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ERIC J. SCHNEIDEWIND v. ANR PIPELINE COMPANY AND ANR STORAGE COMPANY

decided: March 22, 1988.

ERIC J. SCHNEIDEWIND, ET AL., PETITIONERS
v.
ANR PIPELINE COMPANY AND ANR STORAGE COMPANY



ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT.

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.

Author: Blackmun

[ 485 U.S. Page 294]

 JUSTICE BLACKMUN delivered the opinion of the Court.

This case presents the Court once again with a question concerning a State's ability to regulate the activities of natural gas companies.

[ 485 U.S. Page 295]

     I

Respondents ANR Pipeline Company (Pipeline) and ANR Storage Company (Storage) are wholly owned subsidiaries of American Natural Resources Company (Resources), a Delaware corporation which, like Pipeline and Storage, has its principal place of business in Michigan. Both Pipeline and Storage are natural gas companies, within the meaning of the Natural Gas Act of 1938 (NGA or Act), ch. 556, 52 Stat. 821, as amended, 15 U. S. C. § 717 et seq.*fn1 Thus, both are subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC), the regulatory body charged with implementation of the NGA. See § 1(b) of the Act, 15 U. S. C. § 717(b).*fn2

Pipeline is a Delaware corporation that owns and operates an interstate natural gas pipeline system transporting gas, exclusively for resale, to 51 gas distribution centers in Michigan and eight other States, where the gas is either delivered to customers of Pipeline or stored for future delivery. Pipeline

[ 485 U.S. Page 296]

     purchases its natural gas from producers in Texas, Oklahoma, Kansas, Louisiana, and Wyoming.

Storage, which operates independently from Pipeline, is a Michigan corporation organized by Resources in 1978 to develop and operate gas storage reservoirs for nonaffiliated customers. Storage receives gas from outside Michigan and, on demand, redelivers it for sale outside that State. Storage operates four storage fields in Michigan.

Petitioners are members of the Michigan Public Service Commission (MPSC). Under Michigan's Public Utilities Securities Act, 1909 Mich. Pub. Acts No. 144, as amended (Act 144), Mich. Comp. Laws Ann. § 460.301 et seq. (West) (Supp. 1987),*fn3 a public utility exercising or claiming the right

[ 485 U.S. Page 297]

     to transport natural gas in Michigan for public use*fn4 must obtain MPSC approval before issuing long-term securities. Act 144 directs the MPSC to approve a security issuance

[ 485 U.S. Page 298]

     when it "is satisfied that the funds derived . . . are to be applied to lawful purposes and that the issue and amount is essential to the successful carrying out of the purposes or that the issue of the stock fairly represents accumulated and undistributed earnings invested in capital assets and not previously capitalized." § 460.301(3). The MPSC may conduct an investigation, including an appraisal of the company's property at the company's expense, in deciding whether to allow the issue, § 460.301(2), and it "may impose as a condition of the grant reasonable terms and conditions that [it] considers proper." § 460.301(3).

Pipeline and Storage filed in the United States District Court for the Western District of Michigan an amended complaint against petitioners in their official capacities, seeking a declaratory judgment that the MPSC lacks jurisdiction over their security issuances and thus that they may lawfully issue and market securities without MPSC approval.*fn5 Respondent argued that Act 144 was pre-empted by the NGA and that Act 144 violates the Commerce Clause, U.S. Const., Art. I, § 8, cl. 3.

The District court concluded that Act 144 was neither pre-empted by the federal regulatory scheme nor in violation of the Commerce Clause. 627 F. Supp. 923 (WD Mich. 1985). On the pre-emption issue, the court concluded that "compliance with both federal and state regulations is not a physical impossibility, and Act 144 does not stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Id., at 930. As to the Commerce Clause, the court concluded that Act 144 was "an evenhanded and relatively limited state regulation which, as applied to [respondents], has historically had an indirect and minimal effect

[ 485 U.S. Page 299]

     on interstate commerce," while serving legitimate local interests. 627 F. Supp., at 933.

The United States Court of Appeals for the Sixth Circuit reversed, holding that both the pre-emptive effect of the federal regulatory scheme and the Commerce Clause bar application of Act 144 to respondents. 801 F.2d 228 (1986). The Court of Appeals concluded that Act 144 was pre-empted because, by omitting any requirement of advance approval of the issuance of securities "in an otherwise comprehensive' regulatory scheme, Congress has implicitly determined that the States should not impose such regulations," 801 F.2d, at 233-234, and because of the possibility of a conflict between federal and state regulation of natural gas company projects and financing plans, id., at 235-236. Furthermore, the court reasoned, inasmuch as "the burdens of expense, delay, and administrative hassle of 'advance approval' securities regulation far outweigh the benefits, if any, of Michigan's interests in protecting consumers and investors . . . Act 144 unconstitutionally burdens interstate commerce." Id., at 238.

Because of a conflict between the views of the Sixth Circuit and those of the Michigan Supreme Court set forth in Michigan Gas Storage Co. v. Michigan Pub. Serv. Comm'n, 405 Mich. 376, 275 N. W. 2d 457 (1979), we granted certiorari to decide whether Michigan may require ...


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