Producers Transportation Co. v. Railroad Commission

Background

A California law and a state railroad commission order required certain oil pipelines to be treated as common carriers subject to rate and practice regulation. The Producers Transportation Company, organized in 1909 and operating a pipeline from the San Joaquin oil fields to Port Harford since 1910, was ordered to file its rates after a full hearing in 1914. The company argued its pipeline was built and used only under private contracts to carry oil for particular producers and therefore was not a public utility; it also argued the law violated the Constitution’s protections for contracts and due process. A California court sustained the statute and the commission’s order, and the company sought review here.

Reasoning

The core question was whether the pipeline had been devoted to public use so that the State could treat it as a common carrier. The state court found the company had, by its articles of incorporation, its condemnation proceedings for right-of-way, and the substance of its arrangements with shippers, voluntarily made the line available to the public. The opinion explains that if the pipeline had been devoted to public use, the State may regulate rates and practices; the court found the evidence supported that conclusion. The Court rejected the company’s argument that private contracts or mortgage arrangements could prevent regulation, and it held that the contract and due process clauses did not bar the State from regulating a carrier devoted to public use.

Real world impact

The decision means pipelines that have been opened or used to serve many producers can be treated as public utilities and must follow state rate and practice rules. If a pipeline truly remains private and not devoted to public use, the State may not convert it into a public utility without compensation. Owners cannot avoid regulation merely by private contracts or pledges of income.