This

pipeline problem on a case-by-case basis with no success. history is extensively discussed in the attached Staff Report and needs no repetition here except for two points. Even the Clayton and Sherman Acts do not provide an adequate basis for challenging the broad question of shipper-ownership as such. The limitations of the Clayton Act have been discussed above and the Department has an admitted reluctance to use the Sherman Act to deal with problems of industry structure absent some element of collusion. Section 5 of the FTC Act, however, with its broader reach, can address structural questions. Moreover, federal courts, acting on a case-by-case basis, cannot deal effectively with an industry-wide problem. Particularly given the limitations of the Sherman and Clayton Acts, the courts cannot adequately or effectively deal with the basic structural problem presented by oil company ownership of pipelines, much less fashion an industry-wide remedy.

One other approach would be to address the problem by legislation. Legislation, unfortunately, is a singularly blunt weapon. The enunciation of a general principle is easy enough, but the tailoring of the remedy to specific situations is difficult. What is needed is a flexible approach which can take into account a large number of practical considerations. Accomplishing this by legislation would require the creation of an agency with the appropriate discretion and flexibility.

Fortunately, an agency with such flexibility, together with the appropriate powers and jurisdiction already exists Federal Trade Commission.

-

the

It would be unfortunate, however, if the Commission were to undertake such a proceeding without the considerable expertise of the Department of Justice in the area. This can be avoided by a simple request from the Commission that the Department participate in the proceedings.

Conclusion

Since 1906 there have been numerous studies, inves

tigations, and reports on the question of pipeline ownership.*/

Virtually all have found a massive inconsistency between shipper-ownership on one hand, and common carrier status on

the other.

Virtually all have called for divorcing ownership

of pipelines from the shipper function.

Reinforcing this

mass of accumulated expertise is the overwhelmingly persuasive analysis done by the Department of Justice.

It is clear that the failure of traditional common

carrier regulation has not been solely the result of indifference or ineptitude. In the context of the present system of shipperownership, traditional regulation is logically impossible. Such ownership, with its potential for harm both to outside shippers and to consumers, is unfair and violates Section 5 of

*/ This material is discussed at some length in the attached Subcommittee Staff Report on Oil Company Ownership of Pipelines.

the FTC Act. The Commission has the jurisdiction and the

HCP/B3715-01

Authority of the
Department of Energy
to Regulate

Anticompetitive Aspects of
Petroleum Pipeline Operations

June 30, 1978

October 1978

Prepared For

U.S. Department of Energy
Economic Regulatory Administration
Washington, D.C. 20461

Prepared By

William K. Jones

Milton Handler Professor of Trade Regulation

Columbia University School of Law

I.

Table of Contents

The Role of Petroleum Pipelines in the Petroleum
Industry and Alleged Anticompetitive
Practices and Anticompetitive

II. Authority of the ICC (and DOE as Successor) Under the Interstate Commerce Act.

C. Provisions of the Interstate Commerce Act Pertaining
to the Rates of Petroleum Pipelines

Provisions of the Interstate Commerce Act Pertaining
to Services of Petroleum Pipelines.

G.

H.

Minimum Tender Requirements and Demurrage.

I. Service Regulation and Provision of Facilities

127