Northern Natural Gas Company v. Grounds
| Decision Date | 14 October 1968 |
| Docket Number | W-3009,and W-3159.,KC-1980,KC-1946,Civ. A. No. KC-1969,KC-1948,KC-1945,KC-1947 |
| Citation | 292 F. Supp. 619 |
| Parties | NORTHERN NATURAL GAS COMPANY et al., Plaintiffs, v. Ralph GROUNDS, Henry Hitch et al., Defendants. |
| Court | U.S. District Court — District of Kansas |
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Arloe W. Mayne, G. Fred Charles, Ashland, Ky., J. M. O'Loughlin, Oklahoma City, Okl., Gerald Sawatzky Foulston, Siefkin, Powers, Smith & Eberhardt, Wichita, Kan., for Ashland Oil & Refining Co.
Roy Schaeffer Pampa, Tex., Gerald Sawatzky, Foulston, Siefkin, Powers, Smith & Eberhardt, Wichita, Kan., for Cabot Corp.
George Peabody, Oklahoma City, Okl., Mark H. Adams, Adams, Jones, Robinson & Manka, Wichita, Kan., for Cities Service Gas Co. and others.
R. O. Mason, George Conger, Bartlesville, Okl., P. K. Smith, Wichita, Kan., C. C. Cammack, Tulsa, Okl., for Cities Service Oil Co. and Columbian Fuel Corp.
William R. Horkey, Leon C. Gavras, Tulsa, Okl., Gerald Sawatzky, Foulston, Siefkin, Powers, Smith & Eberhardt, Wichita, Kan., for Helmerich & Payne, Inc.
Horace Ballaine, Tulsa, Okl., Richard Jones, Robert J. Roth, Hershberger, Patterson, Jones & Thompson, Wichita, Kan., for Hugoton Plains Gas & Oil and Mapco Production Co.
Charles B. Wallace, Donald G. Canuteson, William H. Tabb, Dallas, Tex., Richard Jones, Robert J. Roth, Hershberger, Patterson, Jones & Thompson, Wichita, Kan., Robert W. Richards, S. M. Groom, Jr., Oklahoma City, Okl., for Mobil Oil Corp.
Byron M. Gray, Topeka, Kan., G. R. Redding, Baker & Daniels, Indianapolis, Ind., for National Helium Corp.
Gerald Sawatzky, Foulston, Siefkin, Powers, Smith & Eberhardt, Wichita, Kan., for Dorchester Gas Producing Co.
James B. Diggs, Oklahoma City, Okl., Wm. F. Pielsticker, Wichita, Kan., for Gulf Oil Corp.
Patrick J. McCarthy, Omaha, Neb., Cochran, Dudley, Fowler, Rucks, Baker & Jopling, Oklahoma City, Okl., Mark H. Adams, Adams, Jones, Robinson & Manka, Wichita, Kan., for Northern Natural Gas Co. and others.
J. K. Smith, R. H. Landt, Fort Worth, Tex., Norton Standeven, Oklahoma City, Okl., George C. Spradling, of Lilleston, Spradling, Gott, Stallwitz & Hope, Wichita, Kan., for Pan American Petroleum Corp.
William S. Richardson, Kansas City, Mo., William L. Robertson, Liberal, Kan., Jeff A. Robertson, Topeka, Kan., Emmet A. Blaes and Robert G. Braden, Jochems, Sargent & Blaes, Wichita, Kan., for Panhandle Eastern Pipe Line Co. and others.
Kenneth Heady, Bartlesville, Okl., Richard B. McDermott, Boesch, McDermott & Eskridge, Tulsa, Okl., Joseph Kennedy, Morris, Laing, Evans & Brock, Wichita, Kan., for Phillips Petroleum Co.
R. T. Robberson, Houston, Tex., Richard Jones, of Hershberger, Patterson, Jones & Thompson, Wichita, Kan., for Superior Oil Co.
Philip R. Wimbish, Elmer W. Adams, Tulsa, Okl., Gerald Sawatzky, of Foulston, Siefkin, Powers, Smith & Eberhardt, Wichita, Kan., for Texaco Inc.
Leo Winters, W. A. McWilliams, Oklahoma City, Okl., A. E. Kramer, Kramer, Nordling & Nordling, Hugoton, Kan., Dale M. Stucky, of Fleeson, Gooing, Coulson & Kitch, Harold R. Porter, Wichita, Kan., Gene Stipe and Richard L. Gossett, McAlester, Okl., for Landowners: Ralph Grounds, Henry Hitch, and others.
H. A. Berry, W. M. Sutton, W. E. Notestine, Amarillo, Tex., George B. Collins, of Collins & Collins, Wichita, Kan., for Shamrock Oil & Gas Corp.
Benjamin E. Franklin, U. S. Atty., Kansas City, Kan., Bernard V. Borst, Asst. U. S. Atty., Wichita, Kan., Floyd L. France, William H. Churchwell and Robert M. Perry, Dept. of Justice, Washington, D. C., for the United States.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
These eight consolidated civil actions come before the Court following a protracted trial for findings of fact and conclusions of law with respect to the issues relating to liability. Six of the cases are actions in the nature of interpleader. Two of the actions are for conversion and reverse condemnation.
All of these actions involve the ownership of helium1 contained in or extracted from natural gas2 and produced from wells drilled in the Chase Group of the Permian formation of the Hugoton gas area in Kansas, Oklahoma, and Texas. Helium-bearing natural gas is produced from these lands by producers operating under leases granted by landowners and other owners of mineral interests in these lands. This helium-bearing natural gas is then sold by these producers to pipeline companies, who, generally speaking, transport this gas for resale for industrial and consumer use throughout the mid-Continental United States. In the early 1960's pursuant to a helium conservation program approved by the Congress and implemented by the Bureau of Mines and the Department of Interior, four companies contracted to sell helium to the United States. The companies proposed to extract this helium from gas in helium processing plants built on or near large volume pipelines. The United States agreed to purchase from each company all the extracted helium up to a contract dollar maximum ranging from nine to 15 million dollars a year. From these purchases, the United States supplies its current demands, as well as builds a conserved supply in a Texas storage reservoir.
The fund involved in each interpleader suit is the money paid and to be paid by the United States to the interpleading plaintiffs for the helium-gas mixture produced and sold by them. The claimants to the fund may be grouped, generally speaking, into three classes, referred to collectively herein as the "land-owners," the "lessee-producers," and the "helex group," which includes the helium extraction and their parent pipeline companies. The landowners claim, in brief, that helium did not pass to their lessees under the oil and gas, or merely gas, leases by virtue of which natural gas has been and is being produced from their properties. The lessee-producers oppose this position, assert that helium did in fact pass under those leases, but that it passed no further, i. e., that it did not pass to the pipeline companies under the gas purchase contracts under which lessee-producers deliver natural gas from the lands in question. The helex group, comprising three pipeline companies and their subsidiary or parent companies, and Phillips Petroleum Company each assert that helium did in fact pass under the oil and gas leases to the lessee-producer, that it passed further, under the gas purchase contracts, and that it was theirs to separate out from the natural gas stream in their possession and sell to the United States. The United States concurs in this position.
In the course of our preparation of Findings of Fact and Conclusions of Law we have reviewed and disposed of the motions to which the parties have taken exception in the light of the evidence before us.
Identification of the parties to these actions and statement of their positions will clarify our views. The parties in the interpleader suits, KC-1945, KC-1946, KC-1947, KC-1948, KC-1969, and KC-1980 all claim ownership of or an interest in the interpleaded fund in the particular case.
KC-1945.
Cities Service Gas Company was the original interpleading plaintiff in Cases KC-1945, KC-1948. It was subsequently joined, however, by Cities Service Helex, Inc., and Cities Service Cryogenics, Inc., (formerly Cities Service Helium, Inc.), both wholly owned subsidiaries of Cities Service Company, which holds, also, upwards of 79 per cent of the stock of Cities Service Gas Company. These plaintiff corporations are organized under the laws of the State of Delaware and have principal places of business in Oklahoma.
It is necessary to state the contractual relationships between the three parties plaintiff. In brief, Cities Service Gas Company conveyed to Cities Service Helium by contract executed August 17, 1961, "for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable considerations" the right to all helium contained in gas purchased by it and gathered to a central point adjacent to its Grant County, Kansas compressor station, together with the right to extract such helium.3 Cities Service Helium in turn, by contract dated the following day, August 18, 1961, conveyed these helium rights to Cities Service Helex, Inc., which agreed to pay therefor 1.35 cents for each thousand cubic feet (Mcf) of gas delivered to Cities Service Helex for helium processing.4 Shortly thereafter, on August 22, 1961, Cities Service Helex contracted to sell helium to the United States.5
Cities Service Helex contracted with the Cities Service Gas Company, on September 11, 1961, for the purchase of gas required for operation of its helium extraction plant, and agreed to sell to the Cities Service Oil Company the crude liquid hydrocarbons recovered in the helium extraction process.6 Cities Service Gas Company is referred to as "Cities."
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