Sidebilder
PDF
ePub

from the Gulf Production Co. through leases in the Texas Panhandle field for $5,000,000. Subsequently, Insull, the Cities Service Co., the Standard Oil Co. of New Jersey, the Columbian Carbon Co., and the Texas Corporation organized the Continental Construction Corporation and the Texoma Natural Gas Co. as production, construction, and transmission companies which were to produce the gas in the Panhandle field and sell the same to the distributing companies serving Chicago and the northern part of Illinois. The Continental Construction Corporation's name was subsequently changed to Natural Gas Pipeline Co. of America, and after a series of transactions Insull's interest was conveyed to the Natural Gas Investment Co., an Illinois corporation whose stock is owned by the Peoples Gas Subsidiary Corporation, and other Illinois companies. The outstanding stock of the Natural Gas Pipeline Co. of America since July 25, 1931, has been owned by the following groups:

[blocks in formation]

The investment in pipe-line gas acreage and other property of this group has been approximately $65,000,000; on account of retirements it is now about $60,000,000. The capacity of the line is approximately 175,000,000 cubic feet' a day. The gross sales have increased from $5,984,000 in 1933 to $9,116,000 in 1934, to $11,433,000 in 1935, to $13,734,000 in 1936. Information which we have received indicates that about 85 to 90 percent of the gross revenues comes from the Chicago area.

The problem of effective regulation of interstate natural-gas rates has become of special concern to us in view of the Commission proceedings and litigation arising from the efforts of the Peoples Gas Light & Coke Co. to obtain a $3,000,000 rate increase. These proceedings began on June 24, 1936, when the company filed its increased schedule of rates.

The company had requested an increase in rates amounting to about 16 percent on its general customers and 50 percent in the minimum bill.

In July the company asked that it be given permission to place its increased rates in effect immediately, pending completion of the Commission proceedings. This request was denied by the commission on August 21. The company then brought suit in the State circuit court and obtained a temporary injunction, which was reversed in the appellate court and which is now on appeal in the State supreme court. The supreme court of our State in February denied the application of the company for a writ of supersedeas which would have restored the injunction granted by the circuit court. Hearings on the right of the company to permanent injunction are now pending before the master in chancery and the Commission is continuing its hearings to determine whether the company is entitled to any rate increase. A final order must be entered by May 24 of this year by the Commission.

The largest item of operating expenses of the Peoples Co. arises out of its annual payments for natural gas to the Chicago District Pipeline Co., which now approximate $13,000,000 per year. In its effort to determine whether the contracts between the Chicago District Pipeline Co, and the Natural Gas Pipeline Co. of America now place an unfair burden upon the consumers of the Peoples Gas Light & Coke Co., the Commission in November cited the Chicago District Pipeline Có, to show cause why its wholesale rates should not be reduced.

In order that we might determine whether or not Natural Gas Pipeline Co. of America's wholesale rates under which it sells gas to the Chicago District Pipeline Co. or whether its contract places an unfair burden ultimately upon the Chicago consumer, a few weeks ago the Commission entered an order directing this same Natural Gas Pipeline Co. of America to file reports with the Commission showing the income, extent, and property investment in connection with the supply of gas service to the Chicago District Pipeline Co.

The Commission also directed the Natural Gas Pipeline Co. of America to make available for the Commission's examination its books and records dealing with the sales of gas to the Chicago District Pipeline Co.

Now, the Natural Gas Pipeline Co. immediately filed a suit in the Federal court alleging that the effort of the Commission to inquire into the profits which the Natural Gas Pipeline Co. was actually earning under its contract with the Chicago District Pipeline Co. violated various provisions of the Federal and State constitutions, notwithstanding their denial of any obligation to the State of Illinois.

For your information I should like to file as part of the record here a copy of the bill filed by the Natural Gas Pipeline Co. of America, in the Federal court.

You will notice that they have alleged that not only is the Commission regulating interstate commerce in an emergency asking that the Natural Gas Pipeline Co. of America produce its books and records, but it is also violating the due process clause and several other provisions of both the Federal and State Constitutions.

(The document referred to is as follows:)

BILL OF COMPLAINT OF NATURAL GAS PIPELINE CO. OF AMERICA, A CORPORATION

In the District Court of the United States for the Northern District of Illinois,

eastern division. Natural Gas Pipeline Co. of America, a corporation, v. James M. Slattery, Andreu Olson, Charles E. Byrne, James D. Marnane, and Harry A. Barr, the persons constituting the Illinois Commerce Commission of the State of Illinois, and Otto Kerner, Attorney General of the State of Illinois. In equity no. 15562

TO THE HONORABLE JUDGES OF THE DISTRICT COURT OF THE UNITED STATES, FOR

THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION :

Natural Gas Pipeline Co. of America, plaintiff, brings this, its bill of complaint, against the defendants, James M. Slattery, Andrew Olson, Charles E. Byrne, James D. Marnane, and Harry A. Barr, the persons constituting the Illinois Commerce Commission of the State of Illinois, and Otto Kerner, attorney general for the State of Illinois, and for its cause of action alleges :

1. The plaintiff, Natural Gas Pipeline Co. of America, formerly Continental Construction Corporation, is a corporation organized in 1930 under and existing by virtue of the laws of the State of Delaware, is a citizen and resident of the

State of Delaware, has offices at 19-20 Dover Green, Dover, Del., and at 20 North Wacker Drive, Chicago, Ill., and brings this suit in its own behalf.

2. The defendants, James M. Slattery, Andrew Olson, Charles E. Byrne, James D. Marnane, and Harry A. Barr are the persons who presently constitute the Illinois Commerce Commission, which is an administrative body created by and acting under and pursuant to an act of the General Assembly of the State of Illinois, entitled, "An act concerning public utilities”, approved June 23, 1921, and in force July 1, 1921, hereinafter referred to as "public utilities act.” Said defendants will hereinafter be referred to collectively as “Illinois Commerce Commission.” The defendant, Otto Kerner, is the attorney general of the State of Illinois and is the legal counsel for the Illinois Commerce Commission, charged with the duty of commencing and conducting suits and proceedings to enforce the orders of the commission and the provisions of the public utilities act, and to recover and enforce the fines and penalties imposed by the public utilities act for its violation, or the violation or nonobedience of the orders of the Illinois Commerce Commission. Each of said defendants is a resident and a citizen of the State of Illinois and subject to the jurisdiction of this court.

3. This is a suit of a civil nature, arising under the Constitution and the laws of the United States of America, between citizens of different States, and within the equity jurisdiction of the district court of the United States, and is brought for the purpose of enjoining the enforcement of a certain order of said Illinois Commerce Commission dated March 3, 1937, and the matter in controversy, exclusive of interest and costs, exceeds the sum of $3,000.

4. Plaintiff is engaged in the sale, transportation, and delivery of natural gas from a point or points in the State of Oklahoma to distributors and consumers of natural gas in the States of Kansas, Nebraska, Iowa, and Illinois, Said natural gas is transported from said point or points in the State of Oklahoma to said consumers or distributors of natural gas in the States of Kansas, Nebraska, Iowa, and Illinois by means of a system of pipe lines and pumping stations. Plaintiff's business and commerce is wholly interstate and national in character, and plaintiff is not engaged in intrastate commerce within the State of Illinois. Plaintiff has not qualified to do an intrastate business within the State of Illinois under the terms and provisions of the laws of the State of Illinois, and is not a public utility nor subject to the jurisdiction or control of the Illinois Commerce Commission under said Public Utilities Act.

5. On or about the 25th day of July, A. D. 1931, the plaintiff, then known as Continental Construction Corporation, and Chicago District Pipeline Co., an Illinois corporation, made and executed a certain agreement in writing dated July 25, 1931, for the sale of natural gas to the said Chicago District Pipeline Co., a true copy of which is attached hereto as exhibit A. On or about the 31st day of December, A. D. 1935, the plaintiff and the Chicago District Pipeline Co. made and executed a certain agreement of forebearance, a true copy of which is attached hereto as exhibit B.

6. Chicago District Pipeline Co. is engaged in the sale, transportation, and delivery of natural gas within the State of Illinois, and plaintiff is informed and believes that said Chicago District Pipelne Co. is solely engaged in intrastate commerce within the State of Illinois and is a public utility within the scope and meaning of the Public Utilities Act and is subject to and under the jurisdicion of the Illinois Commerce Commission pursuant to the terms and provisions of the Public Utilities Act.

7. On or about the 17th day of November, A. D. 1936, the Illinois Commerce Commission issued a certain citation against the Chicago District Pipeline Co., a true copy of which is attached hereto as exhibit C, and the Chicago District Pipeline Co. appeared in response to said citation. Thereafter hearings were instituted by said Illinois Commerce Commission on said citation, and on the 3d day of March 1937, and after the Chicago District Pipeline Co. had closed its evidence, completed its proof, and rested its case, an order was entered by said Illinois Commerce Commission in said cause, directing and commanding the plaintiff to file forthwith with said Illinois Commerce Commission, and on or before the 15th day of March, A. D. 1937, a true and accurate report as to the cost of the property of the plaintiff which is used in supplying natural gas to said Chicago District Pipeline Co., and a statement of income and expenses in connection with supplying gas to said Chicago District Pipeline Co., or to report to said Illinois Commerce Commission, in substitution thereof, a true and accurate statement as to the cost of all its property or properties used by it in the business of transporting and selling natural gas, together with a statement as to the income and expenses for such operations, and further

ordering the plaintiff to make available for the examination of said Illinois Commerce Commission, its officers, agents, and employees, all of plaintiff's accounts and records relating to transactions between plaintiff and Chicago District Pipeline Co., including all accounts and records as to joint or general expenses, any portion of which may be applicable to said transactions. A true copy of said order is attached to this bill as exhibit D.

S. Plaintiff is not a party to said citation or to said proceedings against the Chicago District Pipeline ('o., and said order of March 3, 1937, was made and entered by Illinois Commerce Commission without notice to plaintiff and without giving the plaintiff an opportunity to be heard.

9. Chicago District Pipeline Co. and the plaintiff are not subject to common control through common-stock ownership, or in any other manner. At all times mentioned herein prior to September 1, 1931, all or substantially all of the outstanding common capital stock of Chicago District Pipeline Co. was owned or held by Insull Son & Co., Inc., an Illinois corporation, and, since September 1, 1931, by Natural Gas Investment ('0., an Illinois corporation. The outstanding stock of Natural Gas Pipeline Co. at the times hereinafter mentioned was and is hell hy the following-named corporations, substantially in the amounts indicated, viz:

[blocks in formation]

01 July 2.7. 1931, all, or substantialli all, of the cutst;nding capital stock of Insuli Son & Co., Inc., was owned or held by Instilt Utility Investments, Inc., an Illinois corporation, which was not owned or controlled directly or indirectly by any one or more of the above-listed corporations. Plaintiff is inforneci and believes that the outstanding capital stock of Natural Gas Investmeüi ('o. is held by the following-named corporations, substantially in the amowts indicated :

Percent Peoples Gas Subsidiary (orporation, an Illinois corporation

79. 51 Commonwealth Subsidiary Corporation, an Illinois corporation.

4. 28 Public Service Co. of Northern Illinois, an Illinois corporation

16. 18 And julaintiff is further informed and believes that all of the outstanding capital stock of Peoples Gas Subsidiary Corporation, an Illinois corporation, is owned by the Peoples Gas Light & Coke Co., an Illinois corporation: and that all of the outstanding capital stock of Commonwealth Subsidiary Corporation, an Illinois corporation, is owned by Commonwealth Edison Co., an Illinois corporation.

10. The affairs of the plaintiff and of Chicago District Pipeline Co. are controlied by their respective boards of directors and officers acting pursuant to their charters and the laws of the States of their incorporation. At the time of the negotiation for and execution of said contract of July 25, 1931, the board of directors of the plaintiff corporation consisted of eight members, and said board has subsequently been enlarged to include nine members, but at all times mentioned herein Natural Gas Investment Co. and Insull Son Co., Inc., have been represented by not more than two members of said board and neither Natural Gas Investment Co., Insull Son & Co., Inc., nor any other of the corporations named above, have ever controlled or attempted to control said board, and at none of the times mentioned herein was there any common control of the boards of directors of the plaintiff and of Chicago District Pipe

135605--37-3

line Co. Since the date of plaintiff's incorporation, and until February 9, 1937, one of the two members of plaintiff's board of directors representing Natural Gas Investment Co. or Insull Sons & Co., Inc., has been elected vice president of Natural Gas Pipeline Co. of America, but said vice president never exercised any function of said office nor taken any part in the control or management of plaintiff's business or affairs as such officer, and has received no compensation as vice president and, since February 9, 1937, none of the directors representing Natural Gas Investment Co. has been an officer of Natural Gas Pipeline Co. of America.

11. Plaintiff alleges, and the attorneys, agents, and representatives of the Illinois Commerce Commission so state, that said Illinois Commerce Commission proposes, threatens, and intends to regulate, supervise, and control the contracts, rates, and other affairs of the plaintiff, and otherwise exercise jurisdiction and control over the plaintiff, and as preliminary thereto to inquire into the earnings, expenses, and profits of the plaintiff, the value of its properties and investments, and the other business affairs of the plaintiff; that it is the avowed intention of said Illinois Commerce Commission to treat the Chicago District Pipeline Co. and Natural Gas Pipeline Co. of America as affiliated corporations with common-stock ownership, and subject to common control, to regulate the business affairs of said corporations as a single enterprise under the jurisdiction of said Illinois Commerce Commission, to take jurisdiction of and regulate the profits and income of the plaintiff, and to exercise all power, control, and dominion over the plaintiff, which purports to have been granted to said Illinois Commerce Commission by section 8 (a) of said Public Utilities Act referred to in said order.

12. Plaintiff avers that the Illinois Commerce Commission is not authorized nor empowered to inquire into, investigate, or require the disclosure of the earnings, expenses, or profits of the plaintiff, nor the value of its properties or investments, nor any other business or affair of the plaintiff, and further alleges that said Illinois Commerce Commission is not authorized or empowered nor has it authority or jurisdiction to regulate, control, supervise, or interfere with the contracts or other business affairs of the plaintiff, and avers that the Public Utilities Act, and particularly section 8 (a) thereof, has no application to the plaintiff company and that said act is wholly null and void insofar as said act or said section 8 (a) thereof purport to confer upon the commission any jurisdiction or authority over the plaintiff, its officers or agents, or the plaintiff's. business, books, records, contracts, or affairs. Plaintiff further states that said Illinois Commerce Commission is not authorized or empowered nor has authority or jurisdiction under said Public Utilities Act, or otherwise, to require the plaintiff to file with said Illnois Commerce Commission a report as to the cost of the property of the plaintiff which is used in supplying natural gas to said Chicago District Pipeline Co., or a statement of the income or expenses of the plaintiff in connection with supplying gas to said Chicago District Pipeline Co., or to report to said Illinois Commerce Commission as to the cost of all or any part of its property or properties used by it in the business of transporting and selling natural gas, or to make or disclose any statement as to its income or expenses from such operations or to require the plaintiff to make available for examination by said Illinois Commerce Commission, or its officers, agents or employees, any of its accounts or records relating to transactions between said Natural Gas Pipeline Co. of America and Chicago District Pipeline Co., either including or excluding accounts and records as to joint or general ex pense, any portion of which may be applicable to said transactions, as ordered and directed in said order of the Illinois Commerce Commission dated March 3, 1937, and plaintiff avers that said order is wholly null and void.

13. Plaintiff further alleges that said order of March 3, 1937, and section 8 (a) of said Public Utilities Act deprive the plaintiff of property without due process of law and deny to the plaintiff the equal protection of the laws, and subject plaintiff's books, records, papers, and effects to unlawful searches and seizures, and that said order and said section of said Public Utilities Act are in violation of and prohibited by the Constitution of the United States of America and section one of the fourteenth amendment thereof.

14. If the Illinois Commerce Commission is permitted to enforce said order of March 3, 1937, herein complained of, plaintiff will suffer great inconvenience and expense, plaintiff's trade secrets, secret processes, and methods of doing business will be exposed to its competitors, plaintiff's credit will be impaired, and

« ForrigeFortsett »