Walls v. Midland Carbon Co

Decision Date13 December 1920
Docket NumberNo. 219,219
Citation254 U.S. 300,41 S.Ct. 118,65 L.Ed. 276
PartiesWALLS, Atty. Gen. of Wyoming, et al. v. MIDLAND CARBON CO. et al
CourtU.S. Supreme Court

Mr. Henry E. Lutz, of Denver, Colo., for appellants.

Messrs. John W. Lacey, of Cheyenne, Wyo., and Reid L. Carr, or New York City, for appellees.

[Argument of Counsel from pages 301-309 intentionally omitted] Mr. Justice McKENNA delivered the opinion of the Court.

The complainants are corporations of Delaware and have their places of business in that state.

The defendants are officers of Wyoming, being respectively, its Attorney General, prosecuting officer of Big Horn county, and the Governor of the state.

It is alleged that jurisdiction of the District Court depends upon diversity of citizenship and the Constitution of the United States; the Constitution being violated by an act of the Legislature of the state. Chapter 125 of the Session Laws of 1919.

The object of the suit is to restrain defendants, and each of them, from enforcing or attempting to enforce the legislation.

It is declared by the act, which is attacked, that its purpose is 'the conservation of natural gas.' The first section is as follows:

'The use, consumption or burning of natural gas taken or drawn from any natural gas well or wells, or borings from which natural gas is produced for the products where such natural gas is burned, consumed or otherwise wasted without the heat therein contained being fully and actually applied and utilized for other manufacturing purposes or domestic purposes is hereby declared to be a wasteful and extravagant use of natural gas and shall be unlawful when such gas well or source of supply is located within ten miles of any incorporated town or industrial plant.'

Section 2 prohibits the use, sale, or other distribution of natural gas, the product of any well owned, leased, or managed by any person for the purpose of manufacturing or producing carbon or other resultant products from the burning or consumption of such gas, without the heat therein being fully and actually utilized for other manufacturing purposes or domestic purposes. Violations are made misdemeanors.

The grounds of contention against the act are set forth in very voluminous pleadings, supplemented by a number of affidavits. But only a brief summary of them is necessary to present the question involved, which is, stated broadly, that the act transcends the police power of the state, its purpose and effect being not to regulate and conserve natural gas, but to prohibit its use, and make a discrimination between owners having equal rights, and thereby violates article 1, § 10, of the Constitution and the Fourteenth Amendment thereof.

Prior to the enactment of the statute, the Midland Company had erected a factory for the manufacture of carbon black, which factory is located about 1 1/2 miles from the town of Cowley, Big Horn county, at an expenditure of $375,000. It is equipped for the manufacture of such carbon black, and can be used for no other purpose, and there is produced from it approximately 13,000 pounds of that article daily, which is sufficient for the manufacture of 117,000 pounds of printing ink. From the gas consumed to make the carbon black, there is first extracted approximately 1,600 gallons per day of high-gravity gasoline.

The uses of carbon black are enumerated, and it is alleged that no form of it possessing the same properties and the wide variety of uses can be commercially manufactured from any material or substance other than natural gas.

The origin of the industry and the uses of its product are variously detailed, and it is alleged that the company's factory is so conducted as to permit no waste, that the best known processes and appliances are employed, and that the operation of the gasoline absorption plant and the recovery of gasoline from the gas supplied by the wells would be impossible if the carbon plant should cease to be operated, for the reason that the gas cannot be sold to other users in that locality in sufficient quantities to render the extraction of gasoline therefrom commercially profitable.

The Occidental Oil & Gas Company owns the land upon which are located the gas wells constituting the principal source of supply to the plant and carbon factory of the Midland Company. It, the Occidental Oil & Gas Company, also constructed, owns, and operates the pipe line by which the gas is conveyed to the factory, and delivers it to the factory, receiving from the Eastern Fuel Company, which owns and operates the gasoline extraction plant, a royalty of one-half of the gasoline extracted therefrom. The Oil Company also owns mineral leases covering 1,200 acres of proved gas territory within 10 miles of Cowley. Its business is an integral and inseparable part of that of the Midland Carbon Company, and all of its investments have been made in view of the carbon business.

In the construction of its pipe line it expended $65,000, and in the purchase of lands upon which the wells are located, a sum exceeding $30,000. Other gas lands are alleged to have been purchased and leased prior to the enactment of the law.

There are other allegations asserting the use of the gas and its products, and that such use is not a waste of the gas. Various ways in which the law violates complainants' rights under the Constitution of the United States are detailed; that under the guise of regulation the restrictions of the act are so framed as to abolish, ruin, and destroy complainants' business, while leaving it open to others to engage in carbon manufacture, without saving the gasoline that the penalties imposed by the act are harsh, unreasonable, and confiscatory; and that a dispute of its legality would impose a penalty of $1,000 for each separate daily violation of it. Other injuries are alleged.

As already said, affidavits made by representatives of various trades and industries, displaying the qualities of carbon black and its uses, are attached to the bill. Other affidavits express the detriment, in the opinion of the affiants, of any restriction or regulation of the production of it; and others, from asserted experts, exhibit the source of the gas and the process of manufacture from it of carbon black, and that in its manufacture heat is necessarily evolved, but that as soon as any attempt is made to transform the heat into any other form of energy, such as light or mechanical power, an enormous, but inevitable, loss of heat results.

An injunction is prayed, interlocutory and permanent, restraining defendants from enforcing the act.

Upon the bill (it is verified), exhibits, and affidavits, it was ordered that the application for interlocutory injunction be heard by three judges, and that in the meanwhile a temporary restraining order be granted, upon filing a bond in the sum of $1,000.

The answer, in its admissions, denials, and independent averments, asserts waste of the gas by complainants' gas factory and processes, the depletion of the wells and their product, from which it is estimated that within three years all of the wells will have been utterly and completely depleted, and the depletion will relate, not only to the wells furnishing gas for the manufacture of carbon black, but will likewise relate to the entire region and vicinity.

And it is alleged that by preventing the use of the gas for the manufacture of carbon black, the towns of Lovell and Cowley and all industrial plants therein will be afforded a supply of gas for all domestic and industrial purposes for a period of 30 years.

The vice attributed to the act by complainants is denied, and a benefit and virtue asserted for it.

It is prayed that the bill be dismissed, and the restraining order be dissolved. The answer is verified.

A motion to dissolve the temporary restraining order was made, which was supported by affidavits, and opposed by others.

The affidavits are too long to quote. Those on the part of defendants represent the interest of the city of Lovell and other towns, and the necessity to their industries, if there are to be any, of a natural gas from the wells with which this case is concerned, and represent a depletion of the gas supply by the use made of the gas by complainants. Figures are given. Particulars are stated in one affidavit, and for a review of what are deemed the important tests and elements of judgment of the conditions which existed and would succeed the present practice it is said:

'In conclusion, assuming that the present consumption of gas from this sand is 15,000,000 cubic feet per day (as I have been reliably informed), and that the decrease in pressure for the last year has been 150 pounds, and knowing that the present pressure is approximately 200 pounds, it is a simple problem in mathematics to ascertain the future life of the field. In other words, at the present rate of decrease in pressure, the field will be exhausted in 16 months, and there will be no pressure to force the gas out of the sand. On the same basis of reasoning there are approximately 1,200,000,000 cubic feet left in the sand, and the present consumption is 5,500,000,000 cubic feet per year.'

The court sustained the application for temporary injunction.

The question in the case is, as we have said, whether the legislation of Wyoming is a valid exercise of the police power of the state, and brings into comparison the limits of the power as against the asserted rights of property whether it, the legislation, is a legal conservation of the natural resources of the state, or an arbitrary interference with private rights. Contentions of this kind have been before this court in other cases, and their discussions and decisions have materiality here. We mean, not discussions or decisions on the police power in the abstract or generality, but discussions and decisions involving conditions and principles pertinent to the present case.

It will be observed that the act under review...

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