Opinion ID: 436086
Heading Depth: 2
Heading Rank: 1

Heading: The Congressional Purpose in Mandating Just and Reasonable Oil Pipeline Rates

Text: 14 In 1906, Congress adopted the Lodge Amendment to the Hepburn Act, which extended the definition of common carrier in the Interstate Commerce Act 17 to encompass interstate oil pipelines, and, as a consequence, required pipeline rates to be just and reasonable. 18 In Williams, FERC embarked on a close study of the climate of opinion that existed when Congress passed the Lodge Amendment. In doing so, FERC primarily examined the works of Ida Tarbell, a progressivist of the turn of the century, who has been credited with inflam[ing] the public's long-standing hostility to the [Standard Oil] combination as nothing before had. 19 FERC concluded that the Lodge Amendment was motivated by the desire to bust the Standard Oil trust. 20 15 FERC also found that in the early twentieth century the Standard Oil Company maintained its dominance over the entire American oil business by setting its pipeline rates at such extraordinarily high levels that access to the pipelines (and hence to important downstream markets) was cut off. See 21 FERC at 61,597. From this observation, FERC concluded that the Congress, in mandating that oil pipeline rates be just and reasonable, intended to outlaw only outrageously high rates: Prohibitive rates were a means to that end [of dominating American oil markets]. Congress wanted to forbid both the use of the means and the attainment of the end. The policy at which it fired was a policy of 'prohibitive' pricing. Id. In the belief that [t]he phrase in question, 'just and reasonable,' is a high-level abstraction[,] ... a mere vessel into which meaning must be poured, id. at 61,594, and considering numerous differences in the reasons for the establishment of a regulatory scheme over public utilities, such as electric companies, as opposed to transportation companies, such as oil pipelines, id. at 61,591-96, FERC determined that: 16 the authors of the Hepburn Act's oil pipeline provisions did not use the words just and reasonable in the sense in which public utility lawyers have used them since the 1940's. 17 We think that what was meant was not public utility reasonableness, but ordinary commercial reasonableness. To be specific, we discern no intent to limit these carriers' rates to barebones cost. What we perceive is an effort to restrain gross overreaching and unconscionable gouging. 18 Id. at 61,597. Thus, on the basis of this historical survey, FERC interpreted the statutory mandate that oil pipeline rates be just and reasonable to require only the most lighthanded regulation, with no necessary connection between revenue recoveries and the cost of service.