Mo. Public Service v. Mo. Interstate Gas

• Decision Date: 28 October 2008
• Docket Number: No. WD 68506.,WD 68506.
• Citation: 266 S.W.3d 881
• Parties: MISSOURI PUBLIC SERVICE COMMISSION, Appellant, v. MISSOURI INTERSTATE GAS, LLC, et al., Respondent.
• Court: Missouri Court of Appeals

266 S.W.3d 881

MISSOURI PUBLIC SERVICE COMMISSION, Appellant, v. MISSOURI INTERSTATE GAS, LLC, et al., Respondent.

No. WD 68506.

Missouri Court of Appeals, Western District.

October 28, 2008.

Peggy Ann Whipple, Jefferson City, MO, for appellant.

Paul S. Deford, Aimee Dee Guzman, Co-Counsel, Kansas City, MO, David G. Brown, Co-Counsel, Jefferson City, MO, for respondents.

Before: JOSEPH M. ELLIS, Presiding Judge, LISA WHITE HARDWICK, Judge and JOSEPH P. DANDURAND, Judge.

JOSEPH M. ELLIS, Judge.

The Missouri Public Service Commission ("MoPSC") appeals the dismissal of its petition for preliminary and permanent injunction against Respondents on the basis of federal preemption. Respondents are affiliated companies involved in the transportation and sale of natural gas: Missouri Interstate Gas, LLC ("MIG"); Missouri Pipeline Company, LLC ("MPC"); Missouri Gas Company, LLC ("MGC"); United Pipeline Systems, LLC ("United"); and Gateway Pipeline Company, LLC ("Gateway") (together, "the Pipelines"). MIG, MPC and MGC are wholly-owned subsidiaries of United, which is a wholly-owned subsidiary of Gateway.

MIG owns and operates a 6.6-mile interstate pipeline extending from an interconnection in Illinois to an interconnection with MPC in Curryville, Missouri. When these proceedings began, the Pipelines operated under a certificate of public convenience and necessity issued to MPC by MoPSC in August 1989. That certificate was conditioned upon MPC maintaining physical separation of its intrastate pipeline from the portion of the pipeline that crosses into Illinois and obtaining exemption from federal regulation to become subject to MoPSC's jurisdiction.¹ MPC complied with these conditions and was granted permanent authority to transport natural gas by MoPSC in August 1990. In October 2001, MoPSC granted Gateway, MPC, and MGC authority to combine their operations, with the condition that if the portion of the pipeline extending into Illinois became operational then the companies would take certain actions to assure continued state jurisdiction. None of the Pipelines objected to or sought appellate relief from these orders when they were entered.

On June 28, 2006, the Pipelines filed a joint application with the Federal Energy Regulatory Commission ("FERC") for certificates of public convenience and necessity and abandonment authorizations, seeking to consolidate their intrastate and interstate operations into one interstate operation. The application contemplated that the MPC and MIG facilities would be held by the same company, that gas would flow from Missouri into Illinois, and that MPC and MGC would no longer retain their exemption from federal jurisdiction. The Pipelines did not seek relief from the three previous MoPSC orders and did not seek authorization for the consolidation from MoPSC before filing their application with FERC.

On July 25, 2006, MoPSC filed a petition for preliminary and permanent injunction against the Pipelines, seeking to compel them to comply with the three final orders of MoPSC summarized above and with § 393.190.1, RSMo 2000.² Section 393.190.1 provides that no company under MoPSC's jurisdiction may seek to transfer or consolidate operations without first obtaining authorization from MoPSC and that any transfer or consolidation completed without such authorization is void. The Pipelines removed the case to federal court and filed an answer, but the case was remanded back to the Circuit Court of Cole County. The Pipelines subsequently filed a motion to dismiss the petition, asserting that FERC has exclusive jurisdiction over the transportation and sale of natural gas in interstate commerce under the Natural Gas Act ("NGA") and, therefore, MoPSC's claims were preempted and the court lacked jurisdiction to hear the case.

After initiating the case at bar, MoPSC intervened in the Pipelines' FERC application, requesting that FERC abstain from acting on the application pending resolution of these proceedings. In the alternative, MoPSC moved for FERC to reject or dismiss the application because the Pipelines' proposed merger would contravene conditions in the certificates issued by MoPSC and they did not request approval from MoPSC as allegedly required under state law. The parties presented essentially the same arguments to FERC as to the trial court below and in the arguments on the merits in this appeal.

On April 20, 2007, FERC issued its order concerning the Pipelines' application and all related motions. It denied MoPSC's motions, finding that abstention was improper because "the applications before us and the pending state proceeding involve different issues" and that neither "failure to demonstrate compliance" with state laws nor "arguments that its purpose is to avoid state regulation" were grounds for rejection of an application. FERC declined to address the parties' arguments concerning federal preemption because it had denied the motions to abstain or reject the applications.

FERC granted the Pipelines' application for certificates of public convenience and necessity and authorized them to acquire or abandon by transfer certain facilities so as to consolidate into one interstate pipeline under MGC's name. Among other things, the April 20, 2007 order required the Pipelines to make certain revisions to their rate and tariff proposals and to file certain paperwork ("compliance filings") concerning those issues within 60-90 days "prior to commencement of interstate service." The Pipelines formally accepted the certificates a few days later, acknowledging that certain filings were required 60-90 days before commencing service.

On May 1, 2007, the trial court entered its judgment dismissing MoPSC's action with prejudice, finding that the Pipelines' FERC application was governed exclusively by the NGA and, therefore, the exercise of any state authority, including an injunction from consolidating or transferring without prior authorization, was preempted. The court...