When United Gas Pipe Line Co. (United), a jurisdictional
pipeline, experienced temporary shortages of natural gas supply
forcing it to reduce deliveries to its contract customers, the
Federal Power Commission (FPC) asserted its jurisdiction to effect
a reasonable curtailment plan covering deliveries to both
direct-sales customers and purchasers for resale. While curtailment
proceedings were pending before the FPC, Louisiana Power &
Light Co. (LP&L), a direct-sales customer of United, brought
this action in the District Court against United, seeking to enjoin
curtailment of deliveries to LP&L's plants pursuant to any
FPC-promulgated plans, including any under FPC Order No. 431.
LP&L also sought to enjoin United from seeking FPC
certification of United's previously intrastate deliveries through
its Green System. The FPC intervened, asserting that both matters
were pending before it and any decision by the District Court would
therefore invade its primary jurisdiction. The District Court
dismissed the action, holding that the FPC had jurisdiction of both
proceedings and that LP&L had to exhaust its administrative
remedies. The Court of Appeals reversed, holding that the FPC
lacked jurisdiction to curtail deliveries to direct-sales
customers, since Section 1(b) of the Natural Gas Act makes the Act
applicable only to sales for resale. The Court of Appeals also
reversed the District Court's decision on the Green System, holding
that the system was wholly intrastate.
Held:
1. The FPC has power to regulate curtailment of direct
interstate sales of natural gas under the head of its
"transportation" jurisdiction in § 1(b), and the prohibition in the
proviso clause of that provision withheld from FPC only
rate-setting authority with respect to such sales. Pp.
406 U. S.
631-647.
2. The FPC had primary jurisdiction to determine whether the
Green System was subject to its authority, and the Court of
Appeals
Page 406 U. S. 622
erred in deciding that question.
See Myers v. Bethlehem
Shipbuilding Corp., 303 U. S. 41. Pp.
406 U. S.
647-648.
456 F.2d 326, revered.
BRENNAN, J., delivered the opinion of the Court, in which all
members joined except STEWART, J., who took no part in the decision
of the cases, and POWELL, J., who took no part in the consideration
or decision of the cases.
Page 406 U. S. 623
MR. JUSTICE BRENNAN delivered the opinion of the Court.
In April, 1971, the Federal Power Commission (FPC) promulgated
its Order No. 431 requiring every jurisdictional pipeline to report
to the FPC whether curtailment of its deliveries to customers would
be necessary because of inadequate supply of natural gas. A
pipeline anticipating the necessity for curtailment was required to
file a revised tariff to control deliveries to all customers --
industrial "direct sales" customers, purchasing gas for their own
consumption, and "resale" customers, purchasing gas for
distribution to ultimate consumers.
The principal question here is whether the proviso to § 1(b) of
the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717, prohibits the
FPC from applying its Order No. 431 to curtail direct-sales
deliveries in times of natural gas shortage. Section 1(b)
provides:
"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
Page 406 U. S. 624
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."
(Emphasis supplied.)
A subsidiary question presented is whether the doctrine of
primary jurisdiction obliged the federal courts in this case to
defer to the FPC for an initial determination of FPC jurisdiction
to certificate a particular pipeline delivery when a certification
proceeding to determine that question was pending before the
Commission.
The Court of Appeals for the Fifth Circuit held that the proviso
of § 1(b) prohibited application of FPC curtailment regulations to
direct sales deliveries, and held, further, that neither that court
nor the District Court was obliged to defer to the FPC's pending
certification proceeding. 456 F.2d 326 (CA5 1972). We granted
certiorari, 405 U.S. 973 (1972). We reverse.
I
Respondent Louisiana Power & Light Co. (LP&L) generates
electricity at Sterlington-Electric Generating Station in Ouachita
Parish, Louisiana, and at Nine-Mile Point Generating Station in
Jefferson Parish, Louisiana. The natural gas burned under
LP&L's boilers at both stations is purchased from United Gas
Pipe Line Co. (United), a petitioner in No. 71-1040, under
direct-sales contracts of long standing. The sales to Sterlington
Station are sales of interstate gas, initially certificated by the
FPC. Sales to Nine-Mile Point Station had been wholly intrastate
gas delivered from United's intrastate "Green System" when, in
1970, United diverted 2.6% of the gas from its interstate "Black
System" into the intrastate "Green System," after which United
sought FPC certification of the "Green System." In 1970 also,
United, from concern that its gas supply
Page 406 U. S. 625
during the 1970-1971 heating season would fall short of demand,
sought a declaratory order from the FPC to approve a proposed
program of curtailment of natural gas deliveries to both its direct
and resale customers. This proceeding culminated in agreement among
affected customers under which FPC allowed United to carry out its
program for the 1970-1971 winter.
When, however, United made a supplemental filing in February,
1971, for a proposed curtailment program for the 1971 summer
season, LP&L, in March, 1971, filed this diversity action in
the District Court for the Western District of Louisiana, alleging
that the program was a breach of its contracts with United and
asking injunctive relief against its implementation. LP&L also
asked for a judgment declaring that the "Green System" was an
intrastate system, deliveries from which did not require FPC
certification. The FPC and United sought dismissal of the action on
the ground that a prior decision by the District Court would be
destructive of the FPC's primary jurisdiction, since the FPC was,
in fact, asserting its jurisdiction over both issues at that time
and was promulgating its Order No. 431, and United, in response to
Order No. 431, was filing its third curtailment plan.
In opposition to the motions to dismiss in the District Court,
LP&L argued that the FPC was without jurisdiction to authorize
or approve curtailment programs affecting direct-sales deliveries,
and was also without jurisdiction to curtail deliveries to
Nine-Mile Point Station because they were local, and not
interstate, deliveries. On June 30, 1971, the District Court
dismissed the action, holding that the FPC had jurisdiction of both
curtailment and certification proceedings and that LP&L had to
exhaust its administrative remedies in both,
332 F.
Supp. 692 (1971). The Court of Appeals decision reversed this
dismissal.
Page 406 U. S. 626
II
United is a "jurisdictional" pipeline [
Footnote 1] purchasing gas from producers in Texas and
Louisiana and supplying wholesalers, direct-sales customers, and
other pipelines. United supplies ultimate consumers throughout the
eastern half of the United States from Texas to Massachusetts with
a peak-day commitment in the winter heating months totaling about
6,000,000 thousand cubic feet (Mcf).
In 1970, as part of a pattern of temporary and chronic natural
gas shortages throughout the Nation, [
Footnote 2] United found itself unable to meet all of its
contract commitments during peak demand periods. [
Footnote 3] Indeed, on
Page 406 U. S. 627
days of greatest use, United expected to fall short by as much
as 20% or more. [
Footnote 4] In
October, 1970, United first promulgated a proposed delivery
curtailment plan and sought a declaratory order from the FPC that
the plan was consistent with United's obligations under its tariff
and direct-sales contracts. [
Footnote 5] Many of United's contracts with its customers
made some provision for curtailment in times of temporary shortage,
but these terms were complex, and were not identical in all
contracts or in United's tariff filings with the Commission.
[
Footnote 6] United's proposed
curtailment plan established a priority system of three groups,
curtailed on the basis of end use. These three groups were, in
order of the lowest priority and curtailed first, gas used for
industrial purposes, including gas to generate electricity for
industrial purposes; gas used to generate electricity consumed by
domestic consumers; and gas used by domestic consumers.
See
United Gas Pipe Line Co., F.P.C. Op. No. 606, Oct. 5, 1971.
The plan made no distinction between direct-sales customers and
resale customers.
Page 406 U. S. 628
This plan was opposed by LP&L and others, primarily on the
ground that the FPC had no jurisdiction to curtail deliveries under
direct-sales contracts. While preserving their objections, all but
one of United's customers [
Footnote
7] agreed to a modified plan to go into effect for the
1970-1971 winter season while the proceedings continued.
During this same season, many other pipelines reported serious
shortages and applied to the FPC for assistance in effecting
curtailment plans. In response, the FPC promulgated several
emergency provisions for temporary measures to avoid major
disruptions of power supplies. Orders Nos. 402, 35 Fed.Reg. 7511,
and 402A, 35 Fed.Reg. 8927, authorized short-term purchases by
pipelines facing shortages from other jurisdictional pipelines to
ensure that storage fields were filled. Order No. 418, 35
Fed.Reg.19173, authorized similar emergency purchases from
producers without following usual procedures.
It was because these measures were found to be insufficient that
the FPC promulgated Order No. 431, 36 Fed.Reg. 7505. The Order
recommended that, in filing the required tariff revisions,
"[c]onsideration should be given to the curtailment of volumes
equivalent to all interruptible sales and to the curtailment of
large boiler fuel sales where alternate fuels are available."
Finally, Order No. 431 provided:
"Jurisdictional pipelines have the responsibility in the first
instance to adopt a curtailment program by filing appropriate
tariffs. Such tariffs, if approved by the Commission, will control
in all respects notwithstanding inconsistent provisions in sales
contracts, jurisdictional and nonjurisdictional, entered into prior
to the date of the approval of the tariff. "
Page 406 U. S. 629
United's revised tariff program filed in compliance with this
order immediately became subject to the pending hearing for a
declaratory order. On October 5, 1971, the FPC announced its
interim decision, Op. No. 606, finding jurisdiction to effect a
curtailment program for all customers, revising United's latest
filing slightly, and remanding other issues in the plan to a
hearing examiner. On November 2, 1971, United's plan, as modified,
went into full effect. The appeal of LP&L and others from the
FPC decision, Op. No. 606, is pending in the Court of Appeals for
the Fifth Circuit. [
Footnote
8]
Also, in October, 1970, based on the introduction of the
interstate gas from its Black System, United sought certification
under § 7(c) [
Footnote 9] for
the continued operation of the portion of its pipeline facilities
in Louisiana (the Green System) used to supply LP&L's Nine-Mile
Point generating station. LP&L opposed the application,
alleging that the pipeline was constructed and operated to be
wholly intrastate, and that United's "illegal" introduction of a
very small quantity of interstate gas did not cause the whole
system to come under Commission jurisdiction.
On February 9, 1972, the Commission found in Op. No. 610 that
the Green System was within its jurisdiction, and thus required
certification; it remanded the
Page 406 U. S. 630
proceedings to a trial examiner to determine if the certificate
should be granted under the "public convenience and necessity"
standard of § 7.
The Court of Appeals' reversal of the District Court [
Footnote 10] on the curtailment
issue rested on its view that, under the Natural Gas Act,
". . . FPC has no form of continuing certificate jurisdiction
over direct sales to customers of interstate pipeline companies. It
has the initial right to issue or veto a certificate of public
convenience and necessity, and it must give its approval to the
abandonment of the use of the certificated facilities, but, between
the two functions, the express exemption [in the proviso of § 1(b)]
of regulatory power over such consumptive sales bars agency
intervention."
456 F.2d at 338.
The Court of Appeals' holding that United's injection of
interstate gas from its Black System into the theretofore
intrastate Green System did not establish FPC jurisdiction to
certificate the Green System, rested on its finding that the record
showed that
"the flow of gas from the Black system into the Green system in
the case at bar is occasional and irregular, as well as minimal.
The Green system, as an entire and separate unit, is physically
located and functions entirely in Louisiana. Therefore, the
undisputed facts show that the channel of constant flow is an
intrastate, and not an interstate, channel. The regulation of the
Green system is substantially and essentially a localized matter
committed to Louisiana's jurisdiction."
456 F.2d at 339-340.
Page 406 U. S. 631
III
The Natural Gas Act of 1938 granted FPC broad powers "to protect
consumers against exploitation at the hands of natural gas
companies."
FPC v. Hope Natural Gas Co., 320 U.
S. 591,
320 U. S. 610
(1944).
See FPC v. Transcontinental Gas Pipe Line Corp.,
365 U. S. 1,
365 U. S. 19
(1961);
Sunray Mid-Continent Oil Co. v. FPC, 364 U.
S. 137,
364 U. S. 147
(1960). To that end, Congress "meant to create a comprehensive and
effective regulatory scheme,"
Panhandle Eastern Pipe Line Co.
v. Public Service Comm'n, 332 U. S. 507,
332 U. S. 520
(1947), of dual state and federal authority. Although federal
jurisdiction was not to be exclusive, FPC regulation was to be
broadly complementary to that reserved to the States, so that there
would be no "gaps" for private interests to subvert the public
welfare. This congressional blueprint has guided judicial
interpretation of the broad language defining FPC jurisdiction,
and
"when a dispute arises over whether a given transaction is
within the scope of federal or state regulatory authority, we are
not inclined to approach the problem negatively, thus raising the
possibility that a 'no man's land' will be created.
Compare
Guss v. Utah Labor Board, 353 U. S. 1. That is to say, in a
borderline case where congressional authority is not explicit, we
must ask whether state authority can practicably regulate a given
area, and, if we find that it cannot, then we are impelled to
decide that federal authority governs."
FPC v. Transcontinental Gas Pipe Line Corp., supra, at
365 U. S.
19-20.
This litigation poses the question whether FPC has authority to
effect orderly curtailment plans involving both direct sales and
sales for resale. LP&L insists that
Page 406 U. S. 632
the FPC has no power to include direct sales in these plans.
Transcontinental counsels inquiry into the necessary
consequences of that contention in terms of the scope of federal
and state regulatory authority in the premises.
Thirty-seven percent of United's total sales in 1970 were direct
industrial sales. Under LP&L's argument, this volume would be
wholly exempt from any curtailment plan approved by the FPC, and
thus United's resale customers would be forced to accept the entire
burden of sharply reduced volumes while direct-sales customers
received full contract service. The ultimate consumers thus
affected include schools, hospitals, and homes completely dependent
on a continued natural gas supply for heating and other domestic
uses. These resale consumers could be curtailed by as much as
560,000 Mcf on cold days without dire consequences, but burdening
them with the full curtailment volume would deprive them of up to
1,500,000 Mcf.
From a practical point of view, LP&L's position may thus
produce a seriously inequitable system of gas distribution. Many
direct industrial users of gas require only "interruptible
services," which by the terms of their contracts are recognized to
be of such minimal importance to the user that, upon the happening
of certain events, the supply can be shut off on little or no
notice. Nevertheless, the need for curtailment may not be
sufficient to trigger these provisions of the contract and
interruptible service customers may be able to demand full contract
gas while resale consumers are being drastically curtailed. Many
other direct industrial sales customers have alternative means
available at little or no additional cost, yet, under LP&L's
contention, will be able to demand their contract volumes while
homes, hospitals, and schools suffer from lack of adequate
service.
Can state authority practicably regulate in this area to prevent
this inequity and hardship? Insofar as state
Page 406 U. S. 633
plans purport to curtail deliveries of interstate gas,
Pennsylvania v. West Virginia, 262 U.
S. 553 (1923), is authority that such plans, when they
operate to withdraw a large volume of gas from an established
interstate current whereby it is supplied to customers in other
States, would constitute a prohibited interference with interstate
commerce. But even to the extent the States may constitutionally
promulgate curtailment plans, the inevitable result would be varied
regulatory programs of state courts and agencies, interpreting a
countless number of different contracts and applying a variety of
state agency rules. The conflicting results would necessarily
produce allocations determined simply by the ability of each
customer to pump its desired volume from a pipeline. Moreover, in
some States, Louisiana for example, the state regulatory agency is
forbidden to regulate direct-sales contracts. [
Footnote 11] Besides, a state agency empowered
to regulate these contracts would be obliged to regulate in the
State, not the national, interest. [
Footnote 12]
Cf. Pennsylvania v. West Virginia,
supra. The unavoidable conflict between producing
Page 406 U. S. 634
States and consuming States will create contradictory
regulations that cannot possibly be equitably resolved by the
courts. With these problems in mind, the desirability
Page 406 U. S. 635
of uniform federal regulation is abundantly clear. Nevertheless,
as the Court of Appeals emphasized, 456 F.2d at 335, a need for
federal regulation
Page 406 U. S. 636
does not establish FPC jurisdiction that Congress has not
granted. We turn, then, to analysis of the statute to determine
whether Congress withheld, as LP&L argues, authority from the
FPC to apply its curtailment regulations to direct sales.
IV
In § 1(b) of the Act,
"[t]hree 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
Comm'n, 332 U.S. at
332 U. S. 516.
Each of these is an independent grant of jurisdiction and, though
the Act's application to "sales" is limited to sales of interstate
gas for resale, the Act applies to interstate "transportation"
regardless of whether the gas transported is ultimately sold retail
or wholesale.
FPC v. East Ohio Gas Co., 338 U.
S. 464,
338 U. S. 468
(1950). [
Footnote 13]
Page 406 U. S. 637
LP&L argues that the proviso in § 1(b) creates a complete
exemption of direct sales from curtailment regulations. [
Footnote 14] The answer is that the
prohibition of
Page 406 U. S. 638
the proviso of § 1(b) withheld from FPC only rate-setting
authority with respect to direct sales. Curtailment regulations are
not rate-setting regulations, but regulations of the
"transportation" of natural gas, and thus within FPC jurisdiction
under the opening sentence of § 1(b) that "[t]he provisions of this
Act shall apply to the transportation of natural gas in interstate
commerce. . ." The Court of Appeals reflected that construction on
the ground that under it the "transportation" jurisdiction would
swallow up the proviso's exemption for direct sales. We
disagree.
The major impetus for the congressional grant of sales
jurisdiction to the FPC was furnished by a Federal Trade Commission
study of the pipeline industry in 1935-1936. [
Footnote 15] The study showed that increasing
concentration in the industry was producing vast economic power for
the pipelines and a serious threat of unreasonably high prices for
consumers. This threat was most acute in the case of sales for
resale, because wholesale distributors and their customers had
little economic clout with which to obtain equitable prices from
the pipelines. State power to regulate rates charged for interstate
service to a customer in another State for resale was also thought,
within this Court's decisions, constitutionally to be outside the
regulatory power of the
Page 406 U. S. 639
States.
Public Utilities Comm'n v. Attleboro Steam &
Elec. Co., 273 U. S. 83
(1927);
Missouri v. Kansas Gas Co., 265 U.
S. 298 (1924).
In response to this report and pressures from state regulatory
agencies, Congress enacted a federal "sales" jurisdiction in the
Natural Gas Act, by which Congress granted rate-setting authority
to the Commission over all interstate sales for resale. But as this
Court, in
Pennsylvania Gas Co. v. Public Service Comm'n,
252 U. S. 23
(1920), had sustained state authority to regulate rates for
"direct" sales, and, moreover, the need for federal authority here
was not deemed acute, Congress withheld
rate-setting
jurisdiction over direct sales. That rate setting was the only
subject matter covered by "sales" jurisdiction, and the "direct
sales" exception is clear from the legislative history of the
proviso. The original phrasing of the proviso was:
"
Provided, That nothing in this Act shall be construed
to authorize the Commission
to fix rates or charges for
the sale of natural gas distributed locally in low-pressure mains
or for the sale of natural gas for industrial use only."
Hearing on H.R. 11662 before a Subcommittee of the House
Committee on Interstate and Foreign Commerce, 74th Cong., 2d Sess.,
1 (1936) (emphasis supplied). The phrasing was changed, and the
words "to fix rates or charges" were subsequently deleted, but the
House committee report confirms that the proviso, as finally
phrased, was nevertheless meant to be restricted to rate-setting.
H.R.Rep. No. 709, 75th Cong., 1st Sess., 4 (1937), states:
"It was urged in connection with earlier bills that there should
be inserted at the end of this subsection a proviso as follows:
"
"'
Provided, That nothing in this Act shall be construed
to authorize the Commission to fix the rates
Page 406 U. S. 640
or charges to the public for the sale of natural gas distributed
locally.'"
"In order to avoid misunderstanding, the committee thought it
necessary to omit this proviso from the present bill for the
following reasons, even though there is entire agreement with the
intended policy which would have prompted its inclusion: first, it
would have been surplusage if interpreted as it was intended to be
interpreted, and, second, it would have been, in all likelihood, a
source of confusion if interpreted in any other way. For example,
it was felt that in the effort to find a reason for its inclusion
it might have been argued that it exempted sales to a publicly
owned distributing company, and such an exemption is not, of
course, intended.
It is believed that the purposes of this
proviso, assuming the need for any such provision, are fully
covered in the present provision by the language -- 'but shall not
apply to any other . . . sales of natural gas.'"
(Emphasis supplied.) The author of the changed version, the
General Solicitor of the National Association of Railroad and
Utilities Commissioners, confirmed this interpretation. Hearing on
H.R. 4008, before the House Committee on Interstate and Foreign
Commerce, 75th Cong., 1st Sess., 143.
Thus, Congress' grant of sales jurisdiction as to sales for
resale and the prohibition as to direct sales were meant to apply
exclusively to
rate-setting, and in no wise limited the
broad base of "transportation" jurisdiction granted the FPC. That
head of jurisdiction plainly embraces regulation of the quantities
of gas that pipelines may transport, for, in that respect, Congress
created "a comprehensive and effective regulatory scheme,"
Panhandle Eastern Pipe Line Co. v. Public Service Comm'n,
332 U.S. at
332 U. S. 520,
to "afford consumers a complete, permanent and effective bond of
protection. . . ."
Atlantic
Page 406 U. S. 641
Refining Co. v. Public Service Comm'n, 360 U.
S. 378,
360 U. S. 388
(1959).
"Therefore, when we are presented with an attempt by the federal
authority to control a problem that is not, by its very nature, one
with which state regulatory commissions can be expected to deal,
the conclusion is irresistible that Congress desired regulation by
federal authority, rather than nonregulation."
FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S.
at
365 U. S. 28.
Comprehensive and equitable curtailment plans for gas
transported in interstate commerce, as already mentioned, are
practically beyond the competence of state regulatory agencies.
Congress was also aware that
Pennsylvania v. West
Virginia, 262 U. S. 553
(1923), casts serious doubt upon the constitutionality of state
regulation of such plans. That decision was considered in the
deliberations on the Natural Gas Act, and was cited to the House
Committee as a reason for federal regulation. Hearing on H.R. 11662
before a Subcommittee of the House Committee on Interstate and
Foreign Commerce, 74th Cong., 2d Sess., 14 (1936).
Finally, this Court has already stated its view that curtailment
plans are aspects of FPC's "transportation," and not its "sales,"
jurisdiction. In
Panhandle Eastern, 332 U.S. at
332 U. S. 523,
we said:
"[T]he matter of interrupting service is one largely related . .
. to transportation, and thus within the jurisdiction of the
Federal Power Commission to control, in accommodation of any
conflicting interests among various states. [
Footnote 16] "
Page 406 U. S. 642
V
Since curtailment programs fall within the FPC's
responsibilities under the head of its "transportation"
jurisdiction, the Commission must possess broad powers to devise
effective means to meet these responsibilities. FPC and other
agencies created to protect the public interest must be free,
"within the ambit of their statutory authority, to make the
pragmatic adjustments which may be called for by particular
circumstances."
FPC v. Natural Gas Pipeline Co.,
315 U. S. 575,
315 U. S. 586
(1942). Section 16 of the Act assures the FPC the necessary degree
of flexibility in providing that:
"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. . . ."
15 U.S.C. § 717
o. In applying this section, we have
held that
"the width of administrative authority must be measured in part
by the purposes for which it was conferred. . . . Surely the
Commission's broad responsibilities therefore demand a generous
construction of its statutory authority."
Permian Basin Area Rate Cases, 390 U.
S. 747,
390 U. S. 776
(1968);
see United Gas Pipe Line Co. v. FPC, 385 U. S.
83,
385 U. S. 89-90
(1966).
The substantive standard governing FPC evaluation of curtailment
plans is found in § 4(b) of the Act:
"No natural gas company shall, with respect to any
transportation or sale of natural gas subject to the jurisdiction
of the Commission, (1) make or
Page 406 U. S. 643
grant any undue preference or advantage to any person or subject
any person to any undue prejudice or disadvantage, or (2) maintain
any unreasonable difference in rates, charges, service, facilities,
or in any other respect, either as between localities or as between
classes of service."
15 U.S.C. § 717c(b).
Two procedural mechanisms are available to enforce this
anti-discriminatory provision of § 4(b). As to a tariff already on
file and in effect, the FPC may proceed under § 5(a). [
Footnote 17] The § 5(a) procedure
has substantial disadvantages, however, rendering it unsuitable for
the evaluation of curtailment plans. The FPC must afford interested
parties a full hearing on the reasonableness of the tariff before
taking any remedial action, and, as we have observed,
"the delay incident to determination in § 5 proceedings through
which initial certificated rates [as well as 'practices' and
'contracts'] are reviewable appears nigh interminable."
Atlantic Refining Co. v.
Page 406 U. S. 644
Public Service Comm'n, 360 U.S. at
360 U. S. 389.
[
Footnote 18] In addition, a
prescribed remedial order can have only prospective application.
FPC has therefore chosen to process curtailment plans under §§
4(c), (d), and (e). [
Footnote
19]
Page 406 U. S. 645
Under these provisions, a pipeline's tariff amendments filed
with the FPC go into effect in 30 days unless suspended by the
Commission. If a filing is challenged or the FPC of its own motion
deems it appropriate, it may suspend the amended tariff for up to
five months, at the end of which time the amended tariff becomes
effective pending the completion of hearings. In these hearings,
the pipeline has the burden of proving that its plan is reasonable
and fair.
Order No. 431 makes full use of the § 4 procedures. All
pipelines facing shortages necessitating curtailment are required
to file reasonable allocation schemes as amendments to their
existing tariffs, or to state that the existing tariffs are
adequate. When emergency or other conditions arise and it appears
desirable in the public interest to place a plan into effect, the
FPC may accept the filing, implement it immediately or suspend it,
and employ the plan as a working guideline while hearings continue.
In addition to the flexibility of this arrangement, the requirement
that pipelines submit plans enables the FPC to utilize each
pipeline's unique knowledge of its customers' needs, ability to
substitute other fuel sources, and other relevant
considerations.
The Court of Appeals held that, under our decision in
FPC v.
Transcontinental Gas Pipe Line Corp., 365 U.S. at
365 U. S. 17, FPC
authority over direct-sales contracts is limited to a "veto power"
to be exercised only in certification proceedings under § 7(c) and
abandonment
Page 406 U. S. 646
proceedings under § 7(b). We reject this argument on two
grounds. First, Transcontinental dealt with FPC's authority to
consider direct-sales
rates in certification proceedings.
We there noted that, under § i(b), FPC jurisdiction
over
rates was limited. The litigation here, unlike
Transcontinental, does not involve rates, and, therefore,
the provision of § 1(b) is wholly inapplicable. Secondly,
Transcontinental dealt only with FPC "veto power" under §
7, and in no way limited FPC authority under § 4(b) to prevent
discrimination among a pipeline's customers. Since § 4(b) deals
with "service," the FPC may invoke it to deal with curtailment
programs, whether or not it could also invoke § 7 for that
purpose.
Amici have argued that permitting the pipeline's tariff
amendments to take effect despite contrary terms in existing
contracts is inconsistent with our decision in
United Gas Pipe
Line Co. v. Mobile Gas Service Corp., 350 U.
S. 332 (1956). In that case, however, we dealt with an
attempt by a pipeline unilaterally to effect a change in its
contract terms by making a filing under § 4. In the present cause,
the issue is whether the FPC, acting under the head of its
transportation jurisdiction and its broad mandate under § 16, may
order pipelines facing shortages to develop and submit rational
curtailment arrangements. Our holding in
Mobile Gas Service
Corp. does not govern the decision of this issue, since, as we
observed in that case:
"[D]enying to natural gas companies the power unilaterally to
change their contracts in no way impairs the regulatory powers of
the Commission, for the contracts remain fully subject to the
paramount power of the Commission to modify them when necessary in
the public interest."
350 U.S. at
350 U. S.
344.
Page 406 U. S. 647
We conclude therefore that the FPC has the jurisdiction asserted
here, and that the Natural Gas Act fully authorizes the method
chosen by the FPC for its exercise.
VI
In addition to holding that the proviso to § 1(b) prohibited
curtailment of gas delivered to the Nine-Mile Point Station, the
Court of Appeals held that those deliveries were not regulable by
the FPC, because "the flow of gas from the Black system into the
Green system . . . is occasional and irregular, as well as
minimal," and that "[t]he Green system, as an entire and separate
unit, is physically located and functions entirely in Louisiana";
the court concluded that, for these reasons, "[t]he regulation of
the Green system is substantially and essentially a localized
matter committed to Louisiana's jurisdiction." 456 F.2d at 339-340.
The Court of Appeals erred in deciding this question. The FPC had
exercised its primary jurisdiction, and was conducting proceedings
to determine whether the Green System was subject to its
jurisdiction. In that circumstance, the District Court and the
Court of Appeals were obliged to defer to the FPC for the initial
determination of its jurisdiction.
See Myers v. Bethlehem
Shipbuilding Corp., 303 U. S. 41
(1938). The need to protect the primary authority of an agency to
determine its own jurisdiction
"is obviously greatest when the precise issue brought before a
court is in the process of litigation through procedures
originating in the [agency]. While the [agency's] decision is not
the last word, it must assuredly be the first."
Marine Engineers Beneficial Assn. v. Interlake S.S.
Co., 370 U. S. 173,
370 U. S. 185
(1962). Review of the FPC decision may proceed in due course
pursuant to § 19(b) of the Act, 15 U.S.C. § 717r(b). We see no need
to make the same disposition as to the
Page 406 U. S. 648
curtailment question since the Court of Appeals had Op. No. 606
before it, and acted upon the opinion in reaching its decision.
Reversed.
MR. JUSTICE STEWART took no part in the decision of these
cases.
MR. JUSTICE POWELL took no part in the consideration or decision
of these cases.
* Together with No. 71-1040,
United Gas Pipe Line Co. et al.
v. Louisiana Power & Light Co. et al., on certiorari to
the same court.
[
Footnote 1]
A "jurisdictional" pipeline transports natural gas in interstate
commerce, and for that reason is subject to FPC certification
jurisdiction. The "jurisdictional" label is also sometimes used to
apply to sales, in which case it refers to interstate sales for
resale, which are subject to Commission rate regulation.
[
Footnote 2]
FPC Staff Report No. 2, National Gas Supply and Demand 1971-1990
(1972):
"The emergence of a natural gas shortage during the past two
years marks a historic turning point -- the end of natural gas
industry growth uninhibited by supply considerations. Not only has
the Nation's proven gas reserve inventory for the lower 48 states
been shrinking for the past three years, but major pipeline
companies and distributors in most parts of the country have been
forced to refuse requests for additional gas service from large
industrial customers and from many new customers. For practical
short-term purposes, we are confronted with the fact that current
proven reserves in the lower 48 states, as reported by the American
Gas Association, have dropped from 289.3 trillion cubic feet in
1967 to 259.6 in 1970, a 10.3 percent drop within a three-year
period. Furthermore, approximately 95 percent of this proven
reserve inventory is already committed to gas sales contracts, and
is therefore unavailable for sales to new customers or for
increased volumes to old customers."
Id. at xi.
[
Footnote 3]
Demand for natural gas fluctuates sharply from season to season
and from day to day. Nationally, peak days occur in winter heating
months. For LPL, however, the need for gas is greatest in the
summer months, when air conditioning increases electricity
consumption.
[
Footnote 4]
Many of the facts are taken from the recitals in the petitions
for certiorari, which draw upon evidence presented before the FPC
in the curtailment proceedings. LP&L has not challenged their
accuracy except to argue that no significant gas shortage actually
exists. Our decision in this case in no way limits LP&L's
freedom to argue its position as to the facts on the appeal pending
in the Court of Appeals.
[
Footnote 5]
The Commission has authority to issue declaratory orders under
the Administrative Procedure Act, 5 U.S.C. § 554(e).
[
Footnote 6]
The record in these cases does not contain all the contract
terms dealing with curtailment of deliveries. United's two
contracts with LP&L under consideration in this litigation,
however, indicate that the terms vary from year to year and
customer to customer, since these two contracts themselves
establish slightly different priority systems. Moreover, LP&L
informs us that its contracts had terms slightly different from
those in most other direct-sales contracts.
[
Footnote 7]
The objecting party appealed the decision of the FPC and that
case is now pending in the District of Columbia.
[
Footnote 8]
The petitions of the Solicitor General and United for review
here of the FPC decision prior to judgment of the Court of Appeals
were denied. 405 U.S. 973 (1972).
[
Footnote 9]
Section 7(c) provides:
"No natural gas company or person which will be a natural gas
company upon completion of any proposed construction or extension
shall engage in the transportation or sale of natural gas, subject
to the jurisdiction of the Commission, or undertake the
construction or extension of any facilities therefor, or acquire or
operate any such facilities or extensions thereof, unless there is
in force with respect to such natural gas company a certificate of
public convenience and necessity issued by the Commission
authorizing such acts or operations. . . ."
15 U.S.C. § 717f(c).
[
Footnote 10]
Argument was heard in the Fifth Circuit in November, 1971, one
month after the FPC decision in No. 606. The Court of Appeals
decision was announced in January, 1972, one month before the FPC
decision in No. 610.
[
Footnote 11]
La.Const., Art. 6, § 4.
[
Footnote 12]
The conflict between producing and consuming States over state
or federal regulatory authority is highlighted in the contrast
between Louisiana's
amicus brief in this litigation and
the statement of the Chairman of the New York Public Service
Commission in another case. Louisiana, a producing State,
submits:
"Historically, gas producing states have certain advantages over
states which do not have their own gas supply. Their very proximity
to the source of production attracts industries which use gas as
the raw material without which their plants could not operate. The
lower transportation costs of delivering gas to other industrial
and commercial users within the state makes its use particularly
attractive for such applications. It is not surprising, therefore,
that producing states have a higher proportion of
industrial-commercial consumption of total gas consumed and of firm
gas than consuming states. Louisiana utilizes 84% of the total
quantity of firm gas sold in the state for industrial and power
plant generation purposes, in comparison to a national average of
only 37%."
"Louisiana's economy is heavily dependent upon the availability
of a firm, reliable and uninterrupted supply of natural gas.
Statewide investment by industrial category clearly reflects the
predominance of petroleum, refineries and chemicals which
represented $465,297,370 or 76% of a total industrial investment of
$609,578,850 in 1970. Apart from these industries which use natural
gas as process gas without which their plants cannot function, the
state's electric utilities are completely dependent upon natural
gas as fuel for electric generators."
"Thus, the economic welfare of the state hinges upon the
continued delivery of the volumes of gas it received and used prior
to United's curtailment, and upon the ability to draw upon greater
volumes. Otherwise, its economy will be frozen at or below its
present level. This is not true of other states in which natural
gas plays a subsidiary, rather than a dominant, role in the overall
economy of the state, and in which the electrical utilities have
alternate power sources such as coal, imported liquefied natural
gas and inexpensive hydroelectric power."
Brief of State of Louisiana
Amicus Curiae 2-3. As
observed in
FPC v. Transcontinental Gas Pipe Line Corp.,
365 U. S. 1 (1961),
consuming States prefer federal regulation. The Chairman of the New
York Public Service Commission summed up this position in
In re
Cabot Gas Corp., 16 P.U.R.(N.S.) 443 (1936):
"There can be but one opinion among those who believe in the
conservation of natural resources. They should be developed not to
benefit a few individuals, but in the interests of public welfare,
present and future. Our natural gas resources ought to be
conserved, and there is probably no field where the Federal
government, acting in the interests of the entire country and to
protect the welfare of the future, could accomplish more than in
the natural gas industry. From a conservation viewpoint, I
thoroughly agree with Commissioner Burritt, and if I could see how
a denial of the present petition would work to this end, I would
vote to refuse the application; but will such denial produce the
desired results?"
"The field from which gas is to be taken by the petitioner is in
northern Pennsylvania and southern New York. Apparently, far more
of the gas will come from Pennsylvania than from New York, and over
the extraction of gas in the state of Pennsylvania this Commission
has practically no control. It is possible for Pennsylvania
companies to take all of the gas from this field unless the New
York companies remove the gas before the field is exhausted."
"Further, the Public Service Commission has been given no
adequate authority to determine how the natural gas resources of
this state, to say nothing of the resources of Pennsylvania, shall
be developed. We have no powers directly to control the amount of
gas that is taken from any field, and our indirect powers are so
limited that it is doubtful if much could be accomplished. The
state of New York receives far more gas from sources located beyond
its boundaries than it exports to any adjoining state, and the
conservation of natural gas resources in the various states cannot
be properly brought about except through voluntary action of the
states or by the Federal government. Neither one is yet operative,
and, while attention has been given to electric interstate
commerce, no effective steps have been taken to conserve or
regulate the distribution of natural gas, where it is so urgently
needed."
"In view of the lack of authority conferred upon this Commission
to conserve natural resources, the question becomes primarily what
will be gained to consumers in the state of New York if the
petition is denied. It is stated that about 80 or 90 per cent of
the gas furnished by the petitioner will be used for industrial
purposes, and that only from 10 to 20 per cent will go to the
general public, the inference being that the saving to the
companies purchasing the gas will go to enrich a few stockholders.
Let us assume such are the facts. Who will gain if those benefited
by the petition are deprived of their profits or advantages by a
denial of the petition? This Commission does not control the use
that will be made of the gas from the field tapped by the
petitioner. There are many other companies tapping the supply, and
we have no means of determining where, when, or to whom the gas
will be sold. If restriction is imposed on the use of it in New
York, it may go to Pennsylvania; and if the petitioner is not
allowed to supply the areas which it is proposed to serve, the gas
will go to other areas, and there is no assurance that it will be
used any more beneficially from a public viewpoint than it will be
if the petition is granted."
"As stated, I am heartily in favor of the conservation of
natural gas, as well as other natural resources; but, in this
specific case, will the granting or the denial of the petition work
to the benefit of the people of New York? The benefit to the area
to be supplied by the petitioner is definite, it is known, it is
sure. But, if the petition is denied, who will be benefited? There
is no assurance upon this point. The answer is speculative and
uncertain. There is nothing to assure us that the denial of the
petition would conserve the gas supply. Is it not likely that the
benefits would merely be diverted from one group or one locality to
another?"
[
Footnote 13]
East Ohio dealt with the grant of FPC jurisdiction over
natural gas companies engaged in interstate transportation or sale.
What we said there has relevance to the issue in this case:
"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 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."
"We hold that the word 'transportation,' like the phrase
'interstate commerce,' aptly describes the movements of gas in East
Ohio's high-pressure pipelines."
338 U. S. 338 U.S.
464,
338 U. S.
468-469 (1950) (footnotes omitted).
[
Footnote 14]
It is well established that the proviso was added to the Act
merely for clarification, and was not intended to deprive FPC of
any jurisdiction otherwise granted by § 1(b).
FPC v.
Transcontinental Gas Pipe Line Co., 365 U. S.
1 (1961);
FPC v. East Ohio Gas Co.,
338 U. S. 464
(1950). The House report on the bill described this second sentence
of § 1(b) as follows:
"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., 3 (1937).
[
Footnote 15]
S.Doc. No. 92, pt. 84-A, 70th Cong., 1st Sess., submitted Dec.
31, 1935.
[
Footnote 16]
In
Panhandle, the Court was asked to hold that direct
industrial sales customers receiving gas in interstate commerce
could not be subjected to state regulatory control consistently
with FPC jurisdiction in the area. In support of this position, the
customers argued that state control of certain matters affecting
the sales could not practically be managed by state regulation. Not
surprisingly, the problem of curtailment was used as a prime
example of a matter presenting these difficulties.
[
Footnote 17]
Section 5(a) provides:
"Whenever the Commission, after a hearing had upon its own
motion or upon complaint of any State, municipality, State
commission, or gas distributing company, shall find that any rate,
charge, or classification demanded, observed, charged, or collected
by any natural gas company in connection with any transportation or
sale of natural gas, subject to the jurisdiction of the Commission,
or that any rule, regulation, practice, or contract affecting such
rate, charge, or classification is unjust, unreasonable, unduly
discriminatory, or preferential, the Commission shall determine the
just and reasonable rate, charge, classification, rule, regulation,
practice, or contract to be thereafter observed and in force, and
shall fix the same by order:
Provided, however, That the
Commission shall have no power to order any increase in any rate
contained in the currently effective schedule of such natural gas
company on file with the Commission, unless such increase is in
accordance with a new schedule filed by such natural gas company;
but the Commission may order a decrease where existing rates are
unjust, unduly discriminatory, preferential, otherwise unlawful, or
are not the lowest reasonable rates."
15 U.S.C. § 717d(a).
[
Footnote 18]
Of course, even when conducting a § 5 hearing, the Commission
would have emergency authority to issue interim orders effecting a
curtailment plan.
FPC v. Natural Gas Pipeline Co.,
315 U. S. 575
(1942).
[
Footnote 19]
These sections provide,
"(c) Under such rules and regulations as the Commission may
prescribe, every natural gas company shall file with the
Commission, within such time (not less than sixty days from the
date this Act takes effect) and in such form as the Commission may
designate, and shall keep open in convenient form and place for
public inspection, schedules showing all rates and charges for any
transportation or sale subject to the jurisdiction of the
Commission, and the classifications, practices and regulations
affecting such rates and charges, together with all contracts which
in any manner affect or relate to such rates, charges,
classifications, and services."
"(d) Unless the Commission otherwise orders, no change shall be
made by any natural gas company in any such rate, charge,
classification, or service, or in any rule, regulation, or contract
relating thereto, except after thirty days' notice to the
Commission and to the public. Such notice shall be given by filing
with the Commission and keeping open for public inspection new
schedules stating plainly the change or changes to be made in the
schedule or schedules then in force and the time when the change or
changes will go into effect. The Commission, for good cause shown,
may allow changes to take effect without requiring the thirty days'
notice herein provided for by an order specifying the changes so to
be made and the time when they shall take effect and the manner in
which they shall be filed and published."
"(e) Whenever any such new schedule is filed the Commission
shall have authority, either upon complaint of any State,
municipality, State commission, or gas distributing company, or
upon its own initiative without complaint, at once, and if it so
orders, without answer or formal pleading by the natural gas
company, but upon reasonable notice, to enter upon a hearing
concerning the lawfulness of such rate, charge, classification, or
service; and, pending such hearing and the decision thereon, the
Commission, upon filing with such schedules and delivering to the
natural gas company affected thereby a statement in writing of its
reasons for such suspension, may suspend the operation of such
schedule and defer the use of such rate, charge, classification, or
service, but not for a longer period than five months beyond the
time when it would otherwise go into effect."
15 U.S.C. §§ 717c(c), (d), and (e).