Natural Gas Pipeline Co. v. Panoma Corp.
Headline: Court blocks Oklahoma from setting minimum prices for natural gas transported for resale, upholding federal agency’s exclusive control and limiting state power over interstate gas pricing.
Holding: The Court ruled that Oklahoma cannot set minimum prices for natural gas sold and transported for resale because such sales and transportation are under the exclusive control of the Federal Power Commission.
- Stops states from imposing minimum prices on interstate gas destined for resale.
- Assigns price-setting authority to the Federal Power Commission under federal law.
- Affects pipeline companies and state regulators involved in interstate gas sales.
Summary
Background
Oklahoma regulators tried to set a minimum price that a pipeline company must accept for natural gas after its production and gathering. The gas at issue was transported by the company for resale across state lines. The pipeline challenged the state rule, and the dispute reached the Supreme Court to decide whether the State or a federal agency controls pricing.
Reasoning
The core question was whether a State can regulate sales and transportation of gas that will be resold in interstate commerce. The Court relied on its earlier decision in Phillips Petroleum Co. v. Wisconsin and held that such sales and transportation fall under the exclusive authority of the Federal Power Commission under the federal Natural Gas Act (the federal law governing interstate gas rates). The Court rejected the argument that prior cases about constitutional questions controlled here, explaining those earlier decisions did not address the Natural Gas Act’s allocation of regulatory power. Applying Phillips, the Court reversed and barred Oklahoma’s price regulation.
Real world impact
The decision prevents Oklahoma from enforcing its minimum-price rule for gas transported for interstate resale and makes rate-setting a matter for the federal agency. Pipeline companies cannot be compelled to follow state-set minimum prices for interstate resale gas. Because the ruling follows the Court’s prior Phillips holding, federal regulation will govern pricing when the Federal Power Commission acts.
Dissents or concurrances
Justice Douglas dissented, saying States may regulate price until the federal agency actually imposes federal price regulation, which would leave state rules in place until the agency acts.
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