[1] Prior to this case, independent producers sold natural gas to interstate pipelines at unregulated prices with any subsequent sales for resale being regulated.

The State of Wisconsin sought to close this regulatory loophole in order to keep consumer prices low.

Natural gas producers argued that wellhead sales were exempt from federal regulation as "production and gathering."

Below, the Federal Power Commission compiled an evidentiary record 10,000 pages long before deciding not to regulate wellhead sales.

[5] However, these prices were very low because the amount of available gas supply exceeded the pipeline capacity to move it to national markets.

However, after World War II, wellhead gas prices rose even to the point that producers started to drill new gas-only wells in areas that contained little oil.

[4] On October 28, 1948, while Olds was still chair, the FPC started an investigation into Phillips' jurisdictional status and whether its rates were unjust and unreasonable.

"[14] Further, Minton noted that Congress had failed to pass bills that proposed to amend the law to clearly exempt wellhead sales.

He noted, "Whether it did so by the Natural Gas Act of 1938 is a political and legal controversy that has raged in the Commission and in the Congress for some years.

"[15] Justice Douglas predicted that it would be difficult to develop a cost-based rate for gas sold by independent producers.

"[17] Justice Clark believed that "federal regulation of [producer] sales means an inevitable clash with a complex of state regulatory action, including minimum pricing.

"[18] So Clark recognized that producing states were actively regulating producers with the objective of keeping prices high and the quantity of gas production uniform, which may conflict with federal and consuming states regulators that sought to keep prices low and the quantity of gas abundant.

[19] As a result of the Supreme Court decision, the FPC suddenly had to issue certificates for each interstate producer and to set cost-based prices for such sales.

"[20][note 4] The FPC dropped well-by-well regulation for setting wellhead prices on an area-wide basis on September 28, 1960.