*1 MARYLAND v. LOUISIANA et al. 83, Orig. Argued
No. January 19, May 26, 198 1 Decided *2 J., opinion Court, J., delivered which C. White, Burger, joined. SteveNS, JJ., BreNNAN, Stewart, BlackmüN, Marshall, *3 concurring opinion, p. J., J., post, C. 760. filed a Burger, RehNQUist, dissenting opinion, post, p. J., took part filed a 760. no in the Powell, consideration or decision of the case. Maryland, argued Attorney Sachs, General of
Stephen H. plaintiffs. for the cause him on briefs With were H. David and Robert A. As- Mots, Zarnoch, Feldman, Diana Gribbon Attorneys Maryland; sistant General of Fahner, Tyrone C. Attorney of As- General Illinois, Bolos, Hercules F. Attorney sistant Assist- General, and Thomas Swabowski, J. Attorney Attorney General; ant Gen- Sendak, Theodore L. Indiana, eral of and and Wente, E. Daily William Robert B. Attorney Deputy Attorneys General; Francis X. Bellotti, Massachusetts, of At- General and Alan D. Assistant Mandl, Attorney torney General; Frank J. General Michi- Kelley, gan, General, Solicitor and Arthur E. Derengoski, Robert A. and John Assistant D’Hondt, Keskey, Don L. Dempsey, M. Attorneys Attorney New General; General Abrams, Robert Solicitor and York, General, Shirley Siegel, A. M. Paulann Attorneys and Richard W. Assistant Gen- Caplovitz Golden, Attorney Island, General Rhode eral; II, Dennis J. Roberts Attorney General; Assistant and III, Stephen Lichatin Follette, Attorney Wisconsin, Bronson C. La General Bleck, Attorney General, Steven M. A. Assistant Charles Schur. argued A. Smith for intervenors United
Stuart cause him Solicitor General States et al. With on the briefs were Feit, McCree, Douglas. Jerome M. J. Paul Peragine argued pipeline Frank J. for the cause intervenor Simon, companies. him on the H. Paul With briefs were Collins, Brackett, Oliver, C. McVea William W. Daniel F. Waechter, Jr., Abbott, Jr., Arthur J. Herschel L. Gene W. Wilson, Edwards, Margaret R. Lafitte, John M. Ernest L. Tribble, II, Napper James PL. and Melvin Richter.
Eugene Pugh argued Gressman and the cause Robert G. Jr., Guste, defendant. them on the briefs With were'William J. Blackmon, Attorney Louisiana, M. As General Carmack Attorney General, sistant and William C. Broadhurst.* opinion White delivered Court. Justice joined by In this action, States, several the United pipeline challenge States and a number of companies, constitutionality imposed of Louisiana’s “First-Use Tax” brought principally certain of natural into Louisiana, uses from the Outer Continental Shelf (OCS), as violative Supremacy Clause and the Commerce Clause of the United States Constitution.
I large The lands beneath the Gulf of Mexico have reserves gas. of oil Initially, and natural these reserves could developed technological due to difficulties associated with off- drilling. rig shore In the first 1938, drilling was constructed off the Louisiana, coast of and with of the advent new tech- Moving
*Frederick filed a brief for Associated Gas Distributors as amicus curiae. offshore has Ex-
nologies, drilling commonplace.1 become development ploration of the OCS in the of Gulf Mexico large providing have become percent- industries a substantial of age gas country.2 the natural used in this gas Most of the being from extracted the lands underlying piped the Gulf is to refining plants located in coastal of portions where the is “dried” —the liquefiable hydrocarbons gathered way and removed-—on its to ultimate distribution to con- sumers in over 30 It is States. estimated that of the 98% gas processed OCS eventually Louisiana is sold to out-of- state consumers with the remainder consumed within 2% production The earliest offshore oil occurred in 1896 off the coast of early proj California. The drilling ventures were extensions of onshore Dept, Interior, ects. U. S. Management Mineral Resource of the Outer Shelf, Geological Survey Continental 720, p. 2 Circular first platform, technology offshore well drilled from a mobile the dominant today, used sight located out of from land was drilled miles from the proffer evidence, Louisiana coast in 1947. Ibid. In its the State of 13,000 operating Louisiana estimated that there exist over wells in OCS lands in the Gulf Mexico. See Proffer of Proof of Louisiana to According source, Master 8. to one 948 offshore were drilled off the wells Allen, Developments coast of Louisiana in 1978. Braunstein & in Louisi 1978, (Aug. 1979). ana Coast Offshore Gulf 63 AAPG Bull. 1310 1970, Louisiana, including South an area and off both the onshore adjacent Louisiana, responsible production shore area was for the approximately gas production. of domestic natural Federal 33% Comm’n, Gas, Supply Power Bureau of Natural and De National Gas mand, Rep. Frank, 1971-1990, 2, pp. (1972); Staff No. J. Schanz & H. Pattern, Regulation Energy Natural in the Future National Gas 1972). Producing (K. Industry 18-19 As of Natural Gas Brown ed. 1973, produced from over 25 trillion cubic feet of natural had been lands, approximately coming from federal Louisiana’s offshore with 77% supra, (Table 13). Geological Survey It OCS areas. Circular at 28 present adjacent area has been estimated reserves the offshore approximately gas. Hewitt, to the 38 trillion cubic Gulf States feet J. Knipmeyer, Schluntz, Reserves, J. & E. Estimated Oil and Gas Gulf of (U. Dept, Interior, Geological Mexico Outer Continental Shelf Sur 1979). vey, Dec. *5 The,
Louisiana.3 arrangements pro- contractual between a ducer of gas pipeline companies and the vary. often, Most producer sells the pipeline companies at the wellhead, although producer may retain an interest any components. extractable producers, Some however, retain rights full ownership and simply pay a fee for flat the use pipeline companies’ facilities.4 ownership and control of these large reserves nat ural have been much disputed. In United States v. Louisiana, 339 U. 699 (1950), applied prin Court ciple of its holding United California, States v. 332 U. S. (1947) possesses United States paramount — that rights to lands beneath the Pacific Ocean seaward of Cali fornia’s low-water mark —to the adjacent offshore areas Louisiana. In 1953, Congress passed the Submerged Lands any 43 U. S. Act, 1301-1315, ceding §§C. federal interest the lands within three miles the coast, confirming while Federal Government’s interest in the area seaward 3-mile limit.5 See United Louisiana, States U. S. (1960); Maine, United States v. 420 U. S. 524-526 (1975). In the Congress same year, passed the Outer Con tinental Shelf Lands Act, 43 U. S. C. (OCS §§ 1331-1343 Act), which declared that the “subsoil and seabed of the outer appertain Continental Shelf to the United States and subject to its jurisdiction, control, power of disposi tion . . . .” 1322. The OCS Act also pro established cedures for leasing federal of OCS land to develop mineral passage resources. While the of these Acts established the See Proffer of Proof (Fact of Louisiana to Master 21 43). No. id., (Facts 19-22). at 11-13 Nos. 5 Representatives from the Louisiana, State of as well as from other States, appeared Congress Gulf before support of a measure provide the States with a share of part income from abutting the OCS respective Hearings their States. See on S. 1901 before the Senate Com Affairs, mittee on Interior and Cong., Insular Sess., 83d 1st 185-186, 187-188, 191-193,
respective legal interests of the there has been exten parties, litigation sive to legal establish the of the boundaries .federal OCS Louisiana, domain. See generally United States v. (1980) history “long- U. S. (detailing the of the continuing controversy” and sometimes strained between the United States and lands). Louisiana the OCS concerning
In 1978, the Legislature Louisiana of seven enacted a tax cents per thousand cubic feet of natural the “first gas6 use” of gas imported into Louisiana which was not pre- subjected by viously to taxation another State or the United States. La. Rev. Stat. Ann. (West Supp. §§ 47:1301-47:1307 1981) (Act). imposed precisely The Tax equal to the sev- erance tax the State imposes on gas producers. Louisiana by The Tax is owed gas owner at the time first taxable “use” occurs within Louisiana. 1305B. About § gas brought OCS by pipeline ashore is owned 85% companies, the rest producers. Since most States im- pose their own tax, severance is acknowledged pri- that the mary effect of the First-Use gas Tax will be on produced in the federal OCS area then piped to processing plants located within It Louisiana. has been estimated Louisi- ana would $150 receive at least million in receipts annual from the First-Use Tax.7 6A thousand gas cubic feet of defined, was commonplace as is in the industry, gas as amount of occupies which that volume at a tem perature degrees of 60 pounds per square Fahrenheit and 15.025 inch of
pressure absolute. (B) (West 1981). La. Rev. Stat. Supp. Ann. §47:1303 7Estimates of the annual revenues from the First-Use Tax have varied. The States and the United receipts States the annual estimated million, $225 pipeline to be companies while the suggested $275 million. also, Note, The Louisiana First-Use Tax: Does It Violate the Com Clause?, ($170 merce (1979) 53 Tulane L. Rev. million); First-Use Tax, Rep. (Oct. 1978) ($185 31 La. Coastal L. No. 31 year). million first Part II of the Tax First-Use Act created the First-Use Trust Fund. Receipts placed of the Tax expended were in the fund and in ac- cordance with the terms of the Act. (West La. Rev. Stat. Ann. 47:1351 § reimburse purpose of the First-Use Tax was to stated damages people of Louisiana for to the State’s waterbot- from the in- toms, islands, resulting barrier and coastal areas troduction into from not sub- gas natural areas ject well for the costs compensate state taxes as protecting incurred the State those resources. 1301C. Moreover, designed equalize competition Tax was be- produced subject tween Louisiana and to the state tax of per feet, severance seven cents thousand cubic *7 produced to subject elsewhere a severance tax such as gas. specified OCS The Act § 1301A. a number of different imposition uses justifying including First-Use Tax sale, processing, transportation, manufacturing, use treat- ment, or “other action point ascertainable aat within the state.” 1302 (8).8 §
The Act itself, provisions as well as found elsewhere in the statutes, provided state a number exemptions of from and credits for the First-Use Tax. The Severance Tax Credit provided any taxpayer subject to the First-Use was Tax entitled to a direct any tax credit on Louisiana severance tax in connection with owed the extraction of natural resources within the State. La. Rev. Stat. 47:647 (West Supp. § Ann. Supp. 1981). Specifically, provided the Act proceeds the of 75% go would general towards retirement of (2). debt of State. 1351A § proceeds deposited Also of were a to in Barrier Islands Con- 25% capital servation Account be used to improvements projects fund for designed “conserve, preserve, and maintain islands, reefs, the barrier of shores the coastline of Louisiana.” 1351A § 8A taxable “use” was defined as: sale; transportation “the point delivery the state to the of at the any plant; processing transportation inlet of in the state of un- processed gas point delivery any natural to the of at the inlet of meas- facility; storage possession urement relinquishment or transfer or delivery point state; processing control at a for the extraction liquefiable component products materials; or waste use in manufacturing; treatment; point other ascertainable action at a or within the state.” (8) (West Supp. 1981). Ann. 47:1302 La. Rev. Stat.
1981).9 municipal Second, state-regulated gener- electric plants gas distributing ating natural services located any within Louisiana, purchaser as well as direct of gas used for consumption directly by that purchaser, provided were tax credits on other Louisiana upon showing taxes “fuel electricity for costs generation or natural gas distribution or consumption have increased as a direct result of increases in transportation and gas costs natural delivered marketing from the federal domain of the ,” outer continental . . shelf . which implicitly resulting includes increases from the First-Use Tax. La. (West Rev. Stat. Ann. Supp. § 47:11B 1981).10 imported Furthermore, gas natural for drilling used oil or gas exempted within the State from was the First-Use Tax. La. Rev. Stat. Ann. (West Supp. 1981). §47:1303A Thus, Louisiana consumers of OCS part the most not burdened Tax, apply but does uniformly moving out purported State. The Act also establish legal effect of the Tax in terms defining proper 9The Severance Tax passed Credit bill was same time as the Tax, provides First-Use as follows: *8 (1) Every taxpayer “A. remitting liable for and taxes levied and col- pursuant taxpayer lected to First-Use and each who bears such [the Tax] as a taxes direct of agreements applied result contractual terms in dis- regard (C), of R. S. 47:1303 credit, any shall allowed a direct tax payment following but, time of tax, such not excess of the which amount by against must be borne taxpayer, by such severance taxes owed such taxpayer state, the to the amount of which credit shall exceed the taxpayer amount severance taxes for which such is liable to the state consequence privilege as a direct severing natural resources from the surface of the soil or water the state.” assigns The credit the tax also order in which applied the credit shall be depending type paid. the applied severance credit The credit is first descending to severance oil taxes lists order the other resources subject (2). to tax credit. 647A severance The tax credit does not § any parishes. severance local affect taxes assessed the 647C. § statutory provision exempts provision any The from the tax credit price attributable to increases wellhead inflation. Specif- parties. liable among potentially Tax
allocation of the
cost
be deemed a
the “tax shall
Act
that
ically, declared
preparation
owner
uses made
associated with
Any
which
contract
marketing
of the natural
1303C.
gas.”
except
party
of the Tax to
the cost
attempted to allocate
“against public
to be
was declared
the ultimate consumer
Ibid.
to that extent.”
unenforceable
policy and
filed a motion for leave
States
29, 1979, eight
On March
jurisdiction pur-
under this Court’s
complaint
file a
complaint
The
2,
Art.
of the Constitution.
Ill, §
suant
Tax was
declaratory
the First-Use
sought
judgment
I, 8,§
Art.
(1)
Clause,
under:
the Commerce
unconstitutional
Im-
2;
cl.
Supremacy Clause,
VI,
(3)
3; (2)
cl.
Art.
2;
Impairment
(4)
port-Export Clause,
I, §
cl.
Art.
Equal Protec-
1;
(5)
Clause,
I, 10,§
Contracts
Art.
cl.
Amendment.
tion Clause of the Fourteenth
or its
against Louisiana
sought
injunctive relief
States also
in interstate
any gas
collecting
respect
the Tax with
agents
already collected. We
of taxes
commerce as well as a refund
1979.
to file on
granted plaintiffs’ motion for leave
June
appointed a
we
Subsequently,
II Initially, we must resolve contention, rejected Louisiana’s In Master, that case should be dismissed. support of its motion, two presents principal argu Louisiana First, ments. Louisiana contends States that standing lack the suit under bring original Court’s jurisdiction. Second, argues that if bare even requirements for original jurisdiction exercise of our have met, been this case is not an appropriate one to entertain here because of certain pending actions in Loui state-court siana in sought which the pre constitutional issues be sented may be addressed. See New Mexico, Arizona v. (1976). U. Wyandotte See also Ohio Chemicals Co rp., S. 493, We agree with Special Master both rejected. contentions should be
A The Constitution provides original for this juris- Court’s diction over cases in which a Party.” “State shall a Art. Ill, § cl. 2. Congress provided has in turn Su- preme Court shall have “original and exclusive of all controversies between two or more C. States.” S.U. (1976 1251 (a) ed., Supp. III). order to constitute a proper “controversy” under our jurisdiction, “it must appear State complaining wrong has suffered a through action the other State, furnishing ground judicial redress, right or is asserting against the other State susceptible which is of judicial enforcement according to the accepted principles systems of the common law or equity *10 736 Missouri, 15 1, v. 308 U. S.
jurisprudence.” Massachusetts Illinois, (1927) ; 490 274 U. S. 488, See New York v. (1939). Florida, (1939).11 398, 306 U. S. Texas should be dismissed Louisiana this case asserts that imposed pipeline on the because the Tax is standing want of consumers. directly on the ultimate companies alleged plaintiff of the States its interests view, Under justify type "sovereignty” concerns do not fall within the sue, to ing jurisdiction. Standing exercise of our al purposes injury if the however, exists for constitutional of the “fairly to action leged challenged can be traced independent defendant, injury and not that results from the court.” Simon v. party action of some third not before the Kentucky Rights Organization, 26, S. Eastern U. Welfare Environmen 41-42 See Duke Power Carolina Co. v. Inc., Study (1978). This is Group, tal 438 U. S. clearly the case here. The States are substantial plaintiff while im consumers of natural The First-Use gas.12 Tax, posed pipeline clearly on the to be intended companies, for passed Indeed, on to the ultimate consumer. the statute being passed party bids the Tax from on or back third to purchaser gas explicitly other than the of the directs it should be considered cost preparing for market. (West Supp. La. Rev. Stat. Ann. §47:1303C generally Jersey, (1921) See New York v. New (“Before extraordinary power this court can be moved exercise its under another, Constitution to control the conduct one State at the suit of rights the threatened invasion of magnitude must be of serious and it must convincing evidence”). be established clear and alleged complaint, As in the the annual costs increase natural directly associated with respect the First-Use Tax with each plaintiff Maryland ($300,000); States as follows: ($60,000); New York ($25,000); ($25,000); Massachusetts ($270,000); Rhode Island Illinois ($70,000); Michigan Indiana ($650,000); ($70,000); Wisconsin New Jer sey ($20,000). Complaint, injuries at 12-16. Total direct million, injury $1.5 States was estimated to be to the citizen Id., $120 consumers was estimated at million. at 16.
1981). approval In fact, pipeline companies, with the FERC, passed cost the First-Use Tax have their in Pipeline customers. See First-Use Tax Cases, Reg. *11 10, Rate Docket Order No. RM78-23, No. 43 Fed. (1978).13 Thus, the deter- properly Master “although mined it the tax collected from the pipelines, is It really a burden 12. Report, consumers.” Second is clear that major purchasers the as of nat- States, ural whose cost of has increased as a direct result Louisi- imposition directly ana’s in Tax, of the First-Use are affected a way justify “substantial and real” so to of as their exercise original jurisdiction. this Court’s
Jurisdiction is also
as
supported
the States’ interest
parens patriae. A
permitted
State is not
to enter
con-
troversy as a nominal
in
party
order to forward the claims
Cook,
individual citizens. See Oklahoma ex rel. Johnson v.
U.
387 (1938);
Louisiana,
S.
New
S.
Hampshire
(1883).
But may
representative
act
the
its citi-
original
zens
alleged
actions where
injury
the
the
affects
general population of
way.
g,,
a State
a substantial
See, e.
Illinois,
Missouri v.
(1901);
In
this
respect,
this
case
(1923),
Pennsylvania
Virginia,
Pennsylvania v. Virginia West counsels that we should not dismiss this action. Plaintiff alleged States have substantial injury and serious proprietary to their interests as consumers of natural as a direct result of the unconstitu- allegedly tional actions Louisiana. injury sup- This direct is also ported the States’ protecting interest its citizens from substantial economic injury presented by imposition First-Use Tax. Nor does the incidence the Tax fall on a small group of citizens who likely to challenge the Tax directly. Rather, great many plain- citizens each tiff States are themselves consumers of natural and are faced with increased costs aggregating of dollars per millions year. As the Master individual consumers observed, expected validity cannot litigate the of the First-Use Tax given paid likely that the each consumer are amounts relatively to be Moreover, small. because the consumers are directly responsible to Louisiana for payment they of taxes, course are suing foreclosed from for a refund Louisiana’s courts. such of our circumstances, exercise original jurisdiction is proper.
B With respect argument, Louisiana’s second is true that we have construed the congressional grant of exclusive jurisdiction under (a) requiring oblig- resort our atory jurisdiction only in “appropriate Illinois cases.” City Milwaukee, 406 S. 91, (1972); Arizona v. New *13 Mexico, 425 atS.,U. 796-797. This view consistent with general original jurisdiction observation that the Court’s Nevada, should be “sparingly.” exercised v. United States 412 S. 534, Wyandotte U. 538 See Ohio Chemicals v. Corp., S., Missouri, 401 at 501; U. Massachusetts v. S., 308 U. Milwaukee, 18-20.14 In City at noted that we what of Wyandotte Corp., In Ohio v. Chemicals S., 401 U. the Court system noted grown complex, that our social has more the States “[a]s dignity only “the seriousness involves “appropriate” availability forum another “the but also claim,” where parties, jurisdiction over named there is where relief appropriate where may litigated, be tendered issues pres- urges that at 93. may S., be had.” U. constitu- raising the identical ently pending state lawsuits sufficient reason constitute presented here tional issues jurisdiction. the exercise of our forgo suits lower courts several been filed in various have There The constitutionality of the First-Use Tax. challenging the court brought seeking Louisiana in state suit was first constitu- the First-Use Tax is declaratory judgment Corp., Line Pipe Gas Edwards v. Transcontinental tional. Parish). Rouge Baton 216,867 (19th Disk, East No. Judicial pipeline com- Among were all the named defendants companies doing pipeline in the The panies business State. Other declared unconstitutional.15 sought to have Tax court a refund taxes seeking were filed state lawsuits McNamara, Southern Gas Co. paid protest. under Natural v. Rouge 225,533 (19th District, Judicial East Baton Par- No. granted refund actions were filed after this Court ish). These complaint.16 file plaintiff States’ motion for leave to their disputes persons increasingly enmeshed in a multitude of with have become frequency living Consider, example, their for with outside borders. application clash over of state laws which States nonresidents torts, concerning taxes, vehicles, estates, govern- motor decedents’ business contracts, would, indeed, ment and so forth. It be anomalous were this potential settling principal to be held out as a forum such Court controversies.” pipeline companies removed the to federal court. Louisi case essentially ground granted, motion to remand was on the ana’s contrary provi intervention the Federal District Court be would 1341. Edwards Injunction Act, Trans the Tax sions C. Pipe Corp., (MD continental Line 1979). Gas Supp. F. La. 16By plaintiffs’ rejected granting file, motions for leave to we Louisi Moreover, ana’s motions the case should dismissed. when we expressly referred the ease Master we referred to him all
741 under Since there no provision Louisiana law is interim injunctive relief, pipeline companies required pay were to receipts the Tax. The an put have been escrow account subject to paid refund with interest on the account at the rate Neither plaintiff States, United States, 6%. nor the party any FERC is a named of the state actions they nor have although filed leave intervene, represented at oral argument such motion would a not opposed.17 be The final by suit was commenced the FERC against officials, various state seeking enjoin enforcement of the First-Use Tax on grounds. constitutional FERC v. McNamara, (MD No. C. A. 78-384 La.). That action is stayed. presently City Milwaukee, on which Louisiana pro relies,
posed suit against Illinois four municipalities did not fall within our grant exclusive original because political subdivisions of the could State not considered a State for purposes of 28 U. S. C. 1251 (a) (1976 ed., Supp. § III). S., 406 U. at 94-98. Similarly, Wyan- decision dotte Chemicals did not (a), involve since it suit was a between State and citizens of another State so did fall under our jurisdiction. exclusive relies, Louisiana also pending except motions for Louisiana’s motion to dismiss. See U. S. (1980). Usually, jurisdic- when we decline to exercise our tion, we denying do so the motion for leave to file. See Arizona v. Mexico, New Although U. S. arguable Special empowered Master was not to consider Louisiana’s motion since question we did him, rely not refer the we report nonetheless on his light of the fact that we must consider Louisiana’s motion to dismiss event, the merits in and because the matter went forward before assumption Master on the that the motion to dismiss had been Accordingly, acquiesce referred. we now see no reason not in the Special Master’s properly views that issues were him. before Arg. acknowledged Tr. of Oral It 55-58. that but for the procedural “invitation” there exists no mechanism in Louisiana for the parties States the United States to be made to the state refund suit. *15 case example of a for an v. New Mexico Arizona
however, jurisdiction our exclusive not to exercise we determined where “inappro- was the matter between States because in a case for determination.18 priate” file leave to motion for Arizona’s case,
In denied we that chal- suing to Arizona was against New Mexico. complaint a imposed which a energy tax Mexico’s electrical New lenge utility elec- generating tax on electric kilowatt hour net judg- declaratory a sought New Arizona tricity in Mexico. alia, inter an unconstitutional constituted, the tax ment that brought Arizona interstate commerce. against discrimination elec- consumer of capacity its as a proprietary suit in the for its parens patriae Mexico and tricity generated in New had no forum alleged further that other Arizona citizens. asserted that its interests. New Mexico in which to vindicate statute had chosen affected the the three Arizona utilities jointly had filed suit in state pay the tax and instead not declaratory uncon- seeking judgment a the tax was court held that the circumstances stitutional. This Court “[i]n persuaded ac- case, pending this we are state-court ten- provides appropriate an forum which the issues tion Pennsylvania Jersey, New (1976), v. In 426 U. we denied S. challenging pro a tax leave to file to number of States commuter income adopted case, however, clearly certain States. That visions other has Pennsylvania, present only In applicability no action. reason complaining tax States were denied revenues was because their legislatures give paid States, a for had determined to credit taxes to other Id., any injury extent, voluntarily and, to this was suffered. at 664. parens patriae Moreover, proper was not under doctrine represented aggregation since claims individual claims wrongfully paid taxpayers taxes which commuter the individual were able Id., Missouri, Massachusetts v. to contest. 665-666. See generally ease, responsible this States are not any way impact Moreover, for the economic the Tax. unlike the Pennsylvania, individual citizens have no which situation forum in challenge they directly pay Tax did because the Tax and are not bring entitled to refund actions in Louisiana. (emphasis at 797 litigated.” S.,U. here may
dered original). original action in an appropriateness the issue of course,
Of case-by-case basis. be determined on States must between Mexico, Arizona New similarity with facial Despite case that present from the significant differences there are the three electric First, result. one of opposite an compel Mexico in New in the state-court action companies involved Arizona’s State of Arizona. subdivision political was a by one of the actually being represented thus interests were *16 In none of case, to the suit. this the parties named is refund case.19 It directly represented in the tax States is not suffered Arizona had itself note that important also to for leave it moved to harm as of the time any direct yet paid had the utilities complaint since none the file a highly uncertain present it was tax. the case, Unlike electricity had purchaser interest as a whether Arizona’s not did procedure Mexico’s adversely affected.20 New been utility of taxes al- companies seeking to a refund limit the to companies to refuse permitted rather ready paid, but constitu- statute’s pending tax a declaration of the pay the paid the Tax to be requires In Louisiana tionality. contrast, at the rate accruing interest the refund action with pending Master, effect recognized As 6%. to benefit Louisiana permit interest rate is the limited even delay proceedings to the attendant state-court from ultimately found unconstitutional. is if the Tax sufficiently not in the Arizona case did at issue The tax the basis forming concerns federalism unique implicate Mexico tax At New jurisdiction. most, of our intervene, see parties have been invited to Despite fact that these forum, imperfect primarily is an supra, refund action the Louisiana n. prior on the merits is injunctive relief to the determination because no law. La. Rev. Stat. Ann. 47:1575, 47:1576 possible §§ under (West Supp. 1981). J., concurring). (Stevens, 425 S., at 798 20 See only some residents in one State. present affected magnitude case, and effect of the Tax First-Use far is greater. The anticipated yearly $150-million tax is intended to be and is passed on to millions of being consumers in over 30 States. Unlike day-to-day taxing measures which spurred the Wyandotte, Court’s observations it not is at all a validity “waste” this Court’s time consider the of a tax with the structure and effect of Louisiana’s First-Use Indeed, Tax. is ordinary there nothing about Tax. Given the claim that Louisiana is underlying attempting, effect, levy Tax as a substitute a severance tax on from belong extracted areas that people to the large the relative detriment of the other Union, States in the clear that the implicates Tax First-Use serious important concerns of federalism fully in purposes accord with the reach of our original jurisdiction. of our original jurisdiction exercise supported also
by the fact that the First-Use Tax affects the United States’ interests in the administration of the totally OCS—a factor absent in Arizona v. New Mexico. While we do have exclusive brought suits by the United States *17 against a State, see 28 S. C. (b)(2) (1976 §1251 ed., Supp. III), may we entertain such original suits as actions in appropriate circumstances. e. See, g., United States v. California, 332 U. S. (1947). 19 See also United States v. Alaska, 422 U. 184, 186, S. n. (1975). To be sure, we “seek to original exercise our jurisdiction sparingly and are particularly reluctant jurisdiction to take of suit a where the plaintiff has another adequate forum in which to settle his claim.” United Nevada, States v. S.,U. at 538. In this case, however, clear that a district court brought action by the United States, necessarily which would not include plaintiff States, be would an inadequate forum light in of present posture of this In addition, case. because of the interest of the United States in protecting rights its the OCS area, with ramifications for all coastal States, as well super- the regulatory interests under mechanism that
as its and of re- production development vises natural sources, appropriate we is an one for believe this case jurisdiction (b)(2). § the exercise our original under reject For above, excep- the reasons stated we Louisiana’s tions to report Special Master, accept of the and the rec- ommendation that to deny we motion Louisiana’s dismiss.21 in passing arguments against We note Louisiana’s other jurisdiction original First, exercise of our lacking original are in merit. our by provisions is not affected of the Eleventh Amendment only judicial which “by withholds power federal a against suits State by State, Subjects Citizens another any Foreign or Citizens State.” Thus, original only an action between two States violates the Eleventh actually Amendment suing injuries if the State to recover for specific to Co., Hawaii v. individuals. Standard Oil 405 U. S. 258- (1972). Second, Injunction Act, by n. the Tax which its terms only applies injunctions to courts, issued federal district 28 U. S. C. 1341, is inapplicable original reject actions. We thus Louisiana’s ex ceptions grounds. based on these excepted Louisiana also to each the recommendations made
Special
report
Master in his
concerning
preliminary
first
various
mat
dismiss,
ters. Given the above determination on Louisiana’s motion to
reject
we
exceptions
each of Louisiana’s
adopt
the recommendations
report.
contained in the
Specifically,
agree
Master’s first
we
Jersey,
allegations
injury
New
whose
are
identical
that of the
clearly
plaintiff States,
standing
permitted
has
should
inter
Second,
vene.
we
opera
believe that
the United
States’ interests
tion of the OCS Act and the
in the operation
FERC’s interests
sufficiently important
Natural Gas Act are
to warrant
their intervention
party plaintiffs,
supra,
page.
per
see
at 744 and this
haveWe
often
mitted the United
appropriate
States
intervene in
cases
dis
where
tinctively
interests,
presented by
federal
itself,
best
the United
States
See, g.,
California,
e.
(1953);
stake.
Arizona v.
Ill
argue
First-Use Tax vio
merits, plaintiffs
On
that
Supremacy
because it interferes with federal
lates the
Clause
and sale of natural
in
regulation
transportation
of the
that
Supremacy
provides
commerce. The
interstate
Clause
of the
States which
Constitution, and the Laws
United
“[t]his
supreme
thereof .
.
be the
shall be made
Pursuance
. shall
any
Thing
Law
Land . .
Laws
.
Constitution
VI,
Contrary notwithstanding.”
to the
Art.
cl.
State
this
all con
2.
It
basic to
constitutional command that
flicting
provisions
state
be without effect. See McCulloch v.
(1819).
also Hines
Maryland,
316,
Wheat.
v.
Davidowitz, 312
under the
(1941).
U. S. 52
Consideration
Supremacy
assumption
Clause
the basic
that
starts with
Rice
displace
did not intend to
state law. See
Congress
(1947). But
Corp.,
218,
Santa Fe Elevator
331 U.
as
S.
Court stated
Rice:
may
purpose
displace
“Such a
state
be evi-
[to
law]
ways.
regulation
denced in
The scheme of
several
federal
may
pervasive
be so
to make
the infer-
reasonable
Congress
supple-
no room for
ence
left
the States to
Pennsylvania
Comm’n,
ment it.
R. Co. v.
Service
Public
Patterson,
S. 250 U.
Butter Co. v.
569; Cloverleaf
Congress
148. Or
may
315 U. S.
Act of
touch a
field
in which the federal
interest
is so dominant
system
preclude
federal
will
be assumed
enforcement
subject.
Davidowitz,
of state laws
the same
Hines v.
object
Likewise,
sought
52.
to be obtained
obligations
the federal
im-
law and the character of
may
by it
posed
purpose.
reveal the same
Southern R.
Commission,
v. Railroad
Charleston
439;
U. S.
Co.
mit
private
parties
intervention of
actions. See Oklahoma v.
Texas,
(1922).
Workers,
747 Co., & C. R. S. New 597; W. Co. v. Varnville 237 U. Winfield, Napier York Central Co. 147; R. v. U S. Co., v. Atlantic Line the Coast R. U. S. Or [272 605]. may produce policy state a result inconsistent with the Florida, objective of S. the federal statute. Hill v. U. 538.” Ibid. course,
Of a state statute void it conflicts to extent with a if, “compliance federal with example, statute — both and regulations physical impossibil federal state ais Paul, ity,” Growers, Florida Lime v. S. & Avocado Inc. 373 U. or 132, 142-143 “stands as an (1963), where law obstacle to accomplishment purposes and execution of the full objectives Congress.” Davidowitz, supra, Hines v. 67. at generally Co., See Ray v. Atlantic S. 151, Richfield Terminal, (1978); Air City Burbank v. Lockheed Inc., 411 624, U. S. argue
Plaintiffs that 1303C Act violates Nat- Act, Gas S. ural 15 U. C. ed. (1976 Supp. 717-717w §§ Ill) (Gas Act), by Policy as amended the Natural Gas Act of 1978.22 In Congress 1938, enacted the Gas Act to assure Policy The Natural Gas Act of 1978 to was enacted alleviate adverse economic disparate effects of the treatment inter of intrastate and (1976 state natural ed., sales. Under 15 Supp. Ill), U. S. C. §3320 price for the first sale of shall be considered exceed maxi price mum necessary “any lawful if it recover compressing, costs of gathering, treating, processing, liquefying, transporting gas, or such natural costs, or other similar for, order, borne seller allowed rule or by the Commission.” argue Plaintiffs also that the entire scheme of taxation in Louisiana infra, its exemptions, text, 756-758, with series tax credits and see necessarily authority regulate comprehensive interferes with the FERC’s price gas. Special The Master determined that decision was given permitted difficult to make the fact had FERC the cost to passed may ultimately be on. Master concluded that beyond FERC, decided that some of the costs are the reach of the the Tax a “substantial is not hindrance” to the do not Commission. We plaintiffs’ exception point given to reach need on this our on the resolution presented. other issues and also price fair gas receive a of natural consumers pipelines. interstate power the economic
protect against Co., 320 U. Gas Hope FPC Natural Comm’n Public Service Co. v. Refining Atlantic (1944); *20 Act was The Gas York, (1959). New 360 U. S. the Commission, now Power the Federal provide intended to of pricing authority regulate the wholesale FERC, with to from wellhead flow of interstate commerce gas natural the v. Wiscon- delivery Petroleum Co. Phillips to to consumers. sin, 347 U. S. to owners are entitled present gas natural
Under the law, costs associated legitimate their customers all recover from of natural production, processing, transportation the with Co., S. 237, FPC v. Gas Line 386 U. gas. Pipe United normally allow- (cost proper of includes (1967) service “obviously within the for and this allowance is ance taxes of Commission”). part of As the First-Use the of Tax, the amount the Tax should Louisiana has directed that by be uses made the owner “deemed a cost associated with gas.” marketing of of natural 1303C.23 preparation provides: Section 1303C by made First-Use shall be deemed cost uses a associated with “[The Tax] marketing gas. Any preparation agreement the owner in of of the natural by gas or taxable use first contract which an owner of natural at the time a right any a taxes from occurs claims reimbursement or refund of such gas, hereby party interest, purchaser other than a such other of natural against public policy to that extent. declared and unenforceable any Notwithstanding agreement contract, such such an owner shall not or any right an reimbursement or refund on basis have enforceable cost this tax a incurred such owner virtue of constitutes liquid liquefi- processing gas separation or of natural for extraction of or hydrocarbons, any grounds reim- that this tax constitutes other for able or agreement or there contract, or refund under such unless has bursement judicial unappealable determination that such owner is been a final and refund, notwithstanding public entitled to such reimbursement foregoing policy part provisions and the this purpose of this of The Act further en- provides not have an an owner shall right forceable of the Tax payment seek reimbursement ibid., from party gas, third purchaser other than a even though party third be the owner marketable may hydrocarbons that are extracted from the the course of processing.
The effect of § 1303C is to
with the FERC’s au-
interfere
thority to
regulate
proper
determination of
allocation
of costs
associated with
sale
to consumers.
natural
The unprocessed gas
at the
ex-
obtained
wellhead contains
hydrocarbons
tractable
which are
often owned and sold
most
separately
gas.
from
normally
the “dried”
The FERC
allo-
part
processing
cates
prod-
costs between these related
ucts,
insists
liquefiable hydro-
the owners
carbons
bear
fair share
the expense associated with
processing.24 See generally
Pipe
FPC v. United
Line
Gas
*21
Co., supra,
243 (“income
expense
of unregulated and
regulated
By
activities should be segregated”).
specifying
the First-Use Tax is a
cost to be either borne
processing
by the
or
pipeline
other owner
compensation,
without
an un-
likely
light
of
large
event
sums
involved,
passed
attempted
purchasers,
has
a
usurpa-
substantial
by
of the
of
authority
dictating
tion
the FERC
pipe-
to the
lines the allocation of
for
processing
ship-
costs
the interstate
any legal
pursuant
Subsection C.
Subsection,
action
to this
the state
indispensable party
shall be an
in interest.”
24
Corp.
FPC,
See Mobil
App.
238-240,
Oil
v.
157 U. S.
D. C.
483
235,
1238,
(1973);
2d
FPC,
F.
1241-1243
Detroit
App.
260,
97
D.
C.
269-271,
810,
2d
(1955),
denied,
(1956) ;
230 F.
819-821
cert.
ment into valid contracts entering from of 1303C operation § to reim- hydrocarbons extracted the owners requiring transporting costs with associated pipelines burse 1303C is to shift § The effect of products. these processing insists the FERC expenses, which incidence of certain of of the owners extract- substantially for the benefit incurred of processed consumer hydrocarbons, to the ultimate able of the FERC. prior approval gas without regulation akin to the state over The effect 1303C is Co. Corporation in Northern Natural Gas v. State turned Kansas, In Northern Comm’n 372 U. S. Gas, Natural agency’s rule an required a state administrative company purchase gas ratably natural pipeline interstate particular from field. The Court all wells held that superior the rule violated the interests the Federal Gov ernment under the Gas Act. The order state Commission’s “complex shifted the burden task of balanc performing output thousands natural wells within the ing pipeline company. State” to the This requirement “could seriously impair the Federal authority regu Commission’s the intricate relationship purchasers’ late between the cost structures and eventual costs to wholesale customers who sell to consumers in other This relationship States. is a matter respect with to which Congress given has the Federal Power paramount Ibid. authority.” Commission and exclusive While the Master noted that the FERC was of the *22 opinion that the First-Use Tax was impermissible, Spe- the refused to cial Master recommend that the Court grant plain- judgment tiffs’ motion for on the Supremacy Clause issue § 1303C because he discerned respecting a factual issue con- the nature of cerning the gas-drying the process. Under Special Master’s if view, the facts demonstrated process- that ing for profit was done the of the owners of the extractable hydrocarbons, position then the of the FERC that such costs passed If, not
should be to the consumers correct. was standardizing the however, processing was done as a means the consumers, heat content for sale to then it would be thus pass forward, reasonable to the Tax 1303C would consistent policy. Spe- be with Act The Gas cial Master concluded that this best resolved question was after suitable any event, factual that development, and may be “in adjusted that the end FERC’s orders can be so that the laws mesh will conflict.” without
It our view, however, ripe that the issue is for decision without further evidentiary hearings. Act, Under the Gas determining pipeline producer costs is task of the FERC in subject the first instance, judicial review. the further Hence, hearings contemplated by Master to determine whether and how costs are processing to be allocated as inappropriate Louisiana’s effort pre-empt those process- decisions a statute that directing ing passed costs be on to the consumer. Even if the FERC ultimately determined that such expenses passed should be toto, on in this juris- kind decisionmaking is within diction of FERC; statute, the Louisiana like the Gas, state Commission’s order Northern supra, Natural inconsistent with the way. federal and must At give scheme least, very there is an possibility “imminent of collision,” The adjust ibid.25 FERC need not its ruling to accommodate the Louisiana statute. may To the contrary, the State trespass on authority agency. the federal As we see it, plaintiffs are judgment entitled to on the pleadings that 25It is no answer to note administratively the FERC has deter may mined that passed the Tax be agency’s on. position is that Tax is an authority; unconstitutional as invasion of its and as a condition permitting pipeline companies pass through Tax to con sumers, required companies has legal all action . . “undertak[e] . means; constitutionality to determine the tax,” and secure for an paid effective refund should taxes upon returned finding a final the Tax was Reg. unconstitutional. 43 Fed. *23 Supremacy 1303C is invalid under the § Clause. To ex- therefore, plaintiffs’ exceptions we sustain tent, to the report.26 Master’s second argues The United States that once 1303C is found unconstitu §
tional entire Act falls under provides 4 of the Act which that in the § unappealable judicial event of a “final upholding right decision” any agreement owner to “enforce a contract or otherwise rendered by (C),” unenforceable following consequences R. S. 47:1303 would occur: “(2) right upheld If the provisions arises from the of a contract or
agreement requiring any party other to reimburse or refund to an owner expenses costs or incurred separation such owner virtue of or processing liquid of natural for liquefiable hydrocar- extraction of bons, then this Act shall be secretary null and void and the forth- shall taxpayer with return previously to each paid, together all taxes with percent interest at the rate per of six payment.” annum from the date of specific provision Since a here, contractual precise not involved terms of the Louisiana statute despite met not the fact final and unappealable determination unconstitutionality been 1303C has § Accordingly, position, made. we are provision not in based on the con- 4, tained in to determine that the entire Act is null and void. § States, pipeline Plaintiff as well as the companies, press also another Supremacy issue, contending Clause that the First-Use Tax is inconsistent Act, with (1976 the OCS III). U. S. C. 1331-1356 Supp. ed. and §§ Under it policy is declared of the United States that § “the subsoil and seabed of the outer appertain Continental Shelf to the subject United States and are control, to its jurisdiction, power disposition provided subehapter.” as (a) (1) this Section expressly extends the Constitution and laws of the United States to the subsoil seabed of the shelf. “applicable While the Act borrows and not incon purposes, sistent” state laws for necessary certain such as were gaps to fill Rodrigue law, Casualty Surety in federal see Co., v. Aetna & 395 U. S. expressly (1969), declares that taxation laws shall “[s]tate apply (a) (2) (A). outer Continental Moreover, Shelf.” § provides provision the OCS Act adopting for state law “shall interpreted claiming any never be a basis for interest in or any purpose on behalf of State over the seabed and subsoil of the Shelf, property outer Continental or the and natural resources thereof or (a) (3). By the revenues therefrom.” passing Act, the OCS Con gress “emphatically implemented its view that the para- United States has
IV Plaintiffs argue also First-Use Tax violates Commerce Clause of the United States Constitution which provides that shall Power Congress have “[t]he ... [t]o rights mount beyond to the seabed United three-mile limit . . . Maine, States v. 420 515, (1975). U. S. 526 Plaintiff States contend despite the fact that the First-Use statute declares taxing gas that it is not state-imposed itself and thus not a is severance tax OCS production, on inevitable intent result of the Act impose is to a production tax on the OCS in contravention of the express prohibition of the It OCS Act. is clear that a State has no valid imposing interest in a part, severance tax on land. federal OCS purports justify Louisiana alleviating Tax as a means of the al- leged against gas discrimination by the fact that caused Louisi- gas pay ana must the state tax if severance while does not. But OCS correcting justification the claimed imbalance were the sole asserted for Tax, First-Use grave validity there would be doubt about the Tax. proper charge drilling The fee or for on the is a OCS determination solely which province is within the of the Federal if Government. Even open the United up States were to development decide to to all comers charge spur no development in order to gas, natural Louisiana would overriding by equalize have no imposing interest that decision a tax to production Permitting the cost of local with the federal OCS area. power adversely price the States to exercise such would affect which private developers from Government could command in their bid required price. clearly Act, sovereign As the OCS Louisiana’s interest development stops in the of offshore mineral at its 3-mile border. interests Louisiana, however, presses sup- certain as well environmental interests port Tax, submission, light of its and in of this we do not First-Use resolve necessarily infringes sovereign the issue the Tax whether on the interests United States the OCS. intervening pipeline companies argue The also that Louisiana has no imposing valid interest Tax environmental the First-Use since the pre-empted by Management measure is the Coastal Zone Act (1976 amended, Supp. C. ed. and Stat. as U. S. §§ IV). Management provides Zone Act funds The Coastal federal to com- damage pensate occurring States for environmental result of offshore development agree energy comply to States which with the standards importance of environmental_ mandated the Act. The the concerns for recognized damage expressly in the OCS Act. U. S. 1332- C. § . . Art. regulate Commerce . . the several States . . among 8, cl. Prior established that a state tax I, § 3. case law has se per it burdens interstate commerce is not invalid because may constitutionally since interstate commerce be made Transit, Brady, Complete Auto Inc. way. pay its Stock Rev- See Western Live v. Bureau of (1977). S. 274 U. enue, right to tax inter- State’s may limited, however, state commerce is no tax state sustained (1) unless the tax: has a substantial nexus with the fairly State; (2) apportioned; (3) does not discriminate fairly against commerce; (4) interstate related to the *25 Washington Dept. Revenue provided by services the State. Assn., Washington Stevedoring v. 734, 435 S. (1978). U. principles One of the fundamental of juris- Commerce. Clause prudence State, no is that consistent with the Commerce may “impose a Clause, against tax which discriminates inter- commerce providing state ... a direct commercial advan- tage to local business.” Northwestern States Cement Portland Minnesota, Co. v. 458 (1959). See Stock 450, 358 U. S. Boston Exchange Comm’n, State Tax v. 318, S. (1977). This principle antidiscrimination from inexorably “follows the basic prohibit purpose Clause” to multiplication the of preferential trade areas destructive of the free commerce an- ticipated by the Constitution. Boston Stock Exchange, supra. Milk Madison, Dean Co. v. See 340 U. S. (1951). Initially, it is clear to us that the flow of from the OCS gas wells, through plants in processing Louisiana, through interstate pipelines to the ultimate consumers in over 30 States constitutes argues interstate commerce. Louisiana the taxable “uses” within the State break the flow of commerce are wholly local events. But although the may possess “uses” a sufficient sup- local nexus to (4) (A) (1976 ed., III). Supp. We need not reach this light contention in disposition of our claims, of the other and to this exceptions extent the plaintiff pipeline companies States and the are overruled.
port otherwise valid taxation,27 agree we do not the flow from the wellhead to consumer, though even “in- terrupted” certain but anything a continual events, flow interstate commerce. crossing Gas a state line at any stage of its movement to the ultimate consumer is in during commerce journey. interstate entire California suggests The United States the uses enunciated in the Act do not have support sufficient local nexus to Tax under the Commerce Michigan-Wisconsin Pipe See Clause. Calvert, Line Co. v. 347 U. (1954). While the local nexus of suspect, certain the uses is other uses appear would to have a present substantial local so nexus that on the say record it would difficult be that the entire Tax was unconstitutional ground. on severability providing this The Act contains a clause that if taxation, use is found to an unconstitutional basis next (West Supp. use would be See taxed. La. Stat. Ann. Rev. §47:1303F 1981). Given our resolution on charge, find it un discrimination we necessary to especially reach the local claim light nexus the sever- ability extent, exception clause. To this United States FERC is overruled. argue United States and the States also that the First-Use fairly valid,
Tax apportioned. To be a tax interstate commerce reasonably apportioned occurring must be value of activities Washington upon within the State which imposed. the Tax is Reve- Dept. Washington Stevedoring Assn., nue 435 U. S. *26 suggest principle being
It is submitted several is violated. factors this First, the Tax imposed is on of the each use as a function of the volume gas subject use, attempting the without the of the Tax to tailor amount depending gas on the nature or of the use of within extent actual Second, proceeds Louisiana. the use of Tax demon- of the First-Use fairly substantially strates that the Tax is in excess of amount asso- Act, are proceeds ciated with the local uses. used Under the 75% general debt, only one-quarter directly while is to service Louisiana’s alleged damage pipe- used alleviate the caused environmental Third, the line activities. State has not demonstrated a sufficient rela- provided by tionship between other services the State and the amount of light provided. In our the First-Use Taxes determination that Tax however, discriminatory, apportionment not determine the is we need exceptions FERC, States, of the United issue. The this extent are also overruled. States to
756 Co., Gathering
v. Lo-Vaca 366, (1965). 379 369 See U. S. Calvert, Michigan-Wisconsin Pipe Line Co. 157, 347 S. v. U. Co., FPC v. East Ohio 163 S. Gas (1954); 472- 464, U. FPC, Deep South Oil Co. v. 882, 2d (1950); 887- F. 1957). Illinois Natural Gas Co. v. (CA5 generally Co., Central Public Service Illinois S. 498, 503-504 (1942) (fact change of sale does the-“essential serve business”). interstate nature of the
A state tax must of its effect light assessed actual conjunction considered in provisions with other of the State’s “In tax scheme. duty each case it is our to determine may whether statute under attack, be, its name whatever practical operation will in its against work discrimination Maxwell, commerce.” Best & interstate Co. v. 311 U. See Halliburton Oil (1940).
455-456
Cementing
Well
v. Co.
Reily,
Louisiana obvious gas in- encourage Severance Tax Credit to natural owners gas ex- production volved OCS invest mineral ploration and development within Louisiana rather than development invest in further or in in other OCS production Finally, utility States. under the Louisiana statutes, any electricity any producing gas, gas with OCS natural distribu- dealing gas tor gas, any purchaser OCS direct of OCS consumption by purchaser may recoup in Louisiana gas increase in the cost attributable to the First-Use against Tax through credits various taxes or a combination of otherwise IB taxes owed the State of Louisiana. §47:1 (West Supp. 1981). Louisiana gas consumers of OCS substantially thus protected against impact of the First- Use Tax and have the benefit of gas untaxed OCS which be- it is not subject cause to either a severance tax or the First-Use may Tax cheaper locally produced gas. than gas OCS provided The United example States has an which the Master possible used to illustrate the discrimination: following “This difference can be illustrated example. Owner A gas; has 1000 mcf of OCS owner B has 500 mcf of OCS and 500 mcf gas subject $70 tax; Louisiana’s severance tax. A first owes use $35 B $35 owes of first use tax and B, pays in severance tax. however, only $35 in first use taxes. He owes no severance tax because he can payment against credit first liability.” use the severance tax Second Report, n. 18.
It “gas has been observed that the credit means that extracted offshore extracted in Louisiana will be treated the same for Louisiana only purposes Taxpayer tax when the First Use has no severance tax liability result, to absorb the First Use Taxes.” As a First-Use Tax- payers have an incentive to “undertake mineral extraction activities so as to minimize their effective First Use Tax burden and to equal compete Taxpayers on terms with other First Use whose First Use already been burden has so minimized.” Hellerstein, Tax State W. Taxa- System: Perspectives in the Federal tion on First Tax Louisiana’s Use Gas, Foundation University Natural Shell Lecture at Tulane School (Nov. 20, 1980), pp. 23-24. of Law *28 the First- with is burdened however, moving State, out Use Tax.29 Loui of the the effect aware that Master was Special
The to respect interests. With favor local system is to siana tax noted Master Special Credit, Tax the Severance ownership between apparent no relation is there “[s]ince gas in production and the continental shelf of outer motive in understand Louisiana’s it to Louisiana, hard op intrastate obviously aids an credit, this but permitting only in engaged pipeline a way not available to eration a of Loui outside producing gas transportation interstate credit availa Moreover, at Report, Second 34. siana.” distributing services, plants, gas generating ble electrical being customers resulted in Louisiana purchasers and direct the tax the incidence of part in whole or in from “protected Ibid. to consumers out of the passed on State.” which is not recommend Master did Despite these concerns, Tax under the to invalidate the plaintiffs’ motion granting to tell it was it, as he saw difficult because, Commerce Clause totality opera given the credits, effect of the various being Thus, instead of dis provisions. tion the state tax required “actuality operation” test criminatory, Cementing Reily, supra, Co. v. Oil Well Halliburton Tax a full that the First-Use might hearing demonstrate after “ complement tax intended proper 'compensating’ is a sales complemented tax the use tax severance state Co., (1937).” S. 577 v. Silas Mason 300 U. tax Henneford Report, at 35. Second justified Tax cannot be as a view, our the First-Use compensatory of a first
compensatory
concept
tax.
tax
for
identification of the burden
which the State
requires
Louisiana
attempting
compensate. Here,
claims
may
itself
result
course,
1303C
substantial discrimination
Of
subject
prohibited
to the state severance tax
are not
since owners
allocating
to someone other than
that cost
the ultimate consumer.
from
sever
of the State’s
compensates
First-Use
effect
Tax
sure,
gas. To be
production
of natural
ance tax
local
resources,
its natural
protecting
has an interest
severance tax
impose
States,
like most
has chosen
and,
Bcl
soil.
resources from its
privilege
severing
on the
Roland,
appeal
2d 308,
137 So.
Corp.
Oil
La.
*29
Parker,
2d 175
332 So.
dism’d,
The common thread cases upholding compensatory is between equality taxes of treatment Exchange, local Boston Stock and interstate commerce. See Co., S., 331-332; 429 U. v. Silas Mason 300 U. Henneford Oil, generally Halliburton S., (“equal at 70 treatment for in-state and out-of-state similarly taxpayers precedent situated is condition a from goods imported out-of-state”). valid use tax on As already demonstrated, pattern of credits however, and ex- emptions undeniably allowed under the Louisiana statute vio- principle equality. said, gas lates this As we have OCS may be consumed in the burden generally Louisiana without principal application gas Tax. Its mov- First-Use is to course, out of tax ing equalize the State. Of it does bur- going dens OCS State and Louisiana leaving market. But equalization into the interstate this sort of is kind “compensating” not effect that our cases have recognized. may hearings
It be true that would required further provide precise determination of the extent of the discriin- ination in this is an for not case, this but insufficient reason declaring eliminating now the Tax unconstitutional discrimination. unequal We need know how the Tax is unconstitutionally concluding before it discriminates. Accordingly, plaintiffs’ grant exception we the First-Use Tax unconstitutional under the Commerce Clause because unfairly against purchasers gas moving discriminates through interstate commerce.
V In conclusion, we hold Suprem- 1303C violates acy Clause and that the First-Use Tax is unconstitutional under the Judgment Commerce Clause. to that effect and enjoining further collection Tax shall be entered. Jurisdiction over the case retained the event that further proceedings required implement judgment.
So ordered. *30 Justice Powell part took no in the consideration decision this case.
Chief Justice Burger, concurring. Rehnquist’s
There is much validity Justice dissenting opinion, and it should us keep alert expand to effort to the use original of our jurisdiction. I However, am satisfied that the Court’s resolution of this case is I sound, and there- join fore the Court’s opinion.
Justice Rehnquist, dissenting.
There is no question that this controversy falls within the literal terms of the statutory constitutional and grant of original jurisdiction to this Court. 2, U. S. Art. Const., III, § cl. 28 2; U. S. C. (a) (1976 1251 ed., III). Supp. As the Court stated in Milwaukee, Illinois v. 406 91, (1972), U. S. 93 however, construe 28 U. S. C. § 1251 do (a)(1), “[w]e as we jurisdiction but 2, original 2,§
Art. to honor our III, cl. Because only in cases.” obligatory appropriate it make States seek plaintiff which the nature interests of the existence original and because action, vindicate in this be interests can vindi forums in which these of alternative for the ex “appropriate case” I do not consider this an cated, not, The States have original jurisdiction. ercise of necessity” required my view, “strictest established Wyandotte Ohio v. invoking original jurisdiction, this Court’s I therefore Corp., (1971), U. S. 493, Chemicals motion to dismiss grant defendant Louisiana’s would complaint.
I dominant theme decisions been a consistent and It has original jurisdiction be exer- of this Court that our should searching only cised with considerable restraint after noted Illi- necessity for so. As we inquiry doing into the Milwaukee, long philoso- nois has been this Court’s v. “[i]t be original jurisdiction spar- 'our should invoked phy that ” States, v. ingly.’ S., (quoting Utah United Fuller in 1900 (1969)). Chief Justice wrote U. S. char- original “jurisdiction grave of so delicate it contemplated it would be exercised acter that was . .” necessity was . . save absolute when underlying restraint Texas, 176 U. S. 15. reasons this wisely in- has long established. The Court have also been sparingly invoked because sisted a nisi tribunal. “This prius is not as functioning suited tribunal, perform appellate an . . structured Court is . *31 forced, orig- factfinding the and so task ill-equipped cases, play the role of fact- [jurisdiction] awkwardly inal over of evi- actually presiding the introduction finder without Wyandotte Corp., 498.1 supra, Ohio v. Chemicals dence.” judgment 1 It in this ease the Court decides that on is true that necessary that it not pleadings appropriate, is and therefore is to conduct considerably years docket was ago, Over when Court’s Hughes today, than articulated lighter Chief Justice “in cases the ab- original-jurisdiction concern that accepting intervention, necessity for such showing sence facts grant original juris- be to would assume a burden which the regarded compelling diction be this to assume cannot as Court by might seriously discharge and which interfere with this duty ap- Court its cases controversies deciding the Missouri, propriately brought v. before it.” Massachusetts (1939). ex- recognized The Court has pending original-jurisdiction its time and on resources cases from primary responsibility detracts its an tribu- appellate nal. “The grant breadth of constitutional of this Court’s original jurisdiction dictates we able dis- to exercise cretion over the jurisdictional we hear under head, this cases lest ability our our appellate administer docket be im- paired.” Washington v. General Motors 406 U. S. Corp., Milwaukee, See also Illinois v. supra, at 93-94 (“We sparing original incline a use of our jurisdiction so increasing that our duties with the appellate docket will not suffer”). Original-jurisdiction cases represent an “intrusion society’s in our interest most deliberate and considerate performance of our paramount role supreme as the federal appellate . Wyandotte court . . Ohio .” Corp., Chemicals supra, at 505.
None these concerns adequately answered expedient Special a Master to employing conduct hearings, receive evidence, submit recommendations for our review. no It is reflection on quality of the work any Master this case or other master in other original- jurisdiction case to find it unsatisfactory delegate a I trial. do not Court, understand however, ruling to be appropriate only when a trial is necessary, in accepting original jurisdiction therefore of this case the opens Court may the door to similar eases which necessitate trial. *32 functions of
proper this Court. Of course this Court cannot sit to receive evidence or should conduct trials —but that fact counsel accept might reluctance to cases where the situation not resolution of in- arise, problem by empowering an to act in our I one justice dividual stead. think far appropriate better served trials in with courts, the lower review, rulings than trials before a Master whose simply this Court cannot consider with the care and attention it should. It is one thing findings to review of a district empowered findings court or state court, make its own right, quite accept (or reject) another to recommenda- theory primary tions when this Court is in factfinder. Georgia As Chief Justice Stone it in put Pennsylvania R. Co., 324 S. 439, (1945) opinion): “In (dissenting U. an original suit, even when the case is first referred to master, duty this Court has the of making independent an examina- tion of evidence, process a time-consuming which seri- ously discharge with the ever-increasing interferes of our appellate duties.”
II prudential process by which the “appro- Court culls priate” original-jurisdiction cases from those which are in- appropriate involves two inquiries. Massachusetts v. Missouri, supra, at 18, the Court noted:
“In the exercise of our truly so as to fulfill only the constitutional purpose we not must look to the nature the interests of the complaining quality State —the essential right asserted —but inquire we must also jurisdic- whether recourse to that is-necessary tion . . protection.” . for the State’s This inquiry dual in Washington was reaffirmed v. General Motors Corp., supra, Or, at 113. in Illinois v. Mil- put waukee, S., question “the appropriate what concerns, course, dignity seriousness and claim; yet beyond that it necessarily involves the availability an- *33 is over jurisdiction par- other forum where there the named may litigated, and ties, where the issues tendered be where in- appropriate may prong relief be of the had.” first quiry of of thus involves an assessment the “nature the inter- ests of the complaining state,” quality “the essential of the right asserted,” claim,” “the and of the dignity seriousness prong availability and the of the of an second an examination alternative forum. accepts original jurisdiction
The Court this case for two separate injured reasons: because the States plaintiff are ante, capacity 736-737, their at gas, as of natural purchasers the plaintiff may parens patriae, because States sue as ante, of ruling jurisdiction at 737-739. exists because purchases gas, States’ of own natural Court does not even purport to consider the or qual- nature essential ity of the States’ claim whether it of sufficient “serious- is dignity” invoking ness and to justify grave” our “delicate original jurisdiction. con- recognizes “unique The Court cerns federalism” our original jurisdic- form the basis of ante, tion, 743, explain at but does not how such concerns implicated simply because State on an one levies a tax item which is eventually on to passed consumers, one of which happens to be another State. The “nature of the interests complaining state —the quality right essential as- serted” is indistinguishable right from the interest of a private citizen, and the States’ claim of no greater “seri- dignity” ousness and than claim any other consumer. I that, would hold general as a when a claim rule, State’s is indistinguishable from private the claim other con- sumer jurisdiction. insufficient invoke our original The Court in the past has referred to claims a State in capacity its simply as consumer or as owner mere “make- weights.” Pennsylvania Co., Georgia v. R. supra, 450; Co., Georgia v. Copper Tennessee (1907) ; S. 230, Pennsylvania see also v. Virginia, West 262 U. S. Colorado, dissenting). Cf.
(1923) J., Kansas (Brandeis, makeweight I do not think such a 206 U. our original jurisdiction, particularly suffice invoke should array now vast areas. since States act consumers purchase that States now countless varieties The fact not or even purchased for their use which were items own years for our own limited re- ago suggests concern motivate us in only factor should sources is which sparingly. allowing our invoked state litigation increased dockets in most greatly With strongest tempta- and federal trial there will be courts, to attempt the State groups tion for various interest within *34 bring that Attorney to General of State to an persuade to an end run in the name of the State order make action delay confront time which would around the barriers of per- they merely private litigants.2 Thus them if were original jurisdiction we not indiscriminate use of our mitting but in effect resources, permit scarce only consume our own ordinary private parties courts where bypassing of trial departure litigate to issues. Such a required are same entirely separate of an practice the creation past from risks by standing side side system litigation country, in this system. systems the federal-court with the state-court many variety of a obviously tempting be interests It will “start particular on the merits of a issue to persuasions luxury litigating only top,” so to and have the speak, by the appellate-type followed re- before a Master necessarily gives findings and Court his view which this recommendations. original jurisdiction our required
If that invoke all 2 See, g., empty e. Experience these concerns. teaches that are (State suing Hampshire Louisiana, 76, (1883) S. as New U. bondholders, funding any lawsuit and to collect assignee of bondholders (1923) (State Minnesota, 365, award); Dakota v. North land, damage funding farmers lawsuit and to to farmers’ suing for flood award). collect injury by regulatory
is an to the State as consumer caused activity State, of another list of could cases which be pressed original-jurisdiction cases must be endless. The opinion Court’s contains no limiting principle, as mandated frequent statements our original jurisdiction sparingly required invoked and the inquiry into the nature of the State’s claim.
I would require that tangi State’s claim some involve ble relation to the sovereign original State’s interests. Our jurisdiction should not open be trivialized and to run-of-the- mill claims simply they because brought by but State, a rather should be to complaints by qua limited States States. This would prototypical include the boundary action, disputes, and the familiar involving disputes cases over water rights. such the State seeks cases, rights to vindicate its as State, political a entity.3 nothing Since about com plaint this case sovereign interests, involves I hold would there is no on the basis the States’ own purchases gas.4 of natural 3 Requiring that a implicate sovereignty State’s claim interests also oft-repeated
serves the expression opinions in our the Court will not interfere with action injury one State complaining unless the State magnitude.” is of “serious Arizona, Alabama v. 286, 291 U. S. (1934); Kansas, Colorado v. 320 U. S. *35 n. concern, ante, 11, Court cites this 736, why at explain n. but does not a tax of per seven cents injury thousand cubic feet of is an of “serious magnitude.” 4 It original jurisdiction true that the Court has exercised in cases right where the complaining truly asserted a State cannot be con right affecting sovereign sidered a I interests. do not doubt the Court’s power original jurisdiction to exercise cases, in such nor do I in this case. particular type The decision that a “appropriate” of case was an one for jurisdiction original century ago, however, does not mean that the same appropriate today. sort of case is an explicitly one Justice Harlan rec Wyandotte ognized Corp., in Ohio v. Chemicals 493, 401 U. S. (1971), changes that societal responsi and “the evolution of this Court’s system” legal bilities in the American affected the determination of what States to for the appropriate Nor is this an case patriae. The Court original jurisdiction parens as invoke orig- in an may capacity sue in this announces that a State pop- injury general affects the alleged inal action “where the ante, but way,” 737, ulation of a State in a substantial Court’s may than rule, which be different established Jersey, New Pennsylvania v. articulated in paraphrase, was “It (per curiam) in these terms: 660, (1976) 426 U. S. standing to that a State has has . . . become settled doctrine only interests quasi-sovereign its or sovereign sue when merely is not as a volunteer implicated litigating and it In ex Johnson of its citizens.” Oklahoma rel. personal claims Hughes Cook, Chief Justice (1938), v. 304 U. S. parens may that a State principle sue stressed permit original resort to our “does not so far as patriae go for the but reality in the name of the State an individuals, the State asserts albeit particular benefit declares their enforcement interest in the claims and economic policy.” of state to be a matter sover suing advance a plaintiff States are not
Here the suing to they are interest. Rather eign quasi-sovereign who their citizens interests of those of the economic promote in economic Advancing the gas. and use natural purchase suffi is not group citizens, however, limited terests of a original jurisdiction. support parens patriae cient Co., 220 U. S. Atchison, & R. Oklahoma v. T. S. F. chal standing had no ruled that a State Court
(1911), imposed freight rates unreasonable lenge original in an action within the affecting shippers State citizens of another Louisiana, (1883), 108 U. S. Hampshire In New State. jurisdiction. to exercise appropriate ease in which was an hand and the role of States regulatory efforts on one in state increase suggests need to new considerations on the other as consumers question. present on the brought to bear *36 rejected by Hampshire
the Court
an effort
New
to collect assignee on Louisiana
bonds,
proceeds
state
when the
would
up assignors,
Hampshire
end
the hands of the
citi
New
zens. And in North
Minnesota,
Dakota v.
S. 365
263 U.
turned
(1923), the Court
back an effort
State
plaintiff
to sue for
damage
flood
farmers’ land.
In my view this
suit, brought
to benefit state consumers of
gas,
natural
closer to
these cases than those cited
Missouri
Court,
Illinois,
v.
180 U.
(1901) (health
S.
menace
entire
spread
State from
contagious
specifically noted);
diseases
Colorado,
Kansas v.
(1902)
S. 125
(rights
water);
U.
Georgia
Co.,
Copper
Tennessee
The Court relies on Pennsylvania Virginia, v. West (1923), which “functionally it describes as in distinguishable” Ante, from the case before us. at 738-739. I think Pennsylvania Virginia, v. West decided over the dis sents of Justices Holmes, Branduis, McReynolds, readily distinguishable, “functionally” or otherwise. The harm in Pennsylvania Virginia v. West was the threatened complete cessation of deliveries of gas. natural This harmed all the State, citizens of the since it would prevented have themof from purchasing gas. the natural The harm in volved was also far more serious than the harm in this case. Pennsylvania Virginia, v. West the harm complete was the halt in deliveries of a commodity upon which citizens of the depended. State The opinion there stressed the di rect link to the “health, comfort and welfare” of the citizens Pennsylvania and the serious jeopardy they would be in if their supply heating gas were suddenly cut off. 262 S.,U. at 591-592. Such a direct link to health and welfare is sim ply present in this case. The distinction between an in crease in commodity cost passed on to consumers complained of here, and the complete cessation aof service upon which citizens depended, palpable. seems
III original jurisdiction The particu- exercise this case is larly inappropriate would since issues the States only us decide not litigated have can but in fact be, being, are Although in other forums. this would come our case within original jurisdiction and exclusive if ques- appropriate, tion whether appropriate it is on avail- depends part ability Milwaukee, of alternative forums. See Illinois v. S., Mexico, New 93; Arizona v. S.U. (1976).5 precise issues which the Court finds it neces somehow
sary today currently reach are raised in actions which are pending in a Louisiana An state court. action seeking a declaratory judgment con that its Tax is First-Use stitutional Edwards pending, Pipe v. Transcontinental Gas Line Corp., 216,867 (19th No. Dist., Judicial East Baton Rouge Parish), as is a refund the 17 brought by pipeline suit actually companies tax, liable Southern Gas Natural McNamara, Co. 225,533 v. No. (19th Judicial East Dist., Rouge Parish). Baton The pipeline companies raise Louisiana proceeding the identical challenges raised plaintiff States in the present case.6 I
In view of the foregoing Mexico, consider v. New Arizona supra, controlling. orig- There the Court declined exercise 5The significance Court’s dismissal of the v. Illinois Milwaukee Wyandotte Cory, Ohio v. juris Chemicals as cases not within the exclusive simply of this diction Court thus does not wash. Illinois v. Milwaukee appropriateness indicated the of considering the existence of alternative forums in the original jurisdiction. context of and exclusive v. Arizona appropriateness New Mexico makes the of such consideration in jurisdiction quite and exclusive cases clear. pipeline companies
6 The fact have bring seen fit to suit on analysis their own behalf undermines the of the Court that the consumers gas, both the States and the citizens, States’ parties real pipeline companies obviously interest. The have a sufficient interest justify their suit. brought by inal and exclusive over a suit Arizona challenging injury its citizens consumers of elec- tricity generated subject in New Mexico and to a New Mexico here, imposed tax. As the tax was on utilities, directly quoted language the consumers. The Court from Illinois v. Milwaukee, supra, Missouri, Massachusetts S.U. 1 (1939), concerning original jurisdic- use of our sparing tion and appropriateness considering forums, alternative *38 utilities, and noted that the like the pipeline companies here, had in state court. sued The Court concluded that the “[i]n circumstances of this case, persuaded we are pend- the ing provides state-court action an appropriate forum in which the issues may litigated” here be (emphasis tendered orig- in inal). at 797. S., Although the Court this case stresses that States not parties in the Lou- isiana state-court proceedings, Arizona v. New Mexico we specifically emphasized that the question relevant was whether litigated could issues be elsewhere.
IV The problem basic with my the Court’s opinion, in view, is it articulates no limiting principles would prevent this from deluged Court being by original actions brought by States simply their role as consumers or of behalf groups of their citizens as Perhaps consumers. principles sketched in this dissent are limiting not the best principles which could devised, but difficulty in developing such principles does not lessen the need for them. The absence principles in the Court’s I limiting opinion, fear, “could pave way well for putting this Court into quandary whereby we must opt either pick arbitrarily choose among similarly litigants situated truly to devote enor- mous portions of our energies such matters.” Ohio v. Wyandotte S., Chemicals Corp., 401 U. at 504.7 prob- hardly satisfactory It is simply note, Court, does the that “the
lem is accentuated in this case because it falls within our original and exclusive jurisdiction, which means that similar only cases can be but must be brought here. I conclusion can do no better than quote from a dissent
Justice Frankfurter penned under similar circumstances:
“Jurisdictional doubts inevitably lose force once leave has been given to bill, file a a master has been appointed, long hearings have been held, and a weighty report has been submitted. And were so, this the last as well as assumption first by this Court of a controversy like the present, even serious doubts about it might go unexpressed. well experience But if guide, present decision will give momentum kin- dred litigation and upon reliance it beyond the scope special facts of this case. . [L]egal . . doctrines have, in an odd kind of way, faculty self-generat- extension. ing Therefore, pricking out lines development future what new impor- doctrine, tance of these may issues make it not inappropriate to *39 indicate I difficulties which have not been able to over- come and potential abuses to which the doctrine is not unlikely give rise.” Florida, Texas v. S. 398, 306 U. 434 (1939).8 appropriateness
issue of original in an be deter- action between States must case-by-ease mined Ante, on a basis.” at 743. my jurisdictional question Because of views on the I find unneces sary to case, beyond noting pressure address the merits of this inquiries actions to avoid of course can factual which this Court may go entry not make explain judgment pleadings far to on the ruling over the development Master that further factual necessary proper to a resolution of the issues.