Document: 463 U.S. 319 103 S.Ct. 3024 77 L.Ed.2d 668 PUBLIC SERVICE COMMISSION OF the STATE NEW YORK, Petitioner,v.MID-LOUISIANA GAS COMPANY et al. ARIZONA ELECTRIC POWER COOPERATIVE, INC., Petitioner, v. MID-LOUISIANA MICHIGAN, FEDERAL ENERGY REGULATORY COMMISSION, Nos. 81-1889, 81-1958, 81-2042 and 82-19. Argued March 22, 1983. Decided June 28, Syllabus Title I of Natural Gas Policy Act 1978 (NGPA) defines eight categories natural gas production, specifies maximum lawful price that may be charged for "first sales" in each category, prescribes rules increasing sale" prices month passing them on to downstream purchasers. Section 2(21) as including, a general rule, "any any interstate or intrastate pipeline local distribution company, but not including such sales by enumerated sellers affiliate thereof, unless sale "is attributable to" volumes produced thereof. In 1979, Federal Energy Regulatory Commission (FERC) issued Order No. 58, promulgating regulations implementing statutory definition sale." Independent producers affiliates were assigned all transferred pipelines. But pipelines themselves automatically their production. A enjoys sold at wellhead; consists solely its own production; commingled independent-producer pipeline-producer gas, long it dedicated an equivalent volume production purchaser contract; otherwise unregulated market. if sells market without dedicating particular sale, does enjoy treatment. 1980, FERC 98, under (NGA) providing NGPA's pricing should apply leases acquired after October 8, 1969, from wells drilled January 1, 1973, regardless when underlying lease had been acquired. All other would priced ratemaking purposes just before NGPA was enacted. Respondents (interstate companies transport wellhead customers) petitioned Court Appeals review both orders, contending 58 based misreading 98 acted arbitrarily refusing authorize The held intended provide same incentives independent there no practical obstacles treating transfer pipeline's division transportation first FERC's reading inconsistent with Congress' goal. invalid therefore did separately. Held: exclusion scheme is mandate frustrate regulatory policy Congress sought implement; FERC, however, has discretion deciding which transfer—intracorporate downstream—should receive Pp. 325-343. (a) As respondents contend, authority treat either intracorporate natur l pipeline-owned system customer, case able include rate among costs service, they do acquire producers. plainly satisfies § 2(21)'s "general rule" definition, legislative history clearly demonstrates this statute prohibit deeming "sale." exception diminish sale. 325-327. (b) preserve NGA regulate customers supplant establish rates wholesale market, consisting so-called history, overall structure NGPA, show intend exclude coverage completely. 327-338. (c) argument wrong assign transfers "automatically" because even treatment, refutes position one advocates, since agreed ceiling price. There merit giving treatment result application mixed retail distributors, thereby supplanting traditional state over service. Nor unintended windfall pricing. 339-342. 664 F.2d 530 (5 Cir.1981), vacated remanded. Jerome M. Feit, Washington, D.C., petitioners. James D. McKinney, Jr., respondents. Justice STEVENS delivered opinion Court. 1 By enacting (NGPA), 92 Stat. 3350, 3368, 15 U.S.C. (and Supp. V) 3301 seq., comprehensively dramatically changed method United States. Act, defined specified prescribed question presented whether most owned prescribe different setting gas. answer provided Act's entire NGPA. 2 are consumers. They purchase addition, significant amount own. three sources usually being downstream. Thus, time delivery often impossible identify producer 3 On November 14, Commission1 entered final implement NGPA.2 category producers—independent producers—is second producers—pipeline distributors—is also pipelines, specifically contrary. contrast, third producers—pipelines themselves—is wellhead. Similarly, It contract. Finally, However, having 4 August 4, 98.3 noted construction left outside coverage, so much purchased announced remain subject Commission's jurisdiction (NGA), 52 821, 717 seq. order incentive compete acquiring new drilling wells, decided comparable given promulgated enacted.4 5 Respondent goals Congress. Mid-Louisiana Co. Commission, (CA5 1981). 6 We granted petitions certiorari filed commissions, contend Appeals' holding will profits intend. --- ----, 49, 74 56 (1982). explaining why we agreement Appeals, sale," then consider finally examine specific arguments behalf position. 7 * seek two gas: pipeline, customer. If treated initially authorized exercise sound discretion, further reject possibilities. 8 found 3355, 3301(21). takes form qualified exclusion. rule sweeps broadly, providing: 9 "(A) General rule.—The term 'first sale' means gas— 10 (i) pipeline; 11 (ii) company; 12 (iii) person use person; 13 (iv) precedes described clauses (i), (ii), (iii); 14 (v) follows (iii), prevent circumvention established Act." 3301(21)(A) (emphasis added). Under terms falls within five presumptively sale.5 This can many single between well customers.6 case, rule. only obstacle properly deemed "sale."7 That obstacle, insubstantial. sale; Conference Committee report provides "establish applicable transactions definition." H.R.Conf.Rep. 95-1752, p. 116, U.S.Code Cong. & Admin.News 1978, pp. 8983, 9033. consisted 16 provides: 17 "(B) Certain included.—Clauses subparagraph (A) shall ' 3301(21)(B). 18 language Whether affects depends meaning words "attributable to." Although interpreted "solely to," least consistent ordinary understanding interpret "measurably to."8 Furthermore, have fully spirit exemption adopted latter interpretation percentage sale—the forms pipeline. 19 agree That, dispose case. For substantial difference required other. II 20 determine obligated relevant portion necessary Those rooted federal regulation statute. A. 21 Between 1938 regulated commerce pursuant NGA. enacted response reports suggesting monopoly power harming consumer welfare.9 Initially, construed require end E.g., Pipeline Co., F.P.C. 218 (1940). "just reasonable" 4(a) NGA, 822, 717c(a), examining whatever incurred transporting consumer. itself actual expenses historically associated gathering included base extent proper reasonable. See Power Hope 320 591, 614-615, n. 25, 64 281, 293-294, 88 L.Ed. 333 (1944); Colorado Interstate 324 581, 604-606, 65 829, 840-841, 89 1206 (1945). producer, take evaluate reasonableness rates; considered broad issue whether, perspective, "collusive improperly excessive." Phillips Petroleum 246, 280 (1951). 22 1954, rejected approach. scrutinize Wisconsin, 347 672, 794, 1035 (1954). purpose "to give wholesales commerce, comp ny occurring before, during, transmission company," id., 682, S.Ct., 799, concluded that, purposes, essential obtains affiliates, 685, 800. 23 problems regulating industry grew steadily passage At first, attempted follow applying technique always applied pipeline-produced calculated reasonable company—whether affiliate, producer—by studying company. "cost service" approach quickly proved impractical. Atlantic Refining New York, 360 378, 389, 79 1246, 1254, 1312 (1959). Whereas relatively few vast number threatened overwhelm administrative capacity. Permian Basin Area Rate Cases, 390 747, 757, 13, 1344, 1355, 312 (1968). 24 shifted "area rate" Statement 61-1, 537 (1960). Instead establishing individual company basis schedule producing region. Two elements area bear mention. First, continued computations historical costs, rather than projections future costs. And second, area: "new gas" independently oil date, "old two-tiered structure, "vintage," rested theory already-flowing "price could serve incentive, . above average plus appropriate return, merely confer windfalls." supra, 797, 1375-1376. 25 proceeding governed undertook separate remained company-by-company basis. 7, seventeen months approved rates, date on, "parity" basis; eligible vintage. Production Proceeding (Phase I), 42 738, 752 (1969) (Opinion 568). already-acquired continue old single-company cost-of-service "in expedite proceedings avoid complications evidentiary problems." Id., 753. Significantly, precisely manner themselves. 26 early 1970's, became apparent working. recognized historical-cost-based, led serious shortages. Southern Louisiana Proceeding, 46 86, 110-11 (1971). generally, Breyer MacAvoy, Shortage Regulation Producers, 86 Harv.L.Rev. 941, 965-979 (1973). Therefore, modified practices, shifting "national National Rates Gas, 51 2212 (197 ) 699). national effective equally producers, affiliates. later, responded pure historical-cost-based incentive-price-based approach, 1604, 1615-1618 (1974) 699-H), temporarily abandoning practice vintaging, 1636.10 27 These measures prove sufficient. substantially below available sales, supply inadequate. Throughout 1977 95th studied situation. During closing hours Second Session, package acts, designed customers; B 28 product Committee's careful reconciliation strong, divergent, responses shortage. 29 House bill proposed "a uniform States." H.R.Rep. 95-496, 96, 8247, 8540. key element establishment simultaneously promote reduce burden: 30 "[O]ther controversial aspects perpetuated. uncertainties lengthy judicial determinations avoided statutorily lag reliance upon similarly avoided. Vintaging terminate." Id. 97. 31 Senate bill, passed floor, maintained 1977, cut back 1982, completely deregulated. S. 2104, Cong., 1st Sess., 123 Cong.Rec. 323026 (1977). 32 compromise justly comprehensive govern regulation." Note, Legislative History 59 Texas L.Rev. 101, 116 (1980). I, establishes exhaustive categorization sets forth methodology calculating category. 102 covers certain Outer Continental Shelf." 3358, 3312. "new, onshore wells." 3361, 3313. 104 "natural committed day enactment [the NGPA]." 3362, 3314. 105 "sales existing contracts." 3363, 3315. 106 rollover 3365, 3316. 107 "high-cost gas." 3366, 3317. 108 "stripper gas."11 3367, 3318. section 109 catch-all, covering covered m ximum subtitle." 3319. 33 explicitly wholly divorced historical-cost methods dollar figure per million Btu's, previously price, inflated according formula. 101. recognizes too low authorizes raise whenever principles dictate higher §§ 104, 106, 109. somewhat ambiguous increases categories. 110(a)(2). none categories, lower ceiling. 34 Several features directly To begin with, type past uses who owns well. drafted exhaustive, 35 Moreover, replaces fix return what precise ceilings. 601(b)(1)(A) "[s]ubject paragraph (4), sections paid doe exceed 3409, 3431(b)(1)(A). investors adequate develop supply. "The Congressional decision reorder economic belief secure development additional App. Pet. Cert. B-25.12 36 evinces thought about gas"—gas already NGPA—would incorporates part "vintaging" pattern existed NGA.13 continues received increased accordance inflation formula 101(b)(5) fits into more "the provision highest applicable." 3357, 3311(b)(5). vintaging entitled (high-cost gas) (stripper gas). fact sufficient stimulate some those nation's energy needs justified higher, rates.14 37 these shouldered consumers, complicated implemented determining consumers face bulk increases. 3371-3381, 3341-3348. allocate burden consumers; way force burden. conference makes plain: 38 guarantees pass through purchases levels legislation. recovery must incremental provisions II; structured permit recover." 124, 9041. 39 Given scheme, conclude identified, source excluded. usefulness depend produces it, reason believe group less likely respond other.15 Yet nowhere find expression desire 40 Indeed, combine clear signal 203, acquisition passthrough requirements, states: 41 "Interstate production.—For section, cost determined Commission." 3375, 3343(b)(2). expressly mentions matter jurisdiction. Perhaps significantly, effect 1938: drawing distinction affiliate. point half I. requires natura thereof." 2(21)(B) 326. see 601(b)(1)(E), covered.16 43 sum, correctly ignore intention absent persuasive justification doing so.17 III 44 Of course, agency administration deference." Blum Bacon, 457 132, 141, 2355, 2361, 72 728 incumbent us carefully implicitly exempt scheme. think important address explicitly: aimed propriety ransfer, 45 suggests automatic emphasizes admonition "maximum only. seller his contract permits." 75-1752, 74, 8991. Since arm's-length contractual bargaining "[i]t anomalous extreme nonetheless meant qualify full virtue Brief 31-32. advocates. undoubtedly subjected control, if, addition satisfying requirements [Title I], persons affiliated pipeline." 3410, 3431(b)(1)(E). 47 argues adoption companies, service.18 exaggerated. concedes another allows (reflecting (which reflects costs). Applying principle gas19 trench authority. narrow posed—the efforts—is posed effects special change relationship jurisdiction.20 48 obviously limited receives argues, residual excluded guaranteed risk-free initial investments wells. allow allegedly "an irrational unfair consequences consumers."21 49 glosses determination qualifies retains former inflation. absolutely opportunity windfall. sure, whose saw need stimulate. Seizing fact, footnote brief here well" 108. exist, believes strong price.22 50 belief, shared grants affiliates—entities pursue logical conclusion. agrees denying transports state, creates flat contradiction motivating purposes—to eliminate dual distinguished gas.23 contrary basic philosophy Like "inconsistent [and would] implement." Election Democratic Senatorial Campaign Committee, 454 27, 32, 38, 42, 70 (1981). Unlike intr corporate transfer.24 remanded make choice. judgment vacated, opinion. ordered. 53 WHITE, whom BRENNAN, MARSHALL, BLACKMUN join, dissenting. 54 Our task best narrower inquiry sufficiently accepted reviewing court. FEC Comm., 39, 46, (1981); Train Resources Defense Council, 421 60, 75, 95 1470, 1479-1480, 731 (1975); Zenith Radio Corp. States, 437 443, 450, 2441, 2445, 57 337 (1978). "To satisfy standard court agency's reached arisen proceeding." supra.; Udall Tallman, 380 16, 85 792, 801, 616 (1965). today rejects substitutes highly complex law. so, imposes set itself, addressed selected agency, Appeals. Notwithstanding novelty, perhaps Court's Act. reasonability unreasonability interpretation, us. 55 construction. interpretive issue, delineates circumstances entities, thereof "attributable" distributor, thereof.1 Co rt's Commission. "Although comments recommended otherwise, involved 'attributable' distributor supply, how small, Rather, attribution accomplishes result." reprinted Petn. Cert., B3-B4. majority Court, limits prices, ante 323. Even stops short plausible language.2 notes "at 'measurably to,' " thus Ante, 327. doubt usages similar throughout NGPA,3 accepting alternative possibility, still reach conclusion un refused accord imputing where system. 60 [I]mputing extend concept transactions. result, bookkeeping accounting entries corporation sales. B-5.4 61 now again notwithstanding perfectly language. turns "sales". "sale" "sale, exchange value." 2(20), 3301(2)(20). supports view value title paper transaction. Report's indication 2d Sess. (1978), compel transfers, superfluous. Report discusses context requirements. turn head. neither nor compels define sales—a depart forty years during never 62 "there other." position, Concededly, replace create financial spur exploration 5289, (1978); Tex.L.Rev. 101 undermined ability fulfill goal, stronger nothing hearings, debates expresses congressional dissatisfaction oldest lowest recover prudent success efforts, inhibited optimum efforts One easily other," ante, 336-337, while finding increase sense primary NGPA.5 63 Unable demonstrate counter NGPA,6 attempts portray "several features" effort unsuccessful. undermines incorporating indicates vestiges earlier ensure prices. Only 101(b)(5). Second, true governs unmistakably directed vis-a-vis obtained direct contemplate discussion deals shoulder hardly bears "bulk increases," 336, enlarging provided. limitation not, singularly combination sections, 337-338, treatment.7 observes later opinion, 601(b)(1)(E) insure afforded control. 340. assures lack arms-length excessive intent 203 offers support prices; provision, terms, 66 plain forbids considerable deference interpretation. (1982).8 very companies—as uphold gone offered reasons Order. 67 rejecting approaches implausible. Adoption "downstream override pointed out, 68 "would made distributors. finds evidence [§] expand field historic states. 102, B-62. 69 "exaggerated" rate. govern. vastly role hitherto sector While 602(a) States ceilings ceiling, believing unnecessarily intrude sphere actually submitted present service permits needed unnecessary Supra, 347-348. debatable, pricing, affording gift. Accordingly, public municipal publicly-owned systems citizens, foot windfall, briefs amicus curiae precluding fulfilling protect against exploitation hands companies," FPC 610, 291, Transcontinental Corp., 365 19, 81 435, 445, 377 (1961), afford complete, permanent bond protection charges." Public Service Comm'n 388, 1253, Nothing abandonment rationale—the place. discourage activity wisely minimizes size meet objectives. 71 rejection conclusion," 342, acting like intermingled deserve undermine cannot attributed pipelines' event, partial comply multiply rely needs. Today upsets undeniably supportable statute, out-of-hand laudable objectives unduly intruding granting unwarranted profit. recall overturned respectfully dissent unfortunate instance. "Commission" refer predecessor, B-1 B-13. CFR 270.203 B-14 B-49. 2.66, 154.42 text clause italicized word "and" "or." commentator suggested "where gatherer, processor eventually Hollis, Related Producer Matters Green, Law Mono. 4D.02 270.202 (1982) (setting governing resales). 'sale' exchange, 3301(20). beyond debate instead "unless," used phrase, "except that." Trade Comm'n, Utility Corporations, S.Doc. 92, 70th mentioned 1(a) 1976, vintaging. 509 (1976) 770). Stripper follows: "(1) Rule.—Except (2), 'stripper gas' nonassociated if— preceding 90-day period, Mcf period; period efficient flow, conservation practices maximize ultimate "(2) excess Mcf.—The shall, non-associated stripper (1) exceeds enhanced techniques. "(3) Definitions.—For subsection— Day.—The 'production day' means— "(i) produced; "(ii) prohibited requirement State law Period.—The '90-day period' 90 consecutive calendar days excluding voluntary action right control "(C) Nonassociated Gas.—The 'nonassociated association crude oil." 3367-3368, 3318(b). preserves gas," "did authority." Post, 348-349; 3040, 6. suggestion confuses choice benchmark (but all) preserved time, moves formula, 601(b)(1)(A). "(a) Application.—In computed subsection month. "(b) Maximum Lawful Price.— Rule.—The of— "(A)(i) rate, (or been) April 20, 1977; thereafter, multiplied monthly annual adjustment factor month, Ceiling Prices May Be Increased Just Reasonable. may, order, Commission) bsection, is— provisions; 3362-3363, intermediate step path deregulated industry. Sections 121 122 mechanism decontrol effectively conceded production: "Having embarked course encourage supplies, reaffirmed our coordinating NPA accomplished parity producers." 81-1189, B-25. reply brief, distinguish "are contracts" "subject realities marketplace." Reply 4-6. reveals contracts reflecting marketplace. infra, brought scope aware keep low. declares pipelines." 347-348; post, 350-351 ("the interpretation"). indeed Report, 124—if adequate, simply violate substitute difficult, argue convincingly disregarding expertise policies better served point, observed: [sic ] B25-B26 334. ----. 39. note appear technical difficulties taking absence procedures. invoked "circumvention authority" provide: "[T]he includes comprised identifiable properties, reservoirs unless: empowered establish, modify aside (2) app ication, recently Exxon Eagerton, 2296, 2303, 75 (1983), 105(a) extends 35. 34, admits shows "dedicated" beginning. perceive "dedication" legitimate "windfall." appears misunderstand today, hold unreasonable actions (with regard transfer). summarize, conclusions transfer, transfer. (3) legislation, chop out virtually relegate discretionary Both dissent, 350-351, F.2d, 536-538, offer preferring (2). totally merit, reverse 340-341, (1). supported legislation states essentially price." 95-496 (Pt. 4), (1977), 8547. "wellhead pricing." When limit applicability conjunction qualifying e.g., 110(a)(1), 3320(a)(1) "[S]tate severance taxes borne seller, (b)"; 503(e)(2)(B), 3413(e)(2)(B). failure means, held, "exclusively of." "In corporations produce Comments industrial consume indicate undesirable results valid extending cover production." Petn B-6. added revenues derived pre-19 possibly operate suggest serves perpetuate regulation. Bill ambitious objective replacing disagreed, pattern. recognizes, 334-335. supplies maintains controls plausibly distinguishes contracts, purely internal divisions corporation. B-54. footnote, ourt denigrates analysis observing "reveals 338, 16. safeguards involving subsequently 98. 338-339, 17. concluded, nationwide retaining reasoning enjoyed benefits customers, risks investment development, expenditures." B-56—B-57.

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