Document ID: ./input/supremecourt_opinions/opinions/14pdf/13-271_j4ek.pdf
Page Number: 8.0

Cite as:  575 U. S. ____ (2015) 

5 

Opinion of the Court 

lines  would  typically  buy  gas  from  field  producers  and 
resell  it  to  local  distribution  companies  for  resale.  See 
Tracy,  supra,  at  283.    FERC  (or  FPC),  acting  under  the
authority  of  the  Natural  Gas  Act,  would  set  interstate
pipeline  wholesale  rates  using  classical  “cost-of-service” 
ratemaking methods.  See Public Serv. Comm’n of N. Y. v. 
Mid-Louisiana  Gas  Co.,  463  U. S.  319,  328  (1983).    That 
is,  FERC  would  determine  a  pipeline’s  revenue  require­
ment  by  calculating  the  costs  of  providing  its  services, 
including  operating  and  maintenance  expenses,  deprecia­
tion expenses, taxes, and a reasonable profit.  See FERC, 
Cost-of-Service Rates Manual 6 (June 1999).  FERC would 
then  set  wholesale  rates  at  a  level  designed  to  meet  the 
pipeline’s revenue requirement. 

Deregulation  of  the  natural-gas  industry,  however,
brought about changes in FERC’s approach.  In the 1950’s, 
this  Court  had  held  that  the  Natural  Gas  Act  required 
regulation  of  prices  at  the  interstate  pipelines’  buying
end—i.e.,  the  prices  at  which  field  producers  sold  natural 
gas to interstate pipelines.  Phillips Petroleum Co., supra, 
at 682, 685.  By the 1970’s, many in Congress thought that
such  efforts  to  regulate  field  prices  had  jeopardized
natural-gas supplies in an industry already dependent “on 
the caprice of nature.”  FPC v. Hope Natural Gas Co., 320 
U. S.  591,  630  (1944)  (opinion  of  Jackson,  J.);  see  id.,  at 
629 (recognizing that “the wealth of Midas and the wit of 
man  cannot  produce  . . .  a  natural  gas  field”).    Hoping  to
avoid  future  shortages,  Congress  enacted  forms  of  field
price  deregulation  designed  to  rely  upon  competition, 
rather than regulation, to keep field prices low.  See, e.g.,
Natural Gas Policy Act of 1978, 92 Stat. 3409, codified in
part at 15 U. S. C. §3301 et seq. (phasing out regulation of 
wellhead  prices  charged  by  producers  of  natural  gas); 
Natural  Gas  Wellhead  Decontrol  Act  of  1989,  103  Stat. 
157 (removing price controls on wellhead sales as of Janu­
ary 1993).