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154 Ct. Cl.

Findings of Fact

(c) for gas consumed in excess of 141,500 M.C.F. per month, the ordnance plant rate was lower than the refinery rate.

The evidence does not show how far the Lone Star Shell Loading Plant, the Red River Ordnance Depot, or the Lone Star Steel Company were from the source of the gas furnished by plaintiff, except that after July 1, 1945, the gas for the Lone Star Steel Company came from a field 18 miles from the steel plant.

34. Continuity of service. As previously explained, plaintiff's right to curtail the gas supplied to its industrial customers during periods of peak demand was reflected in lower rate schedules for interruptible gas service to such industrial customers.

Plaintiff's contracts for the Arkansas oil refineries, the Louisiana Ordnance Plant, the Pine Bluff Arsenal, and the Shumaker Naval Ordnance Plant, provided for interruptible gas service. The differences in the rate schedules for that type of service to these customers are shown in preceding findings.

The original contract covering the Lone Star Shell Loading Plant and the Red River Ordnance Plant required plaintiff to supply firm gas only. By supplements to the contract, plaintiff agreed to supply more gas and the extent to which it could interrupt the additional supply is shown in finding 24.

Under plaintiff's first contract with the Lone Star Steel Company, in force from October 2, 1944, to July 1, 1945, the steel company was a main-line customer receiving interruptible gas service for industrial use at the same rates charged at the Pine Bluff Arsenal and the Shumaker Naval Ordnance Plant for interruptible service. After July 1, 1945, when plaintiff entered into a new contract with the steel company, the conditions of service at the plant, as well as the circumstances under which the new contract was executed, are shown in findings 26, 27, and 28.

35. The state in which the service is rendered. Plaintiff contracted to supply gas to Government plants in three states, each having its own regulatory agency. In recognition of the regulatory power of the state commissions, the contracts


Findings of Fact contained provisions for changes in the rates as a result of regulation by the appropriate state agency. However, in the period pertinent to the counterclaim, only the Arkansas Public Service Commission regulated the rates at which plaintiff supplied gas to its industrial consumers and such regulation was limited to those industrial customers who were served from distribution systems in incorporated cities. Neither the Government plants nor the refineries in Arkansas were served from such city distribution systems. All were main-line industrial customers.

36. The type of gas required. With respect to the type of gas required, the conditions of service at all of the Government installations and the private plants pertinent to the counterclaim were similar, except for the Lone Star Steel Company. After July 1, 1945, the steel company was supplied gas in its natural form directly from the Harleton Field.

37. The contracts negotiated between plaintiff and defendant for the Pine Bluff Arsenal, the Shumaker Naval Ordnance Plant, Lone Star Shell Loading Plant, and Red River Ordnance Depot contained provisions by which the Government advanced funds for the construction of connecting facilities between plaintiff's distribution lines and the Government installations. The connections were to become the property of the plaintiff, but the money advanced by the Government was to be refunded by deductions from monthly bills over a period of time. These agreements resulted from the fact that during the wartime period the Government was anxious to get the defense plants in operation as quickly as possible and was willing to advance the capital for the construction of such facilities and permit plaintiff to refund the advance in the manner stated. If the funds had not been advanced by the Government, it would have been necessary for plaintiff to borrow money for the additional construction. No connection charge was made for the Louisiana Ordnance Plant. Plaintiff's practice of having industrial customers advance capital for connecting facilities was not limited to the Government. In instances where the connecting facilities are so extensive that plaintiff must use borrowed capital for the construction, it has been customary for plaintiff to 154 Ct. CI. Findings of Fact take advances from industrial customers and to refund the money through deductions from the customer's monthly bills. In many instances the connections are not the only additional facilities which are required to service large industrial customers. It is often necessary for plaintiff to increase the capacity of its distribution system by adding a compressor station, providing a loop, or in some cases, by obtaining an additional supply of gas frolu the field. Plaintiff frequently obtains advances from realtors who are engaged in the development of large subdivisions under an arrangement by which the advance is refunded when the individual householder's connections are made. The Arkansas Power and Light Company, one of the larger industrial customers of plaintiff, advanced 342 million dollars to provide additional facilities for serving it.


The contracts in evidence between plaintiff and the six Arkansas oil refineries contain no provisions for advances by the customers for connection charges. However, they are annual contracts, representing renewals of prior agreements. The evidence does not show whether the original contracts provided for advances for connections, or whether the location of the refineries with respect to plaintiff's distribution system was such as to require connecting facilities comparable to those needed for the Government installations.

Plaintiff did not require the Lone Star Steel Company to advance money for the construction of the 8-inch pipeline from the Harleton Field to the steel company's premises.

38. The following table shows the cost of monthly gas consumption of eight of plaintiff's customers in quantities ranging from 1,000 M.C.F. to a maximum of 150,000 M.C.F. at the contract rates and illustrates the differences in rates between private customers and the Government plants, as well as the differences in rates between the Government installations.

39. The trial was limited to the issues relating to the right of defendant to recover on its counterclaim.


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Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and it is therefore adjudged and ordered that plaintiff recover of and from the United States the sum of thirty-three thousand one hundred forty dollars and fourteen cents ($33,140.14).

The court further concludes that the defendant is not entitled to recover and, accordingly, its counterclaim is dismissed.



[No. 420-58. Decided July 19, 1961)


Contracts; ship subsidy contract,Merchant Marine Act of 1936; re

capture rights of Government.-In an action by plaintiff to recover amounts recaptured from it by the Government under plaintiff's ship subsidy contract for the period from January 1, 1947, when plaintiff's subsidy operations were resumed after World War II suspension, to September 30, 1948, when plaintiff's ten-year contract expired, on the ground that the application to plaintiff's contract of a new and more restrictive definition of "capital necessarily employed” in computing the recapture sums due during that final year of operations was discriminatory in view of the defendant's treatment of other

154 Ct. CI. Opinion of the Court subsidized lines and was therefore invalid, it is held that plaintiff's situation was too nearly identical with that of the other subsidized ship operators to warrant its less favorable treatment in the application of the new and less favorable recapture regulation promulgated in 1949, and the roll back of the effective date of the new restrictions in plaintiff's case to January 1, 1947, instead of to the date of the expiration of plaintiff's ten-year contract, was discriminatory and unreasonable and

plaintiff is entitled to recover. Regulation of executive department; discrimination in application or

in classification under-effect of on contract.-An administrative agency of the Government authorized by statute to issue regulations having the force and effect of law may make classifications based upon rational differences in the situations of the parties classified differently. But where the regulation makes classifications not based upon valid differences in the situation of the parties and one party is discriminated against by, for example, a retroactive application of a new and restrictive provision in the regulation while others similarly situated are not made subject to such retroactive application, the regu

lation has been illegally applied to that one party. Administrative Law and ProcedureC390, 419 Contracts; validity; provisions in violation of statute; Merchant Ma.

rine Act of 1936.—Where one has a right under a statute, or under a legal doctrine implicit in a statute, that right is not effectively surrendered by a contract purporting to do so. Thus, where the Merchant Marine Act of 1936, 49 Stat. 1985, 46 U.S.C. 88 1101–1294, indicates a congressional intent that there be a fair measure of stability in subsidy contracts and that subsidized operators receive generally equal treatment, an operator does not lose such rights by executing a contract which contains discriminatory provisions depriving him of as favor

able treatment as others similarly situated. Shipping mom 3

Warner W. Gardner for the plaintiff.

Lawrence F. Ledebur, with whom was Assistant Attorney General William H. Orrick, Jr., for the defendant. Carl C. Davis was on the brief.

MADDEN, Judge, delivered the opinion of the court:

The plaintiff sues to recover money which, it says, the Government illegally “recaptured” from it in connection with a ship subsidy contract between the plaintiff and the Government. Only the plaintiff's right to recover is pres

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