Title: Northern Natural Gas Co. v. Republic Natural Gas Co.

State: kansas

Issuer: Kansas Supreme Court

Document:

172 Kan. 450 (1952)
241 P.2d 708
NORTHERN NATURAL GAS COMPANY, Appellee,
v.
REPUBLIC NATURAL GAS COMPANY, Appellant.
No. 38,449

Supreme Court of Kansas.
Opinion filed March 8, 1952.
*451 George Siefkin, of Wichita, argued the cause, and George B. Powers, Samuel E. Bartlett, Carl T. Smith, John F. Eberhardt, Stuart R. Carter, and Robert C. Foulston, all of Wichita, were with him on the briefs for the appellant.
Mark H. Adams, of Wichita, argued the cause, and Lawrence I. Shaw, E.M. Petersen, and F.V. Roach, all of Omaha, Nebraska, and Charles E. Jones, William I. Robinson, J. Ashford Manka, and Orval L. Fisher, all of Wichita, and Auburn Light, of Liberal, were with him on the briefs for the appellee.
The opinion of the court was delivered by
HARVEY, C.J.:
Plaintiff brought this action under our declaratory judgment statute (G.S. 1949, 60-3127 et seq.) seeking a binding adjudication and consequential relief respecting a contract between the parties. Defendant answered denying the interpretation of the contract alleged by plaintiff and that plaintiff was entitled to the relief sought, and prayed that the action be dismissed. It also filed a cross petition for a money judgment, and issues were joined upon the cross petition. A trial by the court resulted in judgment for plaintiff and defendant has appealed.
Plaintiff, hereinafter referred to as Northern, is a corporation organized under the laws of Delaware and authorized to do business in Kansas. It is a Natural Gas Company, as that term is defined in the Act of Congress called the Natural Gas Act, 15 U.S.C.A. 717. Its business is to purchase or produce natural gas in one or more states and convey the same into other states for distribution and sale to ultimate consumers. Its pipe lines begin in the gas fields of Texas, extend north through the Hugoton gas fields in Kansas, and north into Nebraska and eastward to Omaha and to areas north and east of Omaha.
Defendant, hereinafter called Republic, is a corporation organized under the laws of Delaware and authorized to do business in Kansas and is a gas producing company. The sole business of Republic is to produce gas which it sells to Northern. They commenced business about the same time in 1930, Republic producing gas which it sold and delivered to Northern. In 1930 a contract was entered into between the two companies with those purposes in view. We are not concerned here with that contract. It is mentioned only as a part of the history of the dealings of the parties. It was modified from time to time, and under date of December 21, 1945, the parties executed the contract here involved. From the experiences of the parties this contract was designed to cover everything of importance with respect to their dealings. The part of it *452 which appellant thought this court ought to have before it is set out as Appendix "A" to this opinion.
We are concerned here primarily with the business of the parties through the fiscal year from July 1, 1947, to June 30, 1948. The trial was held before the Hon. H.W. Stubbs, a member of the bar of this court, sitting as judge pro tem, selected because of his extensive practice in the law of oil and gas. The trial was held in June, 1950, when parol testimony and documentary evidence were received in evidence. Counsel requested findings of fact and conclusions of law and desired to present briefs, which they did later. Thereafter the court filed a memorandum opinion together with findings of fact and conclusions of law. These so thoroughly treat every feature of the case that we think it pertinent to copy or summarize them quite fully, as follows:
"MEMORANDUM OPINION
"FINDINGS OF FACT
"It also provided:
"3. In addition, the contract further provided:
"CONSTRUCTION OF CONTRACT
No. 1: Annual Minimum and Maximum Volumes.
"No. 2. Tender and Delivery of Gas.
"No. 3. Maintenance of Wells.
"No. 4. Failure of Northern to Take.
"No. 5. Default, Right of Cancellation.
"CONCLUSIONS OF LAW
I.
II.
III.
*469 IV.
V.
VI.
VII.
"Dated this 5 day of January, 1951."
In due time Northern moved for the modification of the wording of two of the findings of fact. This was sustained. Republic moved to modify the findings of fact, the construction of the contract and the conclusions of law in many particulars. This was allowed in a few minor particulars and overruled as to most of them. Republic also moved for a new trial, which was overruled. Judgment was rendered for plaintiff in harmony with the court's modified findings of fact, construction of the contract and conclusions of law. Republic in due time filed a notice of appeal from all adverse rulings and listed numerous specifications of error. In this court Republic presents the questions involved for our determination as follows:
The gist of this lawsuit is embodied in the first question with its subdivisions, stated by Republic to be involved here. The question is founded upon the contention that Republic may lawfully produce and sell all the gas it can produce from its wells so long as it does not produce from any one of the wells, or all of them, more than three times the amount allotted to each well, or all of them, by the state corporation commission. This contention is erroneous. It is predicated solely upon the latter portion of paragraph "p" of the Commission's basic order of March 21, 1944, quoted in the trial court's findings. It ignores the first part of the same paragraph, which as applied to Republic, reads:
This is the basic rule which governs Republic's operation of its wells. This is followed by a proviso:
and report that fact to the Commission. There is no contention in this case that any increased production was allowed by the director by virtue of this proviso. It is true that the latter part of the paragraph provides in substance that a well which produces more than three times the amount of gas allowable to it shall be shut in. Perhaps these provisions were inserted because of the difficulties operators would encounter in attempting to hold production *471 of their wells to the specific allowables named by the Commission and to afford a workable leeway. Certainly they were not designed to nullify the provisions in the earlier part of the paragraph. Apparently it is the contention of Republic that the only penalty it may sustain for overproduction from its wells is to have them shut in. That view, however, is inaccurate. There may be penalties (G.S. 1949, 55-708) or injunctions (G.S. 1949, 55-709). And, aside from those provisions, clearly such conduct is not in harmony either with the statute (G.S. 1949, 55-703) or with the rules of the Commission which it is authorized to make under the section last cited and G.S. 1949, 55-704.
While but two paragraphs, "n" and "p" of the Commission's order of March 21, 1944, were copied in the trial court's findings, the entire order was in evidence. We need not quote from it at length since the parties are familiar with it and it is available to anyone interested. It describes the Hugoton gas field much as was done in Kansas-Nebraska Natural Gas Co. v. State Corporation Commission, 169 Kan. 722, 724, 222 P.2d 704; 170 Kan. 341, 225 P.2d 1054, to which reference is made and in which case Northern was a party. It is a large field, a common source of supply, and many producing wells have been drilled into it by various gas operators. Acting under the state's police power our legislature in 1935 (Chap. 213, Laws 1935) enacted a statute applicable to the Hugoton gas field (now as amended, Chap. 55, Art. 7, G.S. 1949) relating to the production and conservation of natural gas. Its principal purpose is to prevent waste, which it undertook to prohibit. The state corporation commission was vested with jurisdiction over the subject matter of the act. One of the problems to be regulated was orderly production as between operators so as to enable each operator to produce his fair share of the gas from the common pool. To accomplish this the commission, after extended study and repeated hearings, made its basic order of March 21, 1944, which has been amended in a few details not here important. Under this the commission from time to time fixes allowables for the production of gas from each well, and group of wells, in the Kansas portion of the Hugoton gas field. It is essential that operators in that field "limit their takes of gas to the quantities fixed in the schedule as the allowable production" for each well or group of wells, as nearly as that can reasonably be done, as provided in paragraph "p" of the basic order; otherwise, equitable production cannot be maintained.
*472 Able and industrious counsel for Republic have argued the first of the questions they state as being involved in this appeal under several subheads, each of which is predicated upon the theory that the latter portion of paragraph "p" of the basic order allows Republic to produce gas from each of its wells to the amount just under three times the allowable for such well. The theory is wrong. The allowable for each well is the amount stated by the commission as allowed to it,  not 2.99 times such amount. We have given careful study to the arguments of counsel on this question and to the authorities cited by them, but see no necessity for an extended review thereof. We are satisfied with and adopt the findings of fact, construction of the contract and conclusions of law relating thereto made by the trial court.
In view of what we have said upon the question which is the gist of this lawsuit the second question stated by Republic as being involved for our determination becomes an academic one. Counsel for appellant in their brief are frank enough to say:
In this situation we find no necessity of passing upon that portion of the trial court's ruling which pertains to that matter. When a situation arises which the parties think calls for the construction of this provision of the contract it may be done upon the facts pertaining thereto.
The judgment of the trial court is affirmed.
APPENDIX "A."
"(Immaterial parts omitted.) GAS PURCHASE CONTRACT.
"Section 2. As to Gasoline Extracted (omitted).