Lone Star Gas Co. v. Texas
304 U.S. 224 (1938)

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U.S. Supreme Court

Lone Star Gas Co. v. Texas, 304 U.S. 224 (1938)

Lone Star Gas Co. v. Texas

No. 313

Argued March 28, 1938

Decided May 16, 1938

304 U.S. 224

Syllabus

1. A special issue submitted to a jury as to whether a gas rate fixed by a Texas commission was "unreasonable and unjust" to the defendant gas company -- held tantamount to the issue of confiscation in view of instructions given the jury on the meaning of "fair return" and "unreasonable and unjust." Cf. United Gas Public Service Co. v. Texas,303 U. S. 123, 303 U. S. 141. P. 231.

2. Under the Texas law, the Court of Civil Appeals is without authority to substitute findings made by itself for the determinations of a jury in a rate case. P. 304 U. S. 231.

3. A Texas corporation produced and purchased gas in Texas and Oklahoma which it piped and disposed of to distributing companies, closely affiliated with itself through stock ownership. The distributors sold it to consumers in Texas cities. Most of it was procured and transported entirely in Texas; but some, moving from Texas, was piped for a distance in Oklahoma and back into Texas, while a lesser proportion was procured in Oklahoma and piped into Texas. This last portion, after reaching Texas, was run through extraction plants, leaving the residue of it changed in composition and thermic value; much of it was stored there, and, in passing through the pipeline system, it was commingled with the Texas gas and divided and redivided until tracing or identification by volume at any "city gate" delivery was made impossible; at various points before delivery, its pressure was reduced and the gas expanded. The company also sold gas in Oklahoma. A Texas commission, having before it proceedings involving the reasonableness of the rates charged by the distributors to Texas consumers, found it necessary to determine what would be a reasonable charge for the gas delivered to the distributors by the pipeline company at the "city gates," and, in so doing, made an order fixing the charge based on all of the property and operations of the pipeline company considered as an integrated whole.

Held:

(1) That the order was not invalid under the commerce clause.

(a) It did not attempt to regulate the interstate transportation. P. 304 U. S. 236.

Page 304 U. S. 225

(b) It could not be regarded in the circumstances as regulating sales and deliveries in interstate commerce. Id.

(c) The distributors and the pipeline company were but arms of the same organization doing an intrastate business in Texas, and the commission was entitled to ascertain and determine what was a reasonable charge for the gas supplied through this organization to consumers within the State. P. 304 U. S. 237.

(d) The fact that one of the pipelines cut across a corner of another State did not make it any the less a part of a system serving Texas gas to communities in Texas, and the commission, in taking account of this line as part of the property on which the intrastate pipeline rate should be based, was not regulating, or imposing any burden upon, interstate commerce or conflicting with any federal regulation. P. 304 U. S. 238.

(e) The manner in which the gas purchased in and piped from Oklahoma was treated and handled in Texas made it an integral part of the gas supplied to the Texas communities in the pipeline company's intrastate business, and the commission was entitled to consider it in fixing the rate. P. 304 U. S. 238.

(2) This was not a case where the segregation of intrastate and interstate properties and businesses was essential in order to confine the exercise of state power to its own province. Cf. Smith v. Illinois Bell Telephone Co.,282 U. S. 133, 282 U. S. 148-149. P. 304 U. S. 241.

(3) The commission having considered all the pipeline company's properties and operations as an integrated system in fixing the Texas rate, the company was entitled to introduce evidence to overcome the commission's findings, on the same basis, in an effort to prove the rate confiscatory, and the company having succeeded in this and won a judgment holding the rate confiscatory, it was error for the appellate court to reverse the judgment and uphold the rate because the company had failed to make a proper segregation of interstate and intrastate properties and business. P. 304 U. S. 240.

86 S.W.2d 484, 506, reversed.

Appeal from a judgment of the Court of Civil Appeals of Texas which sustained a rate on gas, fixed by the Railroad Commission, therein reversing a judgment to the contrary, adjudging the rate confiscatory, in an action brought by the Commission to enforce it.

Page 304 U. S. 226

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