*1 THE STATE PUBLIC SERVICE COMMISSION OF OF v. CO. еt al. NEW YORK MID-LOUISIANA GAS Argued No. March June 81-1889. 1983—Decided 1983* Cooperative, Arizona Power Inc. *Together 81-1958, with No. Electric al.; 81-2042, Michigan v. Mid-Louisiana Gas Co. et v. Mid-Louisiana No. al.; Co. et Energy Gas Federal 82-19, Regulatory Commission v. and No. al., Mid-Louisiana Co. et Gas also on certiorari same court. *2 Jerome M. Feit argued cause for petitioners all cases. No. 82-19 were Solic- With him on the briefs for petitioner *3 itor General Elliott Lee, Schulder, and Charles A. Moore. Blabey, David E. Richard A. Solomon, and David DAles- sandro filed briefs for No. 81-1889. Arnold in petitioner Berkeley D. and Richard I. filed briefs for peti- Chaifetz Kelley, tioner in No. 81-1958. Frank J. Attorney General Louis J. Caruso, and Arthur of Michigan, General, Solicitor Philip E. D’Hondt and R. Brown, Assistant Attorneys Gen- eral, filed a brief for petitioner No. 81-2042. McKinney
James D. argued the cause for respondents in all cases. him With on the brief for Mid- respondents George McHenry, Jr., W. John Louisiana Gas Co. et al. were Reifsnyder, H. Bumes, Alan C. Jr., C. Frank Rich Wolf, ard Green, Maclver, C. Donald J. Jr., Baish, Richard Owen Lange, Augustine D. Mazzei, Scott M. Fobes, William A. Kennedy, Larry Mapes, Jr., Morris William R. Jr., and D. Terry Hall. William Brackett, W. Daniel F. Collins, Vogel, Gary 0. L. Cowan filed a brief for respondent and Holtzinger, Jr., Co. John E. Michigan Wisconsin Line Pipe Lyn Philip Karol L. Newman, David E. Weatherwax, and Jones filed a brief Supply Consolidated Gas respondent Corp.†
†Briefs of urging Byron Georgiou amid curiae by reversal were S. filed Brown, Jr., by for Edmund California; G. Governor of Daniel E. Gib- opinion of the Court. delivered Justice Stevens (NGPA), Policy By enacting Act of 1978 the Natural Gas §3301 V), seq. Supp. et ed., 3350, 15 U. S. C. Stat. dramatically changed Congress comprehensively and produced in the United States. natural method categories eight defined Act, In I of that Title gas production, specified lawful the maximum natural category, may charged for “first sales” in each that be increasing prices prescribed first sale each month rules for purchasers. ques- passing on to downstream them Energy presented in is the Federal these cases whether tion authority Regulatory to exclude from has gas produced most of the from wells owned this scheme prescribe a different method interstate and to provided by gas. setting is for that The answer “first sale” and the scheme of the Act’s definition a entire NGPA. pipeline companies
Respondents are interstate that trans- They port gas from the wellhead to consumers. independent producers. purchase from most of their they acquire significant from addition, amount wells they their own. own themselves affiliates Gas usually commingled pipe- from all three sources being lines before delivered to their customers downstream. delivеry identify impossible Thus, at the time of it is often *4 producer particular gas. of a of volume 14, 1979, On November the Commission1 entered Order promulgating regulations implement final No. the defi- son, B. McLennan, Kerr, Randolph Robert E. Simpson, Janice J. Calvin Deutsch, Pearce, W. Gordon and Thomas D. Clarke for the Public Utilities Commission State of California et al. H. L.
Richard Silverman and Morton Simons filed a brief for the Public as amicus curiae. Group Power 1 opinion, In this we use the term to refer to “Commission” both Energy Regulatory predecessor, Federal its the Federal Power Commission.
323 category nition “first sale” under the NGPA.2 The first producers independent producers assigned a “first sale” — —is pipelines. for all natural transferred to interstate category producers pipeline second affiliates that are not — assigned themselves or distributors —is also a “first pipelines, sale” for all natural transferred to interstate specifically contrary. unless the Commission rules to the In category producers pipelines contrast, the third them- — automatically assigned pro- selves—is a “first sale” its enjoy any gas duction. A does a “first sale” for it Similarly, enjoys sells at the wellhead. it a “first sale” for any gas solely it sells downstream that consists of its own production. enjoys any It also a “first sale” for downstream commingled independent-producer pipeline- sales producer gas, long equivalent as it dedicated an volume of production purchaser by Finally, its own to that contract. it enjoys commingled a “first sale” for downstream sales of unregulated in an otherwise intrastate market. How- pipeline producer commingled gas if ever, sells in an inter- having particular state market without dedicated a volume of production particular enjoy its sale, to that it does not first sale treatment. August
On 4,1980, Commissionentered Order No. 98.3 The Commission noted that its construction of the NGPA pipeline Order No. 58had left most interstate out- coverage, commingled side the Act’s since so much of it is purchased gas. with It announced that such subject reg- its downstream sale remain to the Commission’s ulatory jurisdiction (NGA), under the Natural Gas Act 52 V). §717 seq. Supp. 15 Stat. U. S. C. et ed. and provide pipelines compete order to an with incentive to independent producers acquiring new leases and drill- 2 (1979). Reg. See Fed. regulations The final are found (1983). §270.203 CFR Reg. See 45 Fed. *5 324 pipeline produc-
ing decided that wells, the new under the NGA that is com- tion should receive treatment independent production given parable under the treatment to regulations promulgated under the It therefore NGPA. pricing providing should first sale the NGPA’s NGA acquired apрly on after leases to all pipeline production from wells to all 1969, and 8, October regardless January when the under- of after drilled acquired. lying All other lease had been purposes just ratemaking priced it had been would be was enacted.4 before the NGPA petitioned
Respondents for review of both Commission or- contending on a misread- that Order No. was based ders, ing No. 98 the Commission and that Order NGPA refusing arbitrarily authorize NGPA had acted Appeals pipeline production. held that The Court all provide the same incentives to the NGPA was intended independent production, pipeline production toas that there treating practical no the transfer were obstacles pipeline’s production transportation to its from a division reading of sale, as a first and that the Commission’s division Congress. goals the NGPA was inconsistent with the (CA5 1981). F. 2d It Order No. 58 invalid and held separately. did not review No. 98 therefore Order granted petitions by the Commission We for certiorari filed regulatory that the Commissions, state which contend Appeals’ provide holding Court of will with profits S. 820 windfall did not intend. U. (1982). general explaining why agreement are in we statutory Appeals, Court of we first review definition history of “first then structure sale,” consider the finally specific arguments behalf NGPA, examine the on position. of the Commission’s The final regulations are found at 18 CFR §§2.66, 164.42
The seek sale respondents first treatment for one of two transfers of natural intracorporate transfer gas: from a pipeline-owned production to the system pipeline, or downstream transfer from commingled pipeline to a customer. If either transfer is treated as sale, a first re- would spondents be able include an NGPA rate for produc- tion their costs of as among service, just do when they they from acquire independent producers. con- They initially tend has authorized the Commission, in the exercise of sound its to treat discretion, either transfer a first They sale. contend further that Congress has not authorized the Commission to reject possibilities. both §2(21)
The definition of “first sale” is found in (1976 §3301(21) NGPA. 92 Stat. 15 U. S. C. ed., V). It form of Supp. takes the a general rule, qualified by an exclusion. general The rule sweeps broadly, providing:
“(A) General rule. — The term ‘first sale’ means any sale of volume any of natural gas—
“(i) to any interstate pipeline or intrastate pipeline; “(ii) to any local distribution company; “(iii) to any for use person person; “(iv) which precedes sale any (i), described clauses (ii), or (iii);
“(v) which precedes or follows sale any described (iv) clauses (i), (ii), (iii), and is defined the Com- mission aas first sale in order to prevеnt circumvention maximum any lawful price established this under Act.” 92 3355,15 §3301(21)(A) Stat. U. ed., S. C. V) added). Supp. (emphasis Under the terms of the general rule, a transfer falls within one of its five clauses is a first presumptively sale.5 This means that there can be a sin- many first sales of (v) The text plain of clause makes it that the italicized word “and” at (iv) the end clause was intended to be “or.” pipeline’s gle cus- the well and volume of between plainly sat- transfer case, In this the downstream tomers.6 including only general rule. The obstacle isfies general ques- intracorporate rule is the transfer within may properly a “sale.”7 That be deemed tion it whether legislative history however, is insubstantial. obstacle, clearly not intended to that the statute was demonstrates *7 deeming prohibit from it a the Confer- sale; the Commission may provides Report the that ence Committee intracorporate applicable to transactions rules “establish Rep. H. R. Conf. No. 95- sale definition.” under the first p. if definition con- Thus, 116 the first sale 1752, general plainly only rule, the Commissionwould sisted a transfer as first sale. to treat either be authorized provides: general exception to the rule “(B) (i), (ii), included. —Clauses sales Certain (A) (iv) (iii), subparagraph shall not include the or gas by any pipe- any volume of natural interstate sale of comрany, pipeline, or localdistribution or line, intrastate any unless such sale is attributable thereof, affiliate produced by pipe- interstate volumes of natural pipeline, company, line, intrastate or local distribution affiliate thereof.” 92 Stat. U. S. C. V). §3301(21)(B)(1976 Supp. ed., authority language not diminish the This does Commission’s intracorporate to treat the transfer a first sale. Whether authority treat the downstream it affects the Commission’s producer sells to a suggested One commentator has that “where processor eventually pipeline, in sells to gatherer, turn sells who a who sales may Hollis, I Related be three gas.” the same Title there first NGPA, Serv., Monograph Energy in 2 Law Producer Matters Under the (1983) (set (H. 1981). 4D, §270.202 § 4D.02 ed. also 18 CFR Green See resales). ting governing forth rules statute, As defined any sale, exchange, or transfer for value.” “[t]he term ‘sale’ means other V). §3301(20) ed., Supp. 92 Stat. U. S. C. depends meaning transfer as a first sale on the words Although interpreted “attributable to.” the Commission meaning “solely them as to,” attributable it would be at least ordinary understanding as consistent with the of the words to interpret meaning “measurably them as attributable to.”8 fully Furthermore, it would have been consistent with the spirit exemption adopted if the Commission had interpretation given latter and had “first sale” treatment to a perсentage percentage of the downstream sale—the pipeline production pipeline. forms of all agree respondents
Thus, we with the that the Commission authority intracorporate has the to treat either the transfer or the downstream transfer aas first sale. That, however, dispose litigation. does not of this For there is a substantial holding difference between thority that the Commission had the au- holding to treat either transfer as a first sale and required the Commission was so to treat one or the other.
II *8 In order to determine whether the Commission was obli- gated intracorporate to treat either the transfer or the rele- portion vant of the downstream transfer sale, as a first it is necessary purposes to examine the of the NGPA. Those purposes history regu- gas in are rooted the of federal natural lation before 1978and in the overall of structure the statute.
A regulated Between 1938 1978, and the Commission of sales gas pursuant in interstate commerce to the NGA. response reports The suggesting NGA was enacted in monopoly power harming the of interstate was Initially, consumer welfare.9 the Commission construed the 8 meaning The latter beyond be would clear if of debate instead the word “unless,” Congress had phrase, used the “except tо the extent that.” 9 Comm’n, See Corporations, Federal Trade Utility 92, S. Doc. No. 70th (1928). Cong., 1(a) 1st reports Sess. explicitly are mentioned the NGA.
328 sales at the down- gas only regulation to require
NGA g., Pipe- E. Natural Gas of interstate pipelines. stream end Co., (1940). line authorized rates that were P. 218 It 2 F. C. §4(a) the meaning reasonable” within and “just § 717c(a), examining C. what- by 52 15 U. S. NGA, 822, Stat. and trans- had incurred acquiring ever costs the pipeline If itself the or a pipeline the to the consumer. gas porting the the actual gas, expenses had produced affiliate pipeline gathering were associated historically the extent and reasonable. proper in the rate base to included Hope Co., FPC v. Natural Gas 591, 614-615, U. S. See FPC, Interstate Gas Co. v. Colorado (1944); and n. 25 (1945). if the However, had S. 604-606 581, U. from the Com- independent an purchased producer, over the to evalu- jurisdiction producer mission did take it rates; of its considered the only ate the reasonableness whether, from the pipeline’s perspective, broad issue or otherwise exces- improperly was “collusive purchase price Phillips Co., 10 F. (1951). Petroleum 246, sive.” P. C. this the Commission’s rejected approach. Court held that NGA to take required We over scrutinize jurisdiction independent producers of the rates they the reasonableness interstate charged Phillips Petroleum Wisconsin, Co. v. U. S. pipelines. We NGA interpreted purpose being the Commission of all “to over rates give jurisdiction commerce, wholesales of natural in interstate whether before, or not and whether company occurring dur- or after transmission an interstate ing, pipeline company,” id., concluded that, regulatory purposes, *9 no gas there was essential difference between the a pipeline obtains from it obtains independent producers id., its affiliates, from own at 685. problems
The
industry
the natural
regulating
grew
Phillips
steadily between
and the
of the NGPA. At
passage
Phillips
first,
to follow the
man-
attempted
by applying
regulatory technique
always
date
the same
it had
applied
pipeline-produced
gas.
just
natural
It calculated
company
pipeline,
and reasonable rates for each
—whether
independent producer by studying
affiliate,
—
historically
costs of
that had
been incurred
particular company. But that so-called
“cost
service”
approach quickly proved impractical.
Refining
See Atlantic
Co. v. Public Service Comm’n New York,
The Commission then to an shifted “area rate” Policy 61-1, See Statement General 24 F. P. C. 818 establishing company Instead of individual rates for each on single the basis of its service, own costs of it established a producing region. rate schedule for each Two elements of the area rate method bear mention. First, the Commission computations continued base its on historical rather costs, projections than on of future costs. second, And it estab- gas” lished two maximum rates for each area: a “new rate for gas produced independently of oil from wells drilled after a given gas” gas. date, and an “old rate for all other priced gas two-tiered structure, on the basis of its “vintage,” theory already-flowing rested on that for “price any price could incentive, serve as an . and . . average plus appropriate above historical costs, an return, merely would confer windfalls.” Permian Basin Area Rate supra, Cases, at 797. proceeding governed only
The Permian Basin area rate production by independent producers. The Commission separate proceeding undertook a to consider whether it appropriate remained to treat affiliates company-by-company on a basis. On October approved months after this Court the use of rates, area *10 330 from that that for leases date acquired concluded
Commission basis; on a “parity” receive should on, as independ- for area rate the same eligible would be such Pipeline Produc- vintage. of the same ently produced gas (Phase I), Proceeding Rate tion Area P. 738, 42 P. C. 752 568). from already-acquired Gas produced No. (Opinion old on the single-company continue to be priced leases would “in expedite proceedings order to cost-of-service method Id., evidentiary problems.” and and to avoid complications affiliates by pipeline gas produced at 753. Significantly, the same manner as precisely gas pro- would be treated themselves. by duced 1970’s, regulatory
In it became early apparent The recognized not Commission working. structure was led two-tiered rate scheme had historical-cost-based, that the Louisiana See Southern serious shortages. Proceeding, Area Rate 46 F. P. 110-111 C. See The Natural Gas Breyer MacAvoy, Shortage & generally L. Producers, of Natural Gas 86 Harv. and the Regulation (1973). Therefore, Rev. the Commission modi 941, 965-979 an to a fied from “area rate” “national practices, shifting its Gas, National Rates Natural rate” approach. for (1974) 699). The national rate F. P. C. No. (Opinion 1, 1973, drilled January became effective for all wells after and applied equally independent producers, A later, affiliates. few months pipelines, further from pure Commission responded shifting historical-cost-based to an incentive-price-based approach, Gas, Rates Natural National 52 F. P. C. 1615-1618 (1974) abandoning No. (Opinion 699-H), by temporarily id., at 1636.10 the practice vintaging, interstate These measures did sufficient. prove rates remained below the substantially unregulated re- sales, supply available for intrastate interstate 10 1976, National vintaging. to return to See decided Gas, (1976) 770). Rates Natural (Opinion P. No. F. C. *11 inadequate. Throughout
mained 1978, 1977 and the 95th During closing studied the situation. hours of package Session, Second it enacted a of five Acts, one designed preserve which was the The NGPA. NGPA is authority regulate the Commission’s under the NGA to natu- gas ral sales from to their customers; however, it is designed supplant authority the Commission’s to establish consisting rates the wholesale market, the market of so- gas. called “first sales” natural
B product The NGPA was the of a Conference Committee’s strong, divergent, responses careful reconciliation of two but gas shortage. to the natural proposed single price policy
The House bill had “a uniform gas produced Rep. for natural in the United H. States.” R. (1977). pt. p. key policy No. 95-496, A 4, element of that statutory price had been the establishment of a incentive simultaneously promote production structure that would regulatory reduce the burden:
“[0]ther aspects reg- controversial of current Federal perpetuated. ulation are not The uncertainties asso- lengthy judicial ciated with review of Federal Power Commission wellhead determinations are avoided statutorily price. use of a established maximum lawful Regulatory lag problems and other associated with reli- upon just ance historical costs to establish and reason- similarly Vintaging able wellhead are avoided. gas prices new natural Id., would also terminate.” at 97. passed bill, Senate on the floor, would have maintained regulation gas
Natural Gas Act for all sold delivered January steadily interstate commerce before 1, 1977, cut jurisdiction gas on back so that all natural sold January completely deregu- after 1, 1982, would have been Sess., Rec. Cong. 95th 1st Cong., lated. S. (1977). has been justly compromise
The Conference Committee’s statute future comprehensive govern as “a described Note, History Legislative regulation.” 59 Texas L. Rev. Policy Act, Natural Gas categorization an exhaustive In Title it establishes I, methodology and sets forth a production, natural gas priсe within each ceiling category: an calculating appropriate “new natural and certain natural 102 covers Section *12 §103 Shelf”; from the Continental covers Outer produced wells”; § 104 covers “natural gas onshore “new, production on the day to interstate commerce committed or dedicated § of NGPA]”; enactment cov- [the the date of the before § 106 contracts”; intrastate covers existing ers “sales under § 107 covers natu- contracts”; “high-cost rollover “sales under gas”;11 § well natural “stripper § ral covers gas”; 11Stripper gas well is defined as follows: natural “(1) (2), Except paragraph in the term provided as General Rule. — gas’ gas means ... to be ‘stripper well natural natural determined produced during any a if— gas natural month from well nonassociated “(A) 90-day period, produced during preceding such well average an of 60 gas natural at a rate which did not exceed nonassociated production day per during period; Mcf such “(B) during period produced at maximum efficient rate such such well its flow, recognized practices in accordance with conservation of determined recovery gas. of designed to maximize the ultimate natural rule, “(2) shall, by in excess 60 Mcf.—The Commission Production of gas produced previ- if well which provide that nonassociated natural from a (1) average of ously qualified paragraph as exceeds an stripper a well under 90-day production period, such natu- per production day during any 60 Mcf if increase may qualify stripper gas continue well natural gas ral gas produced from such well was result nonassociated natural application recognized recovery techniques. of enhanced “(3) purposes of this Definitions. —For subsection— “(A) Day. day’ ‘production term means— Production —The “(i) any day during produced; natural is which “(ii) any day during produced if dur- natural is not a conservation ing day prohibited by requirement of State law or is a is a catchall, covering which is “any not covered maximum lawful by any under price any other section this subtitle.” 92 Stat. 3358-3368, §§3312-3319 U. S. C. V). ed., Supp.
In each category gas, the statute explicitly establishes an incentive scheme that is wholly divorced from traditional historical-cost methods by the applied Commis- sion in the NGA. implementing established either terms a dollar million figure per Btu’s, or in terms aof previously existing and is price, inflated over time ac- cording to a statutory § formula. See 101. For three cate- gories gas, statute that the recognizes ceiling bemay too low and authorizes the Commission to it raise whenever traditional NGA would principles dictate a higher price. See 104, 106, §§ and 109. The Commission is also given some- what ambiguous mandate to authorize increases above the 110(a)(2). for the other ceiling five categories. See none the eight categories, however, is the Commission authority to given a rate than require lower the statutory ceiling.
Several features of comprehensive this scheme bear di- on the rectly question whether Congress the Com- intended *13 mission to be able to exclude pipeline production from its cov- erage completely. with, To begin are defined categories on the basis of the of well type and the uses of its past gas, not on the basis of who And owns well. since it is drafted in a manner that designed exhaustive, is to be all nat- ural gas production falls within at of least one the categories. practice recognized approved by agency having regulatory the State jurisdiction production gas. over of natural “(B) 90-day ‘90-day production Production Period. —The period’ term any period means of days day 90 consecutive excluding any during calendar gas which produced is voluntary not for reasons other than action any person right of gas to control of natural from such well. “(C) Nonassociated gas’ Natural Gas.—The term ‘nоnassociated natural gas produced means natural which is not in association with oil.” 92 crude (1976 3318(b) V). 3367-3368, § ed., Stat. 15 U. S. Supp. C. 334 authority replaces the Commission’s statute
Moreover, the according gas producers what is to return to fix of to rates price precise of ceil- “just schedule with a reasonable” 601(b)(1)(A) “[sjubject para- provides ings. that, to Section (4), purposes 5 of the Natural Gas graph of sections any paid of natural shall be first sale amount Act, just not if. . . such amount does reasonable be deemed to price applicable established maximum lawful exceed the 15 U. C. 3410, Act.” 92 Stat. S. I of this Title under V). 3431(b)(1)(A) statutory Supp. § The new rates ed., adequate provide to incentives investors with to are intended develop supply. the Commission itself As of new sources Congressional recognized “The decision No. 98: Order regulation gas prices to of natural the economic reorder provide statutorily prescribed price system a uniform are . . that such incentives on a . belief was based incentives development necessary and additional continued to secure (1980).12 Reg. gas.” 45 Fed. of natural thought the extent to about evinces careful The statute already gas” gas producers dedicated to inter of “old — passage NGPA—would be able beforе state commerce pricing. enjoy di 104 of the statute Section incentive previ pattern incorporates part “vintaging” rectly that ously contin Thus, most old existed under NGA.13 preserves the old suggests because 104 of the NGPA The dissent “did not intend price gas,” first sales “old the NGPA NGA for certain ” Post, pricing authority. vestiges earlier eliminate all Commission’s the choice 348-349; post, suggestion at 6. This confuses see also n. authority. regulatory For some price of a with the choice benchmark (but all) ceiling price. price preserved as an initial gas, old the NGA formula, time, statutory rather according moves to a But over authority. See regulatory through than the exercise of Commission 601(b)(1)(A). §§ provides: Section Application. “(a) or dedicated —In the of natural committed *14 case of this day on the date of enactment to interstate commerce before ues to receive the it received under the price NGA, increased over time in accordance with the inflation formula found in 101(b)(5) § § 101. of the Act However, that if a specifies vol ume of fits into more than one “the category, provision which could result in the highest shall be price applicable.” §3311(b)(5) (1976 V). Stat. 15 U. S. C. ed., Supp. Thus, old gas that would be to the old subject NGA vintaging rules if may be entitled rate it falls within higher one or I mоre of the Title categories, § other particular 107 (high- cost natural and 108 well gas) (stripper gas). Whether or old not the NGA rates were in fact sufficient to stimulate some from those categories, concluded just Act and for which a and reasonable rate under the Natural Act Gas was in effect on such for the gas, date first sale such natural the maxi- (b) price computed any mum lawful apply under subsection shall first during sale of any such natural delivered month. “(b) Maximum Price.— Lawful “(1) price General Rule. —The maximum lawful under this section for any higher month shall be the of— “(A)(i) just rate, per Btu’s, by and reasonable million established (or been) applicable Commission which was would have to the first sale of gas April 20, 1977, April 1977; natural on in the case of “(ii) any thereafter, in the case of price, per month the maximum lawful Btu’s, prescribed million subparagraph preceding under this for the month multiplied by monthly equivalent adjustment of the annual inflation applicable month, factor for such or “(B) just any reasonable rate which was established Commis- April 27, 1977, sion after and before the date of the enactment of this Act applicable gas. and which is to such natural “(2) Ceiling May Prices Be Increased If Just and Reasonable. —The may, by order, prescribe ceiling rule a maximum lawful (or price, any appliсable to category thereof, first sale of Commission) subject provi- determined preceding otherwise to the section, price sions of this if such is— “(A) higher than the maximum lawful which would otherwise be applicable provisions; under such “(B) just meaning and reasonable within the of the Natural Gas Act.” V). 3362-3363, §3314 Stat. 15 U. ed., Supp. S. C. *15 statutory higher, energy justified the needs that the Nation’s rates.14 providing incen- these addition, the costs of plainly consumers, downstream to shouldered are be
tives compli- by pipelines. Act a Title II of the establishes not implemented Commission, to be structure, cated price determining face the are to bulk consumers §§3341-3348 3371-3381, 15 U. C. S. increases. Stat. V). designed Supp. Title to allocate That ed., designed among categories to consumers; it is not burden producers way any to force in the incentive for diminish any part pipelines of that As the Confer- to bear burden. Report plain: makes ence guarantees agreement that interstate
“The conference may through pur- pass costs of natural purchased if does chases leg- ceiling price levels established under the exceed the recovery .... This must be consistent with islation pricing provisions II; however, Title incremental of Title permit recovery II is to of all costs which structured Rep. H. to recover.” R. Conf. a is entitled p. No. 95-1752, comprehensive scheme,
Given such a we conclude clearly identified, either the statu- would have legislative history, any significant tory language or in the be For source of that was intended to excluded. depend pro- of natural does not on who the usefulness any group no to it, duces and there is reason believe that one respond producers likely to than is less incentives ceiling prices an inter categories gas, some the NGPA are For path regulated industry deregulated step fully on from a mediate industry. provide 121 and 122 of the NGPA a mechanism Sections gas. categories a number of of natural the ultimate decontrol of other.15 Yet nowhere the NGPA do we find any expres- sion of a desire to exclude pipeline production.
Indeed, give three combine a clear statutory provisions intended signal that statute was to include produc- *16 tion. which the costs 203, Section defines acquisition subject to states: passthrough requirements, specifically purposes
“Interstate of this pipeline production. —For in any any the case of natural section, gas produced by any interstate or affiliate of such the pipeline pipeline, first sale of such shall acquisition cost be de- in termined accordance with rules by prescribed 3343(b)(2) § Commission.” 92 15 S. C. Stat. U. V). ed., Supp. This mentions a provision expressly pipeline production as matter to NGPA even more subject jurisdiction. Perhaps it makes clear that intended to con- significantly, Congress in tinue a that had of policy been effect since 1938: a policy no distinction wells a it- drawing by between owned pipeline self and those owned an affiliate. by point That equally from the half apparent of the definition of “first exemption sale” in I. Title That first sale provision treatment requires of a sale that is to “attributable volumes of natural gas pro- duced such interstate affiliate thereof.” pipeline... supra, 2(21)(B) added). § (emphasis See 326. Given that In No. effectively goals Order Commission that the of conceded just apply directly pipeline production the NGPA as to independent as to production:
“Having upon provide embarked under the NGA a course would pipeline independent production incentives both and to producer encourage production gas supplies, having of additional been reaf- Congress’ firmed in this course purpose evidence a similar enact- pricing designed encourage ment of a scheme in the NGPA to additional production, coordinating we believe that our mandate the NGPA and the accomplished through among NPA would be policy parity best independent pipeline producers.” Reg. Fed. same manner as pipeline are to be treated are that affiliates cov- affiliates, explicitly and given § it NGPA, 601(b)(1)(E), directly see follows ered under is covered.16 production that pipeline that correctly concluded sum, Appeals Court first sale production intended receive Congress had no authority pricing. ignore justification absent a so.17 doing intention persuasive brief, argues reply In its the Commission intended to by pipelines production by pipeline distinguish between affiliates, governed by theory on the that affiliate sales “are sales contracts” Reply “subject marketplace.” and are therefore realities of the 601(b)(1)(E) Energy Regulatory Federal Commission 4-6. Brief for Yet rely Congress expressly refused to on affiliate reveals that sales contracts infra, reflecting marketplace. the realities of the See at 340. Con gress brought scope NGPA, fully affiliate within the *17 bargaining rely arm’s-length that it could on affiliates aware not between to keep prices low. nothing legislative hearings, in
The dissent declares that “there is the any Reports, expresses congressional or debates which dissatisfaction with pricing suggests existing pipeline the of or which that the Com- pricing pipeline production of mission’s the oldest and lowest cost on a cost- optimum production by . . pipelines.” of-service basis. inhibited efforts the Post, 347-348; (“the post, see very prices at 350-351 fact also that NGPA necessary spur gas production by to pipeline compa- are not the they are independent producers upon nies —as for a sufficient basis —is uphold which to the The interpretation”). expression Commission’s suggestion statute, § are present 601(b)(1)(E), indeed both the the (1978) Report, 95-1752, Rep. p. Conference H. R. Conf. No. cost-—if adequate, Congress simply of-service were would included not have scope affiliate within the the NGPA. suggests principle The dissent that we to the violate the deference agency’s improperly construction of the statute own substitute our reading statutory difficult, however, argue scheme. It is con to vincingly that the disregarding agency’s expertise Court is the when Commission itself recognized policies Order No. 98 that of the NGPA by granting prices pipeline- would be better served incentive NGPA to produced gas. point, On this the Commission observed:
“Having embarked upon provide under the NGA a course which would price producer incentives both and independent production to
)—I l
interpretation
agency charged
Of course, “the
of an
the administration of a statute is entitled to substantial defer-
(1982).
ence.” Blum v.
Bacon,
firmed encourage designed scheme in the NGPA to additional pricing ment aof coordinating production, we believe that mandate of the our NGPA accomplished through policy parity the NGA would best be a Reg. producers pipeline producers.” 45 Fed. among independent (1980) added). (emphasis supra, at 334. See also advocates. that no one refutes a position
This argument transfer should the intracorporate We agree completely Con- ceiling price. receive the NGPA “automatically” to be treated pipeline producers intended undoubtedly gress The latter affiliate producers. manner as pipeline in the same control, through application to market subjected is group “in the case of first that, any 601(b)(1)(E), provides which affiliate of such any interstate any sale between to in first sale shall be deemed any paid amount pipeline, any in to if, satisfying require- addition be аnd reasonable just does not exceed the amount such amount I], ments of [Title not affiliated persons in first sales between paid comparable 15 U. S. C. interstate Stat. pipeline.” with such V). §3431(b)(1)(E) ed., Supp. of the down- adoption also argues
The Commission in of first sale would result theory application stream sale all mixed volume retail sales by maximum lawful and local distribu- pipelines, intrastate pipelines, interstate regula- traditional state companies, thereby supplanting tion over the costs of intrastate tory authority pipeline transpor- find this to be argument exaggerated. tation service.18 We The Commission concedes that a downstream sale of pipeline if in is a “first sale” that production another State has not been It allows commingled purchased gas. to include an rate appropriate (reflecting NGPA in costs of the overall downstream producing gas) costs). (which also reflects and administrative transportation in the same would Applying principle commingled gas19 Regulatory Energy Brief for Federal Commission 39. See appear any note that there do not difficulties We be technical taking approach, this it as the Commission itself has established approach regulatory it procedures. will follow the absenсe of other authority” Order No. the Commission invoked its “circumvention under provide: the NGPA to by pipeline term ‘first sale’ includes sale or
“[T]he distributor comprised wells, properties, volumes from identifiable
341 no trench way state upon regulatory The nar- authority. row issue posed cost proper to be assigned a pipeline’s —the production efforts —is no different from the issue posed when a cost must be to a assigned pipeline’s purchase of gas from its affiliate. producing And it effects no special change in the between relationship federal and state regulatory jurisdiction.20
Finally, Commission argues that pipeline producers would an unintended if enjoy windfall they received first sale This pricing. windfall is argument limited obviously to only one particular category gas: gas already dedicated to inter- state commerce on the date of enactment of the NGPA, and subject to cost-of-service For under pricing. the Commis- sion’s own Order No. all other re- pipeline production ceives the same it if price would receive treated as a first sale under the NGPA. The Commission argues, however, the residual cost-of-service should be excluded because the were guaranteed a risk-free return on their initial investments those wells. To allow the pipe- lines to receive NGPA on future from those wells would be “an allegedly irrational result with . . . unfair consequences consumers.”21
This over argument glosses the full meaning Congress’ determination that old gas qualifies “first sale” treatment. portion produced wells, reservoirs if a of those properties, volumes is from or reservoirs owned or distributor unless: “(1) at which such regulated pursuant is sold is regulated by agency the Natural Act or empowered Gas State State establish, modify sale; statute to or set aside the rate for such “(2) Commission, application, on has determined not to treat such Reg. 44 sale as a first sale.” Fed. Corp. Eagerton, Exxon recently As we noted v. 462 U. S. 105(a) (1983), authority producer § of the NGPA extends federal to control 602(a) market, prices to the intrastate but at the same time allows the price ceilings States to establish for that that are lower than the market ceiling. federal Energy Regulatory Brief for Federal 35. *20 price, subject retains its former NGA § gas
Under ab- provides inflation. Section over time for to increases old sure, gas a windfall. To be no solutely opportunity if it the inflated NGA rate than higher a rate could receive whose produc- categories one of the special falls within fact, on that Seizing to stimulate. saw a need tion Congress that much in a footnote to its brief suggests the Commission well” production, be “stripper at issue here would of the gas at that, § 108. It argues to the incentive subject since exist, a windfall would category gas, least for that treatment that cost-of-service believes the Commission as the 108 price.22 as an incentive strong just would provide by Congress. not shared belief, however, plainly was That §108 the rate to grants pipeline explicitly For the statute same previously subject that were affiliates —entities themselves. treatment as cost-of-service argu- does not its windfall Moreover, pursue the Commission For it that a is agrees pipeline ment to its conclusion. logical it sells at the any production entitled to the NGPA price treatment if it Yet NGPA by denying pipeline wellhead. State, to another the Commission only transports in flat contradiction sales, creates an incentive for wellhead of the eliminate the motivating purposes to one NGPA’s —to and intra- dual market that between interstate distinguished state sales natural gas.23
The Commission’s is to the struc- position contrary history, and basic of the Like the Court of ture, philosophy NGPA. we conclude that its exclusion of Appeals, frus- is “inconsistent with mandate statutory [and would] FEC trate the policy Congress sought implement.” 22 Id., 34, n. at 35. 23Similarly, the Commission admits that a is entitled to the production, long NGPA for its own downstream contract as the beginning. perceive that the to it shows was “dedicated” from the We why no reason the absence of a “dedication” clause in the contract should legitimate turn a incentive into a “windfall.”
v. Democratic Senatorial 454 U. S. Committee, Campaign Unlike the Court of we be- Appeals, however, lieve intended to discretion give Commission whether first treatment should be deciding sale provided transfer or at the intracorporate downstream transfer.24 The cases should be remanded to the so that it may make choice. may judgment Court vacated, and the cases are Appeals remanded for further consistent with this proceedings opinion.
It is so ordered. *21 White, Justice with whom Justice Brennan, Justice Marshall, Justice Blackmun join, dissenting. Our in these not task cases is to the Natural Gas interpret (NGPA) Act as rather Policy we think best but the narrower into whether the suf- inquiry Commission’s construction was a reasonable to be ficiently accepted court. reviewing Committee, FEC v. Democratic 454 Senatorial Campaign U. 27, (1981); S. 39 Train v. Natural Resources Defense
24 appears holding today, sug The dissent to misunderstand our since it gests that not hold we do unreasonable either of the Commission’s actions (with regard regard the downstream transfer and to intra- the transfer). сorporate summarize, To we have three reached conclusions (1) litigation. this It would be reasonable for the not to Commission give transfer, first intracorporate long sale treatment to the as as (2) given treatment to the Similarly, is downstream it would be transfer. give reasonable for the Commission not first sale treatment to the down transfer, long stream as given such treatment is to the intracorporate (3) itYet was an unreasonble comprehen construction this transfer. legislation, structure, sive and exhaustive new contrary purposes, to its history, chop virtually pipeline produc Commission to out all relegate tion discretionary regulation and to it to under the Both NGA. dissent, post, 350-351, Appeals, 530, at and the Court of 664 2dP. (CA5 1981), (1) preferring approach 536-538 offer reasons for approach (2). arguments policy totally merit, they Those are without are but persuasive adopted not so that we would reverse the if it approach 340-341, (2), supra, they provide justifica see of course no (1). rejecting approach tion for (1975); Corp. Inc., 421 Council, 60, U. S. Zenith Radio (1978). satisfy v. States, United 437 U. S. “To necessary this it is not standard for a court to find that the agency’s only construction was the reasonable one or even the reading question initially have if court would reached the judicial proceeding.” had arisen in a FEC v. Democratic Campaign supra, Committee, Senatorial at 39; Udall v. today rejects Tallman, U. S. The Court agency’sinterpretation reading and substitutes its own highly complex doing imposes this so, law. the Court construction not set forth itself, statute not addressed legislative history, agency, in the not selected and dif- Appeals. ferent even from that of the Court of Notwith- standing novelty, perhaps its the Court’s construction that pipeline production given must be “first sale” treatment intracorporate point either as an transfer or at the of a down- interpretation stream sale is a reasonable of the Act. But its reasonability unreasonability does not establish the interpretation, ques- Commission’s and that, of course, tion before us.
I statutory provisions clearly The relevant of the NGPA will bear the Commission’s construction. Order No. 58 of the *22 interpretive regulation Commission, at issue, delineates production by the circumstances under which a sale of an in- pipeline, company, terstate or intrastate local distribution or regulated affiliate of one of these entities, will be as a first 2(21)(B) sale pro- under the NGPA. Section of the NGPA gas by pipeline vides that a sale of natural a or affiliate thereof is not a first sale unless the sаle is “attributable” to gas produced by pipeline, volumes of natural such distribu- interpretation tor, or affiliate thereof.1 The Court’s of provision rejected by was considered but the Commission. 1“(B) (iv) Certain sales not (i), (ii), (iii), included. —Clauses or of sub- (A) paragraph shall any not include the gas by any sale of volume of natural pipeline, interstate pipeline, intrastate company, or local distribution or many
“Although comments have other- recommended interpret will not wise, the term ‘attrib- pipeline utable’ so as to confer first sale treatment on only portion produced if sales a of the involved was 2(21)(B) pipeline. language The of section re- quires pipeline’s that a sale be ‘attributable’ to the own production. We believe that did not intend pipeline general system sup- for or distributor sales from ply qualify merely portion as ‘first sales’ because some supply, of that no matter how small, consists of its own production. Rather, we believe that these sales were precisely type qual- of sales were intended ify general regulation exclusion from first sale 2(21)(B) or distributor sales section accomplishes NGPA. rule The attribution that result.” Reg. 58, Order No. Fed. majority Appeals
Unlike Court, this the Court did reject interpretation, not this which limits the downstream gas eligible pipeline produced prices, sales of for first sale see stops suggesting ante, at 323. Even the Court short of interpretation plausible the Commission’s is anot construc- statutory language.2 tion of the only The Court notes that it would be “at least as consist- ordinary understanding ent with the of the words to inter- pret meaning ‘measurably them as thus in- to,”’ attributable cluding commingled gas. downstream sales of Ante, at 327. meaning plausible, given I equally doubt that the Court’s any thereof, affiliate unless such sale is attributable to volumes produced pipeline, pipeline, interstate intrastate or local dis- company, tribution affiliate thereof.” 92 Stat. 15 U. S. C. 3301(21)(B) V). ed., Supp. interpretation Commission’s that downstream sales need meaning be considered first sales within supported by the Act is Report the proposed legislation the House on which states that “the first essentially price.” Rep. 95-496, pt. *23 sale wellhead H. R. No. (1977). p. addition, 103 I Title of the NGPA itself is entitled “wellhead pricing.”
346 but NGPA,3 the language throughout of similar usages
other definition as a reasonable the Court’s alternative accepting the the conclusion that one still does reach possibility, is unreasonable. own interpretation Commission’s first refused to accord sale treatment also The Commission where a sale by imputing point to into transmission system. its its takеs first at the would extend the a sale wellhead “[I]mputing result, As a intracorporate to transactions. concept sale and ac- bookkeeping I be applied Title would rather than to actual corporation entries of a counting (1979).4 44 Fed. 66579 Reg. sales.” now this inter- reject this Court The Court Appeals Commission, notwithstanding pretation by again statutory it interpretation is a reasonable perfectly trans- The turns on whether intracorporate issue language. a “sale” fers must be deemed “sales.” The NGPA defines §2(20), as or other for value.” “sale, a transfer exchange (1976 V). §3301(2)(20) ed., Supp. ordinary U. S. C. of the term the Commission’s view that meaning supports sections, it applicability meant to limit the of certain When g., e. conjunction See, qualifying language. used “attributable” in 3320(a)(1) (1976 § 110(a)(1), ed., § Supp. V), provides 16 U. S. which C. price may that a first sale exceed maximum lawfiil if the excess is necessary to recover “State severance taxes attributable to the by seller, only such and borne but the extent the (b)”; amount of such taxes does not exceed see the limitation subsection V). 503(e)(2)(B), 3413(e)(2)(B) § ed., § Supp. also 15 U. S. C. Con 2(21)(B) gress’ modify similarly suggests failure to “attributable” means, held, “attributable” “exclusively comprised of.” addition, “In jurisdiction a rule would extend first NGPA sale all corporations producе gas. which their filed own natural Comments corporations industrial gas production consume their own natural this produce regu indicate that would results and that no valid undesirable latory purpose would extending jurisdiction be served the Commission’s production.” to cover such Reg. Fed. *24 exchange “sale” be an should actual of value and title rather paper Report’s than a transaction. The Conference indica- may applicable that tion the Commission establish rules to intracorporate transactions under the first sale definition, (1978), Rep. p. H. R. Conf. No. 95-1752, allows but does compel agency intracorporate to treat transfers as required Indeed, first sales. if the statute the Commission give to first sale treatment to transfers, the Conference Report’s point superfluous. would be Moreover, Confer- Report question ence discusses the the context of Com- authority intracorporate mission’s to include transfers as first prevent sales in order to circumvention maximum of requirements. language require To use that to transfers to given Report be first sale is to turn the Conference legislative In sum, on its head. neither the statute nor the history agency compels intracorporate to define transfers depart years as first sales—a definition that wоuld from 40 (NGA) during administration of the Natural Gas Act which intracorporate time an transfer had never been considered a gas. sale of natural
The Court a concedes “there is substantial difference holding authority between that the Commission had the to holding treat either transfer a first sale and that the Com required mission was so to treat one or the other.” Ante, at legislative history supports 327. no Since there is its which position, purposes the Court turns to the structure and Concededly, purpose the NGPA. NGPA was replace traditional historical-cost methods with an incentive pricing scheme that would create sufficient financialincentive spur exploration development gas. of natural See Rep. (1978); History Legislative H. R. No. 95-496 Note, Policy the Natural Act, Gas L. If Texas Rev. interpretation ability the Commission’s undermined the Act’s goal, stronger fulfill the Court would have a case. nothing legislative hearings, Reports, But there is in the expresses any congressional debates which dissatisfaction or which of pipeline production pricing the existing and low of the oldest that the Commission’s suggests basis, under on cost-of-service cost est investments all their prudent recover the pipelines optimum inhibited efforts, their success of regardless *25 easily agree can One pipelinеs. efforts production any reason to believe that is no “there the Court that to to incentives likely respond less of is producers one group ante, the cost- that 336-337, finding while other,” than incentives for sufficient basis provides of-service in No. is Thus, Order production. to increase companies of the NGPA.5 primary purpose with the no sense inconsistent interpre- the Commission’s to demonstrate Unable NGPA,6 of the purpose is counter to primary tation regulation the Commission’s to attempts portray Court scheme. regulatory features” inconsistent with “several the Act’s of old First, is treatment The effort unsuccessful. § rather than undermines supports in 104 of the NGPA gas of the By incorporating part the Commission’s position. NGA, existed under the vintaging pattern previously not to all § 104 indicates that NGPA did intend eliminate grants true 5 This even more after Order No. which new parity pricing independent producers. with first sale Only gas prices. old is now limited to the NGA The added revenues de gas pre-1973 possi rived from from wells cannot bly operate drilling as an incentive for the of new wells. suggest perpetu The Court does that the Commission’s view serves system gas regulation. ate dual the House bill While had objective completely replacing existing regulatory more ambitious structure, disagreed, compromise the Senate and the into enacted law did totally supplant incorporates the NGA. directly Section 104 of the Act “vintaging” pattern. the NGA recognizes, gas As the Court most old con price NGA, tinues receive the it received under the increased over time Ante, in accordance with § the inflation formula found 101. at 334-335. provides Act incentive gas adequate supplies new to insure market, in the interstate but gas maintains NGA old controls on prevent unnecessary price increases. vestiges pricing authority of the Commission’searlier or to gas, including gas, ensure that all old would be entitled to higher prices. Only gas quali- “first sale” that old which higher fied for price. first sale treatment would receive the 101(b)(5). § categories
Second, the Court makes much of the fact that gas entitled to first sale treatment are defined on the basis type of well and not on who owns the well. This is general exception true of the “first sale” rule but not of the 2(21)(B) provided governs to that rule these cases unmistakably and which is directed at the treatment to be given pipeline production vis-a-vis natural obtained from independent producers. Moreover, since the Act does not contemplate higher direct or that all natural will receive prices, the Court’s discussion of II Title of the Act, which higher prices, hardly deals with who is to shoulder the bears on what is entitled to first sale treatment I. under Title *26 price The fact that consumers would shoulder the “bulk of the argument enlarging ante, increases,” 336, at is no the provided. amount of for which increases would be Finally, § pricing 601(b)(1)(E), the limitation on in affiliate singly not, does either or in combination with other sections, require ante, pipeline production at 337-338, that all be en- titled to “first sale” treatment.7 As the Court observes 601(b)(1)(E) opinion, § purpose in later its the is to insure prices pipeline that if first sale are afforded to affiliates, 7The plausibly Commission distinguishes sales, governed affiliate contracts, sales purely from the internal transfers of between transportation single corporation. divisions of a Order See 102, No. Reg. Fed. footnote, denigrates a the Court 601(b)(1)(E) analysis by Commission’s observing § “reveals that Congress expressly rely refused to on affiliate sales contracts as reflect ing the realities marketplace.” Ante, pre at n. 16. But it is 601(b)(1)(E) cisely because safeguards the unduly priced consumer from involving sales affiliates but not intracorporate transfers that it is reason able that the former may but not the latter receive first sale treatment. Ante, market control. to subject affiliate would be pricing the lack of arm’s- assures that section, 340. This at not sales are to affiliates does where first bargaining length reflects a hardly congressional in result excessive prices, be entitled to first sale all intent which defines the Act, acquisition §203 of the Thus, prices. offers no support requirements, costs to subject passthrough first sale The section defines how for the position. Court’s the volumes does not determine costs shall be determined but addition, receive first sale prices; to gas eligible by pipeline covers wells owned terms, only its provision, by affiliates.
II of the Act nor its language leg- Since neither the plain and the agency’s intepretation, islative forbids history not undermined the Commission’s of the Act is purpose be considerable deference should afforded approach, Blum v. Bacon, U. S. agency’s interpretation. (1982).8 141-142 Indeed, very fact that NGPA are prices necessary spur gas production by are for they independent producers suf- companies —is —as ficient basis which to the Commission’s inter- upon uphold suggests disregarding agency’s expertise The Court that it is not subsequently granted because the Commission NGPA incentive Ante, pipeline produced gas 338-339, new Order No. 98. n. 17. The concluded, however, policies that the of the NGPA would be prices only by granting better served pipelines prеviously NGPA sub ject retaining to area or nationwide rate treatment while NGA gas produced pricing. under cost-of-service *27 prices
“[T]he Commission found that such incentive should not be available for previously subject from leases treatment, to cost-of-service reasoning pipelines already enjoyed that such have the benefits of a certain recovery production, of and return on the customers, costs of and that their who have borne the risks of early this investment in the years explora- of development, tion and should opportunity have an to receive the benefits of cost-of-service produced treatment for as a result of the expenditures.” (1980). Reg. Order No. 45 Fed. The pretation. Commission, has further however, gone and offered additional reasons the order. justification Commission’s the Court’s rejecting transfer “first
intracorporate downstream sales” ap- not proaches are implausible. Adoption “downstream sale” would override division approach existing between state and federal of of regulation pipeline sales natural gas. As the this pointed out, Commission of adoption theory in result the uniform
“would first sale application max- imum lawful to all mixed retail volume sales made . . . by pipelines distributors. The Commission finds 2(21)(B) in no evidence or in provision [§ ] other the statute that that suggests intended the Commission to the field of require expand federal ratemaking to include all mixed volume authority sales by intrastate local distribution companies, of which has been regulation the historic preserve Order Reg. states.” No. Fed. The Court this rejects argument “exaggerated” because certain sales, downstream such as those has not been commingled purchased gas, receive an Ante, NGPA rate. But 340. for this type gas, Con- §2(21)(B) made the in gress has that judgment NGPA rate should govern. same to commin- Applying principle most gled within gas, pipeline production falls this cate- would the role gory, vastly expand of federal rates in what been hitherto has a sector regulated the States. While 602(a) of the NGPA allows the States to compete with the federal scheme by establishing price for the intra- ceilings state that are market lower than the federal NGPA ceiling, is fully that it justified believing should unnecessarily intrude into this any further than sphere by the Act. actually required
There is a second reasonable basis for the Commission’s order submitted this Court. The Commission would an argues producers unintended enjoy *28 352 Since present first sale pricing. if received they
windfall costs to recover permits cost-of-service un- are priсes first sale production, stimulate needed to by pipelines. natural gas production increase necessary Supra, have if the windfall would Even 347-348. at can no debatable, ques- there be were for new gas given been on to interstate commerce dedicated already tion that to cost-of- subject and NGPA of enactment the date is nothing of an NGPA affording price pricing, service of state public a number Accordingly, than a gift. more and other owned publicly commissions, municipal service citizens, service to which provide energy systems windfall, have filed briefs the bill for the foot would curiae in support amici of the Commission’s position. fulfilling the Commission windfall, this precluding exploita- “to consumers protect against of the NGA purpose Hope FPC v. companies,” of natural gas tion at the hands Trans- FPC v. Co., Natural Gas (1944); 591, 320 U. S. Pipe Corp., Line continental Gas (1961), 365 U. S. and effective afford consumers a complete, permanent “to ” Atlantic from excessive rates and charges, bond of protection Refining York, New Co. v. Public Service Comm’n of an suggests the NGPA Nothing U. S. of the consumer rationale —the basis protection abandonment Thus, the first regulating industry place. discourage Commission’s order does not pipeline production but minimizes the size of the activity only wisely increases to that objectives. to meet the NGPA’s necessary fact
The Court’s of this is based on the rejection position that “the Commission does not its windfall pursue argument ante, conclusion,” to its NGPA logical 342, by denying But when sold at the wellhead. sells at the wellhead it is much like an acting and it independent producer is reasonable for the Commis- sion to have such sales from distinguished intracorporate transfers and downstream sales of Simi- intermingled gas.
larly, judgment dedicated to a downstream sufficiently contract was similar to a wellhead sale to deserve first sale treatment does not undermine the Commission’s give decision “first sale” treatment to which cannot solely pipelines’ production. be attributed to the own In provide partial comply event, the need to windfall to hardly compels agency multiply the Act the burden on industry rely consumers and on natural for their energy needs.
Ill Today upsets interpretation the Court the Commission’s notwithstanding undeniably supportable that it is under the plain language contrary legislative of the statute, not to the history, purpose and consistent with the Act’s to increase the supply gas. doing rejects of natural it so, out-of-hand the objectives unduly intruding Commission’slaudable in not into sphere regulation granting regu- of state and not industry profit. lated an unwarranted windfall I can recall agency’s no similar case in which we have overturned an in- terpretation, respectfully I dissent from this first and unfortunate instance.