PAGENO="0001" 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 PAGENO="0002" 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) PAGENO="0003" 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) PAGENO="0004" 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 PAGENO="0005" 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 PAGENO="0006" 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 PAGENO="0007" 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) PAGENO="0008" 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. PAGENO="0009" 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. PAGENO="0010" 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 ~ ~NCE - ~? ~ P~a ~o4-io,J ~`~-"~` 11. (F,,' C-SC ~.) 1 ~`` ~1P3 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) - . - . 0A9,C,~-CAL~ ( ~. .. .. d ~ . -~ . = ~; G"~-a1 Cc~_ .1 ey P~RSOH.LOC~C~A `~``-~` ~~e~teb, 9etTd) -. *~ ...~......... ~ ~ ~E,,:.j 15 - It epphceSh~ eb~e 99%.4999A3e ieA9E(cAp5) L~T-flRST-MWaZ MR-MOS-~ (9) C) C)9?PRoe~o~y~ Dir. ~ --~ - 3- ~ ...~ ~ 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 A~5 ) Ii CLIEVAI FACTORS Kcca1~dc, ,ēc- j_ 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 ~. n ~ ~ ~ ~ ~ PAGENO="0217" 211 F~D~JtAL PoI~ ComvntcstD~ O~tce o~ *~ ~enen,J Co~,auseI CompA~Tw~ ~A~yS~S ?rocess,o~~I ~t~rc ~t&~i~~ ~ ~°ēn ~3o- ... .. * .. * . *. iM~I oGC g') --__I * . . .. . .. . * `S.- * ..* / - *** :0 .* *.~ ~ ~ __ 1 ~ ~ ~ F ~ ~ ~ `-ii) 11' ~dweeA' 0G~ £perw~o~S ArTAdIIf,JEAIT ~ PAGENO="0218" 212 ~ - D~~4L. flt~iz L'o~n,5sIori - Ofcic.e -o~ l~e n~r~J~ ~ LF4'J] tUE A~st~ P~ocE~lo,3AL S-rncF ~ _.~t A~IL ~ - -- - - `:`"`` `: . 2 0 . . . ., . ., Vt 0 .., L ~ - . . 0 .. 10' ` , . `,. . . . , \ 4 \\ ~W~rO Ppet~i~es .4.. . - - ..` `:: :.i... L-e~,s)~1-iort ,:~j~:,:'Li: `~:tht~,' ~ ~t~o ~ ē ~) - - PAGENO="0219" 213 - - - ~ ~ _U ~ 4 Compflfty,VE tUoAysts tQfltsctminn /bEMttr jyg~n#~srcr~~J -~-~±i~i4~ii - 4 F Tfl~R~k) 3 flfl~i T~E tTFU±iFpJTIftfl L ff~±~ - ~ - H ~r 1 - -~ H ~-H--,- ~ ~~-- 4: ~ - - 3S I \ -t J _/_4- 1~4 ::::t-/ ~ / -~- \ Lf_J II Li: u.. H - - - : i:H: :-YTh-F---r--:T::- 1F: - `F:::;:: - H:; .I1:H::-:-,- H;:;:;-;F-; - lb ~ A7lv~ 7/ ~" ~ ~~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 1~L To 0904 11 11 12 Priv 09 05 P1 te 05 To u~~_:J~__. From L3500 8-29-76 -I - -b- ~ - ~ - ~- ~- -~ -- -- ~ ~i ---~~ ~ H-~ ~- ~- i-~~ 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 01 - I~1Q~QIntyre - X 0905 jJ~ QL 905 11 02 090 5_ JL J~L N~sr.. X Q~4 9 31 0954 9 32 0954 9 33 Wright Kelly,R. X 0905 ~_ 0904 9_ 11 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 SERIES GRD 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 15 87 0905 15 88 Heisler X 0905 14 28 0905 14 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 75 King X 0905 12 12 0905 12 13 0905 I 13 0T PVE~2~T~7 - Ksel X 0905 13 17 0905 13 18 0905 T 1T 19 ~~r.t~z_____ x 0905 12 12 0905 12 13 o~ö~ TT 14 ~_ 0905 11 19 0905 11 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 01 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 SERIES GRB GRD SERIES i GRD GRD Remarks Tuttle X 0905 16 13 0905 16 14 0905 16 DuBoff X 0905 13 12 0905 13 13 15 Telleen X 0905 12 12 0905 12 13 09Q~ 0905 JA ~Ql Taube X 0905 13 09 0905 *~3_ 12 14 Walsh X 0905 13 12 0905 13 13 ~9Q5 0905 JJ 13 JJ~ Garten X 0905 11 10 0905 11. 11 14 Lahey X 0905 11 12 0905 12 01 11 12 Tucker X 0954 09 28 0954 09 ~05 0954 ~2 Burnes X 0905 13 9 Q9Q5 ~U_ ]~Q Q905 jJ 3~L JJ~ ~_ u~tj~ell- 27-76 : LJ~ ~± ~- E - CA~ 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~ IN Last Name 76 SERIES I GRD NOT ESTABL SHED U~TIL 10~8-76 GRD SERIES GRD ~ GRD SERIES GRD GRD Remarks - ~___ -- -_ - -~_~__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 T~ 14 0905 T~ 15 0905~ T~ 16 Hagenlock X 0905 13 34 0905 T~ 35 0905 T5 36~ Lajnke 0905 j~_ 34 0905 5 0905 15 36 To L3400 10-8-76 Shepherd X 0905 j~_ 28 0905 5 28 0905 15 28 Stafford 0905 15 02 0905 5 03 0905 15 04 To L3400 10-8-76 ~oergers~ Q905 jj_. 11 0905 14_ 12 0905 14 13 0905 14 120 To L3500 10-8-76 ~e~u~ch X 0905 J..4 08 4_ 1~. 09 0905 ~: 10 Azzaro 0905 j - 02 03 0905 13 04 Cr~jn~es fl905 ~1 - 12 Q9~~_ 2 13 0905 ]3 01 -_________________ To L3400 1~8-76_ ~osse]~ X 0905 1 0905 13 12 0905 13 X 0905 1 12 0905 12 13 0905 12 14 - -- Lesch X 0905 - 1 12 0905 13 01 0905 13 02 Miles X 0905 1 12 0905 12 13 0905 12 14 N~1~on X 0905 - 1 11 0905_ 13 12 0905 13 To L340010:8_76 - WQ~ds X 0905 J1._ 98 0905 13 0905 13 100 ~h~~ikos ~X 09 O~ ~1 ~_ 1 0905 12 Q905 3 To L34 00 10-8-76 clarke X 09 05 2 ~_9 ~Q~9 05 2 j 0905 - 2 11 ~arher X 0905 11 9 0905 11 1 0905 12 11 x x nQnc ii 1~ Ortman ((i 0905 0905 2 10 (1 0905 ~1 1 ncns 11 0905 0905 Eie1ds~~ ter X X 0905 9 0905 9 fl nf ft9 05 0905 Q1 09 1 ~9 05 11 0905 11 01~ 01 ToL34001 0-8-76 To L3400 10-8-76 02 11 12 To Pvt. md. 2-25-77 Wenner -13) 0904 11 01 0904 11 02 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 X SERIES GRD 0905 16 0905 15 GRD 74 21 SERIES 0905 0905 GRD 16 15 GRD 75 22 SERIES 0905 0905 ORB 16 15 GRD 76 23 Remarks_______ To L34~rTO-8-76 -- -~ Gould Marshall Ir X X X 0905 13 0905 11 0905 11 - 70 11* 10 0905 0905 0905 13 11 11 71 11* 11 0905 0905 0905 13 11 T2T 72 12* 01 ~o L3400 IO~~7i~ ~ Pend1ey~ 0904 11 01 10904 11 02 To L3200 1O-8-7~ Riordan X 0904 11 03 0904 11 04 0904 11 05 X 0904 09 03 0904 09 09 To L1000 8-29-76 x 0905 13 14 Y~l1man X ~-9 toGS~ll 7 18-76) - ToPvtlnd 7-21-76 0905 11 15 *Part_time'Eligibility determited on basis of nu: ber of paid h urs orked. Th - 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~ Last Name * ON BD 1 JUL 76 As of 07-31-76 ~As of 03-28-76 As of 09-25-76 . Remarks GS SERIES CRD MTIIS IN GPD ~.s SERIES GRr) MTIIS - IN ! CS J GRD SERIES (R~ MTIIS IN GRD Lotis X 0905 ]6 37 Q9k5 L6 ~38 09ft5 J6 I To LIpIJQ* Mattingly X 0905 62 Q9Q~ j~5 ~3_ ~90L J5 M ~sy ~Q9Q5 j5 4. 0905 J5 75 EJ~3J.Q0 8-]-7 6 ~ta Bullock__- X 0905 14 16 Q105 j~4 17 J~4~ 18 ~Q~34 ~ * toQ~A jJ~ J~L 1-3Q~77 ~j~qj~__ J< 0905 j~_ jJ~ Q9~~ J~2 Q~2Q5 J2J~ - TQLU0~a*__-_____ ~gus X Q905 jj~ 11 1915 IL J.L O9~5 JJ~ 13 1~La4ac1~ ~jygaard X 0905 ~lJ~ U~ ~905 IL_ J.2_ 090~5 01 ~~4~1Q~tQ - Pederson X 0905 11 . QQ~ JJ~ J~2 ~__ Q9Q~ ~U ~TQ~_UL0~0 ~ Stiles X 0905 11 jJ Q905 ~J~L 8 Jj905 11 19 T0L2OQQ* Stough X 0905 12 16 0905 12 17 0905 12 18 ToJ3l00*~ Lane, B. - X 0905 11 11 0905 J~J~ 12 0905_ J~L. ~l3 T0L3100* ~pd 905 j~ J~9Q5 ~12 ~0105 J~L. ~l 3 TUE1~& ---- ~i~l~tin -~ U~ JLL IL... - -_____ ft9 0 ~ o~o5 04 J190& - 05 -~ ~ -- .IL ~U.. x ~9 05 J..i ~os -___ JJ. ~- J..i oias --.- J..L. 1E± ToiL00~taPJlcL u im CQ.~hQt_ X . - -_ T~t~nd~7~9-16 - s~io~s oi ._____ o~as TQCQaUn~JIQ1J..QIUaIL.. - -~ + *Workload redistributed 10-8-76 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