DOCKET NO.: 78-17
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Tenth Circuit
CITATION: 442 US 529 (1979)
ARGUED: Feb 22, 1979
DECIDED: Jun 18, 1979
Knox Bemis - for petitioner in No. 78-17
Richard A. Allen -
Stanley L. Cunningham - for respondents in both cases
Facts of the case
Media for United Gas Pipe Line Company v. McCombs
Audio Transcription for Oral Argument - February 22, 1979 in United Gas Pipe Line Company v. McCombs
Warren E. Burger:
We'll hear arguments next in the case originally scheduled for the opening argument, United Gas Pipe Line, 78-17 and the consolidated case.
Mr. Allen, I think you may proceed whenever you are ready.
Richard A. Allen:
Mr. Chief Justice and may it please the Court.
The issue in this case is whether the Court of Appeals was correct in the holding that respondents and their predecessors in interest had lawfully abandoned the service of delivering natural gas in interstate commerce even though the Federal Energy Regulatory Commission had never authorized the abandonment under Section 7(b) Natural Gas Act.
Section 7(b) of the Act provides that natural gas company may abandon the service within the Commission’s jurisdiction “without permission and approval of the Commission first had and obtained after due hearing and a finding by the Commission that the available supply of natural gas is depleted to the extent the continuation of service is unwarranted or that the present or future public convenience or necessity permits abandonment.”
To summarize the pertinent facts; in 1948 W. R. Quin acquired an oil and gas lease of attractive land in Texas known as the Butler B Tract.
In 1953, his widow and successor in interest B. Quin entered into a gas sales contract with the United Gas Pipe Line company under which Mrs. Quin undertook to sell to United all merchantable natural gas produced from “all wells now or hereafter drilled during the term of the contract on a number tracks including Butler B.”
In 1954, Mrs. Quin applied for and received from the Commission, a certificate of public convenience and necessity authorizing the sales of gas as provided for in the contract.
Subsequently, the lease was assigned several times.
In one subsequent assignment amended the certificate -- amended the contract with the United to extent its term to 1981 and obtained a certificate from the Commission that authorized the service as proposed in the amended certificate -- in the amended contract and replacing the certificate that was originally issued to Mrs. Quin.
Before 1966, one well on Butler B produced natural gas that was delivered to United under the contract.
In 1966, the then assignee of the lease informed United that there was -- that the well was not producing any more gas and that no further gas would be available at that time.
No gas was produced from property for five years and during that time no one applied to the Commission for authority to abandon service under Section 7(b).
In 1971, the assignee Haring assigned part of his interest in the Butler B Tract to the respondents.
They drilled a deeper well on Butler B, discovered more gas and entered into a contract to sell that gas to a DuPont plant in Texas that is in intrastate commerce.
In 1973, United asserted a right to that gas under its 1953 contract as amended.
And United -- respondents denied that the United had any right to the gas and United filed a complaint with the Commission, which commenced these proceedings.
In the proceeding before Commission, respondent’s principle claim was that the original, the contracts with the United and the certificates from the Commission dedicated only the gas that was produced from the first well that was drilled on the property that is the well that was drilled before 1966, but not gas produced from the well that they had subsequently drilled.
Respondents also suggested to the Commission that even if the gas they were currently producing was dedicated to interstate commerce, the Commission should grant them abandonment authority nunc pro tunc or retroactively in 1966 when production from the first well had ceased.
The Commission held that the certificates issued to respondent’s predecessors dedicated all the gas produced from the Butler B Tract and thus imposed upon respondents an obligation under the Natural Gas Act to continue supplying that gas in the interstate commerce to United.
In view of the fact that the supply of gas under Butler B was concededly not depleted, the Commission also denied respondent's suggestion that the grant abandonment nunc pro tunc to 1966.
The Court of Appeals reversed.
The Court of Appeals reversed on the ground that the facts of this case, established abandonment as a matter of law even though the Commission had never granted abandonment.
Particularly the Court of Appeals relied on the fact that production had ceased from during the period 1966 to 1971 that the parties during that period seem to believe that there was no more gas on the property and that the Commission probably would have granted an abandonment application if one had been filed in that period.
Those facts the court concluded made it necessary for respondents to comply with the requirements to Section 7(b) which forbids abandonment without obtaining approval from the Commission and until the Commission finds appropriate facts in an appropriate hearing and proceeding.
In the court’s view, the facts believed to be true in 1966 --
John Paul Stevens:
Mr. Allen, you mentioned a hearing and proceeding.
Is there a routinely a hearing into the abandonment applications filed?
Richard A. Allen:
There is not routinely a hearing.
The statute Mr. Stevens -- Justice Stevens provides for a due hearing, where there is an abandonment application and all of the interested parities were notified and the application itself demonstrates depletion of supply and the interested parties are concurring that there’s usually not a hearing.