Natural Gas Pipe Line Co. of America v. Panoma Corp.

1953 OK 241, 271 P.2d 354, 3 Oil & Gas Rep. 1092, 5 P.U.R.3d 210, 1953 Okla. LEXIS 686
CourtSupreme Court of Oklahoma
DecidedSeptember 15, 1953
Docket35203
StatusPublished
Cited by9 cases

This text of 1953 OK 241 (Natural Gas Pipe Line Co. of America v. Panoma Corp.) 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
Natural Gas Pipe Line Co. of America v. Panoma Corp., 1953 OK 241, 271 P.2d 354, 3 Oil & Gas Rep. 1092, 5 P.U.R.3d 210, 1953 Okla. LEXIS 686 (Okla. 1953).

Opinions

WELCH, Justice.

The Panoma Corporation owns extensive oil and gas leases in the Guymon-Hugoton gas field in Texas County, Oklahoma. Gas in large quantities is taken therefrom daily pursuant to a contract between Panoma and The Natural Gas Pipeline Company of America.

This contract was made and this gas taking began before the State Corporation Commission by its orders Nos. 19514 and 19515 fixed the price at not less than 7‡ per thousand cubic feet at the wellhead for all natural gas taken from the producing structures or formations of said gas field.

Those orders were upheld by the Supreme Court of Oklahoma and by the Supreme Court of the United States in 1950. Cities Service Gas Co. v. Peerless Oil & Gas Co., 203 Okl. 35, 220 P.2d 279; Cities Service Gas Co. v. Peerless Oil & Gas Co., Corpo[357]*357ration Commission of Oklahoma, 340 U.S. 179, 71 S.Ct. 215, 95 L.Ed. 190. Thus, since the effective date of the aforesaid orders, January, 1947, no one could legally take natural gas from that field at a price less than 7‡ at the wellhead.

The authority of the State in the exercise of its police power to regulate the taking of natural gas is well settled. See Julian Oil & Royalties Co. v. Capshaw, 1930, 145 Okl. 237, 292 P. 841; Wilcox Oil & Gas Co. v. State, 1933, 162 Okl. 89, 19 P.2d 347, 86 A.L.R. 421; Sterling Refining Co. v. Walker, 1933, 165 Okl. 45, 25 P.2d 312; Russell v. Walker, 1932, 160 Okl. 145, 15 P.2d 114; Patterson v. Stanolind Oil & Gas Co., 1938, 182 Okl. 155, 77 P.2d 83, appeal dismissed 305 U.S. 376, 59 S.Ct. 259, 83 L.Ed. 231; Croxton v. State, 1939, 186 Okl. 249, 97 P.2d 11; Denver Producing & Refining Co. v. State, 1947, 199 Okl. 171, 184 P.2d 961; Quinton Relief Oil & Gas Co. v. Corp. Comm. of Oklahoma, 1924, 101 Okl. 164, 224 P. 156, and Cities Service Gas Co. v. Peerless Oil & Gas Co., 1950, 203 Okl. 35, 220 P.2d 279.

The contracted price Natural was to pay Panoma for gas taken under the contract was less than 7‡, but the contract was definitely subject to any valid order of the Corporation Commission. The contract in Article Fourteenth provided that:

“This contract is subject to present and future valid laws and present and future lawful orders of all regulatory bodies now or hereafter having jurisdiction over the parties; and should at any time during the term of this contract either party, by force of any such law or regulation imposed, be ordered or required to do any act inconsistent with the provisions of this contract, the contract shall, subject to the other provisions hereof, continue nevertheless, but shall then be deemed modified to conform with the requirements of such law or regulation.”

See, also, the following language of this court in State ex rel. Roth v. Waterfield, 167 Okl. 209, 214, 29 P.2d 24, 29:

“Thus it may be seen that changes in the obligations of contracts may be made when made as a proper exercise of the police power, not because constitutions may be suspended by police power, but because the right to legislate in the exercise of that power is a part of the existing law of the state at the time of the execution of the contract, and as such enters into the terms and provisions of the contract in the same manner that statutes prescribing procedure become a part of the contract.
“It may be said that all property rights including contracts are subject to the proper exercise of the police power, and in that respect it is often said that individual rights to property being subject to the exercise of this power are qualified as distinguished from absolute.”

See, also, Home Building & Loan Ass’n v. Blaisdell, 1933, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413.

So in 1951, after the aforesaid Price Order of Commission had been fully sustained, Panoma, after demand, made this application to Commission to require Natural to comply with said order to pay a wellhead price of 7‡ for gas taken and to be taken by Natural from Panoma’s leases in said field in Texas County.

Natural responded, in substance, that by reason of the terms of the contract Commission’s price order was not applicable to the gas taken by Natural; and that if proper analysis be made there was no violation of the price order in the taking of gas from this field by Panoma and Natural because such taking under the contract resulted in an aggregate or gross return to Panoma equal to a wellhead price of 7‡ or more.

Upon trial Commission made its findings and entered its order. Commission found, among other things, 1, that since the effective date of the price order January 1, 1947, no one could legally take gas from this field at a price less than 7‡ per thousand cubic feet; 2, that the uncertainty as to the finality of that order, created by the appeal therefrom to the Supreme Court of Oklahoma, and the Supreme Court of the United States, justified Panoma in delivering gas from these leases to Natural without regard [358]*358to said price order, or at less than the minimum price under the contract until said order was finally affirmed; 3, that nevertheless the taking of gas from the structure and formation in these leases at a price less than 7‡ at the wellhead was illegal; 4, that Natural should pay to Panoma the difference between the lesser amount actually paid for gas taken before June 1st, 1951, and the sum or price due at 7‡ for each thousand cubic feet; 5, that the actual amount of gas so taken from the leases was stipulated and was determined in accordance with such stipulation; 6, that therefore Natural should in twenty days pay the sum due Panoma; 7, that strict enforcement of the price order was necessary for the prevention of waste; 8, that the contract between Panoma and Natural could not impair or defeat the effect of the order; 9, that the acceptance of the contract contention would cause and invite discrimination and general breakdown of the regulation preventing waste, etc.

Commission ordered in effect that Natural should pay for all gas received on and after January 1, 1951, at the sum and rate of 7‡ per thousand cubic feet at the wellhead. Commission further ordered that Natural should pay to Panoma a “back-pay” sum sufficient to equal 7‡ per thousand cubic feet for all gas taken by Natural prior to January 1, 1951, at a lesser price.

Commission further ordered that if Natural should fail after 20 days to pay such “back-pay” sum to Panoma, or should fail to pay as much as 7‡ wellhead price for gas taken after January 1st, 1951, that Panoma should cease any delivery of gas to Natural.

On this appeal Natural contends as upon its response below, with the further contention that Commission’s “back-pay” order has the effect of a money judgment which Commission was not authorized to enter.

Natural’s contention that Commission’s price order was not applicable to the gas taken by Natural was based on Natural’s construction of the contract to be a purchase of only a part of the natural gas taken from Panoma’s leases.

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Natural Gas Pipe Line Co. of America v. Panoma Corp.
1953 OK 241 (Supreme Court of Oklahoma, 1953)

Cite This Page — Counsel Stack

Bluebook (online)
1953 OK 241, 271 P.2d 354, 3 Oil & Gas Rep. 1092, 5 P.U.R.3d 210, 1953 Okla. LEXIS 686, Counsel Stack Legal Research, https://law.counselstack.com/opinion/natural-gas-pipe-line-co-of-america-v-panoma-corp-okla-1953.