Railroad Commission of Texas v. City of Austin

Decision Date05 March 1975
Docket NumberNo. B--4843,B--4843
Citation524 S.W.2d 262
CourtTexas Supreme Court
PartiesRAILROAD COMMISSION OF TEXAS et al., Petitioners, v. CITY OF AUSTIN et al., Respondents.

John L. Hill, Atty. Gen., Rex White, Jr., Asst. Atty. Gen., Austin, Burford, Ryburn & Ford, Frank M. Ryburn, Jr., Erle Nye, Dallas, Cantey, Hanger, Gooch, Cravens & Munn, Cecil E. Munn, Fort Worth, Clark, Thomas, Harris, Denius & Winters, Barr McClellan, Austin, Ira Butler, Fort Worth, Worsham, Forsythe & Sampels, Jos. Irion Worsham, Dallas, Bullock & Scott, Tom R. Scott, Midland, Clyde A. Mote, Houston, Graves, Dougherty, Hearon, Moody & Garwood, Dan Moody, Jr., Austin, Bracewell & Patterson, William Key Wilde and Charles G. King, III, Liddell, Sapp, Zivley & Brown, W. Robert Brown, Houston, Keys, Russell, Watson & Seaman, William H. Keys, Corpus Christi, Butler, Binion, Rice, Cook & Knapp, Frank J. Knapp, Louis B. Paine, Jr., and Thomas W. Houghton, Houston, Head & Kendrick, Hayden W. Head, Jr., Corpus Christi, for petitioners.

Don R. Butler, City Atty., George K. Elbrecht, Asst City Atty., Austin, Matthews, Nowlin, Macfarlane & Barrett, W. L. Matthews, Jon C. Wood and Dick Terrell Brown, San Antonio, Small, Craig & Werkenthin, C. C. Small, Jr., and Lawrence S. Smith, Austin, for respondents.

GREENHILL, Chief Justice.

This case concerns the powers of the Texas Railroad Commission to regulate gas utilities and how it may exercise its powers. The primary source of its jurisdiction for such purposes comes from a statute enacted in 1920 which is known as the Cox Act. 1 In order to ascertain legislative intent and to put the provisions of the statute in context, the Cox Act will be discussed herein, along with the construction it has heretofore received by this Court. It will be noted at the outset that there was, and is, no statutory provision which prohibited the sale of gas reserves, or rights in gas reserves; and there is no self-enacting provision requiring the prior approval by the Commission of the sale or assignment of gas reserves or rights therein. 2 And at the time of the transactions here in question, the Railroad Commission had promulgated no rule requiring its prior approval of the sale of gas reserves by a gas utility.

Broadly speaking, the Cities of Austin and San Antonio, and the Lower Colorado River Authority (LCRA), in Docket Number 510 of the Commission, called upon the Commission to suspend indefinitely the delivery of gas which flowed in pipelines owned or associated with Lo-Vaca Gathering Company, herein called Lo-Vaca, and to reallocate the supply of gas which had been sold or assigned under contracts executed by Lo-Vaca or its parent company, Coastal States Gas Producing Company, before the Commission had made any rules or regulations relative thereto. As will be discussed, the Commission dismissed the application of the City of Austin et al without prejudice. It stated that it had no jurisdiction to determine the title to the gas, and it announced on the same day its Docket Number 520. In Docket 520, the Commission announced that it considered it its duty to apportion gas among cities, towns and corporations on a statewide basis. It thereupon called a statewide hearing to determine if the available gas supply in Texas could be apportioned on a voluntary basis; and if not whether there was a need for a mandatory statewide apportionment program.

Thereupon, Austin, San Antonio and the LCRA filed suit in a district court of Travis County against the Commission. The Commission's position, set out below, is amplified by the allegations of the intervenors which came into the case in support of the Commission's position. Among the intervenors are the Texas Utilities Fuel Co., called herein TUFCO, Dallas Power & Light Co., Texas Electric Service Co., and the Texas Power & Light Co. TUFCO and its affiliates serve some 323 municipalities and some 4 million people of Texas with gas or electrical energy produced by gas. Many cities served by TUFCO have submitted briefs in this Court resisting the power of the Commission to allocate, or take away, gas which they say would affect their energy supplies. These include Dallas, Fort Worth, Bonham, Denison, Hillsboro, Tyler, Lufkin, Nacogdoches, Corsicana, Midland, Odessa, Sweetwater, Brownwood, Waco, Temple, and Taylor.

Also intervening were several industrial users including American Smelting, DuPont, Dow Chemical, Clajon Inc., El Paso Natural Gas, Southwestern Refining, and Amoco Gas Company, all of whom put into evidence contracts with Lo-Vaca entered into between 1969 and 1972, which they contended that the Commission had no power to set aside.

The Railroad Commission was of the view that the Commission was without power or jurisdiction to determine the title to the gas under contracts between Lo-Vaca and TUFCO, and between Lo-Vaca and the industrial users. They also took the position that the Cox Act did not authorize the Commission to take such action or to promulgate retroactive rules which would set aside contracts under which gas reserves, or rights to gas, were sold, and to suspend indefinitely the delivery of gas under those contracts. The Commission Did assert the power under the Cox Act to regulate and apportion 'Lo-Vaca's' gas. It had already undertaken to do so.

On June 21, 1973, after a public hearing, the Commission entered an order establishing curtailment priorities and directed that 'neither Lo-Vaca nor Coastal States nor subsidiaries nor affiliates shall make any new sales or spot sales during the period of this Order.' In July of 1973, the Commission, relying upon Article 6063, filed suit against Lo-Vaca in the District Court of Travis County, Texas, 200th Judicial District, asking for appointment of a receiver for Lo-Vaca. No receivership was granted, but pursuant to an Agreed Judgment entered July 17, 1973, the Judge of the 200th Judicial District selected and maintains an independent Board of Directors for Lo-Vaca which operates that company in accordance with the 'plan' set out in the Agreed Judgment.

The Commission and the Petitioners also pointed to the pendency of a suit in the district court in Harris County (Houston) attacking in court the legality of the same contracts which Austin, San Antonio and the LCRA desired to be 'reviewed' by the Commission. The Harris County suit is Pennzoil Pipe Line Co. v. Coastal States. Pennzoil there contends that the Lo-Vaca contracts were void or voidable because they were illegal (discriminatory) and should be set aside. Thereupon, it is alleged, the gas would then be Lo-vaca's; and the Commission would have power under the Cox Act to allocate and apportion such gas among Lo-Vaca's customers. Pennzoil also contends that in equity, TUFCO and the other parties should be treated as 'customers' of Lo-Vaca, and that the court should declare the rights of the parties in a declaratory judgment. The Commission, in its Docket Number 510, was of the view that the Court (as contrasted with the Commission) could and would determine title to the gas and the rights under the gas contracts between TUFCO and others.

The district court in Travis County in this case disagreed. It held that the Commission had the power, jurisdiction, and duty under the Cox Act to go behind the contracts with TUFCO and others. The court also held that by necessary implication the Commission had the power and duty to allocate, or reallocate, the supply of gas flowing in any pipeline of Lo-Vaca regardless of who owns the gas, notwithstanding the fact that Austin, San Antonio and the LCRA concede that the Commission has no power to determine the title to the gas. The Court of Civil Appeals affirmed. 512 S.W.2d 345. Our judgment is that for the reasons set out below the Commission did not err in dismissing without prejudice its Docket 510.

The Court recognizes the importance of the case. For that reason, we have reviewed the status of the Commission itself and some of the powers and duties which it has,--and which it does not have. And, in order to arrive at what we regard at the powers granted to the Commission by the Legislature, we review below the Legislature's entry into the field of gas utility regulation. As stated, the principal legislative action most relevant here is the Cox Act. In an attempt to arrive at a correct understanding of the powers which were, and which were not, granted by the Legislature to the Commission in the Cox Act, it is considered appropriate to review the history of the statutes, as well as the particular words used, the generative forces which led to the enactment of the statute, events surrounding its enactment, the problems they were designed to remedy, and the construction given by this Court to the legislative acts. 3 The Legislature has met many times since the cases set out below were decided. Whether it acquiesced in the decisions or not is not for us to say; but the statutes have not been substantially changed to evidence a different legislative intent. It is now in session; and, within constitutional limitations, it may amend its acts, or enact new statutes, to deal with matters of public policy in the regulation of natural gas and the powers of the Commission.


In the early days of this State, the Legislature itself attempted to regulate railroad companies and their rates. Its efforts were not successful. Attorney General James S. Hogg, later Governor, undertook the leadership to bring effective regulations to that industry. A constitutional amendment was adopted in 1890 which, in effect, called upon the Legislature to pass laws 'to correct abuses and prevent unjust discrimination and extortion' in rates. To accomplish these purposes, the Legislature was authorized in Article X, Section 2, Vernon's Ann.St., to 'provide and establish all requisite means And agencies' as may be necessary. That Section authorized the Legislature to...

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