Railroad Com'n of Texas v. Lone Star Gas Co.

with Preston duty undertook a to select the Mays’ Agency needs. Preston its had appropriate Mays. insurance for the duty to disclose both under the blackletter law and because it held itself out as offer- distinguish cases, partic- To number ing advice, expert agreeing insurance ularly Gambino, Seascape Bates v. give Mays majority advice. The Sobotor, Hickory majority Point and recognizes no minimum standards of due requirement. here creates the “misled” diligence other than to avoid affirmative majority’s analysis, Under the to be action- misrepresentation. majority The denies able a statement must “mislead” about the Mays protec- both their facts and the availability adequacy coverage. they tion should under I have the law. Thus, agent if inappropri- chooses the therefore dissent. policy coverage, ate “negligent.” it is not According to majority, giving no advice MAUZY, J., joins in this dissent. fine, is if advise, even there is duty only giving misleading advice actionable.

The cases do not so agent’s duty limit the Especially Sobotor,

to advise. where express advice,

there was no misleading

just advise, a failure to the distinction fails. majority

The essentially argues that

Mays negligence lost their cause of action jury when the failed to misrepresenta- find The RAILROAD COMMISSION tion. That negligence is not the The law. Morales, OF TEXAS and Dan cause of action is misrep- distinct from the General, Attorney Petitioners, resentation cause of action. majority places much reliance on Grewe, Cal.App.3d Jones v. COMPANY, LONE STAR GAS A DIVI- Cal.Rptr. 717 Plaintiffs in that case CORPORATION, SION OF ENSERCH argued agent the insurance duty had a Company, Respon- and Enserch Gas was, determine what their worth fix dents. liability amount for insurance. The obvi No. D-0650. ous distinction is that the in Grewe sureds neither specifically asked for the Supreme Court of Texas. coverage nor informed the agen insurance Dec. cy of the risk that concerned them. Here the Mays informed Wiley they wanted

to be sure of coverage any continuous might

children they have. majority accepts evidence and infer-

ences contrary jury verdict, and dis-

regards gloss or substitutes its own on supporting

evidence the verdict. There

was evidence the Preston Agency under

the circumstances of this case had the duty Mays

to advise the of their insurance

needs. It should have either offered them appropriate

insurance for their needs or

told them they it did not offer what needed.

There supporting was also evidence

jury’s finding that Agency Preston breach-

ed duty, because it did any not disclose options

insurance other than the Double

Eagle, which was particularly ill-suited to

challenge Texas Railroad Commission 30(a)(1) (5), (Commission) Rules) 34(h)(2-4)(hereinafter governing the gas industry. Lone and En- Star and the Attor- serch sued the Commission ney seeking a declaration General of Texas invalidity applicability of hearing, the trial court Rules. After a judgment rendered the Rules were En- dismissed Lone Star and valid but declaratory request serch’s relief on grounds. appeals The court of re- other ren- judgment versed the trial court’s and judgment that the Rules are invalid dered preempted by because the Rules are feder- 888. For the reasons al law. 798 S.W.2d herein, judgment explained we reverse judg- appeals of the court of and render ment that the Rules are valid. (1) The issues before this court are statutory had the whether the Commission Morales, Miller, F. Ed Sala- Dan Sarah Rules, (2) promulgate zar, Walker, Austin, petitioners. for Don consistent whether the Rules are with Duggins, Barry Bishop, James David C. upon by statutory authority relied the Com- Mann, Austin, respondents. E. for mission, (3) statutory authority whether the the Rules contains sufficient promulgate ON MOTION OPINION guidelines or standards for the exercise of FOR REHEARING (4) authority, the Rules disre- such whether gard separate corporate existence of HIGHTOWER, Justice. notice, Lone Star and Enserch without Respondents’ motions for Petitioners and (5) hearing or evidence and whether rehearing opinion are overruled. by preempted Rules are federal law. September and the 1992 withdrawn following is substituted. challenge Lone Star and Enserch 30(a)(1) (5), 34(h)(2-4). and Company, a division of Rules and

Lone Star Gas (Lone Star), Comm’n, Tex.Reg. (1987) En- Corporation and Tex.R.R. Enserch 3.30(a)(1) (Enserch), (codified Company wholly a at 16 Tex.Admin.Code serch Gas § amended)).1 (5) 3.34(h)(2-4) (since Corporation, and and subsidiary of Enserch owned 30(a)(1) may upon purchaser” as: commission and showing be disallowed a 1. Rule defines a “first designation purposes was for that gas produced purchaser The first of natural (re- circumventing and § of lating this section 3.34 any purchaser A first and affili- from a well. ate of the ral produced and Purchased any to Gas to be purchaser transports that natu- Ratably). Any may file forms in its gas purchases by affiliate from a well use of the it system by pur- pipeline used the first own name. same 30(a)(5) shall be Rule defines an “affiliate” as: of which it is an affiliate chaser treated as a owns, entity by, single purchaser purposes person is owned or for A or first ownership ratability requirements; with another is under common person of nominations and however, entity provided, that is or to the extent of 50% or more that an affiliate by accepting nominating purchasing that otherwise controls or is controlled or de- or entity. marketing pro- person a com- pursuant special another mon For and Deliverability Affiliatesof to a liveries 3.34(h) entity compliance are also affiliates of each other. gram with § that is in 3.28, 3.31, purposes (relating produced of this section and §§ to Gas to be this title Purchased rate first that the sepa- (relating Ratably), of this title to Potential and shall be treated as a and, purchaser; provided of Gas Wells to be Ascertained further Allowables; Reported; Well and Gas designation such affiliate as a Gas Ratably) separate purchaser to be Produced and Purchased is reviewable first Tex. GAS CO. OF TEXAS LONE STAR RAILROAD COM’N 1992) S.W¿d (Tex. Cite as waste, con- gas, prevent promote purpose promulgating of natural The Commission’s servation, rights,2 and was, among things, pre- protect correlative other the Rules concerning taking protect priority system discriminatory production and vent 1, 2, 28, 31, (4)If 34): category (Statewide person producing priority a well a curtailed, solely entity purchases gas in or and waste is or 3 is shut exist, an than resale shall not be considered other affiliate, commission to neither found pipeline, and an interstate as defined purchaser special marketing program nor its 2(15) Policy Act of of the Natural § may purchase purchaser lower affiliated first (15 seq.), U.S.C. 3301 et shall not § 1, 2, priority and 3 priority until all the pipe- intrastate considered an affiliate of an resulting prevented. waste is is taken and line. expedite shall determination The commission 34(h) part: provides pertinent Rule waste, emergency, tem- enter an (h) qualify purchaser If a first elects to upon proof porary, order affidavit or interim separate purchaser first affiliate as occurring. that waste is 3.30(a)(1) (relating of this title to Gas Nomi- § (4) 34(h)(3) and has been amended but Rule 30), (Statewide required) Rule nations issues amendments tire unrelated to the may designate purchaser as a first the affiliate 34(h)(3) Rule was amended before this court. marketing special special program. mar- Comm’n, February 1988. Tex.R.R. effective keting program comply follow- must with the (1988) (codified Tex.Reg. 16 Tex.Ad- nomination, ing respect purchase, 3.34(h)(3)). 34(h)(4) was Rule § min.Code gas. acceptance delivery September Tex. amended effective R.R.Comm’n, subsection, purposes of an affili- For this (1987) (codified Tex.Reg. 2860 marketing purchaser special ated first is the 3.34(h)(4)). § at 16 Tex.Admin.Code purchaser’s pipeline program whose affiliate being transport gas spe- in the is used to rights guarantee mineral inter 2. "Correlative a marketing program. cial opportunity produce to a ‘fair est owner an (2) every special marketing pro- Each and underlying Tex share’ of the reserves his land.” gas gram purchase made offer to must be Co., Producing, v. Fortson Oil aco Inc. discrimination within a field and without (Tex.App. no S.W.2d writ). unjust or unreasonable discrimina- without — Austin appear aspects to be two of the "There operators between fields to all for all tion (1) corollary rights: as a pipeline system doctrine of correlative on the of the affiliated wells right capture, person purchaser first each has a to first purchaser from which the affiliated of the rule of purchasing accepting capture produce has been and oil oil from his land and gas purchaser. well, delivery The offer of as a first gas may produced his and or as from first, second, all and must also be made for (2) protected right owner to be a of the land category gas priority the affiliated third on supply against damage to a common source of system purchaser’s pipeline it has first which right equitable a fair and share of the and a to accepting delivery purchasing been and for Meyers, supply.” H. Williams & C. source of obligation purchase accept and under an to Oil and Gas Terms Oil and Gas Law: Manual of tailgate plant process- delivery a from the of (1991). Although is entitled "a landowner liquids, gathering ing gas a to extract or from opportunity produce fair share of to his to an system purchases and is re- from wells reservoir, quali is common this rule oil from a by physical quired by connec- contract or its capture Com the rule of and the fied both gas entirely sell its to the affiliated tions to Texaco, prevent authority' waste." mission's purchas- purchaser, or not those first whether Comm’n, 583 S.W.2d Inc. v. Railroad purchaser. as a first es were made (Tex.1979). rights are also affected Correlative discriminatory, unreasonably and It is Act, Pooling Tex.Nat. Mineral Interest purchase prohibited, offer to therefore for the 102.001-102.112. Section §§ Res.Code marketing program, gas special or for in the circumstances, "the provides under certain gas special any in the mar- release of for sale commission, application an owner ... on the of any keting program require release of drilling avoiding purpose of of and for any existing other than under contract claims wells, rights, protecting unnecessary correlative gas special for sale in the release of the a waste, and preventing shall establish a unit or marketing requirement program or a of pool interests in the unit within all of the gas in the basis for taken volume-for-volume acreage containing approximate of the area marketing program to be credited special unit_” provides proration Section 102.017 contract, any existing against if the credit effecting pooling, shall be that "all orders period actual provision of is limited to are fair and conditions that on terms and made marketing pro- special participation in the owners afford the owner or and will reasonable Nothing paragraph gram. shall in this opportu in the unit the or interest of each tract offering any operator from of well hibit an fair share.” See nity produce or receive his provisions. The these terms inconsistent with Gas, Oil & v. Pend Oreille Comm’n also Railroad accepted making shall an offer which is not of (Tex.1991). 43-47 existing 817 S.W.2d rights under contract. not affect nominations, companies their production pipeline SMPs as purchases and treat Comm’n, preventing gas. entity Tex.R.R. TEX.REG. for dis- See one taking natu- criminatory production and transports gas if on its gas ral the SMP promulgated these The Commission pipeline system unless the SMP affiliate’s response Rules in to the creation of affiliat- purchaser un- qualifies as a first otherwise special companies (generally known as ed 34(h) hardship applies for a der Rule SMPs) marketing programs by pipeline 34(k). 16 Tex.Ad- exemption under Rule coordinate their companies. SMPs activi- (5), 3.34(h) 3.30(a)(1)and min.Code pipeline company §§ ties with their affiliated (k).4 conditions under The Rules define the transport buy or broker and often companies may qualify their pipeline. pipeline gas on their affiliate’s SMPs which gas marketing industry marketing subject in the as a as SMPs evolved affiliates gas surplus result of a natural which re- regulation. separate prices. com- in low natural sulted marketing require the SMPs’ activi- by long- panies such as Lone Star bound non-discriminatory define ties to be buy higher priced gas term contracts to constituting impermissible specific conduct began losing their market share because Tex.Admin.Code discrimination. unwilling pay higher customers were 3.34(h)(2) § began pur- gas. These customers cost of portion of a The Rules also constitute chasing cheaper gas spot from the mar- nominations, concerning priority system result, formed for ket.3 As a SMPs were gas. purchases buying selling cheaper purpose 3.34(a). 3.30(g), Tex.Admin.Code §§ spot in the market. Because its purpose priority system guaran- is to price gas, only to sell Lone Star able casinghead production of tee the continued gas. percent of its available twenty-five gas,5 special oil and allowable wells and “to Corporation Enserch formed Enserch conservation, waste, prevent promote selling cheaper spot purpose the gas encourage production and to of natural gas market to Lone Star customers who Comm’n, 12 TEX. supplies.” Tex.R.R. gas due to purchased less from Lone Star 536, “pri- (preamble). The REG. pur- higher price. Enserch Lone Star’s system” generally provides high- ority gas producers chased from who had been casinghead gas priority gas (usually er and long-term purchase contracts released from wells) pro- special fully should be allowable producers also from with Lone Star and gas priority duced lower is before The unrelated to Lone Star. part promulgat- in duced. The Commission it part promulgated the Rules because upon that a ed the Rules based the belief companies, often the pipeline believed pipeline company which was unable to take transporting gas only available means of de- market, priority gas lower due to low market could producer from the priority system leverage nego- mand could circumvent the exercise too much market buy by creating a SMP to and sell tiating producers for the release of effect, surplus gas. spot priority market. The Rules lower gas for sale 31) hardship, gas the commis- separate distinct mar- and causes undue 3. There are two and price spot hearing, may, proper The short-term or market is kets. sion after notice and large sophis- action, needs of sensitive and satisfies the grant exception appropriate take or buy gas on the basis of ticated customers who including prevent protect or action to waste long-term is character- price while the market rights. correlative requiring purchasers stable end-use ized gas having long-term supply and continuous "[g]as 5.“Casinghead gas” generally defined as long-term purchase contracts. wells, gas being produced with oil in oil casinghead through taken from the well 34(k) provides: Rule well, distinguished gas top from as 3.28, operation of this section or §§ If the gas C. produced well.” H. Williams & from a 3.30, (relating to Potential or of this title Meyers, Oil and Oil and Gas Law: Manual of Deliverability Gas Wells to be Ascer- and Gas Terms 156 Nominations; Reported; and and Gas tained 28, Allowables) (Statewide Rules Well pipeline company curtailing (concerning could be cas- 85.202 the conservation of oil (and inghead gas waste), produc- gas prevention the attendant oil and and the 86.- tion) system pur- on its its (concerning while SMP was 041-86.042 the conservation chasing waste), 111.083, percent one hundred of the lower gas prevention and the priority gas pipeline system. on the same (authority 111.090 and 111.133 under the companies The Rules pipeline Act). treat and Tex.R.R. Common Purchaser entity their SMPs as one of Comm’n, 12 TEX.REG.

nominating taking gas and unless SMP preamble stated: further qualifies purchaser otherwise as a first un- system embodied in this section is 34(h) applies der Rule hardship for a statutory authority based on the state’s 34(k). exemption under Rule Court, recognized by con- by preventing serve its natural resources I. waste, protecting rights, correlative argues The Commission that it had the preventing discrimination. This authori- statutory authority promulgate ty comprehensive body is embodied in a agree. Rules. We (Chapter of conservation laws Texas Code) designed Natural Resources to en- agency adopt only can “[A]n gas sure rules as are authorized accor- by and consistent pre- dance with market demand and to statutory authority.” with its State Board vent its Deffebach, v. waste. Insurance 631 S.W.2d (Tex.App. writ ref’d — Austin Id. at 536. n.r.e.). An agency’s authority promul Section 85.201 of the Texas Natural Re- gate regulations “may rules and be ex sources Code states that commission “[t]he pressly conferred on it im statute or shall make and enforce rules and orders for plied powers given from other and duties preven- oil conservation of imposed by County statute.” Dallas gas.” tion of waste of oil and Section Stein, Bail Bond Bd. v. 771 S.W.2d 85.202(b) of the Texas Natural Resources (Tex.App. denied); writ — Dallas Code states that shall do commission “[t]he Atchison, Topeka, Railroad Comm’n v. things necessary all for the conservation of 643 (Tex.Civ.App. S.W.2d — Austin prevention oil and of waste of oil n.r.e.). ref'd writ See State Jack may adopt other rules and son, (Tex.1964); S.W.2d Stauf may necessary pur- orders as be those Antonio, 13, City v. San 162 Tex. fer of poses.” 86.001 of Section the Texas Natu- 158, 344 only S.W.2d 160 “The re Code, ral Resources entitled “Declaration quirement agency’s is that an rules must Policy,” of states: consistent the be with laws of this state.” recognition past, present, In of and immi- County Stein, Dallas Bail Bd. v. 771 occurring production nent evils in the 580; S.W.2d at v. Savings Gerst Oak Cliff gas and use of as a result of waste in Ass’n, (Tex. Loan & S.W.2d production gas this and use of in 1968). the determining “The factor ... wheth opportunities absence of correlative particular agency er ... a administrative gas in owners of a common reservoir to rule-making powers has exceeded its is that produce gas, provisions and use the the provisions the rule’s in harmony must be chapter pro- of this are enacted for the general objectives the Act in public private tection of and interests Savings volved.” Gerst v. Oak & Cliff against by prohibiting these evils waste Ass’n, 706; Loan S.W.2d State compelling production. and ratable Deffebach, Board Insurance v. S.W.2d at 798. Tex.Nat.Res.Code 86.001. Section 86.011 § Rules, preamble prohibits “production, the to the the Com- in the waste trans- adopting portation, gas_” mission stated that it the was or use of Tex.Nat. Rules under Texas Natural Resources Code 86.011. Res.Code Section 86.041 of the § (general rulemaking authority), 81.052 Texas Natural Resources Code states: §§ given in must in The commission has broad discretion the Commission be discretion statutes.”); administering provisions chap- administering gas the of this the oil and Exploration Producing Co. v. Woods & may adopt any ter and rule or order in America, Aluminum Co. of provided by the manner that it finds 382 S.W.2d law (Tex.Civ.App. Corpus necessary provisions to effectuate Christi — n.r.e.) (The purposes chapter. and of this writ ref’d Commission body having “is an administrative broad 86.041. 86.042 Tex.Nat.Res.Code Section § in powers and discretion connection with requires “adopt and en- subjects and of conservation (1) force rules and orders to: conserve and petroleum crude oil and natural (2) prevent gas; prevent waste gas_”); Tex.Nat.Res.Code 85.201 § gas drilling producing oper- waste of and (“The commission shall make and enforce piping ations and and distribution for the conservation of oil rules and orders (5) gas require ... wells to drilled and be gas prevention and of oil and and waste operated prevents injury in a manner that 85.202(b) (“The gas.”); Tex.Nat.Res.Code § (9) adjoining property other- ... [and] things necessary commission shall do all accomplish purposes chap- of this wise gas for the conservation of oil and and ter.” 86.042. Tex.Nat.Res.Code § prevention may of waste of oil and and provides: Section 111.083 adopt may other rules and orders as be purchaser purchase A common shall ... necessary purposes.”); for those Tex.Nat. gas purchased or take the natural (“The Res.Code 86.041 commission has § purchaser taken it as a common under administering provi discretion in broad prescribed by rules the commission in the chapter' may adopt any sions of this manner, against under the inhibitions dis- necessary rule or order ... that it finds criminations, subject provi- provisions purposes effectuate the applicable chapter sions under this chapter.”); this Tex.Nat.Res.Code § purchasers common of oil. (“The adopt commission shall and enforce 111.083. 111.- Tex.Nat.Res.Code Section § (1) pre rules and orders to: conserve and provides: gas; (2) prevent vent the waste of compliance The commission shall enforce drilling producing oper waste of subchapter subchap- with this other [and piping ations and in the and distribution of ters and after notice ... sections] accomplish ... otherwise [and] hearing, may make rules and orders See Ex Parte chapter.”). of this defining the distance that extensions or Duncan, 127 Tex. 95 S.W.2d gathering lines shall be made to all oil or (1936) (“The duty carry out the details gas wells and other rules or orders that placed under the statutes is on the Railroad necessary carry those out Land v.Co. Atlantic Commission.”); Gulf pre- Co., visions cited this section and to Refining 134 Tex. 131 S.W.2d Texaco, vent discrimination. also Inc. Comm’n, Railroad 583 S.W.2d Tex.Nat.Res.Code 111.090. Section 111.- § (Tex.1979) (“[T]he Railroad Commission is provides commission 133 that “[t]he power charged vested the with make rules for the enforcement of the duty the of regulating production the of oil subchapters of ... and sec- visions [various prevention for the of waste as well including tions sections 111.083 and 111.- protection as the correlative 090].” Co., rights.”); v. Sun Oil 319 U.S. Burford II. 315, 320-22, 1098, 1100-1102, 63 S.Ct. 87 legislature granted has broad L.Ed. 1424 generally But see Rail in Austin, road Comm’n discretion to the Commission administer City Texas v. ing regulating gas. oil and natural (Tex.1975) (“This the laws 524 S.W.2d 267 Court Co., Refining v. Humble Oil & Stewart generally has held that the Commission has (Tex.1964) (“[T]he only powers 377 S.W.2d 834 such specifically as are dele consistently recognized gated-”) (emphasis have original); courts Hum- pictured presented only by the not Refining v. Railroad ble Oil & Co. subsection, general- Comm’n, language of this but Tex. S.W.2d under consideration.7 (1939) (“We power ly by to fix the statutes think that the give to plain duty of the courts or com- It is the and make rates a board prices bounds, them, within constitutional to taken as conferred mission is not be than and effective scope no less broad implication.”).6 they evidently so legislative the intent 85.201, 85.202, enacting sections manifest. 86.041, 86.042, 86.001, 86.011, (emphasis original) at Id. S.W.2d Natural Resources 111.133 of the Texas (footnote added). Code, legislature expressed its intent conferring upon agency the pre “By an authority have to that the Commission regulations neces practice, power to make rules and every kind of wasteful to vent act, resources, purposes of an sary carry to out the prevent and to conserve argument discrimination, Legislature forecloses the specifically enu whether spell details of that it intended to out the in the statutes or not. Rail merated See Co., regulating industry.” County Dallas 146 Tex. Oil road Comm’n Shell Stein, 580; at (1947). In Bail Bond Bd. v. 771 S.W.2d consid S.W.2d Liquor Super Bd. v. Sav. ering authority and dis Texas Control the Commission’s (Tex.Civ. Co., cretion, Stamp 303 S.W.2d this court stated: n.r.e.). App.—San Antonio writ ref d Noteworthy phrasing is the of this last- expressly an “a statute authorizes When statute, sec- quoted 6029—now [article regulate industry, impliedly it agency to Re- tion 85.202 of the Texas Natural agency promulgate rules authorizes the directing begins by sources which Code] necessary accomplish regulations to make and enforce Commission County Bond purpose.” Dallas Bail gas, prevent rules to the waste of oil and 580; Stein, Texas Bd. v. 771 S.W.2d including, says, the statute rules for Super Stamp Liquor Bd. v. Sav. Control clearly mani- purposes enumerated. This Co., at 539. 303 S.W.2d adoption fests an intention that purposes specified the nine rules for purpose pro The Commission’s power the act should not exhaust the was, among other mulgating the Rules responsibili- nor limit its things, prevent discriminatory produc waste, ty prevent should be includ- but taking gas, prevent tion and might in all other rules be ed which conservation, waste, protect cor promote reasonably necessary found to that end. sys rights, protect priority relative ****** nominations, concerning purchases tem Comm’n, gas. Tex.R.R. [Ojbviously to certain that the Com- be authority prevent every TEX.REG. mission had ability to partic- enhance the Commission’s practice, kind of whether wasteful not, “in har accomplish these and are ularly enumerated or subsection general objectives of the Act 85.202(b) mony Natu- with the section of the Texas [now Savings Code], in most involved.” v. Oak & ral Resources couched Gerst Cliff Ass’n, in Arti- 432 S.W.2d at 706. Conse sweeping language, was inserted Loan quently, conclude that the Commission section 85.202 of the Texas we cle 6029 [now promulgate general statutory As had Natural Resources Code]. can the Rules. authorization as and all-inclusive 85.201, 85.202, under consideration” included and 86.042 7. The "statutes In sections 86.041 (now generally chapter the Code, 86 of article 6008 legis- the Texas Natural Resources Code); Resources article 6014 Texas Natural powers specifically delegated broad lature has 85.045-.047, 85.203); (now and sections 85.125 concerning the and discretion to Commission 91.015); (now section article article 6015 (now production of oil and nat- and the conservation 81.001, 81.054) sections 81.051-.052 gas. ural 85.201-.202).. (now and article 6029 sections deciding, for provide

III. also a mechanism among things, questions concerning other argues that the The Commission in and discrimination a contested waste statutory authority. its are consistent with proceeding. case argue essentially Enserch Lone Star and proceed by Concerning prevention of waste and the Commission cannot conservation, section 86.041 questions motion of rulemaking but must determine the “commission has broad dis- waste, states that concerning discrimination and cor- administering provisions in the cretion rights proceed- by relative a contested case chapter and section 86.042 re- this ...” hearing. agree ing notice and a We after “adopt and en- quires the Commission to are consistent the that the Rules Com- (1) rules and orders to: conserve and force statutory mission’s and that the (2) prevent prevent gas; the the waste required not to Commission is determine drilling producing oper- waste of concerning questions waste and discrimina- piping in the ations and distribution proceeding.8 by tion a contested case (5) require drilled and gas ... wells be statute, by “Unless mandated prevents injury operated a manner that by agency proceed by general choice adjoining property ... other- [and] ad hoc by adjudication is one that rule or chap- accomplish of this wise discretion of primarily lies the informed However, provides 86.082 ter.” section Board Insurance v. State agency.” “commission shall exercise its au- that the Deffebach, 681 S.W.2d (Tex.App.— presence thority prevent waste when n.r.e.) (emphasis in Austin writ ref d by supported or imminence of waste is v. Railroad Comm’n Concerned original); finding based on the evidence introduced at Citizens, (Tex.App— 741 S.W.2d hearing proper after notice.” See SEC w.o.j.). Austin writ dism’d discrimination, Concerning prevention of 202-203, Corp., Chenery 332 U.S. common section 111.083 states that “[a] 1575, 1580-81, 91 L.Ed. 1995 67 S.Ct. purchase or take the purchaser ... shall En- Contrary to Lone Star and gas purchased by or taken it as a legislature created arguments, serch’s purchaser prescribed common under rules of oil and natural system a “dual” manner, under by the commission regulation pos in which the Commission against the inhibitions discriminations....” rulemaking adjudicatory sesses both provides that the “commis- Section 111.090 See, e.g., Tex.Nat.Res.Code powers. compliance sion shall enforce with this sub- 85.041, 85.042, 85.045, 85.201, 85.202, §§ chapter subchapters other and sec- [and 86.041, 86.042, 86.082, 86.001, 86.011, 86.- ... and ... make ... other rules tions] gener 111.090, 111.091, 111.133. necessary carry orders that be out Chiropractic v. Tex. Bd. ally Madden provisions those cited in this section and to Examiners, (Tex. 663 S.W.2d prevent discrimination.” Section n.r.e.). ref d App. writ provides may make — Austin commission “[t]he to act is authorized statute provisions rules for the enforcement of the see, e.g., Tex.Nat.Res.Code by rulemaking, subchapters sections of ... [various 85.202, 85.042, 85.051, 85.201, 85.041, §§ including 111.083 and sections 111.090].” 86.042, 111.090, 86.001, 86.011, 86.041, 111.- However, 111.091(a) section states that (or adjudicatory) a contested case inquiry “commission shall make in each see, e.g., Tex.Nat.Res.Code proceeding, concerning of various field the connection 111.091, 86.082, prevention of in the producers, and if discrimination is found to §§ waste, pre promotion of conservation and practiced by purchaser, a common au of discrimination. The statutes shall an order to the com- vention commission issue as adopt purchaser prevent rules a mon ... that will thorize the Commission Obviously, the Commis- industry and discrimination.” regulating framework concerning rights by questions disposition mine correlative of the other 8. As a result of the Thus, issues, proceeding. express necessary we whether a contested case it is not to consider opinion on this issue. required statute to deter- no the Commission is possesses rulemaking adjudi- powers delegated. the sion both are The Texas catory powers concerning prevention of upheld courts have standards are which waste, promotion pre- quite of conservation and broad.” State v. Texas Mun. Power 258, (Tex.Civ. vention of discrimination. Agency, 565 S.W.2d 1978, App. writ [1st Dist.] — Houston Although the is not Commission dism’d). See also Southwestern Sav. & required every rule- instance to utilize Falkner, 417, Loan 160 Tex. Ass’n v. making proceeding, over a contested case it (1960). legisla S.W.2d “the When may exercise “informed discretion.” How delegates authority, ture its and establish ever, agency when “an faces the alterna standards, may es broad it leave to ... proceeding by rulemaking by tive of [agencies] making the of rules and the de adjudication, process rulemaking of termination of facts to establish the basis except should utilized in those cases ... be application legislative for policy. danger there is that its use would [when] Such standards be broad ... [when] accomplishment frustrate the effective conditions must considered be which cannot agency’s functions.” State Board of conveniently investigated by legisla Deffebach, Insurance v. 631 S.W.2d at 799 ture.” v. Texas Agen State Mun. Power (citing 1 Cooper, F. State Administrative 273; cy, Housing 565 S.W.2d at Authority (1965)). Beal, generally Law 181 Ron See Higginbotham, v. 135 Tex. 143 S.W.2d Rulemaking Scope Ad Hoc in Texas: The (1940). utterly impossible “It is Review, 42 Judicial BAYLOR L.REV. Legislature to meet the demands of (1990); Beal, Ron Ad Hoc Rulemak- every detail in the enactment of laws relat ing: Style, 41 Texas BAYLOR L.REV. 101 ing gas.” to the oil Cor (1989). purpose pro The Commission’s Harrell, zelius v. 143 Tex. 186 S.W.2d was, mulgating among the Rules other See State v. Texas Mun. things, prevent discriminatory produc to (“The Agency, Power 565 S.W.2d at 273 taking gas, prevent tion and legislature required is not to set forth in promote waste and The conservation. provisions necessary gov detail all the to ability enhance the Commission’s agency performance ern the in the of its accomplish purposes these and do not functions.”). Legislature “The ... has au accomplishment “frustrate the effective thorized the Railroad Commission handle the ... functions.” Conse [Commission’s] relating preservation the details quently, the Commission did not its abuse conservation of the natural resources of “informed promulgated discretion” when it Harrell, the State.” Corzelius v. the Rules rather than determine the issues 964; S.W.2d at Brown v. Humble Oil & proceeding. a contested case Further Co., 126 Tex. Refining 83 S.W.2d more, we conclude that the Rules are con (1935); Co., Trapp v. Shell Oil statutory sistent with the Commission’s au Tex. 198 S.W.2d thority and that the Commission is not re quired questions concerning to determine legislature’s to include failure waste and discrimination a contested every specific anticipate unfore detail proceeding. case seen circumstances the statutes which delegate authority to the does IV. not invalidate the statutes for insufficient argues The Commission that the statuto- guidelines Requiring the or standards. authority promulgate ry the Rules con- legislature every and antic to include detail guidelines tains sufficient or standards for ipate circumstances in the stat unforeseen authority. agree. the exercise We delegate authority utes which to the Com Although “legislature purpose dele has mission would defeat the authority delegate powers gating legislative authority. its Corzelius Harrell, agencies carry-out legislative established 186 S.W.2d at 964. broad [,] delegate ... it must establish reason standards the statutes which guide entity standards to to which to the Commission able include prevention of discriminatory production they Lone Star and Enserch if do not use taking (2) gas, preven- of natural pipeline gas. the same transport to Fur- promotion tion of waste and thermore, nothing prevents in the Rules conservation. generally Tex.Nat.Res. Lone operating sep- Star and Enserch from 85.041, 85.042, 85.045, 85.046, Code 85.- §§ arately, purchasing gas separately nego- 201, 85.202, 86.001, 86.011, 86.042, 111.083, tiating contracts separately. Consequent- 111.090, 111.091. More specifically, sec- ly, we conclude that the Rules do not disre- 111.083, tions provide 111.090 and 111.091 gard separate corporate existence of guidelines sufficient standards or concern- notice, Lone Star and Enserch without ing prevention discriminatory production hearing or evidence. taking gas, and sections 85.041, 85.046, 85.202, 86.012, 86.042 in- VI. specific clude guidelines standards or con- argues The Commission that the Rules cerning prevention promotion of waste and preempted Act, are not by the Natural Gas Consequently, conservation. we con- (NGA), 15 U.S.C.A. 717-717w or the §§ clude that statutory authority to 1978, Natural Policy Act of mulgate the Rules contains sufficient (NGPA).9 U.S.C.A. 3301-3342 We §§ guidelines or standards for the exercise of agree. and that the Commission legitimately has statutory exercised its au- Supremacy Under the Clause of thority promulgated when it the Rules. Article VI of the United States Constitu tion, Congress power preempt has the V. state Pipeline law. Northwest Central argue Lone Star and Enserch that the Corp. Corporation v. State Comm’n of disregard separate corporate their Kansas, 493, 509, 1262, 489 U.S. 109 S.Ct. notice, hearing existence without or evi- 1273, 509, (1989). 103 L.Ed.2d 526-27 The disagree. dence. We United States Court has stated congression that the courts are to examine disregard Rules do not determining al intent in Congress whether separate corporate Star, existence of Lone has preemption power. exercised its pipeline Enserch, a company, and an affili explicit the absence of (or SMP) statutory lan company ated of Lone Star. Un guage signaling an pre-empt, intent to der the limited circumstances when affiliat we infer such purchasers Congress ed intent where has pipeline use the same legislated gas, comprehensively to transport give occupy the Rules an affiliated purchasers regulation, entire field of option being leaving no “treated [and regulated] single supplement as room for the States purchaser a first feder law, al ratability of nominations and Rice v. Fe Corp., re Santa Elevator quirements” 30(a)(1), 218, 1146, qualifying under Rule 331 U.S. 67 S.Ct. 91 L.Ed. 1447 (1947), separate purchasers as first under Rule or where the state law at issue 34(h), seeking hardship exemption law, un conflicts with federal either because 34(k). der Rule The Rules not apply impossible both, do it is comply 9. The Rules are directed applicability neither at interstate sion's limitation on the pipelines pipelines nor interstate consumers. Rules to intrastate and note that our "preamble” provide to the Rules ap- Rail- result “[a] different if the Commission plies road Commission enforcement order pipelines will be the Rules to interstate and inter- pipeline only regu- directed at an interstate Pipe state affiliates. See Transcontinental Gas upon finding by Corp. late the com- Line v. State Oil and Gas Board Missis- 409, 411, preempted sippi, mission that the order is not under 474 U.S. 424 n. 106 S.Ct. 732, 737, particular the Tex.R.R.Comm’n, circumstances federal law." 718 n. 88 L.Ed.2d 745 n. 6 (1986); Tex.Reg. Corp. Eagerton, Exxon U.S. 184-85, 2296, 2303-03, appeals The court of characterized this declara- 103 S.Ct. 76 L.Ed.2d tory judgment (1983); challenging action as one 506-07 Northern Natural Gas Co. v. validity Kansas, regarding pipeline Corp. of Rules intrastate State 93, Comm’n U.S. 92- 646, 651-52, systems. S.W.2d at 893. We likewise make 83 S.Ct. 9 L.Ed.2d light such characterization in of the Commis- Growers, completely occupy a Lime Avocado Inc. indicating Florida & an intent Paul, (3) v. conflicts with 142-143, given or state law 83 S.Ct. field 373 U.S. [132] Furthermore, Con 1210, (1963), federal law. 10 248 or because “[w]hen L.Ed.2d traditionally legislates in field occu gress the a the state law stands as an obstacle to States, the as pied by the ‘we start with accomplishment execution of con powers of gressional objectives, Hines v. Davido police historic sumption that the witz, superseded by 52, 399, not to be 85 L.Ed. the States were 312 U.S. 61 S.Ct. the clear (1941). Act unless that was the Federal 581 ” Cal Congress.’ purpose of and manifest Pipeline Corp., 489 Northwest Central Corp., 490 U.S. America v. ARC ifornia See 509, at 109 S.Ct. at U.S. 1661, 1665, 93, 101, 104 L.Ed.2d 109 S.Ct. Co., Pipeline v. ANR Schneidewind 485 (1989) (quoting Rice v. Fe Santa 86, 94 299-300, 1145, 1150-51, 293, 108 S.Ct. U.S. Corp., 331 U.S. 218, 230, 67 Elevator S.Ct. Corp. Exxon v. 316, (1988); 325 99 L.Ed.2d 1146, 1152, 1447, (1947)). 1459 91 L.Ed. Eagerton, 176, 182, 462 U.S. 103 S.Ct. Pa 2301, 497, (1983); that under 2296, 505 There is little doubt but 76 L.Ed.2d Energy NGA, & Elec. v. Resources regulation of the intrastate natu- Gas cific Comm’n, 190, 203-04, gas industry left 103 S.Ct. ral was States. 461 U.S. v. Public Utilities Comm’n Ohio 1713, 1722, 752, (1983). 765 75 L.Ed.2d Co., 456, 467, United Fuel Gas Thus, (1) preemption may 317 U.S. 63 be found when 396, law, (2) 369, 375, 402-03 explicitly preempts 87 L.Ed. Congress state S.Ct. (1943).11 1978, unquestionably states Congress implicitly preempts by state law Until determining gas reg directly purchasers are ‘aimed at interstate 10. In whether state natural 419, preempted, appeals the court of ulations were wholesales for resale.’” 474 U.S. at 106 applied by 715, three "factors” the United (quoting identified S.Ct. at 88 L.Ed.2d at 742 Northern Comm’n, Supreme States Court Transcontinental Corporation Natural Gas Co. v. State Pipe Corp. 652, 94, 609). Line v. State Oil and Gas Board U.S. at 83 S.Ct. at 9 L.Ed.2d at 372 However, 409, 709, Mississippi, 474 U.S. 106 S.Ct. 88 the factors used to determine while (1) “These are: [factors] L.Ed.2d 732 gas regulations whether state natural are regulation comes within the limits whether the distinctly preempted clearly tire not or identi regulatory comprehensive of scheme; (2) federal Transco, the “Transco factors” are consis fied regulation con whether the state the factors enumerated in v. tent with California interest, by expressed flicts with the federal 93, 100-101, Corp., ARC U.S. 109 America 490 Acts, by protecting both consumers ensur 1661, 1665, 86, (1989); S.Ct. 104 L.Ed.2d 94 (3) ing gas prices; regula low whether Corpo Pipeline Corp. v. State Northwest Central Transco, purchasers. at 474 tion is directed 493, 509, Kansas, 489 U.S. 109 ration Comm’n of 423, 715, 420, 106 S.Ct. at 717." 798 U.S. at 1262, 1273, 509, (1989); S.Ct. 103 L.Ed.2d Unfortunately, at Transco does not S.W.2d clearly 293, Co., Pipeline ANR 485 U.S. Schneidewind v. distinctly identify the factors used 299-300, 1145, 1150-51, L.Ed.2d 108 S.Ct. gas regulations state determine whether 316, (1988); Corp. Eagerton, v. Exxon preempted. are 2296, 2301, 176, 182, U.S. 103 S.Ct. 76 L.Ed.2d Transco, upon Court relied Northern In Gas & Elec. v. Ener Pacific Comm’n, Corporation Gas Co. v. State Natural 190, 203-04, Comm’n, gy 461 U.S. Resources (1963): U.S. 83 S.Ct. 9 L.Ed.2d 601 S.Ct. 75 L.Ed.2d finding pre-emption Natural’s Northern First, considerations. Con- thus rests on two Ohio v. United 11. In Public Utilities Comm’n of comprehensive regulatory gress a had created Co., Court discussed the Fuel Gas scheme, and ratable-take orders fell within legislative intent of the NGA: scheme rather than the cate- the limits of that clear, legislative history of the It is as the gory regulatory questions reserved for demonstrates, amply Act [Natural Gas] Second, in the absence of ratable-take States. Congress comprehensive meant create requirements, purchasers a dif- would choose comple- regulation scheme of that would be ferent, costly, purchasing presumably less states, mentary operation to that of the in its By requiring pipelines pattern. to follow the any confusion of functions. The Fed- without costly pattern, Kansas’ order conflicted more Federal En- eral Power Commission [now protecting con- with the federal interest ergy Regulatory exercise would Commission] by ensuring prices. low sumers jurisdiction and for- Transco, over matters in interstate 474 U.S. at 106 S.Ct. commerce, addition, eign to the extent defined in the Court stated at 743. L.Ed.2d Act, matters left to the and local would he prevent economic and measures [to that ”[s]uch contemplat- regulatory Congress gas] target producers bodies. state physical waste harmonious, system regulation requirements dual production, ed a while ratable-take merce, regulate

possessed jurisdiction pipeline company whether exclusive before, gas industry. occurring during, Based not and whether the intrastate natural upon relinquishment pipe- this historical federal or after transmission an interstate ” regulate company.’ (quoting Phillips the intrastate natu- line Petrole- assump- Wisconsin, 672, 682-83, gas industry, ral we start with an um 347 U.S. Co. 794, 799, tion that and NGPA do not 74 S.Ct. 98 L.Ed. NGA (1954))). im- preempt explicitly, specifically the Rules—whether The NGA declared applied it plicitly they transportation or because conflict with feder- that “to the of commerce, in interstate in al law. to the sale inter- gas state commerce of natural ... VII. natural-gas companies engaged in such transportation sale, apply or but shall not argues nei The Commission any transportation other or sale preempts nor the ther NGA NGPA of gas natural or to the local distribution respect pipeline Rules with to intrastate of gas natural or to the used marketing companies gas and intrastate facilities for production such distribution or to the or companies neither the NGA nor and that gathering gas.” natural 15 U.S.C.A. occupy the entire field of intra NGPA of 717(b) (West 1976) added). (emphasis gas regulation. Lone state natural Star § Therefore, or the NGA did not and Enserch do not assert that the NGA establish a comprehensive regulatory in- expressly prohibit regu states from scheme over NGPA lating marketing transportation intrastate affiliates. In trastate of natural sales stead, argue Congress they compre gas gathering of natural legislated through Rather, hensively gas. contemplated the NGPA to the NGA occupy gas pur comprehensive gas regulatory the entire field of natural dual natural chasing pricing. agree government We that nei scheme the federal with exer- occupy cising jurisdiction ther the NGA nor the NGPA over interstate and for- gas regu eign transportation entire field of intrastate natural and sales of natural Consequently, Congress gas lation. has not regulatory exercising and state bodies completely occupied the field of jurisdiction intrastate over all intrastate matters. gas regulation preempt natural so as to the See Public Utilities Comm’n Ohio of Co., Rules. United Fuel 317 U.S. at Gas S.Ct. at 375. prohibited directly regu- States are from sale, lating transportation delivery Congress reasserted its intent that states gas quantities moving govern of purchases, transportation wholesale intrastate gas (including pipe- interstate commerce. Missouri v. Kansas and sales intrastate Co., 298, 307-08, Natural taking delivery gas Gas U.S. lines from interstate 544, 545-46, pipelines) S.Ct. 68 L.Ed. when it enacted the Hinshaw (1924). Congress Amendment, enacted the NGA to fill which overruled the United regulatory occupy this void and the field of Supreme States Court decision in Federal transportation interstate Co., and sale of natu- Power Commission v. East Ohio Gas gas. ral See Northern Natural Gas Co. v. 338 U.S. 94 L.Ed. S.Ct. Corp. Kansas, (1950) (holding State Comm’n gas U.S. that an intrastate com- 84, 91, 646, 650, pany’s taking 83 S.Ct. 9 L.Ed.2d delivery gas from an inter- (1963)(“Congress comprehensive enacted a pipeline subjected pipe- state the intrastate regulation scheme of federal of ‘all whole- line to jurisdic- Federal Power Commission gas NGA).12 sales of natural Thus, interstate com- tion under the after enact- gas industry the natural provisions apply chapter state of this shall not —federal side, regulatory operating bodies side each any person engaged legally in or authorized sphere. active in its own engage transportation in the in interstate (citations 317 U.S. at 63 S.Ct. at 375 omit- commerce or the sale in interstate commerce ted). resale, gas received person person from another within or at the pertinent The Hinshaw Amendment stated in boundary gas of a State if all the natural so part: through Amendment, passing the increase of the Hinshaw even ducers from ment interstate, gas upheld though the natural traveled Court to consumers. subject through prohibition was insufficient to as it pass that alone insofar pipeline receiving such intrastate producer sales of natural applied to jurisdiction. regulatory federal time commerce while at the same intrastate preempted ap- concluding that federal law energy Following shortages plication pass through prohibition 1970’s, Congress enacted the NGPA “to gas in interstate commerce. sales of adequate supplies at assure 185-87, 103 2302-04. The S.Ct. at U.S. Pipe prices.” fair Transcontinental preempt- that federal law Court concluded Corp. v. State Oil Gas Board Line & regard prohibition pass-through ed the 409, 421, Mississippi, 474 U.S. 106 S.Ct. producers it inter- to interstate because 709, 716, 88 L.Ed.2d Con Energy Regulatory Federal fered with the goal gress’ means to this chosen achieve (FERC) regulate authority to Commission’s integrated intrastate- was to establish Note, gas in the gas pricing of natural interstate natural the wholesale market. See at History of interstate commerce. 462 U.S. Legislative the Natural flow (1980). Act, 101, 121 185, regard at 2302-03. to Policy TEX.L.REV. 103 S.Ct. With congressional pass-through prohibition The scheme included federal application of the through regulation and de producers, control—both the Court stated: to intrastate pric regulation gas intrastate natural Although the NGPA extended feder- ... —of 3315(a), (West ing. 15 U.S.C.A. 3371-72 §§ intra- authority prices to control to the al 1982). market, Congress provided also state that this extension federal Court, inter- Supreme The United States to deprive power the States of the did not NGPA, preting held fed- that maximum price ceiling intrastate establish a for price on intra- eral lawful wellhead controls gas sales of a level lower producer at gas special change no in the state effects ceiling. than the federal reg- relationship federal and state between ulatory jurisdiction. See Public Service 186, (citations at 103 S.Ct. at 2303 462 U.S. Comm’n the State New York v. Mid- omitted). that Eagerton We conclude from Co., 319, 340-41, Louisiana Gas U.S. regulation may preempted con- state 3024, 3036, 668, 77 L.Ed.2d 684- 103 S.Ct. gas cerning interstate sales of natural but Moreover, enacting concerning gas intrastate sales of be- valid NGPA, “Congress explicitly envisioned gas scheme regulation cause the NGPA regulate the States would intrastate that state complimentary, dual maintains in accordance na- markets with the overall regulatory federal scheme. Conse- policy.” Energy Group, tional Reserves Congress nar- quently, conclude that we Co., Power Light Inc. v. Kansas & gas mar- rowly regulates intrastate natural 420-21, 709, 400, 697, U.S. S.Ct. rendering intrastate kets the entire without L.Ed.2d marketing subject to pipeline systems regulation to of state federal the exclusion only

The United States H.R.Conf.Rep. No. regulatory bodies. See involving regulation of case state Court 70-71, Cong., 2d 95th Sess. is Ea pipelines Corp. v. intrastate Exxon in, Cong. Ad- reprinted 1978 U.S.Code & gerton, 462 U.S. S.Ct. 8987, 9023-26. Inso- (1983). In min.News the Su Eagerton, L.Ed.2d 497 can regulate the States intrastate preme examined statute far as Court an Alabama na- the overall oil and markets accordance with increasing the severance tax on including natural pro- policy, intrastate prohibiting in Alabama and tional extracted chapter by ultimately are within such visions of this this subsection consumed received State, person primarily con- any by to be matters of local facilities used such declared sale, subject regulation by transportation provided the severed that cern and such person facil- and service the rates 717(c) (West 1976) (added regulation by subject com- Act a State 15 U.S.C.A. ities be 27, 1954, (1954)). exempted pro- ch. matters from the Mar. 68 Stat. 36 mission. transportation, sales and we Although Congress conclude prices,” desired “fair it Congress has not comprehensively leg- require did not possible price lowest through islated the NGA or the NGPA to because the NGPA fact higher enacted occupy statutory the entire field of rates categories intrastate for certain natural gas regulation. gas in order to gas pro- stimulate natural Mid-Louisiana,

duction. 463 U.S. at 335- VIII. Further, 103 S.Ct. at 3034. even though the may impact natural Recognizing Congress has not pricing, control, which is under federal “the completely occupied the field of intrastate purpose State’s regulate must be gas regulation preempt so as to subjects duction or other jurisdic- of state Rules, we consider whether the Rules are tion, and the means chosen must at least preempted they because conflict with feder plausibly legiti- be related to matters of regulating al law purchasers’ price struc mate state concern.” Northwest Central purchasing tures and patterns. There are Pipeline Corp., 489 U.S. at 109 S.Ct. two forms preemption (1) of conflict it is — at 1278. impossible comply with both the federal Legislature granted state law and the state law stands power to promulgate as an obstacle accomplishment orders and rules necessary prevent congressional execution of discrimination and to objectives. prevent monopolistic abuses common Pipeline Northwest Central Corp., 489 purchasers. 509, 109 Tex.Nat.Res.Code 111.090. U.S. at § S.Ct. 1273. The court of The Commission power exercised this in appeals held that the Rules conflict with promulgating these Rules. Prevention of the federal ensuring interest in gas low anti-competitive practices among pipeline prices. argues The Commission that the companies and their SMPs is a relevant federal gas prices interest low is not the concern. Distribs., See Associated Gas only interest, federal regulation that state (in- F.2d at (“Although some may impact gas prices and that its Rules increasingly deed many) pipelines face com- part were in promulgated to minimize mo petition for customers from pipelines, other nopolistic abuses which occurred when pipelines still other enjoy a monopoly or purchased gas SMPs producers from on oligopoly position, because their customers their pipeline system. affiliate’s Lone Star buy must gas from them or not at complain Enserch do not that it would all.”). fact, 1988,13 In adopted FERC impossible comply with both the establishing rules a standard of conduct Therefore, Rules and federal law. we will governing relationships pipeline between only consider whether the Rules stand as companies marketing and their affiliates to congressional an obstacle to objectives re prevent preferential treatment of an affili- garding gas policies. its natural ated marketer pipeline. an interstate protect NGA “serves to con Standards of Conduct for Pipe- Interstate gas sumers of natural monopoly from the Affiliates, lines Marketing with 18 C.F.R. power pipelines” gives interstate 161.1-161.3 apply These rules §§ “regulatory jurisdiction FERC over the pipelines interstate transporting gas for transportation and sale of in interstate companies other and which are affiliated commerce.” Associated Gas Distribs. v. marketing with a brokering entity. Comm’n, Energy Regulatory Federal 899 They do apply pipeline not to intrastate (D.C.Cir.1990). F.2d Additional companies marketing and their affiliates. ly, the NGPA was enacted “to assure ade Standards of Pipe- Conduct for Interstate quate supplies at Affiliates, lines Marketing 18 C.F.R. fair prices.” Transcontinental, 474 U.S. at 161.1-161.3 recognized FERC §§ (emphasis added). 106 S.Ct. at 716 regulate need to the anti-competitive ef- 22,139, 22,161 Fed.Reg. (June 1988); 1989). 13. 53 52,781, 52,791-92 (December 22, Fed.Reg. pipeline marketing preempted. affili- Rules are See Northwest Cen-

fects of interstate fact, following at provided Pipeline, In tral 489 U.S. at S.Ct. ates. FERC Pipeline, preamble proposed 1276. In Northwest to the rules: Central held that “there can be Court portion pipelines’ A substantial trans- any regulation production if little portation transactions and are be- were might not have at least an incremental ing on market- conducted behalf of their purchasers effect on the costs of some affiliate, ing pipelines eco- have an market and contractual situations.” their affiliates. nomic incentive to favor Although U.S. at 109 S.Ct. at 1276. Thus, potential for abuse was and the Rules have an incremental effect significant enough to warrant Commis- * * * gas prices, an incremental effect on natural standards, sion These to- action. price on alone is an insufficient basis gether reporting require- with the rule’s preempt the Rules. See Northwest Cen- ments, give public the Commis- 514-15, 109 Pipeline, tral 489 U.S. at S.Ct. ability pre- to detect and sion staff (“Were practic- each such effect unlawfully [on discriminatory activity. vent triggering conflict es or treated as costs] 52,781, 52,783 Fed.Reg. (December pre-emption, thoroughly this under- would 1989). logical No reason exists for FERC precisely regulato- mine the division pipeline marketing to exclude intrastate af- ry Congress’ field and would render ... regulatory filiates from its scheme other specific grant power virtu- States than to evince its belief that states main- Furthermore, ally meaningless.”). the Su- regulatory authority tain over that natural preme require not Court does lowest Further, given regulatory sphere. price. Only prices required. fair are regulation anti-competitive prac- FERC’s Transcontinental, 421, 106 474 U.S. at pipelines spe- tices interstate and their S.Ct. at 716. affiliates, marketing cial the Rules are har- promote Pipeline, monious with and the federal ener- Kansas Northwest Central gy policy by restraining anti-competitive regulated producers by canceling their discriminatory activities. Without duction allowables when their regulation reg- state consistent with FERC was far the allowable. The below ulation, monopolistic upheld regulation the of in- tendencies Court the because Kan- pipelines regulating trastate would left un- in a for be sas was field reserved any price checked.14 We conclude that the Rules at- the States and effect on was tempt regulate purpose 510-19, juris- negligible. within its Id. 489 U.S. at Likewise, sphere only dictional and the means it chose to at S.Ct. 1273-79. Rules plausibly legiti- indirectly price do so relate to of marginally a matter and affect the of gas regulatory mate state concern. and fit into a area See Northwest Cen- Pipeline, regulation production 489 U.S. at at left to of tral S.Ct. the States — prevent order to waste and discrimina- promoting conservation. tion while also appeals The court of determined preemption important part the Rules conflict the federal An of this However, gov- gas prices. analysis interest in concerns whether the Rules low gas (1) gathering or of regulation impacts production mere fact that state ern natu- (2) gas15 transportation or rates prices is insufficient to conclude that the ral or fact, Legislature provided ‘production gathering’ 14. In in the 15. “The terms and in [the has sufficient in themselves to reserve to "gas are Utility Regulatory NGA] Act that utilities are merely drilling ‘control over the the States not they monopolies in the areas definition like,’ serve_" spacing and of wells and the Colorado 1446e, Tex.Rev.Civ.Stat.Ann. art. FPC, 581, 603, Interstate Gas Co. v. 324 US 89 L addition, (Vernon Supp.1992). we § (1945), S Ct but also the Ed 2d Lone Stair and Enserch do not com- note that regulate power rates of over plain the Rules Eire inconsistent with the element, all, pre key time—a after in efforts to seeking regulations monopolistic to curb FERC protect rights." waste and correlative vent tendencies. Pipeline Corp., U.S. at Northwest Central 511, 109 S.Ct. at 1274. gas. exercising

of natural See Northwest Central traditional state control over the 510-14, Pipeline Corp., 489 at U.S. conservation of natural resources and the specifically, at 1273-76. More S.Ct. wheth- protection rights.” of correlative 489 U.S. (1) primarily regulate er the Rules rates of at 109 S.Ct. at 1275. gas production gas producers fall or which case, asserts, In this the Commission within the State’s traditional among things, other that the Rules were regulate production, rates of conserve re- promulgated prevent discriminatory (2) protect rights sources and or correlative taking gas, prevent duction and of natural purchasing patterns pipelines of interstate waste, promote protect conservation and purchasers gas or for resale after trans- rights. correlative States not “at- portation in interstate commerce which fall tempt regulate pipelines’ purchasing de- regulatory authority within federal guise regulating pro- cisions the mere transportation over rates. Northwest Pipeline duction.” Northwest Central Pipeline Corp., 489 510- Central U.S. at Corp., 489 U.S. at at 1278. S.Ct. 1273-76; at S.Ct. Transcontinen- However, impacts when “state law on mat- 418-21, tal, 474 U.S. at 106 S.Ct. at 714-16. control, ters within the State’s [federal] Frequently there is a subtle dis purpose regulate production must be to or (1) regulation tinction between rates of subjects jurisdiction, other of state and the gas production gas producers plausibly means chosen must be at least purchasing patterns gas purchasers. legitimate related to matters of state con- However, may regulate gas produc States cern.” 489 U.S. at 109 S.Ct. at 1278. though tion even it has an incremental ef case, purpose In this the Commission’s purchasing patterns fect on of interstate was, promulgating among other

pipelines. Pipeline Northwest Central things, prevent discriminatory produc- 512-15, Corp., 489 at U.S. S.Ct. taking pre- tion and of natural and to Pipeline 1274-76. In Northwest Central regulation produc- vent waste. The Corporation Corp., the State taking tion and of natural and the (KCC) adopted regulation of Kansas prevention proper pur- are state waste “providing permanent cancellation poses and fall within the state’s traditional producers’ entitlements to Kansas-Hu- Furthermore, regulatory authority. goton gas.” 489 U.S. at 109 S.Ct. at plausibly Rules are related to their stated regulation “[designed 1267. The was as a market, contractual, legitimate goal preventing counterweight to discrimi- regulatory natory production taking led forces that have interstate purchases preventing Consequently, pipelines to cut back from Kan waste. sas-Hugoton producers sought present ...” under the circumstances this cause, encourage timely production “to conclude that the Rules are not we right quotas by providing that the to ex preempted by federal law. assigned perma

tract amounts of will long nently production be lost if is too IX. delayed.” at at 489 U.S. S.Ct. summary, conclude that the we Com- words, pipe In other the interstate 1267. statutory authority mission had the Hugoton using “the field for lines were Rules, mulgate the that the Rules are con- storage taking gas for current needs while statutory au- sistent with the Commission’s from elsewhere.” 489 U.S. thority, not re- that the Commission is acknowledging at 1269. While that S.Ct. quired questions concerning to determine regulation “may pipelines result waste and discrimination a contested making purchasing decisions that have an proceeding, the Commission’s case and hence on effect on their cost structures rates,” statutory authority promulgate interstate Court stated guidelines contains sufficient or regulation that the “is directed be regulates standards for the exercise of such authori- gas producers, havior of ty, disregard the Rules do not their rates of as a means of separate corporate existence of Lone Star notice, COOKS, hearing Appellant,

and Enserch evi- without Edward Vincent preempted Rules are not dence and that the by federal law. Texas, Appellee. STATE herein, re- explained For the reasons we 70,772. No. judgment appeals of the court of verse judgment and render that the Rules are Texas, Appeals of Court of Criminal valid. En Banc. 16, 1992. Sept. Concurring opinion on Motion For Rehearing Denied Jan. COOK,

Rehearing by J. GAMMAGE,JJ., not DOGGETT and

sitting.

COOK, Justice, concurring. join opinion judgment

I the court’s following I also for the

this cause. write

reasons. bench, hope pray

As I leave the I seats, occupies

that each of us who these court,

whether on the district the court of

appeals supreme always or the court will expected of us.

remember that which is merely guardians the temporary

We are preside.

of the courts over which we part larger

These in turn courts are of our

system justice. These courts are an

institution, judges charged as are we protecting responsibility

with the

dignity profession. of our courts and our attorneys appear in

To the who front obligation

us to treat them we have

respect, arguments, listen to their of the fair

inform ourselves law and impartial. us, lawyer judge,

Each of whether

part legal profession. We must forget

never allow ourselves to this and duty solemn to conduct ourselves in a

our always

manner that reflects honor on the

profession of To that end we must law. minds, hearts and our

consecrate our our

very souls.

Case Details

Case Name: Railroad Com'n of Texas v. Lone Star Gas Co.

Court Name: Texas Supreme Court

Date Published: Dec 31, 1992

Citation: 844 S.W.2d 679

Docket Number: D-0650

Court Abbreviation: Tex.