Cities Service Gas Co. v. Peerless Oil & Gas Co.

1950 OK 4, 220 P.2d 279, 203 Okla. 35, 1950 Okla. LEXIS 512
CourtSupreme Court of Oklahoma
DecidedJanuary 17, 1950
Docket32994, 33006
StatusPublished
Cited by35 cases

This text of 1950 OK 4 (Cities Service Gas Co. v. Peerless Oil & Gas Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cities Service Gas Co. v. Peerless Oil & Gas Co., 1950 OK 4, 220 P.2d 279, 203 Okla. 35, 1950 Okla. LEXIS 512 (Okla. 1950).

Opinions

WELCH, J.

Peerless Oil & Gas Company, owner of a gas well and certain oil and gas leases on lands' located in the Guymon-Hugoton Gas Field in Texas county, filed with the Corporation Commission an application for an order requiring Cities Service Gas Company to connect its pipeline to the gas well and take and receive the natural flow of gas from the well ratably with its taking of gas from other wells of the field, and further that the Commission fix the price at which said gas should be taken and fix the price for all natural gas produced in the Guymon-Hugoton Gas Field in Oklahoma. Peerless alleged drainage by Cities Service and failure of agreement with Cities Service for the taking of gas from its well, and particularly a disagreement as to the price for the gas.

Cities Service filed answer admitting its ownership of a pipeline system and that it was taking gas from the field through its lines and stated an offer to take gas from the Peerless wells ratably with its taking of gas from other wells in the field and at the average price paid for gas in the field. Cities Service alleged a usage of its pipeline in the furtherance of a business of producing natural gas for transportation and sale in interstate commerce and asserted that the Corporation Commission was without power or authority to regulate its facility and business, and, particularly, to order the price and terms for taking or purchasing gas in the field.

After hearing of the Peerless application had commenced the Corporation Commission permitted the State of Oklahoma, on relation of the Commissioners of the Land Office, to file petition in intervention. The Land Office alleged ownership in trust for the state of a large acreage of land in the gas field and surrounding areas. It asserted that monopolistic price and arbitrary measurements for gas prevailed in the field, and was resulting in dissipation and exhaustion of gas from the common source of supply at a fraction of its intrinsic value, and that such taking was resulting in wanton economic waste. The Land Office prayed that the Corporation Commission fix a minimum price and a certain standard of measurement applicable to all gas in the field and to be applied upon its removal from the natural reservoir.

The Commission published notice of the time and place of a hearing to be held upon the Land Office petition, with invitation to all persons interested to appear and be heard. The notices were directed to certain named companies and to “all operators, purchasers, and takers of gas in Oklahoma, and particularly in Guymon-Hugoton Field in Texas County, Oklahoma.”

In the course of the proceeding a petition was filed requesting the Commission to fix a minimum price for gas in the field signed by several persons as royalty owners and under a designation as members of the Texas County Land and Royalty Owners’ Association.

The Commission, after the series of hearings above mentioned, and after hearing testimony from witnesses presented by Peerless, the Land Office, Cities Service, and the testimony of various other persons, entered a general order that on and after a certain future date, therein mentioned, “no natural gas shall be taken out of the producing structures or formations in the Guymon-Hugoton Field in Texas County, Oklahoma, at a price at the wellhead of less than 7c per thousand cubic feet of natural gas measured at a pressure of 14.65 pounds absolute pressure per square inch.” The Commission issued a further order to become effective on the same date directed to Cities Service ordering that Company to take gas from the Peerless wells ratably with its taking from other wells in the field and as ratable taking is prescribed in a certain former gen[38]*38eral order of the Commission, and that Cities Service pay the Peerless for the gas so taken not less than 7c per thous- and cubic feet wellhead price measured at a pressure of 14.16 pounds pressure per square inch.

Subsequent to the effective date of these orders Phillips Petroleum Company filed an application to vacate or modify the price fixing provision of the orders. After a hearing wherein evidence was introduced, the Commission entered an order denying the application to vacate.

Cities Service appeals from the two price-fixing orders. Phillips appeals from these orders and from the order denying its application to vacate.

During the pendency of the Peerless application, Peerless and Cities Service entered into an agreement for a ratable taking of gas from the Peerless wells by Cities Service, leaving unsettled the price to be paid for the gas.

The primary question presented in these appeals arises from the order of the Commission fixing a minimum price on natural gas in the field.

Cities Service presents argument under the following statements:

“1. No constitutional or statutory power is granted Commission, either expressly or by necessary implication, to fix by general order the price or other terms for taking or purchasing natural gas in the field.
“2. 52 O. S. 1941 §233, purporting to authorize Commission in case of dispute to fix price and other terms for taking or purchasing natural gas as between individual parties, is unconstitutional because:
(a) It sets forth no policy or standard to guide Commission in acting thereunder (Articles IV and V. Oklahoma Constitution):
(b) It violates the equal protection clause of the Federal Constitution (Section 1, Article XIV, U. S. Constitution);
and
(c)It violates the due process clauses of the Oklahoma and Federal Constitution (Section 7, Article II, and 14th Amendment; as well as Sections 2 and 23, Article II, Oklahoma Constitution, and Section 59, Article V, Oklahoma Constitution.)
“3. If this Court should hold Commission under existing law is either expressly or impliedly granted natural gas price-fixing powers under some conceivable circumstances, the same are unconstitutional as applied herein because :
(a) Price fixing has no reasonable relationship to waste, protection of correlative rights, or conservation of natural resources;
(b) It casts a burden on, impedes and impairs interstate commerce in violation of the commerce clause of the Federal Constitution (Clause 3, Section 8, Article 1);
and
(c) It denies Cities due process and the equal protection of the law (14th Amendment, Oklahoma Constitution).
“4. If this Court should hold Commission is under present laws granted constitutional or statutory price-fixing powers, then existing laws are not self-executing but require Commission, in advance of an attempt on its part to enforce the taking or purchasing of natural gas, to specify with clarity and particularity the elements constituting the basis of such taking or purchasing so as to enable the parties concerned to effectuate -fully and fairly a completed contract.
“5. If this Court should hold Commission is granted under present laws constitutional and statutory price-fixing powers and existing laws are self-executing, then Commission in exercising its authority thereunder is confined to ascertaining and applying the going or market price and other non-discriminatory equitable terms for taking or purchasing natural gas prevailing in the field.
“6.

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Bluebook (online)
1950 OK 4, 220 P.2d 279, 203 Okla. 35, 1950 Okla. LEXIS 512, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cities-service-gas-co-v-peerless-oil-gas-co-okla-1950.