Pierce Oil Corp. v. Phoenix Refining Co.

Background

In 1913 an Oklahoma oil company built a refinery at Sand Springs. A Virginia oil company also built a refinery at Sand Springs and a thirty-three mile pipeline within Oklahoma to the Cushing oil field. From 1915 the Virginia company carried oil for the Oklahoma refinery under yearly written contracts, but in February 1918 it said it would stop carrying that oil after March 21. The Oklahoma refinery asked the State Corporation Commission to declare the pipeline company a common carrier and to order it to transport oil to the refinery. The pipeline company said it had built the line to serve its own refinery, had only accommodated others, and that treating it as a carrier would take its property without due process.

Reasoning

The Court considered whether the State could treat the pipeline company as a common carrier under Oklahoma law and whether that treatment violated the company’s constitutional rights. Oklahoma had a constitution and pipeline statutes in force before the Virginia company entered the State, and the company had applied for and accepted permission to do business under those rules. The Corporation Commission found substantial evidence that the company had carried oil for others, had the only practical line, and had a monopoly on the route. The Court held that by entering and accepting the State’s privileges the company was subject to the statutes and the Commission’s order, and that this did not unlawfully deprive the company of property.

Real world impact

The ruling means companies that enter a State after its constitution and pipeline laws take effect can be required to follow those laws and cannot later claim a constitutional taking for orders within those statutes. Here the company was ordered to carry certain oil and the court did not decide rates. The decision upholds state power to set conditions on foreign corporations doing intrastate business.