Panama Refining Co. v. Ryan

Supreme Court of the United States · 1935 · Administrative Law

293 U.S. 388 (1935)

Updated August 1, 2026

Administrative Lawnondelegationlegislative powerintelligible principleexecutive ordersNational Industrial Recovery ActSection 9(c)hot oil

Facts

Section 9(c) of Title I of the National Industrial Recovery Act authorized the President to prohibit the interstate and foreign transportation of petroleum and petroleum products produced or withdrawn from storage in excess of the amount permitted by state law or valid state regulation. Acting under that section, the President issued an executive order on July 11, 1933, prohibiting such transportation, and later authorized the Secretary of the Interior to enforce the prohibition and issue regulations. The Secretary then adopted regulations requiring producers, purchasers, shippers, and refiners to file sworn monthly reports and keep records available for inspection. The petitioners, including Panama Refining Company and Amazon Petroleum Corporation, sued federal officials to enjoin enforcement of § 9(c), the executive orders, and the regulations on constitutional grounds.

Issue

Whether § 9(c) of the National Industrial Recovery Act unconstitutionally delegated legislative power to the President by authorizing him to prohibit the interstate and foreign transportation of excess petroleum production without declaring a policy, setting a standard, or requiring findings to guide his action. A related issue was whether the executive orders and regulations issued under that section were therefore invalid.

Rule

Congress may not abdicate or transfer its essential legislative functions. It may authorize executive or administrative officers to make subordinate rules or determine facts only when Congress has declared a legislative policy, established a standard or rule to govern the delegate's action, and, where the exercise of authority depends on facts or conditions, required determinations sufficient to show that the action falls within the delegated authority.

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Congress enacts the Regional Timber Transport Act. One section authorizes the President to prohibit interstate shipment of lumber cut in excess of amounts allowed by state forestry rules, and makes violation of any presidential order a federal misdemeanor. The section gives no criteria for when the President should impose or withhold the ban.

If a lumber producer in Oregon challenges the section after the President issues a blanket prohibition, what is the strongest argument that the section is unconstitutional?

Explanation. The majority rule is that Congress may not transfer essential legislative power by giving the President unlimited discretion to decide whether a prohibition should exist. A valid delegation requires Congress to declare policy, establish a standard or rule, and, where action depends on facts or conditions, require determinations showing the action falls within the delegated authority. Here, the statute defines the subject but leaves the policy choice whether to ban shipments entirely to the President.