The Supreme Court dealt a blow yesterday to seven leading producers of natural gas by rejecting their challenge to a Federal Trade Commission investigation of the possibility that they conspired to under-report reserves in order to drive up prices.
The justices denied a petition by the producers - Exxon, Mobil, Texaco, Standard Oil of Indiana, Standard Oil of California, Shell Oil and Superior Oil - to review an adverse February ruling by a divided U.S. Court of Appeals for the District of Columbia.
In a friends-of-the-court brief, the Chamber of Commerce of the United Stated denounced the ruling as adverse to "the fundamental rights" of all persons and companies subject to investigation by all federal agencies.
Yesterday's action came at a climactic moment in the fight in Congress over whether to continue to regulate natural-gas prices at the wellhead or whether to lift price controls. Opponents of deregulation long have contended that reserves have been under-reported.
The FTC investigation orginatedalmost seven years ago with a request by the late Sen. Philip A. Hart (D-Mich.) to the commission to look into reports by the American Gas Association (AGA), an industry group, of an unprecedented decline in reserves in southern Louisiana, the most important producing area in the nation.
In 1970, the agency directed it staff to investigate "the possibility of collusion or other unlawful conduct" principally by focusing "on the reporting, estimation, and deployment of reserves by the natural gas industry in one selected area of the country."
The trigger for the long legal battle ended yesterday was the FTC staff's issuance of investigate subpoenas.
Some producers complied, but the seven won an important victory in March, 1974, from U.S. District Judge George L. Hart Jr., only to lose it three years later in the Court of Appeals.
In key findings, a majority of the appeals court led by Chief Judge David L. Bazelon concluded that Hart had put limitations on the subpoenas that "effectively blocked legitimate avenues of the FTC'sindustry. . ."
One issue was whether the subpoenas could deal only with proved reserves, as opposed to producers' estimates of reserves of all kinds. Hart limited the inquiry to proved reserves. That was "erroneous," Bazelon wrote.
Hart had rejected the commission's claim that "bid files" - documents used in making bids for oil and gas exploration in the federal domain - were relevant to its inquiry.
The producers contended that such files were highly confidential. But the appeals court held that the files are "reasonably relevant" to the investigation. It also erased various other confidentiality restrictions imposed by Hart.