State Ex Rel. Fatzer v. Sinclair Pipe Line Co.

304 P.2d 930, 180 Kan. 425, 7 Oil & Gas Rep. 343, 17 P.U.R.3d 231, 1956 Kan. LEXIS 329
CourtSupreme Court of Kansas
DecidedDecember 8, 1956
Docket40,271
StatusPublished
Cited by14 cases

This text of 304 P.2d 930 (State Ex Rel. Fatzer v. Sinclair Pipe Line Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Ex Rel. Fatzer v. Sinclair Pipe Line Co., 304 P.2d 930, 180 Kan. 425, 7 Oil & Gas Rep. 343, 17 P.U.R.3d 231, 1956 Kan. LEXIS 329 (kan 1956).

Opinions

The opinion of the court was delivered by

Smith, C. J.:

This is an original action in mandamus by the state on the relation of the attorney general and the corporation commission. An alternative writ was issued. The four defendants filed motions to quash the writ. The cause was finally submitted on such motions pursuant to an order of this court.

The petition alleged various powers of the commission, among them the supervision of the disposition of franchises and properties and the termination of services and the fixing of rates and charges; that defendant Sinclair Pipe Line Company, which will be referred to herein as Pipe Line Company, was engaged in the transportation of petroleum products by pipe line within the state and was a public utility within the meaning of G. S. 1949, 55-501, 66-104 and 66-105, and among the pipe-line systems operated by it in the state was one from the vicinity of Wellsville to the vicinity of Humboldt, known as the Paola-Humboldt system, and one from Eureka to Humboldt, known as the Eureka-Humboldt (these will be referred to as the Paola and Eureka systems); that defendant Sinclair Crude Oil Company, which will be referred to herein as Crude Oil Company, had for its primary business the purchasing of crude oil, including the purchasing along the above two pipe-line systems; that both the above systems were controlled and under the domination of the Sinclair Oil Corporation, a holding company which owned all the stock of each.

The petition further alleged that the Producers Pipe Line Company (hereinafter referred to as Producers) did not produce oil but purchased and sold it and maintained pipe lines and was a [427]*427public utility within the meaning of G. S. 1949, 55-501, 66-104 and 66-105, and as such was within the jurisdiction, authority and control of the corporation commission; that defendant Boyer was instrumental in the incorporation of Producers and was a stockholder and was also engaged in trucking oil from the territory served by the two pipe lines and was jointly involved with the two pipe lines in the matters set forth. The petition alleged also that under order of a federal court of three judges, Boyer had been for several months trucking to Humboldt the crude oil available along the Eureka line, which prior to September 30, 1955, had been transported through the pipe-line system; that the Pipe Line Company was incorporated about November 9, 1950, and about that time it acquired the two pipe lines and also acquired a trunk line for transportation of oil from Humboldt to Illinois, where a refinery of the Sinclair Refining Company was located; that both the Paola and the Eureka had been used for over thirty-five years to transport the flush production of crude oil produced along the two systems; that the Pipe Line Company did not produce any oil but used the systems to transport oil purchased by other Sinclair companies from various producers; that each of the systems was used exclusively to transport oil produced in Kansas to Humboldt, and at Humboldt the oil was placed in tanks and then introduced into the pipe lines of the Pipe Line Company, which transported it to Sinclair’s consignees; that on April 22, 1953, the Sinclair Oil Corporation caused the Crude Oil Company to be incorporated and soon thereafter it began purchasing oil from producers along the Paola and Eureka systems; that prior to September 30, 1955, the oil purchased by the Crude Oil Company was transported by the Pipe Line Company from the leaseholders’ tank batteries to working tanks at Humboldt, all within the state of Kansas, and then placed in the trunk line of the Pipe Line Company for transportation to Sinclair consignees; that in the summer of 1955, the Pipe Line Company began negotiations for the sale of the two pipe-line systems lying wholly within the state of Kansas and as a result Producers was incorporated and thereafter entered into a contract to purchase the two pipe-line systems from Sinclair; that the Crude Oil Company joined Producers in negotiations for the sale of the two systems to Producers; that Producers agreed to pay the Pipe Line Company $275,000 for the two pipe-line systems and certain equipment and agreed to pay $80,000 for oil in the Paola fine at [428]*428the tíme it was to take place, also to pay $25,000 for other equipment; that $105,000 was to be paid at the time of transfer and the balance was to be paid at the rate of five cents per barrel for each barrel of oil delivered through the Paola line and arriving at Humboldt, so that the operators would actually pay the balance owing; that it was agreed Producers would only ship its own oil through the lines and it would be sold to the Crude Oil Company at Humboldt and Sinclair would pay ten cents per barrel above their posted price to Producers for the oil so delivered; that it was agreed no oil would be shipped through the Eureka line but Boyer would truck all the oil lying along that line and charge the leaseholders much in excess of the charge for carrying oil in the pipe-line system and it was agreed that the Eureka system would be salvaged and abandoned and a trucking system substituted at increased charge to producers; that Sinclair Crude Oil Company agreed to purchase oil from wells along either pipe line, which was first purchased and then transported by Boyer or Producers and the Pipe Line Company and Producers agreed not to transport any oil in the two systems unless it was oil purchased by the Crude Oil Company or its predecessors; that the Pipe Line Company agreed to transport such oil from Humboldt to the Sinclair refinery in Illinois; that by this plan the Crude Oil Company would continue to purchase the oil but would do so at Humboldt rather than at the lease level.

The petition then alleged that the Pipe Line Company prior to October 1,1955, refused to transport any oil in either system except that purchased by the Crude Oil Company and there was no practical way to transport oil produced along the two systems other than by such pipe lines; that by the acts described the Pipe Line Company and Crude Oil Company had established what amounted to a monopoly of the oil purchases in the territory; that there was no other qualified buyer of crude oil in the area who was in a position to buy the quantities of oil necessary for continued operation of the stripper wells in question and defendants by their mutual and joint arrangement had controlled the purchase, transportation, sale, hauling and indirectly the production of oil in the vicinity; that pursuant to the arrangement the Crude Oil Company served notice that after September 30, 1955, it would not purchase oil along the two pipe-line systems other than transported by Producers or Marvin E. Boyer; that defendants had planned to make the operation of the Eureka line appear unprofitable, when there actually [429]*429were 1,000 barrels a day available, much of which the Pipe Line Company had refused to accept for transportation and if it were accepted the line would be profitable.

The petition then alleged that following the execution of the agreement on or about September 14,1955, the Crude Oil Company gave written notice to producers along the two systems it would cease purchasing oil on September 30,1955, such notice being given sixteen days prior to its effective date, contrary to the custom in the oil fields to give thirty days’ notice in such cases and after such date the Crude Oil Company declined to buy oil along the two systems unless it was owned or transported by Producers or Boyer.

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State Ex Rel. Fatzer v. Sinclair Pipe Line Co.
304 P.2d 930 (Supreme Court of Kansas, 1956)

Cite This Page — Counsel Stack

Bluebook (online)
304 P.2d 930, 180 Kan. 425, 7 Oil & Gas Rep. 343, 17 P.U.R.3d 231, 1956 Kan. LEXIS 329, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-fatzer-v-sinclair-pipe-line-co-kan-1956.