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Panama Refining Company v. Ryan

Facts of the Case

Provided by Oyez

In 1933, the President issued Executive Order 6199 via the National Industrial Recovery Act (NIRA). The order prohibited transporting petroleum and petroleum products in interstate and foreign commerce if they had been produced in excess of the amounts permitted by states. Panama Refining Co. operated an oil refinery and sought an injunction against enforcing the regulations that were created under the NIRA. It succeeded in the lower court, but the intermediate appellate court removed the injunction. 

Questions

  1. Was the executive order regulating petroleum commerce constitutional?

Conclusions

  1. Writing for the 8-1 majority, Chief Justice Charles E. Hughes concluded the order was not constitutional. Supreme Court held that in enacting the order, the President subsumed legislative powers that Congress does not have the power to delegate. Congress cannot delegate legislative powers to other branches of government in order to sustain the democratic system of government. When it allows the executive branch to make rules, Congress must provide policies and standards for formulating them. This was not the case in the regulation of oil transportation. The lack of any limits on executive discretion concerned the Court and rendered the order unconstitutional. 

    In a dissenting opinion, Justice Benjamin Cardozo argued that there were enough standards to guide the President’s actions so that the delegation of power is constitutional. The President was essentially enforcing Congress’ goals of regulating interstate commerce to prevent unfair competition and the misuse of resources. He also argued that the elasticity of government is crucial for the government to continue to function when faced with new problems.

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