State v. Lone Star Gas Co.

CO. GAS STATE al. v. LONE et STAR

No. 8238. Appeals Austin.

Court of of Texas. Civil July 10, 1935.

Rehearing Sept. Denied Court, trict seeking the enforce- restrain ment of the rate order several consti- grounds, tutional particularly as be- ing confiscatory property. Thereaft- er, commission, General, Attorney others, commission, herein called instituted this proceeding in the district court Tex., county, Travis bring ap- in order to pellee jurisdiction within the of the state court under provisions of section 266 of the United States Code Judicial (28 USCA 380)1 § The commission assert- the validity ed every par- order in ticular, sought and to restrain violating it. In conformity with what was regarded proper procedure under section of Code, the both the state and Judicial federal courts temporarily restrained order, the enforcement of the rate and lat- er the federal court ordered all proceedings stayed therein disposition until the final of Appellee’s herein, this cause. answer seek- ing set aside the and rate restrain its enforcement, appeal was in effect article provides under gas any utility dissatisfied with rate petition a competent jurisdiction of court county aside, Travis up- and have same set showing by on satisfactory clear and evi- dence that such rate is unreasonable and unjust Allred, Atty. Gen., Appellee alleged as to V. former El- it. Jas. order Hooper commerce, rate was of Fitzhugh, bert and C. violative Wm. all Atty. Gen., process, due Austin, McCraw, equal protection, Scott and Wm. Scott, Attys. freedom Asst. clauses the Fed- Gaines and Alfred M. Gen., contract (article eral Kuykendall, Chief Exam- Constitution § and cl. F. Division, 14) ; iner, Amend. Railroad Com- Gas Utilities and'un- Austin, unjust reasonable and and A. R. because it would mission of all of not Houston, Stout, Gen., a on the Atty. afford reasonable return fair former Asst. value property public used in the for the State. service. reply, In lidity asserted the va- Cоffee, Griffith, Roy Karl Marshall F. C. every particular, of the order in de- Dallas, Newcomb, Thompson & Bar- all any gas nied that moved in interstate com- Shannon, all of Fort Ogden wise and K. merce; so, but negligible that if it was Worth, Powell, Austin,.'for Ben H. rate; and was not amount affected appellee. legislation that in absence of Con- subject, gress the commission had BLAIR, Justice. authority under the statutes and in the Acting power under conferred ar- police power exercise the state seq., ticle 6050 and after et regulate public gas utilities, and control hearing which continued for more than gas fix reasonable rates and delivered sold and months, Railroad seven Commission of citizens, though to its even inter- promulgated ap- order requiring indirectly commerce was state incidental- Company, pellee, “charge, Lone Star Gas thereby. ly affected city receive for domestic at the bill and distributing companies gate from all served The trial court concluded commerce it, against $0.32 a rate not exceed questions ap- thou- all constitutional and pellee; feet,” jury sand cubic lieu 40-cent rate but the found answer to the charged. Immediately appellee special theretofore issue submitted that “the one order complaint filed a bill in the to exceed cents federal Dis- for a thou- ing, transporting, selling distribut- delivering, to the feet of sold sand cubic points public natural gates for domestic companies at ing use, pub- served, unjust as to other lic be a declare each to is unreasonable utility, public in- Company.” Judgment was affected with the Gas Lone Star subject regulation the 32- terest and to the setting aside rendered accordingly control of the engaged order, restrain- commission. Gas lines perpetually cent rate buying, trаnsport- in producing, ing its enforcement. ing, delivering, dealing otherwise submitted, special issue pub- natural lic are each declared to be a in con- given instructions definition utility, affected with the inter- therewith, in the nature nection est, and in according nature jury required the charge, and general conducting established method of same fact of law and questions determine all monopoly, and'subject respect pleadings of the entire case. Under holdings their pertaining busi- question of fact was appellee, the ultimate public, ness and in all relations to the yield rea- rate would whether the 32-cent respect and in producing, to their trans- fair value of on the sonable return porting, receiving, .facil- of de- public service used ities, to the full complete control and to the dis- selling natural livering and supervision Authority of the commission. city gates tributing companies at the given fix, is also the commission to estab- Appellee cities and towns. various Texas lish, and enforce a reasonable rate which rate prove the 32-cent attempted that to pipe may charge lines gas for delivered at return, for yield reasonable not a would city gate to distributing another com- reasons, as follows: two pany municipality; or fix a reason- not rate would gas by 32-cent able- rate for sold and delivered 1. Because cent, de- per of 6 companies return distributing other pipe minimum lines or yield the commission; by use; public reasonable for domestic or other clared to equita- fair and fix and establish a and to and proceeds of the sale ble division of the cent, per so, of 6 a return if Because 2. producing gas or natural between confiscatory and un- to be as lowsowas companies companies transporting and the unjust.. and reasonable distributing selling it the ultimate fo appel- heavily upon power burden exercise of The consumer. satisfactory conferred, evi and is authorized clear so the commission show lee to motion, af upon rate would 32-cent own to act dence any corporation, of return person, munic- petition of a ford etc., service. showing Texas interest ipality, in a substantial in not meet property used subject. this burden did Appellee erred trial court proof; quantum Accordingly, the commission of its own for motions commission’s overruling the in hearing investigate a motion ordered. de judgment and for verdict an instructed city gate appellee the 40-cent rate which In view be valid. rate to claring uniformly charged distributing the various presents conclusion, appeal two this companies throughout gas. the' state for divisions, follows: main Appellee approximately and each of the objections are constitutional Three 1. 270 cities and towns served it were order, as 32-cent rate against urged hearing, given notice of the after which follows: fixing commission made its order rate, “fair, gate just interstate com- 32-cent found to be Interference (a) reasonable,” in lieu of the 40-cent merce. charged, rate theretofore found to be “un- right.to con- with the Interference (b) fair, unjust and unreasonable.” tract. property. Interstate Commerce Issue. Confiscation (c) sufficiency of the evidence legal The gas Appellee obtains its natural appellee to show that the rate adduced states, system which under its of ac- two confiscatory or unreasonable order counting is allocated to three sources. it. unjust as to gas produced pur- The first source is n statutes, transported in Texas and pаrticularly chased and de- articles Texas The’ entirely 6053, classify within Texas. As the vari- livered to this appellee authority produc- admits the engaged gas, in of business kinds ous sary price pipe if regulate and fix the line had been constructed Texas; city gates a more within which it shall be sold at the direct route for route, companies compared in that as the Oklahoma to the affiliated the Texas have much proper proceeding, but contends route would been expensive, sandy cor- question through in at- less and less since the rate order also soil, direct, tempts price gas transported through rosive to fix the more commerce, populous region. in is in- more The commission interstate the order pipe part. this valid in toto because invalid in contends that the construction of was, therefore, fraudulently From line done for this source accounts cent, per purpose deprive gas supply. attempting about 79 its total it jurisdiction appellee. From this over produced gas second source of gas source of accounts about Oklahoma, purchased by appellee in subject supply of the total transported through its lines from question. the rate order in points production All into Texas. processed gas- in Okla- this and treated in reserve plants Gainesville, Tex.; compared in oline homa as to those located near Petrolia, plants Tex. At these the amounted to about one-fourth heating cent. The ’gas value of reserves in Texas are more this is lowered therefrom, needs, extracting gasoline supply and than sufficient all Texas practically gas supply like- recompressed. all of of Oklahoma will supply When this leaves Oklahoma for Texas wise needs. The Texas known, its еxact ultimate destination is not used Oklahoma and the Oklahoma balance, considerable amount is run of it used Texas about strike event, through stored wells the ex- if should be the excess plants Oklahoma, traction Tex- negligible. Texas for future use as it is favor of pipe’line needed. Each transporting produce expensive than less line, state the at the for gas Approximately per has a meter gas. Oklahoma cent, purpose measuring the amount thereof. in appellee’s property of is situated of cent, source, pe- the 1927-1933 Texas; approximately per over From this and considered, appellee accounts Texas. are in Gas gas. riod reserves of its cent, gas supply. per of its total so mixed and coming about However, from Oklahoma is gas gas of this the amount Texas that it cannot commingled with during any by until the definitely a marked decline volume to shown traced year accounting period it city the gate, last because it is divided particular cent, per ap- of 1 to about one-half network of amounted the and redivided into supply. All appellee’s gas lines, total of this pipe in amounts which are pellee’s commingled storage pipe lines gas comparison in or amount is in with the negligible delivery appellee’s produced Texas before gas. with Oklahoma Texas the city Appellee gates. contends that at the of Fort Worth not served south gas is Dallas, A gas moved interstate commerce Worth. this nor west of Fort or therefore, is, city gates, not sub- the and very Oklahoma is. amount of small at. jurisdiction independent distributors ject the of the commis- delivered The order sion. and Waxahachie. Gainesville any manner interfere with the- does not produced or The third source gas at thе same the Oklahoma sale of field in in the Panhandle purchased gas. the Texas rate as Tex., by county, transported and Wheeler facts, appellee private pipe through line a cor- these con- appellee’s In view of attempt of de- was an (less Oklahoma the amount that the order ner of tends commerce, Hollis, Okl.) back into and burden interstate regulate liveries at by Texas, part uninterruptedly. The commission a of the affected the because produced purchased indisputably proved rate is alleged and 32-cent Texas, transported by through sparsely set- the pipe line was built the state through appellee a corner just lines tled, rocky pipe within and rough, region, Texas, and back into of Oklahoma boundary the state line of Okla- paralleling the and delivered sold wholesale miles, recrossing it is homa, the where for about various cities- of the Texas gates point at the the Texas line at a Prairie-Dog towns; part river, and because a where an ex- and Town Fork of Red purchased in the state produced or expensive crossing ceedingly was neces- transported by sary, been Oklahoma which would have neces- Company, Compa- uninterruptedly and Cities Gas Texas lines of n ny. companies Texas is sold Each of these is a high pressure where it into corporation, theory corporate and in city gates. wholesale at the by as is a classified article each preliminary bearing As and as “public utility,” distributing engaged in commerce, inter- issues of interstate selling do- natural contract, operat- right ference with use, serving mestic or other one or more relating to ing expenses, other issues of some 270 cities Texas. and towns in jurisdiction reg- of the commission corpоration holding Delaware owns the- appellee, ulate it was the and control cent, excess of of the common ory reason of the commission or voting stock of the affiliated Commu- intercorporate set-up an and affiliation be- nity Company, County Company, Gas Gas distributing com- tween Municipal Company, Gas Texas Cities Gas panies gas at to which it delivered and, Company, through subholding cor- city gates, integrated single busi- but poration, Company. the Dallas Gas enterprise ness established in was which Appellee and all companies dis- affiliated tributing companies merely departments were have connected of- or instru- Dallas, Tex., fices and all of Tex- through mentalities which these single busi- corporations enterprise holding ness sold and delivered Delaware natural corporation have officers and directors or burner ultimate consumer common corporation, to each although asserted that tip user. there is majority by not a city gate number in at the fixing gas rate instance. Voting proxy attorney effectually set-up fixed business under such practiced in fact the interlocking city gate to the burner directors corporations officials of tip, was intrastate commerce and intercorporate set-up. All regulation involved in the subject control corporations with and are alleged that confer commission. It unity enter- Lone subject management oneness of the business Corporation, holding cor- prise accomplished the combination Star Gas effort, through For poration. hold- these services it exacts Corpo- ing corporation, “management Lone Star Gas fee”'of ration, corporation, appellee, gross and a a Delaware chartered аnnual revenue of “management principal Pittsburg, offices fee” also Pa. exacted holding corporation allegation from each affiliated sustaining this are The facts company. corpo- holding The distributing follows: $17,600,000 loaned on ration has Company, Appellee, Gas Lone Star note; and loans have its unsecured been pipe corporate theory Texas a line distributing to made each affiliated com- 6050 corporation, article classified open pany on account un- either or on utility,” “public and “declared to be cent, per 6 notes. at secured Interest with a interest sub- affected $17,600,000 charged indebtedness jurisdiction, ject and reg- control appellee, although holding corpora- By ulation of the Commission.” article cent., 5 money at per borrowed the tion is declared to be business appellee’s a similar exists condition as to the nature and in its ac- which “a business distributing companies, affiliated notwith- method of con- established cording to standing some of them are able borrow monopoly ais business ducting the * * large * sums from local banks at unless conducted 'not be shall cent, interest. 4½ subject jurisdic- to the business upon the conferred Commis- tion herein corporations, except All of all books ap- In excess of sion.” corporation, kept holding are in the common, voting, controlling pellee’s Dallas, Tex., general and a offices at Lone Star Gas Cor- owned stock is authority supervising auditor has and di- corpo- chartered Delaware poration, Accounting all books. rection over serv- permit ration, does not have ices, financing, engineering, purchasing, Texas. do business supervision operating are furnished corporations by the companies Delaware distributing ma- all affiliated holding corporation, general and a counsel Community are the this case terial corporations represents all the involved in County Company, Gas Com- Gas Natural set-up. intercorporate Company, Municipal Gas Gas Dallas pany, cipal and department integrated agent representative In busi- of the between two”; pro- enterprise, appellee engaged repeatedly still ness ducing it has been held in that such purchasing applicable natural rule is not “where 4,000-mile to, stock transporting ownership same has been resorted system purpose for the point production line participating from the city affairs of gates corporation 270 cities and some in the normal manner, and usual * * * towns where the is delivered purpose but for the of controlling subsidiary one the other affiliated distribut- com pany companies. ing A so that uniform rate of be used as a mere city by ap- gate agency cents is made or instrumentality of owning pellee, company companies.” which rate it filed with the com- charged M. Chicago, & mission, Ry. St. P. Minneapolis has and collected & Com Civic Ass’n, years. Appellee long-term several merce 247 U. S. 1229; contracts with its affiliated United States v. companies city gate for the rate. Lehigh Valley Co., 40-cent R. R. 220 U. S. S. Ct. 55 L. Ed. United department In their integrated of the Co., States v. Reading 253 U. S. 40 S. enterprise, business the affiliated distribut- 64 L. Ed. United States v. ing companies engaged selling are Delaware, Co., L. & 873, W. delivering tips burner Also,‘in 59 L. Ed. 1438. consumers, they and for which service rule, discussing the the fact that the same charge a fixed rate. persons are directors managers of two Appellee city also furnishes at the corporations given has been consideration Gainesville, gates of Waxahachie and States, 216 (McCaskill Co. v. United U. Tex., independеnt distributing to two com- 590), panies Company Waxahachie Gas —the tendency growing ex and “a is therefore and the Gainesville pany; &Gas Electrical Com- beyond hibited in the courts look to. Waxahachie, and in a small amount it, corporate purpose form to Municipal its affiliated Company. Gas officers who are identified with The amount of this negligible, also, See, purpose.” Gallatin Natural comparison appellee’s total busi- v. Public Service 79 Mont. Gas Co. independent ness. Each distributing com- 269, corporation P. Where one pany pays city gate 40-cent rate un- another, dominates it has been owns or long-term der appellee. contracts with entity independent held that “the often companies disregarded far the two is so legion cases are which deal part each is considered as but a that indivisible with the relationship of two or more cor Kimberly whole.” Coal Co. v. porations from standpoint of owner 25, 27; A.) F.(2d) Douglas (C. C. ship capital by another, stock in one Mfg. Kentucky Wagon (D. C.) 3 re Co. standpoint of and from the association to McLaughlin C.) Supp. (D. Law v. F. gether purpose carrying for the on a Supp. 601. And “the 2 F. rule which enterprise. single or common business by appears to be established these cases is The rule is well settled that courts will that, corporate organization where the and through the forms to the look realities company of one railroad are affairs con relationship between two or more of the dominated trolled and another railroad corporations in to determine order wheth company through ownership of stock or entity separate corporation; each is a er lease, regarded roads must the be as ident commingled or whether their affairs arе purpose making.” for the of rate ical integrated as to constitute them one such Pontiac, Ry. Michigan O. & N. Co. v. R. enterprise; single business or wheth and Com., R. 203 Mich. 168 N. W. er, intercorporate set-up, through affilia tion, ownership, purpose or stock the analogous question A de- somewhat was subsidiary corporation the to control A., Ry. & court in T. S. F. they cided corporations so that are used as the Com., S.W.(2d) v. R. Co. agents mere instrumentalities or refused), wherein it was held that corporation corporations. (writ owning owned, rule, corporations, controlled, subsidiary discussing the it has been held that alone, carry pick- “ownership, capital operated railroads to of and up on while stock service, by another, delivery corporation possess did not and in one does not individuality identity legal par- corporate separate from the create interest * * * regards jurisdic- corporations, as the prin or create the relation of ent Commission; beyond corporate court to the look form must the Railroad tion of the per- purpose organiza the unified “To held as follows: wherein it was tion, and to the officials who are identified steps in the perform such to mit railroads hold, with purpose. To that otherwise transportation through other process of permit and to corporations the Texas to owned separate legal created and entities dispose capital so so the of their stock and to to defeat them enable them would own, separate entity form -such of their jurisdiction commission over where and to the transportation. management surrender And such case control corporation, separate corporation holding of their business the stock such compаny, permit and its which has to do owned the railroad merely help conduct the business in them to function is would enable sole corporation parent jurisdiction under defeat business of the commis complete operates, utilities, in sion it them whose control over as Texas wholly, largely, if purpose instant not for which case state of Texas through employees, granted subsi- .the same them life the privilege of do diary corporation if it ing will be treated as business. department railroad were mere fact that and the affiliat- itself.” companies may ed distributing engaged in the integrated single but en- business light viewed When terprise ‍​‌‌​‌‌‌‌‌​‌‌‌‌​‌‌​‌‌‌‌‌​​​‌‌​‌​​‌​‌​​‌‌‌​‌​‌‌‌‌‌‍producing, purchasing, trans- rule, ap it becomes facts aforesaid porting, selling natural to the ul- its affiliated dis parent timate tip or burner consumer user is companies engaged were in an tributing controlling importance on the commerce enterprise single business integrated but issue; because the did not fix commission transporting, de producing, purchasing, rate, require it tip nor did the burner the do livering, selling natural companies pay appel- distributing con other use to ultimate mestic or city gate lee not in excess of 32-cent accomplished by com This was sumer. rate, pass the 8-cent reduction and to effort, and bination tip to the consumer or burner ultimate through ownership of more than (cid:127) user. appellee and capital stock of companies by distributing affiliated why the fixed Just corporations holding corporation. All are the gas with city gate rate for the 32-cent management under common distributing com requiring out also for which holding corporation, service rate, panies pay not in excess of such paid fees. The Texas management is corporations on to pass the 8-cent reduсtion holding corporation user, tip consumer burner ultimate directors common have officers and or record. is not clear from order supervise, and actually manage, each, who of dis It business is conceded enterprise business the entire control city gate tributing gas from By per set-up. intercorporate through the tip commerce burner user intrastate intercorporate such organizing mitting or jurisdic the commission had over which have, corporations con set-up, the Texas ; have, it could after a tion and that whole, operations sidering their entire .as reasonableness hearing at integrated business single and created charged by appellee city gate respect ju enterprise, and into, required the inquired va commission, regulate risdiction companies appel- pay rious business, particu control city gate in ex lee at a rate not each fixing of the rates purpose for the larly rate, though 32-cent cess of the even gas pub the might sell it for which gas by appellee the and delivered sold Texas, corporation re must be in the lic city commerce to the moved in interstate gate. engaged single the' being garded author Article purchas enterprise producing, 2,000 of pop business and towns of izes cities over delivering, selling transporting, and local sold ing, ulation to fix rates for by utility. consumer or to the ultimate Texas-Louisiana a natural separate City (Tex. fact Power of Farmersville that Co. in Texas. user (2d) rep App.) 67 com formed which Com. S.W. 235. The corporate entities were to originate mission is authorized rates departments of the in different resent 2,000 of enterprise for and towns less than single business cities but tegrated population; question, the and article authorizes the because not affect does rate, gate pass for and to the 8-cent reduc other rates city gate to fix and it tion or with on to the ultimate burner and towns consumer all cities natural for Furthermore, tip department re user. in its The order regard population. out intercorporate set-up some of the and affilia pending then there were cited that utility, appellee and tion line cities appeals from rates fixed engaged integrated pro of articles business of provisions towns under ducing, purchasing, by pipe al transporting were there 1119 and that line, selling numer natural to the dis pending the commission so before city re tributing companies gates to be the rates at ous cases which some necessarily 300 cities and fixed involved towns in Texas and viewed or Appellee’s the Oklahoma. reasonableness of charter and the determination distributing city kept books charged the under the direction of the au gate rate step prelim intercorporate ditor companies by appellee, as a business set up inary disposition appeals that engaged. of such established it was so cases, commission, hearing or determine On before the order to parties tip proceeded upon theory fix local or rates all that reasonable burner engaged. All of these cities and towns was so It therein. had con tracts hearing with the given were notice of the before affiliated as well as the independent from two companies It would seem commission. city for gate the 40-cent these recitations facts and circum rate uniform ly charged throughout stances that the commission consolidated the state of Texas by appellee. appeals pending before all the cases Texаs statutes author city ize city it in the determination of the the commission fix gate charged by appellee gas gate rate as well as tip local or burner rates necessarily step pre gas, involved as a states in its brief liminary reviewing fixing the local of Texas that “the Railroad Commission tip gas. The authority or burner rates for wisdom power pre to fix and has procedure adopted may of the method can charges scribe the which defendant successfully A separate not be attacked. gas produced purchased make for city case hearing of each town throughout entire trans moving it and woujd presented it, delivery have. point insurmountable up to the at task; if expenses hear city wholly of this gates, within the State criterion, city town could ing subject rights are a to defendant’s under Separate hearings expense. of the Con bear the Fourteenth Amendment States, relief United not afford stitution would Constitution; Rights receive here. which it is not entitled to Bill of authority power to deter and it has the commission Nor is it “essential re charges to be mine the rates and dispose pending before it of a matter order, ceived for the sale of to domestic may it single but in a in Texas disposi in towns and cities customers proper preliminary case make a part matter, rates), though (i. e. local even for fur tion and reserve consideration, has moved contin so sold dispose of sub ther uously in interstate commerce from order, questions in sequent other or issues points origin to the of deliv points of further in the main issue without volved city gates, subject ery sim hearing.” Chamber of notice or Houston reg App.) qualification. ilar But (Tex. v. R. R. Civ. Commerce Comm. charged by de gate rate to be (Tex. ulate (2d) affirmed Com. S.W. gas.” for the sale of interstate Mаgnolia fendant (2d) Pet. App.) 78 S.W. facts, admissions, and of these (Tex. 62 In view Edgar App.) Civ. Co. v. or Moreover, will consider proceedings, we (writ ref.). S.W.(2d) 359 appealable or question as a final der in proceedings and oth parties have court der, pass to a further consideration or as a final erwise treated order commerce issue. the interstate city fixing gate rate. Cer der the 32-cent order, tainly appellee appellee, has so treated the the conduct Whether pri- herein, appellee constructing transporting and if declared valid Pan- any gas line from the Texas pipe interest in order the com further vate may 'through and back requir field Oklahoma regard mission make with handle Texas, companies it is intended at ing where the various to into used, delivered, sold, and be pay city times to not in excess of the 32-cent 494 ed, make and with the attempt intention at all fraudulent times constitutes commerce, delivered, gas sold, that such would be in interstate such move Texas, used is interstate deprive the commission commerce. thereby Appellee is a price public gas utility for which Texas power regulate the cor- poration. sold, primary duty Its appear to be ma- is to may does not serve it be Texas citizens transportation gas produced of the with terial, such from because soil. corporate Texas Its as a mat- life being commerce gas is not interstate granted Except right to au- consideration of for the these ter of fact. premises. view, pipe With line 'construction of the but one thorize the practical conception boundary, be of Okla- can drawn from state within its involved, is, whole with the .transaction concern that homa has no whatever Hollis, produced town, Only Texas and one intended transaction. delivered, sold, to be Oklahoma, by pipe used line. in Texas is served is intrastate by commerce. mere It been as well served fact could have it, that through line from selected route pipe direct Texas Oklahoma as an aid to the is in no manner affected transaction

'such service its Texas by mere fact business cannot order in suit. The work a change in business, nature of the is served de- that such town nor does it affect stop, pipe character of the livered from line does busi- ness. The affect, transportation hinder, through or in manner inter- merely Oklahoma is rupt a method or interfere with the continuous flow of deliv- ery and is a negligible through from Texas Okla- circumstance in determining the Texas, homa and back into it interstate where commerce is- 178, Heyman sue. delivered, Hays, v. sold, 236 intended at all times to be U. S. 403, 35 S. Ct. 59 L. Ed. 527. and used. Law, 347, Supreme In 1 Court the fol- If, however, delivery lowing rule stated: “Interstate com- gas from through Texas Okla practical conception merce is a drawn Texas, homa and back into intended at upon from the course business a broad all times for consumption, be re consideration of substance the garded as commerce, interstate such trans whole transaction. Substance and not only action transportation affects fact, form controls. The actual not tech- gas only and as to considerations, governs.” nical the Texas consumers are interested. The many supporting The text cites cases Act, Interstate Commerce as now amend rule, holding in substance that what ed, expressly excepts from jurisdic is or is not interstate commerce is to be tion of the Interstate Commerce Commis determined broad consideration of regulation sion the interstate trans the substanсe of whole transaction. portation of “natural or artificial gas, by Pacific, etc., See Trade Federal Com. v. line, pipe partly by pipe part line and Ass’n, 52, 255, 273 U. S. 71 ly by USCA, railroad or water.” ti Pipeline L. Ed. Eureka Co. v. Hal 1, 49, chap. 1, tle (1) subd. (b). And' § 265, 101, lanan, U. S. 42 Ct. 257 S. 66 transportation regulation since the States, Swift & Co. v. United expressly excluded the- 276, 375, 398, 25 S. Ct. 49 L. statute, scope of the interstate commerce State, Dozier U. S. Ed. police power the state- is. within 965, Ed. L. S. gas- for which to fix rates S.) 264. (N. L. R. A. citizens, though sold to its even may indirectly or such rates incidental by appellee many cited Cases transportation ly affect interstate gas produced one state others hold gas, may interstate so affect com transported pipe line to another Simpson Shepard, same. merce and use is interstate com state for sale Ed. 230 U. Law, Supreme Court 367. But merce. (N. S.) 48 L. A. Ann. cited and none found no case is 1916A, 18; v. Kansas West Nat Cas. support holding us which would ural Gas S. Ct.. transportation private line L. R. (N. 55 L. A. purchased by produced appel- 1193; Pennsylvania Gas Co. v. Pub S.) through lee in Texas a corner of Okla Com., 252 U. 40 S. uninterrupt- back into lic Service homa and

495 434; gas of the L. Ed. Manufacturers’ Texas with it is mixed Ct. 64 which 215 (D. commingled. or C.) Heat Light & Co. v. Ott . 940, 944, F. 945 expressed by Doubt has been several gas produced courts as to whether in sev Texas statutes nor Neither the eral commingled pipe states and lines any interfere in manner rate order it which is sold is com interstate from Texas transportation gas merce. This seems have conclusion to Texas. through into Oklahoma hack package” been reached “original on- the only regulate and attempts to order doctrine, the holding courts that after the may price gas such fix for imported gas up bulk of the is broken for by‘appellee its va be sold in Texas to indisсriminate distribution individual Manifestly, companies. rious purchasers sale, retail the interstate delivery gas this circuitous route of Contrary commerce is at end. conclu through cannot and does not Oklahoma sions seem to nave been reached where police pow affect the exercise merely prac transmission immediate or er of fix Texas make or tically use, immediate direct from the seller gas rates for its sold to citizens. consumer, is involved. dif But a contends, Appellee however, there n question ferent arises where the trans question gas pro- can be no but that mitted from one state is stored and then purchased duced or it in Oklahoma might distributed as needs its afterwards transported to and sold Texas is develop; where, case, as in this up to moving in interstate commerce composition is and must be city gates de- it reaches the the time changed by extracting hydrocarbons and livery; that the amount the fact and that gasoline volatile ready before is for de it does not affect its is small livery and use the consumer. As to character, in- nor its commerce interstate gas, “original such transmission of transportation. do not sus- We terstate package” theory applicable is doctrine tain the contention. invoked, though and should be even gas produced The facts show transporting company, as did purchased appellee in Oklahoma distributing companies through the affiliated transported by pipe lines to Texas does its ownership intercorporate set-up, stock commerce when move in interstate actually produced gas sells the Oklahoma delivery. city gates of All it reaches the changed as ultimate consumers through is run gas coming from Oklahoma questions Texas. These have bеen either Texas, plants _in where the extraction passed upon anticipated and discussed hydrocarbons gasoline volatile heavier Pennsylvania in the following cases: Gas extracted, leaving are the residue Comm., v.Co. Public Service 252 S.U. composition, changed in its and with its 434; Id., 40 S. 64 L. Ed. Ct. N. heating changed. value lowered 260; E. Y. 122 N. Kan West v. through it run are Large amounts sas Natural Gas U. S. S. farm on the Miller stored in wells 564, 55 (N. S.) Ct. L. Ed. 35 R. A. con- plant extraction near the 1193; Landon, Public Comm. 268, Utilities as needed. tinuously, use later and for 249 U. particular gas has The Oklahoma Id., destination, but it is first city gate Flannelly, State v. Kan. plants, and extraction transported to the etc., Towers, Virginia, P. West Co. v. changed, it composition after A. 265. 134 Md. system ap- pipe line passed into other cases has been commingled with Texas it held that pellee, mixed and police power in the exercise of and redivided gas, divided state, authority impossible state commission system until it is to trace line rates, tip though even identify city gate fix the local burner volume at interstate commerce points At de- moved in delivery. various before where, particularly so pressure city gate, is reduced as livery its case, expand. The in the instant an affiliation exists be amount of gas allowed transporting distribut whole small and tween Oklahoma delivery companies. Thus the state commission ing and redivided before divided validly, process pre city gates, indirect various amount local dis- negligible comparison scribing reasonable rates with the amount

496 city- transportation fix the companies, control and small amount tributing Texas, sold, from in interstate com- Oklahoma where it is gas moved gate rate for to regarded commerce, be as interstate still merce. appellee’s predominately business is Tex- expressly did not The сommission business; police and it is within the pay companies to distributing require the power of the state fix reasonable rates rate, city gate of the 32-cent not in excess citizens, for gas may be sold to its necessary as a hearing was but since this though may indirectly even such rates disposition of the step to the preliminary incidentally transpor- affect the interstate not es pending, it was appeals and cases may tation of gas, such so affect inter- dispose of the sential Simpson state commerce in the same. v. order; single but it in a matter before it Shepard, 352, 729, 741, 230 U. S. Ct. S. complained may, herein of be if the rate 1151, 1511, S.) 57 L. (N. 48 L. R. A. not nor unreasonable held 1916A, 18, Ann. Cas. wherein it is held as requir unjust, subsequently make its order subject peculiarly follows: “Where the companies pay distributing not ing concern, one local its nature rate, further no in excess of such without belongs to the class with which state hearing. Houston Chamber of Com tice or appropriately in making deals Comm., supra. Manifestly, merce v. R. R. provision needs, for re- local it cannot be herein, rate is declared valid if the 32-cent garded as left unrestrained will no further interest can have individuals Congress because act- not may make any order the commission with ed, although may relation to have such a regard requiring the various interstate commerce as to be within the rate, companies pay excess of such power.” reach of the Federal pass reduction on and to the 8-cent This carefully doctrine has restat been Missouri v. Kansas ultimate consumer. ed in the case of L. recent A. A. Schech Co., 298, 44 S. Ct. Natural Gas U. S. Poultry Corp. States, ter v. United 544, Public Comm. 68 L. Ed. Utilities 1570, 947, 837, 850, A. R. L. Ed. 97 L. Landon, supra; East Co. v. Ohio Gas v. as follows: “But where the effect of in Com., S., 465, Tax 283 U. upon trastate transactions interstate com 1171; Pennsylvаnia Gas Co. Pub indirect, merely merce is such transactions Comm., supra; Corp. State lic Service power. remain within the domain of state v. Wichita Gas U. S. Comm. If the commerce clause were construed to 500; Dayton 78 L. Ed. P. & enterprises reach all and transactions Comm., 292 Public Utilities Co. v. which could be said to have an indirect ef 78 L. Ed. Galla upon commerce, fect interstate the federal Co. v. Public tin Natural Gas Service authority practically would embrace all the Comm., Mont. 256 P. 373. people, authority activities of the decision, however, Final in most of the state over its domestic concerns upon principle cases is rested that the only by would exist sufferance of the fed may regulate interstate commerce of Indeed, state government. theory, eral on such a the character of natural in the absence development even the of the state’s com by Congfess. of action As hereinabove subject mercial facilities would be to fed stated, Commerce Act the Interstate ex Simpson eral control. As we said in scope pressly excludes of the in Shepard (Minnesota Case), Rate .from transportation statute the terstate commerce 33 Ct. gas. The amount of the of natural (N. 1916A, 48 L. R. A. S.) Ann. Cas. price charged primarily intimacy 18: Tn of commercial rela tions, the determination of the state in which the superin much that is done in the consumed, police and it is within the may tendence of local matters have an in power make or state to fix reasonable upon bearing direct interstate commerce. public utility rates for furnished development of local resources and the to its citizens. Where the rates are reason extension of may local facilities have a according able and are fixed some very important uni effect communities form, fair, standard, practical they favored, con appreciable less and to degree stitute burden on interstate commerce. alter the course of trade. freedom of So, delivery gas by appellee if the local trade stimulate interstate com through merce, from Texas Oklahoma and back while restrictive measures within police into intended all times for power state, enacted ex consumption, production clusively respect and if business, to internal traffic, may distinguished from interstate tion regulate of the commission to in their reflex or indirect influence diminish rates. changing The order rate is such of the latter and reduce the volume arti therefore not freedom of violative of tra'hsported contract, cles into or out of the state.’ impairment obligation of claus- See, also, Pearson, 1, 21, Kidd v. 128 S.U. es of either the Federal State or Constitu- 6, 346; 16, 1, 19; 9 S. Ct. 32 L. Ed. Heisler v. Thom (Const. tions Tex. art. §§ Const. Co., 245, 259, 260, Colliery 1, 1; 260 S. 43 10, U. 14). U. S. art. cl. Amend. § 83, S. Ct. 67 L. Ed. 237.” right regulate The of state to that, It held “if it has also been practices public utility the rates and aof be commerce will assumed that interstate state, power is police referable to the affected, incidentally yet regulation be legislative and is a function which cannot charges gas of the ‍​‌‌​‌‌‌‌‌​‌‌‌‌​‌‌​‌‌‌‌‌​​​‌‌​‌​​‌​‌​​‌‌‌​‌​‌‌‌‌‌‍local of a natural com away by be alienated or contracted pany as a service corporation any agency political state or subdivision police power the state until within of the state. The Constitution and laws Congress Manufac sees fit to act.” part parcel of a state are a Ott, supra. Light v. turers’ & Heat Co. franchise, corporate terms of a power certainly regulatory And state’s right of the state in the exercise of its interfere is not denied where it does not police power change to franchise or con interstate flow of with or burden the free protection tract rates in the of the inalien gas. People’s Co. v. Public Natural Gas rights general able of its citi welfare 550, Com., 46 S. Ct. Service 270 U. S. Illinois, zens is settled. 94 U. S. Munn v. 371, in this L. Ed. 726. The rate order 70 113, 77; Ry., 24 L. Ed. Electric Milwaukee interfere, any manner re suit does etc., Com., 592, v. R. 142 Co. 153 Wis. transportation strain, or burden the free 491, 1915F, 744, N. Ann. Cas. W. R. A. gas Texas and Oklahoma. Okla between 1915A, 174, 911, Id., affirmed 238 U. S. transported may freely homa be. 1254; 820, 35 State Pub. S. Ct. 59 L. Ed. v. open market sold in the at Texas and Comm., 201, 204 497. Serv. 275 Mo. S. W. gas. Texas reasonable rate fixed for same exception The one re rule with that, legisla absent conclude We therefore gard fixing rates ordinances or contracts by Congress, since the Interstate tion period of time. a limited Southern expressly Act as now amended Commerce Chariton, Iowa 255 U. S. Electric Co. v. transportation of excepted regulation of 539, 400, Appel- 65 L. Ed. 764. S. Ct. by pipe lines” or artificial “natural long periods of lee’s contracts are all for jurisdiction Interstate from time, excep and do not come within Commission, the state commis Commerce case, where, instant tion. And as in the sion, police power of in the exercise between the there is an intimate alliance public gas regulate and control state the utilities, buyer seller, they dealing are not power fix reasonable had the length intercorporate at arm’s/ because of dis delivered rates transactions, they prices affiliation and city companies gate, al tributing public, fix are of no concern to the unless may interstate commerce be indi though they are not within the bounds of reason. thereby. rectly incidentally affected Co., Houston v. Southwestern Bell Tel. 318, 323, 486, U. S. 66 L. Ed. conclude that since the We further Missouri ex rel. Southwestern Bell Tel. Co. produced purchased amount Com., 276, 288, v. Public Service 262 U. S. transported appellee -in Oklahoma 981, 43 S. Ct. 67 L. Ed. 31 A. L. R. and, negligible, if in- and sold 807; United Fuel v. Gas Co. Railroad commerce, the 32-cent rate fixed terstate Kentucky, 300, 320, U. S. Com. in no manner interfered the commission 150, 156, 390, citing Ct. 73 L. Ed. with, impeded, or burdened the flow of quoting Chicago from & Grand Trunk Rail Oklahoma, be sold but such Wellman, way 143 U. S. competition with Texas and at the price approval; Ct. 36 L. Ed. fixed the com- same Smith Illinois Bell Tel. mission. U. S. Western Freedom Contract Issue. Distributing Co. v. Public Service Comm. Kansas, contracts The with the of distributing companies city for the Dayton 40-cent Power Light & Co. v. light Comm., made in the Utility were rate the Public gate 54 S. laws, jurisdic- and of 78 L. Ed. Constitution 4:98 tory Property. evidence is unreason rate Confiscation unjust controversy able and as to it. A constitutionality of immediately proper inter arises as to the yield a fair depends upon it will whether pretation given stat these rules and fu immediate present return for utory requirements as the burden and property used ture,- on the value quantum proof. con of an ac public service. absence tends that the rate be sustained must rate, question new tual under a test against attack return a reasonable whether it will afford it unjust, and because 'unreasonable heavily rests of The burden fact. one does not return on the allow a reasonable a state-made upon seeking to set aside one fair of it property, value is shown when invalidating plead prove to rate to upon be based evidence ad substantial Hyde, 275 U. S. Aetna Ins. Co. v. facts. commission, only duced before the and that 357; 174, Beau 440, 48 S. Ct. the evidence ádduced before commis States, Ry. mont, Co. v. United L. &S. W. may sion on the be hеaring rate consid 74, 1, 282 51 S. Ct. 75 appeal ered on to On the other court. Galveston, 262 U. S. Electric Co. v. Brush hand, appellee hearing contends that the Appel- 606, 443, 47 L. Ed. 1076. appeal to the of de court such issues is plead and matter of law lee failed as a novo, process requires that “due of law rate prove invalidating fact judicial submission to a tribunal for deter pass. suit; now question we to which mination independent judg its own Rate Sufficiency facts, Evidence to Show Legal of ment as according to both law Confiscatory or Unreasonable judicial the settled governing rules ac Unjust. tion and decision.” Otis Elevator Co. v. Comm., 90, 19, 21; Indus. 302 Ill. N. 134 E. le- question concerns remaining The Valley Ohio Co. Ben Bor Water v. Avon by sufficiency adduced gal the evidence of 287, ough, 527, 253 U. S. 40 L. S. Ct. 64 city gate the 32-cent appellee to show that Ed. Reagan v. Farmers’ Loan & and unreasonable rate was Co., 363, 1047, Trust 154 S. 14 U. to be so be- alleged unjust. rate L. Ed. 1014. regards rate-making As re- not afford a cause would power of commission, the Texas courts used value turn on fair adopted scope have this wider review. delivering gas to service Co., R. R. Comm. v. H. & R. T. C. amounted to city gates, and various 340, 352, Tex. 38 S. W. R. R. Comm. compen- just property without taking the 394, Neville, v. 403, Weld & 96 Tex. 73 S. law, in violation process or due sation 529; Gulf, Ry. W. &C. S. F. Co. R. R. v. Fed- Fourteenth Amendment Com., 338, 741, Tex. 113 S. W. 116 S. viewed When eral Constitution. 795;W. R. R. Com. v. San Com Antonio in favor of light presumption press (Tex. Co. App.) Civ. S. W. order, quantum validity of the rate (writ Id., 582, refused 114 Tex. 278 S. W. required to evidence and character 1115); Houston Chamber of Commerce presumption, the evidence overcome v. R. (Tex. App.) R. Comm. Civ. 19 S.W. clearly insufficient appellee was adduced 583, (2d) (Tex. affirmed Com. App.) 78 S. confiscatory or unreason- the rate show W.(2d) Ry. and Missouri-Kansas & T. unjust ground alleged. on the able and S.W, (Tex. Co. v. R. R. App.) Com. Civ. by the ratе fixed ‍​‌‌​‌‌‌‌‌​‌‌‌‌​‌‌​‌‌‌‌‌​​​‌‌​‌​​‌​‌​​‌‌‌​‌​‌‌‌‌‌‍commis 489, 494, (2d) affirmed Producers” Ref. Co. reasonable, valid, presumed Missouri, sion is K. & T. R. (Tex. Co. Com. just it is declared otherwise until App.) (2d) S.W. wherein court jurisdiction. R. R. competent making essentially court said: “Rate legis (Tex. Construction Co. function, v. Uvalde operates Com. lative prospectively. In order to App.) S.W.(2d) Neville, above; Civ. Railroad Com. v. Weld & in favor of the presumption overcome this Prentis v. Atlantic Coast Line 211 U. on the constitutional validity of the rate [210], [150], 53 L. Ed. confiscation, proof the burden ground and authorities there cited. And Dayton heavily upon appellee. P. & many rests the same true of regula rules and Comm., delegated powers tions within the Co. v. Pub. Utilities making 78 L. Ed. 1267. And commission. Rate 54 S. been dele being gated alone, set the rate as unrea Railroad Commission

order to aside requires regard and its acts in that article 6059 have unjust, sonable the force statutes, effect of subject show clear and and are satisfac satisfactory is un- only statutes evidence that such rate review to extent Similar, unjust reasonable and subject, with the as to it. import so are the same regarding statutes railroad rates have been 6657 and articles power which additional so construed the above-cited Texas cas- to determine courts upon the 6658 confer es, scope ju- and in other of- states. The rate, etc., or un is unreasonable whether a appellate dicial of ad- review of orders party complaining. just to the ministrative commissions boards or Benson, 285 U. S. The case Crowell usually by legislative controlled enactment. ih de- 76 L. 52 Ct. may hearing This be either de novo and whether scope of review termining the merely or it mean the correction of appeal from heard on will be new evidence nonpermissible error. Freund on Adminis- order, held as fol- a state commission’s Property, trative over Powers Persons : lows appeals 278. Statutes authorize enforce constitu- brought “In cases purely from matters administrative deci- power of judicial rights, tional usually sion or construed to discretion are necessarily extends United States nonpermis- only authorize the of correction questions, of independent determination error, merely sible or favor the cor- law, necessary to the both of fact scope of rective of review. Illustrative supreme function. performance of that question these matters issuing is the a of illustrative, the is of confiscation The case license, permit, or granting the of a or de- invariably de- almost conclusion ultimate termining public necessity whether a or questions of of upon decisions pending the opera- convenience exists for bus or truck to be held the owner has fact. This court In Legislature tion. such cases the does opportunity for submit- entitled to ‘a fair not vest in courts the administrative func- judicial tribunal ting that issue to license, determining per- tion of whether a independent upon its own determination mit, or certificate of convenience or neces- facts. law and judgment to both issue, sity merely gives should but the n n authority courts to determine whether the federal court “Assuming that the action of the administrative board or com- of these existence itself the determine for beyond (a) power mission is the it could facts, we jurisdictional or fundamental constitutionally exercise, beyond (b) its or Upon what record is question, the come to statutory power, upon (c). based sub- made? There is to be the determination stantial evidence. which seeks provision of the statute matters, As to such administrative such a case confine the cоurt legal findings by effect of the of fact deputy commissioner record before body approximates the administrative he taken. has to the evidence question law, finding of and a without evi * * * is, course, beyond power dence of independ- the essential think that “We body. the administrative Nor will courts judicial power the exercise ence of in such cases review conclusions of the ad States, in the enforcement of the United body upon conflicting ministrative based requires rights that constitutional evidence; if but will sustain its order based determine should such an federal court upon evidence. is the hold substantial Such upon own record the facts issue its Shupee ing in the case of R. R. Comm. v. it.” elicited before 295, App.) S.W.(2d) (Tex. Civ. affirmed See, also, Corp. State Com. v. Wichita Id., 521, 505, 123 Tex. S.W.(2d) Co., 561, 321, 290 U. S. Gas (Tex. R. Comm. Lamb App.) v. Civ. 500; Lehigh Valley L. Ed. R. Co. v. S.W.(2d) questions 161. But the of wheth 24, Com’rs, 49 S. Ct. 73 L. a rate er or unreasonable Prendergast A. L. R. v. unjust have been legal held to be Co., N. Y. Tel. justiciable questions fact, and of . as to 67 L. Ed. 853. scope judicial appellate which the wider adopted statutory by review seems to have been regards appeal As au Legislature and courts of this by state. The article thorized determine scope judicial limited review of rates rate order is unreasonable whether a by an administrative commission fixed Legislature manifest that unjust, Ry. (Peik Chicago, enforced etc. appeal first trial on intended for the be de 97) 94 U. new or additional evidence novo courts, abandoned, soon issue, but was pertinent because the com argument through process of trial and required plainant show clear and evidence entire despite fact that cases, that present rule several is to reviewed, consideration much will be the Constitution Amendment to Fourteenth Commission, findings of given be which, from con protects citizens arbitrary reasonable, neither if Legislature by an of the' fiscation act New to. capricious, will be deferred regula nor legislative to which a commission County Gas Queens rel. N. Y. & York ex was de delegated, tory power has been cit. McCall, loc. [345], 245 U. Bell Co. veloped. rel. Southwestern State ex Ed. 337.” 62 L. Sup.) (Mo. v. Pub. Com. Tel. Co. Serv. 425, 430. 233 S. W. v. Gal case of R. R. Commission In the W. 145 S. C., 105 Tex. veston C. ju scope But whether stat the similar which construed or the de novo hearing review dicial railroad authorizing appeals utes error, ap nonpermissible correction commission, and the fixed rates statutory ques merely peal corrective. is still complainant- requirement that court, if the order whether the tion is not satisfactory evidence “by clear show it, make the would originally before were and un unreasonable the rates are commis made order as was same appellate review scope judicial just,” the sion, only the commission whether but held to be as follows: evidence, reasonably upon sufficient acted right whether substantial foregoing guards the “The statute so infringed. complaining party has been improper Commission from interference evidence sufficiency determining the actions, regard the courts must review, judicial scope the wider under delegated when within the limits of question is whether there is not a the powers, being purpose a result of the order, support scintilla o'f evidence the justice parties, and do between all fairly and but whether the order is sub action, just in having resulted and correct evidence, supported stantially by the when satisfactory until it be shown clear and presumption in the in light viewed the be R. R. Commis evidence otherwise. order, quantum the favor of and. 409, Neville, [394], & Tex. sion Weld 96 required to character of the evidence over language 529. ‘clear and 73 S. W. Particularly presumption. come such satisfactory power the evidence’ limits making rates or regard with this so rates, etc., setting to cases courts aside rates, legislative are and division of which may by evidence it in which be established character, necessarily judicial and not in the leaves no doubt which discretion, imply range legislative that is un mind the rate or rule judicial recognize, with which the courts must v. Chown just and unreasonable. Willis except they where interfere which cannot 395, 617, 59 Am. St. 40 ing, 90 Tex. S. W. statutory rights are or vio constitutional Rep. this attributes It that true appeal the court The reason for lated. high the de work of Commission only is well stated the being corrective plain language verity; is the gree of but it Case, Telephone supra, as follows: Bell doubt, pro law, is, a wise declaring “The statutes rates fixed the vision. Commission prima to be facie reasonable language “It is not within nor presumption until that is removed one law, spirit of the which authorizes seeking their annulment but a proper are to review courts the action of the Railroad recognition power purpose of Commission, that court should inves- Commission, without which its acts adopted by tigate the methods the Commis- empty declarations, would mere be whose fixing rates, sion in nor the motives or operation would, instance, effective in each purposes prompted such action. The judicial approval. have to await Such a upon rights and its of rail- effect .result conception powers of the nature and shippers ju- roads and mark the limit of wholly Commission is unauthorized. Or inquiry.” dicial ganized, creating as the statute the Com statutory require clearly declares, The rules and purpose mission for the genеral ap are in nature and their ments supervising regulating public service plicability necessarily depends upon courts, corporations, reviewing can be actions, proceed facts in each case. No rule laid upon assumption apply to rates which will uni experience down as of the members of the Com In formly to all of utilities. deter especially sorts mission has fitted them for deal mining powers whether rate ing questions concerning with may unjust because corporations; and, unreasonable and activities of such return, property »The yield proper fair value future in the the. by appellee used public fair value service is the of calculation basis by. repro deducting determined from the public service. in the property used may depreciation duction cost be. new the accrued one return for a fair What property. of such was en another, Since depending inadequate for gaged in integrated produc monopoly, business of circumstances, competition ing, highly purchasing, transporting, selling necessity, speculative natural hazards, locality, distributing companies enterprises, profitable city at the gates case the of some instant 300 cities and And where as risk. Oklahoma, towns in Texas and the conclusion it became conflicting and evidence is necessary prop this or to allocate respect segregate therefrom to be drawn erty used in speculative, Texas as well as that used item uncertain conjointly states, gas rates in both in order de interfere should not court termine experience property the fair value of the used any actual in advance of public service, rates. in the Texas new the annual de practical of such result Co., preciation thereof, operat U. and the Texas Gas Willcox v. Consolidated ing expenses 19, 192, 382, making revenue. S. Ed. 48 L. proof 1134, of fair 1034; value of the (N. S.) R. A. 15 Ann. Cas. segregation property, appel- both the commission Galveston, Brush Elec. Co. U. S. calculations, estimates, lee used 1076; opin 67 L. Ed. N. P. expert ions of Ry. Dakota, engineers. accountants and Co. v. North U. S. However, different segregation methods of Rapids 30 S. Ct. 54 L. Ed. Cedar adopted by parties. were Light Rapids, The method Gas Co. v. Cedar of segregation adopted by City 32 S. Ct. 56 L. Ed. provided for Co., operations allocation to Telephone Louisville v. or to intrastate commerce the City value of.all physical located within the bound Knoxville v. Knoxville Water U. ary of Texas. The short section 53 L. 371. Es line from Texas Panhandle pecially statutes and field across is this true where our the corner of Oklahoma and back complained provide, here into order opera Texas was also kept open allocated to Texas proceeding shall be that “this adjustment tions. Gas sales proper.” Im was. made for such orders as wherein operations Texas or intrastate mediately upon question being the rate charged were fixed, with the net appellee applied courts to re amount of to the produced gas years’ Oklahoma for the six enforcement before actual test strain its (1929-1934) period accounting adopted by had under was the reduced rate. charge against the commission. No Okla hearing On the before the commission operations homa or interstate made was appeal court, as well as on to the five for the use of the transmission lines wei;e primary factors considered as es- equipment Texas, within the effect of sential correct dеtermination of- give transportation which was to free whether the rate was or un- produced of all -gas. Texas Oklahoma unjust reasonable and because it did not expenses Texas and Oklahoma and rev allow a reasonable return on the fair value general enues were allocated in accord property appellee of the pub- used segregation physical prop with of the delivering lic service of gas natural method, erties. Under this the fair value city gates, various as follows: property undepreciated of the used in Tex 1. present What was the fair value of $40,256,862.39, was public service ac property public used in the cording opinions calculations and ? service experts. deducting the commission’s After expenses operating depre the ciation, annual 2. What was a reasonable annual allow- there remained for the last two depreciation property? ance of such period, years accounting being of reasonably 3. What were the necessary years period, two lowest revenue of the expenses? operating yield which would Texas net revenue a re 4. What were the reasonable operating per per cent., of 6.74 and 6.76 turn revenues ? method of respectively. segregation materially 5. by appellee What was a reasonable different. rate of used re- property segregation, on the all turn used? method of its Under by appellee in purchased lee did not gas produped quantum adduce the and char transported proof acter necessary Texas Panhandle field and to establish the invalidity pipe confiscatory, corner private being lines rate as across.the sale or unjust. Simpson into Texas for unreasonable Oklahoma and back v. Shepard, use, produced gas and all Oklahoma (N. to interstate commerce. 48 L. R. S.) were allocated A. Ann. 1916A, 18; Louis, Cas. determina Allen The allocation was made I. & St. Co., M. specific gravity tion of the Okla 57 L. one Ed. gas homa Texas Panhandle on the Smith Illinois Bell Tel. hand, gas U. Texas with which West commingled in lines on the oth er hand. It seems that the Oklahoma Clearly the theory difference in as to specific Panhandle had about the same gas produced purchased by whether the gravity. Appellee deter claimed that appellee in the Texas Panhandle field and mining specific gravity in, transported by private pipe line across line, any particular pipe percentage Texas, corner of Oklahoma and back into ’ of Oklahoma-Texas Panhandle could where it was intended at all times to be be determined and allocated to that line. used, sold and accounts for most of the im- Appellee operating expenses allocated and portant difference respect to the fair revenue between the two states sub property value of the pub- used in Texas stantially the same basis as used for the service, lic thereof, depreciation annual property. expert employed by appellee An particularly operating as to the ex- property found the fair value of used penses instance, For revenues. ‍​‌‌​‌‌‌‌‌​‌‌‌‌​‌‌​‌‌‌‌‌​​​‌‌​‌​​‌​‌​​‌‌‌​‌​‌‌‌‌‌‍service, upon repro Texas based Panhandle cost 2 cents new, depreciation, duction cost less to be well; thousand cubic feet at where- $38,350,882.32. He excluded from this cal as, gas from other sources or fields all n equipment culation used 10"cents thousand cubic cost from 6 to handling gas. the Texas Panhandle field advantage in favor of feet. property to Texas he allocated If had from intrastate Com- excluding prop the fair value and considered apparent. The cost of the 2-cent merce is have undepreciated, there would erty as $125,000 only annually gas would add about his find very little difference between been expenses, operating according to to Texas by the that found value and ing of fair 46; whereas, Appellee’s ac- Exhibit No. However, experts. in all commission’s exhibit, cording which shows same calculations, estimates, and their elaborate percentage of the total cost of employed by ap- experts opinions, the transported from the Panhandle field and the Texas Panhandle pellee allocated sold in the Texas revenue would have held that commerce. We to interstate pe- for the have been increased 1929-1933 move in interstate coiii- did not this merce, $1,500,000 annually; riod more than and necessarily follows that it and op- proper show that if other calculations upon experts based testimony of the expenses erating charg- were included and assumption that such did erroneous gas, against ed Panhandle still proved noth interstate commerce in move profit in more than in other was Appellee offered to this ing material case.. by appellee either in Oklahoma handled upon segregation proof correct other no advantage or' Texas. Thus the double to property, of and or allocation appellee freeing in this from intrastate refusing in the commis erred trial court regulation commerce and from state is for an instructed verdict and motion sion’s shown. declaring ap the rate order judgment for every respect. in be valid peаled from to appraisals The also differ toas va upon appellee by to was show The burden units of transmission rious costs, construction satisfactory proper evidence large clear and in due measure to the differ of interstate and intrastate segregation theory segregation. they in ence Where business, appraisals to the same properties and and show the relate to way comparable. every Appellee property employed in of the in intra are value experiences actual cost or commerce and the com used arbitra business state cent, possible rily per as receive under added contin pensation it would the rate only gencies. The commission allowed complained of such valuation. ac Hav experiences, proper segregation make which were to tual cost substan ing failed testimony properties, appel- by the and intrastate tiated contractors en- interstate deprecia- general construc- which in addition the annual to gaged excavation merely $831,946.08, tion of most evidence allowed 6 At also tion work. depreciation opinions annum the presented the difference accumulated reserve. experts. The and estimates of well-qualified Manifest- calculations equally evidence, ex- applied Texas and Okla- ly actual both absence rate, properties, meet the homa since such calcula- does not perience under necessary contrary proof tions so and estimates are quantum character experiences being company, they con- do not as rate order to set aside the quantum proof as to meet fiscatory unjust character of оr unreasonable required respect judicial appellate with appellee. utility review of rates fixed an adminis- greatest difference between The trative Dayton commission or board. P. & proper parties to a allowance relates Comm., supra. L. Co. v. Pub. Utilities Appellee depreciation and amortization. With respect operating expenses, ex- for both Texas Okla estimated that cept items, as to a few controverted lease properties, homa exclusive revenues, respect there is sub- requirement for depletions, the annual hold testimony stantial difference in the as to depreciation was $3,¡465,- and amortization totals both Texas and for the Oklahoma ap- estimated 123.36. The commission years However, period. the accounting depre pellee allowed for annual should be controversy proper same arises as to a prop of its Texas ciation and amortization erties, segregation expenses of such and revenues leaseholds, sum of exclusive to each already state. This difference has $831,946.08. experience The actual pointed out, been since appellee failed seven-year period shown for the as proper to make segregation expenses books, its follows: revenues, prove it failed its case. 1, 1927, inclusive Dec. “Jan. Many operating expense items of are so contrary experiences ap- actual pellee, ór are so large as to be excessive on their A face. few of these will ad- showing verted to proving too appellee’s much experts proved nothing. Taxes. Federal item of between three four An year aside dollars a is set hundred thousand depreсiation it shown that Thus and oth experts as federal income experts specula- appellee’s allowance paid company has never er The taxes. tive, experience, at war with actual tax, liability 'and its therefor income $2,414,102.90 plainly Against excessive. only testimony in litigation. now seven-year period as evidenced amount that regard the record with books, experts an- appellee’s estimate paid should be for taxes ap- depreciation nual and amortization at corporate hookup department of the $1,000,000 per year proximately more. $50,000 per testimony around annum. respect proof, to such held With Corpora that the Lone Star Gas indicates Ill. Bell Tel. the case of Lindheimer tion, company, paid holding all of 151, 54 the income táxes for all its affiliated 1182, that: companies; if that but it be assumed op- company “The has had abundant appellee payment chargeable back to its contentions. In portunity to establish company, proper amount would not be so, company has sub- seeking do $50,000 per year, more instead than computa- estimates and mitted elaborate tions, three or four hundred thousand dollars mark. but these have overshot experts. charged against it Galves much, they intend- Proving fail too Galveston, ton Electric Co. v. * * * ed effect. 388, 42 calculations which are at war “Elaborate , Management Fees. realities are no avail.” with adopted sinking The evidence shows that the hold The determining corporation charged appellee method for de- ing fund annual has man provides $78,000 preciation, which for an annual from ranging agement fees undepreciated base; $100,000 per year. ap- return These fees around persons, re- quantum four pellee were earned and character of evidence claims Mitchell, Simp- quired. Crawford, Gregory, and or the oth- They of one son. are directors Leases. Canceled and Surrendered corporate corporations constituting er undisputed shows Simpson seems The evidence set-up referred to. above appellee, that which sure purchaser as a has reserves to have rendered service pipes adequate years to come. It has pipes appellee. The item for for expenses. gas in appellee’s largest gas reserves in the fields greatest was the Simpson appellee ren- be Beginning The that if world. evidence shows $200,000 any purchasing pipes gan per an- charge dered off around service discount, leases. that no such discount would be num for canceled and surrendered reserves, allowed, any appellee In longer large gas and that view of its admitted pay quoted prices like years, would have to which will last for view any Manifestly judicial one else. this service is the fact that is a matter of Besides, the future. anything knowledge gas by multiplied not worth mil prior daily he rendered the services lions in being cubic feet wasted management originated, market, when the fee was because of the lack of think we compensation required and no was before large unjustified. these charges are The management time. Other fees were company commission allowed the for its fees, fees, accounting gas produced charged, legal company from owned wells Ap- supervision fees. engineering prevailing price. They the full eliminated capital pellee with a organized production expenses, drilling was ex and tool $2,500,000, paid was pеnses, dry holes, stock of half of which and canceled and sur leases, leases owned the incor- with rendered adopt because the method porators. capital then stock allowing Since ed of price the full prevailing field $12,500,000. It been increased to borrowed concurrently nec paid to other owners $17,- open on its note or account unsecured essarily eliminated such items. The own 600,000 corporation, holding from the ers of other wells bear all of these ex $19,- amounting which debt others penses, price and it would seem that 000,000 gradually have been reduced. The paid other owners includes all of these money holding corporation borrowed this expense. items West Ohio Gas Co. v. per charged from to less than it Comm., Public Utilities 128 Ohio St. ½ appellee. ought This to be sufficient man- event, any 191 N. E. 105. At if fees, agement any if should be demanded were charge entitled to some for leasehold corporation. holding holding The depletions, clearly the amount claimed was corporation paid large has been fair large too and excessive. The burden was annually dividends on the stock of upon appellee to charge show that the addition, owned it. some of the reasonable. holding company paid officers are salaries Regulatory Commission and General by appellee affiliated Expenses. as to the reason- companies. proof The fee management ableness experts employed by satisfactory, required to charged $400,000 clear in excess of annum rule. the aforementioned regulatory under general commission and ex penses' proof did not show the rea Expenses. Business New expense. sonableness item oí such advertising or new business These was some character litigation There $126,000 $81,000 vary expenses present Oklahoma and this litigation. If Appellee does business with the annum. expense the entire spread should be over a corporations. Besides sale of the period years affiliated ap- since when the corporations gas, pellee began the affiliated business, industrial to do it would tip local $16,000 the domestic and burner sell to per year. amount to some A wit Appellee proved only a small consumers. appellee ness for testified that such annual advertising, nothing propor is, amount amount would be reasonable. It there experts charges fore, $50,000 tion to the made per year manifest that or bet items, Except expenses their account. a few ter for such is too much. Tliis showing no much advertising began 1909, made how it defendant business in with a distributing compa comparatively capital did for the affiliated small stock. It has $100,000 ; certainly capital $12,500,000, nies and this ex annual now a stock of which supported pense advertising fully paid up. not approximately It owes Galveston, 258 Galveston Co. v. Electric $17,600,000; in Oklahoma properties it has 678; Ed. $75,- 66 L. U. S. S. Ct. value aggregate Texas of the (D. C.) Id. 272 F. 147. public'service 000,000. Allocated to $40,000,000. Appel- property valued at Rate of Return. only covering about lee offered evidence appellee It is the contention of fixing years preceding next 3½ rate as to its cent, jury may per have found that 6a These expenses. operating confiscatory rate of return was or unrea years, depression calculations covered which, unjust. sonable and The of confisca issue course, his- in its are the worst tion jury, was not submitted to year shows last tory; and even at that the we are clear in the view that evidence It is upward trend in its business. by аppellee jury adduced did not raise time, any nor lost shown have money,at cent, question per as to whether a 6 rate upon return to have failed to earn a fair confiscatory of return was either or un Texas, not even property allocated to unjust. reasonable and The commission year the most ab- for the which was cent, found per that a 6 rate of return on of tem- standpoint from the normal one property the fair value of the used in the perature depression. Its ex- and financial public service, after allowing for all rea perts property is almost testified that cent, expenses operating and for de very per perfect. From the be- sonable. preciation amortization, sufficient. favored, was enjoy- ginning appellee has been heavily The upon appellee burden was monopoly rights of ing a clear with all the satisfactory show clear and evidence nothing in the domain. There is eminent that such rate of return was experience history appellee’s business unjust. or unreasonable and To meet this justify which would exorbitant “by required test establish was sought in this large charged account .to be evidence which leaves no reasonable doubt expense. item judicial mind that the rate or rule is Going Value. Comm, unjust R. unreasonable.” Galveston, C., supra. appel- This C. of arriving at its rate base In testimony lee did not do. It offered the $7,000,000 of more than an item included testimony an interested witness and the ex has not Appellee “going value.” experts employed by it to the effect that in incep on account perienced losses cent, cent, opinion per per their an 8 or 10 usually included costs, which are tion rate of return would be reasonable. A dis exception of а few With going value. expert pres interested testified that under of all kinds items, inception costs small cent, per ent cost business conditions rate reproduction been included have (cid:127) entirely return fair and reasonable. Appellee’s business was new calculations. merely presented This evidence the differ business. going valued as an assembled experts, opinion manifestly ence of always profitable, been The business opinion opinions their no been inception have doubt cannot be sub costs finding stituted for heretofore of the commission long paid out of rates since cent, per that a 6 reproduction rate of return fair charged and collected. reasonable, finding the in value, was based new as determined cost upon fact, case, expense, per substantial evidence. for all overhead stant allows cent, per which, operat legal statutory annum is the together with the reasonable state, allowed, ap- rate of fully compensate interest ing expenses offered no evidence development costs which have which even tended to pellee for all cent, incurred, items show that a 6 ample are to cover rate of return would been part property, confiscate forming of what or was unreason entering into and unjust. And “going concern value.” able or since rate order is referred to clearly show the was calculated the fair value of the following authorities public service, property used in the impropriety allowing going concern val after very allowing operating Los ex ue under the facts instant case. Corp. penses depreciation v. R. R. and amortization Angeles Gas & Electric Com., allowances, why reason 77 L. exists the 6 return shоuld be declared Columbus Gas & Fuel Co. v. con Com., fiscatory; but, contrary, it should Pub. U. Dayton held to allow a fair and reasonable 78 L. Ed. 91 A. L. R. rate of Com., Utility Light 292 return on the Power & Co. v. dedicated to appellee. U. service 506 cent, speculative; this true particularly is has been return rate of A 6 case, where, it be shown in the if cas instant following in held not experience would not Co., in actual that the rate Gas v. Consolidated es : Willcox was con- afford a 192, Ed. reasonable return 53 L. 50, 19, 48, Ct. 29 S. U. S. fiscatory, make another appellee is free to 1134, Cas. 15 Ann. 382, (N. S.) 48 A. L. R. application the commis- v. for relief before Light Co. Rapids 1034; Gas Cedar 670, Ct. sion. 655, S. Rapids, 223 U. S. Cedar Co. v. 594; Moines Gas 389, Des L. Ed. declaring the Judgment of the trial court 172, Ct. 153, 35 S. Moines, 238 U. S. Des re- unjust and rate to be unreasonable also, See, Stanislaus

811, Ed. 59 L. by the injunction granted versed. C. River King’s Joaquin & County v. San city dissolved, gate trial court 241, 216, 201, 24 S. Ct. Co., 192 U. I.& commission fixed rate of 32 cents v. Co. 406; Gas West Ohio Ed. 48 L. reasonable, just, and valid declared 301, 191 Com., 128 St. Ohio Utilities Public every particular. City Capital 115; rel. 105, ex State N. E. reversed; injunc- trial court Judgment of Comm. Service v. Public Co. Water tion dissolved. 446, 524, 252 S. W. Missouri, Mo. 454-459. Appellee’s On Motion Rehearing. the view also clear are appel- We On motion rehearing for a utility fixes a state where lee makes the claim that the record does re rate of a 6 allow as to findings rate so not sustain some of our of fact. public property used turn on discrepancies Most of the asserted relate to not, a fair prior to service, will courts property the valuation in the used void, unless same rate, declare public service, such necessary op test of alleged or to is confisca establishes erating expenses. evidence heldWe that as a mat Denver law. a matter invalid as tory or ter of law failed ‍​‌‌​‌‌‌‌‌​‌‌‌‌​‌‌​‌‌‌‌‌​​​‌‌​‌​​‌​‌​​‌‌‌​‌​‌‌‌‌‌‍to establish States United v. Yard Co. Union Stock satisfactory сlear and evidence the ultimate 753; 735, 752, v. State (D. (2d) F. C.) issue, fact to wit: Whether the rate fixed 524, Com., 252 S. 298 Mo. Service Public the commission was so low as not af Co., 212 446, 458; Water Knoxville v. W. ford a reasonable return on the fair value 371; 148, U. S. property public used in the íexas v. Public Utilities Co. Gas Ohio Appellee West service. was afforded a seven N. E. Comm., 128 Ohio St. hearing months’ before the commission and Cedar Rapids Light Co. v. Gas Cedar a three appeal months’ trial on 655, 666, 32 S. Ct. Rapids, 223 U. S. segregation court. It made no as between v. Consolidat 389, 56 L. Ed. properties Willcox its Texas and Oklahoma ed operations; Gas prove and did not the fair 1134, 15 S.) (N. R. A. 48 L. 53 L. property value of the used in the Texas Lou Railroad Com. Cas. Ann. public question service. The of the value Co., 212 Tel. Tel. & isiana Cumberland property determines the reason L. Ed. 577. rate, ableness probably, analysis, adequacy ultimate of service and estimates, opinion calculations, principles financing. Valuation of such on the effort experts a studied show of its service is in the main a charge large part items as opinion, matter closely of estimate or expenses depreciation, operating regards resembles discretion as finding experience the actual of the com- war with by an of value administrative commission. proof pany, and we find no which would event, any statutory a scientific or the trial court to submit authorize is- unattainable; standard of absolute value is jury, but find that sue uncertainty value, and because of this wholly proof failed to meet the burden of except clearly where the evidence shows it, show placed clear and valuation, gross mistake, over or under satisfactory evidence that the rate was inequality, appraisal, fraud in the confiscatory, unjust, and unreasonable аs finding of value administrative com Especially is this true view of the to it. given finality. generally mission is Es experience actual rule that absent under pecially is this the rule absence of an fixed, will the rate the courts not disturb a the new rate. In addi actual test under conflicting, where the evidence is so original cited in the tion to- the authorities drawn and the conclusions to be therefrom following: People opinion, respect item this or that uncertain and see 81; Taylor Assessors, Board of 39 N. Y. 350; (C. v. L. N. 88 F. A.) & R. Co. C. Chicago Burtice, v. 24 Ill. State Rail Cases, road Tax 92 U. S. Merritt, Hilton v. U. People State Com’rs, 89 N. Board of Tax Y. 196 N. E. 581.

Motion overruled. Synnott Campbell, IT. and Hatchell & J. appellant. Longview,

all of McCraw, Atty. Gen., William and Tom al. CO. STATE et REFINING ACME Rowell, Jr., Gray, D. Asst. D. Archie No. 3252. Gen., Attys. appellees. Appeals El Paso. of Texas. Court Civil Sept. 1935. WALTHALL, Justice.' December, 1934, day 15th On .the state of Texas Railroad Commis- Texas, acting sion of behalf in their Texas, Attorney then filed General of .the special this suit district court county, Tex., Gregg against Re- the Acme fining Company, penal- to recover certain stated, prayed petition ties their temporary that the court issue a writ injunction restraining the defendant Acme Company pur- Refining (a) from: Further chasing, transporting, handling crude petroleum oil obtaining without first a ten- authority der or other written from the required Railroad Commission of February 15, 1933; (b) its order of fur- handling, purchasing, transporting, re- ther marketing, oil fining, processing crude complying with order without April Railroad Commission dated requires filing which said order monthly reports; daily (c) shipping shipped causing transported to be products petroleum of crude oil without permit obtaining covering first or tender required shipment the order of the Railroad Commission of Texas dated February lengthy out, petition is and sets sub- stantially, that the defendant Refin- Acme ing Company, though by its authorized only manufacturing to transact charter purchase goods, and sell business and wares, pur- merchandise used for such engaged establishing in fact poses, is maintaining oil' op- business and

Case Details

Case Name: State v. Lone Star Gas Co.

Court Name: Court of Appeals of Texas

Date Published: Jul 10, 1935

Citation: 86 S.W.2d 484

Docket Number: No. 8238.

Court Abbreviation: Tex. App.