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154 Ct. Cl. Findings of Fact of 180,000 cubic feet per hour and to deliver at the Red River Ordnance Depot a maximum of 185,000 cubic feet per hour in lieu of the 10,000 cubic feet per hour originally specified. With respect to these additional quantities of gas, it was agreed that on peak days during the winter and upon one hour's notice, the maximum volume of gas to be furnished could be curtailed to 200,000 cubic feet per hour at the shell loading plant and to 20,000 cubic feet per hour at the ordnance depot. In the same modification of the contract, the defendant agreed to install standby facilities at its own expense to supplement the gas supplied by plaintiff on peak days when deliveries were subject to reduction to the extent stated.

25. By contract dated October 2, 1944, plaintiff agreed to supply the Lone Star Steel Company at its plant near Daingerfield, Texas, gas for industrial purposes on an interruptible basis. The provisions of the contract with respect to the monthly rate, terms of payment, and annual volume discount were identical with those provisions of the contract between plaintiff and defendant that covered the furnishing of interruptible gas at the Shumaker Naval Ordnance Plant. For a time, the gas was supplied by plaintiff from its main line.

26. In 1945 the Southern Natural Gas Pipe Line Company, a Texas corporation, contracted to purchase a supply of gas from producers in the Willow Springs and Harleton Gas Fields, located about 2 miles west of Longview, Texas. In order to dispose of the gas, the pipeline company entered into a contract with the Lone Star Steel Company on May 28, 1945, by which the former agreed to construct a pipeline from the producing field near Longview to connect with the facilities of the steel company and to furnish it a supply of gas over a 10-year period in accordance with the terms of the contract in evidence as plaintiff's exhibit 9. The rates to be paid by the steel company were substantially lower than the rates it had agreed to pay plaintiff for gas sold under the contract of October 2, 1944.

About the time such transactions occurred, the vice-president and general manager of plaintiff made an offer to buy the gas from the owners in the Harleton Field and learned


Findings of Fact

that the Southern Natural Gas Pipe Line Company had already contracted to purchase the gas. Through negotiations between plaintiff's manager and the officers of the pipeline company, a tentative agreement was made for plaintiff to purchase the gas in the Harleton Gas Field from the pipeline company. However, the Lone Star Steel Company would not release the pipeline company from the binding contract of May 28, 1945, unless plaintiff would assume the obligations thereof. As a result, the pipeline company was unwilling to dispose of its gas reserves in the Harleton Field to plaintiff unless it could be relieved of its contract obligations to Lone Star Steel. After further discussions, a threeparty agreement was made whereby

(1) the pipeline company sold its reserves in the Harleton Field to plaintiff; (2) plaintiff was required to and did enter into a written

a contract with Lone Star Steel substantially identical in terms to the contract of May 28, 1945, between Southern Natural Gas Pipe Line Company and Lone Star Steel, and

(3) Lone Star Steel released the pipeline company from the obligations it assumed in the contract of May 28, 1945.

27. The written contract which plaintiff and the Lone Star Steel Company entered into on July 1, 1945, upon the consummation of the agreements described in the preceding finding, contained the following pertinent provisions:

WHEREAS, Seller is in process of acquiring a supply of natural gas in the Harleton Area of Harrison County, Texas and Buyer desires to purchase natural gas from Seller for special purposes herein described;

WHEREAS, Defense Plant Corporation, hereinafter referred to as "Defense Corporation", under an agreement with Lone Star Steel Company (Plancor 763), has undertaken the development of certain iron ore properties in Morris County and Cass County and adjacent counties in the State of Texas, included in which program has been the construction, near the town of Daingerfield, Texas, of an ore beneficiating plant, a power plant, a set of coke ovens, a blast furnace and various other auxiliary facilities; and

WHEREAS, in order to supply Buyer's natural gas requirements at said plant in adequate quantities and at suitable pressures, Seller will, subject to the terms and conditions herein, construct an eight-inch gas pipe line

154 Ct. Cl.

Findings of Fact

capable of supplying a minimum of 800,000 cubic feet of gas per hour, from a point in the said Harleton Field, to the Lone Star Steel Company Plant in Morris County, Texas.

Now THEREFORE, for and in consideration of the mutual benefits herein recited, said parties hereby contract and agree as follows: 1. Seller

will proceed with all reasonable diligence to complete the construction of the aforesaid eight-inch gas pipe line, together with all necessary regulating, and metering equipment. All such construction shall be executed by Seller at its expense and Seller shall, at all times herein contemplated, be deemed sole owner of all material and equipment incorporated in said line, appurtenant thereto, or hereafter salvaged therefrom. Seller will at all times maintain and operate said line at its risk and expense. It is understood that such construction requires the use of critical materials and skilled labor difficult to secure under war conditions, and Seller shall in no wise be liable to Buyer, Defense Corporation, the United States Government, or any other person, firm, corporation or agency whomsoever for delays in completion of such construction, but it shall proceed vigorously and shall exercise reasonable diligence in the completion thereof. This agreement, however, shall be null and void, at Buyer's option, if said gas pipe line is not completed by September 29, 1945.


3. During the term hereof, the minimum monthly billing for gas shall be One Thousand Dollars ($1,000.00), which minimum amount of gas Buyer agrees to use or to pay Seller for if not used, as computed in accordance with the attached rate schedule, provided, however, that such obligation, during the first twenty-four (24) months hereof, shall not be applicable to any period or periods longer than one month, during which all substantial operations by Buyer of its plant near Daingerfield may cease or be interrupted.

4. Buyer shall have the right to purchase, subsequent to completion of Seller's transmission line, under the terms and provisions of this agreement, and Seller shall have the obligation to supply, in the event Buyer exercises such right, not to exceed a total of 19,200,000 cubic feet of gas during each day of twenty-four (24) hours, but such right to purchase and Seller's obligation to deliver the same shall not be cumulative from day to day.


Findings of Fact 6. This contract is for an original term of ten years from date hereof, and supersedes all contracts and agreements for natural gas for the above stated purposes on the above described premises, and at the end of the original term automatically renews itself for successive periods of three years, unless terminated by either party by written notice delivered to the other not less than twelve months (12) in advance of the date upon which the original term or any three-year renewal term expires. The meters measuring gas to Buyer shall be read at intervals of about thirty days, called billing periods, and bills for service during each such billing period will be rendered at the address first stated above and are payable at Shreveport, Louisiana.

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8. Gas to be delivered under this contract shall be merchantable gas as produced in its natural state from the well or wells except that Seller may, before delivery

gas hereunder, extract the liquefiable hydro-carbons, provided, however, that in such extraction or separation the gas shall not be subjected to any treatment which will change the chemical composition of any of the component parts of said gas, permit the admission of oxygen, dilute such gas or reduce the heating content to a value of less than 950 British thermal units per cubic feet of gas saturated with water vapor, and Seller guarantees that such heat content shall not be less than 950 British thermal units per cubic foot of gas saturated with water vapor. Said gas shall contain not more than 30 grains of sulphur per hundred cubic feet and not more than 15 grains of hydrogen sulphide per thousand cubic feet of gas.

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13. It is understood that Buyer is engaged in operating under a lease agreement with Defense Plant Corporation covering such ore plant, power plant, coke ovens, blast furnace and auxiliary facilities, and in the event of termination or cancellation of Buyer's lease agreement with Defense Plant Corporation, this agreement shall terminate contemporaneously with the termination of such lease agreement, unless Buyer shall continue to operate said facilities by purchasing same or by leasing the same from any owner thereof.

154 Ct. Cl.

Findings of Fact

Net Monthly Rate:

First 10,000,000 cu. ft. per month-14¢ per thousand cu. ft.
Next 10,000,000 cu. ft. per month-104 per thousand cu. ft.

All over 20,000,000 cu. ft. per month— 7¢ per thousand cu. ft.
Minimum Charge: During each month of this contract Buyer

agrees to take or pay for a net minimum of $1,000.00 worth of

gas, subject to the provisions of Article 3 of this Contract. Terms of Payment: The net monthly bill is payable on or before

the twentieth (20th) day of the month succeeding that month in which service is rendered. If the bill is not paid by such date, an additional amount of 5% (but not to exceed $50.00)

shall be added to the monthly bill. Annual Volume Discount: If buyer uses, in any twelve months

operating year, a total volume of 100,000 m.c.f. or more, Seller will return to Buyer at the end of such period, by reason of the use of such annual volume, an amount of money computed at the following rates: For consumption from and including 100,000 m.c.f. up to 200,000 m.c.f. per annum one cent ($0.01) per m.c.f.; for consumption from 200,000 m.c.f. to 300,000 m.c.f., two cents ($0.02) per m.c.f.; for consumption of 300,000 m.c.f. or more, three cents ($0.03) per m.c.f.

The monthly and annual rate under this schedule for any contract year shall not be less than an average of 6.5¢ per m.c.f. for the first three years, 7.2¢ per m.c.f. for the next two years, and 7.6¢ per m.c.f. thereafter.

Service under this schedule is for the individual use of Buyer, and the natural gas so purchased shall not be resold except that Buyer is specifically permitted to utilize the gas so purchased in all buildings and houses used by Buyer in the operation of said plant or in houses at the plant site occupied solely by Buyer's employees and which houses have been constructed or may be constructed directly in connection with the construction of the plant; provided that nothing herein contained shall be construed as prohibiting a lessee of Buyer from utilizing gas purchased under this contract.

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28. In accordance with its contract with Lone Star Steel, plaintiff was required to expend approximately $241,000 for the construction of 18 miles of pipeline to transmit the gas from the Harleton Field to the steel company's facilities, although the facilities which plaintiff had previously used for supplying gas to the Lone Star Steel Company under the former contract of October 2, 1944, were adequate for furnishing the volume of gas called for under that contract. As previously stated, the new contract also required plaintiff to furnish the gas to the steel company at lower rates than were provided for in the former contract.

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