Court Opinion

ID: 5071034
Source: CourtListenerOpinion
Date Created: 2021-10-01 10:40:04.06068+00
Date Added: 2024-06-11T08:19:49.975959
License: Public Domain

COMBS, Judge,
dissenting:
I respectfully dissent from the majority in this more than normally complicated case.
It appears to me that of the many issues within this appeal the one that is most appropriate for first consideration is that of the subject matter jurisdiction of the Floyd Circuit Court. If that tribunal did not have authority to adjudge the remaining substantive controversies brought before it, our review abruptly ends.
The United States Congress enacted the Natural Gas Act [N.G.A.] in 1938, and the Natural Gas Policy Act [N.G.P.A.] in 1978. The Federal Energy Regulatory Commission [F.E.R.C.] was created from this body of law. I will endeavor to paraphrase in capsule form only what I believe to be the pertinent portions of those laws.
The F.E.R.C. has exclusive jurisdiction under the N.G.A. to determine when Kentucky-West can divert dedicated gas and sell it to another customer. See N.G.A. § 7(b), 15 U.S.C. § 717f(b). However, certain gas can be removed from N.G.A. jurisdiction upon a determination by the F.E.R.C. that the gas qualifies under a particular *748section of the act. See N.G.P.A. § 107, 15 U.S.C.A. § 3317. If this gas is removed from § 107 then its first purchaser has the right of first refusal to purchase that same gas. N.G.P.A. § 315(b), 15 U.S.C.A. § 3375. F.E.R.C. has exclusive jurisdiction to administer transactions under § 315(b).
November 19, 1982, is a crucial date for determining the jurisdiction of the trial court, for it was then that the F.E.R.C. determined that the well subject of this litigation qualified under § 107 of the N.G. P.A., rendering the N.G.A. abandonment provisions inapplicable.
Appellants’ argument is that the Floyd Circuit Court never had jurisdiction over the subject matter. They say prior to November 19, 1982, the court lacked jurisdiction because then there was no F.E.R.C. prior abandonment approval; after that date they say the F.E.R.C. maintained exclusive jurisdiction to determine whether the proposed sale to the appellees met the N.G.P.A. § 315(b) right of first refusal standards. Appellees’ argument is that the Floyd Circuit Court always had jurisdiction; before and after November 19, 1982. I see relative merit on both sides.
When the F.E.R.C. made its November 19, 1982 determination to remove the gas here in controversy pursuant to § 107, it removed it as Devonian Shale Gas. F.E.R. C. jurisdiction over Devonian Shale Gas ceases not as of the date upon which the § 107 ruling is made, but retroactively to December 1,1978. N.G.P.A. § 601(a)(1)(B), 15 U.S.C. § 3431(a)(1)(B). See also Pennzoil Company v. F.E.R.C., 645 F.2d 360 (5th Cir.1981), cert, denied, 454 U.S. 1142, 102 S.Ct. 1000, 71 L.Ed.2d 293 (1982). Thus, I believe the Floyd Circuit Court had jurisdiction prior to November 19, 1982.
Appellants’ argument against post-November 19, 1982 jurisdiction, again, is that on that date the F.E.R.C.’s ruling under § 107 brought into play the § 315(b) provision that gives rights of first refusal to purchase the gas to the original purchaser. But I do not see the purchase by the appel-lees as a first purchase.
18 C.F.R. § 277.204 reads as follows:
No seller may make a first sale of natural gas which is removed from NGA jurisdiction to any third party purchaser until the original purchaser has both rejected a bona fide offer ... and has rejected an offer substantially accepted in principle by a third party purchaser in an arms-length transaction.
It appears to me that Kentucky-West is the original purchaser of the gas from Kepco, who is the seller, and appellees are third-party purchasers. Thus, Kepco’s sale to Kentucky-West was the first sale, and the sale to the Martins would be a second sale. So I do not believe the § 315(b) provisions apply here. However, since I view the proposed sale to the appellees as a second sale, I believe Kentucky-West must have a F.E.R.C. certificate of public convenience and necessity before it could consummate the sale to the appellees. N.G.P.A. § 7(c). Thus, as I see it, jurisdiction in the Floyd Circuit Court ended November 19, 1982.
The trial court’s damage award has an onset date of December 13, 1981, which is within the jurisdictional time frame. But I believe any damages found to have been incurred after November 19, 1982 should be reversed.
I do not agree that the gas purchase provision violated either the rule against perpetuities or the rule against unreasonable restraints upon alienation. The rule against perpetuities is:
No interest in real or personal property is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest.
J. Dukeminier, Perpetuities Law in Action, p. 6 (Univ. of Ky. Press, 1962). When the gas lease was executed, I believe the interests vested at that time and only the use and enjoyment was delayed. This did not violate the rule against perpe-tuities. Chenoweth v. Bullitt, 224 Ky. 698, 6 S.W.2d 1061 (1928).
Similarly, I would hold that there was no violation of the rule against unreasonable restraints upon alienation. But, probably, the most compelling fact for my dissent here is that the property in question has repeatedly been sold (alienated) and contin*749ues to be sold. Thus, I see no restraining effect of the gas purchase provision.
The above considerations lead me to dissent from the majority opinion. I would affirm the judgment of the trial court except to reverse on jurisdictional grounds the time period for recoverable damages.