Benjamin N. Cardozo

“ Upon the hearing before the commission, the city made the claim that, in the appraisal of the property of the Ohio Fuel Gas Company, the production property should be allocated between Columbus and other municipalities upon the basis of the sales, but that transmission property should be allocated upon the basis of mileage, multiplied by the peak demand at the place of distribution. In opposition, the appellant contended that allocation on the basis of mileage was impracticable, and so the commission unanimously held. ”

“ If the company is not satisfied to have the depletion allowance thus applied in renewal of its life, it may divide the fund among the stockholders and wind the business up. It cannot get its capital back at the expense of the consuming public and also at the same expense provide itself with a fresh supply to keep the business going.
2. The River Rate.
We have seen that the Ohio Company, when buying gas from the United Company, an affiliated corporation, paid an agreed rate (26 1/2 cents per thousand cubic feet) for delivery at the river. ”

“ On the contrary, the course of business makes it clear that, when the fields in use shall be exhausted, the business will extend to others, and this for an indefinite future, or certainly a future not susceptible of accurate estimation. ”

“ Other experts, testifying to an aggregate, without assigning a proportion to the contributory factors, give estimates so vague as to be little more than guesses, one of them, for illustration, holding to the opinion that ten would be a fair percentage, yet unable to give a reason why the amount should not be less or greater. ”

“ At times the immediate purpose of buying up extensive tracts is to forestall or stifle competition that might bring the prices down. There is adequate compensation for investment so remotely beneficial when the cost of renewing fields in present operation, and thus replenishing the capital, is paid out of gross earnings as an expense of operation, with a proportionate increase of the prices to be charged for gas thereafter. ”

“ An ordinance of the city of Columbus, Ohio, approved by the electors at a referendum vote, provides that for five years from November 12, 1929, the price to be charged for natural gas shall be at the rate of 48 cents per thousand cubic feet with a minimum charge of 75 cents per month. ”

“ Other experts, who reject the factor of interest unearned during the period of development, build their estimates of going value upon the cost of attaching new customers to the business, a cost not taken from the books, but merely presumed or estimated at widely variant amounts. ”

“ If that holding is correct, the owner of the exhausted fields will find itself in a brief time with wells and leases that are worthless and with no opportunity in the interval to protect itself against the impending danger of exhaustion. Plainly the state must either surrender the power to limit the return or else concede to the business a compensating privilege to preserve its capital intact. ”

“ It may disagree with the commission either as to the value of the fields or as to the life expectancy of the supply of gas. There will be power, we assume, to direct another hearing if the basis for an intelligent judgment is lacking in the record. When the allowance has been fixed nd has been charged to operating expenses, it will supply the answer to other questions in controversy now. There will be no need, when that is done, to include in operating expenses a separate provision for the payment of 'delay rentals' upon leases in reserve. ”

“ The appellant insists, however, that even this addition will not serve, and that confiscation will result unless there is an allowance of other items which the court and the commission have united in rejecting. Whether that contention may be upheld is the question next before us.
Objection is made that the annual depreciation allowance ($667,612) for depreciable property other than well structures and equipment is less than is necessary to maintain the property intact. ”

“ So far as value had been ad ed above the moneys thus expended, there was not even approximate precision in measuring its amount. The burden of building up patronage may be negligible where there is little competition with any other producer or with other kinds of fuel. ”