Transcontinental Gas Pipe Line Corporation v. State Oil and Gas Board of Mississippi

PETITIONER: Transcontinental Gas Pipe Line Corporation
RESPONDENT: State Oil and Gas Board of Mississippi
LOCATION: Ciraolo's Residence

DOCKET NO.: 84-1076
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Supreme Court of Mississippi

CITATION: 474 US 409 (1986)
ARGUED: Oct 08, 1985
DECIDED: Jan 22, 1986

Ed Davis Noble, Jr. - on behalf of the Appellee State Oil & Gas Board
Glenn Gates Taylor - on behalf of the Appellee Coastal Exploration
Jerome M. Feit - as amicus curiae in support of Appellant
John Marshall Grower - on behalf of the Appellant

Facts of the case


Media for Transcontinental Gas Pipe Line Corporation v. State Oil and Gas Board of Mississippi

Audio Transcription for Oral Argument - October 08, 1985 in Transcontinental Gas Pipe Line Corporation v. State Oil and Gas Board of Mississippi

Warren E. Burger:

Mr. Grower, I think you may proceed whenever you are ready.

John Marshall Grower:

Mr. Chief Justice, and may it please the Court:

Transcontinental Gas Pipe Line Corporation, which I will call Transco, is an interstate pipe line company regulated by the Federal Energy Regulatory Commission.

It purchases gas in the States of Mississippi, Louisiana, Texas and off-shore.

It transports that gas for resale in markets stretching from Alabama to New York.

For many years prior to the spring of 1982, this interstate company, along with many other interstate purchasers, were purchasing gas at a period of time when there was a severe shortage.

They were able to take all of the gas that their contract producers could deliver to them.

Their contracts provided that they could do so.

The contracts did not obligate them to take all of that gas, it only obligated them to take a certain minimum.

These long-term contracts were part of the regulatory scheme.

These contracts provided for minimum-take obligations and take or pay obligations if those minimum takes were not made.

However, in the spring, particularly May of 1982, it became apparent to the gas industry as a whole particularly that there was becoming a surplus of deliverability of gas.

There was a loss of market for a number of reasons that I will not take my time here, the drop in the price of oil, surplus oil, for many reasons.

But, there was an unprecedented, an unforeseeable loss in the markets for natural gas.

That created a problem whereby the interstate pipe line companies, and Transco in this case, could not then purchase all of the gas that was required to be purchased under its contracts.

Byron R. White:

In other words, they couldn't sell it.

John Marshall Grower:

That is exactly right, Your Honor.

They could not sell it.

Byron R. White:

They could buy it.

They could buy it if they had the money.

John Marshall Grower:

The pipe line is not the market.

The pipe line is the conduit to the market and if the market can't take it, they can't buy it.

It is that simple.

Now, when they were unable to buy all of their contracted gas, they had to cease buying gas from owners that they had no obligation to purchase the gas from.

Now, these owners in East Morgantown and Greens Creek field areas of Mississippi, Coastal and others, had chosen not to commit their gas to contract.

In 1978, '79 and '80, when the long-term contracts in this field were made with Getty, Harkins, Florida Gas, and others by Transco, of course, there was a shortage and these particular producers chose not to commit their gas to contract.

All indications were that for the foreseeable future prices were going to continue increasing, oil prices were going up, the market was going to expand, everything look rosy.

There was no need to commit their gas they thought.

I assume they thought that.

They didn't.