Sunray Mid-Continent Oil Company v. Federal Power Commission

PETITIONER: Sunray Mid-Continent Oil Company
RESPONDENT: Federal Power Commission
LOCATION: Dry Docks at Reed, WV

DOCKET NO.: 335
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Tenth Circuit

CITATION: 364 US 137 (1960)
ARGUED: Apr 26, 1960 / Apr 27, 1960
DECIDED: Jun 27, 1960

Facts of the case

Question

Media for Sunray Mid-Continent Oil Company v. Federal Power Commission

Audio Transcription for Oral Argument - April 27, 1960 in Sunray Mid-Continent Oil Company v. Federal Power Commission

Audio Transcription for Oral Argument - April 26, 1960 in Sunray Mid-Continent Oil Company v. Federal Power Commission

Earl Warren:

Number 335, Sunray Mid-Continent Oil Company, Petitioner, versus Federal Power Commission.

Melvin Richter:

May it --

Earl Warren:

Mr. Richter.

Melvin Richter:

May it please the Court.

This is case is here on certiorari to the Court of Appeals for the Tenth Circuit.

It involves the question which is similar to one of the issues which was discussed in the Sun Oil case in which argument has just been concluded.

The question here relates to the Commission's authority under Section 7 (e) of the Natural Gas Act, generally, to issue certificates of unlimited duration where the applicant has explicitly sought a certificate, coextensive in duration with the term of his gas sales contract.

There is no question in this case as there was in Sun Oil as to rates whether initial rates, the rates changes.

Nor there is any question here, again if there was in Sun Oil, as to the scope of a certificate that was issued earlier or the propriety of issuing a second certificate.

In this case, there's been no previous sale of the gas involved in interstate commerce.

If here, Sunray applied for certificate to sell the gas in interstate commerce for the first time, its application unequivocally requested that the certificate be coextensive with the term of his gas sales contract.

Felix Frankfurter:

And what was that, Mr. Richter?

Melvin Richter:

20 years.

Felix Frankfurter:

20 years.

Melvin Richter:

Basic term to 20 years.

And the Commission clearly so understood.

Briefly, the facts in this case are these.

Sun Ray is an integrated company engaged in virtually all spaces of the oil business.

In addition at present, it is producing and selling natural gas under about a 160 long term contracts, most of which offer terms of 20 years or more.

And I might add by the way at this point that about 85% of the gap produces contracts in the industry offer terms of 20 years or more.

Sun Ray also produces substantial qualities of crude oil and frequently in conjunction with natural gas.

Sun Ray refines the crude oil into fuel oil, to gasoline and other products and sell these various products to the public and to the Government.

By contract dated February -- January 1, 1957, Sunray agreed to sell United Gas Pipeline Company gas produced from certain lands and acreage owned by it in Lafayette and Vermilion Parishes in Louisiana.

At present, Sunray is only known of proving gas reserves in this area are in a small portion thereof known as the “Ridge Field,” and this is in Lafayette Parish.

The total area involved here that's dedicated to this contract about 33 square miles of which Sunray owns about 7000 acres.

A very small proportion of those 7 --- 7000 acres have been developed and have proven to have gas reserves.

Under the contract, Sunray is to deliver in United's tank annual minimum quantities about 4.5% of the estimated reserves.

The United in addition is to have a further right, annually to take up to an additional 50% of this, amounted about 6 close to 7%, just right 7%.

That's the maximum take of United.

As I mentioned before, this acreage is in the haul of a ballistic gas fields in South Louisiana and it's expected for the great deal of confidence that additional gas will be discovered in this dedicated area.