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U.S. Supreme Court

Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988)

Schneidewind v. ANR Pipeline Co.

No. 86-986

Argued November 2, 1987

Decided March 22, 1988

485 U.S. 293


Under a Michigan statute (Act 144), a public utility transporting natural gas in Michigan for public use must obtain approval of the Michigan Public Service Commission (MPSC) before issuing long-term securities. Act 144 directs the MPSC to approve a proposed security issuance when it is satisfied that the funds derived therefrom are to be applied to lawful purposes and that the issuance is essential to the successful carrying out of the purposes, or represents accumulated and undistributed earnings invested in capital assets and not previously capitalized. Respondent companies, which serve customers in other States as well as in Michigan, are natural gas companies within the meaning of the federal Natural Gas Act of 1938 (NGA), and are subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC). They filed suit against petitioners, members of the MPSC, in Federal District Court, seeking a declaratory judgment that the MPSC lacked jurisdiction over their security issuances because Act 144 was preempted by the NGA and because it violated the Commerce Clause. The court rejected respondents' claims. The Court of Appeals reversed, holding that both the preemptive effect of the federal regulatory scheme and the Commerce Clause barred application of Act 144 to respondents.

Held: The MPSC regulation of respondents through Act 144 impinges on a field that the federal regulatory scheme has occupied to the exclusion of state law, and Act 144 therefore is preempted. Pp. 485 U. S. 300-310.

(a) Although FERC is not expressly authorized to regulate natural gas companies' issuance of securities, the NGA is a comprehensive scheme of federal regulation of all wholesales of natural gas in interstate commerce that gives FERC a number of tools -- such as its authority to fix rates and to withhold certificates of public convenience and necessity -- for examining and controlling the issuance of such securities in the exercise of its comprehensive authority. Pp. 485 U. S. 300-304.

(b) Congressional intent to preempt state regulation of securities issuances to finance the interstate transportation and sale of natural gas cannot be inferred, as respondents contended, from the mere fact that States might have been precluded from such regulation under "dormant" Commerce Clause principles at the time of the NGA's enactment in 1938. Nor can any inferences as to the States' authority to regulate be drawn, chanroblesvirtualawlibrary

Page 485 U. S. 294

as petitioners contended, from Congress' subsequent failure to enact proposed legislation that would have given FERC explicit authority to regulate the issuance of natural gas companies' securities. Pp. 485 U. S. 304-306.

(c) When applied to natural gas companies, Act 144 amounts to a regulation of rates and facilities used in transportation and sale for resale of natural gas in interstate commerce, a field occupied by federal regulation. Although every state statute that has some indirect effect on natural gas companies' rates and facilities is not preempted, Act l44's effect is not "indirect." Its central purpose is to regulate matters that Congress intended FERC to regulate exclusively. Pp. 485 U. S. 305-309.

(d) The conclusion that Act 144 seeks to regulate a field that the NGA has occupied is also supported by the imminent possibility of collision between Act 144 and the NGA. P. 485 U. S. 310.

801 F.2d 228, affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which all other Members joined, except KENNEDY, J., who took no part in the consideration or decision of the case.

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