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Skelly Oil Co. v. Phillips Petroleum Co.

Supreme Court of the United States

December 9, 1949, Argued ; June 5, 1950, Decided

No. 221


 [*669]  [**877]  [***1198]    MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

In 1945, Michigan-Wisconsin Pipe Line Company sought from the Federal Power  [**878]  Commission a certificate of public convenience and necessity, required by § 7 (c) of the Natural Gas Act, 52 Stat. 825, as amended, 15 U. S. C. § 717f (c), for the construction and operation of a pipe line to carry natural gas from Texas to Michigan and Wisconsin. A prerequisite for such a certificate is adequate reserves of gas. To obtain these reserves Michigan-Wisconsin entered into an agreement with Phillips Petroleum Company on December 11, 1945, whereby the latter undertook to make available gas from the Hugoton Gas Field, sprawling [****5]  over Kansas, Oklahoma and Texas, which it produced or purchased from others. Phillips had contracted with petitioners, Skelly Oil Company, Stanolind Oil and Gas Company, and Magnolia Petroleum Company, to purchase gas produced by them in the Hugoton Field for resale to Michigan-Wisconsin. Each contract provided that "in the event Michigan-Wisconsin Pipe Line Company 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 pipe line, Seller [a petitioner] shall have the right to terminate this contract by written notice to Buyer [Phillips] delivered to Buyer at any time after December 1, 1946, but before the issuance of such certificate." The legal significance of this provision is at the core of this litigation.

The Federal Power Commission, in response to the application of Michigan-Wisconsin, on November 30, 1946, ordered that "A certificate of public convenience and necessity be and it is hereby issued to applicant [Michigan-Wisconsin], upon the terms and conditions of this order," listing among the conditions  [***1199]  that there be no transportation [****6]   [*670]  or sale of natural gas by means of the sanctioned facilities until all necessary authorizations were obtained from the State of Wisconsin and the communities proposed to be served, that Michigan-Wisconsin should have the approval of the Securities and Exchange Commission for its plan of financing, that the applicant should file for the approval of the Commission a schedule of reasonable rates, and that the sanctioned facilities should not be used for the transportation of gas to Detroit and Ann Arbor except with due regard for the rights and duties of Panhandle Eastern Pipe Line Company, which had intervened before the Federal Power Commission, in its established service for resale in these areas, such rights and duties to be set forth in a supplemental order. It was also provided that Michigan-Wisconsin should have fifteen days from the issue of the supplemental order to notify the Commission whether the certificate "as herein issued is acceptable to it." Finally, the Commission's order provided that for purposes of computing the time within which applications for rehearing could be filed, "the date of issuance of this order shall be deemed to be the date of issuance [****7]  of the opinions, or of the supplemental order referred to herein, whichever may be the later." 5 F. P. C. 953, 954, 956.

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. Petitioners severally, on December 2, 1946, gave notice to Phillips of termination of their contracts on the ground that Michigan-Wisconsin had not received a certificate of public convenience and necessity.  Thereupon Michigan-Wisconsin and Phillips brought suit against petitioners in the District Court for the Northern District of Oklahoma. 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 petitioners' attempt  [*671]  at termination of the contracts, they invoked the Federal Declaratory Judgment Act for a declaration that the contracts were still "in effect and binding upon the parties thereto." Motions by petitioners to have Michigan-Wisconsin dropped as a party plaintiff were sustained, but motions to dismiss the complaint for want of jurisdiction were denied. The case then went to the merits,  [****8]   [**879]  and the District Court decreed that the contracts between Phillips and petitioners had not been "effectively terminated and that each of such contracts remain [sic] in full force and effect." The Court of Appeals for the Tenth Circuit affirmed, 174 F.2d 89, and we brought the case here, 338 U.S. 846, because it raises in sharp form the question whether a suit like this "arises under the Constitution, laws or treaties of the United States," 28 U. S. C. § 1331, so as to enable District Courts to give declaratory relief under the Declaratory Judgment Act. 48 Stat. 955, as amended, now 28 U. S. C. § 2201.

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339 U.S. 667 *; 70 S. Ct. 876 **; 94 L. Ed. 1194 ***; 1950 U.S. LEXIS 1813 ****



In a suit under the Federal Declaratory Judgment Act, the District Court decreed that the contracts between respondent and petitioners had not been terminated and remained in full force and effect. The Court of Appeals affirmed. 174 F.2d 89. This Court granted certiorari. 338 U.S. 846. As to one of the petitioners, the judgment is vacated and the cause remanded; as to the other two petitioners, the judgment is reversed with directions that the cause be dismissed. P. 679.


certificate of public convenience, certificate, Courts, federal court, date of issuance, supplemental, issuance, parties, pipeline, termination, contracts, declaratory judgment, natural gas, conditions, purposes

Civil Procedure, Jurisdiction, Subject Matter Jurisdiction, General Overview, Governments, Federal Government, US Congress, Jurisdictional Sources, Judgments, Declaratory Judgments, Federal Declaratory Judgments, Enforcement & Execution, Contracts Law, Remedies, Equitable Relief, Injunctions, Jurisdiction Over Actions, Relief From Judgments, Damages, Monetary Damages, Specific Performance, Constitutional Law, The Judiciary, Constitutional Sources, Federal Questions, Jurisdiction on Certiorari, Considerations Governing Review, State Court Decisions, Federal Questions, Administrative Law, Judicial Review, Reviewability, Standing, Energy & Utilities Law, Natural Gas Industry, Natural Gas Act, Regulators, US Federal Energy Regulatory Commission, Administrative Proceedings, Rehearings, Agency Adjudication, Contract Interpretation