Anderson v. Dyco Petroleum Corp., 61637
| Decision Date | 10 October 1989 |
| Docket Number | No. 61637,61637 |
| Citation | 1989 OK 132,782 P.2d 1367 |
| Parties | Robert G. ANDERSON, Elizabeth G. Anderson, Commonwealth Royalties, Inc., Joseph F. Mueller, Agent for Joseph Fred Muller, Jr., Catherine Elizabeth Mueller, Virginia Marie Mueller and Ann Worden Mueller, Appellants, v. DYCO PETROLEUM CORPORATION, El Paso Natural Gas Company and Panhandle Eastern Pipe Line Company, Appellees. |
| Court | Oklahoma Supreme Court |
Appeal from the District Court of Roger Mills County; Gary P. McGinn, Trial Judge.
Appellants, owners of various percentages of the working interest in a natural gas well located in Roger Mills County sued another working interest owner, Dyco Petroleum Corporation and two gas purchasers, El Paso Natural Gas Company and Panhandle Eastern Pipe Line Company, who had been purchasing gas from the well from Dyco and other working interest owners. Appellants brought three causes of action for monetary relief: 1) a common law claim for conversion as to that percentage of gas asserted to be equal to their individual percentages in the working interest; 2) a claim pursuant to certain Oklahoma statutes, 52 O.S.1981, §§ 23, 24, 24.1, 233, 239 and 240, that the gas purchasers were required to purchase gas ratably from the various working interest owners in proportion to their interests in the well and the two gas purchasers failed to fulfill this obligation; and 3) a claim pursuant to 52 O.S.Supp.1983, §§ 541-547, that the gas purchasers were required to pay each working interest owner for gas purchased in proportion to their individual interests. In addition, Appellants claimed in the third cause pursuant to §§ 541-547 that Dyco was similarly required to pay them for gas sold and although required, it had refused to allow them to ratify agreement(s) between Dyco and the gas purchasers for sale of the well's gas. Upon motion for summary judgment of Appellee, Panhandle, the trial court ruled it was without subject matter jurisdiction over the causes of action in relation to Panhandle. It ruled the causes against it were preempted by force of the Supremacy Clause to the United States Constitution [U.S. CONST. art. VI, cl. 2] because of the existence of two federal enactments [the Natural Gas Act, 15 U.S.C. § 717 et seq. and the Natural Gas Policy Act, 15 U.S.C. § 3301 et seq.] which contain regulations relating to the natural gas industry, particularly interstate pipeline companies, of which Panhandle is one. The causes of action were dismissed as to Panhandle and judgment was rendered in its favor. Held: The dismissal of Panhandle from the case is upheld for reasons which do not require reaching the federal preemption issue deemed dispositive by the trial court. Dismissal was appropriate as to the first cause of action because under the material facts as to which there is no genuine dispute Appellants have no common law claim for conversion against Panhandle. As to the second cause Appellants have no claim because the statutes relied on either do not apply to mandate "ratable" purchasing of working interest owners' proportionate share of gas in one well, but rather to purchasing patterns in relation to multiple wells in a common source of supply or between sources of supply or they do not apply to regulate purchasing of natural gas at all, but to the transportation or production thereof. Finally, Appellants have abandoned or waived any issue or error concerning the trial court's ruling as to §§ 541-547 relied on in their third cause by their failure to present any argument or authority in relation to those provisions in their briefs submitted to this Court.
Ira L. Edwards, Jr., Houston and Klein, Inc., Tulsa, and James M. Tisdale, Cornell, Wright & Tisdale, Clinton, for appellants.
Burck Bailey, Eric S. Eissenstat, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, for appellee Panhandle Eastern Pipe Line Co.
James M. Gaitis, Emery McCandles & Gaitis, P.C., Oklahoma City, for appellee El Paso Natural Gas Co.
This appeal arises from a grant of summary judgment in favor of Appellee, Panhandle Eastern Pipe Line Company, one of three defendants sued by Appellants, a group of working interest owners in the Yowell No. 1-26 natural gas well located in Roger Mills County. Panhandle is an interstate pipeline company that purchases natural gas and transports it through a pipeline system in interstate commerce. Other defendants in the trial court were El Paso Natural Gas Company and Dyco Petroleum Corporation. 1 Appellants alleged in their petition that Panhandle and El Paso were purchasing natural gas from the Yowell No. 1-26 well from Dyco (alleged to be the owner of approximately 47% of the working interest) and other working interest owners. The gist of Appellant's three causes of action was that they are entitled to be paid in proportion to their respective working interests in the well for the gas purchased by Panhandle and El Paso, but that none of the defendants paid them. The first cause alleged by Appellants sounded in tort for conversion of their respective proportionate share of gas. The second was for violation of certain Oklahoma statutes referred to by the parties as "ratable" take statutes. Appellants assert such provisions require Panhandle and El Paso to take gas from all working interest owners in proportion to their respective interests and pay for it accordingly. 2 The third cause was brought pursuant to 52 O.S. Supp.1983, §§ 541-547 which would allow working interest owners in a well the opportunity to ratify any agreement to sell gas entered into by another working interest owner and a purchaser under certain guidelines and to be paid in proportion to their interest. Appellants asserted that Dyco would not allow them to ratify the agreements it and other working interest owners had with El Paso and Panhandle and that none of the defendants had paid them in proportion to their interests in the well.
After filing an answer to the petition Panhandle submitted a motion for summary judgment arguing the trial court lacked subject matter jurisdiction over the causes of action. It took the position that neither the legislative or judicial power of the State of Oklahoma could be invoked, whether by statute, Oklahoma Corporation Commission regulation or court action, to require an interstate pipeline company to purchase gas from any particular producer because via the Supremacy Clause to the United States Constitution (U.S. CONST. art VI, cl. 2) all such state authority was preempted by the operation of two related federal statutory schemes, the Natural Gas Act, 15 U.S.C. §§ 717 et seq. and the Natural Gas Policy Act, 15 U.S.C. §§ 3301 et seq. In essence, Panhandle argues the United States Constitution would be violated if Appellants were allowed to recover under either their conversion or statutory claims and to the extent the state statutes relied on by Appellants provide a viable avenue under state law to allow such a result they are unconstitutional.
Submitted with Panhandle's motion was an affidavit from their in-house counsel. The affidavit set forth its position as a natural gas company and owner/operator of a pipeline system that purchases gas from producers, transports it in interstate commerce and sells it to various concerns along the pipeline. The affidavit indicated that any requirement to purchase uncommitted interests in wells connected to its pipelines would affect the overall price mix of all gas it purchased. It argued that because it was under certain contractual obligations, commonly referred to as "take or pay", to either accept delivery of contract quantities of gas from producers or pay producers for any deficiency in receipt of deliveries below the contract quantities, if it was required to purchase additional gas from working interest owners in positions like Appellants (i.e. those without contracts with Panhandle) or to pay them in proportion to their working interests for gas purchased under these contracts, these "take or pay" provisions might be activated because additional gas was not needed to supply the demand of its customers. 3
In support of its preemption argument Panhandle places heavy reliance on two United States Supreme Court cases it says are dispositive of the instant controversy. These cases are Northern Natural Gas Co. v. State Corporation Commission of Kansas, 372 U.S. 84, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963) and Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Board of Mississippi, 474 U.S. 409, 106 S.Ct. 709, 88 L.Ed.2d 732 (1986). The two cases held that state regulations requiring interstate purchasers like Panhandle to take or purchase gas ratably from producers are preempted by federal regulatory power over interstate pipelines' costs and purchasing patterns exercised by the Federal Energy Regulatory Commission or FERC. Northern Natural was decided under the provisions of the Natural Gas Act of 1938 which empowered the Federal Power Commission (FERC's predecessor) to set price ceilings for sales from producers to pipelines and to regulate the prices pipelines could charge their downstream customers. Transcontinental involved a determination of whether the ruling of Northern Natural survived passage of the Natural Gas Policy Act of 1978 which removed some of the federal controls contained in the Natural Gas Act and to a greater extent left the field of buying and selling natural gas to the market forces of supply and demand. 4 In the present case Panhandle argues that to subject it to lawsuits and potential liability, either monetary or in the form of requiring it to purchase gas from producers with which it has no contractual obligation, puts it in the same situation as that of the pipeline companies involved in Northern Natural and Transcontinental and, thus, Appellants' causes of action are likewise preempted. The trial court agreed and granted summary judgment in favor of Panhandle on the basis it lacked...
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