Newspaper article THE JOURNAL RECORD

Ruling May Halt State Authority to Regulate Takes

Newspaper article THE JOURNAL RECORD

Ruling May Halt State Authority to Regulate Takes

Article excerpt

The U.S. Supreme Court probably struck down Oklahoma's authority to regulate takes of state-produced natural gas by inters tate pipelines Wednesday when it ruled against Mississippi's right to do so, according to Oklahoma officials.

Although there are differences between statutes of the two states, the high court's 5-4 ruling limiting Mississippi's powers appears to extend to Oklahoma, said attorney William Legg of Oklahoma City.

Legg represents eight pipelines who have challenged the Oklahoma Corporation Commission's jurisdiction to require them to take ratably from all interest owners in a gas field.

On the other hand, similarities in the two state laws may overshadow basic differences and prevent a hearing on the merits of Oklahoma's statute, said Kent Harrel, president of Tulsa-based Harrel Energy Co. and an official with the Oklahoma Independent Petroleum Association.

The corporation commission voted July 3 to extend its jurisdiction to require interstate pipelines, as well as the already regulated intrastate lines, to take gas ratably from all interest owners in a gas field rather than from one or a few owners.

The U.S. Supreme Court said Mississippi could not make a similar requirement of interstate pipelines, if there is a pre-existing contracts with only some of the owners.

Federal regulation pre-empts such state regulation of the natural gas industry, said Justice Harry A. Blackmun, who voted against Mississippi, according to an report.

An almost-identical state regulation was struck down by the court in 1963. Later, the Mississippi court upheld that state's Oil and Gas Board when it said Transcontinental Gas Pipeline Corp. (Transco), a subsidiary of Transco Energy Co., must take ratably from all wells producing from a common pool and purchase gas without discrimination in favor of certain operators.

In 1982, Transco said it would no longer purchase gas from owners and producers not under contract, except at prices lower than it paid contracted owners.

Prior to that, the company had purchased gas at a uniform rate, whether it had a contract with an owner or not.

The Mississippi court ruled that the subsequently enacted Natural Gas Policy Act of 1978 had given states regulatory authority over the wellhead sales of gas. …

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