United Fuel Gas Co. v. Hallahan
Headline: State law taxing pipeline transport of natural gas is struck down as applied to a company whose gas flowed mainly out of state, protecting interstate shipments from that tax.
Holding:
- Limits state taxes on gas carried mainly across state lines.
- Protects companies whose gas flows chiefly out of state from that tax.
- Keeps purely local gas sales subject to state taxation.
Summary
Background
A gas company gathered and bought nearly all its natural gas in West Virginia and sent it through pipes that led to or beyond the State line and connected with other companies’ pipes. In one year the company handled about 54,973,588 thousand cubic feet; slightly over a million came from outside West Virginia. It sold about 11,590,656 thousand cubic feet to West Virginia consumers, a little over 10,000,000 to people in other States, and the rest to four connecting companies that mainly carried the gas out of State.
Reasoning
The central question was whether the State statute taxing transportation by pipeline could be applied to this company. The Court found that the large bulk of the gas was carried beyond the State in a steady flow, so that the transportation was in practice commerce among the States. The Court said the smaller local deliveries did not change that character and rejected theoretical possibilities that some gas might remain in state. For those reasons the Court condemned the tax as applied to this company and reversed the lower court’s decree, following the reasoning in the related Eureka Pipe Line case.
Real world impact
The decision prevents the State from enforcing that pipeline-transport tax against a company whose gas shipments chiefly go out of state. The ruling preserves state taxation for genuinely local sales and distribution but limits state power when the dominant movement of the product is interstate. The Court dismissed the company’s certiorari petition and reversed the judgment below.
Dissents or concurrances
Justice Brandeis dissented, and Justice Clarke dissented as to the jurisdictional question, noting disagreement with parts of the Court’s handling.
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