Court Opinion

ID: 8723824
Source: CourtListenerOpinion
Date Created: 2022-11-26 08:53:23.613543+00
Date Added: 2024-06-11T16:59:12.536939
License: Public Domain

MURRAH, Justice
(dissenting).
At the outset, let me acknowledge and embrace the doctrine of abstention, applicable in cases of this kind, to the effect that a federal court will refrain from exercising its equity jurisdiction to enjoin the enforcement or operation of a state statute or a regulatory order of a state tribunal, to vouchsafe the due process or equal protection guaranties of the Fourteenth Amendment.
The doctrine has been readily applied to challenged state statutes and regulatory orders in the exercise of the state police power to regulate the exploration, production and marketing of petroleum products found and produced within the boundaries of a state. Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424; Champlin Refining Co. v. Corporation Commission of State of Oklahoma, 286 U.S. 210, 52 S.Ct. 559, 76 L.Ed. 1062; Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368; Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U.S. 570, 61 S.Ct. 343, 85 L.Ed. 358; Natural Gas Pipeline Co. of America v. Slattery, 302 U.S. 300, 58 S.Ct. 199, 82 L.Ed. 276. These are matters deemed primarily of internal concern within the peculiar competence of state regulatory bodies with adequate recourse to the state courts and to the Supreme Court for redress of asserted deprivation of due process and equal protection of the laws.
The doctrine reached full fruition and vitality in Alabama Public Service Commission v. Southern Railway Co., 341 U.S. 341, 71 S.Ct. 762, 768, 95 L.Ed. 1002, the court saying, “Equitable relief may be granted only when the District Court, in its sound discretion exercised with the ‘scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts,’ is convinced that the asserted federal right cannot be preserved except by granting the ‘extra-ordinary relief of an injunction in the federal courts.’ ” Indeed, the latter case is said to have the practical effect of foreclosing federal equity jurisdiction to vouchsafe economic due process or equal protection “if a plaintiff can be sent to a state court to challenge an agency order.” See Mr. Justice Frankfurter dissenting, 341 U.S. at page 356, 71 S.Ct. at page 771.
But that notion was apparently repudiated in Doud v. Hodge, 350 U.S. 485, 76 S.Ct. 491, 492, the court denying that it had ever “held that a district court is without jurisdiction to entertain a prayer for an injunction restraining the enforcement of a state statute on the grounds of alleged repugnancy to the Federal Constitution simply because the state courts had not yet rendered a clear or definitive decision as to the meaning or federal constitutionality of the statute.” For that matter, three-judge federal equity jurisdiction has always been deemed a ready forum for the asserted deprivation of civil rights under the Fourteenth Amendment. West Virginia State Board of Education v. Barnette, 319 U.S. 624, 63 S.Ct. 1178, 87 L.Ed. 1628; Brown v. Board of Education, 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873; and related cases; McLaurin v. Oklahoma State Regents for Higher Ed., 339 U.S. 637, 70 S.Ct. 851, 94 L.Ed. 1149; Stapleton v. Mitchell, D.C., 60 F.Supp. 51. In the determination of the appropriateness of the exercise of federal equity jurisdiction, the courts seem, however, to recognize a clear distinction between economic and human due process and equal protection. “Much of the vagueness of the due process clause disappears when the specific prohibitions of the First become its standard.” West Virginia State Board of Education v. Barnette, supra, [319 U.S. 624; 63 S.Ct.. 1186].
If only due process and equal protection were involved, I should not hesitate to relegate the plaintiff to its remedy in the state court, for adequate judicial recourse from the challenged order to *646the Supreme Court of Oklahoma is provided by the constitution and laws of Oklahoma. Art.' IX, § 20, Constitution of Oklahoma, 52 O.S.A. §§ 111, 113. But, more is involved than asserted denial of due process of law. The principal complaint of Gulf is that the enforcement of the challenged order will immediately cast a discriminatory burden upon interstate commerce. It was this consideration which prompted us to overrule the motion to dismiss and hear evidence relevant to that issue.
Three-judge equity jurisdiction was cautiously sustained in Public Utilities Commission of Ohio v. United Fuel Gas Company, 317 U.S. 456, 63 S.Ct. 369, 87 L.Ed. 396, where the challenged Commission order asserted jurisdiction to fix the rates for natural gas transported and sold in interstate commerce. After resolving preliminary questions of state law, the court rejected the Commission’s power to establish reasonable rates for the gas sold in interstate commerce on the grounds that the federal government had preempted the field by the Natural Gas Act of 1938, 52 Stat. 821, 15 U.S.C.A. § 717. The court was careful, however, to point out that the Gas Company had exhausted all administrative remedies available to it before bringing the suit. And, it was also careful to note the absence of the necessity for considering whether the commerce clause of its own force invalidated the Commission’s assertion of jurisdiction over the interstate gas rates.
Even in the absence of preempting federal legislation, three-judge equity jurisdiction was deemed proper to vindicate the supremacy of the interstate commerce clause as against state discrimination in Baldwin v. G. A. F. Seelig, 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032. And see also Foster-Fountain Packing Co. v. Haydel, 278 U.S. 1, 49 S.Ct. 1, 73 L.Ed. 147; Lemke v. Farmers Grain Co., 258 U.S. 50, 42 S.Ct. 244, 66 L.Ed. 458.
To be sure, the exhaustion of all administrative remedies is requisite to the exercise of collateral jurisdiction, Natural Gas Co. v. Slattery, supra, and the Commission says that Gulf has not done so.
Paragraph 26 of the challenged order provides in effect that all takers and purchasers shall take the full allowable production “unless relieved” by the Commission after notice and hearing. Paragraph 40 of the order provides in part that “all takers and purchasers shall take the amount fixed in this order unless in an extreme emergency an application is filed for relief from that provision and permission is granted by the Corporation Commission to take less than the amount provided by this order, after notice and hearing * * * ” Conceivably, the Commission might relieve Gulf of the requirements of the order upon a showing of an “extreme emergency”. But, Gulf says that it has no grounds for exception; that no unusual circumstances exist to justify relief from the order. It is said to stand on the same footing with all other takers and purchasers with no grounds for relief except its inability to comply, with the order. And this, the Commission says, is legally insufficient. These representations were made to the Commission and were before it when the challenged order was made. The only recourse to the Commission would be in the nature of a petition for rehearing and I do not understand such to be an administrative prerequisite to judicial inquiry. Republic Natural Gas Co. v. State, 198 Okl. 350, 180 P.2d 1009. It is also noteworthy that no questions of state law are involved, the construction and interpretation of which might obviate the necessity for decision on the constitutional question. Cf. Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971; Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876; Phillips Petr. Co. v. Jones, D.C.W.D.Okl. 147 F.Supp. 122; Sinclair Pipe Line Co. v. Snyder (Sinclair Crude Oil Co. v. State Corporation Commission), D.C.Kan., 147 F.Supp. 632.
Gulf does not challenge the power of the Commission under state law. The *647gravamen of its complaint is that the order is proscribed by the supremacy of the commerce clause of the Federal Constitution. We are thus brought squarely to the question whether the commerce clause of the Constitution by its own naked force prohibits the challenged order. The resolution of that question depends on federal law, and while it may have been preferable to test the constitutionality of the order of a state agency first in the state courts with ultimate recourse to the supreme judge of federal law, the case is rightly here by constitutional choice of forums, and I do not think it would be in the public interest to send the plaintiff away without day.
We start with the proposition, about which there can be no dispute, namely, that the State of Oklahoma, through its Corporation Commission, is clothed with almost plenary power to promulgate, measures for the conservation of its natural resources, and.particularly the production, transportation and marketing of petroleum products. That power and authority, first vitalized in Ohio Oil Co. v. State of Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729, has been reaffirmed too many times to admit of debate. We know that the due process and equal protection clauses of the Constitution impose only tenuous restrictions upon the exercise of that power, and federal courts will rarely interfere on that ground where state remedies are provided. And see Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424, and cases cited.
It is also noteworthy that a state may, consistently with the commerce clause of the Constitution, regulate its internal economy, including oil industry, even though such regulations have some substantial bearing on interstate commerce. It is now well settled that “a state may regulate matters of local concern over which federal authority has not been exercised, even though the regulation has some impact on interstate commerce. * * * The only requirements consistently recognized have been that the regulation not discriminate against or place an embargo on interstate commerce, that it safeguard an obvious state interest, and that the local interest at stake outweigh whatever national interest there might be in the prevention of state restrictions.” Cities Service Co. v. Peerless Co., 340 U.S. 179, 71 S.Ct. 215, 219, 95 L.Ed. 190, and cases cited. See also Milk Control Board v. Eisenberg Farm Products, 306 U.S. 346, 59 S.Ct. 528, 83 L.Ed. 752; Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 85 L.Ed. 315; Panhandle Eastern Pipe Line Co. v. Michigan Public Service Commission, 341 U.S. 329, 71 S.Ct. 777, 95 L.Ed. 993.
Since Cooley v. Board of Wardens, 12 How. 299, 13 L.Ed. 996, first establishing the so-called “balancing of interest” principle in 1852, courts have been struggling with the perplexing problem of making pragmatic adjustments between competing local and national interests under the commerce clause. All agree to the proposition that the states are free to deal with the diverse activities primarily affecting local affairs so long as they do not reach out to regulate interstate commerce to the state’s own economic advantages and to the detriment of the national interest. The contrariety comes from the divergence of views in each case concerning the dominant interest.
The principle is well illustrated by a unanimous court in Baldwin v. G. A. F. Seelig, supra. The philosophical cleavage is graphically illustrated in H. P. Hood & Sons v. Du Mond, 336 U.S. 525, 69 S.Ct. 657, 93 L.Ed. 865, where the court, while agreeing upon the underlying principle, sharply disagreed 'upon its factual application. There, the bare majority, after threading the principle through case after case, struck down a health and safety measure of a New York administrative agency having for its purpose the protection of local milk markets against out-of-state competition despite the avowed health and safety motives. The court thought the obvious effect of the order was to foster economic rivalries and reprisals among states competing for the metropolitan milk market. *648One sure conclusion emerges from the adjudicated eases, that is, whatever stand we take, we shall not stand alone. "With these basic principles in mind, let us analyze the facts.
Gulf Oil Corporation produces oil in all or most of the mid-continent states, including Oklahoma. It purchases oil from 4882 producing leases, 1668 of which are in Oklahoma. It also repurchases oil gathered by other takers from other producing leases in the same area. Some of the repurchases are on a reciprocal contract letter basis, under which Gulf purchases stated amounts of oil in Oklahoma, and sells the same amount of oil to another purchaser in another state or the same state in order to facilitate economical transportation to market. All of the oil purchased by Gulf is transported by pipe line to its five refineries at Port Arthur, Texas, Philadelphia, Pennsylvania, New York, New York, Cincinnati, Ohio and Toledo, Ohio. All of the oil purchased in Oklahoma, including repurchases, is received immediately by the Gulf Refining Company, a wholly owned subsidiary, for transportation through its pipe line to its refineries near Cincinnati and Toledo. None of the oil is transported for delivery to Oklahoma points. Gulf Refining Company operates its pipe line system as an interstate pipe line common carrier cf oil for hire, subject to the Federal Interstate Commerce Act, 49 U.S.C.A. § 1 et seq., and the rules and regulations of the Federal Interstate Commerce Commission issued pursuant thereto, 49 C.F. R., Parts 20, 120, 141, 142, 148, 155, 156, 158,159, 160. All transportation of crude oil through this pipe line system to the Toledo and Cincinnati refineries is pursuant to tariffs filed by Gulf Refining Company with the Federal Interstate Commerce Commission, and is at the rates and subject to the rules and regulations set out in such tariffs.
Some of the oil purchased in Texas, New Mexico and Illinois is also transported immediately to the same refineries. No crude purchased from any other states or countries was received at these refineries during the period in question and the Ohio refineries are the only presently available markets for Oklahoma crude purchased or repurchased by Gulf. These Ohio refineries have been the only market for Oklahoma crude purchased by Gulf since 1952. Since that date, Gulf’s purchases for those refineries have increased from 15,-987 barrels to 38,348 barrels per day. The total purchases for the same refineries for the same date have increased from 66,924 barrels to 78,068 barrels per day. It is necessary to blend the Oklahoma crude with other crude of different gravity in order to bring it up to its optimum refining qualities. During all of the time in question, Gulf’s purchases of Oklahoma crude have conformed to the production allowables fixed by the Oklahoma Corporation Commission, as well as the allowables fixed by the comparable commissions for the states of Texas, New Mexico, Louisiana and Kansas. And, compliance with the orders of the Commission applicable to July, August, September and October 1956 results in the purchase of between 24,000 and 26,000 barrels of oil per day. This is in excess of the market demand for Oklahoma crude at Gulf’s only market and for some months has resulted in excessive top ground storage of crude in Gulf’s facilities along the pipe line system.
Furthermore, the undisputed proof shows a current excess of supply over demand for crude oil nationally. There was expert and unchallenged testimony to the effect that 150,000,000 barrels of gasoline is the desirable amount of reserve stock, and that there is or was at the time of the hearing approximately 170.000. 000 barrels of refined stock in top ground storage. There was undisputed expert proof to the effect that 250,000,-000 barrels of crude oil is the desirable top ground storage to meet refinery needs and to take care of anticipated contingencies ; that there is now or was at the time of the hearing approximately 280.000. 000 barrels of oil in top ground storage. This top ground storage of *649refined and crude stock is shown to be excessive and depressive upon the national market.
The net result of this evidence is that the several producing states are now competing for the limited market for crude oil. The crude oil production from prorated wells greatly affects the economy of the state, both private enterprise which produces it, and the State which taxes it. Oklahoma’s market for the crude oil purchased and transported by Gulf is fixed and limited. It must compete with other states for the same market. When, in June 1956, the Corporation Commission came to determine market demand for the purpose of fixing allowables, it was informed by Gulf in response to the conventional invitation to nominate the amount of oil it would take that “unless the Commission takes action to reduce our runs at least to 19,500 barrels per day, we shall be compelled to take action ourselves. Assuming no action by the Commission effective seven a. m. July 1, 1956, our lease purchase in Oklahoma will be reduced to 75 % of our actual average purchases for the month of May 1956. The effect of this will be to reduce our actual runs to 19,500 barrels per day during July 1956, the amount we have nominated and which we can handle.” In the face of this nomination and representation, the Corporation Commission’s order, effective July 1, 1956, for August, September and October 1956 fixed the allowables based upon Gulf’s purchases for prior months.
The avowed purpose and effect of the challenged order is to prevent physical and economic waste, and it is argued that if the producers are able to sell only a part of the oil they can produce under the Commission’s market demand orders, the result is economic waste, underground waste and surface waste; that marginal wells are rendered unprofitable and recoverable reserves lost; salt water wells and waterflood projects suffer injury, and perhaps destruction; and that other wells can be produced only at greater expense. It is said that producers must provide their own wasteful storage facilities at the lease or forever lose additional production; that underages are never caught up; the surplus oil must be disposed of at reduced prices; and the state suffers in loss of revenue from the' impact on one of its most vital industries.
The Corporation Commission is undoubtedly empowered to fix a reasonable market demand based ‘ upon statutory factors, and it is not bound by the nominations of the takers and purchasers. See 52 O.S.A. § 110. Peppers Refining Co. v. Corporation Commission, 198 Okl. 451, 179 P.2d 899. But it is true, as the Commission’s attorneys say, that “market demand for Oklahoma oil depends upon the market demand of the nation, and in turn of the world-wide supply and demand for petroleum and its products.” In the exercise of its police power to secure co-equal and ratable taking between and within common sources of supply, the Commission may determine the reasonable market demand, but it cannot compel a purchaser to take oil for which it has no market if the result is to prejudice commerce in oil from other states competing for the same market.
There is no contention that Gulf will not take its reduced purchases ratably among its sources of supply, and certainly there can be no contention that the waste and deterioration will be any greater in the tanks of the producers than those of the purchasers. There was expert testimony to the effect that top ground storage of gasoline and crude results in qualitative and quantitative deterioration and waste, and that it creates other hazards which ought to be prevented. The net result of all of this is a coercive, even though laudable, attempt to preserve Oklahoma’s market for its crude oil in competition with other states. The undisputed evidence is that if Gulf is required to take the full allowable, it must do one or all of four things, First, it may withdraw completely from the state with obvious disastrous consequences; second, reduce the number of leases from which it purchases in Oklahoma; third, it may cur*650tail its repurchases of Oklahoma crude with consequent adverse impact upon free interstate trade in oil; or, fourth, it may curtail its interstate purchases elsewhere in order to accommodate the purchase of Oklahoma allowables. To me, any alternative is to impose a restriction upon interstate commerce for the economic advantage of the State of Oklahoma. If Oklahoma can enforce its order to take more oil for interstate markets than the market demand therefor, other competing states can do likewise with chaotic and disruptive consequences to interstate commerce.
Our facts are not ruled by Cities Service Co. v. Peerless Co., supra, where the state fixed the price of natural gas sold in interstate commerce to prevent economic and physical waste. The impact of the order served a legitimate local interest without disruptive effect on interstate commerce. Nor is it like Parker v. Brown, supra; Milk Control Board v. Eisenberg Farm Products, supra; or Panhandle Eastern Pipeline Co. v. Michigan Public Service Commission, supra, where the local interest was dominant and the effect upon interstate commerce nondiscriminatory. In our case, the national interest is dominant. Like H. P. Hood & Sons v. Du Mond, supra; Baldwin v. G. A. F. Seelig, supra; Dean Milk Co. v. City of Madison, 340 U.S. 349, 71 S.Ct. 295, 95 L.Ed. 329; and State of Missouri ex rel. Barrett v. Kansas Natural Gas Co., 265 U.S. 298, 44 S.Ct. 544, 68 L.Ed. 1027, free and nondiscriminatory trade in interstate commerce is at stake. The constitutional limitations on the police power of the state to regulate the interstate transportation of petroleum products was very recently recognized in the Supreme Court of Kansas, the court pointing out that where the national interest is dominant, the state is powerless to regulate, even in the absence of federal legislation. See State of Kansas ex rel. Fatzer v. Sinclair Pipe Line Co., Kan.1956, 304 P.2d 930. I think these circumstances justify the exercise of the extraordinary federal equity remedy.