Missouri Ex Rel. Barrett v. Kansas Natural Gas Co.
Headline: Court limits state power by ruling wholesale interstate natural gas sales to distributors are federal commerce, blocking state utility commissions from imposing rates that directly burden interstate gas trade.
Holding: The Court held that a company’s wholesale sale and delivery of natural gas across state lines to distributing companies is interstate commerce and states may not directly regulate those rates, though local retail sales remain subject to state control.
- Prevents states from setting wholesale rates on interstate natural gas sales to distributors.
- Leaves regulation of local retail gas service to state and municipal authorities.
- Affirms that interstate pipeline sales require national uniform treatment, not differing state rules.
Summary
Background
A Delaware natural gas company produced and bought gas mostly in Oklahoma and some in Kansas, moved it in continuous pipelines into Kansas and Missouri, and sold large wholesale quantities to local distributing companies for resale to consumers. The company raised its wholesale rate from thirty-five to forty cents per thousand cubic feet, and state regulators and courts in Kansas and Missouri moved to stop that increase while federal courts declined to allow state control.
Reasoning
The core question was whether those wholesale sales and deliveries to distributing companies are part of interstate commerce and therefore beyond state power. The Court said the transportation and wholesale sale to distributors are an unbroken interstate business and that letting a state fix the selling price would impose a direct burden on interstate trade. The Court contrasted wholesale interstate sales with later retail sales by local distributors, which occur after the interstate movement ends and remain subject to state regulation.
Real world impact
The decision means states cannot directly regulate or fix prices for wholesale natural gas sales that are essentially interstate, because that would disrupt uniform national commerce. Local distributors’ retail service and sales to final consumers remain under state control. In these consolidated cases the Court affirmed two lower rulings and reversed one state-court outcome, effectively protecting the gas company’s ability to make interstate wholesale sales free from state rate control.
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