United Gas Pipe Line v. Federal Power Commission

PETITIONER: United Gas Pipe Line
RESPONDENT: Federal Power Commission
LOCATION: Hayden Residence

DOCKET NO.: 49
DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 385 US 83 (1966)
ARGUED: Oct 19, 1966 / Oct 20, 1966
DECIDED: Nov 14, 1966

Facts of the case

Question

Media for United Gas Pipe Line v. Federal Power Commission

Audio Transcription for Oral Argument - October 20, 1966 in United Gas Pipe Line v. Federal Power Commission

Audio Transcription for Oral Argument - October 19, 1966 in United Gas Pipe Line v. Federal Power Commission

Earl Warren:

Number 49, United Gas Pipe Line Company, petitioner, versus Federal Power Commission, et al. Mr. Woods.

Vernon W. Woods:

Mr. Chief Justice, may it please the Court.

The petitioner in this case, United Gas Pipe Line Company is a natural gas company is engaged in the business of purchasing gas from producers in the field, transporting that gas through pipe lines and then selling it to distributors for resale and to industry directly for there own use.

This case arises out of the Natural Gas Act and it grows out of an order issued by the Federal Power Commission.

That order for the first time in the history of the Natural Gas Act in this 38 and this is an Act of 1938.

For the first time in the history of the Act, the Federal Power Commission has assumed they had power to order a pipe line to purchase gas.

Moreover, to pay a price fixed unilaterally by the seller and finally to purchase quantities in volumes consistent with the cancelled contract.

Our petition for writ of certiorari posed two questions, whether the Federal Power Commission in fact had a power, authority to order a pipe line without its consent to continue purchasing gas after the producer had cancelled the contract in which a pipe line had been buying gas whether it had authority to order the pipe line to pay the unilaterally increased price fixed by the seller for that gas.

The second question being that if the Act have -- that in it which permits the Commission to issue such an order then is the Act to that extent unconstitutional as violative for the due process requirements just compensation required by the Fifth Amendment to the constitution of the United States.

The facts are undisputed and can be stated briefly and they're important to this petition to show the problem that it is faced with by the Commission's order.

In January 1953, United and Continental Oil Company entered into a contract under the terms in which Continental agreed to sell and United agreed to buy gas produced by Continental Oil Company in the junction Bayou Field.

The junction Bayou Field is located in Cameron Parish which is right in the southwest corner of Louisiana next to the Texas boundary or border.

A contract of a ten year primary term with the provision that it would automatically continue in effect after expiration of the primary term provided that either party could cancel the contract upon 90 days prior written notice.

The contract also provided fixed prices to be paid for the gas.

Two prices, the one in effect at the end of the primary term.

That is the second 5 year period of the contract was 10.79 cents per MCF inclusive of tax reimbursement.

In other words, United Gas Line Company was paying Continental 10.79 cents per MCF as the contract was nearing the end of its primary term.

Now, this contract would've continued automatically in effect.

But for the fact, the Continental Oil Company some 90 days prior to the expiration of the primary term wrote to United and said, We cancel the contract.

And United accepted the letter.

It was canceled on the terms of the contract.

Thereafter United rather Continental came to United and said, We'd like to negotiate with you.

We'd like to enter to a new contract covering the injunction, Bayou Field gas.

And it is ,Fine, let's talk about it.

Continental said in substance that we want to increase the price by our standards, United standards substantially.

They ordered the price to go up to approximately 18 cents in MCF.

That is over the whole term of the contract.

They would've started a little less than that about 15.75.

But they had something else in there that was completely unacceptable to United.

They said that, We wanted to remain open-ended.