Home/Michigan Supreme Court/Michigan Consolidated Gas Co. v. Austin Township

Michigan Consolidated Gas Co. v. Austin Township

128 N.W.2d 491, 373 Mich. 123, 21 Oil & Gas Rep. 496, 1964 Mich. LEXIS 184
CourtMichigan Supreme Court
DecidedJune 1, 1964
DocketCalendar 64-66, Docket 50,364-50,366
StatusPublished
Cited by3 cases

This text of 128 N.W.2d 491 (Michigan Consolidated Gas Co. v. Austin Township) is published on Counsel Stack Legal Research, covering Michigan Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Michigan Consolidated Gas Co. v. Austin Township, 128 N.W.2d 491, 373 Mich. 123, 21 Oil & Gas Rep. 496, 1964 Mich. LEXIS 184 (Mich. 1964).

Opinion

Adams, J.

Plaintiff instituted actions against the defendant townships for the recovery of ad valorem personal property taxes imposed on natural gas located in the townships on December 31, 1960. The taxes were paid under protest. The chief ground of protest was that the tax is discriminatory and illegal because it is assessed upon natural gas which is in interstate commerce.

*127 The problem before the trial judge and before us on appeal is not to determine the applicable law —(there is no dispute as to the law) — but, rather, what the ultimate fact situation is from a considerable array of facts. The law was recently stated by the United States supreme court in Independent Warehouses, Inc., v. Scheele (1946), 331 US 70, 72, 73 (67 S Ct 1062, 91 L ed 1346):

“The governing principles were stated in Minnesota v. Blasius, 290 US 1, 9, 10 (54 S Ct 34, 78 L ed 131) as follows: * * *
“ ‘The States may not tax property in transit in interstate commerce. But, by reason of a break in the transit, the property may come to rest within a State and become subject to the power of the State to impose a nondiscriminatory property tax. Such an exertion of State power belongs to that class of cases in which, by virtue of the nature and importance of local concerns, the State may act until Congress, if it has paramount authority over the subject, substitutes its own regulations. The “crucial question,” in determining whether the State’s taxing power may thus be exerted, is that of “continuity of transit.” Carson Petroleum Co., v. Vial, 279 US 95, 101 (49 S Ct 292, 73 L ed 626). * * *
“ ‘If the interstate movement has begun, it may be regarded as continuing, so as to maintain the immunity of the property from State taxation, despite temporary interruptions due to the necessities of the journey or for the purpose of safety and convenience in the course of the movement. * * * Formalities, such as the forms of billing, and mere changes in the method of transportation do not affect the continuity of the transit. The question is always one of substance, and in each case it is necessary to consider the particular occasion or purpose of the interruption during which the tax is sought to be levied.’ ”

*128 Or appellees have stated the law as follows:

“The supreme court of the United States decisions clearly indicate that the power or jurisdiction of the State to tax turns upon whether or not the property constituting the subject of taxation has come to rest within the taxing jurisdiction for local business purposes. If it has, the authorities- unanimously uphold the jurisdiction of the States to tax. On the other hand, if the property is in transit in interstate commerce and there is no break in the transit, such property has not acquired a, taxable situs within the taxing jurisdiction for ad valorem property tax purposes.” (Emphasis supplied.)

Now, as to the facts, plaintiff is a Michigan corporation engaged as a public utility in the production, purchase, transportation, storage, distribution, and sale of natural gas. These activities are carried on in 7 separate districts in Michigan. It operates as a gas utility in the cities of Detroit, Grand Rapids, Muskegon, Ann Arbor, Mount Pleasant, Greenville, Bolding, Big Rapids, Ludington, Traverse City, Cadillac, and Sault Ste. Marie, and certain adjacent territory. It is the largest natural gas distributor in the State of Michigan with over 800,-000 customers and is engaged in the sale of natural gas to domestic, commercial, and industrial consumers in the above cities and approximately 160 additional municipalities.

Plaintiff’s business does not include the transportation of any natural gas either into or outside of Michigan. It carries on all of its activities and all its property is located within the State. It is subject to regulation by the Michigan public service commission except for its storage operations.

During the summertime the pipeline supply exceeds the Detroit market. The surplus gas is transported northward to the Six Lakes field. During the wintertime the Detroit market exceeds the sup *129 ply of pipeline gas and it is necessary that sufficient capacities be available from the Six Lakes field to supply the difference in the Detroit market. The winter market in Michigan is from 7 to 10 times that of the summer market. This situation was described by the plaintiff in a First Mortgage Bond Prospectus, dated May 23, 1961, reading in part as follows:

“The company owns a number of underground gas storage fields. * * * By storing gas in the summer for use during winter months, the company is able to deliver large volumes of gas in addition to the daily deliveries by its pipeline suppliers. As a consequence, maximum volumes of gas are made available for space heating and other firm uses which are the most remunerative and least affected by fluctuating economic conditions. * * * These storage fields also enable the company to purchase gas from its pipeline suppliers at the most favorable load factors, thus insuring the most advantageous rates.”

It will be noted from the map * appended to this opinion that plaintiff’s storage facilities are located in west central Michigan. Delivery of the gas is made to plaintiff in the Detroit area. The gas which is destined for storage is then transmitted through plaintiff’s pipelines in a northwesterly direction from Detroit to the storage fields. There it is stored until such time as there is a demand for it. It is then withdrawn from the fields either to supply local markets in west central Michigan or to supply the primary Detroit market in which case the gas is returned through the pipelines to the Detroit area.

The storage of gas in these underground gas storage fields may be defined as the storage in reservoirs of porous rock at various depths beneath the

*130

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Cite This Page — Counsel Stack

Bluebook (online)
128 N.W.2d 491, 373 Mich. 123, 21 Oil & Gas Rep. 496, 1964 Mich. LEXIS 184, Counsel Stack Legal Research, https://law.counselstack.com/opinion/michigan-consolidated-gas-co-v-austin-township-mich-1964.