EXXON CORP. v. EAGERTON(1983)
An Alabama statute imposes a severance tax on oil and gas extracted from wells located in the State. In 1979, a statute (Act 79-434) was enacted which increased the tax, exempted royalty owners from the increase, and prohibited producers from passing on the increase to consumers. Appellant producers were parties to pre-existing contracts that provided for allocation of severance taxes among themselves, the royalty owners, and any nonworking interests. The contracts also required the purchasers to reimburse appellants for severance taxes paid. After paying the increase in the severance tax under protest, appellants and other producers filed suit in an Alabama state court, seeking a declaratory judgment that Act 79-434 was unconstitutional and a refund of the taxes paid. Concluding that both the royalty-owner exemption and the pass-through prohibition violated the Equal Protection Clause of the Fourteenth Amendment and the Contract Clause, and that the pass-through prohibition was also pre-empted by the Natural Gas Policy Act of 1978 (NGPA), the trial court held Act 79-434 invalid in its entirety and ordered appellee Alabama Commissioner of Revenue to refund the taxes. The Alabama Supreme Court reversed.
[ Footnote * ] Together with No. 81-1268, Exchange Oil & Gas Corp. et al. v. Eagerton, Commissioner of Revenue of Alabama, also on appeal from the same court.
MARSHALL, J., delivered the opinion for a unanimous Court.
Rae M. Crowe argued the cause for appellants in No. 81-1268. With him on the briefs was Euel A. Screws, Jr. C. B. Arendall, Jr., argued the cause for appellants in No. 81-1020. With him on the briefs was Louis E. Braswell. [462 U.S. 176, 178]
John J. Breckenridge, Jr., argued the cause for appellees in both cases. With him on the briefs were Charles A. Graddick and Herbert I. Burson, Jr.Fn
Fn [462 U.S. 176, 178] Solicitor General Lee, Elliott Schulder, David A. Engels, and Jerome M. Feit filed a brief for the United States et al. as amici curiae urging reversal.
JUSTICE MARSHALL delivered the opinion of the Court.
These cases concern an Alabama statute which increased the severance tax on oil and gas extracted from Alabama wells, exempted royalty owners from the tax increase, and prohibited producers from passing on the increase to their purchasers. Appellants challenge the pass-through prohibition and the royalty-owner exemption under the Supremacy Clause, the Contract Clause, and the Equal Protection Clause.
Since 1945 Alabama has imposed a severance tax on oil and gas extracted from wells located in the State. Ala. Code 40-20-1 et seq. (1975). The tax "is levied upon the producers of such oil or gas in the proportion of their ownership at the time of severance, but . . . shall be paid by the person in charge of the production operations." 40-20-3(a). 1 The person in charge of production operations is "authorized, empowered and required to deduct from any amount due to producers of such production at the time of severance the proportionate amount of the tax herein levied before making payments to such producers." 40-20-3(a). The statute defines a "producer" as "[a]ny person engaging or continuing in the business of oil or gas production," including
Appellants in both No. 81-1020 and No. 81-1268 have working interests in producing oil and gas wells located in Alabama. 2 They drill and operate the wells and are responsible for selling the oil and gas extracted. Appellants are obligated [462 U.S. 176, 180] to pay the landowners a percentage of the sale proceeds as royalties, the percentage depending upon the provisions of the applicable lease. Within any given production unit, there may be tracts of land which the owners of the land have leased to nonworking interests, who are also entitled to a share of the sale proceeds. Appellants were parties to contracts providing for the allocation of severance taxes among themselves, the royalty owners, and any nonworking interests in proportion to each party's share of the sale proceeds. Appellants were also parties to sale contracts that required the purchasers to reimburse them for any and all severance taxes on the oil or gas sold.
After paying the 2% increase in the severance tax under protest, appellants and eight other oil and gas producers filed suit in the Circuit Court of Montgomery County, Ala., seeking a declaratory judgment that Act 79-434 was unconstitutional and a refund of the taxes paid under protest. The Circuit Court ruled in favor of appellants, concluding that both the royalty-owner exemption and the pass-through prohibition violate the Equal Protection Clause and the Contract Clause, and that the pass-through prohibition is also preempted by the Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. 3301 et seq. (1976 ed., Supp. V). Although Act 79-434 contained a severability clause, the court held the entire Act invalid and ordered appellee Commissioner of Revenue of the State of Alabama to refund the taxes paid under protest. The Supreme Court of Alabama reversed, holding Act 79-434 valid in its entirety. 404 So.2d 1 (1981).
Appellants appealed to this Court under 28 U.S.C. 1257(2). We noted probable jurisdiction. 456 U.S. 970 (1982). We now affirm in part, reverse in part, and remand for further proceedings not inconsistent with this opinion.
We deal first with appellants' contention that the application of the pass-through prohibition to gas was pre-empted [462 U.S. 176, 181] by federal law. 3 The applicable principles of pre-emption were recently summarized in Pacific Gas & Electric Co. v. State Energy Resources Conservation & Development Comm'n, 461 U.S. 190, 203 -204 (1983): [462 U.S. 176, 182]
Although the pass-through prohibition thus was not in conflict with 110(a) of the NGPA, we nevertheless conclude that it was pre-empted by federal law insofar as it applied to sales of gas in interstate commerce. To that extent, the pass-through prohibition represented an attempt to legislate in a field that Congress has chosen to occupy. The Natural Gas Act (Gas Act), 52 Stat. 821, as amended, 15 U.S.C. 717-717w (1976 ed. and Supp. V), was enacted in 1938 "to provide the Federal Power Commission, now the FERC, with authority to regulate the wholesale pricing of natural gas in the flow of interstate commerce from wellhead to delivery to consumers." Maryland v. Louisiana, 451 U.S. 725, 748 (1981). As we have previously recognized, e. g., Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 682 -683 (1954); id., at 685-687 (Frankfurter, J., concurring), the Gas Act was intended to occupy the field of wholesale sales of natural gas in interstate commerce, a field which had previously been left largely unregulated as a result of the absence of federal action and decisions of this Court striking down state regulation of sales of natural gas in interstate commerce. The Committee Reports on the bill that became the Gas Act clearly evidence this intent:
We reach a different conclusion with respect to the application of the pass-through prohibition to sales of gas in intrastate commerce. 6 Although 105(a) of the NGPA extended federal authority to control prices to the intrastate market, 15 U.S.C. 3315(a) (1976 ed., Supp. V), Congress also provided that this extension of federal authority did not deprive the States of the power to establish a price ceiling for intrastate producer sales of gas at a level lower than the federal ceiling. Section 602(a) of the NGPA, 92 Stat. 3411, as set forth in 15 U.S.C. 3432(a) (1976 ed., Supp. V), states that
Since a State may establish a lower price ceiling, we think it may also impose a severance tax and forbid sellers to pass it through to their purchasers. For sellers charging the [462 U.S. 176, 187] maximum price allowed by federal law, a state tax increase coupled with a pass-through prohibition will not differ in practical effect from a state tax increase coupled with the imposition of a state price ceiling that maintains the price ceiling imposed by federal law prior to the tax increase. In both cases sellers are required to absorb expenses that they might be able to pass through to their customers absent the state restrictions. Given the absence of any express pre-emption provision in the NGPA and Congress' express approval of one form of state regulation, we do not think it can fairly be inferred that Congress contemplated that the general scheme created by the NGPA would preclude another form of state regulation that is no more intrusive. 7
We conclude that the pass-through prohibition was pre-empted by federal law insofar as it applied to sales of gas in interstate commerce, but not insofar as it applied to producer sales of gas in intrastate commerce.
We turn next to appellants' contention that the royalty-owner exemption and the pass-through prohibition impaired the obligations of contracts in violation of the Contract Clause. 8
Appellants' Contract Clause challenge to the royalty-owner exemption fails for the simple reason that there is nothing to suggest that that exemption nullified any contractual [462 U.S. 176, 188] obligations of which appellants were the beneficiaries. 9 The relevant provision of Act 79-434 states that "[a]ny person who is a royalty owner shall be exempt from the payment of any increase in taxes levied and shall not be liable therefor." On its face this portion of the Act provides only that the legal incidence of the tax increase does not fall on royalty [462 U.S. 176, 189] owners, i. e., the State cannot look to them for payment of the additional taxes. In contrast to the pass-through prohibition, the royalty-owner exemption nowhere states that producers may not shift the burden of the tax increase in whole or in part to royalty owners. Nor is there anything in the opinion below to suggest that the Supreme Court of Alabama interpreted the exemption to have this effect. We will not strain to reach a constitutional question by speculating that the Alabama courts might in the future interpret the royalty-owner exemption to forbid enforcement of a contractual arrangement to shift the burden of the tax increase. See Ashwander v. TVA, 297 U.S. 288, 346 -347 (1936) (Brandeis, J., concurring).
Unlike the royalty-owner exemption, the pass-through prohibition did restrict contractual obligations of which appellants were the beneficiaries. Appellants were parties to sale contracts that permitted them to include in their prices any increase in the severance taxes that they were required to pay on the oil or gas being sold. 10 The contracts were entered into before the pass-through prohibition was enacted and their terms extended through the period during which the prohibition was in effect. By barring appellants from passing the tax increase through to their purchasers, the pass-through prohibition nullified pro tanto the purchasers' contractual obligations to reimburse appellants for any severance taxes.
While the pass-through prohibition thus affects contractual obligations of which appellants were the beneficiaries, it does not follow that the prohibition constituted a "Law impairing the Obligations of Contracts" within the meaning of the Contract [462 U.S. 176, 190] Clause. See United States Trust Co. v. New Jersey, 431 U.S. 1, 21 (1977). "Although the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State `to safeguard the vital interests of its people.'" Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S., at 410 , quoting Home Bldg. & Loan Assn. v. Blaisdell, 290 U.S. 398, 434 (1934). This Court has long recognized that a statute does not violate the Contract Clause simply because it has the effect of restricting, or even barring altogether, the performance of duties created by contracts entered into prior to its enactment. See Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 241 -242 (1978). If the law were otherwise, "one would be able to obtain immunity from state regulation by making private contractual arrangements." United States Trust Co. v. New Jersey, supra, at 22.
The Contract Clause does not deprive the States of their "broad power to adopt general regulatory measures without being concerned that private contracts will be impaired, or even destroyed, as a result." United States Trust Co. v. New Jersey, supra, at 22. As Justice Holmes put it: "One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them. The contract will carry with it the infirmity of the subject matter." Hudson Co. v. McCarter, 209 U.S. 349, 357 (1908). 11 Thus, a state prohibition [462 U.S. 176, 191] law may be applied to contracts for the sale of beer that were valid when entered into, Beer Co. v. Massachusetts, 97 U.S. 25 (1878), a law barring lotteries may be applied to lottery tickets that were valid when issued, Stone v. Mississippi, 101 U.S. 814 (1880), and a workmen's compensation law may be applied to employers and employees operating under pre-existing contracts of employment that made no provision for work-related injuries, New York Central R. Co. v. White, 243 U.S. 188 (1917). 12
Like the laws upheld in these cases, the pass-through prohibition did not prescribe a rule limited in effect to contractual obligations or remedies, but instead imposed a generally applicable rule of conduct designed to advance "a broad societal interest," Allied Structural Steel Co., supra, at 249: protecting consumers from excessive prices. The prohibition applied to all oil and gas producers, regardless of whether they happened to be parties to sale contracts that contained a provision permitting them to pass tax increases through to their purchasers. The effect of the pass-through prohibition [462 U.S. 176, 192] on existing contracts that did contain such a provision was incidental to its main effect of shielding consumers from the burden of the tax increase. Cf. Henderson Co. v. Thompson, 300 U.S. 258, 266 (1937); Beer Co. v. Massachusetts, supra, at 32.
Because the pass-through prohibition imposed a generally applicable rule of conduct, it is sharply distinguishable from the measures struck down in United States Trust Co. v. New Jersey, supra, and Allied Structural Steel Co. v. Spannaus, supra. United States Trust Co. involved New York and New Jersey statutes whose sole effect was to repeal a covenant that the two States had entered into with the holders of bonds issued by The Port Authority of New York and New Jersey. 13 Similarly, the statute at issue in Allied Structural Steel Co. directly "`adjust[ed] the rights and responsibilities of contracting parties.'" 438 U.S., at 244 , quoting United States Trust Co. v. New Jersey, supra, at 22. The statute required a private employer that had contracted with its employees to provide pension benefits to pay additional benefits, beyond those it had agreed to provide, if it terminated the pension plan or closed a Minnesota office. Since the statute applied only to employers that had entered into pension agreements, its sole effect was to alter contractual duties. Cf. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935) (statute which drastically limited the remedies available to mortgagees held invalid under the Contract Clause).
Alabama's power to prohibit oil and gas producers from passing the increase in the severance tax on to their purchasers is confirmed by several decisions of this Court rejecting Contract Clause challenges to state rate-setting schemes that displaced any rates previously established by contract. In [462 U.S. 176, 193] Midland Realty Co. v. Kansas City Power & Light Co., 300 U.S. 109 (1937), it was held that a party to a long-term contract with a utility could not invoke the Contract Clause to obtain immunity from a state public service commission's imposition of a rate for steam heating that was higher than the rate established in the contract. The Court declared that "the State has power to annul and supersede rates previously established by contract between utilities and their customers." Id., at 113 (footnote omitted). In Union Dry Goods Co. v. Georgia Public Service Corp., 248 U.S. 372 (1919), the Court rejected a Contract Clause challenge to an order of a state commission setting the rates that could be charged for supplying electric light and power, notwithstanding the effect of the order on pre-existing contracts. Accord, Stephenson v. Binford, 287 U.S. 251 (1932) (upholding law which barred private contract carriers from using the highways unless they charged rates which might exceed those they had contracted to charge).
Producers Transportation Co. v. Railroad Comm'n of California, 251 U.S. 228 (1920), is particularly instructive for present purposes. In that case the Court upheld an order issued by a state commission under a newly enacted statute empowering the commission to set the rates that could be charged by individuals or corporations offering to transport oil by pipeline. The Court rejected the contention of a pipeline owner that the statute could not override pre-existing contracts:
Finally, we reject appellants' equal protection challenge to the pass-through prohibition and the royalty-owner exemption. Because neither of the challenged provisions adversely affects a fundamental interest, see, e. g., Dunn v. Blumstein, 405 U.S. 330, 336 -342 (1972); Shapiro v. Thompson, 394 U.S. 618, 629 -631 (1969), or contains a classification based upon a suspect criterion, see, e. g., Graham v. Richardson, 403 U.S. 365, 372 (1971); McLaughlin v. Florida, 379 U.S. 184, 191 -192 (1964), they need only be tested under the lenient standard of rationality that this Court has traditionally applied in considering equal protection challenges to [462 U.S. 176, 196] regulation of economic and commercial matters. See, e. g., Western & Southern Life Ins. Co. v. State Board of Equalization, 451 U.S. 648, 668 (1981); Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 461 -463 (1981); Kotch v. Board of River Pilot Comm'rs, 330 U.S. 552, 564 (1947). Under that standard a statute will be sustained if the legislature could have reasonably concluded that the challenged classification would promote a legitimate state purpose. See, e. g., Western & Southern Life Ins. Co., supra, at 668; Clover Leaf Creamery Co., supra, at 461-462, 464.
We conclude that the measures at issue here pass muster under this standard. The pass-through prohibition plainly bore a rational relationship to the State's legitimate purpose of protecting consumers from excessive prices. Similarly, we think the Alabama Legislature could have reasonably determined that the royalty-owner exemption would encourage investment in oil or gas production. Our conclusion with respect to the royalty-owner exemption is reinforced by the fact that that provision is solely a tax measure. As we recently stated in Regan v. Taxation with Representation of Washington, 461 U.S. 540, 547 (1983), "[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes." See Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 (1973); Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526 -527 (1959).
For the foregoing reasons, we conclude that the application of the pass-through prohibition to sales of gas in interstate commerce was pre-empted by federal law, but we uphold both the pass-through prohibition and the royalty-owner exemption against appellants' challenges under the Contract Clause and the Equal Protection Clause. Since the severability of the pass-through prohibition from the remainder [462 U.S. 176, 197] of the 1979 amendments is a matter of state law, we remand to the Supreme Court of Alabama for that court to determine whether the partial invalidity of the pass-through prohibition entitles appellants to a refund of some or all of the taxes paid under protest. See n. 6, supra. Accordingly, the judgment of the Supreme Court of Alabama is affirmed in part and reversed in part, and the case is remanded for further proceedings not inconsistent with this opinion.
[ Footnote 2 ] Appellants in No. 81-1020 are Exxon Corp., Gulf Oil Corp., and the Louisiana Land and Exploration Co. Appellants in No. 81-1268 are Exchange Oil and Gas Corp., Getty Oil Co., and Union Oil Co. of California.
[ Footnote 3 ] The Supremacy Clause of the Constitution provides that "[t]his Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the contrary notwithstanding." Art. VI, cl. 2.
Although appellants in No. 81-1268 also contend that the application of the pass-through prohibition to oil was pre-empted by the Emergency petroleum Allocation Act of 1973 (EPAA), 15 U.S.C. 751 et seq. (1976 ed. and Supp. V), and the regulations promulgated thereunder, we conclude that we have no jurisdiction to consider this contention. The decision below does not discuss this issue, and when "`the highest state court has failed to pass upon a federal question, it will be assumed that the omission was due to want of proper presentation in the state courts, unless the aggrieved party in this Court can affirmatively show the contrary.'" Fuller v. Oregon, 417 U.S. 40, 50 , n. 11 (1974), quoting Street v. New York, 394 U.S. 576, 582 (1969). No such showing has been made here. Although appellants in No. 81-1268 have represented to this Court that the trial court held the pass-through prohibition to be pre-empted by the EPAA, Juris. Statement 3, an examination of the trial court opinion reveals that in fact the court made no mention of the EPAA. Nor does anything in the record before us indicate that this issue was raised in the trial court. Appellants did address the EPAA in their brief before the Supreme Court of Alabama, Brief for Appellees Exchange Oil and Gas Corp., Getty Oil Co., Placid Oil Co., Union Oil Co. of California in No. 79-823, pp. 51-53, but that court did not pass on the issue. Under these circumstances we have no jurisdiction to consider whether the EPAA pre-empted the application of the pass-through prohibition to oil, for it does not affirmatively appear that that issue was decided below. Bailey v. Anderson, 326 U.S. 203, 206 -207 (1945). The general practice of the Alabama appellate courts is not to consider issues raised for the first time on appeal. See, e. g., State v. Newberry, 336 So.2d 181, 182 (Ala. 1976); State v. Graf, 280 Ala. 71, 72, 189 So.2d 912, 913 (1966); Burton v. Burton, 379 So.2d 617, 618 (Civ. App. 1980); Crews v. Houston County Dept. of Pensions & Security, 358 So.2d 451, 455 (Civ. App.), cert. denied, 358 So.2d 456 (Ala. 1978).
Appellants in No. 81-1268 have also burdened this Court with a labored argument that they were denied due process by the Supreme Court of Alabama's refusal to consider the legislative history of the 1979 amendments [462 U.S. 176, 182] to the state severance tax, a history which, according to appellants, shows that those amendments were intended to apply only to certain wells located in one county in the State and not to apply statewide. Suffice it to say that the weight to be given to the legislative history of an Alabama statute is a matter of Alabama law to be determined by the Supreme Court of Alabama.
[ Footnote 4 ] See 404 So.2d, at 6:
[ Footnote 5 ] Although the United States and the Federal Energy Regulatory Commission (FERC) in their amicus brief point to the statement in the Conference Report that "[a]ll ceiling prices under this Act are exclusive of [462 U.S. 176, 185] State severance taxes borne by the seller . . .," H. R. Conf. Rep. No. 95-1752, p. 90 (1978), we do not see how this statement supports their position that the pass-through prohibition was in conflict with 110(a).
[ Footnote 6 ] The parties stipulated that a substantial portion of the gas extracted by appellants was sold in interstate commerce. App. in No. 81-1020, pp. 78, 184-185. Because the trial court concluded that the pass-through prohibition was in conflict with 110(a) of the NGPA, it did not determine how much of the taxes at issue in this case were levied on gas sold in intrastate and interstate commerce. If, on remand, when the Supreme Court of Alabama inquires into the question of severability, see infra, at 196-197, that court holds that the Alabama Legislature would have intended to impose the tax increase on the severance of gas if and only if the increase could not be passed through to consumers when the gas is sold, such a determination may have to be made.
[ Footnote 7 ] We note that these cases do not involve any attempt by a State to prohibit gas producers from passing through the cost of a factor of production such as labor or machinery. Such a prohibition might raise additional considerations not present here because of the inducement it would create for producers to shift away from the factor of production to which the pass-through prohibition applied.
[ Footnote 8 ] The Contract Clause provides that "No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . ." U.S. Const., Art. I, 10, cl. 1.
[ Footnote 9 ] The contracts into which appellants had entered appear to entitle them to reimbursement from the royalty owners for a share of any severance tax paid by appellants in proportion to the royalty owners' interest in the oil or gas, regardless of whether state law imposes that tax on the producer or on the royalty owner. Appellants cite the following contractual provisions as typical of the agreements which they contend are impaired by the royalty-owner exemption:
Even if these contractual provisions were to be interpreted to entitle appellants to reimbursement only for that portion of the severance tax which state law itself imposes on the royalty owners, appellants would still have no objection under the Contract Clause. In that event, the increase in the severance tax would be absorbed by appellants not because the State has nullified any contractual obligation, but simply because the provisions as so interpreted would impose no obligation on the royalty owners to reimburse appellants for the tax increase.
Since appellants have not shown that the royalty-owner exemption affects anything other than the legal incidence of the tax increase, their contention that the exemption is pre-empted by the Gas Act and the NGPA is plainly without merit.
[ Footnote 10 ] For example, appellant Union Oil Co. was a party to a contract concerning oil under which the purchaser was required to reimburse it for "100 percent of the amount by which any severance taxes paid by seller are in excess of the rates of such taxes levied as of April 1, 1976." Ibid.
[ Footnote 11 ] This point was aptly stated in an early decision holding that a statute prohibiting the issuance of notes by unincorporated banking associations did not violate the Contract Clause by preventing the performance of existing contracts entered into by members of such associations:
[ Footnote 12 ] See generally Home Bldg. & Loan Assn. v. Blaisdell, 290 U.S. 398, 436 -437 (1934); id., at 475-477 (Sutherland, J., dissenting); Dillingham v. McLaughlin, 264 U.S. 370, 374 (1924) ("The operation of reasonable laws for the protection of the public cannot be headed off by making contracts reaching into the future") (Holmes, J.); Manigault v. Springs, 199 U.S. 473, 480 (1905) ("parties by entering into contracts may not estop the legislature from enacting laws intended for the public good"); Ogden v. Saunders, 12 Wheat. 213, 291 (1827) (when "laws are passed rendering that unlawful, even incidentally, which was lawful at the time of the contract[,] it is the government that puts an end to the contract, and yet no one ever imagined that it thereby violates the obligation of a contract"); Hale, The Supreme Court and the Contract Clause: II, 57 Harv. L. Rev. 621, 671-674 (1944).
[ Footnote 13 ] The statutes under review in United States Trust Co. also implicated the special concerns associated with a State's impairment of its own contractual obligations. See 431 U.S., at 25 -28; Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 412 -413, and n. 14 (1983).
[ Footnote 14 ] Our conclusion is buttressed by the fact that appellants operate in industries that have been subject to heavy regulation. See Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, at 416 ("Price regulation existed and was foreseeable as the type of law that would alter contract obligations"); Veix v. Sixth Ward Bldg. & Loan Assn., 310 U.S. 32, 38 (1940) ("When he purchased into an enterprise already regulated in the particular to which he now objects, he purchased subject to further legislation upon the same topic").
With respect to gas, see supra, at 184-186; Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, at 413-416. During the time the pass-through prohibition was in effect, the Federal Government controlled the prices of crude oil under the EPAA, 15 U.S.C. 751 et seq. (1976 ed. and Supp. V). Regulations promulgated under the EPAA established maximum prices for most categories of crude oil. 10 CFR Part 212, Subpart D - Producers of Crude Petroleum, 212.71 et seq. (1975).
Appellants' reliance on Barwise v. Sheppard, 299 U.S. 33 (1936), is misplaced. In Barwise the owners of royalty interests challenged a Texas statute that imposed a new tax on oil production, which was to be borne "ratably by all interested parties including royalty interests." The statute authorized the producers to pay the tax and withhold from any royalty owners their proportionate share of the tax. The royalty owners in Barwise were parties to contracts that entitled them to specified shares of the oil produced by their lessee and required the lessee to deliver the oil [462 U.S. 176, 195] "free of cost." Id., at 35. They contended that the statute, by authorizing the lessee to deduct their portion of the tax from any payments due them, impermissibly impaired the lessee's obligation to deliver the oil "free of cost." This Court concluded that the statute did not run afoul of the Contract Clause:
Barwise is relevant to these cases only insofar as it confirms Alabama's power to decide that no part of the legal incidence of the increase in the severance tax would fall on owners of royalty interests. See Part III-A, supra. [462 U.S. 176, 198]