STATE CORP. COMMISSION OF KAN.

v.

FEDERAL POWER COMMISSION; NORTHERN NATURAL GAS CO. V. FEDERAL POWER COMMISSION

WOODROUGH, Circuit Judge.

These cases are brought to this court upon petitions filed under Section 19(b) of the Natural Gas Act, 52 Stat. 821, 831; 15 U.S.C.A. §§ 717, 717r(b), to review opinions and orders of the Federal Power Commission concerning rates, charges and practices of Northern Natural Gas Company, “a natural gas company” within the meaning of the Act.1 Northern is the petitioner in all the cases except No. 14,704, where the Corporation Commission of the State of Kansas, a party to the proceedings before the Commission, is the petitioner. The Commission is respondent in all the cases, and utility customers of Northern have intervened.

Statement.

Northern, as of the close of 1950, was engaged in operations in seven midwestern states, owning and operating an integrated natural gas pipe line system, producing, purchasing, transporting and selling natural gas at wholesale to 27 non-subsidiary utility companies, which in turn served 136 cities and towns, and to its then wholly owned subsidiary (since absorbed by it), Peoples Natural Gas Company, which served 92 cities and towns. In addition, it was serving 16 large volume direct industrial customers in 19 locations, approximately 58 small volume drilling, pumping and irrigation customers, and approximately 1,600 domestic customers. The sales to the 27 utilities represented 80.52% of its total sales, sales to its subsidiary Peoples, 10.48%, and sales to other customers 9% of total sales. Northern’s own production accounted for 18.68% of this supply, of which 5.50% was produced in the Panhandie Field in Texas, 13.12% in the Ilugoton Field in Kansas, and .06% in the Otis Field in Kansas, the remainder of 81.32% being purchased from other producers in Texas, Oklahoma and Kansas.

. . Ihe proceedings before the Commission involved in Nos. 14,704, 14,706, and 14,743, arose out of rate filings made by Northern pursuant to the provisions of Section 4(d) of the Act2 to increase its rates and charges by approximately $8,400,000 and to make other changes in rate schedules. The first of these rate filings was made on March 27, 1950, naming increases in rates and charges amounting to approximately $3,200,000. The second was made by Northern on October 27, 1950, and proposed further increase in its rates and charges of approximately $5,200,000. A third filing was made on January 11, 1951, which proposed changes in certain provisions of Northern’s rate schedules but did not seek increase in the level of rates and is not involved in these review proceedings.

tt • r . Heanngs were commenced on the first , . • * , -o lnen , rate increase filing m August 28, 1950, and , ^ men , were recessed on October 27, 1950, as the , . ... , , second rate increase filing was made on that day. The second filing was consolidated for hearing with the first and hearings were resumed on March 26, 1951, and concluded on Tulv 20 1951 ’

Tile test period adopted by the Commission was the 12-month period (used by petitioner and respondent Commission) of Decomber 1, 1950 to November 30, 1951, which was the first year of operation of the compauy’s system at 600 M c f capacity. The test period therefore reflects actual expericnee for only five months since the hearings were held and concluded during the test period.

Decision was rendered by the Presiding Examiner on January 18, 1952, and many exceptions were taken. After two days of oral argument before it, the Commission on June 11, 1952, issued its Opinion No. 228 and order prescribing rates to be charged by Northern which effected an increase applicable to Northern’s customer companies of approximately $5,000,000 per annum over tile rates in effect prior to the rate filing of March 27, 1950.

Commission denied applications for rehearing except that it granted the applicatlon ^ Northern for rehearing in respect to an ltem of working capital”. Thereaftcr Northern filed its present petition for of °Pim°n N°- 228 and order in No. 14’706’ and the Kansas Commission filed its Petltl(m íor revlew lherTOÍ ln

Ou September 25, 1952, the Commission after hearing in respect to the “working capital” item, entered its Opinion No. 228-A an, percent on property related thereto. In making the analyses and in arriving at the finding the Commission considered but ascribed-no-weight to an order which was promulgated by the State Corporation Commission of Kansas on February 21, 1951, modified March 8, 1951, requiring that all takers of gas from the Kansas Hugoton Field shall-attribute to all gas taken (except gas for-operation of lease's) for all purposes, the fair and reasonable minimum value of not less than eight (8) cents per M c f at the-well head. Rates, charges and classifications determined to be “just and reasonable” were prescribed for Northern to be effective June 11, 1952.

The Commission found that under the rates prescribed Northern should earn the determined fair rate of return on its investment in property devoted to jurisdictional business. But in prescribing the new rates the Commission disallowed Northern’s, application to issue two new rate schedules proposed by it, designated, respectively,. Schedules Ind-1 and Ind-2, and acting under Section 4(e) of the Act, the use of the schedules was suspended. They purported to relate respectively to Northern’s sales of natural gas for resale “for large volume industrial use only” and to sales of natural' gas by Northern to gas utilities for their own use. They are more particularly described later on in the opinion.

The Commission found that the proposed' Ind-1 and Ind-2 schedules were not of themselves complete rate schedules but were dependent on a general schedule called CD-I and that Northern made no sales of gas to utility customers for industrial use only, or for any utility’s own use, and that the sales it made to the utilities were all sales in interstate commerce for resale and therefore subject to the Commission’s jurisdiction.

There was included in the schedules for rate increases proposed by Northern a provision for hilling demand in the amount of 100'% of the contract demand regardless of the actual volume of gas purchased by the customer utility, but the form of schedules prescribed by the Commission restricted the billing demand that may be made by Northern to an 80% minimum of contract demand.

The Commission also prescribed a new separate schedule for deliveries of gas in excess of contract demand.

Petition for Review.

The petition for review filed by Northern has challenged the Opinions 228, 228-A and 233 and Orders as invalid, and it is contended that the Power Commission erred:

(1) in concluding that the rates set by Northern in proposed schedules Xnd-1 and Ind-2 were suspendible under Section 4(e) of the Act, 15 U.S.C.A. § 717c(e);4

(2) in refusing to attribute a value of 8 cents per M c f to the gas produced from Northern’s own wells in the Hugoton field in Kansas;

(3) in its allocation of Northern’s costs between the sales over which the Commission has and those over which it does not have jurisdiction;

(4) in allowing $347,799 instead of $579,-010 as interest during construction;

(5) in deducting $2,120,973 from the $3,125,410 allowed for working capital;

(6) in issuing its Opinion No. 233 and order dismissing $7,601,853 of Northern’s third rate increase filing and refusing to put its $7,601,853 of increase rates into effect under bond pursuant to Section 4 (e);

(7) in forbidding Northern’s proposed change from an 80 percent minimum billing demand to a 100 percent billing demand;

(8) in prescribing a separate rate schedule for deliveries of gas in excess of contract demand; (9) in concluding that a 5]/z percent rate of return was fair and reasonable;

(10) in failing to make adequate findings to support its conclusions, basing them on insufficient evidence, disregarding pertinent evidence and legal standards and acting arbitrarily, capriciously and in deprivation of Northern’s constitutional rights.

The Corporation Commission of Kansas, pursuant to its petition for review, contends that the refusal of the Power Commission to attribute 8 cents cost per M c f at the well head to the gas produced by Northern in Kansas was erroneous. It also contends that the Opinion 228 and Order respecting Rate Schedules CD-I and Plugo ton Area sales should be remanded to the Power Commission with direction to determine actual costs to the cities which lie atop or are adjacent to the Hugoton Gas Field of Kansas.5

Opinion.

The Findings of the Commission.

In our consideration of the assailed findings and conclusions of fact made by the Commission, we are controlled by the provision of Section 19(b) of the Act that “The findings of the Commission as to the facts, if supported by substantial evidence, shall be conclusive.” We recognize the duty to determine substantiality in the light of all that the record relatively presents, but as between two fairly conflicting views the court may not displace the Commission’s choice, even though the court would justifiably have made a different choice had the matter been before it de novo. The review here is not de novo, but the division of functions assigned to the Commission and those assigned to the courts on review remains the same under the Administrative Procedure Act and the decision of the Supreme Court in Universal Camera Corp. v. National Labor Board, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456, as it has always been recognized in this court.

It was well stated in Cities Service Gas Company v. Federal Power Commission, 10 Cir., 155 F. 2d 694, 698:

“Jurisdiction of the Commission and scope of review — It is of first importance to take account of the respective provinces assigned to the Commission and the .courts on review in order that we may perform the functions assigned to us without trespass upon the administrative prerogatives. The primary aim of the Natural Gas Act of 1938, 15 U.S.C.A. § 717 et seq., was to ‘protect consumers against exploitation at the hands of natural gas companies/ Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 610, 64 S.Ct. 281, 291, 88 L.Ed. 333. To effectuate that • purpose, the Act provides that all rates and charges subject to-the jurisdiction of the Power Commission shall be just and reasonable, and declares that any charge which is not just and reasonable is unlawful. Sec. 4(a). To that end, the Commission is . specifically authorized, after hearing, to determine ‘the just and reasonable-rate’, and to fix the same by order-Sec. 5(a). Any aggrieved party to an order of the Commission may obtain a review to the appropriate circuit court of appeals, which is vested with ‘exclusive jurisdiction to affirm, modify,, or set aside such order in whole or in part. * *' * ’. But, ‘the finding of the Commission as to the facts, if supported by the substantial evidence, shall be conclusive.’ Sec. 19(b). In delineating the scope of review, the courts have left no doubt of their disposition to give the Commission a free rein in the effectuation of the Congressional purpose. The administrative process is no longer fettered by judicial notions of the ‘economic merits’ of the rate order.”

1. The Suspension of Northern’s Proposed Schedules Indr-1 and Ind-2.

Northern contends that the Commission erred in finding that its proposed Rate Schedule Ind-1 was subject to suspension under Section 4(e) of the Act. It also contends that the proposed Rate Schedule Ind-2 was not subject to the Commission’s jurisdiction and therefore was not subject to suspension.

As to Rate Schedule Ind-1. Northern does not contend that the sales of natural .gas for resale “for large-volume industrial use only” to which the rate schedule by its terms purported to relate, are not subject to the Commission’s rate fixing power. Its contention is only that suspension of the rate schedule was prohibited by the proviso of Section 4(e), reading as follows:

“Provided, That the Commission shall not have authority to suspend the rate, charge, classification, or service for the sale of natural gas for resale for industrial use only”.

With respect to the Rate Schedule Ind-2. Northern’s contention is that the rate schedule relates to sales of natural gas by Northern to gas utilities for their own use and that such sales are completely exempt from the Commission’s jurisdiction, and consequently not subject to suspension by Section 1(b) of the Act, providing as follows: “* * * The provisions of this act shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas * *

In its Opinion 228 the Commission said:

“The record, however, does not bear out Northern’s contentions. The IND-1 and IND-2 schedules are not of themselves complete rate schedules but are dependent on the C D-l rate schedule, which Northern does not deny was subject to suspension and is subject to our jurisdiction. Additionally, the record conclusively establishes, and we find, that Northern makes no sales of gas to utility customers for industrial use only or for such purchaser’s own use; that the gas to which the IND-1 and IND-2 schedules are intended to apply is actually sold under Rate Schedule C D-l which is applicable to sales for resale for residential, commercial and small industrial users. For these reasons, we find that the IND-1 and IND-2 schedules were subject to our suspension power in accordance with Section 4(e) of the Natural Gas Act and within the purview of the suspension authority therein conferred upon us and were suspended by our order issued April 26, 1950.”

It appears6 that at the time Northern filed its proposed Rate Schedule Ind-1 and Ind-2 on March 27, 1950, it had for its main line system only one general service rate schedule, identified as its C D-l schedule for the sale of natural gas to its gas utility customers for all uses. The rale was stated in the C D-l rate schedule as a two-part rate, consisting of two charges, a demand charge and a commodity charge. The requirements of the utilities under the CD-I rate schedule were determined by the requirements of their domestic commercial and small volume industrial customers and were purchased for sale for all uses. Northern was making no sales of gas to the utility customers for industrial use only or only for the gas utilities’ own use. Northern’s gas was delivered to them in one indistinguishable mass to the town border station, at which point the sale was consummated. Title to and control of the gas upon passing through the metering station vests in the gas utility and Northern control and obligations are terminated. At that time the ultimate disposition of the gas is unknown. From the town border station the gas flows, usually at reduced pressures, into the gas utility’s distribution system, where it is resold for residential, commercial and industrial uses. In some customer’s systems, the purchased gas is commingled with gas manufactured by the gas utility with the result that there is no way of determining the destination of the gas purchased from Northern. At times all of the gas must be used to meet resale customers’ requirements, but at other times, during off-peak periods for example, some part of the gas is available for the gas utility’s own use or for resale on an interruptible basis for industrial use.

Northern’s operations were not proposed to be and were not in fact altered when it filed rate schedules Ind-1 and Ind-2. The schedules were created by Northern in the thought that the rates would be put beyond the authority of the Commission to suspend because they were formulated to relate by their terms to separate sales for resale made by Northern to the gas utility customers which were for industrial use only and separate sales to the utility customers which were not for resale. They were inseparably connected to the C D-l schedule by the fact that they provided on their face that they were available only to gas utilities which purchase “Contract Demand under Northern’s Rate Schedule C D-l”. The Commission declared in view of the substantive facts of Northern’s operations:

“The contract demand is the amount estimated by the purchasing utilities as required to meet firm requirements of their domestic or residential, commercial and small industrial users on peak day. This gas when delivered by Northern is available for all these uses and at no time is gas delivered by Northern for or with the understanding that it is for industrial use only or for the purchaser’s own use. No part of the gas is ‘earmarked’ for any particular customer or use. Indeed, it is not disputed, that if any part of the gas delivered by Northern is sold by the purchaser to a large industrial user (a sale purportedly covered by IND-1) or is used by the purchaser (a sale purportedly covered by IND-2), the volumes so used are included as part of the volumes delivered in satisfaction of Northern’s contract demand obligation under C D-l schedule. This is, of course, consistent with the fact that the gas is sold for resale to domestic, commercial and small industrial users and is not sold either for industrial use only or solely for the purchaser’s own use.

“In the face of these facts we do not think Northern’s contentions as to-IND-1 and IND-2 may be sustained. But, additionally, there is actually no-rate for the services purportedly made available by the IND-1 and IND-2 rate schedules. Northern’s rates are two-part rates, consisting of a demand' charge and a commodity charge. Admittedly, the IND-1 and IND-2 schedules contain only the commodity charge and reference must be had to-the C D-l schedule for demand charge. Without reference to the C D-l schedule the charge for the services purportedly available under IND-1 and' IND-2 cannot be computed. The C D-1 schedule is an inseparable part of the IND-1 and IND-2 schedules. The significance of this lies in the fact that the C D-l schedule relates to sales-for resale for domestic, commercial' and industrial uses and the demand' •charge is associated with such services. In short, the IND-1 and IND-2 rate-schedules are not only incomplete rate-schedules but actually there is neither a complete rate nor complete rate-schedule for services claimed to be-non-suspendible and non-jurisdictional.

“The inseparable nature of the C D-1 and IND-1 and IND-2 schedules-would bring about an absurd result if' Northern’s contentions were sustained. One part of the rate, the demand' charge, would be subject to suspension, whereas another part of the rate, the commodity charge, would not be subject to suspension or even subject to our jurisdiction. This absurd result, we think shows that Northern’s claims are untenable.”

The particulars of Northern’s argument-in support of the non-suspendibility of its Ind-1 and Ind-2 rate schedules are substantially remarshalled by it in its discussion of the Commission’s decision in City of Hastings v. Kansas-Nebraska Natural! Gas Co., Inc., Docket G 1487 F.P.C. Opinion No. 244, issued February 5, 1953.

Northern argues that in that case the natural gas company which sold the city natural gas for resale under a two-part demand and commodity charge rate schedule was permitted by the Commission to use a separate billing for the gas which was consumed by the city itself in its power plant and the Commission held that it did not have jurisdiction over the natural gas company’s charge for that service. Northern has pointed out in its brief a number of particulars in which the service to the City of Hastings was the same as that rendered by Northern to its utility customers for which it proposes its Ind-2 rate schedule here involved. It is insisted that the Commission’s lack of jurisdiction was the same here as the Commission itself found in the City of Hastings case.

But in that case it was expressly found by the Commission that there was a long subsisting contract between the natural gas company involved and the City of Hastings by 1he terms of which the gas company sold the City the interruptible supply of gas it used itself in the power plant by direct sale to the City for that use. The Commission said,

“ * * * our analysis above shows that the parties had effectively established separate rates for separate sales under two separate contracts- — the town border resale contract subject to our rate regulatory powers, and the direct sale power plant contract exempt by statute from our rate authority. * * * the distinguishing circumstance here is that the parties in fact and in law consummated a separate and long continued direct sale beyond our jurisdiction. * * * Having found that the gas consumed by the City at its electric generating plant is not the subject of a resale but rather of a separate sale for consumptive use, we are directly forbidden by Section 1(b) to fix the rate of such sale.”

But in the case at bar, Northern’s contracts with its utility customers are like the town border contracts in the City of Hastings case. They are “sale for resale” contracts which are made subject to the jurisdiction of the Commission by the plain terms of Section 1(b) of the Act. Both the demand charges which Northern makes in its sales of natural gas for resale to -its utility customers and its commodity charges that are added to make up the full price charged for such gas are within the jurisdiction of the Commission. It was not open to Northern to withdraw its business from that jurisdiction by the expedient of issuing schedules Ind-1 and Ind-2 to cover its charges' either in whole or in part for the gas it sells for resale. In the absence of proof such as existed in the City of Hastings case of direct sales for industrial use or for the purchasing utility’s own use, the statute conferring the jurisdiction to regulate on the Federal Power Commission is controlling.

In United States v. Public Utilities Commission, decided April 6, 1953, 345 U.S. 295, 73 S.Ct. 706, it appeared that California Electric Power Company produced electricity in California by hydro-electric projects licensed under the Federal Power Act as amended by the Public Utility Act, 16 U.S.C.A. § 791(a) et seq., and marketed the greater portion of it subject to the State Public Utilities Commission’s authority in that state. The company sold power under duly executed contracts to the Navy Department and to Mineral County, Nevada, for resale and for consumption there and having obtained permission from the State Commission to raise its rates, undertook to impose the new rates on the Department and on the County. The Federal Power Commission issued an order to the Company to show cause why the rates as to the two purchasers were not subject to exclusive federal jurisdiction. The issues were heard by both Commissions in a joint proceeding and both decided in favor of their own asserted authority. The Supreme Court of California upheld the State Commission and the Court of Appeals of the 9th ‘Circuit, California Electric Power Co. v. Federal Power Commission, 199 F. 2d 206, upheld the Federal Commission. On writs of certiorari from the Supreme Court of the United States to' the Supreme Court of California, it was held that the federal authority was paramount and exclusive and the decision of the Supreme Court of California was reversed.

In the course of the opinion, at page 303 of 345 U.S., at page 711 of 73 S.Ct., the Court said that the jurisdictional lines between local and national authority in the regulation of such sales in interstate commerce as are involved,

“were not finally determined until this court’s opinion in Public Utilities Commission of Rhode Island v. Attleboro Steam & Electric Co., 273 U.S. 83, 47 S.Ct. 294, 71 L.Ed. 549. This decision followed the Federal Water Power Act by some seven years. In short, that case established what has unquestionably become a fixed premise of our constitutional law but what was not at all clear in 1920, that the Commerce Clause forbade state regulation of some utility rates. State power was -held not to extend to an interstate sale ‘in wholesale quantities, not to consumers, but to distributing companies for resale to consumers’. 273 U.S. at page 89, 47 S.Ct. at page 296. Attleboro reiterated and accepted the holding of Pennsylvania Gas Co. v. Public Service Commission, 252 U.S. 23, 40 S.Ct. 279, 64 L.Ed. 434, that sales across the state line direct to consumers is a local matter within the authority of the agency of the importing state. But it prohibited regulation of wholesale sales for resale by either interested commission.”

In the same case’, the Supreme Court also considered the contention that as it appeared that both the Navy and the County used some of the power bought from the California company for their own purposes, that fact deprived the Federal Commission of power to regulate the whole sales. The court held that as the electric power was sold to the Navy and to the County under contracts like those in the case at bar, containing no limitations on the rights of the purchasers, the contention could not be sustained. The court said that the problem was, 345 U.S. 317-318, 73 S.Ct. 719,

“whether the entire sale is a ‘sale for resale.’ For purposes of this case, we need not decide the question of whether a somewhat similar ‘commingling’— of power resold with that consumed directly by the purchaser — requires entire federal jurisdiction. For, even assuming arguendo respondents’ proposition that it may be proportionally limited, we hold that the record before us in this case does not present a set of facts or findings justifying that result. By the statute, Commission jurisdiction extends to ‘sales for resale,’ ‘but not to any other sale.’ § 201(b). The problem, then, in applying respondents’ suggested interpretation, is to decide just what power transaction falls within this category of ‘sale for resale’— whether one involving the entire volume of electricity transmitted to the Navy or merely that which the buyer resells to others; the determinant is the delineation of ‘sale for resale.’ See Panhandle Eastern Pipe Line Co. v. Public Service Commission, 332 U.S. 507, 516-517, 68 S.Ct. 190, 194-195, 92 L.Ed. 128. Assuming respondents’ theory, this would turn, of course, on whether an essentially separate transaction covering the power directly consumed by the purchaser is identifiable. The present record will not permit such a finding.”

We think the record here equally precludes such a finding. We find no error in the Commission’s exercise of jurisdiction in suspending the proposed schedules Ind-1 and Ind-2.

2. The Kansas 8 Cent per M c f Valuation Order. Opinion 228 of the Commission includes the following:

“The Kansas Commission Attribution Order. “Northern produces natural gas in the ITugoton Field, located in the State of Kansas. The gas produced in that field constitutes one of Northern’s sources of supply for its sales in interstate commerce of natural gas for resale. Respecting the production of natural gas in the Hugoton Field, the Corporation Commission of the State of Kansas entered an order on February 21, 1951*, as subsequently modified on March 8, 1951, requiring:

“ ‘ * * * all persons, firms or corporations which have taken gas or caused gas to he taken from the Kansas Hugoton Field since March 1, 1949, or which are taking or causing gas to be taken from said field, shall, from and after March 1, 1949, attribute to all gas taken (except gas for the operation of leases), for all purposes, including the payment to producers, land owners, lease owners and royalty owners, the fair and reasonable minimum value of not less than Eight (8) cents per thousand feet at the wellhead until the further order of the Commission in the investigation instituted in Docket No. G-164.’

“Based solely on these provisions of the Kansas Commission’s order, Northern contends that it is required to-include the gas which it produces from the Hugoton Field at an ‘attributed’ value of 8 cents per M c f in computing its cost of service and that hy reason of the requirement placed upon it hy the order, we are legally hound in fixing just and reasonable rates to disregard the actual cost o-f such gas and to substitute 8 cents per M c f for whatever the actual cost. The effect of Northern’s contention would be to add a fictitious $1,914,574 to Northern’s actual cost of service.

“Northern does not, and of course «mid not, claim that the $1,914,574 will be incurred by it or that it represents cost. Nor does Northern contend, that disallowance of the claimed value would be confiscatory. Neither does Northern contend, nor has it attempted to show, that so-und economic reasons exist for a departure from an actual cost of service basis for fixing just and reasonable rates. Its contention, stated baldly, is simply that: The Kansas Commission has ordered this and we are legally bound to obey.

“On the facts of this case and after consideration of Northern’s contentions, we find that the actual cost of the gas to Northern is all that can be allowed.”

In the brief for the Federal Commission in this court it is stated that “there is no dispute that the dollar difference involved between the Commission’s allowance of the actual cost of production of Hugoton Field gas (approximately Sf per M c f) atul the allowance of the claimed value thereof at 8$ per M c f is $1,914,574” (as asserted by Northern). It is also sufficiently established by the record that Northern’s contention joined in by the Kansas Commission for an allowance of a value of 85! per M c f must rest, as the Commission stated, on the above order of the Kansas Commission. The Federal Commission’s refusal to enforce the Kansas “attribution order” does not effect confiscation. The sole question that results from it on this review is, as indicated in the Commission’s opinion, whether or not the Federal Commission was bound to obey the Kansas Commission’s order in performing the Federal Commission’s function of regulating Northern’s rates.

Although it is argued that the sovereign state rights of Kansas are involved and that there has been unconstitutional invasion thereof hy federal authority, we think the problem is rather to determine the extent of the power to regulate Northern’s sales in interstate commerce for resale that Congress has conferred upon the Federal Power Commission. Undoubtedly Congress has power under the Commerce clause of the constitution to regulate commerce in natural gas between the states and it is equally clear that to some extent it has undertaken to do so. By Section 1(a) of the Natural Gas Act it declared that “the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest.” To that end it vested authority in the Federal Power Commission to require natural gas companies to keep records appropriate for administration and exercise of the power to regulate their rates and charges. Through the course of years the Commission has established its method of regulating a natural gas company 7 by first ascertaining its costs and then comparing such costs with the charges exacted from its customers. The essential factor of the method is a system of accounting that shows such costs and that is the system that has been imposed on the natural gas companies. It includes 'no means of showing values of the companies’ properties, but by virtue of the showing of the costs and the charges the Commission has been kept informed of the relation between what they paid out and what they took in, and has been able through that knowledge to uniformly regulate them during a number of years.

A contention has long been reiterated that the regulation of a business affected with a public interest must include consideration of just return on the fair value of the used and useful property. Probably no rate case is contested before the Commission in this era of high prices without a revivor of that contention. We think the argument here that the Commission is bound to give effect to the 8 cent valuation made in Kansas is merely such a revivor of it. It is simply another attempt to prevent the Federal Commission’s exercise of its power to regulate within the confines of . its jurisdiction according to its own judgment by reference to costs and charges, and without reliance upon opinions as to values.

This court is firmly committed that no reversible error is inherent in the Commission’s method of regulation. Panhandle Eastern Pipe Line Co. v. Federal Power Commission, 8 Cir., 1944, 143 F. 2d 488, loc. cit. 492, which was affirmed, 324 U.S. 635. We followed the decisions of the Supreme Court to that effect in Canadian River Gas Co. v. Federal Power Commission, 10 Cir., 1944, 142 F. 2d 943, affirmed, 324 U.S. 581, 65 S.Ct. 829, 89 L.Ed. 1206; Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333.

In the absence of the order of the Kansas State Commission there could be no questioning of the Commission’s power to regulate on the cost basis the charges Northern makes for gas it produces from its own wells in the Hugoton Field and sells in interstate commerce for resale. The Supreme Court holds on full consideration that the regulation of a natural gas company’s charges may be made by the Commission through that method without consideration of values of the gas in the field or at the company’s well heads.

In Panhandle Eastern Pipe Line Co. v. Federal Power Commission, 324 U.S. 635, 65 S.Ct. 821, 828, 89 L.Ed. 1241, the company contended that "it was incumbent on the Commission to determine the field price or actual field value of natural gas in the areas in which petitioner produces gas,” but the Supreme Court affirmed this court’s rejection of the contention. In Colorado Interstate Gas Co. v. Federal Power Commission, 324 U.S. 581, 65 S.Ct. 829, 89 L.Ed. 1206, the court established the legality of the Commission’s method in the regulation of charges of a natural gas company regardless of the company’s claim that its gas had a fair value at the well heads far in excess of its costs. The law as established by the Supreme Court in these cases and in the case of Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333, is that Congress has vested the power in the Federal Commission to regulate in the national interest the charges natural gas companies may make for the gas they sell in interstate commerce for resale and that in accomplishing the regulation the Commission is free from the compulsion of giving any weight to the element of value of the companies’ gas at the well heads.

In that state of the federal law there is no room for the exercise of any local power to obstruct or prevent the lawful functioning of the federal agency entrusted with the federal power of regulation. The federal power to regulate the commerce in natural gas derives directly from the constitution and is, of course, the dominant power. To the extent that Congress has entered the field, exercised its power and authorized its Commission to regulate charges by natural gas companies for the gas they produce and sell in interstate commerce for resale, its mandate must prevail. The decisions of the Supreme Court in the Panhandle, Colorado Interstate and Hope cases all turned squarely upon the issue and affirmed that Congress has made such grant of power to the Federal Commission.

The only argument that merits discussion to the point that there was a power in the Kansas Commission to override and invalidate the Federal Commission’s regulation is the argument that such an inference may be drawn from the Supreme Court’s decisions in Cities Service Gas Co. v. Peerless Oil & Gas Co., 340 U.S. 179, 71 S.Ct. 215, 95 L.Ed. 190, and Phillips Petroleum Co. v. State of Oklahoma, 340 U.S. 190, 71 S.Ct. 221, 95 L.Ed. 204. As to those cases, it is not claimed that they make any reference to or expressly qualify or overrule the prior cases in that court which fully sanction the Federal Commission’s method of regulation. But argument is drawn from them to induce this court not to follow the Hope, Panhandle and Colorado Interstate cases in this case.

In Cities Service v. Peerless, the facts as stated by the Supreme Court were that the respondent Peerless was the owner and operator of producing gas wells in the Hugo ton Gas Field in Oklahoma, but had no pipe line outlet of its own. Tt proposed to sell the potential output of its wells to Cities Service, the operator of an interstate gas pipe line system in the field, but was dissatisfied with the terms obtainable. Peerless accordingly applied to the state commission to order Cities Service to make connection with a Peerless well and purchase the output. Peerless also requested the Commission to fix a price and to require Cities to pay for it. The state commission upon hearing and due proceedings concluded that there was no competitive market for gas in the field, that the integrated well and pipe line owners were able to dictate the prices paid to producers without pipe line outlets and that as a result gas was being taken from the field at a price below its economic value. It further concluded that the taking of gas at the prevailing prices resulted in both economic and physical waste of gas, loss to producer and royalty owners, loss to the state in gross protection taxes, inequitable taking of gas from the common source of supply and discrimination against various producers in the field. On the basis of these findings the Commission issued the two orders that were challenged in the Supreme Court. The first provided “that no natural gas shall be taken out of the producing structures or formations in ihe Guymon-Hugoton field — at a price at the well head, of less than 7 groups — first, the seven companies together, and second, four of the companies as a group. The second group of four, one of which was Northern, were primarily transmission companies, while the other three companies derived the bulk of their revenue from direct sales to ultimate consumers rather than from sales for resale.

The Commission stated that on April 30, 1951, the yield on the common stock of the seven companies was 5.3%, of the four companies 5.2%, and of Northern 5.1%. The Commission then makes its conclusion that a 5%% rate of return will yield Northern’s common stock equity a return of 8.75% after an allowance of %% for costs of financing, that the 8.75% allowance for the common stock with a 62.7% payout will result in a yield of 5.49%, which is in excess of average yields of the seven gas companies. From these facts and conclusions, the Commission makes its ultimate finding, “that, therefore a 5%% rate of return for Northern is fair and reasonable”.

The importance of the rate of yield of the various gas companies’ stocks cannot be denied, but we are not impressed that the comparative yield is all-important. Investigation of other rate cases decided by the Commission discloses that much broader discussions and considerations were gone into in other cases than are to be found in the Commission’s opinion in the case under review.

In the case of Panhandle Eastern Pipe Line Company v. Federal Power Commission, 324 U.S. 635, 650, 65 S.Ct. 821, 828, 89 L.Ed. 1241, the Supreme Court discusses what effect the allowed rate of return would have on the capital structure of Panhandle. The Court said:

“We are unable to say on these undisputed facts that the return [6i/2%] is not commensurate with the risks, that confidence in petitioner’s financial integrity has been impaired, or that petitioner’s ability to attract capital, to maintain its credit, and to operate successfully and efficiently has been impeded.”

At that point in its opinion the Supreme Court inserted the following footnote:

“The Commission stated on this phase of the case: ‘The evidence discloses that the respondents’ business is exceptionally free from serious business hazards. The gas supply is assured for at least thirty to thirty-five more years. We have made ample provision in the annual depreciation allowance for the restoration of the capital investment in the property over the claimed life of the gas supply. The respondents’ markets are rapidly expanding and embrace the large metropolitan area of Detroit, which alone takes 40 per cent of the entire output under a long-term contract. Panhandle Eastern’s president testified that the demand for service is so great that within the next year the respondents will' be called upon to sell every cubic foot of gas that can possibly be delivered through the lines, and that the capacity factor will increase from 70 per cent to 90 per cent.

“ ‘It is likewise apparent from respondents’ own evidence that Panhandle Eastern has been able to raise considerable capital at low cost. Only recently it successfully completed a financing program' at remarkably low rates which resulted in a substantial reduction in its annual cost of capital. $< On # t tf

When the Hope Natural Gas Company-case, affirmed in 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed 333, was before the Commission, the Commission’s opinion included the following on the subject of rate of return, 44 P.U.R., N.S., 1, 32:

“The record contains an abundance of evidence on subject of rate of return. The information includes investors’ appraisal of the natural gas industry, comparative risk data, interest rates and yields on securities of natural gas and electric utilities, statistics showing the growth and stability of the natural gas industry, the trend of the cost of money and its current cost, commodity price indices, industrial production, employment, and payroll indices. Federal reserve ba.nk discount rates, national income payments and other economic data, idle money statistics, the financial history of the Hope Company and the facts about recent financing by its parent Standard Oil Company. * * *

“The company’s contention that it should be allowed a rate of return not less than 8% is unreasonable. The record shows that the Hope Company is a seasoned enterprise whose risks have been minimized by (1) ample past and present provisions for depletion and depreciation with concurrent high profits; (2) protected established markets, through affiliated distribution companies, in populous and industrialized areas; and (3) available supplies of gas locally to meet requirements except on certain peak days in the winter, which it is feasible to supplement in the future with gas from-other sources. During the forty-two years of its history, to 1941, Hope has earned on its owners’ equity an annual average profit of 12 per cent and, in addition, has built up * * * reserves far in excess of requirements. * * *

“In making the findings on rate of return, the national and international situations have commanded our attentions and entered our deliberations. The Commission is aware of the increased demands made upon Hope for gas due to the war program. Considering these matters, the underlying factors, and all of the evidence in the record, the Commission finds that 61/2% is the fair rate of return for the Hope Natural Gas Company. This rate of return being for the future has been1 set only after endeavoring to weigh all known and predictable elements, in setting it we have made allowance for presently unforeseeable contingencies. Our views on the subject of rate of return are consonant with recent decisions by the Supreme Court and other courts and Commissions involving natural gas companies. [Citing, inter alia, F. P. C. v. Natural Gas Pipeline Co. [of America], 315 U.S. 576 [62 S.Ct. 736, 86 L.Ed. 1037.]”

In the case concerning the Canadian River Gas Company, 43 P.U.R., N.S., 205, 229, the Commission considered and discussed, and set out in its opinion, much material similar to 'that set out above in the Hope case. The Commission then said:

“Canadian Company has a long-term, and essentially cost of service contract, with its affiliate, Colorado Company. Colorado and Wyoming companies’ sales are also principally to subsidiaries or affiliates and to stable markets. Colorado Company’s principal industrial sale to Colorado Fuel and Iron Corporation is made to an affiliate. All these facts materially reduce basic business risks that might be present under other circumstances.”

Other opinions of the Commission in rate of return controversies show that the Commission states and considers very many practical matters which affect the application of the practical expert judgment that the Commission has. It certainly appears that consideration of the financial history and conditions of the Hope Natural Gas Company, disclosing that Standard Oil Company was Hope’s “parent”, and that Hope had paid out substantial profits for forty-two years, and had accumulated reserves “far in excess of requirements”, must have materially affected the Commission’s decision on rate of return in that case. Further, in the Canadian River Gas Company case, it certainly was a material consideration that most of that Company’s sales were to affiliates or subsidiaries, and that thus the normal risks of the business were reduced. All such considerations must enter into the Commission’s determination that the rate of return it allows is “just and reasonable” in that it will “enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed * *

Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591, 605, 64 S.Ct. 281, 289, 88 L.Ed. 333. Consideration of the age of a company, its stability, its financial tie-ups, its established and potential outlets, whether the company is expanding or is consolidating its position — all of these things and many more must affect the determination as to how the company will attract capital, and maintain its financial integrity, at a certain rate of return. And it is settled and stated in many cases that the rate of return, from the point of view of the investor, must he sufficient to assure a proper return to the investor and to maintain the company credit and to attract capital. The Supreme Court makes it clear that there are considerations beyond that of the yield to investor. In Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 603, 64 S.Ct. 281, 288, 88 L.Ed. 333 the Court states:

“But such considerations [the balancing of the consumer and investor interests] aside, the investor interest has a legitimate concern with the financial integrity of the company whose rates are being regulated. From the investor or company point of view it is important that there be enough rev enue not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock. Cf. Chicago & Grand Trunk Ry. Co. v. Wellman, 143 U.S. 339, 345-346, 12 S.Ct. 400, 402, 36 L.Ed. 176. By that standard the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital.” (Emphasis supplied.)

In the case under review we are not given any indication that the Commission has so exercised its practical, expert judgment. We are given instead a study that the Commission has made as to the rate of yield of various natural gas companies. We know only from our own search of the record how those yields compare with those of other utilities, and we have no way of knowing how the Commission would rate the risks in' the company here under consideration and other companies. In a footnote to its opinion, the Commission sets out the following:

56% bonds x 2.55% cost of borrowed money.............. 1.43%

44% common equity x 9.25% return on common (including %% cost of flotation)... 4.07%

5.5%

How much weight the Commission ascribed to this equation, we cannot know. It is obvious, however, that no rate of return determination can be set out so meagerly and have conclusive value.

This court recognizes that the scope of its review is limited. Following Federal Power Commission v. Hope Natural Gas Company, supra, if the “end result” of the formula adopted by the Commission is “just and reasonable”, then our judicial review is at an end. It is clear also that the Commission is not bound to the use of any particular formula or group of formulae in determining what is a “just and reasonable” rate.

However, the Congress has provided for judicial review of the orders of the Federal Power Commission in such cases. Obviously there must be some review. And as Mr. Justice Jackson stated in Federal Power Commission v. Hope Natural Gas Company, supra, 320 U.S. at page 645, 64 S.Ct. at page 308, “If we are to hold that a given rate is reasonable just because the Commission has said it was reasonable, review becomes a costly, time-consuming pageant of no practical value to anyone.”

Accordingly, we hold that the findings made as to the allowed rate of return are insufficient, and that this case must be remanded to the Commission with direction to set out more fully and particularly the facts and the reasons bearing on its decision as to the rate of return. We have no desire to substitute our judgment for that of the Commission, and therefore we have no occasion to set out what we feel would be a fair rate of return. What is of importance is that we are unable from the reported findings to arrive at a reasoned conclusion that the 5%% rate of return allowed by the Commission is “just and reasonable”. The Commission has not sufficiently explained why it considers that rate reasonable, other than that it provides a yield to the common stock owners of Northern comparable or greater amounts than those yielded by other natural gas companies. Against that consideration, we find the following in the record (of which there is no mention in the Commission’s opinion) :

(1) Voluminous testimony, both oral and written on behalf of the Petitioner, tending to show that a 6% rate of return is the absolute minimum rate which would provide a return which would be “just and reasonable”.

(2) The finding of the Presiding Examiner, who conducted the hearing in question, as follows:

“Insofar as Northern and the Staff differ as to the particular import of the factors to be included in the consideration of the earnings price ratios, the ex tent of market pressure, and the trends of the interest costs, and the dividends paid on outstanding securities, all factors from whatever basis must be considered in determining wliat is a fair rate of return which ultimately is a judgment determination. The fair rate of return when considered in connection with current investor requirement necessarily includes to a limited extent the anticipations of the immediate future, which has particular application in the case of Northern, which already has contemplated further expansion of facilities to increase its utility service. To that extent, future expectations are not to be neglected and in view of the factors which can be definitely determined, and in those areas in which judgment plays a greater part than computation, it appears that the rate of return of 6% is a fair and reasonable return which must be provided for Northern upon the present state of the record.”

(3) The testimony of the expert witness called by the Commission, who stated as follows in his testimony:

“Q. (By counsel for the Federal Power Commission) Mr. Goubleman, at this time do you have an opinion as to a fair and reasonable rate of return for Northern Natural Gas Company? A. I believe that a rate of return of 6 percent would allow the company to attract capital and that perhaps this figure might be on the high side and might be shaved somewhat.”

This witness gave a detailed explanation why he thought 6% should be the maximum return, and then gave figures showing that 5%% might be adequate.

(4) The fact that no witness, as far as our examination of the record discloses, testified to a rate as low as 5y¿%.

A mere assertion that the Commission has examined “all of the available evidence of record on this subject” does not suffice to show this court, on review, that the conclusion of the Commission as lo the rate of return is the result of the application of the Commission’s expertise and judgment so that we would affirm. The Administrative Procedure Act, 60 Stat. 237, 5 U.S.C.A. § 1001 et seq., is applicable to determinations made by the Federal Power Commission, and that Act provides, 5 U.S. C.A. § 1007(b): “All decisions * * * shall become part of the record and include a statement of (1) findings and conclusions, as well as the reasons or basis therefor, upon all the material issues of fact, law, or discretion presented on the record; * Whether the “end result” is just and reasonable we cannot say, since we do not know the findings and reasoning of the Commission except as to the rate of yield, and therefore we do not feel that the Commission’s decision on the rate of return should be affirmed. Not only does the 5y¿% rate allowed appear to be the lowest ever allowed by the Commission, but the Presiding Examiner’s finding and the testimony of the Commission’s own expert rate-of-return witness militate against it.

The case must be remanded to the Commission with direction to make additional findings and conclusions upon its determination of the issue of Rate of Return, including its reasons and basis therefor so as to comply with the requirements of 5 U.S.C.A. § 1007(b).

10. The contentions that the Commission failed to make adequate findings to support its conclusions, that it based them on insufficient evidence, disregarded pertinent evidence and legal standards and acted arbitrarily, capriciously and in deprivation of the rights of the natural gas company, have been considered in connection with the several conclusions that have been reviewed and are not sustained except as we have found insufficiency of findings and reasons to support the conclusion on the rate of return.

The actions of the Commission brought here for review by the petitions are affirmed in all respects except as to Rate of Return. Reversed and remanded as to that issue only for further proceedings in accordance with this opinion.

. “Natural Gas Company” means a person engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for re-sale. Section 2(6).

. Section 4(d) provides that unless the Commission otherwise orders, changes in uled rates and charges may not be made “except after thirty days’ notice to the Commission and to the public”, given by filing with the Commission a new schedule of rates and charges showing the proposed changes.

. Natural Gas Act. Section 1(b) “The provisions of this act shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas.” 52 Stat. 821 (1938); 15 U.S.C.A. § 717 (1946).

. 15 D.S.O.A. § T17c(c):

Section 4(e) ‘"Whenever any such new schedule is filed the Commission shall have authority, either upon complaint of any State, municipality, or Slate commission, or upon its own initiative without complaint, at once, and if it so orders, without answer or formal pleading by the natural-gas company, but upon reasonable notice, to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, upon filing with such schedules and delivering to the natural-gas company affected thereby a statement in writing of its reasons for such suspension, may suspend the operation of such schedule and defer the use of such rate, charge, classification, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect: Provided, That the Commission shall not have authority to suspend the rate, charge, classification, or service for the sale of natural gas for resale for industrial use only; and after full hearings, either completed before or after the rate, charge, classification, or service goes into effect, the Commission may make such orders with reference thereto as would be proper in a proceeding initiated after it had become effective. Tf the proceeding has not been concluded and an order made at the expiration of the suspension period, on motion of the natural-gas company making the filing, the proposed change of rate, charge, classification, or service shall go into effect. Where increased rates or charges are thus made effective, the Commission may, by order, require the natural-gas company to furnish a bond, to be approved by the Commission, to refund any amounts ordered by the Commission, to keep accurate accounts in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and. upon completion of the hearing and decision, to order such natural-gas company to refund, with interest, the portion of such increased rates or charges by its decision found not justified. At any hearing involving a rate or charge sought to be increased, the burden of proof to show that the increased rate or charge is just and reasonable shall be upon the natural-gas company, and the Commission shall give to the hearing and decision of such questions preference over other questions pending before it and decide the same as‘speedily as possible.”

. The several very substantial briefs that have been filed and oral arguments that were presented on behalf of customers of Northern have received consideration but do not require separate capitulation,

. A record in six printed volumes is made up of parts excerpted verbatim from the 67 typewritten volumes of record in these cases. Statements of facts are adopted from the printed record except where it has been necessary to go to the typewritten matter. *

The order of February 21, 1951, was preceded by an interim order of February 18, 1949. This order was sustained by the Supreme Court of Kansas in Kansas-Nebraska Natural Gas Co. v. State Corporation Commission [109 Kan. 722], 222 P. 2d 704, rehearing denied [170 Kan. 341], 225 P. 2d 1054. Tills order and the order of February 21, 1951, are substantially the same with the exception that the latter order required that the ‘value’ be attributed to gas taken from the field ‘for all purposes’.”

. As to Northern in this case this method involved the determination of a rate base consisting of Northern’s gross investment in its production and transportation properties, less accrued depletion and depreciation associated with those properties, plus a working capital allowance, and the application to that rate base of a “fair rate” of return designed to produce revenue reimbursing Northern for its actual costs of service, including the actual cost of gas produced and purchased by Northern to render the service, interest on long term debt, and a fair return on its common stock and surplus (the equity).

“16. As the provision relating to the months of April to October would allow customers to take in excess of 80% of their contract demand and pay no demand charge thereon, we shall not accept such provision. As shown in Appendix A, of this Opinion, we adopted the following language as the proper definition of Billing Demand:

“ ‘The Billing Demand in effect for a hilling month, in a particular community or hilling group served by Gas Utility shall be the maximum volume of gas delivered by Northern to the Gas Utility under this rate schedule on any day of such month, but not less than 80% of the Contract Demand, nor more than the Contract Demand.’ ”

“18. Section 154.11. General Rules and Regulations.”

*

Footnote by the court:

The actual rate set by the Commission appears to provide a return very slightly in excess of the 5%%. As the Commission stated in its opinion: “The application of these rates results in the test period of revenues which exceed cost of service by approximately $50,000.”

JOHNSEN, Circuit Judge

(concurring separately).

I initially felt, with some degree of conviction, that the Federal Power Commission was required, or at least deferentially ought, in the balancing of proper state and national interests, to have accepted, for purposes of its formulaic processes, the attribution value mandated by the State of Kansas, of 8 cents per thousand cubic feet at the wellhead, on all natural gas taken from Kansas ground,¹ 2as representing a legally fixed production cost, under the State’s right and policy of conserving its natural gas resources, preventing any profligate promotion or exploitation of them, and conditioning undiscriminatingly as between local distribution' and commerce the privilege of removing them from the ground, and within the authority which it seems to me that the Natural Gas Act has specifically permitted to remain in the States to regulate production.2

Cities Service Gas Co. v. Peerless Oil & Gas Co., 340 U.S. 179, 71 S.Ct. 215, 95 L.Ed. 190, and Phillips Petroleum Co. v. State of Oklahoma, 340 U.S. 190, 71 S.Ct. 221, 95 L.Ed. 204, leave no room for any further contention of inherent invalidity in such an attribution mandate as a federal question' in relation to a State’s powers of regulation generally, or as to the amount of the attribution value here fixed being possibly so unreasonable as legally to lack fair relationship to its object or as to constitute an undue burden as such upon interstate commerce. The only question not. answered by these decisions as to the validity of such a form of state regulation — because the question was not there involved — is whether the making of such an attribution order by a State, as a conservational, preventive and conditioning measure in production, is in conflict with or otherwise excluded by the nature and scope of the federal authority which has been asserted in the natural gas domain through the Natural Gas Act.

The Act itself provides, as has been indicated in footnote 2, supra, that its provisions have no application to “the production or gathering of gas.” But the Act also leaves no doubt as to its intent to preempt fully the control of all rates charged for jurisdictional gas, as a question of whether they are “just and reasonable”, on the basis of all necessary elements of consideration, including overall result. This then directly poses the question of whether such an attribution value as has here been mandated by the State of Kansas as a production cost, which concededly is otherwise regulationa'lly valid, can be refused operation and effect as a state conservational, preventive and conditioning measure, as being excluded by the Natural Gas Act, because of its possible touch upon the Federal Power Commission’s rate-fixing powers.

I should be hesitant in view of the fact that Congress has left the field of production and its regulation exempt from federal invasion, to answer the posed question, in its application to such an otherwise proper and manifestly purposive guarding by a State of its gas resources in production, except upon the same basis that it has been many times answered as to a state regulation of some matter of local concern which may affect commerce — -that the mere fact that such a regulation may have some impact upon commerce, as an incident and not as an undue burden, does not require that it be given federal nullity. No more, it would seem to me, ought such a conservational, preventive and privilege-conditioning regulation in the state-preserved field of production to have its operativeness abstractly and generally cut off, just because of its incidence legally as a fate element or factor. Justness and reasonableness from the standpoint of consumer consideration could hardly be said to require such a holding, since the attribution value necessarily would have had to be recognized by the Federal Power Commission, if Northern Natural had purchased from others the approximately 13 per cent of its gas supply which it took from its own wells in the State of Kansas (just as the Commission in effect did recognize the attribution value as a legitimate element of cost as to the gas which Northern Natural was so purchasing) and this amount obviously would in that event have had to be paid by the customer. Nor, in the present situation, on the amount here involved, with the rest of the elements used by the Commission left standing, would it be possible to say that the additional return to Northern Natural as a result thereof would be publicly or industrially intolerable on its face, since, thus considered, its consequence would be to give Northern Natural a return of approximately 6 per cent instead of the 5% per cent which the Commission allowed.

But in any event, in the viewpoint here being discussed, all of these considerations would have had to be weighed against the State’s interest in conservation and its right to control production to that end, before there would be any right to say that they were excluded or outweighed as a matter of federal interest, just because of the incidental effect which they might have upon customer rates or upon Northern Natural’s financial position in the particular situation.

I recognize, however, that there also is some possible basis in the situation for contending that, since the State of Kansas could have nothing to say about how much more or whether anything more was charged for the gas which Northern Natural distributed than the attribution value which it had mandated, its attribution order could, in a certain legal sense at least, be said not to have been here nullified or dishonored, within the scope of its right to make complaint, in view of the fact that the rates fixed by the Commission had all been in excess of 8 cents per thousand cubic feet. And, of course, only insofar as it would be necessary to respect the attribution order in favor of the State of Kansas, as a proper exercise of state policy and interest, would there be any occasion to consider Northern Natural’s claim to have it recognized.

The contention which I have just stated is one which is more escapive than satisfying to me, but, for the sake of unanimity in our disposition, I shall accept it as a sufficient basis for avoiding a dissent, in that it still preserves for me the position that the Federal Power Commission could not completely ignore the attribution order as a proper state regulation in the field of gas production.

I might add just a word on the remand which is being directed for further consideration and explanation by the Commission of the matter of rate of return. I recognize that the judgment of the Commission in this field, unless confiscatoriness or discriminatoriness is manifest, must ordinarily be accepted in a particular situation. Here, however, the Commission is venturing upon a pioneering change in its rate-of-return concept, which presumably is intended to set a pattern and to establish a future policy. This is being done at a time when the investment and financing market has been evidencing an increasing and projective demand for return climbs, over those which have existed for the past several years, and similarly while costs of production are still continuing in their economic rise. Other events also have happened, such as the permission since given Northern Natural by the Commission to make substantial expansion. All of these elements, in the time which has elapsed since the Commission’s order, should give it a better opportunity for evaluation and explanation than its present order reflects, as a basis for any pioneering change in previous concept and apparent future policy and a more solid foundation for a court to feel satisfied to give approval to it.

. “except gas for the operation of leases” —not here involved.

. “The provisions of this Act * * * shall not apply * * * to the production or gathering of natural gas.” 52 Stat. 821, § 1(b), 15 U.S.C.A. § 717(b).