Skelly Oil Co. v. Phillips Petroleum Co.

339 U.S. 667 (1950)

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Nature of the Case

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Facts

In 1945, Michigan-Wisconsin Pipe Line Company (P) sought from the Federal Power Commission a certificate of public convenience and necessity, required by § 7 (c) of the Natural Gas Act for the construction and operation of a pipeline to carry natural gas from Texas to Michigan and Wisconsin. A prerequisite for such a certificate is adequate reserves of gas. Michigan-Wisconsin (P) entered into an agreement with Phillips (P) on December 11, 1945. Phillips (P) undertook to make available gas from the Hugoton Gas Field. Phillips (P) had contracted with petitioners, Skelly Oil Company (D), Stanolind Oil and Gas Company (D), and Magnolia Petroleum Company (D), to purchase gas produced by them for resale to Michigan-Wisconsin (P). The contract provided that if Michigan-Wisconsin (P) shall fail to secure from the Federal Power Commission on or before [October 1, 1946] a certificate of public convenience and necessity for the construction and operation of its pipeline, Ds shall have the right to terminate the contract by written notice to Phillips (P) such notice delivered to at any time after December 1, 1946, but before the issuance of such certificate.' The Federal Power Commission on November 30, 1946, issued the certificate to Michigan-Wisconsin (P). News of the Commission's action was released on November 30, 1946, but the actual content of the order was not made public until December 2, 1946. On December 2, 1946, Ds gave notice to Phillips (P) of the termination of their contracts on the ground that Michigan-Wisconsin (P) had not received a certificate of public convenience and necessity. Ps sued Ds in the District Court alleging that a certificate of public convenience and necessity, 'within the meaning of said Natural Gas Act and said contracts' had been issued prior to Ds' attempt at the termination of the contracts. Ps invoked the Federal Declaratory Judgment Act for a declaration that the contracts were still 'in effect and binding upon the parties thereto.' The District Court decreed that the contracts had not been 'effectively terminated and each remains in full force and effect.' The Tenth Circuit affirmed. Ds appealed.