ANR Pipeline Co. v. Schneidewind

Citation627 F. Supp. 923
Decision Date22 August 1985
Docket NumberNo. G84-438 CA.,G84-438 CA.
PartiesANR PIPELINE COMPANY and ANR Storage Company, Plaintiffs, v. Eric J. SCHNEIDEWIND, Matthew E. McLogan, and Edwyna G. Anderson, Defendants.
CourtU.S. District Court — Western District of Michigan

Mika, Meyers, Beckett & Jones by John C. Jones, Grand Rapids, Mich., for plaintiffs.

Frank J. Kelley, Atty. Gen., by Don L. Keskey, R. Philip Brown, Jeffrey S. Fishman, Asst. Attys. Gen., Lansing, Mich., for defendants.


HILLMAN, District Judge.


This is an action for declaratory relief challenging defendants' assertion of jurisdiction over plaintiffs' securities issues under the Michigan public utilities securities statute, M.C.L.A. § 460.301, et seq, M.S.A. § 22.101, et seq., (hereinafter referred to as "Act 144"). The Michigan Public Service Commission (MPSC), originally a named defendant, was dismissed from the case by opinion and order entered on September 7, 1984. The remaining defendants are Eric J. Schneidewind, member and chairperson of the MPSC, and Matthew E. McLogan and Edwyna G. Anderson, the remaining two members of the MPSC, all in their official capacities.

The record in the case consists of a written stipulation of facts, an appendix thereto, the pleadings, plaintiffs' answers to three sets of interrogatories and plaintiffs' replies to two sets of requests for admissions. The parties have stipulated that the case should be determined on this record. The parties have submitted briefs on the legal issues to be decided, and the Court has heard oral arguments on those issues.

On the stipulated record, the following issues have been submitted to the court for decision: (1) whether federal regulatory schemes applicable to plaintiff companies have preempted the state regulation of securities issues provided by Act 144; (2) whether application of Act 144 to plaintiffs violates the Commerce Clause of the United States Constitution because (a) such application so infringes on national uniformity requirements as to materially and unreasonably burden interstate commerce, and/or (b) such application otherwise so materially and unreasonably burdens interstate commerce. On these grounds, plaintiffs seek a judgment declaring that the defendant commissioners, in their official capacities, have no jurisdiction to regulate or otherwise interfere with plaintiffs' securities issues and plaintiffs may therefore lawfully issue their securities without obtaining the prior approval of defendants.


A. Facts. Because the stipulation of facts is part of the record, only the minimum facts necessary to frame and resolve the legal issues will be restated here.

Plaintiffs ANR Pipeline Company ("Pipeline Company"), a Delaware corporation, and ANR Storage Company ("Storage Company"), are wholly-owned subsidiaries of American Natural Resources Company ("ANR"), a diversified holding company incorporated in Delaware. The principal offices of ANR, Pipeline Company, and Storage Company are located in Detroit, Michigan.

Pipeline Company owns and operates an interstate natural gas pipeline system which transports and sells natural gas for resale only to 51 gas distribution customers in Michigan, Wisconsin, Iowa, Illinois, Indiana, Kansas, Missouri, Ohio and Tennessee. Pipeline Company has no direct retail customers in Michigan.

Pipeline Company operates 15 gas storage fields in Michigan. Eight of those fields are owned by Michigan Consolidated Gas Company ("MCGC") and leased to Pipeline Company. Pipeline Company owns and operates 773 miles of gas transmission pipeline and associated equipment located in Michigan, including two multiple, large-diameter pipelines entering Michigan from Indiana,1 one such pipeline entering Michigan from Ohio, and two transmission lines extending between Wisconsin and Michigan in the upper peninsula. Pipeline Company also owns and operates 195 miles of field and storage pipelines, two transmission compressor stations and ten underground storage compressor stations in Michigan.2 In 1983, over 50% of Pipeline Company's sales were in Michigan, approximately 45% in Wisconsin, and less than 5% in other states.

Storage Company operates gas storage reservoirs to store gas for nonaffiliated customers. Storage Company does not sell natural gas. Four storage fields are presently operational in Michigan, all located in Kalkaska County in the northern lower peninsula. These fields are connected to transmission pipeline of Great Lakes Gas Transmission Company ("Great Lakes") in Crawford County by approximately 24 miles of Storage Company's underground storage lines.

During the summer, natural gas from Great Lakes is delivered to Storage Company by displacement, a commonly employed pipeline company practice of exchanging equivalent volumes of gas at a mutually convenient place in lieu of actual physical delivery of the storage gas. Storage Company stores the gas in one or more of its four gas storage fields and redelivers it on demand within contractual entitlement to Great Lakes for the account of the storage customer. The gas received and injected into storage is produced in Western Canada. The gas withdrawn and redelivered rejoins the gas stream flowing in Great Lakes' pipeline.

All of the gas stored by Storage Company is supplied by its customers outside of Michigan for transmission to Storage Company's facilities by displacement or otherwise. When withdrawn from storage, these volumes of gas are transmitted, by displacement or otherwise, back to Storage Company's customers for use outside the state of Michigan. Thus, Storage Company's customers use Great Lakes' pipeline to transport their gas to and from Storage Company's facilities. Storage Company's storage charges include the costs associated with transporting the gas to and from Great Lakes' transmission line through Storage Company's pipelines to and from the storage fields themselves. Storage Company takes and relinquishes possession of the storage gas at the Deward, Michigan, interconnection between its pipeline and the Great Lakes' transmission lines. In addition to its storage fields and lines, Storage Company has three compressor stations and associated gas injection and withdrawal facilities in Michigan.

Storage Company does not provide storage service to or for Pipeline Company. Storage Company's reservoirs and facilities are not engineered or used as pressure apparatus in, nor are they necessary to, the proper operation of Pipeline Company's system operations.

Storage Company has seven customers consisting of gas pipeline and transmission companies in Texas, Alabama, Missouri, Indiana, Tennessee and Manitoba. All but one of the customers use (d) Pipeline Company to transport their gas to and from Storage Company facilities. One customer used Great Lakes. None of Storage Company's customers purchased their stored gas from Pipeline Company.

Pipeline Company is a "natural gas company," as that term is defined in the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717 et seq.,3 and is therefore subject to the regulatory jurisdiction of the Federal Energy Regulatory Commission ("FERC"). Pursuant to the NGA, the FERC has regulatory jurisdiction over (1) the interstate transportation of gas (including gas storage used to balance fluctuating demand with supplier deliveries), (2) the interstate sale of gas for resale, and (3) the natural gas companies engaged in such interstate transportation and sale for resale.4 Accordingly, the FERC has jurisdiction over all of Pipeline Company's transportation, storage, sales for resale, rates and charges, construction of new facilities, extension or abandonment of services and facilities, and certain other matters. The FERC has further jurisdiction to review and consider specific long-term financing plans for particular construction projects.5 The FERC requires issuance of certificates of public convenience and necessity for any significant expansion of the company's facilities or services,6 but no FERC filings are necessary for short-term financing or for financing other than construction.

Storage Company, according to plaintiffs and as treated in FERC orders, is also a "natural gas company" under the NGA, thereby subject to FERC regulatory jurisdiction.7 Storage Company, like Pipeline Company, holds certificates of public convenience and necessity issued by the FERC when required for significant expansions of facilities or services, but no FERC filings are required for short-term financing or for financing other than construction.

All parties agree that the FERC does (and the MPSC does not) exercise general regulatory jurisdiction over Storage Company's facilities and gas operations, and over all of Pipeline Company's transportation, storage, sales for resale, rates and charges, construction of new facilities, extension or abandonment of service and facilities, and certain other matters. Although lacking general regulatory jurisdiction over either plaintiff, the MPSC has exercised authority under Act 144 over securities issued by Pipeline Company since Pipeline Company was established in 1945, except for the period of 1970-1979.8 Since 1979, Pipeline Company has received unconditional approval of all seven of its securities issue applications. Six applications gained approval within three to six weeks; the remaining application took 8 months to secure approval. The MPSC has exercised the same authority over securities issued by Storage Company, which was organized in 1978, continuously since 1979. During that period, Storage Company received unconditional approval of all three applications it submitted, each within three to six weeks. All applications filed since 1979 by either plaintiff have raised the issue of MPSC jurisdiction under Act 144, but the issue has never been litigated prior to this lawsuit.

B. Legal Issues

1. Preemption Claim

Plaintiffs claim that the federal regulatory schemes applicable to them have preempted ...

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2 cases
  • Schneidewind v. Anr Pipeline Company Anr
    • United States
    • U.S. Supreme Court
    • March 22, 1988
    ...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 impossibilit......
  • ANR Pipeline Co. v. Schneidewind
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • September 15, 1986
    ...violates the Commerce Clause of the United States Constitution. The United States District Court for the Western District of Michigan, 627 F.Supp. 923, held that federal law did not preempt Act 144 and that Act 144 did not violate the Commerce Clause. For the reasons stated below, we hold t......

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