Cities Service Gas Co. v. State Corp. Commission

• Decision Date: 11 May 1968
• Docket Number: No. 44931,44931
• Citation: 440 P.2d 660,201 Kan. 223
• Parties: CITIES SERVICE GAS COMPANY, a corporation, Northern Natural Gas Company, a corporation, Natural Gas Pipeline Company of America, a corporation, Appellees, v. STATE CORPORATION COMMISSION of Kansas, William L. Mitchell, Chairman, James O. Greenleaf and Harry G. Wiles, as members of said Commission, and their respective successors in office, Appellant.
• Court: Kansas Supreme Court

Page 660

440 P.2d 660

201 Kan. 223

CITIES SERVICE GAS COMPANY, a corporation, Northern Natural Gas Company, a corporation, Natural Gas Pipeline Company of America, a corporation, Appellees, v. STATE CORPORATION COMMISSION of Kansas, William L. Mitchell Chairman, James O. Greenleaf and Harry G. Wiles as members of said Commission, and their respective successors in office, Appellant.

No. 44931.

Supreme Court of Kansas.

May 11, 1968.

Rehearing Denied July 12, 1968.

Syllabus by the Court

1. Rules adopted by the State Corporation Commission to assist it to define the public interest and to serve the citizens of the state by prescribing orderly practice

and procedure relating to all proceedings before it, carry out the policy declared by the Legislature, and have the force and effect of law. Following Kansas Public Service Co. v. State Corporation Commission, 199 Kan. 736, 433 P.2d 572.

2. In the constitutional division of powers, the regulation of public utilities is legislative in nature, and the Legislature enacted the Public Utility Act to carry out that function.

3. Where legislative power is delegated subject to a condition, it is a requirement of constitutional government that the conditions be fulfilled. In the absence of such fulfillment, there is no official action-only the vain show of it.

4. There is no known method of insuring against arbitrary action, but the nearest approach to it is to require that findings of fact be made, and when a conclusion is buttressed by adequate basic findings of fact for which there is supporting evidence, arbitrary action becomes more difficult to conceal.

5. As construed and applied by this court, our Public Utility Act (K.S.A. 66-101 et seq.) imposes a specific requirement that the findings conditioning action by the commission be stated in basic findings of fact and stated there expressly.

6. The provisions of K.S.A. 66-118k are construed and applied and it is held: they must be considered within the context of established administrative procedure incorporated in our system of judicial review by the Public Utility Act, and the Legislature did not intend by enactment of the statute to abrogate established principles of administrative law, but rather, intended to supplement them.

7. Rules of procedure relating to the judicial review of an administrative order issued by the State Corporation Commission are stated and applied.

8. In the absence of basic findings of fact necessary to support an order of the State Corporation Commission relating to intrastate sales of natural gas directly from the facilities of an interstate natural gas pipe-line company to industrial consumers within the state, the district court lacks authority to examine the evidence in order to resolve opposing contentions or to spell out in its own findings of fact and state its conclusions of law as the record might permit.

9. The order issued by the State Corporation Commission on April 28, 1965, is examined, and held to be in violation of Rule No. 82-1-232(a), promulgated by the State Corporation Commission and filed with the Revisor of Statutes pursuant to K.S.A. 1965 Supp., 77-415 et seq., in that it failed to contain a summary of the evidence introduced by the appellees and contained no basic findings of fact upon which the commission relied to govern its determination and which persuaded it to arrive at its decision that the appellees were subject to its regulatory jurisdiction, and such order is void, and the district court erred in failing to so conclude and to transmit its judgment to the commission.

Ray E. Cooley, Topeka, and Rex L. Culley, Russell, argued the cause, and E. Edward Johnson, Topeka, was with them on the brief for appellant.

Daniel R. Hopkins, Oklahoma City, Okl., argued the cause, and Charles V. Wheeler, Conrad C. Mount, Oklahoma City, Okl., and Mark H. Adams and Mark H. Adams II, Wichita, were with him on the brief for appellee Cities Service Gas Co.

Mark H. Adams, Wichita, argued the cause, and F. Vinson Roach, Jack C. Osborne and John Will, Omaha, Neb., and Charles E. Jones, Wm. I. Robinson, J. Ashford Manka, Clifford L. Malone, Mark H. Adams II, John S. Seeber, Floyd E. Jensen, Philip L. Bowman, Robert Hall and Joe Rolston, Wichita, were with him on the brief for appellee Northern Natural Gas Co.

Dean E. Peterson, Chicago, Ill., argued the cause, and Charles C. McDugald, Chicago, Ill., and Mark H. Adams and Mark H. Adams II, Wichita, were with him on FATZER, Justice.

the brief for appellee Natural Gas Pipeline Co. of America.

This court is asked by the State Corporation Commission to review an order issued on April 28, 1965, by which the commission asserted jurisdiction over all interstate natural gas pipeline companies operating within Kansas which make direct mainline sales of natural gas to Kansas industrial consumers from their facilities located within the state. The district court held the order to be invalid and void and directed that it be set aside. The commission has appealed.

The proceeding out of which this appeal arises was commenced on January 21, 1964, Docket No. 73, 100-U, by the commission's issuance of its 'Show Cause Order' directing the following named interstate natural gas pipeline companies operating within the state of Kansas: Cities Service Gas Company (Cities Service), Oklahoma City, Oklahoma; Colorado Interstate Gas Company (Colorado Interstate), Colorado Springs, Colorado; Kansas-Colorado Utilities, Inc. (Kansas-Colorado), Colorado Springs, Colorado; Michigan-Wisconsin Pipe Line Company (Michigan-Wisconsin), Detroit, Michigan; Natural Gas Pipeline Company of America (Natural Gas), Chicago, Illinois; Panhandle Eastern Pipeline Company (Panhandle), Kansas City, Missouri; Zenith Gas System, Inc. (Zenith), Alva, Oklahoma, and Northern Natural Gas Company (Northern Natural), Omaha, Nebraska, to appear before the commission on March 16, 1964, and show cause (a) why they should not be required to obtain a certificate of convenience and encessity from the commission; (b) why they should not be required to file with the commission, rate tariffs on charges made for intrastate sales of natural gas to their mainline industrial customers in Kansas, and (c) why their intrastate operations in Kansas should not be subject to the jurisdiction of the commission pursuant to the provisions of 66-104, General Statutes of Kansas, 1961 Supplement (now K.S.A. 66-104.)

On March 16, 1964, all of the natural gas pipeline companies, except Zenith, appeared before the commission as ordered. Zenith informed the commission by letter that it would abide by its ultimate ruling. Prior to that date, petitions to intervene in the docket hearing were filed by Gas Service Company (Gas Service), Kansas City, Missouri; The Department of Defense and other executive agencies of the United States by the Judge Advocate General, and Arkansas-Louisiana Gas Company (Ark-La), Shreveport, Louisiana, which were granted by the commission.

At the commencement of the hearing, Cities Service filed a special appearance and a motion to dismiss the show cause order upon the grounds that K.S.A. 66-104, as interpreted and applied in State ex rel. Fatzer v. Sinclair Pipe Line Co., 180 Kan. 425, 304 P.2d 930, did not authorize the commission to assume jurisdiction of Cities Service either as a public utility or common carrier. The special appearance and motion to dismiss were taken under advisement by the commission and following a pretrial conference, the hearing was continued until December 21, 1964.

Testimony and documentary evidence was presented to the commission on December 21, and 22, 1964, and January 5, 1965, by Cities Service, Colorado Interstate, Northern-Natural, Natural Gas, and Panhandle, and the record was closed. Motions were made by Michigan-Wisconsin and Kansas-Colorado requesting the commission dismiss them from further appearance in the proceeding, which were overruled. The commission took the matter under advisement, and on April 28, 1965, it adopted the following minute which reads:

'WHEREUPON, IT WAS MOVED, SECONDED AND CARRIED: That an Order be issued declaring the direct sales that are exempt under the Natural Gas Act made by interstate gas pipelines in the State of Kansas are a public utility function and as such are subject to the jurisdiction of the Kansas Corporation Commission.'

The commission's order of April 28, 1965, herein involved, was based thereon and, omitting the caption and the signature of the members of the commission, reads:

'STATEMENT OF CASE

'This matter is before the Commission on a Show-Cause Order issued by the Commission, dated January 21, 1964, directing all interstate gas pipeline companies operating within the State of Kansas to show cause why said pipeline companies should not be required to obtain a Certificate of Public Convenience and Necessity from the Commission; to show cause why they should not be required to file with the Commission rate tariffs on charges made for intrastate sales to their mainline industrial customers in Kansas; and to show cause why their intrastate operations in Kansas should not be subject to the jurisdiction of such Commission pursuant to the provisions of Section 66-104, Kansas Statutes Annotated.

'After pre-hearing conferences, the respondent pipeline companies appeared, presented evidence and were examined at hearings in the Commission's hearing room in Topeka, Kansas, on December 21 and 22, 1964, and on January 5, 1965, after which the record in this docket was closed.'

'ISSUES BEFORE THE COMMISSION

'The issues before the Commission are whether or not the direct sales of interstate pipelines to industrial customers within the state of Kansas is a public utility function within the statutory definition of a public utility under Section 66-104, K.S.A. and does the Commission have authority and jurisdiction under Section 66-101, K.S.A. to supervise and control such public utility...