Texoma Natural Gas Co. v. Railroad Commission of Texas

• Decision Date: 08 June 1932
• Docket Number: No. 412-415.,412-415.
• Citation: 59 F.2d 750
• Parties: TEXOMA NATURAL GAS CO. v. RAILROAD COMMISSION OF TEXAS et al. and three other cases.
• Court: U.S. District Court — Western District of Texas

59 F.2d 750 (1932)

TEXOMA NATURAL GAS CO.

v.

RAILROAD COMMISSION OF TEXAS et al. and three other cases.

Nos. 412-415.

District Court, W. D. Texas, Austin Division.

June 8, 1932.

Baker, Botts, Andrews & Wharton and Andrews, Streetman, Logue & Mobley, all of Houston, Tex., Black & Graves, of Austin, Tex., and J. J. Hendrick, of Chicago, Ill., for complainant Texoma Natural Gas Co.

Phillips, Trammell, Chizum, Price & Estes, of Fort Worth, Tex., James W. Finley and R. E. Cullison, both of Bartlesville, Okl., Robert S. Sloan and Frueauff, Robinson & Sloan, all of New York City, for complainant Cities Service Gas Co.

Morgan, Culton, Morgan & Britain, of Amarillo, Tex., and Black & Graves, of Austin, Tex., for complainant North American Oil & Gas Co.

Vinson, Elkins, Sweeton & Weems, of Houston, Tex., Madden, Adkins, Pipkin & Keffer, of Amarillo, Tex., and Black & Graves, of Austin, Tex., for complainant Panhandle Eastern Pipe Line Co.

James V. Allred, Atty. Gen., Fred Upchurch and Maurice Cheek, Asst. Attys. Gen., and Robert E. Hardwicke, Sp. Counsel, of Fort Worth, Tex., for defendants.

Before HUTCHESON, Circuit Judge, and WEST and BRYANT, District Judges.

WEST, District Judge.

The enforcement of an act of the Legislature is restrained, on plaintiffs' petitions, as in violation of the Federal Constitution, awaiting consideration of a three-judge court on prayers for interlocutory injunctions. USCA, tit. 28, § 380. The court so constituted sits in hearing. The cases are consolidated. The required diversity of citizenship of the parties and values of matters in controversy are apparent, and the jurisdiction of the court is not questioned. The Common Purchaser Act, regulating oil and gas pipe lines, was passed by the Forty-Second Legislature of Texas, First Called Session, p. 58, c. 28 (Vernon's Ann. Civ. St. art. 6049a), July 14 to August 12, 1931. The relevant portions follow:

"See. 8a. That in order to further conserve the natural gas resources of this State every person, association of persons, joint stock company, limited co-partnership, partnership, corporation, gas pipe line company or gas purchaser now, or hereafter, claiming or exercising the right to carry or transport natural gas by pipe line, or pipe lines, for hire, compensation or otherwise within the limits of this State, or which is now engaged or shall hereafter engage in the business of purchasing, or taking, natural gas, or residue gas or casinghead gas shall be a common purchaser thereof, and shall purchase, or take, such gas under such rules or regulations as may be prescribed by the Commission, in the same manner, under the same inhibitions against discriminations and subject to the same provisions as are herein set out with respect to common purchasers of oil.

"Sec. 8aa. In addition to persons enumerated in Section 8, hereof, any and all other persons, association of persons, or corporations, operating any pipe line, which may now, or hereafter, purchase crude oil, petroleum, or natural gas in this State, whether they be common carriers or affiliated with common carriers or not, shall be a common purchaser of such crude oil, petroleum or natural gas, and shall purchase crude oil, petroleum or natural gas, offered it for purchase without discrimination in favor of one producer or person as against another as provided in Section 8 hereof."

The common purchaser of gas, as defined, includes persons, associations, partnerships, corporations, pipe lines or purchasers, claiming or exercising the right to transport gas by pipe lines for hire, compensation, or otherwise, thus embracing common and private pipe line carriers of gas, whether purchasers or not. The common purchasers are required to take gas under regulations prescribed by the Railroad Commission.

Penalties for violation of the act or of any rule or regulation of the commission include penalties ranging from $100 minimum to $1,000 for each offense, every day constituting a separate offense; providing that one-half of penalty recovered because of discrimination is to be devoted to the use of the discriminatee, who may also sue on his own account, for damages. The permit of the corporation common purchaser to do business in the state may be canceled at the suit of the Attorney General. The Railroad Commission may require reasonable extensions of lines; mandatory injunction is authorized to compel extensions. Suits are authorized to prevent discrimination between royalty owners and landowners in purchases or for unreasonably delaying payment for gas purchased.

The plaintiffs allege that they are nonresident corporations, authorized to do business in this state, engaged in transporting gas through pipe lines from Texas to markets in other states; that they own and control the gas areas from which their gas is produced from their own wells; then taken into their pipe lines and delivered, under the requirements of contracts previously made, to distributors and ultimate consumers in states named other than Texas; that they are not purchasers of gas, and that their lines are not being used to transport gas for others; that they have not exercised, and do not exercise, the right of eminent domain, nor hold themselves out as common carriers of gas for hire, nor does the public make use of their lines to transport gas; that the reserves of gas owned and controlled by them are sufficient to supply the demand of existing contracts for the present and future; and that the maximum capacities of their gas lines are employed in the deliveries of gas in other states; that to compel them to conform to the requirements of the statute and to the rules of the Railroad Commission will be to deprive them of their property without due process of law, contrary to the Fourteenth Amendment of the Constitution. The plaintiffs also allege that the act questioned seriously interferes with and burdens interstate commerce, contrary to section 8, art. 1, of the Constitution of the United States; and impairs the obligations of lawful contracts existing prior to the passage of the act and deprives them of their property rights therein, contrary to section 10, art. 1, of said Constitution, and contrary to section 16, art. 1, of the Constitution of the state of Texas.

Plaintiffs allege that producers in the same field, with the approval of the Railroad Commission, have made formal demands of plaintiffs, accompanied by tenders and offers to sell definite quantities of gas, that they purchase the gas offered as required by the terms of the act. The producers also demand that plaintiffs extend their pipe lines to serve areas owned by the demanding producers in the same field who are without market outlet. They pray for temporary restraining orders, interlocutory and permanent injunctions.

The defendants allege that plaintiffs' business is affected by the public interest; that the purpose of the act is to require pipe line producers to share their market outlets with other producers in the same field; that they intend to enforce the act and the rules made pursuant thereto; and admit that demands have been made on plaintiffs by producers in the same field to purchase gas offered for sale, as alleged.

On verified pleadings, affidavits, documents, records, maps, and oral testimony, we find the following facts:

The plaintiffs are all Delaware corporations, authorized to transact business in Texas. Their several businesses are substantially the same. They own or control, by stock ownership, leases, or other contracts, gas areas approximating 600,000 acres in the Panhandle of Texas (being the extreme northern part of Texas, bounded north and east by Oklahoma, and west by New Mexico). The defendants in each case are the members of the Railroad Commission of Texas, the Attorney General and the Governor, all residents and citizens of the state. The plaintiffs severally own, operate, and control gas pipe line systems that carry the gas produced from their several separate areas to distributing companies, in states other than Texas. The particular field supplying gas to these lines has been roughly outlined by producing wells as approximating an area in the Panhandle 100 miles long by 15 in width, about 1,500 square miles, estimated to contain sufficient gas to supply ten million people for fifteen or twenty years.

The plaintiff Texoma Company and affiliated companies, after several years of effort and the expenditure of many millions of dollars, secured reserves of gas in place, perfected their transport system, and made definite contracts to supply Northern Illinois, the Chicago districts, and intermediate territory. This company produces its own gas from wells from its own leases within the particular field mentioned. The gas moves continuously from intake into its pipe lines in Texas, thence by affiliated companies' lines to consumers in Illinois and intermediate states. Like methods of sources of supply and of carrying gas by pipe lines in compliance with existing contracts are used by plaintiff Cities Service Gas Company and subsidiary companies, to reach market demands of dense populations of states other than Texas, these results likewise requiring an outlay of millions of dollars. The plaintiffs North American Oil & Gas Company and Panhandle Eastern Pipe-Line Company, under like conditions, have each acquired control of gas areas in the Panhandle, made contracts to market their products in distant states, constructed lines and contracted with other lines for continuous movement to consumers out of Texas into and through other states, which also required a capital outlay of millions. The several properties are operated in carrying out contracts entered into before the passage of the act, which requires the transport of gas by pipe lines from the points of intake on lands owned or controlled by the several plaintiffs within this state to delivery points in other states named in the bills. That the plaintiffs are...