Court Opinion

ID: 9422530
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:03:08.938381+00
Date Added: 2024-06-11T17:22:37.470283
License: Public Domain

Mr. Justice Harlan,
whom Mr. Justice Stewart and Mr. Justice Goldberg join, dissenting.
The conflict asserted between the Kansas Commission’s “ratable take” orders and the authority of the Federal Power Commission is that by virtue of the combined effect of such orders and the minimum “take or pay” provisions of Northern’s Republic “A” contract the consumer price of Northern’s gas sold in interstate commerce will be forced up, thereby potentially embarrassing the Federal Power Commission’s effective exercise of its authority over *99such prices.1 The premise of this alleged conflict is of course that Northern’s Republic “A” contractual obligations remain unaffected by the Kansas Commission’s ratable take orders.
The appellee Commission says that even if all this be correct its orders are nonetheless valid. The Federal Power Commission as amicus, while denying this conclusion, says, however, that no significant conflict with federal authority would arise if the effect of the State Commission’s orders is to abrogate take or pay provisions such as those contained in the Republic “A” contract, and suggests that the case be remanded to the Kansas Supreme Court for determination of that question of state law. This would obviate the necessity of our deciding at this time any questions of federal law.
Without intimating any view upon the federal questions,2 it seems to me that the Federal Power Commis*100sion’s suggestion is an obviously sensible one. Cf. Northern Natural Gas Co. v. Republic Natural Gas Co., 172 Kan. 450, 241 P. 2d 708. The Court’s opinion, as I understand it, gives three principal reasons for refusing to remand: (1) the State Commission’s orders are in any event invalid per se because they bear upon purchasers and not producers of natural gas; (2) even if Northern were no longer bound by the quantity obligations of its Republic “A” contract, the Kansas orders would still be invalid because they require Kansas purchasers who previously took gas unratably to readjust their purchasing patterns, which might possibly affect ultimate consumer prices; and (3) the Kansas Supreme Court in fact reached and decided the federal questions and, apart from that, there are other reasons that would make remand a “highly irregular” course. I can see little or nothing in any of these objections to remand.
I.
That the Kansas orders are directed at purchasers should not be allowed to obscure their true nature. The production of natural gas and its movement into interstate channels constitute one and the same physical operation. Thus the Kansas orders limiting the volume of gas a pipeline may purchase from a given well are tantamount to a limitation on the production of that well. Indeed an order directed to the purchaser of the gas rather than to the producer would seem to be the most feasible method of providing for ratable taking, because it is the purchaser alone who has a first-hand knowledge as to whether his takes from each of his connections in the field are such *101that production of the wells is ratable.3 An order addressed simply to producers requiring each one to produce ratably with others with whose activities it is unfamiliar and over whose activities it has no control would create obvious administrative problems.4
There is thus no warrant for concluding that just because the Kansas orders read “purchaser” rather than “producer” they are an attempt to regulate the interstate sale of natural gas. Their purpose and effect are to limit production — the physical act of drawing gas from the earth. To the extent, then, that appellant’s operations control the volume of gas produced, they involve “production and gathering, in the sense that those terms are used in [the] § 1 (b)” exemption of the Natural Gas Act. Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672, 678.
But regardless of whether the § 1 (b) exemption is applicable here, the orders do not necessarily invade areas reserved to exclusive federal authority.5 The mere fact *102that they are directed at purchasers does not, of itself, interfere with the Federal Power Commission’s functions of certification (§ 7 of the Act) or rate regulation (§§ 4 and 5 of the Act).6 And I find it hard to reconcile the Court’s holding on this score with its statement that “conservation measures aimed directly at interstate purchasers . . . cannot be sustained when they threaten, as here, the achievement of the comprehensive scheme of federal regulation.” Ante, p. 94. (Emphasis added.) As will be shown (infra, pp. 103-106), this threat, if it exists at all in this case, is no different from that flowing from other valid conservation measures.
The Federal Power Commission itself acknowledges that if the Kansas orders release appellant and others from contractual obligations of the sort in question here, then such orders would entail no significant conflict with federal authority. The Commission states: “In that event, despite the fact that the Kansas regulation is in terms addressed to interstate pipeline companies rather than to Kansas producers, we would not urge that it so impinged upon matters of national, as opposed to local, concern, or that it so interfered with the regulatory functions and purposes of the Federal Power Commission under the Natural Gas Act, as to require its invalidation under the supremacy clause.” 7 For the further reasons that will now be discussed, I think this is a perfectly sound position.
*103II.
Of course a remand is unnecessary if, as in the Court’s view, the Kansas Commission’s orders are invalid even though appellant is deemed to be no longer bound by the take or pay provisions of the Republic contract. But the remote possibility of an adverse effect on the cost structures of Kansas purchasers falls far short of establishing such invalidity.
The ratable take orders here were intended as conservation measures8 — to protect the correlative rights of producers taking gas from a common source of supply by preventing drainage from underproduced wells to overproduced wells.9 It has always been recognized that the States possess the power to conserve scarce resources such as natural gas and to prevent unfair and discriminatory production of this resource by some wells at the expense of others. See, e. g., Patterson v. Stanolind Oil & Gas Co., 305 U. S. 376; Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61; Ohio Oil Co. v. Indiana, 177 U. S. 190. It is difficult to imagine any exercise of this conservation power that would not carry with it the possibility of affecting the costs incurred by those who purchase gas from producers. Regulations requiring the casing of wells, prohibiting the use of pumps, restricting production to a certain percent of a well’s “open flow,” imposing a particular gas-oil ratio, controlling drilling operations *104and pipeline pressure, prescribing the permissible spacing of wells, and enforcing pooling or unitization may reduce the amount of gas available for sale by a particular producer (at least in the short run) and thus force a purchaser to buy from it or someone else probably at greater cost. Yet it has never been suggested that such state measures are for that reason invalid.
Indeed, the most direct interference with the availability of gas for interstate sale is the “allowable” order. It places a ceiling on the amount of gas that may be produced by a particular well during a given period of time and inevitably makes pipelines spread their demand among many wells. Obviously its possible effect on cost is precisely the same as that which may be caused by a ratable take order, for the two orders are merely variations of the same regulatory measure; both are designed to prevent the disproportionate taking of gas from some wells to the disadvantage of others.
In Champlin Refining Co. v. Corporation Comm’n, 286 U. S. 210 (1932), this Court sustained, against a challenge under the Commerce Clause, a state allowable order. Since the States had the power to issue such an order at the time the Natural Gas Act was passed, nothing in that Act can now be considered to withdraw it. This is so because it is beyond dispute that when Congress enacted the Natural Gas Act in 1938 it did not intend to deprive the States of any regulatory powers they were then deemed to possess under the Constitution. Rather, the Act was intended only to fill the “gap . . . thought to exist at the time the Natural Gas Act was passed” by providing for federal regulation of those aspects of the natural gas business that the States were at that time believed to be constitutionally incapable of regulating. Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672, 684, 685-687. As was specifically stated in the House Com*105mittee Report, the Act “takes no authority from State commissions, and is so drawn as to complement and in no manner usurp State regulatory authority.” H. R. Rep. No. 709, 75th Cong., 1st Sess., p. 2.10
If an allowable order is now valid, what is the distinction between such an order and the ratable take orders in the present case? The Court points to no difference in terms of effect on cost structure, but only to the fact that the orders here are directed at purchasers and not producers. For reasons already discussed, supra, pp. 100-102, this difference is illusory.
Quite apart from the absence of any significant difference between the possible general cost ramifications of an allowable and a ratable take order, the very facts of the case before us demonstrate the folly of determining whether or not the jurisdiction of the Federal Power Commission has been invaded on the basis of general possibilities unsupported by specific data. Appellant is paying a higher price for gas to Republic than to any other producer in the Kansas Hugoton Field. If appellant could reduce its take from Republic wells without contractual liability, the over-all cost of its gas purchases would in all likelihood decrease. Surely such a beneficial effect on appellant’s cost structure is not inconsistent with the purposes of the Natural Gas Act. And we have no way of knowing the extent to which the same is true of other Kansas purchasers. The lurking danger of collision with federal regulation that the Court fears may be completely nonexistent. Yet on this insecure founda*106tion the Court builds a rule that, if consistently applied, may well destroy the conservation powers of the States. And this in the name of an Act expressly intended to preserve existing state powers.
III.
The Court’s remaining arguments against remand are equally unsatisfactory.
It is said that the Kansas Supreme Court did not rest its decision on a state ground (the abrogation, by virtue of the Commission’s orders, of Northern’s take or pay obligations under the Republic contract), but decided the federal questions. Whatever may have prompted the state court to this course — perhaps a desire to obtain from this Court a broad decision on the federal question or a mistaken belief as to the irrelevancy of the contract question to the existence of the state power now questioned — this surely does not constrict the grounds of our adjudication of the case. It is familiar practice for this Court to refuse to reach federal constitutional questions on which the state courts have predicated decision. It is enough to refer to the landmark concurring opinion of Mr. Justice Brandéis in Ashwander v. Tennessee Valley Authority, 297 U. S. 288, 346-348, enumerating principles designed to avoid the unnecessary adjudication of constitutional questions — a tenet of adjudication to which this Court has always strictly adhered.
A remand, it is also said, would be a “highly irregular” step for the further reasons that the effect of the State Commission’s orders on the Republic “A” contract was not drawn in question in this suit and the Republic Company itself was not a party to the litigation. However, in light of what has already been said the germaneness of that contract issue to the question of the validity of state power in the premises is apparent. And apart from the presumed availability of state procedures for the *107vouching into the case of the Republic Company, we are informed by the Federal Power Commission that there is now pending in the state courts another case against Northern, to which Republic is a party, that involves the continuing validity of the take or pay provisions of the “A” contract.11 Hence, if necessary, the Kansas Supreme Court could on remand of the present case hold its hand pending resolution of the contract issue in the other litigation.
In short, I cannot understand why this Court should not remand for determination of a state law issue that may dispose of this case, as the Court has done in other comparable instances. See, e. g., Leiter Minerals, Inc., v. United States, 352 U. S. 220, 228-230; Aquilino v. United States, 363 U. S. 509, 515-516.
I would vacate the judgments of the Supreme Court of Kansas and remand the case to that court for a determination, in accordance with Kansas procedures, as to the effect of the State Commission’s orders on the Northern-Republic “A” contract.

 These effects, as claimed by the appellant and the Federal Power Commission, are summarized in the appellee’s principal brief on this appeal (p. 26) as follows: “To comply with the Kansas orders by taking ratably in the Kansas Hugoton Field, appellant, it is argued, would have to do one of two things: (1) increase its takes from its other connections in the field until they become ratable with its takes from the Republic A wells, or (2) continue to take the same amount from the field as a whole but reallocate its takes so as to make them ratable by decreasing takes from Republic to a figure below the amount provided by the contract and increasing takes from other wells. It is contended that the first of these courses would require appellant either to take from the Kansas Hugoton Field gas which it does' not want and for which it has no present market or to reduce its takes in other fields and thereby incur contractual liability to producers in those fields, and that the second would result in contractual liability to Republic. Either course, it is argued, will necessarily cause an increase in the price of gas to the ultimate consumer, and for this reason the Kansas orders are inconsistent with the Natural Gas Act.”

 At the 1958 Term the Court dismissed for want of a substantial federal question an appeal presenting substantially the same broad *100federal question which the Court decides today. See Permian Basin Pipeline Co. v. Railroad Comm’n, 358 U. S. 37 (reported below at 302 S. W. 2d 238; and see the Jurisdictional Statement in this Court, No. 64, Oct. Term, 1958).

 Most of the more important oil and gas producing States have long had statutes providing for ratable taking by purchasers to protect correlative rights. See Tex. Stat. Ann., Tit. 102, Art. 6049a, §§ 8, 8a (enacted in 1931); Okla. Stat. Ann., Tit. 52, § 240 (enacted in 1915); La. Rev. Stat., 1950, Tit. 30, §§41-46 (enacted in 1918).

 In these circumstances the situation here is hardly comparable to one in which a State has attempted to impose upon a foreign corporation, not doing business in the State, liability for the collection of a use tax with respect to goods purchased by residents of the taxing State at a store of the corporation located in the State of its domicile. See Miller Bros. Co. v. Maryland, 347 U. S. 340. Surely the Natural Gas Act was not intended to relieve interstate pipelines doing business in a particular State from the mere mathematical computation involved in ratably distributing its over-all need for natural gas among the producers with which it has business connections in that State.

 As this Court noted in Federal Power Comm’n v. Transcontinental Gas Pipe Line Corp., 365 U. S. 1, 8: “. . . Congress, in enacting the Natural Gas Act, did not give the Commission comprehensive powers *102over every incident of gas production, transportation and sale. Rather, Congress was 'meticulous’ only to invest the Commission with authority over certain aspects of this field, leaving the residue for state regulation.”

 That criminal penalties for noncompliance are imposed on purchasers adds nothing to the fact that the orders are addressed to purchasers.

 Memorandum for the Federal Power Commission as amicus curiae, pp. 21-22.

 The Court disclaims any need to consider the contention that the true purpose of the Kansas orders was to require overproduction of the Kansas part of the Hugoton Field in order to prevent its drainage into Texas and Oklahoma (ante, pp. 94-95, note 12).

 When one well in a common pool produces a large volume of gas, the pressure is reduced at that point; the gas in the common pool then tends to flow toward the low pressure point, thereby reducing the amount of gas available for production by other wells.

 See also Panhandle Eastern Pipe Line Co. v. Public Service Comm’n, 332 U. S. 507, 517 (“The Act, though extending federal regulation, had no purpose or effect to cut down state power”); Federal Power Comm’n v. Panhandle Eastern Pipe Line Co., 337 U. S. 498, 502-503, 512-513; Interstate Natural Gas Co. v. Federal Power Comm’n, 331 U. S. 682, 690.

 Republic Natural Gas Co. v. Northern Natural Gas Co., Nos. 4165 and 4235, District Court of Stevens County, Kansas, in which, we .are told, Republic claims damages from Northern for failure to observe the take or pay provisions of the “A” contract.