PUERTO RICO DEPARTMENT OF CONSUMER AFFAIRS, ET AL., PETITIONERS V. ISLA PETROLEUM CORPORATION, ET AL. No. 86-1406 In the Supreme Court of the United States October Term, 1987 On Writ of Certiorari to the Temporary Emergency Court of Appeals Brief for the United States as Amicus Curiae Supporting Petitioners TABLE OF CONTENTS Interest of the United States Statement: A. Federal regulation of petroleum allocation and prices B. Puerto Rico's regulation of prices of certain petroleum products C. Proceedings below Summary of argument Argument: The Emergency Petroleum Allocation Act of 1973, as amended, does not now prohibit the Commonwealth of Puerto Rico from regulating the prices charged by gasoline wholesalers A. Only an operative federal statute can preempt state law B. No extant provision of federal law preempts Puerto Rico's regulation of gasoline prices C. The Transco case does not support a finding of preemption Conclusion QUESTION PRESENTED Whether the Emergency Pertroleum Allocation Act of 1973, 15 U.S.C. 751 et seq., as amended by the Energy Policy and Conservation Act (Pub. L. No. 94-163, Tit. IV, 89 Stat. 941), prohibits the Commonwealth of Puerto Rico from regulating the prices charged by gasoline wholesalers. INTEREST OF THE UNITED STATES This case presents an important question concerning the preemptive effect of a modification of a federal regulatory statute. The United States has an interest in seeing that its laws are given preemptive effect to the extent, and only to the extent, intended by Congress. At the Court's invitation, the United States filed a brief at the petition stage of this case. STATEMENT A. Federal Regulation of Petroleum Allocation and Prices In October 1973 war in the Middle East and a resulting embargo on oil exports to the United States caused severe disruptions in the international trade in crude oil and petroleum products (see Pet. App. 8a). In response, Congress enacted the Emergency Petroleum Allocation Act of 1973 (EPAA), Pub. L. No. 93-159, 87 Stat. 627, 15 U.S.C. 751 et seq., which provided, subject to specified exceptions, for allocation and price regulation of "all crude oil, residual fuel oil, and refined petroleum products produced in or imported into the United States" (Section 4(a), 15 U.S.C. 753(a)). Section 4 of the EPAA directed the President to "promulgate a regulation providing for the mandatory allocation of crude oil, residual fuel oil, and each refined petroleum product, in amounts specified in (or determined in a manner prescribed by) and at prices specified in (or determined in a manner prescribed by) such regulation" (ibid.). The EPAA had explicit preemptive effect, but only to the extent conflict between federal and state regulation. It provided that "(t)he regulation under section 753 of this title (Section 4 of the EPAA) and any order issued thereunder shall preempt any provision of any program for the allocation of crude oil, residual fuel oil, or any refined petroleum product established by any State or local government if such provision is in conflict with such regulation or any such order" (Section 6(b), 15 U.S.C. 755(b)). Section 4 (g)(1) of the EPAA originally provided that "(t)he authority (of the President) to promulgate and amend the regulation and to issue any order under this section, and to enforce under Section 5 such regulation and any such order, expires at midnight February 28, 1975, but such expiration shall not affect any action or pending proceedings, civil or criminal, not finally determined on such date, nor any action or proceeding based upon any act committed prior to midnight February 28, 1975" (Section 4(g)(1), 15 U.S.C. (Supp. III 1973) 753 (g)(1)). Congress amended the EPAA three times to extend the President's authority; the last change set the expiration date at December 15, 1975 (Act of Nov. 14, 1975, Pub. L. No. 94-133, Section 1,89 Stat. 694). On December 22, 1975, Congress enacted the Energy Policy and Conservation Act (EPCA), Pub. L. No. 94-163, 89 Stat. 871. The EPCA retroactively amended the EPAA, repealing Section 4(g) and, instead of terminating all federal controls at the same time, mandated a gradual phase-out of the President's duty to regulate (Sections 401-403, 89 Stat. 941-948). It provided that at the end of a 40-month phase-out the President's regulatory authority would become "discretionary rather than mandatory" and further provided that "(t)he authority to promulgate and amend any regulation or to issue any order under this Chapter shall expire at midnight September 30, 1981, but such expiration shall not affect any action or pending proceedings, administrative, civil, or criminal, not finally determined on such date, nor any administrative, civil, or criminal action or proceedings, whether or not pending, based upon any act committed or liability incurred prior to such expiration date" (Section 461, 89 Stat. 955 (Section 18 of the EPAA, as added), 15 U.S.C. 760g). Pursuant to the discretionary authority conferred by this section, President Reagan terminated all petroleum price and allocation controls on January 28, 1981 (Exec. Order No. 12,287, 3 C.F.R. 124 (1982)). B. Puerto Rico's Regulation of Prices of Certain Petroleum Products Since 1942, Puerto Rico has provided for the regulation of prices of and profit margins on staple commodities sold in its territory (Pet. App. 3a). In 1973, regulatory authority was vested by statute in petitioner Puerto Rico Department of Consumer Affairs (DACO) (ibid.). DACO and its predecessors "regulated the price of gasoline and other petroleum products from 1953 to 1973 * * *. Upon the enactment of (the EPAA), DACO suspended its regulatory authority over gasoline prices and profit margins" (ibid.). In 1975, at a time when the EPAA was scheduled to expire on August 31, 1975, "DACO issued Price Regulation 45 which would restore its price controls (on petroleum products) upon expiration of the EPAA" (Pet. App. 3a). Price Regulation 45, as amended, provided that the Secretary of DACO could issue orders fixing prices and profit margins for gasoline, kerosene and diesel oil sold "at all levels of distribution" within Puerto Rico (Pet. App. 36a, 37a-38a) and required that, when no such orders were in effect, 15 days' notice be given to the Secretary before any seller raised its price for a regulated item (id. at 37a). When the EPCA was adopted, DACO amended Price Regulation 45 to provide that "the price regulation authority would not become effective until 'the Federal Price Controls are lifted over articles here regulated * * * '" (Pet. App. 3a, quoting P.R. DACO Price Reg. No. 45, Amend. No. 1 (1976). Accordingly, Price Regulation 45 became effective by its terms on January 29, 1981. On March 18, 1986, apparently in response to falling world oil prices, the Puerto Rico legislature imposed on oil refiners an excise tax that varied with the world price of oil (1986 P.R. Laws 5; see Pet. App. 49a). On March 26, 1986, the Secretary of DACO issued an order reminding the public of his authority under Price Regulation 45 and reiterating the 15-day notice requirement (Pet. App. 42a-45a). On April 23, 1986, the Secretary of DACO issued two orders. One authorized oil refiners to pass the cost of the excise tax on to gasoline wholesalers but forbade wholesalers from passing the increase on to retailers (Pet. Supp. App. SA25), while the other capped wholesale gasoline prices at their March 31, 1986 levels (Pet. App. 47a). On May 20, 1986, the Secretary issued a third order which "lifted the freeze on gasoline prices. It divided wholesalers into two groups -- minor (Group 1) and major (Group 2). Group 1 wholesalers would be allowed to sell to retailers at a profit of 8.6 cents per gallon, and of 3.6 cents per gallon" (Pet. App. 3a; see id. at 49a-57a (May 20 Order)). C. Proceedings Below In May 1986 (before the Secretary of DACO's order of May 20), respondents filed eight actions in the United States District Court for the District of Puerto Rico challenging DACO's orders, which they claimed conflicted with federal law and with various constitutional provisions. The eight actions were consolidated, and on June 4, 1986, the district court entered judgment for respondents (Pet. Supp. App. SA86-SA87), finding "that the price/regulatory orders of March 26, April 23, and May 20, 1986, (were) unconstitutional based on the substantive due process and preemption considerations discussed herein" (id. at SA86). Respondents appealed the preemption decision to the Temporary Emergency Court of Appeals (TECA) and the substantive due process decision to the First Circuit. /1/ A divided panel of TECA affirmed. The majority began by noting that "the primary task in deciding a pre-emption issue is to determine Congressional intent" (Pet. App. 6a) and admitted that the case was "somewhat unusual in that the claimed preemption results from the absence rather than the presence of federal authority" (id. at 7a). The court of appeals believed, however, that this Court had held "that preemption can occur in these circumstances" (ibid). After a review of the history of federal regulation of oil prices (Pet. App. 7a-10a), the court of appeals turned to this Court's decision in Tully v. Mobil Oil Corp., 455 U.S. 245 (1982). Tully involved a New York statute that "established a two percent tax on the gross receipts of oil companies limited to their revenues derived from their activities within the State" (ibid. (citation omitted)). "Desiring that the tax actually be borne by the oil companies, its intended objects, rather than by consumers, the New York Legislature prohibited the companies from passing on the cost of the tax in the price of their products sold in New York" (id. at 245-246). The oil company plaintiffs in Tully challenged the New York tax on preemption grounds, "claiming that it was in conflict with and therefore pre-empted by federal price control authority under (the EPAA)" (id. at 246). The district court agreed with the plaintiffs and invalidated the tax, and TECA affirmed (Mobile Oil Corp. v. Tully, 499 F. Supp. 888 (N.D.N.Y. 1980), aff'd 653 F.2d 497 (Temp. Emer. Ct. App. 1981), vacated and remanded, 455 U.S. 245 (1982)). This Court decided Tully after the President's regulatory authority had expired pursuant to Section 18 of the EPAA. The Court quoted TECA's explanation of the effect of that expiration: "(TECA) noted that the federal statute would expire by its own terms in September 1981, and that expiration of the Act 'will signal the end of federal concern in this area'" (455 U.S. at 246 (quoting 653 F.2d at 502)). The Court said that "(t)he expiration date for the federal statute has come and gone; the only barrier to the enforcement of the antipassthrough provision no longer exists. However, the injuction entered by the District Court and affirmed by TECA did not terminate on October 1, 1981" (455 U.S. at 247 (emphasis added)). Accordingly, the Court found that "in its present form the declaration of the invalidity of the antipassthrough provision and the accompanying injunction against enforcing it have no current validity and must be set aside" (ibid). Recognizing, however, that the lower courts in Tully had adjudicated a number of issues relating to the effects of the New York law during the period before the expiration of federal price controls, the Court remanded the case to TECA to decide "what effect, if any, the expiration of federal price authority (had) on these collateral matters" (id. at 248 (footnote omitted)). /2/ After describing Tully, TECA in the present case decided that "(a)lthough Tully appears to answer the question we now face, the context of its appeal to the Supreme Court and the Supreme Court's recent decision in Transcontinental convince uss that Tully is not an appropriate guide for our decision" (Pet. App. 11a). TECA was referring to Transcontinental Pipe Line v. State Oil & Gas Bd., 474 U.S. 409 (1986) (Transco), in which this Court considered whether the Natural Gas Act (NGA), ch. 556, 52 Stat. 821, 15 U.S.C. 717 et seq., continued to preempt a state "ratable-take" rule after it was amended by the Natural Gas Policy Act of 1978 (NGPA), Pub. L. No. 95-621, 92 Stat. 3351, 15 U.S.C. 3301 et seq. The NGPA removed FERC's authority to regulate the price of certain high-cost natural gas. The Court found that the NGA as amended nevertheless continued to preempt the state rule. In the present case, TECA read Transco as requiring it to "determine whether by removing federal price control authority Congress intended to allow the states to step in and assume price control authority over gasoline" (Pet. App. 12a). The TECA majority answered that question in the negative, on the basis of its reading of the legislative history of the EPCA. Explaining that the EPCA provided for "a carefully controlled transition to an unregulated market" (id. at 13a), the majority found it "inconceivable that Congress would implement such an extensive and carefully orchestrated termination of federal intervention with the intention that the states step in to regulate" (ibid.). Judge Christensen dissented. He emphasized the temporary, emergency nature of oil price controls: "(t)he very names of the Act and of this Court underscore their transitory nature and purpose" (Pet. App. 20a). He criticized the majority's reading of Tully and Transco (id. at 23a-25a) and discounted the majority's concern that state regulation might "frustrat(e) Congress' goal of allowing market forces to regulate the supply and price of petroleum products," noting that "(t)here are already constitutional limitations on the exercise of (the states') policy power * * * and Congress, of course, has the power to deal with any concern of this nature in light of the Supremacy Clause" (id. at 26a). He added that under the decision below TECA would have to continue deciding preemption cases "long after adjudications of the validity and effect of the regulations and programs under ESA and the EPAA have been fully completed" (ibid). SUMMARY OF ARGUMENT Congress has broad power under the Commerce Clause and the Supremacy Clause to preempt state regulation of the prices of petroleum products, but it may do so only by passing laws. The only pertinent statutory provision now extant is Section 18 of the EPAA, added by the EPCA, which terminated the President's regulatory authority under the EPAA as of September 30, 1981. TECA's ruling that the DACO orders were preempted was based either on a supposed congressional policy that does not inhere in any federal statute, or on an implication it found in Section 18. In either case the ruling was error. TECA stated that the adopting of Section 18, bringing federal regulation to an end, was the result of a "federal decision to deregulate the gasoline market" (Pet. App. 7a). TECA appears to have given preemptive effect to this supposed general "decision," without regard to whether Section 18 itself either explicity or implicity bars state regulation. But a congressional sentiment, even if accurately gauged, is "the Supreme Law of the Land" only to the extent that it is embodied in a "law() of the United States." Cf. INS v. Chadha, 462 U.S. 919, 951-958 (1983). TECA's analysis should have been limited to interpreting the statute now in force. To the extent that TECA was interpreting Section 18 as implicitly preempting state regulation, its interpretation was incorrect. The language of Section 18 and the legislative history of the EPCA do not warrant the inference either that Congress intended to impose a comprehensive federal policy or scheme of regulation that would be violated or frustrated by Puerto Rico's law. TECA's decision appears to have been based on a misreading of this Court's decision in Transco. That case held that a state "ratable take" order was preempted by the Natural Gas Act (NGA), 15 U.S.C. 717 et seq., after it was amended by the Natural Gas Policy Act (NGPA), 15 U.S.C. 3301 et seq. But the Court's ruling in Transco rested on its determination that the NGA and the NGPA created a continuing "comprehensive federal regulatory scheme" (474 U.S. at 422) with which the state order conflicted. Respondents did not show, and the courts below did not find, any such continuing comprehensive federal scheme here. ARGUMENT THE EMERGENCY PETROLEUM ALLOCATION ACT OF 1973, AS AMENDED, DOES NOT NOW PROHIBIT THE COMMONWEALTH OF PUERTO RICO FROM REGULATING THE PRICES CHARGED BY GASOLINE WHOLESALERS A. Only an Operative Federal Statute Can Preempt State Law It is a "familiar and well-established principle that the Supremacy Clause * * * invalidates state laws that 'interfere with, or are contrary to' federal law." Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 712 (1985) (quoting Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 211 (1824)). The Supremacy Clause makes "(t)his Constitution, and the laws of the United States which shall be made in Pursuance thereof * * * the supreme Law of the Land" (U.S. Const. Art. VI, Cl. 2). There is no doubt that Congress could, by enacting legislation otherwise within its powers, have prohibited Puerto Rico from regulating gasoline prices (e.g., Jones v. Rath Packing Co., 430 U.S. 519 (1977)) or could have adopted a federal regulatory scheme with which Puerto Rico's law is inconsistent and by which it is implicitly preempted (e.g., Michigan Canners & Freezers Ass'n, Inc. v. Agricultural Marketing & Bargaining Bd., 467 U.S. 461 (1984)). But Congress's preemptive power must be exercised by enacting a statute. Article I, Section 7, prescribes the exclusive means by which "laws of the United States" are to be adopted (INS v. Chadha, 462 U.S. 919, 951-958 (1983)). As we said at the petition stage, there cannot be a preemptive grin without a statutory cat. Section 6(b) of the EPAA, 15 U.S.C. 755(b), once gave the statute explicit preemptive effect: "The regulation under (Section 4, 15 U.S.C. 753) and any order issued thereunder shall preempt any provision of any program for the allocation of crude oil, residual fuel oil, or any refined petroleum product established by any State or local government if such provision is in conflict with such regulation or any such order." But Section 18 of the EPAA, added by the EPCA, provided that "(t)he authority to promulgate and amend any regulation or to issue any order under this (Act) shall expire at midnight September 30, 1981" (Section 461, 15 U.S.C. 760g). As this Court recognized in Tully, when the President's regulatory authority expired, the preemptive effect of Section 6(b) expired with it. /3/ TECA ruled that the Puerto Rico regulation was preempted despite the expiration of Section 6(b) and without attributing the preemptive effect to any particular extant provision of federal law. Instead, TECA explained that it was "determining the preemption effect of the federal decision to deregulate the gasoline market" (Pet. App. 7a). But not every congressional "decision" is a "law of the United States." For example, when Congress "decides" not to legislate, that decision, standing alone, cannot have preemptive effect. And while the legislation that causes a federal regulatory program to expire is of course a law, the deregulatory sentiment that inspired the legislation, even if accurately gauged, is a law only insofar as it is reflected in a rule that is explicit or implicit in the statutory language. To the extent that TECA meant to be giving preemptive effect to what it perceived to be congressional policy unembodied in any statute, its action was error. B. No Extant Provision of Federal Law Preempts Puerto Rico's Regulation of Gasoline Prices The only pertinent part of the EPAA that could be said to be now in force is Section 18, 15 U.S.C. 760g, added by the EPCA, which terminated the President's regulatory authority on September 30, 1981. TECA's inquiry should have been limited to whether that provision explicitly or implicitly bars the Puerto Rico regulatory actions at issue in this case. We think it clear that if TECA had conducted that inquiry in accordance with this Court's instructions, its answer would have been in the negative. This Court has "consistently emphasized that the first and fundamental inquiry in any pre-emption analysis is whether Congress intended to displace state law, and where a congressional statute does not expressly declare that state law is to be pre-empted, and where there is no actual conflict between what federal and state law prescribe, we have required that there be evidence of a congressional intent to pre-empt the specific field covered by the state law" (Wardair Canada, Inc. v. Florida Dep't of Revenue, No. 84-902 (June 18, 1986), slip op. 4). Section 18 does not "declare that state law is to be pre-empted," and there plainly is no "actual conflict" between Section 18 and Puerto Rico's actions. The only remaining question is whether the language or legislative history of Section 18 evidences an intent to bar states from the field covered by the Puerto Rico regulation. There certainly is no such evidence in the language. As this Court recognized in Tully, the language of Section 18 has a natural and obvious meaning. /4/ The centerpiece of the EPAA has been the President's regulatory authority; all of the statute's other legal consequences, including explicit preemption, derived from that. Section 18 has caused that authority to expire, bringing the statute's continuing legal effect to an end, so that "the only barrier to the enforcement of (the state regulation at issue in that case) no longer exists" (455 U.S. at 247). /5/ Moreover, while it is an extant statutory provision, Section 18 is not what the EPAA was before the President's regulatory authority expired: a substantive federal regulatory program. Section 18, therefore, does not contain the element that this Court has relied on whenever it has found that a state law "'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 713 (1985) (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). TECA said that "the legislative history (of the EPCA) convinces us that Congress intended to establish a market free of any government control other than standby emergency controls" (Pet. App. 14a). Any such inference from the legislative history would, however, be at best indirect: there is not to our knowledge any explicity suggestion anywhere in the legislative history that state laws would continue to be preempted after the termination of federal regulatory authority on September 30, 1981. The question of continuing preemption does not appear to have been mentioned at all. TECA based its conclusion of the reference in the Senate Conference Report to "'a gradual return to an unregulated market'" (Pet. App. 13a, quoting S. Conf. Rep. 94-516, 94th Cong., 1st Sess. 203 (1975)) and similar general comments. TECA asserted that "the possibility of over 50 individual regulatory schemes operating in the petroleum products markets clearly conflicts with and frustrates Congress' goal of allowing market forces to regulate the supply and price of petroleum products" (Pet. App. 13a-14a). But legislation terminating regulation should not be read, on such flimsy evidence as this, /6/ as embodying a federal ban on state regulation as well. State regulation may be addressed to local conditions, and may not give rise to the considerations that led Congress to eschew regulation at the federal level. That is way this Court has frequently stated (see, e.g., Rice v. Santa Fe Elevator Copr., 331 U.S. 218, 230 (1947)) that Congress should not be presumed to have intended to override state regulatory choices. This very case involves a regulation premised on perceived imperfections in the market for gasoline in Puerto Rico (Pet. Supp. App. SA21-SA23). As Judge Christensen noted in dissent, "Puerto Rico, because of its isolation and the essentially local nature of its oil business, presents a peculiar situation" (Pet. App. 26a). TECA referred to no evidence that Congress would want to preempt such local regulation, and we are aware of none. More generally, both the role of the States in the federal system and practical considerations bearing on the interpretation of federal statutes support the traditional presumption that Congress does not intend to require state regulatory policy to track federal regulatory policy unless it affirmatively indicates that intention. As Judge Christensen pointed out in dissent below (see Pet. App. 26a), Congress can easily affirmatively prohibit state regulation that it believes would defeat proper federal objectives. It is much more sensible to require Congress to negate that presumption. That is why this Court has always made "the basic assumption that Congress did not intend to displace state law." Maryland v. Louisiana, 451 U.S. 725, 746 (1981) (citing Rice v. Santa Fe Elevator Corp., 331 U.S. at 230). Here, the legislative history on which TECA relied does not demonstrate an intent to displace state law; it certainly is not enough to overcome the contrary presumption required by this Court's cases. See, e.g., R.J. Reynolds Tobacco Co. v. Durham County, No. 85-1021 (Dec. 9, 1986), slip op. 9; Commonwealth Edison Co. v. Montana, 453 U.S. 609, 633-634 (1981) (preemption on basis of general national policy not favored). C. The Transco Case Does Not Support a Finding of Preemption TECA concluded that it was authorized by this Court's instructions in Transco to infer preemption "from the absence rather than the presence of federal authority" (Pet. App. 7a). TECA said, "(a)s in Transcontinental, we must determine whether by removing federal price control authority Congress intended to allow the states to step in and assume price control authority over gasoline" (Pet. App. 12a). But TECA's reading of Transco reflects a fundamental misunderstanding of that case. Transco did not hold that, whenever Congress has terminated federal regulation of an economic area, there must be an affirmative showing of congressional permission before states may regulate in that area if it is one well within their traditional police powers. /7/ In Transco, this Court found that state regulation was preempted by a continuing federal regulatory program, not by the termination of regulatory authority. The Court had previously held in Northern Natural Gas Co. v. State Corporation Comm'n, 372 U.S. 84 (1963), that the Natural Gas Act (NGA) provided a "comprehensive scheme of federal regulation" (id. at 91) that preempted a state "ratable take order." Thereafter, in the Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. 3301 et seq., Congress amended the NGA, lifting federal price regulation of certain "high-cost natural gas." The question in Transco, which involved a "virtually identical (ratable take) regulation," (Transco, 474 U.S. at 411) was "whether Congress, in enacting the NGPA, altered those characteristics of the federal regulatory shceme which provided the basis in Northern Natural for a finding of preemption" (id. at 417). The court ruled that ratable take orders continued to be preempted. It noted that the NGPA was "'a comprehensive statute to govern future natural gas regulation'" (Transco, 474 U.S. at 420 (quoting Public Service Comm'n v. Mid-Louisiana Gas Co., 463 U.S. 319, 332 (1983)), and "(did) not constitute a federal retreat from a comprehensive gas policy" (Transco, 474 U.S. at 421). It then found that the Mississippi ratable-take rule "(ran) afoul of other concerns identified in Northern Natural" (id. at 423) because it disturbed "the uniformity of the federal scheme" and "would have the effect of increasing the ultimate price to consumers" (ibid.), both subjects of concern to ongoing federal regulation. In sum, the Court in Transco based its conclusion on its understanding of a "comprehensive federal regulatory scheme" (id. at 422). When the Court said, in Arkansas Elec. Coop. Corp. v. Arkansas Pub. Serv. Comm'n, 461 U.S. 375, 384 (1983), cited by TECA at Pet. App. 7a, that "a federal decision to forgo regulation in a given area may imply an authoritative federal determination that the area is best left unregulated," it was discussing a field in which Congress had passed comprehensive legislation explicitly allocating regulatory authority between state and federal agencies (461 U.S. at 378-380). The same was true in Transco. A comprehensive federal regulatory scheme within which one area has been deliberately left unregulated obviously may (if that is determined to be Congress's intention) preempt state regulation in that area. /8/ The present case is quite different: TECA concluded here that Congress intended to preempt despite the absence of any continuing federal involvement. Transco does not warrant that leap. /9/ TECA misunderstood Transco, taking it to stand for a proposition that it does not support and that is not correct. The question this Court framed in Transco -- "'whether Congress, in revising a comprehensive federal regulatory scheme to give market forces a more significant role (* * * ) intended to give the states the power is had denied FERC'" (Pet. App. 12a (quoting Transco, 474 U.S. at 422)) -- was appropriate: Congress had deliverately created some open spaces within a federal regulatory scheme, and the Court naturally inquired whether it intended to invite the States to fill them. The question TECA framed in this case -- whether "Congress * * * intend(ed) to give the states the power it has denied the federal government" (Pet. App. 17a) -- was wholly inappropriate. Congress does not have to give the States power for them to be able to regulate economic transactions within their territories; the States are disabled only by the Constitution or by a law of the United States with which state regulation is inconsistent. The analysis always "'start(s) with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. at 230). See, e.g., International Paper Co. v. Ouellette, No. 85-1233 (Jan. 21, 1987), slip op. 9; California Fed. Savings & Loan Ass'n v. Guerra, No. 85-494 (Jan. 13, 1987), slip op. 8; Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963)). Respondents, in their Supplemental Response at the petition stage, vigorously accuse the United States of departing from the Court's analysis in Transco. Their real problem, however, is to bring the facts and circumstances of this case within the holding of that one -- to show that Congress did not intend merely to "return" to pre-EPAA conditions in which Puerto Rico was free to regulate gasoline prices to meet local needs, but intended a continuing "comprehensive federal regulatory scheme" with which Puerto Rico's regulation is inconsistent. This they have utterly failed to do. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. CHARLES FRIED Solicitor General RICHARD K. WILLARD Assistant Attorney General LOUIS R. COHEN Deputy Solicitor General JAMES M. SPEARS Deputy Assistant Attorney General JOHN HARRISON Assistant to the Solicitor General JOHN F. CORDES BRUCE G. FORREST Attorneys NOVEMBER 1987 /1/ TECA originated in the Economic Stabilization Act Amendments of 1971 (ESAA), Pub. L. No. 92-210, Section 2, 85 Stat. 749, which amended the Economic Stabilization Act of 1970 (ESA), Pub. L. No. 91-379, Tit. II, 84 Stat. 799, to specify implementing procedures for the President's temporary authority under the ESA to control wages, prices and rents throughout the economy. Under the ESA, as amended by the ESAA, TECA was to hear appeals "in cases and controversies arising under (the ESA controls) or under regulations or orders issued thereunder" (Section 2, 85 Stat. 749 (Section 211(b)(2) of the ESA)). When the EPAA was enacted, the President's authority to impose mandatory controls had not expired and TECA was still in existence. Section 5(a)(1) of the EPAA extended TECA's jurisdiction to EPAA litigation: it provided that cases and controversies under the EPAA allocation regulation were to be treated as if they arose under the ESA (15 U.S.C. 754(a)(1)). The courts of appeals have held that TECA has exclusive jurisdiction to decide preemption issues under the EPAA (Pet. App. 4a-6a; see, e.g., Mobil Oil Corp. v. Tully, 639 F.2d 912, 915-916 (2d Cir.), cert. denied, 452 U.S. 967 (1981)). On January 23, 1987, the First Circuit stayed its proceedings pending the issuance of TECA's mandate in this case (see Tenneco Oil Co. v. Department of Consumer Affairs, No. 86-1590 (lst Cir.)). On February 6, 1987, TECA stayed its mandate until this Court finally disposes of the petition (see Rule 41(b), Fed. R. App. P.). /2/ On remand, TECA remanded the case to the district court for further proceedings. Mobil Oil Corp. v. Tully, 689 F.2d 186, 187 (1982). The suit was settled before the district court entered any further orders (No. 80-CV-543 (N.D.N.Y.)). /3/ In its decision in Tully, TECA had ruled that state regulation of gasoline prices was preempted during the period after President Reagan lifted all controls but before his authority to impose them expired (Mobil Oil Corp. v. Tully, 653 F.2d 497, 502 (1981), vacated and remanded, 455 U.S. 245 (1982)). TECA ruled that, since the President had exercised his statutory authority to lift regulation, state control of prices was inconsistent with the President's decision (Tully, 653 F.2d at 502). TECA nevertheless appeared to recognize that all the ongoing legal effects of the EPAA, including preemption, would terminate when the President's regulatory power ended: "When the statute expires in September 1981, it will signal the end of federal concern in this area" (ibid.). As noted above (see pp. 7-8, supra), this Court later endorsed that conclusion, saying (455 U.S. at 247) that since expiration "the only barrier to the enforcement of (an inconsistent state regulation) no longer exists." /4/ TECA asserted (Pet. App. 11a) that this Court's discussion in Tully probably was dictum. But that is wrong: the Court vacated TECA's judgment because the district court's injunction extended beyond September 30, 1981, after which the EPAA no longer provided a basis for barring state regulation (see 455 U.S. at 246-247). However, although the statement in Tully was necessary to the Court's disposition, the case had not been briefed on the merits and the effect of the expiration of federal regulatory authority does not appear to have been raised explicitly by the parties. /5/ Congress evidently throught that the EPAA would be of no further general effect after September 30, 1981, because it added a savings clause to Section 18 preserving "any action or pending proceedings, administrative, civil, or criminal, not finally determined on (the expiration date)" and "any administrative, civil, or criminal action or proceeding, whether or not pending, based upon any act committed or liability incurred prior to such expiration date" (15 U.S.C. 760g). The general rule is that when a temporary law expires the act "by its own terms be(comes) a dead letter" (Burke v. Barnes, No. 85-781 (Jan. 14, 1987), slip op. 3). Savings clauses are necessary to escape the common law rule under which it is "well settled, that an offence against a temporary act cannot be punished after the expiration of the expiration of the act, unless a particular provision be made by law for the purpose" (The Irresistible, 20 U.S. (7 Wheat.) 551, 552 (1822) (Marshall, C.J.)). /6/ Indeed, the phrase TECA quoted from the Senate Conference Report -- "return to an unregulated market" -- implies the elimination of federal controls only. As noted at p. 4, supra, Puerto Rico was free to, and did, impose price controls on gasoline in the pre-EPAA era to which Congress sought to "return." /7/ Controls over prices to be charged within their territories are, of course, a traditional form of state regulation. See, e.g., Munn v. Illinois, 94 U.S. 113, 125 (1876). /8/ When Congress repeals a federal law that has preemptive effect, or provides that such a law will expire, it can, of course, also provide that state and territorial law will continue to be preempted even after substantive federal control has been lifted. But Transco does not authorize a court to presume that a repealing statute has that effect when Congress does not say so. /9/ In discussing the legislative history of the EPCA, TECA said that its enactment "evidence(d) Congressional recognition of the continuing necessity for a strong national policy on energy" (Pet. App. 14a), without distinguishing between Title IV of the EPCA, which amends the EPAA, and the other titles, which frame a national energy policy. The court of appeals thus implied, at least, that it may have thought that those other titles have the same effect as the continuing regulatory structure that was dispositive in Transco. We do not, however, understand TECA to have relied on any statute other than the EPAA in finding preemption. As that court knows well (see Pet. App. 4a-6a, 14a), its jurisdiction is limited to the EPAA and the ESA (see n.1, supra).