Northern Natural Gas Company v. State Corporation Commission of Kansas

PETITIONER: Northern Natural Gas Company
RESPONDENT: State Corporation Commission of Kansas
LOCATION: Beaumont Mills

DOCKET NO.: 62
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 372 US 84 (1963)
ARGUED: Dec 13, 1962
DECIDED: Feb 18, 1963

Facts of the case

Question

Media for Northern Natural Gas Company v. State Corporation Commission of Kansas

Audio Transcription for Oral Argument - December 13, 1962 in Northern Natural Gas Company v. State Corporation Commission of Kansas

Earl Warren:

-- Northern Natural Gas Company, Appellant, versus State Corporation Commission of the State of Kansas.

Mr. Adams, you may proceed with your argument.

Mark H. Adams, Sr.:

Mr. Chief Justice, gentlemen of this Court.

This case comes to this Court from -- on appeal from two judgments of the Supreme Court of the State of Kansas in which there were affirmed two orders of the State Corporation Commission of that state, one dated October 9th, 1959 and the other dated February 3rd, but effective February 8th, 1960.

The first order complained of was directed to Northern Natural Gas Company alone.

The second order was directed to all purchasers of gas.

Each order requested or required that the Pipeline Purchasing Company purchase gas ratably from all of the wells connected to its system in the first instance and the testimony in the case related solely to the, what is known as the Kansas Hugoton Gas Field, although of course there are other gas fields in Kansas.

The real issue in the case is whether the orders and rule here under appeal which on their face and in their intended operative effect regulates sales of gas in interstate commerce for resale are valid in view of the Natural Gas Act and the rules and the regulations of the Federal Power Commission promulgated pursuant thereto.

Northern Natural Gas Company is a corporation engaged in the business of purchasing and transporting natural gas in interstate commerce for resale, for ultimate public consumption, and is therefore a natural gas company as defined in the Natural Gas Act.

The Hugoton Gas Field is a rather large gas field.

Attached to the first memorandum that was filed in this matter in behalf of the Federal Power Commission, you will find a plat that relates to the portion of the Hugoton Field --

Earl Warren:

In what brief is that?

Mark H. Adams, Sr.:

In the first memorandum filed in behalf of the Federal Power Commission.

Earl Warren:

Oh yes.

Hugo L. Black:

April 24th?

Mark H. Adams, Sr.:

Yes, Your Honor.

This plat shows the general outline of the portion of the Hugoton Gas Field that is in Kansas.

Other portion of this gas field extends on through Oklahoma, principally Texas County, Oklahoma, and then another portion is located in the State of Texas.

Of course, each portion of this great gas field is supervised by -- as to production by the State Regulatory Agency of the particular state in which that portion is located.

In 1930, Northern Natural Gas Company began to purchase gas in the Kansas Hugoton Gas Field.

One of its two principal purchase contracts in that field was made in 1930 by the predecessor companies of what is now Northern Natural Gas Company as purchaser and Republic Natural Gas Company as seller.

In this particular record, the supplementary or amended contract which was made in 1945 is made a part of the record.

For convenience sake, it is referred to as the Republic “A” contract because it was the initial contract made between Northern as purchaser and Republic “A” as seller.

Some eight years later, Northern began to make additional purchase contracts for gas from the Kansas Hugoton Field.

And among those contracts, there are -- there is another republic contract so to differentiate between the contracts, we call the first one Republic “A” and the second one, the Republic “B” contracts.

In this first or the Republic “A” contract, there was an agreement for Northern to purchase or pay for, in other words, a take or pay for provision relating to a maximum as well as a minimum volume of gas during each contract year.

Each and all of the other gas purchase contracts which Northern has in the Kansas Hugoton Field required Northern to purchase gas from the connections thereunder ratably as between the wells and accepts from that provision and that requirement, the take or pay for obligations under the Republic “A” contract.

In 1952, this take or pay for provision in the Republic “A” contract was before the Kansas Supreme Court for interpretation with respect to Northern’s obligations in view of the basic proration order which was in effect in the Kansas Hugoton Field that’s an order addressed to producers, requiring ratable production as between all the wells in the field and in that proceeding, the Kansas Supreme Court interpreted that contract as to require Northern to purchase the legal allowables assigned to the Republic “A” wells, no more or no less.

Earl Warren:

I'd -- I didn't get that last, just that last statement in what the Commission did.

Mark H. Adams, Sr.:

Mr. Chief Justice, I think maybe if I amplified it a little bit, it'd be -- the Kansas Corporation Commission in 1944 promulgated what they call the basic proration order for the Kansas Hugoton Field.