Source: https://supreme.justia.com/cases/federal/us/331/682/
Timestamp: 2019-04-22 08:31:04+00:00

Document:
A natural gas company subject to the Natural Gas Act of 1938, 52 Stat. 821, produces some gas and purchases some gas, which it mingles and conducts through a system of field, branch, and main lines (all within a single state) into its main trunk line, whence it is sold to interstate pipeline companies for transportation, resale, and ultimate consumption in other states. The entire movement from the wells to the purchasing companies, through their compression pumps, and across the state lines is a continuous process without interruption for storage, processing or any other purpose.
Held: the Federal Power Commission has jurisdiction under § 1(b) of the Natural Gas Act to regulate such sales. Pp. 331 U. S. 686-693.
(a) Such sales are "in interstate commerce" within the meaning of § 1(b) of the Natural Gas Act. Pp. 331 U. S. 687-689.
(b) They are not within the clause of § 1(b), which excepts "the production or gathering" of natural gas from the Commission's regulatory jurisdiction. Pp. 331 U. S. 689-693.
The Federal Power Commission issued an order under § 5(a) of the Natural Gas Act of 1938, 52 Stat. 821, requiring petitioner to effect substantial rate reductions in certain of its sales of natural gas and to file new schedules of rates and charges. 3 F.P.C. 416. The Circuit Court of Appeals denied a review. 156 F.2d 949. This Court granted certiorari limited to the question of the Commission's jurisdiction. 330 U.S. 852. Affirmed, p. 331 U. S. 693.
Natural Gas Act of 1938. [Footnote 1] After overruling objections to its jurisdiction, the Commission entered an order requiring the petitioner to effect substantial rate reductions in certain of its sales of natural gas and to file new schedules of rates and charges. [Footnote 2] Petitioner, in seeking review of the order in the Circuit Court of Appeals, denied the jurisdiction of the Commission to set rates for the sales in issue in this case and asserted that the rates so established were confiscatory. That Court, one judge dissenting, denied the petition for review. [Footnote 3] We granted certiorari limited to the question of the Commission's jurisdiction.
Petitioner owns and operates 110 natural gas wells and owns or controls over 56,000 acres in the Monroe field of northern Louisiana. Petitioner's main pipeline transports gas southward from the Monroe field through a part of Mississippi and back into Louisiana, where, at Baton Rouge, sales are made to various distributing companies and industrial consumers. Petitioner concedes that, with respect to these operations, it is a natural gas company within the meaning of § 2(6) [Footnote 4] of the Act, and that the Commission has jurisdiction to regulate the rates of sales connected therewith.
wells flows into petitioner's system of field pipelines, moving first into branch lines, then into trunk lines, and finally, into the main trunk lines from which delivery is made to the three purchasing companies. During the course of this movement, petitioner purchases gas from other producers in the field, which gas is introduced into petitioner's system at designated points and is there commingled with the gas moving from petitioner's own wells. By far the larger part of the gas so purchased by petitioner has been gathered from various wells of the selling companies before delivery to petitioner is made. [Footnote 6] The gas moves through petitioner's system at well pressure. Shortly after the sales in question are completed, the gas is directed through the compressor stations of the purchasing companies, and is there subjected to increased pressure in order that it may be moved to markets as far distant as Illinois. The entire movement of the gas from the wells to the purchasing companies through the compressor pumps and across the state lines is a continuous process, without interruption for storage, processing, or for any other purpose. [Footnote 7] All the gas sold in these transactions is destined for ultimate public consumption in States other than Louisiana.
field. [Footnote 8] Counsel for petitioner conceded before the Commission that the prices charged the three pipeline companies were, by agreement, identical with those being charged by other producers in the field. The Commission found that petitioner was an affiliate of one of the three purchasing companies. It was the conclusion of the Commission that the rates charged by petitioner in these sales were "unjust, unreasonable, and unlawful," and ordered rate reductions amounting to $596,320 per year as applied to the volume of gas sold in the test year of 1941.
"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 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."
It is not denied that the transactions in question were sales of natural gas for resale for ultimate public consumption.
Petitioner has raised two issues: First, it is contended, the sales are not "in interstate commerce." Second, the sales are a part of "production or gathering," and hence not within the Commission's power of regulation.
". . . in a constant flow from the mouths of the wells from which it is produced through pipelines belonging to Interstate to the compressor station of the respective purchaser, and thence through said compressor stations into the pipeline of said respective purchaser, and thus into and through states other than Louisiana . . . , all without interruption, and said gas is so destined from the moment of its production."
"The gas transported and sold by Interstate to these three pipeline Companies continues its flow in interstate commerce and, as an established course of business well known to Interstate, is destined for resale for ultimate public consumption in . . . markets outside Louisiana."
". . . commerce between any point in a State and any point outside thereof, or between points within the same State but through any place outside thereof. . . ."
Clearly, the sales in question were a part of commerce being carried on between points in Louisiana and points in other States. There is nothing in that language to suggest that Congress intended that sales consummated before the gas crosses a state line should not be regarded as being "in" such commerce.
The Company contends, however, that, regardless of whether the sales in question are in interstate commerce, those transactions fall within the clause of § 1(b) specifically excepting from the Commission's jurisdiction regulation of " . . . the production or gathering of natural gas." In evaluating that contention, we should not lose sight of the objectives sought to be accomplished by Congress in passing the Natural Gas Act.
jurisdiction of the Commission in any case is to be determined by the resistance or lack of resistance on the part of the State to federal regulation. But, in evaluating the Company's contention that the State's powers have been invaded, we regard it a matter of some significance that, although the State has freely exercised its regulatory powers over the production and gathering of natural gas, there is no evidence of any conflict, present or threatened, in the performing of those functions by the State with the exercise of the jurisdiction of the Federal Power Commission in this case.
for consumption in States other than Louisiana. Unreasonable charges exacted at this stage of the interstate movement become perpetuated in large part in fixed items of costs which must be covered by rates charged subsequent purchasers of the gas including the ultimate consumer. [Footnote 23] It was to avoid such situations that the Natural Gas Act was passed.
For reasons stated above, we have concluded that the Federal Power Commission in this case has not exceeded the jurisdiction conferred upon it by Congress in § 1(b) of the Natural Gas Act.
52 Stat. 821, 56 Stat. 83, 15 U.S.C. § 717 et seq.
"'Natural gas company' means a person engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for resale."
The three companies include the Mississippi River Fuel Corporation, Southern Natural Gas Company, and the United Gas Pipe Line Company, to which gas is sold for the account of the Memphis Natural Gas Company.
Petitioner produced and purchased a total of 51,659,799 Mcf of gas in the Monroe field during 1941. Of this total, petitioner produced from its own wells 28,819,814 Mcf. Of the 22,839,985 Mcf purchased, 95% was gathered by the producers before delivery to petitioner; the remaining 5% was purchased by petitioner directly at the well heads. Petitioner sold 21,863,278 Mcf to the three purchasing companies in the transactions in question.
Gas in the Monroe field is "dry" gas, and consequently is not subjected to any extraction processing. Before moving into the compressor pumps, the gas is run through a series of "scrubbers" which remove dirt and foreign particles. This is accomplished, however, without interruption in the movement.
The transactions in question supply the Mississippi Fuel Corp. with 22% of its requirements, 24% of the requirements of the Memphis Natural Gas Co., and 16.61% of the requirements of Southern Natural Gas Co.
In its complaint filed in the District Court for the Eastern District of Louisiana invoking the equity powers of the Court to restrain the Louisiana Public Service Commission from conducting an investigation into petitioner's rates and charges, petitioner specifically asserted that the sales in question are in interstate commerce, and thus beyond the jurisdiction of the state commission. The District Court granted the requested relief. Interstate Natural Gas Co. v. Public Service Commission, 33 F.Supp. 50; 34 F.Supp. 980.
Shafer v. Farmers' Grain Co., 268 U. S. 189; Lemke v. Farmers' Grain Co., 258 U. S. 50; Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282. And see Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U. S. 498, 314 U. S. 503-504; Currin v. Wallace, 306 U. S. 1, 306 U. S. 10; People's Natural Gas Co. v. Public Service Comm'n, 270 U. S. 550, 270 U. S. 554; Illinois Central R. Co. v. Railroad Comm'n, 236 U. S. 157, 236 U. S. 163. Cf. Milk Control Board v. Eisenberg Farm Products, 306 U. S. 346.
Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U. S. 498, 314 U. S. 508; Peoples Natural Gas Co. v. Federal Power Comm'n, 75 U.S.App.D.C. 235, 127 F.2d 153. Cf. Jersey Central Power & Light Co. v. Federal Power Comm'n, 319 U. S. 61, 319 U. S. 70-71.
Cf. Illinois Natural Gas Co. v. Central Illinois Public Service Co., supra, at 314 U. S. 504-505; State Tax Comm'n v. Interstate Natural Gas Co., 284 U. S. 41, 284 U. S. 44.
Missouri v. Kansas Natural Gas Co., 265 U. S. 298; Public Utilities Comm'n v. Attleboro Steam & Electric Co., 273 U. S. 83; State Corp. Comm'n v. Wichita Gas Co., 290 U. S. 561.
H.R.Rep. No.709, 75th Cong., 1st Sess., 2.
Colorado Interstate Gas Co. v. Federal Power Comm'n, 324 U. S. 581, 324 U. S. 602-603.
The Federal Power Commission has not asserted jurisdiction over all sales taking place in the natural gas fields even though in interstate commerce for resale for ultimate public consumption. In the Matter of Columbia Fuel Corp., 2 F.P.C. 200; In the Matter of Billings Co., 2 F.P.C. 228. We express no opinion as to the validity of the jurisdictional tests employed by the Commission in these cases.
Cf. Colorado Interstate Gas Co. v. Federal Power Comm'n, supra, at 324 U. S. 603; Federal Power Comm'n v. Hope Natural Gas Co., 320 U. S. 591, 320 U. S. 607-612.
The record contains testimony by counsel for petitioner to the effect that these provisions apply to petitioner and that petitioner's operations have conformed with their requirements.
Counsel for the Louisiana Public Service Commission and for two Louisiana municipalities participated in the proceedings before the Federal Power Commission.
A number of cases in this Court have held that the reasonableness of cost items such as that incurred by a purchasing pipeline company in acquiring gas for transportation may be inquired into during the course of subsequent regulation when buyer and seller are affiliated corporations and there is evidence that the sales were not made at arms' length. The Commission found affiliation to exist between petitioner and only one of the three purchasing companies, the Mississippi River Fuel Corporation. There was a finding of "close contractual and operating arrangements" between petitioner and another of the purchasing companies. Natural Gas Pipeline Co. v. Slattery, 302 U. S. 300; Columbus Gas & Fuel Co. v. Public Utilities Comm'n, 292 U. S. 398; Dayton Power & Light Co. v. Public Utilities Comm'n, 292 U. S. 290; Western Distributing Co. v. Public Service Comm'n, 285 U. S. 119; Smith v. Illinois Bell Telephone Co., 282 U. S. 133; United Fuel Gas Co. v. Railroad Comm'n, 278 U. S. 300.

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