Court Opinion

ID: 9427223
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:20:03.414545+00
Date Added: 2024-06-11T17:18:03.851782
License: Public Domain

Mr. Justice Stevens,
with whom The Chief Justice and Mr. Justice Rehnquist join,
dissenting.
The disparity between the regulated price of natural gas in the interstate market and the unregulated price in the Texas market gives this case its importance.1 The legal issue depends on the meaning of § 7 (b), the abandonment provision of the Natural Gas Act.2 Speaking for the United States *532Court of Appeals for the Fifth Circuit, Judge Clark framed the question in this way:
“Does the lessee under a 50-year fixed-term mineral lease, by making certificated sales of leasehold natural gas in interstate commerce, thereby dedicate to interstate commerce the gas which remains in the ground at the end of the 50th year?” Southland Royalty Co. v. FPC, 543 F. 2d 1134, 1136 (1976).
In my opinion, the Fifth Circuit correctly answered that question in the negative and ruled that the lessors did not have to seek the Commission’s abandonment approval under § 7 (b).
Through two separate leases executed in 1925, Gulf Oil Corp. obtained the right to explore, produce, and market oil and gas from specified acreage in Texas.3 The leases were for a fixed term of 50 years, and the reversionary interests in the minerals were shared by a number of fee owners (respondents), of which Southland Royalty Co. is the largest.4 As lessors of the property, respondents received a royalty based on the quantity of natural gas produced and the number of producing wells.5 Gulf’s interest in the leased gas terminated, as a matter of Texas law, in 1975, and the mineral rights reverted to respondents. See Gulf Oil Corp. v. Southland Royalty Co., 496 S. W. 2d 547 (Tex. 1973).
In 1951, well before its leasehold interest expired, Gulf *533contracted to sell casinghead gas 6 to the El Paso Natural Gas Co., an interstate pipeline.7 Thereafter, Gulf applied for, and the Federal Power Commission issued, a certificate of public convenience and necessity authorizing its sale of natural gas to El Paso, to be effective as long as Gulf continued its authorized operations in accordance with the statute and applicable regulations. See n. 13, infra. The price of the gas sold by Gulf to El Paso was then regulated by the Commission. The price of gas on the intrastate market was, however, not subject to such regulation. Shortly before the expiration of the leases, Southland and the other mineral fee owners therefore made plans to sell their casinghead gas in the intrastate market as soon as the leases expired.8 In order to preserve one of its sources of supply, El Paso filed a petition with the Commission seeking a determination that the leasehold gas had been dedicated to interstate commerce and could not be withdrawn from that market without Commission approval.9
The Commission held that Southland and the other mineral interest owners may not divert leasehold gas into the local market without prior Commission approval. The Commission noted that its decision was not supported by direct *534precedent, but reasoned that Gulf had made a dedication of the leasehold gas which imposed a service obligation on the gas itself, rather than on any particular party.10
On respondents’ petition for review, the Court of Appeals reversed. The court held that Gulf, as a tenant for a term of years, could not legally dedicate that portion of the gas which Southland and the other reversioners might own upon expiration of the lease. It rejected the Commission’s argument that since Gulf had an unquantified right during the 50-year term, it had a legal right to withdraw all of the leased gas, and therefore was empowered to dedicate the entire supply to the interstate market. The court reasoned that Gulf’s interest in the gas was contingent upon its removal within 50 years and that its right to dedicate the gas to interstate commerce was subject to the same contingency.11 The Commission’s alternative argument that the acceptance of royalty payments constituted ratification of the dedication to interstate commerce was rejected on the ground that the holders of the reversionary interest had no right to control Gulf’s sale of the gas during the lease term.
In this Court, petitioners12 argue that a lessee’s acceptance *535of a certificate of convenience and necessity of unlimited duration creates a service obligation which the lessors may never abandon without Commission authorization. They rely primarily on this Court's decision in Sunray Mid-Continental Oil Co. v. FPC, 364 U. S. 137; secondarily on somewhat analogous cases arising under the Interstate Commerce Act; and finally on their analysis of the practical consequences of the Court of Appeals’ interpretation of the statute. I consider these arguments in turn,
I
Although Sunray Oil is of immediate concern, that decision must be considered in the context of the jurisdictional development of the Natural Gas Act that began in 1954 with Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672. In Phillips, the Court held that sales of natural gas by an independent producer to an interstate pipeline were subject to the jurisdiction of the Federal Power Commission. The Court rejected the independent producer’s claim that the Act was concerned only with regulating interstate pipelines and, instead, held that the FPC’s jurisdiction was based on the broader concept of interstate “sales” of natural gas. One obvious result of Phillips was the sudden expansion of the Commission’s jurisdictional responsibilities. Permian Basin Area Rate Cases, 390 U. S. 747, 756-757.13 Less obviously, but perhaps more importantly, *536it marked the first step in the development of a regulatory scheme for natural gas that is unique in public utility regulation. As Mr. Justice Harlan observed, “[producers of natural gas cannot usefully be classed as public utilities.” Id., at 756. “Unlike other public utility situations, the relationship which ultimately may subject the independent producer to regulation under the Natural Gas Act has its usual inception in a contract between a producer ... of natural gas . . . and an interstate pipeline . . . 5 W. Summers, Law of Oil and Gas § 924, p. 7 (1966). But while the voluntary sale of natural gas to an interstate pipeline is the event that normally activates the jurisdiction of the Commission,14 the contractual terms of the sale do not define the limits of that jurisdiction.
In Sunray Oil, the Court held that a natural gas company had made a dedication of gas to interstate commerce of unlimited duration even though its sales contract with the interstate pipeline was for a fixed term of 20 years. The company had applied to the Commission for a limited certificate of convenience and necessity authorizing interstate *537sales only for the term of the contract. The Commission, however, tendered the company an unlimited certificate. The Court ruled that by accepting that certificate and by exercising the authority granted by it, the company undertook a service obligation that survived the expiration of the 20-year contract and that it could not abandon without Commission approval.
The Court explained that the company’s statutory obligation was not limited to the contractual commitment it had voluntarily assumed. “[T]he service in which the producer engages [the sale of natural gas] is distinct from the contract which regulates his relationship with the transmission company in performing the service.” 364 U. S., at 153. The duty to continue that service is an obligation imposed by the Act, not by contract. Id., at 155.15
And later in the opinion the Court added:
“An initial application of an independent producer, to make movements of natural gas in interstate commerce, leads to a certificate of public convenience and necessity under which the Commission controls the basis on which ‘gas may be initially dedicated to interstate use. Moreover, once so dedicated there can be no withdrawal of that supply from continued interstate movement without Commission approval. The gas operator, although to this extent a captive subject to the jurisdiction of the Commission, is not without remedy to protect himself.’ [Atlantic Refining Co. v. Public Serv. Comm’n of New York,] 360 U. S., at 389.” Id., at 156.
*538The petitioners argue that like reasoning controls this case. Because the certificate issued to Gulf was not limited by the duration of its leasehold interests, they contend that respondents must supply leasehold gas to El Paso until they obtain permission to abandon that service pursuant to § 7 (b) of the Act. The argument misconceives the nature of the issue resolved by Sunray.
In Sunray the issue before the Court was whether a private contract between a producer and a pipeline company could supplant the Commission’s authority to determine how long the producer’s gas would be subject to interstate dedication. There was no question that the producer had dedicated the gas to the interstate market, and there was no question that the producer owned the gas that he had dedicated. In the case at hand, however, respondents have not themselves dedicated any gas to interstate commerce, and they strenuously urge that Gulf’s power to dedicate their gas was limited by the character of Gulf’s leasehold interest. The issue here, therefore, is one step removed from that in Sunray. Nevertheless petitioners claim that Sunray controls. Their “syllogism” is that since a private contract is not determinative of the scope of a dedication, a private lease should not be determinative of whether there has been a dedication. But the syllogism is a non sequitur.16 Moreover, Sunray cannot, consistently with the purposes and structure of the Natural Gas Act, be expanded in this fashion.
The Natural Gas Act, as this Court has repeatedly stated, does not represent an exercise of Congress’ full power under the Commerce Clause. See, e. g., FPC v. Panhandle Eastern *539Pipe Line Co., 337 U. S. 498, 502. Instead, § 1 (b) limits the Act’s reach to interstate transportation and sales of natural gas, 15 U. S. C. § 717 (b) (1976 ed.), and this same restriction is reflected in the abandonment provision. Section 7 (b) provides that “[n]o natural gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities ... .” 15 U. S. C. § 717f (b) (1976 ed.) (emphasis added). “Natural gas company,” in turn, is defined as “a person engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for resale.” 15 U. S. C. § 717a (6) (1976 ed.) (emphasis added).
While Gulf, like the oil company in Sunray, is a “natural gas company” within this definition, it is clear that, at least prior to the lease termination, the respondents were not. They clearly did not transport gas, and their retention of a standard, fixed royalty interest did not constitute a “sale” of gas in interstate commerce.17 This latter point follows from the rule that the royalty provisions of an oil and gas lease are not subject to the Natural Gas Act. Mobil Oil Corp. v. FPC, 149 U. S. App. D. C. 310, 463 F. 2d 256 (1972), cert. denied sub nom. Mobil Oil Corp. v. Matzen, 406 U. S. 976. The reasoning of the Court of Appeals in that case is applicable here:
“When we come to an ordinary lease by the landowner to the producer there is neither a 'customary’ sale in interstate commerce nor its equivalent in economic effect. Such a lease is a transaction that is itself customary and conventional, but one that precedes the 'conventional’ sales in interstate commerce with which Congress was concerned, indeed even precedes the 'production and gathering’ which § 1 (b) visualized as preceding the sale *540in interstate commerce over which jurisdiction was being established.
“The FPC is limited by the provision establishing its jurisdiction, and we do not find in that provision, rooted as it is in a sale in interstate commerce, any basis for reaching out to cover the landowner’s lease or its royalty payments.” 18
The Commission does not challenge this rule; instead, it argues that “lessors who succeed to the interest of their natural gas company lessees would be natural gas companies within the meaning of the Act.” Brief for Petitioner in No. 76-1587, p. 29. But neither the Commission nor any court has held that a lessor succeeds to the interest of his lessee when a lease expires by its terms. The Commission has held that a purchaser or assignee charged with notice of the burdens imposed on the acquired estate by its former owner must seek abandonment approval under § 7 (b). See, e. g., Cumberland Natural Gas Co., 34 F. P. C. 132 (1965). The Commission has reasoned that, in these situations, the successor-in-interest has “stepp [ed] into the shoes of his predecessor.” Graridge Corp., 30 F. P. C. 1156, 1162 (1963); see also Phillips Petroleum Co. v. FPC, 556 F. 2d 466 (CA10 1977); but see El Paso Natural Gas Co., 48 F. P. C. 1269 (1972).
That analysis does not apply in this case. The character of the fee owner’s reversionary interest was defined when the leasehold estate was created. Respondents did not “step into” Gulf’s leasehold interest; that interest expired. This is, of *541course, merely another way of expressing the well-settled doctrine of property law that “one having a limited estate in land cannot, as against the person entitled in reversion or remainder, create an estate to endure beyond the normal time for termination of his own estate.” 1 H. Tiffany, Law of Real Property § 153, p. 247 (3d ed. 1939).19
Petitioners rejoin that strict concepts of property law or state definitions of ownership cannot control the scope of the federal Act. But this proposition, though valid, does not support petitioners’ position. As the Court has previously stated, “[a] .regulatory statute such as the Natural Gas Act would be hamstrung if it were tied down to technical concepts of local law,” United Gas Improvement Co. v. Continental Oil Co., 381 U. S. 392, 400, and the Court must instead look to the economic reality of the transaction. But in this case respondents, as royalty owners, had “no control over any incident of such [gas] sale either as to the quantity to be sold, the price to be paid, the identity of the purchaser or whether it [should] be sold in interstate or intrastate commerce.” Mobil Oil Corp. v. FPC, supra, at 316, 463 F. 2d, at 262. There is no claim that the lease was terminated prematurely in order to withdraw the gas from the interstate market or to evade the Commission’s ratemaking authority. And, in fact, this case does not even present the specter of evasion or bad faith since the lease was negotiated at arm’s length and executed years before the statute was passed.
My conclusion that Congress did not intend to allow a lessee to dedicate a lessor’s gas in this situation is supported not *542only by the statutory provisions discussed above, but also by the legislative history which clearly counsels restraint in judicial interpretation of the Act. Both the House and Senate Reports state that the Act only “provides for regulation along recognized and more or less standardized lines. There is nothing novel in its provisions, and it is believed that no constitutional question is presented.” H. R. Rep. No. 709, 75th Cong., 1st Sess., 3 (1937); S. Rep. No. 1162, 75th Cong., 1st Sess., 3 (1937). I cannot believe that, in a statute described as containing “nothing novel,” Congress intended to allow a natural gas company, operating under a fixed-term lease, to impose a permanent service burden on the royalty owner over that party’s objection.
II
Based on the preceding analysis, it is apparent that this Court’s railroad abandonment cases do not support petitioners. They rely on Smith v. Hoboken R., Warehouse & S. S. Connecting Co., 328 U. S. 123, and Thompson v. Texas Mexican R. Co., 328 U. S. 134, two companion cases decided in 1946, in which the Court held that § 1 (18) of the Interstate Commerce Act 20 required Commission approval of the abandonment of the lessee’s operations and the lessor had standing to seek that approval.21 These cases make it clear that a lessee’s statutory *543duty to continue operations until a regulatory commission has given its approval to a proposed abandonment may qualify the contractual rights of the lessor. The cases do not, however, shed any light on the question whether a regulated lessee may impose any statutory duties on an unregulated lessor.
The railroad cases did not involve any question concerning the scope of the dedication to interstate commerce, or any attempt to impose an obligation on a party which was not subject to the Commission's jurisdiction. The question was which of the two companies subject to the jurisdiction of the Commission should operate — not whether the operation should continue. Neither the lessor nor the lessee wanted to have the regulated operation cease; both recognized that the common carrier’s obligation to provide service to the public existed independently of the lease and survived its termination. In short, in neither case was there any question but that the lessor was a “common carrier” under the Interstate Commerce Act and subject to the obligations imposed by the Act.
The importance of this distinction is highlighted by subsequent lower court cases interpreting the railroad abandonment provision of § 1 (18). In particular, the Court of Appeals for the Second Circuit has concluded that Hoboken and Thompson do not “hold or imply that a noncarrier, by merely leasing its properties to a carrier, becomes a ‘carrier by railroad,’ thus subjecting itself to an obligation to carry on the operations of its lessee’s railroad . . . .” Meyers v. Famous Realty, Inc., 271 F. 2d 811, 814 (1959), cert. denied, 362 U. S. 910;22 *544see also City of New York v. United States, 337 F. Supp. 150, 153 (EDNY 1972) (three-judge panel); Friendly, Amendment of the Railroad Reorganization Act, 36 Colum. L. Rev. 27, 47-49 (1936). Thus, instead of supporting the petitioners’ position in this case, the cases dealing with railroad abandonment merely illustrate the extent to which petitioners’ claim is unprecedented.
Ill
Finally, petitioners argue that the Court of Appeals’ ruling should be reversed in order to prevent parties from diverting natural gas production from the interstate market at will. The answer to this contention is implicit in the discussion of Sum ay and the Natural Gas Act, Part I, supra, but I will address it separately because this Court has long recognized that one of the central purposes of the Act is “to protect consumers against exploitation at the hands of natural gas companies.” FPC v. Hope Gas Co., 320 U. S. 591, 610. The Commission argues that unless abandonment authorization is required in this case, the natural gas companies will be able to manipulate and restructure their leases to avoid the Commission’s ratemaking authority. There are three answers to this concern.
First, there are few short-term development leases in existence. The magnitude of the capital investment required for exploration and development of oil and gas production makes it extremely unattractive for any natural gas company to accept a short-term production lease. Indeed, the literature *545indicates that the fixed-term leases involved in this case are an almost extinct species, and that development leases typically survive for as long as production is economically feasible.23
Second, nothing in the Fifth Circuit’s decision affects the Commission’s power to require future applicants for certificates to describe the details of their supply arrangements and to withhold approval pending the receipt of appropriate evidence of consent to an unlimited dedication by all interested parties. See Sunray Mid-Continent Oil Co. v. FPC, 364 U. S. 137.24
Finally, the decision of the Fifth Circuit does not in any way allow natural gas companies to exercise an “unregulated choice” over whether to continue serving the interstate market. See FPC v. Moss, 424 U. S. 494, 506 (Burger, C. J., concurring in judgment). The Commission’s error in this case was its conclusion that the need to obtain abandonment authorization was “like an ancient covenant running with the land,” El Paso Natural Gas Co., 54 F. P. C. 145, 150, 10 P. U. R. 4th 344, 348 (1975), which enabled a lessee for a limited term to impose *546a burden on the lessor’s interest after the expiration of the lease. As both the language and history of the Act show, Congress did not intend to work such a revolution in property interests touching natural gas. It confined the applicability of the abandonment provisions to “natural gas companies.” But that term is sufficiently flexible to enable the Commission to analyze the economic and practical significance- of transfers of interests in natural gas regardless of the particular label applied to any transfer. See United Gas Improvement Co. v. Continental Oil Co., 381 U. S. 392.25 The Commission has ample authority to prevent manipulation of the Act’s regulatory provisions.
Despite the Act’s flexibility, I would not stretch it to reach this case. The lessors, as royalty owners, had no control over the interstate sales, and even with the lease running without interruption, the lessee’s interest was limited to a 50-year term. There is no authority in the statute for imposing a permanent service obligation on the lessors in this situation. Accordingly I would affirm the decision of the Court of Appeals.

 At the time the Court of Appeals for the Fifth Circuit delivered its opinion in this case, there was a “gross imbalance between controlled prices at which interstate natural gas [was] sold and the substantially higher values set by the free market for gas . . . .” Southland Royalty Co. v. FPC, 543 F. 2d 1134, 1135 (1976) (citation omitted). Although the Federal Power Commission (now the Federal Energy Regulatory Commission) has taken some action to correct this imbalance, see National Rates for Natural Gas, 56 F. P. C. 2698, 15 P. U. R. 4th 21 (1976), aff’d sub nom. American Public Gas Assn. v. FPC, 186 U. S. App. D. C. 23, 567 F. 2d 1016 (1977), a “substantial disparity” still exists. Brief for Petitioner in No. 76-1587, pp. 6-7, n. 9.

 “No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.” 15 U. S. C. § 717f (b) (1976 ed.).

 See ante, at 521 n. 1.

 Southland acquired one-half of the mineral fee interest in the Waddell lease in 1926; the remaining fractional interests are owned by over 100 other companies and persons. The ownership of the reversionary mineral estate of the Goldsmith lease is also dispersed; Texaco, Inc., is apparently the largest single owner, having acquired a one-fourth interest in 1929.

 Respondents’ royalty interest was % of 4‡ per Mcf (thousand cubic feet) for all casinghead gas produced and sold from the lease; they had no right to take gas in kind or to receive a royalty based on the price received by the lessee for the gas. App. 135-140.

 Casinghead gas is found in association with crude oil; it is to be distinguished from “gas-well gas.”

 Gulf sold its gas from the Goldsmith lease to Phillips Petroleum Co., which processed the gas and sold it to El Paso, which in turn transported the gas in interstate commerce for subsequent resale. For the purposes of this case, the parties have agreed that there are no material differences between the Goldsmith and Waddell leases. See ante, at 521 n. 1.

 Southland entered into a contract with Intratex Gas Co. and Intrastate Pipeline Co., which primarily serves a distributor in Houston, Tex.

 Docket No. CP75-209, commenced by El Paso on January 20, 1975, related to the Waddell lease. Docket No. CI75-594, relating to the Goldsmith lease, was commenced by Texaco on April 8, 1975. Although the interest of Texaco was adverse to El Paso, its petition for a declaratory order raised the same issue as did the El Paso petition in No. CP75-209.

 “In our opinion the various mineral interest reversioners may not sell gas from the two leaseholds in intrastate commerce without prior permission and approval of the Commission. Although we have discovered no case directly on point, we are of the opinion that the cases and the purpose of the Natural Gas Act inevitably lead to this view. . . . [T] he dedication involved is not the dedication of an individual party or producer, but the dedication of gas.” El Paso Natural Gas Co., 54 F. P. C. 145, 149, 10 P. U. R. 4th 344, 347-348 (1975).

 “To the extent that Gulf’s present interest in all of the natural gas is contingent upon its removal within 50 years, the right to dedicate that gas removed to interstate commerce is likewise contingent. Whatever gas is left under the lease lands at the end of the 50 years is not Gulf’s gas and, by the plain terms of the limited leasehold estate, never belonged to it from day one forward.” 543 F. 2d, at 1138.

 Petitioners in this case are the Commission, El Paso, and the State of *535California, which intervened in the suit below on the ground that El Paso was one of its major suppliers of natural gas.

 After the decision in Phillips, the natural gas companies already supplying gas to the interstate market had to apply for Commission approval of that service. The certificate issued to Gulf in this case in 1956 was one of a large number which were issued in a post-Phillips consolidated proceeding. The certificate stated in relevant part:
“The Commission orders
“(A) A certificate of public convenience and necessity be and is hereby issued, upon the terms and conditions of this order, authorizing the sale by Applicant of natural gas in interstate commerce for resale, together with the operation of any facilities, subject to the jurisdiction of the Com*536mission, used for the sale of natural gas in interstate commerce, as herein-before described and as more fully described in the application and exhibits in this proceeding.
“(B) The certificate issued -herein shall be deemed accepted and of full force and effect, unless refused in writing and under oath by Applicant within 30 days from issuance of this order.
“(C) The certificate is not transferable and shall be effective only so long as Applicant continues the acts or operations hereby authorized in accordance with the provisions of the Natural Gas Act, and the applicable rules, regulations and orders of the Commission.” App. 37. See Sun Oil Co. v. FPC, 364 U. S. 170, 171-172.
In 1972, Gulf entered into a second contract with El Paso covering gas produced from wells covered by the leases in question, and the Commission granted Gulf another certificate covering sales under that contract.

 As this Court has previously noted, “the scheme of the Act was one which built the regulatory system on a foundation of private contracts.” Sunray Oil, 364 U. S., at 154; see also United Gas Pipe Line Co. v. Mobil Gas Service Corp., 350 U. S. 332.

 The Court’s statement was made in response to the company’s argument that United Gas Pipe Line Co. v. Mobil Gas Service Corp., supra, established the principle that the Act preserved the integrity of private contracts, and that therefore the Commission should not be allowed to compel it to enlarge its contractual undertaking. The holding in Mobil was that the seller could not file for a rate increase that would violate the terms of his contract. In Sunray, however, no violation of an existing contract was required or permitted by the Commission.

 The fact that Sunray’s contract with its customers did not limit the scope of Sunray’s dedication of its own gas does not logically compel any answer to the question whether Gulf had the power to dedicate gas owned by its lessors after the termination of the lease. See generally Conine & Niebrugge, Dedication under the Natural Gas Act: Extent and Escape, 30 Okla. L. Rev. 735, 821-825 (1977).

 Of course, the sale at issue is the alleged sale in this case; it is irrelevant that some of the respondents may have sold natural gas from other fields under other contracts in interstate commerce for resale.

 149 U. S. App. D. C., at 316-317, 463 F. 2d, at 262-263. As the District of Columbia Circuit correctly observed, the issue is the extent to which royalty payments under a lease are related to the concept of a jurisdictional “sale” under the Act. An entirely different analysis might be appropriate if the lessee or lessor sought to abandon permanent facilities for the interstate transportation of gas, such as a pipeline.

 Petitioners argue that, since Gulf had the right to extract all the natural gas from the leased land, the respondents are, in effect, stepping into the remainder of a burdened interest. This argument is based on a highly selective reading of the lease agreement which simply ignores the express limitation placed on that right to extract “all” the gas. Gulf only had the right to produce and market the gas it found, developed, and sold during the specified 50-year term. See Southland Royalty Co. v. FPC, 543 F. 2d, at 1137-1138.

 “Section 1 (18) provides in part:
“[N]o carrier by railroad subject to this chapter shall abandon all or any portion of a line of railroad, or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment.” 49 U. S. C. § 1 (18).

 In both cases the Court relied on the alternative ground that the lessee was the debtor in a reorganization proceeding in which § 77 of the Bankruptcy Act required the Commission to prepare the plan of reorganization. See Hoboken, 328 U. S., at 130-133; Thompson, 328 U. S., at 142-144. In the Thompson case, which involved a trackage agreement, the Court also relied on the Commission’s jurisdiction under § 5 (2) (a) of *543the Interstate Commerce Act to fix the terms and conditions, including rentals, for any trackage agreements created after the effective date of the Transportation Act of 1940. See 328 U. S., at 146-150.

 The Commission points out that in Meyers the lessee had previously obtained abandonment authorization from the Interstate Commerce Commission. The Second Circuit did not, however, rely on that fact, see 271 F. 2d, at 814, and, in any event, I fail to see how that distinction sup*544ports the Commission’s theory in this case, since it argues that the gas supply itself was dedicated to interstate commerce. Furthermore, it should be noted that Gulf did apply for abandonment authorization, an application which the Commission staff considered “superfluous.” 54 F. P. C., at 151, 10 P. U. R. 4th, at 349. The Commission ruled that the application was appropriate on the ground that “[w]e should have all the significant parties before us . . . .” Ibid. The question whether Gulf was under a duty to request abandonment approval is not before us.

 See 3 H. Williams, Oil and Gas Law § 601.1 (1977); Walker, The Nature of the Property Interests Created by an Oil Gas Lease in Texas, 7 Texas L. Rev. 1 (1928).

 Contrary to the Court’s suggestion, this case has nothing whatsoever to do with the question in Sunray of “whether the conditioning power could be used to achieve indirectly what the Act did not authorize the Commission to do directly.” Ante, at 530. In Sunray petitioner argued that the Commission could only approve what the applicant itself proposed. The Court rejected that argument. It then observed in passing that if it had accepted petitioner’s position, the Commission could probably not have used its “conditioning” power to award a certificate of longer duration than that prayed for, since that would simply allow the Commission to accomplish indirectly what it could not accomplish directly.
No one questions in this case the Commission’s direct power to withhold a certificate pending receipt of evidence that the applicant has the power to make an unlimited dedication. Indeed, no one has ever suggested that that might be an issue. Sunray’s observation with respect to indirect power is, therefore, simply irrelevant.

 In United Gas Improvement, producers of gas had long-term sales contracts with an interstate pipeline. After the Phillips decision, see supra, at 535-536, the parties withdrew their sales contracts and entered into lease arrangements which substantially preserved the terms of the prior contracts. The Court held that these transactions, however characterized by the parties, amounted to “sales” under the Act. Similarly, parties to a contract cannot avoid the Commission’s jurisdiction simply by stating that their sale of natural gas in interstate commerce “ ‘is not subject to the jurisdiction of the Federal Power Commission.’ ” See California v. LoVaca Co., 379 U. S. 366, 367-368.