New England Power Company v. New Hampshire

PETITIONER:New England Power Company
RESPONDENT:New Hampshire
LOCATION:Haag Hall at University of Missouri – Kansas City

DOCKET NO.: 80-1208
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: New Hampshire Supreme Court

CITATION: 455 US 331 (1982)
ARGUED: Dec 07, 1981
DECIDED: Feb 24, 1982

ADVOCATES:
Donald K. Stern – on behalf of the Appellants in No. 80-1471 and No. 80-1610
Gregory H. Smith – Attorney General of New Hampshire, on behalf of the Appellees
Samuel Huntington – on behalf of the Appellant in No. 80-1208

Facts of the case

Question

Audio Transcription for Oral Argument – December 07, 1981 in New England Power Company v. New Hampshire

Warren E. Burger:

We will hear arguments next in the New England Power Company against New Hampshire.

It appears that the Attorney General has been able to get out of the snows and arrive, and we will put him on in due course.

He must be anxious to get back to those snows some time today.

Mr. Huntington, I think you may proceed whenever you are ready.

Samuel Huntington:

Mr. Chief Justice, and may it please the Court, these consolidated cases are here on appeals from the Supreme Court of New Hampshire.

The key issues are whether New Hampshire’s restriction on hydroelectric exports places an undue burden on interstate commerce in violation of the commerce clause, and whether the restriction is pre empted by the Federal Power Act.

The facts are straightforward.

New England Power Company is part of a holding company system that serves customers in Rhode Island, Massachusetts, and New Hampshire.

It owns several hydroelectric units along the Connecticut River located in New Hampshire.

Energy from these units is delivered to an integrated regional transmission grid and flows freely in interstate commerce.

In 1980, the New Hampshire Public Utilities Commission invoked a 1913 state statute and ordered New England Power Company to sell within New Hampshire the output from the units.

The Commission did not order NEP to interrupt physically the way the power is being generated or transmitted.

Rather, it sought to capture exclusively for the benefit of New Hampshire citizens the economic benefits of these units.

New Hampshire’s attempt to retain the economic benefits of an important natural resource exclusively for its own citizens violates the commerce clause.

There are two mainstream cases by this Court which are directly on point.

West versus Kansas Natural Gas Company involved a state prohibition against the export of natural gas.

And in a case even more on point, in Pennsylvania against West Virginia, this Court struck down a statute that required natural gas companies to serve local needs first, before exporting any natural gas.

So you say that the Federal Power Act of ’35 doesn’t either hinder or help you, or at any rate you don’t need it?

Samuel Huntington:

Well, our commerce clause argument is based on the commerce clause itself.

In addition to that we have a pre emption argument that the New Hampshire restriction is pre empted by the Federal Power Act.

Now, New Hampshire seeks to rebut our commerce clause argument by relying on Section 201(b) of the Federal Power Act, so the Federal Power Act is involved in our commerce clause argument to that extent.

And I would like to turn now to that clause.

New Hampshire’s argument is that that is an affirmative grant of authority, and therefore Congress affirmatively authorized them to burden interstate commerce.

What is, Mr. Huntington?

Samuel Huntington:

Section 201(b) of the Federal Power Act.

Let me turn immediately to the language of that section, which I think itself is dispositive.

201(b) provides,

“The provisions of Part 2 of the– “

Where have you cited that?

Samuel Huntington:

–This is at Page 19 of our brief.

Thank you.

Samuel Huntington:

“The provisions of Part 2 shall not deprive a state or a state commission of its lawful authority now exercised over the exportation of hydroelectric energy which is transmitted across a state line. “

The question is, is this a grant, and we submit that the words “shall not deprive” are flatly inconsistent with a grant.

These are not words of grant.

“Lawful authority now exercised” is certainly not a reference to new authority heretofore barred by the commerce clause.

What do you make of Congressman Rodgers’ comment?

Samuel Huntington:

Congressman Rodgers may have thought that the state had lawful authority to restrict hydroelectric exports.

What Congressman Rodgers said is, allow us to continue to exercise these rights which we have.

Congress’s reaction to that was to enact 201(b), which is a savings clause.

Congress said, all right, whatever lawful authority you now have you can continue to exercise, no more, no less.

The context of Section 201(b) is also flatly inconsistent with reading that–

Counsel, what do you think that clause saved for New Hampshire?

Samuel Huntington:

–It saved whatever authority New Hampshire had.

Now, we don’t think the Court needs–

What authority did it have?

As a practical matter, what did that clause save, in your view, for New Hampshire?

Samuel Huntington:

–Well, in fact, it may have saved nothing.

We don’t think the Court needs to reach that issue, because I think there may be a category of cases where the Court could restrict hydroelectric exports in order to meet a local emergency or need, and we do address that in our brief.

Do you think that it may also have saved the power of New Hampshire to regulate retail interstate sales?

Samuel Huntington:

No, there is another provision–

As opposed to wholesale?

Samuel Huntington:

–There is another provision in Section 201(b) that says that the authority of the Federal Energy Regulatory Commission extends to wholesale sales, but to no other sales, and that would take care of the retail sales.

I think the context of Section 201(b) is important here.

Part 2 of the Federal Power Act was passed following the Attleboro decision, which held squarely that interstate flows of electricity are subject to the protection of the commerce clause, and that regulating wholesale sales in interstate commerce is beyond the power of the states.

Now, Congress’s reaction to that decision was not to create new authority, not to delegate to the authority affirmative… to the states affirmative power to regulate wholesale sales.

Congress’s power was… Congress’s reaction was to observe federal state constitutional lines to give the Federal Power Commission, as it was then called, authority over wholesale rates and to preserve to the states whatever authority they had, and we submit that Section 201(b) is completely consistent with this division.

There is another section–

Are there two federal Acts you are talking about?

Because certainly there is a considerable lapse of time between the Attleboro and the ’35 Act.

Samuel Huntington:

–Attleboro was in 1927, so it was seven or eight years.

Samuel Huntington:

But the legislative history of the Part 2 makes clear that they were reacting to the Attleboro decision and that Part 2 was enacted specifically to fill the so called Attleboro gap.

There is another section–

Well, Mr. Huntington, are you… you are arguing first pre emption, I take it.

Samuel Huntington:

–No, we are arguing first that it is an undue burden on interstate commerce.

Why are you taking that approach?

Samuel Huntington:

Because we think the restriction falls squarely within this Court’s commerce clause decisions and must fall.

We think that is the easiest ground to rest the decision.

On pre emption would the case be clear for you if 201 wasn’t in the statute?

Samuel Huntington:

Well, 201(b) is relevant–

Would it or not?

Samuel Huntington:

–I beg your pardon?

Would you think that without 201(b) your pre emption–

Samuel Huntington:

Without 201(b) we wouldn’t be in Court.

It would be clear that there was no… that we had a solid case.

I don’t think New Hampshire would have a case.

–Well, suppose we agreed with your colleague on the other side that 201(b) did save state power?

Samuel Huntington:

If you construe 201(b) as an affirmative grant, which we think would be–

Well, you would never get to the commerce clause argument then.

Samuel Huntington:

–That is right.

You could then–

Well, don’t you think we must face the pre emption argument first?

Samuel Huntington:

–The case presents squarely a commerce clause issue and two pre emption–

Not if 201(b) saves state power.

Samuel Huntington:

–If 201(b)… 201(b) has to be looked at in two senses.

First, does it save from pre emption the New Hampshire restriction?

If it does, it doesn’t violate the commerce clause, the New Hampshire law doesn’t violate the commerce clause, either.

Samuel Huntington:

No.

No, no. 201(b), if it is a traditional savings clause, as we assert it is, then it could save the New Hampshire restriction from pre emption under Part 2.

However, the statute could still be invalid under the commerce clause unless 201(b) is an affirmative grant.

Now, this is the approach the Court used last term in the BT Investment Managers case.

We at least have to construe the statute in order to determine which of those it is.

Samuel Huntington:

No question, the Court must construe Section 201(b), and our contention is that the first question the Court must address is, is it an affirmative grant or is it a savings clause.

If it is a savings clause, then it is not a defense to our commerce clause challenge.

It is only a defense to our pre emption argument, and that is the approach that the Court used in the BT Investment Managers case last year, which involved a savings clause practically identical to the 201(b) savings clause here.

The Court there held that the saving… that it was a savings clause, and it protected the Florida statute there in question from pre emption, but it was not an affirmative grant, and the Florida statute was struck down on commerce clause grounds.

Let me refer the Court to Section 202(f) of the Federal Power Act, which was not mentioned in our briefs, but I think it is relevant here, and I brought it to Mr. Smith’s attention.

202(f), Part 2, was enacted in 1953 to make clear that the Federal Power Commission’s jurisdiction did not extend to international sales, wholesale sales between a single state and a foreign country.

Congress in enacting 202(f) was concerned that these sales might then be beyond either federal or state authority under the Attleboro decision.

So in 202(f) Congress added a provision that said, and I quote,

“The states may regulate any such transaction. “

And the legislative history of 202(f), which is House Report Number 978, 83rd Congress, First Session, makes clear that Congress added that because they were concerned that the states might not have that authority under the Attleboro gap… under the Attleboro decision.

So 202(f) is an example of a clear delegation to the states of authority to regulate wholesale sales.

The states may regulate any such transaction.

That stands in total contrast to 201(b), which says that nothing shall deprive a state of any lawful authority now exercised.

I would like to turn now to New Hampshires second argument to avoid the commerce clause contention we make.

And that is that the state has a proprietary interest in the river itself, and that justifies this restriction on interstate commerce.

Even if the state has a proprietary interest, and we submit it does not, that interest does not justify restricting commerce in a product which is privately manufactured using the river’s power.

Electricity is a product generated by New England Power Company using the river’s power.

By way of analogy, flour is a product that can be milled using the river’s power.

Clearly, New Hampshire does not have the authority under the commerce clause to restrict commerce in flour.

We submit it does not have any authority to restrict commerce in a privately produced product such as electricity.

This is the clear teaching of Foster Packing, a 1928 decision that says a state may not prevent privately owned articles of trade from being sold in interstate commerce.

Do you think cases like that and Attleboro would come out the same way today?

Samuel Huntington:

We rely on Attleboro for the proposition that electricity in interstate commerce is subject to the protection of the commerce clause.

Attleboro stands for the proposition that wholesale sales in interstate commerce are beyond the authority of the states to regulate.

I think there may be some question as to whether all wholesale sales in interstate commerce are beyond the constitutional authority.

However, the restriction we have here is very akin to the Pennsylvania against West Virginia decision, and that case has been reaffirmed time and time again, as recently as last year in the BT Investment case, in the Philadelphia against New Jersey landfill case, and stands for the very solid proposition that a state cannot erect a barrier to the interstate commerce of a product generated from a natural resource.

We submit in any event that New Hampshire does not have a proprietary interest in the river in the same way that it owns, say, state forest lands or the state capitol building.

The interest New Hampshire does have is a regulatory interest.

It has an interest in seeing that the resource is not wasted, it is conserved, and so on.

Samuel Huntington:

But this Court’s decision in Hughes against Oklahoma, striking down a state barrier on the export of minnows, stands firmly for the proposition that this ownership interest in natural resources, wildlife, and so on, does not protect the state regulation from commerce clause scrutiny.

The ownership interest is simply the equivalent of saying, yes, the state may regulate for valid conservation or waste purposes, but those regulations must still pass muster under the commerce clause.

We submit that under the core commerce clause decisions of this Court, the New Hampshire restriction cannot survive the commerce clause attack.

With the Court’s permission, I would like to save the balance of my time for rebuttal.

Warren E. Burger:

Mr. Stern.

Donald K. Stern:

Mr. Chief Justice, and may it please the Court, Massachusetts and Rhode Island also contend that the order of the New Hampshire Public Utilities Commission violates the commerce clause and is pre empted by federal statute.

We agree that Section 201(b) does not act as a grant of Congressional authority, but instead should be construed this Court as a saving clause.

For purposes of my argument, however, I will assume a contrary interpretation of Section 201(b), and will assume that Congress did in fact give to New Hampshire the authority to limit or ban the exportation of hydroelectric power and that the PUC’s order fell within the grant of that authority.

Such an interpretation would, in our view, present serious Constitutional questions centering on the limits of Congressional authority.

What do you do with Prudential against Benjamin and cases like that?

Donald K. Stern:

Well, Your Honor, we don’t dispute that Congress can… has broad discretion and authority with respect to the commerce clause, nor do we dispute that Congress’s authority under the commerce clause exceeds that which a state might otherwise have.

In other words, this case is not a case where we argue that Congress was incapable of giving to the states authority which it wouldn’t have had in absence of Congressional authority.

What we do suggest is that that power which Congress has and which the states willingly gave up to Congress when it entered into the Constitution must be exercised in a way so that the exercise of Congressional power is exercised in some rational manner consistent with the legitimate ends that Congress sought to achieve.

Now, before I pursue that question, Your Honor, I want to briefly describe what we consider Massachusetts and Rhode Island’s interest in this litigation.

On one level, of course, our interest is as narrow as is New Hampshire’s.

Any reduced savings to New Hampshire inevitably means that we pay more.

Well, and partly, too, your citizens, according to New Hampshire, are migrating to New Hampshire.

Donald K. Stern:

Well, that is true, Your Honor.

They are then becoming New Hampshire residents and New Hampshire citizens.

But what is clear is that the fiscal impact of the PUC’s order by its very terms is to shift the economic burden of some $25 million.

Our estimates exceed that amount, but we are willing to accept that at a minimum $25 million is being shifted from the shoulders of New Hampshire residents, rather, from Massachusetts to New Hampshire, but the real impact, I suggest, Your Honor, and this is, I think, perhaps the primary reason we are here, exceeds and transcends the dollars and cents.

The decision of the PUC threatens the long standing cooperative efforts of the New England states with respect to energy matters.

The New England Power Pool represents perhaps this nation’s most sophisticated and highly integrated energy power pool arrangement.

This arrangement, however, is a finely tuned arrangement, and one which, as the Commissioner of the Rhode Island PUC testified at the New Hampshire hearing suggested, could unravel fairly easily.

Moreover, the PUC’s order invites the very sort of economic retaliation and isolation which these same three states were subject to when they were governed by the Articles of Confederation, which leads me to the commerce clause, or back to the commerce clause, and to the authority which the states willingly gave up to Congress.

While we concede that this authority is expansive, there are certain internal and external constraints, we suggest, on Congress’s power to legislate in the area.

I intend to focus my argument on the internal constraints implicated by the commerce clause, and suggest that if the Court adopts New Hampshire’s interpretation of Section 201(b), that this case then presents one of those rare occasions for holding that Congress has exceeded its power under the commerce clause.

In prior instances where the Court has been faced with this argument, it has followed essentially a two step analysis.

First, whether the subject matter which Congress acts falls within the broad reach of the commerce clause, and here there is no dispute.

We concede that Congress had the authority to regulate in the energy area generally, and with respect to hydroelectric power specifically.

Donald K. Stern:

In fact, it forms the premise of our own commerce clause claim and our pre emption claim.

But the second step and the second question is contested here, and that is whether Congress’s action is reasonably related to the goal of regulating interstate commerce.

This question, which is essentially a limited means and ends analysis, requires that there must be some showing, however minimal, that Congress has acted in a rational manner, and here, it is our position that whether one looks for an articulated purpose on the part of Congress or indeed for any plausible reason for Congress’s action, none emerge to support a grant of authority to New Hampshire which effectively keeps the benefits, the economic benefits of hydroelectric power within her borders at the expense of her sister states.

The fact that similar authority was not provided to the vast majority of other states underscores the irrationality of Congress’s action.

Well, it was a grandfathering thing, according to the Congressman from New Hampshire, wasn’t it?

Donald K. Stern:

Well, we suggest, Your Honor, that labeling it as a grandfather clause in this case doesn’t assist New Hampshire, for several reasons.

The first is, it was a curious kind of grandfather clause, because New Hampshire argues that it didn’t simply lock in lawful authority.

Part of its argument is that it gave to a few states authority which it didn’t have before under the commerce clause.

But secondly, we suggest that calling it a grandfather clause may describe what Congressman Rodgers had in mind, but in other instances where the Court has upheld the rationality of grandfather clauses it has looked to see whether the locking in of the inequity, if we can call it that, furthers some other rational, some other legitimate purpose which the legislature or the city council in the case of New Orleans versus Duke had in mind.

Here, of course, it is not a temporary solution.

It is a… to a national problem.

What it does is to give to New Hampshire forever power, important power, within its borders, this economic benefit, yet at the time same deny to the rest of the union, and here specifically Massachusetts and Rhode Island, this very same power.

This is not an instance where Congress simply follows the problem, as it did in the decision which the Court upheld last year, the statute which the Court upheld last year in Hodell, where Congress dealt with a problem, and after extensive hearings found that although the statute, the Strip Mining Act fell peculiarly upon Virginia, what Congress was doing was simply following the problem wherever it found it.

Nor is it an instance, we suggest, as in the voting rights case, the Katzenbach case, where Congress selectively carves out its remedial powers in response to a national problem.

Here, Massachusetts and Rhode Island find themselves on the receiving end of action which we assume for argument purposes but for Congressional action would violate the commerce clause, yet at the same time our action is judged, of course, by the higher standard of the commerce clause, since we lack that Congressional grant.

We suggest that such an unprecedented result is contrary to the very purpose of the commerce clause.

This Court has in the past found great meaning in the silences, in the great silences of the commerce clause.

The Court has interpreted that provision in the name of national unity and free commerce as inhibiting the states.

We suggest that there is another great silence in the commerce clause which places certain limits on Congress, admittedly very narrow ones.

Those limits at a minimum preclude Congress from selectively choking off interstate commerce in a manner that bears no rational relationship to the purpose of the commerce clause.

In effect, Mr. Stern, you are suggesting that this statute might just as well have read, State of New Hampshire.

Donald K. Stern:

Yes, it could have, Your Honor.

We think that Congress can–

That that is the only one of the 50 states to which it could apply?

Donald K. Stern:

–Oh, no, no, Your Honor.

By mentioning New Hampshire, I am focusing on the fact that it is New Hampshire and her neighboring states that are before the Court.

At the time the statute was passed, there were in fact other states which arguably fell within 201(b).

How many?

Donald K. Stern:

I think there were four, Your Honor, and there now remain, I think, only New Hampshire and Wisconsin which at all suggest that they have any authority.

Wisconsin is not before the Court, so we don’t know what authority it suggests.

Donald K. Stern:

In conclusion, I want to again make clear that we do not believe that Congress by virtue of Section 201(b) intended such a grant of authority to New Hampshire.

We do suggest that if the Court disagrees with this interpretation of 201(b), that this interpretation provides a separate basis upon which to reverse the decision of the New Hampshire Supreme Court.

Warren E. Burger:

Mr. Attorney General.

Gregory H. Smith:

Thank you, Mr. Chief Justice, and may it please the Court, without meaning any disrespect for my opposing counsel, or for the counsel in my office who drafted the brief in this case, which I approved, I would like to begin by saying to the Court that in preparing for this argument, I reread all the briefs in this case, and I think that there is one issue in this case, and only one issue in this case, and that is whether Section 201(b) of the 1935 Federal Power Act upon which New Hampshire relies in this case is unconstitutional.

The appellants, to prevail in this case, must carry their burden of demonstrating that that Act was an unconstitutional Act by Congress.

If they do, I lose this case.

If they do not, I do not believe there is any way that they can prevail.

I ask your indulgence to treat briefly some further facts which have already been referred to in the earlier argument.

Section 201(b), as I think you know, provided in fairly explicit terms that a state would not be deprived of its lawful authority now exercised over the exportation of hydroelectric energy which is transmitted across a state line.

That Act of Congress adopted the practice then in existence in four states in the union and wrote it right into the law.

The hydroelectric power plants in New Hampshire on the Connecticut River, which is in fact wholly within New Hampshire, generate electricity without any interstate character in the generation of the electricity itself.

If there is any doubt about what that section of 201(b) means, the appellants have called upon the right state to give the answer.

That section, which was an amendment to the Federal Power Act when it proceeded through Congress, was introduced, was sponsored, and shepherded through Congress by representatives of the state of New Hampshire.

In doing so, the Congressman from the state of New Hampshire addressed his colleagues by saying,

“The Senate bill as originally drawn would deprive certain states, I think five in all, of certain rights which they have over the exportation of hydroelectric energy which is transmitted across the state line. “

“This situation has been taken care of by the House Committee, and I hope you will, when you come to it, Section 201 of Part 2 of the 1935 Power Act, that you will grant us the privilege to continue as we have been for 22 years, to exercise our state right over the exportation of hydroelectric energy transmitted across state lines, but produced up there in the granite hills of old New Hampshire. “

Mr. Smith, it is true that at that time, the state had never in effect exercised its power, is it not, by any action of the Public Utilities Commission?

It simply had a statute on the books which would have permitted the Public Utilities Commission to have acted?

Is that right?

Gregory H. Smith:

I do believe that is correct, Your Honor.

In fact, that statute, which was enacted in 1913, applied to the Connecticut River hydro plants after 1926, and I believe the record shows that all of the hydroelectric plants subject to this appeal were built or taken over by the New England Power Company after 1926.

I think the record also shows that in 1934, the Public Utilities Commission was asked by the New England Power Company or its predecessor with respect to these dams for permission to export hydroelectric energy out of New Hampshire, and that permission was granted.

It has been exercised from the beginning, and the owners of the current dams have taken their interest in these dams, apparently realizing that expressly, and I believe there is reference to that in the record.

It is our position, in fact, contrary to our opponents’, that that authority was exercised, and that the other states, West Virginia, Maine, and Wisconsin, had also statutes on the books at that time, and it was authority which had been used.

It was lawful authority, and we believe the reference to lawful authority in the statute can have only one intelligible meaning.

It meant enacted into law.

They were writing at the time in an obvious context.

This particular statute was brought to the attention of Congress, and it was with this particular statute in mind that that amendment was offered and incorporated into the 1935 Power Act.

It is placed in the section in which the other authority of states regulating hydroelectric energy export is also dealt with.

That is, the authority to control interstate shipments for ultimate consumption and the authority to regulate wholly intrastate authority, and as further support for our view of the clear intention of Congress as expressed in this Act, in the 1978 amendments, the Public Utilities Regulatory Policy Act, a further amendment to 201(b) allowed the Federal Energy Regulatory Commission to require pooling, to mandate interconnection of hydroelectric plants, and there is an exception created in that amendment to this provision upon which we rely today, indicating that Congress had some idea that without that exception the 201(b) as we construe it, and as we think it clearly takes effect in this case, would have prevented mandated pooling ordered by the federal authorities.

Would you also say that in the absence of the statute, that New Hampshire’s actions were lawful under the commerce clause?

In other words, was it in fact a lawful exercise of authority by New Hampshire at the time Congress acted?

Gregory H. Smith:

We think that it very well may have been, and we think that reviewing the authorities from this Court, the control that a state may have over the natural resources within its boundaries which it owns is a question that has been somewhat left open in the decisions of this Court, and–

Well, at least it is arguable, is it not, that at the time Congress acted the first time with 201(b), that the action, whatever it was, that was being taken by New Hampshire was not lawful under the commerce clause?

Gregory H. Smith:

–Certainly it has been argued before this Court today.

In our view, the states do have such authority to control their natural resources, and we cite in our brief such recent authority as the Rees versus State case, the cement plant, indicating that a state, when it owns the thing of commercial value, may have far more authority to control the delivery of that into the stream of commerce than it would have with respect to other matters.

It is our position here today before you, however, that that is not the question before the Court, that 201(b) clearly provides that New Hampshire may exercise its authority under the statute, and the Court need go no further to decide this case–

Well, all right, but help me over that interpretation, if you will.

Assume for a moment that it was unlawful for New Hampshire to be regulating that at the time that 201(b) was passed, and 201(b) was a grant of power for a lawful exercise by New Hampshire.

Then how do you interpret the statute, 201(b), to help you?

Gregory H. Smith:

–I would interpret it the way I have now.

That is, that if I assume, as you have asked me to, that this section was required as a grant of authority by Congress in order to avoid what would otherwise have affected the commerce clause, then relying upon an interpretation of lawful authority that referred directly to the Constitution would not make any sense.

It is our view that the use of the word “lawful” referred to the New Hampshire statute which had been called to the attention of Congress, and to construe it as a direct reference to the Constitution when Congress didn’t say constitutional or cite some provision of the Constitution, renders the entire exercise meaningless.

It becomes circular.

Wouldn’t it be an equally plausible interpretation to say that it is a savings clause in effect, that Congress does not wish to pre empt those states which are exercising lawful authority by virtue of the enactment of this particular Act of Congress?

Gregory H. Smith:

I don’t think so, Your Honor.

I take the position it does not.

In this particular case, it is perfectly clear what the reference was Congress had in mind when it enacted this particular provision.

It does not matter whether it is viewed as a grant or a savings clause.

It is plain from the reading of the statute that what Congress did was adopt the practice of New Hampshire and other states and permit us to go on doing it.

It seems to me that analyzing it rigidly by other cases which refer to grants or savings of one authority or another is somewhat beside the point.

This particular statute is very specific, and in fact was enacted in order to authorize exactly what we were doing in 1935 and what we are doing today.

Let me put a hypothetical to you, Mr. Attorney General.

Suppose New Hampshire had a statute that authorized the state to divert or retain within the state any waters including navigable waters for the purposes of hydroelectric power for the state or irrigation or transportation, and then you had Section 201(b) making a judgment that that was presumably a valid right.

What would you say about that?

Gregory H. Smith:

Well, it seems to me that the authority for New Hampshire to control the water itself at the time that Section 201(b) was enacted was clearer than the authority with respect to hydroelectric energy, and that is largely because Congress had acted to regulate hydroelectric energy in Part 1 of the Federal Power Act of 1920 and then again at the time that this was enacted.

Well, specifically, do you think New Hampshire could keep all the navigable waters that come into the state within the state and not let them flow on through?

Gregory H. Smith:

I am sorry, Your Honor.

I misunderstood.

There is authority from this Court which prevents diverting the natural flow of a river out of the state, and–

My hypothetical was that New Hampshire asserted in a statute that it had authority to do that, contrary to other views.

Would Section 201(b) give it any more than it had before?

Would it give New Hampshire any more rights with respect to those navigable waters than it had before the passage of the statute?

Gregory H. Smith:

–It seems to me that if the question is whether New Hampshire might interfere with the flow of the river in Massachusetts, as in this particular river or this case, this river runs into other states in which other states may have some interest in the flow, certainly the same interest New Hampshire has in the flow of the river, and the ownership of the bed under it that we make in our briefs in this case.

I don’t think in this case there is any question of New Hampshire interfering with the flow of the river itself downstream to such an extent that states downstream from New Hampshire are in any worse position than they were before, and in fact in this particular case the order which is before the Court is one which does not even block the exportation of hydroelectric energy or the pooling of that energy in the New England power pool.

Instead, it simply requires that there be an accounting or bookkeeping which treats it as though the fact that it had been sold within the state of New Hampshire.

It does not undo the New England-wide–

Mr. Attorney General, what about Mr. Huntington’s point about milled flour?

Gregory H. Smith:

–I think it is clearly beyond the scope of what is at issue in this case.

New Hampshire doesn’t assert any control by this statute, and has not asserted in this case any control over those derivative products which may be benefitted from the flow of this river.

If it is not any control, why are we here?

Gregory H. Smith:

New Hampshire asserts control only over… only over the flow–

That is the answer I want about flour.

Gregory H. Smith:

–Mr. Huntington’s argument goes too far.

Mr. Huntington asserts that New Hampshire is trying to control any benefits at all from that hydroelectric energy wherever it may be… wherever the power generated by that river may in fact aid in some incremental way in improving the economic value of some other part of commerce.

New Hampshire hasn’t done anything of the sort.

New Hampshire is only asserting its control under the statute over the generation of the power itself.

We go no further than that in terms of what happens to products.

Could it exercise that over the production of flour?

Gregory H. Smith:

There is nothing in our statute which would permit us to exercise it over anything more.

Well, could they pass such a statute?

Gregory H. Smith:

That certainly isn’t what is at issue here.

All we have is a statute which regulates the power itself, and more importantly, a statute which–

Could they pass such a statute, and would it be constitutional?

Gregory H. Smith:

–It seems to me that the question would have to be whether Congress could pass a statute permitting the state of New Hampshire–

Well, could Congress pass such a statute?

Gregory H. Smith:

–I think it could.

We do not take the position–

You might just as well get to it.

I am going to keep asking until you get to it.

0 [Generallaughter.]

Gregory H. Smith:

–I think Congress could, and I think that the important point which is raised by the argument to which you refer is that there is no question in this case as to the selectivity of this particular… the application of 201(b).

I think that the language in 201(b) which refers to authority now exercised is descriptive and not limiting.

In other words, although it is not before the Court today, it seems to me it may be left to another day whether if another state enacts a statute like this it may argue that the reference in 201(b) was to authority like New Hampshire’s.

Well, then you say they couldn’t pass a statute concerning flour, because that is not in effect today.

Is that what you are saying?

Gregory H. Smith:

No, Your Honor, I am saying that they could pass such a statute, and Congress could adopt such a statute, and I think that it would… and I assume that it would apply to all states equally, in order to permit the regulation, for example, of flour by the states under the commerce clause.

Mr. Attorney General, can I ask you a question about the lawful authority language in 201(b)?

You don’t contend that that language would have authorized New Hampshire to regulate the rates on interstate sales of electricity, do you?

Gregory H. Smith:

We have not contended that, Your Honor.

I think that issue may have been raised in the court below.

All that is done by the order in this case is a regulation of the volume of hydroelectric energy, and we refer, I think, in our brief to a footnote in authority of this Court that evidently that particular section was one which was not concerned with ratemaking, but rather was concerned with regulation or prohibition of the volume of hydroelectric energy which could be exported across state lines.

In constitutional terms, what is the difference between a state regulation of rates and a state regulation of volume?

Gregory H. Smith:

In constitutional terms, I am not sure that there is any difference.

Well, if there is no difference, doesn’t Attleboro establish they could not regulate rates and ergo they could not regulate volume either?

Gregory H. Smith:

The reason, Your Honor, that Attleboro is not dispositive is that Congress in fact has exercised its authority under the commerce clause and has adopted the New Hampshire statute, and has permitted New Hampshire to regulate.

Well, but if that is true, has it not also revitalized what Attleboro put an end to?

I mean, I don’t understand why lawful… do you get the thrust of my concern?

Gregory H. Smith:

Yes.

I think that Attleboro was decided when Congress had not acted.

And Attleboro decided that the states were without authority to regulate wholesale interstate shipments of hydroelectric energy as they were with respect to gas.

My question, in effect, is, did Attleboro remain good law after the enactment of 201(b)?

Gregory H. Smith:

That’s right.

That’s right, because Congress decided, having been called upon by the Attleboro decision to enter the field, to allocate the regulatory authority between the Federal Power Commission or the Federal Energy Regulatory Commission and the states, and the section of the statute upon which we rely is found in that section where Congress was allocating the authority to regulate.

To whom did it allocate that authority?

Gregory H. Smith:

It allocated it very nearly like the Attleboro decision, permitting states to regulate interstate shipments which were for retail or ultimate consumption, and states to regulate wholly intrastate sales.

The clause in 201(b) upon which we rely is in nearly the same section, and in that section Congress has permitted New Hampshire to regulate the energy generated at its hydroelectric plants, and so it is part of the process of Congress in deciding whether a federal agency or a state agency would be better suited to regulating that particular part of commerce.

Mr. Attorney General, suppose I were to read Section 201(b) to mean that the clause shall not deprive a state or state commission of whatever lawful authority it now exercises, and so on, would you say that would be an improper construction of the statute?

Gregory H. Smith:

Well, I think that to the extent whatever suggests that Congress wasn’t guided by the particular statutes which we can look to as the authority, that is, that lawful authority meant something less than what you have suggested to me, Your Honor.

It meant that authority or that kind of authority which is being exercised now by four states under their state law, and I think that it is clear that Congress was referring exactly to these statutes.

Gregory H. Smith:

Authority which is broader than that I don’t think fairly falls under that statute.

I suppose you would agree, or would you, that if your reading of that statute takes care of the pre emption aspect, it doesn’t automatically follow that it controls the commerce clause aspect of the case.

Gregory H. Smith:

I think it does both, Your Honor.

I think that it clearly takes care of the pre emption question by its very terms, and I think that it is clear when we look to the statute and the way in which it was placed in the Act that it also was enacted by Congress presumed to be aware of its authority under the commerce clause to adopt the New Hampshire practice and permit it.

Well, are you saying that the Congress of the United States can interpret the commerce clause in a way that is binding on everyone else?

Gregory H. Smith:

No, I am saying that Congress may act when it chooses to under the commerce clause to permit the states to regulate where they may not have been able to regulate without an authorizing Act of Congress.

Certainly Article 1 would give you that impression, wouldn’t it, when it delegates to Congress the right to regulate commerce among the several states?

Gregory H. Smith:

And I think that that power that Congress has has always been referred to as plenary authority to enter the field, and it is clear that Congress may go further in permitting states to regulate than states could have regulated if Congress had not acted.

Well, do you mean by that that if Congress passed a statute that vested in the Robert Fulton Steamship Company the right to regulate traffic on the Hudson River in New York, that that would be binding on the courts?

Gregory H. Smith:

No, I think that Congress may permit the states to regulate.

Well, in Gibbons against Ogden, the state had delegated that authority to Mr. Fulton and his colleagues, hadn’t they?

Gregory H. Smith:

Well, I think that Congress in that case, Congress had not addressed the matter at all, as I recall it.

And it was clear that the silence of the commerce clause was sufficient to render unconstitutional the action of the state in having provided the preference to the private entrepreneur.

The question here, however, is different.

The question here is one in which Congress, not unlike other situations, has acted, has acted with this particular authority specifically in mind, and has permitted states to exercise this type of authority in regulating private enterprise.

Mr. Smith, how would this preference be effected?

And it doesn’t contemplate, does it, any new transmission lines or anything, or does it?

Gregory H. Smith:

I am sorry, Your Honor.

Are the New Hampshire customers who are going to be preferred going to be serviced out of the interstate grid or not?

Gregory H. Smith:

Yes, they are.

In fact–

Well, who established the grid?

Gregory H. Smith:

–The grid was established voluntarily by the private power companies, and now–

And approved by the FEC?

Gregory H. Smith:

–Yes, that’s correct.

Would you say that it would be contrary to the statute if the FEC said, well, maybe you can preserve your own power for your own New Hampshire customers, but if you are going to do that, build your own transmission lines, and don’t depend on the grid?

Gregory H. Smith:

I think that with–

New Hampshire wants to effect this preference through the grid system, doesn’t it?

Gregory H. Smith:

–That’s correct, and the 1978 amendments provide that for the first time the federal authority may require interconnection and wheeling of authority across utilities to others.

Before that, it was voluntary, and it seems to me that the clear effect of that is that if the federal energy regulatory commission wants to exercise the authority it now has, there is a specific provision exempting that kind of authority, that is, mandatory pooling, from the effect of 201(b), but that wasn’t so until 1978.

Gregory H. Smith:

Congress specifically exempted this kind of federal authority from the effect of the authority given the states under 201(b).

Well, you say it would not be inconsistent with the federal domain for New Hampshire to demand that its customers be preferred out of the power in the grid.

Gregory H. Smith:

That is essentially… That is essentially correct, Your Honor.

In other words, we have not withdrawn–

I take it the FEC, FER doesn’t agree with you on that.

Gregory H. Smith:

–They have filed a brief, and they do oppose it, in fact, Your Honor.

I would simply like to conclude, in sum, by saying that if 201(b) or the clause upon which we rely has any possible meaning, it must authorize what New Hampshire was doing in 1935 and what we are continuing to do today, and appellants–

Would you agree that the FERC could step in at this stage and say that the New Hampshire Supreme Court decision and PUC decision were superseded by a new order of the FERC?

Gregory H. Smith:

–I don’t think in this particular case there would be any occasion to do that, but I think with the 1978 amendments, that were New Hampshire to have exercised its authority more broadly, and to have required that the wires be snipped, as it said in the briefs, that with the 1978 amendments, for the first time the Federal Energy Regulatory Commission could mandate interconnection and wheeling, and that seems to me to be clear, but New Hampshire has not exercised authority that broad in this particular case.

It seems to me that the appellants can prevail in only one of two ways.

They must either have met their burden of proof that the Act of Congress which remained unchallenged for 45 years is unconstitutional, which they have not done, or they can go across the street to Congress and ask Congress to amend the statute.

Thank you, Your Honor.

Warren E. Burger:

Very well.

Mr. Huntington.

Samuel Huntington:

The Attorney General stated that it is not significant whether the Section 201(b) savings clause is a grant or a savings clause.

We differ there.

We say that is very significant, and that is the square holding of BT Investment Managers just last term.

When presented with a clause such as this, the Court must ask two questions.

First, does the clause interdict pre emption?

We say clearly it does to some extent, and we have discussed in our brief exactly to what extent it does interdict Part 2 pre emption.

The second question is, does the clause go beyond interdicting pre emption and affirmatively give to the states an authority to regulate commerce that the states did not previously have.

In BT Investment Managers, the Court found that savings clause did not do that.

We submit that this savings clause, which reads virtually identically to the Bank Holding Company Act savings clause in BT Investment Managers, also does not give the state authority.

In fact, New Hampshire concedes in their brief at Page 15 that the language of 201(b) is not that usually used by a legislature when authorizing an act.

That, we submit, is an understatement.

When was the Bank Holding Company Act enacted?

Samuel Huntington:

I am afraid I don’t know.

Basically what happened here is, Congress finessed the issue as to whether the New Hampshire authority referred to by Congressman Rodgers was or was not… Congress finessed it by saying, whatever authority you have is saved from Part 2 pre emption, but left to the courts to determine what is saved, and that is precisely what this case presents for the first time.

This is the first time New Hampshire has imposed a restriction.

In fact, the first time any state has imposed a restriction–

Well, then, you concede that Congress did not intend to pre empt New Hampshire’s authority by the–

Samuel Huntington:

–I think that comes to the question in volume versus rate regulation which Mr. Justice Stevens raised.

I was interested to hear Mr. Smith contend now that all New Hampshire did here was to regulate volume and not rates.

New Hampshire did not in any way attempt to restrict physically the amount of energy flowing out of state from these units.

What did New Hampshire do?

They attempted to require New England Power Company to sell this power within New Hampshire, an economic shift through adjustments in wholesale contracts and tariffs.

That is wholesale ratemaking, and that is exclusively within the jurisdiction of FERC.

There is one further case which we discuss in our brief which I think is pertinent here, and that is the California case.

–You essentially then agree with the position of the United States, or the FERC, with respect to pre emption?

Samuel Huntington:

Yes, we do.

And we argue pre emption on both Part 1 and Part 2 in our brief, and rely on our discussion there.

Yes.

Samuel Huntington:

The California case involved Section 20 of Part 1.

Section 20 of Part 1 recognized or at least referred to state authority over wholesale sales from hydroelectric plants that are licensed.

The Court had before it, does the state have any lawful authority after Attleboro over sales from hydroelectric licensed units, and the court held, no, it didn’t.

Congress was simply wrong when they assumed in enacting Section 20 that the states had some authority.

We think we have a parallel situation here.

Whatever Congressman Rodgers may have assumed, in fact, New Hampshire does not have any type of authority under the commerce clause.

That is what lawful authority is, and that–

But doesn’t that bear on pre emption, even if Congress is wrong as to its perception of the constitutional law, if it enacts a statute under that misapprehension?

The misapprehension may be a valid tool for construing the statute?

Samuel Huntington:

–It is certainly a valid tool as far as pre emption is concerned, but Congress did not pass judgment on the lawfulness of the New Hampshire authority, and that is why they said lawful authority now exercised, leaving it for further determination what that lawful authority is.

Well, I take it the position of the United States or the FERC and you on pre emption is that however you construe 201(b), that New Hampshire has gone way beyond whatever Congress may have approved in that.

It never approved this approach to keeping the power within New Hampshire.

Samuel Huntington:

Precisely.

Thank you.

Warren E. Burger:

Thank you, gentlemen.

The case is submitted.