A natural gas company which is subject to the Natural Gas Act
may sell the leases covering an estimated 12% of its total gas
reserves without the approval and contrary to an order of the
Federal Power Commission. Pp. 337 U. S.
1. Section 1(b) of the Natural Gas Act, excluding "the
production or gathering of natural gas" from the Commission's
jurisdiction, left the transfer of gas leases to state regulation
and outside the scope of the Commission's regulatory powers. Pp.
337 U. S.
2. Sections 5(b), 6(a) and (b), 8(a), 9(a), 10(a) and 14(b),
empowering the Commission to make investigations, to prescribe
rules for the keeping of accounts and records by natural gas
companies, and to require them to file such reports as are deemed
necessary by the Commission in the proper administration of the
Act, do not require a different result. Pp. 337 U. S.
3. Nor is a different result required by §§ 7(c), 4, 5, and 16,
authorizing the Commission to issue certificates of convenience and
necessity for the interstate transportation and sale of natural
gas, to determine reasonable rates for such transportation and
sale, and to do the things appropriate to carry out the provisions
of the Act -- even when the leases involved were used to justify
the issuance of certificates of convenience and necessity. Pp.
337 U. S.
4. Nor is a different result required by § 7(b), which forbids
any natural gas company to abandon any of its facilities subject to
the jurisdiction of the Commission without the prior approval of
the Commission. Pp. 337 U. S.
5. The conclusion here reached is supported by the undisputed
finding by the District Court that it has been the practice for
natural gas companies to trade freely in gas leases and that the
Commission has never before asserted the right to regulate the
transfer of such leases. Pp. 337 U. S.
6. Since the Commission could not stop the transfer of a gas
lease, it was not entitled to an injunction delaying such a
transfer until it could complete an investigation and determine its
own power and the necessity for using it. Pp. 337 U. S.
172 F.2d 57 affirmed.
Page 337 U. S. 499
A Federal District Court denied an injunction sought by the
Federal Power Commission to bar the sale of certain gas leases by a
natural gas company subject to the Natural Gas Act. The Court of
Appeals affirmed. 172 F.2d 57. This Court granted certiorari. 336
U.S. 935. Affirmed,
MR. JUSTICE REED delivered the opinion of the Court.
Stated broadly, this certiorari brings before us for review a
problem involving the scope of the power over the gas reserves of a
natural gas company given to the Federal Power Commission by the
Natural Gas Act. 52 Stat. 821, as amended, 56 Stat. 83.
Specifically, the question to be decided is whether a natural gas
company, subject to the Act may sell the leases covering an
estimated twelve percent of its total gas reserves without the
approval, and contrary to an order, of the Commission.
The issue is made very sharply because the District Court and
the Court of Appeals have refused an injunction, sought by the
Commission, to hold the consummation
Page 337 U. S. 500
of the sale in abeyance until the Commission, through an
admittedly permissible investigation, can determine whether the
disposal of these reserves will impair the ability of Panhandle to
supply its present and prospective customers in the area which it
has undertaken to serve as a public utility. The Commission may
find that public interest will best be served by requiring
Panhandle to retain these reserves. The public interest has strong
appeal to a court of equity for its remedies once a legal right is
fairly in controversy. [Footnote
Respondent, Panhandle Eastern Pipe Line Company (herein called
Panhandle), a Delaware corporation, transports and markets natural
gas in interstate commerce by means of its pipeline system, which
runs from Texas into Michigan. In addition, it owns or controls
gas-producing properties in Kansas, Oklahoma, and Texas.
In September, 1948, Panhandle organized Hugoton Production
Company (hereinafter called Hugoton), also a Delaware corporation.
On October 11, 1948, pursuant to a written agreement between the
two companies, Panhandle transferred to Hugoton gas leases on
approximately 97,000 acres of land in Kansas and $675,000 in cash.
In return, Panhandle received all the outstanding capital stock of
Hugoton and the option to purchase, on or after January 1, 1965,
all or part of the gas produced from this land, which is at present
undeveloped and not connected with any pipeline system. The gas
reserves under this acreage are estimated at approximately 700
billion cubic feet. Hugoton thereafter contracted to sell to the
Kansas Power and Light Company, for a period of fifteen years from
November 1, 1949, to November 1, 1964, the gas produced from these
leases, which, according
Page 337 U. S. 501
to the contract, was to be consumed wholly within the
On the same date as the transaction between Panhandle and
Hugoton, Panhandle declared a dividend of the Hugoton stock to the
holders of its common stock at the rate of one-half share of
Hugoton stock for each share of common stock of Panhandle. The
dividend was to be paid November 17, 1948, to Panhandle's
stockholders of record on October 29, 1948. Nothing called to our
attention indicates any control retained by Panhandle over the
On October 26, 1948, the Federal Power Commission (hereinafter
called the Commission) ordered an investigation
"pursuant to the provisions of Section 14 of the Natural Gas
Act, of the facts and circumstances involved in the formation and
proposed operation of the Hugoton Production Company and the
transfer to said company by Panhandle Eastern of the natural gas
reserves. . . ."
By supplementary order of November 10, 1948, Hugoton was joined
as a party, a date for a public hearing was fixed, and Hugoton and
Panhandle ordered to show cause why they should not be directed to
cancel the contract and why Panhandle should not be prohibited from
transferring the leases without the consent of the Commission and
from distribution the Hugoton stock to its stockholders. Pending a
final determination, the Commission ordered that the status
be maintained by Panhandle and Hugoton.
Upon the apparent refusal of Panhandle to company with this
order, the Commission, on November 13, 1948, instituted the instant
suit in the United States District Court for the District of
Delaware, seeking a preliminary injunction and a temporary
restraining order to compel Panhandle to proceed no further with
the stock distribution and to maintain the status quo
pending the final determination of the questions for which the
Page 337 U. S. 502
before the Commission had been set. The district court issued
the temporary restraining order, which has been kept in effect by
successive orders and which enjoined Panhandle from issuing to its
stockholders the dividend of Hugoton stock. Panhandle was ordered
to cause Hugoton to refrain from transferring any of the gas leases
and from issuing or transferring any of it capital stock. After a
hearing, the district court refused to grant the preliminary
injunction on the ground that there had not been shown any basis
for the relief sought by the Commission.
On appeal, the Court of Appeals for the Third Circuit affirmed
the judgment of the district court on the ground that § 1(b) of the
Natural Gas Act, excluding "the production or gathering of natural
gas" from the Commission's jurisdiction left the transfer of gas
leases to state regulation and outside the scope of the
Commission's regulatory powers. 172 F.2d 57. The State Corporation
Commission of Kansas had been granted leave to intervene in the
Court of Appeals in opposition to the Federal Power Commission.
To consider the important question of the applicability of the
Natural Gas Act to this transaction, we granted certiorari. 336
Without entering upon another review of its legislative history,
] suffice it to say
that the Natural Gas Act did not envisage federal regulation of the
entire natural gas field to the limit of constitutional power.
Rather, it contemplated
Page 337 U. S. 503
the exercise of federal power as specified in the Act,
particularly in that interstate segment which the states were
powerless to regulate because of the Commerce Clause of the Federal
Constitution. [Footnote 3
jurisdiction of the Federal Power Commission was to complement that
of the state regulatory bodies. [Footnote 4
] Accordingly, Congress, in § 1(b) of the Act,
not only prescribed the intended reach of the Commission's power,
but also specified the areas into which this power was not to
Section 1(b) provides as follows:
"(b) The provisions of this Act 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."
Panhandle Eastern Pipe Line
Co. v. Public Service Commission
Page 337 U. S. 504
of Indiana, 332 U. S. 507
332 U. S. 516
The Act, moreover, expressly exempts from its coverage [Footnote 5
] (1) any other
transportation or sale of natural gas; (2) the local distribution
of natural gas; (3) the facilities used for local distribution, and
(4) the production and gathering of natural gas.
The Commission seeks to distinguish between the activities of
production and gathering, such as drilling, spacing wells, or
collecting gas, and the facilities, such as reserves and gas
leases, used therefor, and argues that only the former were
excluded from the coverage of the Act. In support of this position,
it is pointed out that the section specifically exempts both the
local distribution and the facilities used therefor, while it makes
no mention of the facilities used for production or gathering.
] In the face of the
unambiguous language of the Act and its legislative background, we
cannot ascribe such a narrow meaning to the words, "the production
or gathering of natural gas." In Colorado Interstate Gas Co. v.
Federal Power Commission, 324 U. S. 581
324 U. S. 603
Page 337 U. S. 505
that this phrase comprehended the producing properties and
gathering facilities of a natural gas company. We now adhere to
this natural and clear meaning of the words and their obvious
expression of congressional intent. [Footnote 7
] Of course, leases are an essential part of
The Commission cites §§ 5(b), 6(a) and (b), 8(a), 9(a), 10(a),
and 14(b) to show that Congress intended "to confer a certain
measure of authority upon the Commission" over the production and
gathering of gas. These sections empower the Commission to make
investigations, to prescribe rules for the keeping of accounts and
records by the natural gas companies, and to require that the
companies file such reports as are deemed necessary by the
Commission in the proper administration of the Act. These powers
are inquisitorial in nature, and were designed to aid the
Commission in exercising its powers and "to serve as a basis for
recommending further legislation to the Congress." Section 14(b),
quoted below, comes closest to supporting the Commission's
Page 337 U. S. 506
but that confers only power to obtain information. [Footnote 8
] Although these sections
bear evidence of congressional consideration of the relationship of
production properties to other elements of the natural gas
business, they do not, even by implication, suggest to us an
extension of the regulatory provisions of the Act to cover
incidents connected with the production or gathering of gas.
In Colorado Interstate Gas Co. v. Federal Power Commission,
at 324 U. S. 602
the Court, in considering the more important of these sections,
said that they described powers which were aids to the "normal
conventions" of ratemaking. We held that the Commission, in
exercising its ratemaking authority, could include the fair value
of the producing and gathering facilities in the rate base of a
natural gas company. The primary duty of the Commission is to fix
just and reasonable rates for the transportation and sale of
natural gas in interstate commerce for resale. For this purpose,
the Court permitted the Commission to examine and consider the cost
of production and gathering. The use of such data for ratemaking is
not a precedent for regulation of any part of production or
marketing. Before the Colorado Interstate
decision, it was
apparent that the value of producing facilities and the cost of gas
bought by a
Page 337 U. S. 507
natural gas company from producers would be weighty factors in
ratemaking, whether a rate base method or other method for fixing
rates was used. Low valuation by the Commission of producing
properties or low cost allowance for purchased gas discourages
exploration for gas or its sale in interstate commerce. [Footnote 9
] Congress knew this
necessary relationship between production and distribution, but
excluded the Commission from exercising any direct control or
regulation over the actual production and gathering of natural
The Commission urges it has jurisdiction over the transaction
between Panhandle and Hugoton from the powers granted to it by §
7(c) of the Act, which authorizes it to issue certificates of
convenience and necessity for the interstate transportation and
sale of natural gas, and those granted to it by §§ 4 and 5 to
determine reasonable rates for such transportation and sale. It is
pointed out that Panhandle, in three applications for certificates
of convenience and necessity to construct additional pipeline
facilities, had included the acreage here involved as part of its
gas reserves, and certificates were issued upon the finding by the
Commission that Panhandle had adequate reserves to warrant its
expansion. [Footnote 10
Moreover, Panhandle had been permitted to include these reserves in
its rate base as "used and useful property." The Commission
therefore argues that these gas leases which Panhandle proposes to
grant to Hugoton have been dedicated to the discharge of
Panhandle's public utility obligation to render adequate service at
reasonable and nondiscriminatory rates. From these circumstances,
Page 337 U. S. 508
Commission concludes that these leases cannot be relinquished by
Panhandle without the consent of the Commission, which has the
implied power to protect its ratemaking function and to insure the
maintenance of adequate service by a natural gas company. Sections
4, 5, and 7 do not concern the producing or gathering of natural
gas; rather, they have reference to the interstate sale and
transportation of gas, and are so limited by their express terms.
Thus, §§ 4(a), (b), (c), 5(a), and 7(c) speak of "transportation or
sale of natural gas subject to the jurisdiction of the Commission,"
while § 7(a) and (b) refer respectively to "transportation
facilities" and "facilities subject to the jurisdiction of the
Commission." [Footnote 11
Nothing in the sections indicate that the power given to the
Commission over natural gas companies by § 1(b) could have been
intended to swallow all the exceptions of the same section, and
thus extend the power of the Commission to the constitutional limit
of congressional authority over commerce. The repetition of the
words "subject to the jurisdiction" makes clear to us the intent to
keep the Commission's hands out of the excepted local matters. The
same answer applies to petitioner's argument that § 16 gives it
authority to stop sales of leases. [Footnote 12
] The power to do the things appropriate to
carry out the provisions of the Act can hardly be taken to rescind
a prohibition against certain actions.
The Federal Power Commission leans heavily upon § 7(b), which
provides that no natural gas company may abandon any of its
facilities subject to the jurisdiction
Page 337 U. S. 509
of the Commission without the prior approval of the Commission.
] The argument
here is that, since natural gas is the "lifeblood" of a pipeline
system, a company, by disposing of its gas reserves unhampered by
Commission control, may render itself unable to continue service;
consequently, abandonment of facilities and service without the
consent of the Commission will result. The argument begs the
question. The section, like those above, covers only "facilities
subject to the jurisdiction of the Commission."
To accept these arguments springing from power to allow
interstate service, fix rates, and control abandonment would
establish wide control by the Federal Power Commission over the
production and gathering of gas. It would invite expansion of power
into other phases of the forbidden area. [Footnote 14
] It would be an assumption of powers
specifically denied the Commission by the words of the Act as
explained in the report and on the floor of both Houses of
Congress. [Footnote 15
Page 337 U. S. 512
of this Act is replete with evidence of the care taken by
Congress to keep the power over the production and gathering of gas
within the states. [Footnote
] This probably occurred because the state legislatures, in
the interests of conservation, had delegated broad and elaborate
power to their
Page 337 U. S. 513
regulatory bodies over all aspects of producing gas. [Footnote 17
] The Natural Gas Act was
designed to supplement state power and to produce a harmonious and
comprehensive regulation of the industry. [Footnote 18
] Neither state nor federal
regulatory body was to encroach upon the jurisdiction of the other.
enacted this Act after full consideration of the problems of
production and distribution. It considered the state interests, as
well as the national interest. It had both producers and consumers
in mind. Legislative adjustments were made to reconcile the
The District Court found as a fact, and the finding is
undisputed by the Commission, that
"[i]t has been the practice in the natural gas industry for
companies to trade freely in gas leases, and the Commission has
never heretofore asserted the right to regulate transfers of such
Thus, for over ten years, the Commission has never claimed the
right to regulate dealings in gas acreage. Failure to use such an
important power for so long a time indicates to us that the
Commission did not believe the power existed. [Footnote 20
] In the light of that history, we
Page 337 U. S. 514
not, by an extravagant, even if abstractly possible, mode of
interpretation push powers granted over transportation and rates so
as to include production. If possible, all sections of the Act must
be reconciled so as to produce a symmetrical whole. [Footnote 21
] We cannot attribute to
Congress the intent to grant such far-reaching powers as implicit
in the Act when that body has endeavored to be precise and explicit
in defining the limits to the exercise of federal power. [Footnote 22
The Commission sought by injunction to enforce its order halting
the transaction between Panhandle and
Page 337 U. S. 515
Hugoton pending the outcome of its investigation. The Commission
argues that, at any rate, the transfer should be enjoined until it
can determine its own power and the necessity of using it.
Injunctive aid was requested under § 20(a) [Footnote 23
] of the Act and the general equity
power of the district court. To be entitled to judicial assistance,
however, the order issued by the Commission must be valid and based
on a statutory grant of power to the Commission. As we have held
above that the transfer of undeveloped gas leases is an activity
related to the production and gathering of natural gas, and beyond
the coverage of the Act, the authority of the Commission cannot
reach the sales. A proposed transfer cannot be stopped by the
Commission. It should not be permitted to delay what it cannot
prevent. [Footnote 24
the Commission is of the opinion that it should have power to
Page 337 U. S. 516
disposition of leases by natural gas companies, it is authorized
to call the attention of Congress to that fact. [Footnote 25
The judgment of the Court of Appeals is accordingly
MR. JUSTICE MURPHY took no part in the consideration or decision
of this case.
Porter v. Warner Holding Co., 328 U.
, 328 U. S. 398
Yakus v. United States, 321 U. S. 414
321 U. S. 440
Hecht Co. v. Bowles, 321 U. S. 321
321 U. S. 331
Virginia R. Co. v. System Federation, 300 U.
, 300 U. S. 552
City of Harrisonville v. W. S. Dickey Clay Co.,
289 U. S. 334
289 U. S.
The legislative history has been discussed by our prior opinions
in Panhandle Eastern Pipe Line Co. v. Public Service Comm'n of
Indiana, 332 U. S. 507
332 U. S.
-521; Interstate Natural Gas Co. v. Federal Power
Comm'n, 331 U. S. 682
331 U. S.
-690; Colorado Interstate Gas Co. v. Federal
Power Comm'n, 324 U. S. 581
324 U. S.
-603; Federal Power Comm'n v. Hope Natural Gas
Co., 320 U. S. 591
320 U. S.
-613; Illinois Natural Gas Co. v. Central
Illinois Public Service Co., 314 U. S. 498
314 U. S.
H.R.Rep. No.2651, 74th Cong., 2d Sess., pp. 1-3;
H.R.Rep. No.709, 75th Cong., 1st Sess., pp. 1-4; S.Rep. No.1162,
75th Cong., 1st Sess., pp. 1-3.
See Public Utilities Comm'n v. United Fuel Gas Co.,
317 U. S. 456
317 U. S. 467
Panhandle Eastern Pipe Line Co. v. Public Service Comm'n,
332 U. S. 507
332 U. S.
The House report on the Act, after quoting the exemption
provisions of § 1(b), says:
"The quoted words are not actually necessary, as the matters
specified therein could not be said fairly to be covered by the
language affirmatively stating the jurisdiction of the Commission,
but similar language was in previous bills, and, rather than invite
the contention, however unfounded, that the elimination of the
negative language would broaden the scope of the act, the committee
has included it in this bill."
H.R.Rep. No.709, 75th Cong., 1st Sess., p. 3.
Actually, in the words of the House report,
"That part of the negative declaration stating that the act
shall not apply to 'the local distribution of natural gas' is
surplusage by reason of the fact that distribution is made only to
consumers in connection with sales, and, since no jurisdiction is
given to the Commission to regulate sales to consumers, the
Commission would have no authority over distribution, whether or
not local in character."
H.R.Rep. No.709, 75th Cong., 1st Sess., p. 3.
In a brief prepared by the Solicitor of the Federal Power
Commission for the House Committee on Interstate and Foreign
Commerce on the constitutionality of H.R. 11662, an earlier bill
substantially similar to the Natural Gas Act, the following appears
as part of the analysis of the bill:
"The bill makes no attempt to regulate the production or
gathering facilities of a natural gas company, this function being
purely local in character, nor is any attempt made to exercise
control over distribution facilities."
Hearings before a subcommittee of the House Committee on
Interstate and Foreign Commerce on H.R. 11662, 74th Cong., 2d
Sess., p. 17.
The Solicitor of the Federal Power Commission, in testifying at
the same hearing, also answered the following question:
"Mr. COLE [Member of Committee]. Does this bill give anywhere
the Commission power over the source of natural gas in the
different fields in a manner which we might call comparable to that
which your Commission now has over hydroelectric generating
"Mr. DeVANE [Solicitor of the FPC]. It does not; no, it does not
attempt to regulate the gathering rates or the gathering business.
Section 11, I believe it is, of the bill deals with that."
"(b) The Commission may, after hearing, determine the adequacy
or inadequacy of the gas reserves held or controlled by any natural
gas company, or by anyone on its behalf, including its owned or
leased properties or royalty contracts, and may also, after
hearing, determine the propriety and reasonableness of the
inclusion in operating expenses, capital, or surplus of all delay
rentals or other forms of rental or compensation for unoperated
lands and leases. For the purpose of such determinations, the
Commission may require any natural gas company to file with the
Commission true copies of all its lease and royalty agreements with
respect to such gas reserves."
H.R.Rep. No.709, 75th Cong., 1st Sess., p. 7.
Colorado Interstate Gas Co. v. Federal Power Comm'n,
324 U. S. 581
324 U. S. 603
Federal Power Comm'n v. Hope Natural Gas Co., 320 U.
, 320 U. S. 610
320 U. S.
5 F.P.C. 544, 546, 949, 952; 5 FPC Docket G-876, Order of June
Colorado Interstate Gas Co. v. Federal Power Comm'n,
324 U. S. 581
324 U. S.
"SEC. 16. The Commission shall have power to perform any and all
acts, and to prescribe, issue, make, amend, and rescind such
orders, rules, and regulations as it may find necessary or
appropriate to carry out the provisions of this act. . . ."
"(b) No natural gas company shall abandon all or any portion of
its facilities subject to the jurisdiction of the Commission, or
any service rendered by means of such facilities, without the
permission and approval of the Commission first had and obtained,
after due hearing, and a finding by the Commission that the
available supply of natural gas is depleted to the extent that the
continuance of service is unwarranted, or that the present or
future public convenience or necessity permit such
Would it soon be contended that statutory power to require
extension of service, § 7(a), included power to require exploration
or acquisition of leases or allocation of production to interstate
pipelines in order to serve the public interest?
The report of the House Committee on Interstate and Foreign
Commerce on H.R.6586, which became the Natural Gas Act, was adopted
without change by the Senate Committee on Interstate Commerce as
its report on the same bill. See note 3 supra.
The following excerpts are taken
from the report as particularly pertinent:
"The bill is substantially identical with H.R.12680 which, as
amended, was reported by the Committee on Interstate and Foreign
Commerce of the Seventy-fourth Congress, second session, with a
recommendation that it pass. If enacted, the present bill would,
for the first time, provide for the regulation of natural gas
companies transporting and selling natural gas in interstate
commerce. 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.
(1924), 265 U. S.
, and Public Utilities Commission v. Attleboro
Steam & Electric Co.
(1927), 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."
"* * * *"
". . . The bill takes no authority from State commissions, and
is so drawn as to complement, and in no manner usurp, State
regulatory authority, and contains provisions for cooperative
action with State regulatory bodies. . . ."
"* * * *"
"Your committee believes that this legislation is highly
desirable to fill the gap in regulation that now exists by reason
of the lack of authority of the State commissions."
H.R.Rep. No.709, 75th Cong., 1st Sess., pp. 1-3.
During the debate on the bill in the House, its sponsor,
Chairman Lea of the Committee on Interstate and Foreign Commerce,
made the following explanatory statements:
"The primary purpose of the pending bill is to provide Federal
regulation in those cases where the State commissions lack
authority under the interstate commerce law. This bill takes
nothing from the State commissions; they retain all the State power
they have at the present time. This bill would apply to the
transportation of natural gas in interstate commerce and to the
sale of natural gas in interstate commerce for resale or public
"The bill does not apply to the production and gathering of
81 Cong.Rec. 6721.
Likewise, on the floor of the Senate, Chairman Wheeler of the
Committee on Interstate Commerce gave a similar interpretation to
"Mr. AUSTIN. Mr. President, may I ask the Senator from Montana
(Mr. Wheeler) a question concerning this bill? Does the bill
undertake to regulate the production of natural gas, or does it
undertake to regulate the producers of natural gas?"
"Mr. WHEELER. It does not attempt to regulate the producers of
natural gas or the distributors of natural gas -- only those who
sell it wholesale in interstate commerce. . . ."
"Mr. AUSTIN. Mr. President, will the Senator yield for one other
"Mr. WHEELER. Yes."
"Mr. AUSTIN. Is the bill limited in its scope to the regulation
"Mr. WHEELER. Yes; it is limited to transportation in interstate
commerce, and it affects only those who sell gas wholesale."
"Mr. KING. Mr. President, I should like to obtain information
from the Senator as to the implications that arise from the bill,
and what States it would affect. As an illustration, if gas is
produced in Wyoming and is transported for consumption into the
Senator's State or my State, would the Federal Power Commission
have to do with such an activity?"
"Mr. WHEELER. No, and let me say to the Senator that, as a
matter of fact, the bill does not interfere with the State
regulation in any way, shape, or form."
81 Cong.Rec. 9312.
"Mr. CONNALLY. Is it not also true, even though the utility
commissioners advocate it, that, whenever a Federal agency takes
over an activity such as this, the State authorities begin to shift
or lose their responsibility? If we turn this over to the
Interstate Commerce Commission, essentially what they do will be
reflected all over the country, because the interstate rates will
be superimposed on the State commissions, and they must necessarily
be governed by them. Did not that happen to the railroads?"
"Mr. WHEELER. There is no doubt about that, but this is an
entirely different situation."
"Mr. CONNALLY. Yes; one involves the railroads, and the other
"Mr. WHEELER. No. There is no attempt, and can be no attempt,
under the provisions of the bill, to regulate anything in the field
except where it is not regulated at the present time. It applies
only as to interstate commerce, and only to the wholesale price of
81 Cong.Rec. 9313.
"Mr. AUSTIN. Then it would leave to the future the right to meet
any effort on the part of the central Government to acquire the
natural resources of the State of Montana, or the State of Vermont,
or any other State?"
"Mr. WHEELER. Oh, yes. It does not touch it in any way, shape,
or form, except to require the furnishing of information."
"Mr. AUSTIN. I have great fear of these occult methods of
acquiring the natural resources of our several States."
81 Cong.Rec. 9314.
While Congress was considering the passage of the Natural Gas
Act, a bill (H.R. 5711 and S.1919, 75th Cong., 1st Sess.) was
introduced in both houses of Congress on March 17, 1937, which
"this Act shall apply to the procurement of natural gas for the
purpose of its transmission through pipelines and its sale,
exchange, transmission, or distribution in interstate commerce. . .
The jurisdiction of the Federal Power Commission was defined as
"The [Federal Power] Commission shall have jurisdiction over all
facilities for the procurement of natural gas for its transmission
through pipelines and its sale, or for exchange, or distribution in
interstate commerce, and over the transmission of natural gas in
pipelines in interstate commerce and over the sale, or exchange of
natural gas in interstate commerce, and over all facilities
connected therewith as parts of a system of natural gas
transmission operated in more than one State."
The provisions of this bill, however, failed of adoption;
instead, Congress enacted § 1(b), with its specific exemptions from
the coverage of the Act.
See, for example,
Kansas Gen.Stat., c. 55, §§ 701-713
(Supp. 1947); Mich.Stat.Ann., c. 97, §§ 13.138(1)-13.140(10) (Supp.
1947); Okla.Stat.Ann., tit. 52, c. 3, §§ 81-247; Texas
Rev.Civ.Stat., tit. 102, § 6008 et seq.
with Supp. 1948); La.Gen.Stat. §§ 4766-4826.2.
Public Utilities Comm'n v. United Fuel Gas Co.,
317 U. S. 456
317 U. S.
Interstate Natural Gas Co. v. Federal Power Comm'n,
331 U. S. 682
331 U. S.
Federal Trade Comm'n v. Bunte Brothers, 312 U.
, 312 U. S. 352
Norwegian Nitrogen Products Co. v. United States,
288 U. S. 294
288 U. S.
Colorado Interstate Gas Co. v. Federal Power Comm'n,
324 U. S. 581
324 U. S.
Section 5(b) reads:
"(b) The Commission, upon its own motion or upon the request of
any State commission, whenever it can do so without prejudice to
the efficient and proper conduct of its affairs, may investigate
and determine the cost of the production or transportation of
natural gas by a natural gas company
in cases where the
Commission has no authority to establish a rate governing the
transportation or sale of such natural gas."
When the provisions of the bill which became the Natural Gas Act
were being read for amendment on the floor of the House, § 5(b) was
amended by inserting the italicized words. Mr. Boren, a member of
the House Committee on Interstate and Foreign Commerce, who
submitted this amendment, explained the purpose of it as
"Mr. BOREN. Mr. Chairman, my amendment has been agreed to by the
committee. I offer the amendment in order to keep the jurisdiction
of the Federal Government as clearly defined as possible from the
jurisdiction of the State government in cases arising under the
provisions of this bill."
"During the hearings, I offer this amendment and made the
following statement: "
" Mr. Chairman, I would like to make this observation for the
record and as a challenge to the proponents of this bill: that
subsection B of section 5 provides for a growth and for the
extension of the influence of a Federal bureau, or commission, in a
realm wherein this proposal submits on its own acknowledgment that
the Federal authority and responsibility does not rightfully
"Mr. Chairman, this amendment clarifies the jurisdiction as
between the Federal and State governments, and assures us that the
Federal Government will not go into a realm where the State
government already has proper authority to handle the problem."
"The committee has approved the amendment, and I have nothing
further to say."
81 Cong.Rec. 6728.
"SEC. 20.(a) Whenever it shall appear to the Commission that any
person is engaged or about to engage in any acts or practices which
constitute or will constitute a violation of the provisions of this
act, or of any rule, regulation, or order thereunder, it may, in
its discretion, bring an action in the proper district court of the
United States, the District Court of the United States for the
District of Columbia, or the United States courts of any Territory
or other place subject to the jurisdiction of the United States, to
enjoin such acts or practices and to enforce compliance with this
act or any rule, regulation, or order thereunder. . . ."
Cf. Public Utilities Comm'n v. United Fuel Gas Co.,
317 U. S. 456
317 U. S.
In an analogous situation before the institution of this
litigation, there had been uncertainty of opinion in the Commission
as to the reach of the Act toward sales by independent producers
and gatherers to natural gas companies for transportation in
interstate commerce. See
reports of the Federal Power
Commission on its Natural Gas Investigation (Docket G-580),
transmitted to Congress on April 28, 1948. In part IV of the report
subscribed, to by Commissioners Smith and Wimberly, it is concluded
at pp. 38 and 40:
"No reasonable basis is found in the Act or its legislative
history for a conclusion that, although the 'activities' of
production and gathering are exempt under Section 1(b), sales of
natural gas which are made at arm's length by producers and
gatherers who do not thereafter transport it in interstate commerce
may be regulated. Unless such a distinction is specifically
disclaimed, doubts and uncertainties will continue to be felt and
expressed regarding the possible jurisdiction under the Natural Gas
Act of those who only produce and gather natural gas and then sell
it to others transporting such gas in interstate commerce."
"In view of the present unsettled state of this matter, it is
desirable, as the Commission has heretofore recommended, that the
Congress should adopt appropriate amendatory legislation to make it
clear that independent producers or gatherers of natural gas, and
their sales thereof to interstate pipelines, are not subject to the
provisions of the Natural Gas Act. Such action will confirm what
clearly appears to have been the original intent of Congress when
it enacted the Natural Gas Act in 1938."
the report subscribed to by Commissioners
Draper and Olds, pp. 12-14.
Congress is now giving consideration to this problem.
H.R.79, H.R.1758, H.R.982, S.1498, and S.1831, 81st
Cong., 1st Sess., and committee hearings thereon.
MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS and MR. JUSTICE
RUTLEDGE concur, dissenting.
The Court's judgment and opinion in this case go far toward
scuttling the Natural Gas Act. 52 Stat. 821, as amended, 56 Stat.
83. In that Act, Congress declared it "necessary in the public
interest" for the Federal Government to regulate natural gas
companies engaged in
Page 337 U. S. 517
the interstate transportation and sale of natural gas. Many
sections of the Act detailed the authority granted the Federal
Power Commission to regulate such companies, and in addition, § 16
granted broad congressional authority to the Commission
"to perform any and all acts, and to prescribe, issue, make,
amend, and rescind such orders, rules, and regulations as . . .
necessary or appropriate to carry out the provisions"
of the Act. Today's opinion interprets this Act as denying the
Commission all authority to perform any action or issue any order
to regulate an interstate company's interest in natural gas
properties. This interpretation deprives the Commission of the
power to discharge its congressionally imposed duty to protect the
The Court's sterilizing interpretation rests on an exception to
Commission authority appearing in § 1(b) of the Act. [Footnote 2/1
] That exception provides that
the Act shall not
Page 337 U. S. 518
apply to "the production or gathering of natural gas." I agree
with the Court that this language is "unambiguous," and that this
Court should give the language its "clear and natural meaning."
"Production" of gas would thus mean the act of bringing forth gas
from the earth, and "gathering" would mean the act of collecting
gas after it has been brought forth. Such are the "clear and
natural" meanings we had heretofore attributed to these word
symbols. Colorado Interstate Gas Co. v. Comm'n,
324 U. S. 581
324 U. S.
-604; Interstate Natural Gas Co. v. Federal Power
Comm'n, 331 U. S. 682
331 U. S.
-691. It was the physical acts incident to the
"production and gathering" of gas -- local activities -- that our
prior decisions emphasized Congress intended to leave states free
to regulate. Today, the Court reads this congressionally granted
privilege of states to regulate the act of "production" as an
absolute bar to the Federal Power Commission's regulation of the
ownership of gas reserve properties. Gas reserves are indispensable
to proper service of interstate customers of an interstate natural
gas company. And, in thus limiting the Commission's jurisdiction,
the Court leaves the Commission impotent to protect the public's
interest in having interstate companies maintain adequate gas
reserves. This disabling interpretation reads the Federal Act as
though it contemplated "ineffective regulation," an interpretation
directly opposed to that we gave the Act in Panhandle Eastern
Pipe Line Co. v. Public Service Comm'n, 332 U.
, 332 U. S.
Section 7(e) of the Act requires the Commission to issue
certificates of convenience and necessity only if an interstate
"able and willing properly to do the acts and to perform the
service proposed and to conform to the provisions of the Act and
the requirements, rules, and regulations of the Commission
thereunder. . . ."
As authorized by § 7(d), the Commission requires applicants
Page 337 U. S. 519
for certificates to show "the gas reserves which are to supply
the market which is proposed to be served." [Footnote 2/2
] And § 7(b) denies a company power to
"abandon all or any portion of its facilities subject to the
jurisdiction of the Commission. . . ." If evidence were needed to
show the importance Congress attributed to the gas reserve
facilities of a company, that evidence appears in §§ 7(b), 7(c) and
7(e). Jurisdiction to regulate a natural gas company without
jurisdiction to regulate its gas reserves would be like granting
jurisdiction to regulate railroads without power to regulate the
tracks, routes, rights-of-way, etc. And we have held that the
Commission has jurisdiction under the Natural Gas Act to consider
the gas producing properties in fixing rates. Colorado
Interstate Gas Co. v. Federal Power Commission, 324 U.
; Panhandle Eastern Pipe Line Co. v. Federal
Power Comm'n, 324 U. S. 635
324 U. S.
The respondent company had its rate base fixed and its ability
to serve the public determined on its claim to ownership of the
very gas reserve properties the Court now permits it to sell to an
affiliate over the protest of the Commission. According to
allegations in the Commission's complaint, the respondent gas
company has already received from its customers large sums of money
from rates which reflected expenses incurred in maintaining these
reserves and for exploration and development costs in relation to
them. But, under the Court's holding today, these properties,
increased in value by consumer contributions, can be given away by
the respondent company to its newly formed affiliate. Congress
could not have intended to render the Commission powerless to
protect gas reserves necessary to continued consumer service and
paid for by rates fixed to allow development of the reserves.
Page 337 U. S. 520
Furthermore, the reserves, costing only $160,000, have now
apparently been capitalized by the respondent's affiliated
"purchaser" at $10,000,000. If the gas reserves continue to be held
by the respondent company, the rates will be fixed on the basis of
the original $160,000 cost. Panhandle Eastern Pipe Line Co. v.
Federal Power Comm'n, 324 U. S. 635
324 U. S. 648
It is at least doubtful whether, after today's holding, the company
can be prevented from hereafter charging rates based on the
$10,000,000 inflated valuation. Thus, the unwholesome practices
that the Natural Gas Act was primarily designed to prevent are
given a new lease on life. For a purpose of the Act was to protect
consumers, and one of the evils it was aimed to prevent was the
holding company technique of transfers and retransfers between
parent corporations, their offsprings, and affiliates. Federal
Power Comm'n v. Hope Natural Gas Co., 320 U.
, 320 U. S.
It seems inconceivable that Congress would have passed an Act to
regulate natural gas companies with a wholly neutralizing exception
to bar regulation of the gas reserves upon which the whole gas
business depended. I cannot attribute such a meaningless and
deceptive action to the Congress. While the Act itself grants broad
Commission powers effectively to regulate gas companies, the
Court's interpretation deprives the Commission of power essential
to fixing fair rates and to protecting continued services during
the life of a company's gas reserves.
Today's opinion regards Congress' action like that of the parent
who ordered his offspring to go swimming with a stern admonition
not to go near the water.
I would reverse.
Today's opinion also relies on a "finding of fact" by the
District Court that the Commission had never heretofore "asserted
the right to regulate transfers of such leases." The majority
opinion views this "finding" as an evidence that, for ten years,
"the Commission did not believe the power existed." But this
"finding" of fact rests only on affidavits offered in respect to a
motion for a preliminary injunction, and should not be utilized as
a prop to support the Court's interpretation of the Act. Moreover,
the Commission points out that, until the present time, no such
trading as is involved here had taken place. The Commission states
in its brief that the finding of fact
"does not reflect the full picture. Until this time, such
trading has taken place with the view of blocking in reserves and
improving service, and, so far as the Commission is presently
aware, not to achieve results which would derogate from the
§ 57.5(f) of the Commission's Order No. 99 (7 Fed.Reg.