Federal Power Commission v. Amerada Petroleum Corp.

1965-02-01

Headline: Federal agency’s power to regulate gas sales upheld; Commission allowed to treat gas delivered into an interstate pipeline as subject to federal oversight when commingled flows are later resold across state lines, affecting producers and pipelines.

Holding: The Court reversed the appeals court and held that the Federal Power Commission may regulate gas sold into an interstate pipeline when commingled flows lead to resale across state lines, so the Commission’s jurisdiction stands.

Real World Impact:

Upholds federal regulation over gas sold into interstate pipelines when flows are commingled and resold.
Makes producers and pipelines subject to federal oversight despite contracts claiming only in-state use.
Leaves similar disputes to be decided case-by-case under the same rule.

Topics: interstate gas regulation, pipeline sales, federal agency power, commingled gas

Summary

Background

An interstate pipeline company (Montana-Dakota, or MDU) contracted to buy natural gas from two local producers (Amerada and Signal) under agreements that said the gas would be used entirely within North Dakota. Some other local sellers had certified sales for resale. The gas from all sellers was delivered and mixed in the same pipeline at a common plant, and parts of that mixed stream were later sent out of state and resold. The Federal Power Commission said the mixed deliveries were subject to its federal regulation; an appeals court had rejected that view and treated the North Dakota contracts as outside federal authority.

Reasoning

The central question was whether the Commission could regulate gas delivered into the interstate pipeline when the physical stream was commingled and some of the mixed gas ultimately was resold across state lines. The Court explained that this case factually matched the Court’s recent decision in Lo-Vaca and thus the Commission’s assertion of jurisdiction was appropriate. The Supreme Court reversed the appeals court and allowed the Commission to treat these sales as subject to federal regulation because the deliveries into the common interstate stream could be resold out of state. Effectively, the federal agency prevailed.

Real world impact

Producers and pipelines that deliver gas into a mixed interstate stream cannot avoid federal oversight simply by labeling a contract for in-state use. The decision applies similar fact patterns on a case-by-case basis, so future disputes will be decided under the same approach rather than by a broad new rule. Parties should expect federal review when commingled flows reach interstate markets.

Dissents or concurrances

Two Justices (Goldberg, joined by Stewart) and Justice Harlan added a concurrence clarifying that here respondents claimed more nonjurisdictional gas than their proportionate share, so the Court did not decide whether a precise, separate in-state sale could exist despite commingling.