Respondent owns and operates a natural gas business wholly
within Ohio, selling gas only to Ohio consumers. Most of this gas
is transported into Ohio from other states through interstate
pipelines, owned by other companies, which connect inside Ohio with
respondent's large high pressure lines in which the gas, propelled
mainly by its own pressure, flows continuously more than 100 miles
to respondent's local distribution systems.
Held:
1. Respondent is a "natural gas company" subject to the
jurisdiction of the Federal Power Commission under the Natural Gas
Act. Pp.
338 U. S.
467-474.
(a) The continuous flow of gas from other states to and through
respondent's high pressure lines constitutes interstate
transportation. Pp.
338 U. S.
467-468.
(b) The word "transportation" in § 1(b) of the Act is not
limited to companies which both transport natural gas in interstate
commerce and sell it for resale; it applies to the movement of
interstate gas in respondent's high pressure pipelines, even though
respondent sells gas direct to consumers, rather than for resale.
Pp.
338 U. S.
468-469,
338 U. S.
471-474.
(c) Respondent is not exempt from the Act on the ground that all
its facilities come within the proviso in § 1(b) making the Act
inapplicable "to the local distribution of natural gas or to the
facilities used for such distribution," since this was not intended
to exempt high pressure pipelines transporting interstate gas to
local mains. Pp.
338 U. S.
469-471.
(d) Neither the language of the Act nor its legislative history
indicates that Congress meant to create an exception for every
company that transports interstate gas in only one state, even when
the company is fully subject to state regulation and sells gas
direct to consumers, rather than for resale. Pp.
338 U. S.
471-474.
2. The order of the Federal Power Commission requiring
respondent to keep accounts and submit reports as required under
the Act is not so burdensome as to exceed constitutional or
statutory limitations. Pp.
338 U. S. 474-475.
Page 338 U. S. 465
3. The Commission's order did not violate any rights reserved to
the states under the Tenth Amendment. P.
338 U. S.
476.
84 U.S.App.D.C. 312, 173 F.2d 429, reversed.
The Federal Power Commission found that respondent was a natural
gas company subject to its jurisdiction, and ordered respondent to
keep accounts and submit reports as required by the Natural Gas
Act, 15 U.S.C. §§ 717
et seq. 74 P.U.R.(N.S.) 256. The
Court of Appeals reversed on the ground that respondent was not
"engaged in the transportation of gas in interstate commerce within
the meaning of the Act." 84 U.S.App.D.C. 312, 173 F.2d 429. This
Court granted certiorari. 337 U.S. 937.
Reversed, p.
338 U. S.
476.
Page 338 U. S. 466
MR. JUSTICE BLACK delivered the opinion of the Court.
Section 1(b) of the Natural Gas Act [
Footnote 1] provides that the 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 . . . 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. . . ."
Section 2(6) defines "natural gas company" as "a person engaged
in the transportation of natural gas in interstate commerce. . . ."
The Federal Power Commission, after hearings, found as facts that
respondent East Ohio Gas Company was a natural gas company, and
subject to the Commission's jurisdiction. [
Footnote 2] On these and subsidiary findings, the
Company was ordered to keep accounts and submit reports as required
by the Act. [
Footnote 3] The
Commission rejected the Company's contentions [
Footnote 4] that its operations were not covered
by the Act and that the expense of supplying the required
information was so great as to transgress statutory and
constitutional limits. [
Footnote
5] The Court of Appeals for the District of Columbia, without
reaching other contentions, reversed the Commission's orders on the
ground that the Company was not "engaged in the transportation of
natural gas in
Page 338 U. S. 467
interstate commerce within the meaning of the Act." [
Footnote 6] Importance of the questions
to administration of the Act prompted us to grant certiorari. 337
U.S. 937.
I
East Ohio owns and operates a natural gas business solely in
Ohio, selling gas to more than half a million Ohio consumers
through local distribution systems. Most of this natural gas is
transported into Ohio from Kansas, Texas, Oklahoma, and West
Virginia through pipelines of Panhandle Eastern Pipe Line Company
and of Hope Natural Gas Company, an affiliate of East Ohio. Inside
the Ohio boundary, these interstate lines connect with East Ohio's
large high pressure lines in which the imported gas, propelled
mainly by its own pressure, flows continuously more than 100 miles
to East Ohio's local distribution systems. The combined length of
these high pressure trunk lines is at least 650 miles.
That this continuous flow of gas from other states to and
through East Ohio's high pressure lines constitutes interstate
transportation has been established by numerous previous decisions
of this Court. The gas does not cease its interstate journey the
instant it crosses the Ohio boundary or enters East Ohio's pipes,
even though that Company operates completely within the state where
the gas is finally consumed. Respondents do not and cannot claim
that their gas is not in interstate commerce. [
Footnote 7] As we held in
Interstate Natural
Gas Co. v. Federal Power Comm'n, 331 U.
S. 682,
331 U. S. 688,
the meaning of "interstate commerce" in this Act is no more
restricted than that
Page 338 U. S. 468
which theretofore had been given to it in the opinions of this
Court.
Respondents contend, however, that the word "transportation" in
§ 1(b) must be construed as applying only to companies engaged in
the business of transporting gas in interstate commerce for hire or
for sales to be followed by resales, whereas East Ohio does
neither. The short answer is that the Act's language did not
express any such limitation. Despite the unqualified language of §
1(b) making the Act apply to "transportation of natural gas in
interstate commerce," respondents ask us to qualify that language
by applying it only to businesses which both transport and sell
natural gas for resale. They rely on a sentence in the declaration
of policy, § 1(a), referring to "the business of transporting and
selling natural gas." But their contention that the word "and" in
the policy provision creates an unseverable bond is completely
refuted by the clearly disjunctive phrasing of § 1(b) itself. As we
pointed out in
Panhandle Eastern Pipe Line Co. v. Public
Service Comm'n, 332 U. S. 507,
332 U. S. 516,
§ 1(b) made the Natural Gas Act applicable to three separate
things:
"(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."
And, throughout the Act, "transportation" and "sale" are viewed
as separate subjects of regulation. They have independent and
equally important places in the Act. Thus, to adopt respondents'
construction would unduly restrict the Commission's power to carry
out one of the major policies of the Act. Moreover, the initial
interest of Congress in regulation of transportation facilities was
reemphasized in 1942 by passage of an amendment to § 7(c) of the
Act broadening the Commission's powers over the construction or
extension of pipelines. 56 Stat. 83. This amendment followed a
report of the Commission to Congress
Page 338 U. S. 469
pointing out that without amendment the Act vested the
Commission with inadequate power to make
"any serious effort to control the unplanned construction of
natural gas pipelines with a view to conserving one of the
country's valuable but exhaustible energy resources. [
Footnote 8]"
We hold that the word "transportation," like the phrase
"interstate commerce," aptly describes the movements of gas in East
Ohio's High-pressure pipelines. [
Footnote 9]
Respondents also contend that East Ohio is exempt from the Act
because all its facilities come within the proviso in § 1(b) making
the Act inapplicable "to the local distribution of natural gas or
to the facilities used for such distribution." But what Congress
must have meant by facilities for "local distribution" was
equipment for distributing gas among consumers within a
particular
Page 338 U. S. 470
local community, not the high pressure pipelines transporting
the gas to the local mains. For, in decisions prior to enactment of
the statute, this Court had sharply distinguished between the two:
it had made it clear that the national commerce power alone covered
the high pressure trunk lines to the point where pressure was
reduced and the gas entered local mains, while the state alone
could regulate the gas after it entered those mains. [
Footnote 10] The legislative history
shows that the attention of Congress was directly focused on the
cases drawing this distinction. It was because these cases had
barred federal regulation of community supply systems that the
Committee Report could correctly describe the "local
distribution"
Page 338 U. S. 471
proviso as surplusage which was "not actually necessary."
[
Footnote 11] We are wholly
unpersuaded that Congress intended to treat trunk lines like East
Ohio's as though they were mere integrated facilities of the
numerous community supply systems which they service. Indeed, as
respondents admitted upon oral argument here, the logical
consequence of such a principle would be that even a pipeline
stretching from Texas to Cleveland would be completely exempt from
the federal Commission's jurisdiction if it were owned by East
Ohio. To draw such a strained inference from the congressional
exemption of local distribution systems would ignore the importance
of nationally controlling interstate pipelines in order to preserve
"equality of opportunity and treatment among the various
communities and states concerned."
Missouri v. Kansas Natural
Gas Co., 265 U. S. 298,
265 U. S. 310.
What we have said indicates that East Ohio comes squarely within
the coverage of the Act as set out in §§ 1(b) and 2(6).
Nevertheless, respondents contend that this express coverage is
restricted by the broad purpose of the Act to provide federal
regulation only for those companies which states could not
regulate. Urging that all of East Ohio's business is fully subject
to regulation by the state, they rely on statements by this Court
that Congress intended not to cut down state regulatory power, but
rather to supplement it by closing "the gap created by the prior
decisions."
Panhandle Eastern Pipe Line Co. v. Public Service
Comm'n, 332 U. S. 507,
332 U. S.
517-519;
See also Public Utilities Comm'n of
Ohio v.
Page 338 U. S. 472
United Fuel Gas Co., 317 U. S. 456,
317 U. S. 467.
We adhere to those statements. But prior constitutional decisions,
not what we have since decided or would decide today, form the
measure of the gap which Congress intended to close by this Act.
Illinois Natural Gas Co. v. Central Illinois Public Service
Co., 314 U. S. 498,
314 U. S. 508,
and see Parker v. Motor Boat Sales, 314 U.
S. 244,
314 U. S.
250.
In a series of cases repeatedly called to the attention of the
House Committee, [
Footnote
12] this Court had declared that states could regulate
interstate gas only after it was reduced in pressure and entered a
local distribution system.
Public Utilities Comm'n v.
Landon, 249 U. S. 236,
249 U. S. 243;
Missouri v. Kansas Natural Gas Co., 265 U.
S. 298,
265 U. S. 310;
Public Utilities Comm'n v. Attleboro Steam & Electric
Co., 273 U. S. 83,
273 U. S. 89,
and see East Ohio Gas Co. v. Tax Comm'n, 283 U.
S. 465,
283 U. S.
470-472. [
Footnote
13] Under these decisions, state regulatory power could
Page 338 U. S. 473
not reach high pressure trunk lines and sales for resale. This
was the "gap" which Congress intended to close. It therefore acted
under the federal commerce power to regulate what these decisions
had indicated that the states could not. We have already held that,
in so doing, Congress subjected to federal regulation a company
transporting interstate gas, and selling it for resale, wholly
within one state.
Illinois Natural Gas Co. v. Central Illinois
Public Service Co., 314 U. S. 498.
[
Footnote 14] The only
respect in which
East Ohio differs from that company is
that it sells gas direct to consumers, rather than for resale. This
difference is immaterial. For, as we have already pointed out,
East Ohio comes directly within the express provision
granting power to the Commission to regulate "transportation of
natural gas in interstate commerce," just as the Illinois company
came directly within the express provision covering sale for
resale. And, in the light of the
Illinois Gas decision, we
cannot see how the "local distribution" proviso can be construed as
encompassing all of East Ohio's operations throughout the state.
That proviso cannot mean one thing for "transportation" and another
where "sale for resale" is involved.
Here, as elsewhere, once a company is properly found to be a
"natural gas company," no state can interfere with federal
regulation. That a state commission might also have some regulatory
power would not preclude
Page 338 U. S. 474
exercise of the Commission's function.
Connecticut Light
& Power Co. v. Federal Power Comm'n, 324 U.
S. 515,
324 U. S. 533;
Public Utilities Comm'n v. Attleboro Steam & Electric
Co., 273 U. S. 83,
273 U. S. 89-90.
Nor does the Act purport to abolish all overlapping. Section 5(b),
for example, provides that the Commission 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."
52 Stat. 824. Yet clearly the state agency establishing such a
rate would have equivalent authority.
We find no language in the Act indicating that Congress meant to
create an exception for every company transporting interstate gas
in only one state. Regardless of whether it might have been wiser
and more far-seeing statesmanship for Congress to have made such an
exception, we should not do so through the interpretative process.
There is nothing in the legislative history which authorizes us to
interpret away the plain congressional mandate.
II
A contention not passed on by the Court of Appeals, but urged
here by respondents, is that compliance with the Commission's
accounting and report orders would impose so great a burden on East
Ohio "as to make such orders transgress statutory and
constitutional limits." Our attention is not specifically referred
to anything in the record showing that the Commission has required
East Ohio to adopt any particular accounting method or make any
particular report not reasonably related to the Commission's
granted powers in this respect. [
Footnote 15] Nor did the
Page 338 U. S. 475
Commission fail to make proper findings to support its order.
All of the Commission requirements affirmatively appear to call for
the precise kind of accounting system, information, and reports
that Congress deemed relevant and necessary for the Commission to
have in performing its regulatory duties. The principles of law
governing such requirements were adequately set out by Mr. Justice
Cardozo, speaking for the Court, in
American Telephone &
Telegraph Co. v. United States, 299 U.
S. 232.
See also Northwestern Electric Co. v.
Federal Power Comm'n, 321 U. S. 119.
Measured by these criteria for judicial review of such orders, we
find no reason to reject the Commission's findings that the orders
here issued were necessary and proper as applied to East Ohio. And,
as to the cost of compliance, it is sufficient to say as the Court
said in the
American Telephone & Telegraph case,
supra, at
299 U. S. 247:
"The evidence does not show that the expense . . . will lay so
heavy a burden upon the companies as to overpass the bounds of
reason." [
Footnote 16]
Page 338 U. S. 476
The contention that the Commission's order violates the reserved
rights of the states under the Tenth Amendment is foreclosed by the
Court's holding in
Northwestern Electric Co. v. Federal Power
Comm'n, supra, at
321 U. S. 125.
Section 8(a) of the National Gas Act itself provides that
"nothing in this act shall relieve any such natural gas company
from keeping any accounts, memoranda, or records which such natural
gas company may be required to keep by or under authority of the
laws of any State."
The Commission's order is valid and should be enforced.
Reversed.
MR. JUSTICE DOUGLAS and MR. JUSTICE BURTON took no part in the
consideration or decision of this case.
[
Footnote 1]
52 Stat. 821, as amended by 56 Stat. 83, 15 U.S.C. § 717
et
seq.
[
Footnote 2]
The Commission instituted the proceedings on its own motion and
on complaint of the City of Cleveland, Ohio. Later, other Ohio
cities filed similar complaints.
See 1 F.P.C. 586; 4
F.P.C. 15; 4 F.P.C. 497.
[
Footnote 3]
See note 15
infra.
[
Footnote 4]
The Public Utilities Commission of Ohio, an intervenor, made
substantially the same contentions.
[
Footnote 5]
74 P.U.R.(N.S.), 256. Related orders and discussions appear in 4
F.P.C. 15, 497, 638, 28 P.U.R.(N.S.), 129;
East Ohio Gas Co. v.
Federal Power Comm'n, 115 F.2d 385.
[
Footnote 6]
84 U.S.App.D.C. 312, 316, 173 F.2d 429, 433.
[
Footnote 7]
See, e.g., Colorado-Wyoming Gas Co. v. Federal Power
Commission, 324 U. S. 626;
Illinois Natural Gas Co. v. Central Illinois Public Service
Co., 314 U. S. 498,
314 U. S.
503-504.
See also East Ohio Gas Co. v. Tax
Commission, 283 U. S. 465,
283 U. S. 470;
The Daniel
Ball, 10 Wall. 557.
[
Footnote 8]
Federal Power Commission, Twentieth Annual Report (1940), p. 78.
See Wheat, Administration by the Federal Power Commission
of the Certificate Provisions of the Natural Gas Act, 14
Geo.Wash.L.Rev.194, 197.
[
Footnote 9]
In the
Pipe Line Cases, 234 U.
S. 548,
234 U. S. 562,
this Court held that the Uncle Sam Oil Company was not engaged in
"transportation" of oil, within the statutory meaning of that word
in the Interstate Commerce Act, where it was "simply drawing oil
from its own wells across a state line to its own refinery, for its
own use, and that is all. . . ." This holding as to the meaning of
transportation in the Interstate Commerce Act has slight force, if
any, in determination of the word's meaning under this different
and far more comprehensive Act. Furthermore, East Ohio is not
merely moving gas for processing in its own plants. It buys and
transports it for sale; there is no further processing of any kind,
except for eventual reduction of pressure. This puts East Ohio's
transportation more nearly in the category of that which we held to
bring oil transportation within the coverage of the Interstate
Commerce Act.
Valvoline Oil Co. v. United States,
308 U. S. 141,
308 U. S. 145;
Champlin Refining Co. v. United States, 329 U. S.
29. In the latter case, transported oil was to be sold
in interstate commerce, while here the sale was to be made in
intrastate commerce. This difference, however, is no persuasive
reason why the special holding in the
Uncle Sam case
should be expanded to control our holding here.
[
Footnote 10]
In both
Public Utilities Comm'n v. Landon, 249 U.
S. 236,
249 U. S. 245,
and
Pennsylvania Gas Co. v. Public Service Comm'n,
252 U. S. 23,
252 U. S. 28,
this Court held that states could regulate retail sales of
interstate gas to local consumers. In the
Landon case, the
Court reasoned that state control of a local distributing company
was permissible because "interstate movement ended when the gas
passed into local mains." The
Pennsylvania Gas decision,
however, was based on a completely different line of reasoning. The
Court held that the gas continued in interstate commerce until it
reached the burner tips, but nevertheless permitted state
regulation because retail sales presented a problem of local,
rather than national concern. In
Missouri v. Kansas Natural Gas
Co., 265 U. S. 298,
265 U. S. 310, the
Court resolved these conflicting doctrines by readopting the
Landon rule. It limited the
Pennsylvania Gas
holding to its precise facts by interpreting that decision as
resting solely on the
Landon principle that states could
regulate charges for service to local consumers.
Public
Utilities Comm'n v. Attleboro Steam & Electric Co.,
273 U. S. 83,
273 U. S. 89,
reaffirmed this choice of doctrine, applying it to a company which,
like East Ohio, transmitted its product (electricity) wholly within
one state. In
East Ohio Gas Co. v. Tax Comm'n,
283 U. S. 465,
283 U. S.
470-472, the Court recognized that the doctrine of
Pennsylvania Gas extending interstate commerce to the
burner tips was in conflict with, and must yield to, the doctrine
of the
Landon and
Kansas Gas cases.
See
note 13 infra.
Thus, when the Natural Gas Act was passed, this Court's decisions
had already resulted in a sharp cleavage between local distribution
facilities and high pressure pipelines serving those
facilities.
[
Footnote 11]
The Report stated that the proviso was
"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."
H.R.Rep. No. 709, 75th Cong., 1st Sess., pp. 3-4. This could
only mean that the phrase "interstate commerce" was construed by
the Committee, as it had been by this Court, to exclude "local
distribution."
[
Footnote 12]
The record of the Committee hearings considering the proposed
bill is crowded with repeated references to the cases discussed in
note 10 supra; no
other cases received such emphasis. The General Solicitor for the
National Association of Railroad and Utilities Commissioners, for
example, explained that the
East Ohio case
"established very clearly that a State has jurisdiction to
regulate the business of distributing gas after it has been
imported, and the pressure has been stepped down to permit of local
distribution. It, however, leaves the State authorities still
subject to the rule announced in the
Kansas case. . .
."
Hearings before the House Subcommittee of the Committee on
Interstate and Foreign Commerce, 74th Cong., 2d Sess., 88. The
Solicitor of the Federal Power Commission pointed out in his brief
to the same committee that
"The States cannot control the wholesale rates extracted for
natural gas thus transported, nor may they regulate any other of
the phases of interstate transportation."
Id., 16. Amendments which would have specifically
exempted from federal regulation all companies operating wholly
within one state were proposed, but rejected.
[
Footnote 13]
See note 10
supra. The
East Ohio case cited above concerned
the question of whether the company was subject to state taxes. The
tax doctrines involved are irrelevant here. Undeniably relevant,
however, is the fact that Congress directly considered the doctrine
of interstate commerce enunciated in that case: that transportation
of out of state gas to the local system "is essentially national --
not local -- in character, and is interstate commerce within, as
well as without, that state."
283 U. S. 283 U.S.
465,
283 U. S.
470.
[
Footnote 14]
There are implications in the Court's opinion that, under
prevailing constitutional doctrine, a state might now, in the
absence of federal legislation, regulate such a company as Illinois
Gas or East Ohio.
See Illinois Natural Gas Co. v. Central
Illinois Public Service Co., 314 U. S. 498,
314 U. S. 504,
discussed in
Panhandle Eastern Pipe Line Co. v. Public Service
Comm'n, 332 U. S. 507,
332 U. S. 512.
But compare H. P. Hood & Sons v. DuMond, 336 U.
S. 525,
336 U. S.
545.
[
Footnote 15]
The orders here primarily rest on Commission regulations
pursuant to the following sections. Section 6(b) authorizes the
Commission to require a natural gas company to file
"an inventory of all or any part of its property and a statement
of the original cost thereof, and . . . keep the Commission
informed regarding the cost of all additions, betterments,
extensions, and new construction."
52 Stat. 824, 15 U.S.C. § 717e(b). Section 8(a) makes it the
duty of such companies to keep "such accounts, records of
cost-accounting procedures," etc., as the Commission may by rules
and regulations prescribe. Section 10(a) similarly requires "annual
and other periodic or special reports." Section 5(b) authorizes the
Commission to "investigate and determine the cost of the . . .
transportation of natural gas by a natural gas company" even where
the Commission has no authority to establish rates for the
transportation or sale of that gas. Section 16 vests the Commission
with broad powers to prescribe general orders, rules, and
regulations found "necessary or appropriate to carry out the
provisions of this act."
[
Footnote 16]
The Commission found that East Ohio's estimate placing the cost
of compliance at between $1,500,000 and $2,000,000 was
"not convincing, for our experience with other companies with
greater property investment indicates that this estimate is
considerably exaggerated."
74 P.U.R.(N.S.), 256.
MR. JUSTICE JACKSON, whom MR. JUSTICE FRANKFURTER joins,
dissenting.
If this were a case of applying an explicit policy of Congress
to one recalcitrant gas company, there would, of course, be no
dissent. But if it were such, we would not be likely to find the
Ohio and her Utility Commission, the National Association of
Railroad and Utility Commissioners, and public authorities of
several states, including some with notable records for protecting
the public interest, here helping the utility. This alliance of
state authorities against the Federal Power Commission suggests
that there must be more to this case than meets the eye.
The key to an understanding of the Federal Natural Gas Act is
its purpose to supplement, but not to supplant, state regulation.
Before passage of the Act, each state was able to regulate the
ultimate price of natural gas distributed to its consumers.
Pennsylvania Gas Co. v. Public Service Comm'n,
252 U. S. 23. This
Court has never denied any state that power. But, in doing so, they
were obliged to allow as operating costs what the distributing
Page 338 U. S. 477
company paid for the gas when brought into its system from out
of the state. This purchase price the state could not regulate,
often not even investigate, and the purchases frequently were from
affiliates, a fact which might cool the local company's normal zeal
to drive a good bargain for itself and its consumers. Hence, the
states appealed to Congress to set up machinery to fix the import
price of out of state gas. This was all that the states asked the
Federal Government to do, and it is everything that the Federal
Power Commission revealed any purpose to do while the legislation
was pending. Its Solicitor summarized the purposes before a
subcommittee of the House Committee on Interstate and Foreign
Commerce, as follows:
"The whole purpose of this bill is to bring under Federal
regulation the pipelines, and to leave to the State commissions
control of distributing companies and over their rates, whether
that gas moves in interstate commerce or not."
Hearings Before a Subcommittee of the House Committee on
Interstate and Foreign Commerce on H.R. 11662, 74th Cong., 2d Sess.
24. That is what the state authorities active in promoting the
legislation seem to have believed had been accomplished.
East Ohio is an all-Ohio company, deriving income solely from
distributing gas directly to Ohio consumers. It sells no gas for
resale. All of its assets are located, and all of its business is
transacted, in Ohio. Since 1911, the Ohio State Commission has
exercised regulatory powers over it which have included ratemaking,
authorizing acquisition of sale of property, approval of
capitalization and security issues, complete control of accounting
practices, and requiring detailed periodic reports. Except for
inability to fix the price at which gas should be delivered to the
company at the state line, Ohio is able to supervise and regulate
this utility completely and continuously.
The Federal Power Commission, as authorized by the Act, fixed
the state line price that East Ohio must pay
Page 338 U. S. 478
for its out of state supplies. But now it seeks to go beyond
this and superimpose some features of its regulation which conflict
with the regulation of the identical subject matter by the Ohio.
How much farther than the order here under review the Commission
will go in supplanting or duplicating state regulation is not clear
from its argument, and how far it can go is rendered unclear by the
Court's opinion, which expressly approves some overlapping but
leaves its bounds in carefully stated doubt. The anxiety which this
program stirs among other states is explained by its magnitude. The
Power Commission, in its petition here, notes forty-three pending
cases in which it takes this same position
vis-a-vis state
regulation.
It appears that the present particular issue arises because the
Commission has theories of accounting different from those the
state has seen fit to accept. The Federal Commission has ordered
East Ohio to change its entire accounting system for all of its
properties, at a very heavy cost. This requires it either to
conduct its accounting contrary to laws of Ohio and the orders of
the State Commission, or perhaps to keep two sets of books. This is
a real conflict in which experience shows state control will wither
away and leave the federal rule in possession of the field.
This Court can sustain such overlapping and overriding of the
state's authority only by repudiating its own recent statements.
After reviewing the history of the Natural Gas Act, we have said
that
"Congress meant to create a comprehensive scheme of regulation
which would be complementary in its operation to that of the
states, without any confusion of functions."
Public Utilities Comm'n v. United Fuel Gas Co.,
317 U. S. 456,
317 U. S. 467.
In a later case, quoting H.R.Rep. No. 709, 75th Cong., 1st Sess.,
we said that
"[T]he bill was designed to take 'no authority from State
commissions,' and was 'so drawn as
Page 338 U. S. 479
to complement and in no manner usurp State regulatory
authority.'"
Federal Power Comm'n v. Hope Natural Gas Co.,
320 U. S. 591,
320 U. S. 610.
Quoting the same House Report, we thereafter pointed out that
"the 'basic purpose' of Congress in passing the Natural Gas Act
was 'to occupy this field in which the Supreme Court has held that
the States may not act.'"
Interstate Natural Gas Co. v. Federal Power Comm'n,
331 U. S. 682,
331 U. S. 690.
And, only last year, we observed that,
"The Natural Gas Act was designed to supplement state power and
to produce a harmonious and comprehensive regulation of the
industry. Neither state nor federal regulatory body was to encroach
upon the jurisdiction of the other."
Federal Power Comm'n v. Panhandle Eastern Pipe Line
Co., 337 U. S. 498,
337 U. S.
513.
What defines the point beyond which the provisions of the Act
shall not apply? The Court suggests that there is an inherent
limitation on the affirmative grant of power which would render
surplusage the clause in § 1(b) denying application of the Act to
"the local distribution of natural gas or to the facilities used
for such distribution." Or it may be this exclusionary clause
itself. At any rate, the Court finds the dividing line of
jurisdiction to be drawn by physical characteristics of the
transmission lines. It seizes upon the point where the high
pressure at which gas is transmitted any substantial distance is
reduced to the low pressure at which it must be served to
customers' burners through the community supply lines as the outer
limit of the "local" area reserved to the states.
Recognizing the purpose of the Federal Natural Gas Act of June
21, 1938, to regulate only that which was unregulated and
unregulatable by the states, the Court assumes that decisions prior
to its passage, "not what we have since decided or would decide
today," fix the states' power for the purposes of measuring that of
the Commission.
Page 338 U. S. 480
The Court has heretofore followed the principle that Congress
does not intend to freeze the impact of its legislation within
current judicial decisions in the absence of evidence which makes
such intention unmistakable.
United States v. South-Eastern
Underwriters Assn., 322 U. S. 533. But
today it makes no effort to look for evidence of such an intention,
and, had it searched, it would not have found it.
Cf. Helvering
v. Griffiths, 318 U. S. 371;
Parker v. Motor Boat Sales, 314 U.
S. 244.
Today's anomalous result, whereby the Commission is given
regulatory power over the intrastate distribution facilities of a
gas company over whose sales it admittedly has no jurisdiction, is
based upon the premise that paramount in Congress' mind in dealing
with cases prior to passage of the Act, was not the holdings of
applicable cases relating to regulation, but the peculiarly
mechanistic formula employed principally in 1931 in
East Ohio
Gas Co. v. Tax Comm'n, 283 U. S. 465,
[
Footnote 2/1] as a means of
holding that the Ohio could levy an excise tax based on the entire
gross receipts from sales to local consumers by an interstate gas
company.
I find no convincing indication, either in the language of the
Act or in its legislative history, that Congress intended that we
should be forever bound, in construing this legislation, either by
the then current decisions as to limitations of the Commerce Clause
on state power,
cf. United States v. South-Eastern Underwriters
Assn., supra, or by the then current criteria of what
separated local from nonlocal facilities. The crucial question is
not whether this Court in 1931 would have held a given
Page 338 U. S. 481
factual situation without the area of local distribution and
beyond the reach of state regulation, but whether this Court today
can say that the federal power can be exerted because the state
power cannot be exerted. So long as we pay even lip service to
Congress' intention to leave to the states that which they can
regulate, we cannot satisfactorily beg this question.
But even if the Court is to shift to the doctrine that Congress
casts its Acts forever in the mold made by prior decisions of this
Court, the pressure reduction station now relied upon to limit
"local" had lost its standing even in tax cases, and never was
accepted in regulation cases. If Congress was interested in tax
case criteria when it passed the Natural Gas Act, it must have
known of this Court's disdainful disregard of pressure changes in
favor of emphasis on the difference between wholesale and retail
distribution less than half a year after the
East Ohio tax
decision.
State Tax Comm'n v. Interstate Natural Gas Co.,
284 U. S. 41.
[
Footnote 2/2]
And yet, although the Committee Reports and the records of
congressional debates on the Natural Gas Act may be scanned in vain
for any mention of this pressure reduction
Page 338 U. S. 482
point, we are now asked to believe that Congress fixed it as the
point where state control should end and federal control should
begin. With this approach, today's decision confines the states'
regulatory power to the service area, bounded by the low-pressure
transmission system, which means practically within the city gates.
By its emphasis on this pressure change, the Court finds a plain
congressional grant of Commission jurisdiction over high pressure
pipelines such as those of East Ohio. However, this pressure factor
is one which we found immaterial in
Interstate Natural Gas Co.
v. Federal Power Comm'n, supra, at
331 U. S. 689,
where, with rare unanimity, we put our emphasis upon the fact of
sale for resale in interstate commerce. But today it is the
difference between retail and wholesale operations which is termed
immaterial, so long as the factor of high pressure pipelines is
present.
This shift in emphasis rests upon inferences drawn from the
legislative history of the Natural Gas Act which are wholly
inconsistent with those drawn in our prior decisions examining the
subject. Heretofore, we have been careful consistently to observe
that Congress did not attempt to occupy the entire field within the
limits of its constitutional power, and, until today, we have
insisted that, in extending federal regulation, Congress "was
meticulous to take in only territory which this Court had held the
states could not reach."
Panhandle Eastern Pipe Line Co. v.
Comm'n, 332 U. S. 507,
332 U. S. 519.
We said only two years ago in that case that,
"[B]y 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; the latter, service
interstate to local distributing companies for resale,
Page 338 U. S. 483
as held in
Missouri v. Kansas Natural Gas Co.,
265 U. S.
298, reinforced by
Public Utilities Comm'n v.
Attleboro Steam & Electric Co., 273 U. S.
83."
And we went on to say that the purpose of the legislation was to
make state regulation effective "by adding the weight of federal
regulation to supplement and reinforce it in the gap created by the
prior decisions."
Id. at
332 U. S. 514,
332 U. S. 517.
And see Interstate Natural Gas Co. v. Federal Power
Comm'n, 331 U. S. 682,
331 U. S. 689;
also, Federal Power Comm'n v. Hope Natural Gas Co.,
320 U. S. 591,
320 U. S. 609,
quoting from
Illinois Natural Gas Co. v. Central Illinois
Public Service Co., 314 U. S. 498,
314 U. S. 506.
We could hardly have said more clearly that the "gap" was in the
wholesale realm of the natural gas industry in interstate
commerce.
The Court's opinion professes to adhere to these statements
relating to the gap Congress intended to close. But it first widens
the gap, squarely upon the premise that, under decisions of this
Court called to Congress' attention prior to passage of the Act,
the state regulatory power could not reach transmission lines for
interstate gas outside the point of reduction in pressure.
Actually, no decision could have been called to the attention of
Congress, and none is or can be cited today, in which this Court
held that any of the intrastate transmission lines of any retail
gas, electric or similar company, within or without the pressure
reduction point, were beyond the state regulatory authority. Nor
was this question even at issue in any case cited by the Court in
support of its premise. That is not to say that the question was
not considered, however. Quite to the contrary, less than two
months before passage of the Natural Gas Act, this Court, through
the pen of Mr. Justice Hughes, in a case not cited by the Court,
declared that such transmission lines were properly within the
sphere of state ratemaking powers.
Lone Star
Gas Co. v. Texas, 304
Page 338 U. S. 484
U.S. 224. [
Footnote 2/3] And so,
if Congress were consulting the decisions of this Court to define
the gap in state power which it must fill with the Commission's
function, it found the latest, and all but unanimous, one -- to
declare that no gap such as the Court perceives today was then
existent.
Although the scope of the Natural Gas Act was not limited to
sales of natural gas in interstate commerce for resale, it must be
recognized that, if any one thing is clear from the legislative
history of this Act, it is that Congress' paramount concern was to
establish regulation of such prices. [
Footnote 2/4] And it must likewise be recognized that,
whatever
Page 338 U. S. 485
of our old doctrines may have been frozen into the Act, could
not include the point of pressure reduction and entrance into
municipal lines as the measure of state regulatory authority, for
no such doctrine can be found in our cases.
Thus, it is apparent that, in selecting the point to mark either
the inherent limitation in the Act's affirmative grant of power to
the Commission or the corollary limit imposed by the clause
excluding facilities used in local distribution, the Court has
resorted to criteria neither
Page 338 U. S. 486
supportable by this Court's decisions prior to the Act nor even
claimed to be consistent with its most recent doctrines.
But if the pressure reduction point cannot be resurrected from
the
East Ohio tax case to bound the facilities used in the
local distribution of natural gas in interstate commerce, what
criteria can we employ? It is not as though a simple,
unsophisticated answer were not available. It seems to me that the
obvious answer is that intrastate transmission lines of a retail
gas company, devoted exclusively to serving communities within the
state, are facilities used in the local distribution of natural gas
and are accordingly excepted from application of the Act. For it
must not be forgotten that, if justification for today's decision
cannot be found in § 1(b) of the Act, it cannot be established by
resort to the language of those sections defining the Commission's
powers. For § 1(b) is jurisdictional. It sets forth the areas to
which the provisions of the Act shall and shall not apply. Its
"but" clause was Congress' assurance to the state bodies sponsoring
the legislation that federal control would not extend to the area
within their authority.
Cf. Connecticut Light & Power Co.
v. Federal Power Comm'n, 324 U. S. 515,
324 U. S.
527.
This simple solution squares not only with modern standards, but
also with the approach, if it is to be adopted, that Congress, in
passing this Act, froze into law current judicial decisions. It
keeps faith with the states. It is decidedly consistent with our
recent declaration, under the almost identical words of a similar
Act, that limitation of local facilities was not to be found in the
East Ohio tax formula, and that even the transmission
lines of a statewide system supplying electric power to consumers
in over a hundred communities are "facilities used in local
distribution."
Connecticut Light & Power Co. v. Federal
Power Comm'n, supra.
Page 338 U. S. 486
Of course, this solution does not render meaningless the
"transportation of natural gas in interstate commerce" to which the
provisions of the Act apply. For instance, it would logically
enough give to the Federal Power Commission, under the above
"transportation clause," exclusive jurisdiction over the main
transmission lines of a retail gas company which ran through Ohio
and on into New York; but it would leave to Ohio exclusive
jurisdiction over lateral lines branching out from the main trunk
in Ohio and, whether one or one hundred miles long, devoted
exclusively to delivering gas to the burner tips in Ohio
communities. Similarly, under the hypothesis constructed in the
Court's opinion, wherein East Ohio is pictured as having its own
transmission lines extending all the way from Texas, it would give
exclusively to the Power Commission jurisdiction over those lines
beyond the Ohio border as well as over those within or without the
state not devoted exclusively to serving Ohio consumers at retail.
Again, it would, quite obviously within the words of the Act, give
exclusively to the Power Commission jurisdiction over companies
which might act in the nature of common carriers transporting gas
in interstate commerce for hire. In short, it would give to the
transportation clause a meaning which, contrary to today's opinion,
does not render surplusage the "sale in interstate commerce of
natural gas for resale" to which the provisions also apply.
[
Footnote 2/5]
Page 338 U. S. 488
What the Power Commission asks the Court to do today is not to
fill a gap in the state's power to regulate, for there is none, but
to create a gap in order to make room for federal power.
I can well understand the zeal of the Federal Power Commission
to expand its control over the natural gas industry. It sprawls
over many states, and each system must be physically integrated
from the depths of the wells to the consumer's burner tips. Its
regulation cannot be uniform if the Federal Commission controls
only a middle segment, with production on one end and distribution
on the other committed to the control of different states. But that
was as far as Congress was willing to supersede state authority. It
left the peculiar problems affecting production to the producing
states, it left the ultimate protection of consumers to the
consuming states, and it left the Federal Power Commission in the
middle to fix the rates for gas moving between the two. This
obviously subdivides regulation of what has to operate as a unitary
enterprise, but that is often the consequence of our federal
system. Whatever we may think would be wise policy in this field,
the Act which Congress passed places limitations upon the Power
Commission which may chafe, but which neither we nor the Commission
are free to override. If the Commission had foreshadowed its
present course, I do not suppose the Act would have passed, for it
certainly would have evoked resistance of the state regulatory
agencies, instead of their support.
Congress may well have believed that diversity of
experimentation in the field of regulation has values which
centralization and uniformity destroy. As Mr. Justice Brandeis
said,
"It is one of the happy incidents of the federal system that a
single courageous state may, if its citizens choose, serve as a
laboratory, and try novel social and economic experiments without
risk to the rest of the country."
New State Ice Co.
v.
Page 338 U. S. 489
Liebmann, 285 U. S. 262,
285 U. S. 311.
Long before the Federal Government could be stirred to regulate
utilities, courageous states took the initiative, and almost the
whole body of utility practice has resulted from their
experiences.
We must not forget that regulatory measures are temporary
expedients, not eternal verities -- if, indeed, they are verities
at all. Certainly one of the matters on which the states might well
be indulged -- the right to an opinion of their own -- is as to the
accounting methods of a utility whose whole property and business
being accounted for is within the state. Out of their diversity of
practice and experience emerge pragmatic tests. What the Federal
Power Commission seeks to require of this Ohio gas company, for
example, is to revert by accounting methods to emphasis on original
cost, a basis which William Jennings Bryan, for an earlier
generation of progressives, eloquently urged this Court to reject
in the field of railroad ratemaking.
Smyth v. Ames,
169 U. S. 466.
See Mr. Bryan's argument, 169 U.S. at 489. That is a basis
of which, last month, we said in another connection, "Original cost
is well termed the
false standard of the past' where, as here,
present market value in no way reflects that cost." United
States v. Toronto Navigation Co., 338 U.
S. 396, 338 U. S. 403.
It must be remembered that closer than any federal agency to those
they regulate and to their customers are the state authorities,
whose mechanisms are less cumbersome, and whose principles can much
more quickly be adjusted to the changing times.
We should not utilize the centralizing powers of the federal
judiciary to destroy diversities between states which Congress has
been scrupulous to protect. If now and then some state does not
regulate its utilities according to the federal standard, it may be
a small price to pay for preserving the state initiative which gave
us utilities regulation far in advance of federal initiative.
Page 338 U. S. 490
I think that observance of good faith with the states requires
that we interpret this Act as it was represented at the time they
urged its enactment, as its terms read, and as we have, until
today, declared it,
viz., to supplement, but not to
supplant, state regulation. What amounts to an entrapment of the
state agencies that supported this Act under the representation
that it would not deprive them of powers, but would only make their
powers effective, will probably not make it easier to get needed
regulatory legislation in the future.
[
Footnote 2/1]
In the
East Ohio tax case, the reduction of pressure
and expansion of volume of the gas at the point of entrance into
local supply mains was compared to the breaking of an original
package after shipment in interstate commerce, so that its contents
could be treated, prepared for sale, and sold at retail.
[
Footnote 2/2]
The question before the Court concerned the power of the
Mississippi to tax wholesale operations of an interstate pipeline
company. Curtly dismissing the State's arguments resting on the
fact that the gas pressure had been reduced before the sale for
resale, the Court held, as succinctly stated in the headnote:
"The selling of gas wholesale to local, independent distributors
from a supply passing into and through the State in interstate
commerce does not become a local affair, and subject to a local
privilege tax, merely because the vendor, to deliver the quantities
sold, uses a thermometer and a meter and reduces the pressure."
In its argument to the Court, 284 U.S. at 42, the state had
presented the analogy of pressure reduction to the breaking of an
original package shipped in interstate commerce,
cf.
338
U.S. 464fn2/1|>note 1,
supra. State Tax Comm'n
v. Interstate Natural Gas Co., 284 U. S.
41.
[
Footnote 2/3]
In the
Lone Star case, this Court examined the validity
of an order of a Texas commission fixing the rate to be charged by
the Lone Star company for gas sold to local distributing companies
at the gates of numerous Texas communities. Most of the Lone Star
gas was piped from fields in the Texas Panhandle, but across a
segment of Oklahoma. A small amount was produced or purchased in
Oklahoma, piped into Texas, treated, and added to the local supply.
Thus, commingled beyond separate recognition, both types of gas
were conducted through high pressure lines and sold to the various
retail distributing companies. Because of the interrelated
corporate structure of Lone Star and these distributing companies,
the Court treated them as one operating unit, and approved the
state's exercise of its ratemaking power based upon valuation of
the entire integrated system.
[
Footnote 2/4]
H.R.Rep. No.709, 75th Cong., 1st Sess. 1-2, adopted without
change in S.Rep. No.1162, 75th Cong., 1st Sess. 1-2, said of the
proposed bill which became the Natural Gas Act:
". . . 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. 23
(1920). 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 (1924), and
Public Utilities Commission v. Attleboro Steam & Electric
Co., 273 U. S. 83 (1927)). 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."
Congressional debates on the bill were similarly concerned with
those aspects of the natural gas industry over which no state
regulatory control existed. These debates were led, in the House,
by Chairman Lea of the Committee on Interstate and Foreign
Commerce, and, in the Senate, by Chairman Wheeler of the Committee
on Interstate Commerce. In his explanatory statement, the former
declared,
"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."
81 Cong.Rec. 6721. And he added later, "The object of this bill
is to supply regulation in those cases where the State commission
has no power to regulate."
Ibid. Committee member Halleck
assured the House that "this bill seeks only to reach those sales
where the sale is for resale to the ultimate consumer."
Id., 6723. And, in the Senate, Chairman Wheeler
declared:
"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 gas."
81 Cong.Rec. 9313.
Neither the East Ohio case nor its mechanistic formula was
emphasized or even adverted to in the Committee Reports or in the
congressional debates.
[
Footnote 2/5]
The suggested construction also comports with the conclusions of
the House and Senate Committee reports, H.R.Rep. No.709, 75th
Cong., 1st Sess., 3, and S.Rep. No.1162, 75th Cong., 1st Sess.
3:
"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."