This section contains the nature of the case and procedural background.

The FPC through notice and comment rulemaking adopted regulations governing the terms of contracts between gas producers and pipelines to whom they supplied gas. The regulations prohibited escalator clauses; adjusting the contract price for gas to future higher prices for newly delivered gas. There was no oral argument, but an opportunity was afforded all parties to submit their views in writing. Texaco and Pan American did so along with others. Later each party then submitted an application of necessity under section 7 of the Natural Gas Act to supply natural gas to a pipeline company. The Act required that such applications under section 7 be set for hearing. The Commission rejected these applications, as the prices they disclosed were not permissible under the regulations; no hearings were held.

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