being apart
from the regular chain of personnel actions in the Commission, I
continue to regard that way. There have to be papers signed.
Mr. LENT. For a promotion.
Mr. SMITH. Yes.
Mr. LENT. Even the staff report.
Mr. SMITH. I would regard it as such. There have to be papers
signed. Whether this is a technical transfer, I don't know.
Mr. LENT. Mr. Lotis' situation is next. I think you testified that
the work of the Commission was-I don't recall whether you said it
was impeded or you did not think it was impeded as a result of his
transfer in the October 1976 reorganiation.
Mr. SMITH. My answer, I believe, is that it was for a time, prin-
cipally because of the loss and transfer of some of the younger
attorneys in that section.
Mr. LENT. Did you disagree with the decision of the Chairman or
the decision of Mr. Fee in putting Mr. Lotis in his new position in
view of the well-known fact that he was seeking other employment?
Mr. SMITH. I thir~k it was an appropriate thing for them to do. The
personnel arrangement in the office of OGC is very likely not that
which I would have done. I think, given all the circumstances sur-
rounding the case, it was an appropriate thing to do.
Mr. LENT. In other words, in October of 1976 this big reorganiza-
tion involving hundreds of employees of the FPC took place, and
you had one top man in Mr. Lotis who had put out the word and it
was well known that he was seeking other employment, and he was
actually jobhunting in the agency and in other places.
Would it not have been an unwise decision for Mr. Journey, as
part of this reorganization, to place a man who was known to be
seekilig other employment into a position of authority and super-
vision over a large group of people?
Mr. SMITH. If someone has expressed an intent to leave, as Mr.
Lotis did, it would not be logical to assign him a large section.
Mr. LENT. Do you agree or disagree with the decision of Mr.
Journey, as approved obviously by the Chairman, to put Mr. Lotis
in the position he was put into?
Mr. SMITH. With Mr. Lotis' expressed intention to seek other
employment, I agree with it. It might have been possible to induce
him to forget about seeking other employment and to stay and to
assume that function. I am not sure that was an alternative. Let me
retract that. I am speculating.
PAGENO="0543"
587
Mr. LENT. There was some testimony here that Mr. Lotis had told
his superiors that he was going to leave prior to election scheduled
for November of 1976. There is other testimony that Mr. Lotis let
the Chairman, at least, know that he would stay until the election
of 1976.
Would your answer have been any different as to his replacement
or the wisdom of that replacement whether he had estimated his
exit date as before election or until the election?
Mr. SMITH. Mr. Lent, I have had some difficulty from reading the
transcript, and I have had a number of conversations with Mr. Lotis
and continue to seek his advice on some things. I don't fully under-
stand what he conceived his function to the Commission relative to
the election and how it would be thereafter. In other words, I sup-
pose what I have to say is that if he had expressed an intention of
leaving, then placed the election contingency on top of that, I
probably would still have regarded him as someone who no longer
saw his further career as being with the Federal Power Commission.
Mr. LENT. If I may ask one final question, and this will be my
final question.
If you could give this committee the benefit of your judgment as the
oldest, in point of time of service, member of the Federal Power
Commission as to why these shifts in personnel were made, I would
appreciate it. Could you give us the real story as to what occasioned
these changes?
You said before it did not have to do with their testimony before
the committee. What was the real story behind these changes?
Mr. SMITH. I think that the reason Judge Lewnes left and became
an administrative law judge was because he wanted to. Mr. Lewnes
would not have been fired. I can almost assure you of that.
I don't know why Mr. Mamone was transferred.
Mr. Lótis and Mr. Journey cannot work together in any way. Mr.
Journey is the General Counsel and Mr. Lotis isn't. I think that is
probably why Mr. Lotis is where he is.
Mr. LENT. And the last of the four horsemen was Mr. Wofsy, and
he left of his own accord, as I recall.
Mr. SMITH. That is my understanding.
Mr. LENT. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Smith, the statement of Mr. Lewnes was not that he
left beciiuse he wanted to, was it? Mr. Lewnes in his statement, and
I can read it, says:
Whal/it was was that they rearranged the situation. I guess you would call
it a demeaning situation.
Th~ General Counsel and Deputy sat basically where they should sit but
Mr./Lotis and I were moved practically to the door in the back, no table to
pu~1 your stuff on, sitting there with your books in your hands. Obviously, you
~tere to speak-although no one said it, but it was obvious at least to me in
4ny view-speak when spoken to and not when you feel you should.
No one said that, but that was my impression. Coupling that with rumors
and other manifestations I had previously, again more or less the same kind
of problems Mr. Wofsy encountered when he was acting, I decided you just
can't perform.
Then Mr. Lemov said: In March of 1976 did you talk to the Executive
Director, Mr. Curtis Fee?
PAGENO="0544"
538
Mr. LEWNES. Yes.
Mr. LEMOV. About what you perceived to be the problem?
Mr. LEWNE5. Yes. Again I think it was right after the reshuffling in the
Commission meeting.
I think my first conversation with Mr. Fee at the Commission-I had met
him previously when he was not with the Commission. I went in to see him.
It was him and me, and he was very helpful and cooperative.
I said: "Curt, look, I can read the signs. Give it to me straight."
In essence he said: "George, some people have problems with you." That's
all. I didn't ask him for any more.
I said: "Curt, based on this, and my Own feelings, I have activated my
name to become a law judge. I want to pursue it."
He said, "If that's what you want to do, take your time, find what you want.
If I can be of any assistance, I will."
That is a different context from that of a voluntary change. It
is a change brought about by circumstances, is it not?
Mr. SMITH. Yes, sir, it clearly was. There are two aspects to it.
One is whether Mr. Lewnes wanted to become an administrative law
judge. I think he did. He assured me he did.
The other question is whether, had the situation at the Commis-
sion and the attitude that Mr. Lewnes, been more favorable, whether
he would under those circumstances not have desired to become an
administrative law judge. I think his testimony which you cite does
show that he felt that his work environment was not one with which
he was happy.
Mr. Moss. There were only 29 positions in the Office of General
Counsel which were affected by the reorganization of October. I
believe I am correct on that, am I not? There. were 29 professional
staff reassigned in the Office of General Counsel.
Mr. Si~rITH. I believe I have seen that figure before.
Mr. Moss. The only senior person ~who was reassigned to another
unrelated activity without request was Mr. Mamone, and so was
Mr. Lotis. It is unique when you look at this list of. 29 professionals
and 2 stand out as having had an action taken which was different
from that of the others. Would that raise some question in your
mind?.
Mr. SMITH. I would probably do as you have done, Mr. Chairman,
and that is to see whether there was some connecting link which
explained the different treatment of those people. I do not know why
Mr. Mamone was transferred.
Mr. Moss. As to Lotis, the General Counsel stated that he didn't
regard this as a disadvantage to Mr. Lotis because he was assigned to
very important cases. We went over that in some considerable detail.
He did not characterize it as an action taken because of the
fact that. he had been told he was leaving. He said it was very
important work he was assigned to, equally as important as the work
he had had.
Taken in that context, what would your judgment be?
Mr. SMITH. I think Mr. Lotis did not regard it as having the
same significance as the work he was engaged in before.
Mr. Moss. Would you have?
Mr. SMITH. I would not have regarded it as such.
Mr. Moss. I think those are all the questions we have at this
time.
PAGENO="0545"
539
We shall take a 15-minute break in order to permit the members
to respond to the quorum call. We will then resume with Commis-
sioner Watt.
[Brief recess.]
Mr. Moss. The subcommittee will come to order.
Commissioner Watt, would you stand and be sworn?
Do you solemnly swear that the testimony you are about to give
before this subcommittee is the truth, the whole truth, and nothing
but the truth, so help you God?
Mr. WATT. I do.
Mr. Moss. Would you identify yourself to the reporter for the
hearing record?
TESTIMONY OP FAMES G. WATT, VICE CHAIRMAN,
FEDERAL POWER COMMISSION
Mr. WATT. I am James G. Watt, Commissioner at the Federal
Power Commission.
Mr. Moss. Do you have a statement?
Mr. WATT. I do not have a statement, Mr. Chairman.
Mr. Moss. Mr. Lemov?
Mr. LEMOV. Commissioner Watt, good afternoon.
I would like to ask you how long you served on the Federal
Power Commission.
Mr. WATT. I was sworn in November 11, 1975.
Mr. LEM0V. Prior to that what was your experience?
Mr. WATT. Prior to that for 3½ years I served as Director of the
Bureau of Outdoor Recreation in the Department of the Interior.
Mr. LEMOV. In that position you did not deal with electric or gas
matters?
Mr. WATT. That is correct.
Mr. LEM0v. Prior to that 31/2 years what?
Mr. WATT. I was for 3½ years Deputy Assistant Secretary for
W~ter and Power Resources in the Department of the Interior
where I had responsibility for water resource development, and
research, as well as the marketing of power from the Federal-
Mr. LEMOV. Hydroelectric power?
Mr. WATT. That is right.
Mr. LEMOV. You did no natural gas work there.
Mr. WATT. That is right.
Mr. LEM0V. Your background is that of an attorney?
Mr. WATT. That is right.
Mr. LEMoV. Prior to coming to the Government what did you do?
Mr. WATT. I spent 2 years with the United States Chamber of
Commerce in charge of their natural resources section or depart-
ment, and prior to that I was for 4 years legislative assistant and
counsel to a United States Senator from Wyoming.
Mr. LEM0v. You were aware that Commission witnesses, at the re-
quest of the Dingell subcommittee, Mr. Lewnes and Mr. Mamone,
had testified before that subcommittee?
Mr. WATT. Yes, I was.
~7-292 ~-77-~ -
PAGENO="0546"
540
Mr. LE~rov. The issue in that case, of course, was producer reserva-
tions of gas from the interstate market.
Mr. WATT Yes.
Mr. LEMOY. That was and continues to be a very significant issue,
I assume. You would agree with that?
Mr. WATT. Yes.
Mr. LEMOV. You do not doubt Congress has a legitimate interest
in inquiring into that issue, do you?
Mr. WATT. I am sure they do and should.
Mr. LEM0v. You don't question, I assume, the need for these
Commission personnel to respond to invitations from committees to
testify.
Mr. WATT. No. I think the body of expertise is vested in the several
Federal agencies and the Congress needs to call upon them.
Mr. LEM0v. Actually don't you think that Mr. Lewnes and Mr.
Mamone were a bit perceptive in that testimony because, it turns out,
that the practice of direct sales to industrial users, or reservations for
producer use on which they were testifying with regard to Tenneco,
has suddenly become a major issue in the last month; has it not?
Mr. WATT. I am not prepared to comment on whether they are
perceptive or not. I have never read their testimony. I was aware of
what they said only through newspaper accounts, and a motion to
hold the oral argument which was a result of that testimony.
Mr. LE~rov. Assuming that they did testify on producer reserva-
tions, which is in fact what the newspapers indicated, and the fact
there was a leaking of gas from the interstate market to the intrastate
market without authorization and without authority under the
Natural Gas Act, is that not essentially the subject, at least reserva-
tions, the subject of the Commission's recent major order in Tenneco?
Mr. WATT. We have issued a show cause to Tenneco on that very
subject.
Mr. LE1%lov. You found a substantial amount of gas that might
have been moved without an appropriate permit?
Mr. WATT. That is the allegation.
Mr. LEM0v. That is what they were talking about in Tenneco I
year ago. Don't you think they deserve a commendation for spotting
such a significant issue and calling it to the attention of the
Commission and the Congress?
Mr. WATT. If they did, that is fine. They should, yes.
Mr. LEMOV. And in the Mobil case you were also aware they testi-
fied before this subcommittee with regard to the Grand Isle 95
case.
Mr. WATT. Yes.
Mr. LEM0v. And in that case their testimony was that they
recommended an order which said that the gas was already dedi-
cated and that the Commission should direct Mobil to connect that
field during that shortage year of 1975-46. The Commission did
not do that, did it, order Mobil to flow that field?
Mr. WATT. I am not aware that we did.
Mr. LEM0v. In view of that testimony and that perceptiveness in
terms of issues, the question of withholding, producer reservations,
PAGENO="0547"
and the lack of certificates for the transportation of gas, don't you
think these employees performed admirably in behalf of the public
interest and the Commission?
Mr. WATT. I am not able to comment on that. I don't know whether
they were perceptive. I do not know whether they initiated the hear-
ings, responded under subpena, or what the conditions were. I am
aware they did testify. They testified on an issue which was obviously
hot then and continues to be a hot item.
Mr. Moss. Mr. Commissioner, you surely do not believe they initi-
ated a congressional hearing.
Mr. WATT. I simply do not know.
Mr. Moss. You served how many years as a Senator's aide?
Mr. WATT. Four years.
Mr. Moss. Do you know of any instance where congressional com-
mittee hearings were brought by the actions of members of commis-
sion staffs?
I have been here only 25 years. I am not aware of any such case.
It would be almost an assumption there that the committee
determines.
Mr. WATT. I should hope so, yes.
Mr. Moss. Well, it would be a safe assumption in most cases unless
you can cite some precedent. I know of none.
Mr. WATT. I am not trying to cite a precedent either way.
Mr. Moss. You raised the question of whether or not the staff
instigated the hearings. I want to make it clear that in my opinion
they are ridiculous assumptions. It would not be possible.
Mr. WATT. I understand why you respond that way and I share
that view. I also don't want to be crowded in a question of trying to
pin merits on anybody for anything. I am not aware of those
situations. I am just aware that they happened. Committees have
a responsibility and every right to call on the best evidence they can
get.
Mr. LEM0V. The reason I asked the question is because you
mentioned a moment ago in your testimony that there was a motion
for an oral argument.
Mr. WATT. That is correct. -
Mr. LEM0V. And there was criticism of the staff in that, that
motion critical of the staff.
Mr. WATT. Yes.
Mr. LEMOV. You were aware of that?
Mr. WATT. Yes. I try to read some, not all of the pleadings, but
most of the pleadings that come before us.
Mr. LEMOV. It turns out that that particular issue that the staff
was testifying about was not something to be critical about but it
was something of great significance and importance; is that correct?
Mr. WATT. In that particular case the Commission in a unanimous
vote did not go the way the staff recommended.
Mr. LEMoV. Which case are we talking about now?
Mr. WATT. That would have been the Tenneco case on which we
had the oral arguments in February of 1916.
PAGENO="0548"
542
Mr. LEM0v. This is the case where Tenneco gas-was there not an
order to make up some gas and was it not made up in the interstate
market?
Mr. WATT. It is split. The answer is yes and no.
Mr. LE1~rov. I wonder whether you could furnish for the record
the result of that particular Tenneco case in terms of restoring gas,
whether gas was restored to the interstate market by Tenneco under
Commission order.1
Mr. W~rr. There was a settlement and we approved the settlement.
Mr. Moss. Without objection, we shall hold the record open at this
point for clarification.
Mr. WATT. That order, yes.
Mr. LEM0v. When our staff investigators talked to you, you had
some pretty strong language directed toward an employee of 20
years, Assistant General Counsel Lewnes.
Did you review Mr. Lewnes' personnel record before this inter-
view?
Mr. WATT. I never read it.
Mr. LEM0v. You are aware that he was recommended for one of
the most prestigious awards in Government of the Federal Bar
Association, the Government Lawyer of the Year award, by Nassikas,
the previous Chairman.
Mr. WATT. I have not read his personnel record.
Mr. LEMOV. Don't you think your critical remarks in view of that-
you called him an "aggressive advocate and a vindictive person."
Don't you think that was-
Mr. WATT. Would you read the quote? I don't think that is quite
right.
Mr. LEMOV. I was reading from it. Our interviewer in the meinoran-
dum states, "Lewnes had a general reputation at the FPC of being
an aggressive advocate and a vindictive person."
Mr. WATT. Yes.
Mr. LENT. Does the witness have a copy? Has he been provided
with a copy of the interview record that is in the evidence?
Mr. WATT. Yes, I have. Thank you, Mr. Lent.
Mr. LENT. I didn't see it before you.
Mr. WATT. It is a memorandum made available to me. It is a
memorandum summarizing a conversation I had with two members
of the staff.
I point out the fact that that is the reputation that he has. It is
not a charge that I made.
Mr. LEMOV. That is his reputation. Does the memorandum cor-
rectly reflect the conversation our investigators had with you?
Mr. WATT. I think it is a very well-written memorandum. It obvi-
o~isly does not cover everything. It does not pretend to cover every-
thing. It presents a pretty good spirit of what was said.
The quotes attributed to me as quotes I think are accurate quotes
of what I did say.
lp1j~ FPC directed Tenneco Oil Company to repay the imbalance of 18,615,171 Mcf of
natural gas to Tennessee Gas Pipeline Company within 2 years in opinion 755, issued
March 1, 1976.
PAGENO="0549"
.543
Mr. LEMOV. Yet you have not reviewed his personnel file to this
date.
Mr. WATT. I have not.
Mr. LEMOY. I wonder whether we can have Mr. Watt look at the
review of the personnel file conducted by our staff which is in
evidence in this proceeding.
Mr. LENT. Mr. Chairman, if I may merely inject a question as to
what relevance Mr. Lewnes' personnel record might have with respect
to this witness inasmuch as most of the material in that personnel
record antedated this witness' taking on the role of Commissioner.
Mr. Moss. It was in the subject employee's personnel file and,
therefore, would have been available to anyone who sought to ex-
amine that ifie.
Mr. LE3rov. That is a review by a member of our staff of the
personnel ifie which we had delivered up here, Commissioner.
You will see there that Mr. Lewnes has an unbroken record of
promotion and commendation and no derogatory information what-
soever from the time he came to the Federal Power Commission in
1959.
If he had such a reputation around the Commission as being
vindictive and aggressive, would he have lasted that long and been
promoted?
Mr. WATT. He obviously was and is.
Mr. LEMOv. Maybe the problem is you.
Mr. WATT. That is always a possibility.
Mr. LEM0v. I just want to point out that the previous Chairman,
Mr. Nassikas, served for 5 years, I believe.
In writing this recommendation, which he signed and which
General Counsel at that time signed, and it is quoted in this
memorandum which you have before you, it was very laudatory-
"Legal acumen and unswerving integrity ;" "enhanced the Commis-
sion's stature in the eyes of the legal profession ;" "his record and
performance have been superior in all respects and he is indeed
deserving of the award for which he has been nominated."
Don't you think you should have reviewed the personnel file before
you proceeded with that kind of scurrilous charge about him?
Mr. WATT. I don't consider it a scurrilous charge at all. I would
have no reason to really object to what Chairman Nassikas said
there.
Mr. LEMOY. You concur with it?
Mr. WATT. I have not had an opportunity to review Mr. Lewnes'
record for the number of years Mr. Nassikas did. I don't disagree
with it and I don't necessarily concur with it.
Mr. Lewnes worked for Mr. Nassikas at that time. They had an
employer-employee relationship and it is based on that, I am
sure.
Mr. LEM0v. Commissioner Smith testified that this open exchange
got kind of heated in Commission meetings and it was the rule
around the Commission for years when he got there, and as long
as he was there actually until this reorganization when the desks
were moved around.
PAGENO="0550"
544
Could it be that what you saw was really the adjudicatory
process functioning?
Mr. WArP. OK. Now we are getting to the issue.
I did not like the procedures that I saw when I came to the
Commission. I was brand new, and your memorandum before you
quotes me accurately as saying I was as green as grass.
I sat and I watched a Commission; they were at a roundtable, and
you had a hard time telling who the Commissioners were because it
was an aggressive, almost hostile environment at times. Staff would
fight staff on different issues. I was appalled at what I considered to
be lack of accountability.
I saw within the Office of the General Counsel lawyers taking
different sides. Frequently, I would ask who is speaking for the
Office of the General Counsel. I saw that there wasn't really any
accountability. I saw several lawyers, including Mr. Lewnes, as
aggressive "advocates."
I did not and do not feel that in Commission deliberations we
should have an advocate there at that table. The time for advocacy is
at the trial level.
We are seeking at the Commission meeting counsel and advice
from the best people we can have. For FPC lawyers to come be-
fore us and advocate a narrow special interest, after it has been
through the administrative law judge and all the pleadings have been
filed, is improper in my opinion. It is today and it was then.
I did not like that procedure.
George Lewnes was an aggressive advocate. He had a case and
he presented it relentlessly. I don't think that was proper then and I
complained about it.
Mr. LEM0v. That wasn't peculiar to him but it was the way the
Commission functioned at that time.
Mr. `WATT. That is correct.
Mr. LE~Iov. He was playing the game the way the rules were when
you got there. You were a new boy on the block, weren't you?
Mr. WATT. I sought to change the rules.
Mr. LEMOv. Did you tell Mr. Lewnes first before you criticized
him, according to Mr. Fee?
Mr. WATT. We criticized frequently and I let it be known that I
wanted it to be known who was accountable. I tried to make t~e
General' Counsel accountable. I like to think I left tracks at the
Commission. I try to have an impact and I tried to see to it we
would have more accountability there. I complained to several, and
the lawyers would know that I was complaining about their "ad-
versary" role at those Commission meetings. I would like to think
that the other Commissioners also shared that view to some degree.
At least we went to open public meetings, sunshine-type meetings.
We rearranged the furniture in an effort to try to make some
people accountable so you would know who the Commissioners were
and who were supposed to be staff advisers.
Mr. LEMOV. Did you ever recommend to Mr. Dunham that Mr.
Lewnes be fired or terminated?
Mr. `WATT. I recommended that there be changes made so we
would know who was accountable.
PAGENO="0551"
545
Mr. LEMoV. Did you ever recommend to Chairman Dunham that
Mr. Lewnes be fired or terminated?
Mr. WATT. I think the answer to that is no.
Mr. LEM0v. Did you ever recommend that he be demoted?
Mr. WATT. No.
Mr. LEMOV. Do you think his performance warranted demotion?
Mr. WATT. No; he is an aggressive advocate but it was not the
type of performance that should have been carried around the Com-
mission table.
Mr. LEMOV. So you were not responsible for the instruction that
Mr. Fee gave to Mr. Minor, "Find a way to get rid of Lewnes," were
you? You were not the source of that?
Mr. WATT. I never gave orders to anybody like that but I certainly,
as implied in that memorandum, could have been interpreted, if not
quoted, as saying I thought we needed to bring some change in there
and change the order of doing business. I did not like it and we
do it much differently now than was done in preceding years.
Mr. LEM0Y. It was not directed to a particular person?
Mr. WATT. I spoke to the Chairman because he is the chief admin-
istrative officer. I spoke to him on more than one occasion in more
than one place.
Mr. LEM0v. Did you direct a request to the Chairman or to Mr.
Fee to get rid of Mr. Lewnes?
Mr. WATT. No, I didn't direct anybody to do anything. I just
complained we have to make changes.
Mr. LE1%rov. That wasn't directed to any particular person, though,
but to the system itself.
Mr. WATT. To the system. In that r~ference we would have talked
to the several lawyers. Mr. Lewnes was not the only one who took
this role.
Mr. LEMOV. By the way, in view of your suggestion of changing
the role generally at Commission meetings, it would have been
quite possible to instruct the existing Commission staff as to the
new procedure and have them function that way?
Mr. WATT. Yes; and we did that.
Mr. LE~rov. It was not necessary to give any instruction to find
a way of getting rid of anybody or firing anybody? It wasn't neces-
sary, was it?
Mr. WATT. It was not.
Mr. LEMOV. If it was done, it would not have been necessary in
terms of the operation of the Commission, would it?
Mr. WATT. I have been in government service long enough to
know you don't fire anybody. I have been a line officer. I have run
my own bureau. We use those terms loosely probably. We say fire
people. That means you are firing them from a responsibility and a
performance and get them into something else. It is very difficult to
fire anybody under the Civil Service Commission rules.
Mr. LE~rov. Did you want to move Mr. Lewnes out of that
particular job?
Mr. WATT. I wanted to move Mr. Lewnes out of his role of
being an advocate before the Commission.
Mr. LEM0v. When did you express that particular desire?
PAGENO="0552"
546
Mr. WATT. I probably started expressing it very soon in my
tenure there.
Mr. LEM0v. About when?
Mr. WAIT. I don't know.
Mr. LEMOV. You came in when, in November?
Mr. WATT. I made a conscious effort not to get actively involved in
any cases the first month I was there. In December I selectively voted
on those cases I thought I understood and didn't on cases that were
tough, the ongoing ones, and started voting full time in January.
Mr. LEMOV. Again, as long as the system in the Commission meet-
ing was changed so there was less of an advocacy position, which is
always the way it was run-your testimony is that there was no
reason that particular personnel had to be taken out of particular
jobs.
Mr. WATT. I was demanding changes come about-and demand is
the improper word-I was urging changes be brought about which
would change the character of the job, yes. The character of those
jobs I was hoping would be changed, and they were changed.
Mr. LEMOV. Changed by structuring the Commission meetings
differently; is that right?
Mr. WAIT. Yes; there are many ways you can do that. There are
many ways you can bring about change. 1 didn't care how they
brought about the change just so change was brought about. I am
not ordering how that change be brought about but I was urging
with the strongest emphasis I could, on repeated occasions at many
opportunities, that change needed to be brought about.
Mr. LEM0V. You had no question about the competency of Mr.
Lewnes and Mr. Mamone, did you?
Mr. WATT. Excuse me-
Mr. LEMOY. Mr. Lewnes or Mr. Mamone?
Mr. WATT. I had no question about Lewnes' competency.
Mr. LEMOY. Mr. Chairman, if we may, at this point I would like
to ask that a memorandum dated March 2~ to you from Stephen
Sims of a telephone conversation with former Chairman Nassikas
be placed in the record at this point and distributed.
Mr. Moss. Mr. Sims, you have been sworn already.
Do you affirm that this is a memorandum from you and that it
reflects your conversation with former Chairman Nassikas?
Mr. SIMS. Yes, I do.
Mr. Moss. Without objection, the memorandum will be placed in
the record.
[The memorandum referred to follows :3
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
WASHINGTON, D.C., March 22, 1977.
Memorandum
To: Hon. John E. Moss, Chairman.
From: Stephen Sims, Special Assistant.
Subject: Memorandum of Conversion Between Mr. John Nassikas, Former
Chairman, Federal Power Commission, and Stephen Sims, Special As-
sistant, Subcommittee on Oversight and Investigations.
PAGENO="0553"
I called Mr. Nassikas on the telephone on March 22, 1977. He was generally
aware that hearings involving the FPC were in progress, but was not familiar
with their substance.
Mr. Nassikas served as Chairman from August 1, 1969, to October 21, 1975.
During this period he has no recollection of any transfer or removal from a
case on substantive grounds of any attorney as a result of an order from the
Chairman or any Commissioner. If the Commission and an attorney disagreed
on an issue, it would not be proper to transfer the attorney. Testifying before
Congress would not be a valid reason either. The only justification for such
an action would be to avoid a conflict of interest or to more rationally
distribute the caseload. He observed that attorneys and other staff members
were encouraged to express their view while he was Chairman and then
the Commission would make its decision. Staff lawyers must delineate and
discern the issues, present the overall public interest as they see it. That is
their function.
Mr. Nassikas had "high regard" for Lewnes, Mamone, Wofsy, and Lotis.
All were "highly competent". All were promoted during his tenure at the
Commission. He specifically noted Mr. Lewnes' "courage" and his manner of
"calling issues as he saw them, which is the way it should be." Mamone was
"just as competent in representing the public interest." Mr. Nassikas added
that he had appointed Lotis an Assistant General Counsel, which further
demonstrated his high opinion of Lotis
Mr. LEMov. I wanted to point out to you that Mr. Nassikas told
our staff he had "high regard" for Lewnes, Mamone, Wofsy, and
Lotis, that all were "highly compentent", all were promoted.
He specifically noted Mr. Lewnes' courage and his manner of cal-
ling issues as he saw them, which is the way it should be.
Mr. WATr. That is a good description of Mr. Lewnes, I think.
Mr. LEM0v. The previous Chairman obviously liked the way this
Commission was running.
Mr. WATT. Obviously or he would not have run it that way.
Mr. LEMOV. Certainly he asserted the competency of all these
men and that is clear according to this memorandum.
Mr. WATT. I see that in the memorandum. It is perhaps fortunate
I didn't serve when Mr. Nassikas was Chairman. He and I would
have tangled over the way meetings were run.
Mr. LEM0v. There is testimony by Mr. Fee, page 39 of the trans-
cript of March 14:
The impression I was given in my conversations with the Chairman and
with Commissioner Smith was that on occasions Mr. Lewnes was given certain
instructions by the Commission as far as the way certain things should be
drafted, certain things should be done, and he was not complying with
those instructions.
I think Mr. Smith testified today that he found Mr. Lewnes
highly competent.
Did you have any problems with whether instructions were being
followed or things drafted properly?
Mr. WATT. Yes, I did. I think Commissioner Smith testified
exactly along the lines I would, that we did have problems getting
`)rders back on that. Mr. Lewnes is a tough, tough advocate. He
ook positions and he didn't like to have those positions changed. We
tad a hard time getting some of the changes we wnnted made in a
* imely fashion.
In the long run he was always responsive. There was never a
refusal to do the job, but sometimes if we wanted an order written
differently from the way he wanted it, it took a while to get it.
PAGENO="0554"
548
Mr. Lrn~iov. Could you specify specifically where there was a
delay or where the order was not drafted properly?
Mr. WATT. I am not prepared to say.
Mr. LEMOV. It was bad enough to make some negative comments
about Mr. Lewnes but you do not recall the cases.
Mr. WATT. You are interpreting my comments about Mr. Lewnes.
I don't want my silence to be acquiesence to your interpretation of
my views.
Mr. LEM0v. You have said he is competent.
Mr. WATT. He is very competent. He is an aggressive advocate. I
just felt that the role of advocacy around the Commission table was
improper.
Mr. LuMov. There was some testimony regarding Mr. Mamone.
You told Mr. Journey that you wanted to get him out of that job
which he was handling. Is that true?
Mr. WATT. That is not what I said and I don't believe that is in
the record.
If you want me to comment on my views on Mr. Mamone, I will
be glad to do that.
Mr. LEMOY. Let me get the record.
Mr. WATT. Page 60.
Mr. LEMov. Thank you.
Mr. WATT. I think you are looking for Friday's record.
Mr. LEMov. We will get back to see what was said.
Mr. Journey said on March 18 before the subcommittee, and it is
transcript page 60:
Prior to the rendition of this opinion, Mr. Chairman, in one of our open
meetings-we operated under the sunshine before the law became a fact-
Commissioner Watt came over to the table where I was and asked me in
open meeting to find areas for Mr. Mamone in other parts of OGO.
That is your testimony?
Mr. WATT. That is Mr. Journey's testimony.
Mr. LEMOV. What is your testimony?
Mr. WATT. Thank you.
Mr. LEMOV. All right. What is your testimony.
Mr. WATT. I do not recall that conversation. I do not deny it
might have taken place because it would reflect a general attitude I
had about Mr. Mamone.
I picked up an attitude toward him in three different arenas. A
Commissioner is exposed to the staff in three different capacities.
No. 1, a.s counselor and advisor to the Commission. We had an
opportunity to have, as I have already testified-I didn't like it
but we had from November to April-lawyers coming before the
Commission in an "adversary" role to debate, argue, and fight for
the positions they thought were right. I had an opportunity to
watch Mr. Mamone function in that capacity during those months.
Second, the Commissioner could review the work of his legal
staff, and that is in writing orders for the Commission to consider.
There is an attempt, and I think successful attempt, on the part of
the General Counsel to divide that work so that counsel does not
write orders on the cases which he is actually litigating. Therefore, I
PAGENO="0555"
549
have watched Mr. Mamone perform in those types Of cases where
he wrote an order for our review, editing and approval and sup-
posedly, and I think in every instance I am aware of, on cases where
he was not the litigating attorney.
The third area where a Commissioner watches the performance
of his legal staff, or the FPC staff, is the area where he is litigating
the case. In most instances, of course, a Commissioner never really
sees as a practical matter those lawyers perform. We see their plead-
ings, read those, and have an idea of how they handle the case.
In a few rare instances we see litigating counsel argue their
cases at a hearing.
I have watched Mr. Mamone do that once. I have seen his work
product in the pleadings. In those three areas I am familiar with
the professionalism of Mr. Mamone.
Mr. LEM0V. Now let's get back to the statement Mr. Journey
made.
Mr. Moss. We will have to take a break now because there is a
vote on the floor.
I think it would be wise that we accommodate the witness as well
as the members for lunch.
We shall break until two o'clock.
[Whereupon, at 1 :05 p.m., the hearing recessed to reconvene at
2 p.m.]
AFTER RECESS
[The subcommittee reconvened at 2:15 p.m., Hoi~. John E. Moss,
chairman, presiding.]
Mr. Moss. The committee will be in order.
Mr. Lemov, please proceed.
Mr. LEM0v. Just before the recess I had asked you about the
Journey statement at page 60 of the transcript of March 18, 1977,
where he said that in an open meeting you had asked him to find
areas of work for Mr. Mamone in other parts of the Office of the
General Counsel.
Now I would like you to answer that for me, please-
Mr. WATT. You want my views on that subject matter?
Mr. LEMOV. No, not your views. Did you tell Mr. Journey to get
Mr. Mamone out of the natural gas section of the General Counsel's
Office?
Mr. WATT. I have no recollection of such a conversation at all, but
it would not be inconsistent with my general attitudes and views on
the work product of Mr. Mamone, so it is conceivable that I would
have said such a thing.
Prior to the recess I was laying groundwork to attempt to present
to the committee the three arenas in which a Commissioner can
evaluate the work product.
Mr. LEMOV. That is on the record already.
Mr. Moss. Let him go ahead.
Mr. WATT. I tried to outline that because that is the only way that
I can judge a man. I have had the fortunate opportunity of seeing
a good portion of Mr. Mamone's work in those three areas. I have
PAGENO="0556"
550
come to the conclusion that the Commission is entitled to the very
best counsel and advice that we can get, and I have not been satisfied
with the advice that Mr. Marnone has given us in the past.
Mr. LEM0v. Did you examine his personnel file before you made
that judgment?
Mr. WATT. I did not.
Mr. LEMov~ Did you think it was incumbent upon you to do that?
Mr. WATT. I did not. I. judged him on what advice and counsel
and the work product he was submitting to me at the time. It was
not important to me what his background was or how he had done
yesteryear but how he was doing today in serving the Commission
during the time period in which I was serving.
Mr. LEMOY. But you said you were green as grass when you came
to the Commission in November 1975.
Mr. WATT. I sure did.
Mr. LEM0v. And here you were evaluating a specialist in natural
gas work who had been performing that job without criticism for
11 years, and you didn't look at his personnel file?
Mr. WATT. I did not look at his personnel record and I didn't
stay green as grass very long. Let's get that clear. I wanted to have
an impact on the Commission. I wanted to bring about change, and
I worked long and hard to do so.
While I was green as grass I didn't participate. I did not vote
for the first month I was there. I voted selectively for the second
month I was there because I had to get up to speed before I started
speaking out on issues.
When I started speaking out, I felt competent to do so, and I felt
competent in evaluating Mr. Mamone.
Mr. LEMOY. Without examining his personnel file.
Mr. WArr. Without examining his personnel file. I was looking at
the work product of the lawyer and that is how I judged him.
Mr. LEi~rOv. Did you talk to his immediate supervisor, Mr. Lewnes,
about his performance?
Mr. WATT. I talked to his supervisor, Mr. Journey, about it.
Mr. LEMOV. His immediate supervisor, Mr. Lewnes, I said.
Mr. WATT. I don't know that I did. George was the immediate
supervisor from November to April 1.
Mr. LEM0v. That is correct.
You indicated you do not recall your conversation.
When did you make your evaluation in your own mind of Mr.
M9mone?
Mr. WATT. The evaluation with regard to the counsel and advice
he was giving was made in a continuous process, starting with the
first appearance that he would have had before the Commission
after I went there. I have already talked about that. It was an ad-
versary conflict content that I didn't think was proper in some
cases where he should have been involved.
Mr. LEMOV. All the Commission lawyers performed in that adver-
sary way. That was the standard method.
Mr. WATT. Some performed it better than others.
Mr. LEM0v. In what specific cases -did you have some problem with
regard to Mr. Mamone?
PAGENO="0557"
551
Mr. WATT. I cannot name the specific case, but the type of case
where he took a hard line position on a repeated basis was the ques-
tion of reserves in its several manifestations which came before the
Commission.
Mr. LEMOv. He took a hard line position on that?
Mr. WATT. He did.
Mr. LEM0v. What kind of position was that?
Mr. WATT. It was the type of position that he was advocating, for
example, where we ought to make warranty responsibilities for the
companies, where we ought-I am referring to the Superior case, in
that case as illustrative and not limited to because I am talking
about a type of case.
The Getty case was another where we talked about the commitment
of all the commerciable gas in the well bore, or portions they wanted
to commit.
Mr. LEM0v. Staff was arguing that the entire field should be com-
mitted to the well bore and not the little limited reservoir?
Mr. WATT. That is correct.
Mr. LEMOV. You did not favor that position?
Mr. WATT. The Commission did not favor that, and, of course,
I voted with the majority-unanimous in this case.
Mr. LEM0v. He was arguing the case before you. You had not voted
yet, had you?
Mr. WATT. In these two cases which I really don't want to talk
about as the only two. I am talking about a style of case. He hap-
pened to be the attorney of record in those two cases. It was that
subject matter that was his specialty and it came up in a host of
cases.
Mr. LEM0v. Did he ever repeat the same-
Mr. WATT. Yes. That is what we were talking about.
Mr. LEMOY. I would like to know specifically. After the Commis-
mission made a decision in a particular case he repeated the identical
argument again. Can you name a case?
Mr. WATT. I cannot name a case to you.
Mr. LEMOV. I would like to know whether you can search your
records and find where he repeated an argument after the Commis-
sion had conclusively decided, repeated the identical argument.
Mr. WATT. These are open, free-wheeling, meetings. I am telling
you what my opinion is, my view.
There is no record kept of the open meetings.
Mr. LEMOY. Is it not true that on this question of producer reser-
vations in the most recent decision on the subject, Tenneco, the
Commission overruled the Cliandeleur case which was the very
position Mr. Mamone was arguing in favor of? They ultimately
accepted the staff position that the Chandeleur case which allowed
the producer to reserve large amounts of gas for his own use as an
incentive was no longer necessary?
Mr. WATT. That is my case, the one I wrote. It was a three-to-one
vote. That is the position I took, yes.
Mr. LEMOV. You adopted part of the argument of the staff on
that, that Chandeleur should be overruled.
Mr. WATT. I think that is right.
PAGENO="0558"
:552
Mr. LEMOV. Mr. Chairman, if we may, I would ask that a memo-
randum of a telephone conversation with Mr. Forquer, the prior
General Counsel before Mr. Journey at the Federal Power Commis-
sion, be placed in the record here.
It bears upon requests by Commissioners to remove attorneys from
cases. I think it is relevant at this point.
Mr. Moss. This is a memorandum dated today.
Susan Leal, you have been previously sworn.
Ms. LEAL. Yes, sir.
Mr. Moss. You prepared this memorandum and it correctly re-
flects the content of a telephone conversation?
Ms. LEAL. Yes, sir.
Mr. Moss. Is there objection?
Hearing none, the item will be made part of the record at this
point.
[The memorandum referred to follows:]
CONGRESS OF THE UNITED STATES,
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
WASHINGTON, D.C., March 23, 1977.
Memorandum
To: Michael R. Lemov, Chief Counsel.
From: Susan Leal, Counsel.
Subject: Telephone interview with former General Counsel Leo Forquer,
March 23 1077.
I read a portion of the March 18 transcript to Forquer (Tr. 83, lines 16-23)
to provide background for my questions. Then I asked Forquer: What were the
dates of your service as General Counsel at the FPC?
He answered: June 1972 to September 1974.
I further asked Forquer: When you were General Counsel, were you
ever asked by a Commissioner to remove an attorney from a case or transfer
him to another department because that attorney was not performing in a
satisfactory manner, or was in conflict with a Commissioner as to the
merits of a case, or for no stated reason.
He answered: "No."
Mr. LEM0v. On page 67 of the transcript of March 18, 1977, Mr.
Dunham testified, Commissioner Watt, that you and Commissioner
Smith had brought to his attention the fact that certain orders were
not being prepared within the time frame you desired to have them
prepared or perhaps alternatives were not prepared in the way they
were instructed on the part of various people here.
I want to ask you about that. Can you name for us any particular.
orders that were not prepared on time or alternatives not prepared
on time?
Mr. WATT. I am not prepared to do that. That is my general re-
action. I would have complained to Chairman Dunham about that
type of work product at those times. I still continue to complain
about it as the situation comes up.
Mr. LEMOV. It still comes up now and then.
Mr. WATT. Now and then things don't move as fast as I would
like to move them.
Mr. LEMOV. I wonder, Mr. Chairman, whether I could ask that
the memoranda from Mr. Lewnes, Assistant General Counsel, to
PAGENO="0559"
553:
Mr. Journey dealing with shortage of personnel, dated November
4
Mr. Moss. November 4, January 15 of 1976, March 18 of 1976,
and March 26 of 1976.
Those will be made part of the record at this point.
If there is no objection, it will be inserted.
[The memorandums referred to follows:]
NOVEMBER 4, 1975.
Memorandum
To. Drexel D. Journey, General Counsel.
From: George P. Lewnes, Assistant General Counsel.
Subject: Shortage of Personnel.
As you are aware, some time prior to Alan Carpien's (Edward Mark's
section) resignation from the Commission in the early part of July 1975, I
attempted to have the Office of Personnel Programs process a replacement.
Their having totally fouled up on the first replacement, I submitted a second
name. By the time the second one was ready for approval, a hiring freeze
was invoked by you pursuant to instructions from the Office of Personnel
Programs and the Office of the Comptroller. Additionally, William Braun, one
of my senior curtailment attorneys, also re~igned recently.
At the present time, the workload in Edward Mark's section has been
backing up because of a lack of a replacement for Alan Carpien. I have*~
attempted to alleviate this backlog by farming out to the trial attorneys the
drafting of as many "franny" orders as their respective schedules will permit.
However, the backlog in Ed Mark's section remains significant. In light of the
priorities we will be giving to applications for relief from curtailments inclu-
sive of those filed under Order 533, it does not appear that we could materially
dent the backlog without the necessary replacement for Alan Carpien.
Additionally, Greg Williams, now in Edward Mark's section, will be
graduating from law school next month. It is my intent to use him as a
replacement for William Braun in the trial section since his experience and
training will allow me to immediately assign him to the trial of cases without
a senior supervisory attorney. We will, therefore, have two vacancies in
Edward Mark's section.
I, therefore, urge that we be permitted to hire two law students immediately
so that they can be sufficiently trained by the time Greg Williams moves into
the trial section.
For the last two years, as you will note, I have not asked for an increase in
personnel in either of my sections and have received none.
JANUARY 15, 1976.
Memorandum
To: Drexel D. Journey, General Counsel.
From: George P. Lewnes, Assistant General Counsel.
Subject: Personnel Departures, Promotions, Workload and Morale.
I have previously indicated to you both orally and in writing my anticipa-
tion of a loss of personnel with a concomitant decrease in productivity due to
the inequities of the promotional practices instituted by your office. Mr.
Gregory Letterman has tendered his resignation and has accepted another
position. I attribute his departure directly to the fact that he was one of the
attorneys whose promotion was denied under circumstances that have never
been explained to his satisfaction.
With Mr. Letterman's departure, I am now lacking two trial attorneys, two
law clerks (law students), one legal clerk (typing), and one secretary. With
no action as yet having been taken on the requested promotions for Gregg
WTllliams from GS-9 to GS-11 (trial attorney) and Neda Klein from GS-3 to
GS-4 (typist), I would anticipate their departure as well as others. In
addition, my secretary steno, GS-8 will be going on maternity leave. All of
these circumstances will result in a further diminution of this section's
productivity in matters of critical concern to the Commission, the regulated
companies, and the consuming public they serve.
PAGENO="0560"
554
JANUARY 16, 1976.
Memorandum
To: Mr. George P. Lewnes.
From: General Counsel.
Subject: Your memorandum dated January 15, 1976.
As you know from the regular bi-weekly staff meetings of OGC the
overall staff resources which we now have, and which we will have, are
determined in the context of overall agency resources.
The promotion policies of OGC are conducted in accordance with overall
agency policies. On numerous occasions at the bi-weekly OGC staff meetings
you and all Assistants have been supplied with such information on promotions
as I have obtained. On December 12, 1975, you received the accompanying
memorandum from the Director, Office of Personnel Programs. Today, you
were given further guidance by Curt Fee. As I receive further information you
will be apprised promptly.
Your assistance in discharging these policies will ensure the continuing good
work of all of OGC.
DEEXEL D. JOURNEY.
FEDERAL POWER CoMMIssIoN,
WASHINGTON, D.C., December 12, 1975.
Memorandum
To: Bureau and Office Heads.
From: Director, Office of Personnel Programs.
Subject: Summary statement of promotion objectives and requirements for
bureaus and offices.
This is in response to several requests I have received for a description of
promotion objectives and requirements. It does not constitute a substitute for
the myriad of personnel and budget laws, regulations, policies and procedures
applicable to specific promotion situations but instead reflects a management
summary of the promotion program of this agency. Actual promotion actions
of this agency follow merit promotion procedure, agency regulations and
Civil Service regulations.
For the purposes of this agency, a promotion action involves the change of a
Federal employee to a higher grade when both the old and the new positions
of the employee are under the general schedule or under the same type
graded wage schedule (e.g., printing plant). The position to which an employee
has been promoted is by law and regulation an entirely new position with a
new position description and separate number, even though the position may be
in the same organizational and physical location, under the same supervisor
and/or same line of work. From a pay standpoint, the promotion results from
the employee being officially assigned, on a given effective date, work certified
by classification as being of higher grade level. The new position description of
higher grade, assigned to the employee, constitutes a type of voucher for
services rendered by the employee to the government. The promotion is the final
step in a process which either resulted from a posting of tl1e vacancy with
subsequent paneling and selection from among the best qualified' candidates
from within and/or outside the agency or resulted from a career promotion
from a position with known promotion (e.g., career-ladder positions; trainee
positions; understudy positions; and positions filled at a grade below the
established or anticipated grade) or resulted from accretion of higher level
duties through no planned management action; or change in classification
standards.
Promotions are not consummated as a reward for excellence of job per-
formance or conduct. They are strictly achieved on a merit basis to fill higher
level positions which are needed to meet existing operational needs in the
particular bureau or office.
External, non-personnel factors which have an impact on the FPC promotion
program (by the filling of authorized vacancies) include salary allotments,
average grade and position ceiling allocations of each FPC bureau and office, as
well as the goals of the new President's Cost Reduction Program.
There are two kinds of position ceiling: (a) one for full-time, permanent
positions and (b) the other for total positions. The `ceiling for part-time,
PAGENO="0561"
.555
temporary and intermittent positions is arrived at by subtracting the figure
for (a) from (b). The total employment ceiling is established by the Office of
Management and Budget, and is further broken down within the agency by the
Executive Director for each bureau and office.
Another~ control primarily designed to prevent improper escalation of the
grade structure within agencies is the average grade restraint. This is an
obligation placed on this Commission through the Office of Management and
Budget. The agency average grade restraint is further broken down for each
bureau and office. The position ceiling and average grade authorized is moni-
tored by the Office of Personnel Programs.
Salary allotment, based on the Congressionally approved FPC budget, is a
critical element in any proposed promotion action. The FY 76 salary allot-
ments for each bureau and office has been allotted salary funds predicated on
agencywide operational needs.
Severe budgetary restraints which have faced this agency during the last
fiscal year and so far in FY 76 has had an adverse effect on our ability to
establish new positions for all desired in-service promotions and recruitment
efforts.
Recently many SF-52's requesting personnel actions for recruitment and
promotion had to be returned to the individual office without action because the
position ceiling, average grade and salary allotment for that office had already
been exceeded. Being "overdrawn" on salary allotment in one office necessitates
the delay or non-processing of SF-52's for other bureaus and offices. Although
regrettable, this condition has resulted in hardships not only for employees in
all occupational areas and offices but as well to management in meeting the
ever increasing staffing needs of the agency.
We understand the continuing desire of each office to effect promotions. At
the same time, there is the harsh reality that in many offices the salary allOt-
ment, position ceiling and/or average grade allocation under the FY 75 con-
tinuing resolution, FY 76 allocations or both have been exceeded during the
first quarter of the fiscal year.
An obvious remedy to the in-service promotion and recruitment problem
would be~ an increased allotment in all areas of restraint previously noted.
This has not been administratively feasible. Consequently each office must
attempt to obtain its allotments via such factors as attrition, and a reduction
in the number of requests for promotion and recruitment actions pending
approval of the FPC FY 76 budget and during the remainder of this fiscal
year.
Another factor which also must be considered along with the previously
mentioned allotments is the President's Cost Reduction in Personnel Manage-
ment Program. During FY 74 the FPC promotion rate was 27.7% of its total
workforce (361 out of 1300 employees).
During FY 75, the FPC promotion rate was 23.9% (316 out of 1320 em-
ployees) which met our FPC goal of 24.9% under the President's program.
By way of contrast, one office's promotion rate during FY 75 was a high 36%.
The promotion rate of the remaining FPC offices was 22.3%.
During the beginning of FY 76, from July through September 1975, the
promotion rate in this same office reached 19% of total staff as contrasted
with 6% for all other FPC offices. This situation, of course, requires a careful
examination of planned recruitment and promotion requests.
WALTER C. STERLING, Jr.
MARCH 18, 1976.
Memorandum
To: Drexel D. Journey, General Counsel.
From: George P. Lewnes, Assistant General Counsel.
Subject: Certificate Section Workload and Personnel Shortages.
I have from time to time written you advising of the current status of
things in the Certificate Section. Most recently I wrote you about the antici-
pated loss of my only remaining law clerk, Stephen Krenkel (GS-5) due to his
limited appointment. I also advised you orally yesterday, that William Koerner
(Trial Attorney GS-14) and Pamela Dowdie (GS-5-clerk typist) will also
be leaving and that Linda Stallard my senior Steno-typist is going on maternity
leave beginning next week.
87-292 0 - 77 - 38
PAGENO="0562"
556
In summarizing recent and current cl.epartures we find that, assuming
Mr. Krenkel's departure, I will be lacking in Ed Mark's section, three law
clerks (two have never been replaced) all of whom were hired as GS-7 and
one legal clerk GS-5 (Susan King who was never replaced). This leaves that
section with only 2 attorneys, Ed Mark and Stan Harris, and 2 clerk-typists,
one of whom spends most of her time maintaining the records of filings, orders
issued, etc. Since Ed Mark's office handles practically all notices of applica-
tions and the drafting of uncontested orders, it is obvious and has been for the
past year that his workload could not keep flowing with the limited personnel.
As a consequence I have had trial attorneys grade GS-11 through GS-15 trying
to take up the slack by drafting uncontested orders during periods when they
were not working on trial cases. This, in turn, has caused a number of the
trial attorneys to seek compensatory time for work done after hours or on
weekends. It is obvious that the use of high grade trial attorneys for work that
can more readily be done by GS-7 law clerks is not the most efficient from a
cost standpoint.
But even the foregoing no longer can be deemed a viable alternative. Most
recently I have lost senior trial attorneys such as Sheila Hollis, William
Braun, Gregory Letterman, Glenn Letham and now William Koerner. None of
these have been replaced except to the extent that Greg Williams was trans-
ferred from a law clerk to trial attorney when he recently graduated from
law school.
Insofar as secretarial help, with Pamela Dowdle's departure, we will be
short of three (one vacancy was never filled, Susan King's vacancy is
temporarily being filled by Neda Klien and Pamela Dowdie). With Linda
Stallard going on maternity leave, we are now left with seven secretaries in-
clusive of Mark's Section, 2 of whom must devote most of their time to
recording keeping and work flow, 1 to writing and typing basket producer
orders, with the remaining 4 handling the typing work load for 23 attorneys.
You have indicated that a reorganization or restructuring of staffing is
probably in the making in consideration of the budgetary assignment to OGC.
Since this section has handled an inordinate amount of responsibility insofar
as gas matters are concerned, it is my suggestion that certain assignments be
transferred out, if, in fact, the necessary replacements are not forthcoming.
Such matters as curtailments and pipeline investigations could more rapidly
go into BNG while producer matters unrelated to a pipeline certificate applica-
tion could go into Gilmore's shop leaving this section with what it was
initially intended for, namely contested and uncontested pipeline cases inclusive
of export and import of LNG. For example, without any new attorneys and
without reassignment of curtailment matters, William Koerner's departure
places a great strain on our ability to handle all of the LNG cases now on
file.
I would appreciate an early conference with you on this matter since the
workload is beginning to accumulate and meeting date lines more difficult all
to the detriment of the Commission, the companies involved and the con-
sumers they serve.
Incidentally, after receiving Mrs. Lane's memo of March 17, 1976, I spoke
with her and Mrs. Ackerman and was advised that it was based on your
instruction that my section be the first called upon to provide secretarial
assistance from time to time to Commissioner's offices for periods of up to
three weeks. We obviously will attempt to comply but you must realize that
such assignment will further exacerbate a most difficult existing shortage.
MARCH 26, 1976.
Memorandum
To: Drexel D. Journey, General Counsel.
From: George P. Lewnes, Assistant General Counsel.
Subject: Departure of Additional Personnel.
In my memorandum to you of March 18, 1976, I detailed the near intolerable
situation in my trial and riontrial sections occasioned by the loss of personnel
which you have not permitted me to replace. I also indicated to you possible
alternatives.
I have now been given two weeks notice by Frances Buchanan that she too
is leaving. Again I have stated often to you that with the shortage of legal
PAGENO="0563"
557
and secretarial personnel coupled with rumors which I shall not go into,
morale is at the lowest ebb that I have had the misfortune to observe during
my entire tenure at the Commission.
With Frances Buchanan and Pamela Dowdle's departure and with Linda
Stallard having just gone on maternity leave, Earlia Ganey will be the lead
secretary assisted by Cheri Shaffer. They will have the joint responsibility of
maintaining the office records and the paper and work flow of the office which
is considerable. With whatever time is available, they will endeavor to do some
typing. This leaves us with only two full time typists in the entire section.
Couple all of this with some of the special assignments that you personally
have assigned to me and to attorneys in my office places a further burden on
my staff that can only, in my judgment, lead to additional future resignations
of some of our more capable trial attorneys.
I do not enjoy writing these reports but our obligation to effectively and
professionally serve the public is being stultified for lack of a reasonable
number of qualified replacements.
Mr. LEMOV. If you look at that, you `will see a series of memo-
randa there, one responding memorandum from Mr. Journey, which
reflect a severe shortage of personnel in the Certificate Section from
a period preceding your taking office as a Commissioner and con-
tinuing until almost Mr. Lewnes' and Mr. Mamone's sudden de-
parture from the section involved.
I would like to ask whether you think some of the so-called draft-
ing problems or alternative problems might have been caused by a
lack of staff in that section and the fact we were going through a
major crisis in the curtailment of natural gas supplies and a very
heavy caseload.
Mr. WATT. I assume that can be a legitimate reason.
Mr. LEMov. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Lent?
Mr. LENT. Thank you, Mr. Chairman.
Commissioner Watt, I have asked all of the witnesses on this
question of retaliation that might or might not have been taken
against any of the employees of' the Federal Power Commission as
a result of their testimony before this subcommittee or any other
committee of the Congress.
Can you tell us whether, based on your knowledge and your serv-
ice with the Federal Power Commission, any of the transfers that
this committee has been concerned with-that of Mr. Mamone, or
Mr. Wofsy, or Mr. Lotis-has been as a result of their testimony
before a committee of Congress?
Mr. WATT. I know of not the slightest evidence whieh would indi-
cate that is so. I have been involved in no conversations which would
have any way of being stretched to that conclusion-not that I
heard of, seen, nor thought of in any way.
Mr. LENT. You then agree with the testimony of Commissioner
Smith.
Mr. WATT. Yes.
Mr. LENT. And Chairman Dunham.
Mr. WATT. Yes.
Mr. LENT. That this testimony was in no way related to the per-
sonnel transfers which took place.
Mr. WATT. Absolutely: I am absolutely agreeing that there was
no relationship.
PAGENO="0564"
558
Mr. LENT. You testified with respect to Mr. Lewnes that you have
no question with respect to his competency.
Mr. WATT. That is correct.
Mr. LENT. But you did question what his function would be at
Commission meetings.
Mr. WATT. That is right.
Mr. LENT. When there are disagreements as to policy of the Fed-
eral Power Commission as between the Commissioners and the
members of the staff, such as Mr. Mamone and Mr. Lewnes-when
you have questions at the Federal Power Commission as to policy,
who prevails as between the staff and the Commission?
Mr. WATT. It is the Commission's responsibility to set policy.
Mr. LENT. And the Commissioners are an independent regulatory
agency; is that correct?
Mr. WATT. Yes.
Mr. LENT. And the staff is definitely subservient to the Commis-
sioners.
Mr. WATT. They are supposed to be.
Mr. LENT. Is it true, Mr. 1,~S,Tatt, that you have written Commis-
sion opinions which were critical to Mr. Mainone's handling of
cases before the Commission?
Mr. WATT. Yes; I have written opinions which would criticize
his work.
Mr. LENT. Were these opinions unanimous or were there dissent-
ing opinions taking exception to your characterization of Mr. Ma-
mone's work?
Mr. WATT. In the opinions that have been called to my attention
they were unanimous decisions voted four to nothing. We had a
four-man Commission at the time.
In the opinions I have written they have also been critical of
other lawyers wh2 have presented their cases if the Commission was
not agreeing with them.
In these particular cases that have been put into your record
which you are no doubt referring to we quoted administrative law
judge's criticism and pointed out that the four of us were agreeing
with the criticism that an administrative law judge rendered.
Mr. LENT. If any of the other Commissioners disagreed with your
assessment of Mr. Mainone's performance, they could, of course,
have dissented or written a concurring opinion but taking exception
to your comments concerning the staff's performance?
Mr. WATT. That is correct, and that would have been expected of
them. If they did not agree in totality with all the writings, they
would write concurrences and dissents, as we have all done on dif-
ferent cases.
Mr. LENT. On any of the occasions you are referring to was that
done by any of the other Commissioners?
Mr. WATT. No; it was not. They supported the opinions I wrote.
Mr. LENT. With respect to the rearrangement of the chairs at the
Commission meetings, Chairman Dunham has testified that this was
done primarily to reorganize the way the Commission considered
matters before it, and I think that you agreed with the rearrange-
ment of the furniture.
PAGENO="0565"
559
Mr. WATT. Absolutely.
Mr. LENT. Has this rearrangement in fact made the Commission
meetings more efficient and orderly in your opinion?
Mr. WArP. Much more so in my opinion.
Mr. LENT. Are all points of view still coming to the Commission's
attention under this new system?
Mr. WATT. We think so, and we make every effort to do so.
Mr. LENT. Was Mr. Lewnes' change in location to your lrnowl-
edge in any way related to his congressional testimony?
Mr. WATT. Not to his congressional testimony but related to his
advocatorial role in the Commission room, which I think is improper.
Mr. LENT. Chairman Dunham testified that administrative law
judge appointments are circulated to other Commissioners for re-
action. Did you review Mr. Lewnes' appointment to become an AU
at the Commission?
Mr. WATT. I did thoroughly review it and discussed it with Mr.
Lewnes.
Mr. LENT. Did you approve or disapprove of this personnel move?
Mr. WATT. I approved of it and discussed it with George Lewnes
for a short period of time and wished him well. I thought it was a
good move for him. I considered it a promotion. He did at that time,
and I assume still does.
Mr. LENT. So that you were not critical of Mr. Lewnes' perform-
ance but rather of his function, as I understand it, before the Fed-
eral Power Commission, and you find no inconsistency in subse-
quently approving his application to become an AU. It that cor-
rect?
Mr. WATT. That is correct. As an AU I think George Lewnes
will hone with great skill the points that he wants to make. He is
an advocate by nature, and an effective advocate, and as an AU his
role will be reviewed by all the intervening parties to the action and
be subjected to the Commission for its independent review and
comment.
Mr. LENT. When the subcommittee staff conducted its interview
with you on March 15 you were quoted as having made a statement
to the effect that "Lewnes would eat your lunch if you turned your
back."
Mr. WATT. Yes.
Mr. LENT. I would like to ask you, first of all, is that an accurate
quote.
Mr. WATT. Yes.
Mr. LENT. And, if so, what did you mean by that statement in your
own words?
Mr. WATT. That would be an accurate quote. It is a phrase that
I have used for a number of years.
By that phrase, I mean that in my opinion George Lewnes is an
aggressive advocate who will take advantage of every situation he
can to see to it that the position he is taking prevails. That is the
very reason I objected to the performance he carried on in the
Cormmssion meetings. I did not think that was the role for an ad-
vocate to be in.
PAGENO="0566"
560
Mr. LENT. The same staff interview indicates that you said that:
If Chairman Dunham is asked fair and proper questions and given an
opportunity to relate the full story, that his testimony * * *
before this committee
will prove very embarrassing to Lewnes and also to Mamone. He declined to
elaborate.
"He" means you.
Did you say that, and, if so, what did you mean?
Mr. WATT. We would have had a conversation that those sentences
you read would probably summarize. I think these whole hearings
will prove to be embarrassing to all these professional men. I do
not like being here before the committee today. My testimony on
Mr. Mamone particularly will not help him in his professional
career, and I do not relish the role I am playing. I do not enjoy
pointing out the weaknesses of other people. It is just an embarrass-
ing situation all the way around.
I would choose not to be here, but I have an obligation to appear
before the committee and I have an obligation to present my opinions
and views as you ask for them.
Mr. LENT. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Gore?
Mr. GORE. Thank you, Mr. Chairman.
I can understand how these hearings can sometimes be embarrass-
ing and difficult. If you had the power to avoid being here, I guess
you would, wouldn't you?
Mr. WATT. I sure would.
Mr. GORE. If you had the power to avoid someone under you
being here, would you attempt to do that, too?
Mr. WATT. If it would cause everyone embarrassment, I would.
Mr. GORE. It kind of gets to the heart of these hearings.
Did you find the testimony last January embarrassing?
Mr. WATT. Absolutely not. I am pleased that you pick up this
line of questioning as you did with Commissioner Smith. I was not
embarrassed by it at all.
I came to the Commission after those events had happened. I
do not hold any responsibility for prior Commission actions. I do
not feel I have to defend the institution of the Federal Power Com-
mission or any other entity. I am there to do my job and, as you
men are, we need to get the best evidence we can.
There is no embarrassment whatsoever. I think it needs to be
done.
Mr. GORE. If it had been embarrassing, you might have-if testi-
mony would be embarrassing and it was in your power to prevent
and impede an employee under you to testify, then you might con-
sider doing that?
Mr. WATT. Let me back lip on that so there is no misunderstand-
lug.
Embarrassment I am talking about is dealing with the man's
character and reputation which may affect his professional career
in the years ahead. That is what I am being sensitive to.
PAGENO="0567"
561
When you talk about the substantive issues, that is something
else. We need full disclosure on substance.
Mr. GORE. Embarrassment is sometimes not a scientific term to be
easily characterized or measured. It is sometimes just an emotional
reaction and it can cause actions to be taken.
One of the purposes of these hearings is to determine whether
or not that emotional reaction on the part of members of the Com-
mission led to or contributed to the adverse personnel actions which
subsequently took place.
Mr. WATT. I can speak only for myself on that. I wasn't, but I
know that the general tenor of the three new members was one of
detachment of past activities. We were there to learn and to do what
we thought was right in the public interest from the time we got
there forward.
Mr. GORE. Yes. You testified that when you first came to the Com-
mission you wanted to see some changes made.
Mr. WArr. Yes.
Mr. GORE. What were those changes?
Mr. WATT. I wanted, after seeing how the meetings ran, to see
that the way of handling those cases was done in a way which would
bring about fair handling of them in my opinion.
Mr. GORE. What is your view of the proposed public policy of
deregulating natural gas?
Mr. WATT. I am an advocate of deregulation.
Mr. GORE. You think regulation is counterproductive ~
Mr. WATT. Yes, I do.
We are talking about new gas.
Mr. GORE. You are charged with regulation.
Mr. WATT. Yes, I am.
Mr. GORE. If it is your view that strict regulation is counter-
productive and not in the public interest, does it not follow that
you might consider taking actions to minimize the damage to the
public from strict adherence to the regulatory pattern?
Mr. WATT. It does not follow that way. I have taken an oath of
office to fulfill the law as it is. I think the law is wrong. I think the
law does not allow us to make the best decision, so, therefore, under
the law we are looking for a combination of least wrong answers
that will carry out the public interest within the law that is now
on the books.
I would urge Congress to change the law.
Mr. GORE. So you see your role, then, as one of complying with
the letter of the law that you are sworn to administer but minimiz-
ing the damage to the public that you see coming from the admin-
istration of that law.
Mr. WATT. I guess the answer to your question is yes, within the
law.
Mr. GORE. Well, one of the ways to minimize the public damage,
if you adopt your view, is to kind of pull back on the strictness with
which the law is administered as long as you stay within the letter
of the law. Is that a fair assumption?
PAGENO="0568"
562
Mr. WATT. Some people have taken that approach, prosecuting
attorneys and the like, in enforcing laws. We have not done that at
the Federal Power Commission.
Mr. GORE. That is another purpose for these hearings, to deter-
mine whether or not that has been done, because the people who
testified before this subcommittee and before Chairman Drngell's
subcommittee last year were advocating a more strict adoption of
regulations. This was not in correspondence with your views as to
how the law should be administered.
Mr. WATT. We have administered the law, and everything that is
controversial to the slightest degree is taken to the courts. The
courts have acted on all those things, striking some of the FPC
actions down, confirming others. We are checked on that in every
instance.
In fact, right today they are arguing our new gas rate put out
in July of 1976. That is being argued today and tomorrow.
Mr. GORE. You testified that you are an advocate of deregulation.
Do you agree that if charges of substantial withholding of natural
gas are verified that weakens the argument of those who favor de-
regulation?
Mr. WATT. I don't know how to handle that question. I suppose
as a political reality it does. I don't know that it should.
From an economist's point of view, you look to the market forces
to control it.
Mr. GORE. A substantial pattern of withholding was confirmed, as
I believe the evidence shows. It shows that the market power of the
companies which dominate the natural gas industry is such that a
removal of the government's role would leave businessmen and
homeowners at the mercy of the non-competitive industry.
Mr. WATT. If it is determined it is a non-competitive industry,
then certainly government must regulate it. That is the basic test:
Is there fair competition between the producers of natural gas?
Mr. GORE. And one of the ways of answering that question is a
determination of whether or not there has been withholding, a look
at what the pattern in the industry is right now. Is that correct?
Mr. WATT. I have a little hesitancy in answering your question
because I am not sure our definition of withholding is the same.
Commissioner Smith in earlier conversations with you today made
a distinction between the different types of withholding.
Certainly if there are wells which have been drilled and con-
nected up to interstate pipelines and certificated to be flowing and
they are not, then certainly the conclusion you come to is a reason-
able conclusion.
Mr. GORE. You said that you began to feel right away that it
was improper to have a vigorous adversary proceeding before the
Commission.
Mr. WATT. That is correct.
Mr. GORE. Where does the staff present its views and arguments
to the Commission?
Mr. WATT. At the first go-round with an AU presiding so that
there can be cross examination and both sides advocated as well as
the several sides presenting their cases.
PAGENO="0569"
563
Mr. GORE. Are you present at those?
Mr. WATT. No, we are not.
Mr. GORE. Where does the staff present its arguments to the Com-
mission? That is my question.
Mr. WATT. As a general rule they do that through the pleadings
and there are no opportunities for any of the parties to present an
advocacy position orally to the Commission. There are exceptions
to that, as I have already alluded to.
Mr. GORE. So the proceeding which you began to feel shortly
after your appointment was improper was the only time that the
staff had an opportunity to present adversary viewpoints to the
Commission.
Mr. WATT. They had done so. The counsel of record had already
done s~ in the pleadings.
Mr. GORE. In the pleadings.
Mr. WATT. Like all other parties to the action. None of the other
parties to the actions are allowed to come in and advocate additional
arguments after the pleadings have been put in.
Mr. GORE. You paid very close attention to the pleadings.
Mr. WATT. I do, yes.
Mr. GORE. Did you pay close attention when Tenneco in its plead-
ings complained of the testimony presented?
Mr. WATT. I did. That is one reason I voted for the oral argu-'
ments where we allowed all the parties to present in an adversary
position their case. That is one of the rare instances we have had
where we have done that. It has happened a few times, three or
four times, in the year and a half I have been there. It is a rare
situation.
Mr. GORE. Do you think it is unseemly for the staff to present a
vigorous adversary position in open hearings before the Commis-
sion? Why did you think it was improper? *
Mr. WATT. In an open hearing?
Mr. GORE. Yes, before the Commission.
Mr. WATT. I will need to back up here. They have a responsibility
to be aggressive advocates for their positions. We don't have any
control over their positions. Those are formulated. Their positions
need to be subject to the cross examination of the other parties to
the case.
I think it would be unfair, and I think it has been unfair, to
allow the FPC staff to have that adversary position before the AL~J,
he [AU] then makes his position, the other parties make their
pleadings, and then give the FPC lawyers a second crack at the
Commission without having the other parties to the case also present
their views. It seems unfair. It is an imbalance. It is almost an ex
parte situation. It is a very difficult judicial role to be playing in
my opinion.
Mr. GORE. This idea came to you shortly after you came to the
Commission. You came in October or November?
Mr. WATT. November 11 I was sworn in.
Mr. GORE. November 11, 1975.
Mr. WATT. Yes.
PAGENO="0570"
564
Mr. GORE. In January, when the testimony took place, were you
aware that the testimony took place?
Mr. WATT. Yes.
Mr. GoRE. You were aware of newspaper accounts of it?
Mr. WATT. That is correct.
Mr. GORE. You disagreed with the testimony, did you?
Mr. WATT. I never read it. I just read about it in the newspaper.
I didn't disagree or agree. It would have been improper for me to
have gotten involved at that time. Those were cases yet to come
before us.
Mr. GORE. Part of the testimony indicated that there was a sub-
stantial withholding of natural gas. Did that conflict with your
view of the situation at that time?
Mr. WATT. At that time that I read about it in the newspaper I
didn't have a view. The case had not been presented to us yet. That
is why we had the oral arguments, so that it could be presented to us.
Mr. GORE. So you did not react one way or the other to the testi-
mony.
Mr. WATT. No. I have tried-not always successfully but I have
tried-not to react to all newspaper accounts on any subject.
Mr. GORE. Now, then, after you became a little bit more involved
in the proceedings of the Commission, you then decided that this
situation was just intolerable, that you weren't dissatisfied with the
vigorous advocacy of Mr. Lewnes or Mr. Mamone.
Mr. WATT. Excuse me. I was dissatisfied.
Mr. GORE. That you were dissatisfied.
Mr. WATT. Yes.
Mr. GORE. I said you weren't satisfied. Did I misstate myself?
Mr. WATT. I am not sure. I was dissatisfied with their role.
Mr. GORE. Very well. But you have difficulty remembering whether
or not you asked Mr. Journey to reassign Mr. Mamone.
Mr. WATT. I do not have any difficulty in remembering that I
have asked for that situation to change. I do not remember the
instance that he talks about where I came up to him at some time
and said, move him to another position.
At that time Mr. Mamone was not appearing before the Com-
mission as counselor and advisor any more. We would just have
been working off his work product in the written form, whether it
be drafts of the orders we were considering or the cases that he was
attorney of record in.
Mr. GORE. Did you ask for him to be taken off natural gas mat-
ters or not?
Mr. WATT. I got tired of what I considered to be improper work
coming up to the Commission and I complained about it. I never
asked that he be relieved of any one particular case.
Mr. GORE. Did you ask that he be taken off of natural gas mat-
ters or not?
Mr. WATT. I know that you are interpreting my answer as being
evasive, and I don't mean to be. I was not satisfied with him and I
complained about the work product he was giving us.
PAGENO="0571"
565
Mr. Goiu~. Did you ask for him to be taken off natural gas mat-
ters or not?
Mr. WATT. I did not use those words.
Mr. GORE. Did you ask for him to be taken off natural gas matters?
Mr. W~ri~. I did not use those words. I complained-
Mr. GORE. Did you ask in other words?
Mr. WATT. I have been trying to say yes, I have been complaining
about his work product. I think that can be interpreted that I was
not satisfied with what service the Commission was getting from
Mr. Mamone.
I think it is fair for Mr. Journey to interpret that I would like
to see his services elsewhere. I did not think that he was giving us
the type of professional work that we deserve on the Commission
when we are making the kinds of decisions we need to make.
Mr. GORE. Your testimony is no, you did not ask for him to be
taken off natural gas matters. You simply said to Mr. Journey that
you didn't like the work he was doing.
Mr. WATT. I am testifying to you that I don't remember any
specific words that I have said to Mr. Journey. I am testifying that
I did complain on more than one occasion about the work product
of Mr. Mamone, and I was tired of having that type of work
product presented to us.
Mr. GORE. My recollection was that Mr. Journey testified that you
asked him to get him off natural gas matters.
Mr. WATT. Page .60 has his words there.
Mr. GORE. Reading from the transcript on page 58:
Mr. JOURNEY. In the case of Mr. Mamone, as I said in my prepared testimony
which I submitted on March 8, the General Counsel sometimes received a
request from an individual Commissioner to have staff lawyers do other
work. In the case of Mr. Mamone I did receive such a request.
Mr. Moss. From which Commissioner?
Mr. JoURNEY. Commissioner Watt.
So his testimony is that you requested him to assign Mr. Mamone
to do other work.
Mr. WATT. That is his testimony. I am not contradicting it.
Mr. GORE. But you are not confirming it, either.
Mr. WATT. I am not giving any quotes on any words I said, I
simply don't remember. He is not giving a quote.
I am telling you that I was not satisfied with the professional
work Mr. Mamone was doing.
Mr. GORE. All right. It may seem like a minor point to you, and
I hope I am not belaboring it beyond reason, but I am not asking
you for an exact quotation of the specific words that you used.
My question really is very simple. Did you ask, in whatever words,
for Mr. Mamone to be taken off of natural gas work?
Mr. WATT. I think that is probably a fair conclusion as long as
you are not trying to tie me into any words.
Mr. GORE. So your answer is yes.
Mr. WATT. You are sure trying to stretch answers for me. I am
telling you I was not satisfied. I would have been happy had he not
been submitting the kind of work he did to us on a repeated basis.
PAGENO="0572"
566
So the conclusion would be yes, I would have been happy had he
found work elsewhere.
Was I asking for it? You can draw those conclusions from it.
That is why I am not contradicting what Mr. Journey said.
If this is a major point, we need to dwell on it. If I am being
evasive, I don't mean to be.
Mr. GORE. I think it is.
Let me refer back to the context of these hearings to tell you
why I believe it is a major point.
We have had three people testify before the subcommittee, as
well as ~Chairman Dingell's subcommittee, and within a very short
period of time after their testimony, which was embarrassing to
the Commission as an entity-
Mr. WATT. It was not embarrassing to me.
Mr. GORE. It was embarrassing to at least one Commissioner.
Mr. WArr. OK.
Mr. GORE. It was embarrassing to those who have a public policy
position in favor of deregulating natural gas.
You want to respond to that?
Mr. WATT. That is not my testimony, but go ahead. Excuse me.
Mr. GORE. Do you agree that that testimony was embarrassing?
Mr. WATT. I simply don't know. I am an advocate of deregulation.
There is no question about that.
Mr. GORE. Yes.
Mr. WATT. It was not embarrassing to me.
Mr. GORE. How do you advocate deregulation?
Mr. WATT. Well, I am doing it right now. I do it in speeches I
give.
Mr. GORE. I guess Mr. Mamone was advocating the opposite point
of view before congressional subcommittees. We are all anxious to
advocate our particular views at times. It becomes complicated when
you work for a regulatory commission.
Anyway, within a short period of time after this testimony Mr.
Lewnes was the subject of an inquiry of how he could be fired.
Now we are trying to determine whether Mr. Mamone was the
object of an inquiry or of a request that he be taken off natural gas
matters, the subject of his testimony, and the area within which
he had been working for years, and transferred to the hydro-
electric power division where he had no experience.
That is why I think within that context this is a significant point:
Whether or not you requested his removal from natural gas matters.
I am getting the impression that you did request his removal
from natural gas matters.
Mr. WATT. OK, I think we are cOmmunicating.
Mr. GORE. All right.
Mr. WATT. I am not satisfied and was not satisfied with the work
product of Mr. Mamone. It had nothing to do with his testimony
before this committee or any other committee of Congress.
I did not think, and I do not think, that he served at the profes-
sional standard that should be demanded of a senior staff attorney
serving the Federal Power Commission. That is why I don't like to
be here to say that about a man. That is not good for his record.
PAGENO="0573"
567
Mr. Moss. Let me make it very clear that that is good for his
record. If anyone wants to have another battle with this chairnian,
let them take any action against him because that statement was
made by you.
This is not in his record but it is in my record, the record of this
House.
I caution you very strictly-let that not reflect in any action of
this Commission as long as I am chairman, or the entire Commission
will be up here.
Mr. WATT. That is fair enough, Mr. Chairman, but it needs to be
pointed out that I am being asked for my professional evaluation of
a professional lawyer. I am giving it.
Mr. Moss. No, you are not. You are being asked for your evalua-
tion as a Commissioner of a professional lawyer.
Mr. WATT. All right, I will take that.
Mr. Moss. Whether or not you are a lawyer, because that is not a
requirement for a Commissioner.
Mr. WATT. I will take that correction.
But Mr. Gore has pushed me hard on this. The record is pretty
clear on it.
I would not choose to have to make that kind of record about Mr.
Mamone or anyone else.
Mr. LENT. Mr. Chairman, I wonder whether the record could
reflect the fact that I take exception.
Mr. Moss. Indeed, it will.
Mr. LENT. I take exception to any claim by this committee that
we are in anyway going to impinge upon the absolute, unfettered
independence of this regulatory Commission or of any other regu-
latory commission.
I feel they must be independent and it ill-behooves us as a com-
inittee of Congress to in anyway indicate that we are going to
threaten and intimidate a Commissioner-
Mr. Moss. You may so reflect on the record, and I am not intimi-
dating. I a.m stating a fact. There is a criminal statute for punitive
action because of testimony before this committee.
Mr. LENT. I don't think the Commissioner has taken that position.
Mr. Moss [rapping the gavel]. I am cautioning the witness and
the Federal Power Commission that I will not tolerate any action
adverse to any witness who appears before this committee.
Mr. LENT. The saw cuts both ways.
Mr. Moss. If you want to have an argument with the Chair, you
may pick a time different from this.
Mr. LENT. I am not having an argument with the Chair.
Mr. Moss. Your exception is noted in the record.
Mr. Gore has the floor.
You may continue, Mr. Gore.
Mr. GORE. I believe Mr. Mamone's record, as I read it, will sub-
stantially outweigh any adverse comment reflected in your responses
to my questions. As I read his record, it is a record of magnificent
public service, of advocacy of the public interest and, only inci-
dentally, advocacy of points of view with which I agree.
PAGENO="0574"
5~S
I believe that your testimony this morning, by whomever it is
read, will not jeopardize his career in anyway, shape, or form.
I wonder, in conclusion, if you were dissatisfied with the ad-
vocacy of adversary points of view before the Commission if that
same kind of feeling did not also' apply to advocacy of adversary
points of view in a broader public forum by employees under your
jurisdiction.
Mr. `WATT. You are asking? Absolutely not. There is a place for
advocacy and there is a place where it should not be. It should not
be in a quasi-judicial, appellate-type arrangement such as the Fed-
eral Power Commission.
We handle those cases that are appealed to us from the adversary
arena. It is a quasi-judicial law. If you are going to allow one party
to litigation to come in and have a second crack at the judges-rn
this case Commissioners-you ought to, in fairness, in our American
jurisprudence, allow all the parties to be aggressive advocates.
My poition was then and is today that if you let only one party
in, you are undermining the very system we are trying to protect.
Mr. GORE. `Commissioner Smith testified he was worried about how
this might appear when Judge Lewnes was transferred to admin-
istrative law judge, when Mr. Mamone was transferred to the hydro-
electric division. `Were you worried about how it might appear?
Mr. WATT. I really wasn't that conscious of it at the time. In
Mr. Mamone's case, he was taken out of the aggressive advocacy
role in April, and I think his transfer didn't come for some many
months later. I kind of lost track of where he was. It was not a
weekly irritant.
In Mr. Lewnes' case, he sought, for whatever reasons the AU
position, and came to me and asked me to sign it because that is
what he wanted. I considered it a promotion and I didn't think it
was going to cause any real problems.
Mr. GORE. Do you feel a need to let the employees of the Federal
Power Commission know that if they testify before congressional
committees and subcommittees they will suffer no retribution what-
soever?
Mr. WATT. I don't feel there is a need, but if we need to do it
again, we can.
We constantly are letting them know that that is expected of
them, they have the freedom to do it. We are constantly inviting
them to bring to us any differences of opinion they have in writing
and orally.
We seek at all times to bring out any differences of opinion.
I am going to divert from what I intended to be saying for a
moment, but our procedures, down there, Mr. Gore, are based on the
assumption that everything we do as a Commission is going to be
known all over town. There are rio secrets at the Federal Power
Commission.
If any staff, whether you are talking about GS-1 or GS-18, has
views different from those presented by their bureau heads or the
Commission, we know from experience that everybody in town
that wants to know can know what those different parties are, so
PAGENO="0575"
569
we make a conscious effort, particularly Chairman Dunham is
always working on this and it is almost a point of irritation on my
part-he is always asking: "Are there different thoughts and opin-
ions? Is there a difference in view?"
We cultivate that so we can have the benefit of that knowledge
before somebody else creams us from the blind side when we didn't
know of that difference. We need to know differences of opinion with-
in staff early on.
Mr. GORE. Did you worry the personnel actions taken within the
time frame immediately after the testimony might have given the
impression to other employees in the Federal Power Commission
that this in some fashion was retribution?
Mr. WATT. With the exception of George Lewnes, I was not
aware there were personal actions being taken immediately after a
congressional hearing. I think the Mamone transfer came-
Mr. GORE. Within a few months after.
Mr. WATT. I thought October.
Mr. GORE. When was he removed from the advocacy role?
Mr. WATT. In April when we went to our public meetings with
the sunshine concept.
Mr. GORE. He was taken off the HIOS case effectively in June,
if I am not mistaken. The testimony will reflect that.
Did you have concern this might give the impression of retribu-
tion to other employees within the Federal Power Commission?
Mr. WATT. I really didn't. No, I didn't, because there really was
no retribution involved, so I did not think about it.
Lewnes wanted what he was getting. With regard to the employ-
ees, there was no retribution there.
Mr. GORE. I think the record is pretty clear on what Mr. Lewnes
wanted and the circumstances surrounding the so-called-----
Mr. WATT. I think so.
Mr. GORE. His request for the position of administrative law judge.
I think the record was made clear on that only this morning.
I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Luken?
Mr. LtJKEN. As I understand the testimony, there are two branches
to your argument with reference to your position regarding Mr.
Mamone's inadequacy. One is the advocacy role in meetings and the
other is the work product observed in his reports and staff work.
Would that be a fair statement?
Mr. WATT. Yes.
Mr. LUKEN. You use a word I don't recognize, at least as to pro-
nunciation-"advoasary."
Mr. WATT. Yes, when we have different points of view.
Mr. LUKEN. Would that be the same as my saying "advocacy"?
Mr. WATT. OK.
Mr. LUKEN. Or is there something more to it than that?
Mr. WATT. Maybe I am mispronouncing it. Am I?
Mr. LUKEN. It sounds like a neat pronunciation of advocacy or
adversary. Maybe you have coined a good word. Maybe it is con-
sistent with your meaning.
PAGENO="0576"
570
Mr. WATT. I have no hidden meanings. Perhaps it is just my
sloppy English.
Mr. LUKEN. I will think about it. It sounds like a pretty good
word. "Advocacy" might describe it, then.
Are you familiar with the fact that. Mr. Keeley replaced Mr. Ma-
mone on the HIOS case
Mr. WATT. I was not aware, frankly, until this morning that
Mamone had been withdrawn from that case. I did, of course, know
Keeley was handling it.
Mr. LUKEN. You were not aware until this morning Mr. Ma-
mone was actually withdrawn?
Mr. WATT. That is right. You see, I looked for accountability,
and the General Counsel was handling it as far as I was concerned
in this situation. Then when it came to be an active case before us,
we were working on the orders with Pat Keeley. I didn't know he
was handling it. For accountability, the General Counsel was
handling it.
Mr. LUKEN. You were aware that Mr. Mamone was working on
HIOS?
Mr. WATT. That is the one I was not aware of. By the time I was
aware of the case, Mr. Keeley was working with it.
Mr. LUKEN. You have allowed that you just might have made the
statement that Mr. Journey attributes to you.
Mr. WATT. That is not inconsistent with my point of view; that
is right.
Mr. LUKEN. The statement was consistent with your attitude?
Mr. WATT. That is right.
Mr. LUKEN. That was just shortly before Mr. Mamone was re-
lieved of that case, but you were not aware of the contemporaneous
nature of those actions?
Mr. WATT. No.
Mr. LUKEN. As a Commissioner you have indicated that you
sought change very avidly.
Mr. WATT. Yes.
Mr. LUKEN. And you were quite concerned about the work prod-
uct of Mr. Mamone.
Mr. WATT. Yes.
Mr. LUKEN. I would like to get to the question we have discussed
with other witnesses regarding your role as a Commissioner.
I believe under the law the administration of the Federal Power
Commission is up to the Chairman. Is that right?
Mr. WATT. That is correct.
Mr. LUKEN. What do you see as your role in these matters with
reference to the work product and efficiency of Mr. Mamone?
Mr. Smith testified that he did not feel that it was his role, to
get into such evaluations, or at least make actions or make recom-
mendations with respect to it. Apparently you believe it was your
right and duty to make such recommendations.
Mr. WATT. As a Commissioner, I have no responsibility for the
management of the people employed by the Federal Power Com-
mission. I have no responsibilities for assignment of cases or work-
load.
PAGENO="0577"
571
I have a vital, vital role to play in seeing to it that the decisions
I make are based on the best type of evidence I can get before me
and the best material.
When I have material coming before me that is not adequate, I
complain about it. I complain to the Chairman, to the General
Counsel, or to one of the Chiefs of the Bureau of Power or the
Bureau of Natural Gas.
How they get that work product to me, whether they have enough
staff, who is doing it, that is not my responsibility; but I do squawk
when I do not get a good work product.
I think if we are to make these decisions, we have to have the
best work product we can have before us.
Mr. LUKEN. So if you said, as you admit you might have said, to
Mr. Journey to find other areas of work for Mr. Mamone, that was
just your way of saying that you weren't satisfied with his work.
Mr. WATT. We don't know the context in which that was taken.
I was letting-
Mr. LUKEN. You don't know simply because your memory does
not supply us with all the details.
Mr. WATT. And apparently Mr. Journey didn't give you the
background. I don't know what case he talked about. There were
repeated cases of inadequate work product presented to the Com-
mission, in my opinion.
Mr. LUKEN. Therefore, you recommended his reassignment.
Mr. WATT. I recommended that he no longer be giving us that
kind of work product. If it meant reassignment, that is his re-
sponsibility and not mine, telling him where he is to work and
what cases. In effect, I am saying, "Don't bring me any more of
that kind of bad work."
Mr. LUKEN. You were getting beyond establishing policy but
meddling into the assignment of Mr. Mamone, you as a Commis-
sioner recommending it to Mr. Journey. You were then definitely
getting into the administration and, therefore, the work of the
Chairman.
Mr. WATT. He could have interpreted it that I was meddling in
his business affairs; that is right. I have no authority to order him,
and I obviously was not; but I did complain. I complain still. I like
a good work product.
Mr. LUKEN. How many employees did you complain about as
being too strong an advocate?
Mr. WATT. I complained about, prior to April 1, all of the Assist-
ant General-
Mr. LUKEN. Would you limit yourself to the question? I don't
know whether you heard it all.
On the issue of being too strong an advocate, how many times
did you complain?
Mr. WATT. Excuse me. I thought I was trying to answer that.
Mr. LUKEN. Go ahead; I am sorry.
Mr. WATT. That complaint was registered to the lawyers who
participated in the Commission meetings prior to about April 1
when we changed the format, and, as discussed here, moved the
87-292 0 - 77 - 37
PAGENO="0578"
572
furniture. At that time I would have been backing off on that advo-
cacy role.
Still today I frequently complain about staff who try to introduce
new evidence at this time rather than having presented it in the
record when the record should have been built.
Mr. LUKEN. I think you mentioned, if I am correct, that you ob-
jected to Mr. Lewnes' role as an advocate.
Mr. WATr. Yes.
Mr. LUKEN. To the same degree as you did Mr. Mamone?
Mr. WATT. Probably much more so, probably much more aggress-
ively so.
Mr. LUKEN. He is as aggressive an advocate.
Mr. WATT. A much stronger advocate.
Mr. LUKEN. He is at least as objectionable.
Mr. WATT. I thought he was more so. He was there on all the
cases.
Mr. LUKEN. But you make a distinction as far as Mr. Lewnes is
concerned. His work product was all right.
Mr. WATT. That is my opinion, yes.
Mr. LUKEN. But you have stated as a general statement that you
found Mr. Mamone's work product to be inadequate, insufficient.
Mr. WArr. That is correct.
Mr. LUKEN. But you have not stated anything in support of that,
or you have not outlined what you mean by the fact it was not pro-
fessional or not a good work product. Do you mean you did not
agree with his conclusions?
Mr. WATT. No. I meant it was not done in a way that it should
have been done.
Mr. LUKEN. I submit you just made another general statement.
Mr. WATT. I have made one.
Mr. LtTKEN. You cannot pull yourself up by your own bootstraps.
Mr. WATT. I made a statement intentionally so.
Mr. LTJKPN. You cannot give us instances of this?
Mr. WATT. Your record has material submitted by our General
Counsel, Drexel Journey, referring to some cases that point out a
very bad record that was part of the responsibility of Mr. Mamone
when he was advocating these cases.
Mr. LTJREN. Is that four cases?
Mr. WATT. I think the General Counsel produced four cases.
Mr. LUKEN. Tenneco, Superior Oil. Getty-two Tenneco cases.
Might those be the cases?
Mr. WATT. Those were the ones General Counsel pulled out for
you, yes.
Mr. LUKEN. Were those the ones you referred to?
Mr. WATTS. Yes.
Mr. LTJKEN. I have a summary of them, the Tenneco Oil case. My
summary is that the Commission accepted a settlement of the case
supported by all parties, including the New York Public Service
Commission, but not supported by the FPC staff. The staff position
was that the FPC staff opposed it because the producer proposed
to use offshore gas to make repayment, and then the criticism of the
FPC staff.
PAGENO="0579"
573
The Commission says, "We are aware of the merits of some of the
staff's arguments."
Is that a fair summary as you recall that case?
Mr. W~rr. That is an opinion written by Chairman Dunham after
the oral arguments we had, which were the result of the con-
gressional hearings that you folks had.
Mr. LTJKEN. What does it omit that might be significant with
reference to the staff's work, or a critique of the staff's work?
Mr. WATT. I hesitate to comment on it because it would be gen-
eralization and you don't want that.
Mr. LUKEN. Answer it any way you want.
Mr. WATT. Your question again is what?
Mr. LUKEN~ Well, I just read a summary of the result of the
staff's position and the lack of criticism in the opinion. I guess we
are talking about opinion, are we not?
Mr. WATT. Yes.
Mr. LTJKEN. Lack of criticism of the FPC staff.
Do you know of any criticism of the FPC staff in that opinion or
elsewhere?
Mr. WATT. Yes.
Mr. LUKEN. What was it?
Mr. WATT. Page 4
Mr. LUKEN. Do you want to summarize it or excerpt it?
Mr. WATT. I think it would be helpful to put this in the record.
I guess it is in the record elsewhere. There is quite a bit to read. I
don't know whether you want me to read it.
Our review indicates that the joint resolution is the most viable method of
obtaining repayment of this imbalance. The proposal proffered by staff to cut
off deliveries to Creole jeopardizes a sensitive industry which has not partici-
pated in creating this imbalance. Staff has chosen to ignore the potential
repercussion of curtailing a gas supply essential to the production of fuel for
th~ space shuttle program. We cannot and will not do so.
The preceding paragraph comments about the administrative
law judge rejecting the staff's arguments.
Mr. LUKEN. Staff was making the consumer argument there, was
it not?
Mr. WATT. Obviously the Commission didn't feel so.
Mr. LUKEN. Proposed resolution was based on a view contrary to
the public interest to use offshore gas dedicated to the interstate
market to make repayment. That is a couple paragraphs up.
Mr. WATT. I didn't follow where you were. There is a summary
there. If you are still on page 4, top paragraph, last sent~nce, that
summarizes a position taken by the Commission.
In brief and in oral argument staff referred to several small onshore
reserves which were not part of the settlement proposals.
Mr. LUKEN. That is a reference to matters not in the record.
In any event, the Commission-.--
Mr. WATT. Do you want more specific on one of the other opinions
that the General Counsel called to your attention?
Mr. LUKEN. Just from my reading of this, the Commission dis-
agreed with the staff.
Mr. WATT. That is correct, unanimously.
PAGENO="0580"
574
Mr. LtXKEN. I see no stinging rebuke here.
Mr. WATT. I don't, either.
Mr. LTJKEN. In other words, it is not unusual. The Commission
will have to come clown on one side or the other.
Mr. WATTS~ That is right.
Mr. LIJKEN. It is not a criticism because the arbiter in tl~s case
disagreed with the staff, is it?
Mr. WATT. It always is not. Somebody has to lose.
Mr. LUKEN. I thought you were saying that in these cases there
was contained a criticism of the work product of the staff. I find
disagreement with the conclusions of the staff but I do not find
criticism of the work product.
Mr. WATT Okay.
Mr. LUKEN. Do you want to go to the next one? You said you
had another one.
Mr. WATT. Whatever you want. You were eager that I have
specifics. Therefore, if the staff would hand to you the opinion that
General Counsel supplied to them aiid discussed Friday in the
Superior case, page 8, where we as a unanimous Commission quotes
Administrative Law Judge Zwerdling, our chief Administrative
law judge, one of the respected judges in the Federal system, we
just say:
"We agree with Judge Zwerdling's evaluation of staff's prepara-
tion of proceeding wherein he stated"-and we quote it in your
record several times earlier.
Mr. LUKEN. Was this with reference to the withholding issue?
Mr. WATT. Superior deals with the warranty issue.
Mr. LUKEN. Which in turn deals with withholding?
Mr. WATT. It is a companion issue with the Getty case, a reserva-
tion issue.
Mr. LUKEN. In deaiin~ with the warranty the staff took the posi-
tioii there was withholding; is that right? They said there was
possible withholding?
Mr. WATT: I didn't think that was the issue.
Judge Zwerdling is not. criticizing the end result. Here lie criti-
cizes the professionalism of the presentation at the contested case.
Mr. LUKEN. Is that where lie makes that criticism, "a hodge-
podge of barely-stated conclusions"?
Mr. WATT. Read the next sentence.
Mr. LUKEN. All right.
"In concluding"--
Mr. Moss. We will put time entire matter in the record at this
point.
Mr. WATT. That would be helpful.
iThe material referred to follows:]
PAGENO="0581"
575
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
OPINION NO. 755
Tenneco Oil Company Docket No. CI75-~66
Tennessee Gas Pipeline Company,
A Division of Tenneco, Inc.
OPINION AND ORDER
DIRECTING REPAYMENT OF IMBALANCE
Issued: March 1, 1976 DC-50
PAGENO="0582"
576
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Tenneco Oil Company Docket No. C175-466
Tennessee Gas Pipeline Company,
A Division of Tenneco, Inc.
OPINION NO. 755
APPEARANCES
Gordon Gooch, Jeron Steve~ Bruce ~ Michael B. Silva, and
Vernon N. Turner for Tenneco Oil Company
Leland F. Cadenhea4, Lilyan G. Sibert, Harold L. Talisman,
Dale A. Wright, and Melvin Richter for Tennessee Gas
Pipeline Company
William A. Wood, Thomas G. Johnson, and William Riddoch for
Shell Oil Company
John W. Glendining, Jr., and John S. Schmid for Bay State Gas
Company, et al.
William P. Saviers, Jr., Daniel L. Bell, Jr., and Giles D. H.
Snyder for Columbia GasTi~ansmission Corporation -
John E.~ Holtzinger, Jr., and C. Stephen Angle for Consolidate~
Gas Supply Corporation
Heino H. Prahl for National Fuel Gas Supply Corporation
William N. Barrick andW. H. Schwarzschild, III, for the
Governor and State of Tennessee
Peter H. Shiff and Richard A. Solomon for the Public Service
Commission of the~St~te ~ ~ew York
Jerome Ackerman, Ms. Luize Z. Laitos, John F. Healy, William H.
Allen, and Bingham B. Leverich for Air Products & Chemicals, Inc.
PAGENO="0583"
577
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
GAS SUPPLY (Repayment of Imbalance)
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John H. Hofloman III,
and James G. Watt.
Tenneco Oil Company ) Docket No. C175-466
Tennessee Gas Pipeline Company,)
A Division of Tenneco, Inc. )
OPINION NO.755
OPINION AND ORDER
DIRECTING REPAYMENT OF IMBALANCE
(Issud March 1, 1916)
DUNHAM, Chairman:
Procedural History
This proceeding was initiated by a Commission order
issued February 7, 1975, in Docket No. CI75-466, directing
Tenneco Oil Company (Tenneco Oil) and Tennessee Gas Pipeline
Company (Tennessee) to show cause why Tenneco Oil should not
immediately repay 12,552,438 Mcf of natural gas to Tennessee.
The order also directed Tennessee to balance receipts from
and deliveries for Tenneco Oil on a daily basis in order to
prevent any further increase in the deficit. Our awareness
of the aforementioned deficit resulted from applications
filed in Tenneco Oil Company, Docket No. CI75-45, Tennessee
Gas Pipeline Company, Docket No. CP75-23, and Tenneco Oil
Company, Tennessee Gas Pipeline Company, Docket No. CP75-120
wherein the imbalance was identified. Due to the level of
curtailment on the Tennessee system, the Commission found
that an emergency existed and set the issue of repayment
for hearing.
In response to the Commission's order to show cause,
Tennessee filed a request with the Commission on February 21,
1975, seeking authorization to use the "Blue Water System
Credit" to prevent any increase in the aforementioned deficit.
The Commission denied the request directing the parties to
address the issue of the propriety of the credit in the
administrative hearing.
PAGENO="0584"
578
The hearings were held in March, 1975. On July 31,
the Presiding Administrative Law Judge issued the initial
decision directing Tenneco Oil to submit a plan whereby the
deficit would be repaid within one year at a rate of not
less than 60,000 Mcf per day or a volume equal to Tennessee's
available capacity, whichever was found to be less. The
Presiding Judge also concluded that the Blue Water System
Credit was not an appropriate method of reducing the deficit.
On January 21, 1976, Tenneco Oil filed a motion requesting
oral argument due to the publicity this case had received in
the newspapers and the testimony by members of the Commission
Staff before the House Subcommittee on Energy and Power. The
Commission granted the motion in an effort to assure that
each party would be treated in a fair and impartial manner.
Oral argument was held on February 20, 1976.
Statement Of Case
The imbalance grew out of a 1964 transportation agreement
between Tenneco Oil and Tennessee whereby Tennessee agreed to
transport natural gas to Creole Gas Pipeline (Creole) for the
account of Tenneco Oil. The gas supply to be transported
was destined for Air Products and Chemical, Inc. (Air Products),
a manufacturer of anhydrous ammonia and liquid hydrogen. Under
the agreement, Tenneco Oil was to supply Creole with the lesser
of one-half of Air Products' requirements or 15,000 Mcf per day
with an option to increase the volume by 7,500 Mcf per day.
Delivery commenced in July, 1965. The deficit also resulted
from a second agreement between Tenneco Oil and Creole whereby
Creole agreed to transport a maximum of 24,000 Mcf per day of
natural gas supplied to it by Tennessee for the account of
Tenneco Oil to Tenneco Oil's Chalmette Refinery.
The imbalance arose in 1968. Although Tenneco Oil
added new delivery points during the interim, the imbalance
continued to increase until the issuance of the show cause
order in 19.75.
All of the parties to the proceeding agree that the
imbalance exists. In his initial decision, Administrative
Law Judge Convisser found the amount of the imbalance to be
18,615,171 Mcf as of January 31, 1975. Although none of the
parties excepted to the Judge's finding as to the amount, the
method of repayment is in issue.
PAGENO="0585"
579
On July 21, 1975, Tennessee and Tenneco Oil filed a
second payback proposal, a "Proposed Resolution on the
Merits". 1/ To eliminate the imbalance, Tenneco Oil requested
necessary Commission authorization to deliver volumes of gas
from .Bethany Field, Texas, East Cameron Block 281 and from
any reserved interests in future agreements between Tenneco
Oil and Tennessee. Tenneco Oil estimated daily deliverability
would be 30,000 Mcf per day which would eliminate the imbalance
in approximately 1.8 years. 2/ Of greater significance is
Tenneco Oil's proposal to deaicate the onshore Bethany reserves
and the reserved interest in East Cameron Block 281 to
Tennessee upon the elimination of the imbalance. Tenneco Oil
estimated these reserves to be approximately 41 Bcf. Tenneco
Oil has reserved the right to file for and collect the highest
price available for natural gas first sold in interstate
commerce at the time the imbalance becomes zero. All of the
parties to the proceeding with the exception of Air Products
filed comments on the Proposed Resolution. All except Staff
supported the proposal.
On oral argument, the principal parties to this proceed-
ing, Columbia Gas Transmission Corporation (Columbia), Con-
solidated Gas Supply Corporation (Consolidated), the Public
Service Commission of the State of New York (New York), and
National Fuel Gas Supply Corporation (National Fuel), reiterated
their support of the Proposed Resolution. They found the
proposed method of repayment offered two advantages: repayment
of the imbalance within a reasonable period of time and the
dedication to the interstate market of the reserved interest
claimed by Tenneco Oil in offshore reserves.
1/ In Docket No. CP75-23,' Tenneco filed a payback proposal
on October 7, 1974. The sources for the additional
supply were a subject of the administrative hearing.
Daily Recoverable
2/ Deliverability Reserves
A. Bethany Field
Drummond Well 2 ,000 Mcf 5 Bcf
Werner-Weiner Well 1,000 Mcf 5.1 Bcf
B. East Cameron
Block 281 17,000 Mcf 30 Bcf
C. Eugene Island
Blocks 342 and 343 10,000 Mcf n/a
30,000 Mcf 40.1 Bcf
PAGENO="0586"
580
Staff's position is that Tenneco Oil and Tennessee should
use those volumes of gas now flowing under the aforementioned
transportation agreements to repay the unauthorized advance.
Due to the current and projected level of curtailment, Staff
asserts that Section 16 of the Natural Gas Act should be
employed to terminate deliveries to Chalmette Refinery and
Air Products. Staff's opposition to the Proposed Resolution
is based on the view that it is contrary to the public in-
terest to use offshore gas which is dedicated to the inter-
state market to make repayment. Staff argues that Tenneco
Oil should fulfill its contractual obligations to Creole
with onshore supplies. In brief and in oral argument, Staff
referred to several small onshore reserves which were not
part of the settlement proposals. 4/
In his initial decision, the Judge rejected Staff's
arguments concluding that the proposed action would not only
penalize Air Products, a customer of Creole, but would abrogate
contractual obligations existing between the parties. He also
rejected the proposed settlement on the basis that it did not
contain adequate information as to the potential rate of
repayment and the magnitude of the underlying reserves. In
its briefs on exceptions to the. initial decision, Tenneco
sets forth the data necessary to adequately evaluate the
merits of the proposal.
Our review indicates that the Joint Resolution is the
most viable method of obtaining repayment of this imbalance.
The proposal proffered by Staff to cut off deliveries to
Creole jeopardizes *a sensitive industry which has not par-
ticipated in creating this imbalance. Staff has chosen to
ignore the potential repercussions of curtailing a gas supply
essential to the production of fuel for the Space Shuttle
Program. We cannot and will not do so.
Staff has also suggested that the intrastate drilling
efforts of Tenneco Oil might be a source of supply. The
record currently contains three potential sources which do
not have certificate applications currently pending before us.
Furthermore, it is uncertain when these sources will be able
Daily Deliverability
4/ 3 Small Texas Wells 2,500 Mcf
Bay Baptiste 6,000 Ncf
(Title problem with the State
of Louisiana
Bay Chourbrant 5,000 Mcf
PAGENO="0587"
581
to commence production. Relying on such sources would result
in needless delay in repayment. More important, whether the
Commission can require a producer to file for certificates
for sale and delivery is not without question.
New York, who has previously objected to the Commission's
allowing producers to reserve an interest of its offshore
reserves for their own use, 5/ endorses the proposal and is
willingto accept the reservationclaimed therein since the
major portion of the supply will flow to the interstate
consumer upon the elimination of the imbalance. In its
briefs and on oral argument, New York has emphas[zed the
importance of immediate repayment for the interstate consumer
and the concurrent benefits that flow from the Proposed
Resolution.
In accepting this settlement, we are aware of the merits
of some of Staff's arguments. We have however reviewed a
related case that is now before us, Tenneco Oil Company, et al.,
Docket No. C175-45, et al., and found that many of Staff's
arguments are also contained therein. Although deliveries
commenced in 1965, all of the gas Creole received from Tennessee
for Tenneco Oil's account was sold and transported without any
certification by the Commission. Upon Tenneco Oil's review
of the underlying contracts in 1974, Tenneco Oil and Tennessee
applied for the necessary authorization in Docket Nos. C175-45,
CP75-23 and CP75-12O which were consolidated in abovementioned
case. 6/ Tenneco Oil and Tennessee seek to continue to sell
and transport the supply of natural gas to Creole.
5/ Appeal to the U.S. Court of Appeals for the District
- of Columbia, Brooklyn Union Gas Company, et al. v. F.P.C.,
case Nos. 75-1581, et al.
6/ In Docket No. C175-45, Tenneco Oil filed an application
for a certificate to sell gas to Air Products to fulfill
one-half of its plant requirements including 1976
requirements. In Docket No. CP75-23, Tennessee filed
an application to transport the aforementioned supply
to Creole for the account of Tenneco Oil. In Docket
No. CP75-l2O, Tenneco Oil filed a joint application
for the approval of an Exchange and Transportation
Agreement which provides for the receipt and delivery
of a maximum of 24,000 Mcf per day of gas by Tennessee
to Creole for Tenneco Oil's account to be transported
to Tenneco Oil's Chalmette Refinery.
PAGENO="0588"
582
Tenneco Oil is currently using a substantial amount of
offshore gas to provide a supply to Creole for the benefit
of Air Products and its Chalmette Refinery. Staff has argued
in this proceeding that offshore reserves should not be used,
but that Tenneco Oil should attach existing onshore reserves.
Pursuant to a data request, Tenneco Oil supplied evidence
of the amount of current onshore drilling in the instant
case. The initial decision in this consolidated proceeding
was issued on December 2, 1975 and the case is now before
us on exceptions. In reviewing the issue of certifying the
continued sale and transportation of these volumes, we shall
closely scrutinize the feasibility of implementing Staff's
proposal. Should additional data as to onshore reserves be
required, we shall on our own motion request it.
Our acceptance of the foregoing settlement should not
be interpreted as evidence of our sanctioning Tenneco Oil's
behavior. Although there may be some question as to whether
Tenneco Oil and Tennessee should have applied for certifica-
tion in 1964, a lag of ten years in making the requisite
applications is unconscionable. Tenneco Oil's and Tennessee's
joint action of allowing the imbalance to grow to its current.
level from 1968 to 1974 is further evidence of Their disregard
for the regulations under which they operate, i.e., the Natural
Gas Act and its regulations.
Blue Water System Credit
In claiming the Blue Water System credit against the
imbalance, Tenneco Oil relies on the theory that as a producer,
it has the right to remove liquids from the gas flowing
through the, Blue Water System, an offshore gathering system.
As Tenneco Oil has foregone this right, it asserts that it
is therefore entitled to a credit of 4.5 percent. ~Ihe signi!~
ficance of the Blue Water System credit is thatitwould
~±educe the amount of the imbalance by 5 663 171 Mcf to a total
amount owing of 12,952,000 Mcf.
In 1972, Tennessee began to divert some of Tenneco
Oil's gas from Tennessee's East Leg through Columbia's
Blue Water Header to Tennessee's West Leg. When Tenneco
Oil's gas had been transported through the East Leg, it had
been processed at the Yscloskey processing plant; however,
Tenneco Oil had no processing plant. on th~ West Leg. Under
its agreement with Tennessee, the credit which began in
Aprill 1973 will cease when the imbalance is eliminated.
The evidence indicates that the Blue Water credit was adopted
specifically to reduce the imbalance.
/
PAGENO="0589"
583
Staff, Columbia and Consolidated objected to the credit
asserting that it produces no benefit to the customers of
the Tennessee system but is merely an accounting device.
The Presiding Judge concurred in their arguments and disallowed
the credit. We agree that Tenneco Oil should not use the
credit as a means of reducing the amount of the imbalance
but should repay the total amount.
The record clearly demonstrates that this credit is an
unique contractual arrangement between Tenneco Oil and~nnessee.
The underlying motives for the credit are questiona5re at
best. Furthermore, the Tennessee System has experienced a
severe shortage of available supplies for its interstate
customers. The credit appears to be merely a means of
reducing the amount of gas which Tenneco Oil should repay
Tennessee. Although Tennessee supports the credit, we
believe that the system and its customers would better be
served by the additional amount of 5 Bcf of natural gas.
Creole
In our order setting oral argument, we stated our inten-
tion to reconsider our action in Creole Gas Pipeline Corpora
tion, et al., Docket No. CP75-24l, et al. By order dated
November I8~ 1975, we had granted C~oT~ and New Orleans
Public Service Inc. exemptions from federal regulation under
Section 1(c) of the Natural Gas Act on the basis that they
transport and sell natural gas wholly within the State
of Louisiana and are subject to the jurisdiction of the
state. Based on the redörd before us, we find that it would
not be appropriate fOr us to modify our prior order.
The Commission further finds:
(1) As of January 31, 1975, Tenneco Oil Company had
an existing obligation to repay Tennessee Gas Pipeline Company
18,615,171 Mcf of natural gas.
(2) The Proposed Resolution on the Merits filed on
July 21, 1975, is an appropriate means of correcting the
imbalance.
(3) The imbalance should be corrected within two years.
PAGENO="0590"
584
(4) The proposed Blue Water Systeu credit should be
disallowed.
(5) The initial decision should be adopted as the
decision of the Commission except as modified and supplemented
by this opinion and order.
The Commission orders:
(A) Tenneco Oil Company shall repay to Tennessee Gas
Pipeline Company the amount of ~the imbaLańcč, which as of
January 31, 1975 was 18,615,171 Mcf of natural gas, under the
terms of the Proposed Resolution on the Merits, filed on
July 21, 1975, within two years of the date of this opinion
and order.
(B) Insofar as the gas supply to be used for repayment
under the terms of the Proposed Resolution on the Merits has
not been certificated for transportation in interstate com-
merce, Tenneco Oil Company shall file the necessary applica-
tions within fifteen (15) days of the date of this order.
(C) Tenneco Oil Company and Tennessee Gas Pipeline
Gom~shal1 both file statements monthly with this
~Coimi~rs~sion of the total amount delivered to Tennessee Gas
Pipeline Company to reduce the imbalance and the amount of
the remaining imbalance.
(D) The Blue Water System credit is rejected as a
means of reducing the imbalance.
(E) The initial decision is adopted as the decision
of the Commission as supplemented and modified by this
opinion and order.
By the Commission.
(SEAL)
Kenneth F. Plumb,
Secretary.
PAGENO="0591"
585
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
(~)
OPINION NO. 766
Superior Oil Company, etal. ) Docket No. C1714-734, etal.
OPINION AND ORDER ON RER EARING
WITh RESPECT TO CERTIFICATE CONDITION
Issued: June 29, 1976
DC-SO
PAGENO="0592"
586
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Superior Oil Company, etal. ) Docket No. C174-7314, etal.
OPINION NO. 766
APPEARANCES
Pat F. Timmons, Scott P. Anger, for The Superior Oil Company
Paul W. Hicks, Jimmy C. Bailey, for The Placid Oil Company
Larry J. Gunn, P. D. Endom, for Sea Robin Pipeline Company
Frederic G. Berner, Jr., Richard J. Flynn, for Michigan-Wisconsin
Mpe Line Company
Richard F. Generelly~, for Kewanee Oil Company
W. 0. Strong, III, Richard F. Generelly, for Ashland Oil, Inc.
Russell Maxnone, for the Staff of the Federal Power Commission
PAGENO="0593"
587
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John H. Holloman III,
and James G. Watt.
Superior Oil Company, et al. ) Docket No. C174-734, et al.
OPINION NO. 766
OPINION AND ORDER ON REHEARING
WITH RESPECT TO CERTIFICATE CONDITION
(Issued June 29, 1976)
WATT, Commissioner:
The instant proceeding involves rehearing and reconsidera-
tion of a certificate condition imposed by Ordering Paragraph
(J) in Commission order dated January 17, 1975, in Docket No.
CI74-734, et al. Superior Oil Company (Superior), Placid
Oil Company (PTacid), and Ashland Oil Company (Ashland), (herein
referred to jointly as "Producers") filed. applications for
rehearing of the aforementioned order. The Commission, by
order issued March 20, 1975, granted the applications for
rehearing and directed that a hearing be held commencing
May 13, 1975.
The Producers had filed applications seeking certificates
of public convenience and necessity pursuant to Section 7 of
the Natural Gas Act authorizing the sale of certain volumes
of natural gas to Michigan Wisconsin Pipe Line Company (Mich
Wisc) from Block 182, Vermilion Area, Offshore Louisiana
pursuant to contracts between the Producers and the pipeline
executed in 1974. These underlying contracts arose from
advance payment agreements executed by the Producers in early
1971 granting Mich Wise the right to purchase any and all new
reserves of gas produced in Block 182. The sales contracts include
the conventional provisions; however, they provide for the
87-292 0 - 77 - 38
PAGENO="0594"
588
Docket No. C174-734, et al. - 2 -
Producers to deliver to Mich Wisc specified volumes of natural
gas reserves found in specified reservoirs under Block 182.
These conditions have been termed `upper ceiling volumetric
limits. The contracts also permit annual redetermination
of reserve levels allowing the volumetric commitment set
forth in each contract to be reduced should Mich Wisc and the
Producers agree that the redetermination shows the reservoirs
to hold less gas than originally estimated.
The Producers have the right, although not the obligation,
to find and dedicate additional reserves to Mich Wisc from
other locations to make up any shortfall in the agreed upon
estimates. Should the estimate of remaining recoverable
reserves be increased above the original commitment as a
result of redetermination or should additional reserves be
discovered and developed in Block 182, Mich Wisc and the
Producers have agreed to enter into new contracts covering
the new reserves.
None of the contracts allow the Producers to reserve
dedicated gas other than for operational needs. The Daily
Contract Quantity (DCQ) under each contract is 1 MMcf for
each 3.65 Bcf of estimated reserves during the first five
years of delivery and 1 MMcf for each 7.3 Bcf thereafter.
By letter orders dated December 20, 1974, the Commission
granted each producer a temporary certificate under which the'.'
commenced deliveries. On January 17, 1975, the Commission
granted permanent certificates of public convenience and
necessity subject to the following condition not present in
the temporary authorizations:
J "The certificate issued in Paragraph (A)
above authorizes the sale of warranted
volumes of natural gas as specifically
stated herein and in the applicable
contracts. The Applicants in these
proceedings may not reduce said volumes
by use of the reserve redetermination
clauses of said contracts. Should any
applicant desire to reduce the warranted
volumes, it must file for Commission
authorization pursuant to Section 7(b)
of the Natural Gas Act." 1/
1/ Mimeo p. 2.
PAGENO="0595"
589
Docket No. C174-734, et al. - 3 -
The Producers objected to the imposition of condition (J)
which they viewed as a warranty or guarantee for the delivery
of a specified volume of gas to Mich Wisc. In its order
dated March 20, 1975, the Commission provided for a hearing
of the issues raised in the applications for rehearing filed
on February 18, 1975. The Commission expressed concern therein
that:
(I) the producers may withhold greater volumes
than necessary to meet their `operational
demands', or that
(2) the redetermination provision may allow
buyer and seller to jointly approve a
lower determination without opportunity
for scrutiny, the effect of either or
both of which may tend to (a) lessen the
utility, and thus inflate the cost over
time, of the 2.6 miles of connecting
pipeline and/or (b) deprive the inter-
state market of badly needed gas supplies. 2/
A one day hearing was held and on February 20, 1976,
Presiding Administrative Law Judge Zwerdling issued his
initial decision finding that the certificates should be
modified by the deletion of ordering paragraph (J). The Judge
did not address the issue of the Commission statutory authority
to impose the condition as he concluded that its imposition
was unnecessary due to his finding that the gas is dedicated
to interstate commerce.
ISSUES
The issues raised by the Commission's Orders in these
consolidated proceedings are:
I. Is the warranty condition imposed by
ordering paragraph (J) required by the
public convenience and necessity? 3/
2/ Order Providing for Hearing, Setting Procedure Dates, Con-
solidating Proceedings and Granting Rehearing, p. 4.
3/ Findings and Order After Statutory Hearing Issuing Cer-
tificates of Public Conveni~ence and Necessity, Amending
Order issuing Certificate of Public Convenience and Ne-
cessity, and Granting Petitions to, intervene issued
January 17, 1975, The Superior Oil Company, et al, Docket
No. C174-734, et al, Ordering paragraph (J).
PAGENO="0596"
590
Docket No. C174-734, et al. - 4 -
II. Is the upper ceiling volumetric limit in the
contract prohibited by the public convenience
and necessity? 4/
III. Does the Commission have the statutory authority
under Section 7(e) of the Natural Gas Act to
require that a producer of gas guarantee delivery
of an estimated volume of reserves as a condi-
tion to certification of the sale in interstate
commerce?
I. WARRANTY CONDITION
Staff contends that the warranty condition set forth in
ordering paragraph (J) should be retained in order to assure
that all of the reserves in Block 182 will be delivered to the
interstate market. Absent the warranty condition, Staff foresees
the possibility that any excess quantities of reserves may be
used for the Producers' operational need or withheld or
otherwise diverted from Mich Wisc. Staff appears to anti-
cipate that the Producers and Mich Wisc will conspire to use
the reserve redetermination clause to establish upper ceiling
volumetric limitations to reduce supplies to the interstate
market.~
The Producers have objected to the imposition of this condi-
tion and have refused permanent certificates in which it is
incorporated. They assert that there is no factual or legal jus-
tification for the imposition of the warranty condition. The
Producers argue that the public interest does not require the
imposition of a warranty condition, particularly since under the
advance payment agreements, the total reserves are dedicated
to the interstate market. The Producers further assert that
the imposition of the condition could result in the reduction of
available supply to the interstate market. A warranty obliji
tion does not add any reserves but does penalize the Producers
4/ Order providing For Hearing, Setting procedures, ConsOli
-. dating proceedings and Granting Rehearing, The Superi~~
Oi1ComPa1Y,et.~ Docket No. Ci74-734 et al, issued
March 20, 1975, memo, page 4.
PAGENO="0597"
591
Docket Nos. C174-734, et al. - 5 -
in the event that the ultimate recoverable reserves prove to
be less than the original estimate. 5/ Available funds for
exploration and development would thereby be reduced as would
the incentive for exploration.
if the method estimating recoverable reserves were an exact
science, a great deal of risk associated with the production of
natural gas would be eliminated. The producer could project
his production from any given reservoir and evaluate whether
its development will be profitable and to what extent. We
find it difficult to comprehend why the Staff believes that
this Commission should place the producers in the impossible
position of having to make such definitive estimates. To do
so would only divert new exploration and drilling efforts away
from the interstate market or encourage producers to proffer
unrealistically low estimates of recoverable reserves in order
to avoid the incurrence of penalties.
In the instant proceeding, the recoverable reserves are
located in Offshore Louisiana Federal domain and thereby must
be committed only to the interstate market. Once commenced,
sales cannot cease absent Commission authorization under
Section 7(b) of the Natural Gas Act. The record demonstrates
that the Producers have committed 100 per cent of their
supplies to Mich Wisc. The Producers have asserted that they
want to commence the sale of these reserves and thereby generate
income in order to further their business purpose, i.e. the
exploration for natural gas. Had the producers wanted to use
a portion of the gas for other than "operational purposes",
they would have set forth a percentage reservation in their
certificate application. The Commission has previously approved
such reservations. 6/
5/ The Staff evidenced an awareness of this on page 4 of its
Initial Brief in the following statement; "As to the
first option of requiring the Producers to warrant the
contract volumes, we recognize has serious drawbacks to
the producers in the event that the producible natural gas
turrEout to be less than the contract volumes. The Staff
is aware that other companies which have had warranty sales
have suffered severe problems (see for example, Gulf Oil
Corporation, Opinion No. 692). The Commission staff is also
aware of~Ehe fragility of initial reserve estimates from
producing formations in the Gulf of Mexico. Thus we sympa-
thize with the Producers' objection to the warranty obligation."
6/ Opinion No. 727 and Opinion No. 743.
PAGENO="0598"
592
Docket No. C174-734, et al. - 6
In its brief on exceptions, Staff interjected the
argument that the initial decision failed to take
cognizance of the Commission's policy statements set forth in
Order Nos. 539 and 539-A 7/ and reached a result
inconsistent therewith. ~Eaff asserted that these contracts
do not provide for .a firm contract commitment and thereby
are inconsistent with the foregoing orders. Staff concluded
by stating that the policy statements require the imposition
of condition (J).
The Staff has misinterpreted the Commission's statement
of policy. The text of Order No. 539-A answers the arguments
advanced by Staff. 8/
"Order No. 539 was promulgated to insure
that once deliveries of natural gas commence
in interstate commerce under the terms of a
contract and certificate, such deliveries
continue in accordance with the terms of the
contract and certificate, and that prior to
termination of such deliveries the requisite
abandonment authority is obtained from the
Commission. Order No. 539 did not, however,
transform a gas sales contract between a
producer and a pipeline into a warranty
contract guaranteeing delivery of a specific
volume of gas irrespective of the source."
II. UPPER CEILING VOLUMETRIC LIMITS
In Articles IV and V of the contracts between the Producers
and Mich Wisc, upper ceiling volumetric limits have been
established. 9/ The parties assert that these provisions are
an attempt to establish an orderly rate of take (DCQ) in accord-
ance with the agreed upon estimates of the reserves which have
been developed at the time the contracts were written. In
conjunction with these limits, the gas sales contracts contain
reserve redetermination clauses which allow the parties to
lower the established limit should the reserves prove to be
less than initially estimated.
7/ Docket No. RN76-8, issued October 14, 1975 and March 26,
1976, respectively.
8/ Mimeo p. 5.
9/ producer Volume (Mcf)
Superior 5 ,376,000
Placid 3,112,000
Kewanee 1,866,000
Ashland 6,906,000
PAGENO="0599"
593
Docket~Nos. CI74~734, et al. - 7 -
The Producers and Mich Wisc concur that under the advance
payment agreements, there will be an ultimate commitment of all
of the Block 182 reserves to Mich Wisc, however, the producers
should not be required to make such a total commitment in the first
gas purchase contract. Although Mich Wisc admits that it would
have been amenable to an initial gas purchase contract that
committed all reserves underlying Block 182, it was confidant
that the ceiling would have no adverse effects on the potential
gas supply for its customers. In addition to the supervised
production of these reserves by the USGS and Federal govern-
ment, the pipeline argues that the economic interests of the
Producers will force early production of the reserves.
Under the advance payment agreements, Producers must repay
the advances even if gas deliveries are not made.
The Producers candidly admit that the upper ceiling volume-
tric limits offer a device for protecting them from potential
"vintaging problems". The Producers also want to protect
their position as to the refund credit provision in Opinion
No. 598. The Producers argue that in establishing the volume
of the reserves, they thereby qualify for the refund credit
as would any additional volumes covered under new contracts.
Although Opinion No. 699-H eliminates the refund credits, the
issue is currently under court review. 10/ In addition, the
Producers maintain that it is reasonable to agree upon the
volume of recoverable reserves in order to fix the daily
contract quantity.
Staff opposes this provision stating that the use of upper
ceiling limits in the contracts to establish take-or-pay obliga-
tions or for work-off of the refund obligation is not required.
Staff does not address the primary reason for the proposal, i.e.,
viutagin~, but proposes to rewrite the contract by deleting
the provision. Staff's sole justification is that "dedica-
tion of gas reserves to pipelines in small increments is not
in the public interese' inferring that to allow the provision
would result in the withholding of gas reserves.
We find that these provisions are not inconsistent
with the public interest. Staff's speculation about potential
withholding of reserves is based on its fallacious assumption
that the reserves have not been dedicated under the
advance payment agreements and do not lie within the offshore
Federal domain. The Producers herein are bound by the terms
of the advance payment agreements to enter into superseding gas
10/ 520 F.2d. 1061. (D.C. Cir. 1975), Sub. norn. The Califo~4~
Company, et al. v. F.P.C., S.Ct. Nos. 73-1289 et al.
PAGENO="0600"
594
Docket Nos. C174-734, et al. - 8 -
purchase contracts if there are any additional reserves, sub-
ject to possible price revisions. There is no question of
the dedication and commitment of the reserves to Mich Wise.
The crucial question in this proceeding is whether the proposed
condition advocated by Staff herein would provide any benefit
to the consumer in the form of a greater supply of natural gas.
The facts clearly indicate that such would not be the case.
As Presiding Judge Zwerdling noted in his decision
the questions posed in this proceeding are "basic, general
policy questions, not calling for different answers on the basis
of different evidentiary records and different individual
producer certificate cases." The issue is whether the
Commission can and should require all producers to dedicate all
"commercially producible" reserves in a well bore in their
initial certificate application. In other words, does the
Commission have the authority under the Natural Gas Act to.
require a producer to dedicate more gas in interstate commerce
than is set forth in the certificate application.
We agree with Judge Zwerdling's evaluation of Staff's
participation in this proceeding wherein he stated, "In support
of its warranty condition recommendation the Staff brief presents
a hodge-podge of barely stated doubts, fears and conclusions
unsupported by any substantial analysis or rationale" af In
concluding that the Staff had provided. "no really serious or
helpful analysis of the policy issues" in this proceeding, the
Judge suggested that the Commission should consider these issues
in a rulemaking proceeding. After consjderation, we have
concluded that a rulemaking proceeding is unnecessary. The
Commission independently is able to determine whether it has
the statutory authority to impose the suggested condition and
whether such condition is required by the public convenience
and necessity. The position advocated solely by Staff in this
and the ~ proceeding is contrary to both our statutory
authority and the public interest. 12/ Moreover, our findings
herein will establish the prečedent Tor other proceedings
thereby eliminating the possibility of further unnecessary
hearings in the future.
III. AUTHORITY UNDER SECTION 7(e)
Although Judge Zwerdling did not address the issue of
whether the Commission has the statuatory authority to impose
condition J, we find it necessary to do so as to avoid a further
proliferation of cases. In so doing we shall review the
arguments of the parties.
11/ Initial Decision, Mimeo p.. 9.
12/ Getty Oil Company, et al., Docket No. C175-3l9, et al.
PAGENO="0601"
595
Superior Oil Company, et al.
Docket Nos. C174-734, ėt aT. - -
Staff asserts that under the precedents established by
Catco and Sunray Mid-Continent Oil Company v. F.P.C., 13/
the CommisaT~icontrols the terms under which gas nay
initially dedicated to the interstate market. Staff argues
that the Commission should rely on these cases in establishing
a new policy whereby the underlying contracts would dedicate
all commercially producible reserves from the surface to the
limit of the well bore on the theory that the proposed uniform
method of dedication of gas from federal leases would terminate
any question of withholding of supplies. Staff attempts to
buttress its position by asserting that Section 7(b) does not
provide adequate protection for the consumer in that producers
can and have terminated deliveries without the requisite aban-
donment authorization from the Commission.
In arguing its position the Commission Staff has relied
primarily on the Supreme Court decision in Sunray. In that
proceeding the producer applied for a certificate of public
convenience and necessity requesting that certification be
limited to the remaining term of the contract with the
pipeline. Consistent with its uniform practice, the Com-
mission tendered and the producer accepted a certificate
without any form of time limitation. The question presented
to the Court was whether the Commission had the authority
to tender a certificate without the requested time limitation.
Taking into account the Commission's responsibilities under
Section 7 of the Act, the Supreme Court held that the Com-
mission had the requisite authority to issue a limited
certificate or one unlimited in term. Further, it held that
after accepting an unlimited certificate the producer could
not withdraw the supply of gas from interstate commerce
without Commission authorization. The producer's remedy was
not to accept the certificate as proferred by commencing
deliveries thereunder.
13/ Atlantic Refinery Company v. Public Service Commission,
360 U.S. 378, 364 U.S. 137.; 364 U.S. 137.
PAGENO="0602"
596
Docket Nos. C174-734, et al. - 10 -
The Producers argue that the Sunray case does not reach
the issue now before us which is whether the Commission had
the authority to require producers to expand their contractual
obligations in a manner which the Commission may find to be in
the public interest. Citing United Gas Pipeline Comp~~ V.
Mobile Gas Corporation 14/ th~ProducerS argue that the Com-
~iiiion does not have the authority under its conditioning
power to abrogate private contracts between the producer and
pipeline purchaser. Moreover, they assert that the power of
the Commission to condition a certificate application is
limited by the scope of the proposed service contained in the
certificate application before the Commission. 15/
Producers also assert that by conditioning certificates
to require the producers to guarantee delivery of the estimated
recoverable reserves, the Commission is infringing upon the
production exemption provided by Section 1(b) of the Natural
Gas Act. Furthermore, by requiring a total dedication of the
gas, they argue that the Commission would be physically involved
in each well drilled by a producer to ensure that all gas
reservoirs are covered by contracts and certificate applications.
Citing ~fllips Petroleum v. ~Wisconsin, 16/ they maintain that
the Commission has no jurisdiction over the physical activities
of the properties used in the production of gas. Without
deciding the relevance of the producers' Section 1(b) argument,
we do agree that the Commission~ cannot and should not force
producers to dedicate reserves for which they have not sought
certification. 17/
In Panhandle Eastern Pipeline Company v. F.P.C., 18/ the
Supreme Court restrained the Commission in an attempt to rely
on its general power to regulate the sale of undeveloped,
undedicated leases by an interstate natural gas company under
Section 7(c) of the Act, stating that, "the power to do things
appropriate to carry out the provisions of the Act can hardly
be taken to rescind aprohibition against certain actions."
This Commission is cognizant that it cannot create authority
or expand its jurisdiction through the use of the conditioning
powers of Section 7(e).
14/ 350 U.S. 332 (1955).
15/ F.P.C. v. Hunt, 376 U.S. 575 (1964).
16/ 347 U.S. 672 (1964).
17/ Skelly Oil Company v. F.P.C., 375 F.2d 6 (10th Cir. 1967).
18/ 337 U.S. 498 (1949).
PAGENO="0603"
597
Docket Nos. C174-734, et al - 11 -
However, in Atlantic Refining Co. v. Public Service
Commission, 360 U.S. 378 (1958), the Court said:
Section 7(e) vests in the Commission
control over the conditions under which
gas may be initially dedicated to inter-
state use. Moreover, once so dedicated
there can be no withdrawal of that supply.
from continued interstate movement without
Commission approval.
And it further explained in Sunray Oil Co. v. F.P.C., 364 U.S.
137, 152 (1959)
The Commission's practice supports its
authority here in the terms of §7 (e).
It has long drawn a distinction between
the underlying service to the public a
natural gas company performs and the
specific manifestation--the contractual
relationship--which that service takes
at a given moment.
These broad interpretations of the authority of the Commission
under Section 7 were summarized by the Court as having the
following basis:
When Congress enacted the Natural Gas Act
it was motivated by a desire "to protect con-
sumers against exploitation at the hands of
natural gas companies." Sunray Mid-Continent
Oil Co. v. Federal Power Comm'n, 364 U.S. 137,
147. To that end, Congress "meant to create
a comprehensive and effective regulatory scheme."
Panhandle Eastern Pipe Lime Co. v. Public
Service Comm'n, 332 U.S. 507, 520. See Public
Utilities Comm'n v. United Fuel Gas Co.,
317 U.S. 456, 467. It is true, of course, that
Congress did not desire comprehensive federal
regulation; much authority was reserved for the
States. But, it is equally clear that Congress
did not desire that an important aspect of this
field be left unregulated. See Panhandle Eastern
Pipe Line Co. v. Public Service Comm'n, supra.
Therefore, when a dispute arises over whether
a given transaction is within the scope of
federal or state regulatory authority, we are
not inclined to approach tI-~e problem negatively,
PAGENO="0604"
598
Docket Nos. C174-734, et. al. -12
thus raising the possibility that a "no man's land"
will be created. ]9/ Compare Gu~v. Utah Labor Board,
353 U.S. 1.
F.P.C. v. Transcontinental Gas Corp., 365 U.S. 1, 19. (1960).
Every term and condition attached by the Commission to
the issuance of a certificate must comport with the require-
ments of Section 7(e) which authorizes the Commission to
attach only "such reasonable terms and conditions as the
public convenience and necessity may require." (Emphasis added).
The Courts have required that the Commission's authority to
attach certificate conditions be exercised only when supported
by soundly based findings on the record before, it. Further-
more, conditions may only be found to be reasonable if they
do not exceed the authority vested in the Commission by the
other sections of the Natural Gas Act.
19/ The instant holding neither creates a "regulatory gap"
- nor carves out a "no man's land" within which producers
can arbitrarily exploit or withhold gas reserves. Under
the "Outer Continental Shelf Lands Act", 43 U.S.C. 1331,
et ~ (1953), the Secretary of the Interior is directed
to "prescribe such rules and regulations as may be necessary
to carry out" the provisions of the law relating to leasing
of the Outer Continental Shelf, 43 U.S.C. 1334(a) (1), and
to place in the leases "such other terms and provisions
as the Secretary may prescribe at the time of offering the
area for lease." 43 U.S.C. ~l337(b) (4) . The Form 3300-1
Oil and Gas Lease for OCS Lands provides in Section 3,
in relevant part:
Lessee agrees . . . (c) (2) After due notice in
writing, to diligently drill and produce such
other wells as the Secretary may reasonably require
in order that the leased area or any part thereof
may be properly and timely developed and produced
in accordance with good operating practice.
PAGENO="0605"
599
Docket Nos. C174-734, et al. -13-
The record in this proceeding does not provide any
basis upon which the Commission should condition the certi-
ficates as contended by Staff. The Commission has express
authority under Section 7(e) to attach conditions to a
certificate as the public convenience and necessity may
require. Generally the cases upholding the authority of
the Commission under Section 7(e) are cases in which the
Commission has limited the contract rate between producers
and pipelines to a rate which the Commision considers to be
in the public convenience and necessity. The Commission's
conditioning power and the right to refuse to certificate
a proposal is not however the equivalent of statutory
authority to direct a producer to "dedicate its gas to
interstate commerce" in the first instance. We therefore
conclude that there is no basis in law or fact that sustains
the position that the public convenience and necessity
would be served or the public interest maintained by the
attachment of the condition imposed by Ordering Paragragh (J).
The Commission finds:
(1) The certificates of public convenience and necessity
granted to The Superior Oil Company, Placid Oil Company,
Kewamee Oil Company and Ashland Oil Company by Commission
order issued January 17, 1975, should be modified by deletion
of Ordering Paragraph (J) from such certificate.
(2) The initial decision should be adopted as the
decision of the Commission except as modified or supplemented
by this Opinion and Order.
The Commission orders:
(A) The certificates of public convenience and necessity
granted to the Superior Oil Company, Placid Oil Company,
Kewanee Oil Company and Ashland Oil Company by Commission
order issued January 17, 1975, are modified by deletion of
Ordering Paragraph (J) from such certificates.
(B) The initial decision is adopted as the decision
of the Commission except as modified or supplemented by
this Opinion and Order.
By the Commission.
(SEAL)
Kenneth F. Plumb,
Secretary.
PAGENO="0606"
600
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
(~)
OPINION NO. 767
Gett Oil Company, etal. ) C175-319, etal.
OPINION AND ORDER GRANTING CERTIFICATION,
LIMITED REMANDING AND REOPENING OF RECORD
Issued: June 29, 1976 DC-50
PAGENO="0607"
601
UNITED STATES OF AMERICA
FEDERAL PCMER COMMISSION
Before Con~issioners: Ribhard L. Dunham, Chairman;
Don S. Smith, John H. Holloman III,
and James G. Watt.
Docket Nos.
Getty Oil Company
Atlantic Richfield Company
Continental Oil Company
Getty Oil Company
Cities Service Oil Company
Texaco Inc.
Atlantic Richfield Company
Tenneco Oil Company
Tenneco Oil Company
Tenneco Exploration, Ltd.
Continental Oil Company
Getty Oil Company
Atlantic Richfield Company
Cities Service Oil Company
Continental Oil Company
Cities Service Oil Company
Texaco Inc.
Michigan Wisconsin Pipeline
Michigan Wisconsin Pipeline
Michigan Wisconsin Pipeline
CI75-3l9
CI75-4ll
C175-493
CI7S-5l6
C175-558
CI75-614
CI75-65l
CI75-746
CI75-747
CI7S-748
CI75-76l
CI75-769
C176-2
CI76~-l8
CI76-4l
C176-58
CI76-74
CP69-249
CP7O-163
CP73-65
OPINION M~. 767
OPINION AND ORDER GRANTING CERTIFICATION,
LIMITED REMANDING AND REOPENING OF RECORD
WATT, Commissioner:
(1.su.d Jun.s 29, 1976)
These proceedings involve producer certificate appli-
cations for sales of natural gas from Louisiana Offshore
Federal Domain to several interstate pipelines. Continental
Oil Company (Continental), Atlantic Richfield Company (ARCO),
Getty Oil Company (Getty), and Cities Service Oil Company
(Cities) herein referred to jointly as CAGC have filed
applications for certification of sales of their
respective interests from three blocks of gas
Company)
Company)
Company)
PAGENO="0608"
602
Docket Nos. C175-3l9, etal. - 2 -
reserves in Offshore Louisiana. These blocks are Eugene
Island Block 217, South Marsh Island Block 261, and
West Cameron Block 177.
CAGC proposes to sell the defined gas reserves under-
lying Eugene Island Block 217 to Texas Gas ~iransmission
Corporation (Texas Gas) with transportation effectuated
through the facilities of Michigan Wisconsin Pipe Line
Company (Mich-Wisc). The sales from South Marsh Island
Block 261 are to be made to Trunkline Gas Company (Trunkline),
whereas those from West Cameron Block 177 are to be made to
Tennessee Gas Pipeline Company (Tennessee). 1/
The contracts underlying the foregoing applications pro-
vide for the sale of gas from either certain defined reservoirs
or down to certain defined depths. In addition, the contracts
pertaining to Block 217 provide for terms of five years,
whereas those pertaining to Blocks 177 and 261 are for 20-year
terms.
Tenneco Oil Company (Tenneco Oil) and Tenneco Explora-
tion, Ltd. (Tenneco Exploration) have applied for certification
of the sale of gas from Eugene Island Blocks 342 and 343 and
East Cameron Block 281 to Tennessee. The underlying con-
tracts contain terms of 10 years in addition to reserving
25 percent for the benefit of Tenneco Oil. ~j
Texaco has filed an application for certification
authorizing the sale of gas from Eugene Island Block 205
to Consolidated Gas Supply Corporation (Consolidated). The
contract sets forth specified reservoirs and does not contain
1/ Continental and Cities, in Docket Nos. C176-74 and C176-58,
have retained twenty-five percent of their interests
in the reserves for their own use. No pipeline has
filed a request for authorization to transport the gas.
2/ Tenneco Oil has reserved twenty-five percent of the
reserves for its own use. A request to transport
the reserved gas is pending before the Commission
for decision in Docket No. C175-45, et al.
PAGENO="0609"
603
Docket Nos. C175-319, et al. 3
a conventional acreage commitment subject to a depth limita-~
tion. Texaco also filed an application for the sale of its
interest in East Cameron Block 281 to Tennessee. This con-
tract provides for a term of five years and contains a depth
limitation provision.
By order dated June 3, 1975, the Commission consolidated
the applications of CAGC and Mich-Wisc, established hearing
dates and granted temporary certificates. All of the under-
lying producer gas sales contracts limited dedications to
the base of defined producing formations for a limited period
of time. The Commission directed a formal hearing, instructing
the parties to submit evidence addressing the question of
"whether the dedication of gas reserves to be connected
from Federal Domain leases should not include all the
commercially producible gas reserves from the surface to
the limit of the well bore." Four independent producers
and the purchasing pipeline applied for rehearing, asserting
that the Commission had no authority to require a hearing
on issues pertaining to limitation in producer sales contracts
and, further, that conditioning commencement of a temporary
certificate upon not filing an application for rehearing
violated Section 19(a) of the Natural Gas Act. The
Commission denied rehearing in an order dated July 24,
1975. By order issued September 22, 1975, the Commission
consolidated the applications filed by Tenneco Exploration
and Tenneco oil and one filed by Texaco with the aforementioned
cases. The other Texaco application was consolidated with this
proceeding by order issued September 9, 1975.
The hearing was held in November and December 1975. Due
to the importance of the issues in this consolidated proceeding
and their similarity with those proposed in Superior Oil
Compaj~y, et al., Docket Nos. C174-734, et flj., on May 27, 1976,
the Comi~ion directed the Administrative Law Judge to
certify the record to it on its own motion. Accordingly,
we are simultaneously issuing our opinions in these two
consolidated proceedings.
87-292 0 - 77 - 39
PAGENO="0610"
604
Docket Nos. CI75~-3l9, et al. - 4 -
ISSUES
(1) Whether the imposition of the Staff's proposed
conditions would be reasonable in terms of Section 7(e)
of the Natural Gas Act?
(2) Does the Comission have authority under
Section 7(e) of the Natural Gas Act to require the
applicants to dedicate "all commercially producible
reserves" to the interstate market?
(3) Are the producers required to file applications
for certification of oil flow facilities through which
natural gas is transported?
RECORD EVIDENCE
During the administrative hearing, the applicants sub-
mitted uncontroverted testimony establishing the basis on
which the underlying gas sales contracts were negotiated.
They demonstrated that it is a general practice for gas
reserves to be committed on the basis of specific formations
or down to the deepest developed producible formation. They
also testified that the present uncertainty as to future
pricing and regulatory policies require the producers to
limit the contract terms.
Evidence analyzing interstate contracts from 1970 and
thereafter with regard to contract provisions concerning
dedication of reserves with specific depth limitations, and
as to term contracts, was submitted by the producers. The
majority of offshore contracts and total U.S. contracts
contain commitments limited as to depth. On the average,
more than 80 percent of offshore contracts and more than
50 percent of the total U.S. contracts have such depth
limitations. 3/
Although traditionally the producer sales contracts
have been for a period of 20 years, the evidence demonstrates
that they are now being made for increasingly shorter terms.
Since 1970, when substantially all interstate contracts were
for 20-year terms, the trend has been declining. By 1975,
3/ Exhibit 2, Schedule 1.
PAGENO="0611"
605
Docket Nos. C175-3l9, et al. - 5 -
nearly half of the new contracts for offshore supplies were
for terms of 10 years or less, whereas 25 percent contained
terms of five years or less. For the total United States,
interstate contracts with less than a 20-year term increased
from 8 percent in 1971 to 45 percent in 1974 and 50 percent
in 1975, with more than 30 percent of the 1975 contracts
having a term of five years or less. 4/
In addition to the foregoing evidence, the telling
argument advanced by the producers is that supplies of gas
from these offshore formations, nof yet found or committed,
must be subject to new contracts for sale to interstate pipe-
lines or other interstate arrangements. In order for the
producers to sell these future supplies, they must come before
the Commission. Moreover, there could be no adverse effect to
the consumer by not requiring producers to commit reserves at
this time which are not yet developed or ready for commitment.
Staff did not offer any evidence to sustain its position
that the contracts of all producers should uniformly contain
a condition dedicating all commercially producible reserves.
Staff merely argued on brief the unsupported conclusion that
"this uniform dedication of gas from Federal leases would
terminate any and all questions of withholding." 5/ Having
characterized the proceeding as determining "whether the
Commission can be compelled to approve a withholding of
natural gas reserves by the gas producers," 6/ Staff made no
attempt to demonstrate the existence of the withhholding
alleged." Staff ignored all evidence submitted by producers
establishing that they had dedicated all known commercially
producible reserves.
We find that the provisions are not inconsistent with
the public interest. Staff speculation about potential with-
holding of reserves is unsubstantiated. In the instant pro-
ceeding, the recoverable reserves are located in Offshore
Federal Domain and are thereby committed to the interstate
market. Once commenced, sales cannot cease absent Commission
authorization under Section 7(b) of the Natural Gas Act.
4/ Exhibit 2, Schedule 2.
5/ Initial brief, page 5.
6/ Initial brief, page 10.
PAGENO="0612"
606
Docket Nos. C175-319, etal. - 6
Furthermore, the record demonstrates that the producers have
committed 100 percent of their known reserves. 7/ The
producers assert that they want to commence the sale of these
reserves and thereby generate income in order to further
their business purpose, i.e., the exploration of natural gas.
The facts clearly indicate that the position advocated by
Staff would not provide any benefit to the consumer in the
form of a greater supply of natural gas or otherwise.
AUTHORITY UNDER SECTION 7(e)
Presiding Judge Zwerdling commented on this proceeding in
his Superior Oil decision, stating that the questions in these
proceedings are "basic general policy questions, not calling
for different answers on the basis of different evidentiary
records in different individual producer certificate cases."
The issue is whether the Commission should require all producers
to dedicat" all "coriinercially producible" reserves in a well
bore in their Initial certificate application. In other
words, does the Commission have authority under the Natural
Gas Act to require a producer to dedicate more gas in inter-
state commerce than is set forth in the certificate application?
Our findings herein and those in Superior will establish the
precedent for other proceedings, thereby eliminating the
possibility of unnecessary hearings in the future.
Staff asserts that under the precedents established by
Catco and Sunray Mid-Continent Oil Company v. F.P.C.,
the Commission controls t~he terms under which gas may
be initially dedicated to the interstate market. Staff argues
that the Commission should rely on these cases in establishing
a new policy whereby the underlying contracts would dedicate
all commercially producible reserves from the suriace to the
limit of the well bore on the theory that the proposed uniform
method of dedication of gas from federal leases would terminate
any question of withholding of supplies. Staff attempts to
buttress its position by asserting that Section 7(b) does not
provide adequate protection for the consumer in that producers
can and have terminated delIveries without the requisite aban-
donment authorization from the Commission.
7/ See Footnotes 1 and 2.
8/ Atlantic Refinery Company v. Public Service Commission
360 U.S. 378,; 364 U.S. 137. -
PAGENO="0613"
607
Getty Oil Company, et al.
Docket Nos. C175-3l9, et al. - 7 -
In arguing its position the Commission Staff has relied
primarily on the Supreme Court decision in Sunray. In that
proceeding the producer applied for a certificate of public
convenience and necessity requesting that certification be
limited to the remaining term of the contract with the
pipeline. Consistent with its uniform practice, the
Commission tendered and the producer accepted a certificate
without any form of time limitation. The question presented
to the Court was whether the Commission had the authority
to tender a certificate without the requested time limitation.
Taking into account the Commissions responsibilities under
Section 7 of the Act, the Supreme Court held that the
Commission had the requisite authority to issue a limited
certificate or one unlimited in term. Further, it held that
after accepting an unlimited certificate the producer could
not withdraw the supply of gas from interstate commerce
without Commission authorization. The producers' remedy
was not to accept the certificate as proffered by commencing
deliveries thereunder.
The Producers argue that the Sunray case does not reach
the issue now before us which is whether the Commission had
the authority to require producers to expand their contractual
obligations in a manner which the Commission may find to be in
the public interest. Citing United Gas Pipeline Company v.
Mobile Gas Corporation 9/ the Producers argue that the Commission
does not have the authority under its conditioning powers to
abrogate private contracts between the producer and pipeline
purchaser. Moreover, they assert that the power of the
Commission to condition a certificate application is limited
by the scope of the proposed service contained in the certificate
application before the Commission. 10/
Producers also assert that by conditioning certificates
to require the producers to guarantee delivery of the estimated
recoverable reserves, the Commission is infringing upon the
production exemption provided by Section 1(b) of the Natural
Gas Act. Furthermore, by requiring a total dedication of the
gas, they argue that the Commission would be physically involved
in each well drilled by a producer to ensure that all gas
reservoirs are covered by contracts and certificate applications.
Citing Phillips Petroleum v. Wisconsin, 11/they maintain that the
9/ 350 U.S. 332 (1955).
10/ F.P.C. v. Hunt, 376 U.S. 575 (1964).
11/ 347 U.S. 672 (1964).
PAGENO="0614"
608
Docket Nos. C175-319, et al. - 8 -
Commission has no jurisdiction over the physical activities
of the properties used in the production of gas. Without
deciding the relevance of the producers' Section 1(b) argument,
we do agree that the Commission cannot and should not force
producers to dedicate reserves for which they have not sought
certification. 12/
In Panhandle Eastern Pipeline Company v. F.P.C., 13/ the
Supreme Court restrained the Commission in an attempt to rely
on its general power to regulate the sale of undeveloped,
undedicated leases by an interstate natural gas company under
Section 7(c) of the Act, stating that, `the power to do things
appropriate to carry out the provisions of the Act can hardly
be taken to rescind a prohibition against certain actions."
This Commission is cognizant that it cannot create authority
or expand its jurisdiction through the use of the conditioning
powers of Section 7(e).
However, in Atlantic Refining Co. v. Public Service
Commission, 360 U.S. 378 (1958), the Court said:
Section 7(e) vests ~.n the Commission
control over the conditions under which
gas may be initially dedicated to inter-
state use. Moreover, once so dedicated
there can be no withdrawal of that supply
from cOntinued interstate movement without
Commission approval....
And it further explained in Sunray Oil Co. v. F.P.C., 364 U.S.
137, 152 (1959):
The Commission's practice supports its
authority here in the terms of §7 (e).
It has long drawn a distinction between
the underlying service to the public a
natural gas company performs and the
specific manifestation- -the contractual
relationship--which that service takes
at a given moment.
12/ Skelly Oil Company v. F.P.C., 375 F.2d 6 (10th Cir. 1967).
13/ 337 U.S. 498 (1949).
PAGENO="0615"
609
Docket Nos. C175-3l9, et al. - 9 -
These broad interpretations of the authority of the Commission
under Section 7 were summarized by the Court as having the
following basis:
When Congress enacted the Natural Gas Act
it was motivated by a desire "to protect con-
sumers against exploitation at the hands of
natural gas companies." Sunray Mid-Continent
Oil Co. v. Federal Power Comm'n, 364 U.S. 137,
147. To that end, Congress "meant to create
a comphrensive and effective regulatory scheme."
Panhandle Eastern Pipe Line Co. V. Public
Service Comm'n, 332 U.S. 507, 520. See Public
utilities Comm'n v. United Fuel Gas Co.,
317 U.S. 456, 467. It is true, of course, that
Congress did not desire comprehensive federal
regulation; much authority was reserved for the
States. But, it is equally clear that Congress
did not desire that an important aspect of this
field be left unregulated. See Panhandle Eastern
Pipe Line Co. .v. Public Service Comm'n, sup~.
Therefore, ~Fien adispute arises over whether
a given transaction is within the scope of
federal or state regulatory authority, we are
not inclined to approach the problem negatively,
thus raising the possibility that a "no man's
land" will be created. 14/ Compare Guss v. Utah
Labor Board, 353 U.S. 1.
14/ The instant holding neither creates a "regulatory gap"
nor carves out a "no man's land" within which producers
can arbitrarily exploit or withhold gas reserves. Under
the "Outer Continental Shelf Lands Act", 43 U.S.C. 1331,
et ~. (1953), the Secretary of the Interior is directed
to "prescribe such rules and regulations as may be necessary
to carry out" the provi~ions of the law relating to leasing
of the Outer Continental Shelf, 43 U.S.C. 1334(a) (1), and
to place in the leases "such other terms and provisions
as the Secretary may prescribe at the time of offering the
area for lease." 43 U.S.C. ~l337(b)(4). The Form 3300-1
Oil and Gas Lease for OCS Lands provides in Section 3,
in relevant part:
Lessee agrees . . . (c) (2) After due notice in
writing, to diligently drill and produce such
other wells as the Secretary may reasonably require
in order that the leased area or any part thereof
may be properly and timely developed and produced
in accordance with good operating practice.
PAGENO="0616"
610
Docket Nos. C175-319, et al. -10-
F.P.C. v. Transcontinental Gas Corp., 365 U.S. 1, 19. (1960).
Every term and condition attached by the Commission to
the issuance of a certificate must comport with the require-
ments of Section 7(e) which authorizes the Commission to
attach only "such reasonable terms and conditions as the public
convenience and necessity may require." (Emphasis added).
The Courts have required that the Commission's authority to
attach certificate conditions be exercised only when supported
by soundly based findings on the record before it. Further-
more, conditions may only be found to be reasonable if they
do not exceed the authority vested in the Commission by the
other sections of the Natural Gas Act. Of course, if the
condition meets the requirements of Section 7(e) of the Act,
the imposition of the condition would not exceed the Commission's
statutory authority.
The record in this proceeding does not provide any
basis upon whi~ch the Commission should condition the certi-
ficates as contended by Staff. The Commission has express
authority under Section 7(e) to attach conditions to a
certificate as the public convenience and necessity may
require. Generally the cases upholding the authority of
the Commission under Section 7(e) are cases in which the
Commission has limited the contract rate between producers
and pipelines to a rate which the Commision considers to be
in the public convenience and necessity. The Commission's
conditioning power and the right to refuse to certificate
a proposal is not however the equivalent of statutory
authority to direct a producer to "dedicate its gas to
interstate commerce" in the first instance.
PAGENO="0617"
611
pocket Nos. CI75~3l9, ~ - 11 -
THE OIL FLOW LINES
A subsidiary issue in this proceeding is whether CAGC
is required to obtain certificates for the.
movement of casinghead and gas well gas through oil flow
lines from the offshore platform to the onshore delivery point
to the pipeline. The casinghead and gas well gas from
Block 261 South Marsh Island platform is to be carried through
oil pipelines or flow lines from offshore to CAGC's central
separation fac:.lities located on'hore at Vermilion Parish,
Louisiana, where the gas and liquids are separated and the
gas is then sold to Trunkline. CAGC alleges that the move-
ment of the gas in solution ~,ith oil through oil flow lines
is incidental and subsidiary to the movement of the oil and
therefore not subject to Commission jurisdiction.
CAGC further argues that the oil lines, to the extent
that they are used to carry ~az in solution with the oil,
are an integral and necessary part of the CAGC gathering
system to bring the gas onshorc for delivery to the pipeline.
They assert that these lines arc c:cempt under Section 1(b)
of the Natural Gas Act which prccludes the Commission from
exercising jurisdiction over the production and gathering
of natural gas or the facilitics used for such. CAGC
further argues that certification would not serve any regu-
tatory purpose, inasmuch as they will not seek to cease
delivery of the natural gas committed from South Marsh
Island Block 261 without complying with the abandonment
requirements of Section 7(b) oi~ the Natural Gas Act. They
allege that the Commission's jurisdiction need only be con-
cerned with the completion of sale and delivery at the
delivery point onshore, Vermilion Parish.
In its brief, Staff argues that the producers should
be required to obtain certification for the facilities in
order to foreclose the opportunity for them to divert
Federal Ebmain gas to the intractata market. Citing
Gulf Oil Corporation, Docket No. C176-l05, order issued
August 15, 1975, Staff maintains that jurisdiction over
the facilities should be c,sertcd to assure continuity of
gas supply. In the Gulf order, the Commission merely instituted
a show cause proceeding against Gulf in order to determine the
jurisdictional status of its operations and facilities in Offshore
Southern Louisiana rather than deciding any jurisdictional issue.
PAGENO="0618"
612
Docket. Nos. C175-319, et al. - 12 -
The four producers which comprise CAGC have executed
four separate but identical advance payment agreements
with Trunkline which commit all underlying reserves
Block 261. ~/ Under these agreements, the interstate
pipeline is assured of receiving all reserves from Block
261 which negates Staff's argument of potential withholding. 16/
Furthermore, these producers own the facilities which transpoFt
and process this gas supply prior to the sale to Trunkline
which thereby eliminates the potential for diversion from
the interstate market. We therefore find that certifi-
cation under Section 7 of the Natural Gas Act is not
required.
On June 14, 1976, CAGC filed a notion with this
Commission requesting that the proceeding be remanded to
the presiding Administrative Law Judge for a limited purpose
of reopening the record to take evidence on the issue of the
imposition of certificate conditions based upon Commission
Order Nos. 539 and 539-A. 17/ The CAGC applicants stated
that they were unwilling to accept such conditions and
therefore requested that the Commission set for formal
hearing the issue. It is appropriate for us to remand
the proceeding and reopen the record for the limited
purposes stated above. We also find that this limited
issue should be treated in a separate phase so as not to
delay our decision as to the other issues in this case.
15/ Gas Supply Incentive Agreements dated 5/30/75.
16/ Opinion No. ______, Superior Oil Company, et al.
17/ Docket No. RM76-8, issued October 14, 1975 and
- March 26, 1976, respectively.
PAGENO="0619"
613
Docket Nos. C175-319, et al. - 13 -
Furthermore, we will provide the other applicants in
this consolidated proceeding an opportunity to file a
written statement as to whether they are willing to
accept Order No. 539 conditions in the certificate issue.
In the event, any parties do not make a filing within
forty-five (45) days of the date of this order, the Com-
mission on its own motion will attach the conditions to
the certificate issued herein. We therefore direct that
the Administrative Law Judge should not establish any
procedural dates with respect to the formal hearing prior
to the expiration of this 45-day period.
On June 22, 1976, CAGC filed a Supplemental Memorandum
wherein they set forth the issues in the Superior and Getty
cases. They asserted that the cases do not lend themselves
to a common decision, and, therefore, should be considered
separately on the separate records made by each. The*
opinions which we issue today indicate our independent
review of the records in both proceedings. We however
found that the issues in both proceedings involved an
analysis of Section 7(e) of the Natural Gas Act and as
our conclusion is consistent in both cases, our findings
with regard to this issue are similar.
The Commission finds:
(1) The applicants are "natural-gas companies" within
the meaning of the Natural Gas Act.
(2) Each of the proposed sales in these proceedings is
required by the public convenience and necessity.
(3) It is not in the public interest to condition,
pursuant to Section 7(e) of the Natural Gas Act, these
certificates of public convenience and necessity.
(4) The CAGC applicants are not required to apply
and obtain certificates of public convenience and necessity
under Section 7 of the Nćturtl Gas Act relating to the
transportation and delivery of casinghead and gas well gas
from Block 261 South Marsh Island Field, Offshore Louisiana,
to a central point onshore Vermilion Parish, Louisiana, for
delivery and sale of natural gas in interstate commerce.
PAGENO="0620"
614
Docket Nos. C175-319, et al. - 14 -
(5) The motion filed by the CAGC applicants on
June 14, 1976, should be granted. This proceeding should
be remanded to the Administrative Law Judge for the limited
purpose of reopening the record and taking evidence to
determine whether the conditions set forth in Orders
No. 539 and 539-A should be imposed upon the certificates
issued herein.
The Commission orders:
(A) Certificates of public convenience and necessity
are hereby issued or amended to~ each of the applicants for the
sale of natural gas for resale and/or the transportation thereof
in interstate commerce subject to the jurisdiction of the
Commission necessary therefor, all as proposed in their
applications.
(B) This proceeding is hereby remanded to the Admin-
istrative Law Judge for the limited purpose of reopening
the record so as to consider the imposition of Order No. 539
and 539-A conditions upon the certificates issued herein.
Upon the expiration of the 45-day period following the
date of this order, the presiding Administrative Law Judge
may, at his discretion, establish appropriate procedural
dates for the formal hearing.
(C) The applicable general terms and conditions set
forth in the Commission's Rules and Regulations Under the
Natural Gas Act and particularly those contained in
Sections 154 and 157.20 thereof shall attach to the cer-
tificates issued herein.
By the Commission.
( SEAL)
Kenneth F. Plumb,
Secret~ry.
PAGENO="0621"
615
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
OPINION NO. 789
Tenneco Oil Company, et al. ) Docket No. C175-45, et al.
OPINION AND ORDER REQUIRING THE FILING OF AMENDED
APPLICATIONS, GRANTING TEMPORARY AND PERMANENT
CERTIFICATES AND OTHER RELIEF
IN CONSOLIDATED PROCEEDINGS
Issued: March 7, 1977
DC-B-47
PAGENO="0622"
616
UNITED STATES OF AMERICA
FEDERAL POWER CO~Th~ISSION
Tenneco Oil Company, et al. ) Docket No. C175-45, et al.
OPINION NO. 789
APPEARANCES
Bruce Kiely, Gordon Gooch and Michael B. Silva for Tenneco Oil
Company
Justin R. Wolf, William M. Lange and Paul W. Ricks for Placid
Oil Company
Justin R. Wolf, William M. Lange and Robert W. Henderson for
Hunt Petroleum Corporation, Hunt Industries and Hunt Oil
Company
.Justin R. Wolf, William M. Lang~ and Dick Coates for Hamilton
Brothers Oil Company and Hamilton Brothers Exploration Company
Richard F. Generel]~y and Charles R. Fellows for Kewanee Oil
Company
Richard F. Generelly and W. 0. Strong, III, for Ashland Oil, Inc.
Platt W. Davis, III, and J. Evans Attwell for TransOcean Oil,
Inc.
Harold L. Talisman, Peter L. Hatton, Leland F. Cadenhead,
Lilyan G. Silbert, John S. Grube and Anthony D. Pryor for
Tennessee Gas Pipeline Company,.,a Division of Tenneco Inc.
andTenneco Chemicals, Inc.
James J. Flood~Jr., Brian D. O'Neill and John D. Townsend for
Trunkline Gas Company
Philip C. Wrangle, Ronald L. Kueh~ Jr., and Walter M. Starke
for Southern Natural Gas Company
PAGENO="0623"
617
Docket No. C175-45, et al. - ii -
Jack Vickrey, W.B. Cassin, P. D. Endom, Larry J. Gunn and
J._A._Tramuto for United Gas Pipe Line Company
Tom Burton for Ammonia Enterprises Pipeline, Inc., and
Continental Oil Company
William A. Wood and Thomas G. Johnson for Shell Oil Company
Peter H. Schiff and Richard A. Solomon for the Public Service
Commission of the State of New York
Frederick Moring and Kenneth Rubin for Associated Gas
Distributors
Jerome Ackerman and Luize Z. Laitos for Air Products and
Chemicals, Inc~
Thomas Hudson for Olin Corporation
Linda E. Buck, J. R. Pat~p~, David B. Robin~p~, James G. Best.~
and Harry E. Barsh for Louisiana Department of Conservation
I. Jay Golub, Steven M. Hackermati and Walter W. Kurczewsi~ for
Swift Chemical Company
Sam Riggs,~~f~., E.L. Crea~y~, B. E. Potts and Robert S. Whee~~
for Cities Service Oil Company
John W. Glendeniflg~~., John S. Schmid and Paul W.Fox for
Bay State Gas Company, et al.
Edward H. Gerstenf~!4 and Alfred L. Price for First Mississippi
Corporation
George A. Avery for Consumers Power Company
S~phen A. Herman for CF Industries, Inc.
David W. Bowman and B.H. Hughes fc~ Firestone Tire and Rubber Company
William A. Mpg~~ for OKC Corporation
Russell Mam~~ and Robert Aber for the Staff of the Federal
Power Commission
PAGENO="0624"
618
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John II. Holloman III,
and James G. Watt.
Tenneco Oil Company, et al. ) Docket No. C175-45,
) etal.
OPINION NO. 789
OPINION AND ORDER REQUIRING THE FILING OF AMENDED
APPLICATIONS, GRANTING TEMPORARY AND PERMANENT
CERTIFICATES AND OTHER RELIEF
IN CONSOLIDATED PROCEEDINGS
(Issued March 7, 1977)
WATT, Commissioner:
1. This is a consolidated proceeding concerning multiple
applications seeking authority pursuant to Section 7 of the
Natural Gas Act (15 U.S.C. § 717f) to sell or transport
natural gas in interstate commerce and to construct facili-~
ties fcr such transportation and sale. The major
issue to be decided in this proceeding is
whether natural gas produced from the offshore Federal
Domain may be sold by or utilized by the producer for pur-
poses other than resale in interstate commerce. For the
reasons set forth herein 2/ we determine that such sales
or utilization are presently permitted by the public
interest to the extent that such gas is to be sold or
utilized for essential high priority (process or feed-
stock) purposes.
1/ See particularly paragraphs 63-73 infra.
PAGENO="0625"
619
Docket No. C175-45, et al. - 2 -
The Initial Decision established a framework which we
shall follow in order to avoid confusion due to the multi-
plicity of applications. The applications were divided
into the South Marsh Island Transactions, the Tennessee
Gas Pipeline Company Transactions, and the Ammonia Enter-
prises Pipeline, Inc. Project. ?J
FACTUAL BACKGROUND
The South Marsh Island Transactions
2. The applications filed herein commit 100% of the gas
reserves in Blocks 268, 269 and 281 of the South Marsh
Island Area, offshore Louisiana, to various interstate
pipelines subject to an option retained by each producer
to reserve a portion of such reserves for its own use
and disposition. Applications were also filed by Trunkline
Gas Company (Trunkline) and Southern Natural Gas Company
(Southern) for the construction of offshore and onshore
facilities necessary to deliver this gas from offshore
platforms to onshore delivery points. As of July 1, 1974,
the aggregate proven and probable reserves in these blocks
were estimated to be 366 billion cubic feet (Bcf) of natural
gas. The estimated potential reserves underlying the
11,450 acre tract were approximately 1.2 trillion cubic
feet.
3. The producer applications contain reservations of up
to 50 percent of the reserves. The producers' reserved qas
will be used for the production of anhydrous ammonia,
an essential ingredient of agricultural fertilizer. It
is proposed, on an annual basis, to use nearly 37 Bcf of
natural gas from the South Marsh Block for the production
of 1,175,000 tons of anhydrous arnmomia.
2, Ammonia Enterprises Pipeline, Inc. requested permission
to withdxaw its application in Docket No. CP75-268
on December 11, 1975. .
87-292 0 - 77 - 40
PAGENO="0626"
620
Docket No. C175-45, et al. - 3 -.
4. The producers are the Placid Group, Ashland Group and
TransOcean. Their dedication of the gas supply is contained
in advance payment agreements between Trunkline, Southern
and the individual producers. The initial gas purchase
contracts were executed simultaneously with the advance
payment agreenents containing volumetric limits which
provide for an aggregate sale to the pipeline purchasers
of 395 Bcf. Subsequent gas purchase contracts, which are
required to be executed by the parties, will be substantially
identical with those before us except as to price. The
contracts provide that the new" price is to be the highest regulated
price available to comparable producers of offshore gas at
the date the new gas purchase contracts are made.
5. The daily deliverability from these three blocks will
reach 300,000 Mcf/d during the third year of operation and
will continue at that level until 1983 when it will decline.
Under the contracts, the producers have proposed to supply
150,000 Mcf/d for sala to interstate pipelines. The issue
presented by these applications is the validity of the
producers' reservation of a portion of the offshore gas
for high priority industrial use.
6.. All of the gas will be transported from the offshore
platforms to a point in St. Mary Parish, Louisiana via new
offshore facilities to be built by Trunkline. In Docket
No. CP75-l9, Trunkline has requested Commission authorization
to construct these facilities. In the same docket, Trunkline
also proposes to build onshore facilities in St. Mary's
Parish to deliver the gas for processing by the producers
at the Calumet Plant or a second potential plant. In Docket No.
CP75-149, Trunkline has filed a separate application for
the side-valve and tap which would enable Trunkline to deliver
up to 140,000 Mcf/d to Southern. The total estimated cost
of the facilities proposed to be built by Trunkline is
$33,124,000.00, including interest during construction and
contingencies.
7. Trunkline filed an Environmental Impact Statement which
the Judge reviewed and concluded therefrom that the project
was not a major federal act significantly affecting the
environment. The Judge concluded that the facilities pro-
posed to be constructed by Trunkline met the conventional
standards of public convenience and necessity and that the
construction and operation thereof should be certificated.
.8. In Docket No. CP75-l63, Southern applied for authority
to construct about one-half mile of pipeline and install
compression facilities so that Southern would be able to
PAGENO="0627"
621
Docket No. CI75-45, et al. - 4 -
receive the gas transported for it by Trunkline into its
existing system. The aggregate cost of the facilities
was estimated at $2,448,475. In Docket No. CP75-316, the
Judge also approved the construction of the proposed
facilities, whereby Southern would transport the natural
gas from the compressor station to a new arrmionia plant
proposed to be constructed. The Judge found that Southernts
transportation charges were just and reasonable.
The Placid Group
~. In the applications beforeus, Placid Oil Company and others
(Placid Group) have applied for authorization to sell 189 Bcf of
natural gas to Trunkline and Southern. .~( The Placid aroup
has contractually reserved 50 percent of its- gro~s sales,- or up to
94.5 Bcf, for use in an anhydrous ammonia plant owned by the rSro~ucers
and First Mississippi Corporation (First Mississippi). it
is anticipated that the plant will require approximately
47,800 Mcf/d.
10. First Mississippi alleges that its primary corporate objective
has been to build a new ammonia plant. In 1975, First
Mississippi entered into a joint venture with the Placid
Group to build and operate the proposed Ampro plant. First
Mississippi has a 25 percent interest in the proposed plant
and is to be responsible for the construction, operation and
marJ~etjng of production. The total required investment
is estimated at $80,000,000. Financing for construction
cannot be obtained until a supply of natural gas can be
assured.
3/ Placid Oil Company (Trunkline)
Docket No. C175-59 74 Bcf
Hunt Petroleum Corp. (Trunkline)
Docket No. CI75-66 7 Bcf
Hunt Industries (Trunkline)
Docket No. CI75-67 7 Bcf
Hamilton Bros. Oil Co. (Trunkline) 23 Bcf Small
Producer
Hamilton Bros. Expl. Co. (Trunkline) 4 Bcf
Total Gross sales to Trunkline 115 Bcf
Hunt Oil Co. (Southern) 74 Bcf, Dkt. No.
C175-68
Placid group--Total Gross sales
to Trunkline and Southern 189 Bcf
PAGENO="0628"
622
Docket No. C175-45, et al. - 5 -
The Ashland Group
11. The Ashland Group has also reserved the ~~ntractual right to use up
to 50 percent of its gross sales in the nanufacture of anhydrous
ammonia and proposes to build and operate an anhydrous ammonia
manufacturing plant in the same area as the Ampro plant, which
will be located in Donaldsonville, Louisiana.1/The fertilizer
is to be sold to CF Industries, Inc. (CF), an agricultural
cooperative association which is owned by nineteen regional
cooperatives located in the fifteen states and two Canadian
provinces. The plant will cost approximately $73,000,000 and
will produce about 420,000 tons of ammonia annually. It is
estimated that 43,500 Mcf per day of natural gas will be
required for feedstock and process (reformer fuel) purposes.
It is anticipated the Ashland Group and Mesa Petroleum
Corporation (Mesa) will supply the plant with natural gas in
proportion to their ownership in the plant. 4J There is an
outstanding agreement with Trunkline for the transportation
of up to 25,177 Mcf/d from South Marsh Island to Shadyside,
Louisiana, dated April 29, 1975. A similar transportation
agreement between Trunkliné and the Placid Group is the
subject of Trunkline's applicatiob in Docket No. CP75-330.
The agreement between the Ashland Group and Southern for
transportation is currently under negotiation.
~/ Ashland Oil, Inc. (Trunkline) 56 Bcf
Docket No. ci75-l22
Highland Resources, Inc. (Trunkline) ... 23 Bcf
Docket No. C175-733
Kewanee Oil Co. (Trunkline)
Docket No. C175-69 7 Bcf
Gross sales - all to Trunkline 86 Bcf
Y Ashland Oil 35.0%
Highland Resources, Inc. 11.5%
Kewanee Oil Company 3.5%
Mesa 50.0%
PAGENO="0629"
623
-6-
Docket No. C175-45, et al.
TransOcean
12. TransOcean proposes to sell its reserves (120 BCF) to.
Southern subject to its contractual rights to reserve for ten years
beginning January 1, 1976, for use in the nitrogen and
fertilizer nanufacturing complex of a corporate affiliate,
up to 35,393 Mcf/d plus reserve PVR Gas and Btu adjustment
gas, but not to exceed (1) 11,743,875 Mcf plus reserve PVR
gas and Btu adjustment gas annually, or (2) one-half of
TransOcean's total reserves in the ten year period.
13. TransOcean, an independent oil and gas producer, is an
87 percent owned subsidiary of Vickers Energy Corporation, a
wholly owned subsidiary of Esmark, Inc. Swift Agricultural
Chemicals Corporation is also a corporate subsidiary of
Esmark, Inc. and is a major manufacturer of agricultural
fertilizers which buys substantially all the production
from the Beaumont Nitrogen Complex. The plant was built in
1967 and cannot be converted to alternate fuel. It requires
a maximum of 35,393 Mcf per day or a total of 11,743,875
Mcf per year to operate at full capacity.
INITIAL DECISION
14. Although the Placid group arid the Ashland group
requested authorization to retain 50 percent of their
respective offshore reserves, the Presiding Administrative
Law Judge found that a reservation of up to 35 percent of
their South Marsh Island reserves would be in the public
interest. Recognizing that Trunkline, United, and Southern
needed these supplies of gas for the interstate market
in order to ameloriate their current and projected levels
of curtailment, the Judge framed the issue in the case as
being whether the requirements of public convenience and
necessity permit the certification of such reserves to
supply the high-priority needs of anhydrous ammonia plants.
After thoroughly reviewing the rationale of The chancteleur case,~
Opinion ~s. 727 7/ and 743 8/, the J~ge onncluded that "the South Marsh Island
6/ Public Service Commission of the State of New York v.
Federal Power CommissiOn, 463 F. 2d 824 (D.C. Cir., 1972),
affirming in Chandeleur ~p~line Conpapy, 44 F.P.C. 1747)
(1970), which had reconsidered, pursuant to the remand
in Public Service Commission of the State of New York v.
FPC, 436 F. 2d 904 (D.C. Cir., 1970), and reaffirmed,
Chandeleur Pipeline Conpapy, 42 F .P.C. 20 (1969).
7/ Tennessee Gas Pipeline Company, et al., F.P.C._,
Docket No. CP72-6, April 17, 1975; "Order Denying
Rehearing", June 12, 1975.
8/ Mobil Oil Corporation, F.P.C. , Docket No. C173-402,
et al., September 9, 1975.
PAGENO="0630"
624
Docket No. C175-45, et al. - -
producers should each be permitted to reserve up to 20
percent of their respective interests as the `incentive
allotment alone'." Further recognizing that the Placid
and Ashland groups would use this gas for new plants to
expand the anhydrous ammonia industry, the Judge referred
to the Commission's Findings and Order after Rulemaking in
`Docket No. RM74-l4, issued July 16, 1974. From page 13 of the
mimeo, he cited the following:
If the basic feedstock for an end use is
non-substitutable, as in the case of natural gas
used for the production of nitrogen fertilizer or
for other special applications in the petrochemical
industry, there can be no reference to other fuels,
and the burden of the shortfall must either be
equitably shared on a priority basis by the affected
industry, or a hard and critical choice faust be made
to grant a higher priority to the industry determined
to be most important to the national welfare."
After examining the record establishing the need for the end
product, the Judge concluded that the use of 35 percent of
the reserve gas would be appropriate.
15. In order to continue the operation of the existing
Beaumont Nitrogen Complex, the Judge authorized Transocean
to transport the full 50 percent of its offshores reserves.
Since Mobil has contracted to continue to supply the
plants through 1976, the Judge limited the transportation
authorization to nine years, rather than 10, starting on
January 1, 1977. The Judge distinguished the Placid and
Ashland groups from Transocean solely on the basis
that the latter plant was existing while the other two were
still in the planning or construction stage.
The Tennesee Gas Pipeline Transactions
The East Cameron Block 33 Proposals
16. In Docket No. CP73-339, Tennessee applied for certif i-
cation to construct four-tenths of a mile of sixteen-inch
pipeline. In June 1974, the Commission authorized the
construction of the facilities to enable Tennessee to begin
purchasing the gas from Conoco and Cities Service. The
Commission also certificated the sale and Tennessee began
purchasing the supply in 1974; however, administrative
hearings on the transportation issues were deferred.
PAGENO="0631"
625
Docket No. C175-45, et al. 8 -
17. Conoco and Cities Service have agreed to dedicate to
Tennessee one-half of the recoverable gas reserves from
their respective one-third interests in the East Cameron
Block 33 and Tennessee has agreed to transport the other
half of the gas for the two producers' own use. The term
of the transportation agreement is twenty years. `The
total recoverable reserves were estimated to be 140 Bcf
with an estimated daily deliverability of 100,000 Mcf.
The transportation rate to be charged is the sum of (1) the
then current offshore transportation cost per Mcf adjusted
to reflect the cost of additional facilities required, if
any, and (2) the then current onshore transportation rate
per Mcf. The exact rate to be charged will be based upon
Tennessee's cost at the tune it is issued in a rate schedule
filing.
18. Conoco proposes to use its gas to meet preexisting
commitments for sale of gas in the Lake Charles area,
and Cities Service proposes to use the gas in its own
refinery. Conoco's supply would be delivered to Olin
Corporation (Olin) and Firestone Tire and Rubber Company
(Firestone) for use in their industrial facilities under
contracts which expire in 1984. At the time of hearing,
Conoco was contractually required to sell and deliver
to Olin and Firestone their requirements of natural gas,
not to exceed 100,000 Mcf/d to Olin and 1,700 Mcf/d to
Firestone. These customers have previously obtained their
gas supply from Conoco through its intrastate pipeline
system at Lake Charles, under long term, firm industrial
contracts made in the early 1960's. Corioco submitted
evidence which substantiated its claim that it cannot
continue to meet these contract requirements from
solely intrastate reserves, but that it must use some
of its offshore reserves.
19. In 1972, Conoo~ was delivering approximately 10,000 ~f/d
to Firestone for use in its facilities. Since 1973, the
Firestone contract has been amended whereby its daily
supply has been reduced to 1,700 Mcf/d for process and
safety gas usage in the plant. Firestone has installed the
necessary equipment and storage facilities to use substitute
fuels for all other purposes.
PAGENO="0632"
626
Docket No. C175-45, et al.
-
20. Olin's facility produces four product groups: (1) ammonia
urea and nitrogen-containing products; (2) toluene diamine
(TDA) and toluene diisocyanate (TDI); (3) soda ash; and
(4) Thermolin RF230 and 101. Olin's ammonia plant is one
of the largest in the world. At the tine of hearing,
it was estimated that this plant consumed about two-thirds of
all gas used at the facility. Subsequent to the conclusion
of the hearing, Olin filed a contract amendment dated
July 17, 1975, which provided for the reduction of the plant's
daily demand from 100,000 Mcf/d to 45,000 Mcf/d by July 1,
1977. The amendment permits Conoco to supply alternate
fuels in accordance with the conversion scheduled to be
undertaken by Olin.
21. The transportation of Cities Service's interest in
Block 33 East Cameron reserves is a second effort to obtain
Commission authorization for the transportation of offshore
gas to onshore Louisiana for the Company's use in its
refinery. Based on the present rate of delivery, the
50 percent reservation sought herein would provide 16,250 Mcf/d.
Citing the self-help measures undertaken by Cities Service
to reduce natural gas consumption and the substantial decrease
in gas supply and usage, the Presiding Judge concluded that
the public interest required the authorizatipn of the
proposed transportation by Tennessee of a maximum of 35 percent
of the total production from Cities Service's reserves. Cities
Service's intrastate supply as well as its interstate supply
from onshore sources declined over 67 percent from 1970-74
and is anticipated to continue to decline substantially
after 1975 due to the projected loss of 20,000 Mcf/d of
spot purchases and increase in curtailment by United.
22. Pursuant to Opinion No. 727, none of the gas transported
from Cities Services' reserves can be used as boiler fuel.
The Commission provided that three months subsequent to the
date of the issuance of the opinion, none of natural gas from
any of the sources could be used for that purpose in the
refinery complex. The three months period allowed the
necessary time to convert boilers to alternate fuel, which
has been completed.
PAGENO="0633"
627
Docket No. C175-45, et al. - 10 -
23. The Judge found in the instant proceeding that the condi-
tión in Opinion No. 727 with respect to boiler fuel should
not be incorporated herein except with the qualification that
follows: No part of the transported fuel shall be used for
boiler fuel except in mixture with by-product (or "complex')
gas and consumption of all natural gas in the plant for such
purposes should not exceed an annual average 3% of the energy
requirements of the complex.
24. Offshore Louisiana gas sales made by Cities during 1974
averaged about 373,000 Mcf/d in addition to 31,000 Mcf/d
from onshore Southern Louisiana properties. Opinion No.. 727
authorized the transportation of 5000 Mcf/d. The initial
decision would allow an additional 11,375 totalling approxi-
mately 16,000 Mcf/d from its own offshore reserves, which is
about 4.3% of Cities sales from all its offshore sources.
Tenneco and Shell
25. This series of transactions includes applications filed
by Tennessee to initiate or continue transportation or ex-
change services for Tenneco and Shell. In Docket Nos. CP75-
23 and CP75-120, Tennessee seeks authorization to transport
gas reserved by Tenneco under a 1974 sales agreement with
Tennessee from Vermilion Block 246, Offshore Louisiana in
the Federal Domain. Tennessee is to redeliver the gas to
Creole Gas Pipe Line Corporation (Creole), for resale to
Air Products, a manufacturer, and Tenneco's Chalmette Refinery.
In Docket No. C175-45, Tenneco seeks authority to make,
continue and increase the foregoing sale to Creole for re-
sale to Air Products. Contemporaneously, Tenneco seeks
transportation authorization of its gas to Creole for redelivery
to Air Products. Shell has a similar application filed in
Docket No. C175-684. Shell's application was filed at
the direction of the Commission and is conditional upon the
Commission's finding that its sale to Creole is jurisdictional.
In Docket No. C175-l07, Shell petitioned for a disclaimer
of jurisdiction. Tennessee's application to transport Shell's
gas was filed in Docket No. CP75-ll9.
26. Creole is an intrastate natural gas pipeline system
which extends from Yscloskey to Chalmette. Creole has no
gas supplies of its own and has only access to such at the
Yscloskey plant from Shell and Tenneco. Previously, all
the gas received by Creole has been transported to Yscloskey
PAGENO="0634"
628
Docket No. C175-45, et al. - 11 -
by Tennessee for Shell or Tenneco without any certificate
authorization by the Commission. When it began in 1965,
only gas which originated and was consumed within the state
of Louisiana was transported.
27. In August, 1963, Shell and Creole and American Sugar
Company entered into an arrangement by which Shell's gas
was sold to the latter. The arrangement was structured so that
it was ostensibly a sale to Creole for resale to American
Sugar, with a direct and contemporaneous contract executed
between American Sugar and Shell warranting Shell's reserves.
In 1964, Shell negoiated a similar arrangement with Air
Products. However, after requesting that Tennessee transport
Shell's gas through its existing facilities to the Yscloskey
plant for redelivery to Shell, Tennessee stated it would
be willing to transport that gas, provided half of Air
Products' plant requirements would be furnished by Tenneco.
On August 14, 1964, a letter agreement between Shell and
Tenneco was executed. Creole requested that the sale by the
producers to the industrial customers it served be structured
as a sale to Creole for resale to those customers to avoid
the jurisdiction of the Louisiana Public Service Commission
over Creole 9/ and to help ~nance the new pipeline required
for the sale to Air Products.
28. All of the gas supplied by Shell has originated within
the state of Louisiana, whereas Tenneco's originated, or
is proposed to originate, at various points within the
states of Louisiana and Texas and offshore Louisiana in
the Federal Domain.
A. The Shell Petition for Disclaimer (Docket
No. CI75-l07).
29. The Presiding Judge concluded that Creole's practical
function was purely that of a transporter, ~although there
is a sale by Shell to Creole followed by a sale to Air
Products. He founa that the transaction did not fall within
the Section 1(b) of the Natural Gas Act, a "sale in interstate com-
merce of natural gas for resale for ultimate public consumption
9/ Tr. 1245.
PAGENO="0635"
629
Docket No. C175-45, et al. - 12 -
for domestic, commercial, industrial, or any other use'.
In analyzing the term of art, resale "for ultimate public
consumption", the Judge found that Creole is not a public
service company, as the pipeline does not resell "to the
public" or "for ultimate public consumption" but only to a
private contract customer. The Judge further concluded
that the intrastate transportation of the natural gas via
interstate pipeline (i.e. Tennessee) does not covert the
transaction into an interstate sale. 1(~
30. In view of his finding with regard to Shell's peti-
tion for disclaimer of jurisdiction, the Presiding Judge
dismissed the conditional application filed in Docket
No. C175-684. In conjunction therewith, the Judge also
dismissed Tenneco's application for certification of its
sale to Creole to meet the remaining one-half of the
natural gas requirements of Air Products. The only
material difference between the transactions by Shell
and Tenneco is the source of the gas.
31. None of the parties to the proceeding excepted to the
Judge's finding that the proposed sales were non-jurisdic-
tional, although the Staff had asserted in brief to the
Judge that the transactions were jurisdictional. Our
independent review of the jurisdictional issue leads us
to conclude that the Judge's decision should be sustained.
The substance of the transactions is material, not the
form. Moreover, we find that the public interest
considerations are in no way jeopardized. As certification
of the transportation of these supplies is necessary
under Section 7 of the Natural Gas Act, the Commission is
able to ensure their delivery as authorized.
B. The Tennessee application to transport for
Shell - Docket No. CP75-1l9.
32. Tennessee filed an application seeking authorization
to continue the transportation of 35,000 Mcf per day of
natural gas from four delivery points within the state of
Louisiana for Shell to the Yscloskey plant. Under a Gas
Transportation Agreement dated August 13, 1964, as amended,
Tennessee and Shell agreed to the present volume of 35,000
Mcf per day. The Agreement also contained an option
17 California v. La Vaca Gathering Company, 379 U.S. 366.
PAGENO="0636"
630
Docket No. C175-45, et al. - 13 -
providing for a maximum contract volume of 42,500 Mcf per
day, which Shell elected to exercise, effective about Jan-
uary 1, 1976. Tennessee has requested authority to transport
this additional 7,500 Mcf per day.
33. The gas transported by Tennessee for Shell will ultimately
be consumed by three industrials, Air Products, OKC, or
Amstar, within the state of Louisiana. The record indicates
that actual deliveries have been substantially smaller than
the contract maximum. The rate formula for such transporta-
tion is Tennessee's average transportation rate per Mcf per hundred
miles Facilities already in t~1ace or certificated
for o~her purposes will be used to effectuate this transaction.
The Judge concluded that the transportation rate was just
and reasonable.
34. The Judge limited his inquiry to potential adverse effects
that proposed intrastate transportation might have on Tennessee's
interstate operation of the facilities used. None of the
parties objected to the proposed certification. New York
supported it on the basis that the gas otherwise would not
be available to the interstate market and thus would allow
a larger portion of the interstate pipeline facilities to
lie idle. By utilizing these facilities, the cost of
service to the ratepayers will be reduced.
C. Tennessee's application for authority to transport gas for
Tenneco for consumption by Air Products--Docket No. CP75-23.
The joint application of Tennessee and Tennecd for authority
to exchange and transport gas for Tenneco for consumption
in its Chalmette refinery-- fln~ket~ No. CP75-120.
35. These two applications involve the transportation by
Tennessee for Tenneco of natural gas from several onshore
and offshore delivery points to Creole for delivery
to Air Products' plant, Docket No. CP75-23, and the
Chalmette refinery, Docket No. CP75-l20. Underlying
these applications are two agreements. The original
transportation agreement between Tennessee and Tenneco
Oil, dated September 14, 1964, provided for the
transportation of onshore intrastate gas in a quantity
of 15,000 Mcf per day from Lake. Barre, Louisiana, to
Creole. When the Lake Barre gas reserves began to diminish
in 1966, Tenneco Oil began to deliver gas from the Federal
PAGENO="0637"
631
Docket No. C175-45, et al. - 14 -
Domain. The present applications add two new delivery points,
Vermilion Block 246 and a well in Terrebonne Parish. In its
application, Tenneco proposed to increase the maximum aggregate
daily transportation volumes to Creole for Air Products from
15,000 Mcf to 22,500 Mcf per day.
36. The second agreement incorporates by reference all
the delivery points mentioned in the first agreement and also
provides for delivery of volumes to Chalmette refinery.
It does not specify any volume, but testimony indicates
that Tenneco requests authority to transport up to 24,000
Mcf per day. Chalmette refinery is currently receiving
22,250 Mcf per day from Texaco under a contract which
terminates July 1, 1977. The total average `refinery require-
ments are 33,838 Mcf per day.
~ The transportation rate will be a monthly chargé
calculated by multiplying the total Mcf transported from
each point of receipt by a rate based on the pipeline
mileage involved and Tennessee's average charge per
hundred miles per Mcf applicable to the turnoff points of
receipt.
38. In Docket Nos. CP75-23 and CP75-l20, the overriding
issue is the end use of the natural gas. Air Products,
an industrial consumer needs approximately 22,500 Mcf per day
from Tenneco and an equal amount from Shell. Tenneco Oil
proposes that its Chalmette refinery will use approximately
24,000 Mcf per day. Air Products proposes to use this supply
of natural gas in an existing ammonia plant and a proposed
additional plant, in addition to an existing liquid hydrogen
plant and a second proposed liquid hydrogen plant. The existing
ammonia plant uses a maximum of 17,400 Mcf per day as feedstock
and 8,200 Mcf per day for process fuel. Air Products
had been using 4,800 Mcf per day for boiler fuel; however, the
record establishes that conversion of all boiler fuel use was
projected to be completed in November, 1975. About 85 percent
of the ammonia produced is used for the production of
agricultural fertilizer.
39. Air Products has purchased an idle ammonia plant
with a production capacity of 250 tons of ammonia per day.
The plant would use 5,300 Mcf per day for feedstock and
PAGENO="0638"
632
Docket No. C175-45, et al. - 15 -
3,100 Mcf per day of natural gas for process heat in the
reformer. The plant, built in 1953, is currently located
in Kansas, however, Air Products proposed to move the plant
to Louisiana. The Judge denied authorization, finding that
offshore Federal Domain gas would not be an efficient
use of the facilities or the gas.
40. Air Products' liquid hydrogen plant produces about
32 tons of product per day. It was constructed in 1965
to serve the requirements of the National Aeronautics and
Space AdministratiOn however, upon completion of the
Apollo and Skylab programs, NASA's demand fell to about
20 percent of the output. Today,80 percent of the plant's
capacity is in use.
41. Due to the projected institution of the space shuttle
program, NASA has contracted with Air Products to
provide a supply of liquid hydrogen which is double
the plant's current capacity. Air Products proposes
to build a new plant to fulfill this demand. The existing
plant requires 4,100 Mcf per day of natural gas as
feedstock and 2,300 Mcf per day for process heat in the
reformer. The new plant would require 4,300 Mcf per day for
process fuel. The total requi~ement5 for liquid hydrogen
production from both plants would be approximately 10,000
Mcf per day of natural gas.
42. The record establishes that there are only two other
liquid hydrogen plants in the eastern half of the United
States, which have a total capacity less than half of the
New Orleans plant. Long-distance transportation of liquid
hydrogen by cryogenic truck is not economically feasible.
Air Products alleges that the proposed use of natural gas
in both plants should be certificated due to the defense-
related use to which the liquid hydrogen will be put.
D. Chalmette Refinery
43. Tenneco's Chalmette refinery is its only refinery.
The refinery is designed to operate only on natural gas
and requires about 33,838 Mcf daily, in addition to 27,266 Mcf
per day of by-product gas. It produces liquid petroleum gas,
gasoline, kerosene, diesel and No. 2 oil, No. 6 fuel oil,
metallurgical coke, and a number of petrochemicals. Chalmette
presently uses natural gas as 12.5 percent feedstock, 12.5 percent
PAGENO="0639"
633
Docket No. C175-45, et al. - 16 -
boiler fuel, and 75 percent process fuel. It uses no natural gas,
directly or indirectly, as boiler fuel to generate electricity,
but as a means of generating a supply of steam, which is
critical to the operation of the entire refinery.
44. In its brief to the Presiding Judge, Tenneco asserted
that 70 to 75 per\cent of the steam demand is normally
provided by waste heat from the process; however, in order
to provide the necessary amount of steam without affecting
reliability of the plant's operation, natural gas should be
used as the fuel to supply the supplemental energy necessary.
Tenneco argues that the use of liquid fuels would require
more complex instrumentation and increased maintenance.
~ Although none of the process facilities at Chalmette
were designed to burn liquid fuels, some conversion from
gas burners to carbonation burners permitting the use of
liquid fuels has commenced. Tenneco, however, argues that if
it is not allowed to have a portion of its gas transported for
use at Chalmette but is forced to use exclusively liquid fuel,
there will be a substantial drop in refined product and in
operating efficiency.
46. Chalnette now receives 22,250 Mcf daily from Texaco
under a contract which terminates July 1, 1977. Prior to
1973, it received about 13,800 Mcf. per day from Gulf Oil.
Until the Texaco contract terminates in `77, Tenneco seeks
authority to have transported 12,000 Mcf daily of its own
gas to maintain the complete gas operation, whereas
after 1977, Tenneco requests authorization to transport
24,000 Mcf per day.
47. The Presiding Judge found that the continued use of
13,900 Ncf per day in process units should be permitted
as it results in a net gain of energy equivalent to
31,200 Mcf per day in consumption and product. He also found
that it would be unobjectionable to reduce the risk of burner
failure by leaving the gas burners in place to pick up
the load in an emergency situatioi only. He concluded that the
plant should be converted within the two years, so as to consume
not over 13,900 Mcf/d on the average, plus emergency gas
required in the event of oil burner failure in steam
generators.
PAGENO="0640"
634
Docket No. C175-45, et al. - 17 -
48. The Judge authorized the transportation of natural
gas to meet the average daily requirements of Air
Products, which total 36,300 Mcf, of which 25,600 Mcf
are for the existing ammonia plant, 6,400 Mcf for the
existing liquid hydrogen plant, and 4,300 Mcf for the new
liquid hydrogen plant. In order to satisfy Shell's
obligation to Air Products, Tennessee was authorized to
transport intrastate gas on a segment of its interstate
pipeline. Specifically, Tennessee was authorized to
transport for Shell up to 16,000 Mcf/d until
December 1, 1977 or the date of completion of Air Pro-
ducts' new liquid hydrogen plant, and thereafter up to 18,150
Mcf/d.
49. With regard to the Chalmette refinery, the Judge authorized
the transportation of up to 12,000 Mcf per day until the termina-
tion of Tenneco's current contract with Texaco, thereafter
be authorized. He also provided that the volumes specified were
average volumes for a 60-day period.
50. Although recognizing that delivery from South Timbalier
Blocks 22 and 27 and West Cameron Block 201 commenced in 1966
to Air Products without certification, he found no evidence
of willful violation of the Natural Gas Act of any of the
Commission's Regulations. He further found that had appli-
cations been filed with the Commission, "they would un-
doubtedly have been approved on the theory of Chandeleur. "]~/
He concluded that Tenneco's offshore deliveries for sale to
Air Products' plants and use in its own refinery represented
less than 4/10 of one percent of its total deliverability.
He specifically found that the reservation of 25 percent
of Vermilion Block 246 was in the public interest, finding
the total percentage of offshore gas reserved for Tenneco's
account to be less than 9/10 of one percent of Tenneco's
offshore deliveries.
E. Docket iso. C175-105.
51. Tenneco applied for a certificate authorizing the sale
to Tennessee of 75 percent of its interest in Vermilion
Block 246, Offshore Louisiana. On February 6, 1975, the
Commission issued a temporary certificate authorizing
commencement of the sale. The Judge granted a permanent
certificate for the foregoing sale, subject to the ac-
ceptance by Tennessee for the certificates granted in Docket
No. CP75-23 and CP75-l20.
117~Mimeo, page 86.
PAGENO="0641"
635
- 19 -
Docket No. C175-45, et al
THE RECORD EVIDENCE
52. The record in this case establishes that present nitrogen
fertilizer production capacity must be maintained and utilized.
The public interest in maintenance of an adequate supply of
nitrogen fertilizers has been repeatedly recognized not only
by Congress 12/ but also by this Commission. 13/ The record
reflects that the use of nitrogen fertilizers results in higher
yields and lower unit costs of agricultural products and is
"essential to this country's food and plant based fiber pro-
duction."
53. As evidenced by the Commission's repeated grants of extra-
ordinary relief from curtailment flow to allow continued pro-
duction of fertilizer, the use of gas for fertilizer production
is superior to the vast majority of industrial uses. The
Applicants assert that the denial of the reservation would
divert gas from fertilizer production and allocate it to in-
ferior induetrial uses.
~L Ammonia production in the United States is of critical
importance to this nation's welfare. Dr. John Douglas of the
Tennessee Valley Authority testified that the supply of fer-
tilizer by 1980 would be very tight "unless every single plant
that has been announced obtains gas somewhere, and unless we
probably have even more plants than have been announced."
(Tr. ). He predicted that the price of nitrogen would
rise as the supply would decrease, thus raising the farmer's
cost and, in the long run, the cost of food to the consumers.
The public interest in producing more abundant supplies of
nitrogen fertilizer is patently obvious. Dr. Douglas testified
that this nation must increase its present productive capacity
of 17.5 million tons of ammonia to between 24 and 26 million
tons by 1980 if requirements of nitrogen for fertilizer use
are to be met (Tr. 1456).
12/ S. Res. 289, 93d. Cong., 2d Sess., 120 Cong. Rec. 5. 2392
(Daily ed. Fed. 27, 1974); S. Res. 391, 93d. Cong., 2d Sess.
~/ United Gas Pipe Line Co. (Mississipp~L Chemical Corp.),
Docket No. RP74-37-l (1975); Southern Natural Gas Co.
(Kaiser Aluminum and Chemical Corp.), Docket Nos. RP74-6
and RP74-17l-3 (1974); Southern Natural Gas Co., Opinion
No. 696, Docket No. CP72-52 (1974); Texas Eastern Trans
mission Corp. (Carnegie Natural Gas Co.), Opinion No. 716,
Docket No. RP74-39-8 (1975); Florida Gas Transmission Co.
(Basic Magnesia, Inc., et al.), Docket No. RP74-5O-l,
otal. (1974).
87-292 0 - 77 - 41
PAGENO="0642"
636
Docket No. C175-45, et al.
-19~-
55. TVA summaries, as of April 15, 1975, indicate that the
current announced capacity for domestic ammonia production will
yield an apparent capacity of 25.5 million tons per year by
1980 (Tr. 1458). No provision, howe.ver, has been made for
normal closures of obsolete plants. By 1980 some 25 to 30
ammonia plants in the United States will be over 20 years old.
These plants have a listed annual capacity of between two and
three million tons of anhydrous ammonia. It is Dr. Douglas's
opinion that we can expect at least one-half of these plants
to be closed by 1980. That figures in the apparent projected
capacity for 1980 by one to 1.5 million tons per year.
56. Furthermore, Dr. Douglas's estimates of projected capacity
are based solely on announce4 intentions. He qualified his
projection by recognizing that not all of the announced plants
may be built due to potential shortages of necessary natural
gas for fuel and feedstocks..
57. Mr. Edwin M. Wheeler, President of the Fertilizer Insti-
tute, testified that a shortfall in excess of 1.1 million tons
*of nitrogen will occur in 1980. The underlying basis for
these projections is the steadily increasing demand for nitrogen
fertilizer, due to the continuing effort by the American farmer
to increase the yield. The demand for nitrogen fertilizer has
risen steadily as modern agricultural techniques and the use of
high-nitrogen demanding hybrid seeds have been implemented.
58. The role of American ammonia productive capacity is one
of critical importance, and potentially we could be as vulnerable to
foreign pressures regarding the supply of ammonia as we have been
to the OPEC countries with respect to oil. Th~ current difference
in price between imported ammonia at $350 per ton and domestic
ammonia at $180 to $210 per ton could grow proporticnately in
relation to the degree of.a shortage in the United States.
59. This Commission is aware that during the past 12-month
period, there has been a surplus of available fertilizer on
the market. In testimony submitted by the Applicants, the
expert witnesses were cognizant of the possibility cf such
short-term occurrences; however, their estimates we~:e based on
long-term projections.
PAGENO="0643"
637
Docket No. C175-45, et al.
- 20 -
60. On January 9, 1976, Staff moved for a reopening of these
proceedings to develop further evidence on the current fer-
tilizer and ammonia supply situation. On March 8, 1976, the
Commission deferred consideration of the Staff motion pending
its review of these proceedings, The bases of Staff's motion
were newspaper articles and citations to a study done several
years ago. The Staff attempted to incorporate this same
evidence in its initial brief to the Presiding Administrative
Law Judge. On August 22, 1975, the Judge found it necessary
to strike these portions of the Staff's initial brief in
response to protests that it contained references to published
statements outside of the record, which raised issues con-
troversial in nature, represented unqualified opinion and were
unexamined hearsay evidence without probative value. Staff
included the same material in its Brief on Exceptions. In their
briefs to the Commission, all parties objected to Staff's actions,
arguing that such behavior was contrary to the administrative
process.
61. We are aware that the Commission Staff made no
attempt to sponsor any evidence in this proceeding
~nd we concur in the parties' position that the referenced
material has no place in our consideration. Section 1.29(c)
of the Commission's Rules of Practice and Procedure clearly
provides that a party's argument on brief should be based upon
the evidence of the record. Fundamental fairness requires
that the Commission base its decision on the record evidence
upon which opposing parties had an opportunity to testify and
be cross-examined.
62. The Associated Gas Distributors (AGD), the Public Service
Commission of the State of New York (New York) and Staff
oppose the Commission's policy of allowing the producers to
reserve a portion of their reserves for their own use or dis-
position. New York characterizes this initial decision as
constituting a major expansion of the doctrines established
by the Commission in Opinion Nos. 727 and 743, in that the
Judge certificated reserves in excess of the 20 percent level
established in Opinion No. 727. New York argues that there
is no evidence to support any reservation for the producers'
use; however, assuming the validity of Opinion No. 727, the
reservation should be limited to the 20 percent l~~ei pre-
viously established.
PAGENO="0644"
638
Docket Nos. C175-45, et al. - 21 -
Process and Feedstock Gas
63. While the parties and AU applied the so-called "Chande-
leur incentive" and the need therefor to the factual settings
of each of the instant certificate applications, we are not
satisfied that these applications can be determined solely
by the holding of Chandeleur.
64. The Natural Gas Act,Sec. 7(c), provides in pertinent
part that:
"No natural gas company---shall engage in the
transportation or sale of natural gas, subject
to the jurisdiction of the Commission,---unless
* there is in force with respect to. such natural
gas company a certificate of public convenience
and necessity issued by the Commission authorizing
such acts or operations---."
The term public convenience and necessity has been defined to
include a broad public interest test. In a similar statute
the Supreme Court has held that:
"The Commission is the guardian of the public in-
terest in determining whether certificates of con-
venience and necessity shall be granted. For the
performance of that function the Commission has been
entrusted with a wide range of discretionary authority.
Interstate Commerce Commission v. Parker, 326 U.S. 60.
Its function is not only to appraise the facts
and to draw inferences from them but also to
bring to bear upon the problem an expert judg-
ment and to determine from its analysis of the
total situation on which side of the contro-
versy the public interest.lies." See Interstate
Commerce Commission v. Railway Labor Executives
Assn. 315 U.S. 373~~~ 376-377.
65. While the Commission has been entrusted with a wide
range of discretionary authority, it is manifest that such
authority is not unlimited and cannot be exercised i.i an
arbitrary or capricious manner. In Transco X-20 (FPC V.
Transco, et al., 365 U.S. 1) the Commission exercised its
discretion in denying a certificate for the transportation
of gas to be used as boiler fuel by Con Ed in New York. There
the Commission found that (1) boiler fuel use of the wasting
asset, natural gas, is inferior to other uses, (2) it is not
in the public interest to pre-enpt pipeline capacity for such
use and, (3) the direct purchase of gas for boiler fuel would
exert an upward pressure on the field price structure. The
PAGENO="0645"
639
Dockets Nos. C175-45, et al. - 22 -
Supremé Court upheld the Commission in all three respects, it
appearing however that the principal ground was `whether the
Commission, through its certification power, may prevent waste
of gas committed to its jurisdiction." F.P.C. v. Transco,
et al., 365 U.S. 1, 8).
66. The Chandeleur application was met by opposition that
the use of natural gas in its refinery was inferior to uses
which would eventuate from the sale of such gas to interstate
pipelines. On remand from the U.S. Court of Appeals for the
District of Columbia Circuit, the Commission found a substan-
tial portion of the end-use of such gas to be inferior but
nonetheless reaffirmed its earlier grant of the requested
certificate on the grounds of the substantial added expense
of utilizing another fuel and the fact that increased ref in-
ery capacity would create an added incentive for further
exploration and development in the area. 44 FPC 1747, 1753-60.
67. In the instant proceeding neither Transco X-20, nor
Chandeleur is on point (with ~the exception of refinery gas)
since the end-use to which the natural gas is to be put is
for either process or feedstock purposes---both superior uses
for which no available alternative, other than propane, exists.
With respect to these proposed sales for process and feedstock
purposes the issue before this Commission is whether natural
gas from the offshore Federal domain should be denied to
new direct purchasers for intended superior uses and made
available to the public only through sales by interstate
pipelines. The resolution of this issue must be predicated
upon the overall public interest since there is no other
statutory basis upon which such a determination can be
sustained.
68. The AU found that the proposed uses of this gas for
the manufacture of chemicals, ammonia, fertilizer and
liquid hydrogen are in the public interest, and indeed the
record supports no other conclusion. We must accept these
findings as a starting point and determine whether some other
aspect of the public interest demands that these applications
be denied. The only such arguments advanced are essentially
that (1) there is ample natural gas available in the intra-
state market to supply these needs and, (2) the public in-
terest requires that natural gas from the offshore Federal
domain should be dedicated only for uses that cannot be
satisfied by the intrastate market.
69. While we are aware of statements which indicate a pre-
sent surplus of natural gas available in the intrastate market
and the fact that the intrastate market has fared considerably
better in the acquisition of new gas supplies in recent years,
the record does not support a finding that there now exists,
PAGENO="0646"
640
Docket Nos. C175-45, et al. - 23 -
and that there will continue to exist adequate supplies availa-
ble in the intrastate market to satisfy these needs. Accord-
ingly, we need not now face the guestion of
whether we should seek to impose new, essential industrial uses
of natural gas upon the intrastate market.
70. We are then left with the determination:
whether the public interest requires that this gas be pur-
chased by interstate pipelines for resale to ultimate con-
sumers, other interstate pipelines and local distribution
systems. We are, of course, aware of the constantly worsening
gas supply situation and the ever growing curtailments on in-
terstate pipeline systems. We are also aware that some of the
present gas utilization in the interstate market is
for inferior uses. We are also mindful that in many portions of
this Nation new natural gas consumers are being added daily,
and further that these consumers could be served equally well
with another more abundant fuel.
The Supreme Court in Transco X-20 stated,
"One apparent method of preventing waste of
gas is to limit the uses to which it may be
put, uses for which another more abundant
fuel nay serve equally well." 365 U.S. 1, 8.
It is, of course, beyond our authority to prevent the
attachment of new consumers. We however, note that these
situations exist when deciding whether or not the public
interest requires that natural gas from the offshore Federal
domain be reserved for purchase by interstate pipelines.
71. We recognize that many sound reasons may be advanced
for protecting the gas supply to existing residential and
small cornmerical consumers even though such uses nay be
wasteful. We also recognize that continued deterioration
of natural gas supplies may some day dictate that offshore
Federal domain supplies be reserved for sale to interstate
pipelines for resale. However, the record before us coupled
with our knowledge of curtailment levels, and dwindling sup-
ply trends is not sufficient to require now the denial of
this gas for direct purchase or utilization for process and
feeds tock purposes.
72. HTowever, neither does the public interest require the
reservation of any arbitrary percentage of the gas supplies
for such purposes. We shall therefore require each producer
PAGENO="0647"
641
Docket Nos. C175-45, et al. - 24 -
and pipeline to amend the appropriate applications so as to
provide the specific details with respect to process and feed-
stock uses, including the volumes of gas to be sold and
transported for such purposes. Such amendments should be
filed with this Commission within thirty (30) days of the
issuance of this Opinion and Order.
Refinery Gas
73. Natural gas to be used by refineries cannot be classified
as superior use in its entirety, nor has any attempt been made
to justify its use on such ground. Clearly Chandeleur is ap-
posite under the circumstances. The AU in applying Chandeleur
found that the incentive is still a valuable tool for eliciting
additional gas supplies. The AU's decision was issued several
months prior to the issuance of Opinion Nos. 770 and 770-A
establishing new National producer rates, and was premised
upon Opinion Nos. 727 and 743 which would preclude the use
of any of this gas for boiler fuel. At the rates estab-
lished in Opinion No. 770-A, utilizing a methodology designed
to look forward to anticipated costs rather than backward at
experienced costs, we find and herein hold that the Chandeleur
incentive is no longer necessary to encourage the further
development of natural gas reserves. As indicated above,
we use the term "Chandeleur incentive' as that device by
which inferior uses of natural gas from the off shore Federal
domain by a producer is permitted as an incentive to
further exploration and development. As far as superior
uses of natural gas are concerned, we make no distinction
between gas used in a refinery as opoosed to any industrial
use. We shall therefore permit the producers and pipelines
to amend their approriate applications to give us the details
including volumes of gas to be utilized and transported
for superior uses process and feedstock consistent herewith
within thirty (30) days from the issuance hereof.
Uti~i~nt~o.i ~. I.itrastate Gas Supplies
74. The foregoing discussions of process and feedstock gas
and refinery ~as are not intended to -indicate a willingness
on the part of this Commission to permit the use of natural
gas from the offshore Federal Domain in installations where
natural gas from intrastate sources is being, or will be
used for inferior purposes (other than process or feedstock
uses). Any certificates issued in these dockets permitting the
transportation of such gas will be conditioned so as to
prohibit the use of natural gas from any sources for non-
essential lower priority purposes so long as natural gas from
the offshore Federal Domain is being delivered to and/or used
in that facility. Should the irnmediatecessatiOn of the use
of intrastate natural gas for such non-essential, inferior
purposes be impracticable, t~ie Commission will consider a
program for the orderly phasing out of such use. Those
PAGENO="0648"
642
Docket Nos. C175-45, et al. - 25 -
desiring to phase out such use should present specific
plans therefor with the filing of the amended applications
provided for herein.
Curtailment Protection
75. In Chandeleur, the certificate of public convenience
and necessity was conditioned explicitly to provide for
emergency deliveries to the transporting pipeline, United
Gas Pipeline Company, from the reserved volumes. Chandeleur
was required to make up to 88,000 Mcf per day available to
United when United had fully curtailed its industrial
deliveries but still require&. additional volumes".., to
meet its customers' requirements for essential purposes,
national defense requirements and domestic use and
storage 44 FPC -1765. We find that the public interest
requires a similar condition in this case. Although we
have limited severely the end-uses for which the subject
volumes may be reserved, there has been a corresponding
deterioration in the supply posture and curtailment situation
of the transporting pipelines here.
76. Therefore, whenever the Commission determines that
Trunkline or Southern is curtailing high-priority industrial
end-uses to the plant protection level and is unable to
supply all essential human-needs requirementsBi then the
reserved volumes shall be made available to Trunkline and/or
Southern to the extent necessary to serve those essential
human-needs requirements and subject to payback if later
ordered. Finally, we note that it may be necessary to modify
this condition to accomplish its intended purpose, if the
Commission's current curtailment priorities are modified
substantially.
14/ For the purposes of this opinion, "essential human-
needs requirements" shall be defined as: (1) use of
natural gas in a residence; (2) use of natural gas in
a commercial establishment in amounts less than 50
Mcf per peak day; plus (3) any other use of natural gas
where the termination of service would endanger life,
health or the maintenance of physical property. See
Emergency Natural Gas Act of 1977, Pub. L. No. 95-2,
Section 2(1) (Feb. 2, 1977).
PAGENO="0649"
643
Docket Nos. C175-45, et al. - 26 -
Tenneco Chemicals
77~ This is a joint application filed, in Docket No. CP75-258,
by Tenneco Chemicals, Inc. (TCI) and Tennessee, whereby Tennessee
would be allowed to purchase from TCI one-third of the supply
which TCI has purchased in Louisiana and Texas for its petro-
phemical plant at Pasadena, Texas. As part of its transpor-
tation arrangement, TCI will release to Tennessee at least one-
third of the onshore volumes TCI has contracted to purchase and
will permit Tennessee to borrow 30 percent of the remaining two-
thirds during the winter for return during the summer. While
TCI will pay the producers onshore prices of 90~ and $1.25 per
Mcf, the portion of the gas which TCI releases to Tennessee will
be at the Commission's approved rate. At the time of filing,
TCI anticipated absorbing the difference between the rate it
would pay the producers and the Cornmission's approved rate for
the gas released to Tennessee.
78. The Commission issued a temporary certificate on July 3,
1975, which was subsequently modified August 1, 1975, by the
deletion of a condition requiring the producers to file for and
obtain producer certificates under Section 7(c) of the Act for
their sales to TCI. On March 3, 1976, Tennessee filed a notion
to amend the temporary certificate so as to authorize the
addition of two new gas supply sources, thereby increasing the
presently authorized volume by 3,000 Mcf per day. Although it
was initially estimated that TCI would cause to be delivered to
Tennessee for transportation approximately 14,500 Mcf per day,
cancellations have reduced the total volume to approximately
4,000 Mcf per day. The aggregate amount to be certificated is
now estimated to be 7,000 Mcf per day.
79. All parties to the proceeding supported the application;
however, the Judge held that he could not issue a certificate
as requested. Although Tennessee has characterized this pro-
posal as a mere "transportation arrangement" and "release,
TCI resells one-third of the gas purchased at nonjurisdictional
is! The subject volumes are to be used as feedstock (55 percent),
- for process uses (35 percent), and as boiler fuel
(10 percent).
PAGENO="0650"
644
r)ocket Nos. C175-45, et al. - 27 -
prices to Tennessee, which in turn will sell it for ultimate
public consumption outside~of the states of origination. There-
fore, citing Deep South Oil Co. v. F.P.C., 247 F.2d 882 (5th
Cir. 1957), he concluded that the producer sales of the release
gas to be resold in interstate commerce are subject to our
jurisdiction, and that approval of Tennessee's application in
this docket nust be conditioned upon filing of the appropriate
producer. applications that are required by Section 7(c) and
cannot be waived. (Opinion No. 735, Marathon Oil Company, et al.
Docket Nos. C174-537, etal., issued June 24, 1975). --
80. Judge Southworth also incorporated a Staff recommendation that
the parties restructure this proposal to mitigate anticipated
objections by the producers. He suggested that the release
portion of this gas could be sold directly to Tennessee at the
applicable ceiling rate and under our jurisdiction so that
remainder, presumably to be sold at a higher rate reflecting
the reduced pricing of the release gas, would be subject only
to a transportation certificate within the guidelines of Order
Nos. 533 and 533-A. 16/
81. The transportation certificate was further conditioned to
require that these volumes shall not be used, "except by dis-
placement", for boiler fuel which represents 10 percent of the
plant's end-use requirements. While recognizing that TCI has
the ability to fuel its steam boilers with oil when necessary,
the Judge declined under these circumstances to attäch any
conditions restricting the use of intrastate qas from other
sources as boiler fuel.
82. Tennessee has excepted to the jurisdictional condition.
Staff continues to press for complete conversion of boilers
within three years. Tennessee reiterates its view that this
case concerns simply a transporation agreement that provides
in part for the release of certain volumes. It seeks to
distinguish the Deep South decision, ~ on these facts
and suggests that interstate consumers will not be harmed by
a regulatory gap, since the transportation agreement to be
certificated provides for "release" at a just and reasonable
rate below the actual intrastate sales price. Alternately,
if the producer sales are jurisdictional, then Tennessee re-
quests waiver of the filing requirements of Section 7(c) in
these "special circumstances".
16/ Docket No. RM75-25, Policy with Respect to certification
of Pipe Line Transportation Agreements, issued August 28,
1975, and November 10, 1975.
PAGENO="0651"
645
Docket Nos. C175-45, ~ ~. - 28 -
83. We affirm the initial decision in toto on these points.
Neither the semantic characterization of this proposal as a
transportation release nor the reduction in the price paid by
Tennessee for the release gas affects the basic jurisdictional
conclusion. Although their sales contracts are with TCI, these
producers are selling into interstate commerce gas which will
be transported without interruption beyond the states of
origination for resale and ultimate consumption. Even if it is
that all filing requirements could be waived, we decline
to do so, finding that the particular circumstances to which
- Tennessee alludes will not justify an unprecendented waiver
that would be inconsistent with oui~ fundamental responsibilities. 1_I
Our jurisdiction over these producers necessarily will extend
well beyond a limitation of the original sales price to a just
and reasonable rate. jp~/ However, we will consider favorably,
if possible, any proposal to restructure this arrangement to
reduce the burdens imposed upon the producers.
84. Finally, we hold that the Presiding Judge correctly
- conditioned the certificate to proscribe the transportation of
the subject gas for boiler fuel use, except to the extent that
these volumes displace intrastate gas from other sources.
Tennessee and TCI have consented to this limitation. Staff
would further require the conversion of all boilers at the
Pasedena plant within three years, thereby limiting TCI's
ability to use any additional volumes acquired and transported
within the intrastate market. Staff did not support its cryptic
suggestion or explain why an absolute affirmative restriction
on TCI's operations is needed. The transportation condition
in the initial decision is reasonable, appropriate on these
facts, and consistent with past practice, Texas Eastern
Transmission Corporation (North Alabama Gas District), Docket
No. RP74-39-8, Order Modifying Order Granting Extraordinary
Relief and Denying Applications for Rehearing, issued May 1,
1975, mimeo at 7-8.
17/ Opinion No. 742-A, issued July 27, 1976, Docket No. R-393,
Small Producer Regulation.
18/ Order No. 539-B, issued July 30, 1976, Docket No. PN76-8,
Policy With Respect to Enforcement of Deliverability and
Rendition of Natural Gas Service Under Certificated
Arrangements.
PAGENO="0652"
646
Docket Nos. C175-45, et al. - 29 -
The Commission finds:
(1) Applicants Placid Oil Company, Hunt Petroleum
Corporation, Hunt Industries, Hunt Oil Company, Kewanee
Oil Company, Highland Resources, Inc., Ashland Oil, Inc.,
and Transocean Oil, Inc., are engaged in the sale of natural
gas in interstate commerce for resale for ultimate public
consumption, subject to the, jurisdiction of the Commission,
and are or will be natural-gas companies within the meaning
of the Natural Gas Act. -
(2) The transportation and/or exchange of natural
gas in interstate commerce by applicants Trunkline Gas
Company, Southern Natural Gas Company, United Gas Pipe
Line Company and Florida Gas Transmission Company, and
the construction and operation of any facilities
necessary therefor, as described hereinabove and in
their respective applications, and as hereinafter'
authorized, are subject to the jurisdiction of the
Commission; and the said applicants are natural-gas
companies within the meaning of the Act.
(3) Each of the above applicants is able and willing
properly to do the acts and to perform the services which
it is hereinafter authorized to perform and to conform
to the provisions of the Act and the requirements, rules
and regulations of the Commission thereunder; and the
proposed services, sales, operations and construction,
to the extent authorized by and subject to the conditions
set forth in `the certificates hereinafter granted,,
are or will be required by the present or future public
convenience and necessity.
- (4) The public interest requires the approval of
the Gas Purchase Contracts between Trunkline Gas Company
a]Jd, respectively, Hamilton Brothers Oil Company and
Hamilton Brothers Exploration Company, upon the terms and
conditions hereinafter ordered.
(5) Applicant Tennessee Gas Pipeline Company,
a Division of Tenneco, Inc., owns and operates facilities
for the transportation of' natural gas in interstate com-
merce and the sale in interstate commerce of natural gas
for resale for ultimate public consumption, and is a
natural-gas company within the meaning of the Act and
subject to the jurisdiction of the Commission.
PAGENO="0653"
647
Docket Nos. C175-45, et al. - 30 -
(6) The transportation and/or exchange of natural
gas by Tennessee for Continental Oil Company
Cities Service Company, Tenneco Oil Company, Shell Oil *
Company and Tenneco Chemicals, Inc., is or will be
subject to the jurisdiction of the Commission.
(7) The sale of natural gas by Shell Oil Company
to Creole Gas Pipeline Corporation for resale solely
to Air Products and Chemicals, Inc., is not a sale
in interstate commerce of natural gas for resale for
ultimate public consumption within the meaning of the
Act and therefore is not subject to the Commission's
jurisdiction.
(8) The sale of natural gas by Tenneco Oil Company
to Creole Gas Pipeline Corporation for resale solely to
Air Products and Chemicals, Inc., is not a sale in
interstate commerce of natural gas for resale for
ultimate public consumption within the meaning of the
Act and therefore is not subject to the Commission's
jurisdiction.
(9) The public inte~ist requires that the temporary
certificate granted to Tenneco Oil Comany in Docket
No. C175-lOS, under date of February 6, 1975, be made
permanent, subject to the conditions set forth in said
temporary certificate and in the order herein.
(10) The joint applicant Tenneco Chemicals, Inc.
("TCI") will be upon engaging in the transaction with
Tennessee and in its joint application with Tennessee,
engagčd in hd~ai& `i~ Tinterstate commerce -of natural
gas for resale for ultimate public consumption within
the meaning of the Act, and will be a natural-gas company
subject to the Commission's jurisdiction.
(11) The said applicants Tennessee and Tenneco
Chemicals, Inc., are able and willing properly to do the
acts and to perform the services which they are
hereinafter authorized to perform and to conform to
the provisions of the Act and the requirements, rules,
and regulations of the Commission thereunder; and the
proposed sales and services, to the extent authorized
by and subject to the conditions set forth in the certi-
ficates hereinafter granted, are or will be required by
the present and future necessity.
PAGENO="0654"
648
Docket No. C175-45, et al. - 31 -
The Commission orders:
(A) Within 15 days from the issuance of this Opinion
and Order each affected producer and pipeline shall file with
this Commission amendments to the respective applications
filed in these consolidated proceedings to conform such
applications to the provisions set forth herein.
(B) Temporary certificates for the sale of natural gas
and the construction and operation of any facilities subject
to the jurisdiction of the Commission necessary for such
sales by various producers to the interstate pipeline con-
tract purchasers are hereby issued in accordance with the
application in each docket as follows:
(i) Placid Oil Company (Docket No. C175-59),
Hunt Petroleum Corporation (Docket No. C175-66),
Hunt Industries (Docket No. C175-67), Ashland Oil,
Inc., (Docket No. C175-l22), Highland Resources,
Inc. (Docket No. C175-733), and Kewanee Oil Company
(Docket No. C175-69) authorizing the sale of natural
gas to Trunkline Gas Company; and to Hunt Oil Company
(Docket No. C175-68) authorizing the sale of natural
gas to Southern Natural Gas Company, all from Blocks
268, 269 and 281, South Marsh Island Area, offshore
Louisiana in the Federal Domain; and
(ii) TransOcean Oil, Inc. (Docket No. C175-l38)
authorizing the sale of natural gas to Southern
Natural Gas Company and its assignee, United Gas
Pipe Line Company from Blocks 268, 269 and 281,
South Marsh Island Area, offshore Louisiana in the
Federal Domain.
Each temporary certificate is issued subject to
Commissions Opinion Nos. 699 as amended or 770 as amended,
and any further orders issued thereunder and to the
following expressed conditimps'
(1) The initial rates shall be the lesser of
the contract rate or the national rate
applicable to the commencement date of
each well involved provided in Opinion
No. 770, as amended, provided, however,
that prior to the commencement of service,
Applicant shall file in compliance with
PAGENO="0655"
649
Docket Nos. C175-45, et al. 32 -
the order issued November 18, 1976, in
American Public Gas Association, et al,. v.
F.P.C. No. 76-2000 (CA DC) an express
refund undertaking for all amounts
collected in excess of the just and
reasonable rates determined upon final
judicial review of Opinion No. 770,
as amended.
(2) If Applicant chooses not to submit the
express refund undertaking required by condition
(1) above, Applicant may commence service
at the lesser of the initial rate provided
for in the contract or the national rate
provided for in Opinion No. 699-H (53.0 cents
per Mcf at 14.73 psia subject to upward and
downward Btu adjustment from a base of
1,000 Btu and a gathering allowance of
0.5 cent per Mcf)
(3) There shall be filed, within 30 days from
the date of initial delivery, 3 copies of a
revised billing statement which clearly
sets forth the components of the initial
rate to be charged in accordance with (1)
or (2) above, namely, base rate, Btu
adjustment and gathering allowance, together
with a statement demonstrating the
applicability of such rates.
(4) Section 154.93 of the Commission's Regulations
is hereby waived to permit filing of the con-
tracts. The granting of such waiver, how-
ever, does not constitute approval of any
impermissible pricing provision and any rate
increase based on said pricing provision
to the extent it is inconsistent with
the provisions of Section 154.93 of the
Commission's Regulations is subject to re-
jection.
All persons making jurisdictional sales pursuant to
the authority granted by each certificate are hereby given
notice that the contractual obligations between the buyer
PAGENO="0656"
650
Docket Nos. C175-45, et al. - 33
and the seller are incorporated into the certificate obliga-
tions, and that the certificate is further conditioned to
require that the seller shall observe the standard of a pru-
dent operator to develop and maintain deliverability from
reserves dedicated hereunder.
(C) All provisions of the several advance payment
agreements (sometimes called Gas Exploration Development
Incentive Agreements) between the Applicants and the
purchasers set forth in Ordering Paragraph B, executed
on or about the date of several initial gas purchase
and sale contracts between such parties, relating
to the obligations of the Applicants to enter into
additional gas purchase agreements as long as any
reserves remain in the aforesaid blocks or any of
them,shall remain in effect without change exceot as
hereinafter may be expressly approved by the
Commission;
(i) Each such superseding purchase and sale
contract must be lawful at the effective date
thereof, an in the event of any dispute
as to such lawfulness, there shall be no
interruption of service pending upon the
termination thereof, and the approval of
any necessary changes therein, by the Commission;
(ii) Any reservation authorization contained
in any said gas purchase and sale contracts
permitting the respective Applicant to take
for Applicant's own use or disposition up
to 50t of the gas agreed to be committed
under such gas purchase and sale contract
shall be chanqed from 50% to 0% whenever the said
reservation figure of 50% appears therein,
the provisions with resoect to such reserva-
tions and authorization appearing in the
aforesaid advanced payment agreements shall
likewise be modified by changing the figure
of 50% to 0% whenever it appears, and all
said contracts and agreements shall be further
modified as may be necessary or appropriate to
effect such change in percentage;
(iii) Within 15 days after the issuance of
this Opinion,Applicants shall notify the Com-
mission, or cause the Commission to be notified,
of the precise volume of gas to be sold and/or
transported for process or feedstock uses.
Applicants shall show the volumes sold and
delivered to Trunkline, Southern, and United,
and each of them, during the same period.
PAGENO="0657"
651
Docket Nos. C175-45, et al. - 34 -
(iiii) Any revenues collected as a result of
the advance being included in rate base shall
be refunded by the pipeline company to its
customers, together with interest at the rate
of nine percent per annun, from the date of
payment until refunded, within 12 months after
the removal of the advance from this account
unless otherwise directed by the Commission.
(D) The~gas purchase and sales contracts between
Trunkline Gas Company and Hamilton Brothers Oil Company
and Hamilton Brothers Exploration Company, respectively,
(which latter companies appeared as parties in these pro-
ceedings as applicants for permission to have their contracts
containing limitation on reserve dedication approved, by the
Commission, pursuant to the Commission's order of April 14,
1975 herein) are disapproved without prejudice to their
resubmission within 15 days conformed to the provisions of
this Opinion and Order.
(E) Temporary certificates of public convenience and
necessity are issued to each of the applicants Trunkline Gas
Company (Docket Nos. CP75-19 and CP75-149), Southern Natural
Gas Company (Docket Nos. CP75-163 and CP75-316), Trunkline
Gas Company (Docket Nos. CP75-l49 and CP75-330), Southern
Natural Gas Company (Docket No. CP75-l51 and CP75-316), and
joint applicants Southern Natural Gas Company, United Gas
Pipe Line Company, and Florida Gas Transmission Company
(Docket No. CP75-153), to construct and operate the facilities
described hereinabove and in the applications, as amended,
in said dockets pending the submission and approval of
amended applications consistent with the provisions hereof.
(F.) A certificate of public convenience and necessity
is issued to applicant Tennessee Gas Pipeline Company, a
Division of Tenneco Inc., to construct and operate the
facilities described in the application in Docket No. CP73-
339, as amended, and to render transportation service to
Continental Oil Company (Conoco) and Cities Service Oil
Company pursuant to the respective Gas Transportation
Agreements with said companies as described hereinabove
and in said application; provided, however, with respect
to the gas transported for Conoco, which shall be for
Conoco's use in fulfilling Conoco's contract obligations
(amended as hereinabove described) to Firestone Tire Rubber
Company and Olin Corporation at their facilities at or
near Lake Charles, Louisiana, that such gas (together with
any other gas which Conoco or any affiliate thereof may
hereinafter be authorized to transport or have transported
for it from the federal domain to Firestone or Olin) shall
not exceed in aggregate volume the process use and feed-
stock requirements of the Firestone and Olin plants as re-
duced or to be reduced to amounts not exceeding the following:
(1) Firestone, 1700 Mcf/d and (2) Olin, 65,000 Mcf/d; and
to 45,000 Mcf/d effective July 1, 1977. The transportation
for Cities Service Oil Company, whichshall be for Cities
Service's use in its refinery complex ~at Lake Charles,
87-292 0 - 77 - 42
PAGENO="0658"
652
Docket Nos. C175-45, et al. - 35 -
Louisiana, provided that (1) The Gas Transportation Agreement
dated November 14, 1972, between Tennessee and Cities Service
Oil Company and the Gas Purchase and Sale Agreement between
the same parties shall be modified and amended as may be
necessary and appropriate to provide for the purchase and
sale of Cities Service's gas reserves in East Cameron
Block 33 to Tennessee, and for the transportation of
Cities Service's gas reserves in such field as provided
therein with respect to the portion thereof not sold to
Tennessee and (2) no part of the gas transported under the
said Transportation Agreement shall be used for boiler fuel
(as defined in subparagraph (c) (9) of Section 2.78 of the
Statements of General Policy and Interpretations of the
Commission at the date hereof).
(G) The Petition for Declaratory Order Disclaiming
Jurisdiction filed by Shell Oil Company in Docket No.
C175-l07 is granted.
(H) The conditional application filed by Shell Oil
Company in Docket No. c175-684, at the direction of the
Commission is dismissed.
(I) The application filed by Tenneco Oil Company
in Docket No. C175-45 is dismissed.
(J) The outstanding certificate authorization of
Tennessee is amended (Docket No. CP75-1l9) to authorize
the transportation for Shell of natural gas for process
and feedstock uses originating in the State of Louisiana
in volumes not exceeding 35,000 Mcf/d prior to December
31, 1975, or 42,000 Mcf/d thereafter, from the four points
within the State of Louisiana set forth hereinabove and
in the application in said docket, to Yscloskey, Louisiana,
upon the terms and conditions provided in the said appli-
cation, for sale to Creole Gas Pipeline Corporation for
resale solely to and consumption by Air Products and
Chemicals, Inc., within the State of Louisiana, or for
sale to and consumption by OKC Corporation and Amstar
Corporation within the State of Louisiana.
(K) Certificates are issued to Tennessee (Docket
- No. CP75-23) and to Tennessee and Tenneco Oil Company
(Docket No. CP75-120) authorizing Tennessee to transport
natural gas to Yscloskey, Louisiana, for delivery to
Creole Gas Pipeline Corporation for the account of
Tenneco Company from South Timbalier Blocks 22 and 27.,
West Cameron Blocks 194 and 216 (from Block 201), and
Vermilion Block 246 (all offshore Louisiana in the
Federal domain), and from Lake Barre, Louisiana, and
PAGENO="0659"
653
Docket No. C175-45, et al. - 36 -
Tenneco Oil Terrebonne Land Development, et al., Well
No. 1, Terrebonne, Louisiana; and authorizing Tenneco
and Tennessee to exchange natural gas delivered by Tenneco
to Tennessee at points in the State of Texas described
hereinabove and in the joint application in Docket No.
CP75-120, and redelivered by Tennessee to Tenneco Oil at
or near Lake Barre, Louisiana, for transportation by
Tennessee to Yscloskey, Louisiana, for delivery to Creole
Gas Pipeline Corporation for Tenneco's account; provided,
however, that (1) all the gas transported by Tennessee
pursuant to this paragraph K, other than the exchange gas,
shall be delivered to satisfy a portion of the process and
feedstock requirements of the New Orleans complex of Air
Products and Chemicals Corporation (Air Products); and
thereafter, the process and feedstock requirements of
Tenneco's refinery at Chalmette, Louisiana; (1) the aggre-
gate volumes of natural gas delivered to satisfy the
requirements of Air Products, as provided in the Tenneco
contract, shall not exceed the (a) one-half the total plant
requirements of Air Products or (b) upon the completion of
Air Products' new liquid hydrogen plant, one-half of the
aggregate requirements. The aggregate volume of natural
gas delivered pursuant to the application in Docket No.
CP75-120 to satisfy the process and feedstock requirements
of Tenneco's refinery at Chalmette, Louisiana (including
the exchange of gas) shall not exceed 12,000 Mcf/d prior
to the termination of Tenneco's current contract with
Texaco, Inc., for the supply of gas to said refinery, or
24,000 Mcf/d thereafter.
(L) A permanent certificate of public convenience
and necessity is issued to Applicant in Docket No. C175-105
subject to Opinion No. 770, as amended, and any further
orders issued thereunder in condition to the lesser of
the contract rate or the applicable national rate pro-
vided in Opinion No. 770, as amended. Within 30 days
hereof the applicant shall file in compliance with the
Order issued November 18, 1976, in American Public Gas
Association, et al., v. F.P.C. (CA DC No. 76-2000),
an express re?~n~undertaking for all amounts collected
in excess of the just and reasonable rates determined
under final judicial review of Opinion No. 770, as
amended, to the extent required by that court order.
If Applicant chooses not to submit the expressed refund
undertaking required by the November 18, 1976 order,
PAGENO="0660"
654
Docket Nos. C175-45, et al. - 37 -
Applicant may continue service at the lesser of the
initial rates provided for in the contract or the national
rate provided in Opinion No. 699-H (53.0 cent per Mcf
at 14.73 psia subject to upward and downward Btu
adjustments from a base of 1,000 Btu and a gathering
allowance of 0.5 cent per Mcf). Such permanent authorization
is effective on and after the date of this order. Ordering
Paragraph (F) of Opinion No. 770-A requires applicant to
file a supplementtO the applicable rate schedule, effective
as of the effective date of that Opinion, reflecting-any
reductions required to bring any or all of its previously
accepted rates into conformity with the applicable adjusted
national rate established therein.
All persons making jurisdictional sales pursuant to the
authority granted by each certificate are hereby given
notice that the contractual obligations between the
buyer and and seller are incorporated into the certificate
obligations, and that the certificate is further condi-
tioned to require that the seller shall observe, the
standard of a prudent operator to develop and maintain
deliverability from reserves dedicated hereunder.
(M) A certificate of public convenience and necessity
is issued to Tenneco Chemicals,. Inc., and Tennessee Gas
Pipeline Company, a Division of Tenneco, Inc., upon their
joint application in Docket No. CP75-258, authorizing the
sale, transportation and exchange of natural gas as in
the said application set forth.
(N) The rate schedules related to the producer author-
izations granted herein are hereby accepted for filing to
be effective on the date of initial delivery and each
producer applicant shall advise the Commission in writing
of such date within 10 days thereof. The rate schedules
have been designated as follows:
Docket No. Description Designation
C175-59 Contract 5-31-74 Placid Oil Company
FPC Gas Rate Schedule No. 59
C175-66 Contract 5-31-74 Hunt Petroleum Corporation
FPC Gas Rate Schedule No. 10
PAGENO="0661"
655
Docket Nos. CI75-45. ~ - 38 -
Docket No. Description Designation
C175-67 Contract 5-31-74 Hunt Industries
FPC Gas Rate Schedule No. 11
C175-68 Contract 6- 4-74 Hunt Oil Company
FPC Gas Rate Schedule No. 76
C175-69 Contract 5-31-74 Kewanee Oil Company
FPC Gas Rate Schedule No. 96
C175-122 Contract 5-31-74 Ashland Oil Inc.
FPC Gas Rate Schedule No. 251
C175-l38 Contract 7- 9-74 TransOcean Oil, Inc.
FPC Gas Rate Schedule No. 28
C175-733 Contract 5-31-74 Highland Resources, Inc.
FPC Gas Rate Schedule No. 13
(0) Insofar as may be applicable, there shall be
attached to the issuance of each certificate granted in
this order, and to the exercise of the rights given there-
under, the terms and conditions of Section 157.20 of the
Commission's Regulations Under the Natural Gas Act, and
all construction, extensions or acquisitions shall be
completed and in actual operation by applicants and any
authorized operations, services, or sales shall be
actually undertaken and regularly performed by applicants
within one year from the date of issuance hereof.
By the Commission. Commissioner Smith, concurring in part
and dissenting in part, will have a
~ E A L ) separate statement to be issued later.
Kenneth F. Plumb,
Secretary.
Mr. LTJKEN. Do you have any other instances?
Mr. WATT. If you want to turn to the Getty case, which already
is in your record, page 5, I refer to the last two paragraphs on that
page. .
Mr. LuKEN. "Staff did not offer any evidence to sustain its
position . . ."
The Commission disagreed with the staff on this one, too, did it
not.?
PAGENO="0662"
656
Mr. WATT. Yes.
Mr. LUKEN. In its conclusions
Mr. WAm Yes.
Mr. LnKEN. Any others?
Mr. WATT. The fourth one that General Counsel submitted to
you, which is also in your record, is the Tenneco case, March 7, page
20.
Mr. LTJKEN. Of Tenneco?
Mr. WATT. Yes. It is a paragraph labeled 60.
The Commission has said, third sentence:
The bases of staff's motion were iiewspaper articles and citations to a study
done several years ago. The staff attempted to incorporate this same evidence
in its initial brief to the presiding Administrative Law Judge. On August 22,
1975, the judge found it necessary to strike these portions of the staff's
initial brief in response to protests that it contained references to published
statements outside of the record, which raised issue controversial in nature,
represented unqualified opinion, and were unexamined hearsay evidence with-
out probative value. Staff included the same material in its brief on excep-
tions. In their briefs to the Commission, all parties objected to staff's actions
arguing that such behavior was contrary to the administrative process.
Mr. LTJKEN. So the staff was simply trying to ask the Commission
to take judicial notice of the newspaper articles.
Mr. WATT. There is a time to do that and there is a time not to.
This was not the time.
Mr. LTJKEN. WIiat we are in is an evidentiary argument. We
lawyers can discuss it this way.
Mr. WATT. You don~t present new evidence to the appellate court,
do you?
Mr. LUKEN. Is that the extent of the criticism?
Mr. WATT. Those are the cases that the General Counsel pulled
out for your reference. Is is not the extent of the criticism that I
have leveled here today.
Mr. LUKEN. WTe1I, as to the cases, that is the extent of it? This is
what you cited?
Mr. WATT. I have not done any research to pull out any number
of cases.
Mr. Moss. Would the ffentleman yield?
Mr. LUKEN. Yes.
Mr. Moss. You keep talking of the judicial process.
Mr. WATT. Yes, FPC is a quasi-judicial body.
Mr. Moss. Is this not a rulemaking body? Is it not more analogous
to the quasi-legislative function? It applies across the board.
Mr. WATT. I am not sure to what you refer, Mr. Chairman.
Mr. Moss. You have oiiasi-judicia~ functions.
Mr. WATT. Yes. -
Mr. Moss. And you have significant quasi-legislative functions.
Mr. WATT. That is correct.
Mr. Moss. They are different in character.
Mr. WATF. Yes.
Mr. Moss. And is it not true that much of your work falls in the
quasi-legislative rather than in the quasi-judicial?
Mr. WATT. Some does, yes.
PAGENO="0663"
657
Mr. Moss. Not only some but a significant number of cases are in
the quasi-legislative category.
Mr. WATT. That is right.
Mr. Moss. Rulemaking was legislative; was it not?
Mr. WATT. Yes.
Mr. Moss. Wnsn't this rulemaking?
Mr. WATT. These are cases.
Mr. Moss. You combined all the cases into one, did you not, on
reservations, on producer reservations? You combined all of the
cases into one on producer reservations; did you not?
Mr. WATT. We consolidated cases wherever we could. That does
not make them rulemaking.
Mr. Moss. To determine the whole issue of the reservations in this
case, did you not?
Mr. WATT. For those cases which were party to the action, and it
becomes precedential in nature,
Mr. Moss. For the future.
Mr. WATT. As a precedent but not in rulemaking.
Mr. Moss. And we will seek for more expert guidance on tins. I
have served on this committee now for well over 20 years and I
think it comes as close to a legislative action as any I know of.
I thank the gentleman for yielding.
Mr. LUKEN. Do you know a Judge Zimmet? Obviously you don't
from the expression on your face.
Mr. WATT. He is one of our administrative law judges.
Mr. LuluiN. Is he a qualified administrative law judge?
Mr. WATT. I assume he is.
Mr. LUKEN. Do you know? Have you seen his work?
Mr. WATT. Yes. I have no reason to object to it. I assume I
probably voted against some of his work, too, but-
Mr. LUKEN. Your name is James Watt; is it not?
Mr. WATT. Yes.
Mr. LUKEN. In this opinion you have the following to say:
I would also note that the record does not support the intemperate language
of the AU. There is no place in the administrative process for unbridled
emotionalism at the sacrifice of factual analysis and judicious application of
appropriate legal principles.
I submit that that is stronger criticism that you leveled at Judge
Zimmit than anything I have seen with reference to Mr. Mamone.
Yet you say Judge Zimmit is qualified and you find no fault.
Mr. WATT. I sure did there, didn't I? I sure found fault with
him there and I sure criticized him.
Mr. LUKEN. Of course, and I am not testifying. I have had
enough experience as a lawyer to know that in our legal system,
which is an adversary system, that when the judge or the court of
appeals gets around to writing opinions that criticisms are made
of one side or the other, particularly the losing side, which if
taken in isolation could be considered a criticism, but you would
almost never find those same judges or courts of appeal considering
that to be a criticism of the work product but simply a disagreement
with the conclusion.
Mr. WATT. I think that is fairly stated.
Mr. LUKEN. To go a little further, the inadequacy of the argument
PAGENO="0664"
658
might be based on the fact that he just didn't have a very good
case. Is that right?
Mr. WATT. I think you phrased it very well. I tried to make that
same point earlier in this testimony, pointing out that we were
frequently criticizing the lawyers who didn't support the position
that we the Commission took, so I made my criticism of Mr.
Mamone not willingly, but I made it on a general basis, based on
the work product presented before me.
Mr. LUKEN. You are restating that.
Mr. WATT. I am restating it.
Mr. LUKEN. We have tried to be specific as to what you mean by
that. I want to give you the opportunity before I close to be as
specific as you can be. We tried to follow up these specifics.
What other specifics. are there to support that?
Mr. WATT. I have brought no specifics with me. I am here at
your invitation to respond to the testimony that was presented by
Mr. Fee and Mr. Journey as to whether I said those things or
not. I have tried to~ give you that to the best of my ability. I have
given you my opinion on one of the counsel that still works at the
Federal Power Commission, and, as you folks have pointed out,
effectively. He has a personnel record that speaks highly of him.
The views I have expressed today are not in accord with his
personnel file. I am very much aware of that.
Mr. LUKEN. Two more questions.
I believe you said that when you came into this job you didn't
know anything about gas.
Mr. WATT. That is correct.
Mr. LUKEN. And within 2 months you had made a judgment with
reference to the work nroduct of Mr. Mamone.
Mr. WATT. That is correct.
Mr. LUKEN. With reference to his legal briefs and his memoranda.
Is that right?
Mr. WATT. That is correct.
Mr. LUKEN. I have nothing further.
Mr. Moss. Mr. Wunder, would you like some time?
Mr. WUNDER. No, sir.
Mr. Moss. Mr. Sims?
Mr. SIMS. Thank you, Mr. Chairman.
Mr. Commissioner, do you feel that you have the legal authority,
speaking in the abstract now, to order the General Counsel to
transfer any of the lawyers in the Office of the General Counsel?
Mr. WATT. No, I do not think I have any legal authority. No, I
have no legal authority to do that.
Mr~ SIMS. I am speaking in the abstract.
Mr. WATT. In a practical sense as well.
Mr. SIMS. If Mr. Journey took your complaints and interpreted
them as an order from you, which was his testimony, and as a
result transferred an attorney, he would have been in error, would he
not?
Mr. WATT. I think that is correct.
Mr. SIMS. Thank you. I just wanted to clear up that point.
I would like to go to another point now concerning how the staff
position is now presented.
PAGENO="0665"
659
As I understand it, the staff position is forwarded in written form
to the Commission; is that correct?
Mr. WATT. Yes.
Mr. SIMS. Are these written documents in all cases made public?
Mr. WATT. I don't believe they are.
Mr. SIMS. They are not appended to the order necessarily, are
they?
Mr. WArr. No, they are not.
Mr. SIMS. So that the staff's advocacy of a position is really not
made public so far as the public attends Commission meetings until
the staff articulates its position; is that correct?
Mr. WATT. That is correct, and in many instances they are not
given an opportunity to be vocal at those hearings or at those
meetings.
Mr. SIMS. That is after the rearrangement of the chairs.
Mr. WATT. That is right.
Mr. SIMs. So what you really object to, it seems to me, is not
the fact that the staff would advocate a position in writing, but the
fact they would articulate this in view of the public at a Commis-
sion meeting. In other words, the fact the staff would write down
a position and send it to you did not seem to bother you so much as
the fact that they would perhaps stand up and articulate their
position in an open meeting.
Mr. WATT. If that is a question, the answer is no, that is not
correct.
Mr. SIMS. That is not your feeling at all.
Mr. WAIT. No, it is not. With the written submissions you have
an opportunity when you are doing your homework to evaluate
BNG submission with OGC, with the pleadings of the parties, and
you can weight it in that light.
Then if you have questions, we invite members of the staff to
come and discuss it with us for counsel and advice. That is the
way we get at it.
Mr. SIMS. You feel that the staff does not add anything in its
articulation of its position.
Mr. WATT. I would not say that at all. The question is quite lead-
ing. That is not my position at all.
In some cases it is needed, and we invite it, and we have en-
couraged it and we give every opportunity where it is needed.
In many cases we can resolve them without having the staff dis-
cuss it at all.
Mr. SIMS. I am just a little puzzled in trying to draw the line be-
tween an acceptable and an unacceptable articulation or advocacy
of a position.
It would seem that if I were a junior lawyer in the Federal Power
Commission I would have a great deal of difficulty in trying to
draw that line.
What kind of guidance have you given to the lawyers and the
other professional staff members on the Commission on this matter?
Do you follow my point?
Mr. WATT. Yes, and it is a fine line sometimes. Frequently, it is
extended beyond where propriety would have it.
They are to advise and counsel so that the Commissioners have
PAGENO="0666"
660
knowledge of the input that they need. They are not to be there
presenting their narrow point of view at the expense of other
points of view.
Mr. SIMS. Do you think that if a Commissioner caused an at-
torney to be transferred-
Mr. Moss. Would you hold for a moment?
Mr. SIMS. Yes.
Mr. Moss. I think it appropriate at this point to put section
177(s) (c) into the record. It is title 15:
The Commission may employ such attorneys as it finds necessary for
proper legal aid and service of the Commission or its members in the conduct
of their work, or for proper representation of the public interest in investiga-
tions made by `it or cases or proceedings pending before it, whether at the
Commission's own instance or upon complaint or to appear for or represent
the Commission in any case in court.
I think this a relevant section because I think it also represents a
congressional direction and it does not narrow the role of counsel
quite as tightly as you appear to draw it in your discussion.
I yield back.
Mr. SIMS. Thank you, Mr. Chairman.
I would like to ask you a general question as to what you think
the effect of Mr. Mamone's transfer and the activation of Mr.
Lewnes' administrative law judge request and certain of these
other items, Mr. Lotis' reorganization, I would say, might have
on staff in the future.
Let me put it this way, sir: Do you think that if a Commis-
sioner caused an attorney to be transferred, and it was generally
known that the attorney and the Commissioner disagreed on
philosophical and substantive grounds, such as reservation of gas
and things which have been discussed today, the transfer could have
a chilling effect on the willingness of other attorneys or staff persons
to espouse opinions they believe' to be counter to those held by that
Commissioner?
Mr. WATT. I think it is conceivable' that it could. It sure hasn't
slowed many of them down that I am aware of. The people that
would be slowed down I would not be aware of, I gness.
Mr. SIMS. I think we may be running out of people of that nature,
sir. I am very worried about the future of those professionals in the
Federal Power `Commission, whether they become part of a new
energy department or not, as to the possible intimidating or chilling
effect these actions might have on them.
Mr. WATT. Let me try to put your mind at rest there. I can assure
you that we have a professional staff and, man, are they tough and
aggressive in presenting their views at every opportunity they have.
Mr. SIMS. You seem to have testified that you, Chairman Dunham,
and others are at least as tough in trying to tone this down.
Mr. WATT. We are not trying to tone it down. We are trying to
channel it so that it comes out at the right time so that there is
what I would consider real due process.
Mr. SIMs. It strikes me as a very difficult thing to identify in a
day-to-day situation as to which is the right channel and which is
the wrong channel.
Mr. WATT. I think it probably is difficult and I think we will
probably have different men differing on those conclusions.
PAGENO="0667"
661
Mr. SIMs. I wanted to make the point that it worried me as to
how this would be perceived, particularly by the junior professionals
within the Commission.
Mr. WATT. So far we see no evidence that they have slackened off
at all.
Mr. Smrs. I am pleased to hear that, sir.
One other point. You have two staff assistants, do you not-Mr.
Allen and Mr. Shipley?
Mr. WATT. That is correct.
Mr. Smis. Mr. Shipley used to work for Huskie Oil before he
came to the FPC.
Mr. WATT. He worked for several months for Glen Neilson,
chairman of Husky Oil, and had a fundraising responsibility for
Brigham Young University.
Mr. SIMS. And Mr. Allen used to work for Potomac Electric
Power Co., among other places?
Mr. WATT. Several years ago. You skip an interesting record.
For the sake of the record, that should be more complete.
Mr. Shipley was hired by me to be my personal staff assistant. I
hired him from the International Trade Commission.
Prior to that he had worked for the State of Maryland.
Prior to that he had worked for the Department of the Interior.
Prior to that position he worked for me in the Department of the
Interior, and we had hired him in that first instance from Glen
Neilson on that BYTJ project.
Frank Allen, I hired in February 1976. Prior to that he had been
head of the Bureau of Natural Gas. That is a political appoint-
ment.
The Chairman came in and relieved Mr. Allen and Other political
appointees, one other, at that time. I hired him. As I have just
said, he had been head of the Bureau of Natural Gas and before
that in the General Counsel's Office, and he worked for another
coimnissioner. I forgot the sequence, but he has been at the Federal
Power Commission for 8 or 9 years.
Before that, he came from Pepco.
Mr. SIMs. Right after you hired him he had been one of the
star witnesses before the Subcommittee on Energy and Power
where, I believe, he testified that he had ordered held up a study by
Mr. Wright and others in the producer rate case, opinion 699, the
pending national rate at that time.
As I recall that testimony, Mr. Wright's proposed gas rate had a
range of 60 to 69 cents per Mcf and, when Mr. Allen and his
people redid the study, the range rose to between 85 cents and
$1.69.
It was right after that, for whatever reason, that he was relieved
by Chairman Dunham and he came on your staff.
The only point that I wanted to make is that these people had
certain contacts within and without the Commission.
I wanted to ask whether either Mr. Allen, Mr. Shipley, or you
personally received from outside the Commission any complaints or
suggestions to remove Mr. Lewnes, Mr. Mamone, Mr. Lotis, or
Mr. Aber.
If the answer is no, fine.
PAGENO="0668"
662
Mr. WATT. I am surprised at your question. The answer is an
emphatic no, an emphatic no.
Mr. SIMs. I am very pleased with that answer.
I have no further questions, Mr. Chairman.
Mr. Moss. It is my understanding you became concerned about
Mr. Mamone before you did about Mr. Lewnes; is that correct?
Mr. WATT. I don't get it.
Mr. Moss. You became concerned about the quality of Mr. Ma-
mone's work before you became concerned about Mr. Lewnes' role as
a vigorous advocate.
Mr. WATT. I don't think that would be a correct position to
take. I didn't mean to imply that.
Mr. Moss. I am trying to recall your testimony of this afternoon.
Mr. WATT. OK.
Mr. Moss. When you stated that you had observed Mr. Mamone, I
think, before you had started to vote on too many of the cases.
Mr. WATT. That is correct.
Mr. Moss. Then is my statement correct?
Mr. WATT. No.
Mr. Moss. That you had observed him? Put it in context for me.
Mr. WATT. Thank you.
I would have been observing the operation at the Commission
meetings commencing in November. George Lewnes would have
been an active participant in all those meetings on all those cases
dealing with certificates. I would more likely have~ seen him
much more frequently during that period.
Mr. Moss. Did you find that other employees of the Commission,
other than these two, caused you concern?
Mr. WATT. Yes.
Mr. Moss. How many?
Mr. WATT. I would have complained probably about all of the
lawyers who took an active role in that period of time.
Mr. Moss. The lawyers took an active role because it was the
custom, the precedent in the Commission's format of operation that
they take that role.
Mr. WATT. That is right.
Mr. Moss. I read a section of the Code into the record. It does not
seem inconsistent with that section of the Code, does it?
Mr. WATT. As you read that language of the Code, I thought it
substantiated my position 100 percent.
Mr. Moss. It did? As I read it, I thought it substantiated mine.
We have a case here where, I suppose, if I were writing a dissent, I
might have some critical observations and, if you were writing one,
you would have one.
Mr. WATT. I think that is a fair summary.
Mr. Moss. This sort of illustrates the problem that an attorney has
in representing the issue before the Commission.
Mr. WATT. Yes.
Mr. Moss. All proceedings of the Commission are not judicial
in character.
Mr. WATT. That is correct.
Mr. Moss. Many are and many are not.
Mr. WATT. That is correct.
PAGENO="0669"
663
Mr. Moss. I am puzzled as to how you, so soon after your arrival,
identified as virtually incompetent and unprofessional a man who
had for at least 11 years been assigned to cases-and I am going to
put in the record at this point a record of cases assigned to Russell
Mamone as of October 13, 1976. There are 26 of them, some of the
most important cases handled by the Federal Power Commission.
Then I will put in the hydroelectric cases assigned to Russell
Marnone as of February 4, 1977, and that appears to be the time
when there was a decision made to start moving him from natural
gas and having him transfer over to the hydroelectric section,
February 4 of 1977. That is a capitulation at that time but does not
represent the date.
He had from 1965 to 1976 major responsibility for 62 cases, again
some of the most significant cases which the Federal Power Com-
mission heard. That will go in the record at this point.
[The following material was received for the record:]
APPENDIX A-CASES ASSIGNED TO RUSSELL MAMONE, OCT. 13, 1976
Name Docket No. Date of order Subject
Superior Oil Co., et al C174-734____ June 29, 1976; Limitations by producers on volumes of gas
Opinion No. sold to pipeline.
766.
Cities Service Oil Co., et al C175-479 June 25, 1976~ Abandonment of gas sale; rate for sales to
and Tennessee Gas Pipeline Co., East Cameron
C175-489. Bloc 135.
Gas Gathering Corp C175-34 July 2, 1975.... Classification of gathering company.
Investigation of Tennessee Gas Pipeline Co.. RP75-45 Jan. 19, 1976_ - Invesffgation of 1974-75 curtailment and
gas shortage.
Exxon Pipeline Co. of California CP74-35 July 20, 1976 - Santa Barbara Channel offshore pipeline.
Southern Natural Gas Co RP74-71--2__ Apr. 15, 1975 - Over-run of gas by Atlanta Gas Light Co. of
boiler fuel for use by Georgia Power Co.
Michigan Gas Storage, et al CP75-322_...._ Jan. 11, 197L... Use of offshore Louisiana gas by Consumers
Power Co.
Shell Oil Co C176-3 and Apr. 12, 1976~ Warranty sale to Southern Natural Gas Co.,
Cl67-808.
Transcontinental Gas Pipeline Co CP72-135~ Sept. 26, 1975_ Storage and exchange with Sun Oil Co.
Natural Gas Pipeline Co CP72-233 Aug. 21, 1975~ Transportation of Texaco's gas from offshore
Texas.
Do CP76-14 Sept. 8, 1976~ Reservation by producers of offshore
Louisiana gas.
Gulf Oil Corp CI76-105~~ Aug. 15, 1975__ Jurisdiction over Gulf's pipelines ri offshore
Louisiana.
Tenneco Oil Co. et al Cl75-45 May 14, 1975. Trarsportation of offshore Louisiana gas for
producers use.
Columbia Gulf Transmission et al ~ ~` i:{~ou~~ for new pipelines offshore
Continental Oil Co., et al C175-761 Dec. 22, 1975~ Exceeding 60 days under emergency sales
regulations.
Hilda B. Wienert, et al G-2730 Mar. 3, 1976; Price for rollover of producers sales con-
Opinion No. tracts.
655.
Natural Gas Pipeline Co CP76-14 Nov. 21, 1975_ West Cameron Bloc 543 gas supply project.
Exxon Corp Rl-75-46 June 1, 1976 -- Rate increase on warranty sale to Columbia
and Gas Transmission Corp.
R175-76.
Tennessee Gas Pipeline, et al CP72-6 June 13, 1975; Transportation of offshore Louisiana gas for
Opinion No. producers.
727.
Rosario Production Co., et al Cl66-77& - - - Nov. 8, 1976; Refund of excess charges to Lone Star by
Opinion No: producers.
781.
Mobil Oil Corp Rl72-250 -- - May 18, 1976. Diversion of interstate gas to local customer,
and Oct. 3, TCB Field.
1975.
Getty Oil Co., et al C175-319 - - - Sept. 17, 1976.... Reservations by producers on offshore sales
to pipelines.
1C175-538___ - Sept. 8, 1976_ (Sales to Trunkline from offshore Louisiana
0 i i orp. run inc as o ēCP17S-273.... Aug. 15, 1975 `( Grand Isle Block 95 Field.
Texas Eastern Transmission Corp., et al~_ G-12446 Sept. 14, 1976~. Refund of excess charges by Rayne Field
producers.
Felmont Oil Corp. and Case Pomeroy Oil Co C176-318 Transportation of offshore Louisiana gas for
producers.
Black Marlin Pipeline Co CP75-93 June 7, 1976..~. Transportation of offshore Texas gas to
Union Carbide Corp.
PAGENO="0670"
664
APPENDIX B-HYDROELECTRIC CASES ASSIGNED TO RUSSELL MAMONE, FEB. 4, 1977
Name Docket No. Date of order Subject
Alabama Water Imp., Commission v. Ala- E-7440 Feb. 2, 1977__ Water quality at Holt and Smith projects
bama Power Co. Black Warrior River.
Alabama Power Co P-2165 and Feb. 11, 1977 - General Hydro matters.
P-2230
Pacific Power & Light Co P-935 Feb. 3, 1977_ -- Relicensing Merwin project.
Clark-Cowlitz Joint Op. Agency P-2791 Feb. 18, 197L - License application for Merwin project.
APPENDIX C-MAJOR RESPONSIBILITY CASES AND AREAS OF RUSSELL MAMONE, 1965-76
Name Docket No. Date of order Subject
Transwestern Pipeline Co. and Cities CP67-220..... Opinion No. Sales by Transwestern Pipeline to Cities
Service Gas Co. 574; Mar. 11, Service Gas Co.
1970.
George Desppt, et al CI65-974.. - - - Oct. 16, 1969~ Unauthorized sales by producers.
Pacific Gas Transmission Co., et al CP69-346...__ Mar. 13, 1970_ Imports of Canadian gas.
William G. Webb, et al G-6887 Opinion No. Abandonment of gas sales and acquisition
642; Jan. 4, by El Paso Natural Gas Co.
1973.
Spencer Gas Co Rl69-2 (None) Comploint on excessive gas rates.
United Gas Pipe Line Co CP69-28&__. Sept. 24, 1969~ Expanded boiler fuel sales to Mississippi
Power & Light and Gulf Power Cos.
Columbia Gulf Transmission Co., et al CP65-102 Opinion No. New market expansions for competitive
et al. 512; Jan. 24, markets.
1967.
Transcontinental Gas Pipeline Corp CP65-181._.... Opinion No. Boiler fuel sales to Consolidated Edison of
532. New York.
Panhandle Eastern Pipeline Co CP66-50 Opinion No. Direct sales by local utility to industrial
510; Dec.23, customer.
1966.
Do do Opinion No. Industrial sate certificate.
539~ May 1,
196~.
Do CP68-214 Opinion No. Export sales to Canada.
566- Sept. 5,
196~.
Cities Service Gas Co., et al CP66-22&_... Opinion No. Major pipeline expansion and producer
527; Aug. 15, abandonments.
Cities Service Gas Co. and El Paso Natural CP66-226 Sept. 17, 1968 Joint gathering facilities in Hugoton Field,
Gas Co. and (40 FPC Kans.
CP65-384 463)
Harry C. Boggs CI67-719____ Nov. 7, 1967_ Producer abandonment to United Fuel Gas
Co.
Shenandoah Gas Co CP68-196..._ Sept.30, 1968~ Right-of-way of pipeline.
South Texas Natural Gas Co CP67-349..... Aug. 23, 1969 Rates of sales to Transcontinental Gas Pipe-
(42 FPC line Corp.
200).
(Study) (None) Apr. 12, 1966~ FPC jurisdiction oversales.
Do do Dec. 20, 1966_ - FPC jurisdiction of direct sales by producers
to consumers.
Do do Jan. 27, 1969~ FPC jurisdiction over natural gascompanies,
sec. 1(c) of the act.
Cities Services Gas Co CP67-150.._ Jan. 27, 1967~ Powerplant gas sale to Kansas Gas &
Electric Co.
Atlantic Seaboard Corp CP66-235__ Jan. 25, 1966~_ Unauthorized construction and operation of
facilities.
Biddiford and Saco Gas Co IN-997 May 5, 1967~ Jurisdiction over facilities.
Transcontinental Gas Pipeline Corp CP63-228~ July 2, 1968~~ LNG tank sitting, New Jersey.
Michigan-Wisconsin Pipeline Co CP66-65 Dec.23, 1965~ Merger of pipelines.
General American Oil Co. of Texas, et aL~ Rl65-281~~ Apr. 19, 1966~ Escrow of producer refunds in Federal
Domain disputed zone.
Atlantic Seaboard Corp CP66-390~ Sept. 20, 1966~ Pipeline safety, materials.
Northern Natural Gas Co., et al CP66-247..... Oct. 28, 1966~_ Import of gas from Canada.
Northern Natural Gas Co CP67-295..... Nov. 14, 1967_ Sale of gas to fertilizer plant.
East Tennessee Gas Co CP66-375__ Nov. 14, 1966~ Service levels to customers.
Tennessee Gas Transmission Co CP68-166..... Mar. 21, 1968~ Right-of-way dispute.
South Georgia Natural Gas Co (None) Jan. 26, 1966._. Right-of-way problems.
(Study) do May 20, 1966.. Natural Gas Pipeline Safety Act
Excess Capacity of Pipelines R-293 Feb. 11, 1966_ - Rulemaking.
Curtailment Reports of Pipelines R-368 June 25, 1969~ Do.
Five year forecast pipeline companies R-317 Jan. 24, 1969W Do.
Texas Eastern Transmission Corp CP72-21L~ May 1, 1972_ - - Transportation rate for Mobil from offshore
Louisiana.
Consolidated Gas Supply Corp., et aI CP73-158___ Sept. 15, 1972; Exchange and storage of gas.
Opinion No.
675.
PAGENO="0671"
665
APPENDIX C-MAJOR RESPONSIBILITY CASES AND AREAS OF RUSSELL MAMONE, 1965-76-Continued
Name Docket No. Date of order Subject
Navarro Gas Producing Co., et al Cl71-834 Sept. 20, 1972; Transportation and sale of gas.
and Opinion No.
CP72-274 689.
Natural Gas Pipeline Co., and Phillips CP71-50 Jan. 30, 1973__ Transportation and exchange of producer's
Petroleum Co. gas.
Natural Gas Pipeline Co. and Amoco Pro- CP72-105 May 1, 1972 - - Exchange and transportation of gas, Florida
duction Co. and Power & Light Co.
C 172-129
Missouri Edison Co CP70-161_..~ Opinion No. Service to industrial customer.
614; Mar.
10, 1972.
Tennessee Gas Pipeline Co CP65-352 Opinion No. Abandonment of LNG facilities.
624- July 26,
19ń.
El Paso Natural Gas Co., et al CP71-6 Opinion No. Joint operation of storage.
620; June 19,
1972.
Arkansas-Louisiana Gas Co CP71-31L__ Opinion No. Acquisition of industrial gas pipeline lateral.
653; Mar. 14,
1973.
Atlanta Gas Light Co CP71-221___ Oct. 4, 1971._ Jurisdiction over facilities at Tennessee-
Georgia border.
Tennessee Gas Pipeline Co., et al CP68-231__.... Mar. 6, 1969~_ Offshore leasing pipeline proposal.
Panhandle Eastern Pipeline CP75-50 July 20, 1976~_ Increase in budget limit for compression
facilities.
South Texas Natural Gas Gathering Co CP76-272_.. Oct. 19, 1976__ Deliveries under an imbalance.
Arkansas Gas Exploration, et al CI76-319~~ Oct. 27, 1976 - Certificate for new sales.
Texas Gas Transmission Corp CP76-367__ Oct. 19, 1976 - Abandonment of lateral land.
Tenneco Oil Co., et al Cl75-466~~. Mar. 1, 1976; Show-cause on imbalance of deliveries not
Opinion 755. authorized.
Sea Robin Pipeline Co., et al CP73-87 Apr. 5, 1974 Producer reserves behind new pipeline.
(51 FPC
1221).
Tennessee Gas Pipeline Co CP73-243_... Nov. 15, 1973_ Pipeline expansion, Grand Isle Bloc 41-43,
West Delta Bloc. 35-41 offshore Louisiana.
Texas Eastern Transmission Corp CP66-43 Mar. 2, 1973. Investigation of Staten Island, N.Y. LNG
facility.
High Island Offshore System CP75-104_..~ July 30, 1976 Pipeline construction offshore Texas and
and June 4, Louisiana.
1976.
Tennessee Gas Pipeline Co CP73-48 June 4, 1973.~. Pipeline offshore Louisiana East Cameron
271-273.
Southern Natural Gas Co. and Atlantic CP73-247 Aug. 29, 1973__ South Pass 61 pipeline gas supply.
Richfield. and CI73-
639.
Natural Gas Pipeline Co CP74-101_ -- Apr. 18, 1974; Pipeline construction, Eugene Island 300
Sept. 24, offshore, Louisiana.
1974.
Ch6vron Oil Co CI74-425_.. Feb. 14, 1975_ Gas supply, Bloc 28 Field West Cameron
Area, offshore Louisiana.
Natural Gas Pipeline Co CP74-254 - - Oct. 5, 1976 -- Excess storage withdrawals 1975-76 winter
Columbia Gulf Transmission Co., et al CP76-66~.~. Apr. 2, 1976~ South Marsh Bloc 58 Field pipeline.
Exchange Oil and Gas C176-12 and Mar. 22, 1976__ Emergency gas sales to United Gas Pipeline.
C176-27. and Columbia Gas Transmission Co.
Southern Natural Gas Co CP76-76_ - -- Apr. 12, 1976_ - West Delta Bloc 133 offshore pipeline.
Public Service of North Carolina Co RP76-103_ - - June 2, 1976~. Diversion of royalty gas by Texas.
Mr. Moss. From Chairman Nassikas on back, right up until the
time he encountered .you, he apparently satisfied the people who
worked with him. The same is true of Mr. Lewnes.
However, you got on the scene in November. You held off voting
until December. Then you selectively voted on an increasing scale
into a full stride of participation. But you found you were dissatis-
fied with their performance, their professionalism.
Were you in disagreement with their general philosophical views ~
Mr. WATT. I don't think I can answer that question because I don't
know that I really knew their philosophical view except as ex-
pressed through these cases.
Mr. Moss. As it applied to these cases, were you in general
PAGENO="0672"
666
disagreement with the philosophical views expressed in their
presentations?
Mr. WATT. With regard to George Lewnes, I think that George
and I would probably be found to be similar on most cases.
With regard to Russell Mamone, I found that he had given-as
you point out, had been assigned and given-some of the most
important cases at the Federal Power Commission. I agree with that
assessment.
There was a series of cases that had a common thread through
them and I found myself being given the responsibility of picking
those up and leading the Commission in unanimous votes, as we
discussed, in a general finding in opposition to the position that
Russell Mamone was advocating. I assume the position he was
advocating was one of personal philosophy, although that is an
assumption on my part.
I would probably find myself at variance with him on this nar-
row issue.
Other than this professional input, I do not have an evaluation
of Russell Mamone to know philosophically where I would stand
with him.
Mr. Moss. Rather than being critical of staff, you objected to the
vigorous advocacy role undertaken by them. Why didn't you propose
a procedural change in the Commission's operation?
Mr. WATT. We did.
Mr. Moss. No.
Mr. WATT. Excuse me.
Mr. Moss. I do not mean the matter of the changing of the seating
arrangement. I mean by a specific instruction going forward to the
staff that, in the future you are not to undertake this vigorous
advocacy role.
Mr. WATT. That was done. A memorandum in your file dated
April 1 signed by Chairman Dunham shows that.
Mr. Moss. We shall review that.
[The following correspondence was received for the record:]
PAGENO="0673"
667
NINETY-FIFTh CONGRESS 900,9 2323
JOHN C. MOSS. CALIF., CHAIRMAN P2o~o (202) 225-4441
CONGRESS OF THE UNITED STATES
0295CR, 0010 9*90 4.. NA,o,, HOUSE OF REPRESENTATiVES
9225330.02*0900. COuP. (00101000) SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS -
*IS00'21RCCSOCROfl,0000. OFTHE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
92*34.100.53050633 WOO. WASHINGTON, D.C. 205(5
April 12, 1977
Honorable James G. Watt
Vice Chairman
Federal Power Commission
Washington, D. C. 20426
Dear Mr. Chairman:
Thank you for your letter of April 1 pointing out
the incorrect reference to Administrative Order 160
during theSubcommittee's March 24hearings. The error
has already been brought to my attention by staff. The
record will be corrected and both the Memorandum to All
Employees and Administrative Order 158 will be included.
The confusion was caused by the similarity in dates of
the memorandum and the two orders, all of which were
issued on April 1, 1976 and all of which refer to similar
subject matter.
Attachment A, a memorandum to you from Secretary
Plumb, summarizes the changing degree of participation
of FPC staff at Commission meetings. However, it does
not address the relevant question raised on March 23,
which is the balance between FPC's quasi-judicial and
quasi-legislative functions. The memorandum will there-
fore not be included in the hearing record.
In closing, I would note that my reading of Chair-
man Dunham's April 1, 1976 memorandum entitled: "Changes
in Commission Policy and Procedure" and Administrative
Order 158 reveals no instruction to the staff to cease
their "vigorous advocacy role" (Mar 23, Tr. 155).
gere~~
JOHN S. MOSS
Chairman
Subcommittee on
Oversight and Investigations
JEM:ssh
V7-292 0 - 77 - 43
PAGENO="0674"
668
FEDERAL POWER COMMISSION
WASHINGTON
20426
April 1, 1977
VICE CHAIRMAN JAMES G. WATT
Honorable John E. Moss
Chairman, Subcommittee on
Oversight & Investigations
The House of Representatives
2323 Rayburn House Office Building
Washington, DC 20515
Dear Mr. Chairman:
In reviewing the transcript of March 23 concerning
my testimony before your Subcommittee, I find there are
two instances where you said you wanted to look further
into a particular matter. ~ ask that this letter and the
two attachments be placed in the Committee Hearing Records
and be included in the Committee Print.
Attachment A relates to the quasi-judicial nature of
the Commission and the historical functioning of the
Commission. The deliberations before the Commission must
be carried out in accord with the separation of functions
provisions of the Administrative Procedure Act.
Attachment B contains the memorandum and Administrative
Order No. 158 I referred to on page 155 of the March 23
transcript. The documents limit for purposes of account-
ability the role of the FPC Staff in the meetings of the
Commissioners. The documents do not lessen the responsi-
bility of FPC Staff to .be aggressive advocates in the
proper forum.
Unfortunately, on March 24 in questioning other
witnesses, you referred back to your exchange with me and
then went on to suggest, in error, that I was referring to
Administrative Order No. 160. On page 74 you have suggested
I improperly reported to you. The facts are that your
staff didn't deliver to you the April 1, 1976 documents to
which I was referring. They are attached.
PAGENO="0675"
669
Honorable John E. Moss Page 2
This letter and the attachments should help to set
the record straight.
incerely yours,
es G. Watt
Vice Chairman
Att. A & B
cc: Members of Subcommittee on
Oversight & Investigations
PAGENO="0676"
670
Attachment B
FEDERAL POWER COMMISSION
WASHING1ON. U. C. 234~
OF TH~ CF4A~RMAN April 1, 1976
Commission Staff
FROM: The Chairmrni
SUBJECT: Changes in Commission Policy and Procedure
This memorandum is to inform you of changes in
Commission policy and procedure adopted today by the
Commission. In. summary these changes will:
1. Streamline Commission consideration of matters
before it for decision by revising the preparation
and presentation of staff materials and recommenda-
tions.
2. Open Commission meetings to public observation.
3. Create a mechanism by which the staff and the
public can assist the Commission in its efforts
to anticipate and address future regulatory problems
and issues on a timely basis.
Streamlining Commission Meetings
Beginning with the April 21 agenda meeting, the Commission
intends to institute several changes aimed at improving
the presentation of staff views. The Executive Director
will coordinate staff recommendations and define areas of
difference between staff positions so that they may be
clearly presented to the Commission. In any case in
which there is disagreement within a Bureau or Office, any
strongly held position different from the position of the
Bureau or Office will be included with the Bureau or Office
recommendation. The Commission strongly encourages any
staff member who so desires to come before it for purposes
of presenting a dissenting opinion.
PAGENO="0677"
671
In order to allow the Commission maximum opportunity
to explore, fully matters before it, staff participation in
Commission meetings will be limited to the persons
designated by each Bureau or Office as being concerned
with the pending matter. Other persons may participate
in discussion of particular items by invitation of the
Bureau or Office head supervis5ng that individual, or at
the request of any Commissioner.
Finally, all items con~ituting the agenda for a
`egular Wednesday Commission meeting must be delivered to
the Secretary no ].ater than noon the preceding Wednesday,
except that the Commission may choose to consider late
items when they are submitted with a written explanation
of the reason for the delay, signed by the person responsible
for the item.
These new procedures and requirements are experimental
in nature and are subject to revision as we gain experience
with their operation. We hope that they will improve the
quality of staff presentations ~nd increase the amount of
time now available to the Commission for study and
discussion of agenda items. We welcome any suggestions
for additional changes which may contribute to attaInment
of these objectives.
Openin~g~9rnmisSion Meeti~s
Beginning with the April 21 agend~ meeting, the public
and Commission staff will be invited to observe Commission
meetings. Participation will be limited to Commissioners
and Commission staff as defined in the rules regarding
streamlining meetings. Cameras and other recording devices
will not be permitted.
Commission meetings may be closed when the Commission
considers matters which: (a) are classified as secret by
Executive Order or statute; (b) relate to internal personnel
rules and practices; (c) relate to the necd for personal
or commercial privacy.
PAGENO="0678"
672
To the maximum extent feasible, the Secretary will
give advance notice of the time, place and subject of
meetings which will be open to all those who are interested.
~~pective Planning Mechanism
The Commission has established procedures under which
each Office and Bureau will, every six months, submit a
report outlining future regulatory issues likely to confront
the Commission. In addition, the public is invited to make
similar presentations to the Commission. The Commission
will hold special agenda meetings to consider the possibilities
for action on the suggestions made by staff and the public.
Matters currently before the Commission will not be considered
at these speci~l meetings.
These procedures will help the Commission to set
internal priorities and to anticipate problems. The effect
will be to improve the quality of commission decisionmaking
and to avert bottlenecks and backlogs before they materialize.
The Commission welcomes any suggestions which will further
accomplishment of these objectives.
Top Sheet Procedure
With the adoption of the top sheet or summary cost of
service presentations in natural gas pipeline and public
utility rate cases, the Commission will have another
regulatory procedure available to reduce the back log
of current rate filings in both industries. At the end of
February 1976 back logged natural gas pipeline rate
increases under suspension and subject to potential refund
liability totalled about $2.2 billion and involved 145 cases, The
corresponding figures for public utilities under the
Power Act totalled about $1/2 billion, and involved about
200 cases.
To expedite the ultimate resolution of these cases,
FPC Staff will concentrate upon a course of on the record
settlement conferences, pipeline by pipeline and electric
utility by utility. The Commission believes that through
PAGENO="0679"
673
a concentrated effort of such conferences, and ~~here
necessary hearings before the Administrative Law Judges,
these back logs can be reduced significantly. The top
sheet procedure should focus the attention of all parties
upon the important and significant dollar and policy
questions; settlement discussion will cover various
locked~in periods and flow through the pancakes from
top to bottom.
~ ~
Richard L. Dunham
Chairman
PAGENO="0680"
674
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John H. Bolloman III,
and Jam~s G. Watt.
ADMINISTRATIVE ORDER NO. 158
COMMISSION MEETINGS: PROCEDURE CHANGES
(April 1, 1976)
The Commission believes that the decision-making
process of Commission meetings. can be improved through
better staff coordination of the salient issues, reduc-
tion of the number of items given consideration, and
increasing the lead time for consideration of agenda
items. These actions should result in greater oppor-
tunity for effective input to the Conimisison's
decisional process and better exposition of all views
regarding agenda items.
This administrative order revises the current
Commission procedures regarding bureau and office
coordination of agenda items; time schedules for
placing items on the Commission meeting agenda;
separation of approved, disapproved and modification!
discussion agenda items and bureau/office representa-
tion at Commission meetings.
These procedures set forth below shall be
effective beginning with the Commission meeting of
April 14, 1976, with items for that day's agenda to
be delivered to the Secretary by noon April 7, 1976.
PAGENO="0681"
675
1. Inter-Bureau/Office Coordination of Agenda Items
(a) Before being placed on the agenda, all
proposed agenda items shall be circulated
to the offices and bureaus concerned. Each
bureau or office to which a proposed agenda
item is circulated shall have one week to
indicate its concurrence, or to specify any
objections which cannot be reconciled. The
bureau/office coordinations shall be completed
prior to the placement of the item on the
agenda. No item shall be placed on the agenda
until all of the concurrences or specified
objections of each office concerned have been
obtained; however, an item may nevertheless be
placed on the agenda at the request of any
Commissioner.
(b) In any case where there is disagreement
within a bureau or office, any strongly held
position contrary to the office position should
be included `with the bureau or office recoirm~en-
dation.
(c) The Executive Director is directed to
coordinate recommendations and areas of differ-
ences so that staff positions can be clearly
presented to the Commission.
2. A~genda Item - Timeliness
Reasoned decision-making requires adequate time
for consideration. Accordingly, all items for the
agenda for a regular Wednesday meeting shall be
delivered to the Secretary not later than noon of
the preceding Wednesday. The agenda shall be fixed
and the materials delivered to the Commissioners
not later than noon of the preceding Thursday.
An item which is not in compliance with these time
standards will not be placed on the agenda without
an accompanying explanation of the reason for the
delay, signed by the person responsible therefor.
The Commission may choose not to consider such late
items.
PAGENO="0682"
676
3. Pre-Meeting Agenda Action
Along with the delivery of the agenda materials,
each Commissioner will be provided with a form to
indicate approval, disapproval, or desire for modi-
fication or discussion of each agenda item. These
forms shall be returned by the Commissioners to the
Secretary by 9:00 a.tn. of the day of the meeting.
Prior to the meeting, the Secretary shall circulate
a compilation of the forms indicating specifically
those items on which agreement has not been reached.
4. Staff Representation at Commission Meetin~g~
Proper opportunity for participation by appro-
priate staff members, and adequate discussion by the
members of the Commission necessitates the following
procedures for Commission meetings:
(a) Each bureau or office shall be represented
by its head (or his designated representative)
and one deputy or other staff person, for the
discussion of all agenda items concerning that
office.
(b) Persons other than those noted above (such
as authors of draft opinions or relevant memoranda,
proponents of differing positions, etc.) shall
participate in the discussion of particular items
on the invitation of their supervising bureau or
office head, or of any Commissioner.
Subsequent to the issuance of this order, the appro-
priate portions thereof will be published as a Commission
directive.
By the Commission.
(S E A L)
Kenneth F. Plumb,
Secretary.
PAGENO="0683"
677
Mr. Moss. But at the time of your disagreement with the staff
playing that role, that was the accepted norm in the Commission,
was it not~?
Mr. WATT. That is correct.
Mr. Moss. And, therefore, it did not constitute a basis for being
critical of them either as unprofessional or as overly vigorous in
their advocacy, did it?
Mr. WATT. The point you are making is quite right. The fact
they did advocate was the normal operating procedure, and that
was expected of them, so they cannot be faulted for doing what was
expected of them.
However, it also gave us an opportunity to evaluate their profes-
sionalism at that .time.
Mr. Moss. Is that the only time their professionalism had been
evaluated?
Mr. WATT. By me?
Mr. Moss. By you, yes, it was not the only time.
Mr. WATT. I evaluated them in their performance before the
Commission when they were supposed to be counseling and advising,
and when they were drafting orders; and, third, when they were
the attorneys of record and I saw their pleadings. Therefore, we
have those areas of responsibility which I evaluated.
Mr. Moss. Your background for making this kind of an evalua-
tion in the administrative law field, in the regulatory field, was
what? Had you ever served on a regulatory commission before?
Mr. WATT. Never been in a regulatory responsible position before
this assignment.
I had been managing lawyers and professional people in my
entire professional career. I have been a manager of professional
people.
Mr. Moss. There is a big difference in managing lawyers in the
Department of the Interior as compared to managing lawyers in an
independent regulatory commission; is there not? A regulatory
function is a lot different from an administrative function?
Mr. WATT. Substantially different.
Mr. Moss. There is a significant difference in the role of a lawyer
in the two.
Mr. WATT. That is correct, in the role; but in their professional-
ism-drafting, articulation, presentation of the arguments-there
would not be a big difference.
Mr. Moss. You were uniquely qualified to evaluate their profes-
sionalism.. They had been properly evaluated by their superiors, their
immediate supervisors, and found not wanting. That had been con-.
curred in by the General Counsel, and they had been found not
wanting.
I have had the staff interview the previous Chairman of the
Commission and he says they were found not wanting.
Now we shall interview each of the previous General Counsels
and determine whether they were found wanting.
I say that because at this moment we have just your evaluation as
the one unique one, and you must, indeed, have great competency to
PAGENO="0684"
678
have so quickly discerned this absence of the effectiveness of pro-
fessionalism from persons who had been a sigrnficant part of the
profesional team at the Federal Power Commission.
Don't you feel just a little humble in assuming that kind of a
role?
Mr. WATT. I did not assume that kind of a role.
Mr. Moss. But you did-
Mr. WATT. Excuse me. May I finish?
Mr. Moss. You did, and you have placed it on this record ]ust as
clearly as anything can be on the record.
Mr. WATT. I tried to be clear.
Mr. Moss. That you did assume that role.
Mr. WATT. May I respond?
Mr. Moss. Indeed, you may.
Mr. WATT. I tried to be clear. I do not desire to come before your
committee on this issue.
Mr. Moss. I know you didn't. I haven't the slightest illusion about
that. I know you did not want to come before my committee.
Mr. WATT. As your counsel asked me, I have no responsibilities
in evaluating these men.
Mr. Moss. But you exercised one.
Mr. WATT. But I did want to bring about change in the way the
Commission was operating, and I voiced my views, as I have a
responsibility to do, to the Chairman and to the General Counsel.
Mr. Moss. And you do not want to cause damage to a man's repu-
tation, so you move subtly to see that he is removed from a position
of significant importance to one of lesser significance in an entirely
different area where he has no expertise in an agency such as the
Federal Power Commission where every damn professional in the
group knows precisely what has happened.
Are you telling me in good faith that you did not want to cause
believe you. I cannot buy it. It doesn't sell. It doesn't even sound
injury to that individual? Let me say if you are, that I do not
reasonable, and I can't believe that you really mean it.
If you do, I think you had better start searching your soul.
I might add that there is almost an analogous situation here. You
as a Commissioner taking a strong advocacy position against the
policies laid down by the Congress of the United States. You are
serving on an independent regulatory commission, closer to being
an arm of the Congress than of the executive. Yet you are taking
a very strong position of advocacy contrary to the announced poli-
cies of the Congress. We do not criticize you for it but you criticize
the staff who does the same thing in that Commission.
Do you find any inconsistency in that?
Mr. WATT. Mr. Chairman, I just simply do not agree with the
summary that you have made.
Mr. Moss. I don't mind whether you agree or not.
Mr. WATT. The consistency is the forum. Those who have exper-
tise and are in the public service have an obligation to be advocates
at the right time. I think it is perfectly appropriate and would
encourage this committee, which I don't need to do because you
PAGENO="0685"
679
are an activist in that area which is good, and I would encourage
our employees to respond because they have expertise and they have
competency that you folks can draw upon-they need to be advo-
cates. But when we are in a quasi-judicial role-
Mr. Moss. That is still debatable.
Mr. WATT. Very well. When we are-
Mr. Moss. Do you concede it is also a quasi-legislative agency?
Mr. WATT. Yes.
Mr. Moss. Very well.
Mr. WA~n~. Absolutely.
Mr. Moss. It is not exclusively judicial.
Mr. WATT. That is quite right.
Mr. Moss. I am afraid that is the precise key to this entire thing.
You view it virtually as a court. That it is not.
Mr. WATT. When I am dealing with litigated cases, I do perceive
it and try to conduct myself as closely as I can to protect that type
of relationship.
Mr. Moss. You believe that all of the previous Federal Power
Commission members and Chairmen ignored that obligation?
Mr. WATT. I would assume not.
Mr. Moss. They condoned the very pattern of conduct that these
gentlemen engaged in.
Mr. WATT. I don't know how Commissions conducted themselves
prior to Chairman Nassikas.
Mr. Moss. You saw the April memorandum that this was accepted
practice in the Commission.
Mr. WATT. For the Nassikas Commission. I don't know how
Commissions prior to that performed. I don't know either way. I
do know how the Nassikas Commission functioned by reputation.
Mr. Moss. We will find out because I want every question that
comes up on this record to be answered because it has become a
very important record.
Let me say that I think you narrow too much the role of the staff.
I have stated in this hearing that I do not favor the abolition of the
Federal Power Commission. I favor a strong and effective regu-
latory body, an independent agency, not one over in the executive
branch of Government.
However, if it is to be as narrowly defined in its function and as
inflexible in presenting a strong public interest case as you would
have it, then I am not certain that I want the Commission to exist
at all.
It should achieve the objectives of an independent agency. I
certainly don't want to turn it over to the courts.
I think we have covered the subject.
The committee will now stand adjourned until 10 o'clock tomorrow
morning.
[Whereupon, at 4:05 p.m., the hearing adjourned to reconvene
at 10 a.m. on Thursday, March 24, 1977.]
PAGENO="0686"
PAGENO="0687"
ADVERSE PERSONNEL ACTIONS AGAINST. PROFES-
SIONAL STAFF MEMBERS AT THE FEDERAL POWER
COMMISSION _____
THURSDAY, HARCH 24, 1977
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C.
The subcommittee met at 10 a.m., pursuant to notice, in room
2322, Rayburn House Office Building, Hon. John E. Moss, chair-
man, presiding.
Mr. MoSS. The subcommittee will be in order.
This morning we have with us the four gentlemen who have been
the focal point of discussions for the past several days.
I understand that you, Mr. Lewnes, and you, Mr. Lotis, each have
statements, and that the other two do not have statements.
Is that correct?
Mr. LEWNES. That is correct.
Mr. LOTIS. That is correct.
Mr. MAMONE. That is correct.
Mr. WOFSY. That is correct.
Mr. Moss. The Chair will recognize Mr. Lewnes for his state-
ment and he will be followed then by Mr. Lotis.
I shall note for the record that all previous witnesses have been
previously sworn.
You may proceed.
TESTIMONY OF GEORGE P. LEWNES, ADMINISTRATIVE LAW JUDGE,
FEDERAL POWER COMMISSION; JOHN G. LOTIS, ASSISTANT LITI-
GATION COUNSEL. OFFICE OF THE GENERAL COUNSEL, FPC; RUS-
SELL B. MAMONE, TRIAL ATTORNEY, OFFICE OF THE GENERAL
COUNSEL, FPC; AND CYRIL S. WOFSY, TRIAL ATTORNEY, OFFICE
OP THE GENERAL COUNSEL, FPC
Mr. LEWNES. Mr. Chairman, as you will recall, I had no opening
statement when I was called to testify, nor did I intend to offer any
closing peroration.
However, Commissioner Watt testified yesterday as to what may
have been his penultimate answer, that perhaps a similarity existed
in our respective philosophical approaches toward the regulatory
processes, that is, his and mine.
I would like to touch upon two or three areas within the broadest
(681)
PAGENO="0688"
682
use of the term "philosophy" and trust that the record will reflect
where we may agree or disagree. I shall be very brief.
In listening to some of the testimony, to me personally the deepest
wound of all was Mr. Fee's statement that Mr. Journey told him
that I was experiencing some difficulties with my attorneys and they
with me. I understand Mr. Journey made no mention of the subject
in his testimony.
This, indeed, bears on, call it what you will-philosophy, de-
lination of responsibilities, ethics.
During my term as Assistant General Counsel I supervised one
of the most dedicated group of attorneys in the public service. They
were aggressive, determined, competent, ethical, advocates all. The
superlatives are endless, with an esprit de corps second to none, with
vindictiveness toward none, and I emphasize the word "vindictive-
ness."
They pursued the interest of the consumers vigorously, as they
did all violations which were unveiled. They exercised their re-
sponsibilities to the full limits of their legislative leash, namely,
the Natural Gas Act.
I use the term "leash" because the Natural Gas Act is an enabling
statute. Enabling statutes circumscribe how far you can go, in
essence saying you can go so far and no more. But certainly you
must go to the full limits mandated by Congress. If Congress had
wanted us to do less, they would have shortened the leash.
We are, therefore, justified in reading the statute not narrowly
as through a keyhole but rather in the broadest light of the evils it
is aimed at and the good that it hoped for. I believe I just para-
phrased Justice Jackson.
The attorneys were also instructed to assiduously follow Com-
mission precedents except to the extent that a convincing argument
could be made of a change in circumstances as would warrant a
departure from precedent.
The Chandeleur precedent which you have heard so much about
and Mr. Mamone's successful advocacy for its reversal, which I
fully endorsed as an Assistant General Counsel, is a good illus-
tration.
This in essence was the philosophy, if you will call it that, as it
was with my predecessor who began with the Commission at about
the time of the passage of the Natural Gas Act. It was handed to
me and I in turn handed it to those I supervised.
As to offshore producer. reservations of reserves, I vigorously
opposed any such reservations in my capacity as Assistant General
Counsel, and I endorsed Mr. Mamone's similar opposition.
One last bothersome area deals with the removal of an attorney
from assigned litigation, and here I would like to generalize and not
comment on what this record does or does not show except to note
that Commissioner Watt. and Commissioner Smith appear to be on
opposite ends of the question.
Can anyone here, particularly those of you who are or have been
practicing attorneys, think if any act more horrendous than to be
removed as counsel on a case without the benefit of a bill of par-
PAGENO="0689"
683
ticulars? Does that not affect his future potential and his promo-
tions? And how does it affect his associates?
My own personal view is that expressed by former Chairman
Nassikas, in Mr. Sims' memorandum of conversation of March 22,
1977. It is a responsibility of the General Counsel to maintain the
sanctity of the independence of the trial attorneys from intrusion
by members of the Commission. It is for the General Counsel to
determine whether an attorney is or is not performing in a satis-
factory manner and, if the attorney is not, are there not regulations,
internal procedures to be foflowed under Civil Service guidelines.
And if there is a conflict of interest, or even if it might give the
impression of a conflict of interest, the attorney himself should
voluntarily ask for his removaL And if the attorney is young, and
not quite familiar with such nuances, is it not the responsibility
of his immediate supervisor, with years of experience in such mat-
ters, to remove him and thereby preclude the attendant cloud that
might inevitably follow?
To cavalierly remove an attorney merely-and I emphasize
"merely"-because of a Commissioner's dissatisfaction and no more
to me can result in cadre of yesmen, those who seek to read the
Commissioners in advance and give them what they want; or, to put
it more bluntly, a cadre of attorneys whose foremost thought will
be to protect their derrieres.
Alexander Hamilton in The Federalist in 1788 perhaps stated the
all-pervading thought most clearly: "In the course of human nature
the power over a man's subsistence amounts to a power over his will."
Mr. Chairman, may I be permitted-this is my very last statement-
to digress to a lighter vein, yet convey a serious though regarding
the effusive encomiums I have received during the course of this
testimony? May I be permitted?
Mr. Moss. Yes.
Mr. LEWNES. I think perhaps Mr. Lent would appreciate it since
we both come from the same part of the country.
Back home in Brooklyn when we have Irish wakes they are in-
variably held in the home.
When Patty died he was laid out in the middle of the living room
and the widow and daughter dutifully were off in the corner.
All of Patty's friends came in, looked into the coffin and praised
Patty-that he was a religious man, a nondrinking man, never beat
his wife, worked hard, endless.
Finally the wife, in total desperation, turned to the daughter and
said, "Daughter, go take a look in that coffin and see if that is your
old man they are talking about."
That is how I felt sitting here in these proceedings.
I don't have anything else to say. I came here without accusations
toward anyone. I don't think I have accused anyone although I
think, Mr. Lent, you may have alluded a statement to me which I
did not make in one of your questions. If you like, I can point it
out to you.
I still do not accuse anyone nor make any accusations whatsoever.
Thank you.
87-292 0 - 77 - 44
PAGENO="0690"
684
Mr. Moss. Thank you, Mr. Lewnes.
Mr. Lotis?
TESTIMONY OP JOHN G. LOTIS
Mr. LoTIs. Thank you.
I thank the subcommittee for allowing me this opportunity to
respond to certain statements which have been made to this sub-
committee in the course of your current investigation.
On March 8, 1977, a subpena was issued by the Chairman of the
Interstate and Foreign Commerce Committee of the House of Rep-
resentatives which directed that I appear before your subcommittee.
In conjunction with my appearance I issued a direct statement dated
March 14, 1977, and at the hearing that same day answered truth-
fully all questions put to me by Congressmen and their staff.
It would be a mistake on my part or that of any other witness to
believe that there can be any profit or gain from their appearance
and testimony in this proceeding. I neither seek nor expect any
personal or professional advantage from these proceedings.
On a personal basis this has been one of the most difficult and
trying experiences of my life. I did not volunteer my testimony and
made it clear to your staff that unless a subpena were issued I
would not testify.
The purpose of my testimony was to answer questions raised by
representatives of the American public in the Congress concerning
certain Federal Power Commission officials' activities and actions. I
believe that the public's right to know how Government's business
is conducted is paramount, takes precedence over other considera-
tions, and compelled me to answer all questions directed to me at
the March 14, 1977, hearing, however embarrassing my answers may
have been to agency officials.
A prepared statement dated March 10, 1977, submitted by cover-
ing letter dated March 8, 1977, to the chief counsel of this sub-
committee, states on page 13 that:
In addition, the restructured OGC as part of the Commission's overall
effort, has assisted in the accelerated disposition of electric rate filings under
Part II of the Federal Power Act.
Further it states:
The reduction in the backlog of electric cases under Part II of the
Federal Power Act is from 156 pending cases in September 1976 to 129 in
January 1977, or a reduction of 17 percent. Pending electric rate cases now
subject to refund total approximately $580 million on an annualized basis or
a reduction of almost 10 percent from the September 1976 total.
The Commission itself publicly reports the status of electric rate
filings and cases in a quarterly report entitled "FPC Reports on
Electric Regulatory Activities."
During the period September 30, 1976 to December 31, 1976, the
Commission reports disposing of 27 cases pending before it.
Of the 27 cases disposed of during that last quarter, 5 were the
result of Commission opinions which are a work' product of the
Commission itself and 22 were the result of settlements negotiated
by my staff prior to the reorganization when I was Assistant Gen-
eral Counsel.
PAGENO="0691"
685
The 22 settlements approved by the Commission in the last
quarter of 1976, along with the five Commission opinions,, resulted
in an approximate $50 million reduction in the amount under sus-
pension. Thus, $50 million of the $58 million reduction referred to
in the statement can be attributed directly to the efforts of my staff
prior to the reorganization I did not attempt to trace the remaining
$8 million.
Some, if not all of it, may be likewise traceable to Commission
opinions and/or settlements previously negotiated by my staff and
approved by the Commission after the first of this year.
I have attached as appendix A to my testimony a breakdown of
the cases to which I refer. It may be appropriate to note here also
that whereas I had an average 6 attorneys assigned to electric rates,
the newly-created electric section had 17 attorneys on board by
November 15, 1976, and at that time were allocated three additional
slots.
With respect to gas pipeline rate cases, there were 188 cases
pending as of September 30, 1976. At December 31, 1976, the pending
cases increased to 190. During the last quarter of 1976 the amount
under suspension increased from $3.19 billion to $3.34 billion, an
increase of $150 million.
These figures have been compiled and supplied to me by Mr.
Joseph Stiles who received them from Ms. Jean Sultzer of the
Bureau of Natural Gas.
As I understand it, these figures will be supplied shortly for an
agency news release.
The pipeline rate work under the new organization was handled
by six attorneys, the same number that I assigned to that activity
on average.
Thus, if one were to assess the effectiveness of the reorganization
in terms of dollars under suspension, as has been chosen, we find
that gas pipeline and electric rates have increased by $92 million in
the 3 months following the reorganization despite an increase of 11
attorneys assigned to these activities.
However, the record should be made clear that I do not share
the believe that the effectiveness of the reorganization can or should
be measured in cases pending or dollars under suspension.
In response to questioning by Chairman Moss on March 18, 1977,
transcript pages 213-214, concerning these same statistics, the follow-
ing exchange took place:
Mr. Moss. Are you saying the figures I cited are incorrect?
Mr. JOURNEY. I am saying that I think you have misinterpreted some of
the figures because some of the work product of that was really under the
aegis .of the settlement task force which was established in June.
As can be seen from appendix A, the five Commission opinions
which resulted in a reduction of $1,021,711 in the backlog occurred
prior to the establishment, June 28, 1976, of the electric settlement
task force.
Moreover, 14 of the 22 settlements resulting in a $37,270,981 re-
duction in the electric backlog occurred prior to the establishment
of the task force.
PAGENO="0692"
686
Of the remaining eight settlements amounting to a $11,377,257
reduction in the amount under suspension, I am advised that the
task force was either not present during settlement negotiations or,
if present, did not activel~r participate. In no case did they change
an already-established staff position.
Several comments are in order with reference to the affidavit
identified as appendix A to Mr. Journey's March 18, 1977 statement
to the subcommittee. I would like to affirm, and to do so unequivo-
cally for the record, that the conversation which I described at the
March 14, 1977 subcommittee hearing, transcript page 121, did
indeed take place. The chronological sequence of events (1) to (5)
decribed in the affidavit does not detract from my testimony. I
have no reason to believe that the sequence of events did not occur
as the affidavit describes. My testimony in this matter, however,
remains firm.
With reference to an affidavit of Mr. Kenneth Plumb, Commission
Secretary, attached to Mr. Journey's March 18, 1977 statement, a
few comments are in order.
While I was under the impression that staff counsel had spoken
to Mr. Plumb with respect to the proper comment period in the
Ohio Electric Co. rate case, docket No. E-8888, it appears from
the March 13, 1977, letter from staff counsel to Chairman Moss that
she had probably spoken to someone other than Mr. Plumb. This
would not be unusual because, on occasion, when Mr. Plumb is un-
available, others in his office would probably review notices.
Notice of the settlement in the Ohio Electric case was issued July
21, 1975, and provided for comments to be filed by July 29, 1975.
I have checked with Mrs. Phyliss Lane of the administrative office
within the Office of General Counsel and she advises me that her
records show that the notice of the Ohio Electric settlement was pre-
pared and hand carried to the Secretary's office on July 18, 1975.
This means that if the notice had been issued immediately, then an
11-day comment period would have been provided. While I in-
tended that a 2-week notice be given and I thought this had been
arranged by staff counsel, obviously something less was eventually
agreed upon.
With reference to an affidavit of Mr. Lamke attached to Mr.
Journey's March 18, 1977 statement, I can assure this subcommittee
as I have assured Mr. Lamke personally, that I have never criti-
cized Mr. Lamke for the manner in which he acquitted himself in
the AEP case nor did I intend to do so by my March 14 testimony.
I believe that the position he has taken in the AEP service-related
cases, as described in his affidavit, has been a responsible one. I have
only respect for Mr. Lamke's ability and integrity and the record
should so reflect.
I discussed this matter with Mr. Lamke on March 23, 1977, and,
based on our conversation, we have reached the conclusion that it
would not be necessary to include Mr. Lamke's affidavit into this
hearing record. Mr. Lamke has read my statement relative to his
affidavit and he concurs.
In conclusion, I want to reaffirm my statements made before this
subcommittee on March 14, 1977.
PAGENO="0693"
687
Thank you.
Mr. Moss. Without objection, the appendix attached to your state-
merit will be made part of the record at this point.
[Appendix A referred to follows:]
APPENDIX A-ELECTRIC RATE CASES TERMINATED, OCTOBER TO DECEMBER 1976
1st quarter-Jan. 1 through Mar. 31
Filed Jan. 16 S
0
E-9216
E-9322
$1, 756, 930
Certified Feb. 27 S
Certified Mar. 2 S
Filed Mar. 16 S
Filed Mar. 29 S
E-9136
E-9140
ER76-204
ER76-158
1, 646, 700
25, 296, 819
117, 936
2d quarter-Apr. 1 through June 30
Certified Apr. 14 S
Filed Apr. 22 S
Filed May 20 S
Filed June 7 S
Filed June 8 S
E-9407
E-9485
E-9046
ER76-157
E-9446
826, 425
195,080
200, 397
955, 456
Filed June 17 S
E-8137
S
E-8217
0
E-8187
0
E-8446
581, 068
0
E-8598
0
Filed June 22 S
E-8721
ER76-21
440, 643
3d quarter-July 1 through Sept. 30
Certified July 22 S
Filed Aug. 4 S
Filed Aug. 16 S
Filed Sept. 13 S
S
S
E-8952
ER76-305
ER76-409
E-8882
ER7E-381
ER76-687
1, 084, 000
1, 128, 439
536, 723
943, 834
7, 684, 261
4th quarter-Oct. 1 through Dec. 31
Certified Oct. 8 5
E8071
S
E-8142
Filed Nov. 19, 1975 S
E-9388
6, 275, 238
49, 669, 949
S=Settlement.
O=Commission opinion.
Mr. Moss. Mr. Mamone, do you have any statement?
Mr. MAMONE. I have a few comments, if I may.
Mr. Moss. Proceed.
TESTIMONY OP RUSSELL B. MAMONE
Mr. MAMONE. Thank you, Mr. Chairman.
I specifically wish to reiterate to the committee that on October
8, 1976, the date on which I was informed that I had been trans-
ferred to the hydroelectric licensing section, Mr. Journey never made
any statement whatsoever concerning my work. He made no state-
ment whatsoever concerning Commissioner Watt or any statement
PAGENO="0694"
688
by Commissioner Watt. He did not mention any of the opinions that
Mr. Journey and Commissioner Watt referred to in their recent tes-
timony of the last few days.
Furthermore, Mr. Chairman, the General Counsel, as well as Mr.
Griffin, his assistant, never made any statement on October 8 that
the reorganization or my transfer was for the purpose of following
the civil service rule as to job rotation. There is no policy on job
rotation within the Office of the General Counsel under Mr. Journey.
In fact, several attorneys have asked to be rotated in the past and
they have been denied that request.
I would point out to the committee that the opinions that Mr.
Journey and Commissioner Watt referred to were written by Com-
missioner Watt-and the first opinion that has any apparent criti-
cism of me was issued on June 29, 1976, which according to the
testimony of Commissioner Watt yesterday was long after he formed
an opinion that my work product was not satisfactory.
The other opinion in the Tenneco Oil Company case, Opinion
789, was issued in March of this year, some 5 months after I had
been transferred out of the natural gas regulation area.
I do not see how that could have any impact on a decision made
in October of 1976.
On yesterday, when Commissioner Watt referred to Opinion 789,
the Tenneco opinion, he did not cite to the committee the following
statement which is in the opinion, paragraph 60, page 20.
It states that on January 9, 1976, the staff moved for a reopening
of these proceedings to develop further evidence on the current
fertilizer and ammonia supply situation.
In spite of the fact that this motion of the staff had been made
14 months prior to the opinion, Mr. Watt and Mr. Journey saw fit
to criticize me for attempting to bring to the attention of the Com-
mission the vastly changed situation in the fertilizer area.
The Administrative Law Judge in this very case refers to pre-
cisely the same article in the New York Times referring to the
changed circumstances in the fertilizer industry.
That report was based on an interview with officials of the World
Bank.
The Commission staff has subsequently received reports from the
United States Department of Agriculture confirming the substantial
change in the ammor~ia and fertilizer situation, and the motion of
the staff was based on these changes.
The only other material in our brief which was the subject of
criticism by Commissioner Watt and Mr. Journey also related to the
fertilizer situation.
One of the articles was the proceeding of the 24th annual meeting
of the Soil Conservation Society of America; the 90th annual Con-
ference of the American Water Works Association. These were
materials we sought to bring to the attention of the Commission to
show that there were additional factors which should be considered,
and we sought to have the record reopened for these purposes some
14 months prior to the opinion in which the staff is criticized by
Commissioner Watt and Mr. Journey.
PAGENO="0695"
689
Additionally, the subcommittee should be aware that on February
28, 1977, an order was issued by the Commission in a case entitled
Atlanta Gas Light Company v. Southern Natural Gas Company,
Docket CP74-329 by James G. Watt, Acting Chairman; Don Smith;
and John H. Holloman, III, which in that case involving the
Columbia Nitrogen Corporation, involving the gas supply for the
Columbia Nitrogen Corporation for the production of fertilizer,
and it specifically directed the parties to submit new briefs on a
number of subjects, including "and the current national supply
outlook for fertilizer."
I believe, Mr. Chairman, that these matters should be supple-
mented in the record to show that there was a valid basis for the
staff's request for reopening the record and a valid basis for attempt-
ing to bring to the Commission's attention the important changes in
this particular situation which we thought was worthy of their
consideration.
Thank you, Mr. Chairman.
Mr. Moss. Thank you.
If you will submit those statements to the staff, they will be re-
viewed for inclusion in the record, and the record will be held open
at this point to receive that material.
Mr. MAM0NE. Thank you, sir.
[The following statements were received for the record:]
PAGENO="0696"
690
UNITED STATES OF L~MERICA
FEDERAL POWER COMMISSION
Before Commissioners: James G. Watt, Acting Chairman;
Don S. Smith, and John H. Holloman III.
Atlanta Gas Light Company ) Docket No. CP74-329
V.
Southern Natural Gas Company
ORDER REQUIRING ADDITIONAL BRIEFS
(Issued February 28, 1977)
This proceeding involves the application of Atlanta Gas
Light Company (Atlanta) for an order under Section 7(a) of the
Natural Gas Act directing Southern Natural Gas Company (Southern)
to shift certain contract demand quantities of gas from the
Atlanta area devlivery point to the Augusta area delivery point.
The proposed transfer would enable Atlanta to provide additional
firm gas service to Columbia Nitrogen Corporation and Nipro, Inc.
(Columbia). The gas required for these plants will be used
for plant protection and for feedstock in the production of
fertilizer.
On October 18, 1976, this Commission issued an order
modifying the initial decision in this proceeding. That
order effectively denied Atlanta's application. Applications
for rehearing were filed by Atlanta and Columbia. L~n untimely
application for rehearing was filed by the Public Service
Commission of the State of Georgia. On December 17, 1976, the
Commission granted rehearing for purposes of further consider-
ation.
After the close of the record in this proceeding, this
Commission issued an order implementing an interim curtailment
plan on the Southern system. 1/ That curtailment plan, inter
1/ Southern Natural Gas Co., Opinion No. 747, Docket No. RP74-6,
November 20, 1975; Opinion No. 747-B, May 21, 1976.
DC-B-28
PAGENO="0697"
691
alia abolished the AO-CD distinction and the firm-interruptible
ar~Einction. That action had the collateral affect of changing
the nature of this proceeding. Additionally, during the current
heating season Southern has experienced unprecedented demands for
its gas and has been forced to curtail into Priority 1.
Because of the factors enumerated above, we feel it would
be appropriate for the parties to file new briefs in this
proceeding discussing this application in terms of the current
curtailment situation on Southern's system. Briefing on this
matter should include, but is not limited to, the ability of
Southern to serve this new high priority load; the ability of
Atlanta to serve the load without approval of the instant
application by use of its own peak shaving facilities or by
curtailment of other customers, or any other means at its
disposal; Atlanta's current policy regarding the addition of
new residential, commercial, and industrial customers; and the
current national supply outlook for fertilizer. In accord
with the Administrative Procedure Act, the briefs of the
parties should discuss only those facts which are in records
filed with, or made before, the Federal Power Commission,
or matters of which administrative notice may be taken.
The Commission finds:
It is appropriate and proper in the administration of the
Natural Gas Act to require the filing of additional briefs in
this proceeding.
The Commission orders:
(A) Simultaneous briefs shall be filed by all parties
with this Commission on or before March 15, 1977.
(B) Simultaneous reply briefs shall be filed with the
Commission on or before March 30, 1977.
By the Commission.
(SEAL)
Kenneth F. Plumb,
Secretary.
PAGENO="0698"
692
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
OPINION NO.. 789
Tenneco Oil Company, et al. ) Docket No. C175-45, et al.
OPINION AND ORDER REQUIRING THE FILING OF AMENDED
APPLICATIONS, GRANTING TEMPORARY AND PERNANENT
CERTIFICATES AND OTHER RELIEF
IN CONSOLIDATED PROCEEDINGS
Issued: March 7, 1977
DC-B-47
PAGENO="0699"
693
UNITED STATES OF A~RICA
FEDERAL POWER CD~IISSION
Tenneco Oil Company, et al. ) Docket No. C175-45, et al
OPINION NO. 789
APPEARANCES
Bruce ~ Cordon Gooch and Michael B. Silva for Tenneco Oil
Company
Justin R. Wolf, William M. Lange and Paul W. Ricks for Placid
Oil Company
Justin R. Wolf, William M. Lange and Robert W. Henderson for
Hunt Petroleum Corporation, Hunt Industries and Hunt Oil
Company
Justin R. Wolf, William M. Lan~ē and Dick Coates for HamiltOn
Brothers Oil Company and Hamilton Brothers Exploration Company
Richard F. Generelly and Charles R. Fellows for Kewanee Oil
Company
Richard F. Generelly and W. 0. Strong, III, for Ashland Oil, Inc.
tt W. Davis, III, and J. Evans Attwell for TransOcean Oil,
Inc.
Harold L. Talisman, Peter L. Hatton, Leland F. Cadenhead,
Lilyan C. Silbert, John S. Grube and Anthony D. Pryor for
Tennessee Gas Pipeline Company, a Division of Tenneco Inc.
and Tenneco Chemicals, Inc.
James J. Floods Jr., Brian D. O'Neill and John D. Townssnd for
Trunkline Gas Company
Philip C. Wrang]~, Ronald L. Kuehn, Jr., and Walter M. Starke
for Southern Natural Gas Company
PAGENO="0700"
694
Jack Vickr~~, W.B. Cassin, P.D. Endom, ~ J. Gunn and
J.A._Tramuto for United Gas Pipe Line Company
Tom Burton for Ammonia Enterprises Pipeline, Inc., and
Continental Oil Company
William A. Wood and Thomas G. Johnson for Shell Oil Company
Peter H. Schiff and Richard A. Solomon for the Public Service
Commission of the State of New York
Frederick Mori~ and Kenneth Rubin for Associated Gas
Distributors
Jerome Ackerman and Luize Z. Laitos for Air Products and
Chemicals, Inc.
Thomas Hudson for Olin Corporation
Linda E. Buck, .J. R. Patton, David B. Robinson, James G. Bete
and Harry E. Barsh for Louisiana Department of Conservation
I~y~Golub, Steven M. Hackerman and Walter W. Kurczewski for
Swift Chemical Company
Sam Riggs, Jr., E. L. Creasey, B. E. Potts and Robert S. Wheeler
for Cities Service Oil Company
hn W. Glendening, Jr., John S. Schmid and Paul W. Fox for
Bay State Gas Company, et al.
Edward H. Gerstenfield and Alfred L. Price for First Mississippi
Corporation
George A. Avery for Consumers Power Company
Stephen A. Herman for CF Industries, Inc.
David W. Bowman and B.H. Hughes fc~ Firestc~e Tire and Rubber Company
William A. Mogel for OKC Corporation
Russell Mamone and Robert Aber for the Staff of the Federal
Power Commission
PAGENO="0701"
695
UNITED STATES OF AMERICA
FEDERAL POWER COMMISSION
Before Commissioners: Richard L. Dunham, Chairman;
Don S. Smith, John H. Holloman III,
and James C. Watt.
Tenneco Oil Company, et al. ) Docket No. C175-45,
etal.
OPINION NO. 789
OPINION AND ORDER REQUIRING THE FILING OF AMENDED
APPLICATIONS, GRANTING TEMPORARY AND PERMANENT
CERTIFICATES AND OTHER RELIEF
IN CONSOLIDATED PROCEEDINGS
(Issued March 7, 1977)
, Commissioner:
1. This is a consolidated proceeding concerning multiple
applications seeking authority pursuant to Section 7 of the
Natural Gas Act (15 U.S.C. § 717f) to sell or transport
natural gas in interstate commerce and to construct facili-
ties fer such transportation and sale. The major
issue to be decided in this proceeding is
wnether natural gas produced from the offshore Federal
Domain may be sold by or utilized by the producer for pur-
poses other than resale in interstate commerce. For the
reasons set forth herein ~/ we determine that such sales
or utilization are presently permitted by the public
interest to the extent that such gas is to be sold or
utilized for essential high priority (process or feed-
stock) purposes.
1/ See particularly paragraphs 63-73 infra.
PAGENO="0702"
696
The Initial Decision established a framework which we
shall follow in order to avoid confusion due to the multi-
plicity of applications. The applications were divided
into the South Marsh Island Transactions, the Tennessee
Gas Pipeline Company Transactions, and the Ammonia Enter-
prises Pipeline, Inc. Project. a~
FACTUAL BACKGROUND
The South Marsh Island Transactions
2. The applications filed herein commit 100% of the gas
reserves in Blocks 268, 269 and 281 of the South Marsh
Island Area, offshore Louisiana, to various interstate
pipelines subject to an option retained by each producer
to reserve a portion of such reserves for its own use
and disposition. Applications were also filed by Trunklifle
Gas Company (Trunkline) and Southern Natural Gas Company
(Southern) for the construction of offshore and onshore
facilities necessary to deliver this gas from offshore
platforms to onshore delivery points. As of July 1, 1974,
the aggregate proven and probable reserves in these blocks
were estimated to be 366 billion cubic feet (Bcf) of natural
gas. The estimated potential reserves underlying the
11,450 acre tract were approximately 1.2 trillion cubic
feet.
3. The producer applications contain reservations of up
to 50 percent of the reserves. The producers' reserved gas
will be used for the production of anhydrous ammonia,
an essential ingredient of agricultural fertilizer. It
is proposed, on an annual basis~ to use nearly 37 Bcf of
natural gas from the South Marsh Block for the production
of 1,175,000 tons of anhydrous ammonia.
2/ Ammonia Enterprises Pipeline, Inc. requested permission
to withdzaw its application in Docket No. CP75-268
on December 11, l9'75.
PAGENO="0703"
697
4. The producers are the Placid Group, Ashland Group and
TransOcean. Their dedication of the gas supply is contained
in advance payment agreements between Trunkline, Southern
and the individual producers. The initial gas purchase
contracts were executed simultaneously with the advance
payment agreements containing volumetric limits which
provide for an aggregate sale to the pipeline purchasers
of 395 Bcf. Subsequent gas purchase contracts, which are
required to be executed by the parties, will be substantially
identical with those before us except as to price. The
contracts provide that the new" price is to be the highest regulated
price available to comparable producers of offshore gas at
the date the new gas purchase contracts are made.
5. The daily deliverability from these three blocks will
reach 300,000 Mcf/d during the third year of operation and
will continue at that level until 1983 when it will decline.
Under the contracts, the producers have proposed to supply
150,000 Mcf/d for sale to interstate pipelines. The issue
presented by these applications is the validity of the
producers' reservation of a portion of the offshore gas
for high priority industrial use.
6. All of the gas will be transported from the offshore
platforms to a point in St. Mary Parish, Louisiana via new
offshore facilities to be built by Trunkline. In Docket
No. CP75-l9, Trunkline has requested Commission authorization
to construct these facilities. In the same docket, Trunkline
also proposes to build onshore facilities in St. Mary's
Parish to deliver the gas for processing by the producers
at the Calumet Plant or a second potential plant. In Docket No.
CP75-l49, Trunkline has filed a separate application for
the side-valve and tap which would enable Trunkline to deliver
up to 140,000 Mcf/d to Southern. The total estimated cost
of the facilities proposed to be built by Trunkline is
$33,124, 000. 00, including interest during construction and
Contingencies.
7. Trunkline filed an Environmental Impact Statement which
the Judge reviewed and concluded therefrom that the project
was not a major federal act significantly affecting the
environment. The Judge concluded that the facilities pro-
posed to be constructed by Trunkline met the conventional
standards of public convenience and necessity and that the
construction and operation thereof should be certificated.
8. In Docket No. CP75-l63, Southern applied for authority
to construct about one-half mile of pipeline and install
compression facilities so that Southern would be able to
PAGENO="0704"
698
receive the gas transported for it by Trunkline into its
existing system. The aggregate cost of the facilities
was estinated at $2,448,475. In Docket No. CP75-3l6, the
Judge also approved the construction of the proposed
facilities, whereby Southern would transport the natural
gas from the compressor station to a new ammonia plant
proposed to be constructed. The Judge found that Southern's
transportation charges were just and reasonable.
The Placid Group
~ In the applications before us, Placid Oil Company and others
(Placid Group) have applied for authorization to sell 189 Bcf of
natural gas to Trunkline and Southern. .~/ The placid (roup
has contractually reserved 50 percent of its gross salesr or up to
94.5 Bcf, for use in an anhydrous ammonia plant owned by the i5roducers
and First Mississippi Corporation (First Mississippi). it
is anticipated that the plant will require approximately
47,800 Mcf/d.
10. First Mississippi alleges that its primary corporate objective
has been to build a new ammonia plant. In 1975, First
Mississippi entered into a joint venture with the Placid
Group to build and operate the proposed Ampro plant. First
Mississippi has a 25 percent interest in the proposed plant
and is to be responsible for the construction, operation and
marKeting of production. The total required investment
is estimated at $80,000,000. Financing for construction
cannot be obtained until a supply of natural gas can be
assured.
3/ Placid Oil Company (Trunkline)
Docket No. CI75-59 74 Bcf
Hunt Petroleum Corp. (Trunkline)
Docket No. CI75-66 7 Bcf
Hunt Industries (Trunkline)
Docket No. C17567 7 Bcf
Hamilton Bros. Oil Co. (Trunkline) 23 Bcf Small
Producer
Hamilton Bros. Expl. Co. (Trunkline) Bcf
Total Gross sales to Trunkline 115 Bcf
Hunt Oil Co. (Southern) 74 Bcf, Dkt. No.
C175-68
Placid group--Total Gross sales
to Trunkline and Southern 189 Bcf
PAGENO="0705"
699
The Ashland Group
11. The Ashland Group has also reserved the ~ntractual right to use up
to 50 percent of its gross sales in the manufacture of anhydrous
ammonia and proposes to build and operate an anhydrous ammonia
manufacturing plant in the same area as the Ampro plant, which
will be located in Donaldsonville, Louisjana.3/The fertilizer
is to be sold to CF Industries, Inc. (CF), an agricultural
cooperative association which is owned by nineteen regional
Cooperatives located in the fifteen states and two Canadian
provinces. The plant will cost approximately $73,000,000 and
will produce about 420,000 tons of ammonia annually. It is
estimated that 43,500 Mcf per day of natural gas will be
required for feedstock and process (reformer fuel) purposes.
It is anticipated the Ashland Group and Mesa Petroleum
Corporation (Mesa) will supply the plant with natural gas in
proportion to their ownership in the plant. 4J There is an
outstanding agreement with Trunkline for the transportation
of up to 25,177 Mcf/d from South Marsh Island to Shadyside,
Louisiana, dated April 29, 1975. A similar transportation
agreement between Trunkliné and the Placid Group is the
subject of Trunkline's applicatiob in Docket No. CP75-330.
The agreement between the Ashland Group and Southern for
transportation is currently under negotiation.
4/ Ashland Oil, Inc. (Trunkline) 56 Bcf
Docket No. C175-122
Highland Resources, Inc. (Trunkline) ... 23 Bcf
Docket No. C175-733
Kewamee Oil Co. (Trunkline)
Docket No. C175-69 7 Bcf
Gross sales - all to Trunkline 86 Bcf
~` Ashland Oil 35.0%
Highland Resources, Inc. 11.5%
Kewanee Oil Company 3.5%
Mesa 50.0%
87-292 0 - 77 - 45
PAGENO="0706"
700
TransOcean
12. TransOcean proposes to sell its reserves (120 BCF) to
Southern subject to its contractual rights to reserve for ten years
beginning January 1, 1976, for use in the nitrogen and
fertilizer manufacturing complex of a corporate affiliate,
up to 35,393 Mcf/d plus reserve PVR Gas and Btu adjustment
gas, but not to exceed (1) 11,743,875 Mcf plus reserve PVR
gas and Btu adjustment gas annually, or (2) one-half of
TransOcean's total reserves in the ten year period.
13. TransOcean, an independent oil and gas producer, is an
87 percent owned subsidiary of Vickers Energy Corporatiofl~ a
wholly owned subsidiary of Esmark, Inc. Swift Agricultural
Chemicals Corporation is also a corporate subsidiary of
Esmark, Inc. and is a major manufacturer of agricultural
fertilizers which buys substantially all the production
from the Beaumont Nitrogen Complex. The plant was built in
1967 and cannot be converted to alternate fuel. It requires
a maximum of 35,393 Mcf per day or a total of 11,743,875
Mcf per year to operate at full capacity.
INITIAL DECISION
14. Although the Placid group arid the Ashland group
requested authorization to retain 50 percent of their
respective offshore reserves, the Presiding Administrative
Law Judge found that a reservation of up to 35 percent of
their South Marsh Island reserves would be in the public
interest. Recognizing that Trunkline, United, and Southern
needed these supplies of gas for the interstate market
in order to ameloriate their current and projected levels
of curtailment, the Judge framed the issue in the case as
being whether the requirements of public convenience and
necessity permit the certification of such reserves to
supply the high-priority needs of anhydrous ammonia plants.
After thoroughly reviewing the rationale of The chancteleur case, 6/
Opinion Nos. 727 7/ and 743 8/, the Judge onncluded that "the South Marsh Island
Y ~ )
affirming in Chandeleur Pipeline Coqpapj, 44 F.P.C. 1747)
(1970), which had reconsidered, pursuant to the remand
FPC, 436 F. 2d 904 (D.C. r., 1970) ~nd reaffirmed, v.
Chandeleur Pipeline Comp~p~y~, 42 F.P.C. 20 (1969).
7/ Tennessee Gas Pipeline Company, et al., _F.P.C.
Docket No. CP72-6, April 17, 1975; `Order Denying
Rehearing", June 12, 1975.
8/ Mobil Oil Corporation, _F.P.C._, Docket No. CI73-402,
et al., September 9, 1975.
PAGENO="0707"
701
producers shouldeach be permitted to reserve up to 20
percent of their respective interests as the `incentive
allotment alone'." Further recognizing that the Placid
and Ashland groups would use this gas for new plants to
expand the anhydrous ammonia industry, the Judge referred
-to the Commission's Findings and Order after Rulemaking in
Docket No. RM74-14, issued July 16, 1974. From page 13 of the
mimeo, he cited the following:
If the basic feedstock for an end use is
non-substitutable, as in the case of natural gas
used for the production of nitrogen fertilizer or
for other special applications in the petrochemical
industry, there can be no reference to other fuels,
and the burden of the shortfall must either be
equitably shared on a priority basis by the affected
industry, or a hard and critical choice must be made
to grant a higher priority to the industry determined
to be most important to the national welfare."
After examining the record establishing the need for the end
product, the Judge concluded that the use of 35 percent of
the reserve gas would be appropriate.
15. In order to continue the operation of the existing
Beaumont Nitrogen Complex, the Judge authorized Transocean
to transport the full 50 percent of its offshores reserves.
Since Mobil has contracted to continue to supply the
plants through 1976, the Judge limited the transportation
authorization to nine years, rather than 10, starting on
January 1, 1977. The Judge distinguished the Placid and
Ashland groups from Transocean solely on the bas.is
that the latter plant was existing while the other two were
still in the planning or construction stage.
The Tenne3see Gas Pipeline Transactions
The East Cameron Block 33 Proposals
16. In Docket No. CP73-339, Tennessee applied for certif i-
cation to construct four-tenths of a mile of sixteen-inch
pipeline. In June 1974, the Commission authorized the
construction of the facilities to enable Tennessee to begin
purchasing the gas from Conoco and Cities Service. The
Commission also certificated the sale and Tennessee began
purchasing the supply in 1974; however, administrative
hearings on the transportation issues were deferred.
PAGENO="0708"
702
17. Conoco and Cities Service have agreed to dedicate to
Tennessee one-half of the recoverable gas reserves from
their respective one-third interests in the East Cameron
Block 33 and Tennessee has agreed to transport the other
half of the gas for the two producers' own use. The tern
of the transportation agreement is twenty years. The
total recoverable reserves were estimated to be 140 Bcf
with an estimated daily deliverability of 100,000 Mcf.
The transportation rate to be charged is the sum of (1) the
then current offshore transportation cost per Mcf adjusted
to reflect the cost of additional facilities required, if
any, and (2) the then current onshore transportation rate
per Mcf. The exact rate to. be charged will be based upon
Tennessee's cost at the time it is issued in a rate schedule
filing.
18. Conoco proposes to use its gas to meet preexisting
commitments for sale of gas in the Lake Charles area,
and Cities Service proposes to use the gas in its own
refinery. Conoco's supply would be delivered to Olin
Corporation (Olin) and Firestone Tire and Rubber Company
(Firestone) for use in their industrial facilities under
contracts which expire in 1984. At the time of hearing,
Conoco was contractually required to sell and deliver.
to Olin and Firestone their requirements of natural gas,
not to exceed 100,000 Mcf/d to Olin and 1,700 Mcf/d to
Firestone. These customers have previously obtained their
gas supply from Conoco through its intrastate pipeline
system at Lake Charles, under long term, firm industrial
contracts made in the early 1960's. Conoco submitted
evidence which substantiated its claim that it cannot
continue to meet these contract requirements from
solely intrastate reserves, but that it must use some
of its offshore reserves.
19. In 1972, Cono~ was delivering approxirrately 10,000 ~f/d
to Firestone for use in its facilities. Since 1973, the
Firestone contract has been amended whereby its daily
supply has been reduced to 1,700 Mcf/d for process and
safety gas usage in the plant. Firestone has installed the
necessary equipment and storage facilities to use substitute
fuels for all other purposes.
PAGENO="0709"
703
20. Olin's facility produces four product groups: (1) ammonia
urea and nitrogen-containing products; (2) toluene diamine
(TDA) and toluene diisocyanate (TDI); (3) soda ash; and
(4) Thermolin RF230 and 101. Olin's ammonia plant is one
of the largest in the world. At the time of hearing,
it was estimated that this plant consumed about two-thirds of
all gas used at the facility. Subsequent to the conclusion
of the hearing, Olin filed a contract amendment dated
July 17, 1975, which provided for the reduction of the plant's
daily demand from 100,000 Mcf/d to 45,000 Mcf/d by July 1,
1977. The amendment permits Conoco to supply alternate
fuels in accordance with the conversion scheduled to be
undertaken by Olin.
21. The transportation of Cities Service's interest in
Block 33 East Cameron reserves is a second effort to obtain
Commission authorization for the transportation of offshore
gas to onshore Louisiana for the Company's use in its
refinery. Based on the present rate of delivery, the
50 percent reservation sought herein would provide 16,250 Mcf/d.
Citing the self-help measures undertaken by Cities Service
to reduce natural gas consumption and the substantial decrease
in gas supply and usage, the Presiding Judge concluded that
the public interest required the authorizatipn of the
proposed transportation by Tennessee of a maximum of 35 percent
of the total production from Cities Service's reserves. Cities
Service's intrastate supply as well as its interstate supply
from onshore sources declined over 67 percent from 1970-74
and is anticipated to continue to decline substantially
after 1975 due to the projected loss of 20,000 Mcf/d of
spot purchases and increase in curtailment by United.
22. Pursuant to Opinion No. 727, none of the gas transported
from Cities Services' reserves can be used as boiler fuel.
The Commission provided that three months subsequent to the
date of the issuance of the opinion, none of natural gas from
any of the sources could be used for that purpose in the
refinery complex. The three months period allowed the
necessary tine to convert boilers to alternate fuel, which
has been completed.
87-292 0 - 77 - 46
PAGENO="0710"
704
23. The Judge found in the instant proceeding that the condi-
tión in Opinion No. 727 with respect to boiler fuel should
riot be incorporated herein except with the qualification that
follows: No part of the transported fuel shall be used for
boiler fuel except in mixture with by-product (or `complex")
gas and consumption of all natural gas in the plant for such
purposes should not exceed an annual average 3% of the energy
requirements of the complex.
24. Offshore Louisiana gas sales made by Cities during 1974
averaged about 373,000 Mcf/d in addition to 31,000 Mcf/d
from onshore Southern Louisiana properties. Opinion No. 727
authorized the transportation of 5000 Mcf/d. The initial
decision would allow an additional 11,375 totalling approxi-
mately 16,000 Mcf/d from its own offshore reserves, which is
about 4.3% of Cities sales from all its offshore sources.
Tenneco and Shell
25. This series of transactions includes applications filed
by Tennessee to initiate or continue transportation or ex-
change services for Tenneco and Shell. In Docket Nos. CP75-
23 and CP75-120, Tennessee seeks authorization to transport
gas reserved by Tenneco under a 1974 sales agreement with
Tennessee from Vermilion Block 246, Offshore Louisiana ~fl
the Federal Domain. Tennessee is to redeliver the gas to
Creole Gas Pipe Line Corporation (Creole), for resale to
Air Products, a manufacturer, and Tenneco's Chalnette Refinery.
In Docket No. C175-45, Tenneco seeks authority to make,
continue and increase the foregoing sale to Creole for re-
sale to Air Products. Contemporaneously, Tenneco seeks
transportation authorization of its gas to creole for redelivery
to Air Products. Shell has a similar application filed in
Docket No. C175-684. Shell's application was filed at
the direction of the Commission and is conditional upon the
Commission's finding that its sale to Creole is jurisdictional.
In Docket No. C175-l07, Shell petitioned for a disclaimer
of jurisdiction. Tennessee's application to transport STiell's
gas was filed in Docket No. CP75-ll9.
2. Creole is an intrastate natural gas pipeline system
which extends from Yscloskey to Chalnette. Creole has no
gas supplies of its own and has only access to such at the
Yscloskey plant from Shell and Tenneco. previously, all
the gas received by Creole has been transported to Yscloskey
PAGENO="0711"
705
by Tennessee for Shell or Tenneco without any certificate
authorization by the Commission. When it began in 1965,
only gas which originated and was consumed within the state
of Louisiana was transported.
27. In August, 1963, Shell and Creole and American Sugar
Company entered into an arrangement by which Shell's gas
was sold to the latter. The arrangement was structured so that
it was ostensibly a sale to Creole for resale to American
Sugar, with a direct and contemporaneous contract executed
between American Sugar and Shell warranting Shell's reserves.
In 1964, Shell negoiated a similar arrangement with Air
Products. However, after requesting that Tennessee transport
Shell's gas through its existing facilities to the Yscloskey
plant for redelivery to Shell, Tennessee stated it would
be willing to transport that gas, provided half of Air
Products' plant requirements would be furnished by Tenneco.
On August 14, 1964, a letter agreement between Shell and
Tenneco was executed. Creole requested that the sale by the
producers to the industrial customers it served be structured
as a sale to Creole for resale to those customers to avoid
the jurisdiction of the Louisiana Public Service Commission
over Creole 9/ and to help finance the new pipeline required
for the sale to Air Products.
28. All of the gas supplied by Shell has originated within
the state of Louisiana, whereas Tenneco's originated, or
is proposed to originate, at various points within the
states of Louisiana and Texas and offshore Louisiana in
the Federal Domain.
A. The Shell Petition for Disclaimer (Docket
No. C175-l07).
29. The Presiding Judge concluded that Creole's practical
function was purely that of a transporter, although there
is a sale by Shell to Creole followed by a sale to Air
Products. He found that the transaction did not fall within
the Section 1(b) of the Natural Gas Act, a "sale in interstate com-
merce of natural gas for resale for ultimate public consumption
9/ Tr. 1245.
PAGENO="0712"
706
for domestic, commercial, industrial, or any other use.
In analyzing the tern of art, resale "for ultimate public
consumption", the Judge found that Creole is not a public
service company, as the pipeline does not resell "to the
public" or "for ultimate public consumption" but only to a
private contract customer. The Judge further concluded
that the intrastate transportation of the natural gas via
interstate pipeline (i.e. Tennessee) does not covert the
transaction into an interstate sale. 1(~
30. In view of his finding with regard to Shell's peti-
tion for disclaimer of jurisdiction, the Presiding Judge
dismissed the conditional application filed in Docket
No. C175-684. In conjunction therewith, the Judge also
dismissed Tenneco's application for certification of its
sale to Creole to meet the remaining one-half of the
natural gas requirements of Air Products. The only
material difference between the transactions by Shell
and Tenneco is the source of the gas.
31. None of the parties to the proceeding excepted to the
Judge's finding that the proposed sales were non-jurisdic-
tional, although the Staff had asserted in brief to the
Judge that the transactions were jurisdictional. Our
independent review of the jurisdictional issue leads us
to conclude that the Judge's decision should be sustained.
The substance of the transactions is material, not the
form. Moreover, we find that the public interest
considerations are in no way jeopardized. As certification
of the transportation of these supplies is necessary
under Section 7 of the Natural Gas Act, the Commission is
able to ensure their delivery as authorized.
B. The Tennessee application to transport for
Shell - Docket No. CP75-ll9.
32. Tennessee filed an application seeking authorization
to continue the transportation of 35,000 Mcf per day of
natural gas from four delivery points within the state of
Louisiana for Shell to the Yscloskey plant. Under a Gas
Transportation Agreement dated August 13, 1964, as amended,
Tennessee and Shell agreed to the present volume of 35,000
Mcf per day. The Agreement also contained an option
lēr California v. La Vaca Gathering Company, 379 U.S. 366.
PAGENO="0713"
707
providing for a maximum contract volume of 42,500 Mcf per
day, which Shell elected to exercise, effective about Jan-
uary 1, 1976. Tennessee has requested authority to transport
this additional 7,500 Mcf per day.
33. The gas transported by Tennessee for Shell will ultimately
be consumed by three industrials, Air Products, OKC, or
Amstar, within the state of Louisiana. The record indicates
that actual deliveries have been substantially smaller than
the contract maximum. The rate formula for such transporta-
tion is Tennessee's average transportation rate per Mcf per hundred
miles Facilities a].readv in r'lace or certificated
for other purposes will be used to effectuate this transaction.
The Judge concluded that the transportation rate was just
and reasonable.
34. The Judge limited his inquiry to potential adverse effects
that proposed intrastate transportation might have on Tennessee's
interstate operation of the facilities used. None of the
parties objected to the proposed certification. New York
supported it on the basis that the gas otherwise would not
be available to the interstate market and thus would allow
a larger portion of the interstate pipeline facilities to
lie idle. By utilizing these facilities, the cost of
service to the ratepayers will be reduced.
C. Tennessee's application for authority to transport gas for
Tenneco for consumption by Air Products--Docket No. CP75-23.
The joint application of Tennessee and Tennecd for authority
to exchange and transport gas for Tenneco for consumption
in its Chalmette refinery-- flnokei- No. CP75-120.
35. These two applications involve the transportation by
Tennessee for Tenneco of natural gas from several onshore
and offshore delivery points to Creole for delivery
to Air Products' plant, Docket No. CP75-23, and the
Chalmette refinery, Docket No. CP75-l20. Underlying
these applications are two agreements. The original
transportation agreement between Tennessee and Tenneco
Oil, dated September 14, 1964, provided for the
transportation of onshore intrastate gas in a quantity
of 15,000 Mcf per day from Lake Barre, Louisiana, to
Creole. When the Lake Barre gas reserves began to diminish
in 1966, Tenneco Oil began to deliver gas from the Federal
PAGENO="0714"
708
Domain. The present applications add two new delivery points,
Vermilion Block 246 and a well in Terrebonne Parish. In its
application, Tenneco proposed to increase the maximum aggregate
daily transportation volumes to Creole for Air Products from
15,000 Mcf to 22,500 Mcf per day.
36. The second agreement incorporates by reference all
the delivery points mentioned in the first agreement and also
provides for delivery of volumes to Chalmette refinery.
It does not specify any volume,but testimony indicates
that Tenneco requests authority to transport up to 24,000
Mcf per day. Chalmette refinery is currently receiving
22,250 Mcf per day from Texaco under a contract which
terminates July 1, 1977. The total average refinery require-
ments are 33,838 Mcf per day.
~ The transportation rate will be a monthly charge
calculated by multiplying the total Mcf transported from
each point of receipt by a rate based on the pipeline
mileage involved and Tennessee's average charge per
hundred miles per Mcf applicable to the turnoff points of
receipt.
38. In Docket Nos. CP75-23 and CP75-120, the overriding
issue is the end use of the natural gas. Air Products,
an industrial consumer needs approximately 22,500 Mcf per day
from Tenneco and an equal amount from Shell. Tenneco Oil
proposes that its Chalmette refinery will use approximately
24,000 Mcf per day. Air Products proposes to use this supply
of natural gas in an existing ammonia plant and a proposed
additional plant in addition to an existing liquid hydrogen
plant and a second proposed liquid hydrogen plant. The existing
ammonia plant uses a maximum of 17,400 Mcf per day as feedstock
and 8,200 Mcf per day for process fuel. Air Products
had been using 4,800 Mcf per day for boiler fuel; however, the
record establishes that conversion of all boiler fuel use was
projected to be completed in November, 1975. About 85 percent
of the ammonia produced is used for the production of
agricultural fertilizer.
39. Air Products has purchased an idle ammonia plant
with a production capacity of 250 tons of ammonia per day.
The plant would use 5,300 Mcf per day for feedstock and
PAGENO="0715"
709
3,100 Mcf per day of natural gas for process heat in the
reforner. The plant, built in 1953, is currently located
in Kansas, however, Air Products proposed to nove the plant
to Louisiana. The Judge denied authorization, finding that
offshore Federal Domain gas would not be an efficient
use of the facilities or the gas.
40. Air Products liquid hydrogen plant produces about
32 tons of product per day. It was constructed in 1965
to serve the requirements of the National Aeronautics and
Space Administration; however, upon conpletion of the
Apollo and Skylab prograns, NASA's denand fell to about
20 percent of the output. Today,80 percent of the plant's
capacity is in use.
41. Due to the projected institution of the space shuttle
progran, NASA has contracted with Air Products to
provide a supply of liquid hydrogen which is double
the plant's current capacity. Air Products proposes
to build a new plant to fulfill this demand. The existing
plant requires 4,100 Mcf per day of natural gas as
feedstock and 2,300 Mcf per day for process heat in the
reformer. The new plant would require 4,300 Mcf per day for
orocess fuel. The total requirements for liquid hydrogen
production from both plants would be approximately 10,000
Mcf per day of natural gas.
42. The record establishes that there are only two other
liquid hydrogen plants in the eastern half of the United
States, which have a total capacity less than half of the
New Orleans plant. Long-distance transportation of liquid
hydrogen by cryogenic truck is not economically feasible.
Air Products alleges that the proposed use of natural gas
in both plants should be certificated due to the defense-
related use to which the liquid hydrogen will be put.
D. Chalmette Refinery
43. Tenneco's Chalmette refinery is its only refinery.
The refinery is designed to operate only on natural gas
and requires about 33,838 Mcf daily, in addition to 27,266 Ncf
per day of by-product gas. It produces liquid petroleum gas,
gasoline, kerosene, diesel and No. 2 oil, No. 6 fuel oil,
metallurgical coke, and a number of petrochemicals. Chalmette
presently uses natural gas as 12.5 percent feedstock, 12.5 percent
PAGENO="0716"
710
boiler fuel, and 75 percent process fuel. It uses no natural gas,
directly or indirectly, as boiler fuel to generate electricity,
but as a means of generating a supply of steam, which is
critical to the operation of the entire refinery.
44. In its brief to the Presiding Judge, Tenneco asserted
that 70 to 75 percent of the steam demand is normally
provided by waste heat from the process; however, in order
to provide the necessary amount of steam without affecting
reliability of the plant's operation, natural gas should be
used as the fuel to supply the supplemental energy necessary.
Tenneco argues that the use of liquid fuels would require
more complex instrumentation and increased maintenance.
~ Although none of the process facilities at Chalmette
were designed to burn liquid fuels, some conversion from
gas burners to carbonation burners permitting the use of
liquid fuels has commenced. Tenneco, however, argues that if
it is not allowed to have a portion of its gas transported for
use at Chalmette but is forced to use exclusively liquid fuel,
there will be a substantial drop in refined product and in
operating efficiency.
46. Chalmette now receives 22,250 Mcf daily from Texaco
under a contract which terminates July 1, 1977. Prior to
1973, it received about 13,800 Mcf. per day from Gulf Oil.
Until the Texaco contract terminates in `77, Tenneco seeks
authority to have transported 12,000 Mcf daily of its own
gas to maintain the complete gas operation, whereas
after 1977, Tenneco requests authorization to transport
24,000 Mcf per day.
47. The Presiding Judge found that the continued use of
13,900 Mcf per day in process units should be permitted
as it results in a net gain of energy equivalent to
31,200 Ncf per day in consumption and product. He also found
that it would be unobjectionable to reduce the risk of burner
failure by leaving the gas burners in place to pick up
the load in an emergency situation only. He concluded that the
plant should be converted within the two years, so as to consume
not over 13,900 Mcf/d on the average, plus emergency gas
required in the event of oil burner failure in steam
generators.
PAGENO="0717"
711
48. The Judge authorized the transportation of natural
gas to meet the average daily requirements of Air
Products, which total 36,300 Mcf, of which 25,600 Mcf
are for the existing ammonia plant, 6,400 Mcf for the
existing liquid hydrogen plant, and 4,300 Mcf for the new
liquid hydrogen plant. In order to satisfy Shell's
obligation to Air Products, Tennessee was authorized to
transport intrastate gas on a segment of its interstate
pipeline. Specifically, Tennessee was authorized to
transport for Shell up to 16,000 Mcf/d until
December 1, 1977 or the date of completion of Air Pro-
ducts' new liquid hydrogen plant, and thereafter up to 18,150
Mcf/d.
49. With regard to the Chalmette refinery, the Judge authorized
the transportation of up to 12,000 Mcf per day until the termina-
tion of Tenneco's current contract with Texaco, thereafter
be authorized. He also provided that the volumes specified were
average volumes for a 60-day period.
50. Although recognizing that delivery from South Timbalier
Blocks 22 and 27 and West Cameron Block 201 commenced in 1966
to Air Products without certification, he found no evidence
of willful violation of the Natural Gas Act of any of the
Commission's Regulations. He further found that had appli-
cations been filed with the Commission, "they would un-
doubtedly have been approved on the theory of Chandeleur. "]~/
He concluded that Tenneco's offshore deliveries for sale to
Air Products' plants and use in its own refinery represented
less than 4/10 of one percent of its total deliverability.
He specifically found that the reservation of 25 percent
of Vermilion Block 246 was in the public interest, finding
the total percentage of offshore gas reserved for Tenneco's
account to be less than 9/10 of one percent of Tenneco's
offshore deliveries.
E. Docket 190. C175-105.
51. Tenneco applied for a certificate authorizing the sale
to Tennessee of 75 percent of its interest in Vermilion
Block 246, Offshore Louisiana. On February 6, 1975, the
Commission issued a temporary certificate authorizing
commencement of the sale. The Judge granted a permanent
certificate for the foregoing sale, subject to the ac-
ceptance by Tennessee for the certificates granted in Docket
No. CP75-23 and CP75-l20.
ii7~imeo, page 86.
PAGENO="0718"
712
THE RECORD EVIDENCE
52. The record in this case establishes that present nitrogen
fertilizer production capacity must be maintained and utilized.
The public interest in maintenance of an adequate supply of
nitrogen fertilizers has been repeatedly recognized not only
by Congress 1Z/ but also by this Commission. 13/ The record
reflects that the use of nitrogen fertilizers results in higher
yields and lower unit costs of agricultural products and is
"essential to this country's food and plant based fiber pro-
duction."
53. As evidenced by the Commission's repeated grants of extra-
ordinary relief from curtailment flow to allow continued pro-
duction of fertilizer, the use of gas for fertilizer production
is superior to the vast majority of industrial uses. The
Applicants assert that the denial of the reservation would
divert gas from fertilizer production and allocate it to in-
ferior industrial uses.
54. Ammonia production in the United States is of critical
importance to this nation's welfare. Dr. John Douglas of the
Tennessee Valley Authority testified that the supply of fer-
tilizer by 1980 would be very tight "unless every single plant
that has been announced obtains gas somewhere, and unless we
probably have even more plants than have been announced."
(Tr. ). He predicted that the price of nitrogen would
rise as the supply would decrease, thus raising the farmer's
cost and, in the long run, the cost of food to the consumers.
The public interest in producing more abundant supplies of
nitrogen fertilizer is patently obvious. Dr. Douglas testified
that this nation must increase its present productive capacity
of 17.5 million tons of ammonia to between 24 and 26 million
tons by 1980 if requirements of nitrogen for fertilizer use
are to be met (Tr. 1456).
12/ S. Res. 289, 93d. Cong., 2d Sess., 120 Cong. Rec. S. 2392
(Daily ed. Fed. 27, 1974); S. Res. 391, 93d. Cong., 2d Sess.
~/ United Gas Pipe Line_Co. (Mississippi Chemical Corp~),
Docket No. RP74-37-l (1975); Southern Natural Gas Co.
(Kaiser Aluminum and Chemical Corp~), Docket Nos. RP74-6
and RP74-l7l-3 (1974); Southern Natural Gas Co., Opinion
No. 696, Docket No. CP72-52 (1974); Texas Eastern Trans
mission Corp. (Carnegie Natural Gas Co.), Opinion No. 716,
Docket No. RP74-39-8 (1975); Florida Gas Transmission Co.
(Basic Magnesia, Inc., et al.), Docket No. RP74-50-l,
etal. (1974).
PAGENO="0719"
713
55. TVA summaries, as of April 15, 1975, indicate that the
current announced capacity for domestic ammonia production will
yield an apparent capacity of 25.5 million tons per year by
1980 (Tr. 1458). No provision, howeyer, has been made for
normal closures of obsolete plants. By 1980 some 25 to 30
ammonia plants in the United States will be over 20 years old.
These plants have a listed annual capacity of between two and
three million tons of anhydrous ammonia. It is Dr. Douglas's
opinion that we can expect at least one-half of these plants
to be closed by 1980. That figures in the apparent projected
capacity for 1980 by one to 1.5 million tons per year.
56. Furthermore, Dr. Douglas's estimates of projected capacity
are based solely on announced intentions. He qualified his
projection by recognizing that not all of the announced plants
may be built due to potential shortages of necessary natural
gas for fuel and feedstocks..
57. Mr. Edwin M. Wheeler, President of the Fertilizer Insti-
tute, testified that a shortfall in excess of 1.1 million tons
of nitrogen will occur in 1980. The underlying basis for
these projections is the steadily increasing demand for nitrogen
fertilizer, due to the continuing effort by the American farmer
to increase the yield. The demand for nitrogen fertilizer has
risen steadily as modern agricultural techniques and the use of
high-nitrogen demanding hybrid seeds have been imolemented.
58. The role of American ammonia productive capacity is one
of critical importance, and potentially we could be as vulnerable to
foreign pressures regarding the supply of ammonia as we have been
to the OPEC countries with respect to oil. The current difference
in price between imported ammonia at $350 per ton and domestic
ammonia at $180 to $210 per ton could grow proportionately in
relation to the degree of a shortage in the United States.
59. This Commission is aware that during the past 12-month
period, there has been a surplus of available fertilizer on
the market. In testimony submitted by the Applicants, the
expert witness~s were cognizant of the possibility of such
short-term occurrences; however, their estimates were based on
long-term projections.
PAGENO="0720"
714
60. On January 9, 1976, Staff moved for a reopening of these
proceedings to develop further evidence on the current fer-
tilizer and ammonia supply situation. On March 8, 1976, the
Commission deferred consideration of the Staff motion pending
its review of these proceedings, The bases of Staff's motion
were newspaper articles and citations to a study done several
years ago. The Staff attempted to incorporate this same
evidence in its initial brief to the Presiding Administrative
Law Judge. On August 22, 1975, the Judge found it necessary
to strike these portions of the Staff `s initial brief in
response to protests that it contained references to published
statements outside of the record, which raised issues con-
troversial in nature, represented unqualified opinion and were
unexamined hearsay evidence without probative value. Staff
included the same material in its Brief on Exceptions. In their
briefs to the Commission, all parties objected to Staff's actions,
arguing that such behavior was contrary to the administrative
process.
61. We are aware that the Commission Staff made no
attempt to sponsor any evidence in this proceeding
~nd we concur in the parties' position that the referenced
material has no place in our consideration. Section 1.29(c)
of the Commission's Rules of Practice and Procedure clearly
provides that a party's argument on brief should be based upon
the evidence of the record. Fundamental fairness requires
that the Commission base its decision on the record evidence
upon which opposing parties had an opportunity to testify and
be cross-examined.
62. The Associated Gas Distributors (AGD), the Public Service
Commission of the State of New York (New York) and Staff
oppose the Commission's policy of allowing the producers to
reserve a portion of their reserves for their own use or dis-
position. New York characterizes this initial decision as
constituting a major expansion of the doctrines established
by the Commission in Opinion Nos. 727 and 743, in that the
Judge certificated reserves in excess of the 20 percent level
established in Opinion No. 727. New York argues that there
is no evidence to support any reservation for the producers'
use; however, assuming the validity of Opinion No. 727, the
reservation should be limited to the 20 porcont 1evo~. pre-
viously established.
PAGENO="0721"
715
Process and FeedstOck Gas
63. While the parties and AU applied the so-called "Chande-
leur incentive" and the need therefor to the factual settings
of each of the instant certificate applications~ we are not
satisfied that these applications can be determined solely
by the holding of Chandeleur.
64. The Natural Gas Act, Sec. 7(c), provides in pertinent
part that:
"No natural gas conpany---shall engage in the
transportation or sale of natural gas, subject
to the jurisdiction of the Commission,---1rnless
* there is in force with respect to such natural
gas company a certificate of public convenience
and necessity issued by the Commission authorizing
such acts or operations---."
The term public convenience and necessity has been defined to
include a broad public interest test. In a similar statute
the Supreme Court has held that:
"The Commission is the guardian of the public in-
terest in determining whether certificates of con-
venience and necessityshall be granted. For the
performance of that function the Commission has been
entrusted with a wide range of discretionary authority.
Interstate Commerce Commission v. Parker, 326 U.S. 60.
Its function is not only to appraise the facts
and to draw inferences from them but also to
bring to bear upon the problem an expert judg-
ment and to determine fron its analysis of the
total situation on which side of the contro-
versy the public interest lies." See Interstate
Commerce Commission v. Railway Labor Executives
Assn. 315 U.S. 373, 376-377.
65. While the Commission has been entrusted with a wide
range of discretionary authority, it is manifest that such
authority is not unlimited and cannot be exercised in an
arbitrary or capricious manner. In Transco X-20 (FPC V.
Transco, et al., 365 U.S. 1) the Commission exercised its
discretion in denying a certificate for the transportation
of gas to be used as boiler fuel by Con Ed in New York. There
the Commission found that (1) boiler fuel use of the wasting
asset, natural gas, is inferior to other uses, (2) it is not
in the public interest to pre-enpt pipeline capacity for such
use and, (3) the direct purchase of gas for boiler fuel would
exert an upward pressure on the field price structure. The
PAGENO="0722"
716
Supremé Court upheld the Commission in all three respects, it
appearing however that the principal ground was `whether the
Commission, through its certification power, may prevent waste
of gas committed to its jurisdiction." F.P.C. v. Transco,
et al., 365 U.S. 1, 8).
66. The Chandeleur application was met by opposition that
the use of natural gas in its refinery was inferior to uses
which would eventuate from the sale of such gas to interstate
pipelines. On remand from the U.S. Court of Appeals for the
District of Columbia Circuit, the Commission found a substan-
tial portion of the end-use of such gas to be inferior but
nonetheless reaffirmed its earlier grant of the requested
certificate on the grounds of the substantial added expense
of utilizing another fuel and the fact that increased refin-
ery capacity would create an added incentive for further
exploration and development in the area. 44 FPC 1747, 1753-60.
67. In the instant proceeding neither Transco X-20, nor
Chandeleur is on point (with the exception of refinery gas)
since the end-use to which the natural gas is to be put is
for either process or feedstock purposes---both superior uses
for which no available alternative, other than propane, exists.
With respect to these proposed sales for process and feedstock
purposes the issue before this Commission is whether natural
gas from the offshore Federal domain should be denied to
new direct purchasers for intended superior uses and made
available to the public only through sales by interstate
pipelines. The resolution of this issue must be predicated
upon the overall public interest since there is no other
statutory basis upon which such a determination can be
sustained.
68. The AU found that the proposed uses of this gas for
the manufacture of chemicals, ammonia, fertilizer and
liquid hydrogen are in the public interest, and indeed the
record supports no other conclusion. We must accept these
findings as a starting point and determine whether some other
aspect of the public interest demands that these applications
be denied. The only such arguments advanced are essentially
that (1) there is ample natural gas available in the intra-
state market to supply these needs and, (2) the public in-
terest requires that natural gas from the offshore Federal
domain should be dedicated only for uses that cannot be
satisfied by the intrastate market.
69. While we are aware of statements which indicate a pre-
sent surplus of natural gas available in the intrastate market
and the fact that the intrastate market has fared considerably
better in the acquisition of new gas supplies in recent years,
the record does not support a finding that there now exists,
PAGENO="0723"
717
and that there will continue to exist adequate supplies availa-
.ble in the intrastate market to satisfy these needs. Accord-
ingly, we need not now face the question of
whether we should seek to impose new, essential industrial uses
of natural gas upon the intrastate market.
70. We are then left with the determination:
whether the public interest requires that this gas be pur-
chased by interstate pipelines for resale to ultimate con-
sumers, other interstate pipelines and local distribution
systems. We are, of course, aware of the constantly worsening
gas supply situation and the ever growing curtailments on in-
`terstate pipeline systems. We are also aware that some of the
present gas utilization in the interstate market is
for inferior uses. We are also mindful that in many portions of
this Nation new natural gas consumers are being added daily,
and further that these consumers could be served equally well
with another more abundant fuel.
The Supreme Court in Transco X-20 stated,
One apparent method of preventing waste of
gas is to limit the uses to which it may be
put, uses for which another more abundant
fuel may serve equally well." 365 U.S. 1, 8.
It is, of course, beyond our authority to prevent the
attachment of new consumers. We however, note that these
situations exist when deciding whether or not the public
interest requires that natural gas from the offshore Federal
domain be reserved for purchase by interstate pipelines.
71. We recognize that many sound reasons may be advanced
for protecting the gas supply to existing residential and
small commerical consumers even though such uses may be
wasteful. We also recognize that continued deterioration
of natural gas supplies may some day dictate that offshore
Federal domain supplies be reserved for sale to interstate
pipelines for resale. However, the record before us coupled
with our knowledge of curtailment levels, and dwindling sup-
ply trends is not sufficient to require now the denial of
this gas for direct purchase or utilization for process and
feeds tock purposes.
72. ifowever, neither does the public interest require the
reservation of any arbitrary percentage of the gas supplies
for such purposes. We shall therefore require each producer
PAGENO="0724"
718
and pipeline toanend the appr~priate applications so as to
provide the specific details with respect to process and feed-
stock uses, including the volumes of gas to be sold and
transported for such purposes. Such amendments should be
filed with this Commission within thirty (30) days of the
issuance of this Opinion and Order.
Refinery Gas
73. Natural gas to be used by refineries cannot be classified
as superior use in its entirety, nor has any attempt been made
to justify its use on such ground. Clearly Chandeleur is ap-
posite under the circumstances. The AL~ in applying Chandeleur
found that the incentive is still a valuable tool for eliciting
additional gas supplies. The AU's decision was issued several
months prior to the issuance of Opinion Nos. 770 and 770-A
establishing new National producer rates, and was premised
upon Opinion Nos. 727 and 743 which would preclude the use
of any of this gas for boiler fuel. At the rates estab-
lished in Opinion No. 770-A, utilizing a methodology designed
to look forward to anticipated costs rather than backward at
experienced costs,~ we find and herein hold that the Chandeleur
incentive is no longer necessary to encourage the further
development of natural gas reserves. As indicated above,
we use the term "Chandeleur incentive as that device by
which inferior uses of natural gas from the offshore Federal
domain by a producer is permitted as an incentive to
further exploration and development. As far as superior
uses of natural gas are concerned, we nake no distinction
between gas used in a refinery as opposed to any industrial
use. We shall therefore permit the producers and pipelines
to amend their approriate applications to give us the details
including volumes of gas to be utilized and transported
for superior uses process and feedstock consistent herewith
within thirty (30) days from the issuance hereof.
Litrastate Gas Supplies
74. The foregoing discussions of process and feedstock gas
and refinery gas are not intended to indicate a willingness
on the part of this Commission to permit the use of natural
gas from the offshore Federal Domain in installations where
natural gas from intrastate sources is being, or will be
used for inferior purposes (other than process or feedstock
uses). Any certificates issued in these dockets permitting the
transportation of such gas will be conditioned so as to
prohibit the use of natural gas from any sources for non-
essential lower priority purposes so long as natural gas from
the offshore Federal Domain is being delivered to and/or used
in that facility. Should the immediate cessation of the use
of intrastate natural gas for such non-essential, inferior
purposes be impracticable, tie Commission will consider a
program for the orderly phasing out of such use. Those
PAGENO="0725"
719
desiring to phase out such use should present specific
plans therefor with the filing of the amended applications
provided for herein.
Curtailment Protection
75. In Chandeleur, the certificate of public convenience
and necessity was conditioned explicitly to provide for
emergency deliveries to the transporting pipeline, United
Gas Pipeline Company, from the reserved volumes. Chandeleur
was required to make up to 88,000 Mcf per day available to
United when United had fully curtailed its industrial
deliveries but still requirec?. additional volumes".., to
meet its customers' requirements for essential purposes,
national defense requirements and domestic use and
storage 44 FPC 1765. We find that the public interest
requires a similar condition in this case. Although we
have limited severely the end-uses for which the subject
volumes may be reserved, there has been a corresponding
deterioration in the supply posture and curtailment situation
of the transporting pipelines here.
76. Therefore, whenever the Commission determines that
Trunkline or Southern is curtailing high-priority industrial
end-uses to the plant protection level and is unable to
supply all essential human-needs requirementsU/ then the
reserved volumes shall be made available to Trunkline and/or
Southern to the extent necessary to serve those essential
human-needs requirements and subject to payback if later
ordered. Finally, we note that it may be necessary to modify
this condition to accomplish its intended purpose, if the
Commission's current curtailment priorities are modified
substantially.
14/ For the purposes of this opinion, "essential human-
needs requirements" shall be defined as: (1) use of
natural gas in a residence; (2) use of natural gas in
a commercial establishment in amounts less than 50
Mcf per peak day; plus (3) any other use of natural gas
where the termination of service would endanger life,
health or the maintenance of physical property. See
Emergency Natural Gas Act of 1977, Pub. L. No. 95-2,
Section 2(1) (Feb. 2, 1977).
87-292 0 - 77 - 47
PAGENO="0726"
720
Tenneco Chemicals
77* This is a joint application filed, in Docket No. CP75-258,
by Tenneco Chemicals, Inc. (TCI) and Tennessee, whereby Tennessee
would be allowed to purchase from TCI one-third of the supply
which TCI has purchased in Louisiana and Texas for its petro-
phemical plant at Pasadena, Texas. As part of its transpor-
tation arrangement, TCI will release to Tennessee at least one-
third of the onshore volumes TCI has contracted to purchase and
will permit Tennessee to borrow 30 percent of the remaining two-
thirds during the winter for return during the summer. While
TCI will pay the producers onshore prices of 90~ and $1.25 per
Mcf, the portion of the gas which TCI releases to Tennessee will
be at the Commission's approved rate. At the time of filing,
TCI anticipated absorbing the difference between the rate it
would pay the producers and the Commission's approved rate for
the gas released to Tennessee.
78. The Commission issued a temporary certificate on July 3,
1975, which was subsequently modified August 1, 1975, by the
deletion of a condition requiring the producers to file for and
obtain producer certificates under Section 7(c) of the Act for
their sales to TCI. On March 3, 1976, Tennessee filed a motion
to amend the temporary certificate so as to authorize the
addition of two new gas supply sources, thereby increasing the
presently authorized volume by 3,000 Mcf per day. Although it
was initially estimated that TCI would cause to be delivered to
Tennessee for transportation approximately 14,500 Mcf per day,
cancellations have reduced the total volume to approximately
4,000 Mcf per day. The aggregate amount to be certificated is
now estimated to be 7,000 Mcf per day.
79. All parties to the proceeding supported the application;
however, the Judge held that he could not issue a certificate
as requested. Although Tennessee has characterized this pro-
posal as a mere "transportation arrangement" and `release',
TCI resells one-third of the gas purchased at nonjurisdictional
15/ The subject volumes are to be used as feedstock (55 percent),
- for process uses (35 percent), and as boiler fuel
(10 percent).
PAGENO="0727"
721
prices to Tennessee, which in turn will sell it for ultimate
public consumption outside of the states of origination. There-
fore, citing Deep South Oil Co. v. F.P.C., 247 F.2d 882 (5th
Cir. 1957), he concluded that the producer sales of the release
gas to be resold in interstate commerce are subject to our
jurisdiction, and that approval of Tennessee's application in
this docket must be conditioned upon filing of the appropriate
producer applications that are required by Section 7(c) and
cannot be waived. (Opinion No. 735, Marathon Oil Company, at al.
Docket Nos. C174-537, et al., issued June 24, 1975). - -
80. Judge Southworth also incorporated a Staff recommendation that
the parties restructure this proposal to mitigate anticipated
objections by the producers. He suggested that the release
portion of this gas could be sold directly to Tennessee at the
applicable ceiling rate and under our jurisdiction so that
remainder, presumably to be sold at a higher rate reflecting
the reduced pricing of the release gas, would be subject only
to a transportation certificate within the guidelines of Order
Nos. 533 and 533-A. 16/
81. The transportation certificate was further conditioned to
require that these volumes shall not be used, "except by dis-
placement", for boiler fuel which represents 10 percent of the
plant's end-use requirements. While recognizing that TCI has
the ability to fuel its steam boilers with oil when necessary,
the Judge declined under these circumstances to attach any
conditions restricting the use of intrastate gas from other
sources as boiler fuel.
82. Tennessee has excepted to the jurisdictional condition.
Staff continues to press for complete conversion of boilers
within three years. Tennessee reiterates its view that this
case concerns simply a transporation agreement that provides
in part for the release of certain volumes. It seeks to
distinguish the Deep South decision, ~ on these facts
and suggesi~ that interstate consumers will not be harmed by
a regulatory gap, since the transportation agreement to be
certificated provides for "release" at a just and reasonable
rate below the actual intrastate sales price. Alternately,
if the producer sales are jurisdictional, then Tennessee re-
quests waiver of the filing requirements of Section 7(c) in
these "special circumstances".
16/ Docket No. RM75-25, Policy with Respect to Certification
of Pipe Line Transportation Agreements, issued August 28,
1975, and November 10, 1975.
PAGENO="0728"
722
83. We affirm the initial decision in toto on these points.
Neither the semantic characterization of this proposal as a
transportation release nor the reduction in the price paid by
Tennessee for the release gas affects the basic jurisdictional
conclusion. Although their sales contracts are with TCI, these
producers are selling into interstate commerce gas which will
be transported without interruption beyond the states of
origination for resale and ultimate consumption. Even if it is
assumed that all filing requirements could be waived, we decline
to do so, finding that the particular circumstances to which
- Tennessee alludes will not justify an unprecendented waiver
that would be inconsistent with our fundamental responsibilities. 17'
Our jurisdiction over these producers necessarily will extend
well beyond a limitation of the original sales price to a just
and reasonable rate. 13/ However, we will consider favorably,
if possible, any proposal to restructure this arrangement to
reduce the burdens imposed upon the producers.
84. Finally, we hold that the Presiding Judge correctly
- conditioned the certificate to proscribe the transportation of
the subject gas for boiler fuel use, except to the extent that
these volumes displace intrastate gas from other sources.
Tennessee and TCI have consented to this limitation. Staff
would further require the conversion of all boilers at the
Pasedena plant within three years, thereby limiting TCI's
ability to use any additional volumes acquired and transported
within the intrastate market. Staff did not support its cryptic
suggestion or explain why an absolute affirmative restriction
on TCI's operations is needed. The transportation condition
in the initial decision is reasonable, appropriate on these
facts, and consistent with past practice, Texas Eastern
Transmission Corporation (North Alabama Gas District), Docket
No. RP74-39-8, Order Modifying Order Granting Extraordinary
Relief and Denying Applications for Rehearing, issued May 1,
1975, mimeo at 7-8.
11,' Opinion No. 742-A, issued July 27, 1976, Docket No. R-393,
Small Producer Regulation.
18/ Order No. 539-B, issued July 30, 1976, Docket No. RM76-8,
Policy With Respect to Enforcement of Deliverability and
Rendition of Natural Gas Service Under Certificated
Arrangements.
PAGENO="0729"
723
The Commission finds:
(1) Applicants Placid Oil Company, Hunt Petroleum
Corporation, Hunt Industries, Hunt Oil Company, Kewanee
Oil Company, Highland Resources, Inc., Ashland Oil, Inc.,
and Transocean Oil, Inc., are engaged in the sale of natural
gas in interstate commerce for resale for ultimate public
consumption, subject to the jurisdiction of the Cc~mmission,
and are or will be natural-gas companies within the meaning
of the Natural Gas Act.
(2) The transportation and/or exchange of natural
gas in interstate commerce by applicants Trunkline Gas
Company, Southern Natural Gas Company, United Gas Pipe
Line Company and Florida Gas Transmission Company, and
the construction and operation of any facilities
necessary therefor, as described hereinabove and in
their respective applications, and as hereinafter
authorized, are subject to the jurisdiction of the
Commission; and the said applicants are natural-gas
companies within the meaning of the Act.
(3) Each of the above applicants is able and willing
properly to do the acts and to perform the services which
it is hereinafter authorized to perform and to conform
to the provisions of the Act and the requirements, rules
and regulations of the Commission thereunder; and the
proposed services, sales, operations and construction,
to the extent authorized by and subject to the conditions
set forth in the certificates hereinafter granted,
are or will be required by the present or future public
convenience and necessity.
(4) The public interest requires the approval of
the Gas Purchase Contracts between Trunkline Gas Company
a~)d, respectively, Hamilton Brothers Oil Company and
Hamilton Brothers Exploration Company, upon the terms and
conditions hereinafter ordered.
(5) Applicant Tennessee Gas Pipeline Company,
a Division of Tenneco, Inc., owns and operates facilities
for the transportation of natural gas in interstate com-
merce and the sale in interstate commerce of natural gas
for resale for ultimate public consumption, and is a
natural-gas company within the meaning of the Act and
subject to the jurisdiction of the Commission.
PAGENO="0730"
724
(6) The transportation and/or exchange of natural
gas by Tennessee for Continental Oil Company
Cities Service Company, Tenneco Oil Company, Shell Oil
Company and Tenneco Chemicals, Inc., is or will be
subject to the jurisdiction of the Commission.
(7) The sale of natural gas by Shell Oil Company
to Creole Gas Pipeline Corporation for resale solely
to Air Products and Chemicals, Inc., is not a sale
in interstate commerce of natural gas for resale for
ultimate public consumption within the meaning of the
Act and therefore is not subject to the Commission's
jurisdiction.
(8) The sale of natural gas by Tenneco Oil Company
to Creole Gas Pipeline Corporation for resale solely to
Air Products and Chemicals, Inc., is not a sale in
interstate commerce of natural gas for resale for
ultimate public consumption within the meaning of the
Act and therefore is not subject to the Commission's
jurisdiction.
(9) The public interest requires that the temporary
certificate granted to Tenneco Oil Comany in Docket
No. C175-lOS, under date of February 6, 1975, be made
permanent, subject to the conditions set forth in said
temporary certificate and in the order herein.
(10) The joint applicant Tenneco Chemicals, Inc.
("TCI") will be upon engaging in the transaction with
Tennessee and in its joint applicationwith Tennessee, -
engaged iń~hd~ale ih "interstate commerce of natural
gas for resale for ultimate public consumption within
the meaning of the Act, and will be a natural-gas company
subject to the Commission's jurisdiction.
(11) The said applicants Tennessee and Tenneco
Chemicals, Inc., are able and willing properly to do the
acts and to perform the services which they are
hereinafter authorized to perform and to conform to
the provisions of the Act and the requirements, rules,
and regulations of the Commission thereunder; and the
proposed sales and services, to the extent authorized
by and subject to the conditions set forth in the certi-
ficates hereinafter granted, are or will be required by
the present and future necessity.
PAGENO="0731"
725
The Commission orders:
(A) Within 15 days from the issuance of this Opinion
and Order each affected producer and pipeline shall file with
this Commission amendments to the respective applications
filed in these consolidated proceedings to conform such
applications to the provisions set forth herein.
(B) Temporary certificates for the sale of natural gas
and the construction and operation of any facilities subject
to the jurisdiction of the Commission necessary for such
sales by various producers to the interstate pipeline con-
tract purchasers are hereby issued in accordance with the
application in each docket as follows:
(i) Placid Oil Company (Docket No. C175-59),
Hunt Petroleum Corporation (Docket No. C175-66),
Hunt Industries (Docket No. C175-67), Ashland Oil,
Inc., (Docket No. C175-122), Highland Resources,
Inc. (Docket No. C175-733), and Kewanee Oil Company
- (Docket No. C175-69) authorizing the sale of natural
gas to Trunkline Gas Company; and to Hunt Oil Company
(Docket No. CI75~68) authorizing the sale of natural
gas to Southern Natural Gas Company, all from Blocks
268, 269 and 281, South Marsh Island Area, offshore
Louisiana in the Federal Domain; and
(ii) TransOcean Oil, Inc. (Docket No. CI75-138)
authorizing the sale of natural gas to Southern
Natural Gas Company and its assignee, United Gas
Pipe Line Company from Blocks 268, 269 and 281,
South Marsh Island Area, offshore Louisiana in the
Federal Domain.
Each temporary certificate is issued subject to
Commission's Opinion Nos. 699 as amended or 770 as amended,
and any further orders issued thereunder and to the
following expressed conditicms~
(1) The initial rates shall be the lesser of
the contract rate or the national rate
applicable to the commencement date of
each well involved provided in Opinion
No. 770, as amended, provided, however,
that prior to the commencemeni~ of service,
Applicant shall file in compliance with
PAGENO="0732"
726
the order issued November 18, 1976, in
American Public Gas Association, et al,. v.
F.P.C. No. 76-2000 (CA DC)an express
refund undertaking for all amounts
collected in excess of the just and
reasonable rates determined upon final
judicial review of Opinion No. 770,
as amended.
(2) If Applicant chooses not to submit the
express refund undertaking required by condition
(1) above, Applicant may commence service
at the lesser of the initial rate provided
for in the contract or the national rate
provided for in Opinion No. 699-H (53.0 cents
per Mcf at 14.73 psia subject to upward and
downward Btu adjustment from a base of
1,000 Btu and a gathering allowance of
0.5 cent per Mcf)
(3) There shall be filed, within 30 days from
the date of initial delivery, 3 copies of a
revised billing statement which clearly
sets forth the components of the initial
rate to be charged in accordance with (1)
or (2) above, namely, base rate, Btu
adjustment and gathering allowance, together
with a statement demonstrating the
applicability of such rates.
(4) Section 154.93 of the Commission's Regulations
is hereby waived to permit filing of the con-
tracts. The granting of such waiver, how-
ever, does not constitute approval of any
impermissible pricing provision and any rate
increase based on said pricing provision
to the extent it is inconsistent with
the provisions of Section 154.93 of the
Commission's Regulations is subject to re-
jection.
All persons making jurisdictional sales pursuant to
the authority granted by each certificate are hereby given
notice that the contractual obligations between the buyer
PAGENO="0733"
727
and the seller are incorporated into the certificate obliga-
tions, and that the certificate is further conditioned to
require that the seller shall observe the standard of a pru-
dent operator to develop and maintain deliverability from
reserves dedicated hereunder.
(C) All provisions of the several advance payment
agreements (sometimes called Gas Exploration Development
Incentive Agreements) between the Applicants and the
purchasers set forth in Ordering Paragraph B, executed
on or about the date of several initial gas purchase
and sale contracts between such parties, relating
to the obligations of the Applicants to enter into
additional gas purchase agreements as long as any
reserves remain in the aforesaid blocks or any of
them,shall remain in effect without change excent as
hereinafter may be expressly approved by the
Commission;
(i) Each such superseding purchase and sale
contract must be lawful at the effective date
thereof, an in the event of any dispute
as to such lawfulness, there shall be no
interruption of service pending upon the
termination thereof, and the approval of
any necessary changes therein, by the Commission;
(ii) Any reservation authorization contained
in any said gas purchase and sale contracts
permitting the respective Applicant to take
for Applicant's own use or disposition up
to 50% of the gas agreed to be committed
under such gas purchase and sale contract
shall be changed from 50% to 0% whenever the said
reservation figure of 50% appears therein,
the provisions with resnect to such reserva-
tions and authorization apnearing in the
aforesaid advanced payment agreements shall
likewise be modified by changing the figure
of 50% to 0% whenever it appears, and all
said contracts and agreements shall be further
modified as may be necessary or appropriate to
effect such change in percentage;
(iii) Within 15 days after the issuance of
this Opinion,Applicants shall notify the Com-
mission, or cause the Commission to be notified,
of the precise volume of gas to be sold and/or
transported for process or feedstock uses.
Applicants shall show the volumes sold and
delivered to Trunkline, Southern, and United,
and each of them, during the same period.
PAGENO="0734"
728
(iiii) Any revenues collected as a result of
the advance being included in rate base shall
be refunded by the pipeline company to its
cust?mers, together with interest at the rate
of nine percent per annun, from the date of
payment until refunded, within 12 months after
the removal of the advance from this account,
unless otherwise directed by the Commission.
(D) The gas purchase and sales contracts between
Trunkline Gas Company and Hamilton Brothers Oil Company
and Hamilton Brothers Exploration Company, respectively,
(which latter companies appeared as parties in these pro-
ceedings as applicants for permission to have their contracts
containing limitation on reserve dedication approved by the
Commission, pursuant to the Commission's order of April 14,
1975 herein) are disapproved without prejudice to their
resubmission within 15 days conformed to the provisions of
this Opinion and Order.
(E) Temporary certificates of public convenience and
necessity are issued to each of the applicants Trunkline Gas
Company (Docket Nos. CP75-19 and CP75-l49~, Southern Natural
Gas Company (Docket Nos. CP75-163 and CP75-3l6), Trunkline
Gas Company (Docket Nos. CP75-149 and. CP75-330), Southern
Natural Gas Company (Docket No. CP75-151 and CP75-316), and
joint applicants Southern Natural Gas Company, United Gas
Pipe Line Company, and Florida Gas Transmission Company
(Docket No. CP75-l53), to construct and operate the facilities
described hereinabove and in the applications, as amended,
in said dockets pending the submission and approval of
amended applications consistent with the provisions hereof.
(F) A certificate of public convenience and necessity
is issued to applicant Tennessee Gas Pipeline Company, a
Division of Tenneco Inc., to construct and operate the
facilities described in the application in Docket No. CP73-
339, as amended, and to render transportation service to
Continental Oil Company (Conoco) and Cities Service Oil
Company pursuant to the respective Gas Transportation
Agreements with said companies as described hereinabove
and in said application; provided, however, with respect
to the gas transported for Conoco, which shall be for
Conoco's use in fulfilling Conoco's contract obligations
(amended as hereinabove described) to Firestone Tire Rubber
Company and Olin Corporation at their facilities at or
near Lake Charles, Louisiana, that such gas (together with
any other gas which Conoco or any affiliate thereof may
hereinafter be authorized to transport or have transported
for it from the federal domain to Firestone or Olin) shall
not exceed in aggregate volume the process use and feed-
stock requirements of the Firestone and Olin plants as re-
duced or to be reduced to amounts not exceeding the following:
(1) Firestone, 1700 Mcf/d and (2) Olin, 65,000 Mcf/d; and
to 45,000 Mcf/d effective July 1, 1977. The transportation
for Cities Service Oil Company, which shall be for Cities
Service's use in its refinery complex at Lake Charles,
PAGENO="0735"
729
Louisiana, provided that (1) The Gas Transportation Agreement
dated November 14, 1972, between Tennessee and Cities Service
Oil Company and the Gas Purchase and Sale Agreement between
the same parties shall be modified and amended as may be
necessary and appropriate to provide for the purchase and
sale of Cities Service's gas reserves in East Cameron
Block 33 to Tennessee, and for the transportation of
Cities Service's gas reserves in such field as provided
therein with respect to the portion thereof not sold to
Tennessee and (2) no part of the gas transported under the
said Transportation Agreement shall be used for boiler fuel
(as defined in subparagraph (c) (9) of Section 2.78 of the
Statements of General Policy and Interpretations of the
Commission at the date hereof).
(c) The Petition for Declaratory Order Disclaiming
Jurisdiction filed by Shell Oil Company in Docket No.
C175-107 is granted.
(H) The conditional application filed by Shell Oil
Company in Docket No. C175-684, at the direction of the
Commission is dismissed.
(I) The application filed by Tenneco Oil Company
in Docket No. C175-45 is dismissed.
(J) The outstanding certificate authorization of
Tennessee is amended (Docket No. CP75-l19) to authorize
the transportation for Shell of natural gas for process
and feedstock uses originating in the State of Louisiana
in volumes not exceeding 35,000 Mcf/d prior to December
31, 1975, or 42,000 Mcf/d thereafter, from the four points
within the State of Louisiana set forth hereinabove and
in the application in said docket, to Yscloskey, Louisiana,
upon the terms and conditions provided in the said appli-
cation, for sale to Creole Gas Pipeline Corporation for
resale solely to and consumption by Air Products and
Chemicals, Inc., within the State of Louisiana, or for
sale to and consumption by OKC Corporation and Amstar
Corporation within the State of Louisiana.
(K) Certificates are issued to Tennessee (Docket
No. CP75-23) and to Tennessee and Tenneco Oil Company
(Docket No. CP75-l20) authorizing Tennessee to transport
natural gas to Yscloskey, Louisiana, for delivery to
Creole Gas Pipeline Corporation for the account of
Tenneco Company from South Timbalier Blocks 22 and 27,
West Cameron Blocks 194 and 216 (from Block 201), and
Vermilion Block 246 (all offshore Louisiana in the
Federal domain), and from Lake Barre, Louisiana, and
PAGENO="0736"
730
Tenneco Oil Terrebonne Land Development, et al., Well
No. 1, Terrebonne, Louisiana; and authorizing Tenneco
and Tennessee to exchange natural gas delivered by Tenneco
to Tennessee at points in the State of Texas described
hereinabove and in the joint application in Docket No.
CP75-120, and redelivered by Tennessee to Tenneco Oil at
or near Lake Barre, Louisiana, for transportation by
Tennessee to Yscloskey, Louisiana, for delivery to Creole
Gas Pipeline Corporation for Tennecos account; provided,
however, that (1) all the gas transported by Tennessee
pursuant to this paragraph K, other than the exchange gas,
shall be delivered to satisfy a portion of the process and
feedstock requirements of the New Orleans complex of Air
Products and Chemicals Corporation (Air Products); and
thereafter, the process and feedstock requirements of
Tenneco's refinery at Chalmette, Louisiana; (1) the aggre-
gate volumes of natural gas delivered to satisfy the
requirements of Air Products, as provided in the Tenneco
contract, shall not exceed the (a) one-half the total plant
requirements of Air Products or (b) upon the completion of
Air Products' new liquid hydrogen plant, one-half of the
aggregate requirements. The aggregate volume of natural
gas delivered pursuant to the application in Docket No.
CP75-120 to satisfy the process and feedstock requirements
of Tenneco's refinery at Chalmette, Louisiana (including
the exchange of gas) shall not exceed 12,000 Mcf/d prior
to the termination of Tenneco's current contract with
Texaco, Inc., for the supply of gas to said refinery, or
24,000 Mcf/d thereafter.
CL) A permanent certificate of public convenience
and necessity is issued to Applicant in Docket No. C175-105
subject to Opinion No. 770, as amended, and any further
orders issued thereunder in condition to the lesser of
the contract rate or the applicable national rate pro-
vided in Opinion No. 770, as amended. Within 30 days
hereof the applicant shall file in compliance with the
Order issued November 18, 1976, in American Public Gas
Association, et al., v. F.P.C. (CA DC No. 76-2000),
an express refund undertaking for all amounts collected
in excess of the just and reasonable rates determined
under final judicial review of Opinion No. 770, as
amended, to the extent required by that court order.
If Applicant chooses not to submit the expressed refund
undertaking required by the November 18, 1976 order,
PAGENO="0737"
731
Applicant may continue service at the lesser of the
initial rates provided for in the contract or the national
rate provided in Opinion No. 699-H (53.0 cent per Mcf
at 14.73 psia subject to upward and downward Btu
adjustments from a base of 1,000 Btu and a gathering
allowance of 0.5 cent per Mcf). Such permanent authorization
is effective on and after the date of this order. Ordering
Paragraph (F) of Opinion No. 770-A requires applicant to
file a supplementto the applicable rate schedule, effective
as of the effective date of that Opinion, reflecting any
reductions required to bring any or all of its previously
accepted rates into conformity with the applicable adjusted
national rate established therein.
All persons making jurisdictional sales pursuant to the
authority granted by each certificate are hereby given
notice that the contractual obligations between the
buyer and and seller are incorporated into the certificate
obligations, and that the certificate is further condi-
tioned to require that the seller shall observe the
standard of a prudent operator to develop and maintain
deliverability from reserves dedicated hereunder.
(M) A certificate of public convenience and necessity
is issued to Tenneco Chemicals, Inc., and Tennessee Gas
Pipeline Company, a Division of Tenneco, Inc., upon their
joint application in Docket No. CP75-258, authorizing the
sale, transportation and exchange of natural gas as in
the said application set forth.
(N) The rate schedules related to the producer author-
izations granted herein are hereby accepted for filing to
*be effective on the date of initial delivery and each
producer applicant shall advise the Commission in writing
of such date within 10 days thereof. The rate schedules
have been designated as follows:
Docket No. Description Designation
C175-59 Contract 5-31-74 Placid Oil Company
FPC Gas Rate Schedule No. 59
C175-66 Contract 5-31-74 Hunt Petroleum Corporation
FPC Gas Rate Schedule No. 10
PAGENO="0738"
732
Docket No. Description Designation
C175-67 Contract 5-31-74 Hunt Industries
FPC Gas Rate Schedule No. 11
C175-68 Contract 6- 4-74 Hunt Oil Company
FPC Gas Rate Schedule No. 76
C175-69 Contract 5-31-74 Kewanee Oil Company
FPC Gas Rate Schedule No. 96
C175-l22 Contract 5-31-74 Ashland Oil Inc.
FPC Gas Rate Schedule No. 251
C175-l38 Contract 7- 9-74 TransOcean Oil, Inc.
FPC Gas Rate Schedule No. 29
C175-733 Contract 5-31-74 Highland Resources, Inc.
FPC Gas Rate Schedule No. 13
(0) Insofar as may be applicable, there shall be
attached to the issuance of each certificate granted in
this order, and to the exercise of the rights given there-
under, the terms and conditions of Section 157.20 of the
Commissions Regulations Under the Natural Gas Act, and
all construction, extensions or acquisitions shall be
completed and in actual operation by applicants and any
authorized operations, services, or sales shall be
actually undertaken and regularly performed by applicants
within one year from the date of issuance hereof.
By the Commission. Commissioner Smith, concurring in part
and dissenting in part, will have a
~ E A L ) separate statement to be issued later.
Kenneth F. Plumb,
Secretary.
PAGENO="0739"
733
Mr. Moss. Mr. Wofsy, do you have a statement?
Mr. WOFSY. I do not have a written statement but I would like
to say just one word.
Mr. Moss. You may proceed.
TESTIMONY OF CYRIL S. WOFSY
Mr. Worsy. Insofar as my testimony is concerned, I believe that
everybody who has testified before you has substantiated my state-
ments. However, I do want to commend you and your subcommittee
for instituting this investigation. I think it was properly based, and
I think you had valid reasons for your concern. I am pleased that
you have instituted this investigation.
I thank you for that.
Mr. Moss. Thank you, sir.
Mr. Sims?
Mr. SIMS. Thank you, Mr. Chairman.
Mr. Lotis, there are a few matters that I would simply like to
clarify for the purpose of the record at this point.
On page 7 of this morning's statement you referred to an appen-
dix A of Mr. Journey's March 18 statement, an affidavit which is
identified as appendix A.
Is that the affidavit prepared by Mr. Perdue?
Mr. LoTIs. Yes, sir.
-Mr. SIMS. As I recall your earlier testimony before this subcom-
mittee, you recounted to us under questioning a conversation which
you had with Mr. Perdue in which he mentioned that the hiring of
an additional GS-14 lawyer from outside the Federal Power Com-
mission would have the effect of blocking the promotion to the level
of GS-15 of attorneys who were then currently serving in that
particular section. Is that a fair summary?
Mr. LOTIS. The testimony as it appeared in the transcript is per-
haps unclear.
Mr. SIMS. That was the conversation. Is that correct?
Mr. Loris. That was the conversation that took place and that is
how I reported it to your investigators prior to this hearing.
Mr. SIMS. Instead of making it clear that you were referring to a
GS-15 level position, you simply said, "this position."
Mr. Loris. Yes, and I meant to say "GS-15." I apologize.
The way it appears in the transcript, it seems I was referring
back to a GS-14. That was incorrect.
Mr. SIMS. And it was not your logic as to how this would occur.
It was Mr. Perdue's logic, was it not?
Mr. Loris. Right. Mr. Perdue in his affidavit indicates that if the
conversation did take place it would have been very difficult for him
to block someone inasmuch as the person in question wouldn't be due
for a 15 until December of that year.
Of course, at the time of the conversation I did not question him
on it. I did not understand what he meant at the time as to how that
could occur, but the conversation did take place.
Mr. SIMS. And whether he was actually confirmed as a deputy
PAGENO="0740"
734
general counsel at that time, whether he was acting, or whether he
was still an assistant general counsel, does not mean he didn't make
the statement; is that correct?
Mr. LoTIs. I didn't testify he was a deputy at the time the con-
versation took place.
Mr. SIMS. Thank you.
There is one other matter. While it seemed to be clear at one point
of the testimony, it may not be entirely clear at this point, and that
is your intention as to when and under what circumstances you
were considering leaving the Federal Power Commission.
You testified that you told Chairman Dunham on the 4th of June,
1976, that you would stay on until at least after the election.
On page 208 of the transcript of March 18 the following exchange
took place:
Mr. Moss. Mr. Lotis also told the Chairman that he planned to remain
with the Commission until after the November 1976 election.
Mr. JOURNEY. I can only-
Mr. Moss. Is that correct?
Mr. DUNHAM. Yes, sir.
Now, as I recall, you also indicated that within a few weeks
before the October 1976 reorganization of the Office of the General
Counsel you went to the Commissioners and indicated to them at
that time your intent to stay on at the Federal Power Commission.
Mr. Lorts. Yes; in my direct statement I indicated that 2 weeks
prior to the actual reorganization I had heard rumors that there
would be a reorganization affecting my position. I met separately
with each individual Commissioner with the exception of the Chair-
man-because I had already informed him of my standing at that
time-that I was concerned about the reorganization and how I
would fit into it. I wanted to be sure that each Commissioner knew
that I would be on and I wanted to be considered as part of those
plans.
Mr. SIMS. And was it not also well known that, if the Democratic
Party won the election, it was quite likely that, in fact, Mr. Journey
might be leaving rather than you, and in that case you had intended
to stay?
Mr. L0TIS. I believe I have so testified, that I expected on the
national scene if the Democratic Party came into office, that the
agency officials, and that would include Mr. Journey, would most
likely be replaced. I wanted to see my future at the agency if that
occurred.
Mr. SIMS. Do you know of any reason why you should have been
reorganized out of your position relative to your intentions that you
might possibly leave after the election?
Mr. Lo~rrs. No; I do not. I have not seen it based on the comments
I have heard in this record.
Mr. SIMS. It is my recollection that during the summer of 1976,
at least, when the reorganization plans were being formulated, that
Mr. Carter had a lead of some degree, and if a reasonable person
were trying to guess whether either you or Mr. Journey would be
leaving, they might have had to conclude, in fact, it would be Mr.
Journey.
PAGENO="0741"
735
It strikes me there is possibly a double standard here, that at the
same time Mr. Journey had concluded it was necessary to remove
you because you might be leaving after the election, he was certainly
not inhibited, nor was Chairman Dunham inhibited, in pushing
through a rather sweeping reorganization of the Federal Power
Commission even though it was more likely that they would be
leaving.
I wonder whether you have any observations on this.
Mr. L0TI5. I believe I see your logic but I have nothing to add to
what I have previously testified in that respect.
I never stated to Mr. Journey that I was leaving the agency. I
informed Mr. Journey, as a matter of courtesy, that I had applied
for the position of administrative law judge. I did that because I
assumed they would contact him in the course of things. It is one
thing to apply for administrative law judge, but it takes months to
get on the register if you get on it, and it is entirely another matter
whether once you get on that you will stay on the active list or
whether you put yourself on the inactive list. I did not get on the
register until September. I put myself on the inactive list at that
time.
Mr. SIMS. I am also struck by the memorandum by you that you
put into the record of the subcommittee which stated that on or
about July 30, 1976, Mr. Journey formally replied to you that the
attrition which had occurred in your staff would not be met with
replacements. Is that a proper recollection?
Mr. LOTIs. Yes.
Mr. SIMS. It strikes me, also, that this was within a few weeks
after the memos between you and Mr. Journey relative to the Ohio
Electric case were put into the record of this subcommittee. Is that
correct?
Mr. Loris. That is correct.
Mr. Smrs. How long before that time had you been asking Mr.
Journey for either additional staff or some help for your caseload?
Mr. L0TI5. TJLP to that point I don't think I had been. My first
request came when I felt a real squeeze in the loss of six attorneys,
the need for additional help, and it was denied me on July 30, I
believe it was. I lost one-third of my attorneys by that time and
the situation was desperate.
Mr. SIMS. And this denial came within a few weeks?
Mr. L0TI5. Yes; I understand your hearings in Indiana were on
July 18. My request was denied July 30.
Mr. SIMS. I think the record indicates, at least to me, that you
were a very tough regulator of electric and gas rates, tough in that
you sought to do this in a way which could be justified on cost and
you did not condone attorneys nor anyone else stepping out in the
hall and settling at a higher or even a lower rate.
Mr. L1~NT. Is this a question, Mr. Chairman?
Mr. Moss. It is a question.
Mr. LENT. Or is this a statement?
Mr. SIMS. The gentleman will have to be a little patient for me.
I apologize for that.
87-292 0 - 77 - 48
PAGENO="0742"
736
When this evidence found its way into the subcommittee's record
you began to encounter problems.
Do you feel in your own mind that it is because of your strict
regulatory posture that you and Mr. Journey came into conflict?
Mr. L0TI5. Yes.
Mr. SIMS. You think that is one of the important reasons you
were reorganized out of your position in October?
Mr. L0TI5. Yes.
Mr. SIMS. Thank you.
I have no further questions of Mr. Lotis.
I would like to address a few more questions to some of the other
witnesses.
Mr. Lewnes and Mr. Mamone, either or both of you, in your
opinion was Mr. Watt's displeasure with you due to your position
favoring strong regulation of natural gas producers and pipelines
being at odds with his position, which was equally strongly in favor
of deregulation?
Mr. LEWNES. Frankly, I don't know what Commissioner Watt's
displeasure was. He never told me of it. The only displeasure, if you
call it that, was at the Commission meetings where we would kick
around a case and the issues.
Mr. SIMs. Mr. Mamone?
Mr. MAMONE. It seems that the friction, if you wish to call it that,
between Commissioner Watt was intensified almost contemporane-
ously with Mr. Lewnes, Mr. Aber, and myself testifying before the
* subcommittee of Congressman Dingell on the Tenneco case, and,
as your record reflects, almost immediately after that hearing
Tenneco filed a request with the Commission for oral argument
pointing out that staff members had so testified, and exactly and
precisely what motivated Commissioner Watt, he never communi-
cated directly to us.
As I stated earlier this morning, either indirectly or directly, he
never criticized my work product until this hearing.
Mr. SIMS. He gave you no constructive criticism nor did Mr.
Journey?
Mr. MAMONE. No, sir.
Mr. SIMs. They gave you no opportunity to correct these alleged
deficiencies discovered within a few months of Mr. Watt's arrival?
Mr. MAMONE. That is correct.
Mr. SIMS. And within a few months, I might add, of your testi-
mony before this and another subcommittee.
Mr. MAMONE. That is correct.
Mr. SIMs. I questioned Mr. Watt yesterday about the possible
chilling effect of these transfers.
Do you have any indication from any of the younger members in
the Office of the General Counsel what effect these various transfers
and reorganizations have had on their morale and their willingness
to testify before congressional committees, or willingness to take a
position which they believe might be counter to that favored by the
Commissioners?
Mr. Mamone?
PAGENO="0743"
737
Mr. MAMONE. Mr. Sims, in my opinion it definitely does inhibit
their willingness to cooperate and participate in any way in these
matters. Many of the younger attorneys are under severe economic
pressure. They are young men and trying to start their families.
The cost of living in this area is very high. Just one little episode,
perhaps trivial-when there was a statement made here in these
hearings that some of the attorneys were dissatisfied with Mr.
Lewnes' supervision during the time that Mr. Lewnes was Assistant
General Counsel of the Certificate Section-several young attorneys
thought that perhaps they would submit some sort of a statement
to the subcommittee of their support for Mr. Lewnes. Several of
the young attorneys felt they should not do this because it might
be jeopardizing their immediate career, even though it was a very
minor matter. They, nevertheless, felt they should stay out of it.
I see their point of view. I am not criticizing them or any of the
persons involved but it is a little example of where they have to be
careful because General Counsel controls their assignments; Gen-
eral Counsel controls their salaries, their promotions, everything
they do at the Commission.
Mr. SIMS. I would just like to note for the record that when I
went over to the Federal Power Commission and sought to interview
certain young attorneys in connection with this investigation, I
found a good number of them shared the same fear. They were, in
fact, afraid to talk to me or very worried because they thought it
might have an adverse effect on their future employment with the
Federal Power Commission. This was a very disturbing situation.
I simply wanted to note this for the record.
Turning to some of the cases that Commissioner Watt cited yes-
terday, the first case, CI 75-466, the Tenneco case, where the issue
was how Tenneco would repay the gas which it had diverted from
the interstate to the intrastate market, Mr. Mamone, was it your
position that, since the offshore gas would go to interstate commerce
anyway, that the repayment to interstate pipelines should logically
come from intrastate gas, or at least gas which was onshore and
would not with certainty go into interstate commerce
Mr. MAMONE. Yes, that is' correct, Mr. Sims. That was the position
of the staff.
I might add, for the information of the committee, it is not only
staff counsel who takes that position but it is a coordinated position
taken with all of our technical and economic advisors. It is not one
person taking a position before the Commission. It represents the
best thinking, the best judgment of all of the staff people involved
in these cases, and it was our judgment that Tenneco Oil Co. should
be required to repay gas they had taken without authorization from
onshore gas which otherwise would go into intrastate commerce.
Mr. SIMS. In other words, you did not want Tenneco to repay the
interstate market with interstate gas.
Mr. `MAMONE. That is correct.
Mr. SIMS. In the Superior Oil Co. case, CI 74-734, the issue was
whether or not condition (j), or paragraph (j), which required pro-
ducers to warrant delivery of specified volumes of reserves, should
be retained in the permanent certificate issue. Is that correct.
PAGENO="0744"
738
Mr. MAMONE. Yes, that was the issue.
Mr. SIMS. What body was it that put this paragraph into the
temporary certificate?
Mr. MAMONE. Mr. Sims, the Commission itself put that condition
in the permanent certificate. When the oil companies refused to accept
that condition in the permanent certificate, the Commission then
granted them a hearing, and the opinion was the result of the
4iearing.
However, the so-called condition (j) warranty obligation was
written by the Commission itself and the staff sought to sustain and
justify that condition in that certificate.
Mr. SIMS. In other words, this was not something which the staff
thought up but in fact was something that the Commission initially
put in?
Mr. MAMONE. Yes. The staff did not initiate that condition. It
was initiated by the Commission itself.
Mr. SIMS. We heard a number of comments yesterday about how
the staff was opposing Commission policy. This does not strike me
as such an example.
Mr. MAMONE. I agree.
Mr. SIMS. The Commission appeared in the end to change its
mind. Is that a fair statement?
Mr. MAMONE. Yes, the Commission decided that they would not
require these producers to warrant the amount of gas available from
that field that they said they had available. They changed their
position.
It was reflected by the change in the members of the Commission,
of course.
Mr. SIMS. How many times in your 11 or 12 years now at the
Federal Power Commission has an administrative law judge re-
jected one of your briefs with very strong language such as in
the allegation made in the Superior case?
Mr. MAMONE. I have not kept track of them but we have some
sharp administrative law judges and they frequently do reject posi-
tions of the staff. It is not unusual for them to do that.
Mr. SIMS. Have attorneys speaking for producers or pipelines
suffered similar rejections in your experience with the Commission?
Mr. MAMONE. Certainly. All parties, all participants frequently
lose and they are frequently told that their views are not acceptable.
Mr. Moss. There seems to be that sense among the Justices on the
Supreme Court in their opinions of yesterday.
Mr. MAMONE. Yes, sir.
Mr. SIMS. I wanted to make that clear, that this was not un-
precedented nor even in some person's opinion all that unusual.
Mr. MAMONE. That is correct. Interestingly enough, Mr. Sims,
one of the proposals that. the staff submitted to the administrative
law judge in the Superior case which he rejected was subsequently
adopted by the Commission.
Mr. Moss. We will have to break for 15 minutes.
Mr. SIMS. That concludes my questioning, Mr. Chairman.
Mr. Moss. Very well. .
[Brief recess.]
PAGENO="0745"
739
Mr. Moss. The subcommittee will be in order.
The Chair recognizes the gentlemaii from New York, Mr. Lent.
Mr. LENT. Thank you, Mr. Chairman.
Mr. Lotis, have you ever sought ernploymei~t with the Potomac
Electric Co.
Mr. LoTIs. Yes, after the reorganization.
Mr. LENT. When was that?
Mr. LoTIs. I received a call-
Mr. LENT. You say after the reorganization?
Mr. Loris. Yes, in October. I received a call-
Mr. LENT. Just tell me when.
Mr. Loris. I don't know. Within 1 week of the reorganization. I
just don't know the date.
Mr. LENT. And had you interviewed or filed application with
Pepco earlier than that?
Mr. Loris. No.
Mr. LENT. Any other utilities that you sought employment with?
Mr. Loris. After the reorganization?
Mr. LENT. No, before the reorganization.
Mr. Loris. I earlier testified on this. The last conversation I could
recall with either a private law firm or a utility was in December
1975. Those were the last conversations I recollected.
After that day I testified I remembered conversations with that
particular law firm. They made an offer in December 1975. I con-
sidered it and I think I rejected it in a phone conversation in
February 1976.
Then prior to that time, in terms of private law firms or utilities,
it would be going back some time. I just don't recall.
Mr. LENT. When we interviewed Commissioner Smith yesterday,
we asked him-or I asked him-at page 56 of the record:
Would it not have been an unwise decision for Mr. Journey, as part of this
reorganization, to place a man who was known to be seeking other employ-
ment into a position of authority and supervision over a large group of
people?
Mr. SMITH. If someone has expressed an intent to leave, as Mr. Lotis did,
it would not be logical to assign him to a large section.
Mr. LENT. Do you agree or disagree with the decision of Mr. Journey as
approved obviously by the Chairman to put Mr. Lotis in the position he was
put into?
Mr. SMITH. With Mr. Lotis' expressed intention to seek other employment,
I agree with it.
Now we have here the statement of the Commissioner to the effect
that it was a wise decision to put you in the slot to which you were
assigned Do you disagree with Commissioner Smith?
Mr. Loris. That was based on the assumption, I believe implicit
in your question, that I had expressed an intent to leave.
I had testified earlier that on June 4 I indicated to the Chairman,
and he recognized in his testimony and he so testified, that he knew
as of about that date that I was going to stay on until after the
national election.
I just testified this morning that I never told Mr. Journey that I
was going to leave the agency. Mr. Journey never asked me that
question.
PAGENO="0746"
740
If this was his thinking in the course of his planning of the re-
organization, he never asked me that and I never told him.
Mr. LENT. When Commissioner Smith testified he was not equivo-
cating at all, he said: "When Mr. Lotis expressed his intention to
seek other employment, I agreed with it."
Later on in the testimony I asked Mr. Smith whether his answer
would have been any different as to his replacement or the wisdom
of that replacement if you had estimated your exit date as before
election or until the election.
His answer was:
Mr. Lent I have had some difficulty from reading the transcript, and I have
had a number of conversations with Mr. Lotis and continue to seek his advice
on some things. I don't fully understand what he conceived his function to
the Commission relative to the election and how it would be thereafter.
In other words, I suppose what I have to say is that if he had expressed
an intention of leaving, then placed the election contingency on top of that,
I probably would still have regarded him as someone who no longer saw his
further career as being with the Federal Power Commission.
Now I will put my question to you again: Do you disagree, then,
with the opinion of Commissioner Smith?
Mr. LoTIs. Yes.
Mr. LENT. I asked Mr. Smith whether he could give the commit-
tee the benefit of his judgment as to why these shifts in personnel
were made. He said at page 58:
I think the reason Judge Lewnes left and became an Administrative Law
Judge was because he wanted to. Mr. Lewnes would not have been fired. I
can almost assure you of that.
Mr. Lewnes, do you agree or disagree with Commissioner Smith's
opinion that the reason you left to become a judge was because you
wanted to become a judge?
Mr. LEWNES. I think I testified that the reason I became a judge
was because I wanted to become a judge.
Mr. LENT. Thank you.
Mr. LEWNES. However, I did give the premise upon which I made
that conclusion and picked up that option.
Mr. LENT. Mr. Lotis, Commissioner Smith further stated, and
this is at page 48, starting at line 18 of the transcript:
Mr. Lotis and Mr. Journey cannot work together in any way. Mr. J'ourney
is the General Counsel and Mr. Lotis isn't. I think that is probably why
Mr. Lotis is where he is.
Do you agree or disagree with that opinion of Commissioner
Smith?
*Mr. LoTIs. So far as I know, there is only one General Counsel
within our agency. Inasmuch as there cannot be two, I certainly
am not.
Mr. LENT. Do you agree that you and Mr. Journey could not have
worked together in any way?
Mr. L0TIS. No, I don't agree with that statement. I have testified
as to how I handled particular cases. I believe my conduct has been
entirely proper, and I assume that a General Counsel who would
have agreed with that conduct would have created a situation where
there would be no friction, albeit there was because we took different
positions on basic questions which came up before the Commission.
PAGENO="0747"
741
Mr. LENT. My recollection is that when you testified that all of the
Commissioners thought you had gotten a bum deal in your transfer
and sympathized with your position-
Mr. LoTIs. Yes.
Mr. LENT. Was that true?
Mr. Lo~ns. Yes.
Mr. LENT. Certainly one of those Commissioner was not Mr. Watt.
We heard his testimony yesterday and he was very clear on that.
We also have now the testimony of Commissioner Smith, that he
agreed with your transfer.
We know that Chairman Dunham OK'd your transfer.
Who are these Commissioners who felt you got a bad deal?
Mr. LoTIs. Commissioner Smith, and he said so on a number of
occasions to me.
Mr. LENT. Is he the strongest reed on which you hang your case
that the Commissioners felt you had gotten a bad deal and that the
transfer should not have taken place?
Mr. Lons. In addition to Commissioner Smith, I heard from
Commissioners' assistants who expressed that same view, assistants
to Watt, the Chairman himself, and Mr. Holloman.
Mr. LENT. That does not square with what Mr. Smith told the
committee yesterday.
Mr. LoTIs. I know that. I also know what Mr. Smith said on a
number of occasions, expressing deep regret for what happened in
my situation.
Mr. LENT. He told the committee that he thought it was a wise
decision.
Mr. LoTIs. I cannot speak to that. I can say what Commissioner
Smith told me on a number of occasions.
Mr. LENT. All right.
Mr. Mamone, did I understand you correctly during your examina-
tion this morning by Mr. Sims to say, with respect to the Commis-
sion's criticism of your work, that you had no opportunity to cor-
rect your work?
Mr. MAMONE. I never received any criticisms from the Commis-
sion until I heard the testimony of Mr. Journey and Mr. Watt dur-
ing these committee hearings. Therefore, it follows, if a person never
received a criticism, that person has no opportunity to correct
alleged problems.
Mr. LENT. Don't you read the Commission opinions?
Mr. MAMONE. Certainly.
Mr. LENT. You read the Tenneco opinion and the Superior
opinion?
Mr. MAMONE. There is nothing in the Tenneco opinion that is
critical. Congressman Luken went over that in detail yesterday with
Commissioner Watt. You can read that examination. There is not
anything critical in the Tenneco opinion at all.
Mr. LENT. There were several other opinions as well, were there
not?
Mr. MAMONE. There were four opinions that Mr. .Journey and Mr.
Watt referred to.
PAGENO="0748"
742
Mr. LENT. You saw nothing in any of those opinions that reflected
on your work product?
Mr. MAMONE. No, sir, I did not. I saw they disagreed with posi-
tions we were presenting but I see no criticism other than the one
where we requested to have the record reopened and it was denied.
Mr. LENT. In the Superior Oil Co. case decision where the Com-
mission quotes Judge Zwerdling, you do not see anything critical
of your work performance in that?
Mr. MAMONE. No, sir.
Mr. LENT. When Judge Zwerdling said the staff brief presents a
"hodgepodge of barely stated doubts, fears, and conclusions unsup-
porteć by any substantial analysis or rationale," you don't consider
that critical of your work product?
Mr. MAMONE. No. That is their conclusion. I do not consider it
critical because I felt, and still feel, the brief was quite adequate
on all those points in defending the condition (j) which the Com-
mission asked us to try.
Mr. LENT. When the Commission went on further and said, "In
concluding that the staff had provided no really serious or helpful
analysis of the policy issues in this proceeding," you don't consider
that to be critical of your work performance?
Mr. MAMONE. No, sir, I do not.
Mr. LENT. I have no further questions, Mr. Chairman.
Mr. Moss. Mr. Waigren?
Mr. WALGREN. I shall certainly not take long.
I want to thank each of you very personally and also in a very
real way for the 430-plus thousand people I represent here in Wash-
ington. They cannot join us in these proceedings but it is in their
interest that you have served.
I think this case raises the most serious questions of whether the
Congress can get at, whether those 430,000 people can get at, viola-
tions that may even rise to the criminal level and which go to the
heart of their interest.
The only way that can possibly happen is if public servants such
as yourselves are free to come before committees of Congress and
give evidence freely and completely.
I think you have done a very real service to the people that I
represent and I hope we will be able to look at this record now as-
sembled, and to look at those circumstances which seem damning
to say the least when you think of the instances which go back in
time to the circumstances of this past winter and the kind of light
that some of us have shed on the Tenneco case and the implications
of the withholding of that kind of gas or the diversion of that kind
of gas through the interstate market.
I can think of nothing more serious than that. I think you have
done a great service to everyone by taking the position that you
took both then and now.
I realize it was a substantial uncertainty for yourselves that you
did this, and I think that is the real saving grace we might have as
a Government; that is, that we have people like you involved in
our work.
PAGENO="0749"
74~
I simply would like to say how suspicious the circumstances look
to me at this point, especially when you have the beginning of the
moves and pressures brought against the several of you who took
part in this testimony.
I think you have done a great thing in coming back again and
helping to create a record which we can now look at in a dispassion-
ate sense.
I know that there is a chilling effect on people who work in the
regulatory agencies and in the other agencies of government when
they are brought under pressure by the policymakers, but I think
you will have contributed your own chilling effect on their ability
to engage in that kind of activity with impunity if they know that
Congress and a record will be looking over their shoulders.
In that sense, I think you have done everyone a tremendous serv-
ice through your willingness to come forward in the Tenneco case,
others, and this investigation.
I want personally to thank you, and I want you to know, too,
that the impact of your views on this situation will not stop here
as this hearing comes to a close but I trust that the committee will
be looking at this very carefully to see exactly what recommenda-
tions it can make, both individually and as Congressmen, to the
public as well as with other agencies of government.
Thank you very much.
Mr. Moss. Mr. Luken?
Mr. LuK1~N. Mr. Lewnes, what was the premise for your becoming
an administrative law judge and applying to become an administra-
tive law judge?
Mr~ LEWNES. As I previously testified, I was on the roster-
Mr. LUKEN. I might say at the outset that I think we will neces-
sarily be reviewing and wrapping up some things, so I don't mind
if you are repetitious.
Mr. LEWNES. I had gotten on the roster in 1969. In 1970 I was
appointed Assistant General Counsel. I thereafter called and asked
them, within a short while, to take my name off the roster because
I was receiving requests as to whether I was interested in becoming
an administrative law judge or an examiner at the time. -
I felt so long as I could do the job I felt I had to do with the kind
of independence I thought was necessary to do it, I would remain
in that job.
In the early part of 1976 I felt that I just could not function the
way my predecessor had. functioned, the way I had functioned, the
way I thought I should function, and I activated my application.
As to the details of that, I spelled them out earlier. I activated
my application.
Mr. LJKEN. You activated your application because of the onerous
and confining situation you described, having to do with your testi-
mony before this subcommittee?
Mr. LEWNES. Yes.
Mr. LUKEN. Was your staff being disseminated?
Mr. LEWNES. The dissemination of the staff began, I would say,
in October and November of 1975 but it did not reach full escalation
until the early part of 1976.
PAGENO="0750"
744
I indicated that I felt that in light of the movement of the chairs
around the Commission meeting room that was an indication of
speak when spoken to and not when you thought you had a responsi-
bility to speak on a matter that was within your jurisdiction, as we
had always operated.
I had never been told not to speak. I had never been told that this
was a new ballgame. Maybe it was a new baligame but they did
not inform the players, at least they did not inform all the ball-
players.
I take that, plus the conversation I had with Mr. Fee, a straight-
forward and honest conversation.
I then decided it was time to leave.
Mr. LUKEN. The conversation with Mr. Fee was, that you had
been reading the signs, and he confirmed you were reading those
signs correctly. Was that the gist of the conversation?
Mr. LEWNES. Yes, sir.
Again, there was no conversation as to firing or not firing. These
were part of the rumors.
As I indicated, I told him the story, that I was reading the signs,
that I was not wanted.
His exact words as best I can paraphrase them were, "Some people
have problems with you."
I said, "That is good enough."
Mr. LUKEN. What you are saying is that regardless of salary or
title, you were in the job which you wanted to do as Assistant Gen-
eral Counsel, and prior to these conditions described, which were
subsequent to your testimony, prior to that you had rejected the
opportunity to follow up on that application to be an administrative
law judge. Is that correct?
Mr. LEWNES. That is basically correct. This is not to say that if
some job came along that I felt was better than being an Assistant
General Counsel I would not have considered it.
However, at that particular time I was happy doing what I was
doing. The thought of becoming a law judge during those 6 years
never really entered my mind until the culmination of what I felt
were indications that I should move on.
Mr. LUKEN. Were any statements made to you other than your
conversation with Mr. Fee with reference to the opinions of the
Commissioners or the General Counsel or any supervisors?
Mr. LEWNES. No, sir; never of a critical nature.
Mr. LUKENS. In signs or signals you have not mentioned?
Mr. LEWNES. No; I think Commissioner Smith did indicate, I
had conversations with him on and off, and he was a Commissioner
who had been there many years. We discussed generally how to ex-
pedite things, what we could do to better bring things before the
Commission. They were general conversations but never a word of
criticism from anyone.
Mr. LUKEN. Never a word of criticism.
Mr. LEWNES. That is correct.
Mr. LUKEN. So the signals that you got were not direct other than
the conversation with Mr. Fee.
PAGENO="0751"
745
Mr. L1~WNES. Yes, sir, as I said, they were rumors and my own
signs, as I called them.
Mr. LUKEN. Were you aware of Mr. Fee's conversation with Com-
missioner Dunham which was testified to here with reference to
getting you out of the job?
Mr. LEWNES. No; I was not.
Mr. LUKEN. You heard about it here?
Mr. LEWNES. I heard rumors before that here. I first heard a
public pronouncement that had occurred-
Mr. LUKEN. Then you were aware in the sense you had heard
rumors.
Mr. LEWNES. I had heard general rumors. It was not just me-
changes would take place, and "I think you will get fired;" "I think
Mr. Lotis will get fired." These are general rumors.
I do not want to say I can substantiate any of it, but that plus
the fact that staffs are being disseminated, people will be reorgan-
ized, what have you, I felt the climate was wrong.
Mr. LUKEN. Where did you hear those rumors?
Mr. LEWNES. I think some of my attorneys might have said these
things.
I had just come back from Florida, as I indicated. I had gotten
the flu twice. I was disturbed at what was happening. When I came
back, apparently rumors escalated again.
I do not know. People were coming in from all over. Whether it
was people from the Bureau of Natural Gas or people from the
outside calling you, it was just a conglomerate.
I said, "Hell, I don't want to hear any more. I will see Curt Fee
and find out once and for all."
That is what happened.
Mr. LtTKEN. These rumors were statements from people within the
Commission and people doing business with the Commission?
Mr. LEWNES. In general I would say that is correct.
Mr. LUKEN. Would you mind summarizing your testimony before
the subcommittee?
Mr. LEWNES. I testified twice before this subcommittee and once
before Congressman Dingell's subcommittee.
The first time I testified before the subcommittee I had been on
vacation. I got a phone call in the summer of 1975, I believe it
was, to appear here. I did under instructions of Chairman Nassikas.
I just do not recall the substance of that. It had something to do
with producers.
In any event, the second time, the time I appeared before Con-
gressman Dingell and the time I appeared before this subcommittee,
it dealt essentially with producers either not living up to their
certificated authorizations or the fact that gas was moving out of
the interstate market, what I would call illegally.
Mr. LUKEN. So the issue there was withholding and regulation.
Mr. LEWNES. Basically, yes.
Mr. LUKEN. Which are related.
Mr. LEWNES. Obviously.
Mr. LUKEN. And you took a position that there was withholding.
Those were your findings?
PAGENO="0752"
746
Mr. LEWNES. At the time we testified, one of your committee peo-
ple had an order we had drafted which they had gotten from the
Commission. They presented it to us and we agreed we had drafted
the order in which we had said there was a rebuttable presumption
that gas was being purposely withheld. That was essentially the
testimony given.
Mr. LUKEN. Mobil is deliberately and intentionally withholding
natural gas from the interstate market.
Mr. LEWNES. What are you reading from, Mr. Luken ~
Mr. LTJKEN. I am reading from what appears to be a transcript,
an excerpt from the order which you submitted to the Commission.
Mr. LEWNES. I don't recall but it sounds right.
Mr. LUKEN. Was the thrust of your testimony in favor of regu-
lation?
Mr. LEWNES. It was in favor of enforcing a Commission certificate
which had required the company to do something. That was one.
This had to do with the Gulf warranty.
Essentially, yes, it was enforcing regulations to the full limits
of our legislative leash, which is the Natural Gas Act. I testified to
that this morning.
Mr. LUKEN. Did the Commission agree with your position?
Mr. LEWNES. My recollection at the time is that I do not think
they did. What they issued was not what we had submitted.
Mr. LUKEN. Did Commissioner Watt disagree with the position in
which you favored strong regulation?
Mr. LEWNES. I cannot recall whether he was there at the time or
not, Mr. Luken. I think you should look at the order which was
issued.
Mr. LUKEN. In that particular case, was that Commissioner
Watt's position?
Mr. LEWNES. Again I would have to refer you to whatever he
subscribed to which was publicly issued. I just do not recall what
position he took. I know the Commission did not.
If it was a unanimous decision, then obviously he did not agree
with the position I had taken.
Mr. LUKEN. As counsel, under the Natural Gas Act, Mr. Lewnes,
or under the applicable laws, what were your duties with reference
to the Commission?
Mr. LEWNES. When applications are filed which fell within my
province, which was certificates, abandonments, imports, exports,
LNG, coal gasification, curtailments normally apnlications would be
noticed. Someone in my shop would issue a notice of that applica-
tion.
In the meantime the Bureau of Natural Gas would do the analysis.
At times members of the Bureau of Natiral Gas would talk to me,
my counterparts, and we would kick around a particular situation.
We did this on a daily basis. I would say we probably talked about
20 cases a day at least.
Eventually a draft might emerge. If we had an agreed upon posi-
tion, I reviewed the draft, had my input on the legalities involved,
and it was finalized and then presei~ted to the Commission.
PAGENO="0753"
747
If we had differences of opinion, we might state those in the
memorandum, or if they were strong enough, we might put out
separate memorandums.
When the memorandums went up to the Commission, it was my
function to assist and articulate to the Commission a more detailed
expression of what was set forth in the memorandum, what the
Commission was asking questions about.
The other hat I wore was one which supervised the attorneys at
the trial level. Once a decision went up to the Commission from
the hearing below upon exceptions or upon the Commission's own
motion, that was analyzed by the Office of Special Assistants. We
normally would not have any input into that except to the extent that
a Commissioner would ask quesions about it.
Mr. LtJKEN. What was your legal authority to represent the public
interest?
Mr. LEWNES. The fact I was hired by the Federal Power Com-
mission, the Natural Gas Act, and-
Mr. LUKEN. Let me clarify that. We are in an area where the
question might well be raised that you were employed by the
Federal Power Commission. Was it not your duty simply to follow
the policies and philosophies of the Federal Power Commissioners?
Mr. LEWNES. No, sir.
Mr. LUKEN. Or did you have a duty to represent the consumer
and the public interest in addition, and what about possible conflicts
there?
I would like you to tell me what the law is and your interpretation.
Mr. LEWNES. As I view it, our job is first to the public which pays
us. Second-
Mr. LTJKEN. That is a general statement. What is the legal basis
for it?
Mr. LEWNE5. Second-
Mr. LUKEN. The statutory basis.
Mr. LEWNE5. I do not think there is a statutory thing. You are
employed by the Commission. You are obviously subservient to the
Commissioners. You respect their judgments.
Once their judgments are pronounced in a written opinion, you
are obligated to follow those to the letter except to the extent that
you find there are changed circumstances as would warrant an
argument to the contrary.
That is exactly what was done, as I indicated before, in the
Chandeleur case, and the Commission agreed that there apparently
were changed circumstances and they backed off of that.
But at all times we are obligated to follow the Commission's
written opinions whether they are pending in court or not. In other
words, they may be reversed, but once a Commission makes a
written pronouncement, we are bound to follow that pronouncement.
Mr. LUKEN. You have been accused in these hearings of advocacy.
What is your right to advocate the consumer interest before the
Commission?
Mr. LEWNES. The advocacy, I think Mr. Sims brought it out, is
really set forth in the memorandums we put to the Commission.
PAGENO="0754"
74~
It is not my advocacy but the advocacy of the entire staff which has
worked on the case, be it the Bureau of Natural Gas, the Office of
Economics, be it the Office of Accountants, or the Office of General
Counsel. That is where the advočacy is.
However, oftentimes those memorandums are not all compre-
hensive, and the way we had always operated is that Commissioners
would kick it around. They would make statements. They wanted
to know whether their assumptions were correct. They would ask
questions.
We would advocate that which was in the written memorandum
there. To say that the memorandum was not public, well, it is not
my fault. It was the Commission's rules which did not make what
went on in Commission meetings at that time public, whether it be
an oral statement or a written memorandum.
Mr. LUKEN. Would you agree with the statement that the Natural
Gas Act places responsibility for advocating the public interest
position on Commission staff attorneys?
Mr. LEWNES. I have lived by that. Whether it is in the statute
or not, that is the way I have operated. I think that it was probably
in my job description. I am not too sure but I think it is.
Mr. LUKEN. In your experience has that been the creed that other
attorneys in the Commission live by also?
Mr. LEWNES. As I testified this morning, my predecessor, who
had been at the Federal Power Commission I believe at the time
the Natural Gas Act was enacted, that was the rule he lived by.
Those were the rules he handed down to me. Those were the rules
I lived by. Those were the rules I required my attorneys to live by.
Mr. LUKEN. Following up the responsibility, of advocating the
public interest, if you find in handling specific cases that there is
withholding of gas, it would be your responsibility to assert that
to the Commission regardless of whether the Commission agreed
with it?
Mr. LEWNES. Absolutely.
Mr. LUKEN. That is what you did?
Mr. LEWNES. Yes, sir~
Mr. LUKEN. And if it was your belief in carrying out that re-
sponsibility that regulation of natural gas, if you favored regulation
of natural gas, you would assert that in carrying out that responsi-
bility; is that right?
Mr. LEWNES. Yes, sir. As Assistant General Counsel, that was my
responsibility. If I felt that someone was not living up to the cer-
tificate which was granted under the Natural Gas Act, or someone
was doing that which the Natural Gas Act as I read it would be
held to be an illegality, I had a responsibility to report that to the
Commission, and we did.
Mr. LUKEN. And it was the displeasure of a certain member or
members of the Commission with your positions and your advocacy
of these matters which brought about the condition which caused
you to leave. Is that right?
Mr. LEWNES. I do not know that, Mr. Luken. All I knew is what
Mr. Fee told me-some people were dissatisfied with me.
PAGENO="0755"
749
Having heard these hearings, I still do not know who they were.
Mr. LTJKEN. We are not asking who the people were.
Mr. LEWNES. I do not know whether they were Commissioners.
I just do not know who they were. All I know is what Mr. Fee
told me. He confirmed it on this record.
Mr. LTJKEN. They would be supervisors?
Mr. LEWNES. Unless he was listening to some GS-3 or GS-4.
I do not know.
Mr. LUKEN. That was not your interpretation?
Mr. LEWNES. I do not think so.
Mr. LUKEN. You have had the total experience here. As you
stated, your advocacy, as it has been described, your testimony before
the subcommittee here, the subsequent conditions under which you
operated what inference do you make from these facts?
Mr. LEWNES. Again, I testified that at the time that things were
occurring, and at the time I concluded that it was time to move,, I
had drawn a causal relationship between having testified on the Hill
and the happenings.
Mr. LUKEN. Thank you, Mr. Lewnes.
I have notmade any comments other than asking questions in these
hearings.
Obviously, it is a grave matter for this subcommittee, and I
would think for this Congress, where there is any suggestion that
the testimony before a subcommittee would be visited with any
kind of reprisal. I would like to echo the comments of my colleagues
in congratulating you and the other witnesses here at the table.
I think you have been questioned exhaustively and there just
does not seem to be any question but that your inference is the
inference which could and must necessarily be drawn, that it was
your testimony and it was your advocacy of the consumer position,
right or wrong, before this subcommittee and before the other sub-
commitee which resulted in the reprisals. I think that is a very serious
matter which I hope we will look into further.
Thank you, Mr. Chairman.
Mr. Moss. Mr. Santini?
Mr. SANTINI. Thank you, Mr. Chairman.
I would like further to contribute to the continued state of either
mental or physical exhaustion of the witnesses on a specific area of
inquiry I pursued before with other witnesses before this sub-
committee.
This deals with terms of our modest, little in-house operation in
what has become known as the Henderson hiatus.
FPC issued an opinion on July 7, 1976. I know you have com-
mitted to memory all of the FPC case numbers so this will pose no
problem for you in recalling it.
This was the FPC decision to order Nevada Power Co. to give
back $162,000 to CalPac in July 1976.
*Th*e opinion ordered Nevada Power Co. to file rate schedules
within 60 days and refund $162,000 with 9 percent interest 30 days
after they approved Nevada Power's rate schedule.
On September 2, Nevada Power submitted its amended rate
schedules.
PAGENO="0756"
750
On December 13, FPC approved Nevada Power's amended rate
schedules. Refunds with interest were, therefore, required to be
made to CalPac and to the community of Henderson, Nev., by
January 12, 1977.
It may come as little shock or surprise that Nevada Power has
made no refund.
An itinerant utility user from Henderson, Nev., visited Washing-
ton, D.C., on February 24, 1977, and met with a representative of
the FPC. In this instance, it was Assistant Litigation Counsel
I)aniel Goldstein, who has been a helpful and positive influence
throughout the course of this effort at communication and rectifica-
tion.
This time it appears was the first time that FPC staff, at least,
became informed of the fact that as of this date, of February 24,
1977, no refund of any kind had been made. This was confirmed
immediately on that date, February 24.
On March 1, 1977, a newspaper reporter from Nevada reviewed this
issue and discovered no decision for action had been made in the
interim. February 24 to March 1, time period.
On March 2, the Commission met to consider the approval of a
district court enforcement action against Nevada Power. Three of
the four Commissioners were present.
FPC General Counsel, Solicitor, and Assistant General Counsel
recommended approval of the district court action, that is FPC
intercession in district court. The question is in a twofold context.
Mr. Lotis, who had served as General Counsel in charge of rates,
was ceremoniously or unceremoniously relocated in this interim.
My first question is this: Did that removal of Mr. Lotis in any
of your collective or individual judgments contribute in anyway to
this breakdown in response and enforcement action by the Com-
mission?
Mr. LOTIS. I do not see how because I would not have been made
aware of that fact, that Nevada Power had not made the refunds.
The refund requirement or the refund renorting would have been
made to the Bureau of Power and it would have been some time
before it would have been brought to my attention.
Once it would have been brought to my attention, I assure you I
would have pursued it. However. I cannot find the relationship
between my change in responsibility on October 12 and that par-
ticular case.
Mr. SANTINI. Would you characterize the office transfers and duty
assignment or change in job position as enhancing internal or-
ganization or detracting from it?
Mr. LOTIS. In terms of productivity?
Mr. SANTINI, Yes.
Mr. LoTIs. In terms of productivity, in my area of responsibility
I testified this morning that productiviy has not increased, and from
apearances, because of the increase in number of attorneys assigned
to this, it would have declined under the standards that Mr. Journey
chooses to judge productivity.
MF.WOFSY. If I may respond as to quality, I think the quality
ha~ bc~n inhibited by these transfers. I believe that the quality of
PAGENO="0757"
751
the work has been greatly deteriorated for the simple reason that
the younger attorneys who are doing the work do not have the
experience and know-how to know how to handle and cope with
certain matters. I believe the Nevada order you are speaking of
may have a bearing on that.
I am presently now working for Dan Goldstein. He did tell me a
little bit about this decision and their going to the Commission with
a recommendation.
It was my understanding that the order asking for, or requiring,
refund did not have a concomitant reporting requirement, which
was the followup as to why the Commission or the staff was not
aware of this lack of refund obligation being disposed of by the
utility. I think that is in essence what I mean by the quality of work.
I just do not b~elieve that these transfers have enhanced the quality.
Mr. SANTINI. Could that concomitant provision, which you referred
to and which was testified to as being a trigger mechanism, auto-
matically have been included previously in Commission order of
work in most instances?
Mr. WOFSY. Yes, sir. I believe Mr. Lotis also can speak to that.
Mr. LoTIs. Quite frankly, that particular item you refer to, I
think it was the result of a Commission opinion in which neither
myself or my successor, Mr. Goldstein, would have played a part.
Aside from whether there was a refund condition-
Mr. SANTINI. Reporting condition?
Mr. Lo~ris. Yes.
The Power Act, as well as Commission rules, prescribe that excess
charges shall be refunded with interest at a designated interest
rate so that the utility was on constructive notice that they had that
obligation.
Whether the literal implementing language was put in the order
is in my judgment not a valid defense.
Mr. SANTINI. Thank you. You have responded and added further
enlightenment to the internal confusion we are grappling with here.
would like to pursue one further area somewhat removed and
calling for a legal conclusion. I hope you will feel that such a con-
clusion would be worthwhile in terms of this committee's ultimate
* assessments.
I am sure you are familiar with the Cinderella Career & FiniBhing
School case of 1970 which can be cited as 425 F. 2d 583, 1970.
I am concerned about the suggestion, at least, and perhaps the
irrefutable evidence at best, that the internal transfer action here
constituted a due process violation under the test as suggested by
the Cinderella decision
I quote now from page 591 of that case:
The case for disqualification has succinctly been stated as being whether
a--~disinterested observer-may conclude that the agency has in some measure
adjudged the facts as well as the law of the particular case in advance of
hearing It.
Does the internal transfer action here constitute a manifestation
from above of a predisposition with regard to case matters that will
be coming before the Commission, at the very least suggesting it,
and perhaps at the very most suggesting it?
87-292 0 - 77 - 49
PAGENO="0758"
752
I would appreciate any thought or observation you feel appropriate
on the observation that it could constitute a due process question or
concern.
Mr. WOFSY. I testified that I asked Mr. Journey to take me out of
the job of caretaker after George had left. This is as Assistant
General Counsel for certificate work.
I did that specifically because I was asked to take an attorney off
a case that was ongoing.
It was my impression that one of the possible reasons for requir-
ing that attorney to be taken off that case was the dissatisfaction
that the Commission had, or some of the Commission members had,
in a similar case hat he had tried, and that was going to the issue
as to which way he should flip-flop on this particular case.
I felt that if I stayed on, this intrusion would become enhanced.
That is why I left.
Mr. SANTINI. Thank you.
Do any of the other witnesses care to comment?
Mr. MAMONE. Previously the Commission had been challenged in
court on the question of separation of functions which goes to the
ultimate c&uestion of disqualification of the Commission in making
a final decision.
In a case called International Paper Co. the Commission was
challenged on separation of functions. The Second Circuit Court of
Appeals upheld the Commission's procedures because the Com-
mission was able to show that the General Counsel was separated
from the trial counsel by the Assistant General Counsel, who at that
time was Mr. Robert L. Russell. This was a case which arose in our
section.
The Judges of the Court of Appeals were persuaded that the
parties were treated fairly because there was that separation of
function within the Office of General Counsel.
Mr. SANTINI. Do you feel that under the evidence as established
by the testimony before this subcommittee that when Commissioner
Watt came down and directed that Mr. Mamone be taken off a case
that he was disrupting or interfering with this detachment relation-
ship?
Mr. MAM0NE. Congressman Santini, we are not sure it was
Commissioner Watt who asked that the attorney be removed. I do
not think that is clear in the record.
However, Mr. Journey testified, and Mr. Wofsy testified, there
was an instruction from upstairs to take me off the case. Regardless
of who was involved, I think there is a question of possible inter-
ference by the decisionmakers with the people who are trying cases
on the record. This could possibly be an interference.
1 do not know of anybody who challenged it but there is that
potential.
Mr. SANTINI. With regard to Mr. Luken's earlier inquiry, it might
be useful for this record to include a specific statory reference.
Mr. LEMOY. It is already in the transcript.
Mr. SANTINI. I am advised we do not want to encumber an already
overburdened record.
PAGENO="0759"
753
Mr. Moss. I believe that is a section I read into the record yester-
day during my discussion with Commissioner Watt.
Mr. SANTINI. I shall withdraw any offer at this time.
Thank you, Mr. Chairman and gentlemen.
Mr. Moss. Mr. Lent, you desire more time?
Mr. LENT. Mr. Chairman, I have no further questions except to
restate my previous opinion that this record, so far as I have been
able to determine, is bereft of any hard evidence of any retaliatory
action taken against any of these employees as a result of their
testimony before this committee or the other subcommittee chaired
by Chairman Dingell.
What we basically have here is a great deal of surmise, innuendo,
hearsay, and coincidence not substantiated by facts.
I think in plain English what we have had before us the past few
days is the exposure of a typical employer-employee conflict, and
regardless of whether we may or may not individually sympathize
with the positions taken by these four gentlemen who are here this
afternoon, nonetheless, their employees are the Commissioners.
They have the authority vested in them by law to take whatever
personnel actions they deem necessary, and I am convinced that what
personnel actions were taken here had no relation to their testimony
before this subcommittee. There is no evidence of any wrong-doing
and I am satisfied as to that and my minority report will so indicate.
There is nothing here which should give us cause for alarm.
Mr. Moss. Gentlemen, I have questions. I must confess that I have
cause for alarm.
I suppose that the difference in the experience of Mr. Lent and
myself accounts for that alarm.
I have chaired committees now for some 23 years where I have
summoned witnesses under five administrations. I~ have learned the
absolute need for the Congress to be able to assure witnesses that
their appearances will not result in any action adverse to them
because, if we suffer that to happen, then in the future we cannot
expect to get cooperative witnesses. We will have a little less than
the full disclosure which the Congress must have if it is to exercise
its responsibilities to the electorate.
We have, as I have repeated on this record several times, in-
teresting coincidences. We have four of you before us representing
not a single objective in this hearing but rather three objectives
which I set forth in my opening statement at the beginning of these
hearings.
We are concerned with the effect of transfer and understaffing
on the operations of important units in the Federal Power Com-
mission.
We are concerned with any reprisals which might have been taken
against employees.
Those two areas seem to be important because three of you were
involved in congressional hearings in one degree or another, two of
you very specifically and a third, Mr. Aber, being involved very
directly, also, and chose to leave the Commission as a result of
developments which occurred following his testimony.
PAGENO="0760"
754
That should not be overlooked by the members of this subcommittee
as they review this record.
You, Mr. Lewnes, I think today again placed in context, as I tried
the day before yesterday, the true reason for your leaving. It was
not because you felt you were advancing yourself, securing a position
of greater satisfaction to you, but you felt that circumstances had
arisen in the Commission which, viewing yOur options, made the
option of seeking to reactivate your application for a law judge
the most attractive of the alternatives.
Do I place that in the correct context?
Mr. LEWNES. Exactly.
Mr. Moss. Not faced with the evolving situation in the Com-
mission, you would not have reactivated.
Mr. LEWNES. At that particular time my general feeling is that
I would not have.
Mr. Moss. This is not a simple arrangement of furniture you are
talking about, was it?
Mr. LEWNES. No, sir.
Mr. Moss. It was a message which was conveyed through a
realignement of the relative relationship of the. staff of the Com-
mission.
Mr. LEWNES. Yes, sir.
Mr. Moss. Yesterday Mr. Watt, in response to some questions
from me, stated that the remedy suggested was not to take after
the persons on the Commission staff who were following the prece-
dents, and I believe they persisted as long as you were in the
Commission as a member of staff. Am I correct in that?
Mr. LEWNES~ Yes, sir.
Mr. Moss. That was for more than 15 years?
Mr. LEWNES. Yes, sir.
Mr. Moss. Changing only following the April 1 memorandum from
the Commissioners, administrative order 160, which led to the so-called
sunshine approach of meetings.
Mr. LEWNES. The chairs were moved prior to that April 1 date.
Mr. Moss. They were moved prior to that April 1 date.
Then in discussion with Commissioner Watt I stated-
Rather than being critical of staff-
Page 155 of the hearing record
you objected to the vigorous advocacy role undertaken by them. Why didn't
you propose a procedural change of the Commission's operation?
Mr. WATT. We did.
Mr. Moss. No.
Mr. WATT. Yes.
Mr. Moss. I do not mean the matter of changing the seating arrangement.
I mean by a specific instruction going forward to the staff that, "In the future
you are not to undertake this vigorous advocacy role."
Mr. WATT. That was done. Memorandum filed April 1 signed by Chairman
Dunham shows that.
I stated that we shall review that.
Now we have reviewed the files. The memorandum is entitled
"changes in Commission Policy and Procedure," dated April 1, 1976,
signed by Chairman Dunham.
It goes on and discusses physical layout and the conditions for
PAGENO="0761"
755
closed meeting and conditions for open meeting. Nowhere in that
memorandum do I find an instruction to any staff to discontinue
their active advocacy role.
Do any of you gentlemen have knowledge of the existence of a
memorandum directing that you discontinue your advocacy role?
Mr. LEWNES. Neither in writing nor orally up until April 5 when I
left the Commission. I had not seen nor heard of any such instruction.
Mr. Moss. Mr. Mamone?
Mr. MAMONE. No, Mr. Chairman. I know of no such thing.
Mr. Moss. Mr. Wofsy?
Mr. WOFSY. No, Mr. Chairman.
Mr. Moss. Mr. Lotis?
Mr. LoTIs No, sir.
Mr. Moss. That, Mr. Lent, causes me some concern, because the
Commissioner was not open with me in giving me the truth.
We shall pursue the matter further with him.
Mr. Lotis, much has been made about your expressions of intention
to leave. There is considerable examination by Mr. Lent on that and
reference to Mr. Smith's testimony.
A more careful reading of Mr. Smith's testimony shows that it is
carefully in the language of context with an assumption that you
had, indeed, made a firm determination to leave the Commission,
and that you had not done, and you had so informed Commissioner
Dunham, and Commissioner Dunham affirmed that fact before this
subcommittee. Is that correct?
Mr. LoTIs. Yes, sir.
Mr. Moss. Because then I went on with Commissioner Smith and
I examined him beginning on page 61 running through page 62,
where I get a sort of different reaction from Commissioner Smith.
He does not seem to show quite the enthusiasm for what was being
done, or what had been done.
He also stated that he did not think that you regard your changed
status as having the same significance as your previous duties.
Yet Mr. Journey, in his testimony, told us that you were assigned
cases of great importance and that lie did not regard this as any
downgrading of your assignment.
Am I correct in that?
Mr. LoTIs. Yes.
Mr. Moss. Do you regard it as a downgrading in your assignment?
Mr. Lo~ris. Absolutely. Prior to the reassignment I was responsible
for approximately 200 formal hearing cases, 200 investigations
instituted by the Commi~sion, where I played a principal role in
developing the staff position in the case, pursuing discovery and
working with both the legal and the technical staff in developing
the position we would advocate during the course of those trials.
In addition to that, under the separation of functions rule, I was
also ~permitted to participate in an advisory capacity to the Com-
mission on those same 200 cases, so besides investigating and being
one of the principal supervisors of the investigatory team, I was
perhaps the principal advisor to the Commission on all rate matters
that were in hearing.
The only rate matters the Commission tries under the present
PAGENO="0762"
756
rules are electric cases, and pipeline rate cases, most of the producer
cases being done by rulemaking. So I had virtual responsibility
for about 99 percent of the rate investigations conducted by the
agency.
In terms of overall hearing work, I had responsibility, as I
previously testified, for over 50 percent of the hearings conducted
by the agency.
Mr. Moss. Mr. Mamone, do you believe your present assignment
is consistent with the recommendations of the Touche Ross report
that the staff be utilized to the maximum effectiveness in the fields
of their greatest expertise?
Mr. MAMONE. Mr. Chairman, as I previously testified, I had no
experience in hydroelectric licensing regulation, and, therefore,
my transfer to that section was not considered as a recommendation
of the Touche Ross report.
Mr. Moss. Have you at this late date reached your optimum
effectiveness in that assignment, that new assignment?
Mr. MAMONE. I have not, Mr. Chairman.
Mr. Moss. Is there significant workload in the area where you
previously worked?
Mr. MAMONE. Yes, a very heavy workload in the natural gas
regulation area.
Mr. Moss. A backlogged workload?
Mr. MAMONE. Yes, and the people who remain there are very
heavily loaded with very urgent business.
Mr. Moss. Can you think of any other reason which makes rational
to you your reassignment other than the fact you appeared before two
subcommittees of Congress and gave testimony that seemed to cause
some embarrassment to the members of the Commission?
Mr. MAMONE. No other reason, Mr. Chairman, except, as I stated,
that I was persistent advocate of the public interest and attempting
to protect what I perceived to be the consumer interest.
Mr.~ Moss. Was it not the mandate by law that you be a persistent
advocate?
Mr. MAMONE. Yes, Mr. Chairman, that is the specific direction
of the Natural Gas Act, as I stated in my original statement. It had
always been the direction of the Commission that we carry out that
statutory mandate.
Mr. Moss. I believe that in 1959-60, when we had the old oversight
subcommittee, we reviewed the independent regulatory commissions,
and we adopted in our reports-fairly unanimous reports-a phi-
losophy expressed by you, Mr. Lewnes-that you should push really
to the outer limits of that enabling statute to determine what you
could or could not do, looking finally to the courts to tell you whether
you had gone beyond the limits intended by the Congress.
I recall very clearly a discussion with the then-Chairman of the
Federal Trade Commission, a commission which had been unduly
timid over the years, reluctant to test its full powers.
The committee again, as I recall, was unanimous in its finding
to let them go out and let the courts tell them when they went too
far.
PAGENO="0763"
757
With less than that, the inhibiting force of a single Commissioner's
displeasure being able to bring about major staff reassignments, is
it possible to expect that public positions will be given vigorous
advocacy?
Mr. LEW1~ES. I do not think so.
I think, as we have all testified in generalities, that if it is known
that a particular Commissioner espouses a particular position, and
that that Commissioner is thereafter instrumental in removing an
attorney from a case, that obviously has to be an inhibiting force on
others working there. There is just no doubt in my mind that that
will occur.
Mr. Moss. Actually Congress went to considerable length in care-
fully drafting the nature of an independent regulatory commission
-requiring it to be bipartisan and requiring staggered terms-in
order to ensure that there would be very strong divergent views
expressed on those commissions, did it not?
Mr. WOFSY. Yes.
Mr. Moss. Going back to the first of the independent commissions,
the Interstate Commerce Commission, and following through to the
most recent,~ the Commission on Consumer Product Safety, that
pattern has been followed, to ensure that there would be vigor in
discussing issues.
Who wrote the opinions that were cited here yesterday?
Mr. MAMONE. Three of the four opinions were written by Com-
missioner Watt.
Mr. Moss. Three of the four opinions which were relied upon by
the Commissioner as evidence of your-I do not know whether it
was your lack of professionalism or what else was it, your advocacy-
were written by the Commissioner who was displeased with you.
Mr. MAMONE. Yes, sir.
Mr. Moss. While the opinions were unanimous, the underlying
data included in the opinions are not always reviewed as carefully
as the conclusions; is that correct?
Mr. MAMONE. Yes, Mr. Chairman, with one modification. In the
Tenneco opinion which was issued recently, Commissioner Smith
said he is going to dissent. He has not yet filed his dissent.
The latest opinion written by Commissioner Watt, agreed to by
the other two Commissioners, has not-
Mr. Moss. There are two courses you were pursuing in those four
opinions and they have since been adopted by the Commission; is
that correct?
Mr. MAMONE. Not every point, Mr. Chairman, but several of the
important points have now been adopted by the Commission; yes,
sir.
Mr. Moss. But as you correctly point out, that was not your
opinion. It was the product of a staff and it represented a bringing
together of views for consideration by the Commission.
Mr. MAM0NE. That is correct. The views that I represented were
not solely my views but the views of all the people on the staff who
assisted and cooperated in the trial of these cases. It was a large
number of people involved.
PAGENO="0764"
758
Mr. Moss. And that was true with each of you gentlemen; is that
correct? -
Mr. LoTIs. Yes, sir.
Mr. LEWNE5. Yes, sir, insofar as any position presented, you
would have to discuss it with the other bureaus involved and you
would either go up with a joint position or you would go up with
memorandums indicating where your differences were.
Mr. W0F5Y. We in essence were the mouthpiece for staff. The
staff did not meet and did try to reach agreement as to what position
it would take. In the majority of the cases we were assigned to, the
staff did have a unanimous position which we advocated.
Mr. Moss. Up to this moment are you aware of any order which
has been issued by the Chairman, the General Counsel, or the Com-
mission removing the staff from the role of advocacy which it has
historically pursued?
Mr. MAMONE. I know of none, Chairman Moss. In fact, the state-
ment of Chairman Dunham the other day indicated that he favored
continued staff advocacy of various positions before the Commission.
Mr. Moss. Mr. Watt did not feel that way.
Mr. MAMONE. Mr. Watt takes a different view, as he told you.
Mr. Moss. With all of the staff which is available to the Com-
mission and the role played by them, the only ones to suffer adverse
actions were those who were involved, except yours was not an
adverse action, Mr. Wofsy, but it was a matter of conscience.
Mr. WOFSY. That is right.
Mr. Moss. You could not carry out an order and you asked,
therefore, to be relieved of the role of an acting Assistant General
Counsel because you were fearful that the pattern, once established,
would become increasingly onerous to live with. Is that right?
Mr. WoFsY. That is absolutely right. While you might say it was
not an adverse action, I look upon it as being an adverse action.
If George had left, and he had left, I felt that I was the person
who could carry forward with the Federal Power Commission re-
quirement under the act to handle the natural gas crisis in the best
manner.
Mr. Moss. In that ~ontext, of course, it was an adverse action.
In order to be able to live with your conscience, you had to forego
the opportunity of the promotion.
Mr. Worsy. That is what I wanted clear. Insofar as my having
testified previously, or anything of that nature, I have never testified
before you.
Mr. Moss: Following your request to be relieved of the role of
Acting Assistant General Couusel, were you subsequently trans-
ferred out of natural gas work?
Mr. W0F5Y. Well, I am presently out of natural gas work. I am
now on the Electric Rate Section.
Mr. Moss. Was that by choice?
Mr. Worsy. No. I gave Drex the opportunity to place me where
he thought I could. be of best use to him and the Commission.
Mr. Moss. Is that where he then placed you?
PAGENO="0765"
759
Mr. WOFSY. That is where I wound up; yes, sir.
Mr. Moss. The staff will be instructed to get a drawing of the
physical layout of the Commission room as it existed before the
April-was it April they started the change?
Mr. LEWNES. The first change I saw was in the beginning of
March. However, that was before the Commission had moved down
into the public room which they would occupy.
Mr. Moss. We will want to go into the room where the Com-
mission had been holding its meeting, where they changed the
format, prior to going down to the public hearing rooms.
Was the public admitted to the hearing when you first returned
and found the changed seating arrangement?
Mr. LEWNES. No, sir. They went public after I. had left.
Mr. Moss. They went public after you left?
Mr. LEWNES. Yes.
Mr. Moss. So the change did not relate to the so-called sunshine
move.
Mr. WOFSY. I believe that the change came about at about the
time that the notice of the sunshine regulation was put out to the
public.
Mr. Moss. That was April 1.
Mr. WoFsY. I believe that is when it was initiated, was it not?
Mr. Moss. It was initiated. It is shown as a Commission order 160.
Mr. WoFsY. The notice probably went out before that time. I
think it was right around the time of the notice going out to the
public that these changes were made.
As a matter of fact, the room where we held our private session,
that is the Commission meeting room, is now where they are present-
ly holding the public sessions. They had moved down to the hearing
room A, the larger meeting room.
Mr. Moss. My concern is the point raised by Mr. Lewnes that
there was a change in the physical layout and in the seating which
was a departure from the pattern which had existed for a number of
years.
Mr. W0F5Y. That is right.
Mr. Moss. Apparently this record reflects that that had occurred
before the meetings were open to the public.
Mr. WoFsY. Yes, sir. What I wanted to have the record clear on
was that the change in the actual seating arrangements I think
occurred around the time of the notice. I believe it is close to that.
Mr. Moss. The notice was issued while you were there, Mr. Lewnes,
or after you left?
Well, we will get the notice.
I shall want the record held open at this point to receive either
a drawing of the layout or an appropriate photograph. However, we
want the material reflected in this record.
[The following charts were received for the record:]
PAGENO="0766"
760
Federal Power Commiaaion Meeting Rooa Before Chaira Rearranged
* Aaaiatant General Counaet I
*GL = Mr. Lewnea Chiiv -
PAGENO="0767"
761
Federal Power Commission Meeting Room - Interim Seating Arramgement
After Chairs Rearranged Narch 1976, But Before Meeting Open to
Public in April 1976:
Legend:
I Reserved for Individuals
~ Reserved for any FPC Staff
PAGENO="0768"
762
Federal Power Commission Meeting Room - Current Seating Arrangement
ccx~cooooo
coc~ccoo
cjc~cjoo
oooco
`I
Legend:
* Reserved for Individuals
~ Reserved for any FPC Staff
0 Open to the Public
Note: Assistant Litigation Counsel
can sit in ~ or 0
PAGENO="0769"
763
Mr. Moss. There is some criticism directed at you, Judge Lewnes,
for delay in carrying out directions from the Commission on
preparation of your work. I placed in the record yesterday four
memos from you to Mr. Journey, the General Counsel, where you
complained with regard to the lack of staff and the failure of the
Commission to replace them.
Did you find that to be a crippling impact upon the operation
of your unit?
Mr. LEWNES. Absolutely. I recall again that at the time I got sick
the work was beginning to pile up. The attorneys working for me
volunteered and were coming in during evenings and working week-
ends to get out the work.
The general impression was building up that first we take your
people away and then we say you are incompetent.
Mr. Moss. It sort of works out rather well on occasion because
you can almost document a decline in the competency of a person
after you take away his staff. I know I would find that seriously
crippling if my staff were taken away.
Mr. LEWNES. I think there is a direct relationship.
Mr. Moss. There is a direct relationship. There is no way you can
deny it.
Gentlemen, I have nothing further.
Mr. LoTIs. Mr. Chairman, before we close there is one piece of
unfinished business.
Mr. Lent had asked me concerning whether I had any contacts
with Potomac Electric Power Co. and, if so, when they occurred.
As I recall my testimony, I said I thought it occurred a week
after the reorganization that I thought I was contacted by PEPCO.
Upon reflections, they might have called me the week of or the
week prior to. I would like to have the record held open for me
merely to give you the date.
Mr. Moss. Without objection, the record will be held open to
receive the correction after you have checked.
[The following letter was subsequently received for the record
from Mr. Lotis:]
MAY 23, 1977.
Chairman JOHN E. Moss,
~S'ubcommittee on Oversight and Investigations, Committee on Interstate and
Foreign Commerce, House of Representatives, TVashington, D. C.
DEAR MR. Moss: On May 23, 1977, I was contacted by Mr. Stephen Sims of your
Staff and was asked to provide additional information concerning my meetings
with Potomac Electric Power Company which I mentioned in my testimony
during the March 1977 hearings concerning FPC personnel practices. At the
hearings I could not recall exactly when I met with Potomac Electric Power
Company personnel to discuss employment and I requested that the record be
held open until I could provide that information.
My first meeting with Potomac Electric Power Company was on Octo-
ber 8, 1976. The meeting was at. the request of Mr. Alan Kirk, the General
Counsel who wanted to discuss my possible employmen't with the company. At
the time I was not aware of any case pending at the Commission invOlving Pepco.
I mentioned `this fact to Mr. Kirk at our first meeting. He said that he thought
there might be an old case which had been pending for some time involving
Pepco's only sale which was subject to Federal Power Commission jurisdiction,
but was not certain. That was the extent of our discussion involving any case.
Sometime after the Octobey 8, 1976, meeting with Mr. Kirk I found out that there
PAGENO="0770"
764
had been a Pepco case (Docket No. E-8741) over which I last exercised super-
visory responsibility on October 29, 1975, when briefs opposing exceptions `to the
Presiding Judge's decision had been filed. Following briefs opposing exceptions
the case was assigned to the Office of Special Assistants which hnd the respOnsi-
bility for writing the Commission decision. At 110 time do I ever recall giving
advice or being asked to give advice on the Pepco case to the Commission or the
Office of Special Assistants. Of course, on October 8, 1976, I learned that I had
been relieved of my responsibilities as Assistant General Counsel so I would not
have been in a position to advise OSA or the Commission even if I so desired. I
have checked my recollection of this matter with Mr. Donald Shepler, the attor-
ney in the Office of Special Assistants who had been assigned the responsibility
for writing the decision. He advises me that at no time did he ever discuss the
Pepco case with me. He also advises me that the decision in the Pepco case
(Opinion No. 779 issued October 19, 1976) was based on the analysis and recom-
mendation he bad made to the Commission in a memorandum dated
January 19, 1976.
After the October 8, 1976, meeting with Mr. Kirk, I had several other meetings
w-ith him and other Pepco personnel concerning possible employment the next of
which was October 19, 1976. A job offer was made to me in the last week of
October 1976, (I believe October 27, 1976) which I declined to accept in the
middle part of November 1976.
Parenthetically it should be noted that the Commission adopted Staff's position
and refused to grant Pepco a rate increase in Opinion No. 779.
Very truly yours,
JOHN G. LoTIs.
Mr. Moss. Gentlemen, I want to thank each one of you. I want
also to caution the Commission against any more coincidences affect-
ing those of you still with the Commission who have appeared
before this subcommittee under subpena.
The ordering of hearings, should those coincidences occur, will
be much more quickly undertaken than they were in this instance.
I think the record clearly shows that two things have occurred.
They had a chilling effect on the staff of the Commission and we
have had some remarkable coincidences.
A third point, of course, is that there has been delay and a
diminished efficiency and effectiveness in the Commission staff's
ability to carry out the duties imposed on the Commission by law.
We are going to review this hearing record very carefully and,
after all the material reqUested has been supplied for the record, a
report will be written.
If that report has the impact which I think it will have, if it is
as strong in suggesting that there was indeed adverse effect upon
the persons who testified before this subcommittee and the sub-
committee chaired by Congressman Dingell, then that report will
be referred to the Department of Justice with a request that it be
reviewed very carefully for possible action by the Department of
,Justice.
If that does not satisfactorily dispose of it, if Justice does not
fully prosecute it, I would not hesitate to introduce an appropriate
resolution of impeachment to assure that no one would ever again
move to tamper with a witness who appeared before this sub-
committee.
Gentlemen, you are excused with the thanks of the subcommittee.
[Whereupon, at 12:50 p.m., the hearing adjourned.]
0