332 U.S. 507 (1947), 69, Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana

Docket Nº:No. 69
Citation:332 U.S. 507, 68 S.Ct. 190, 92 L.Ed. 128
Party Name:Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana
Case Date:December 15, 1947
Court:United States Supreme Court

Page 507

332 U.S. 507 (1947)

68 S.Ct. 190, 92 L.Ed. 128

Panhandle Eastern Pipe Line Co.


Public Service Commission of Indiana

No. 69

United States Supreme Court

Dec. 15, 1947

Argued November 14, 17, 1947



1. Sales of imported natural gas by an interstate pipeline carrier direct to industrial consumers are sales in interstate commerce, even though the gas leaves the main transmission line within the state and is piped to the consumers through branch lines or laterals at reduced pressure. Pp. 512-513.

2. In view of the position of the state commission as construed by the state supreme court, the orders of the commission, directing immediately only the filing of information, constituted an assertion of power to regulate appellant's rates and service under the state's comprehensive scheme of regulation, and appellant was not required to await a further regulatory order before contesting the commission's jurisdiction. P. 511.

3. In the light of the legislative history, provisions, and policy of the Natural Gas Act, and of the judicial history leading to its enactment, sales of natural gas by an interstate pipeline carrier direct to industrial consumers, although in interstate commerce, are subject to regulation by the states. Pp. 513-524.

Page 508

4. By the Natural Gas Act, Congress did not occupy the entire field open to federal regulation of the transportation and sale of natural gas in interstate commerce, but extended federal regulation only to that area which this Court previously had held the states could not reach. Pp. 516-519.

5. It is unnecessary in this case to consider the effect of the Commerce Clause of the Federal Constitution independently of the effect of the Natural Gas Act as here construed. P. 524.

224 Ind. 662, 71 N.E.2d 117, affirmed.

Orders of a state commission requiring a pipeline company to file tariffs, regulations, reports, etc., were vacated and enjoined by a state court. The Supreme Court of the State reversed. 224 Ind. 662, 71 N.E.2d 117. On appeal to this Court, affirmed, p. 524.

RUTLEDGE, J., lead opinion

MR. JUSTICE RUTLEDGE, delivered the opinion of the Court.

Broadly, the question is whether Indiana has power to regulate sales of natural gas made by an interstate

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pipeline carrier direct to industrial consumers in Indiana. More narrowly, we are asked to decide whether the Commerce Clause, Const. Art. I, § 8, by its own force, forbids the appellee, Public Service Commission, to require appellant to file tariffs, rules and regulations, annual reports, etc., as steps in a comprehensive plan of regulation preliminary to possible exercise of jurisdiction over rates and service in such sales.1

Panhandle Eastern transports natural gas from Texas and Kansas fields into and across intervening states, including Indiana, to Ohio, and Michigan. In Indiana, it furnishes gas to local public utility distributing companies and municipalities. These, in turn, supply the needs of over 112,000 residential, commercial, and industrial consumers.

Since 1942, appellant also has sold gas in large amounts direct to Anchor-Hocking Glass Corporation for industrial consumption.2 Shortly before beginning this service, appellant had informed a number of its customers, local distributing companies in Indiana, that it intended to render service directly to large industrial consumers wherever possible.3 Pursuant to that policy, since these proceedings

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began direct service has been extended to another big industrial user.4

[68 S.Ct. 192] In 1944, the Commission initiated hearings relative to direct service by Panhandle Eastern to Indiana consumers. It concluded that "the distribution in Indiana by Panhandle of natural gas direct to consumers is subject to regulation by this Commission under the laws of this state," notwithstanding any alleged contrary effect of the Commerce Clause upon appellant's direct sales to industrial users. Accordingly, it issued its order of November 21, 1945, for the filing of tariffs, etc., as has been stated.

Early in 1946, Panhandle Eastern brought this suit in a state court to set aside and enjoin enforcement of the order. While the cause was pending, the Commission issued a supplemental order declining appellant's offer to submit the specified tariffs, reports, etc., "as information only," and reasserting its full regulatory power as conferred by the Indiana statutes.5 63 P.U.R. (N.S.) 309.

The trial court vacated the orders and enjoined the Commission from enforcing them. It accepted appellant's view of the effect of the Commerce Clause on its

Page 511

operations. The Supreme Court of Indiana reversed that judgment and denied the relief appellant sought. 71 N.E.2d 117. It held first that the Commission's orders amounted to an unequivocal assertion of power to regulate rates and service on appellant's direct industrial sales, and thus presented squarely the question of the Commission's jurisdiction over such sales as affected by the Commerce Clause. The court did not flatly hold that the sales are in interstate, rather than intrastate, commerce. But, taking them to be of the former kind, it held them nevertheless subject to the state's power of regulation under the doctrine of Cooley v. Board of Wardens, 12 How. 299. The court further held that appellant, in making these sales, is a public utility within the meaning and application of the state's regulatory statutes, Burns Ind.Stat.Ann. § 54-105 and Ind. Acts 1945, c. 53, p. 110. It is this decision we have to review pursuant to § 237 of the Judicial Code, 28 U.S.C. 344(a).6

The effect of the state statutes, whether permitting the filing of the tariffs, etc., as information unrelated to further regulation or requiring the filing as initial and integral steps in the regulatory scheme, and thus as presenting at the threshold of the scheme's application the question of the state's power to go further with it, is primarily a question of construction for the state courts to determine. In view of the Commission's position, as construed by the state supreme court, we cannot say that the only thing presently involved is the state's power to require the filing of information without reference to its further use for controlling these sales. Cf. Arkansas Louisiana Gas Co. v. Department of Public Utilities, 304 U.S. 61. Here,

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the orders constituted "an unequivocal assertion of power" to regulate rates and service. Indeed, they involve something more than a mere threat to apply the regulatory plan in its later phases. They represent the actual application of that plan in its initial stage. In such a situation, appellant was not required to await [68 S.Ct. 193] a further regulatory order before contesting the Commission's jurisdiction. Cf. Public Utilities Comm'n of Ohio v. United Fuel Gas Co., 317 U.S. 456.

This does not mean that we now express opinion concerning the validity of any further order which the Commission may enter. No such order is before us. It does mean that we are required to decide whether the sales in question lie within the scope of the state's power to regulate rates and service, so that some further order in those respects may or may not be entered.

Nor do we question that these sales are interstate transactions. The contrary suggestion left open in the state supreme court's treatment rests upon the view that gas transported interstate takes on the character of a commodity which has come to rest or broken bulk when it leaves the main transmission line and, under reduced pressure, enters branch lines or laterals irrevocably on its way to final distribution or consumption. Those merely mechanical considerations are no longer effective, if ever they were exclusively, to determine for regulatory purposes the interstate or intrastate character of the continuous movement and resulting sales we have here.7

Page 513

Thus, gas furnished to local utilities for resale is supplied unquestionably, both as to transportation and as to sale, in interstate commerce. Yet it is subjected to practically identical changes in pressure with the gas sold by appellant directly for industrial use.8 Neither practical common sense nor constitutional sense would tolerate holding that reduction in pressure makes the industrial sales to Anchor-Hocking wholly intrastate for purposes of local regulation, while deliveries at similar pressures to utility companies remain exclusively interstate. Variations in main pressure are not the criterion of the states' regulatory powers under the Commerce Clause. Cf. Interstate Natural Gas Co. v. Federal Power Comm'n, 331 U.S. 682, 689. The sales here were clearly in interstate commerce.

The controlling issues therefore are two: (1) has Congress, by enacting the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717, in effect forbidden the states to regulate such sales as those appellant makes directly to industrial

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consumers; (2) if not, are those sales of such a nature, as related to the Cooley formula, that the Commerce Clause, of its [68 S.Ct. 194] own force, forbids the states to act.

We think there can be no doubt of the answer to be given to each of these questions -- namely, that the states are competent to regulate the sales. The two questions may best be considered in the background of the legislative history of the Natural Gas Act and of the judicial history leading to its enactment in 1938.

Prior to that time, this Court, in a series of decisions, had dealt with various situations arising from state efforts to regulate the sale of imported natural gas. The story has been adequately told,9 and we do not stop to review it again or attempt reconciliation of all...

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