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,
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.
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.
Page 485 U. S. 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. [
Footnote 1] 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). [
Footnote
2]
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
Page 485 U. S. 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. (1967 and
Supp.1987), [
Footnote 3] a
public utility exercising or claiming the right
Page 485 U. S. 297
to transport natural gas in Michigan for public use [
Footnote 4] must obtain MPSC approval
before issuing long-term securities. Act 144 directs the MPSC to
approve a security issuance
Page 485 U. S. 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. [
Footnote 5] Respondents argued that Act 144 was preempted
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 preempted
by the federal regulatory scheme nor in violation of the Commerce
Clause.
627 F.
Supp. 923 (WD Mich.1985). On the preemption 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
Page 485 U. S. 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 preemptive 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 preempted 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 respondents to obtain MPSC approval before issuing and
marketing securities.
II
The circumstances in which federal law preempts state regulation
are familiar.
See Arkansas Elec. Coop. Corp. v. Arkansas Public
Serv. Comm'n, 461 U. S. 375,
461 U. S. 383
(1983).
See also Fidelity Federal Savings & Loan Assn. v.
De la Cuesta, 458 U. S. 141,
458 U. S.
152-154 (1982). A preemption question requires an
examination of congressional intent.
Id. at 152. Of
course, Congress explicitly may define the extent to which its
enactments preempt state law.
See, e.g., Shaw v. Delta Air
Lines, Inc., 463 U. S. 85,
463 U. S. 95-96
(1983). In the
Page 485 U. S. 300
absence of explicit statutory language, however, Congress
implicitly may indicate an intent to occupy a given field to the
exclusion of state law. Such a purpose properly may be inferred
where the pervasiveness of the federal regulation precludes
supplementation by the States, where the federal interest in the
field is sufficiently dominant, or where "the object sought to be
obtained by the federal law and the character of obligations
imposed by it . . . reveal the same purpose."
Rice v. Santa Fe
Elevator Corp., 331 U. S. 218,
331 U. S. 230
(1947). Finally, even where Congress has not entirely displaced
state regulation in a particular field, state law is preempted when
it actually conflicts with federal law. Such a conflict will be
found
"'when it is impossible to comply with both state and federal
law,
Florida Lime & Avocado Growers, Inc. v. Paul,
373 U. S.
132,
373 U. S. 142-143 (1963), or
where the state law stands as an obstacle to the accomplishment of
the full purposes and objectives of Congress,
Hines v.
Davidowitz, 312 U. S. 52,
312 U. S.
67 (1941).'"
California Coastal Comm'n v. Granite Rock Co.,
480 U. S. 572,
480 U. S. 581
(1987), quoting
Silkwood v. Kerr-McGee Corp., 464 U.
S. 238,
464 U. S. 248
(1984).
In this case, we conclude that Act 144 regulates in a field the
NGA has occupied to the exclusion of state law, and that it
therefore is preempted.
III
A
The NGA long has been recognized as a "comprehensive scheme of
federal regulation of
all wholesales of natural gas in
interstate commerce.'" Northern Natural Gas Co. v. State
Corporation Comm'n of Kansas, 372 U. S.
84, 372 U. S. 91
(1963), quoting Phillips Petroleum Co. v. Wisconsin,
347 U. S. 672,
347 U. S. 682
(1954). [Footnote 6] The NGA
confers upon FERC exclusive
Page 485 U. S. 301
jurisdiction over the transportation and sale of natural gas in
interstate commerce for resale.
Northern Natural Gas Co.,
372 U.S. at
372 U. S. 89.
2FERC exercises authority over the rates and facilities of natural
gas companies used in this transportation and sale through a
variety of powers. Sections 4, 5, and 7 of the NGA, as amended, 15
U.S.C. §§ 717c, 717d, and 717f, give FERC a number of tools for
examining and controlling the issuance of securities of natural gas
companies in the exercise of its comprehensive authority.
First, in exercising its authority to determine a "just and
reasonable" rate for the transportation or sale of natural gas
subject to its jurisdiction, FERC may conduct hearings and
undertake a detailed examination of a company. § 4 of the NGA,
as amended, 15 U.S.C. § 717c. For example, to calculate a
reasonable rate of return on invested capital, FERC examines a
company's capital structure (the percentages of its capital that
come from debt, common stock, and preferred stock), establishes the
rate of return allowable on each type of capital, and determines an
overall rate of return as a weighted average, in accordance with
the amount of each kind of capital.
Public Service Comm'n of
New York v. FERC, 259 U.S.App.D.C. 86, 96, 813 F.2d 448, 458
(1987). Thus, a natural gas company's capital structure is related
directly to the rates FERC allows it to charge. When a company's
"equity ratio moves beyond generally accepted limits," however,
FERC may calculate a company's rates on an imputed "reasonable
capital structure" rather than on the actual structure.
Alabama-Tennessee Natural Gas Co., 38 FERC � 61,251, p.
61,849,
aff'd in relevant
Page 485 U. S. 302
part on rehearing, 40 FERC � 61,244, pp. 61,813-61,816
(1987). Thus, FERC exercises its ratemaking authority to limit the
burden on ratepayers of abnormally high equity ratios.
See,
e.g., Tarpon Transmission Co., 41 FERC � 61,044 (1987). In
addition, this power effectively permits FERC to control, albeit
indirectly, a natural gas company's capital structure. FERC's power
to prevent an overcapitalized company from financing its equity
through inflated rates presumably acts as a strong deterrent to the
development of such a capital structure.
Second, a natural gas company must obtain from FERC a
"certificate of public convenience and necessity" before it
constructs, extends, acquires, or operates any facility for the
transportation or sale of natural gas in interstate commerce. §
7(c)(1)(A) of the NGA,
as amended, 15 U.S.C. § 717f
(c)(1)(A). FERC will grant the certificate only if it finds the
company able and willing to undertake the project in compliance
with the rules and regulations of the federal regulatory scheme. §
7(e),
as amended, 15 U.S.C. § 717f(e). FERC may attach
"to the issuance of the certificate and to the exercise of the
rights granted thereunder such reasonable terms and conditions as
the public convenience and necessity may require."
Ibid. In fulfilling this statutory duty, FERC has
promulgated extensive regulations that require a statement of the
plans for financing a proposed facility and a detailed description
of any proposed securities issuance. 18 CFR § 157.14(14) (1987).
[
Footnote 7] FERC, like the
Federal Power Commission,
Page 485 U. S. 303
its predecessor, has not hesitated to use its certification
power to ensure that a project is financed in accordance with the
public interest. [
Footnote
8]
Page 485 U. S. 304
Third, FERC has various powers and obligations that both allow
and require it to protect against the deleterious effects of
ill-considered or improper securities issuances in this area. For
example, officers and directors of natural gas companies are
prohibited from profiting from the company's securities issues.
See § 12, 15 U.S.C. § 717k. No company may abandon any
service or facility without FERC approval, including a finding by
FERC that either the available gas supply is depleted, or "the
present or future public convenience or necessity permit such
abandonment." § 7(b), 15 U.S.C. § 717f(b). A company must keep its
accounts in accordance with FERC's Uniform System of Accounts, and
must submit those accounts for review as FERC deems necessary. §§ 8
and 10, 15 U.S.C. §§ 717g and 717i; 18 CFR pt. 201 (1987). Finally,
FERC has the authority to examine and to change "any rule,
regulation, practice, or contract affecting [rates that] is unjust,
unreasonable, unduly discriminatory, or preferential." § 5(a), 15
U.S.C. § 717d(a).
Although the NGA gives FERC these substantial powers and
obligations, it is also true, as petitioners remind us, that FERC
is not expressly authorized to regulate the issuance of securities
by natural gas companies. Of course, if such express authority were
granted, preemption would be more apparent, given the comprehensive
nature of FERC's authority. In the absence of an express provision,
however, we must examine whether the preissuance review of
securities in which Michigan engages amounts to a regulation in the
field of gas transportation and sales for resale that Congress
intended FERC to occupy.
As an initial matter, respondents argue that Act 144 is
preempted by the NGA because
"[s]ecurities issuances used to finance the interstate sale and
transportation of natural gas were clearly beyond the power of the
states to control in 1938."
Brief for Respondents 12. They premise this argument on this
Court's statements that Congress intended, by
Page 485 U. S. 305
enacting the NGA, to cover areas of natural gas regulation that
the States could not reach under the Court's "dormant" Commerce
Clause decisions.
See, e.g., Panhandle Eastern Pipe Line Co. v.
Public Service Comm'n of Indiana, 332 U.
S. 507,
332 U. S.
514-516 (1947) (NGA covers sales for resale by
interstate carriers; States regulate direct sales to consumers even
though made by interstate carriers). Thus, if the Commerce Clause
barred the States from a certain method of regulation when the NGA
was enacted in 1938, respondents argue, that type of regulation was
covered by the NGA, and is now preempted. Our inquiry, however, is
not so easily answered.
Even if Commerce Clause jurisprudence would have barred Act
144's regulation at the time of the enactment of the NGA, an issue
never directly settled by the Court, that would not decide this
case. The authorities on which respondents rely state only what is
now well settled: Congress occupied the field of matters relating
to wholesale sales and transportation of natural gas in interstate
commerce.
See, e.g., Illinois Gas Co. v. Central Illinois
Public Service Co., 314 U. S. 498,
314 U. S.
506-507 (1942). The question remains, however, whether
Act 144 regulates
within this exclusively federal domain.
Furthermore, in the absence of an express statement in the NGA of
an intent to preempt this kind of state law, respondents' syllogism
may be flawed.
"To the extent that Congress sought to freeze its perception of
[the scope of constitutionally permissible state regulation] into
law, . . . it did so only as a means to accomplishing the end of
workable federal regulation, not as an end in itself."
Arkansas Elec. Coop. Corp. v. Arkansas Public Serv.
Comm'n, 461 U.S. at
461 U. S. 384,
n. 8. If Congress did not intend a particular kind of federal
regulation, preempting state regulation of that kind would not
necessarily have served Congress' purpose.
Ibid. An intent
to preempt state regulation thus cannot be inferred from the mere
fact that States were
Page 485 U. S. 306
precluded from such regulation at the time of the NGA's
enactment.
Similarly, petitioners' reliance on Congress' subsequent failure
to enact proposed legislation that would have given FERC explicit
authority to regulate the issuance of securities of natural gas
companies [
Footnote 9] deserves
only passing mention. This Court generally is reluctant to draw
inferences from Congress' failure to act.
See, e.g., American
Trucking Assns., Inc. v. Atchison, T. & S. F. R. Co.,
387 U. S. 397,
387 U. S.
416-418 (1967);
Red Lion Broadcasting Co. v.
FCC, 395 U. S. 367,
395 U. S. 381,
n. 11 (1969). Indeed, those Members of Congress who did not support
these bills may have been as convinced by testimony that the NGA
already provided "broad and complete . . . jurisdiction and control
over the issuance of securities" as by arguments that the matter
was best left to the States.
See Hearings on H.R. 5306
before a Subcommittee of the House Committee on Interstate and
Foreign Commerce, 81st Cong., 2d Sess., 53 (1950). Furthermore,
even if, in enacting the NGA, Congress had decided to deny FERC
access to a particular regulatory tool, it would not necessarily
follow that Congress intended to allow the States the use of that
tool. Congress may have determined that this particular form of
regulation simply should not be employed. That authoritative
federal determination would have full preemptive force.
Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Bd.
of Mississippi, 474 U. S. 409,
474 U. S. 422
(1986).
C
We turn then, to the crux of the issue: whether Act 144 is a
regulation of the rates and facilities of natural gas companies
used in transportation and sale for resale of natural gas in
interstate commerce. Since we find that it is, we conclude that it
is preempted.
Page 485 U. S. 307
As noted earlier, Act 144 allows the MPSC to examine a security
issuance of a natural gas company to determine whether it is
"to be applied to lawful purposes and . . . is essential to the
successful carrying out of the purposes, [or] represents
accumulated and undistributed earnings invested in capital assets
and not previously capitalized."
Mich.Comp.Laws Ann. § 460.301(3) (Supp.1987). The Michigan
Supreme Court has authoritatively construed Act 144 as designed to
protect investors in the gas company's securities and to protect
ratepayers.
Attorney General v. MPSC, 412 Mich. 385, 402,
316 N.W.2d
187, 193 (1982). By guarding against the "evils and injurious
effects on the public of overcapitalization,"
Indiana &
Michigan Power Co. v. Public Service Comm'n, 405 Mich. 400,
410,
275 N.W.2d
450, 453 (1979), Act 144 both protects investors and ensures
"efficient and uninterrupted service at reasonable rates."
Ibid. It is our view, however, that, when applied to
natural gas companies, Act 144 amounts to a regulation of rates and
facilities, a field occupied by federal regulation. The objectives
sought by Act 144 are the same as those sought by the NGA.
Petitioners argue that, without Act 144, a company could take on
so much debt through securities issuances that it would lack the
resources to maintain its Michigan facilities properly. This could
threaten the supply of gas to Michigan consumers, petitioners
argue, lead to a rate increase, or hurt investors in the company.
In another scenario, a company might take on more equity than it
needs, requiring it to charge higher rates (because equity usually
requires a higher rate of return). Petitioners also explain that
Act 144 protects against overcapitalization in the sense of a lack
of correlation between a company's capital stock and the value of
its property. An imbalance in this respect, petitioners argue,
could also threaten the supply of gas at reasonable rates.
[
Footnote 10]
Page 485 U. S. 308
Each of these uses of Act 144, however, is an attempt to
regulate matters within FERC's exclusive jurisdiction. By keeping a
natural gas company from raising its equity levels above a certain
point, Michigan seeks to ensure that the company will charge only
what Michigan considers to be a "reasonable rate." This is
regulation of rates. The other aim of Act 144, seeking to ensure
that a company is financed in a way that will allow proper
maintenance of its facilities and continuance of its services, for
the benefit of both ratepayers and investors, also falls within
FERC's exclusive purview since those facilities are a critical part
of the transportation of natural gas and sale for resale in
interstate commerce. In short, the things Act 144 regulation is
directed at, the control of rates and facilities of natural gas
companies, are precisely the things over which FERC has
comprehensive authority. [
Footnote 11]
Of course, every state statute that has some indirect effect on
rates and facilities of natural gas companies is not preempted.
Cf. Metropolitan Life Ins. Co. v. Massachusetts,
471 U. S. 724,
471 U. S.
753-756 (1985). Act 144's effect, however, is not
"indirect." In this case, we are presented with a state
Page 485 U. S. 309
law whose central purpose is to regulate matters that Congress
intended FERC to regulate. Not only is such regulation the function
of the federal regulatory scheme, but the NGA has equipped FERC
adequately to address the precise concerns Act 144 purports to
manage. As reviewed above, FERC can control potential instances of
overcapitalization, and its effects on both ratepayers and
investors, by its regulation of rates. To the extent that Act 144
is directed at "overcapitalization" in the sense of a lack of
correlation between a company's capital stock and the value of its
property, FERC directly monitors the same matter through its
accounting requirements. As to natural gas companies that threaten
the continued supply of gas by seeking to finance their operations
through excessive debt, FERC may prevent such problems through its
certification power. Indeed, as discussed above, FERC's detailed
examination of a company's finances includes review of security
issuances involved in financing new facilities. [
Footnote 12] In addition, FERC has its
power to prevent abandonments. Finally, FERC's authority to
regulate and fix practices affecting rates allows the agency to
address directly any unduly leveraged, unduly risky, or unduly
capitalized investments.
Thus, while the NGA does not expressly grant FERC preissuance
authority over the securities of natural gas companies, FERC
achieves the regulatory ends of such review with regard to rates
and facilities through the exercise of its express regulatory
responsibilities.
Page 485 U. S. 310
D
Our conclusion that Act 144 seeks to regulate a field that the
NGA has occupied also is supported by the imminent possibility of
collision between Act 144 and the NGA.
See Northern Natural Gas
Co. v. State Corporation Comm'n of Kansas, 372 U.S. at
372 U. S. 91-93;
Maryland v. Louisiana, 451 U. S. 725,
451 U. S. 751
(1981). If the MPSC ever denied a natural gas company authority to
issue a security under Act 144 for a FERC-approved project, the
disagreement between state and federal authorities over the wisdom
of the project and its proposed financing would interfere with the
federal regulatory scheme. Furthermore, any state-ordered
alteration in a company's capital structure would impinge on the
federal ratemaking authority.
When a state regulation
"affect[s] the ability of [FERC] to regulate comprehensively . .
. the transportation and sale of natural gas, and to achieve the
uniformity of regulation which was an objective of the Natural Gas
Act"
or presents the "prospect of interference with the federal
regulatory power," then the state law may be preempted even though
"collision between the state and federal regulation may not be an
inevitable consequence."
Northern Natural Gas Co., 372
U.S. at
372 U. S. 91-92.
Although hypothetical conflicts will not always show an intent to
preempt state authority,
see Rice v. Santa Fe Elevator
Corp., 331 U. S. 218,
331 U. S. 237
(1947), this "imminent possibility" further demonstrates the NGA's
complete occupation of the field that Act 144 seeks to
regulate.
We therefore conclude that the MPSC regulation of respondents
through Act 144 impinges on a field that the federal regulatory
scheme has occupied and, consequently, that Act 144 is preempted.
[
Footnote 13]
Page 485 U. S. 311
IV
Because we have concluded that Act 144 is preempted by the NGA,
we need not decide whether, absent federal occupation of the field,
Act 144 violates the Commerce Clause.
See Transcontinental Gas
Pipe Line Corp. v. State Oil and Gas Bd. of Mississippi, 474
U.S. at
474 U. S.
425.
The judgment of the Court of Appeals is affirmed.
It is so ordered.
JUSTICE KENNEDY took no part in the consideration or decision of
this case.
[
Footnote 1]
"'Natural-gas company' means [an individual or a corporation]
engaged in the transportation of natural gas in interstate
commerce, or the sale in interstate commerce of such gas for
resale."
§§ 2(6) and (1) of the NGA, 15 U.S.C. §§ 717a(6) and (1).
Petitioners argued below that Storage was not a natural gas
company within the meaning of the NGA, contending that the storage
of gas constitutes neither the transportation nor the sale of gas
in interstate commerce. Both courts below rejected this argument,
see 627 F.
Supp. 923, 925-926 (WD Mich.1985), and 801 F.2d 228, 230, n. 3
(CA6 1986), reasoning that "transportation" includes storage.
"'Underground gas storage facilities are a necessary and
integral part of the operation of piping gas from the area of
production to the area of consumption.'"
Ibid., quoting Columbia Gas Transmission Corp. v. Exclusive
Gas Storage Easement, 776 F.2d 125, 129 (CA6 1985), and
578 F.
Supp. 930, 933 (ND Ohio 1983). We agree. Petitioners, in any
event, do not press the point here.
[
Footnote 2]
By the NGA,
"Congress undertook to establish federal regulation over most of
the wholesale transactions of electric and gas utilities engaged in
interstate commerce, and created the Federal Power Commission . . .
(now the Federal Energy Regulatory Commission) . . . to carry out
that task."
Arkansas Elec. Coop. Corp. v. Arkansas Public Serv.
Comm'n, 461 U. S. 375,
461 U. S. 378
(1983).
[
Footnote 3]
Act 144 provides in relevant part:
"Sec. 1. (1) . . . [A] corporation, association, or individual
exercising or claiming the right to carry or transport natural gas
for public use, directly or indirectly, . . . by or through a
pipeline or engaged in the business of piping or transporting
natural gas for public use, directly or indirectly, or engaged in
the business of purchasing natural gas for distribution may issue
stocks, bonds, notes, or other evidences of indebtedness payable at
periods of more than 12 months after the date of issuance, if
necessary for the acquisition of property, the construction,
completion, extension, or improvement of facilities or for the
improvement or maintenance of service or for the discharge or
lawful refunding of obligations and may issue stock to represent
accumulated earnings invested in capital assets and not previously
capitalized, if the Michigan public service commission issues an
order authorizing the issue and the amount of the issue, and states
that in the opinion of the commission the use of the capital or
property to be acquired to be secured by the issue of the stock,
bonds, notes, or other evidences of indebtedness, is reasonably
required for the purposes of the person, corporation, or
association, or that the issue of the stock fairly represents
accumulated and undistributed earnings invested in capital assets
and not previously capitalized. Approval of securities does not
presume that the projects to be constructed or property to be
acquired will be included in the company's rate base."
"(2) A person, corporation, or association desiring authority to
issue stocks, bonds, notes, or other evidences of indebtedness
shall make written application to the commission in the form as the
commission requires. After receiving the application, the
commission, for the purpose of determining whether the commission
should grant the authority, may make an inquiry or investigation,
hold hearings, and examine witnesses, books, papers, documents, or
contracts the commission considers of importance in enabling it to
reach a determination. An interested person, including
municipalities and organizations whose membership consists of a
substantial number of ratepayers within the service area of the
utility, shall have the right to intervene as provided in the rules
of the commission. . . . "
"(3) If from the application filed and other information
obtained from the investigation authorized in this act the
commission is satisfied that the funds derived from the issue of
stocks, bonds, or notes 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, the commission shall
grant authority to make the issue. In granting the authority, the
commission may impose as a condition of the grant reasonable terms
and conditions that the commission considers proper."
"(4) A person, corporation, or association may issue notes for
lawful purposes, payable at periods of not more than 24 months,
without authority from the commission; but the notes shall not, in
whole or in part, be refunded by an issue of stock or bonds or by
an evidence of indebtedness running for more than 12 months without
the consent of the commission."
"(5) This act shall apply to stock, shares, bonds, or notes
issued to or taken by the incorporators or their agents, assigns,
or trustees of a corporation or association in the first instance,
and shall also apply to stock, bonds, or notes issued to or taken
by the stockholders of the corporation or association, their
agents, assigns, or trustees, after the first instance."
"
* * * *"
"(8) This act shall not apply to a person, corporation, or
association which is engaged in the business of carrying,
transporting, piping, purchasing for distribution, or selling
natural gas into this state, which derives less than 5% of its
consolidated gross revenues from all of its operations from natural
gas operations in this state, and which does not offer residential
natural gas service to the general public under rules promulgated
by the Michigan public service commission."
Mich.Comp.Laws Ann. § 460.301 (Supp.1987).
[
Footnote 4]
Subsection (8) of Act 144 provides, however,
see
n 3,
supra, that the
Michigan statute does not apply to a natural gas company that
"derives less than 5% of its consolidated gross revenues from all
of its operations from natural gas operations in [Michigan]."
[
Footnote 5]
The parties agreed that the District Court should decide the
case on the basis of a stipulation of facts, an appendix thereto,
respondents' answers to three sets of interrogatories, and
respondents' replies to two sets of requests for admissions.
627 F.
Supp. 923 (WD Mich.1985).
[
Footnote 6]
The Natural Gas Policy Act of 1978 (NGPA), 92 Stat. 3351, 15
U.S.C. § 3301
et seq., did not compromise the
comprehensive nature of federal regulatory authority over
interstate gas transactions.
Transcontinental Gas Pipe Line
Corp. v. State Oil and Gas Bd. of Mississippi, 474 U.
S. 409,
474 U. S.
420-421 (1986).
See Arkansas Louisiana Gas Co. v.
Hall, 453 U. S. 571,
453 U. S. 580
(1981). The enactment of the NGPA reflected a congressional belief
that a different system of natural gas pricing was needed to
balance supply and demand.
Transcontinental Gas, 474 U.S.
at
474 U. S. 421.
The changes the NGPA wrought in FERC's authority have no bearing on
the outcome of this case.
[
Footnote 7]
This required disclosure includes:
"(i) A detailed description of applicant's outstanding and
proposed securities and liabilities. . . . "
"(ii) The manner in which applicant proposes to dispose of
securities . . . ; the persons, if known, to whom they will be sold
. . . and if not known, the class or classes of such persons."
"(iii) A statement showing for each proposed issue, by total
amount and by unit, the estimated sale price and estimated net
proceeds to the applicant."
"
* * * *"
"(vi) Statement of anticipated cash flow, including provision
during the period of construction and the first 3 full years of
operation of proposed facilities for interest requirements,
dividends, and capital retirements."
"(vii) Statement showing, over the life of each issue, the
annual amount of securities which applicant expects to retire
through operation of a sinking fund or other extinguishment of the
obligation."
"(viii) A balance sheet and income statement (12 months) of most
recent date available."
"(ix) Comparative pro forma balance sheets and income statements
for the period of construction and each of the first 3 full years
of operation, giving effect to the proposed construction and
proposed financing of the project."
"(x) Conformed copies of all agreements, contracts, mortgages,
deeds of trust, indentures, agreements to advance materials or
supplies or render services in return for applicant's securities,
underwriting agreements, and any other agreements or documents of a
similar nature."
"(xi) Conformed copies of all reports, letters, or other
documents, submitted by applicant to underwriters, insurance
companies, or others regarding financing, including business
studies, forecasts of earnings, and other similar financial or
accounting reports, statements, or documents."
"(xii) Conformed copies of all applications and supporting
exhibits, registration statements, or other similar submittals, if
any, to the Securities and Exchange Commission, including all
supplements, changes or modifications of the above."
"(xiii) Any additional data and information upon which applicant
proposes to rely in showing the adequacy and availability to it of
resources for financing its proposed project."
18 CFR § 157.14(14) (1987).
[
Footnote 8]
See Trailblazer Pipeline Co., 18 FERC � 61,244, p.
61,503 (1982) (certificate "conditioned on applicants' waiver of
their right to apply for the recovery of their equity investment in
this project should it fail");
Midwestern Gas Transmission
Co., 21 F.P.C. 653, 656 (1959) (certificate issued on
condition that company pay no dividends on common stock until
interim notes were converted into preferred stock, or total
long-term debt was reduced to 75% or less of total capitalization).
Each of these opinions was amended on rehearing in ways not
relevant here.
See 23 FERC � 62,355 (1983), 26 FERC �
61,068 (1984), and 34 FERC � 62,016 (1986) relating to
Trailblazer, and 30 F.P.C. 759 (1963) and 30 F.P.C. 1313
(1963) relating to
Midwestern.
[
Footnote 9]
See, e.g., as introduced, H.R. 5306 and S. 2746, 81st
Cong., 1st Sess. (1949); S. 1880, 84th Cong., 1st Sess., § 3
(1955).
[
Footnote 10]
It is perhaps worthy of note that the purported purposes of Act
144, as applied to respondents, appear highly artificial at best.
Storage does not serve any Michigan consumers. Thus, it is hard to
see what effect regulation of Storage could have on the supply of
gas at reasonable rates to Michigan consumers. As to investors,
since respondents issue their securities on international and
national financial markets, Michigan investors are involved with
these issuances only to the extent they operate and invest through
these markets. Thus, even petitioners must concede that Michigan
investors probably will never own more than a small percentage of
respondents' outstanding securities.
[
Footnote 11]
Of course, one area FERC does not exclusively control is
"securities regulation" in the traditional sense of the term,
i.e., protection of investors from fraudulent or deceptive
issuances. Michigan has an interest in guarding against the sale of
such securities in Michigan. To this end, Michigan, like many other
States, has a "blue sky" law that governs the registration and sale
of securities sold within the State.
See Mich.Comp.Laws
Ann. § 451.701
et seq. (1967 and Supp.1987). While such
traditional "securities regulation" is not FERC's direct concern,
Act 144 is not that kind of regulation. Act 144 applies only to
utilities, and is not limited to securities sold within
Michigan.
[
Footnote 12]
Normally, regulations do not preempt state authority unless they
declare their intent to do so with "some specificity."
See
California Coastal Comm'n v. Granite Rock Co., 480 U.
S. 572,
480 U. S. 583
(1987). These regulations are indicative, however, of the broad
powers FERC has at its disposal in regulating natural gas
companies, and thus the extent to which Act 144 intrudes on a field
of regulation that federal legislation has occupied.
See R. J.
Reynolds Tobacco Co. v. Durham County, 479 U.
S. 130,
479 U. S.
148-149 (1986);
but cf. Hillsborough County v.
Automated Medical Laboratories, Inc., 471 U.
S. 707,
471 U. S. 717
(1985).
[
Footnote 13]
Petitioners place much reliance on
Rice v. Santa Fe Elevator
Corp., 331 U. S. 218
(1947), where this Court rejected a facial challenge to a state
statute that regulated the securities issuances of grain warehouses
in a fashion similar to the operation of Act 144. The Court reached
its conclusion even though the United States Warehouse Act, 39
Stat. 486,
as amended, 7 U.S.C. § 241
et seq.
(1946 ed.), through licensing provisions, regulated the facilities,
rates, and services of grain warehouses. That case, however,
involved a field of regulation that, unlike the regulation of
natural gas company securities issuances, "the States ha[d]
traditionally occupied." 331 U.S. at
331 U. S. 230.
Indeed, petitioners and their
amici point to no State
other than Michigan that has applied a regulation similar to Act
144 to natural gas companies engaged solely in activities subject
to FERC's jurisdiction. Moreover, the United States Warehouse Act
was not nearly so comprehensive as the NGA. Indeed, a warehouseman
was not required to operate under the Act,
id. at
331 U. S. 233,
and even as to warehousemen who were licensed under the Act, the
Secretary of Agriculture had made no attempt to regulate these
matters,
id. at
331 U. S. 237.
In the words of the Rice Court: "The test . . . is whether the
matter on which the State asserts the right to act is in any way
regulated by the Federal Act."
Id. at
331 U. S. 236.
In the present case, Act 144 fails that test.