Court Opinion

ID: 9564352
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:58:39.860769+00
Date Added: 2024-06-11T09:18:22.014953
License: Public Domain

Fatzer, J.,
dissenting: With profound respect, I express my disagreement with the court’s holding that the reversal of Cities Service Gas Co. v. State Corporation Commission, 180 Kan. 454, 304 P. 2d 528, by the per curiam opinion in Cities Service v. State Comm'n, 355 U. S. 391, 2 L. Ed. 2d 355, 78 S. Ct. 381, rehearing denied 355 U. S. 967, 2 L. Ed. 2d 542, 78 S. Ct. 531, requires the conclusion that the Kansas order in question was void ah initio on January 1, 1954.
Press of work makes impossible an extended dissenting opinion, but I feel obligated to state my views to the extent time permits.
The constitution of the United States established a federal system of dual sovereignty. For purposes here concerned, federal jurisdiction consists of that conferred by the constitution and valid congressional enactments. Governmental powers not conferred upon the federal government by the constitution are reserved to the states respectively, .or to the people. An essential feature of our dual system is that in some areas federal jurisdiction is exclusive; in others, state jurisdiction is exclusive, and still in others, federal and state jurisdiction is concurrent.
Situations of federal jurisdiction which led, to some extent, to the passage of the Natural Gas Act of June 21, 1938 (Ch. 556, 52 Stat. 821, 15 U. S. C. A. § 717) are found in Missouri v. Kansas Gas Co., 265 U. S. 298, 68 L. Ed. 1027, 44 S. Ct. 544, and Pub. Util. Comm. v. Attleboro Co., 273 U. S. 83, 71 L. Ed. 549, 47 S. Ct. 294. Both cases held that exclusive jurisdiction over the rates of gas or electricity moving in interstate commerce was vested in the federal government by the constitution.
The legislative history of the Natural Gas Act has been detailed in a whole series of decisions by the supreme court of the United States (Illinois Gas Co. v. Public Service Co., 314 U. S. 498, pp. 506-508, 86 L. Ed. 371, pp. 376, 377, 62 S. Ct. 384; Power Comm'n v. Hope Gas Co., 320 U. S. 591, pp. 609-613, 88 L. Ed. 333, pp. 348-350, 64 S. Ct. 281; Interstate Gas Co. v. Power Comm’n, 331 U. S. 682, pp. 689, 690, 91 L. Ed. 1742, pp. 748, 749, 67 S. Ct. 1482; Panhandle Pipe Line Co. v. Comm’n, 332 U. S. 507, pp. 514-524, 92 L. Ed. 128, pp. 136-141, 68 S. Ct. 190; Power Comm’n v. Pan*546handle Co., 337 U. S. 498, pp. 502-515, 93 L. Ed. 1499, pp. 1503-1510, 69 S. Ct. 1251). The principal function of the Act is to fix “just and reasonable” rates to protect consumers against exploitation at the hands of natural gas companies. However, in each of those cases it was specifically stated that, by the enactment of the Natural Gas Act, Congress did not intend the federal government to occupy the entire field of concurrent jurisdiction to the exclusion of the states and that state regulation of conservation of natural gas remain unimpaired. Illustrative of this fact is Power Comm’n v. Panhandle Co., supra, wherein it was said:
“. . . The Natural Gas Act was designed to supplement state power and to produce a harmonious and comprehensive regulation of the industry. Neither state nor federal regulatory body was to encroach upon the jurisdiction of the other. Congress enacted this Act after full consideration of the problems of production and distribution. It considered the state interests as well as the national interest. It had both producers and consumers in mind. Legislative adjustments were made to reconcile the conflicting views.” (p. 513.)
In the Hope case, supra, it was held that the act conferred no federal power to use price as a conservation tool (pp. 608-610). On the other hand, it was specifically held in Cities Service Co. v. Peerless Co., 340 U. S. 179, 95 L. Ed. 190, 71 S. Ct. 215, that the constitution did not preclude state power to use minimum wellhead price as a conservation tool. Thus, even after the Natural Gas Act was passed, state, and not federal power, had exclusive jurisdiction to use price as a conservation tool. There could be no conflict in the area of conservation. Hence, the state’s use of wellhead price as a conservation tool could only conflict with federal authority if it hampered traditional federal utility regulation over wellhead price in determining just and reasonable rates for the purchase, transportation and sale of natural gas in interstate commerce for resale.
We have here the clearest possible example of a gas field over which there is concurrent state and federal jurisdiction. The state’s power of conservation may be freely exercised unless and until it conflicts with the Federal Power Commission’s jurisdiction in fixing just and reasonable utility rates for interstate pipe-line companies, as well as independent natural gas producers,- for gas sold in interstate commerce and transported for resale in other states. The Kansas minimum wellhead price order operated only at the wellhead as a conservation measure, and only upon the producer. The Federal Power Commission first exercised jurisdiction over the wholesale of gas by independent producers on July *54716, 1954, by its order No. 174 following Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672, 98 L. Ed. 1035, 74 S. Ct. 794, decided June 7, 1954. But, conflict between the two orders could not have antedated July 16, 1954, since the Federal Power Commission was given no power to reduce rates retroactively (15 U. S. C. A. § 717 [d]), (Power Comm'n v. Hope Gas Co., supra; Cities Service Gas Producing Co. v. Federal Power Com'n, 233 F. 2d 726, p. 730).
With, actual exercise of jurisdiction over independent producers by the Federal Power Commission already in effect, the supreme court of the United States reversed our decision in Cities Service v. State Comm'n, supra. The opinion simply states:
'Ter Curiam.
“The judgment is reveresd. Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672; Natural Gas Pipeline Co. v. Panoma Corporation, 349 U. S. 44.”
The Phillips and Panoma cases each involved natural gas moving in interstate commerce after both production and gathering had been completed. We are left in the dark as to the supreme court’s theory of the application of the rule of those cases to wellhead sales of natural gas governed by the Kansas minimum price order. It seems to me those cases fall in the class of Missouri v. Kansas Gas Co., supra, and Pub. Util. Comm. v. Attleboro Co., supra; a category over which the states never had jurisdiction.
Phillips decided that the Federal Power Commission had jurisdiction of the rates of all wholesales of natural gas in interstate commerce for resale, and by the time of Panoma (decided April 11, 1955) it had assumed that jurisdiction.
Had an opinion been written in our case (Cities Service v. State Comm'n, supra), the present controversy would likely have been decided before it arose, but, in the absence of an opinion, we are compelled to decide as best we can whether state power to establish a minimum wellhead price as a conservation measure was suspended by mere passage of the Natural Gas Act in 1938, or whether it became suspended when the Federal Power Commission first assumed jurisdiction over independent producers on July 16, 1954. The Natural Gas Act permitted the exercise of jurisdiction in the Federal Power Commission’s discretion at any time after 60 days from June 21, 1938, as the commission should designate (15 U. S. C. A. § 717 [c]). But, for a period of sixteen years federal power remained dormant. During that period hundreds of gas wells were drilled and gas sale and purchase contracts were entered into in good faith without Federal Power Com*548mission approval or apparent need therefor. To hold that the Natural Gas Act was self-executing and in and of itself subjected wellhead sales to federal utility regulation is to indelibly impress the taint of illegality on all acts done by parties to those many contracts and renders them unenforceable by either buyer or seller. The Federal Power Commission was the agency designated by Congress to exercise and assert federal jurisdiction, and, until it did so, valid state conservation regulations, although based upon minimum wellhead price, were valid and enforceable. In the absence of the exercise of federal jurisdiction, and in the light of local exigencies, a state is free to act in order to protect its legitimate interests even though interstate commerce is directly affected (Eichholz v. Comm'n, 306 U. S. 268, 83 L. Ed. 641, 646, 59 S. Ct. 532).
In my judgment, the Kansas order was a valid exercise of the regulatory power of the state until suspended and made inoperative by the Federal Power Commissions exercise of its paramount authority on July 16, 1954. Such a construction is consistent with the authorities cited above and permits an orderly, uniform and consistent pattern of state, followed by federal, regulation of price of natural gas at the wellhead. A contrary decision creates a gap between the exercise of valid state and valid federal regulatory power; renders a state powerless to exercise regulatory power over matters of local concern because of the possibility of subsequent judicial determination of “direct and positive” conflict with the “dormant and unexcercised” regulatory power of a federal agency, and casts doubt upon and clouds the validity of presently existing state laws. In Missouri Pacific Ry. v. Larabee Mills, 211 U. S. 612, p. 623, 53 L. Ed. 352, 29 S. Ct. 214, it was said:
“. . . the mere grant by Congress to the commission of certain national powers . . . does not of itself and in the absence of action by the commission interfere with the authority of the State to make those regulations conducive to the welfare and convenience of its citizens. . . .” (p. 623.)
To the same effect are N. W. Bell Tel. Co. v. Ry. Comm'n, 297 U. S. 471, 80 L. Ed. 810, 56 S. Ct. 536; Welch Co. v. New Hampshire, 306 U. S. 79, 83 L. Ed. 500, 59 S. Ct. 438, and Eichholz v. Comm'n, supra.
The reversal of our case by the supreme court of the United States unquestionably determined that the Kansas order was invalid because of conflict with the exercise of federal jurisdiction under the Natural Gas Act. Except for one possessing powers of clairvoyance the case decided nothing more. More specifically, *549it did not decide, in my judgment, when conflict between state and federal jurisdiction arose. The effect of the reversal must be determined in light of the rules of the supreme court of the United States as to its own judgments. Two rules have been consistently stated: (1) Cases are decided upon the basis of the situation existing at the date of decision, taking into account both factual and legal changes in circumstances pending the proceedings (Watts, Watts & Co. v. Unione Austriaca & c., 248 U. S. 9, 63 L. Ed. 100, 39 S. Ct. 1; Vandenbark v. Owens-Illinois Co., 311 U. S. 538, 85 L. Ed. 327, 61 S. Ct. 347), and (2), reversals determine only questions discussed and decided (Wolff Packing Co. v. Indus. Court, 267 U. S. 552, 69 L. Ed. 785, 45 S. Ct. 441; Schuylkill Trust Co. v. Penna., 302 U. S. 506, 82 L. Ed. 392, 58 S. Ct. 295).
With respect to those rules, what was the federal question presented and decided in Cities Service v. State Comm'n, supra? That question was succinctly stated by Cities Service in its notice of appeal to the supreme court of the United States in that case, as follows:
“III
“The following Federal question only is presented by this appeal:
“Whether the State Corporation Commission of Kansas has the jurisdiction and authority, in face of the provisions of the Natural Gas Act (15 U. S. C. A. 717, 62 Stat. 821), and the jurisdiction of the Federal Power Commission thereunder, to fix a minimum price for natural gas produced and sold in the Kansas-Hugoton Gas Field by producers therein to Appellant, a natural gas company, either at the wellhead or in said field after production and gathering thereof has been completed, or both, for transportation and resale in interstate commerce, or to prohibit the production of such natural gas by said producer, or inflict severe penalties therefor, if the price fixed by such order for such gas is not paid by the purchaser or taker thereof to the producer.” (Emphasis supplied.)
In its brief in the present appeal, Cities Service states:
“This was the question (quoted above) decided by the Court. . . .”
Thus, the only federal question presented in Cities Service v. State Comm'n and decided by the supreme court of the United States is the one quoted above. I do not believe it may be correctly stated that the federal question presented in that appeal involved the issue of when federal jurisdiction under the Natural Gas Act conflicted with the state conservation regulation in question. That point was not presented in that appeal and the judgment of reversal by the per curiam opinion may not, in my judgment, be *550construed to indicate the Kansas order was invalid and unenforceable on January 1, 1954. While that date appears in the recitals of the mandate, the judgment portion of the mandate reversing our case was clear and unambiguous, and did not state that the Kansas order was void ab initio on January 1,1954. As previously indicated, that precise question was not presented in that appeal.
I do not read a deviation from the foregoing conclusions into Michigan Wis. Co. v. Corp. Comm’n, 355 U. S. 425, 2 L. Ed. 2d 412, 78 S. Ct. 409. That case and the three decided with it were later appeals involving the order in Natural Gas Co. v. Panoma Corp., 349 U. S. 44, 99 L. Ed. 866, 75 S. Ct. 576. Following reversal of Panoma by the supreme court of the United States, the supreme court of Oklahoma, conforming to the mandate, set aside the Oklahoma minimum price order as to sales after gathering, but left it in effect as to wellhead sales. Pending the second appeal to the supreme court of the United States in Panoma (Michigan Wis. Co. v. Corp. Comm’n, supra) the reversal of Cities Service v. State Comm’n, supra, determined that the holding of the first Panoma decision applied not only to the point where gathering ended, but extended to the point of production — the wellhead itself.
Since the sales involved in Panoma were not wellhead sales, the supreme court of Oklahoma apparently felt that the Panoma case left the status of the minimum wellhead price portion of the Oklahoma order still valid. In my judgment, the Michigan Wis. Co. case, deciding the second Panoma appeals, is similar to Wolff Packing Co. v. Indus. Court, supra. The procedure of determination by the state supreme court of questions not expressly decided by the previous reversal, was approved, but in making its second decision, the supreme court of Oklahoma made an erroneous decision on the merits, that is, that federal jurisdiction only extended to where gathering ended, which was again reversed on the merits (Cities Service v. State Comm’n, supra), and not for failure to comply with the mandate on the first appeal.
I agreeably accept decisions of the supreme court of the United States, but I do not believe that court has squarely determined the present question, however, my colleagues feel otherwise. If a majority were to agree with my conclusions, and we incorrectly decided that the judgment of reversal in our case (Cities Service v. State Comm’n, supra) did not import a determination that the Kansas minimum price order was void ab initio on January 1, 1954, our *551error may readily be corrected upon appeal to the supreme court of the United States. On the other hand, if we forego that conclusion, out of an excess of caution to not intrude upon the mandate of the supreme court of the United States, our own error may be corrected only upon certiorari, in which the governing factors are not the correctness or incorrectness of our decision, but whether the question is of such national importance as to entitle the case to review in competition with hundreds of other cases.
Although fully cognizant of the holding and statements so ably set forth in the court’s opinion, I would nevertheless reverse the judgment with instructions to vacate the State Corporation Commission’s order from and after July 16, 1954, the date when the Federal Power Commission first exercised jurisdiction over independent gas producers in the Hugoton Gas Field following the decision in Phillips on June 7, 1954. As previously indicated, this conclusion permits an orderly, uniform and consistent pattern of state, followed by federal, regulation of price of natural gas at the wellhead.