The Hugoton-Anadarko Area, one of the oldest gas-producing areas in the world, is comprised of the state of Kansas, Texas Railroad Commission District No. 10, the Oklahoma Panhandle (six counties), and the Anadarko Basin of Oklahoma (fifteen counties). The Hugoton and Panhandle Fields are the largest known gas fields in the United States.

The intervenors who have filed individual or joint briefs supporting the Commission herein are: The Northern Distributor Group (Central Telephone and Util*977ities Corporation, Iowa Electric Light and Power Company, Iowa-IUinois Gas and Electric Company, Iowa Power and Light Company, Iowa Public Service Company, Metropolitan Utilities District of Omaha, Minneapolis Gas Company, Northern States Power Company [Minnesota], Northern States Power Company [Wisconsin], and Northwestern Public Service Company), Amoco Production Company, Mobil Oil Corporation, Northern Natural Gas Production Company, Shell Oil Company, Diamond Shamrock Corporation, Amerada Hess Corporation, Getty Oil Company, Atlantic Rich-field Company, Humble Oil & Refining Company, Cabot Corporation, Hunt Oil Company, H. L. Hunt, Caroline Hunt Sands, A. G. Hill, Alinda Hunt Hill, Secure Trust, Cities Service Oil Company, Placid Oil Company, Tenneco Oil Company, Soliio Petroleum Company, Texaco, Inc., The Superior Oil Company, Continental Oil Company, Phillips Petroleum Company, Marathon Oil Company, Dorchester Gas Producing Co., Skelly Oil Company, Gulf Oil Corporation, Sun Oil Company, Helmerich-Payne, Inc., Warren Petroleum Corporation and Pipeline Intervenors (Cities Service Gas Company, Kansas-Nebraska, Natural Gas Company, Inc., Colorado Interstate Gas Company, Natural Gas Pipeline Company of America, El Paso Natural Gas Company, Northern Natural Gas Company, Panhandle Eastern Pipe Line Company, and Transwestern Pipeline Company).

These two proceedings are two of a number of area rate cases that the Commission has been conducting to fix just and reasonable rates to be charged by producers of natural gas to pipeline companies for sale in interstate commerce. Such area rate cases are the means devised by the Commission to cope with the problem of producer-rate regulation thrust upon it by the decision of the Supreme Court in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954).

The Commission later severed from these joint proceedings the issue of the proper method to be used in pricing natural gas produced by pipelines or their affiliates. 35 F.P.C. 497 (1966). The FPC’s final decision in the severed proceeding (Opinion No. 568, Pipeline Production Area Rate Proceeding, 42 F.P.C. 738 (1969) was affirmed, with certain caveats, in City of Chicago, Illinois v. Federal Power Commission, 458 F.2d 731 (D.C.Cir. 1971).

In the Examiner’s decision, the term “new gas” refers to gas produced under contracts executed after January 1, 1961. See 44 F.P.C. 761, 768, n. 3 (1970). The Commission’s Opinion No. 586, however, refers to “new gas” as gas produced *978under contracts executed after November 1, 1969. See 44 F.P.C. 761, 786-787 (1970).

No consumer interests other than petitioners and the eonsumer-intervenors opposed the settlement proposal. Among consumer interests represented in the Commission proceeding who filed no opposition to the settlement proposal were: the Georgia Public Service Commission, Michigan Public Service Commission, Pennsylvania Public Utility Commission, Public Service Commission of Wisconsin, and the State Corporation Commission of Kansas.

Said the Commission, at 44 F.P.C. 772: “14. A settlement proposal by virtually all of the area’s producers, supported by the pipelines and the distributors conveying the greater part of the interstate gas from the area, commands attention. A resolution of the issues which so many parties are willing to accept reduces the possibility of future litigation. Of course the settlement proposal must be considered upon its merits, in the light of existing conditions, ...”

Casinghead gas is gas produced from oil wells in conjunction with the production of oil, while gas-well gas is not produced in association with oil. Certain other descriptive terms which will be employed in this opinion should also be briefly explained.

The permissible gathering charges for the described types of gas vary by no more than one tenth of a cent per Mcf between the initial decision and the proposal; and in some cases the initial decision permits the slightly higher rate, while in other instances the Commission-approved proposal permits the slightly higher charge.

Whether the reasons given are adequate to support the result reached is another question to be explored at a later point in this opinion.

At 44 F.P.C. 781, the Commission further stated:

We note, however, that in the brief filed by Shell Oil Company and a group of producer-intervenors, it is calculated that the Commission’s prescribed rate for gas-well rates contracted prior to November 1, 1969, would produce a rate of return of not more than fifteen percent. A fifteen percent rate of return was found to be appropriate by the Commission in Teosas Gulf Coast (Opinion No. 595) F.P.C. . . . (May 6, 1971), and in Southern Louisiana II (Opinion No. 598) . . . F.P.C. . . . (July 16, 1971). In the case before us, the major producer group presented extensive evidence tending to justify a rate of return of sixteen to eighteen percent.

In addition, of course, a rate of return determination in an area case is affected by all of the imponderables which must be taken into account in determining a rate of return for a particular producer. As the Commission states in its brief: “There are a variety of choices available to the Commission in examining rate of return: Whether to use earnings data from integrated or noninte*983grated firms? What time period should be used in judging prior earnings performance? Whether to use earnings data from a firm’s production department? What weight should be given the ‘discounted cash flow’ method or the ‘true yield’ theory? Moreover, assuming a precise rate of return figure has been obtained, there remains the question of the appropriate theoretical average rate base to which such a rate is to be applied. Such a rate base for producers is composed of three cost components: successful well costs, lease acquisition costs, and other production facilities. Each of these components of the rate base is itself a variable cost component. Finally, assuming some precise rate base may be arrived at, one must determine both the depletion standard and time lag in order to calculate the average net investment.”

In his decision, the Examiner found that a ten and one-half percent over-all rate of return should be adopted. The Examiner concluded that this over-all rate would permit a return on equity in excess of twelve percent.

In determining that a twelve percent rate of return would be adequate, the Examiner had adhered to the “comparable earnings” test set forth in Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 603, 64 S.Ct. 281, 88 L.Ed. 333 (1944). We do not believe the Hope decision stands for the rule that a “comparable earnings” test is required. In the Permian case, the Supreme Court specifically held that “other standards might properly have been employed.” 390 U.S. at 806, 88 S.Ct. at 1380. See Southern Louisiana Area Rate Cases v. Federal Power Commission, 428 F.2d 407, 424, n. 38 (5th Cir. 1970). The agency record indicates that, as applied by the Examiner in this case, the “comparable earnings” test yielded uncertain results. Staff witness Shaffner indicated that the period used in his rate of return recommendation, 1959-1963, was the lowest five-year earnings period since World War II. Other witnesses, likewise relying on historical earnings, arrived at different results. Witness Morton, using data from the 1952-1965 and 1961-1965 periods, recommended a sixteen percent rate of return. The record contains several other studies of rate of return based upon the earnings of production departments of integrated companies, showing rates of return ranging from fourteen and nine-tenths percent to fifteen and nine-tenths percent. It was in the light of this wide range of evidence on rate of return, and other factors mentioned in the Commission’s opinion, that a twelve percent rate of return was held to be inadequate. The Commission here referred to changes in the economic climate, evidenced by persistent inflationary trends in the general economy, “unusual liquidity pressures” on corporate enterprises, and rising interest rates. While the Commission made these observations in connection with its discussion of the one cent per Mcf price escalation which would go into effect on July 1, 1972, the same reasons are applicable with regard to the over-all problem of rate of return.

In Hope, the Court said:

The Court there said:

In the Southern Louisiana Area Rate Oases, supra, the court also referred to the “inaccuracy of pricing techniques.” 428 F.2d, at 423, note 33.

The Commission explained:

In Permian, the Supreme Court said:

The Commission went on to explain, at 44 F.P.C. 774-775: The Commission also discussed the supply and demand problem at length at 44 F.P.C. 781-783. The Commission concluded that while all major sources of energy in the United States, including gas, are currently in short supply, there is a continuing growth in demand for gas which has risen beyond all expectations of a few years ago. The Commission noted that there is no direct evidence in this proceeding as to what relationship a particular price might have to new gas supplies. But it added, at 44 F.P.C. 783:

In this connection the Commission points out in its brief in this court that whereas the 1963 Census of Mineral Industries showed gas well drilling costs were sixteen» dollars and forty-eight cents per foot and dry-hole drilling costs were eight dollars and sixty-nine cents per foot, the 1967 Census of Mineral Industries indicates gas well drilling costs of twenty-five dollars and eighty-two cents per foot and dry-hole-drilling costs of fourteen dollars and ninety-seven cents. The Commission adds:

The consumer-intervenors additionally contend that the 1969 Future Requirements Committee (FRC) Report “has similarly not been tested and even its projections the Commission discounted.” No record reference is supplied concerning this asserted Commission action.

The AGA Reports, referred to by the consumer-intervenors, have been published annually since 1945. These reports, we are told, are relied upon by financial institutions and the industry. They have also been relied upon by the Commission in prior rate proceedings. Permian Basin Area Rate Proceeding, 34 F.P.C. 159, at 197 (1965) ; Southern Louisiana Area Rate Proceeding, 40 F.P.C. 530, at 545 (1968). See also, Permian Basin Area Rate Cases, supra, 390 U.S. at 816-817, 88 S.Ct. 1344, 20 L.Ed.2d 312. The Fifth Circuit commented extensively on the FPC Staff Report in question, indicating that “there is evidence of a serious supply deficiency.” Southern Louisiana Area Rate Cases, supra, 428 F.2d at 415, 437, 438 and 440.

We also note that the consumer-intervenors did not participate to any extent in the agency hearings in this case, nor did they file exceptions or answers to exceptions. They challenged a subsequent AGA report for the first time in their application for rehearing of October 19, 1970, almost four years after the record had been closed. These additional circumstances make it questionable whether these intervenors have standing to raise this question. See 18 C.F.R. § 1.31(c) ; Wisconsin v. Federal Power Commission, 91 U.S.App.D.C. 307, 201 F.2d 183, 186-187 (1952).

The Commission has found it necessary to authorize new and simpler procedures for authorization of emergency purchases of gas by pipelines. See FPC Orders Nos. 402, 43 F.P.C. 707 (1970), 402-A, 43 F.P.C. 822 (1970), and 418, 44 F.P.C. 1574 (1970). Curtailment proceedings by pipelines include Natural Gas Pipeline Company of America, Docket No. RP 70-42, Northern Natural Gas Company, Docket No. RP 71-89, and United Gas Pipe Line Company, Docket No. RP-71-29.

In Permian, the Supreme Court, referring to the “zone of reasonableness,” said : “The Commission may, within this zone, employ price functionally in order to achieve relevant regulatory purposes ; it may, in particular, take fully into account the probable consequences of a given price level for future programs of exploration and production.” 390 U.S. at 797, 88 S.Ct. at 1376.

In this connection it is to be noted that the Commission opinion and order under review prescribed a moratorium on rate increases after this one cent per Mcf escalation, until July 1, 1977.

The total refunds required for the period ending December 31, 1969, would be approximately forty-seven million dollars. The excess amounts collected, and not required to be refunded, would total about five million dollars.

Section 4(e) provides in part:

See Mesa Petroleum Co. v. Federal Power Commission, 441 F.2d 182 (5th Cir. 1971) ; Niagara Mohawk Power Corp. v. Federal Power Commission, 129 U.S.App.D.C. 376, 379 F.2d 153, 157-158 (1967) ; Continental Oil Co. v. Federal Power Commission, 378 F.2d 510, 532 (5th. Cir. 1967) ; Public Service Commission of New York v. Federal Power Commission, 117 U.S.App.D.C. 287, 329 F.2d 242, 250 (1964).