1. The business of piping natural gas from one state to another
and selling it not to consumers, but to independent distributing
companies which sell it locally to the consumers is interstate
commerce free from state interference.
Pennsylvania Gas Co. v.
Public Service Comm'n, 252 U. S. 23,
distinguished. P.
265 U. S.
307.
2. An attempt of a state to fix the rates chargeable in this
interstate business is a direct burden on interstate commerce, even
in the absence of any regulation of it by Congress. P.
265 U. S.
308.
282 F. 341 (No. 155) affirmed.
111 Kans. 809 (No. 133) reversed.
282 F. 680 (No. 137) affirmed.
In the first of these cases, the appellants sought to enjoin the
Kansas Natural Gas Company from increasing
Page 265 U. S. 299
its rates in Missouri without the consent of the Public
Utilities Commission of that state. The decree of the district
court refusing the injunction is here affirmed.
In the second case, the Kansas Supreme Court allowed a
peremptory mandamus to compel the same company to reestablish and
maintain certain rates in Kansas until otherwise ordered by the
Utilities Commission of that state. Reversed.
The third case was a suit in the federal court in Kansas to
enjoin collection by the same company of increased rates in Kansas
until allowed by the Kansas Utilities Commission. The injunction
was denied. Affirmed.
Page 265 U. S. 305
MR. JUSTICE SUTHERLAND delivered the opinion of the Court.
These cases were consolidated for argument. They present for
decision the single question whether the business of the Kansas
Natural Gas Company, hereinafter called the Supply Company,
consisting of the transportation of natural gas from one state to
another for sale, and its sale and delivery, to distributing
companies, is interstate commerce, free from state
interference?
The facts necessary to be considered in reaching a conclusion
are, shortly, as follows:
The Supply Company is a Delaware corporation, engaged in
producing and buying natural gas, mostly in Oklahoma but some in
Kansas, and, by means of pipelines, transporting it into Kansas and
from Kansas into the state of Missouri, and in each state selling
and delivering it to distributing companies which then sell and
deliver it to local consumers in numerous communities in Kansas and
Missouri. The gas originating in Kansas is mingled for
transportation in the same lines with that originating in Oklahoma.
The pipelines are continuous from the wells to the place of
delivery.
The three cases are alike in the fact that they arise from the
action of the Supply Company in making an increase of rates from 35
cents to 40 cents per 1,000 cubic feet -- in Missouri, without the
consent and approval of the Public Utilities Commission of the
state, and in Kansas notwithstanding a previous order of the
federal court fixing a 35-cent rate and the action of the Utilities
Commission approving and fixing that rate. The power of the
Utilities Commission of each state is challenged on the ground that
the matter, under
Page 265 U. S. 306
the commerce clause of the Constitution, is not subject to state
control.
In No. 155, appellants brought suit in the federal district
court to enjoin the Supply Company from increasing its rates. The
injunction prayed was denied. 282 F. 341.
In No. 133, the defendants in error filed a petition in the
Kansas Supreme Court for a writ of mandamus to compel the Supply
Company to reestablish and maintain the rate of 35 cents per 1,000
cubic feet for gas furnished to the distributing companies, until
otherwise ordered by the Utilities Commission. The case was
presented to that court on demurrer to the return and answer. The
demurrer was sustained, and a peremptory writ of mandamus allowed,
as prayed, 111 Kan. 809.
In No. 137, the suit was to enjoin the Supply Company from
collecting or attempting to collect the increased rates from
various gas distributing companies until the consent thereto of the
Utilities Commission of the state should be secured. The federal
district court denied the injunction, but retained the bill for
another purpose not necessary to be stated.
Central Trust Co.
of New York v. Consumers' Light, Heat & Power Co., 282 F.
680.
The business of the Supply Company, with an exception not
important here, is wholly interstate. The sales and deliveries are
in large quantities not for consumption, but for resale to
consumers. There is no relation of agency between the Supply
Company and the distributing companies, or other relation except
that of seller and buyer,
Public Utilities Comm'n v.
Landon, 249 U. S. 236,
249 U. S.
244-245, and the interest of the former in the commodity
ends with its delivery to the latter, to which title and control
thereupon pass absolutely. The question is therefore presented in
its simplest form, and, if the claim of state power be upheld, it
is difficult to see how it could be denied in any case of
interstate transportation and sale of gas. Both federal courts
denied the power. The state
Page 265 U. S. 307
court conceded that the business was interstate and subject to
federal control, but rested its decision the other way upon the
fact that Congress had not acted in the matter and that, in the
absence of such action, it was within the regulating power of the
state.
The question is controlled by familiar principles.
Transportation of gas from one state to another is interstate
commerce, and the sale and delivery of it to the local distributing
companies is a part of such commerce. In
Public Utilities
Comm'n v. Landon, supra, at
249 U. S. 245,
this Court said:
"That the transportation of gas through pipelines from one state
to another is interstate commerce may not be doubted; also it is
clear that, as part of such commerce, the receivers might sell and
deliver gas so transported to local distributing companies free
from unreasonable interference by the state."
See Pennsylvania v. West Virginia, 262 U.
S. 553,
262 U. S. 596,
and cases there cited.
The line of division between cases where, in the absence of
congressional action, the state is authorized to act and those
where state action is precluded by mere force of the commerce
clause of the Constitution is not always clearly marked. In the
absence of congressional legislation, a state may constitutionally
impose taxes, enact inspection laws, quarantine laws and,
generally, laws of internal police, although they may have an
incidental effect upon interstate commerce.
Pennsylvania
Railroad Co. v. Hughes, 191 U. S. 477,
191 U. S.
488-491. But the commerce clause of the Constitution, of
its own force, restrains the states from imposing direct burdens
upon interstate commerce. In
Minnesota Rate Cases,
230 U. S. 352,
230 U. S. 396,
Mr. Justice Hughes, speaking for the Court, said:
"If a state enactment imposes a
direct burden upon
interstate commerce, it must fall, regardless of federal
legislation. The point of such an objection is not that Congress
has acted, but that the state has directly restrained
Page 265 U. S. 308
that which, in the absence of federal regulation, should be
free."
The question is so fully discussed in that case that nothing
beyond its citation is required.
The contention that, in the public interest, the business is one
requiring regulation need not be challenged. But Congress thus far
has not seen fit to regulate it, and its silence, where it has the
sole power to speak, is equivalent to a declaration that that
particular commerce shall be free from regulation.
See Robbins
v. Shelby County Taxing District, 120 U.
S. 489,
120 U. S. 493.
With the delivery of the gas to the distributing companies,
however, the interstate movement ends. Its subsequent sale and
delivery by these companies to their customers at retail is
intrastate business, and subject to state regulation.
Public
Utilities Comm'n v. Landon, supra, p.
249 U. S. 245.
In such case, the effect on interstate commerce, if there be any,
is indirect and incidental. But the sale and delivery here is an
inseparable part of a transaction in interstate commerce -- not
local, but essentially national, in character -- and enforcement of
a selling price in such a transaction places a direct burden upon
such commerce inconsistent with that freedom of interstate trade
which it was the purpose of the commerce clause to secure and
preserve. It is as though the commission stood at the state line
and imposed its regulation upon the final step in the process at
the moment the interstate commodity entered the state and before it
had become part of the general mass of property therein.
See
Brown v. Houston, 114 U. S. 622,
114 U. S. 634.
There is nothing in
Pennsylvania Gas Co. v. Public Service
Comm'n, 252 U. S. 23,
inconsistent with this view. There, the Gas Company, a Pennsylvania
corporation, transmitted gas from Pennsylvania into New York and
sold it directly to the consumers. The service to the consumers,
which was the thing for which the regulated charge was made, was
essentially local, and the decision rests upon this feature. Mr.
Justice Day, in the
Page 265 U. S. 309
course of the opinion, said (p.
252 U. S.
31):
"The pipes which reach the customers served are supplied with
gas directly from the main of the company which brings it into the
state; nevertheless, the service rendered is essentially local, and
the sale of gas is by the company to local consumers who are
reached by the use of the streets of the city in which the pipes
are laid, and through which the gas is conducted to factories and
residences as it is required for use. The service is similar to
that of a local plant furnishing gas to consumers in a city."
The commodity, after reaching the point of distribution in New
York, was subdivided and sold at retail. The
Landon case,
so far as this phase is concerned, differs only in the fact that
the process of division and sale to consumers was carried on not by
the Supply Company, but by independent distributing companies.
In both cases, the things done were local, and were after the
business in its essentially national aspect had come to an end. The
distinction which constitutes the basis of the present decision is
clearly recognized in the
Landon case. The business of
supplying, on demand, local consumers is a local business, even
though the gas be brought from another state and drawn for
distribution directly from interstate mains, and this is so whether
the local distribution be made by the transporting company or by
independent distributing companies. In such case, the local
interest is paramount, and the interference with interstate
commerce, if any, indirect, and of minor importance. But here, the
sale of gas is in wholesale quantities, not to consumers, but to
distributing companies for resale to consumers in numerous cities
and communities in different states. The transportation, sale, and
delivery constitute an unbroken chain, fundamentally interstate
from beginning to end, and of such continuity as to amount to an
established course of business. The paramount interest is not
local, but national, admitting of and requiring
Page 265 U. S. 310
uniformity of regulation. Such uniformity, even though it be the
uniformity of governmental nonaction, may be highly necessary to
preserve equality of opportunity and treatment among the various
communities and states concerned.
See, for example, Welton v.
Missouri, 91 U. S. 275,
91 U. S. 282;
Hall v. De Cuir, 95 U. S. 485,
95 U. S.
490.
That some or all of the distributing companies are operating
under state or municipal franchises cannot affect the question. It
is enough to say that the Supply Company is not so operating, and
is not made a party to these franchises by merely doing business
with the franchise holders.
No. 155 Affirmed.
No. 133 Reversed.
No. 137 Affirmed.