Phillips Petroleum Co. v. Wisconsin
| Phillips Petroleum Co. v. Wisconsin | |
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| Argued April 6–7, 1954 Decided June 7, 1954 |
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| Full case name | Phillips Petroleum Co. v. Wisconsin |
| Citations | 347 U.S. 672 (more)
74 S.Ct. 794, 98 L.Ed. 1035
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| Prior history | 92 U.S.App.D.C. 284, 205 F.2d 706 (DC Cir. 1953) |
| Holding | |
| Wellhead sales of natural gas are subject to federal regulation | |
| Court membership | |
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| Case opinions | |
| Majority | Minton, joined by Warren, Black, Reed, Jackson |
| Concurrence | Frankfurter |
| Dissent | Douglas |
| Dissent | Clark, joined by Burton |
| Laws applied | |
| Natural Gas Act; 15 U.S.C. § 717 | |
Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672 (1954), was a case decided by the Supreme Court of the United States holding that sale of natural gas at the wellhead was subject to regulation under the Natural Gas Act. Prior to this case, independent producers sold natural gas to interstate pipelines at unregulated prices with any subsequent sales for resale being regulated. The State of Wisconsin sought to close this regulatory loophole in order to keep consumer prices low. Natural gas producers argued that wellhead sales were exempt from federal regulation as "production and gathering." Below, the Federal Power Commission compiled an evidentiary record 10,000 pages long before deciding not to regulate wellhead sales. However, the courts reversed, and the case resulted in federal price controls on wellhead gas prices for the next 40 years.
Natural gas is typically produced in association with oil from wells. Wells can also be drilled into geological formations that have mostly gas and very little oil. In the infancy of the oil industry, any natural gas produced from oil wells was burned off. Later, states passed conservation laws which required the gas to be captured and transported in pipelines for useful purposes. In order to prevent any gaps in the natural gas regulation when natural gas flows in interstate commerce, Congress enacted the Natural Gas Act of 1938. That law required that companies must obtain from the Federal Power Commission (FPC) a "certificate of public convenience and necessity" (certificate) before making any sale for resale natural gas in interstate commerce. The FPC set the maximum prices charged for gas sold under a certificate. For example, if gas flowed from a well in Texas through a pipeline to New York where it was sold to a gas distribution company, the sale by the pipeline to the distributor would need a certificate. The final sale to retail customers were exempt from the law. Although the Natural Gas Act regulated both the transportation and sale of gas in interstate commerce, the "production and gathering" of gas was exempt from federal regulation, although potentially subject to state control. Production means bringing the gas out of the ground to a pipe at the top of the wellhead. Gathering refers to the flow of gas through low pressure lines to the center of a gas field where the gas is treated and compressed to bring it up to the high pressures used in long-distance pipelines.
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