282 F. 341 (W.D.Mo. 1922), 361, State of Missouri v. Kansas Natural Gas Co.

Docket Nº:361.
Citation:282 F. 341
Party Name:STATE OF MISSOURI ex rel. BARRETT, Atty. Gen., et al. v. KANSAS NATURAL GAS CO. (KANSAS CITY GAS CO., Intervener).
Case Date:June 30, 1922
Court:United States District Courts, 8th Circuit, Western District of Missouri

Page 341

282 F. 341 (W.D.Mo. 1922)

STATE OF MISSOURI ex rel. BARRETT, Atty. Gen., et al.



No. 361.

United States District Court, W.D. Missouri, Western Division.

June 30, 1922

Page 342

Jesse W. Barrett, Atty. Gen., and R. Perry Spencer, Gen. Counsel, and James D. Lindsay, Asst. Gen. Counsel of Public Service Commission, both of Jefferson City, Mo., for complainant.

H. O. Caster and R. D. Garver, both of Bartlesville, Okl., and Richard J. Higgins, of Kansas City, Kan., for defendant.

J. W. Dana, of Kansas City, Mo., for intervener.

VAN VALKENBURGH, District Judge.

Complainant, the state of Missouri, at the relation of the Attorney General of the state, and the Public Service Commission of the state, filed a bill of complaint against the Kansas Natural Gas Company, praying a permanent injunction against said company, to restrain it from increasing the price of gas sold by it to local distributing companies in the state, to the extent of 5 cents per 1,000 cubic feet, over the rates heretofore in effect, without first procuring the consent and approval of the Public Service Commission. Such increase of 5 cents per 1,000 cubic feet, the Kansas Natural Gas Company has informed the distributing companies, would be effective after the so-called April meter readings of 1922. The Kansas Natural Gas Company also advised the distributing companies that, unless they complied with the rates announced and fixed by them, they would discontinue supplying gas to the distributing companies. The Kansas City Gas Company, which purchases gas from the Kansas Natural and distributes such gas so purchased at Kansas City, filed its intervening petition herein and asked, among other things, the same relief as that prayed by complainant.

The defendant filed answers to the bill of complaint and the intervening bill, in which answers it asserts that it is engaged in the transportation of gas from the state of Oklahoma, into and through the state of Kansas, and into the state of Missouri; that such gas is sold by it in Kansas and Missouri; and that therefore its business is interstate commerce, and as such is free from the regulation herein sought to be imposed. The three parties, complainant, intervener, and defendant, have executed and filed an agreed statement of facts, which is supplemented by evidence of a documentary nature, introduced by complainant and intervener. The facts thus established, in so far as they may be necessary to a decision of the points in controversy, are hereinafter sufficiently disclosed. Upon the record thus made, the cause is presented for final hearing upon the application for permanent injunction against the Kansas Natural Gas Company from raising its rate 5 cents per 1,000 cubic feet at the gates of the cities, on the ground that the company has submitted itself, either directly or impliedly, to the jurisdiction of the Public Service Commission, and that it has no right to raise that rate without first applying to the commission, and then only subject to its orders, with a right to review the commission's findings, on the ground that the same are confiscatory and unreasonable.

The whole question has been submitted to the court upon one proposition; i.e., the power of the commission respecting this application. The cases chiefly relied upon are the Langdon Case and the so-called Pennsylvania Case, in 249 U.S.at page 236, 39 Sup.Ct. 268, 63 L.Ed.

Page 343

577, and 252 U.S.at page 23, 40 Sup.Ct. 279, 64 L.Ed. 434. The Langdon Case concerned itself entirely with the question of whether the right existed in the receivers of the Kansas Natural Gas Company to enjoin the utilities commissions and the municipalities from interfering with a raise of rates by a local distributing company; that was the real issue in that case. The Supreme Court had occasion to advert to some other principles involved, and the case becomes important, principally from that standpoint. The court said that the transportation and sale of gas through pipe lines from one state to another is interstate commerce, and that as a part of such commerce the receivers might sell and deliver gas so transported to local distributing companies, 'free from unreasonable interference by the state;' they were under no compulsion to accept an unremunerative price.

It has been stated and shown, with respect to those conditional contracts, that conditions have been so materially changed that it is at least a matter of doubt, if not conclusively established, that those contracts as such are no longer binding as to the terms imposed by them.

Some question is raised here as to what is meant by the expression 'free from unreasonable interference by the state. ' In the Pennsylvania Gas Case, the court had to do with the gas company as a distributing agent. There gas was distributed directly to the consumers in different cities and localities therein mentioned, by the pipe line company, and the court held that when that was the situation the company came under the regulating power of the state, because what was done was a local intrastate business, and not interstate commerce, to which reference had been made in the Langdon Case, and they had occasion to differentiate the Langdon Case from the Pennsylvania Case, which was then before the court, and it is not without significance that, in deciding a question which came clearly within the local power, control, and regulation of the state, it should have been thought necessary by the Supreme Court to point out the difference existing between the different classes of commerce, interstate as against intrastate. The court says:

'We think that the transmission and sale of natural gas produced in one state, transported by means of pipe lines and directly furnished to consumers in another state, is interstate commerce within the principles of the cases already determined by this court.'

So we are left with no doubt as to the fact that this conclusively establishes that the transportation of natural gas from one state to another is interstate commerce, and that far we have no difficulty in reaching a final conclusion.

The court further said:

'The general principle is well established, and often asserted, that the state may not directly regulate or burden interstate commerce. That subject, so far as legislative regulation is concerned, has been committed by the Constitution to the control of the federal Congress. But, while admitting this general principle, it, like others of a general nature, is subject to qualifications not inconsistent with the general rule, which now are as well established as the principle itself. * * * In varying forms, this subject has frequently been before this court. The previous cases were fully reviewed and deductions made therefrom in the Minnesota Rate Cases, 230 U.S. 352.'

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Now, it is significant that the court places the application of this principle upon the same basis as in the case of railroad regulation and transportation; so that we may have some light thrown upon the question by referring to the principles applicable to such cases. The Minnesota Rate Cases, 230 U.S. 352, 33 Sup.Ct. 729, 57 L.Ed. 1511, 48 L.R.A. (N.S.) 1151, Ann. Cas. 1916A, 18, of course, very exhaustively clear up the entire subject, and it is unnecessary to go to any other decided cases, in order to learn what the principles involved are, and to learn where the line of demarcation falls. After stating the limitations, it was said in the Minnesota Rate Cases, 230 U.S. 402, 33 Sup.Ct. 741, 57 L.Ed. 1511, 48 L.R.A. (N.S.) 1151, Ann. Cas. 1916A, 18:

'But within these limitations there necessarily remains to the states, until Congress acts, a wide range for the permissible exercise of power appropriate to their territorial jurisdiction, although interstate commerce may be affected. It extends to those matters of a local nature as to which it is impossible to derive from the constitutional grant an intention that they should go uncontrolled pending federal intervention. Thus there are certain subjects, having the most obvious and direct relation to interstate commerce, which nevertheless, with the acquiescence of Congress, have been controlled by state legislation from the foundation of the government, because of the necessity that they should not remain unregulated and that their regulation should be adapted to varying local exigencies; hence the absence of regulation by Congress in such matters has not imported that there should be no restriction, but rather that the states should continue to supply the needed rules until Congress should decide to supersede them. Further, it is competent for a state to govern its internal commerce, to provide local...

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