1. Sales of imported natural gas by an interstate pipeline
carrier direct to industrial consumers are sales in interstate
commerce, even though the gas leaves the main transmission line
within the state and is piped to the consumers through branch lines
or laterals at reduced pressure. Pp. 332 U. S.
2. In view of the position of the state commission as construed
by the state supreme court, the orders of the commission, directing
immediately only the filing of information, constituted an
assertion of power to regulate appellant's rates and service under
the state's comprehensive scheme of regulation, and appellant was
not required to await a further regulatory order before contesting
the commission's jurisdiction. P. 332 U. S.
3. In the light of the legislative history, provisions, and
policy of the Natural Gas Act, and of the judicial history leading
to its enactment, sales of natural gas by an interstate pipeline
carrier direct to industrial consumers, although in interstate
commerce, are subject to regulation by the states. Pp. 332 U. S.
Page 332 U. S. 508
4. By the Natural Gas Act, Congress did not occupy the entire
field open to federal regulation of the transportation and sale of
natural gas in interstate commerce, but extended federal regulation
only to that area which this Court previously had held the states
could not reach. Pp. 332 U. S.
5. It is unnecessary in this case to consider the effect of the
Commerce Clause of the Federal Constitution independently of the
effect of the Natural Gas Act as here construed. P. 332 U. S. 524
224 Ind. 662, 71 N.E.2d 117, affirmed.
Orders of a state commission requiring a pipeline company to
file tariffs, regulations, reports, etc., were vacated and enjoined
by a state court. The Supreme Court of the State reversed. 224 Ind.
662, 71 N.E.2d 117. On appeal to this Court, affirmed,
332 U. S. 524
MR. JUSTICE RUTLEDGE, delivered the opinion of the Court.
Broadly, the question is whether Indiana has power to regulate
sales of natural gas made by an interstate
Page 332 U. S. 509
pipeline carrier direct to industrial consumers in Indiana. More
narrowly, we are asked to decide whether the Commerce Clause,
Const. Art. I, § 8, by its own force, forbids the appellee, Public
Service Commission, to require appellant to file tariffs, rules and
regulations, annual reports, etc., as steps in a comprehensive plan
of regulation preliminary to possible exercise of jurisdiction over
rates and service in such sales. [Footnote 1
Panhandle Eastern transports natural gas from Texas and Kansas
fields into and across intervening states, including Indiana, to
Ohio, and Michigan. In Indiana, it furnishes gas to local public
utility distributing companies and municipalities. These, in turn,
supply the needs of over 112,000 residential, commercial, and
Since 1942, appellant also has sold gas in large amounts direct
to Anchor-Hocking Glass Corporation for industrial consumption.
] Shortly before
beginning this service, appellant had informed a number of its
customers, local distributing companies in Indiana, that it
intended to render service directly to large industrial consumers
wherever possible. [Footnote 3
Pursuant to that policy, since these proceedings
Page 332 U. S. 510
began direct service has been extended to another big industrial
user. [Footnote 4
In 1944, the Commission initiated hearings relative to direct
service by Panhandle Eastern to Indiana consumers. It concluded
that "the distribution in Indiana by Panhandle of natural gas
direct to consumers is subject to regulation by this Commission
under the laws of this state," notwithstanding any alleged contrary
effect of the Commerce Clause upon appellant's direct sales to
industrial users. Accordingly, it issued its order of November 21,
1945, for the filing of tariffs, etc., as has been stated.
Early in 1946, Panhandle Eastern brought this suit in a state
court to set aside and enjoin enforcement of the order. While the
cause was pending, the Commission issued a supplemental order
declining appellant's offer to submit the specified tariffs,
reports, etc., "as information only," and reasserting its full
regulatory power as conferred by the Indiana statutes. [Footnote 5
] 63 P.U.R. (N.S.) 309.
The trial court vacated the orders and enjoined the Commission
from enforcing them. It accepted appellant's view of the effect of
the Commerce Clause on its
Page 332 U. S. 511
operations. The Supreme Court of Indiana reversed that judgment
and denied the relief appellant sought. 71 N.E.2d 117. It held
first that the Commission's orders amounted to an unequivocal
assertion of power to regulate rates and service on appellant's
direct industrial sales, and thus presented squarely the question
of the Commission's jurisdiction over such sales as affected by the
Commerce Clause. The court did not flatly hold that the sales are
in interstate, rather than intrastate, commerce. But, taking them
to be of the former kind, it held them nevertheless subject to the
state's power of regulation under the doctrine of Cooley v.
Board of Wardens,
12 How. 299. The court further
held that appellant, in making these sales, is a public utility
within the meaning and application of the state's regulatory
statutes, Burns Ind.Stat.Ann. § 54-105 and Ind. Acts 1945, c. 53,
p. 110. It is this decision we have to review pursuant to § 237 of
the Judicial Code, 28 U.S.C. 344(a). [Footnote 6
The effect of the state statutes, whether permitting the filing
of the tariffs, etc., as information unrelated to further
regulation or requiring the filing as initial and integral steps in
the regulatory scheme, and thus as presenting at the threshold of
the scheme's application the question of the state's power to go
further with it, is primarily a question of construction for the
state courts to determine. In view of the Commission's position, as
construed by the state supreme court, we cannot say that the only
thing presently involved is the state's power to require the filing
of information without reference to its further use for controlling
these sales. Cf. Arkansas Louisiana Gas Co. v. Department of
Public Utilities, 304 U. S. 61
Page 332 U. S. 512
the orders constituted "an unequivocal assertion of power" to
regulate rates and service. Indeed, they involve something more
than a mere threat to apply the regulatory plan in its later
phases. They represent the actual application of that plan in its
initial stage. In such a situation, appellant was not required to
await a further regulatory order before contesting the Commission's
jurisdiction. Cf. Public Utilities Comm'n of Ohio v. United
Fuel Gas Co., 317 U. S. 456
This does not mean that we now express opinion concerning the
validity of any further order which the Commission may enter. No
such order is before us. It does mean that we are required to
decide whether the sales in question lie within the scope of the
state's power to regulate rates and service, so that some further
order in those respects may or may not be entered.
Nor do we question that these sales are interstate transactions.
The contrary suggestion left open in the state supreme court's
treatment rests upon the view that gas transported interstate takes
on the character of a commodity which has come to rest or broken
bulk when it leaves the main transmission line and, under reduced
pressure, enters branch lines or laterals irrevocably on its way to
final distribution or consumption. Those merely mechanical
considerations are no longer effective, if ever they were
exclusively, to determine for regulatory purposes the interstate or
intrastate character of the continuous movement and resulting sales
we have here. [Footnote 7
Page 332 U. S. 513
Thus, gas furnished to local utilities for resale is supplied
unquestionably, both as to transportation and as to sale, in
interstate commerce. Yet it is subjected to practically identical
changes in pressure with the gas sold by appellant directly for
industrial use. [Footnote 8
Neither practical common sense nor constitutional sense would
tolerate holding that reduction in pressure makes the industrial
sales to Anchor-Hocking wholly intrastate for purposes of local
regulation, while deliveries at similar pressures to utility
companies remain exclusively interstate. Variations in main
pressure are not the criterion of the states' regulatory powers
under the Commerce Clause. Cf. Interstate Natural Gas Co. v.
Federal Power Comm'n, 331 U. S. 682
331 U. S. 689
The sales here were clearly in interstate commerce.
The controlling issues therefore are two: (1) has Congress, by
enacting the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717, in
effect forbidden the states to regulate such sales as those
appellant makes directly to industrial
Page 332 U. S. 514
consumers; (2) if not, are those sales of such a nature, as
related to the Cooley
formula, that the Commerce Clause,
of its own force, forbids the states to act.
We think there can be no doubt of the answer to be given to each
of these questions -- namely, that the states are competent to
regulate the sales. The two questions may best be considered in the
background of the legislative history of the Natural Gas Act and of
the judicial history leading to its enactment in 1938.
Prior to that time, this Court, in a series of decisions, had
dealt with various situations arising from state efforts to
regulate the sale of imported natural gas. The story has been
adequately told, [Footnote 9
and we do not stop to review it again or attempt reconciliation of
all the decisions or their groundings. Suffice it to say that, by
1938, the Court had delineated broadly between the area of
permissible state control and that in which the states could not
intrude. The former included interstate direct sales to local
consumers, as exemplified in Pennsylvania Gas Co. v. Public
Service Comm'n, 252 U. S. 23
latter, service interstate to local distributing companies for
resale, as held in Missouri v. Kansas Natural Gas Co.,
265 U. S. 298
reinforced by Public Utilities Comm'n of Rhode Island v.
Attleboro Steam and Electric Co., 273 U. S.
Shortly, then, as the decisions stood in 1938, the states could
regulate sales direct to consumers, even though made by an
interstate pipeline carrier. This was true of sales not only for
domestic and commercial uses, but also for industrial consumption,
at any rate whenever the interstate carrier engaged in distribution
for all of these
Page 332 U. S. 515
uses. [Footnote 10
the other hand, sales for resale, usually to local distributing
companies, were beyond the reach of state power regardless of the
character of ultimate use. This fact not only prevented the states
from regulating those sales, but also seriously handicapped them in
making effective regulation of sales within their authority.
Page 332 U. S. 516
This impotence of the states to act in relation to sales for
resale by interstate carriers brought about the demand for federal
regulation and Congress' response in the Natural Gas Act. To reach
those sales and prevent the hiatus in regulation their immunity
caused, the Act declared in § 1(b):
"The provisions of this chapter 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."
This section determines the Act's coverage and does so in the
light of the situation existing at the time. Three things, and
three only, Congress drew within its own regulatory power,
delegated by the Act to its agent, the Federal Power Commission.
These were: (1) the transportation of natural gas in interstate
commerce; (2) its sale in interstate commerce for resale, and (3)
natural gas companies engaged in such transportation or sale.
The omission of any reference to other sales -- that is, to
direct sales for consumptive use -- in the affirmative declaration
of coverage was not inadvertent. It was deliberate. For Congress
made sure its intent could not be mistaken by adding the explicit
prohibition that the Act "shall not apply to any other . . .
. . ." (Emphasis added.) Those words plainly mean that
the Act shall not apply to any sales other than sales "for resale
for ultimate public consumption for domestic, commercial,
Page 332 U. S. 517
industrial, or any other use." Direct sales for consumptive use
of whatever sort were excluded.
The line of the statute was thus clear and complete. It cut
sharply and cleanly between sales for resale and direct sales for
consumptive uses. No exceptions were made in either category for
particular uses, quantities, or otherwise. And the line drawn was
that one at which the decisions had arrived in distributing
regulatory power before the Act was passed. [Footnote 12
Moreover, this unusual legislative precision was not employed
with any view to relieving or exempting any segment of the industry
from regulation. The Act, though extending federal regulation, had
no purpose or effect to cut down state power. On the contrary,
perhaps its primary purpose was to aid in making state regulation
effective by adding the weight of federal regulation to supplement
and reinforce it in the gap created by the prior decisions.
] The Act was
drawn with meticulous regard
Page 332 U. S. 518
for the continued exercise of state power, not to handicap or
dilute it in any way. This appears not merely from the situation
which led to its adoption and the legislative history, including
the committee reports in Congress cited above, but most plainly
from the history of § 1(b) in respect to the changes which took
place in reaching its final form. [Footnote 14
Page 332 U. S. 519
It would be an exceedingly incongruous result if a statute so
motivated, designed, and shaped to bring about more effective
regulation, and particularly more effective state regulation, were
construed in the teeth of those objects, and the import of its
wording as well, to cut down regulatory power, and to do so in a
manner making the states less capable of regulation than before the
statute's adoption. Yet this, in effect, is what appellant asks us
to do. For the essence of its position, apart from standing
directly on the Commerce Clause, is that Congress, by enacting the
Natural Gas Act, has "occupied the field," i.e.,
entire field open to federal regulation, and thus has relieved its
direct industrial sales of any subordination to state control.
The exact opposite is the fact. Congress, it is true, occupied a
field. But it was meticulous to take in only territory which this
Court had held the states could not reach. [Footnote 15
] That area did not include direct
consumer sales, whether for industrial or other uses. Those sales
had been regulated by the states, and the regulation had been
repeatedly sustained. In no instance reaching this Court had it
been stricken down. [Footnote
It is true that no case came here involving state regulation of
direct industrial sales wholly apart from sales for other uses. In
the cases sustaining state power,
Page 332 U. S. 520
whether to regulate or to tax, the company making the industrial
sales was selling also to domestic and commercial users. [Footnote 17
] But there was no
suggestion -- certainly no decision -- that a different result
would follow if only direct industrial sales were being made.
Neither the prior judicial line nor the statutory line was drawn
between kinds of use or on the relation between sales for different
uses. Both lines were drawn between sales for use, of whatever
kind, and sales for resale. Cf. Colorado Interstate Gas Co. v.
Federal Power Comm'n, 324 U. S. 581
324 U. S.
The Natural Gas Act created an articulate legislative program
based on a clear recognition of the respective responsibilities of
the federal and state regulatory agencies. It does not contemplate
ineffective regulation at either level. We have emphasized
repeatedly that Congress meant to create a comprehensive and
effective regulatory scheme, complementary in its operation to
those of the states, and in no manner usurping their authority.
Public Utilities Comm'n v. Gas Co., 317 U.
, 317 U. S. 467
Federal Power Comm'n v. Hope Natural Gas Co., 320 U.
, 320 U. S.
-610; Interstate Natural Gas Co. v. Federal Power
Comm'n, 331 U. S. 682
331 U. S. 690
And, as was pointed out in Federal Power Comm'n v. Hope Natural
Gas Co., supra,
320 U.A. at 320 U. S. 610
"the primary aim of this legislation was to protect consumers
against exploitation at the hands of natural gas companies." The
scheme was one of cooperative action [Footnote 18
] between federal and state agencies.
Page 332 U. S. 521
It could accomplish neither that protective aim nor the
comprehensive and effective dual regulation Congress had in mind if
those companies could divert at will all or the cream of heir
business to unregulated industrial uses. [Footnote 19
The Natural Gas Act therefore was not merely ineffective to
exclude the sales now in question from state control. Rather, both
its policy and its terms confirm that control. More than "silence"
of Congress is involved. The declaration, though not identical in
terms with the one made by the McCarran Act, 59 Stat. 33, 15 U.S.C.
§ 1011, concerning continued state regulation of the insurance
business, is in effect equally clear, in view of the Act's
historical setting, legislative history and objects, to show
intention for the states to continue with regulation where Congress
has not expressly taken over. Cf. Prudential Ins. Co. v.
Benjamin, 328 U. S. 408
Congress has undoubted power to define the distribution of power
over interstate commerce. Southern Pacific Co. v. Arizona,
325 U. S. 761
325 U. S. 769
and authorities cited; cf. Prudential Ins. Co. v. Benjamin,
Here, the power has been exercised in a manner wholly
inconsistent with exclusion of state authority over the sales in
Congress' action, moreover, was an unequivocal recognition of
the vital interests of the states and their people, consumers and
industry alike, in the regulation of rates and service. Indiana's
interest in appellant's direct sales is obvious. That interest is
certainly not less than the
Page 332 U. S. 522
interest of California and her people in their protection
against the evil effects of wholly unregulated sale of insurance
interstate. Robertson v. California, 328 U.
. Not only would industrial consumers in most
instances go without protection as to rates and service other than
that supplied by competition from other fuels, [Footnote 20
] but the state's regulatory
system would be crippled, and the efforts of the Indiana Commission
seriously hampered in protecting the interests of other classes of
users equally, if not more, important. [Footnote 21
As against these vital local interests, becoming more important
with every passing year in the steady transition from use of more
primitive fuels to natural gas and fuel oils, appellant seeks to
set up its own interest in complete freedom from regulation and, if
any is to be imposed, a supposed national interest in uniform
regulation. The national interest, considered apart from its own,
is largely illusory on this record. For itself, the company asserts
that state regulation of prices and service will amount to a power
of blocking the commerce or impeding its free flow.
There are two answers. One is experience. Insofar as this phase
of the natural gas industry has been subjected to state regulation
to date, those effects have not been shown to occur. The other
answer, in case that experience should vary, is the power of
Congress to correct abuses in regulation if and when they appear.
Page 332 U. S. 523
power to regulate interstate commerce, wherever it exists, is
not the power to destroy it, unless Congress has expressly so
provided. [Footnote 22
is the power to require that it be done on terms reasonably related
to the necessity for protecting the local interests on which the
Appellant also envisages conflicting regulations by the
commissions of the various states its main pipeline serves,
particularly in relation to curtailment of service when weather
conditions or others require it, and fears conflict also between
the state commissions and the Federal Power Commission. It assigns
these possibilities in support of its view that national uniform
regulation alone is appropriate to its operations. There is no
evidence thus far of substantial conflict in either respect.
] and we do not
see that the probability of serious conflict is so strong as to
outweigh the vital local interests to which we have referred
requiring regulation by the states. Moreover, if such conflict
should develop, the matter of interrupting service is one largely
related, as appellees say, to transportation, and thus within the
jurisdiction of the Federal Power Commission to control, in
accommodation of any conflicting interests among various states.
These considerations all would lead to the conclusion that the
states are not made powerless to regulate the sales in question by
any supposed necessity for uniform
Page 332 U. S. 524
national regulation but that, on the contrary, the matter is of
such high local import as to justify their control, even if
Congress had remained wholly silent and given no indication of its
intent that state regulation should be effective. But in this case,
in addition to those considerations taken independently, the policy
which we think Congress has clearly delineated for permitting and
supporting state regulation removes any necessity for determining
the effect of the Commerce Clause independently of action by
Congress and taken as operative in its silence.
The attractive gap which appellant has envisioned in the
coordinate schemes of regulation is a mirage. The judgment of the
Supreme Court of Indiana is
MR. JUSTICE JACKSON concurs in the result.
MR. JUSTICE MURPHY took no part in the consideration or decision
of this case.
The Commission is authorized to take these steps by Indiana
statutes creating the state's regulatory scheme for public
utilities. Burns Ind.Stat.Ann. §§ 54-101 et seq.
Appellant's sales to Anchor-Hocking are far larger than sales
made to several of the local distributing companies. Thus, in 1943,
appellant sold 1,150,279 cubic feet to Anchor-Hocking, and only
151,065 cubic feet to the local utility served from the same branch
line. See note 8
This was in 1941. In 1943, the chairman of appellant's board
"Panhandle was anxious to take over such business because it was
unregulated transaction both as to the Federal Power Commission and
the Public Service Commission of Indiana, and that he intended to
establish higher industrial rates based on a competitive fuel
Prior to the hearings before the Commission, appellant had
entered into arrangements to provide direct industrial service to
an E. I. DuPont de Nemours & Company plant near Fortville,
Indiana. That service was commenced subsequent to the hearings.
In the trial court, the Commission had urged, as it still does,
that its first order merely required the filing of information, and
that no action would lie to contest its power to fix rates or
otherwise regulate the sales until that power was exercised. This
resulted in bringing forth appellant's tender of compliance as
"information only," conditioned upon the Commission's acceptance of
the filing as such and without prejudice to appellant's right to
contest the validity of any subsequent order. The supplemental
order expressly stated that the filing, if any, would be deemed to
be for the purpose of and available for use by the Commission in
carrying out its further duties under the statute.
Several of the local utility companies, which had been
intervenors in the proceedings before the Commission, were
permitted to intervene in the court test of the orders and are
appellees here. The National Association of Railroad and Utilities
Commissioners has filed a brief amicus curiae
of the Commission's position.
In Illinois Natural Gas Co. v. Central Illinois Public
Service Co., 314 U. S. 498
314 U. S. 504
the Court referred to earlier decisions turned by "applying this
mechanical test for determining when interstate commerce ends and
intrastate commerce begins," namely, "upon the introduction of the
gas into the service pipes of the distributor," and then
"In other cases, the Court, in determining the validity of state
regulations, has been less concerned to find a point in time and
space where the interstate commerce in gas ends and intrastate
commerce begins, and has looked to the nature of the state
regulation involved, the objective of the state, and the effect of
the regulation upon the national interest in the commerce. Cf.
South Carolina Highway Dept. v. Barnwell Bros., 303 U. S.
, 303 U. S. 185
, 303 U. S.
187 et seq.; California v. Thompson,
313 U. S.
, 313 U. S. 113
Duckworth v. Arkansas, 314 U. S. 390
314 U.S. at 314 U. S.
Appellant's gas enters Indiana in a 22-inch main at a pressure
of 250 pounds or more per square inch. In the state, the gas enters
a 16-inch branch line at a pressure of 200 pounds per square inch,
and then a 6-inch lateral line at a pressure of 100 pounds per
square inch. In the lateral line, the gas is transported to two
adjacent meter houses. From one house, gas is delivered to
Anchor-Hocking at pressures as low as 10 pounds per square inch,
while, from the other, deliveries are made to a local distributing
company at pressures ranging from 9 to 25 pounds per square
Similarly, gas from other laterals stemming from appellant's
main line is reduced to a pressure of 16 pounds per square inch
before being furnished to the DuPont plant and to pressures of
approximately 20 pounds per square inch for two utility companies
served from the same lateral as the DuPont plant.
For a summary of the leading decisions concerning the sale and
transportation of gas prior to the passage of the Natural Gas Act,
see Illinois Natural Gas Co. v. Central Illinois Public Service
Co., 314 U. S. 498
314 U. S.
-505. See also
Powell, Note Physics and Law
-- Commerce in Gas and Electricity, 58 Harv.L.Rev. 1072; Howard,
Gas and Electricity in Interstate Commerce, 18 Minn.L.Rev. 611.
Appellant contends that "wholesale" -- i.e.,
quantity -- service direct to industrial consumers, as exemplified
by its sales to Anchor-Hocking, is to be distinguished from the
sales in Pennsylvania Gas Co. v. Public Service Comm'n,
252 U. S. 23
were made in a manner commonly associated with a local distribution
system supplying gas to consumers in a city. Nothing in the
decision, however, requires it to be so limited. On the contrary,
emphasis may rather be placed on the fact that both situations
involve sales to ultimate consumers, Anchor-Hocking being just as
clearly in that category as the "factories and residences" served
by the company in the Pennsylvania Gas Co.
Illinois Natural Gas Co. v. Central Illinois Public Service
Co., 314 U. S. 498
314 U. S. 505
where Chief Justice Stone, in summarizing the Pennsylvania Gas
case, stated that it involved gas "sold directly to
ultimate local consumers;" Jersey Central Power and Light Co.
v. Federal Power Comm'n, 319 U. S. 61
319 U. S. 78
(dissenting opinion); Powell, Note, 58 Harv.L.Rev. 1072, 1082,
quoted infra, note
decision, 273 U. S.
, had been made in the face of the Rhode Island
Commission's finding that the Narragansett company, in selling
electric current interstate to the Attleboro company, was suffering
an operating loss, while the rates to its other customers yielded a
fair return, and over the Commission's contentions grounded on that
finding that it could not effectively regulate rates of the
Narragansett company to its local consumers without also regulating
its rates to the Attleboro company.
the memorandum submitted on behalf of the
National Association of Railroad and Utility Commissioners by its
general solicitor, Mr. John E. Benton, Hearings before Committee on
Interstate and Foreign Commerce on H.R. 4008, 75th Cong., 1st Sess.
"Sales for industrial use ought not to be exempt from all
regulation, for the result may very well be that unjustifiable
discrimination will result, and there will be no commission to
which complaint may be made. Sales for industrial uses plainly
ought to be subject to regulation by the same Commission which
regulates sales to other classes of consumers, so that just and
reasonable rates, for the several classes of service, properly
related to each other, may be established."
". . . [T]he Supreme Court has from the beginning allowed the
state both to tax and to fix the price on the first sale or
delivery of gas or electricity brought in from a sister state when
and if this first sale is also necessarily the last sale because
consummated by consumption."
Powell, Note, 58 Harv.L.Rev. 1072, 1082.
In H.Rep. No. 709, 75th Cong., 1st Sess., the Committee on
Interstate and Foreign Commerce said of the proposed bill which
became the Natural Gas Act:
"It confers jurisdiction upon the Federal Power Commission over
the transportation of natural gas in interstate commerce, and the
sale in interstate commerce of natural gas for resale for ultimate
public consumption for domestic, commercial, industrial, or any
other use. The States have, of course, for many years regulated
sales of natural gas to consumers in intrastate transactions. The
States have also been able to regulate sales to consumers even
though such sales are in interstate commerce, such sales being
considered local in character and in the absence of congressional
prohibition subject to State regulation. (See Pennsylvania Gas
Co. v. Public Service Commission, 252 U. S.
.) There is no intention in enacting the present
legislation to disturb the States in their exercise of such
jurisdiction. However, in the case of sales for resale, or
so-called wholesale sales, in interstate commerce (for example,
sales by producing companies to distributing companies) the legal
situation is different. Such transactions have been considered to
be not local in character and, even in the absence of Congressional
action, not subject to State regulation. (See Missouri v.
Kansas Gas Co.. 265 U. S. 298
, and Public
Service Commission v. Attleboro Steam and Electric Co.,
273 U. S.
.) The basic purpose of the present legislation is to
occupy this field in which the Supreme Court has held that the
States may not act."
H.Rep. No. 2651, 74th Cong., 2d Sess., 1-3;
Sen.Rep. No. 1162, 75th Cong., 1st Sess.
In the hearings on H.R. 4008, the bill in the 75th Congress, the
representative of several large pipeline companies construed § 1(b)
as it then stood to exempt sales to industrial consumers from all
regulation, state as well as federal, and proposed an amendment
exempting sales for resale, when for industrial use only, from
regulation under the proposed legislation. Hearings before
Committee on Interstate and Foreign Commerce on H.R. 4008, 75th
Cong., 1st Sess. 124. In an answering memorandum, Mr. Benton
pointed out the pipeline representative's misunderstanding of the
purposes of § 1(b), stating that
"service to an industrial user is just as much a local service .
. . as is a sale to a householder for domestic use . . . , [and]
until Congress occupies the field, a sale for industrial use is
accordingly subject to State regulation. . . ."
at 143. He proposed an alternative amendment to
render it clear beyond doubt that federal regulation of sales for
resale extended to transactions where the gas was to be used for
industrial purposes only. Id.
at 142. Mr. Benton's
amendment was adopted by the House committee, and appears in
substantially unaltered form in § 1(b) of the Natural Gas Act as
finally enacted. In H.Rep. No.709, 75th Cong., 1st Sess., the
committee emphasized that Mr. Benton and other representatives of
state commissions and municipalities appeared in support of the
In support of its position, appellant relies in part on H.Rep.
No. 800, 80th Cong., 1st Sess., favorably reporting H.R. 4051
amending the Natural Gas Act. This bill did not become law. The
views expressed in the committee report made in 1947, some nine
years after the Natural Gas Act's passage, are hardly
determinative, or, in juxtaposition with the contemporaneous
history, persuasive of the congressional intent in passing that
See notes 12 and
Pennsylvania Gas Co. v. Public Service Comm'n,
252 U. S. 23
appears to be the only case flatly ruling the point for regulatory
purposes. But its authority was clearly recognized in Illinois
Natural Gas Co. v. Central Illinois Public Service Co.,
314 U. S. 498
314 U. S. 505
cf. note 10
supra; Missouri v. Kansas Natural Gas Co., 265 U.
, 265 U. S. 308
Public Utilities Comm'n v. Attleboro Co., 273 U. S.
, 273 U. S. 87
and other cases, as well as in the congressional report quoted in
The jurisdiction granted the Federal Power Commission by the
Natural Gas Act necessitates close correlation with state
regulatory bodies. Section 17 of the Act provides for cooperation
between the federal and state agencies. See note 23 and text
Over 38 percent of the gross revenues of the local Indiana
utilities from the sale of gas is derived from service to the
approximately 250 industrial consumers served by them. If service
to any substantial number of the industrial users were to be taken
over by appellant, the local utilities not only would suffer great
losses in revenue, but would be unable to dispense with more than a
trivial percentage of their plant properties. The resultant
increase in unit cost of gas would lead necessarily to increased
rates for the consumers served by the local companies.
Pipeline service, by the very physical conditions characterizing
the industry and magnitude of investment required, acquires large
monopolistic effects, more particularly in marketing areas distant
from producing ones. Cf. Federal Power Comm'n v. Hope Natural
Gas Co., 320 U. S. 591
320 U. S. 610
note 17 and text. Most often, its competition is with other fuels,
rather than competing pipelines.
See note 19
Cf. Milk Control Board v. Eisenberg Farm Products,
306 U. S. 346
Robertson v. California, 328 U. S. 440
328 U. S. 448
Industrial Gas Co. v. Public Utilities Comm'n,
St. 408, 412, 21 N.E.2d 166; In re Service Gas Co.,
P.U.R. (N.S.) 202.
Kentucky Whip and Collar Co. v. Illinois Cent. R. Co.,
299 U. S. 334
Clark Distilling Co. v. Western Maryland R. Co.,
242 U. S. 311
United States v. Darby, 312 U. S. 100
There is no evidence of any conflict in the asserted exercise of
jurisdiction by the appellee Commission with any functions of the
Federal Power Commission. In granting appellant permission under §
7(c) of the Natural Gas Act to extend its facilities to serve the
DuPont plant, see note
the Federal Power Commission specifically
provided that the order was
"without prejudice to the authority of the Indiana Commission in
the exercise of any jurisdiction which it may have over the sale or
service proposed to be rendered by Panhandle Eastern to du
Cf. note 18
See note 23