Puerto Rico Department of Consumer Affairs v. Isla Petroleum Corporation, 86-1406

• Decision Date: 19 April 1988
• Docket Number: No. 86-1406,86-1406
• Parties: PUERTO RICO DEPARTMENT OF CONSUMER AFFAIRS, et al., Petitioners v. ISLA PETROLEUM CORPORATION et al
• Court: U.S. Supreme Court

485 U.S. 495

108 S.Ct. 1350

99 L.Ed.2d 582

PUERTO RICO DEPARTMENT OF CONSUMER AFFAIRS, et al., Petitioners

v ISLA PETROLEUM CORPORATION et al.

No. 86-1406

Argued Feb. 29, 1988.

Decided April 19, 1988.

Syllabus

In 1973, Congress passed the Emergency Petroleum Allocation Act (EPAA), which required the President to promulgate regulations governing allocation and pricing of petroleum products, and expressly pre-empted state and local regulation of allocation and pricing that conflicted with those regulations. Under the EPAA, the President's regulatory authority was to terminate in 1975, but subsequent amendments (including an amendment by the Energy Policy and Conservation Act (EPCA) in 1975) extended his authority until September 30, 1981, when it expired. In 1986, Puerto Rico, which had suspended its regulation of petroleum products when the EPAA was passed, imposed an excise tax on oil refiners, and petitioner Puerto Rico Department of Consumer Affairs issued regulations requiring that advance notice of price increases be given to the Department's Secretary, prohibiting wholesalers from passing on the cost of the tax to retailers, and imposing maximum profit margins on sales by wholesalers to retailers. Respondent oil companies brought actions, which were consolidated by the District Court, alleging that the Department's regulations were unconstitutional on pre-emption grounds. The court enjoined enforcement of the regulations, holding that the Department's authority was pre-empted by the decision of Congress to decontrol petroleum prices. The Temporary Emergency Court of Appeals affirmed.

Held: The Department's regulations are not pre-empted. The test for federal pre-emption of Puerto Rico law is the same as the test under the Supremacy Clause for pre-emption of the law of a State. There is no merit to respondents' contention that the EPAA evinced a federal intent to enter the field of petroleum allocation and price regulation, and that the EPCA never countermanded that intent, but merely changed the nature of the federally imposed regime from one of federal hands-on regulation to one of federally mandated free-market control. Although the Constitution permits congressional creation of such a regime, it is to be assumed that the historic police powers of the States are not superseded by a federal statute unless that is the clear and manifest purpose of Congress. Transcontinental Pipe Line Corp. v. State Oil and Gas Bd. of Miss., 474 U.S. 409, 106 S.Ct. 709, 88 L.Ed.2d 732, does not announce a new rule of burden-shifting whenever the Federal Government terminates or reduces its regulation of a field of commerce, replacing the normal need for finding a federal intent to pre-empt with a need to find a federal intent to retransfer authority to the States. Since Congress has withdrawn from all substantial involvement in petroleum allocation and price regulation, there is no extant action that can create an inference of pre-emption in an unregulated segment of an otherwise regulated field, and pre-emption, if it is intended, must be explicitly stated. Pp. 499-504.

811 F.2d 1511, reversed.

SCALIA, J., delivered the opinion of the Court, in which all other Members joined, except O'CONNOR, J., who took no part in the consideration or decision of the case.

Lynn R. Coleman, Washington, D.C., for petitioners.

John C. Harrison, Washington, D.C., for U.S. as amicus curiae, supporting petitioners, by special leave of Court.

Mark L. Evans, Washington, D.C., for respondents.

Justice SCALIA delivered the opinion of the Court.

In this case we must determine whether federal legislation providing for controls over the allocation and pricing of petroleum products, passed in response to the oil crisis of the early 1970's, or the legislation subsequently eliminating those controls, pre-empts gasoline price regulation by the Commonwealth of Puerto Rico.

I

In 1973, Congress passed the Emergency Petroleum Allocation Act (EPAA), Pub.L. 93-159, 87 Stat. 627, 15 U.S.C. § 751 et seq., in reaction to severe market disruptions caused by an embargo on oil exports to the United States. The central provision of the legislation, upon which all the rest depended, was § 4, 15 U.S.C. § 753, which required the President to promulgate regulations governing allocation and pricing of petroleum products. The Act also contained an express pre-emption provision, § 6(b), 15 U.S.C. § 755(b), precluding state and local regulation of allocation and pricing in conflict with a regulation or order under § 4.^* As origi- nally enacted, the EPAA provided for termination of the President's regulatory authority early in 1975, but during that year Congress provided for temporary extensions, and then enacted the Energy Policy and Conservation Act (EPCA), Pub.L. 94-163, 89 Stat. 871 (codified in scattered Titles and sections of United States Code), which amended the EPAA to provide for gradual decontrol. The EPCA extended the President's EPAA regulatory obligations for 40 months, and thereafter granted him discretionary regulatory authority until September 30, 1981; on that date, the statute prescribed that "[t]he authority to promulgate and amend any regulation or to issue any order under [the EPAA] shall expire." § 461, 89 Stat. 955, 15 U.S.C. § 760g.

Before enactment of the EPAA, Puerto Rico had regulated the prices of gasoline and other petroleum products sold in the Commonwealth. The Puerto Rico Department of Consumer Affairs (referred to in this litigation as DACO, apparently the acronym of its Spanish title, Departamento de Asuntos del Consumidor) was charged with regulating these and other commodities, but suspended its regulation of petroleum products when the EPAA was passed in 1973. In 1975, anticipating the expiration of the EPAA, DACO issued a regulation to restore its regulatory authority, but after the EPCA was passed it modified this regulation to make it effective only after federal price controls were lifted. Then in the spring of 1986 (41/2 after the President's regulatory authority was terminated), the Legislature of Puerto Rico imposed an excise tax on oil refiners, and DACO issued the regulations that are the subject of the challenge here. DACO Orders of March 26, April 23, and May 20, 1986 (App. to Pet. for Cert. 42a-45a, App. 7-12, 21-29). Among other requirements, these regulations prescribed that the Secretary of DACO be given 15 days' notice of price increases, pro- hibited wholesalers from passing on the cost of the excise tax to retailers, and imposed maximum profit margins on sales by wholesalers to retailers.

Respondents, several oil companies, brought actions that were consolidated in the United States District Court for the District of Puerto Rico alleging, inter alia, that DACO's orders were unconstitutional on pre-emption grounds, and requesting declaratory and injunctive relief. The District Court enjoined DACO from enforcing its regulations, in part on the grounds that DACO's authority was pre-empted by Congress' decision to decontrol petroleum prices, and petitioners appealed this determination to the Temporary Emergency Court of Appeals (TECA). (Petitioners also challenged certain other aspects of the District Court's decision in an appeal to the United States Court of Appeals for the First Circuit, which has stayed its proceedings.) A divided panel of the TECA affirmed. 811 F.2d 1511 (1986). Because of the importance of the issue presented, we granted the petition for certiorari. 484 U.S. 814, 108 S.Ct. 65, 98 L.Ed.2d 29 (1987).

II

Although Puerto Rico has a unique status in our federal system, see, e.g., Examining Board v. Flores de Otero, 426 U.S. 572, 596, 96 S.Ct. 2264, 2278, 49 L.Ed.2d 65 (1976), the parties have assumed, and we agree, that the test for federal pre-emption of the law of Puerto Rico at issue here is the same as the test under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, for pre-emption of the law of a State. See 48 U.S.C. § 734 (statutory laws of the United States generally "have the same force and effect in Puerto Rico as in the United States"); Helfeld, How Much of the United States Constitution and Statutes Are Applicable to the Commonwealth of Puerto Rico?, 110 F.R.D. 452, 469 (1985) (Supremacy Clause applies to Puerto Rico). Cf. Examining Board, supra, 426 U.S. at 597, 96 S.Ct., at 2279; Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 675, 94 S.Ct. 2080, 2087, 40 L.Ed.2d 452 (1974). Our Supremacy Clause cases typically involve analysis of the scope of pre-emptive intent underlying statutory provisions that impose federal regulation. See, e.g., Louisiana Public Service Comm'n v. FCC, 476 U.S. 355, 368-370, 106 S.Ct. 1890, 1898-1899, 90 L.Ed.2d 369 (1986); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95-96, 103 S.Ct. 2890, 2898-2900, 77 L.Ed.2d 490 (1983); Hines v. Davidowitz, 312 U.S. 52, 67, 69-70, 61 S.Ct. 399, 405-406, 85 L.Ed. 581 (1941). While the EPAA was operative, that typical question posed relatively little difficulty, since § 6(b) explicitly pre-empted state regulation "in conflict" with an EPAA regulation or order. Here, however, we are presented with the decidedly untypical claim that federal pre-emption exists despite, not only the absence of a statutory provision specifically announcing it, but the absence of any extant federal regulatory program with which the state regulation might conflict and which might therefore be thought to imply pre-emption. Respondents' contention, in a nutshell, is that the EPAA evinced a federal intent to enter the field of petroleum allocation and price regulation, and that the EPCA never countermanded that intent, but merely changed the nature of the federally imposed regime from one of federal hands-on regulation to one of federally mandated free-market control.

We have suggested elsewhere that the Constitution permits congressional creation of such a regime. See, e.g., Arkansas Electric Cooperative Corp. v. Arkansas Public...