*1 CO. v. MICHI- PIPE LINE EASTERN PANHANDLE COMMISSION SERVICE PUBLIC GAN et al. May 14, 1951. Argued, April 1951. Decided 486. No. *2 appellant. for argued Robert P. the cause Patterson Clayton Jennings. him F. With on the brief was Michigan, Edmund E. General of Shepherd, Solicitor argued the cause for the Public Service Com- mission, appellee. him With on the brief were Frank C. Millard, Attorney General, Daniel J. O’Hara and Charles Martin, M. A. Attorneys Stephen Assistant J. General. Roth, then Attorney of General, was also counsel. Richberg
Donald R. argued the cause for Michigan the Consolidated Co., appellee. Gas With him on the brief (cid:127) Dyer were G. and W. James Williams. Clifton Perlman,
Solicitor General Stern, Robert L. Bradford Foster, Ross and Bernard A. Jr. filed a memorandum for the Federal Power Commission, as amicus curiae. opinion delivered the of the
Me. Justice Minton Court.
This is an appeal from the affirmance of an order of the Michigan Public Service Commission requiring ap- pellant to obtain a public certificate of convenience and necessity before selling natural gas direct to industrial consumers in a municipality already served a utility.
Appellant engaged transportation the of natural gas by pipe line from fields in Texas, Oklahoma and Kansas into areas which include the State Michigan. Appellant ais “natural-gas within company” coverage of the Natural Act, Gas Stat. 15 U. S. C. §§ 717 seg., et subject and thereunder regulation by the Fed- eral Power Appellee Commission. Michigan Consoli- Company public utility Michigan
dated Gas is a domes- appropriate gas under authorization distributes in and around tic, commercial and industrial consumers supply entire nat- Detroit. Consolidated obtains its ural for distribution in Detroit district gas appellant. publicly
In 1945 program announced for direct securing large industrial customers sale In gas Michigan. pay Detroit it offered to City lay operate pipe for the line its along alleys directly large streets In year appellant customers. October of succeeded in securing large direct-sale with contract Company Motor Dearborn plant, located *3 in already the Detroit district. Ford was purchasing quantities substantial of gas for industrial use at the plant Dearborn from Consolidated.
Believing its interests and those of its were customers prejudiced by appellant’s program, particularly the contract, complaint Consolidated filed a with Michi- the gan Public Appellant appeared Service Commission. jurisdiction contest the of the Commission over such sales. After hearing, the appellant Commission ordered to—
“cease and desist from making direct sales and deliv- eries of natural gas to industries within the State of Michigan, located municipalities within already being public served utility, until such time as it shall have first obtained a public certificate of convenience and necessity from this Commission to perform such services.”1 1 authority The Commission acted Comp. Laws, under of Mich. 1948, 460.502, provides: § public utility begin
“Sec. 2. No shall hereafter the construction or operation any public utility plant system or thereof nor shall it any render purpose transacting carrying service for the or on a order of injunction against Appellant obtained an Ingham County, Court of in Circuit the Commission The Court held that the order was Michigan. Circuit invalid. prohibition and therefore of interstate commerce judges dissenting, Supreme Michigan, Court of three the Commission’s reversed the Circuit Court and affirmed 2d court W. 324. That order. 328 Mich. N. Commission rejected order of the argument sell appellant was an absolute denial of the ap- in direct to consumers. Since gas Michigan pellant application Michigan free to make public Commission for a convenience certificate as necessity sales, to such the order was construed as denying the right without sell direct first obtaining require- such certificate. The court held this directly, local indirectly, by serving any business either or other utility agency engaged business, any municipality so in such local any utility agency engaged this state where other is then rendering such local business service, the same sort of or where municipality receiving sort, such service of the same until such public utility shall first obtain from the commission a certificate that necessity requires require convenience and or will con- struction, operation, service, or extension.”
Other provide: relevant sections of the statute any necessity “Sec. 3. Before such certificate of convenience and issue, applicant petition shall therefor shall file a with the com- *4 stating mission municipality municipalities the name of the it proposes render, desires to serve and the kind of service which it applicant necessary and that the has secured the consent or franchise municipality municipalities authorizing from such it to transact a local business.” 460.503. § determining question public
“Sec. 5. In the convenience and necessity the commission shall take into consideration the service being utility serving territory, rendered the then the invest- utility, benefit, any, public ment in such if to the in the matter proper equitable of rates and such other matters as shall be in determining necessity public requires whether or not convenience and applying utility territory. to serve the ...” 460.505. §
ment be within the State’s regulatory authority despite the interstate character of the sales. This appeal chal- lenges the correctness of that decision. sale industrial proposed by consumers as appel- clearly
lant is interstate Pipe commerce. Panhandle Line Co. Indiana, v. Public Service Comm’n 332 U. S. 507, 513; Pennsylvania Commission, Co. v. Gas 252 U. S. 23, 28. But the sale and distribution of gas to local consumers made engaged one in interstate commerce is “essentially in aspect local” subject and is to state regulation without infringement of the Commerce Clause of the Federal In Constitution. the absence of federal regulation, regulation state required is in- Pennsylvania terest. Commission, Gas Co. v. supra, at 31. opinion See also Cardozo, inJ., Pennsylvania Gas Commission, v.Co. 225 N. Y. N. E. 260. These principles apply to direct consumption sales for industrial as well as to sales for domestic and commercial uses. Panhandle-Indiana, supra, at 514, 519-520.
The facts the instant case show proposed are primarily sales of local They interest. emphasize need for local regulation and the wisdom of principles just discussed. To accommodate operations, proposes to the streets alleys use of Detroit and en- A virons. local utility already operating area, the same Consolidated, supply receives its entire of natural from appellant. A portion substantial rev- Consolidated’s enues is derived from large sales to industrial consumers. Appellant ignored requests of Consolidated for additional gas to meet the increased wants of its industrial customers. Instead of attempting to meet through increased needs Consolidated, appellant launched a program to secure for itself large customers, accounts some whom already being were served In by Consolidated. connection with the Motor Company, note- *5 334 appellant proposed which tap line
worthy substantially parallel be directly would serve line existing tap from the a distance only short Ford. now serves Consolidated local using utilities be there two only would Thus, not but systems, distribution accommodate their facilities to con- the same seeking to serve they would be compete for the asserts Appellant sumers. local regard to the without business of volume cream the appellant success- necessity. Were or public convenience ad- be reflected no doubt venture, it would ful in this of over-all' costs service versely in Consolidated’s Con- supply is of only whose source rates to customers “essen- of a situation clearly presents This solidated. State to the interest of vital concern and tially local” Michigan. supreme. field is Congress acts this when course,
Of Act, Natural Gas of the (b) Section It has acted. provides as follows: supra, trans- to the apply Act shall of this provisions
“The commerce, gas interstate of natural portation for gas natural commerce sale interstate domestic, for consumption for ultimate resale and to use, other industrial, any or commercial, transportation in such companies engaged natural-gas transportation other any apply sale, but shall local distribution or to gas of natural or sale distri- used for such to the facilities gas or natural gathering production or to bution gas.” field. of the only part occupied Congress Act
By this commerce in interstate only the sale sales, As to use consumptive Direct sales covered. for resale Panhandle-Indi- regulation. left to state designedly were of the divi- further Speaking 516-518. ana, 332 U. S. *6 of regulatory sion in over interstate commerce authority gas, natural in this Court said case: same an if exceedingly incongruous “It would be result a statute so motivated, designed shaped bring and regulation, particularly about more effective and in regulation, more effective state were construed objects, import wording teeth of those and the of its well, power as to cut down regulatory to do so in a making regula- manner capable the states less tion than in adoption. this, before the statute’s Yet effect, is what asks us to do. For es- directly position, apart standing sence of its on clause, Congress enacting the commerce is that e., i ‘occupied field,’ the Natural Gas Act has open the entire field and thus regulation, federal any has relieved its direct industrial sales subordi- nation to state control. opposite
“The exact is the fact. it is Congress, true, occupied field. But it was meticulous to take only had which this Court held states territory could did include direct not reach. That area not sales, consumer whether for industrial or other uses. and the regulated by Those had been the states sales in- In no regulation repeatedly had been sustained. stricken down. reaching stance this Court had it been an legis- “The Natural Gas Act created articulate recognition lative on a clear of the program based and state respective responsibilities the federal contemplate inef- regulatory agencies. It does empha- regulation at level. We have fective either to create Congress meant repeatedly sized scheme, regulatory and effective comprehensive those of the states complementary operation . usurping authority. their . . no manner v. pointed Hope out in Power Comm’n And, as was primary aim of Co., ‘the Gas U. S. [320 591] against ex- legislation protect was to consumers this companies.’ ploitation at the hands of action cooperative between The scheme one accomplish It could agencies. federal and state comprehensive aim nor the protective neither that mind, had in regulation Congress dual and effective all if at will companies could divert those unregulated cream of their business *7 519, 520-521. uses.” 332 U. S. might “dual have statutory regulation” scheme of appear exigencies overlaps
some or conflicts but no and hence no opposing There are no directives here. be- necessity for claims as any conflicting us to resolve regulation. tween state and federal by it Appellant concedes, must, as it that direct sales subject regulation to to state industrial consumers are rate contends, how- under the Panhandle-Indiana decision. It comprehend problem, ever, that decision does not Michi- jurisdiction by that the here asserted reasoning com- power prohibit is to interstate gan Commission gas. in natural merce prohibition par- might be the end result
Although appellant to secure a cer- sales, require to ticular direct necessity may before it public convenience tificate of utility is by public served municipality already enter a intima- There is no regulation, prohibition. absolute to gas available appellant tion that cannot deliver sell have additional for who Consolidated resale customers inter- against It is no discrimination gas requirements. require appellant route Michigan state commerce utility certificated through existing its sales of necessity would not public convenience and where the there is neither discrimi- by be served direct sales. That regulation here saves this prohibition nation nor Mond, 336 U. S. Du Sons v. Hood & cases as rule of such to have said where a state by appellant, relied on 525, by prohibiting interstate commerce against discriminated competition. subject local business it because it would Commission under which the And the statute or intra- an interstate distinguish between acted does not locality already in a operate desiring to agency state v.Co. Peerless Service See Cities utility.2 served Co., U. 188. S. engaged not follow that because
It does regulation is free from state commerce it interstate as essentially aspects local its business manage free to recognizes of this Court’s decisions pleases. The course case, supra; Pan- Service See Cities no such license. Co. v. Pennsylvania Gas case, supra; handle-Indiana would not Commission, 252 a course U. S. 23. Such in- Congress regulation dual accomplish the effective prejudice substan- permit appellant and would tended, compelled Natural This is not tial interests. local Constitution. Clause of Gas Act or the Commerce Judgment affirmed. *8 Doug- whom Frankfurter, Mr. Justice Mr. Justice dissenting. las joins, in its fields gas to sell
Panhandle seeks Ford Motor directly to Oklahoma and Kansas Texas, Conced- Michigan. in Company plant Dearborn its We commerce. of interstate edly is the clearest kind this lay to controversy Panhandle’s desire in have not here power and the Michigan of highways in the pipes long privileges so exactions for such Michigan of to make con- unconstitutional doctrine of not offend the as it does wholly different asserting a Michigan here is ditions. an out- whether right to say claims the The State claim. supra. note See permitted compete to with Michi- may be of-State seller gas Michigan in of natural to gan distributors the sale may deter- Michigan says that it consumers. industrial that, and since the mine that the local market is saturated may disadvantage an out-of-State distributor entry of him make deny leave to may disrupt market, the local such sales. Pan- prohibit to Michigan right
The here asserted has, directly to consumers furnishing gas handle from lodged Act, been Natural Gas 1938, by virtue of the since advised We are in Power Commission. the Federal in multitudinous that it has exercised Commission for direct sale authority transportation over instances Commission, true,” adds the is, course, “It consumers. sale to an interstate authorizing “that a state certificate if the Fed- meaningless be an consumer would necessary a for the deny can certificate eral Commission If means this vice versa.” transportation facility, here Michigan that the control anything it means Federal authority of the within effective claims is Commission Federal Power Power Commission. Pan- gas by transportation deny for may certificate reasons Company Motor the same handle to withholding certificate upon Michigan rely that would necessity to Panhandle sell convenience stability, Questions conservation, of market Ford. be relevant the like would competition and of cut-throat Commis- in the other. The as as one well factors case Michigan is subordinate power that sion is clear not frustrate could Michigan authority, to its so Pan- denying authority granting Commission’s sale to for direct handle the enter consumers. posi- Commission’s from the to be drawn
The inference *9 cer- needs the Commission’s Panhandle that, tion is since tificate for the physical transportation the to Eord, it any cannot in event such sale to Ford prior make to the issuance of the certificate. be, Howsoever this Court placed has in a different suggested case focus. It is that until there is an actual clash between an order of the Commission and order now is a vacuum assailed there which Michigan may enter. Congress No doubt could give the States authority over such a field interstate deny commerce and it to the to give Commission or it supplanted States until by Commission action. It has done The problem neither. therefore remains what it was under the law of the Commerce Clause before the enactment of the Natural Gas Act. problem does disappear by not invoking solving
phrase, “regulation,
prohibition.”
not absolute
The Com-
merce Clause sought
put
to
an end to
economic
autarchy of the States.
It is not
de-
to
termine what competition she will or will
allow from
without, subject,
course,
protect
her
to
to
those
State interests
implied
which are
by the now threadbare
phrase that
interstate
pay
commerce must also
way,
or
protect
local
only
interests that
incidentally insignificantly touch interstate
or foreign commerce.
g.,E.
Union Brokerage
Jensen,
Co. v.
If there were no Constitution with Clause, a Commerce each State could products shut out the of other States admit them on conditions. Under Constitution commerce belongs not to the States but It Congress. is not for the States, pursuit policies, of local State decide products what may State without cross boundaries or admit they them on condition sat- isfy local policy. economic If as a matter of national policy States are Congress have such power, give must them, as it did in of liquor, prison-made the case goods, and insurance. See Act of Aug. 8, Stat. *10 340 494; 49 Stat. 24, 1935, July of 121; Act § U. S. C.
313, 27 (a) ; 1606 C. § 26 U. S. 1391, Stat. 53 10,1939, Aug. Act of (b). 1012 § S. C. 34,15 U. 59 Stat. 1945, 9, of Mar. Act except out keep a State right of inherent Against the States, other or services products leave the by its 307, 267 U. S. Kuykendall, v. in Buck the decisions decisive. to me 317, seem Maloy, U. S. v. Co. Bush entire for the speaking Brandéis, Justice Mr. What McReynolds, said Justice only Mr. excepting Court, here, There, as here. the situation Buck defines case requiring statute a State with confronted the Court was regula- necessity. a of convenience certificate There freight busses. passenger and related to tion of system a course such but of prohibition, outright no denying access duty is based on the certification served. already adequately community is if the the market shall prohibition “determines a scheme whether Such a officials, to test state resort, by through applied be action— of federal province within the peculiarly which is inter- conducting adequate existence of facilities of the Wash- provision Thus, . state commerce. . . own the use of not of regulation, is a ington statute upon Its effect commerce. of interstate highways, but it. but to obstruct merely not burden commerce is Clause.” is forbidden the Commerce state Such action at 316. 267 U. S. “free significance or minimize the mock easy
It is Seelig, F. v. G. A. states,” Baldwin among the trade Inc., 526, significance given which is the U. S. adjudi- century and half Clause the Commerce lessons as to Court. With doubts what cation all this con- the beneficial teaches, few than history seem clearer conception which have from this sequences flowed principle, as is true of this Commerce It Clause. appeal to be reduced to the principle others, that which it is invoked. instance in particular of the