Maryland v. Louisiana

PETITIONER:Maryland
RESPONDENT:Louisiana
LOCATION:Home of George Summers

DOCKET NO.: 83 ORIG
DECIDED BY: Burger Court (1975-1981)
LOWER COURT:

CITATION: 451 US 725 (1981)
ARGUED: Jan 19, 1981
DECIDED: May 26, 1981

ADVOCATES:
Eugene Gressman – for the defendant
Frank J. Peragine – for intervenor Pipeline Companies
Robert G. Pugh, Jr. – for the defendant
Stephen H. Sachs – for plaintiff States
Stuart A. Smith – for United States

Facts of the case

Question

Audio Transcription for Oral Argument – January 19, 1981 in Maryland v. Louisiana

Warren E. Burger:

The Court will hear arguments first this morning in case of the State of Maryland against the State of Louisiana, an original jurisdiction case.

Mr. Sachs, you may proceed whenever you are ready.

Stephen H. Sachs:

Thank you very much Mr. Chief Justice, and may it please the Court.

This original action challenges the validity of Louisiana’s First-Use Tax on natural gas and its companion measures that comes to the Court on exceptions, the two reports of the Special Master.

In his report of May 14, 1980, the Special Master recommended among other things that the Court grant the motions to intervene of the United States of the seventeen pipeline companies and of the State of New Jersey.

In his report of September 15, 1980, he recommended denial of Louisiana’s motion to dismiss and denial of the eight plaintiff States’ motion for judgment on the pleading.

With the Court’s permission, I would like to discuss the operation of the statutory scheme with particular emphasis on its facial and intended discrimination against interstate commerce.

Next, the Solicitor General speak to the scheme’s interference with the authority of the Federal Energy Regulatory Commission and finally, Mr. Peragine, on behalf of the pipelines will speak to their motion to intervene as well as to certain Commerce Clause issues.

May it please the Court, this Court some 30 years ago, in Dean Milk Company v. Madison recognized that a state statute which would be clearly invalid which — and I quote the Court artlessly disclosed and a valid purpose to discriminate against interstate commerce.

This, we respectfully suggest to the Court, is such a case and it falls even more squarely within this Court’s recent precedence of Boston Stock Exchange against the New York Tax Commission and the City of Philadelphia against New Jersey.

Because, Your Honors, nothing emerges more clearly from the 115 pages of legislative history which you have before you and from the statutory scheme itself, than the compulsive concern of Louisiana to export this tax.

William H. Rehnquist:

General Sachs.

Stephen H. Sachs:

Yes sir.

William H. Rehnquist:

Before you get to the so-called merits of the case, is it your opinion that Illinois — Illinois versus Milwaukee completely overruled Ohio versus Wyandotte?

Stephen H. Sachs:

No, Your Honor, it is not our opinion that Illinois against City of Milwaukee overrules Ohio against Wyandotte nor as our opinion that this case is controlled by this Court’s disposition of the application for reasons of jurisdiction in Arizona against New Mexico.

Those cases, Your Honor, were not exclusive within the exclusive jurisdiction of this Court.

Both the Illinois case and the Ohio case were cases within the original jurisdiction but not controlled — not controlled by Section 1251 of the Judiciary Act, which gives this Court exclusive jurisdiction.

Furthermore, may I say, Your Honor that this case is far from the kind of case that impacts the common law notions of nuisance as involved in one of those cases.

It’s far from the kind of case that impacts scientific testimony and scientific evidence that would have been required as Mr. Justice Harlan, I think, said in the Ohio case with Mr. Justice Douglas perhaps in the Illinois case.

This is a case which impacts 30 states of this union and which test whether or not one state at the time of energy crisis can, in what we claim to be flagrant violation of the original principles of the Commerce Clause, can impose its will on other states.

And so, Your Honor, for both jurisdictional reasons, as well as prudential reasons, we think this case is radically different from both the Ohio case and the Illinois case.

And may I also add, Your Honor, if I may, that in Arizona against New Mexico, there is not the slightest suggestion that we can find that the suggestion of whether or not the states can get an alternative hearing in some other forum is in any way overruled.

And it’s worth to point out, I think, Your Honor, that here, we can go no place else.

There is no other forum where Maryland or her sister states who are plaintiffs can be heard and so for all those reasons, Your Honor, we feel that this case is quite properly here.

William H. Rehnquist:

Maryland is (Inaudible)

Stephen H. Sachs:

We are here in both capacities Your Honor.

William H. Rehnquist:

I realize that.

Stephen H. Sachs:

And we — and I make the same assertion in both capacities.

We are here very much like Pennsylvania.

It was here some 50 years ago in a suit against West Virginia in which very similar contentions were being made when one state thereby, by simply cutting off supply, was having impact on the State and it citizens.

William H. Rehnquist:

Well, but do you disagree with the notion that there is some tension between Pennsylvania versus West Virginia and Ohio versus Wyandotte?

Stephen H. Sachs:

No, Your Honor, I do not and the reason — that as I do disagree with the contention that there is tension between the two propositions for the reasons that I began to indicate perhaps a moment or two ago.

We are dealing here, as this Court did in Pennsylvania against West Virginia, with a case that probes deep into the nature of this union.

I don’t blush to say that here, two centuries after the foundation of this republic, where youre facing — and we’re asking this Court to face, precisely the questions of sectionalism, precisely the questions of the ability of one state to profiteer from its position in this case as a — afford a supply of a very important natural resource.

Those concerns Your Honor, well, I don’t need to denigrate the issues of nuisance or the issues of pollution or the issues that vex the States of Illinois and Ohio in the two cases that we’ve been discussing.

Well, I don’t mean to denigrate those.

We respectfully suggest, Your Honor, that here, we are dealing about some — with something terribly different.

This tax brings in to the State of Louisiana 300 million.

Let me be conservative, 250 million a year.

And Louisiana’s statutory structure would give us, if we are successful, if we could get to their courts, and if we could sue in their courts, they would give us 6% on our money.

They are the kinds of reasons Your Honor.

William H. Rehnquist:

Yet ordinarily a litigant suing on the basis that the tax violated the Commerce Clause or for some other reason was deficient constitutionally would have this case reviewed in the District Court, the Court of Appeals.

And if it is as important as you say it is in this Court by a writ of certiorari or perhaps one of few remaining direct appeals.

Here, you have a Special Master and it goes directly to this Court.

Given the importance of the case, I would think the prudential considerations mentioned in Wyandotte might be all — all the more important in that you would get more exhaustive review of your contentions in the ordinary litigated process than you would in the original jurisdiction type of action.

Stephen H. Sachs:

I have two responses of that Mr. Justice Rehnquist.

The first is, I know nothing in the law that suggests that exhaustive is good.

We don’t believe we need an exhaustive review.

We believe that just as this Court found in Boston Stock Exchange, as it found in Philadelphia against the City of New Jersey, this statute is facially offensive to the Commerce Clause and as Mr. Smith would argue to the Supremacy Clause.

Exhaustion is not needed to determine those legal questions.

William H. Rehnquist:

Well, I don’t mean exhaustions in the sense of exhaustion of remedies, but I mean review by several different courts.

Stephen H. Sachs:

Nor — nor with all respect, Your Honor, do we believe that review by several different courts is essential to determine the claim here.

We are not another plaintiff.

We are not a litigant as appears in most of the courts of this country.

We are sovereign states, and we are within the original jurisdiction put there by the founders of this — of the Constitution for it to be heard precisely.

Because there was concern that to be heard in the forum of a foreign state or to be heard elsewhere, would not do justice between the parties.

And so, we are here because we are within the constitution of prescription.

We are here in the exclusive jurisdiction because we’re within the statutory prescription and we are here, as far as I can argue to you Your Honor, with — on the right side of all of the prudential concerns, serious indignity of the claims, one of the — one of the pieces of language that come, I think, from Mr. Justice Douglas’ opinion for this Court in the Illinois case.

It’s hard for me to imagine, I say, as an advocate certainly but I say as a lawyer, it is hard for me to imagine a more serious and a more dignified claim to engage the constitutional attention of this Court than this claim which harks back to the very primal concerns which were present when the Constitution was written.

And so, it doesn’t need, in our respectful judgment Your Honor, reviewed by other courts.

Stephen H. Sachs:

It doesn’t need factfinding by any Special Masters.

What it needs is the judgment on the pleadings that we have sought and that we earnestly pressed on this Court’s attention.

William H. Rehnquist:

Philadelphia against New Jersey, of course, came up through the regular courts, did it not?

Stephen H. Sachs:

It did Your Honor but significantly, it was decided as I recall it, on pleadings.

And in Boston Stock Exchange against the New York Tax Commission, all the more significantly was decided on a motion to dismiss.

Let me dwell on Boston Stock Exchange for a moment if I may.

The — that case is very much like this one.

There, like here, it was decided on the pleadings.

There, like here, the legislative history, which betrayed and which as Mr. Justice White in his opinion for a unanimous court suggested, which betrayed a purpose to protect the instate commercial interest in an impermissible way.

There, in Boston Stock Exchange like here, the claim was made that well theres a compensating — this is a really compensating tax within the meaning of Henneford or the meaning of Halliburton.

But this Court said that the statute there did not support that characterization.

And so, here, this statute does not support that characterization.

This is not a compensating tax, Mr. Justice Rehnquist, and members of the Court.

This is a —

William H. Rehnquist:

But — but that — that’s the merits.

Stephen H. Sachs:

Well, it is the merits but it’s the merits of the narrow but fundamental question as to whether this statute facially discriminates and intends to discriminate against interstate commerce.

Mr. Justice Rehnquist, you cant read the 115 pages, that’s all there are, the 115 pages which are Exhibit C to the last filing on behalf of the State.

You can’t read that and the 10 or 12 pages of the statute, without seeing and realizing that with the Louisiana legislature wanted to do, and this is not hyperbole on my part, it is theirs.

What I wanted to do was to make up for its frustration for years, much of which has been recorded in the annals of this Court and its ability to profit from the rich deposits of natural gas on the outer continental shelf in the federal domain.

And in an effort to do that, what they determined to do was to impose a so-called First-Use Tax on the first time this gas comes into the State.

That may have been bad enough.

We may be here.

We may have been here in any case, but they went way beyond that.

They exempted every conceivable local incidents of the tax.

The local domestic producers were exempted.

The local utility users were exempted.

The local commercial interest, which would take otherwise, take from the tax were exempted.

And what they did as one of them said, “If this tax is going to be passed, it’s going to be a passed on tax, no doubt about it.”

And the history that you’ll see when you read the legislative history was how that legislature was going to confront the problem of getting the benefits of the tax without having the local folks bear the burden.

William H. Rehnquist:

Could Maryland itself have gone into United States District Court in Louisiana and made this same claim?

Stephen H. Sachs:

No, Your Honor, for two reasons.

The first is because it is our belief and we think the cases are ample — Illinois against the City of Milwaukee indirectly says it, “We’re in the exclusive jurisdiction of the Supreme Court.

We cannot go into the courts of Louisiana to sue Louisiana or its official officials and get that kind of relief.”

But secondly, and let — let me say all of this at once lest I’d be misunderstood.

We, because we were not the taxpayers, that is not the same thing as saying we do not have standing here in this Court, but because we were not literally the taxpayers in Louisiana, we could not have engaged in the refund proceedings which only the pipeline companies could have engaged.

William H. Rehnquist:

Who supports you in this case?

Stephen H. Sachs:

They do indeed support this.

They came — they asked to be — they intervened and their position and ours are certainly similar on the merits, ours and many commentators who have reviewed these matters, Professor Hellerstein among them have indicated the facial unconstitutionality of this Louisiana tax.

I’d like to address if I may, what we think — the only thing that we believe troubled the Special Master on this aspect of the case, namely the facial unconstitutionality as far as discrimination against interstate commerce is concerned, what Mr. Davis, the Special Master did, was to say he almost did it.

You can’t read his opinion without feeling that — another inch or two and perhaps we would have been there, but he didn’t do it.

And on this aspect of the case, he didn’t because he was concerned that perhaps the actuality of operation of the tax would disclose that it had a bona fide compensating tax kind of a justification.

And with all respect to the Special Master, we think he misconceived two things.

First of all, the whole notion of actuality of operation, the phrase of course comes from this Court’s opinion in Halliburton, but in no way, shape or form can it be said to be a call to trial.

What actuality of operation meant there and what it meant in its — in the seminal case of Henneford, the Cardozo opinion many years ago, saying that a sales tax and a — and used tax can indeed be compensating was simply that you look at the way these statutes operate.

It was not a statement that you need evidence.

There was not a statement that you have to have a trial.

It was a question of looking at the entire statutory scheme.

It was not, I repeat, a call to trial.

Indeed, in Henneford itself, the opinion — the opinion of Mr. Justice Cardozo that — that liberated this from some of the past — it was an earlier avoidance of taxation by some management.

I say, what Cardozo did in Henneford was to decide a case with — there is no evidence.

There — it is a — its basic — is a facial judgment he made in the Henneford opinion which makes super clear to us that actuality of operation is not necessarily a call to trial.

And then the second thing that the Special Master we think misperceived was that there is a very, very significant difference between the sales tax, used tax, compensating tax analysis and the kind of compensation claimed here.

What is being claimed here is compensating in the sense of we don’t like the fact that we can’t tax OCS gas and we want to do better.

It’s much like if in Boston Stock Exchange, they said we don’t like the fact that the regional stock exchanges are outhustling us or out advertising us or drawing business away from us.

In that sense, one can say that the New York statute was compensating.

But as this Court unanimously said, that’s not what compensating means for purposes of tax analysis.

What compensating means as Mr. Justice Cardozo said in the Henneford case, in the famous metaphor there is that the dweller from within and the stranger from afar have to be treated evenhandedly, evenhandedness he said is the theme that has to run through the statutes.

And may I respectfully suggest to this Court that when you examine this statute and the legislative history, you will see that it makes a mockery of the notion of evenhandedness of what they did here.

What they did is every step of the way, read — if you read no other page, Your Honors.

Read page 82C of the — of the legislative history as reprinted here in our — in our last filing which is simply a summary.

Stephen H. Sachs:

It’s only one line and it’s not the best quotes but it’s one line in which you can — in one page in which you can see that they were saying we’re taking care of everybody locally who could possibly get hurt.

And when one state does that, when one state attempts to profiteer from its position for a rich source of national energy, when one saw — when one state does that, it impacts, we respectfully suggest, the very concerns that led the founders of this republic to write the Commerce Clause and to — and it offends the very notion of a free economy in an open economy and of comity between the states that the Commerce Clause is all about.

When you read that legislative history, you will see this (Inaudinle)

You will see how they are upset about what Montana is doing.

You will see how they’re upset about the protections the easterners get.

You will see how this is a part of a growing national sectionalism over how we’re going to afford energy and who’s going to pay for it.

And as I said before, and as I say in closing, that is precisely the kind of offense.

It is precisely the kind of parochialism that the Commerce Clause we respectfully suggest was quick to the Constitution to prevent.

I’ll reserve the rest of my time with your permission Mr. Chief Justice.

Warren E. Burger:

Very well, General Sachs.

Mr. Smith.

Stuart A. Smith:

Mr. Chief Justice, may it please the Court.

I think it can be stated with assurance on an examination of the Special Master’s report and on the statute that this Louisiana First-Use Tax on natural gas is aimed at what is called OCS gas or Outer Continental Shelf gas.

It essentially exempts all gas for which a severance tax is paid either in any other state or in Louisiana.

It also was aimed in part on federal enclave gas.

That is the gas that is extracted from federal enclaves owned by the Federal Government.

The Federal Energy Regulatory Commission has, as the Court has said in numerous opinions exclusive jurisdiction over the sale and ratemaking over the sale of transportation of gas moving in interstate commerce.

There can be no doubt that this gas is moving interstate commerce from the wellhead to the burner tips, the cases or legion that that movement is interstate commerce.

The Federal Energy Regulatory Commission objects principally to Section 47:1303C which is set forth in full at page 6 of our brief.

That is the last brief we filed just exception of the United States.

And that provision states any agreement or contract by which an owner of natural gas at a time made taxable use first occurs claims a right to reimbursement or refund the such taxes from any other party in interest other than a purchaser of such natural gas is hereby declared to be against public policy and unenforceable to that extent.

Potter Stewart:

Mr. Smith if we accepted either your argument or that of General Sachs, this Louisiana tax would be invalid, would it not?

Stuart A. Smith:

That is correct, Mr. Justice Stewart.

Potter Stewart:

It wouldn’t be necessary to accept both of them at all.

Stuart A. Smith:

No.

As a matter of fact, it wouldn’t be necessary to accept both of them and in fact, the Louisiana statute, Section 4 (2) of the statute, the Louisiana legislature thought that this 1303C was so important and such a core provision to the tax that it says — states that if that tax — if that provision is held unconstitutional, the entire statute falls.

William H. Rehnquist:

Mr. Smith.

Stuart A. Smith:

The Court accepts —

Potter Stewart:

And — and your argument is a constitutional argument insofar as it relies on the Supremacy Clause?

Stuart A. Smith:

Right.

Stuart A. Smith:

And if the Court accepts that argument, the entire statute falls and the Court need not reach any other argument.

William H. Rehnquist:

Mr. Smith, FERC would’ve had no difficulty in suing Louisiana in the Federal District Court in Louisiana, would it not?

Stuart A. Smith:

The — FERC would’ve have had no difficulty suing Louisiana and in fact, there is a suit that has brought in the middle district of Louisiana, but that the states cannot be parties to that suit as General Sachs has pointed out.

So, the prudential considerations indicate that the states cannot be heard in that suit.

Secondly, that suit — the District Court in that suit, has abstained from deciding the matter and indefinitely postponed it pending a resolution of the — of suits brought by Louisiana officials in the Louisiana courts, and the Louisiana Court has indefinitely postponed consideration of its suit which the states cannot be parties as well pending a resolution — you know, disposition by this Court of the matter.

William H. Rehnquist:

Well so that all revolves around our original jurisdiction in here, does it not?

Stuart A. Smith:

It does.

I think that — the point simply is, is that those — both of those forms are inappropriate forms for the resolution of what we think are these major constitutional questions because number one, the states cannot be heard in those suits.

Secondly, in fact Louisiana, in the state action, recently, sought to move things along or to give the appearance of moving things along by seeking a rule to have the states “Invited into the suit,” and that state court refused.

So the matter — you know, those — those suits are off track and theyre not — they’re really not going anywhere.

The only — the only —

William H. Rehnquist:

But part of the reason theyre off track is because of this original action?

Stuart A. Smith:

I don’t think so, Mr. Justice.

I think what — the reason theyre off track — well this — let me point one of the thing with respect to the state suits which we pointed out in our brief amicus in support of the complaint about a year and a half ago in this Court and that is that the — that state suit is a declaratory action by state — by state officials against the pipelines and producers and more or less asks the Court to hold the tax valid in anticipation of possible challenges of invalidity.

I would suggest to the Court that that is probably not an Article III case of controversy since it asks that Louisiana court for a judge for an advisory opinion about — about a tax in anticipation of the challenge that you know in another court that hasn’t occurred yet.

Thurgood Marshall:

Mr. Smith, you say that these other courts are “Inappropriate.”

Don’t you need a better word than inappropriate?

Stuart A. Smith:

I really — I suspect that they’re really not capable of the kind of constitutional resolution of the sort.

Thurgood Marshall:

You say that it wouldn’t be enough?

Stuart A. Smith:

No.

And I think that the prudential considerations that dictated the Court deferring or dismissing the motion or denying the motion for a bill — for leave to file a complaint in Arizona versus New Mexico, simply don’t apply there — apply here because there — there, the New Mexico suits were capable of the kind of resolution.

In fact, the Special Master in his report of May 14 in this case pointed out that the — one of the utility companies in the new — Arizona versus New Mexico case was in privity with Arizona because it was a political subdivision of Arizona.

So essentially, the State could be heard in the New Mexico court.

And here — here, the sovereign states cannot be heard and that seems to be plain and I don’t think that anybody really could take serious dispute of that.

That’s why we think that the prudential considerations really speak in favor of the Court’s original — employment of the original jurisdiction in this context because of the fact that the cases in which the Court has declined are really distinguishable.

William H. Rehnquist:

Well, the solar power district in Arizona is in privity with the suit of Arizona only in the sense that it — there’s an enabling statute alive to be formed.

Stuart A. Smith:

Yes, but that makes a big difference.

Essentially, the Court said in its per curiam opinion that the solar power company was a political subdivision of Arizona.

That means essentially that the State of Arizona had a — had a mechanism by which it could be heard in the New Mexico courts in the States of Maryland and the eight other states involved in this case really don’t have that — don’t have that opportunity.

The — the jurisdictional provision of 1251 (a) (1) is really an exclusive one and for the State of Maryland to complain here in its capacity as consumer and as parens patriae, the original jurisdiction is the voice for that very purpose of giving the states an absolutely objective forum for the resolution of what our very complicated and touchy constitutional questions that really go to the heart of the really federal system, I think.

William H. Rehnquist:

Would you — would you say the same thing if the State of Maryland itself was not a direct purchaser of Louisiana gas?

In other words, if it’s simply suing parens patriae?

Stuart A. Smith:

Well, I think I would say the same thing but of course, I don’t have to say that here because it’s much — we have a much — the State of Maryland has a much stronger case because it is a consumer of —

William H. Rehnquist:

Granted — granted —

Stuart A. Smith:

— of natural gas in the same way that the Federal Government did.

William H. Rehnquist:

Granted but I was asking you — (Voice Overlap) —

Stuart A. Smith:

I think that the parens patriae thing is compelling in the sense that you know, you’ve got a bunch of consumers, you know, who basically on the basis of this tax which is really — you know, for want of a better expression, exported, you know fiscal greed or going to have to pay higher utility bills and the chances of people like that bringing a suit to complain in the proper forum are really remote.

And for the State to act as parens patriae in that kind of capacity, it seems to me is in the best traditions of parens patriae jurisdiction.

William H. Rehnquist:

Well, where’s the limitation then?

Isn’t the State capable of acting as parens patriae in almost any suit that any of its citizens are affected by?

Stuart A. Smith:

I suppose — I suppose that’s so, but you know here, where the fiscal stakes are so large, where Maryland also is suing in its capacity of consumer, I don’t think that you know the Court need to wrestle with those difficult questions of what would happen if the State was only here as parens patriae.

I think I would like to talk in my remaining time about the complaint of the Federal Energy Regulatory Commission here and that is essentially Section 1303 (c).

The language I read essentially prohibits a pass back of the tax to the producer.

Potter Stewart:

May I interrupt you just for a moment Mr. Smith to ask if each of the eight plaintiff States is itself a consumer of gas?

Stuart A. Smith:

I think that’s — I think that’s correct and I think that’s alleged in the complaint and I don’t think there’s any —

Potter Stewart:

Right.

Stuart A. Smith:

— dispute about that.

Now, what that means essentially, by prohibiting the pass back, Louisiana has responded to the only other sort of concern here that the producers would complain about this tax.

And what they did essentially was the same thing that Texas did in the Michigan-Wisconsin case which the Court struck down, that Texas gallery taxes as violative of the Commerce Clause.

Louisiana wanted to protect the producers which own the residual liquid and liquefiable hydrocarbons.

And the Commission has taken the position over last 25 years that a cost of processing and transportation, the very kind of taxable use that Louisiana sets out in its statute that that cost is a cost to be borne by the producers because it is essentially a cost of extracting the liquid hydrocarbons that the — that the producer retains or gets back when the gas is processed.

Byron R. White:

Mr. Smith, do they treat all producers alike?

There are only about 15% of the producers who own the gas when it’s first processed?

Stuart A. Smith:

I think that’s right, but the rest of them, you know, get it back I think.

Essentially the mechanism as — the mechanics of the processes the Special Master set forth in his findings are based on Louisiana’s profits.

So there’s no quarrel about that.

Mechanism is essentially that the producers retain or get back, the liquid and liquefiable hydrocarbons.

And the Commission has taken the position that that is — that the costs associated with that process are to be borne by the producers (Voice Overlap) —

Byron R. White:

So the law prevents passing back to the producer this tax whether or not he still owns the gas at the time the tax is first applied?

Stuart A. Smith:

Right, because the producer, in effect, — in all cases, retains the liquid and liquefiable hydrocarbons.

Stuart A. Smith:

Now, the Commission has taken the position and the Commission has sole and exclusive authority to allocate cost.

The Natural Gas Act is clear on that.

That that is, of course, to be borne by the producers.

But the Louisiana statute says no, that any allocation that requires that pass back is to be abrogated and cant be enforced.

Now, that sets the Commission and Louisiana on a collision course that we claim violates the Commerce Clause.

And in that — in support of that, we need look no further than the Court’s opinion in Northern Natural Gas versus Kansas Commission where this Kansas Commission tried very much the same sort of thing and in fact, it was really arguably even more benign, because what the Kansas Commission tried to do was to impose a ratable taking over a number of wells.

And the courts — and the Court said, “No you cannot invade that — that is the exclusive jurisdiction of the Commission.”

Now to that, Louisiana says or the Special Master says, “Well, let’s see.

Let’s take some evidence and see whether in fact — as to the degree of conflict that there really is between the Commission and the Louisiana statute.”

Byron R. White:

Who made the motion for judgment on the pleadings?

Stuart A. Smith:

The plaintiff States.

Byron R. White:

And how about the FERC?

Stuart A. Smith:

We intervened.

We have a — we have a motion pending to intervene as plaintiff which the —

Byron R. White:

Well was there any —

Stuart A. Smith:

— which the Master will — will support.

Byron R. White:

Was there any evidence?

Was there any kind of affidavits or anything else or is it strictly on the pleadings?

Stuart A. Smith:

Strictly on the pleadings.

Strictly on the pleadings other than the basis of —

Byron R. White:

So would it — would you treat this as a motion for summary judgment or what would you treat it?

Stuart A. Smith:

Essentially it’s a motion for —

Byron R. White:

It’s a — it’s only if there were evidence offered outside the pleading?

Stuart A. Smith:

That’s right.

Well, the evidence outside — the evidence outside the pleadings is the evidence —

Byron R. White:

I don’t think any — has to be —

Stuart A. Smith:

There doesn’t have to any evidence.

I mean the nature of the — you know, the decisions are there.

The statute is there and what the Special Master said was, “Let’s take some evidence to see what the degree of conflict really is.

Perhaps the Federal Energy Regulatory Commission can accommodate itself to Louisiana.”

Stuart A. Smith:

We submit that that’s got it back.

That stands a Supremacy Clause on its head.

It’s not the Commission that has to accommodate itself to Louisiana.

It’s Louisiana that has to accommodate itself to the Commission because of the Commission’s exclusive jurisdiction.

Byron R. White:

Well, you know, you wouldn’t — what if the Commission put out an order in a specific case allocating these costs?

Stuart A. Smith:

If the Commission put out an order allocating these costs, well, it’s for the — well, let me say and my time is — I don’t want to trench upon the time of the pipelines but let me simply say that the Commission — it is not necessary to consider what would happen if the Commission put out an order because in our view, the mere fact that Louisiana has trenched upon the exclusive jurisdiction of the Commission, the Commission could agree with Louisiana, but that’s not the point.

Louisiana cannot speak to the allocation of cost because that function is a judgment for the Commission to make and the Commission to make alone.

And to that extent, let me close by simply referring to the Court the language in page — the language in Northern Natural Gas that we think answers this contention decisively.

The Court said, “It may be true as the State Commissioner urges that accommodation on the part of the Federal Power Commission could avoid direct collision.”

But this argument misses the point, not the Federal, but the State regulation must be subordinated when Congress has so plainly occupied the regulatory field.

Thank you

Warren E. Burger:

Mr. Peragine.

Frank J. Peragine:

Mr. Chief Justice, and may it please the Court.

I speak in behalf of the 17 interstate natural gas pipeline companies that have sought to intervene in this case.

Those pipelines are all regulated by Federal Energy Regulatory Commission.

We are involved in this case because it is we, who buy the offshore gas, bring it into Louisiana in our pipeline systems, and take it beyond Louisiana in the most — in most cases, just approximately 97.5 %.

We are the owners of the offshore gas as we bring it into the State of Louisiana and we are the owners when it is subjected to the so-called uses which trigger the First-Use Tax.

William H. Rehnquist:

Mr. Peragine, you — you’ve actually commenced a refund suit have you not?

Frank J. Peragine:

Yes we have, sir.

We have sued because we are required to in the sense that if we don’t sue for refund of the taxes that we have paid under protest, then it’s — we’ve lost that money.

So the Louisiana statutory procedure provides that if youre going to contest this tax, you must pay it under protest and sue for refund and that’s what we have done.

William H. Rehnquist:

And if you lost in Louisiana court —

Frank J. Peragine:

If we have been —

William H. Rehnquist:

— this Court would be open on certiorari?

Frank J. Peragine:

Presumably, yes.

Yes, sir.

I can’t disagree with that, sir.

We are, as owners of the gas, the tax of course is in imposed on us.

We are subject to severe penalties if we do not pay the tax including seizure of the gas as contraband.

And as I’ve already mentioned, we’re paying it under protest.

Frank J. Peragine:

Meanwhile — meanwhile, the FERC has permitted to pass through of most of the tax that we pay through our jurisdictional customers.

In other words, we — we have a tracking mechanism and we can get that tax back as we — the money paid for that tax, we are recovering it now from the ultimate customers in other words.

Byron R. White:

So, why isn’t — why isnt that sort of an accommodation by the Commission to the Louisiana tax?

Frank J. Peragine:

Well you speak of it as an accommodation, sir.

Byron R. White:

Well, Mr. Smith said it is not to —

Frank J. Peragine:

Well, if I may address that point, Justice White for a moment, you have here — let’s say the Commission does issue an order saying, “We’re not going to pay any attention to this non pass back provision,” which is the brunt of the Government’s argument here as to 1303C.

What we have there in that situation, sir, is the wording of the Louisiana statute comes into play.

It says, only if 1303 is declared to be unenforceable by a final judgment of a court, then if it is, then the entire statute self-destructs.

But in the situation which Your Honor poses, sir, you would not have a final unappealable judgment of a competent — of a court of any jurisdiction.

You would have merely a regulatory order and therein lies the problem because the Louisiana statute attempts to infringe upon the area reserved exclusively for Federal Energy Regulatory Commission.

Byron R. White:

So you say, it’s just in Northern Natural Gas?

Frank J. Peragine:

That is correct sir, yes.

Byron R. White:

It’s an infringement, an invasion of an exclusive jurisdiction?

Frank J. Peragine:

Yes, under the — right sir.

We are here seeking to intervene as parties to assert our own interest as the taxpayers directly affect it and to support the plaintiff States in attacking the tax on statutory and constitutional grounds.

The Special Master has recommended our intervention because we satisfy all the traditional requirements for intervention as exemplified by the Federal Rules of Civil Procedure and the applicable case law.

Louisiana has raised, in that connection, a specter of Eleventh Amendment immunity.

We submit and as the Master implied in his report, the Eleventh Amendment doesn’t really apply here because we are not suing the sovereign State of Louisiana.

We are, however, seeking to intervene in a case properly brought by other sovereign states.

Moreover, the whole purpose underlying the Eleventh Amendment is to protect the States from attacks on its treasury.

This is not that because the relief sought here is prospective only against the imposition of what is deemed to be an unconstitutional levy.

Moreover, and perhaps foremost, Louisiana has waived any Eleventh Amendment immunity because it has authorized any person contesting this tax or any state tax to come into its courts, in any federal court, any federal or state court and make its case known.

Byron R. White:

Well, why shouldn’t — why shouldn’t Louisiana be able to impose some kind of a tax with respect to the processing of natural gas within its borders?

Frank J. Peragine:

Yes, Your Honor that —

Byron R. White:

Suppose it didn’t attempt to control who ultimately paid it, suppose it didn’t?

Frank J. Peragine:

Oh but it is — it is just that, Your Honor.

Byron R. White:

Well, I know —

Frank J. Peragine:

And for this reason —

Byron R. White:

I know you — I know that —

Frank J. Peragine:

Processing — there’s not a tax on processing.

Frank J. Peragine:

It’s a tax on the so-called first use of the gas that is coming into Louisiana.

Now —

Byron R. White:

Well a use just happens to be a process?

Frank J. Peragine:

Well, one of the uses happens to be processing.

There are many others.

Byron R. White:

Well, it’s one of them, one of them.

Frank J. Peragine:

But the — but the effect — yes it is, sir.

Byron R. White:

Well, why shouldn’t Louisiana be able impose a tax with respect to that processing-use?

Frank J. Peragine:

Because, Your Honor, if you look at processing, first of all, it is an integral part of the interstate transmission of this gas which began offshore at the wellhead.

Now, processing is so interconnected or so integral with the interstate transmission of that gas that it’s necessarily a part of that interstate transmission process and it doesn’t interrupt, the uninterrupted stream of that gas as it comes into Louisiana in its transport and beyond.

Byron R. White:

Well, you just barely started to answer my question.

And so what if that’s true?

Frank J. Peragine:

All right sir, well what is your — is —

Byron R. White:

My question is why shouldn’t — that’s an activity going on within Louisiana and I suppose that Louisiana is giving it some protection.

Frank J. Peragine:

But in any activity —

Byron R. White:

Why shouldn’t it — why shouldn’t that part of the interstate movement have to pay either way?

Frank J. Peragine:

Well, the process — I may say this, Your Honor.

The processing is traditionally done by the producers who own the liquids and liquefiables and they want to get those liquids and liquefiables out of the gas.

Byron R. White:

Yes.

Frank J. Peragine:

So they attempt to do that.

Byron R. White:

Why do they do that?

Frank J. Peragine:

But the tax is not imposed on it.

Byron R. White:

Where do they do that?

Frank J. Peragine:

They do it in Louisiana, no question about that.

Byron R. White:

And in plants, they have plants?

Frank J. Peragine:

In plants, yes, tremendous plants which do that.

But this tax is not imposed on the processing, it’s imposed on the natural gas and coming into that plant is the natural gas that —

Byron R. White:

I thought — you said it was imposed on the use?

Frank J. Peragine:

Yes.

Byron R. White:

And that the use has to be processing?

Frank J. Peragine:

One of the uses is processing, sir, but —

William H. Rehnquist:

Is that semantics in the same sense that General Sachs referred to Justice Cardoza’s opinion in Silas Mason against Henneford?

Frank J. Peragine:

Well, it may be semantics, Your Honor, but I think we have a battle of semantics here.

This is — this is so core, the First-Use Tax on natural gas, but it really it is —

Byron R. White:

But what if — what if the State put on a certain rate of tax for every — every unit of processing of gas that was processed whether you speak in trillions or billions or millions or whatever it is?

Why couldn’t the State do that?

Frank J. Peragine:

I — I don’t know that a State could not do that, to put a tax on the processing of gas, Your Honor.

Byron R. White:

Within the — within Louisiana?

Frank J. Peragine:

Within the confines of Louisiana and if that was a tax on processing itself, I don’t know that that would —

Byron R. White:

Oh, but you say processing is part of interstate commerce.

Frank J. Peragine:

Yes, it is.

Processing —

Byron R. White:

But — but you concede that it may —

Frank J. Peragine:

But you’re talking about —

Byron R. White:

— that that kind of a tax might be —

Frank J. Peragine:

But this —

Byron R. White:

— nevertheless valid.

Frank J. Peragine:

The effect of — the effect of this tax is that it’s transported beyond to Louisiana’s borders, sir, because the only —

Byron R. White:

Now, you’re changing the case again.

I want to put aside this requirement that you — that they pass along.

Couldn’t Louisiana collect a tax on processing even though that processing was a gas that was in the —

Frank J. Peragine:

Well I think —

Byron R. White:

That was in the course of being transmitted out-of-state?

Frank J. Peragine:

I suppose the answer to that, Justice White, is that the Court would have to — would have to hold that the interstate commerce does not begin until the processing has been completed.

Byron R. White:

Why?

Why is that?

Interstate commerce pays its way?

Frank J. Peragine:

Interstate commerce pays its way, Your Honor, but I don’t believe that it has to — that it must be — well, let me get off that.

It is levied only as to OCS gas, this particular tax.

And even though it is processed, it is still that natural gas that comes through that plant.

Frank J. Peragine:

In practical effect, it falls only on the pipeline companies who transport the gas through and beyond Louisiana.

William H. Rehnquist:

Well, why do the States have any standing to object to it if in private or if that involves only a pipeline?

Frank J. Peragine:

Well, because it passes on the — the pipelines pass it on and ultimately, it falls on the customers of the pipeline companies.

My time is up, Your Honors.

Excuse me.

Warren E. Burger:

Mr. Gressman.

Eugene Gressman:

Chief Justice Burger and it may please the Court.

It is the position of the State of Louisiana primarily as expressed in its pending motion to dismiss that this suit simply does not belong at this juncture and with the parties involved on the original docket of this Court.

There are innumerable jurisdictional standing and prudential problems that plague this case.

But the primary consideration that I think should control the disposition of the case is the prudential declination standard expressed in Ohio v. Wyandotte Chemicals Company, and more particularly, Arizona versus New Mexico.

Now, Mr. Sachs has indicated that the Ohio v. Wyandotte principle, whereby this Court may in its discretion decline to exercise a case that is otherwise within the original jurisdiction of this Court where there is an alternative form in which the identical issues can be brought, should somehow not apply in that branch of this Court’s original jurisdiction between two or more states.

Now granted, Ohio v. Wyandotte was a suit under the other branch of this Court’s original but concurrent jurisdiction as between a state and citizens of another state.

But if any question were raised as Mr. Sachs seems to have raised, that the same principle of declination in terms of the very practical and jurisprudential considerations set forth in Wyandotte, if there’s any question that that — those considerations apply equally to suits between two or more states, that was set to rest by the case of Arizona versus New Mexico, which is virtually on all fours with the situation that is presented to this Court today.

Byron R. White:

Well you don’t — you don’t suggest then — I thought you were going to just these cases beyond our jurisdiction?

Eugene Gressman:

It is for various reasons but I don’t think we —

Byron R. White:

You are arguing that right now.

You are arguing this — the principle of discretionary declination.

Eugene Gressman:

Discretionary declination which encompasses, in this case, additional considerations which I think put this case beyond the pale of this Court’s original jurisdiction, even though it is nominally a suit between two or more states.

I think one may start —

Byron R. White:

Well do you think is a case of controversy between Maryland and Louisiana or not?

Eugene Gressman:

No, Your Honor, that is one of our basic propositions that there is no controversy, no — between the sovereign interest of the State of Maryland and the sovereign interest of the State of Maryland —

Byron R. White:

That isn’t what I asked.

That isn’t quite what I asked.

Eugene Gressman:

— Louisiana.

Byron R. White:

It was whether — whether there was a case of controversy between the two.

It doesn’t have to be any conflict of sovereign interest, does it?

Eugene Gressman:

Well, if there does, in terms of invoking this Court’s original jurisdiction.

Now, what the real controversy here is all about and it’s very simple.

This is a suit involving a controversy over the tax refund claims of the private pipeline taxpayers and the State of Louisiana.

And what has happened here is that the States, the plaintiff States have sought to volunteer to adjudicate and secure relief in this Court for the private refund claims of the taxpayer of the pipeline companies.

Eugene Gressman:

Look for a moment at what this complaint filed by the State of Maryland asked.

It asked that the — this Court declare unconstitutional, the Louisiana First-Use Tax and that it enjoin the collection of that tax from the private pipeline taxpayers.

And then the last clause on the relief paragraph asked that this Court order the State of Louisiana to refund taxes paid to the pipeline companies.

Now, there is not one word.

Byron R. White:

They also wanted to declare that this statute declared unconstitutional.

Eugene Gressman:

That is true, Your Honor.

Byron R. White:

Prospectively even.

Eugene Gressman:

Pardon?

Byron R. White:

At least that part of it would be prospective.

Potter Stewart:

And did they ask for —

Eugene Gressman:

Yes, indeed.

Potter Stewart:

Did they ask for an injunction on future collections?

Eugene Gressman:

Yes, Your Honor.

Potter Stewart:

And that this complaint was filed not just by the State of Maryland but by eight states, was it not?

Eugene Gressman:

That’s true.

There are so many states —

Potter Stewart:

And each — each alleged that it — itself was a consumer of gas.

Eugene Gressman:

That is true but there is not one word in the (Inaudible) that would go to the benefit of consumers.

Potter Stewart:

Well, except in joining the taxes (Voice Overlap) —

Byron R. White:

Well, you — you don’t suggest that the — that this tax doesn’t resolve it, increasing the cost of gas to the States.

Eugene Gressman:

No, there is no question that that is —

Byron R. White:

Does the State of Maryland have a State in the controversy then substantially?

Eugene Gressman:

No, not in the —

Byron R. White:

Well, itself uses gas, doesn’t it?

So, you should —

Eugene Gressman:

That is true but that is a proprietary interest, Your Honor, and this Court has so declared and that brings us right back to the proposition that was stated as recently in Pennsylvania, New Jersey, that it has become subtle doctrine that a State has standing to sue only when it’s sovereign or quasi-sovereign interest are implicated.

And it is not merely litigating as a volunteer the personal claims of its citizens.

Byron R. White:

Well, it’s litigating its own claims.

It’s litigating — in part at least, it’s litigating its claim because it uses gas and it’s paying more than it should for it — for its gas.

Eugene Gressman:

Yes, but the interest that it is asserting there, that is the cost, the burden of the tax that has somehow been passed on by reason of some authority other than the State of Louisiana.

Eugene Gressman:

The State of Louisiana has not insisted in its tax statute that this tax be passed on.

This tax could’ve been absorbed by the — by the taxpayers or it could’ve been passed on to some other entity, but with the approval and authority of the Federal Energy authorities it has been passed on the consumer.

Now, the fact is that the States of Maryland and the other States have only the common interest that every consumer has when it purchases a product.

In other words, the interest that the State of Maryland asserts here is no end as a consumer of gas is no different, is no more sovereign in its characteristic than the interest of the Maryland housewife who purchases gas from the same pipeline operations.

In fact, they are suing precisely on behalf of all the gas consumers, personal gas consumers in the State of Maryland.

Now, I suggest that that does not — that standing as a — as a proposition of invoking the very serious jurisdiction of this Court under Article III over controversies between two or more states simply does not encompass a controversy where no sovereign interest of the State, of the plaintiff State are involved in the litigation.

And it is —

Thurgood Marshall:

I have an awful problem with saying that money is not an interest on the sovereign.

I mean, the sovereign cannot operate them well without money, can it?

Eugene Gressman:

Of course not, Your Honor.

Thurgood Marshall:

So, it is a — it is a part and when they use that money for gas, they can’t use that same money for police —

Eugene Gressman:

No.

Thurgood Marshall:

— fire or any other.

Eugene Gressman:

But the same could be —

Thurgood Marshall:

(Inaudible)

Eugene Gressman:

It is obviously a burden but it’s a burden that consumers have had to pay from the year one.

There is no getting around it.

Now, the question is how can you invoke the original jurisdiction of this Court?

Thurgood Marshall:

Because the State is involved.

Eugene Gressman:

Well, the State —

Thurgood Marshall:

The State’s money is involved, the State’s life, blood is involved.

It is all a lot of beautiful phrases.

Eugene Gressman:

I understand exactly what you’re saying, Justice Marshall.

The point, however, is that, that money, that injury or burden as you will has never been elevated, so far as I know, into any kind of a cause of action.

A consumer simply does not have any recognizable cause of action to bring suit against to some other State who happens to have imposed a tax upon a taxpayer or a manufacturer of a product.

Thurgood Marshall:

Which you’ve been passed on the —

Eugene Gressman:

Which then the manufacturer by economic forces or otherwise, passes on to the consumer.

We — we purchase today — everything we purchase as a consumer is literally composed of hundreds, if not thousands of hidden taxes that have been passed on to us as consumers.

And to open the door of the judiciary to suits brought by consumers with no greater interest than that, I think it would bring chaos upon the federal court system.

And it would be doubly chaotic to open the doors of this Court’s original jurisdiction over suits between states simply because a state which purchases hundreds of thousands of products in the course of its operations happens to find a hidden tax, so-called, in one of the products that it purchases for its use in heating the State Capital building.

Eugene Gressman:

And therefore, can bring a suit before this Court challenging the constitutionality of the taxing State statute.

This is precisely the kind of controversy that this Court set in Ohio v. Wyandotte should not be involved in the original docket of this Court.

Justice Harlan, in pointing out the sum of the prudential factors that underlie the principle of declination expressed in Wyandotte pointed as a prime example the innumerable suit that exist in this country, innumerable controversies, let me say, between private citizens and a tax — taxing authority.

And if you open the door of this Court’s original jurisdiction to the — any state acting solely as a consumer to come before you and assault and adjudicate the constitutionality of a state statute of a Sister State, a state tax statute of a Sister State, I suggest that — that this would be disruptive of this Court’s valuable time and energies which, as Justice Harlan so well pointed out, are as a matter of national policy and judicial policy much better devoted to cases on its appellate docket.

John Paul Stevens:

It is true is it not that there are more federal interest in this particular controversy than in most of the cases that you’re describing because of the source of the gas and the special federal statute —

Eugene Gressman:

Of course, there are.

John Paul Stevens:

It’s sort of a unique case.

Eugene Gressman:

There are but perhaps the answer that can be given to all those interests lies in the various causes of action that are pending and available in other courts.

There, it is significant that there is a tax refund suit in the State of Louisiana brought by the taxpayers, the pipeline companies.

It is significant that there is a suit in the federal court in Louisiana brought by the federal authorities where they can assert all the federal interest that they claim are at issue here.

Indeed, there is a plethora of suits brought by — both by the State of Louisiana and more particularly by the various pipeline companies and taxpaying interest in Louisiana.

John Paul Stevens:

Mr. Gressman, when would you predict that the issue would be finally resolved if the alternative route is taken rather than ruling on the motion for summary judgment, assuming that the judgment on the pleadings — motion of the judgment on the pleadings has merit.

Eugene Gressman:

Well —

John Paul Stevens:

There’s quite a difference in time and in interest (Voice Overlap) —

Eugene Gressman:

Yes, of course, but that involves a host of other considerations as to whether this case could ever be disposed of on the merits — on the basis of the pleadings without any kind of an evidentiary hearing but the point is —

John Paul Stevens:

We’re just making that assumption for purposes preparing the relative value, the two different procedures?

Eugene Gressman:

Right, well, in comparing the value of the two forum or sets of forums that are available, let me say there is no comparison.

I think every consideration, every prudential, every judicial, every wise principle of judicial administration would suggest that the — is so far greater chances of securing a meaningful kind of adjudication of these constitutional issues in the state courts or in the federal courts in Louisiana.

William H. Rehnquist:

Didn’t it take approximately 20 years for the State of Arizona — for the case of Arizona versus California to be finally —

Eugene Gressman:

Yes.

The case was in —

William H. Rehnquist:

— decided by this Court?

Eugene Gressman:

— on this original docket where you have to extend — involve yourself in evidentiary hearings before a Special Master can well take many, many years.

Now, I have now way of estimating how it would take here but let me say this.

John Paul Stevens:

Of course, the evidentiary hearing is probably rather brief if you grant the judgment (Voice Overlap) —

Eugene Gressman:

Well, that is true but it says — that suggests another proposition, and maybe so brief as to the untrustworthy, as a method of serious constitutional adjudication determining the — the validity of a state tax on the basis of pleadings.

John Paul Stevens:

But Mr. Smith’s argument is valid, what — why do you need all the evidence for?

I don’t know, maybe it is (Inaudible)

Eugene Gressman:

We —

John Paul Stevens:

And suppose it is.

Eugene Gressman:

We hardly disagree that — that you can even define, let alone resolve the constitutional issues by looking at this very complex and in many respects, ambiguous statute.

The very basic thing I want is missing in the litigation before this Court is any kind of authoritative state court interpretation of what this statute means or what sections of it have been and have applied and therefore — or ripe for adjudication.

And there are other State law questions that have been raised in the lower courts that might be dispositive of this entire litigation without ever reaching the constitutional issues that the plaintiff so —

John Paul Stevens:

I had the impression, it’s really fairly simple.

If the tax is imposed on the gas that comes from the Outer Continental Shelf is not consumed in Louisiana?

Eugene Gressman:

Well, on the contrary, Your Honor, there are various difficulties in determining which Section of the statute has been applied.

There are eight alternative users that — that might be —

John Paul Stevens:

Most of the gas goes through a processing plant then shipped out-of-state, isn’t it?

Eugene Gressman:

That is true but there —

John Paul Stevens:

But the tax is applied on all that gas.

Eugene Gressman:

But there are other kinds of uses.

John Paul Stevens:

Isn’t that right?

Eugene Gressman:

It depends on your definition and then what method is selected by the State tax authorities to impose it.

Now, maybe it’s a — at the processing plant or is it on the as to gas —

John Paul Stevens:

(Voice Overlap) —

Eugene Gressman:

— as to gas as it comes —

John Paul Stevens:

— situations even if the Act —

Eugene Gressman:

— from the outer continental shell —

John Paul Stevens:

— is equal to the severance tax that’s imposed on the gas that originates from Louisiana.

Eugene Gressman:

Well, and — but much of the problems of consideration of the discriminatory nature of this tax whether there is indeed what —

John Paul Stevens:

And its clear isn’t it that there is no tax on processing of gas that originates in Louisiana.

Eugene Gressman:

Not on the —

John Paul Stevens:

The only process — you call this a processing tax.

The only time it’s imposed is on the gas that originates out-of-state and it’s consumed out-of-state.

Eugene Gressman:

Well, that — that involves —

John Paul Stevens:

That’s the only processing tax a State seeks to impose.

Eugene Gressman:

That’s right but the problem is it can be under this statute as to which of various processing uses are being attacked.

Now, there — and out of — once that is (Voice Overlap) —

John Paul Stevens:

And those are determined entirely by the source and the destination of the gas rather than the character of the processing or the use.

Eugene Gressman:

Not necessarily, Your Honor.

Eugene Gressman:

It may depend upon contracts.

It may depend upon what the state tax authorities conceive of as the use that is being exercised or utilized by the assessor and how the — and various other propositions which is —

William H. Rehnquist:

Mr. Gressman, is there any hint in the Constitution, Article III or in our previous cases that there is some bifurcation in our original jurisdiction between cases that can be decided on the pleadings and cases that require evidentiary hearings?

Eugene Gressman:

Not in jurisdictional terms, no.

I can’t — yes, I can conceive of a case in this original category that might be decided on the pleadings.

But that doesn’t go to jurisdiction or it might go to some prudential requirement or consideration as to whether you should cut off evidentiary hearings rather than go forward on a summary basis.

One of the best — the closest example I can find of that nature is Pennsylvania against West Virginia where West Virginia had enacted the statute which cut off all exportation of natural gas from West Virginia into Pennsylvania.

Now, the day after that statute was enacted, Pennsylvania and Ohio were in this Court seeking a declaration of the invalidity of that tax, of that West Virginia statute before it even became effective, which ultimately raised a good deal of concern on the part of Mr. Justice Brandeis.

But nonetheless, the Court did take the case and did decide it presumably on the basis of the reading of the statute.

But what is significant even there was that the Court felt compelled even in terms of just reading this brand new statute to appoint a Commissioner who held extensive hearings in Pennsylvania and West Virginia, prolonged this emergency kind of review of the phase of the statute for some — two years before this Court ultimately decided.

And it utilized a great deal of evidence accumulated during those hearings in reading the face of the statute, and you will find that, much of that evidence in the initial part of that opinion.

But ultimately, I think these various problems need not be confronted or resolved, particularly these difficult matters of statutory interpretation.

It need not be resolved because of the overriding concern expressed in Ohio v. Wyandotte that this Court has committed.

The major part of its resources to the overwhelming burden that we all know exists with respect to appellate docket matters.

Now, the consideration, the vital consideration in determining when that Ohio v. Wyandotte principle applies is dependency of some kind of state court action that provides inappropriate forum in which the issues tendered here may be litigated.

Now, as expressed in Arizona v. New Mexico, the emphasis is on the identity of the issues that are presented here in an original complaint with those that are available for adjudication in the alternate forum.

And if there is an identity of those issues, then they — that can be adjudicated and if any federal constitutional issues survive, the state court forum review of the matter, then of course they can be brought here on certiorari or appeal on the appellate docket.

Now, it is an undenied fact that every issue that is being put to Your Honors by the plaintiff States as supported by the United States and the pipeline companies are identical to the jot and tittle with the issues that are involved in pending litigation in the state courts and federal courts of Louisiana.

And those cases, therefore, make it appropriate.

Dependency of those cases, makes it appropriate for this Court to stand back and say, “Well, why should we devote any more of our attention to this case?”

Even apart from what I call the spurious jurisdictional allegations here in terms of the interest asserted on behalf of consumer states.

Why do we even have to address those problems?

Why do we have to address the complicated statutory provisions and try to define and predict what the state court might interpret them to mean and thereafter, extract out the relevant constitutional considerations when all of these is going forward in the state and federal courts in Louisiana.

Warren E. Burger:

You’re taking some of your colleagues’ time.

Eugene Gressman:

I appreciate that, Your Honor, and I will simply conclude by saying that the Arizona v. New Mexico case is entirely in point and is a controlling authority or what I deem to be appropriate the dispositions of this case, a declination, a refusal, a discretionary determination by this Court that let us wait until all of these issues arise and come up to us through the regular appellate process.

Now, let me add one other prudential consideration that weighs against continuing the case, this constitutional adjudication in this case.

Let me say — this gets back to some of the jurisdictional problems that Justice Rehnquist has mentioned.

In a real sense, once you understand whose real interest are involved in this case and they are the real — and the taxpayers, the private taxpayer citizens are the real parties in interest in this suit, in this Court to obtain a tax refund on — for their benefit.

I suggest that they are not only the real parties and interest but they are indispensable parties to any kind of effective relief or adjudication that this Court had rendered.

And yet they cannot become parties to this Court without destroying this jurisdiction.

Eugene Gressman:

Because once a private party is — comes in as party plaintiff under the original jurisdiction of this Court, state versus state, and that private party comes through intervention but whatever the needs, joins the case as party plaintiffs then that would be in direct violation of the Eleventh Amendment which withdraws from this Court and every court jurisdiction over a suit by a private citizen against a sovereign state.

Now, I suggest that there has been no waiver here.

The State of Louisiana has never consented to be sued under the original jurisdiction of this Court.

I doubt if it would be effective if they made one because I think this Court’s Article III type of jurisdiction over — between suits, between states is not easily waivable by any state.

But be that as it may, we simply do not have the real parties in interest.

The real parties to this controversy as parties before this Court, they are parties down in Louisiana.

They tend to consult to their heart’s content and litigate down there their real interest.

Now, the — the other thing is that the plaintiff States and I say, if they have this consumer interest which they do, I think can express that interest in the ongoing litigation in the Louisiana courts.

And I think we are entitled as — on behalf of the Attorney General of the State of Louisiana to extend to the State of Maryland, et al., the precise type of invitation that the Attorney General of Missouri extended to the State of Massachusetts, whose desire to litigate in a controversy.

And at page 308 U.S. at page 20, the Attorney General before the bar of this Court, Attorney General of Missouri said that it would seem that Massachusetts should be able to bring a suit against the trustees for collection of its taxes and either a Missouri State court or in a Federal District Court in Missouri and that such a suit would in Missouri constitute case of controversy.

So too I think the State of Louisiana will not oppose any effort by the State of Maryland to present its interest in some manner before the pending litigation.

Lewis F. Powell, Jr.:

What assurance do we have as to that Mr. Gressman?

Eugene Gressman:

You have the assurance of the Attorney General of the State of Louisiana.

Lewis F. Powell, Jr.:

Where?

Eugene Gressman:

I —

Lewis F. Powell, Jr.:

Are you making it now?

Eugene Gressman:

I am making it now and I — it is also been made before the state courts in Louisiana.

Lewis F. Powell, Jr.:

That litigation down there had been dormant for a long, long time, hasn’t it?

Eugene Gressman:

Yes, because —

Lewis F. Powell, Jr.:

No progress whatsoever?

Eugene Gressman:

No, that is not entirely correct.

There has been a good deal of pretrial efforts.

We have filed requests for admissions, various other pretrial information has been sought, but the basic trouble is that the plaintiff taxpayers are in the saddle seat as plaintiffs and they are fully capable at any moment to move forward with their litigation.

Byron R. White:

Well, I thought we were told earlier by one of your colleagues that the Louisiana court had declined (Voice Overlap) —

Eugene Gressman:

No, that is — that is not correct, Your Honor, and Mr. Pugh, my co-counsel will straighten that matter out.

Byron R. White:

If he has time.

Eugene Gressman:

That’s right.

So that — without further ado, I will give — I will give Mr. Pugh the time.

Thank you, Your Honor.

Warren E. Burger:

Mr. Pugh.

Robert G. Pugh, Jr.:

Mr. Chief Justice, may it please the Court.

William J. Brennan, Jr.:

What about this, the trial court did or did not refuse in?

Robert G. Pugh, Jr.:

Absolutely, it refused him to this extent if I may, Your Honor.

We moved that they be invited because it was a — we thought it was important a forum to be there.

And that connection and admittedly our statutes do not have a procedural method by which an invitation may be extended from a court.

However, we wanted to determine whether or not the pipelines had some objection to their presence in that litigation.

We found the answer to that in that they raised all of the questions concerning whether or not there could be an invitation under the laws of Louisiana to someone to join in one of the proceedings.

The Court said that it would welcome them but the Court did acknowledge that we had no procedural vehicle to specifically invite them in.

I suggest to the Court that —

William J. Brennan, Jr.:

Where does that lead?

Robert G. Pugh, Jr.:

Your Honor, we have an ongoing proceed.

It has not been indefinitely postponed.

William J. Brennan, Jr.:

Well then, may I ask this?

Robert G. Pugh, Jr.:

Yes, Your Honor.

William J. Brennan, Jr.:

The fact that the Attorney General of Louisiana is willing to extend the invitation, does it or does not bind — that bind your courts?

Robert G. Pugh, Jr.:

We are absolutely bind — well, whether or not —

William J. Brennan, Jr.:

Does it bind the court?

Robert G. Pugh, Jr.:

— whether or not this is a prestigious vehicle to accept an invitation issued by an Attorney General to another State.

I will state, Your Honor, that we will not oppose their argument.

William J. Brennan, Jr.:

Well, I know you won’t oppose but what will your courts do?

Robert G. Pugh, Jr.:

Our courts will not oppose the intervention because the Court has already said it would welcome them upon their request, and that’s in the record in Louisiana.

And let’s speak of those actions if I may.

First of all, immediately after the Act was passed, it was Louisiana that filed a suit.

It filed a declaratory judgment proceeding, not only against the pipelines, but also the other parties in interest, the producers.

One of the difficulties with the factual aspects of this case is these so-called “contracts” which is supposed to trigger everything.

They haven’t surfaced.

We don’t know who wrote what to whom and under what circumstance.

To that extent, we made the producers as well as the pipelines, parties defendants in our proceedings.

Within a week, before we filed a suit in the federal court and our suit was removed.

The federal court, on a motion to remand, remanded our suit and at the same time, on a motion to stay or dismiss, stayed the federal suit.

Thurgood Marshall:

And when was that?

Robert G. Pugh, Jr.:

That was September the 29th, that litigation was filed.

Thurgood Marshall:

What year?

Robert G. Pugh, Jr.:

1978 and it was tied up for full 5 months based on the removal.

Thurgood Marshall:

And it’s still tied up?

Robert G. Pugh, Jr.:

To this extent, Your Honor, they appealed —

Thurgood Marshall:

You mean they’re still tied up?

Robert G. Pugh, Jr.:

Yes, so, the federal court —

Thurgood Marshall:

Of course I’m going to ask you next, when is it set for argument?

Robert G. Pugh, Jr.:

It is — it was set for argument in the Fifth Circuit, Your Honor.

Thurgood Marshall:

Well, when is it set for trial now?

Robert G. Pugh, Jr.:

The federal case is not set for trial, Your Honor.

Thurgood Marshall:

But when is the state case set then?

Robert G. Pugh, Jr.:

We are prepared to set the state case immediately.

Thurgood Marshall:

It isn’t set.

Neither one is set.

Robert G. Pugh, Jr.:

Neither of those proceedings have been set for trial but if I may follow it through, Your Honor.

Thurgood Marshall:

That’s over two years.

Robert G. Pugh, Jr.:

Yes, sir.

We first filed the suit on September of 1978.

Now, when this suit was filed, the Fifth Circuit said that they would waive the argument, said they would wait to see what this Court did.

To that extent, they didn’t stay up but they put it if you will on the backburner.

Now, what we have done in the state court proceedings, Your Honor, is we have moved to consolidate and the pipelines say that they don’t object to the consolidation of the state court’s suit that we filed and their refund suit that they filed, so that all of the parties, that is to say both the pipelines and the producers are — will be before the Court at one time.

It is to that proceeding that we believe that the plaintiff States, if they wish to do so may join us and we welcome them.

At that point, we may have complete state court adjudication about a most difficult statute.

Thurgood Marshall:

Don’t you think that could’ve been the reason for the original jurisdiction provision in the Constitution that the State did not go down to a local state court of another state?

Don’t you think that might have been the reason?

Robert G. Pugh, Jr.:

I’m satisfied that was the reason, Your Honor, but — but the problem here is, should there not be a state court interpretation of its own Acts.

This Court has certainly indicated so in the past.

This Court, in the (Inaudible) case, in the Kennedy case, in Virginia versus — West Virginia and the Pullman case, and a case resolving the very same question here, in the Great Lakes case.

Robert G. Pugh, Jr.:

This Court and the Great Lakes case said that the refund procedure in Louisiana is a speedy adequate remedy, approved its use, stayed its hand —

William J. Brennan, Jr.:

Mr. Pugh, what about the interest of FERC in the state court?

It’s not a party to the state court.

Robert G. Pugh, Jr.:

But it may be, Your Honor.

William J. Brennan, Jr.:

How?

Robert G. Pugh, Jr.:

It may — Louisiana has a broad jurisdictional base.

William J. Brennan, Jr.:

Well, how does it get — how does it get in?

Robert G. Pugh, Jr.:

They’d intervene, Your Honor.

William J. Brennan, Jr.:

You said it brought its own action, I gather in United States District Court.

Robert G. Pugh, Jr.:

Yes, it did, Your Honor.

William J. Brennan, Jr.:

And that still — that’s the one now before the Fifth Circuit.

Robert G. Pugh, Jr.:

Yes Sir.

The only place that everybody —

William J. Brennan, Jr.:

But I mean, their — their issue, as I understand the argument, that they make a statutory claim that under the Supremacy Clause, your statute has to fall anyway.

Robert G. Pugh, Jr.:

Well, of course, it — we suggest —

William J. Brennan, Jr.:

That’s — that’s their argument?

Robert G. Pugh, Jr.:

That’s right, Your Honor.

William J. Brennan, Jr.:

How are they going to be heard in a state court?

Robert G. Pugh, Jr.:

They’re going to go in and they’re going to move to intervene and we’re going to say, “We love to have you and at that time, we’re going to have all the parties in Louisiana and Louisiana is the one —

William J. Brennan, Jr.:

Well, why do you think they brought their own federal court action?

Robert G. Pugh, Jr.:

Because they couldn’t bring the action in Louisiana in the first place, Your Honor, but it doesn’t mean they could intervene on a pendent action.

That’s the differential between the two if they couldn’t bring the action in the state court.

Byron R. White:

Why — why couldn’t they, by the way?

Robert G. Pugh, Jr.:

Well, it’s my appreciation that they could not, could be on their own, but it’s my procedural —

Byron R. White:

Could they have been sued?

Could you — could you have made them defendants in your suit?

Robert G. Pugh, Jr.:

In our initial suit?

On our declaratory judgment act, we can make any party who was affected by the outcome of the suit, a defendant.

I do not believe that we could have, if you will drag the United States of America into a state court proceeding of this nature.

Byron R. White:

Well, I’m not talking about United States.

Byron R. White:

I was talking about the Commission.

Robert G. Pugh, Jr.:

Well, it is an agency of the United States.

Byron R. White:

Wouldn’t you have to start out before it?

Robert G. Pugh, Jr.:

Well, as a matter of fact, Your Honor, if you’re talking about the full — FERC.

Byron R. White:

Yes.

Robert G. Pugh, Jr.:

Well, FERC actually has the same issue up right now.

FERC is deciding whether or not — see, they passed the tax through.

They apparently felt that they had the jurisdiction to pass the tax through and they did it.

Right now, FERC is deciding whether or not they ought to change their mind about that and whether or not the producers ought to pay some or all of that tax.

Byron R. White:

And of course —

Robert G. Pugh, Jr.:

That’s right now (Voice Overlap) —

Byron R. White:

— if they ordered — if they ordered the producer to pay some of this tax, you might — your tax might be in a little bit of trouble, wouldn’t it?

Robert G. Pugh, Jr.:

It could be these problems but one thing that hasn’t been (Voice Overlap) —

William J. Brennan, Jr.:

Well, I gather by a provision of your own tax law, if that happened, your whole — it would be appealed, wouldn’t it?

Robert G. Pugh, Jr.:

For the raised reasons, it would, Your Honor.

Is that that self-destruct provision —

William J. Brennan, Jr.:

Yes.

Robert G. Pugh, Jr.:

— relates to processing and also to —

William J. Brennan, Jr.:

Well, suppose FERC were to — suppose FERC were to change its mind now and say —

Robert G. Pugh, Jr.:

All right, sir.

William J. Brennan, Jr.:

— we’ll — we’ll put the whole thing on the producer, would yours — would your statute then self-destruct?

Robert G. Pugh, Jr.:

It would not be — self-destruct until these contracts were presented to a court of competent jurisdiction to find out whether or not under the terms of the contract, either by courts or attacks that that would be passed back.

Now, FERC can do what it wishes.

We have no control of it.

They may pass that tax on or follow it and we can’t help it.

If they pass it back and it affects our Act, then —

William J. Brennan, Jr.:

Well then, when does your self-destruct provision become operative?

Robert G. Pugh, Jr.:

It becomes operative if there is a judicial determination that either a cost or a tax, there are two paragraphs, are determined by a court, a final court.

William J. Brennan, Jr.:

By a court.

Robert G. Pugh, Jr.:

All right, that processing and also distribution — no sir, I’m sorry.

Robert G. Pugh, Jr.:

It’s processing and separation are affected by that court decision but they are the users, Your Honor, the other users, there is the transfer of the gas itself to the end of the pipeline — of the processing plant.

That’s another use that’s not covered under these two.

One of the problems with this case is the difficulty that all of these cases it had with defining as you will know, not only what process means, what does distribution mean, what does gathering mean because those three items were exempt from the statute.

In fact, the natural gas —

Mr. Pugh, (Voice Overlap) —

Robert G. Pugh, Jr.:

— policy act — excuse me Your Honor.

John Paul Stevens:

In the refund actions pending in the state courts, is there any claim made that the tax is not do as a matter of state law?

Robert G. Pugh, Jr.:

Absolutely, Your Honor.

There are three constitutional provisions, none the least of which is 74B of our Constitution —

John Paul Stevens:

I should have said state law.

Robert G. Pugh, Jr.:

— brand new constitution.

John Paul Stevens:

Under the taxing statute itself.

Robert G. Pugh, Jr.:

Under the taxing statute?

John Paul Stevens:

Yes.

Robert G. Pugh, Jr.:

Is that what?

Let me — let me (Voice Overlap) —

John Paul Stevens:

Is there a claim that the tax was not payable under the statute?

Robert G. Pugh, Jr.:

Yes.

(Voice Overlap) —

Robert G. Pugh, Jr.:

They claimed they don’t owe it.

They don’t claim — it’s not — they say that they shouldn’t be required to pay it if the statute is unconstitutional, under state law as well as federal law.

John Paul Stevens:

But it’s — but it’s the entire attack is on the validity of the statute.

Robert G. Pugh, Jr.:

Absolutely.

John Paul Stevens:

There’s no argument about whether the statute applies to processing or the transportation anything like that.

Robert G. Pugh, Jr.:

It’s based upon the validity of the tax.

It’s the tax refund.

It’s a — but what’s important is one of the issues that are raised in the state court below that can only be resolved in a state court is the issue of whether or not it’s really what they’re claiming.

They’re claiming it’s a tax on natural gas and we have a provision in our Constitution that says you cannot tax natural gas except as it relates to a service tax, severance tax.

Now, the validity of that must be determined to determine whether or not the state law applies.

The Constitution of Louisiana may well resolve this problem for you and you never have to reach it.

Robert G. Pugh, Jr.:

And we suggest to the Court that it’s important.

John Paul Stevens:

You don’t confess error around the state law I point, I don’t suppose.

Robert G. Pugh, Jr.:

What is that, Your Honor?

John Paul Stevens:

You don’t confess error around the state law.

Robert G. Pugh, Jr.:

Absolutely not, Your Honor, and I appreciate you’re giving me those conservatory words because we don’t confess anything.

However, we’d be pleased for them to prove it and attempt to prove it, and they’ve alleged it.

Thurgood Marshall:

Mr. Pugh.

Robert G. Pugh, Jr.:

Yes, Your Honor.

Thurgood Marshall:

This is all (Inaudible) they’ve taken over two years.

Robert G. Pugh, Jr.:

How does it taken over two years?

I could get — tell you one reason, Your Honor, because every other week I get another pleading in this case.

I had the difficulty of keeping up and there are lots of lawyers in Louisiana, but it’s trying to juggling both.

You go — we’d file a suit, they remove it.

The Court remands it, they appeal the other suit, the next thing we know we got this suit and every other — two pleadings had been filed since our last report in this case.

So, we’re busy, but I suggest to the Court and I commit to the Court.

You send it back to Louisiana and we’re going to be in court.

Now, we’re through with of this.

We’re going to resolve this issue like we tried to immediately after the Act was passed.

We tried to do it and we got stopped everywhere we went.

We are concern about the money, we need it.

You raised the question and thank you for doing so, Your Honor.

Byron R. White:

Now that —

Robert G. Pugh, Jr.:

You raised the —

Byron R. White:

— you know you can’t — Maryland can’t be in there litigating with Louisiana.

Robert G. Pugh, Jr.:

In the state court, Your Honor?

Byron R. White:

Yes.

Robert G. Pugh, Jr.:

It’s not my appreciation that they cannot.

It’s my appreciation that Maryland, if it chooses to do so under our procedure may intervene in that litigation, Your Honor.

William H. Rehnquist:

I would’ve thought after Maine against (Inaudible), Maryland certainly could litigate in the Louisiana courts about the constitutionality of Louisiana.

Robert G. Pugh, Jr.:

I commit to the Court that as a matter of Louisiana law, they can.

Robert G. Pugh, Jr.:

Of course, I’m not a Maine lawyer.

I do understand their decision, under the words of that decision, they could go elect on our procedural statute, they’d do the same thing and we’d welcome to do it.

Your Honor, you mentioned — you mentioned money, the phrase I think the Court used was government can’t act without money.

We have that same problem, Your Honor.

We can’t act without it — do you know that 39 square miles of Louisiana goes in the water every year, it’s gone.

When we lose 39, Federal Control OCS picks up 39.

We are losing land and what are we losing it by because there are 124 of these processing plants.

Thurgood Marshall:

Then why should you make Maryland pay for that.

Robert G. Pugh, Jr.:

We don’t want to make Maryland specifically pay for it.

Thurgood Marshall:

(Voice Overlap) in this case.

Robert G. Pugh, Jr.:

This, yes, is what’s tearing up the coastline.

The bringing of this case with 6000 miles of pipe we have crisscrossed from one end to the other.

Assuming it’s 12 miles out, that would be 500 different pipes coming in there.

Everytime those pipes come in there, they’re destroying our entire coastline and we’re doing what we can to furnish gas for this country but we — but we need some help.

Byron R. White:

Tell me, tell me why or perhaps by studying the legislative history carefully enough, I’d know why the — why the — why is the provision that the producer is not to pay any of this tax.

Robert G. Pugh, Jr.:

Well, first of all, Your Honor.

I would like to say at this point and I’ll answer your question is that — you’re talking about legislative history, we don’t have any legislative here.

What happened if some girl pushed a button down there and then —

Byron R. White:

So then, it’s all right to ask you?

Robert G. Pugh, Jr.:

Yes sir, absolutely all right to ask me.

We — we have in Louisiana, unfortunately, we have a situation where we’ve got an Act here that is the subject as many Acts of competing interest.

In Louisiana, about the only thing we’ve had for years is oil and gas industry and they are powerful.

They have been powerful.

How else could the provision be on the Constitution that you couldn’t tax the natural gas except for a service tax.

We’ve got an Act that has been the — the wagon has been loaded on it.

We only suggest to the Court that we need an opportunity to interpret our own acts.

The producers are strong enough to put that provision under the Act.

Byron R. White:

Well now, how about my question?

Robert G. Pugh, Jr.:

All right, Your Honor.

Byron R. White:

Do you remember what it was?

Robert G. Pugh, Jr.:

Well, in all candor, Your Honor, I kind of got lost in my own verbatim.

As I understand the Court’s question, try me out, let me see, as I understood your question.

Byron R. White:

Well, I’ll put it again.

I’ll put it again.

What was the — what is the reason if all Louisiana is trying to do is to raise some revenue, why does it require that — or forbid the producer to pay any of the tax.

Robert G. Pugh, Jr.:

Well, what we’re saying is if there’s a contract to pass back those provisions of it, then it self-destruct.

It’s in, Your Honor, because it was lobbied in there.

Byron R. White:

Lobbied?

Robert G. Pugh, Jr.:

Absolutely, Your Honor.

That’s what I’m saying.

They’re powerful enough to do so and they have done so.

Byron R. White:

Well, that — that guarantees that the pipelines are going to pay under Louisiana law and the pipelines may be passing on it.

Robert G. Pugh, Jr.:

No, sir.

It — it depends on whether FERC tells them to pay it, Your Honor.

If FERC tells them to pay it, then they pay it.

We don’t make FERC do that.

Now, if FERC wants to say to Maryland, we were wrong in that 10A or 10B, we want it now to be against the producers, then we got us a (Inaudinle), Your Honor.

And we’re going to have it in Louisiana and it’s going to be between the producers and the pipelines and maybe that’s what we ought to really be doing anyway, is let that be aired as between those two parties because they are —

Byron R. White:

Well, of course, the Commission is suggesting that — that you’re infringing — Louisiana’s infringing on its territory by even purporting to try to allocate these costs.

Robert G. Pugh, Jr.:

Your Honor, they got to be taxes that can be passed on because the Act says they can be passed on.

The Act says they can consider cost and that taxation is part of that court.

There’s an ad valorem tax that’s being passed on.

There are sales tax presumably being passed on.

There’s an apportionment tax from Louisiana all the way up to Maryland.

Every state is collecting the tax on those pipelines going through there and FERC is letting it all be done.

So, the question is why can’t we have a tax and let FERC if they want to pass it on.

If they don’t want to pass it on, then we’ll face up to what the statute said.

I only suggest to the Court again that we do have a forum.

We have a forum where everybody can be and a forum at which state law can be interpreted right down there where those processing plants are, right where all of these activities are occurring.

John Paul Stevens:

Mr. Pugh, what do you think the major factual issue that has to be decided is?

Robert G. Pugh, Jr.:

Well, Your Honor, the biggest factual issue in my opinion is when really does FERC get control, do you understand.

The Natural Gas Act talks about natural gas unmixed.

Now, what is unmixed except that it’s on the outlet of the processing plant?

Remember the (Inaudinle) case.

The reason it was struck was because the tax was a gathering tax imposed outside of the processing plant on the outlet of the processing plant and Justice Clark, went to great lengths to use to the word “after,” to italicize it.

He said it’s after processing.

It is after gathering and it is after producing.

So, we got a real question.

We got another question, Your Honor.

John Paul Stevens:

That’s the major factual issue you’ve just described.

Robert G. Pugh, Jr.:

That’s one of the major factual issues.

Another one issue, the Natural Gas Policy Act says that production includes transportation to the coast.

Now, if the States, as the Natural Gas Act require, have some control over production and over gathering, well, the statute says it.

Thurgood Marshall:

So, Louisiana court can interpret that federal statute better than we can.

Robert G. Pugh, Jr.:

I did not suggest that for a moment, Your Honor.

Thurgood Marshall:

No?

Robert G. Pugh, Jr.:

I only suggest, Your — I would not do that, Your Honor.

I only suggest that to interpret one requires necessarily an appreciation of another.

I don’t think you just hang these two statutes up, Your Honor, and say, “This looks good and that looks bad” or “this good look — looks good and that looks bad.”

We must have an underlying interpretation of the constitutional facts that are applicable to that statute, whether or not it’s the processing plant, whether or not it’s transportation.

Well, it’s not — it’s any one of these other uses including sale.

And the only thing we ask this Court to do is give us an opportunity to resolve the problem in a forum best suited to make a determination of that statute.

If you do it elsewhere, you don’t have a final state court determination anyway.

It could be knocked out but we’d still have the problem.

This — this is a brand new ballgame.

We still have a problem of whether or not states, it’s my appreciation that — that another one has been considered by this Court.

In any event, you have the problem about whether the States who are required to bear the economic burdens of what’s happening to their State whether or not those economic burdens, we should get some help from somewhere else.

This is not the first or the last statute of this type that would be coming along.

We only suggest that it’s time.

It’s time to take a good look at what did Congress mean when it said that the States and the Federal Government should work together.

Robert G. Pugh, Jr.:

I’m sorry.

Warren E. Burger:

Your time has expired, Mr. Pugh.

Robert G. Pugh, Jr.:

I apologize.

Byron R. White:

Mister, it sounds to me what your argument really is and — is that we should — rather than just let this case go on, we should really dismiss it here.

Robert G. Pugh, Jr.:

I’m not suggesting — yes, that’s actually correct, Your Honor.

I wish — it should be dismissed here.

I would suggest one other thing that the Court ought to consider, the intervention of the pipelines because then, you have the Eleventh Amendment problem, but dismiss the case and let us try it.

We’ll try it, Your Honor.

That’s a commitment on the part of Louisiana.

We’d get it going.

Thank you, sir.

Warren E. Burger:

General Sachs, let me ask you this.

Once this case was filed here, papers were filed here, is there anything unusual about having the state courts and any other federal court to defer action until they knew where this case was going, if anywhere?

Stephen H. Sachs:

You’re asking me, Mr. Chief Justice, whether there were something unusual about the fact of the Fifth Circuit as it did, stayed the FERC action pending the outcome of this decision.

I cannot purport to be an expert, Mr. Chief Justice.

It does not strike me as unusual.

This is case is here perhaps — I would like to think it means that the Fifth Circuit feels this case belongs here but perhaps that asks — that asks too much.

Warren E. Burger:

And in any event, they might like to know what we think about it.

Stephen H. Sachs:

I — I would certainly think so, Mr. Chief Justice.

William J. Brennan, Jr.:

Well, what about the state courts?

Stephen H. Sachs:

Mr. Chief — Mr. Justice Brennan, we can’t — I must come back to what I said earlier.

It is the position of the States.

I appreciate very much the hospitality of our friends from Louisiana.

We — we enjoy being told come on down.

We — we are grateful for that, but we know that the original jurisdiction, especially the exclusive aspect of the original jurisdiction does not permit us to go there.

And secondly, the reason for the rule on the first place ought not remand a sovereign state to the courts of another state for disposition of matters of this kind of consequence.

William H. Rehnquist:

Mr. Sachs, supposing that the Attorney General of Maryland became convinced that a number of Maryland residents who would move or retire to Louisiana were being unconstitutionally taxed by Louisiana in the — in a state tax proceeding.

Could it bring an original action against Louisiana as parens patriae in this course claiming that the Louisiana statute was unconstitutional?

Stephen H. Sachs:

Well, I think probably not, Mr. Justice Rehnquist, because for the very reason that this case, for example, in Pennsylvania against West Virginia are different from Pennsylvania against New Jersey, that that commuter tax situation that occupied this Court in Austin and New Hampshire and then the original jurisdictional declined where a state is really acting as the surrogate for some of its citizens.

And that — that’s not this case, Mr. Justice Rehnquist.

Stephen H. Sachs:

Not only are we their proprietor.

As in our proprietary matter, we are there on behalf of all of the state institutions and all of the consumers in the State of Maryland as well as our Sister States on behalf of their citizens a pervasive —

William H. Rehnquist:

Well, did you count heads to decide whether you’re parens patriae or anything?

Stephen H. Sachs:

I — I think, with all respect, that — that cheapens the — it cheapens the concept but I think that pervasiveness, if you call that counting heads then so be it.

Pervasiveness across the State, cutting across all lines, it can add up to a parens patriae.

It has to be something more than counting heads in the sense that the aggregate problem is greater than the sum of the parts, but whether or not you have to find out how many parts there are to make the sum, I think you can make a difference whether you’re dealing with a thousand citizens or four millions citizens.

And I think the parens — as the Chief — as Justice Marshall pointed out in the — in the Hawaii against Standard Oil case a couple of years ago, there is a recognized parens patriae role for the States to play on behalf of their — of their consumers.

I would like to point out, if I could, something of what I have to characterize the disingenuousness of the argument being tendered by Louisiana and especially the — what I would characterize is the parade of prudential horribles that Mr. Gressman raises for you.

There is something ironic for us to be told that we don’t have standing when it is us who bear the tax.

The pipelines pass on the tax.

FERC sits and says, “Okay, you can pass on the tax.”

Louisiana passed the tax knowing and expecting that it would go the heart of the States who were bearing the tax, yet we are being told, “You are not injured.

You were not the real party in interest.

You have not been hurt.”

And I respectfully suggest to the Court that runs counter to every notion of the reason for standing.

Standing rules in the first place are there to ensure that the party raising the issues will indeed press the issues, that they have a real stake in the matter.

This is the essence of the case in controversy requirement.

You may be rest assured, Your Honor.

Potter Stewart:

But General Sachs, every commodity that the State buys is filled with passed on taxes.

Stephen H. Sachs:

Indeed they are, Mr. Justice Stewart.

Potter Stewart:

And as I — as you — does a State as a purchaser of each of those commodities acquire standing to attack the tax?

Stephen H. Sachs:

No, sir, but the distinction here is that the — the unconstitutional event in the first place, as your legislative history will show you, is that Louisiana imposed this tax, taking advantage of a mechanism, a conduits to the pipelines, a FERC mechanisms, all of which happened exactly as they forecast it precisely so that the tax would be born as we bear it.

That, I respectfully suggest, Mr. Justice Stewart, must distinguish this kind of a situation for standing purposes from the situation in which every consumer always bears as part of a cost every tax as ever passed.

I think that’s true but this is radically different from that.

I would like to respond if I may to a point raised by Mr. Justice White earlier with respect to whether Louisiana could constitutionally tax our processing.

I want to concede that there are circumstances in which that certainly could happen.

If we’ve learned anything from Complete Auto against Brady and if we’ve learned anything from the Washington Stevedoring case, we have been liberated from the notions that there are some automatic per se rule that says you can’t touch it if it’s in interstate commerce.

But what we also know is that a test must be applied and included in that test is whether or not the statute discriminates against interstate commerce and whether or not it is apportioned, et cetera.

And on this branch of the case, we are saying much like Boston Stock Exchange, and much like Pennsylvania — City of Philadelphia against New Jersey, it is possible to say that facially, this statute does those things.

So that we can live very comfortably, Mr. Justice White, in the universe that says, “Louisiana can find some tax that is not offensive to interstate commerce and it can oppose it on the thing called processes.”

Stephen H. Sachs:

It doesn’t matter — may I get back to what you’ve raised earlier, Mr. Justice Stevens, and that it really doesn’t matter in this case and we’ve yet to hear facts suggested.

They are tendered or raised today or in all of the pleadings that suggest any fact that makes it necessary for an evidentiary hearing on this aspect of the case.

There is nothing about processing whether processing is or isn’t one thing or another does not change the fact that what this statute does is to take every conceivable opportunity to export this tax out of the state.

A fertilizing company in Alabama is going to — that takes gas from the Outer Continental Shelf is going to pay this tax.

A fertilizing company in Louisiana that takes the same gas does not pay the tax.

The utility companies in Louisiana pay the tax — do not pay the tax on gas that comes from the Outer Continental Shelf, but utility companies in my case — in my state and in New York and in Massachusetts, and all of the other states, indeed 30 of the States of this nation will pay that tax.

As one of the sponsors of the utility tax credit bill said in the legislative history very candidly he said, “I just want to make sure that the folks in my district don’t have higher fuel bills.”

Well, all of us, especially those who of us who run for office would like to be able to ensure that that protection is afforded.

But the Constitution of the United States says, “You can’t do that and make interstate commerce bear all the burden.”

And finally, what the — the essential discrimination in this case and Professor Hellerstein, in his — in his lectures in Tulane not so long ago points this out.

The essential discrimination in this case is that an owner of gas, who takes the gas from the Outer Continental Shelf and who has severance tax liability in the State takes the Outer Continental Shelf gas, tax free.

One who doesn’t do business in the State of Louisiana and does have those severance tax credits, he pays the full tax and that, may it please the Court, is precisely why the Commerce Clause exists to prevent.

Thank you very much.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.

We’ll resume at one o’clock with Albernas against the United States.