California v. Lo-Vaca Gathering Company Page 2

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Media for California v. Lo-Vaca Gathering Company

Audio Transcription for Oral Argument - November 17, 1964 in California v. Lo-Vaca Gathering Company

Audio Transcription for Oral Argument - November 18, 1964 in California v. Lo-Vaca Gathering Company

Richard A. Solomon:

As the Court may remember, that case involved the sale of gas by the California Electric Company to the navy.

The navy took the power in California and transmitted over its lines into Nevada.

Most of that purchased by the navy was for its own users, but about 17% was used for resale to residents of a housing project.

Given these facts, the Court had no difficulty in saying that the entire transaction was jurisdictional.

And it brushed off with a single work unsubstantial, a claim that the sale was not jurisdictional because California Electric didn't intend to make sales for resale and hadn't so specified in its contract.

The Court said, and I'm quoting from page 316, “The concrete fact of resale of some portion of the electric energy transmitted from a state to a point outside thereof invokes federal jurisdiction at the outset.”

The problem comes from the language of the Court in the California case in which it suggested, which had left open the question, as to whether if California Electric had made two separate sales to the navy, one for resale and one for its own use, whether the latter sale could have been classified as juris -- as “nonjurisdictional”.

The Court citing its own opinion in the Penn Water case at 343 U.S. strongly implied that such a segregation would not have been available to split an interstate from an intrastate's dream of gas or power.

But it did question as to whether or not the problem might be as it said different with respect to splitting off such a stream between a purchaser's own use and the resale situation.

Now, I suggest that nothing in this Court's opinion supports the lower court decision here.

All the Court was suggesting was that on appropriate circumstances it might be possible for the sole supplier of a buyer as California electric of course was the sole supplier of the navy, to make two separate sales to that buyer, one of which would be jurisdictional and the other which would not be jurisdictional.

Thus, a pipeline at the end of its pipeline might take the gas which should had El Paso, it might take the gas which had -- had been transporting and make a sale -- make one sale to a city for a jurisdictional purpose and another sale to the same city for its own use.

The problem involved in the City of Hastings case which was referred to in the footnote in California and which is one of the other major cases relied on here.

But in such a situation of course when the pipeline says that the “nonjurisdictional” sale is a sale of my gas for use in your boiler fuel.

That is where the fuel for use in the boiler is coming from.

It's not coming from three or four other sellers.

We don't have a situation in where the “nonjurisdictional” contract merely claims to be providing this gas, it is providing this gas.

Now, the other primary prop in the lower court's opinion for this decision is the case in the Eight Circuit Court of Appeals called State of North Dakota against the Federal Power Commission, which is discussed at considerable length in the briefs.

And which may possibly represent a peculiar situation in which it limited amount of segregation, if you want to use the word, is possible in the intrastate field.

The facts there were that the Montana-Dakota Pipeline was buying gas from one source in Montana.

It was buying gas at the so-called Tioga Station.

All of its gas came from there.

The gas actually previously was 85% from Amerada and 15% from Cigna.

But all the gas they purchased was at that point.

They bought it under two contracts; one of which was admittedly for intrasta – interstate, and the other of which was restricted for intrastate deals.

Most of the intrastate gas actually went over a separate line which didn't get out of the state at all.

But some of the intrastate gas traveled along with the interstate gas in a line which extended into Wyoming and was siphoned off before it got to Wyoming into four small North Dakota communities.

And the Court, the Eight Circuit held in that case that those sales were intrastate commerce because they were made in the State of North Dakota and never got outside of the State of North Dakota.

Well, it's perfectly clear I think from my recital of the facts that the reason that they were able to do so was that you didn't have between the Tioga plant and the four laterals to these North Dakota communities intervening parties coming in and bringing gas.

So that it was fair to say, that all of the gas sold at the Tioga plant for intrastate sale and no other gas was the gas that got into these four laterals.