United Gas Pipe Line Co. v. Mobile Gas Service Corp.

Last updated
United Gas Pipe Line Co. v. Mobile Gas Service Corp.
Seal of the United States Supreme Court.svg
Argued November 7–8, 1955
Decided February 27, 1956
Full case nameUnited Gas Pipe Line Co. v. Mobile Gas Service Corp., et al.
Citations350 U.S. 332 ( more )
76 S. Ct. 373; 100 L. Ed. 2d 373; 1956 U.S. LEXIS 1650
Case history
Prior215 F.2d 883 (3d Cir. 1954); cert. granted, 348 U.S. 950(1955).
Holding
A gas company could not unilaterally modify a rate in a contract on file with the Federal Power Commission
Court membership
Chief Justice
Earl Warren
Associate Justices
Hugo Black  · Stanley F. Reed
Felix Frankfurter  · William O. Douglas
Harold H. Burton  · Tom C. Clark
Sherman Minton  · John M. Harlan II
Case opinion
MajorityHarlan, joined by unanimous
Laws applied
National Gas Act, 15 U.S.C. § 717 et seq.

United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956), is a United States Supreme Court case in which the Court interpreted the Natural Gas Act of 1938 (NGA) as not allowing a gas supply company to unilaterally modify rates in a natural gas supply contract by filing a new rate schedule with the Federal Power Commission (FPC). [1] Mobile Gas and its companion case Federal Power Commission v. Sierra Pacific Power Co. [2] established the Mobile-Sierra presumption which holds that an electricity or natural gas supply rate established resulting from a freely negotiated contract is presumed to be "just and reasonable" and thus acceptable under the NGA or Federal Power Act (FPA). [3]

Contents

Background

The NGA was enacted in 1938 to regulate the interstate natural gas industry, including gas pipeline companies. The NGA regulated the rates charged by gas companies to their customers, which included local gas distribution companies and industrial users, through the filing by gas companies of rate schedules and contracts with customers. The NGA required gas companies to file tariffs of their new rates with the FPC, a federal administrative agency, at least thirty days prior to their becoming effective, and authorized the FPC to investigate rates to determine if they were in the public interest. The FPC could also suspend rates except for those involving gas supplied to industrial users while the investigating the rates.

In 1946 the Ideal Cement Company wanted to construct a cement plant in Mobile, Alabama. The local natural gas distribution company, Mobile Gas Service Company, entered into a ten-year contract with the United Gas Pipe Line Company to obtain gas at 10.7 cents per thousand cubic feet, which was at a substantially lower price than that charged for other gas customers, so that it could then provide the gas to the cement plant at 12 cents per thousand cubic feet. The contract between Mobile Gas and United Gas was filed with and approved by the FPC, and became part of the tariff and contracts on file for United Gas.

In June 1953 United Gas filed a new rate schedule with the FPC which purported to increase the rate for the natural gas for resale to the Ideal Cement plant to 14.5 cents per thousand cubic feet, which was a rate closer to that paid by other gas customers. Mobile Gas objected, stating that under the NGA United Gas could not unilaterally change the contract rate. The FPC ruled that the new rate, being a non-suspendable industrial rate under the NGA, would automatically become effective thirty days after it was filed unless it found the rate to be unlawful. Mobile Gas paid the new rate until April 15, 1955, when it assigned its contract with Ideal Cement to United Gas with the approval of the FPC. Since the only remaining issue was the alleged excess payment resulting from the difference between 10.7 and 14.5 cents per thousand cubic feet that Mobil Gas had paid to United Gas while responsible for the contract, the FPC ended its investigation regarding the validity of the new rate as it believed that its ruling would not have a retroactive effect.

Mobile Gas appealed the administrative decision of the FPC to the Court of Appeals for the Third Circuit, which reversed the decision and directed the FPC to reject the new tariffed rate in question and to order United Gas to refund the excess payments received under the new rate. [4] The FPC and United Gas appealed the circuit court order to the Supreme Court, which granted certiorari.

Opinion

The unanimous opinion by Justice Harlan noted that there was no allegation that the NGA was unconstitutional, so the only issue in the case involved the statutory interpretation of the NGA. The opinion stated that the provision in the NGA requiring the filing of rate schedules was not a rate setting procedure, but a prerequisite to the establishment of new rates. While the NGA required a gas company to file new rates and contracts with the FPC, it did not authorize the abrogation of any contract in effect. The FPC could investigate rates in contracts, but contracts could be modified or rejected by the FPC only if the rate in the contract was found to be so low as to be harmful to third parties and not in the public interest. Thus, a gas company had no authority to unilaterally change a rate in a contract by filing a new rate schedule with the FPC.

The opinion also explained that the NGA was different from the Interstate Commerce Act (ICA) then in effect, which required transportation companies to use the same rate schedule for all customers and did not authorize special rates to be set by contract with individual customers as the large number of customers engaged in interstate commerce did not permit an administrative agency to review contracts with special rates. In comparison, there were relatively few gas companies and customers, and the NGA’s authorization to set rates using contracts recognized that dedicated infrastructure and capacity with individualized costs might be required for a gas company to serve a customer. Based on this difference, the Court then distinguished the prior case of Armour Packing Co. v. United States (1908), [5] where a contract between a shipper and a railroad used the same rate as in a rate schedule filed with the Interstate Commerce Commission (ICC). The railroad later filed a new rate schedule with the ICC. The Supreme Court held in that case that the new rate applied as the ICA, unlike the NGA, required the same rate schedule for all customers.

As the NGA did not authorize a gas company to change rates specified in its contracts unilaterally, the new rate schedule filed by United Gas was a nullity with respect to the gas provided for the Ideal Cement plant. As such, United Gas was required to refund the excess payments made under the new rate schedule to Mobile Gas.

Subsequent events

The Supreme Court in the companion case FPC v. Sierra Pacific Power Co. found a similar result regarding contracts filed with the FPC involving electricity sales under the FPA. [2] In later cases, the validity of rates set by contracts between gas and electric transmission companies became known as the Mobile-Sierra presumption. Under this presumption, an electricity or gas rate specified in a freely negotiated contract is presumed to be “just and reasonable” and thus acceptable under the FPA or NGA. [3]

A later case which had facts similar to Mobile Gas, except that the contract between the gas pipeline company and customer stated that the applicable rate was the rate in the schedule filed with the FPC. In United Gas Pipe Line Co. v. Memphis Light, Gas, and Water Division (1958), [6] the Supreme Court held that the gas company could revise the referenced gas rate in the contract by filing a new rate schedule with the FPC.

The cost of natural gas supplied by United Gas to the cement plant in Mobile, Alabama was the subject of a later Supreme Court decision, United Gas Pipe Line Co. v. Ideal Cement Co. (1962). [7] The issue in that case was whether United Gas could recoup the cost of a tax levied by the City of Mobile on natural gas sales. The Supreme Court vacated a lower court ruling that the tax was actually a means of licensing a pipeline company’s right to enter the state, and stated that federal courts should abstain from ruling on complex state law issues which have not yet been resolved. This form of federal court abstention is based on the case of Railroad Commission v. Pullman Co. (1941) [8] and is known as the Pullman abstention doctrine. [9]

On October 1, 1977, the FPC was replaced by the Federal Energy Regulatory Commission. [10]

See also

Related Research Articles

Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) is the United States federal agency that regulates the transmission and wholesale sale of electricity and natural gas in interstate commerce and regulates the transportation of oil by pipeline in interstate commerce. FERC also reviews proposals to build interstate natural gas pipelines, natural gas storage projects, and liquefied natural gas (LNG) terminals, in addition to licensing non-federal hydropower projects.

Tying is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a tying sale makes the sale of one good to the de facto customer conditional on the purchase of a second distinctive good. Tying is often illegal when the products are not naturally related. It is related to but distinct from freebie marketing, a common method of giving away one item to ensure a continual flow of sales of another related item.

Eversource Energy is a publicly traded, Fortune 500 energy company headquartered in Hartford, Connecticut, and Boston, Massachusetts, with several regulated subsidiaries offering retail electricity, natural gas service and water service to approximately 4 million customers in Connecticut, Massachusetts and New Hampshire.

Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 U.S. 519 (1978), is a case in which the United States Supreme Court held that a court cannot impose rulemaking procedures on a federal government agency. The federal Administrative Procedure Act of 1946 and an agency's statutory mandate from Congress establish the maximum requirements for an agency's rulemaking process. An agency may grant additional procedural rights in the regulatory process. However, a reviewing court cannot "impose upon the agency its own notion of which procedures are 'best' or most likely to further some vague, undefined public good"; to do so would exceed the limits of judicial review of agency action.

Railroad Commission of Texas

The Railroad Commission of Texas is the state agency that regulates the oil and gas industry, gas utilities, pipeline safety, safety in the liquefied petroleum gas industry, and surface coal and uranium mining. Despite its name, it ceased regulating railroads in 2005.

Gulf South Pipeline is a natural gas pipeline system that transports gas between south and east Texas, Louisiana, Alabama, Mississippi, and Florida. The system is owned by a limited partnership. The system connects to Henry Hub in Louisiana. Its FERC code is 11. The pipeline was formerly owned by the United Gas Pipe Line Company, a subsidiary of United Gas Corporation.

Commodity Futures Trading Commission v. Schor, 478 U.S. 833 (1986), was a case in which the Supreme Court of the United States held an administrative agency may, in some cases, exert jurisdiction over state-law counterclaims.

UGI Corporation

UGI Corporation is a natural gas and electric power distribution company headquartered in King of Prussia, Pennsylvania, with extensive operations in the United States and Europe.

Memphis Light, Gas and Water

The Memphis Light, Gas and Water Division (MLGW) is a municipal public utility serving Memphis and Shelby County, Tennessee.

Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co., 549 U.S. 443 (2007), was a United States Supreme Court case about attorney's fees in bankruptcy cases. Justice Samuel Alito wrote the opinion for a unanimous court.

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), is a United States Supreme Court case that involved issues concerning statutory standing in antitrust law.

Smyth v. Ames, 171 U.S. 361 (1898), also called The Maximum Freight Case, was an 1898 United States Supreme Court case. The Supreme Court voided a Nebraska railroad tariff law, declaring that it violated the Fourteenth Amendment to the United States Constitution in that it takes property without the due process of law. The Court defined the constitutional limits of governmental power to set railroad and utility rates by stating that regulated industries have the right to a "fair return". The ruling was later overturned in Federal Power Commission v. Hope Natural Gas Co.

Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39 (2003), is a Supreme Court of the United States case holding that a federal administrative agency approved public utility tariff preempted a state public utilities commission rate order under the filed rate doctrine.

Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672 (1954), was a case decided by the Supreme Court of the United States holding that sale of natural gas at the wellhead was subject to regulation under the Natural Gas Act. Prior to this case, independent producers sold natural gas to interstate pipelines at unregulated prices with any subsequent sales for resale being regulated. The State of Wisconsin sought to close this regulatory loophole in order to keep consumer prices low. Natural gas producers argued that wellhead sales were exempt from federal regulation as "production and gathering." Below, the Federal Power Commission compiled an evidentiary record 10,000 pages long before deciding not to regulate wellhead sales. However, the courts reversed, and the case resulted in federal price controls on wellhead gas prices for the next 40 years.

Natural Gas Act of 1938

The Natural Gas Act of 1938 was the first occurrence of the United States federal government regulating the natural gas industry. It was focused on regulating the rates charged by interstate natural gas transmission companies. In the years prior to the passage of the Act, concern arose about the monopolistic tendencies of the transmission companies and the fact that they were charging higher than competitive prices. The passage of the Act gave the Federal Power Commission (FPC) control over the regulation of interstate natural gas sales. Later on, the FPC was dissolved and became the Federal Energy Regulatory Commission (FERC). FERC continues to regulate the natural gas industry to this day.

On March 20, 2011, AT&T announced that it would purchase T-Mobile USA. On August 31, 2011, the Antitrust Division of the United States Department of Justice formally announced that it would seek to block the takeover, and filed a lawsuit to such effect in federal court. The bid was abandoned by AT&T on December 19, 2011.

Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), is a United States Supreme Court case in which the Court interpreted the Federal Power Act (FPA) as permitting the Federal Power Commission (FPC) to modify a rate specified in a contract between an electric utility and distribution company only upon a finding that the contract rate is unlawful because it adversely affects the public interest. Sierra Pacific and its companion case United Gas Pipe Line Co. v. Mobile Gas Service Corp. established the Mobile-Sierra doctrine, which holds that an electricity or natural gas supply rate established resulting from a freely negotiated contract is presumed to be "just and reasonable" and thus acceptable under the FPA or Natural Gas Act (NGA).

United Gas Pipe Line Co. v. Ideal Cement Co., 369 U.S. 134 (1962), is a United States Supreme Court case which vacated a lower appellate court decision, holding that federal courts should abstain from ruling on the constitutionality of a state tax issue that state courts should determine.

United Gas Pipe Line Co. v. Memphis Light, Gas, and Water Division, 358 U.S. 103 (1958), is a United States Supreme Court case in which the Court interpreted the Natural Gas Act of 1938 (NGA) as allowing a gas supply company to unilaterally modify a rate in a natural gas supply contract if the contract specified that the rate was that of the rate schedule filed with the Federal Power Commission (FPC) and the gas company filed a new rate schedule. This case clarified the Mobile-Sierra doctrine established by United Gas Pipe Line Co. v. Mobile Gas Service Corp. (1956) and its companion case Federal Power Commission v. Sierra Pacific Power Co. (1956), which holds that an electricity or natural gas supply rate established resulting from a freely negotiated contract is presumed to be "just and reasonable" and thus acceptable under the NGA or Federal Power Act (FPA).

<i>Scenic Hudson Preservation Conference v. Federal Power Commission</i> US Circuit Court of Appeals case

Scenic Hudson Preservation Conference v. Federal Power Commission, 354 F.2d 608 is a United States Second Circuit Court of Appeals case in which a public group of citizens, the Scenic Hudson Preservation Conference, organized and initiated legal action after the Federal Power Commission approved plans for Consolidated Edison to construct a power plant on Storm King Mountain, New York. The federal regulatory agency had denied that the environmental group could bring action, but the court disagreed, ruling that Scenic Hudson had legal standing because of their "special interest in aesthetic, conservational, and recreational aspects" of the mountain.

In order to insure that the Federal Power Commission will adequately protect the public interest in the aesthetic, conservational, and recreational aspects of power development, those who by their activities and conduct have exhibited a special interest in such areas must be held to be included in the class of 'aggrieved' parties under s. 313 (b). We hold that the Federal Power Act gives petitioners a legal right to protect their special interests.

References

  1. ↑ United Gas Pipe Line Co. v. Mobile Gas Service Corp., 250 U.S. 332 (1956).
  2. 1 2 Federal Power Commission v. Sierra Pacific Power Co. , 250 U.S. 348 (1956).
  3. 1 2 Ascani, Catherine (2009). "Casenote: Deal or No Deal: It's a Deal in Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1 of Snohomish County, Washington". Mercer Law Review. Walter F. George School of Law, Mercer University. 60: 1025, 1032–33.
  4. ↑ Mobile Gas Service Corp. v. Federal Power Commission, 215F.2d883 ( 3d Cir. 1954).
  5. ↑ Armour Packing Co. v. United States, 209 U.S. 56 (1908).
  6. ↑ United Gas Pipe Line Co. v. Memphis Light, Gas, and Water Division , 358 U.S. 103 (1958).
  7. ↑ United Gas Pipe Line Co. v. Ideal Cement Co. , 369 U.S. 134 (1962).
  8. ↑ Railroad Commission v. Pullman Co. , 312 U.S. 496 (1941).
  9. ↑ Stein, Michael Ashley (1995). "The Domestic Relations Exception to Federal Jurisdiction: Rethinking an Unsettled Federal Courts Doctrine". Boston College Law Review. 36: 669, 692, 694–95.
  10. ↑ 42 U.S.C.   § 7172.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.