IN RE: the Investigation of Ownership

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Court of Appeal, Second District, Division 1, California.

IN RE: the Investigation of Ownership, Production, Sale and Distribution of PRUDHOE BAY, ALASKA NATURAL GAS. Evelle J. YOUNGER, Attorney General of the State of California, Petitioner and Appellant, v. John JENSEN and Pacific Lighting Gas Development Co., Respondents, Exxon Corporation, Respondent.

Civ. 52440, 52975.

Decided: July 11, 1978

Evelle J. Younger, Atty. Gen., Warren J. Abbott, Robert H. O'Brien, Asst. Attys. Gen., and Linda L. Tedeschi, Deputy Atty. Gen., for petitioner and appellant. Manatt, Phelps, Rothenberg, Manley & Tunney, Alan I. Rothenberg, and Julia J. Rider, Los Angeles, for respondents John Jensen and Pacific Lighting Gas Development Co. McCutchen, Black, Verleger & Shea, Jack D. Fudge, Los Angeles, Michael L. Hickok, and Robert L. Norris, Houston, Tex., for respondent Exxon Corp.

In January 1976 The Attorney General of the State of California, purportedly acting under the provisions of Government Code section 111801 et seq., delegated authority to certain named persons “to conduct an investigation into the ownership, production, sale and distribution of Prudhoe Bay, Alaska, natural gas insofar as it affects the State of California, to determine the existence, nature, and scope of violations of the federal and state antitrust laws pertaining to price fixing, monopolization, division of markets, and restraint of trade, and to hold hearings, issue subpoenas, inspect books and records, take testimony, hear complaints, and administer oaths in connection therewith” as the delegates might deem necessary. The following April, subpoenas to attend and testify and to produce books, records, papers and documents were served on Pacific Lighting Gas Development Company (PLGD) and Exxon Corporation (Exxon)2 and certain officers thereof. PLGD and Exxon each produced some documents in response to the subpoenas, and a representative of each company appeared to testify. The Attorney General was not satisfied with the extent of compliance. Cooperative efforts to effect a compromise as to what further compliance was necessary ultimately were unavailing. The Attorney General petitioned the superior court for orders compelling compliance. The two petitions were jointly heard for argument, PLGD and Exxon raising substantially identical grounds in opposition thereto. The court denied the petitions, ruling that the Attorney General's investigation was preempted by federal law, namely the Natural Gas Act of 1938 (15 U.S.C.A., ss 717-717w) and the Alaska Natural Gas Transportation Act of 1976 (id., ss 719-719o ).3 The court did not reach other matters raised in objection, principally Commerce Clause and Fourth Amendment arguments. On this appeal from orders denying petitions, we affirm for the same reason the superior court denied the petitions federal preemption.

The facts relevant to this inquiry are not in dispute. Exxon and Atlantic Richfield Company (ARCO) are two of the three major producers of Prudhoe Bay, Alaska natural gas, the largest reservoir of natural gas ever discovered in North America. Natural gas is, of course, an energy source of major importance to this country, and in recent years a natural gas supply shortage has become a matter of increasing concern. In 1970 the Federal Power Commission (FPC or Commission)4 took certain steps to alleviate the natural gas shortage. One of these allowed natural gas pipelines, subject to certain conditions, to include in their rate base advance payments to natural gas producers for gas to be delivered at a future date. This measure was expected to stimulate natural gas production by affording producers ready capital investment to finance development and production; allowing rate base treatment for the advance payments provided the encouragement to pipelines to advance the funds. This action of the Commission was upheld in Public Serv. Com'n, State of N. Y. v. Federal Power Com'n (1972), 151 U.S.App.D.C. 307, 467 F.2d 361 as “a justifiable experiment in the continuing search for solutions to our nation's critical shortage of natural gas.” (151 U.S.App.D.C. p. 317, 467 F.2d p. 371.)

The advance payments program was originally approved on a temporary basis. It was subsequently modified and continued on several occasions, and in December 1973 it was extended to Alaskan advances. In March 1975 ARCO and PLGD entered into an advance payments or funding agreement whereby ARCO agreed to “enter into exclusive good faith negotiations” with an affiliate of PLGD5 for the right to purchase 60 percent of ARCO's gas reserves at Prudhoe Bay.6 In return, PLGD and Southern California Gas Company (SoCal), another affiliate, promised to pay the interest and carrying charges on a production payment loan arranged by ARCO. The same month a similar agreement was reached between Exxon and Pacific Gas and Electric Company (PG&E).7 This contract gave PG&E “the sole and exclusive initial right to negotiate” for 30 percent of Exxon's Prudhoe Bay gas production over a twenty-year period in exchange for the advance of the cost of raising capital; Exxon would raise the capital.

Each of these agreements described certain of the terms to be included in the future contracts for sale should they actually be concluded. One of the terms was a “most favored nation” pricing provision according to which the buyer agreed to pay the seller the highest price provided in any other contract for sale of Prudhoe Bay natural gas to be delivered in the lower 48 states.8

Apparently PG&E and SoCal submitted applications to the California Public Utilities Commission (PUC) for permission to pass on to consumers the costs entailed by the agreements with Exxon and ARCO respectively. These applications were approved though it seems the PUC was highly critical of the funding agreements. Sometime after the applications were submitted, the president of the PUC requested the opinion of the Attorney General regarding possible antitrust violations with respect to the funding agreements. A general concern was expressed as to the possibility of antitrust violations including market division by the gas producers, and two specific questions were asked: “1. Would a ‘most favored nation’ clause such as that contained in (the funding agreements), if incorporated in a gas purchase contract, constitute a violation of the antitrust laws? (P) 2. Do the funding agreements containing such ‘most favored nation’ clauses constitute an antitrust violation prior to the formation of gas purchase contracts?” The Attorney General's opinion of January 2, 1976, concluded that serious antitrust questions were raised by the funding agreements and “the circumstances surrounding the proposed development and distribution of Prudhoe Bay natural gas,” and recommended further investigation.9

On December 31, 1975, after the decision in Public Serv. Com'n, State of N.Y. v. Federal Power Co. (1975) 167 U.S.App.D.C. 100, 511 F.2d 338,10 and upon further consideration, the Federal Power Commission terminated its advance payments program; termination of the Alaskan payments was retroactive to a date preceding the agreements of respondents. On January 12, 1976, PLGD and ARCO mutually agreed to terminate their funding agreement. SoCal then petitioned the PUC to rescind its approval of the agreement, which was done on January 27. PG&E and Exxon mutually agreed to terminate their funding agreement on February 9; PG&E petitioned the PUC to rescind its approval thereof, and this was done on April 13.

The Attorney General's “Delegation of Authority to Conduct Investigation and Hold Hearings in Connection Therewith” was signed January 19, 1976, and the subpoenas to PLGD and Exxon were served in April. While said delegation of authority purports to authorize an investigation of ownership, production, sale, and distribution of Prudhoe Bay natural gas insofar as it affects California to determine the existence, nature, and scope of violations of federal and state antitrust laws, the Attorney General does not now assert authority to investigate violations of federal law under the provisions of Government Code section 11180. Thus, our inquiry is limited to whether this investigation into the possibility of violation of state antitrust law is preempted by federal statutes.

The doctrine of preemption has its source in the Supremacy Clause (U.S.Const., art. VI, cl. 2): “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” Numerous catchwords have been employed in preemption analysis. The Supreme Court “in considering the validity of state laws in the light of treaties or federal laws touching the same subject, has made use of the following expressions: conflicting; contrary to; occupying the field; repugnance; difference; irreconcilability; inconsistency; violation; curtailment; and interference. But none of these expressions provides an infallible constitutional test or an exclusive constitutional yardstick.” (Hines v. Davidowitz (1941) 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581, fn. omitted.) In the final analysis, a court's function is to determine whether the challenged statute “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” (Ibid.; Perez v. Campbell (1971) 402 U.S. 637, 649, 91 S.Ct. 1704, 29 L.Ed.2d 233.)

In recent years cases involving the question of preemption seem to have arisen at an accelerating rate. To mention only a few of the more significant ones, Ray v. Atlantic Richfield Co. (1978) 435 U.S. 151, 98 S.Ct. 988, 55 L.Ed.2d 179; Jones v. Rath Packing Co. (1977) 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed.2d 604; De Canas v. Bica (1976) 424 U.S. 351, 96 S.Ct. 933, 47 L.Ed.2d 43; Kewanee Oil Co. v. Bicron Corp. (1974) 416 U.S. 470, 94 S.Ct. 1879, 40 L.Ed.2d 315; Goldstein v. California (1973) 412 U.S. 546, 93 S.Ct. 2303, 37 L.Ed.2d 163; and City of Burbank v. Lockheed Air Terminal (1973) 411 U.S. 624, 93 S.Ct. 1854, 36 L.Ed.2d 547. If one includes cases involving labor law preemption one need only look to the last few months to find Sears, Roebuck and Co. v. San Diego District Council of Carpenters (1978) 436 U.S. 180, 98 S.Ct. 1745, 56 L.Ed.2d 209 and Malone v. White Motor Corp. (1978) —-U.S. ——, 98 S.Ct. 1185, 55 L.Ed.2d 443. Needless to say, such cases tend to add to the lexicon of terms used in preemption analysis, while the number and variety of separate opinions in these cases suggest how elusive is the exclusive constitutional yardstick. While it may be true that there are fairly discernible trends in the decisions over a period of time (see Note, The Preemption Doctrine: Shifting Perspectives on Federalism and the Burger Court (1975) 75 Colum.L.Rev. 623), cases are not decided by trends. We confess we do not find even in the more recent decisions of the Supreme Court the consistent analytical standard discerned by some commentators (e.g., Catz and Lenard, The Demise of the Implied Federal Preemption Doctrine (1977), 4 Hastings Const.L.Q. 295). What we do see as clearly mandated by the authorities is a close consideration of the nature and purpose of the federal law with asserted preemptive effect and a respectful appreciation of the demands of a federalist system. As the court recently said: “Our prior cases on pre-emption are not precise guidelines . . . , for each case turns on the peculiarities and special features of the federal regulatory scheme in question.” (City of Burbank v. Lockheed Air Terminal, supra, 411 U.S. 624, 638, 93 S.Ct. 1854, 1862.)

Natural Gas Act

The primary purpose of the Natural Gas Act was to protect consumers against exploitation at the hands of natural gas companies (Power Comm'n v. Hope Gas Co. (1944) 320 U.S. 591, 610, 64 S.Ct. 281, 88 L.Ed. 333) and to underwrite just and reasonable rates to consumers of natural gas (Atlantic Rfg. Co. v. Pub. Serv. Comm'n. (1959) 360 U.S. 378, 388, 79 S.Ct. 1246, 3 L.Ed.2d 1312) a related purpose being to assure adequate service to the consumer (Southern Louisiana Area Rate Cases v. Federal Pow. Com'n (5th Cir. 1970)428 F.2d 407, 435). In Section 1(b) of the Natural Gas Act (15 U.S.C.A., s 717(b)) Congress drew three things within its own regulatory power, delegated by the Act to its agent, the Federal Power Commission. These were: (1) the transportation of natural gas in interstate commerce; (2) its sale in interstate commerce for resale; and (3) natural gas companies engaged in such transportation or sale. (Panhandle Pipe Line Co. v. Comm'n. (1947) 332 U.S. 507, 516, 68 S.Ct. 190, 92 L.Ed. 128.) Congress did not exercise its authority to constitutional limits. Instead, Congress envisioned a comprehensive scheme of dual state and federal authority. (FPC v. Louisiana Power & Light Co. (1972) 406 U.S. 621, 631, 92 S.Ct. 1827, 32 L.Ed.2d 369.)

One of the Commissions' major powers involves the determination of just and reasonable rates and charges in the sale for resale and interstate transportation of natural gas. All rates and charges made, demanded or received by any natural gas company for or in connection with jurisdictional sales or transportation11 must be just and reasonable 15 U.S.C.A., s 717c(a)) and not unduly discriminatory (id., subd. (b)). To enable the Commission to exercise this oversight authority every natural gas company must file with it schedules showing rates and charges together with all contracts which in any manner affect or relate to such. (Id., subd. (c).)

Technically the establishment of rates remains a matter for private agreement. However, the Commission's inquiry into the reasonableness of rates may arise in one of several ways. At the inception of a transaction subject to the Commission's jurisdiction there is the requirement of a certificate of public convenience and necessity. (s 717f(c).)12 The Commission may attach to the issuance of the certificate and to the exercise of rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require. (Id., subd. (e).) With this power the Commission may condition the grant of a certificate upon the establishment of rates determined by it to be just and reasonable. (Atlantic Rfg. Co. v. Pub. Serv. Comm'n, supra, 360 U.S. 378, 391-392, 79 S.Ct. 1246.) In the case of a rate under an existing schedule the Commission may inquire into reasonableness on its own initiative or upon request of certain interested parties; if it finds that the rate is unjust, unreasonable, unduly discriminatory or preferential it determines the just and reasonable rate and fixes the same by order (s 717d(a).) In such a case the Commission has no power to order reparation of charges received in excess of the just and reasonable rate. (See United Gas Improv. Co. v. Callery Properties (1965) 382 U.S. 223, 229, 86 S.Ct. 360, 15 L.Ed.2d 284.) When a natural gas company seeks to change it rates, assuming this is permitted by contract (see United Gas Co. v. Mobile Gas Corp. (1956) 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373), the Commission may suspend operation of the new rate while it conducts a hearing concerning the lawfulness of the proposed change. The suspension may not last longer than five months; if the proceeding has not been completed in this time the rate may go into effect, but the Commission may require the natural gas company to furnish a bond and keep detailed records in order to make refund of the increase if, upon completion of the hearing and decision the Commission decides the increase is not justified. (s 717c.)

The Commission's authority is not confined to rate regulation and certification proceedings. Under certain circumstances it may also require a natural gas company to extend or improve its facilities to establish connection with and sell natural gas to a person or municipality engaged in local distribution of natural gas to the public. (s 717f(a).) The Commission has the authority to make rules and regulations necessary or appropriate to carry out the provisions of the Act. (s 717o.)

The broad responsibilities conferred on the FPC have been reinforced by a broad construction of Commission powers by the courts (see Permian Basin Area Rate Cases (1968) 390 U.S. 747, 776, 88 S.Ct. 1344, 20 L.Ed.2d 312); exemptions from the Commission's jurisdiction tend to be narrowly construed (see Interstate Gas Co. v. Power Comm'n. (1947) 331 U.S. 682, 689-693, 67 S.Ct. 1482, 91 L.Ed. 1742; Colorado Interstate Co. v. Comm'n. (1945) 324 U.S. 581, 598, 65 S.Ct. 829, 89 L.Ed. 1206). While it is true that the Natural Gas Act does not regulate natural gas from wellhead to burner tip, it is also true that “The Supreme Court has never formulated a clear test to determine precisely what areas in the natural gas industry are left open to state regulation.” (Public Service Comm'n of W. Va. v. Federal Power Com'n (4th Cir. 1971) 437 F.2d 1234, 1238.)

Federal Power Commission price regulation of the natural gas industry is pervasive. (McLeran v. El Paso Natural Gas Company (S.D.Tex.1972) 357 F.Supp. 329, 331.)13 The federal regulatory scheme leaves no room either for direct state regulation of the prices of interstate wholesales of natural gas (Natural Gas Co. v. Panoma Corp. (1955) 349 U.S. 44, 75 S.Ct. 576, 99 L.Ed. 866), or for state regulations which would indirectly achieve the same result (Northern Gas Co. v. Kansas Comm'n. (1963) 372 U.S. 84, 91, 83 S.Ct. 646, 9 L.Ed.2d 601.)

Because the antitrust inquiry of the Attorney General is directed at matters within the jurisdiction of the FPC, basically interstate wholesale sales of natural gas rather than local retail sales, a strong argument might be made that the FPC's pervasive and exclusive authority to regulate prices of interstate wholesale sales of natural gas itself precludes the investigation of the Attorney General. The general objective of all antitrust laws is to promote robust competition (Von Kalinowski and Hanson, The California Antitrust Laws: A Comparison With the Federal Antitrust Laws (1959) 6 UCLA L.Rev. 533) which, it is supposed, will result in the fairest price to consumers. (See Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 44, 172 P.2d 867.) As an essentially price-directed measure, the application of state antitrust laws to a transaction within the jurisdiction of the FPC appears to run counter to the holding of Northern Gas Co., supra, 372 U.S. 84, 83 S.Ct. 646, that even indirect efforts to control prices are forbidden the states, notwithstanding that the interstate wholesale sale of gas will have a direct effect on retail sales within the states. (Cf. Public Utilities Comm'n v. Gas Co. (1943) 317 U.S. 456, 63 S.Ct. 369, 87 L.Ed. 396.)

The Attorney General argues, however, that because FPC approval of a given transaction in the natural gas industry does not confer immunity from federal antitrust laws anticompetitive aspects of the transaction are a “peripheral concern” of federal regulation and therefore not preempted (see De Canas v. Bica, supra, 424 U.S. 351, 360, 361, 96 S.Ct. 933). It is true that the federal scheme of regulation of the natural gas industry does not preclude application of federal antitrust laws to transactions within the jurisdiction of the FPC. (Otter Tail Power Co. v. United States (1973) 410 U.S. 366, 373-375, 93 S.Ct. 1022, 35 L.Ed.2d 359.) But the FPC, in passing on any given transaction within its jurisdiction must consider anticompetitive consequences thereof. (California v. Fed. Power Comm'n. (1962) 369 U.S. 482, 485, 82 S.Ct. 901, 8 L.Ed.2d 54; Atlantic Seaboard Corp. v. Federal Power Com'n (1968) 131 U.S.App.D.C. 291, 295, 404 F.2d 1268, 1272, fn. 10; Northern Natural Gas Co. v. Federal Power Com'n (1968), 130 U.S.App.D.C. 220, 225, 399 F.2d 953, 958). To say that antitrust implications are a merely peripheral concern of the Federal Power Commission betokens a rather straitened conception of the “just and reasonable” and “public convenience and necessity” standards lying at the heart of the Natural Gas Act.

It is just not the case that because federal antitrust law applies to the natural gas industry despite the regulatory scheme of the Natural Gas Act that state antitrust laws also apply. (See Connell Co. v. Plumbers & Steamfitters (1975) 421 U.S. 616, 635-636, 95 S.Ct. 1830, 44 L.Ed.2d 418; Standard Radio & Television Co. v. Chronicle Pub. Co. (1960)182 Cal.App.2d 293, 300-301, 6 Cal.Rptr. 246.)14 The Natural Gas Act and the federal antitrust laws stand on an equal footing. If their operation tends to overlap it is because Congress has so decreed, and in the event of conflict it is necessary as far as possible to reconcile the operation of these laws.15 Simply put, where one is considering the relationship of two federal laws there is no preemption, i. e., Supremacy Clause, problem. It may be true that California's antitrust laws are harmonious with federal antitrust laws, but this is only two-part harmony as it leaves out of account the role of the FPC. Federal supremacy comprehends the possibility that one federal law may coexist uneasily with another.16 This does not mean that the law must at the same time admit fifty additional guests claiming to be related to the one who cannot be put out.17

But it is not necessary to pursue the question in any broader form than that in which it arises in this instance. Nor is there much purpose in discussing cases finding various state laws preempted by the Natural Gas Act, which, though they may be interesting, only underscore what has already been said.18 Instead, we observe that not only does the Attorney General's investigation intrude generally on the jurisdiction of the Federal Power Commission but it is directed in large part at subjects on which the FPC has already acted. For example, the Attorney General has questioned whether the funding agreements containing most favored nation clauses to be included in contracts for the interstate wholesale of natural gas are contracts in restraint of trade. In the opinion letter of January 2, it is explained that under the “rule of reason” test (Standard Oil Co. v. United States (1911) 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619.) “Analysis of the validity of the SoCal Funding Agreement and the PG&E Letter Agreement requires the development of additional facts and surrounding circumstances, including the history, purposes, business justifications, and economic effect of both the Funding Agreements in general and the ‘most favored nation’ clauses in particular.” It will be remembered, of course, that the advance payments program had already been given express FPC approval, that the temporary program had been several times extended and modified to include Alaskan payments, and that the FPC's approval of the program had been challenged and upheld in federal court. But in addition, the FPC had earlier considered and passed upon the propriety of most favored nation clauses in sales contracts within its jurisdiction. Apparently such clauses have had a long and widespread use in the natural gas business. In 1962 the FPC expressly disapproved such clauses in contracts of independent producers19 for jurisdictional sales of natural gas. Only certain pricing provisions of independent producers are permissible,20 any other being “inoperative and of no effect at law.” (18 C.F.R. s 154.93.) Any contract executed on or after April 2, 1962, containing other than the permissible provisions “shall be rejected” so far as producer rates are concerned. (Ibid.) A producer's application for a certificate of public convenience and necessity “shall be rejected” if any contract submitted in support of it contains any of the forbidden provisions (id., s 157.25). So far as pipeline certificates are concerned, any producer contract executed after said date which contains an impermissible pricing clause “will be given no consideration in determining adequacy” of a pipeline company's gas supply (id., s 157.14(a)(10)(v); see Federal Power Comm'n v. Texaco (1964) 377 U.S. 33, 35-36, 84 S.Ct. 1115, 12 L.Ed.2d 112.) In Superior Oil Company v. Federal Power Commission (9th Cir. 1963) 322 F.2d 601, this exercise of the Commission's rule-making power was upheld. The court rejected the contention that the action was discriminatory as not applying to pipelines, saying at page 621: “The Commission could well determine that there are practical differences between the operations of the two kinds of companies, which warrant different treatment with regard to price-changing clauses.”

There might be given other examples both of the existence of federal authority and of its exercise in the areas into which the Attorney General would conduct his inquiry. But, while we believe the Natural Gas Act of itself precludes the exercise of authority asserted by the Attorney General, consideration of the Alaska Natural Gas Transportation Act will shorten our discussion and conclusively determine the question.

Alaska Natural Gas Transportation Act (ANGTA)

The purpose of ANGTA was to provide the means for making a sound decision as to the selection of a transportation system for delivery of Alaska natural gas to the lower 48 contiguous states and, if such a system were approved, to expedite its construction and initial operation by “(1) limiting the jurisdiction of the courts to review the actions of Federal officers or agencies taken pursuant to the direction and authority of this chapter, and (2) permitting the limitation of administrative procedures and effecting the limitation of judicial procedures related to such actions.” (15 U.S.C.A., s 719a.) Significantly, it was added: “To accomplish this purpose it is the intent of the Congress to exercise its constitutional powers to the fullest extent in the authorizations and directions herein made, and particularly with respect to the limitation of judicial review of actions of Federal officers or agencies taken pursuant thereto.” (Ibid.) Proceedings of the FPC to certificate a transportation system were suspended; the FPC was directed to review the contesting systems and report to the President; it was authorized to recommend approval of a particular system or advise that no system should be approved pursuant to the Act. The President was authorized to decide whether a transportation system should be approved and if so to designate such a system and submit this recommendation to Congress for its approval. Of the several provisions in the Act for informational input into the presidential decision-making process21 one mandated a study by the Attorney General of the antitrust issues and problems relating to the production and transportation of Alaska natural gas.22 On September 22, 1977, President Carter made his decision recommending approval of the ALCAN proposal for an Alaskan natural gas pipeline.23 On November 8 the decision was approved by joint resolution of Congress. (H.J.Res.No.621, 95th Cong., 1st Sess. (1977), 91 Stat. 1268.)

The report accompanying the President's decision is especially interesting for its consideration of the antitrust implications of efforts to exploit Prudhoe Bay natural gas, and its illustration of the cooperative functioning of federal antitrust law and regulation under the Natural Gas Act. The antitrust and competitive effects of an Alaskan natural gas system were thoroughly studied by the Federal Power Commission and the Justice Department. These studies supported the conclusion that the ALCAN project would have no harmful effect on regional or national competition in the natural gas industry and that any potential competitive abuse could be cured by “proper federal regulation.” The FPC and Justice Department agreed that certification of a transportation system for Alaskan natural gas would not have a significant impact upon competition in the natural gas transportation and distribution industries. Gas producers would have no ownership interest in the system; they would be permitted to participate in financing the project only to the extent of guaranteeing portions of the project debt. The Attorney General concluded that “present Federal Power Commission regulation appears to preclude an opportunity for competitive abuse by the gas producers.”24 This section of the President's report concluded: “Any potential competitive problems can be guarded against through (1) imposing proper conditions in the license to construct the transportation system . . .; (2) monitoring gas purchase contracts between gas producers and gas transmission companies; (3) requiring the disclosure of any collateral agreements between producers and transmission companies; (4) requiring government scrutiny and approval of any plans for gas reallocation or displacement, and government monitoring of any industry discussions to derive such plans; and (5) imposing regulatory sanctions in any specific cases of abuse that may arise.”25

The intention of Congress, expressed in the first section of ANGTA, to “occupy the field” cannot be taken lightly. Granted, there is no precise definition of the field being occupied, but we think it clear that that field includes antitrust concerns related to the ownership, production, sale, and distribution of Prudhoe Bay natural gas. In passing ANGTA Congress acted to provide the United States prompt partial relief from the shortage of natural gas supplies. The availability of Alaska natural gas is a matter of urgent concern. “An early decision on whether or not consumers can rely upon receiving approximately a trillion cubic feet of Alaska natural gas per year in the early 1980's would greatly assist future planning and could alleviate severe hardships. If Alaska gas will be available, it could contribute significantly to reducing natural gas shortages. If Alaska natural gas will not be available, then the Nation needs to know so that planning can begin for alternate energy supplies. A prompt decision on an Alaska natural gas transportation system is also needed because construction costs for such large construction projects can and have escalated very rapidly. . . . The production and transportation of Alaska natural gas would be the largest private construction project ever undertaken. Substantial delays could cost consumers large sums of money and threaten the economic feasibility of any Alaska gas transportation system. (P) Needless delay must be avoided in coming to a decision. However, time is needed for a considered analysis of alternatives, the selection of the most competent applicant to construct and operate the project, and if an Alaska-Canada system is chosen, careful coordination and negotiations with the government of Canada. The timetable established in the Committee substitute to S.3521, in the judgment of the Committees, reflects these necessities and results in a decision at the earliest practicable time, consistent with prudent government decision-making. Moreover, a central purpose of this legislation is to prevent time-consuming administrative and judicial delay after a decision to construct a system has been made.” (H.R.Rep.No.94-1658 2d Sess. (1976) reprinted in 1976, U.S.Code Cong. & Admin.News, pp. 6643, 6648-6649.)

When Congress, because of the national significance of Alaska natural gas, has curtailed its own procedures, and those of agencies established by it, to expedite resolution of this important question can it be supposed that Congress contemplated that the states were nevertheless free to interpose their antitrust laws as a further check to see that in the implementation of national goals local concerns were accorded proper deference? The Attorney General's investigation does not make for merely an imagined conflict with federal law. According to the House Committee on Interstate and Foreign Commerce “Final financing for an Alaskan natural gas transportation project cannot be arranged until the Alaskan natural gas producers execute sales contracts.” (H.R.Rep.No.95-739, pt. 2, 1st Sess. (1977) Code Cong. & Admin.News, pp. 3325, 3335.) If the Attorney General may investigate the 1975 funding agreements there is no reason why he may not investigate any other agreement relating to interstate sale for resale to a California purchaser.

No doubt California antitrust law is an area of local concern within the scope of the state's traditional police power, and for that reason the assumption is that there is no preemption unless that was the clear and manifest purpose of Congress. (Rice v. Santa Fe Elevator Corp. (1947) 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447.) “But when Congress has ‘unmistakably . . . ordained,’ Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963), that its enactments alone are to regulate a part of commerce, state laws regulating that aspect of commerce must fall. This result is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose.” (Jones v. Rath Packing Co., supra, 430 U.S. 519, 525, 97 S.Ct. 1305, 1309; City of Burbank v. Lockheed Air Terminal, supra, 411 U.S. 624, 633, 93 S.Ct. 1854, 36 L.Ed.2d 547.)

We cannot but conclude that the Attorney General's challenged investigation “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” (Hines v. Davidowitz, supra, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581; De Canas v. Bica, supra, 424 U.S. 351, 363, 96 S.Ct. 933, 47 L.Ed.2d 43) as expressed in the Natural Gas Act of 1938 and the Alaska Natural Gas Transportation Act of 1976.

The orders and each of them are affirmed.


1.  Section 11180, Government Code reads: “The head of each department may make investigations and prosecute actions concerning:“(a) All matters relating to the business activities and subjects under the jurisdiction of the department.“(b) Violations of any law or rule or order of the department.“(c) Such other matters as may be provided by law.”

2.  Actually the subpoena was served on Exxon Company, U.S.A., an operating division of Exxon Corporation. But it was Exxon Corporation that responded to the subpoena.

3.  The court was of the opinion that “(I)f anything ever was a prime candidate for the application of the doctrine of preemption, this is it.”The Attorney General disputes whether the court relied on the Alaska Natural Gas Transportation Act. It is true this is not completely clear from the record, though the effect of this Act was raised by respondents. Whether the court did in fact rely on this Act is, however, immaterial inasmuch as we determine the correctness of the court's decision, not of its reasoning. (E. g., Olson v. County of Shasta, 5 Cal.App.3d 336, 343, 85 Cal.Rptr. 77.)

4.  The Federal Energy Regulatory Commission has succeeded to the regulatory jurisdiction of the FPC (42 U.S.C.A., s 7172). For convenience we continue to refer to the Federal Power Commission.

5.  PLGD explains in its appellate brief that it is a subsidiary of Pacific Lighting Corporation, a holding company with a number of subsidiaries.

6.  ARCO was also served with an investigative subpoena. On June 14, 1976, upon application of ARCO the United States District Court for the Central District of California issued a temporary restraining order restraining the Attorney General from continuing his investigation as to ARCO and from enforcing the subpoena served pursuant to the investigation. Following a chain of events not relevant here, a preliminary injunction issued on September 29, 1977, on the basis of preemption. The Attorney General's appeal from this order is now pending before the Ninth Circuit Court of Appeals. All proceedings on the appeal have been stayed, however, apparently because the District Court had indicated that ARCO's motion for summary judgment should be granted. On June 26, 1978, summary judgment was entered permanently enjoining the Attorney General's investigation.

7.  PG&E was also served with an investigative subpoena. We are informed that in an enforcement action similar to those in this case the Superior Court for the City and County of San Francisco (Benson, J.) on November 19, 1976, substantially enforced the subpoena and denied constitutional challenges, including that of preemption by the Natural Gas Act.

8.  The ARCO-PLGD most favored nation clause:“The contract gas sales price under regulation shall be negotiated to be the highest of: (a) the highest price provided in any other long-term Prudhoe Bay contract for delivery of substantial volumes of gas to the lower 48 states or (b) the highest applicable just and reasonable rate adopted by the Federal Power Commission or (c) the nation-wide area rate in effect in 1975 adjusted for applicable Alaska taxes and inflation to date of deliveries. Other pricing provisions shall include full BTU adjustment, tax reimbursement, excess royalty clause, escalation and redetermination clauses and Seller's right to file for special relief.“The contract gas sales price absent regulation shall be negotiated to be the highest of: (a) commodity value in Buyer's market less treating and transportation costs to such market, (b) any higher price provided in any other long-term Prudhoe Bay contract for delivery of substantial volumes of gas to the lower 48 states, and (c) a negotiated minimum price.” (Emphasis added.)The Exxon-PG&E provision was:“Pursuant to the exercise of the sole and exclusive right to negotiate . . . EXXON and Corporation (P.G. & E.) will negotiate towards an agreement upon a firm schedule of minimum prices (in cents per MMBtu's) to be not less than (1) the highest price then provided in any other contract for the sale of Prudhoe Oil Pool gas to be delivered in the lower forty-eight (48) states or (2) the estimated commodity value of natural gas at the time of first deliveries in the market to be served less applicable costs to the market. . . . There will also be a provision for redeterminations of a higher price in the event of: A. Regulatory authority adoption of higher allowed prices with Corporation (P.G. & E.) to agree to pay to Exxon such higher allowed prices. B. Regulation or de-regulation such that variable pricing provisions can be used, and one of such variable pricing provisions results in a higher price, in which event, the higher of the following will apply, such higher prices to be redetermined every six (6) months beginning with the effective date of such re-regulation or de-regulation. (Specific details of these pricing provisions remain to be negotiated pursuant to the exercise of the sole and exclusive right to negotiate created in the instrument to which this Exhibit C is attached): 1. The highest price in the field paid by any U.S. buyer to any seller for significant quantities of gas produced from the North Slope of Alaska to be delivered in the lower forty-eight (48) states, adjusted for any difference in transportation to a common point, quality, taxes and excess royalties. 2. The commodity value of natural gas in the market area of the Corporation adjusted for applicable cost to market.” (Emphasis added.)The underscored sections are known as three-party most favored nation clauses. (See FPC v. Sunray DX Oil Co. (1968) 391 U.S. 9, 18, fn. 2, 88 S.Ct. 1526, 20 L.Ed.2d 388.)

9.  The opinion identified several areas of concern. Price-fixing by producers of natural gas, Division of the California Market, contracts in restraint of trade, and monopolization of natural gas part of which is to be distributed in California.

10.  The court held that the FPC had failed to focus on significant issues arising out of the advance payments program and had neglected to provide a reasoned and responsive explanation of its decision to continue the program and expand the scope of the advances eligible for rate base treatment. The record was remanded to the FPC for further proceedings.

11.  A “jurisdictional” pipeline transports natural gas in interstate commerce and for that reason is subject to FPC certification jurisdiction. The “jurisdictional” label is also sometimes used to apply to sales, in which case it refers to interstate sales for resale, which are subject to Commission rate regulation. (FPC v. Louisiana Power & Light Co., supra, 406 U.S. 621, 626, fn. 1, 92 S.Ct. 1827.)

12.  Similar Commission approval on the basis of public convenience or necessity is required for the abandonment of facilities or service. (s 717f(b).)

13.  “In 1954 the Supreme Court held, in the now-famous case of Phillips Petroleum Co. v. Wisconsin (1954) 347 U.S. 672 (98 L.Ed. 1035, 74 S.Ct. 794) that the rates of an ‘independent producer’, one unaffiliated with but selling to interstate pipelines, were covered by the Natural Gas Act despite the ‘production’ exemption, because the producer was engaged in ‘sales in interstate commerce of natural gas for resale.’ By including producers, Phillips made possible the complete regulation of distributors' natural gas prices . . . .” (Johnson, Producer Rate Regulation in Natural Gas Certification Proceedings: Catco in Context (1962) 62 Colum.L.Rev. 773, 774; see id., for a history of producer rate regulation.)

14.  These cases also illustrate the rule that “the general applicability of a state cause of action is not sufficient to exempt it from pre-emption.” (Farmer v. Carpenters (1977) 430 U.S. 290, 300, 97 S.Ct. 1056, 1063, 51 L.Ed.2d 338.)

15.  Implied repeal of the antitrust laws is not favored. “When there are two acts upon the same subject, the rule is to give effect to both if possible.” (U. S. v. Borden Co. (1939) 308 U.S. 188, 198, 60 S.Ct. 182, 188, 84 L.Ed. 181.)

16.  For a discussion of one aspect of competition in the natural gas industry and how procompetitive and regulatory goals interact see Smith, The Federal Power Commission and Pipeline Markets: How much competition? ((1969) 68 Colum.L.Rev. 664.)While it is often said that the Federal Antitrust Laws, complement direct federal regulation (e. g., Northern Natural Gas Co. v. Federal Power Com'n, supra, 399 F.2d 953, 959) the fact that the Federal Power Commission, though it must consider, is not bound by the dictates of antitrust law (id., at p. 958) along with the fact that Federal Power Commission approval does not confer antitrust immunity reveals some basic tension.

17.  Oddly enough the Supreme Court has not been called upon to authoritatively decide whether federal antitrust laws have preemptive effect on state antitrust laws. (See generally Note, The Commerce Clause and State Antitrust Regulation (1961) 61 Colum.L.Rev. 1469.) So far as this court is concerned it is settled that federal antitrust law does not preempt parallel state efforts to control unfair competitive practices. (Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 49-51, 172 P.2d 867; R. E. Spriggs Co. v. Adolph Coors Co., 37 Cal.App.3d 653, 659 et seq., 112 Cal.Rptr. 585.)

18.  (See e. g., FPC v. Louisiana Power & Light Co., supra, 406 U.S. 621, 92 S.Ct. 1827, 32 L.Ed.2d 369; Public Utilities Comm. v. Gas Co., supra, 317 U.S. 456, 63 S.Ct. 369, 87 L.Ed. 396; Illinois Gas Co. v. Public Service Co. (1942) 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371; Public Service Com'n of W. Va. v. Federal Power Com'n, supra, 437 F.2d 1234; Federal Pr. Com'n v. Corporation Com'n of State of Okl. (W.D.Okl.1973) 362 F.Supp. 522 aff'd., 415 U.S. 961, 94 S.Ct. 1548, 39 L.Ed.2d 863; Cabot Corporation v. Public Service Com'n of W. Va. (S.D.W.Va.1971) 332 F.Supp. 370; United Gas Pipe Line Co. v. Willmut Gas & Oil Co. (1957) 231 Misc. 700, 97 So.2d 530.)

19.  “Independent producer” for this purpose means one engaged in the production or gathering of natural gas who sells natural gas in interstate commerce for resale, but who is not engaged in the transportation of natural gas (other than gathering) by pipeline in interstate commerce. (18 C.F.R., s 154.91(a) (1977).)

20.  The permissible provisions are defined in 18 C.F.R., section 154.93: “(a) Provisions that change a price in order to reimburse the seller for all or any part of the changes in production, severance, or gathering taxes levied upon the seller; (b) Provisions that change a price to a specific amount at a definite date; (b-1) Provisions that permit a change in price to the applicable just and reasonable area ceiling rate which has been, or which may be, prescribed by the Commission for the quality of the gas involved; and (c) Provisions that, once in five-year contract periods during which there is no provision for a change in price to a specific amount (paragraph (b) of this section), change a price at a definite date by a price-redetermination based upon and not higher than a producer rate or producer rates which are subject to the jurisdiction of the Commission, are not in issue in suspension or certificate proceedings, and, are in the area of the price in question . . . .”

21.  “In the second stage of the decision-making process, an opportunity is provided for Federal officers and agencies, State governors, other instrumentalities of government, and interested persons to comment on the recommendation and report of the Federal Power Commission. This device is seen as a means of equipping the President with a full range of information to enable him to arrive at a determination as to whether to submit a decision to the Congress designating a system for approval and, if so, to make an intelligent selection of the system to be designated.” (H.R.Rep.No.94-1658, 2d Sess. (1976) reprinted in 1976 U.S.Code Cong. & Admin.News, pp. 6643, 6644.)

22.  Section 719l provides that nothing in the Act or any action taken thereunder shall imply an amendment to or exemption from any provision of the antitrust laws.

23.  For a description of this and the competing system see H.R.Rep.No.94-1658, 2d Sess. (1976) reprinted in 1976 U.S.Code Cong. & Admin.News, p. 6643.

24.  There was a reservation expressed should wellhead prices of natural gas be decontrolled.We do not, of course, speculate as to what our own decision might be should natural gas be significantly deregulated.

25.  It appears that item (3) is a recommendation of the Attorney General based upon consideration of the Alaska advance payments program prior to the FPC's termination thereof.

LILLIE, Acting Presiding Justice.

THOMPSON, and HANSON, JJ., concur.