Amicus Curiae Brief — Williams v. Overholser

MAR 8 1954

Nos. 280, 281, 418 HAROLD 8. WiLLEY,

Jn the

Supreme Court of the Anited States

October Term, 1953

--~

No. 280

PHILLIPS PETROLEUM COMPANY,

Petitioner,

vs.

STATE OF WISCONSIN, et al.,

Respondents.

No. 281

STATE OF TEXAS, et al.,

Petitioners,

vs.

STATE OF WISCONSIN, et al.,

Respondents.

No. 418

FEDERAL POWER COMMISSION,

Petitioner,

vs.

STATE OF WISCONSIN, PUBLIC SERVICE COMMISSION OF WIS-

CONSIN, et al., Respondents.

JOINT BRIEF AMICI CURIAE

{ J. A.A. BURNQUIST A. HORGH

Atterney General Attorney General

State of Minneso State of Iowa

State Capitol

GEORGE B. SJOSELIUS Des Moines, Iowa

/ Deputy Attorney General

Attorney for the

State of Minnesota State of Iowa

102 State Capitol

St. Paul 1, Minnesota CLARENCE 8S. BECK

Attorneys for the Attorney General

State of Minnesota State of Nebraska

State 1

JOHN F. BONNER ' lance Nebraska

City Attorney ’ Attorney for the

City of Minneapolis Ss of Nebraska

Minneapolis, Minnesota : ~

Attorney for i

City of Minneapolis sab

MARCH 6, 1954.

Sa nneneteiendenenamennne rare

AT. 3539 Hayward-Court Brief Printing Co,, Minneapolis 15, Minn. AT. 3539

INDEX

Page

Opinions below ........-..:eseeeeeeeee re eeeeeees 1

JerteletiOM . ww. cece ccc cc ccvcccccccscccceves 2

Question presented ........---++seseeereerereees 2

Statute involved ...........:2 eee e cece cece eeeees 2

Statement of the case ........---- eee ee creer renee 3

Interest of Amici Curiae ..........-..-seeeeeeees 3

State of Minnesota ...........-0ceccececcecrees 5

City of Minneapolis .........-.6-+++eeeeeeeeees 5

EE ce perntecvevereseeresvesvevers 6

State of Nebraska ..........--:eeeceeeecsenees 7

Summary of argument ..........------+eeeereees 8

Argument ... .....--.e cece cere eet e ec eecerres 9

Rs cede cevewnsascteereseesesesurece 21

TABLE OF CONTENTS

CASES: Page

Colorado Interstate Gas Co. v. Federal Power Com-

mission, 324 U. S. 581 (1945) ........-..+-5-+- 16

Federal Power Commission v. Hope Natural Gas

Co., 320 U. S. 591 (1944) .........-.--- 16, 17, 19

Hartford Electric Light Co. v. Federal Power Com-

mission, 131 F. 2d 953 (2nd Cir. 1942), cert.

denied, 319 U. S. 741 (1943) .......-0-00-e sees 15

Illinois Natural Gas Co. v. Central Illinois Public

Service Commission, 314 U. S. 498 (1942) ..... 17

Interstate Natural Gas Co. v. Federal Power Com-

mission, 156 F. 2d 949 (5th Cir. 1946), affirmed,

fs ye £) |) rer rer ee 9

Interstate Natural Gas Co. v. Federal Power Com-

mission, 331 U. S. 682 (1947) ..........- 12, 16, 18

Jersey Central Power & Light Co. v. Federal Power

Commission, 319 U. S. 61 (1943) ............ 12

Michigan-Wisconsin Pipe Line Co. v. Calvert, Nos.

198, 199, U. S. Sup. Ct., Feb. 8, 1954 (22 U.S. Law

SS ocr ebeckeceseceesveveeree 11, 12, 19

Minis v. United States, 15 Pet. 423 (1841) ....... 14

Missouri ex rel. Barrett v. Kansas Gas Co., 265 U.

NR ce ghana se eeecera sane trernees 12

Re Northern Natural Gas Co., Federal Power Com-

mission Opinion No. 233 and accompanying order

of July 30, 1952, docket No. G-1881, 95 P. U. R.

= (WE, Bp 12GB . ccc ccccccccescvccecccvccsvcss 5

Panhandle Eastern Pipe Line Co. v. Calvert, Nos.

200, 201, U. S. Sup. Ct., Feb. 8, 1954 (22 U. S.

i voici vedvcceteoenenmineawe 11, 19

Panhandle Eastern Pipe Line Co. v. Indiana Public

Service Commission, 332 U. S. 507 (1947) ...10, 16

Peoples Natural Gas Co. v. Federal Power Com-

mission, 127 F. 2d 153 (D. C. Cir. 1942), cert.

eee as So de os pas bteepeansereead 9, 18

Re Phillips Petroleum Company, 10 F. P. C. 246

tt +. ».irihéeuddendaneusneeshena 1, 10, 11, 20

Public Utilities Commission v. Attelboro Steam &

Electric Co., 273 U. S. 86 (1927) .............. 12

Ryan v. Carter, 93 U.S. 78 (1876) .............. 15

Spokane & Inland Empire R. Co. v. United States,

Pe Se CE ciebvcesnsguceteeetorses 15

State of Wisconsin v. Federal Power Commission,

205 F’. 2d 706 (D. C. Cir. 1953) .............. 1, 11

United States v. Dickson, 15 Pet. 141 (1941) ..... 14

United States v. McElvain, 272 U. S. 633 (1926) .. 15

United States v. Morrow, 266 U.S. 631 (1925) ... 14

STATUTES:

Natural Gas Act of June 21, 1938, c. 566, 52 Stat.

821, as amended, 15 U.S. C. 717 et seq. (1946 ed.)

$1(a) andi(b) ..2, 8, 9, 10, 13, 14, 15, 17, 18

St oven ed dade eke sedbnenaswas seeetehe 18

28 U.S.C. § 1254 (1) (Supp. IV, 1946 ed.) ....... 2

52 Stat. 831 (1938),15 U.S.C. § 717r(b} (1946ed.) 2

OTHER CITATIONS:

In the matter of Northern Natural Gas Co., Federal

Power Commission docket No. G-2217

SEE sc cebovedeverceereveversees & @& 7

SEED Socrevcsducdeveveddeteséevedioce 21

DEE ME -orercccerecesevecesseseerteuese 21

DEED Seed ecvecdesedecdsesuoerzecanet 4

DEED dvvvcescevceveveceecoreseseeses 4

SEE GP vce crcccccocseccneseseesssacoee 4

BIE GD oc cc ccccccccsecssocsoeoreoccese 4

Rule 27 (9) (d) Rules of the United States Supreme

— } ee ee re ee

In the

Supreme Court of the United States

October Term, 1953

No 280

PHILLIPS PETROLEUM COMPANY,

Petitioner,

vs.

STATE OF WISCONSIN, et al.,

Respondents.

No. 281

STATE OF TEXAS, et al.,

Petitioners,

vs.

STATE OF WISCONSIN, et al.,

Respondents.

No. 418

FEDERAL POWER COMMISSION,

Petitioner,

vs.

STATE OF WISCONSIN, PUBLIC SERVICE COM-

MISSION OF WISCONSIN, et al., Respondents.

JOINT BRIEF AMICI CURIAE

OPINIONS BELOW

The opinion of the Court of Appeals for the District of

Columbia is reported in 205 F. 2d 706 (1953). The opin-

ion and accompanying order of the Federal Power

Commission is reported in 10 F. P. C. 246 (1951).

ess

2

JURISDICTION

The jurisdiction of this Court is invoked under 52

Stat. 831 (1938), 15 U. S. C. §717r(b) (1946 ed.) and 28

U.S. C. §1254(1! (Supp. IV, 1946 ed.).

QUESTION PRESENTED

Is Phillips Petroleum Company a “natural gas com-

pany” within the meaning of the Natural Gas Act so

that the Federal Power Commission has jurisdiction to

fix the rates at which Phillips sells natural gas to five

interstate pipeline companies for interstate transpor-

tation and resale for ultimate distribution to the pub-

lic?

STATUTE INVOLVED

The pertinent provision of the Natural Gas Act (Act

of June 21, 1938, c. 566, 52 Stat. 821, as amended, 15 U.

S. C. 717 et seq., 1946 ed.) is as follows:

“Section 1. (a) As disclosed in reports of the

Federal Trade Commission made pursuant to Senate

Resolution 83 (Seventieth Congress, first session)

and other reports made pursuant to the authority

of Congress, it is hereby declared that the business

of transporting and selling natural gas for ultimate

distribution to the public is affected with a public in-

terest, and that Federal regulation in matters re-

lating to the transportation of natural gas and the

sale thereof in interstate and foreign commerce is

necessary in the public interest.

“(b) The provisions of this act shall apply to

the transportation of natural gas in interstate com-

merce, to the sale in interstate commerce of natural

gas for resale for ultimate public consumption for

domestic, commercial, industrial, or any other use,

and to natural-gas companies engaged in such trans-

portation or sale, but shall not apply to any other

transportation or sale of natural gas or to the local

——_

3

distribution of natural gas or to the facilities used

for such distribution or to the production or gath-

ering of natural gas.”

STATEMENT OF THE CASE

Briefly, the facts concerning the sales made by Phil-

lips which raise the question here are these: Phillips

owns and operates natural gas gathering systems and

processing plants. Through progressively larger pipe-

lines it gathers gas that it produces from its own wells

and other gas that it buys, at common points in and near

its processing plants (R. 1743). At these plants it

processes the gas to make it salable or to recover ex-

tractable products or both (R. 1742-43). Phillips then

moves the gas a short distance to meters located either

just within or outside the plant enclosure. At these me-

ters the gas is delivered by Phillips to five interstate

pipeline companies ‘n fulfiliment of sales contracts pre-

viously made (R. 1691-1711, 1743-44). These pipeline

companies then transport the gas in interstate commerce

to the states where it is resold and ultimately distrib-

uted to the public (R. 1827-34).

e

INTEREST OF AMICI CURIAE

This brief is filed by the States of Minnesota, Iowa

and Nebraska and the City of Minneapolis pursuant to

Rule 27 (9) and (d) of the Rules of the United States

Supreme Court.

These amici curiae are all vitally concerned and will

be affected by the outcome of these cases. Northern

Natural Gas Company, through its subsidiary, Indepen-

dent Natural Gas Company, purchases gas from Phillips

Petroleum Company, the sales of which are involved in

these cases. (Northern Natural Gas Company will some-

———— i

4

times hereafter be referred to as “Northern” and Phil-

lips Petroleum Company as “Phillips.” )

The common interest and concern of Minnesota, Iowa

and Nebraska and the City of Minneapolis is evidenced

by the fact that natural gas is sold by Northern to di-

rect consumers of Northern, and to utility companies in

these three states who in turn distribute and sell the gas

to ultimate consumers. In 1953 Northern sold approxi-

mately 240,000,000 MCF of gas in these three states. In

1954 it is estimated that Northern will sell approximate-

ly 270,000,000 MCF of gas in these three states.

It is estimated by Northern that out of its total gas

purchases of approximately $40,000,000 in the year 1954,

approximately $10,000,000 will be paid to Phillips for

gas purchased by Northern to be distributed in the ap-

proximate volumes related below in the states of Minne-

sota, Iowa and Nebraska. See Exhibit 83, In the Matter

of Northern Natural Gas Co., Federal Power Commis-

sion docket No. G-2217 (hereinafter cited as “F. P. C.

docket No. G-2217.”)

Exhibit 6 in F. P. C. docket No. G-2217 discloses that

the total system-wide sales of Northern for the year

1954 are estimated at approximately 288,000,000 MCF.

Northern estimates that it or its wholly owned or

controlled subsidiaries will purchase from Phillips for

the year 1954 approximately 83,816,000 MCF. See Ex-

hibits 17, 80 and 82 in F. P. C. docket No. G-2217.

These figures disclose that the purchases estimated

to be made by Northern, or its subsidiaries, from Phil-

lips will constitute approximately 29% of the total sys-

tem-wide estimated sales of Northern for the year 1954.

The particular interest and concern of the sovereign

states and the City of Minneapolis, who are here amici

curiae, are as follows:

5

1. STATE oF Minnesota. The particular interest

and concern of the State of Minnesota in the outcome of

this case arises in part from the fact that the State of

Minnesota purchases gas as a direct customer from

Northern. It also purchases gas from distributing com-

panies which buy all of their gas from Northern. North-

ern is the only interstate pipeline company serving

natural gas in the State of Minnesota.

The total volume of gas bought by the State of Minne-

sota, in its sovereign capacity, for various State insti-

tutions, in the year 1953 amounted to 2,414,299 MCF, at

a cost of $428,701.32.

During 1952 Northern sold approximately 105,000,000

MCF of natural gas in the State of Minnesota which

would produce a total revenue to Northern at rates un-

der the Federal Power Commission’s opinion No. 233 and

accompanying order of July 30, 1952, docket No. G-1881,

95 P. U. R. (N. S.) 143, of approximately 25 million dol-

lars.

The total volume which Northern estimates it will sell

in the State of Minnesota for the year 1954 is approxi-

mately 125,000,000 MCF. See Exhibit 6 in F. P. C. docket

No. G-2217.

Approximately 43% of the total estimated sales of

Northern for the year 1954 will be made in the State of

Minnesota for ultimate public consumption.

2. Ciry oF MINNEAPOLIS. The particular interest and

concern of the City of Minneapolis in the outcome of this

case is based on the fact that:

(1) the City of Minneapolis purchased gas, through

its various governmental departments, from Min-

neapolis Gas Company during the year 1953 in the

amount of 272,098 MCF at a cost of $134,517.08;

(2) Minneapolis Gas Company purchases all of its gas

from Northern; and

(3) the Minneapolis Gas Company operates under a

franchise granted by the City of Minneapolis, which

involves the rates to be charged to the users of

gas within the city. It is therefore necessary for

the protection of the interests of the City of Min-

neapolis and citizen consumers of gas within the

the city, that the City of Minneapolis express its

concern and interest in the outcome of this case.

3. Strate or Iowa. The State of Iowa and many of

the citizens thereof are vitally concerned with the out-

come of this case. Northern sells natural gas to approx-

imately 75 communities in the State of Iowa, including

the cities of Des Moines, Council Bluffs, Ames, Boone,

Atlantic, Fort Dodge, Mason City and Sioux City. In 1953

the citizens of the State of Iowa purchased from North-

ern 57,656,000 MCF of natural gas.

Michigan-Wisconsin Natural Gas Company also sells

natural gas to many Iowa communities, including Fort

Madison, Fairfield, Burlington, Centerville, Mt. Pleas-

ant and Keokuk. In 1953 this company sold approxi-

mately 2,500,000 MCF of natural gas in the State of Iowa.

Natural Gas Pipeline Company of America, while not

directly concerned in the present litigation, will be di-

rectly affected with the decision rendered herein and that

Company sells natural gas to many Iowa communities,

including Davenport, Cedar Rapids and Clinton. In 1953

Natural Gas Pipeline Company sold 29,174,404 MCF in

the State of Iowa.

7

It can readily be seen that the State of Iowa and its

citizens have a direct and deep interest and concern in

the present litigation.

4. STATE oF NepraskKa. Not only the citizens of the

State of Nebraska, but the state government itself, are

consumers of large volumes of natural gas supplied by

interstate pipeline companies. Therefore, the State, on

behalf of itself and its citizens, is vitally concerned with

the outcome of the instant case.

There are approximately 224 cities and towns in the

state of Nebraska served natural gas from four inter-

state pipelines, namely, Northern Natural Gas Company,

Kansas-Nebraska Natural Gas Company, Inc., Natural

Gas Pipeline Company of America and North Central

Gas Company. There are also twenty-three major activi-

ties or institutions owned and operated by the State

of Nebraska which are so served natural gas.

During the year 1952, the interstate pipelines, operat-

ing in Nebraska, supplied approximately 70,000,000 MCF

of natural gas to the consumers in the state, from which

approximately $16,700,000 was paid to them.

In 1953 the State of Nebraska and its citizens pur-

chased solely from Northern Natural Gas Company ap-

proximately 49,000,000 MCF of natural gas, costing ap-

proximately $13,720,000. It is estimated that in 1954

Northern w'll sell 61,000,000 MCF of natural gas to the

State of Nebraska and its citizens. See Exhibit 6 in F.

P. C. docket No. G-2217. This volume of natural gas is

estimated to cost $18,300,000.

The State of Nebraska, during the year 1953, pur-

chased for its own institutions a total of 1,839,700 MCF

of natural gas from Northern and Kansas-Nebraska

Natural Gas Company, at a cost to it of $532,138.13.

a

Included among the cities so served in Nebraska are

Omaha, its largest city, and Lincoln, its capitol city. Rep-

resentative of the other cities are Beatrice, Fremont,

Hastings, Kearney, Norfolk, York, Scottsbluff, Grand

Island, Nebraska City and North Platte.

From the foregoing, we believe it is apparant that the

State of Nebraska and its citizens have a substantial

interest in the instant case and are genuinely concerned

in its decision.

SUMMARY OF ARGUMENT

The intent of Congress to regulate the sales in inter-

state commerce of natural gas for resale made by Phil-

lips here is obvious from the plain and unambiguous

language of §1 of the Natural Gas Act. It is clear from

the language of §1(b) of the Act that the “production or

gathering” proviso was intended to mean only the loca!

activities of physical production or physical gathering

which can be constitutionally regulated by a state. There-

fore, the “production or gathering” proviso of §1(b) does

not except the interstate sales made by Phillips here

from jurisdiction of the Federal Power Commission. Any

other construction would nullify the wholesome intent of

Congress.

ARGUMENT

L The sales made by Phillips to the five interstate pipe-

line companies are “sales in interstate commerce of

natural gas for resale for ultimate public consump-

tion” within the plain meaning of §1 of the Natural

Gas Act, and therefore, are subject to the rate-mak-

ing power of the Federal Power Coramission.

In resolving the question presented in this case it is

necessary to first determine whether the sales made by

Phillips to the five interstate pipeline companies are

within the purview of the Natural Gas Act. Only then is

it material to consider whether the proviso in §1(b) of

the Act regarding “production or gathering” ex-epts

these sales from the jurisdiction of the Federa) Power

Commission. For if the sales involved here were not cov-

ered by the Act, they would not be subject to federal

regulation and the proviso of £1(b) would have nothing

on which to operate. An activity not within the Act could

not be taken out of it.

The intent of Congress as to what activities are sub-

ject to federal regulation under the Natural Gas Act is

clearly evidenced by the plain and unambiguous lan-

guage of §1(b) of the Act. See Interstate Natural Gas Co.

v. Federal Power Commission, 156 F. 2d 949, 951 (5th

Cir. 1946), affirmed, 331 U. S. 682 (1947); Peoples

Natural Gas Co v. Federal Power Commission, 127 F. 2d

153, 155 (D. C. Cir. 1942), cert. denied, 316 U. S. 700.

Section 1(b) conveys an obvious and definite meaning;

the Natural Gas Act shall apply to three distinct things:

(1) the transportation of natural gas in interstate

commerce ;

10

(2) its sale in interstate commerce for resale; and

(3) -natural gas companies engaged in such trans-

portation or sale.

See Panhandle Eastern Pipe Line Co. v. Indiana Public

Service Commission, 332 U. S. 507, 516 (1947).

The reasons for federal regulation of the above inter-

state activities are set forth in the explicit language of

§1(a) of the Act:

(1) “the business of transporting and selling gas for

ultimate distribution to the public ig affected

with a public interest’; and

(2) “Federal regulation in matters relating to the

transportation and sale thereof in interstate

and foreign commerce is necessary in the public

interest.”

Thus, the coverage of the Natural Gas Act is succinctly

stated in language which is so clear and definite that the

intent of Congress is inescapable: the business of trans-

porting and selling natural gas in interstate commerce

for ultimate distribution to the public is affected with a

public interest and therefore is made subject to federal

regulation to protect that interest.

Are the sales here by Phillips within the affirmative

coverage of the §1(b) of the Act? Phillips admits in its

brief submitted to the Federal Power Commission (p.

38) and it is evident from the record that these sales

are sales “in interstate commerce of natural gas for re-

sale for ultimate public consumption.” The Commission’s

finding to this effect is undisputed (R. 1712, 1740; 16 F.

P. C. 246, 262, 276). The Commission also found that

Phillips’ operations here include the transportation of

natural gas in interstate commerce within §1(b) of the

—

11

Act. This interstate transportation by Phillips will not

be considered, however, because if the Commission has

jurisdiction over the interstate sales made by Phillips

here, the question of jurisdiction over the interstate

transportation by Phillips will be unnecessary to the dis-

position of this case. -

In its opinion (R. 1740, 10 F. P. C. at 270) the Com-

mission said:

“But for the exemption of production and gather-

ing in §1(b), as already noted, Phillips would be a

‘natural-gas company’. It concedes and on the record

here it could not deny, that the sales involved are

sales ‘in interstate commerce of natural gas for re-

sale for ultimate public consumption’ within §1(b)’s

affirmative stated coverage of the act, when con-

sidered independently of the exemption of produc-

tion and gathering.” (Italics added. )

The Commission’s finding on this point was cited with

approval by the Court of Appeals for the District of

Columbia in its review of the jurisdictional question

raised here in State of Wisconsin v. Federal Power Com-

mission, 205 F. 2d 706, 710 (D. C. Cir. 1953) :

“The Commission finds that the sales involved

here are sales in interstate commerce of natural gas

for resale. That finding is not disputed.”

That the sales of natural gas made by Phillips here

are sales in interstate commerce for resale is also shown

by the recent decision of this Court in the companion

cases of Michigan-Wisconsin Pipe Line Co. v. Calvert

and Panhandle Eastern Pipe Line Co. v. Calvert, Nos.

198-201, U S. Sup. Ct., Feb. 8, 1954 (22 U. S. Law Week

4119). The operations of the Michigan-Wisconsin Pipe

Line Company which presented the question in that de-

cision appear identical to the operations of Michigan-

12

Wisconsin here. In both instances Michigan-Wisconsin

accepted delivery of natural gas from Phillips at the me-

ter located just within the fence of the Sherman-Hans-

ford processing plant in Texas. After the gas was taken

into the Michigan-Wisconsin pipes, it moved, in a steady

and continuous flow, across state lines to consumers out-

side of Texas. (Compare R. 1690-1711, 10 F. P. C. at 251-

53, with Michigan-Wisconsin Pipe Line Co. v. Calvert,

supra at 4116-17.)

The question presented in the Michigan-Wisconsin and

Panhandle Eastern cases was (Michigan-Wisconsin Pipe

Line Co. v. Calvert, supra at 4116) :

“* * * whether the Commerce Clause is infringed

by a Texas tax on the occupation of ‘gathering gas’,

measured by the entire volume of gas ‘taken’, as ap-

plied to an interstate natural gas pipeline company,

where the taxable incidence is the taking of gas from

the outlet of an independent gasoline plant within

the State for the purpose of immediate interstate

transmission.”

In striking down the Texas occupational tax as an undue

burden on interstate commerce which violated the Com-

merce Clause, this Court held that the taking of gas by

Michigan-Wisconsin was essentially a part of interstate

commerce itself.

Earlier decisions of this Court further support the

finding by the Federal Power Commission that the sales

by Phillips to th= “ive interstate pipeline companies are

sales in inte. state commerce of natural gas for resale.

See Interstate Natural Gas Co. v. Federal Power Com-

mission, 331 U. S. 682, 688-90 (1947), Cf. Jersey Central

Power & Light Co. v. Federal Power Commission, 319

U. S. 61, 69 (1943) ; Public Utilities Commission v. Attel-

boro Steam & Electric Co., 273 U. S. 83, 86 (1927) ; Mis-

aa

—

souri ex rel. Barrett v. Kansas Gas Co., 265 U. S. 298, 308

(1924).

13

[l. The meaning of §1 of the Natural Gas Act is clear

and does not, by the “production or gathering” pro-

viso of §1(b), except the interstate sales made by

Phillips in this case from jurisdiction of the Fed-

eral Power Commission. From the language used,

the intent of congress is plainly evidenced that the

“production or gathering” proviso does not reach

the interstate sales here but is confined to local

activities of physical production and physical gath-

ering.

The purpose of Congress to regulate the sales by Phil-

lips here is evident from a reading of the affirmative

coverage provisions of §1(b) of the Act. Without more

it is clear that these interstate sales would be subject

to the rate-making jurisdiction of the Federal Power

Commission. It is necessary, however, to consider wheth-

er the proviso of §1(b) regarding “production or gather-

ing” affects the Commission’s jurisdiction over these in-

terstate sales by Phillips.

After affirmatively covering interstate transportation

and sales of natural gas for ultimate public consump-

tion, §1(b) then states that the Act shall not apply to

four activities:

(1) “any other transportation or sale of natural

gas” (other than those in interstate commerce] ;

(2) “the local distribution of natural gas”;

(3) “the facilities used for such [local] distribution’”’;

and

(4) “the production or gathering of natural gas.”

Are these activities consistent with federal regulation

‘ of interstate transportation and sales of natural gas or

14

do they exempt some phases of such transportation and

sales from jurisdiction of the Federal Power Commis-

sion?

The cardinal rule of statutory construction is to as-

certain and declare the intention of the legislature and

carry such intention into effect to the fullest degree.

Where the will of the lawmaking body is declared in plain

and unequivocal terms, a construction should not be

adopted which would nullify or defeat this intention. It is

evident from the clear and unambiguous language of $1

(a) and the affirmative coverage of §1(b) of the Act that

Congress intended to subject the interstate sales made

by Phillips in this case to federal regulation in the pub-

lic interest. The specific question is thus raised: does

the “production or gathering” proviso of §1(b) of the

Act carve out from jurisdiction of the Federal Power

Commission these interstate sales of natural gas made

by Phillips to the five pipeline companies?

The general purposes of a proviso were stated in the

decision of Minis v. United States, 15 Pet. 423, 445

(1841), where this Court said:

“The office of a proviso, generally, is either to ex-

cept something from the enacting clause, or, to

qualify or restrain its generality, or to exclude some

possible ground of misinterpretation of it, as ex-

tending to cases not intended by the Legislature to

be brought within its purview.” (Italics added.)

See United States v. Morrow, 266 U. S. 531, 534 (1925).

It is a fundamental rule of statutory construction that a

proviso should be strictly construed and held to include

no case not clearly within the purpose, letter or express

terms of the proviso. In United States v. Dickson, 15 Pet.

141, 165 (1841), this Court said:

“Passing from these considerations to another,

which necessarily brings under review the second

—

point of the objection to the charge of the court

below, we are led to the general rule of law which

has always prevailed, and become consecrated al-

most as a maxim in the interpretation of statutes,

that where the enacting clause is general in its

language and objects, and a proviso is afterwards

introduced, that proviso is construed strictly, and

takes no case out of the enacting clause which does

not fall fairly within its terms. Jn short, a proviso

carves special exceptions only out of the enacting

clause; and those who set up any such exception,

must establish it as being within the words as well

as within the reason thereof.” (Italics added.)

15

Cf. United States v. McElvain, 272 U. S. 633, 639 (1926) ;

Spokane & Inland Empire R. Co. v. United States, 241 U.

S, 344, 348 (1916) ; Ryan v. Carter, 93 U.S. 78, 83 (1876).

See Hartford Electric Light Co. v. Federal Power Com-

mission, 131 F. 2d 953, 962 (2nd Cir. 1942), cert. denied,

319 U.S. 741 (1943). Therefore, if it is possible, such con-

struction of a proviso should be adopted as is consistent

with, and not repugnant to, the purpose and intent of the

Act.

When § 1 of the Natural Gas Act is read in its entirety,

the intent of Congress, as to what shall be subject to

federal regulation, is evident from the clear and un-

ambiguous language employed. Section 1(a) states that

interstate sales and interstate transportation of natural

gas for ultimate distribution to the public must be sub-

ject to federal regulation in the public interest; section

1(b) affirmatively declares that the transportation of

natural gas in interstate commerce and its sale in inter-

state commerce for resale are subject to the Act; the

provisos in § 1(b) merely exclude any ground for mis-

interpreting the coverage of the Act by listing certain

local activities which can be constitutionally regulated

=

16

by the states and are not to be confused with interstate

sales for resale or interstate transportation of natural

gas. The provisos are only by way of explanation as to

what is covered by the Act.

Although the “production or gathering” proviso was

not prefaced by the descriptive term “local,” it is obvious

from the plain language used and the tenor of the other

provisos that Congress intended it to mean local physical

production and local physical gathering. Also, the defi-

nite meaning of § 1 of the Act cannot be avoided by any

technical semantic argument as to what is “production”

or what is “gathering.” The intent of Congress, as evi-

denced by the unambiguous language of the Act, to regu-

late the sales by Phillips here as sales “in interstate com-

merce of natural gas for resale,” is paramount and must

be given full effect.

The plain language of § 1 of the Natural Gas Act is

| nite by the purpose of the Act, as shown in its

egislative history, and the prior decisions of this Court.

The legislative history of the Act has been reviewed by

this Court on numerous occasions so there is no need to

repeat what has been said before, other than to briefly

comment on it. See Panhandle Eastern Pipe Line Co. v.

Indiana Public Service Commission, 332 U. S. 507, 520

(1947); Interstate Natural Gas Co. v. Federal Power

Commission, 331 U. S. 682, 689-90 (1947); Colorado In-

terstate Gas Co. v. Federal Power Commission, 324 U. S.

581, 601 (1945); Federal Power Commission v. Hope

Natural Gas Co., 320 U. S. 591, 609-10 (1944) ; Illinois

Natural Gas Co. v. Central Illinois Public Service Com-

mission, 314 U. S. 498, 506 (1942). As stated in these

opinions of this Court, the purpose of the Natural Gas

Act was to provide for the regulation of natural gas com-

panies transporting and selling natural gas in interstate

wd .

coramerce. What was sought to be reached were the

wholesale sales of natural gas in interstate commerce

which were national in character and not subject to state

regulation, even in the absence of Congressional action.

In Illinois Natural Gas Co. v. Central Illinois Public

Service Comm., supra at 506, this Court said:

“An avowed purpose of the Natural Gas Act of

June 21, 1938, was to afford, through the exercise of

national power over interstate commerce, an agency

for regulating the wholesale distribution to public

service companies of natural gas moving interstate,

which this Court had declared to be interstate com-

merce not subject to certain types of state regula-

tion. * * * By its enactment Congress undertook to

regulate a defined class of natural gas distribution

without the necessity, where Congress has not acted,

of drawing the precise line between state and federal

power by the litigation of particular cases.”

As this Court pointed out in Federal Power Commission

v. Hope Natural Gas Co., supra at 610, the Natural Gas

Act was passed to protect the public interest:

“The primary aim of this legislation was to pro-

tect consumers against exploitation at the hands of

natural gas companies.”

Because of the clear language of § 1 of the Natural

Gas Act and its purpose, it is hardly conceivable that

Congress intended that the “production or gathering”

proviso of § 1(b) remove from jurisdiction of the

Federal Power Commission the wholesale sales made by

Phillips in interstate commerce to the five pipeline com-

panies. The interstate sales involved in this case are one

of the things specifically intended to be covered by the

Act; therefore, it seems incongruous that Congress

would have removed them from the purview of the Act

by means of a proviso.

co

The identical jurisdictional question raised here was

before this Court in Interstate Natural Gas Co. v. Federal

Power Commission, 331 U. S. 682 (1947). That case in-

volved the jurisdiction of the Federal Power Commis-

sion to regulate sales made in the field by Interstate

Natural Gas Co. in Louisiana to three pipeline companies,

each of which transported the gas so purchased to mar-

kets in states other than Louisiana. The Interstate case

is not distinguishable from the instant situation merely

because Interstate Natural Gas Company happened to

be a natura] gas company within § 2(6) of the Act on

account of other operations conducted by it. The juris-

dictional question in the Interstate case turned solely

on the sales made in the field by Interstate and not by

the status of the company’s other operations. This Court

held: (1) the sales made in the Louisiana gas fields to

three pipeline companies for transportation to other

states and resale were “sales in interstate commerce”;

(2) the “production or gathering” proviso of § 1( b) of

the Act did not remove these sales from the Commis-

sion’s power of regulation. This Court concluded that

regulation of the interstate sales involved was pre-

dominantly a matter of national concern because un-

reasonable charges exacted at this stage of the inter-

state movement would have to be covered by rates

charged the ultimate consumers of the gas. The Natural

Gas Act was designed to specifically avoid such situa-

tions. See Peoples Natural Gas Co. v. Federal Power

Commission, 127 F. 2d 153, 155 (D. C. Cir. 1942), cert.

denied, 316 U. S. 700.

Additional judicial support for the plain meaning of

§ 1 of the Act that the scope of gathering and produc-

tion is confined to the local activities of physical gather-

—

ing and physical production and does not reach the in-

terstate transportation or sale of natural gas is found

in the recent cases of Michigan-Wisconsin Pipe Line Co.

vy. Calvert and Panhandle Eastern Pipe Line Co. v. Cal-

vert, Nos. 198-201, U. S. Sup. Ct., Feb. 8, 1954 (22 U.S.

Law Week 4119). In those cases the facts were almost

identical to the facts here regarding the sales by Phillips

to the five interstate pipeline companies. In holding that

the Texas occupational tax on gathering gas was void

because the incidence of the tax was on interstate com-

merce, this Court said (supra at 4118, 4119) :

“But the tax here is not levied on the capture,

gathering or production of the gas, but rather on

its taking into interstate commerce after produc-

tion, gathering and processing.

* * aa * *

19

«* * * But the processing, on which the tax is not

imposed, was done by Phillips and took place prior

to the taxable event of ‘taking’. As for the inter-

ference of title passing, appellees readily admit this

levy was designed to avoid taxing the sale; and we

think that, as a basis for finding a separate local

activity, the incidence must be a more substantial

economic factor than the movement of the gas from

a local outlet of one owner into the connecting inter-

state pipeline of another. Such an aspect of inter-

state transportation cannot be ‘carved out from

what is an entire or integral economic process,’ Nip-

pert v. Richmond, supra, at 423, by legislative

whimsy and segregated as a basis for the tax. The

separation must be realistic.”

The local aspects of production and gathering, as dis-

tinguished from the national aspects of interstate trans-

portation and sales of natural gas, were also recognized

by this Court in Federal Power Commission v. Hope

Natural Gas Co., 320 U. S. 591, 612-13 (1944):

a

20

“We do not mean to suggest that Congress was

unmindful of the interests of the producing states

in their natural gas supplies when it drafted the

Natural Gas Act. As we have said, the Act does not

intrude on the domain traditionally reserved for

control by state commissions; and the Federal

Power Commission was given no authority over ‘the

production or gathering of natural gas.’ § 1(b).

* * * Thus Congress was quite aware of the interests

of the producing states in their natural gas sup-

plies. But it left the protection of those interests to

measure other than the maintenance of high rates to

private companies. If the Commission is to be com-

pelled to let the stockholders of natural gas com-

panies have a feast so that the producing states

may receive crumbs from that table, the present act

must be redesigned. Such a project raises questions

of policy which go beyond our province.” (Italics

added. )

The administrative decisions of the Federal Power

Commission on the jurisdictional question in the instant

case which are contrary to the clear and unambiguous

language of the Natural Gas Act are entitled to no

weight here. The plain meaning of the Act cannot be dis-

regarded because the Commission, on occasion, has in-

terpreted it narrowly. For a complete analysis of the

course followed by the Commission, see the dissenting

opinion of Commissioner Buchanan in the instant pro-

ceeding, 10 F. P. C. 246, 307-15.

21

CONCLUSION

The simple question here is whether Federal Power

Commission should regulate the price of natural gas

sold in the field and subsequently resold for ultimate

public consumption. These amici curiae are gravely con-

cerned over the steadily increasing cost of natural gas

in the field in recent years.

Northern obtains its gas in Kansas, Texas, Oklahoma

and New Mexico and resells practicaliy all of such gas

in the states of Nebraska, South Dakota, Iowa and Min-

nesota. As of December 31, 1953, there were approxi-

mately 685,000 ultimate consumers on Northern’s sys-

tem in that area. This includes domestic, commercial

and industrial users. As of that date there were approxi-

mately 380,000 homes heated with natural gas in this

area from the system of Northern alone. The increase in

cost to the ultimate consumers in this area can be dem-

onstrated by the records in the recent F. P. C. docket No.

G-2217, a proceeding in which Northern filed for an in-

crease in its wholesale rates (the fourth increase filed in

the last four years). It is shown there that for twelve

months ending June 30, 1953, Northern sold 226,000,000

MCF of natural gas in the area named. Northern esti-

mates that in 1954 it will sell 279,000,000 MCF in the

same area (Exhibit 7 in F. P. C. docket No. G-2217).

This is an increase of 23.5% in volume. For the 226,000,-

000 MCF of natural gas Northern paid $21,175,640 and

for the 279,000,000 MCF it estimates it will pay $40,012,-

900 (Exhibit 16 in F. P. C. docket No. G-2217). This is

an increase of 88% in price. The Natural Gas Act was

passed to protect the ultimate consumers from such ap-

parently excessive charges.

We respectfully submit that the sales involved in the

instant case are within the rate-fixing jurisdiction of the

Federal Power Commission. This Court should affirm the

decision of the court below.

Respectfully submitted,

J. A. A. BURNQUIST,

Attorney General,

State of Minnesota,

GEORGE B. SJOSELIUS,

Deputy Attorney General,

State of Minnesota,

102 State Capitol,

St. Paul 1, Minnesota,

Attorneys for the State of Minnesota.

JOHN F. BONNER,

City Attorney,

City of Minneapolis,

Minneapolis, Minnesota,

Attorney for City of Minneapolis.

LEO A. HOEGH,

Attorney General, State of Iowa,

State Capitol,

Des Moines, Iowa,

Attorney for the State of Iowa,

CLARENCE S. BECK,

Attorney General, State of Nebraska,

State Capitol,

Lincoln, Nebraska,

Attorney for the State of Nebraska.

CERTIFICATE OF SERVICE

The undersigned, Assistant Attorney General for the

State of Minnesota, hereby certifies that on the 6th day

of March, 1954, he served a copy of the foregoing brief

upon each of the parties of record in this proceeding by

duly mailing a copy thereof by depositing the same in

the United States mail, properly addressed and with’

postage prepaid, to counsel of record for each of said

parties as follows:

ROBERT L. STERN (5 copies)

Acting Solicitor General of the

United States,

t of Justice,

Washington, D. C.

WILLIARL W. GATCHELL

(5 copies)

General Counsel, Federal Power

Commission,

1800 Ave. N. W

VERNON W. THOMSON,

Attorney General of Wisconsin.

STEWART G. HONECK,

= md Attorney General of

Wisconsin,

State Capitol,

Madison, Wisconsin.

Attorneys for

State of Wisconsin.

WILLIAM E. TORKELSON,

Chief Counsel, Public Service

Commission of Wisconsin.

1 West Wilson Street,

Madison, Wisconsin.

Attorney for Public Service C..m-

mission of Wisconsin.

aa

WALTER J. MATTISON,

City Attorney,

City of Milwaukee, Wisconsin.

HARRY G. SLATER,

First Assistant City Attorney,

City of Milwaukee, Wisconsin,

City of Milwaukee, Wisconsin.

GERALD K. O'BRIEN,

Prosecuting Attorney,

Wayne County, Michigan.

LEONARD SIMONS,

Wayne County, Michigan.

PRICE D

Attorney General, State of Texas.

J. PAULL MARSHALL,

Union Trust Building,

Washington 5, D. C.

Attorneys for State of Texas and

Railroad Commission of Texas.

MAC Q. WILLIAMSON,

Attorney General, State of

Oklahoma.

24

DAVID M. PROCTOR, FLOYD GREEN,

City Counselor, Conservation Attorney,

City of Kansas City, Missouri. “— of a

apitol ce Building,

JEROME M. JOFFER, Oklahoma City, Oklaoma

Special Utilities and Legislative

Counsel, City of Kansas City, J. PAULL MARSHALL,

Missouri, Union Trust Building,

2800 City Hall, Washington 5, D. C.

Kansas City, Missouri. Attorneys for Corporation Com.

Attorneys for mission of State of Oklahoma,

City of Kansas City, Missouri. JOE L. MARTINEZ,

PAUL T. DWYER, Attorney General,

Acting Corporation Counsel, State of New Mexico,

City of Detroit, Michigan. in ——— ta ed Mexico

rney for State of New Mexico

JAMES H. LEE, and Oil Conservation Commission,

Special Assistant Corporation State of New Mexico.

Counsel, City of Detroit, Mich.,

301 City Hall,

Detroit 26, Michigan.

Attorneys for

City of Detroit, Michigan.

JOSEPH J. BRIGHT,

Assistant Attorney General,

State of Minnesota,

102 State Capitol,

St. Paul, Minnesota.