The Federal Power Commission (FPC) (defendant) instituted a notice-and-comment rulemaking process and adopted a regulation governing price clauses in contracts between natural gas producers and pipelines. Texaco, Inc. (Texaco) (plaintiff) submitted comments in the proceeding. The Natural Gas Act governed the supply of natural gas. The act stated that natural gas suppliers must apply for a certificate of public convenience and necessity and that the FPC “shall set” each such application “for hearing.” Texaco applied for a certificate that contained price clauses disallowed by the new FPC regulation. Without a hearing, the FPC rejected Texaco’s application. Texaco challenged the rejection, arguing that it was entitled to a hearing on its application under the act. The court of appeals agreed and remanded the case to the FPC. The United States Supreme Court granted certiorari.