Fpc v. East Ohio Gas Co., 338 U.S. 464 (1950)

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Author: Justice Black

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Fpc v. East Ohio Gas Co., 338 U.S. 464 (1950)

MR. JUSTICE BLACK delivered the opinion of the Court.

Section 1(b) of the Natural Gas Act{1} provides that the Act

shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption . . . and to natural gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution. . . .

Section 2(6) defines "natural gas company" as "a person engaged in the transportation of natural gas in interstate commerce. . . ." The Federal Power Commission, after hearings, found as facts that respondent East Ohio Gas Company was a natural gas company, and subject to the Commission’s jurisdiction.{2} On these and subsidiary findings, the Company was ordered to keep accounts and submit reports as required by the Act.{3} The Commission rejected the Company’s contentions{4} that its operations were not covered by the Act and that the expense of supplying the required information was so great as to transgress statutory and constitutional limits.{5} The Court of Appeals for the District of Columbia, without reaching other contentions, reversed the Commission’s orders on the ground that the Company was not "engaged in the transportation of natural gas in interstate commerce within the meaning of the Act."{6} Importance of the questions to administration of the Act prompted us to grant certiorari. 337 U.S. 937.

I

East Ohio owns and operates a natural gas business solely in Ohio, selling gas to more than half a million Ohio consumers through local distribution systems. Most of this natural gas is transported into Ohio from Kansas, Texas, Oklahoma, and West Virginia through pipelines of Panhandle Eastern Pipe Line Company and of Hope Natural Gas Company, an affiliate of East Ohio. Inside the Ohio boundary, these interstate lines connect with East Ohio’s large high pressure lines in which the imported gas, propelled mainly by its own pressure, flows continuously more than 100 miles to East Ohio’s local distribution systems. The combined length of these high pressure trunk lines is at least 650 miles.

That this continuous flow of gas from other states to and through East Ohio’s high pressure lines constitutes interstate transportation has been established by numerous previous decisions of this Court. The gas does not cease its interstate journey the instant it crosses the Ohio boundary or enters East Ohio’s pipes, even though that Company operates completely within the state where the gas is finally consumed. Respondents do not and cannot claim that their gas is not in interstate commerce.{7} As we held in Interstate Natural Gas Co. v. Federal Power Comm’n, 331 U.S. 682, 688, the meaning of "interstate commerce" in this Act is no more restricted than that which theretofore had been given to it in the opinions of this Court.

Respondents contend, however, that the word "transportation" in § 1(b) must be construed as applying only to companies engaged in the business of transporting gas in interstate commerce for hire or for sales to be followed by resales, whereas East Ohio does neither. The short answer is that the Act’s language did not express any such limitation. Despite the unqualified language of § 1(b) making the Act apply to "transportation of natural gas in interstate commerce," respondents ask us to qualify that language by applying it only to businesses which both transport and sell natural gas for resale. They rely on a sentence in the declaration of policy, § 1(a), referring to "the business of transporting and selling natural gas." But their contention that the word "and" in the policy provision creates an unseverable bond is completely refuted by the clearly disjunctive phrasing of § 1(b) itself. As we pointed out in Panhandle Eastern Pipe Line Co. v. Public Service Comm’n, 332 U.S. 507, 516, § 1(b) made the Natural Gas Act applicable to three separate things:

(1) the transportation of natural gas in interstate commerce; (2) its sale in interstate commerce for resale, and (3) natural gas companies engaged in such transportation or sale.

And, throughout the Act, "transportation" and "sale" are viewed as separate subjects of regulation. They have independent and equally important places in the Act. Thus, to adopt respondents’ construction would unduly restrict the Commission’s power to carry out one of the major policies of the Act. Moreover, the initial interest of Congress in regulation of transportation facilities was reemphasized in 1942 by passage of an amendment to § 7(c) of the Act broadening the Commission’s powers over the construction or extension of pipelines. 56 Stat. 83. This amendment followed a report of the Commission to Congress pointing out that without amendment the Act vested the Commission with inadequate power to make

any serious effort to control the unplanned construction of natural gas pipelines with a view to conserving one of the country’s valuable but exhaustible energy resources.{8}

We hold that the word "transportation," like the phrase "interstate commerce," aptly describes the movements of gas in East Ohio’s High-pressure pipelines.{9}

Respondents also contend that East Ohio is exempt from the Act because all its facilities come within the proviso in § 1(b) making the Act inapplicable "to the local distribution of natural gas or to the facilities used for such distribution." But what Congress must have meant by facilities for "local distribution" was equipment for distributing gas among consumers within a particular local community, not the high pressure pipelines transporting the gas to the local mains. For, in decisions prior to enactment of the statute, this Court had sharply distinguished between the two: it had made it clear that the national commerce power alone covered the high pressure trunk lines to the point where pressure was reduced and the gas entered local mains, while the state alone could regulate the gas after it entered those mains.{10} The legislative history shows that the attention of Congress was directly focused on the cases drawing this distinction. It was because these cases had barred federal regulation of community supply systems that the Committee Report could correctly describe the "local distribution" proviso as surplusage which was "not actually necessary."{11} We are wholly unpersuaded that Congress intended to treat trunk lines like East Ohio’s as though they were mere integrated facilities of the numerous community supply systems which they service. Indeed, as respondents admitted upon oral argument here, the logical consequence of such a principle would be that even a pipeline stretching from Texas to Cleveland would be completely exempt from the federal Commission’s jurisdiction if it were owned by East Ohio. To draw such a strained inference from the congressional exemption of local distribution systems would ignore the importance of nationally controlling interstate pipelines in order to preserve "equality of opportunity and treatment among the various communities and states concerned." Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310.

What we have said indicates that East Ohio comes squarely within the coverage of the Act as set out in §§ 1(b) and 2(6). Nevertheless, respondents contend that this express coverage is restricted by the broad purpose of the Act to provide federal regulation only for those companies which states could not regulate. Urging that all of East Ohio’s business is fully subject to regulation by the state, they rely on statements by this Court that Congress intended not to cut down state regulatory power, but rather to supplement it by closing "the gap created by the prior decisions." Panhandle Eastern Pipe Line Co. v. Public Service Comm’n, 332 U.S. 507, 517-519; see also Public Utilities Comm’n of Ohio v.United Fuel Gas Co., 317 U.S. 456, 467. We adhere to those statements. But prior constitutional decisions, not what we have since decided or would decide today, form the measure of the gap which Congress intended to close by this Act. Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 508, and see Parker v. Motor Boat Sales, 314 U.S. 244, 250.

In a series of cases repeatedly called to the attention of the House Committee,{12} this Court had declared that states could regulate interstate gas only after it was reduced in pressure and entered a local distribution system. Public Utilities Comm’n v. Landon, 249 U.S. 236, 243; Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310; Public Utilities Comm’n v. Attleboro Steam & Electric Co., 273 U.S. 83, 89, and see East Ohio Gas Co. v. Tax Comm’n, 283 U.S. 465, 470-472.{13} Under these decisions, state regulatory power could not reach high pressure trunk lines and sales for resale. This was the "gap" which Congress intended to close. It therefore acted under the federal commerce power to regulate what these decisions had indicated that the states could not. We have already held that, in so doing, Congress subjected to federal regulation a company transporting interstate gas, and selling it for resale, wholly within one state. Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498.{14} The only respect in which East Ohio differs from that company is that it sells gas direct to consumers, rather than for resale. This difference is immaterial. For, as we have already pointed out, East Ohio comes directly within the express provision granting power to the Commission to regulate "transportation of natural gas in interstate commerce," just as the Illinois company came directly within the express provision covering sale for resale. And, in the light of the Illinois Gas decision, we cannot see how the "local distribution" proviso can be construed as encompassing all of East Ohio’s operations throughout the state. That proviso cannot mean one thing for "transportation" and another where "sale for resale" is involved.

Here, as elsewhere, once a company is properly found to be a "natural gas company," no state can interfere with federal regulation. That a state commission might also have some regulatory power would not preclude exercise of the Commission’s function. Connecticut Light & Power Co. v. Federal Power Comm’n, 324 U.S. 515, 533; Public Utilities Comm’n v. Attleboro Steam & Electric Co., 273 U.S. 83, 89-90. Nor does the Act purport to abolish all overlapping. Section 5(b), for example, provides that the Commission may

investigate and determine the cost of the production or transportation of natural gas by a natural gas company in cases where the Commission has no authority to establish a rate governing the transportation or sale of such natural gas.

52 Stat. 824. Yet clearly the state agency establishing such a rate would have equivalent authority.

We find no language in the Act indicating that Congress meant to create an exception for every company transporting interstate gas in only one state. Regardless of whether it might have been wiser and more far-seeing statesmanship for Congress to have made such an exception, we should not do so through the interpretative process. There is nothing in the legislative history which authorizes us to interpret away the plain congressional mandate.

II

A contention not passed on by the Court of Appeals, but urged here by respondents, is that compliance with the Commission’s accounting and report orders would impose so great a burden on East Ohio "as to make such orders transgress statutory and constitutional limits." Our attention is not specifically referred to anything in the record showing that the Commission has required East Ohio to adopt any particular accounting method or make any particular report not reasonably related to the Commission’s granted powers in this respect.{15} Nor did the Commission fail to make proper findings to support its order. All of the Commission requirements affirmatively appear to call for the precise kind of accounting system, information, and reports that Congress deemed relevant and necessary for the Commission to have in performing its regulatory duties. The principles of law governing such requirements were adequately set out by Mr. Justice Cardozo, speaking for the Court, in American Telephone & Telegraph Co. v. United States, 299 U.S. 232. See also Northwestern Electric Co. v. Federal Power Comm’n, 321 U.S. 119. Measured by these criteria for judicial review of such orders, we find no reason to reject the Commission’s findings that the orders here issued were necessary and proper as applied to East Ohio. And, as to the cost of compliance, it is sufficient to say as the Court said in the American Telephone & Telegraph case, supra, at 247: "The evidence does not show that the expense . . . will lay so heavy a burden upon the companies as to overpass the bounds of reason."{16}

The contention that the Commission’s order violates the reserved rights of the states under the Tenth Amendment is foreclosed by the Court’s holding in Northwestern Electric Co. v. Federal Power Comm’n, supra, at 125. Section 8(a) of the National Gas Act itself provides that

nothing in this act shall relieve any such natural gas company from keeping any accounts, memoranda, or records which such natural gas company may be required to keep by or under authority of the laws of any State.

The Commission’s order is valid and should be enforced.

Reversed.

MR. JUSTICE DOUGLAS and MR. JUSTICE BURTON took no part in the consideration or decision of this case.

1. 52 Stat. 821, as amended by 56 Stat. 83, 15 U.S.C. § 717 et seq.

2. The Commission instituted the proceedings on its own motion and on complaint of the City of Cleveland, Ohio. Later, other Ohio cities filed similar complaints. See 1 F.P.C. 586; 4 F.P.C. 15; 4 F.P.C. 497.

3. Seenote 15, infra.

4. The Public Utilities Commission of Ohio, an intervenor, made substantially the same contentions.

5. 74 P.U.R.(N.S.), 256. Related orders and discussions appear in 4 F.P.C. 15, 497, 638, 28 P.U.R.(N.S.), 129; East Ohio Gas Co. v. Federal Power Comm’n, 115 F.2d 385.

6. 84 U.S.App.D.C. 312, 316, 173 F.2d 429, 433.

7. See, e.g., Colorado-Wyoming Gas Co. v. Federal Power Commission, 324 U.S. 626; Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 503-504. See also East Ohio Gas Co. v. Tax Commission, 283 U.S. 465, 470; The Daniel Ball, 10 Wall. 557.

8. Federal Power Commission, Twentieth Annual Report (1940), p. 78. See Wheat, Administration by the Federal Power Commission of the Certificate Provisions of the Natural Gas Act, 14 Geo.Wash.L.Rev.194, 197.

9. In the Pipe Line Cases, 234 U.S. 548, 562, this Court held that the Uncle Sam Oil Company was not engaged in "transportation" of oil, within the statutory meaning of that word in the Interstate Commerce Act, where it was "simply drawing oil from its own wells across a state line to its own refinery, for its own use, and that is all. . . ." This holding as to the meaning of transportation in the Interstate Commerce Act has slight force, if any, in determination of the word’s meaning under this different and far more comprehensive Act. Furthermore, East Ohio is not merely moving gas for processing in its own plants. It buys and transports it for sale; there is no further processing of any kind, except for eventual reduction of pressure. This puts East Ohio’s transportation more nearly in the category of that which we held to bring oil transportation within the coverage of the Interstate Commerce Act. Valvoline Oil Co. v. United States, 308 U.S. 141, 145; Champlin Refining Co. v. United States, 329 U.S. 29. In the latter case, transported oil was to be sold in interstate commerce, while here the sale was to be made in intrastate commerce. This difference, however, is no persuasive reason why the special holding in the Uncle Sam case should be expanded to control our holding here.

10. In both Public Utilities Comm’n v. Landon, 249 U.S. 236, 245, and Pennsylvania Gas Co. v. Public Service Comm’n, 252 U.S. 23, 28, this Court held that states could regulate retail sales of interstate gas to local consumers. In the Landon case, the Court reasoned that state control of a local distributing company was permissible because "interstate movement ended when the gas passed into local mains." The Pennsylvania Gas decision, however, was based on a completely different line of reasoning. The Court held that the gas continued in interstate commerce until it reached the burner tips, but nevertheless permitted state regulation because retail sales presented a problem of local, rather than national concern. In Missouri v. Kansas Natural Gas Co., 265 U.S. 298, 310, the Court resolved these conflicting doctrines by readopting the Landon rule. It limited the Pennsylvania Gas holding to its precise facts by interpreting that decision as resting solely on the Landon principle that states could regulate charges for service to local consumers. Public Utilities Comm’n v. Attleboro Steam & Electric Co., 273 U.S. 83, 89, reaffirmed this choice of doctrine, applying it to a company which, like East Ohio, transmitted its product (electricity) wholly within one state. In East Ohio Gas Co. v. Tax Comm’n, 283 U.S. 465, 470-472, the Court recognized that the doctrine of Pennsylvania Gas extending interstate commerce to the burner tips was in conflict with, and must yield to, the doctrine of the Landon and Kansas Gas cases. Seenote 13, infra. Thus, when the Natural Gas Act was passed, this Court’s decisions had already resulted in a sharp cleavage between local distribution facilities and high pressure pipelines serving those facilities.

11. The Report stated that the proviso was

not actually necessary, as the matters specified therein could not be said fairly to be covered by the language affirmatively stating the jurisdiction of the Commission.

H.R.Rep. No. 709, 75th Cong., 1st Sess., pp. 3-4. This could only mean that the phrase "interstate commerce" was construed by the Committee, as it had been by this Court, to exclude "local distribution."

12. The record of the Committee hearings considering the proposed bill is crowded with repeated references to the cases discussed in note 10, supra; no other cases received such emphasis. The General Solicitor for the National Association of Railroad and Utilities Commissioners, for example, explained that the East Ohio case

established very clearly that a State has jurisdiction to regulate the business of distributing gas after it has been imported, and the pressure has been stepped down to permit of local distribution. It, however, leaves the State authorities still subject to the rule announced in the Kansas case. . . .

Hearings before the House Subcommittee of the Committee on Interstate and Foreign Commerce, 74th Cong., 2d Sess., 88. The Solicitor of the Federal Power Commission pointed out in his brief to the same committee that

The States cannot control the wholesale rates extracted for natural gas thus transported, nor may they regulate any other of the phases of interstate transportation.

Id., 16. Amendments which would have specifically exempted from federal regulation all companies operating wholly within one state were proposed, but rejected.

13. Seenote 10, supra. The East Ohio case cited above concerned the question of whether the company was subject to state taxes. The tax doctrines involved are irrelevant here. Undeniably relevant, however, is the fact that Congress directly considered the doctrine of interstate commerce enunciated in that case: that transportation of out of state gas to the local system "is essentially national -- not local -- in character, and is interstate commerce within, as well as without, that state." 283 U.S. 465, 470.

14. There are implications in the Court’s opinion that, under prevailing constitutional doctrine, a state might now, in the absence of federal legislation, regulate such a company as Illinois Gas or East Ohio. See Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 504, discussed in Panhandle Eastern Pipe Line Co. v. Public Service Comm’n, 332 U.S. 507, 512. But compare H. P. Hood & Sons v. DuMond, 336 U.S. 525, 545.

15. The orders here primarily rest on Commission regulations pursuant to the following sections. Section 6(b) authorizes the Commission to require a natural gas company to file

an inventory of all or any part of its property and a statement of the original cost thereof, and . . . keep the Commission informed regarding the cost of all additions, betterments, extensions, and new construction.

52 Stat. 824, 15 U.S.C. § 717e(b). Section 8(a) makes it the duty of such companies to keep "such accounts, records of cost-accounting procedures," etc., as the Commission may by rules and regulations prescribe. Section 10(a) similarly requires "annual and other periodic or special reports." Section 5(b) authorizes the Commission to "investigate and determine the cost of the . . . transportation of natural gas by a natural gas company" even where the Commission has no authority to establish rates for the transportation or sale of that gas. Section 16 vests the Commission with broad powers to prescribe general orders, rules, and regulations found "necessary or appropriate to carry out the provisions of this act."

16. The Commission found that East Ohio’s estimate placing the cost of compliance at between $1,500,000 and $2,000,000 was

not convincing, for our experience with other companies with greater property investment indicates that this estimate is considerably exaggerated.

74 P.U.R.(N.S.), 256.

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Chicago: Black, "Black, J., Lead Opinion," Fpc v. East Ohio Gas Co., 338 U.S. 464 (1950) in 338 U.S. 464 338 U.S. 467–338 U.S. 476. Original Sources, accessed August 25, 2019, http://www.originalsources.com/Document.aspx?DocID=Q7QB9R3K5AJZDHT.

MLA: Black. "Black, J., Lead Opinion." Fpc v. East Ohio Gas Co., 338 U.S. 464 (1950), in 338 U.S. 464, pp. 338 U.S. 467–338 U.S. 476. Original Sources. 25 Aug. 2019. www.originalsources.com/Document.aspx?DocID=Q7QB9R3K5AJZDHT.

Harvard: Black, 'Black, J., Lead Opinion' in Fpc v. East Ohio Gas Co., 338 U.S. 464 (1950). cited in 1950, 338 U.S. 464, pp.338 U.S. 467–338 U.S. 476. Original Sources, retrieved 25 August 2019, from http://www.originalsources.com/Document.aspx?DocID=Q7QB9R3K5AJZDHT.