Federal Power Commission v. Panhandle Eastern Pipe Line Company/Dissent Black

by Hugo Black

United States Supreme Court

337 U.S. 498

Federal Power Commission  v.  Panhandle Eastern Pipe Line Company

 Argued: April 22, 1949. --- Decided: June 20, 1949

Mr. Justice BLACK, with whom Mr. Justice DOUGLAS and Mr. Justice RUTLEDGE concur, dissenting.

The Court's judgment and opinion in this case go far toward scuttling the Natural Gas Act. 52 Stat. 821, as amended, 56 Stat. 83, 15 U.S.C.A. § 717 et seq. In that Act Congress declared it 'necessary in the public interest' for the Federal Government to regulate natural-gas companies engaged in the interstate transportation and sale of natural gas. Many sections of the Act detailed the authority granted the Federal Power Commission to regulate such companies and in addition § 16 granted broad congressional authority to the Commission 'to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as * * * necessary or appropriate to carry out the provisions' of the Act. Today's opinion interprets this Act as denying the Commission all authority to perform any action or issue any order to regulate an interstate company's interest in natural-gas properties. This interpretation deprives the Commission of the power to discharge its congressionally imposed duty to protect the public interest.

The Court's sterilizing interpretation rests on an exception to Commission authority appearing in § 1(b) of the Act. ^[1] That exception provides that the Act shall not apply to 'the production or gathering of natural gas.' I agree with the Court that this language is 'unambiguous' and that this Court should give the language its 'clear and natural meaning.' 'Production' of gas would thus mean the act of bringing forth gas from the earth, and 'gathering' would mean the act of collecting gas after it has been brought forth. Such are the 'clear and natural' meanings we had heretofore attributed to these word symbols. Colorado Interstate Gas Co. v. Comm., 324 U.S. 581, 597 604, 65 S.Ct. 829, 837-840, 89 L.Ed. 1206; Interstate Natural Gas Co. v. Federal Power Comm., 331 U.S. 682, 689-691, 67 S.Ct. 1482, 1486-1487, 91 L.Ed. 1742. It was the physical acts incident to the 'production and gathering' of gas-local activities-that our prior decisions emphasized Congress intended to leave states free to regulate. Today the Court reads this congressionally granted privilege of states to regulate the act of 'production' as an absolute bar to the Federal Power Commission's regulation of the ownership of gas-reserve properties. Gas reserves are indispensable to proper service of interstate customers of an interstate natural-gas company. And in thus limiting the Commission's jurisdiction the Court leaves the Commission impotent to protect the public's interest in having interstate companies maintain adequate gas reserves. This disabling interpretation reads the Federal Act as though it contemplated 'ineffective regulation,' an interpretation directly opposed to that we gave the Ac in Panhandle Eastern Pipe Line Co. v. Public Service Comm., 332 U.S. 507, 520, 68 S.Ct. 190, 196, 92 L.Ed. 128.

Section 7(e) of the Act requires the Commission to issue certificates of convenience and necessity only if an interstate company is 'able and willing properly to do the acts and to perform the service proposed and to conform to the provisions of the Act and the requirements, rules, and regulations of the Commission thereunder * * *.' As authorized by § 7(d), the Commission requires applicants for certificates to show 'the gas reserves which are to supply the market which is proposed to be served.' ^[2] And § 7(b) denies a company power to 'abandon all or any portion of its facilities subject to the jurisdiction of the Commission * * *.' If evidence were needed to show the importance Congress attributed to the gas reserve facilities of a company, that evidence appears in §§ 7(b), 7(c) and 7(e). Jurisdiction to regulate a natural-gas company without jurisdiction to regulate its gas reserves would be like granting jurisdiction to regulate railroads without power to regulate the tracks, routes, rights-of-way, etc. And we have held that the Commission has jurisdiction under the Natural Gas Act to consider the gas producing properties in fixing rates. Colorado Interstate Gas Co. v. Federal Power Commission, 324 U.S. 581, 65 S.Ct. 829, 89 L.Ed. 1206; Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 324 U.S. 635, 648-649, 65 S.Ct. 821, 827-828, 89 L.Ed. 1241.

The respondent company had its rate base fixed and its ability to serve the public determined on its claim to ownership of the very gas reserve properties the Court now permits it to sell to an affiliate over the protest of the Commission. According to allegations in the Commission's complaint the respondent gas company has already received from its customers large sums of money from rates which reflected expenses incurred in maintaining these reserves and for exploration and development costs in relation to them. But under the Court's holding today, these properties, increased in value by consumer contributions, can be given away by the respondent company to its newly formed affiliate. Congress could not have intended to render the Commission powerless to protect gas reserves necessary to continued consumer service and paid for by rates fixed to allow development of the reserves.

Furthermore the reserves, costing only $160,000, have now apparently been capitalized by the respondent's affiliated 'purchaser' at $10,000,000. If the gas reserves continue to be held by the respondent company the rates will be fixed on the basis of the original $160,000 cost. Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 324 U.S. 635, 648, 65 S.Ct. 821, 827, 89 L.Ed. 1241. It is at least doubtful whether after today's holding the company can be prevented from hereafter charging rates based on the $10,000,000 inflated valuation. Thus the unwholesome practices that the Natural Gas Act was primarily designed to p event are given a new lease on life. For a purpose of the Act was to protect consumers and one of the evils it was aimed to prevent was the holding company technique of transfers and retransfers between parent corporations, their offsprings and affiliates. Federal Power Comm. v. Hope Natural Gas Co., 320 U.S. 591, 610, 64 S.Ct. 281, 291, 88 L.Ed. 333.

It seems inconceivable that Congress would have passed an Act to regulate natural gas companies with a wholly neutralizing exception to bar regulation of the gas reserves upon which the whole gas business depended. I cannot attribute such a meaningless and deceptive action to the Congress. While the Act itself grants broad Commission powers effectively to regulate gas companies, the Court's interpretation deprives the Commission of power essential to fixing fair rates and to protecting continued services during the life of a company's gas reserves.

Today's opinion regards Congress' action like that of the parent who ordered his offspring to go swimming with a stern admonition not to go near the water.

I would reverse.

Notes

1. Today's opinion also relies on a 'finding of fact' by the District Court that the Commission had never heretofore 'asserted the right to regulate transfers of such leases.' The majority opinion views this 'finding' as an evidence that for ten years 'the Commission did not believe the power existed.' But this 'finding' of fact rests only on affidavits offered in respect to a motion for a preliminary injunction and should not be utilized as a prop to support the Court's interpretation of the Act. Moreover, the Commission points out that until the present time no such trading as is involved here had taken place. The Commission states in its brief that the finding of fact 'does not reflect the full picture. Until this time, such trading has taken place with the view of blocking in reserves and improving service, and so far as the Commission is presently aware, not to achieve results which would derogate from the Commission's jurisdiction.'
2. § 57.5(f) of the Commission's Order No. 99 (7 Fed.Reg. 6844).