Court Opinion

ID: 9624016
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:48:44.520856+00
Date Added: 2024-06-11T18:05:37.787758
License: Public Domain

WELCH, J.
Peerless Oil & Gas Company, owner of a gas well and certain oil and gas leases on lands' located in the Guymon-Hugoton Gas Field in Texas county, filed with the Corporation Commission an application for an order requiring Cities Service Gas Company to connect its pipeline to the gas well and take and receive the natural flow of gas from the well ratably with its taking of gas from other wells of the field, and further that the Commission fix the price at which said gas should be taken and fix the price for all natural gas produced in the Guymon-Hugoton Gas Field in Oklahoma. Peerless alleged drainage by Cities Service and failure of agreement with Cities Service for the taking of gas from its well, and particularly a disagreement as to the price for the gas.
Cities Service filed answer admitting its ownership of a pipeline system and that it was taking gas from the field through its lines and stated an offer to take gas from the Peerless wells ratably with its taking of gas from other wells in the field and at the average price paid for gas in the field. Cities Service alleged a usage of its pipeline in the furtherance of a business of producing natural gas for transportation and sale in interstate commerce and asserted that the Corporation Commission was without power or authority to regulate its facility and business, and, particularly, to order the price and terms for taking or purchasing gas in the field.
After hearing of the Peerless application had commenced the Corporation Commission permitted the State of Oklahoma, on relation of the Commissioners of the Land Office, to file petition in intervention. The Land Office alleged ownership in trust for the state of a large acreage of land in the gas field and surrounding areas. It asserted that monopolistic price and arbitrary measurements for gas prevailed in the field, and was resulting in dissipation and exhaustion of gas from the common source of supply at a fraction of its intrinsic value, and that such taking was resulting in wanton economic waste. The Land Office prayed that the Corporation Commission fix a minimum price and a certain standard of measurement applicable to all gas in the field and to be applied upon its removal from the natural reservoir.
The Commission published notice of the time and place of a hearing to be held upon the Land Office petition, with invitation to all persons interested to appear and be heard. The notices were directed to certain named companies and to “all operators, purchasers, and takers of gas in Oklahoma, and particularly in Guymon-Hugoton Field in Texas County, Oklahoma.”
In the course of the proceeding a petition was filed requesting the Commission to fix a minimum price for gas in the field signed by several persons as royalty owners and under a designation as members of the Texas County Land and Royalty Owners’ Association.
The Commission, after the series of hearings above mentioned, and after hearing testimony from witnesses presented by Peerless, the Land Office, Cities Service, and the testimony of various other persons, entered a general order that on and after a certain future date, therein mentioned, “no natural gas shall be taken out of the producing structures or formations in the Guymon-Hugoton Field in Texas County, Oklahoma, at a price at the wellhead of less than 7c per thousand cubic feet of natural gas measured at a pressure of 14.65 pounds absolute pressure per square inch.” The Commission issued a further order to become effective on the same date directed to Cities Service ordering that Company to take gas from the Peerless wells ratably with its taking from other wells in the field and as ratable taking is prescribed in a certain former gen*38eral order of the Commission, and that Cities Service pay the Peerless for the gas so taken not less than 7c per thous- and cubic feet wellhead price measured at a pressure of 14.16 pounds pressure per square inch.
Subsequent to the effective date of these orders Phillips Petroleum Company filed an application to vacate or modify the price fixing provision of the orders. After a hearing wherein evidence was introduced, the Commission entered an order denying the application to vacate.
Cities Service appeals from the two price-fixing orders. Phillips appeals from these orders and from the order denying its application to vacate.
During the pendency of the Peerless application, Peerless and Cities Service entered into an agreement for a ratable taking of gas from the Peerless wells by Cities Service, leaving unsettled the price to be paid for the gas.
The primary question presented in these appeals arises from the order of the Commission fixing a minimum price on natural gas in the field.
Cities Service presents argument under the following statements:
“1. No constitutional or statutory power is granted Commission, either expressly or by necessary implication, to fix by general order the price or other terms for taking or purchasing natural gas in the field.
“2. 52 O. S. 1941 §233, purporting to authorize Commission in case of dispute to fix price and other terms for taking or purchasing natural gas as between individual parties, is unconstitutional because:
(a) It sets forth no policy or standard to guide Commission in acting thereunder (Articles IV and V. Oklahoma Constitution):
(b) It violates the equal protection clause of the Federal Constitution (Section 1, Article XIV, U. S. Constitution);
and
(c)It violates the due process clauses of the Oklahoma and Federal Constitution (Section 7, Article II, and 14th Amendment; as well as Sections 2 and 23, Article II, Oklahoma Constitution, and Section 59, Article V, Oklahoma Constitution.)
“3. If this Court should hold Commission under existing law is either expressly or impliedly granted natural gas price-fixing powers under some conceivable circumstances, the same are unconstitutional as applied herein because :
(a) Price fixing has no reasonable relationship to waste, protection of correlative rights, or conservation of natural resources;
(b) It casts a burden on, impedes and impairs interstate commerce in violation of the commerce clause of the Federal Constitution (Clause 3, Section 8, Article 1);
and
(c) It denies Cities due process and the equal protection of the law (14th Amendment, Oklahoma Constitution).
“4. If this Court should hold Commission is under present laws granted constitutional or statutory price-fixing powers, then existing laws are not self-executing but require Commission, in advance of an attempt on its part to enforce the taking or purchasing of natural gas, to specify with clarity and particularity the elements constituting the basis of such taking or purchasing so as to enable the parties concerned to effectuate -fully and fairly a completed contract.
“5. If this Court should hold Commission is granted under present laws constitutional and statutory price-fixing powers and existing laws are self-executing, then Commission in exercising its authority thereunder is confined to ascertaining and applying the going or market price and other non-discriminatory equitable terms for taking or purchasing natural gas prevailing in the field.
“6. The orders of the Commission are void because of vagueness, indefiniteness, and uncertainty.
*39“7. Commission erred in denying Cities’ motions and demurrers; (a) Motion to allow inspection and copy of certain records and documents of Peerless material to judicial phase of case;
(b)Demurrer, motion to dismiss, and motion for judgment in judicial phase of the case;
(e) Combined demurrer, motion to dismiss, and motion for judgment in the legislative phase of the case;
(d) Motion to set aside findings of fact and conclusions of laws in order entered by Commission in judicial phase of the case and substitute therefor certain findings of fact and conclusions of law submitted by Cities and for judgment;
(e) Motion for new trial in judicial phase of the case.
“8. The findings and orders of Commission are not supported by substantial, competent evidence and are contrary to the undisputed evidence.
“9. Commission failed to grant Cities a fair and impartial trial and hearing in accordance with the due process clauses of the Oklahoma and Federal Constitutions (Section 7, Article II, Bill of Rights, Oklahoma Constitution; Section 1, Article XIV, U. S. Constitution;
(a) By refusing to inform Cities in advance of the trial of the case what rules of practice and procedure would be applied by Commission at the hearing thereof;
(b) By allowing the misjoinder of judicial and legislative matters;
(c) By erroneously consolidating judicial and legislative matters;
(d) By erroneously allowing Land Office to file petition in intervention and intervene in the case;
(e) By allowing a private citizen to make a statement and speech to the Commission during the course of the trial;
(f) By conducting a plebiscite'of land and royalty owners while case was in hearing;
(g) By filing petitions with Federal Power Commission while trial was in progress stating Commission was interested in increasing price of natural gas;
(h) By allowing Commission’s conservation attorney to participate and take an active part in trial of private dispute between Peerless and Cities;
(i) By admitting incompetent and hearsay evidence and testimony;
(j) By refusing to segregate and seperate the evidence of Peerless, Land Office and others at the close of their testimony so Cities could know what evidence pertained to the judicial phase of the case and what evidence pertained to the legislative phase of the case;
(k) By Commission’s refusing to recognize, apply, and abide by its own subsisting orders.”
Since 1913, Laws 1913, ch. 198, secs. 1, 2, 3, 52 O.S. 1941 §§231, 232, 233, the statutes of this state have provided that owners might take, from a common source, amounts of gas proportionate to the natural flow of their respective wells, but not more than 25% of that natural flow without consent of the Corporation Commission; that any person taking gas from a gas field, except for certain specified purposes, “shall take ratably from each owner of the gas in proportion to his interest in said gas, upon such terms as may be agreed upon between said owners and the party taking such, or in case they cannot agree at such a price and upon such terms as may be fixed by the Corporation Commission. . . .”
Obviously, the protection of the interest of all owners of the gas is the intent of the statute and such is the standard of guidance to the Corporation Commission acting thereunder.
Various types of state regulatory schemes providing for ratable taking and designed to protect the “coequal rights” of the several owners of com*40mon source of supply have been sustained. Ohio Oil Co. v. Indiana, 177 U. S. 190, 44 L. Ed. 729, 20 S. Ct. 576; Bandini Petr. Co. v. Superior Ct., 284 U. S. 8, 76 L. Ed. 136, 52 S. Ct. 103, 78 A. L. R. 826; Patterson v. Stanolind Oil & Gas Co., 182 Okla. 155, 77 P. 2d 83; Patterson v. Stanolind Co., 305 U. S. 376, 83 L. Ed. 231, 59 S. Ct. 259. In Republic Natural Gas Co. v. State et al., 198 Okla. 350, 180 P. 2d 1009, an order of such an effect by the Corporation Commission was sustained.
In reference to provisions of section 233, supra, and an order of the Corporation Commission made pursuant thereto requiring producer of gas to take ratably from well of another producer in the field, it was held that a foreign corporation obtaining permission to do business and produce natural gas in this state may not question constitutionality of the statute. The decision of this court affirming the Commission was appealed to the United States Supreme Court. Republic Natural Gas Co. v. State et al., 334 U. S. 62, 92 L. Ed. 1212. That court held, in an opinion by Justice Frankfurter, that by reason of matters left open by the Commission’s order, this court’s judgment lacked the finality requisite to a review there. In the majority opinion reference is made to the order of the Commission as going no further than to require ratable taking of gas and. the probability that the Commission will be later asked to determine specific terms of the taking including the price to be paid for the gas. Reference is made to price-fixing as being inherently provocative of constitutional claims and to the probability of additional federal question arising out of the controversy. Four members of the court joined in dissent. In a dissenting opinion by Justice Rutledge containing a discussion of the case on the merits, it is said:
“ ... In a line of cases beginning a half century ago with Ohio Oil Co. v. Indiana, 177 U. S. 190, 44 L. Ed. 729, 20 S. Ct. 575, this Court has upheld various types of state regulatory schemes designed to prevent waste and to protect the ‘coequal rights’ of the several owners of a common source of supply. Those cases clearly recognize that the state regulation may be justified on alternative grounds, either to prevent waste or to adjust private correlative rights.”
After stating a conclusion that a state may require ratable taking in the preservation of correlative rights in a common source of supply, it was further said:
“The remaining narrow issue is whether the most practical method of achieving a fair accommodation of the correlative rights of the parties is invalid because Republic is required to take and to pay for gas that it does not want — at least does not want if it must pay for it. . . .
“The fact that Republic is compelled either to purchase Peerless’ gas or to carry it to market and account for the profits does not make the regulation unreasonable. If that were the sole cause for complaint, the state could take the more drastic step of requiring all the well owners to shut down completely until all were able to produce on a ratable basis or came to some agreement effective to make this possible. It is clearly within the state’s power to require Republic to compensate Peerless for the gas drained from under the Peerless land. Patterson v. Stanolind Oil & Gas Co., 305 U.S. 376, 83 L. Ed. 231, 59 S. Ct. 259. Here, instead of requiring Republic to make a cash payment based on the estimated amount of drainage, the commission has selected what is unquestionably a more accurate method of adjusting the correlative rights. Even if it could be assumed that this method imposed a somewhat heavier burden on Republic than possible alternatives, it does not follow that the method selected by the Commission is unconstitutional. For we have constantly recognized the propriety of allowing wide discretion to the administrative agencies who are best qualified to select the most reasonable solutions to the thorny problems that accompany *41regulation in this highly technical field. Railroad Commission v. Rowan & N. Oil Co., 310 U. S. 573, 84 L. Ed. 1368, 60 S. Ct. 1021. Keeping in mind the fact that property law is peculiarly a matter of local concern, the special difficulty of defining and regulating property rights in natural gas, the respect due to experts in this field, and the rather unusual facts this record presents, I cannot say that the state is without power to enter this order.
“It is suggested that the order, since it includes the requirement of purchase and not merely of transportation and accounting for profits, becomes invalid because it shifts from Peerless to Republic the business risk incident to ownership and sale of the gas. Possibly this might furnish a more serious basis for objection in materially different circumstances. But, apart from what has already been said, in those now presented I conceive no substantially greater harm to be possible from the order’s operation, than depriving Republic of the rights to drain gas from beneath Peerless’ lease without liability to pay for the gas so drained.
“This assumes that if the parties should be unable to agree upon terms the commission will fix them in a manner taking due account of prevailing market conditions relevant to the price to be paid, as well as reasonable compensation for the use of Republic’s facilities. With those limitations properly applied, it is hard to see what great business risk will be shifted to Republic. For, as we have already noted, the commodity is one not subject to storage, must be sold as soon as it is transported to the point of consumption, and therefore cannot be subject to possible wide fluctuation in selling price between the times of purchase and sale by Republic.”
We think it clear that the due process and equal protection provisions of the Federal and State Constitutions do not preclude the state, in the exercise of its power to preserve the correlative rights of producers of natural gas from a common pool, from requiring one either to shut down its wells or take ratably from the other producer who has no outlet under such terms as the parties may agree upon; or in default of agreement, to take upon such terms and price as may be fixed by the Corporation Commission consistent with equality in returns for gas taken in the field. Such device is but a practical or feasible alternative consistent with production by both to protect the one from drainage by the other.
The Commission’s order, made under the provisions of section 233, supra, directing that Cities Service as a condition of its further taking of gas from the field, should take ratably from the wells of Peerless, is readily sustainable. The portion of the order directing payment for the gas so taken at not less than 7c per thousand cubic feet at the wellhead rests upon the Commission’s general order prohibiting the taking of gas from the producing structures or formations in the field for a price at the wellhead of less than 7c per thous- and cubic feet.
In 1915 provision was made for regulation of the extraction of natural gas, not only to prevent excessive drainage as between producers, but for the prevention of waste and for the protection of the interest of the public and the interest of all those having a right to take from a common reservoir.
It was provided, Laws 1915, ch. 197, §4, 52 O. S. 1941 §239, that when the full production from a common source of supply of natural gas is in excess of the market demands, a producer from such common source of supply may take therefrom only such proportion as may be marketed without waste, and in such proportion as the natural flow of the well or wells of such producer bears to the total natural flow of the field, having due regard to the acreage drained by each well; provided that the Corporation Commission may permit the taking of a greater amount whenever it shall deem such taking reasonable or equitable. The statute provides that “the said commission is authorized and directed ... to regulate the taking of natural gas from any or all such common sources of supply within the state, so as to prevent waste, protect the *42interests of the public, and of all those having a right to produce therefrom, and to prevent unreasonable discrimination in favor of any one such common source of supply as against another.”
The succeeding section 240 provided as follows:
“Every person, firm or corporation, now or hereafter engaged in the business of purchasing and selling natural gas in this state, shall be a common purchaser thereof, and shall purchase all of the natural gas which may be offered for sale, and which may reasonably be reached by its trunk lines, or gathering lines without discrimination in favor of one producer as against another, or in favor of any one source of supply as against another save as authorized by the Corporation Commission after due notice and hearing; but if any such person, firm or corporation, shall be unable to purchase all the gas so offered, then it shall purchase natural gas from each producer ratably. It shall be unlawful for any such common purchaser to discriminate between like grades and pressures of natural gas, or in favor of its own production, or of production in which it may be directly or indirectly interested, either in whole or in part, but for the purpose of prorating the natural gas to be marketed, such production shall be treated in like manner as that of any other producer or person, and shall be taken only in the ratable proportion that such production bears to the total production available for marketing. The Corporation Commission shall have authority to make regulations for the delivery, metering and equitable purchasing and taking of all such gas and shall have authority to relieve any such common purchaser, after due notice and hearing, from the duty of purchasing gas of an inferior quality or grade. (Laws 1915, ch. 197, sec. 5)”
Obviously the impelling reason for discrimination in the taking of gas from one source of supply as against another rests in economic consideration, and it is obvious that a practical and ready means of preventing such discrimination appears with control of the price of gas at its original source, or at the “wellhead” in each of the particular fields. Reference to protection of the interest of all those having a right to produce gas from a common source of supply directs attention to the owners of the land overlying the gas and such interests as they have conveyed. Doubtless because of the technical and financial requirements in taking gas from its natural place, it has long been the general practice of landowners to lease the privilege of taking gas from under their lands and usually in consideration of a royalty of 1/8th or a particular part of the gas so taken or its equivalent marketed. Because of such technical and financial requirements in the development of a gas field, and necessary to the marketing and commercial use of gas, landowners are usually compelled to enter into such leasing arrangements as the only means of securing an exploration and development of their gas resources. In the very nature of the product, landowners cannot accept delivery of gas so produced but must trust to producers for a proper handling of their share of the production. Such reserved or royalty interests are transferable and oft-times are sold in whole or in part.
As suggested by Justice Rutledge in Republic Nat. Gas Co. v. State, supra:
“ . . . Natural gas in place is volatile and fugitive, once a single outlet is opened. When extracted it cannot be stored in quantity, but must be marketed ultimately at burner tips in the time necessary for conveyance to them from the well mouth. The competitive struggle for the industry’s rewards is particularly intense in the initial stage of developing a field. By the industry’s very nature large outlays of capital are required for successful continuing production and marketing. All those factors, however, tend toward monopoly once success has been achieved in a particular field.
“These peculiar qualities, moreover, have been reflected in the legal rights relating to the ownership of gas in place, as well as its extraction. They have been adapted to its nature and to *43that of the competitive struggle regarding it. Only a specialist in this branch of the law, which varies from state to state, can undertake to say with any reliable degree of precision what rights may be in particular situations. These difficulties, intensified by the competitive struggle for the product and the inadequacy of common-law ideas to control it, have forced both the states and the federal government to adopt extensive regulatory measures in recent years. This has been necessary both to conserve the public interest in this rapidly depleting natural resource and to secure fair adjustment of private rights in the industry. Rather than being a sacred, untouchable enclave of the common law, the field by its very nature lends itself especially to governmental intervention for such purposes. . . .”
It is readily conceivable that in the course of development of a particular gas field, the ownership of producing and marketing facilities might become such, or be so combined, as to permit monopolistic practices. Under the circumstances prices for gas might be established having no relation to the market value of gas prevailing throughout the natural gas industry, and in other fields of commensurate development costs, and having no relation to the market value of other natural resources and products in competitive usage. On the other hand, a like result might obtain from economic warfare between competing producers and marketers. Under either of such circumstances, prices might be so reduced that landowners or royalty holders or particular leaseholders would have their interests in the gas exhausted, dissipated and taken, without having received any reasonable compensation, and each suffer waste of a valuable reversion.
Likewise, the taking of gas under such circumstances would be inimical to the public interest. Like other natural resource, the subject of private ownership and exploitation, natural gas is a taxable resource. The tax is applied to the gross production and finally measured by the market value or price of the thing produced or reduced to personal possession. The taking of gas from a field, when the taking price of the gas is substantially lower than the price prevailing in other gas fields having commensurate production costs, and at prices having no relation to the market value of other of the natural resources of competitive usage, leads to an exhaustion of such gas without it having borne its fair share of taxation.
Natural gas being exhaustible and of various valuable usage, the public interest extends to its conservation. Undoubtedly the price at which gas may be obtained has an influence upon the ultimate purpose for which gas may be taken and used, and when the price for gas is substantially lower than its intrinsic value or lower than the market price of products of similar usage, a wasteful use of the gas is apt to occur.
The relationship of price to conservation is suggested in the following expression from the concluding paragraph of the opinion in Quinton Relief Oil & Gas Co. v. Corporation Commission, 101 Okla. 164, 224 P. 156:
“ . . . Natural gas has twice the heating units as artificial gas, and taking into consideration the convenience of natural gas, it is intrinsically worth more than artificial gas; its market value being from $2 to $3 per 1,000 cubic feet. The amount of carbon black produced from 1,000 cubic feet of natural gas has a market value of about 10 cents. It, therefore, is obvious that the state, in the proper exercise of its police power and in conservation of so valuable a natural resource as natural gas, may prohibit the wasteful utilization of the same in the interest of the public welfare.”
The impelling reason for or cause of discrimination in the taking of gas from. one source of supply as against another, and the dilemma of the landowner growing out of private contract for the sale of gas without his interest being represented, is suggested in the *44following expression found in Oklahoma Natural Gas Corp. v. State et al., 161 Okla. 104, 17 P. 2d 488:
“It would be a very efficient scheme to circumvent the proration law for a purchaser of gas operating by pipeline, which it has to have in order to successfully handle gas, to take more gas in one place on a low cost than a rival operating on a higher purchase cost depending on contract, and by a system of reciprocity, allow its competitor in another pool to take more on the cheap rate. Thus it would be to the advantage of the friendly pipelines, and very much to the disadvantage of the unsuspecting landowner. Hence the necessity for putting somewhere the power to get a check upon this and as far as possible prevent it and equalize.”
We are of the opinion that such considerations as above discussed occupied the legislative mind and motivated the enactment of the 1915 Act. In the 1915 Act the grant of power to the Corporation Commission to regulate the taking of natural gas from any source of supply, so as to protect the interest of all those having a right to produce therefrom, by necessary implication, includes the power to fix a minimum price on the gas as a condition of the taking, when found reasonably necessary to the accomplishment of that purpose. Likewise the grant of power to regulate, with directions that such power be exercised so as to prevent waste and protect the interest of the public, necessarily implies a power to fix prices as a condition of the taking of gas when otherwise, and because of prevailing prices, the public interest might suffer.
It is well settled that the state in exercise of its police power may regulate the taking of natural gas in the protection of the public interest and in preservation of private correlative rights. Quinton Relief Oil & Gas Co. v. Corp. Comm., supra; Patterson v. Stanolind Oil & Gas Co., 182 Okla. 155, 77 P. 2d 83, and Republic Natural Gas Co. v. State, supra.
Such policy of the law-making body of the state is expressed in the 1915 act. In the nature of the subject matter the Legislature was compelled to leave to another agency of the state the duty of bringing about the result pointed out by the statute. As has been noted, under section 239, supra, the Commission is charged with the duty of regulating the taking of gas from a common source of supply. The standard to guide the Commission in acting thereunder is the prevention of waste, the protection of the interest of the public, and the protection of the interest of all those having a right to produce from such common source of supply. There is no invalid delegation of power by reason of uncertainty in the stated criterion and the act does not confer arbitrary and uncontrolled powers. The price-fixing feature of the Commission’s order is but a means of securing the purpose for which the act was passed, or is the instrumentality employed by the Commission to carry out the legislative will and it is limited in its use to the effecting of the expressed purpose. The validity of the order rests in its reasonableness and relevancy to the policy the Legislature was free to adopt.
As was stated in Nebbia v. New York, 291 U. S. 502, 78 L. Ed 940:
“Price control, like any other form of regulation, is unconstitutional only if arbitrary, discriminatory, or demonstrably irrelevant to the policy the Legislature is free to adopt, and hence an unnecessary and unwarranted interference with individual liberty.”
See Herrin v. Arnold, 183 Okla. 392, 82 P. 2d 977.
The Commission had before it the sworn testimony of persons who stated they were engineers of long experience in the production and marketing of natural gas. These witnesses gave testimony to the effect that studies had been made of the character of the natural gas in the Guymon-Hugoton Field, and that studies had been made of the *45intrinsic value of natural gas or the value of gas as compared to the market value of other fuels in the relation to the heat units each would produce. With these factors considered, it was stated that the commercial heat value of the gas in the Guymon-Hugoton Field, tested with consideration to its delivery and sale at a certain central point of commercial usage, and with subtraction of nominal transportation costs to such central point of commercial usage, is in excess of 10c per 1,000 cubic feet. It was stated that large blocks of acreage in the Guymon-Hugoton Field are under lease to a comparatively few companies who own the only pipe line outlets from the field, and that competition in the price of gas is not an element in the taking of gas in the field; that the gas is being taken from the field at prices at the wellhead ranging from 3.6c to 5c per 1,000 cubic feet measured on a basis of 2 pounds pressure per square inch above atmospheric pressure; that gas is being taken from the field and sold away from the field under unit of measurement of less than 2 pounds above atmospheric pressure. Various opinions were expressed by these witnesses who related long records of experience in the gas industry. It was stated that taking of gas from the field at prices of 3.6c to 5c per 1,000 cubic feet constituted economic waste and that such prices were conducive of physical waste and that to prevent economic and physical waste the minimum price for gas in the field should be 10c per 1,000 cubic feet.
An employee of the State School Land Commission gave testimony to the effect that the state owned 49,600 acres of land located in Texas county, 30,160 acres of which was under lease with 6,099.92 acres being held as producing leaseholds; that the Land Office was receiving royalty from such productions on the basis of 4c per 1,000 cubic feet for gas at the wellhead, and in some instances on the basis of 5c at the wellhead and that one producer from a large acreage was offering to pay 3.34 cents.
The testimony abundantly supports a conclusion that the conditions under which gas is being taken from the field is injurious to the interest of the public at large, and inimical to the interest of a substantial group such as landowners and others and is resulting in economic waste and conducive to physical waste. The testimony demonstrates that the price fixed as a condition of the further taking of gas from the field is reasonable and not beyond the requirements of the situation sought to be corrected, and will not result in discrimination.
The Corporation Commission has heretofore exercised its power of fixing prices at which natural gas may be produced and taken. As early as 1920, after the prescribed notice and hearing, the Commission fixed the price of 9c per M.C.F. for gas in the Cushing field. And in 1944, acting specifically in view of the national emergency, the Commission, after notice and hearing, authorized the taking of natural gas for the manufacture of carbon black, but fixed the price to be paid for the gas so produced and used. And it was specified that the continued effectiveness of the permit should depend on the maintaining of the fixed price.
In this connection we observe the following demonstrations of a well-known rule of construction. In Foot v. Town of Watonga, 37 Okla. 43, 130 P. 597 (598), this court said:
“The construction placed on statutes or constitutional provisions by officers in the discharge of their duties, either at or near the time of the enactment, which has been long acquiesced in, is a just medium for their judicial interpretation.”
And in Newblock v. Bowles, 170 Okla. 487, 40 P. 2d 1097, (1101), this court said:
“In McCain v. State Election Board et al., 144 Okla. 85, 289 P. 759, 760, this court held: ‘The construction which *46has been placed upon a statute by the officer or governmental department charged with the carrying out of the provisions of the law is to be accorded due consideration by the courts in construing the statute.’ To the same effect is the holding of this court in Leininger et al. v. Ward-Beekman & Brooks, Inc., 139 Okla. 292, 282 P. 467; Glasco v. State Election Board et al., 121 Okla. 119, 248 P. 642; Foot et al. v. Town of Watonga, 37 Okla. 43, 130 P. 597.”
And in Washington County v. State Tax Commission, 103 Utah, 73, 133 P. 2d 564 (568), this court said:
“ ‘It is a general rule that contemporaneous construction by the department of government specifically delegated to carry out a provision of the Constitution raises a strong presumption that such construction, if uniform and long acquiesced in, rightly interprets the provision. . . . While such construction is not conclusive upon the courts, it is entitled to the most respectful consideration.’ Wells Fargo & Co. v. Harrington, 54 Mont. 235, 169 P. 463, 466.”
See, also, League v. Town of Taloga, 35 Okla. 277, 129 P. 702; Williams v. Continental Construction Co., 168 Okla. 510, 34 P. 2d 254.
In Great Northern Life Insurance Co. v. Read, 136 Fed. 2d 44, in construing a statute of Oklahoma, the 10th Circuit Court of Appeals said:
“It is clear, under the Oklahoma statutes, that the license of a foreign insurance company expires on the last day of February next after its issue. Art. XIX of the Oklahoma Constitution and the Oklahoma statutes, hereinabove referred to, permit of the construction that the payment of the gross premiums tax on or before the expiration of the license year on the last day of February is exacted for the privilege of doing business in the state during that license year and as a condition precedent to the issuance of a license for the ensuing year. Such has been the uniform and long-continued construction of the executive department charged with the administration of the statutes. The long-continued construction of a statute by a department of the government charged with its execution is entitled to great weight and should not be overturned without cogent reasons. The Legislature of Oklahoma has convened many times during this period of administrative construction without expressing its disapproval. That silence may be regarded as acquiescence in or approval of the administrative construction. Similar statutory provisions have been so construed.”
Cities Service contends the order appealed from impedes and impairs interstate commerce in violation of the commerce clause of the Federal Constitution. In Interstate Natural Gas Co. v. Federal Power Commission, 67 S. Ct. 1482, 331 U. S. 682, 91 L. Ed. 1742, is a case involving the jurisdiction of the Federal Power Commission, we note this expression:
“In denying the Federal Power Commission jurisdiction to regulate the production or gathering of natural gas, it was not the purpose of Congress to free companies such as petitioner from effective public control. The purpose of that restriction was, rather, to preserve in the States powers of regulation in areas in which the states are constitutionally competent to act. ...”
“Clearly, among the powers thus reserved to the States is the power to regulate the physical production and gathering of natural gas in the interest of conservation or of any other consideration of legitimate local concern.”
Here the Corporation Commission has fixed a minimum price for gas in a natural common reservoir; such price to be applied at the wellhead as a condition of the taking. The regulation applies to the production of natural gas and though it results in an incidental effect upon the sale price for gas after the gas has been reduced to possession, the subsequent sale of the gas for delivery into another state does not brand the Commission order as a regulation of interstate commerce. The regulation is imposed before any operations of interstate commerce occur. In Parker, Director of Agricul*47ture, et al. v. Brown, 317 U. S. 341, it is said:
“ ... No case has gone so far as to hold that a state could not license or otherwise regulate the sale of articles within the state because the buyer, after processing and packing them, will, in the normal course of business, sell and ship them in interstate commerce.”
We do not perceive that the commerce clause of the Federal Constitution precludes the state in the protection of local interests from fixing a uniform minimum price consideration as a condition of the taking of natural gas from a common reservoir because a producer therefrom may have contracted or will contract for sale and delivery of his share of the production outside the state, or because a purchaser from such producer will sell and transport the gas in interstate commerce.
The general order of the Commission fixing the minimum price for gas taken from the field as a part of the order requiring Cities Service to take ratably from the Peerless wells and as applied to Cities Service has the effect of requiring Cities Service to take ratably from Peerless and pay for the gas so taken at a price equal to the minimum price it must obtain for gas from its own wells offered at the well. If it may be said that under the price-fixing order, Cities Service with ownership of pipeline facilities, might take gas from its own wells and after payment of public charges and royalty claims on the gas on a basis of the minimum price fixed by the state, run the gas across the state line and there with profit make disposition of the gas at prices below the minimum fixed by the state, it does not follow that it has a right to use its pipeline facilities to gather gas from other wells on such basis, in otherwise disregard of price regulations, or that it may so use its wells as to effect a drainage from others without liability having relation to the price regulation.
Undisputedly, the production from the Cities Service wells was resulting in drainage of the area where the Peerless wells were located and Cities Service offered to take ratably from the Peerless wells with its taking from its own wells. The effect was an offer to take the gas at the average price prevailing in the field, or on the terms of a “common purchaser” of gas in the field. Cities Service suffered no prejudice to its rights in the fact that the Commission saw fit to investigate field-conditions after dispute has arisen growing out of drainage from Peerless wells, or in the fact that a fixed price for gas was established. The order prohibiting Cities Service from taking gas from its wells except that it take ratably from the' Peerless wells, insofar as it fixes the price for the gas so taken, is the- same as that required of any purchaser of gas from the field. There occurs no greater invasion of Cities Service’s rights than depriving it of the right to drain gas from beneath the Peerless lease without paying for it. The overall effect of the order is to furnish a practical alternative, consistent with production by both Cities Service and Peerless, to protect Peerless from drainage by Cities Service.
We find no basis in the due process and equal protection clauses of the Federal and State Constitution for condemning the orders in their application to Cities Service.
Cities Service complains of certain rulings in reference to certain pleadings filed and complains of the Commission’s conduct and rulings in the course of the various hearings held leading up to the promulgation of the orders here under attack.
The orders are legislative in character and subject in a large measure to the rules and principles by which the validity of statutes are determined. In the hearings preceding the orders, and not for violations thereof, the rules and principles of procedure obtaining in the enactment of a statute more *48nearly apply than the strict rules applicable to law courts.
We have examined the record and find substantial evidence to support the Commission’s findings and no error of law is committed.
Phillips Petroleum Company in application to the Commission to vacate the orders introduced testimony to the effect that it owns oil and gas leases on several thousands of acres of land in the Guymon-Hugoton Field, and several producing gas wells thereon, and was presently taking several millions cubic feet of gas daily from such wells; that Phillips sells no gas produced from said field in the State of Oklahoma, but gathers gas from its wells through its own gathering system to a central point in the State of Texas where it processes the gas and extracts therefrom natural gasoline and other hydrocarbons and .sells the residue gas; that it sells such residue gas to Panhandle Eastern Pipe Line Company at 4c per 1,000 cubic feet; that it has agreed to sell and deliver to Panhandle Eastern all of the gas it produces from 175,000 acres under lease in Texas county, subject to its right to extract natural gasoline and other liquid hydrocarbons from said gas prior to the delivery of such gas to Panhandle Eastern at the said central point in Texas.
Phillips here adopts the brief, of Cities Service and with enlargement of argument here presents similar contentions concerning the authority of the Commission to make the orders appealed from and the constitutionality of the orders appealed from.
Our discussion of the Cities Service appeal is here applicable. We find no basis in the due process and equal protection clause of the Federal and State Constitutions for condemning the orders appealed from in their application to Phillips.
The orders appealed from are affirmed.
DAVISON, C.J., ARNOLD, V.C.J., and CORN and JOHNSON, JJ., concur. GIBSON, LUTTRELL, HALLEY, and O’NEAL, JJ., dissent.