Northern Natural Gas Company v. Grounds, No. 307-69 to 322-69
| Citation | 441 F.2d 704 |
| Decision Date | 20 May 1971 |
| Docket Number | 361-69 to 402-69 and 486-69 to 515-69.,No. 307-69 to 322-69 |
| Parties | (Consolidated Helium Cases) NORTHERN NATURAL GAS COMPANY et al. (Helex Group), Appellees and Cross-Appellants, v. Ralph GROUNDS, Henry Hitch, et al. (Landowners), Appellants and Cross-Appellees, and Socony Mobil Oil Co., Inc. (Mobil Oil Corporation substituted) et al. (Lessee-Producers), Appellants and Cross-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Wayne Coulson and Dale M. Stuckey, Wichita, Kan., for landowners. With them on the brief were Bernard E. Nordling, Leland E. Nordling, Hugoton, Kan., Gene Stipe, Richard L. Gossett, McAlester, Okl., Leo Winters, Hooker, Okl., and W. A. McWilliams, Oklahoma City, Okl., for landowners; Donald I. Mitchell, Wichita, Kan., for Federal Land Bank; and of counsel were Kramer, Nordling & Nordling, Hugoton, Kan., Fleeson, Gooing, Coulson & Kitch, Wichita, Kan., and Stipe, Gossett & Stipe, Oklahoma City, Okl.
Richard Jones, Wichita, Kan., James B. Diggs, Oklahoma City, Okl., Gerald Sawatzky and George C. Spradling, Wichita, Kan., for lessee-producers. With them on the brief were Arloe W. Mayne, G. Fred Charles, Ashland, Ky., J. M. O'Loughlin, Oklahoma City, Okl., and Stanley G. Andeel, Witchita, Kan., for Ashland Oil & Refining Co.; William C. Charlton, Abilene, Tex., and Stanley G. Andeel, Wichita, Kan., for Cabot Corp.; Cecil C. Cammack, Alfred O. Holl, Roy Z. Johnson, R. O. Mason, Bartlesville, Okl., and Stanford J. Smith, Wichita, Kan., for Cities Service Oil Co.; Stanley G. Andeel, Wichita, Kan., for Dorchester Gas Producing Co.; William F. Pielsticker, Wichita, Kan., for Gulf Oil Corp.; William R. Horkey, Leon C. Gavras, Tulsa, Okl., and Stanley G. Andeel, Wichita, Kan., for Helmerich & Payne, Inc.; Charles B. Wallace, Donald G. Canuteson and William H. Tabb, Dallas, Tex., for Mobil Oil Corp.; H. O. Hickman and R. H. Landt, Ft. Worth, Tex., for Pan American Petroleum Corp.; H. A. Berry, W. M. Sutton, W. E. Notestine, Amarillo, Tex., and George B. Collins, Wichita, Kan., for Diamond Shamrock Corp.; Murray Christian and R. T. Robberson, Houston, Tex., for The Superior Oil Co.; Eugene G. Bell, Tulsa, Okl., for Mapco Production Co.; Philip R. Wimbish, Elmer W. Adams, Tulsa, Okl., and Stanley G. Andeel, Wichita, Kan., for Texaco, Inc.; and of counsel were Foulston, Siefkin, Powers & Eberhardt, Wichita, Kan., for Ashland Oil & Refining Co., Cabot Corp., Dorchester Gas Producing Co., Helmerich & Payne, Inc., and Texaco, Inc., Hershberger, Patterson, Jones & Thompson, Wichita, Kan., for Mapco Production Co., Mobil Oil Corp., and The Superior Oil Co., Holliman, Mason & Maddux, Bartlesville, Okl., for Cities Service Oil Co., Lilleston, Spradling, Gott, Stallwitz & Hope, Wichita, Kan., for Pan American Petroleum Corp., and Underwood, Wilson, Sutton, Heare & Berry, Amarillo, Tex., for The Diamond-Shamrock Corp.
Emmet A. Blaes, Wichita, Kan., Richard B. McDermott, Tulsa, Okl., William S. Richardson, Kansas City, Mo., and Mark H. Adams, II, Wichita, Kan., for the Helex group. With them on the brief were Jack W. Wertz, George E. Peabody, Oklahoma City, Okl., and Mark H. Adams of Adams, Jones, Robinson & Manka, Wichita, Kan., for Cities Service Gas Co.; Mark H. Adams of Adams, Jones, Robinson & Manka, for Cities Service Cryogenics, Inc. and Cities Service Helex, Inc.; William J. Zeman, Lloyd G. Minter, Kenneth Heady, Bartlesville, Okl., and Boesche, McDermott & Eskridge, Tulsa, Okl., for Phillips Petroleum Co.; Jochems, Sargent & Blaes, Wichita, Kan., Wendell J. Doggett, Kansas City, Mo., and William L. Robertson, Indianapolis, Ind., for National Helium Corp. and Panhandle Eastern Pipe Line Co.; F. Vinson Roach, Patrick J. McCarthy, Omaha, Neb., and Mark H. Adams of Adams, Jones, Robinson & Manka, Wichita, Kan., for Northern Natural Gas Co., Northern Helex Co., and Northern Gas Products Co.
Floyd L. France, Washington, D. C., for the United States. With him on the brief were Shiro Kashiwa, Asst. Atty. Gen., Bernard V. Borst, Asst. U. S. Atty., and S. Billingsley Hill, Atty., Dept. of Justice.
Before BREITENSTEIN, SETH and McWILLIAMS, Circuit Judges.
Helium, a rare element found as a component of natural gas, has become in the last 20 years increasingly important to national defense, science and industry. Through scientific and technical advances this inert and noncombustible gas, which was formerly wasted at the burner tips of gas appliances, now has great value. Congress recognized the need for helium by the Helium Act Amendments of 1960, Pub. L. 86-777, 74 Stat. 918, 50 U.S.C. § 167 et seq., which provide for a helium conservation program, with private participation, under the control of the Bureau of Mines, an agency of the Department of the Interior.
The natural gas fields of the Hugoton area in Western Kansas and the Oklahoma and Texas panhandles contain 99% of the nation's recoverable supply of helium. The landowners gave the leases under which the helium-bearing gas is obtained from the earth. The lessee-producers drilled the wells, produced the gas, and sold it to interstate pipelines which are under the jurisdiction of the Federal Power Commission. Affiliates and subsidiaries of the pipelines, the Helex group, separate helium from other gaseous components and sell the mixture to the United States. The Bureau of Mines stores the helium mixture and refines it to 99.99% pure helium for sale to government agencies and private industry. The basic issue is whether the landowners and the lessee-producers can receive benefit from the value of the helium. The trial court rejected all claims of the landowners and lessee-producers to the helium and gave judgment for the Helex group and the United States. See Northern Natural Gas Company v. Grounds, D.Kan., 292 F.Supp. 619. We reverse. In our opinion the Helex companies must account to the lessee-producers for the reasonable value of the helium contained in the processed gas and the lessee-producers must pay royalty on such value to the landowners.
Six of the eight actions which were consolidated for trial are in the nature of interpleader. The fund in each 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. Four of the cases were brought by Cities Service Gas Company, a pipeline. One was brought by Northern Natural Gas Company, a pipeline, and its subsidiary Northern Helex Company. In each of these five cases the defendants are named landowners and named lessee-producers in each instance as representatives of a class. The sixth interpleader was brought by National Helium Corporation which is owned in equal shares by Panhandle Eastern Pipe Line Company and National Chemical and Distillers Company. The defendants are Panhandle Eastern and named landowners as representatives of a class. Pursuant to a third-party complaint by Panhandle Eastern, named lessee-producers were brought in as representatives of a class. Motions to dismiss the interpleaders on jurisdictional grounds were denied by the trial court and we affirmed. Grounds v. Northern Natural Gas Company, 10 Cir., 327 F.2d 1003.
The remaining two actions were brought by named landowners, as representatives of their class, against the United States. One is under the Federal Tort Claims Act, see 28 U.S.C. §§ 1346(b), 1402, and 2674, on the theory of conversion, and the other under the Tucker Act, see 28 U.S.C. § 1346(a) (2), on the theory of reverse condemnation.
All eight actions were maintained in the district court as class actions under Rule 23, F.R.Civ.P. One class is the landowners and the other is the lessee-producers. The district court held that the actions were properly maintainable as class actions. See 292 F.Supp. 619, 633-637. On these appeals no question is raised as to the propriety of the district court treatment of the cases as class actions.
After consolidation, there were extensive discovery proceedings, a definitive pre-trial order, and a 43-day trial limited to the question of liability. The trial court made full and detailed findings of fact which are found at 292 F.Supp. 619. For the sake of brevity in this opinion, we repeat only those facts which we deem necessary for understanding of the case and disposition of the issues. It is enough to say that we find no material dispute as to the determinative facts. The controversy is over the conclusions to be drawn from those facts and the application of the law thereto.
Helium is a colorless, odorless, and tasteless gas which, in the present state of scientific knowledge, will not react chemically or physically with any other element, except under laboratory conditions. The generally accepted theory is that helium is formed by radioactive disintegration within the earth and migrates to the same reservoir traps as do other gases. Through eons of time it has commingled with, and become diffused with, natural gas hydrocarbons which were formed from organic materials of ages past. Helium is noncombustible. It is the second lightest element found on earth, next to hydrogen which is highly combustible. Helium does not liquefy at standard atmospheric pressure until it reaches -452.1 degrees Fahrenheit, almost absolute zero and lower than any other gas.
Helium was first discovered in the spectrum of sunlight in 1868. Sometime in the 1890's helium was found on the earth. In 1905, helium was discovered in gas from a well at Dexter, Kansas. Helium remained a laboratory curiosity until 1918 when the United States began commercial extraction of helium from gas produced in the Petrolia Field of Texas for use in military balloons and blimps during World War I.1
Before 1960, with minor exceptions, the production and marketing of helium was accomplished by the Bureau of Mines pursuant to the Helium Act of 1925, 43 Stat. 1110. Until...
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