United Fuel Co v. Public Service Commission of West Virginia

Decision Date02 January 1929
Docket NumberNo. 4,4
Citation73 L.Ed. 402,49 S.Ct. 157,278 U.S. 322
PartiesUNITED FUEL CO. v. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA et al. Re
CourtU.S. Supreme Court

Messrs. John W. Davis, of New York City, and Harold A. Ritz, of Charleston, W. Va., for appellants.

Messrs. Robert S. Spilman, of Charleston, W. Va., and George S. Wallace, of Huntington, W. Va., for appellee.

Mr. Justice STONE delivered the opinion of the Court.

Appellant is a west Virginia corporation engaged in producing natural gas which it sells in West Virginia Pennsylvania, Ohio, and Kentucky. A part of its business is the sale of gas at wholesale to distributors, and is not regulated by any public body. Another part is the sale of gas direct to consumers in West Virginia cities, and is subject to regulation by the appellee commission. In April, 1924, appellant filed with the commission a schedule increasing its rates in its 'regulated' business in West Virginia. The commission, after an extensive hearing, denied this application for an increase, holding that the existing schedule yielded a fair return on appellant's property. P. S. C. W. Va. Bulletin, 91. Appellant then sought, by the present suit in the District Court for the Southern District of West Virginia, an injunction restraining the commission from interfering with appellant in putting into effect its new and higher rate schedule. Application for a preliminary injunction was heard by a court of three judges upon the record before the commission and some additional testimony, and was denied. 14 F.(2d) 209. The case is here by direct appeal from the order of the District Court, under section 266 of the Judicial Code (28 USCA § 380).

An earlier proceeding before the commission in 1917 had resulted in its order for an increase in the rate of 5 cents per 1,000 cubic feet which, in 1923, was set aside by the Supreme Court of West Virginia. City of Charleston v. Public Service Commission, 95 W. Va. 91, 120 S. E. 398. A similar case, United Fuel Gas Co. v. Railroad Comm. of Kentucky, 13 F.(2d) 510, coming here by appeal from a final decree of the District Court for Eastern Kentucky, involving similar and some additional questions and denying the relief asked, was heard with this, and is discussed in a separate opinion. 278 U. S. 300, 49 S. Ct. 150, 73 L. Ed. —. The two cases involve substantially the same property and business. The issues as to valuation are identical, and, so far as material here, the records as to them are practically the same.

Appellant, through ownership in fee and leases or contracts on a rental or royalty basis, controls the production of natural gas from 814,910 acres of land. A part of this area, the so-termed 'proven' territory, is at present being used in production; the remainder being held in reserve as either 'probable' or 'unfavorable' sources of future production. Its principal items of property consist of its interest in this acreage, working capital, buildings, machinery, mains, pipes, compressors, and other equipment used in the production and distribution of gas.

The value as claimed by appellant and as found by the commission and the court of the total property of appellant used in both its 'regulated' and 'unregulated' business, follows:

                      Value claimed by appellant
                 
                                                                          As of
                                                                      Dec. 31, 1924
                 
                     Physical property (production
                      transmission, and distribution systems
                      etc.).......................................... $22,274,274 00
                 
                     Gas lands, leaseholds, and rights................ 36,449,176 00
                 
                     General overhead charges.......................... 6,357,046 00
                 
                     New property added during 1924.................... 2,044,778 00
                 
                     Working capital..................................... 990,000 00
                 
                     Going concern value (difference between
                      reproduction cost new and same
                      less deterioration).............................. 8,423,105 00
                                                                        ____________
                 
                                                                      $76,538,379 00
                 
                 
                     Value as found by the commission
                 
                                                               As of             As of
                                                           Dec. 31, 1923     Dec. 31, 1924
                 
                    Physical property..................... $25,000,000 00.   $25,648,457 72
                 
                    Working capital........................... 990,000 00.       990,000 00
                 
                    Going concern value..................... 3,000,000 00.     3,000,000 00
                 
                    Gas rights and leaseholds
                     (book value)........................... 6,343,329 67.     6,361,511 42
                                                            ______________    ______________
                                                             35,333,329 67    $35,999,969 14
                 
                 
                 
                 
                      Value as found or assumed by the court below:
                 
                                                                          As of
                                                                      Dec. 31, 1923
                 
                     Physical property (production,
                      transmission, and distribution systems,
                      overhead, etc., less depreciation)............. $26,000,000 00
                                                         
                     Going concern value............................... 3,000,000 00
                 
                
                     Working capital..................................... 990,000 00
                 
                     Assumed value of gas reserve presently
                      used and useful in the public service
                      ("proven" territory)............................ 10,317,311 39
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