Document: 436 U.S. 519 98 S.Ct. 1955 56 L.Ed.2d 505 State of CALIFORNIA et al., Petitioners,v.SOUTHLAND ROYALTY COMPANY al. EL PASO NATURAL GAS COMPANY, Petitioner, v. SOUTHLAND FEDERAL ENERGY REGULATORY COMMISSION, Nos. 76-1114, 76-1133 and 76-1587. Argued Dec. 7, 1977. Reargued April 17, 1978. Decided May 31, Rehearing Denied Oct. 2, See 439 885, 99 230, 231. Syllabus In 1925, Gulf Oil Corp. executed a lease under which it paid royalties for the exclusive right to produce market oil gas from certain land 50 years. Thereafter, lessors sold their mineral fee interest respondents. 1951 contracted sell casinghead leased property petitioner El Paso Natural Gas Co., an interstate pipeline. Subsequently, obtained Federal Power Commission certificate public convenience necessity unlimited duration authorizing service Paso. When Gulf's original expired in 1975, its as lessee remaining reserves terminated reverted Just before expired, respondents arranged intrastate purchaser. Paso, order preserve one sources supply, petitioned FPC determination that could not be diverted without abandonment authorization pursuant § 7(b) Act (Act). The agreed, holding once began flow commerce field subject duration, such unless authorized service. On respondents' petition review, Court Appeals reversed, Gulf, tenant term years, legally dedicate portion might own upon lease's expiration. Held: acted within statutory powers requiring obtain permission abandon issuance created federal obligation serve until had been obtained, reasonably concluded continue attached gas, matter contract but law, ound all those with dominion power sale over including whom reverted. imposed by survived expiration private agreement gave rise FPC's jurisdiction. Sunray Mid-Continent Co. FPC, 364 137, 80 1392, 4 1623. Pp. 523-531. 543 F.2d 1134, reversed remanded. Stephen R. Barnett, Washington, D. C., Energy Regulatory Commission. Randolph W. Deutsch, San Francisco, Cal., petitioners California J. Evans Attwell, Houston, Tex., John L. Hill, Atty. Gen., Austin, amicus curiae, special leave Court. Mr. Justice WHITE delivered opinion 1 1925 owners acreage Texas Corp., lessee, next years.1 was entitled drill wells, string telephone telegraph wires, build storage facilities pipelines on land. would also have "such other privileges are requisite conduct said operations." App. 135. exchange, were receive royalty based quantity natural produced number producing well payments. following year, one-half respondent Southland Royalty rest 2 After this Court's decision Phillips Petroleum Wisconsin, 347 672, 74 794, L.Ed. 1035 (1954), applied 30,000 Mcf per day. By dated 28, 1956, granted among construed "permanent" Sun 170, 175, 1388, 1391, 1639 (1960).2 entered into second additional volumes 1972, 1973. 3 50-year July 14, and, local lessee's 496 S.W.2d 547 (Tex.1973). prior lease, purchaser, at higher prices available market. then filed seeking 1938, 52 Stat. 824, amended, 15 U.S.C. 717f(b) (1976 ed.).3 agreed contention, relying "principle established Section 'service' may abandoned our approval." 54 F.P.C. 145, 150, 10 P.U.R. 4th 344, 348 (1975). held not, termination obligated seek permission. reaffirmed view denying rehearing, added language insuring any deliveries during period Commission's review constitute dedication 2821, 11 488 5 Fifth Circuit reversed. 1134 (1976). court lease. Because importance question presented authority Commission, now we certiorari. 433 907, 97 2970, 53 1091. We reverse. 6 fundamental purpose is assure adequate reliable supply reasonable prices. 147, 151-154, 1400-1402, 1623 (1960); Atlantic Refining Public Serv. Comm'n New York, 360 378, 388, 79 1246, 1253, 1312 (1959). To end, only must who also, Act: 7 "No natural-gas company shall or jurisdiction rendered means facilities, approval first after due hearing, finding depleted extent continuance unwarranted, present future permit abandonment." ed.). 8 therefore control both terms provided conditions will cease: 9 "An initial application independent producer, make movements commerce, leads controls basis 'gas initially dedicated use. Moreover, so there can no withdrawal continued movement approval.' " supra, U.S., 156, S.Ct., 1403. "so framed afford consumers complete, permanent effective bond protection excessive rates charges." 1253. extends t transportation resale consumers. 1(b), 717(b) flows across state lines regardless intentions producer. Lo-Vaca 379 366, 85 486, 13 357 (1965). approved approach questions physical gas: 12 "We Connecticut Comm'n, 324 515, 529, 65 749, 89 1150, 'Federal follow electric energy, engineering scientific, rather than legalistic governmental, test.' And test followed Act, except Congress itself has substituted so-called legal standard technological one. Id., 530-531, 749." 369, 488. reasoned circumstances case,4 "[t]he fact substantial part resold [in commerce] . invokes outset entire transaction." Ibid. 14 litigation initiation fields certificate. did affect Act. think interpretation provision permissible recognized contractual arrangements. case, pipeline 20 years sought limited period. insisted certificate; upheld do so, even producer remain pipeline, obtained. "will Act." 155, despite provisions sales essential effectuate purposes Act; otherwise producers free arrangements circumvent ratemaking goals statute. 142-147, 1395-1399. 16 Similar principles litigation. This covering issue here statute law bound Sunray, 17 Respondents distinguish ground case owned covered certificate, central theme concerned continuation "service" particular rights. traced show "all matters required—the construction extension, making jurisdictional sales—must justified they relate." 1400. specifically noted "§ does refer sales, 'services.' 150 n. "[had] long drawn distinction between underlying performs specific manifestation relationship—which takes given moment." 152, 1401. paramount here. Once commenced used lessees, required discontinuance "any facilities." Private shift thereby determine provide service, parties simply agree terminate 18 contend never impressed because "dedicated" sale. core argument "no man what he own." Brief Respondent 8. maxim appealing resonance, unfair advantage ambiguity "dedicate." For most lawyers, laymen, "dedicate" "give, present, surrender use." Webster's Third International Dictionary 589 (1961). But surrendered public; placed "just reasonable" specified 4(a) 717c(a) Judicial insures confiscatory. Pipeline 315 575, 62 736, 86 1037 (1942); Hope 320 591, 602-603, 64 281, 287-288, 88 333 (1944). Thus, "dedicating" market, effect gift changes regulatory status.5 Here, receiving apparently objection, intervened proceedings so. 917, 919 19 Responde ts appear argue should viewed "natural companies" respect Waddell Ranch voluntarily committed act place them As seen, somewhat beside point, already became when assumed gas. language, "the involved individual party gas." F.P.C., 149, 4th, 348. event, perceive unfairness respondents, lessors, responsible "mineral permitted holders sales." 920. They object Indeed, pointed out, duty purchasers 919. leases typically include diligently develop see, e. g., H. Williams & C. Meyers, Law 853 (1977), time major outlet see 394, 1256. Having expected rules restrictions cover Cf. Louisville Nashville Mottley, 219 467, 482, 31 265, 270, 55 297 (1911).6 21 discussed "practical consequences" consumer if 143, reasoned: 22 "If petitioner's contentions sustained, way clear every certification transmission company, thus automatically date, untrammelled regulation, reassess whether desired serving market." 142, 1396. 23 A "local economy grown dependent fuel" experience disruption significantly These observations equally pertinent leases. If rights structure leasing frustrate aims 24 suggest require voluntary assumption lessor condition certificates issued future. It obvious solution nothing protect communities presently depending issued. questioned conditioning achieve indirectly authorize directly. light tension, 7(e) need restricted these indirect dubious methods." 25 conclude "A hamstrung tied down technical concepts law." United Improvement Continental 381 392, 400, 1517, 1522, 466 tying concept cripple decisive action greatest. Guided believe broader authority. 26 cases remanded further consistent opinion. 27 So ordered. 28 STEWART POWELL took consideration cases. 29 [May 1978] 30 STEVENS, THE CHIEF JUSTICE REHNQUIST join, dissenting. disparity regulated price unregulated gives importance.1 depends meaning 7(b), Act.2 Speaking States Circuit, Judge Clark way: 32 "Does fixed-term certificated leasehold remains end 50th year? 1136 33 my opinion, correctly answered negative ruled 7(b). 34 Through two separate explore, produce, Texas.3 fixed reversionary interests minerals shared (respondents), largest.4 property, received wells.5 terminated, 35 1951, gas6 pipeline.7 for, issued, operations accordance applicable regulations. 13, infra. was, however, regulation. Shortly leases, made plans soon expired.8 withdrawn approval.9 36 divert approval. supported direct precedent, itself, party.10 37 reversioners rejected since unquantified term, withdraw empowered contingent removal same contingency.11 alternative acceptance payments constituted ratification term. 38 Court, petitioners12 creates authorization. rely primarily 1393, 1623; secondarily analogous arising Interstate Commerce finally analysis practical consequences Appeals' I consider arguments turn. 39 * Although immediate concern, considered context development 1954 1035. Phillips, producer's claim regulating instead, "sales" One result sudden expansion responsibilities. Permian Basin Area Rate Cases, 390 747, 756-757, 1344, 1354-1355, 312.13 Less obviously, perhaps more importantly, marked step scheme unique utility Harlan observed, "[p]roducers cannot usefully classed utilities." 756, 1354. "Unlike situations, relationship ultimately regulation usual inception ." Summers, 924, p. (1966). while event normally activates Commission,14 define limits 40 Oil, though contra t. tendered accepting exercising it, undertook 20-year 41 explained company's commitment assumed. "[T]he engages [the gas] distinct regulates his performing service." 153, contract. 1403.15 later added: 42 operator, although captive remedy himself.' [Atlantic York,] page 389, 1254, 1312." 43 like reasoning case. interests, misconceives nature resolved Sunray. 44 supplant how dedication. There dedicated. hand, themselves strenuously urge character interest. here, therefore, removed Nevertheless controls. Their "syllogism" determinative scope dedication, syllogism non sequitur.16 cannot, consistently expanded fashion. 45 repeatedly stated, represent exercise Congress' full Clause. See, Panhandle Eastern Pipe Line 337 498, 502, 69 1251, 93 1499. Instead, 1(b) Act's reach ed.), restriction reflected provision. provides "[n]o ed.) (emphasis added). "Natural company," turn, defined "a person engaged thesale resale." 717a(6) 46 While company" definition, that, least termination, not. clearly transport retention standard, "sale" commerce.17 latter point follows rule Mobil 149 U.S.App.D.C. 310, 463 256 (1972), cert. denied sub nom. Mobile Matzen, 406 976, 92 2409, 676. here: 47 "When come ordinary landowner neither 'customary' nor equivalent economic effect. Such transaction customary conventional, precedes 'conventional' concerned, indeed 'production gathering' visualized preceding being established. 48 49 "The establishing jurisdiction, find provision, rooted reaching out landowner's payments."18 challenge rule; argues "lessors succeed lessees companies Petitioner No. 76-1587, 29. succeeds expires terms. purchaser assignee charged notice burdens acquired estate former owner Cumberland 132 successor-in-interest "stepp[ed] shoes predecessor." Graridge 1156, 1162 (1963); Ph llips 556 (CA10 1977); Bass, 1269 (1972). 51 That apply owner's created. "step into" interest; expired. is, course, merely another expressing well-settled doctrine "one having against reversion remainder, create endure beyond normal estate." Tiffany, Real Property 247 (3d ed. 1939).19 Petitioners rejoin strict definitions ownership proposition, valid, support petitioners' position. previously "[a] law," 466, instead look reality transaction. owners, incident [gas] either sold, paid, identity [should] commerce." U.S.App.D.C., 316, F.2d, 262. prematurely evade And, fact, specter evasion bad faith negotiated arm's length passed. My conclusion intend allow lessor's situation above, legislative history counsels restraint judicial Both House Senate Reports "provides along less standardized lines. novel provisions, believed constitutional presented." H.R.Rep.No.709, 75th Cong., 1st Sess., (1937); S.Rep.No.1162, (1937). described containing "nothing novel," intended operating impose burden party's objection. II Based analysis, apparent railroad petitioners. Smith Hoboken R., Warehouse S.S. Connecting 328 123, 66 947, 90 1123, Thompson Mexican 134, 937, 1132, companion decided 1946, 1(18) Act20 standing approval.21 c ear commission proposed qualify lessor. shed duties involve concerning attempt operate—not operation continue. Neither wanted cease; common carrier's existed independently termination. short, "common carrier" obligations highlighted subsequent lower interpreting 1(18). particular, Second "hold imply noncarrier, properties carrier, becomes 'carrier railroad,' subjecting carry Meyers Famous Realty, Inc., 271 811, 814 (1959), denied, 362 910, 681, 619;22 City York States, F.Supp. 153 (EDNY 1972) (three-judge panel); Friendly, Amendment Railroad Reorganization Colum.L.Rev. 27, 47-49 (1936). supporting position dealing illustrate unprecedented. III 57 Finally, ruling prevent diverting production will. answer contention implicit discussion Part I, address separately "to exploitation hands companies." 610, 291, 333. able manipulate restructure avoid three answers concern. 58 First, few short-term existence. magnitude capital investment exploration makes extremely unattractive accept literature indicates almost extinct species, survive economically feasible.23 59 Second, Circuit's affects applicants describe details withhold pending receipt appropriate evidence consent interested parties. 1623.24 60 "unregulated choice" Moss, 424 494, 506, 96 1003, 1010, 186 (BURGER, J., concurring judgment). error "like ancient covenant running land," (1975), enabled show, work revolution touching confined applicability sufficiently flexible enable analyze significanc transfers label transfer. 466.25 ample manipulation provisions. 61 Despite flexibility, stretch interruption, imposing situation. Accordingly affirm Appeals. "Waddell" 45,771 acres Crane County, Tex. year identical "Goldsmith" 19,840 Ector litigation, material differences discuss 100 language. prompted dispute interpreted "batch certificates." 1391. Texaco, 25% Goldsmith Lease, 1, declaration purchasers. Texaco's adverse raised issues Paso's consolidated it. Utilities proceeding. arrangement purchased internal use only. explicit reservation remove some physically commingled sources, An analogy found change zoning status property. Newport Associates, Inc. Solow, N.Y.2d 263, 332 N.Y.S.2d 617, 283 N.E.2d 600 410 931, 1372, 593 (1973); Richman Philadelphia Zoning Board Adjustment, 391 Pa. 254, 258, 137 A.2d 280, (1958). type precedent. "follows pattern regulation." 141-142, 1395. 1(18), similarly carrier chapter line railroad, thereof, At very early date cessation tracks, Chicago Alton Toledo, Peoria Western 146 I.C.C. 171 (1928). Lehigh Valley Proposed Abandonment Operation, 202 659 (1935), ceased operate enactment Long decisions. S. 130, 952, 1123 (1946) ("[A] abandoning operations"); 144-145, 944, 1132 ("[T]he trackage 1904 passage immaterial; contracts enactment"). precedents demonstrate here—an obtained—is range possibilities anticipated b profiting operations. "gross imbalance controlled [was] substantially values set 1135 (1976) (citation omitted). (now Commission) taken correct imbalance, Rates Gas, ---, (1976), aff'd American Assn. 23, 567 1016 "substantial disparity" still exists. pp. 6-7, 9. ante, 521 1. 1926; fractional persons. dispersed; largest single owner, one-fourth 1929. Respondents' 1/8 4¢ (thousand cubic feet) lease; take kind 135-140. Casinghead association crude oil; distinguished "gas-well processed turn transported resale. Intratex Intrastate serves distributor Docket CP75-209, January 20, related CI75-594, relating Texaco 8, 1975. declaratory CP75-209. "In various leaseholds discovered directly inevitably lead view. [T]he 347-348 "To likewise contingent. Whatever left lands plain estate, belonged day forward." 1138. California, suit below suppliers supplying 1956 large post-Phillips stated relevant part: orders "(A) hereby order, Applicant resale, together hereinbefore fully exhibits "(B) herein deemed accepted force effect, refused writing oath days order. "(C) transferable continues acts rules, regulations Commission." 37. 171-172, 1389-1390, 1639. wells question, noted, built system foundation contracts." 154, 1402; Service 350 332, 76 373, 373. statement response principle preserved integrity contracts, allowed compel enlarge undertaking. seller file rate increase violate violation existing Sunray's customers limit logically generally Conine Niebrugge, Dedication Extent Escape, Okla.L.Rev. 735, 821-825 (1977). Of alleged case; irrelevant 316-317, 262-263. District Columbia entirely different extract land, are, stepping remainder burdened highly selective reading ignores express limitation "all" found, developed, 1137-1138. "[N]o relied debtor reorganization proceeding 77 Bankruptcy prepare plan reorganization. Hoboken, 130-133, 951-953; Thompson, 142-144, 943-944. agreement, 5(2)(a) fix conditions, rentals, agreements Transportation 1940. 146-150, 944-947. points Myers 814, fail supports theory commerce. Furthermore, authorization, staff "superfluous." 151, 349. "[w]e significant us request approva us. Williams, 601.1 (1977); Walker, Nature Interests Created Lease Texas, L.Rev. Contrary suggestion, whatsoever "whether directly." Ante, 530. argued approve applicant proposed. argument. observed passing position, probably "conditioning" award longer prayed accomplish No ever suggested issue. observation irrelevant. Improvement, long-term decision, 535-536, withdrew contracts. transactions, however characterized parties, amounted Similarly, stating 'is Commission.' 367-368, 357.

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