Document: 474 U.S. 409 106 S.Ct. 709 88 L.Ed.2d 732 TRANSCONTINENTAL GAS PIPE LINE CORPORATION, Appellantv.STATE OIL AND BOARD OF MISSISSIPPI and Coastal Exploration, Inc., et al. No. 84-1076. Argued Oct. 8, 1985. Decided Jan. 22, 1986. Rehearing Denied March 24, See 475 1099, 1485. Syllabus In 1978, during a period of natural gas shortage, appellant interstate pipeline entered into long-term contracts with appellee Getty Oil Co. others to purchase from common pool in Mississippi. The contract obligated buy only Getty's shares the produced by wells operated. Demand was sufficiently high that also purchased, on noncontract basis, production smaller owners, such as wells. But 1982, consumer demand dropped significantly, began have difficulty selling its gas. It therefore announced it would no longer owners whom had not contracted. cut back so amount equal ownership interest maximum flow. This deprived revenue, because none share being produced. then filed petition Mississippi State Gas Board (Board), asking enforce statewide Rule 48 requiring purchasers without discrimination favor one producer against another same source supply. found violation ordered start taking "ratably" (i.e., proportion various owners' shares) pool, under nondiscriminatory price take-or-pay conditions. On appeal, Circuit Court held Board's authority pre-empted Natural Act 1938 (NGA) or Policy 1978 (NGPA), NGPA effectively overruled Northern v. Corporation Comm'n Kansas, 372 84, 83 646, 9 601, which struck down, pre-emption grounds, state regulation virtually identical order. Supreme affirmed. Held: ratable-take order is NGA NGPA. Pp. 417-425. (a) Congress, enacting NGPA, did alter characteristics comprehensive regulatory scheme provided basis for finding pre-emption. directly undermines Congress' determination supply, demand, high-cost be determined market forces. To extent Congress denied Federal Energy Regulatory Commission (FERC) power regulate prices at pipelines gas, wanted leave supply first-sale market. light intent move toward less regulated national market, decision remove jurisdiction FERC cannot interpreted an invitation States impose additional regulations. 417-423 (b) disturbs uniformity federal scheme, since will forced comply varied regulations their purchasing practices. effect increasing ultimate consumers, thus frustrating goal ensuring low most effectively. 423-425. 457 So.2d 1298, reversed. BLACKMUN, J., delivered opinion Court, BURGER, C.J., BRENNAN, WHITE, MARSHALL, JJ., joined. REHNQUIST, dissenting opinion, POWELL, STEVENS, O'CONNOR, joined, post, p. 425. 1 John Marshall Grower, Jackson, Miss., appellant. 2 Jerome M. Feit, Washington, D.C., F.E.R.C. amicus curiae, support appellant, special Court. 3 Glenn Gates Taylor, appellee. 4 Ed Davis Noble, Jr., Bd. 5 Justice BLACKMUN 6 We are confronted again issue all parties owning interests pool. purchases respective compelled even though has pre-existing than pool's owners. 7 601 (1963), regulation. present case, however, ruled subsequently enacted 92 Stat. 3351, 15 U.S.C. § 3301 seq., nullified vesting over wellhead sale went hold impermissibly burden commerce. Because importance issues functioning we noted probable jurisdiction. 470 1083, 105 1840, 85 140 (1985). 8 * Harper Sand lies Marion County southern classified "high-cost gas" NGPA's 107(c)(1), 3317(c)(1), taken depth more 15,000 feet. At time proceedings before Mississippi, six separate drew A recognized property that, drawn up through well, pressure surrounding well reduced other flows towards area producing well. Thus, can drain entire if owned several different these often referred "correlative rights." See, e.g., Miss.Code Ann. 53-1-1 (1972 Supp.1985). Some Co., actually drill operate Others, own working Normally, lesser rely operators arrange sales production, see App. 26, although some nonoperator either operator's customers. 10 Appellant Transcontinental Pipe Line (Transco) operates transports fields Texas, Louisiana, resale customers throughout Northeast. Beginning Transco 35 two operators, Florida Exploration Tomlinson Interests, line prevailing industry practice, contained "take-or-pay" provisions. These essentially required accept currently certain percentage each capable producing, pay right take delivery later time, usually limited duration. Take-or-pay provisions enable sellers avoid fluctuations cash flow thought encourage investments development. Pierce, Regulation, Deregulation, Contracts, 68 Va.L.Rev. 63, 77-79 (1982). 11 shortage. Transco's Tomlinson's they operated, while Exploration's produced, regardless ownership. 107. Coastal, Id., 155. spring May 1982 id., 41-42. refused Coastal's request allowed ratify contract, made counteroffer, refused, significantly lower existing transport arranged sales. 66-69. Fifty-five offers Transco. 1309 (Miss.1984). 12 immediate economic cutback deprive geological effect, Getty-Tomlinson areas field, capacity, areas; produce may siphoned away. Moreover, decrease pressure, left ground, become costly recover value decline. II 13 July 29, Statewide 48, "ratable-take" requirement. provides: 14 "Each person now hereafter engaged business oil producers shall owner, operator, supply." never been employed require gas; rather, sole purpose appears prevent drainage, is, buyer contracting seller draining So.2d, 1306. conducted 3-day evidentiary proceeding. and, Order 409-82, 13, 1982,1 16 appealed ruling First Judicial District Hinds County, Miss. parts relevant this preempted (NGA), ch. 556, 52 821, 717 NGPA; Natural; run afoul Commerce Clause United Constitution. 17 affirmed portion Court's judgment. 1298 (1984). With respect claim, court prior predecessor, Power Commission, possessed "plenary transportation commerce." 1314. Under interpretation Natural, where Kansas invalid "invade[d] exclusive conferred upon Commission," U.S., 89, S.Ct., 649, Mississippi's "authority ratable suspended—preempted, you will, any orders 409-82 wholly unenforceable." conclude enactment removed FERC's "high-cost" (the type pool). 601(a)(1) "the apply deregulated (emphasis added), 1316, "[t]hat message decisive preemption case." Ibid. 18 implicit 48. compliance could bring conflict still-existing powers industry. Arkansas Electric Cooperative Corp. Public Service Comm'n, 461 375, 384, 103 1905, 1912, 76 (1983), deregulation appropriate entitled much weight determining actively. Although stemmed desire deregulate industry, "[h]owever consistent continued proscription might theoretical underpinnings deregulation, ban gas." 1318. 19 addressing issue, relied balancing test set out Pike Bruce Church, 397 137, 90 844, 25 174 (1970): when law "regulates evenhandedly effectuate legitimate local public interest, effects commerce incidental, upheld unless imposed clearly excessive relation putative benefits." 142, 847. weighing benefit burden, reviewing should consider whether "could promoted impact activities." purpose—the prevention unfair drainage commonly pools. identified principal higher consumers But, Cities Peerless & 340 179, 186-187, 71 215, 219-220, 95 L.Ed. 190 (1950), do render impermissible per se Clause. Also, expressed clear "all reasonable costs borne ultimately consumer. . within scope affirmative expressly authorized increases." 1321. potential commerce: otherwise thereby leading reduce Louisiana Texas. rejected argument, noting both Texas regulations, presumably protect producers, actual cause imprudent entry contracts, rather State's knew 48's existence foreseen risk shares. permitted pass along increased costs, bear "simply inevitable consequence free policies era vested negative complain." 1322. 20 Finally, argument served ratable-production need burdensome alternatives existed, failed meet threshold requirement demonstrating unreasonable commerce.2 III 21 If action were analyzed standard used pre-empted. Whether governs case depends altered those 22 considered "comprehensive regulation" 91, 650. Company Republic Hugoton Field. but requirements satisfied Republic. 87, 648. historically ratably wells, but, starting 1958, needed field producing. causing Republic's previously producers,3 issued "take allowables producers." 88, 649. 23 argued represented permissible attempt correlative rights producers. contention. Section 1(b) NGA, 717(b), Act's "shall gathering said, "has consistently 'production' 'gathering' terms narrowly confined physical acts drawing earth preparing first stages distribution." 90, Since Kansas' directed "a purchaser producers," ibid., Northern, purchaser, exempted coverage. 24 "undeniable adopt waste gas," 185, 219, view rule conservation measure.4 Such measures target "aimed wholesales resale." 94, 652. between terms: "enacted 'all commerce.' " 650, quoting Phillips Petroleum Wisconsin, 347 672, 682, 74 794, 799, 98 1035 (1954). "[U]niformity objectives. 91-92, 650-651. And, said: 26 "The danger interference arises unmistakably unambiguously who after shift shoulders performing complex task output thousands State. readjustment patterns took unratably seriously impair Commission's intricate relationship purchasers' cost structures eventual wholesale sell States" original). 92, 651. 27 rests considerations. First, created fell limits category questions reserved States. Second, absence requirements, choose different, costly, pattern. By follow pattern, conflicted protecting prices. 28 involved "utility-type ratemaking" control supplies. Haase, Role Implementing Houston L.Rev. 1067, 1079 (1979). FPC ceilings charge downstream "[i]n early 1970's, became apparent structure working." New York Mid-Louisiana 463 319, 330, 3024, 3031, 77 668 (1983). Nation experience serious shortages. NGA's "artificial pricing scheme" said "major cause" imbalance demand. S.Rep. 95-436, 50 (1977) (additional views Senators Hansen, Hatfield, McClure, Bartlett, Weicker, Domenici, Laxalt). 29 response, justly described 'a statute govern future regulation.' 332, Note, Legislative History Act, 59 101, 116 (1980). aim remains assure adequate supplies fair prices, reflects congressional belief new system balance 10. role "overse[e] scheme." L.Rev., 1079; (NGPA implements commodity approach"). does constitute retreat policy. Indeed, respects expanded control, granted intrastate time. §§ 311 312, 3371 3372. 30 Appellees argue, 601(a)(1)(B)(i) (ii), 3431(a)(1)(B)(i) stripped subject order, leaving purchases. 601(a)(1)(B) states [the NGA] solely reason sale" retains pipelines' practices, 601(c)(2) requires permit "except determines paid due fraud, abuse, similar grounds." According appellees, involvement concern itself customers; FERC, interfere suppliers. believe concerns latter relationship, aspects 31 That step little affect pipeline's intrude concerns. affirmatively particular "[A] forgo given imply authoritative best unregulated, event preemptive force regulate" 1912. Cf. Machinists Wisconsin Employment Relations 427 132, 150-151, 96 2548, 2557-2558, 49 396 (1976). 32 proper question 107 revising give forces significant intended FERC. answer must negative. meant vest explicitly. 503(c) 602(a), 3413(c) 3432(a). possess "intricate States," 651, old regime, still deep concern. review behavior circumscribed. 148-150, 170. 33 runs Natural. unification markets, contention inconsistent especially unavailing. consumers. industry-wide. Va.L.Rev., 77-78; H.R.Rep. 98-814, pp. 23-25, 133-134 Pipelines already committed excess lead elsewhere, triggering 161, finds practices abusive. fact, challenging, grounds automatic passthrough incurred 177-178.5 event, disrupteds requirement, frustrates effectively; abusive refuses allow passthrough, direct conflict. 34 change perspective embodied rested part exacerbated problems preventing making adjustments.6 actions threaten distort once artificially price. Although, long run, able adjust account orders, adjustments norm postpone achievement aims IV concluded reach whether, absent occupation nevertheless 36 judgment 37 ordered. 38 O'CONNOR join, dissenting. 39 3409, 3431(a)(1), removes coverage 717-717w. 121(b) 3331(b), exempts lingering controls nonetheless holds application "do equity among Juris. Statement 28a, misuses doctrine extricate bed itself. I dissent invades sphere conflicts decontrolling policy dormant 40 imposition familiar solution problem "drainage" pool.1 When individuals incentive capture rapidly possible "draining away" his reserves. practice results faster removal rate single owner choose, makes difficult obtain last amounts eliminates perverse incentives rise sharp practice. Champlin Refining Oklahoma 286 210, 233, 559, 564, 1062 (1932). 41 controversy centers around Pool (Harper Pool), definition term 107(c)(1) feet beneath ground surface drilling 1978.2 there Pool. Three operated Inc. They shared large number including 42 company As drilled ensure fixed way, bound purchase, themselves operators' agreed clause promising streams 43 Until purchased nonoperating spot roughly paying pursuant fixed-price contracts. glut thereupon attempted company. Failing attempt, offered sign Getty. offer, counteroffer turn refused. 44 sought relief arguing disproportionate violated (Rule 48), 45 forth 129a. 46 opposed enforcement owner's allowable share. obligations operating profitably presently take. urged reflect current substitute "ratable-production" rule. Had acceded proposals, liability realized downside contractual resulting clauses avoided expense instead Transco, finding, inter alia: 47 "Transco's course conduct discriminate (like Coastal) relatively small undivided [w]ells simply interests. refusal [the] very completed (1) discriminatory violates .; (2) constitutes 'waste' because, things, abuses nonuniform, unratable withdrawals undue tracts land, result just equitable detriment Coastal. ." 110a-111a. 51 insofar taking, despite claims reverses grounds. applied reasoning NGA. takes outside purview 53 passed response holding prevented regulating sold Missouri 265 298, 544, 1027 (1924). "to occupy Exxon Eagerton, 462 176, 184, 2296, 2302, 497 defined scope: 54 commerce, consumption domestic, commercial, industrial, use, companies sale, distribution facilities (Emphasis added.) 55 Initially, (predecessor (FERC)) extend end pipelines, pipelines. F.P.C. 246 (1951); Pipeline 218 (1940). 1954, gave broader reading. creating extending sales, 677-678, 796; 685-686, 800-801 (Frankfurter, concurring). 56 decided backdrop. constituted "inva[sion into] rules "constitute 'production gathering' domain Act." 89-90, explained purchasers, involve "threate[n] invasion [they] 'in way involv[e] gas.' added). reasoned "leaves room indirectly" indirectly "invalidly invade agency's domain" regulation.3 "States allocate conserve scarce resources lands," 93, use means "threaten effectuation 57 chronic shortages caused Its decontrol allowing according conditions vanish. accomplish purpose, divided three major categories: 87-89 601(a)(1)(B), 3431(a)(1)(B). established formulas gradual 102(b), 103(b), 107(a), 3312(b), 3313(b), 3317(a). totally decontrolled November 1979. 121(b), 3331(b); supra, 87-88. Ceilings continue 88-89. qualifies covers ever controlled cf. eliminated.4 Therefore, case. Rather, stands obstacle full accomplishment purpose. Silkwood Kerr-McGee Corp., 464 238, 248, 104 615, 621, 78 443 58 eliminate governmental gas.5 interferes merely defines establishes rules, Markets depend function efficiently. Ratable-take serve twin dealing removing "drainage." face, here completely Like compulsory unitization rule, gives joint level owner. way. similarly neutral context contracting. legal regulates relations seems equate pools akin tax subsidy, tend 60 Unlike taxes subsidies, attenuated operation Their promote efficient inhibit subsidy might. inefficiencies associated out-of-state in-state every violate promotes, inhibits, efficiency competitive included developing body applicable extraction. Oklahoma, (1932); (1950). One agree wished return concluding wish. 61 promulgated fact transaction affords validity based implication midstream expansion justifies party disappointed expectations nothing Contract jurisprudence masquerading reasonably foreseeable applications principles activities, Reserves Group, Light 459 400, 697, 569 happened here. adverse obligations. insisting frozen moment agreements, non-contracting owners.6 62 my conclusion pre-empted, address appellant's "dormant" analysis "free market" seem add express focus analysis. Here interest—the conservation—and incidental most. therefore, "one degree," 847, (1970). 63 place burdened creates independent combination private contributes short-run burden. Similarly, free-market High-cost tiny fraction aggregate n. (about 1%). mere drop bucket. leaves minimize losses due, takes. unlikely 64 Nor restrictive serving interest. minimal occasion inquire "less restrictive" means. agrees, greater administrative burdens authorities: 65 "[A]n feasible method providing alone first-hand knowledge connections ratable. An addressed whose activities unfamiliar create obvious problems." 100-101, 655 (Harlan, dissenting) (footnotes omitted). 66 offends neither jurisdiction, affirm "forthwith Greens Creek East Morgantown Fields, operator [sic] pool; specifically, chooses elects Fairchilds, Inexco." Pet. Cert. 112a. claims, void-for-vagueness challenge, Takings state-law exception. lacked prohibit nonparties original price, them. essence allocates pro rata demanded. For example, owns 75% 100 units units, majority he owns, 75 units. noted, "upheld numerous kinds legislation designed curb (1932)," statement challenges Due Process Equal Protection Clauses, pre-emption: "These ends justify uses put restricted." 185-186, 219. October 31, 1985, initial decision, ¶ 63,026, imprudent. Administrative Law Judge demonstrate how staff requested judge pursue least-cost strategy irrespective 48." 65,073 refused: "In view, entitled, indeed required, decisions authorities until overturned States." 65,074. claim merits, schemes patent. constrained find undertaken almost demonstrative foreclose what searching oversight exercise power, invalidation challenged act, shows field. evidence exists suggest circumscribed action, dissent's complaint intend 433, 5, misses point. distortive willing replace distortion ultimately, want case—requires formalistic achieve withdrawal causes changes migration spreading remaining called viewpoint migrate "drain" away "(1) February 19, 1977, completion location located feet; "(2) geopressured brine; "(3) occluded coal seams; "(4) Devonian shale; "(5) extraordinary risks costs." 107(c), 3366, 3317(c). (1984), "state general ways." 621. "If evidences falling entirely displaced matter question, law, impossible purposes objectives Congress." jurisdictional falls test—statutes "occupy field" exclusion fraudulently, abusively, illegitimately passing 3431(c)(2), include levels. (1983) (state prohibiting severance pass-on jurisdiction); Maryland 451 725, 746-752, 101 2114, 2128-2131, 576 (1981) 747, 2129, (question reserved). mentions "supply" "demand" variables decontrol. There legislative history, unnecessarily complicates distorts concerned always acknowledged traditionally power. (1963). placing ceilings, "allowables," period. absolute restrictions raising above equilibrium. themselves, not. infer central planners manipulation Planners individual preferences. sense object alleged protection purposes. While uniformly includes recontrol them, anarchistic gap relationships.

Category: 9