Energy Reserves Group, Inc. v. Kansas Power & Light Co. case
brief summary
459 U.S. 400 (1983)
CASE FACTS
A public utility entered into a contract with an oil company to purchase gas at a set price. There were two price escalators in the contract. First, if a government fixed a price higher than that in the contract, the price would rise to that level. Also, the oil company could determine a new price every two years based upon market fluctuations. Then, Congress passed the Natural Gas Policy Act of 1978 (Act), 15 U.S.C.S. § 3301 et seq., which allowed for computation of prices at the lower of those set in existing contracts or at a price fixed by the Act. Kansas then adopted the Kansas Natural Gas Protection Act (Kansas Act), Kan. Stat. Ann. § 55-1401 et seq., which permitted increases under escalator clauses. The oil company sought to terminate the contracts, but the utility refused. Thus, the oil company filed suit seeking declaratory relief.
ARGUMENT
The oil company complained that the Kansas Act violated the Contract Clause of the U.S. Constitution.
HOLDING
The Court found that the Kansas Act did not violate the Contract Clause because the natural gas industry was highly regulated in order to protect consumers and the Kansas Act was rationally related to that goal of protection.
CONCLUSION
The Court affirmed the judgment.
459 U.S. 400 (1983)
CASE SYNOPSIS
Petitioner oil company challenged a
finding by the Supreme Court of Kansas that the Kansas Natural Gas
Protection Act, Kan. Stat. Ann. § 55-1401 et seq., did not
violate the Contracts Clause of the U.S. Constitution.CASE FACTS
A public utility entered into a contract with an oil company to purchase gas at a set price. There were two price escalators in the contract. First, if a government fixed a price higher than that in the contract, the price would rise to that level. Also, the oil company could determine a new price every two years based upon market fluctuations. Then, Congress passed the Natural Gas Policy Act of 1978 (Act), 15 U.S.C.S. § 3301 et seq., which allowed for computation of prices at the lower of those set in existing contracts or at a price fixed by the Act. Kansas then adopted the Kansas Natural Gas Protection Act (Kansas Act), Kan. Stat. Ann. § 55-1401 et seq., which permitted increases under escalator clauses. The oil company sought to terminate the contracts, but the utility refused. Thus, the oil company filed suit seeking declaratory relief.
ARGUMENT
The oil company complained that the Kansas Act violated the Contract Clause of the U.S. Constitution.
HOLDING
The Court found that the Kansas Act did not violate the Contract Clause because the natural gas industry was highly regulated in order to protect consumers and the Kansas Act was rationally related to that goal of protection.
CONCLUSION
The Court affirmed the judgment.
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