Document: 462 U.S. 176 103 S.Ct. 2296 76 L.Ed.2d 497 EXXON CORPORATION, et al., Appellants,v.Ralph EAGERTON, Jr., Commissioner of Revenue Alabama, al. EXCHANGE OIL AND GAS Appellants, v. Ralph P. the State Alabama. Nos. 81-1020, 81-1268. Argued Feb. 22, 1983. Decided June 8, Syllabus An Alabama statute imposes a severance tax on oil and gas extracted from wells located in State. In 1979, (Act 79-434) was enacted which increased tax, exempted royalty owners increase, prohibited producers passing increase to consumers. Appellant were parties pre-existing contracts that provided for allocation taxes among themselves, owners, any nonworking interests. The also required purchasers reimburse appellants paid. After paying under protest, other filed suit an state court, seeking declaratory judgment Act 79-434 unconstitutional refund Concluding both royalty-owner exemption pass-through prohibition violated Equal Protection Clause Fourteenth Amendment Contract Clause, pre-empted by Natural Gas Policy 1978 (NGPA), trial court held invalid its entirety ordered appellee taxes. Supreme Court reversed. Held: 1. federal law insofar as it applied sales interstate commerce, but not intrastate commerce. Pp. 180-187. (a) Act, 1938, intended occupy field wholesale natural Alabama's trespassed upon authority Federal Energy Regulatory Commission (FERC) regulate prices sold bars increasing their pass particular expense—the tax—to purchasers. Whether or should be permitted recover this expense is matter within sphere FERC's regulatory authority. 184-186. (b) Although NGPA extended control market, Congress extension did deprive States power establish price ceiling at level lower than ceiling. Since may ceiling, impose forbid sellers through customers. Pp.186-187 2. does violate since nullify contractual obligation beneficiaries. provides only incidence shall fall nowhere states shift burden owners. 187-189. 3. Nor Clause. While affected obligations beneficiaries, constitute "Law impairing Obligations Contracts" meaning imposed generally applicable rule conduct, main effect shield consumers increase. Its existing permitting incidental. Cf. Producers Transportation Co. Railroad Comm'n California, 251 228, 40 131, 64 L.Ed. 239. 189-194. 4. Neither nor violates Both measures muster standard rationality considering equal protection challenges statutes regulating economic commercial matters. plainly bore rational relationship State's legitimate purpose protecting excessive prices. Similarly, Legislature could have reasonably determined would encourage investment production. 195-196. 404 So.2d 1 (Ala.1981), affirmed part, reversed remanded. Rae M. Crowe, Mobile, Ala., No. C.B. Arendall, 81-1020. John J. Breckenridge, Montgomery, appellees cases. Justice MARSHALL delivered opinion Court. This case concerns wells, Appellants challenge Supremacy 2 * 1945 has Code Ala. § 40-20-1 seq. "is levied such il proportion ownership time severance, . paid person charge production operations." 40-20-3(a).1 operations "authorized, empowered deduct amount due proportionate herein before making payments producers." 40-20-3(a). defines "producer" "[a]ny engaging continuing business production," including 3 "the owning, controlling, managing, leasing property well, producing manner receiving money valuable consideration rental produced. ." 40-20-1(8). 4 1979 79-434, 4% 6% gross value point Whereas had previously fallen interests produced, amendment specifically increase: 5 "Any who owner exempt payment liable therefor." Acts p. 687, 1, Ala.Code 40-20-2(d), amended. 6 consumers: 7 "The privilege absorbed those persons engaged severing only, producer costs payments, either directly indirectly consumer; being express intent act borne exclusively severer gas." 8 became effective September 1979. repealed May 28, 1980. 1980, 80-708, 1438. 9 81-1020 81-1268 working Alabama.2 They drill operate are responsible selling extracted. obligated pay landowners percentage sale proceeds royalties, depending provisions lease. Within given unit, there tracts land leased interests, entitled share proceeds. providing non-working each party's them all sold. 10 2% eight Circuit Montgomery County, protest. ruled favor appellants, concluding preempted 15 U.S.C. 3301 (Supp. IV). contained severability clause, entire appellee, reversed, holding valid entirety. (Ala.1981). 11 appealed 28 1257(2). We noted probable jurisdiction. 456 970, 102 2231, 72 843 (1982). now affirm reverse remand further proceedings consistent with opinion. II 12 deal first appellants' contention application law.3 principles preemption recently summarized Pacific & Electric Resources Conservation Development Comm'n, --- ----, 1713, 1722, 75 ---- (1983): "Absent explicit preemptive language, supercede altogether found 'scheme regulation so pervasive make reasonable inference left no room supplement it,' 'because touch interest dominant system will assumed preclude enforcement laws same subject,' object sought obtained character reveal purpose.' Fidelity Savings Loan Assn. de la Cuesta, [102 3014, 3022, 73 664] (1982); Rice Santa Fe Elevator Corp., 331 218, 230 [67 1146, 1152, 91 1447] (1947). Even where entirely displaced specific area, extent actually conflicts law. Such conflict arises when 'compliance regulations physical impossibility,' Florida Lime Avocado Growers, Inc. Paul, 373 132, 142-143 [83 1210, 1217, 248] (1963), 'stands obstacle accomplishment execution full purposes objectives Congress.' Hines Davidowitz, 312 52, 67 [61 399, 404, 85 581] (1941)." 13 contend 110(a) NGPA, 3320(a) V), pertinent part follows: 14 " considered exceed maximum lawful if exceeds necessary recover— (1) attributable seller *." 16 agree Alabama4 provision. On face give affirmative right include his It simply deemed exceeded he been included. Nothing legislative history called our attention indicate greater language indicate.5 17 thus we nevertheless conclude To extent, represented attempt legislate chosen occupy. (Gas Act), 52 Stat. 821, amended, §§ 717-717w (1976 ed. Supp. III), 1938 "to provide Power Commission, FERC, pricing flow commerce wellhead delivery consumers." Maryland Louisiana, 451 725, 748, 101 2114, 2130, 68 576 (1981). As recognized, e.g., Phillips Petroleum Wisconsin, 347 672, 682-683 (1954); id., 685-687, 74 794, 799, 800-02, 98 1035 (Frankfurter, J., concurring), largely unregulated result absence action decisions striking down committee reports bill clearly evidence intent: 18 "[S]ales resale, so-called sales, (for example, companies distributing companies) local and, even Congressional action, subject regulation. basic present legislation act." H.R.Rep. 709, 75th Cong., 1st Sess. 1-2; S.Rep. 1162, 1-2 (citations omitted) (emphasis added). 19 over barred See FPC United Pipe Line Co., 386 237, 243, 87 1003, 1007, (1967) added): 20 "One [the FPC's] statutory duties determine just rates sufficient permit company service return investment. Cost servic therefore major focus inquiry. Normally included cost proper allowance 21 Here, "interfere[d] determination associated U.S., 749, S.Ct., 2130. Just issue Louisiana because effectively "shift[ed] certain expenses ultimate consumer processed without prior approval FERC," 750, 2131, preempted, producers. 22 reach different conclusion respect commerce.6 105(a) 3315(a), Section 602(a) 3432(a) IV), 23 "[n]othing chapter affect enforce produced price, any, subchapter I chapter." 24 Reserves Group, Kansas Light 697, 710, 569 (1983) (in enacting "Congress explicitly envisioned markets accordance overall national policy"). 25 think For charging allowed law, coupled differ practical imposition maintains cases absorb they might able customers absent restrictions. Given provision Congress' one form regulation, do can fairly inferred contemplated general scheme created another more intrusive.7 26 III 27 turn next impaired violation Clause.8 Appellants' fails simple reason nothing suggest nullified beneficiaries.9 relevant portion legal i.e., cannot look additional contrast prohibition, whole anything below interpreted effect. strain constitutional question speculating courts future interpret arrangement Ashwander TVA, 297 288, 346-347, 56 466, 482, 80 688 (1936) (Brandeis, concurring). B 29 Unlike exemption, restrict sold.10 entered into terms period during By barring purchasers, pro tanto purchasers' 30 affects follow constituted Trust New Jersey, 431 21, 97 1505, 1517, 92 (1977). "Although facially absolute, must accommodated inherent police 'to safeguard vital people.' Group supra, 704, quoting Home Bldg. Blaisdell, 290 398, 434, 54 231, 238, 78 413 (1934). long recognized restricting, altogether, performance enactment. Allied Structural Steel Spannaus, 438 234, 241-242, 2716, 2720-21, 57 727 (1978). If otherwise, "one obtain immunity private arrangements." 1517. 31 "broad adopt concerned impaired, destroyed, result." Holmes put it, whose rights, are, restriction, remove contract about them. carry infirmity matter." Hudson McCarter, 209 349, 357, 529, 531, 828 (1908) (Holmes, J.).11 Thus, beer into, Beer Massachusetts, 25, 989 (1878), lotteries lottery tickets issued, Stone Mississippi, 814, 1079 (1880), workmen's compensation employers employees operating employment made work-related injuries, York Central R. White, 243 188, 37 247, 61 667 (1917).12 32 Like upheld these cases, prescribe limited remedies, instead conduct designed advance "a broad societal interest," 249, 2724: producers, regardless whether happened increases contain incidental shielding Henderson Thompson, 300 258, 266, 447, 451, 81 632 (1937); 32. 33 Because sharply distinguishable struck supra. involved Jersey sole repeal covenant two holders bonds issued Port Authority Jersey.13 'adjust[ed] rights responsibilities contracting parties.' 244, 2722, employer contracted pension benefits benefits, beyond agreed provide, terminated plan closed Minnesota office. agreements, alter duties. Worthen Kavanaugh, 295 56, 55 555, 79 1298 (1935) (statute drastically remedies avail ble mortgagees Clause). 34 prohibit confirmed several rejecting rate-setting schemes established contract. Midland Realty City 109, 345, 540 (1937), party long-term utility invoke public commission's rate steam heating higher declared annul between utilities customers." Id., 113, 346 (footnote omitted). Union Dry Goods Georgia Public Service 248 372, 39 117, 63 309 (1919), rejected order commission setting charged supplying electric light power, notwithstanding contracts. Accord, Stephenson Binford, 287 251, 53 181, 77 288 (1932) (upholding carriers using highways unless charge). 35 239 (1920), particularly instructive purposes. newly empowering set individuals corporations offering transport pipeline. pipeline override preexisting contracts: 36 "That some adopted material. A common carrier transportation mortgaging pledging income prevent postpone exertion carrier's practices. clause Constitution interpose power." 232, 133. There material difference us. immune subsequently transportation, sell likewise commodities. And dictating customers, requiring themselves rather permissible contracts, well.14 IV 38 Finally, reject exemption. neither challenged adversely fundamental interest, see, Dunn Blumstein, 405 330, 336-342, 995, 999-1003, 274 (1972); Shapiro 394 618, 629-631, 89 1322, 1328-30, 600 (1969), contains classification based suspect criterion, Graham Richardson, 403 365, 1848, 1852, 534 (1971); McLaughlin Florida, 379 184, 191-192, 283, 287-89, 222 (1964), need tested lenient h traditionally See, Western Southern Life Ins. Board Equalization, 648, 668, 2070, 2083, 514 (1981); Clover Leaf Cemetery 449 456, 461-463, 715, 722-23, 66 659 Kotch River Pilot Comm'rs, 330 552, 564, 910, 916, 1093 Under sustained legislature concluded promote purpose. 2083; 461-462, 464, 722, 723-24. here standard. Our reinforced fact solely measure. stated Regan Taxation Representation Washington, 1997, 2002, (1983), "Legislatures especially latitude creating classifications distinctions statutes." Lehnhausen Lake Shore Auto Parts 410 356, 359, 93 1001, 351 (1973); Stores Ohio Bowers, 358 522, 526-527, 437, 440, 480 (1959). V foregoing reasons, uphold against remainder amendments partial invalidity entitles note 6, Accordingly, remanded 41 ordered. payable constitutes lien possession original purchaser unmanufactured condition." Exxon Gulf Oil Land Exploration Exchange Getty California. "[t]his Constitution, Pursuance thereof supreme Law Thing Laws contrary notwithstanding." Art. VI, cl. Emergency 1973 (EPAA), 751 promulgated thereunder, jurisdiction consider contention. decision discuss issue, highest failed question, omission want presentation courts, aggrieved affirmatively show contrary." Fuller Oregon, 417 40, 50 n. 11, 94 2116, 2123 642 (1974), Street York, 576, 582, 1354, 1360, 572 (1969). No showing here. EPAA, Juris. Stmt. 3, examination reveals mention EPAA. record us raised court. address EPAA brief Brief Appellees Placid 51-53, issue. circumstances oil, appear decided below. Bailey Anderson, 326 203, 206-207, 66, 68, 90 (1945). practice appellate issues appeal. Newberry, 336 182 (1976); Graf, 280 71, 189 912, 913 (1966); Burton Burton, 617, 618 (Ct.Civ.App.1980); Crews Houston Dept. Pensions Security, 455 (Ct.Civ.App.1978), cert. denied, 456. burdened labored argument denied process refusal which, according shows apply county statewide. Suffice t say weight So.2d, 6: "Nowhere section [§ 3320 NGPA] 'pass-through' Rather, merely states. aimed words, although perfectly raise gas, limitations requires mandated Relying passage, contends bar label tax: believes resulting f gas. adopting perceived levying consumer. Therefore anyone along tax." 16-17 original). leave free tell what doing. limitation, understand below, passage relied amicus statement Conference Report "[a]ll exclusive .," H.R.Conf.Rep. 95-1752, 95th 2d (1978), U.S.Code Cong. Admin.News 1978, 8800, 9007, see how supports position 110(a). stipulated substantial JA 78, 184-185. much If, remand, inquires severability, infra, 196-197, holds passed sold, made. involve factor labor machinery. considerations inducement create away producti n applied. "[n]o Obligation Contracts. Const., I, 10, entitle reimbursement owners' owner. cite following typical agreements exemption: "Lessor bear pay, deducted royalties hereunder, Lessor's of: "(a) All premises." JA76-77. "LESSOR LESSEE respective participation minerals covered hereby thereof, lease premises thereof." JA184. These seem itself still objection event, obligation, shown exempti merit. appellant concerning "100 percent excess April 1976." aptly early prohibiting issuance notes unincorporated banking associations preventing members associations: "[I]t sai formed dissolved stoppage business. then? Is States? Consider construction lead. Let suppose, gaming, cock-fighting, horse-racing, masquerades, carrying state, seriously convinced pernicious institutions, venture interdict them: contended, violated?" Myers Irwin, S. (Pa.) 367, 372 (1816). 436-437, 239; 475-477, 253-54 (Sutherland, dissenting); Dillingham McLaughlin, 264 370, 374, 44 362, 364, 742 (1924) ("The operation headed off reaching future.") J.); Manigault Springs, 199 473, 480, 127, 130, (1905) ("parties entering estop good"); Ogden Saunders, 213, 291, 606 (1827) (when "laws rendering unlawful, incidentally, government puts end contract, yet ever imagined thereby contract"); Hale, Clause: II, Harv.L.Rev. 621, 671-674 (1944). review implicated special impairment own obligations. 25-28, 1519-21; 14, 705 14. buttressed industries heavy 708 ("Price existed forese type obligations."); Veix Sixth Ward Bldg Assn., 310 32, 38, 60 792, 84 1061 (1940) ("When purchased enterprise already regulated objects, topic."). With 184-186; - 706-709. During effect, controlled crude Allocation Regulations most categories oil. CFR 212, Subpart D—Producers Crude Oil, 212.71 reliance Barwise Sheppard, 299 33, 70, (1936), misplaced. Texas new production, "ratably interested interests." authorized withhold tax. specified shares lessee deliver "free cost." 35, 70-71. contended statute, authorizing them, impermissibly lessee's run afoul "[T]he subordination apportion lessors lessee. Plainly stipulation duty fix mode payment. true though admissible stipulate who, ultimately 72. appellant's assertion last sentence quotation meant if, specifying agreement thrust allocate saw fit, limit decide specify confirms Part III-A,

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