Source: http://openjurist.org/338/us/464
Timestamp: 2017-01-22 13:01:51
Document Index: 223281250

Matched Legal Cases: ['§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 7', '§ 1', '§ 1', '§ 717', '§ 717', '§ 717', '§ 717']

338 US 464 Federal Power Commission v. East Ohio Gas Co | OpenJurist
338 U.S. 464 - Federal Power Commission v. East Ohio Gas Co Homethe United States Reports338 U.S.
338 US 464 Federal Power Commission v. East Ohio Gas Co 338 U.S. 464
70 S.Ct. 266
94 L.Ed. 268
FEDERAL POWER COMMISSIONv.EAST OHIO GAS CO. et al.
Rehearing Denied Feb. 20, 1950.
See 339 U.S. 905, 70 S.Ct. 515.
[Argument of Counsel from page 465 intentionally omitted]
Section 1(b) of the Natural Gas Act1 provides that the 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 * * * 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 * * *.' Section 2(6) defines 'natural-gas company' as 'a person engaged in the transportation of natural gas in interstate commerce * * *.' The Federal Power Commission, after hearings, found as facts that respondent East Ohio Gas Company was a natural-gas company and subject to the Commission's jurisdiction.2 On these and subsidiary findings the Company was ordered to keep accounts and submit reports as required by the Act.3 The Commission rejected the Company's contentions4 that its operations were not covered by the Act and that the expense of supplying the required information was so great as to transgress statutory and constitutional limits.5 The Court of Appeals for the District of Columbia, without reaching other contentions, reversed the Commission's orders on the ground that the Company was not 'engaged in the transportation of natural gas in interstate commerce within the meaning of the Act'.6 Importance of the questions to administration of the Act prompted us to grant certiorari. 337 U.S. 937, 69 S.Ct. 1516, 93 L.Ed. 1742.
That this continuous flow of gas from other states to and through East Ohio's high-pressure lines constitutes interstate transportation has been established by numerous previous decisions of this Court. The gas does not cease its interstate journey the instant it crosses the Ohio boundary or enters East Ohio's pipes, even though that Company operates completely within the state where the gas is finally consumed. Respondents do not and cannot claim that their gas is not in interstate commerce.7 As we held in Interstate Natural Gas Co. v. Federal Power Comm., 331 U.S. 682, 688, 67 S.Ct. 1482, 1486, 91 L.Ed. 1742, the meaning of 'interstate commerce' in this Act is no more restricted than that which theretofore had been given to it in the opinions of this Court.
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., 332 U.S. 507, 516, 68 S.Ct. 190, 195, 92 L.Ed. 128, § 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 pipe lines. 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 pipe lines with a view to conserving one of the country's valuable but exhaustible energy resources.'8 We hold that the word 'transportation' like the phrase 'interstate commerce' aptly describes the movements of gas in East Ohio's High-pressure pipe lines.9
Respondents also contend that East Ohio is exempt from the Act because all its facilities come within the proviso in § 1(b) making the Act inapplicable 'to the local distribution of natural gas or to the facilities used for such distribution'. But what Congress must have meant by facilities' for 'local distribution' was equipment for distributing gas among consumers within a particular local community, not the high-pressure pipe lines transporting the gas to the local mains. For in decisions prior to enactment of the statute this Court had sharply distinguished between the two: it had made it clear that the national commerce power alone covered the high-pressure trunk lines to the point where pressure was reduced and the gas entered local mains, while the state alone could regulate the gas after it entered those mains.10 The legislative history shows that the attention of Congress was directly focused on the cases drawing this distinction. It was because these cases had barred federal regulation of community supply systems that the Committee Report could correctly describe the 'local distribution' proviso as surplusage which was 'not actually necessary.'11 We are wholly unpersuaded that Congress intended to treat trunk lines like East Ohio's as though they were mere integrated facilities of the numerous community supply systems which they service. Indeed, as respondents admitted upon oral argument here, the logical consequence of such a principle would be that even a pipe line stretching from Texas to Cleveland would be completely exempt from the federal Commission's jurisdiction if it were owned by East Ohio. To draw such a strained inference from the congressional exemption of local distribution systems would ignore the importance of nationally controlling interstate pipe lines in order to preserve 'equality of opportunity and treatment among the various communities and states concerned.' State of Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310, 44 S.Ct. 544, 546, 68 L.Ed. 1027.
What we have said indicates that East Ohio comes squarely within the coverage of the Act as set out in §§ 1(b) and 2(6). Nevertheless respondents contend that this express coverage is restricted by the broad purpose of the Act to provide federal regulation only for those companies which states could not regulate. Urging that all of East Ohio's business is fully subject to regulation by the state, they rely on statements by this Court that Congress intended not to cut down state regulatory power, but rather to supplement it by closing 'the gap created by the prior decisions.' Panhandle Eastern Pipe Line Co. v. Public Service Comm., 332 U.S. 507, 517—519, 68 S.Ct. 190, 195—196, 92 L.Ed. 128; see also Public Utilities Comm. of Ohio v. United Fuel Gas Co., 317 U.S. 456, 467, 63 S.Ct. 369, 375, 87 L.Ed. 396. We adhere to those statements. But prior constitutional decisions, not what we have since decided or would decide today, form the measure of the gap which Congress intended to close by this Act. Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 508, 62 S.Ct. 384, 388, 86 L.Ed. 371; and see Parker v. Motor Boat Sales, 314 U.S. 244, 250, 62 S.Ct. 221, 225, 86 L.Ed. 184.
In a series of cases repeatedly called to the attention of the House Committee,12 this Court had declared that states could regulate interstate gas only after it was reduced in pressure and entered a local distribution system. Public Utilities Comm. v. Landon, 249 U.S. 236, 243, 39 S.Ct. 268, 63 L.Ed. 577; State of Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310, 44 S.Ct. 544, 546, 68 L.Ed. 1027; Poublic Utilities Comm. v. Attleboro Steam & Electric Co., 273 U.S. 83, 89, 47 S.Ct. 294, 496, 71 L.Ed. 549; and see East Ohio Gas Co. v. Tax Comm., 283 U.S. 465, 470 472, 51 S.Ct. 499, 500—501, 75 L.Ed. 1171.13 Under these decisions state regulatory power could not reach high-pressure trunk lines and sales for resale. This was the 'gap' which Congress intended to close. It therefore acted under the federal commerce power to regulate what these decisions had indicated that the states could not. We have already held that in so doing Congress subjected to federal regulation a company transporting interstate gas, and selling it for resale, wholly within one state. Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371.14 The only respect in which East Ohio differs from that company is that it sells gas direct to consumers rather than for resale. This difference is immaterial. For as we have already pointed out, East Ohio comes directly within the express provision granting power to the Commission to regulate 'transportation of natural gas in interstate commerce,' just as the Illinois company came directly within the express provision covering sale for resale. And in the light of the Illinois Gas decision we cannot see how the 'local distribution' proviso can be construed as encompassing all of East Ohio's operations throughout the state. That proviso cannot mean one thing for "transportation' and another where 'sale for resale' is involved.
Here as elsewhere, once a company is properly found to be a 'natural gas company,' no state can interfere with federal regulation. That a state commission might also have some regulatory power would not preclude exercise of the Commission's function. Connecticut Light & Power Co. v. Federal Power Comm., 324 U.S. 515, 533, 65 S.Ct. 749, 757, 89 L.Ed. 1150; Public Utilities Comm. v. Attleboro Steam & Electric Co., 273 U.S. 83, 89—90, 47 S.Ct. 294, 296, 71 L.Ed. 549. Nor does the Act purport to abolish all overlapping. Section 5(b), for example, provides that the Commission may 'investigate and determine the cost of the production or transportation of natural gas by a natural-gas company in cases where the Commission has no authority to establish a rate governing the transportation or sale of such natural gas.' 52 Stat. 824. Yet clearly the state agency establishing such a rate would have equivalent authority.
A contention not passed on by the Court of Appeals but urged here by respondents, is that compliance with the Commission's accounting and report orders would impose so great a burden on East Ohio 'as to make such orders transgress statutory and constitutional limits.' Our attention is not specifically referred to anything in the record showing that the Commission has required East Ohio to adopt any particular accounting method or make any particular report not reasonably related to the Commission's granted powers in this respect.15 Nor did the Commission fail to make proper findings to support its order. All of the Commission requirements affirmatively appear to call for the precise kind of accounting system, information, and reports that Congress deemed relevant and necessary for the Commission to have in performing its regulatory duties. The principles of law governing such requirements were adequately set out by Mr. Justice Cardozo speaking for the Court in American Telephone & Telegraph Co. v. United States, 299 U.S. 232, 57 S.Ct. 170, 81 L.Ed. 142. See also Northwestern Electric Co. v. Federal Power Comm., 321 U.S. 119, 64 S.Ct. 451, 88 L.Ed. 596. Measured by these criteria for judicial review of such orders, we find no reason to reject the Commission's findings that the orders here issued were necessary and proper as applied to East Ohio. And as to the cost of compliance, it is sufficient to say as the Court said in the American Telephone & Telegraph case, supra, 299 U.S. at page 247, 57 S.Ct. at page 177, 81 L.Ed. 142: 'The evidence does not show that the expense * * * will lay so heavy a burden upon the companies as to overpass the bounds of reason.'16
Today's anomalous result whereby the Commission is given regulatory power over the intrastate distribution facilities of a gas company over whose sales it admittedly has no jurisdiction is based upon the premise that paramount in Congress' mind in dealing with cases prior to passage of the Act, was, not the holdings of applicable cases relating to regulation, but the peculiarly mechanistic formula employed principally in 1931 in East Ohio Gas Co. v. Tax Comm., 283 U.S. 465, 51 S.Ct. 499, 75 L.Ed. 1171,1 as a means of holding that the State of Ohio could levy an excise tax based on the entire gross receipts from sales to local consumers by an interstate gas company.
But even if the Court is to shift to the doctrine that Congress casts its Acts forever in the mold made by prior decisions of this Court, the pressure-reduction station now relied upon to limit 'local' had lost its standing even in tax cases and never was accepted in regulation cases. If Congress was interested in tax case criteria when it passed the Natural Gas Act, it must have known of this Court's disdainful disregard of pressure changes in favor of emphasis on the difference between wholesale and retail distribution less than half a year after the East Ohio tax decision. State Tax Comm. v. Interstate Natural Gas Co., 284 U.S. 41, 52 S.Ct. 62, 76 L.Ed. 156.2
The Court's opinion professes to adhere to these statements relating to the gap Congress intended to close. But it first widens the gap, squarely upon the premise that, under decisions of this Court called to Congress' attention prior to passage of the Act, the state regulatory power could not reach transmission lines for interstate gas outside the point of reduction in pressure. Actually, no decision could have been called to the attention of Congress, and none is or can be cited today, in which this Court held that any of the intrastate transmission lines of any retail gas, electric or similar company, within or without the pressure-reduction point, were beyond the state regulatory authority. Nor was this question even at issue in any case cited by the Court in support of its premise. That is not to say that the question was not considered, however. Quite to the contrary, less than two months before passage of the Natural Gas Act, this Court, through the pen of Mr. Chief Justice Hughes, in a case not cited by the Court, declared that such transmission lines were properly within the sphere of state ratemaking powers. Lone Star Gas Co. v. Texas, 304 U.S. 224, 551, 58 S.Ct. 883, 82 L.Ed. 1304.3 And so if Congress were consulting the decisions of this Court to define the gap in state power, which it must fill with the Commission's function, it found the latest, and all but unanimous one, to declare that no gap such as the Court perceives today was then existent.
Although the scope of the Natural Gas Act was not limited to sales of natural gas in interstate commerce for resale, it must be recognized that, if any one thing is clear from the legislative history of this Act, it is that Congress' paramount concern was to establish regulation of such prices.4 And it must likewise be recognized that, whatever of our old doctrines may have been frozen into the Act, could not include the point of pressure reduction and entrance into municipal lines as the measure of state regulatory authority, for no such doctrine can be found in our cases.
Of course, this solution does not render meaningless the 'transportation of natural gas in interstate commerce' to which the provisions of the Act apply. For instance it would logically enough give to the Federal Power Commission, under the above 'transportation clause,' exclusive jurisdiction over the main transmission lines of a retail gas company which ran through Ohio and on into New York; but it would leave to Ohio exclusive jurisdiction over lateral lines branching out from the main trunk in Ohio and, whether one or one hundred miles long, devoted exclusively to delivering gas to the burner tips in Ohio communities. Similarly, under the hypothesis constructed in the Court's opinion, wherein East Ohio is pictured as having its own transmission lines extending all the way from Texas, it would give exclusively to the Power Commission jurisdiction over those lines beyond the Ohio border as well as over those within or without the state not devoted exclusively to serving Ohio consumers at retail. Again, it would, quite obviously within the words of the Act, give exclusively to the Power Commission jurisdiction over companies which might act in the nature of common carriers transporting gas in interstate commerce for hire. In short it would give to the transportation clause a meaning which, contrary to today's opinion, does not render surplusage the 'sale in interstate commerce of natural gas for resale' to which the provisions also apply.5
We must not forget that regulatory measures are temporary expedients, not eternal verities—if indeed they are verities at all. Certainly one of the matters on which the states might well be indulged—the right to an opinion of their own—is as to the accounting methods of a utility whose whole property and business being accounted for is within the state. Out of their diversity of practice and experience emerge pragmatic tests. What the Federal Power Commission seeks to require of this Ohio gas company, for example, is to revert by accounting methods to emphasis on original cost, a basis which William Jennings Bryan for an earlier generation of progressives eloquently urged this Court to reject in the field of railroad rate-making. Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819. See Mr. Bryan's argument, 169 U.S. at page 489. That is a basis of which, last month, we said in another connection, 'Original cost is well termed the 'false standard of the past' where, as here, present market value in no way reflects that cost.' United States v. Toronto, Hamilton & Buffalo Navigation Co., 338 U.S. 396, 403, 70 S.Ct. 217, 221. It must be remembered that closer than any federal agency to those they regulate and to their customers are the state authorities, whose mechanisms are less cumbersome and whose principles can much more quickly be adjusted to the changing times.
52 Stat. 821, as amended by 56 Stat. 83, 15 U.S.C. § 717 et seq., 15 U.S.C.A. § 717 et seq.
See, e.g., Colorado-Wyoming Gas Co. v. Federal Power Commission, 324 U.S. 626, 65 S.Ct. 850, 89 L.Ed. 1235; Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 503—504, 62 S.Ct. 384, 385—386, 86 L.Ed. 371. See also East Ohio Gas Co. v. Tax Commission, 283 U.S. 465, 470, 51 S.Ct. 499, 500, 75 L.Ed. 1171; The Daniel Ball, 10 Wall. 557, 19 L.Ed. 999.
In both Public Utilities Comm. v. Landon, 249 U.S. 236, 245, 39 S.Ct. 268, 269, 63 L.Ed. 577, and Pennsylvania Gas Co. v. Public Service Comm., 252 U.S. 23, 28, 40 S.Ct. 279, 280, 64 L.Ed. 434, this Court held that states could regulate retail sales of interstate gas to local consumers. In the Landon case the Court reasoned that state control of a local distributing company was permissible because 'interstate movement ended when the gas passed into local mains.' (249 U.S. 236, 39 S.Ct. 270.) The Pennsylvania Gas decision, however, was based on a completely different line of reasoning. The Court held that the gas continued in interstate commerce until it reached the burner tips, but nevertheless permitted state regulation because retail sales presented a problem of local rather than national concern. In State of Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310, 44 S.Ct. 544, 546, 68 L.Ed. 1027, the Court resolved these conflicting doctrines by readopting the Landon rule. It limited the Pennsylvania Gas holding to its precise facts by interpreting that decision as resting solely on the Landon principle that states could regulate charges for service to local consumers. Public Utilities Comm. v. Attleboro Steam & Electric Co., 273 U.S. 83, 89, 47 S.Ct. 294, 296, 71 L.Ed. 549, reaffirmed this choice of doctrine, applying it to a company which like East Ohio, transmitted its product (electricity) wholly within one state. In East Ohio Gas Co. v. Tax Comm., 283 U.S. 465, 470—472, 51 S.Ct. 499, 500—501, 75 L.Ed. 1171, the Court recognized that the doctrine of Pennsylvania Gas extending interstate commerce to the burner tips was in conflict with and must yield to the doctrine of the Landon and Kansas Gas cases. See note 13 infra. Thus when the Natural Gas Act was passed this Court's decisions had already resulted in a sharp cleavage between local distribution facilities and high-pressure pipe lines serving those facilities.
The Report stated that the proviso was '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.' H.R.Rep. No. 709, 75th Cong., 1st Sess., pp. 3—4. This could only mean that the phrase 'interstate commerce' was construed by the Committee, as it had been by this Court, to exclude 'local distribution.'
See note 10 supra. The East Ohio case cited above concerned the question of whether the company was subject to state taxes. The tax doctrines involved are irrelevant here. Undeniably relevant, however, is the fact that Congress directly considered the doctrine of interstate commerce enunciated in that case: that transportation of out-of-state gas to the local system 'is essentially national—not local—in character and is interstate commerce within as well as without that state.' 283 U.S. 465, 470, 51 S.Ct. 499, 500, 75 L.Ed. 1171.
The orders here primarily rest on Commission regulations pursuant to the following sections. Section 6(b) authorizes the Commission to require a natural gas company to file 'an inventory of all or any part of its property and a statement of the original cost thereof, and * * * keep the Commission informed regarding the cost of all additions, betterments, extensions, and new construction.' 52 Stat. 824, 15 U.S.C. § 717e(b), 15 U.S.C.A. § 717e(b). Section 8(a) makes it the duty of such companies to keep 'such accounts, records of cost-accounting procedures,' etc., as the Commission may by rules and regulations prescribe. Section 10(a) similarly requires 'annual and other periodic or special reports'. Section 5(b) authorizes the Commission to 'investigate and determine the cost of the * * * transportation of natural gas by a natural-gas company' even where the Commission has no authority to establish rates for the transportation or sale of that gas. Section 16 vests the Commission with broad powers to prescribe general orders, rules and regulations found 'necessary or appropriate to carry out the provisions of this act.'
H.R.Rep.No.709, 75th Cong., 1st Sess. 1—2, adopted without change in S.Rep.No.1162, 75th Cong., 1st Sess. 1—2, said of the proposed bill which became the Natural Gas Act: '* * * The States have, of course, for many years regulated sales of natural gas to consumers in intrastate transactions. The States have also been able to regulate sales to consumers even though such sales are in interstate commerce, such sales being considered local in character and in the absence of congressional prohibition subject to State regulation. See Pennsylvania Gas Co. v. Public Service Commission (1920), 252 U.S. 23 (40 S.Ct. 279, 64 L.Ed. 434). There is no intention in enacting the present legislation to disturb the States in their exercise of such jurisdiction. However, in the case of sales for resale, or so-called wholesale sales, in interstate commerce (for example, sales by producing companies to distributing companies) the legal situation is different. Such transactions have been considered to be not local in character and, even in the absence of Congressional action, not subject to State regulation. (See (State of) Missouri v. Kansas (Natural) Gas Co. (1924), 265 U.S. 298 (44 S.Ct. 544, 68 L.Ed. 1027), and Public Utilities Commission v. Attleboro Steam & Electric Co. (1927) 273 U.S. 83 (47 S.Ct. 294, 71 L.Ed. 549)). The basic purpose of the present legislation is to occupy this field in which the Supreme Court has held that the States may not act.'