National Steel Corp. v. Long

• Decision Date: 12 July 1989
• Docket Number: No. G86-88-CA5.,G86-88-CA5.
• Parties: NATIONAL STEEL CORPORATION, Dome Petroleum Limited, Dow Chemical Canada, Inc., Nova, an Alberta corporation, Petro-Canada, Inc., Shell Canada, Ltd., Dome NGL Pipeline, Ltd., and Dome Pipeline Corporation, Plaintiffs, v. William E. LONG, Edwyna G. Anderson and Matthew E. McLogan, Defendants. and Michigan Consolidated Gas Company and Michigan Gas Utilities Company, Intervening Defendants.
• Court: U.S. District Court — Western District of Michigan

718 F. Supp. 622

NATIONAL STEEL CORPORATION, Dome Petroleum Limited, Dow Chemical Canada, Inc., Nova, an Alberta corporation, Petro-Canada, Inc., Shell Canada, Ltd., Dome NGL Pipeline, Ltd., and Dome Pipeline Corporation, Plaintiffs, v. William E. LONG, Edwyna G. Anderson and Matthew E. McLogan, Defendants and Michigan Consolidated Gas Company and Michigan Gas Utilities Company, Intervening Defendants.

No. G86-88-CA5.

United States District Court, W.D. Michigan, S.D.

July 12, 1989.

Robert B. Webster and Douglas West of Hill, Lewis, Adams, Goodrich & Tait, Detroit, Mich., for Nat. Steel Corp.

Pat D. Conner of Conner, Harbour, Snider & Thomas, Ann Arbor, Mich., for all other plaintiffs.

Henry J. Boynton, Asst. Atty. Gen. for State of Mich., Lansing, Mich., for Long, Anderson, McLogan.

William K. Fahey of Foster, Swift, Collins & Coey, Lansing, Mich., for Michigan Consol. Gas Co.

Daniel J. Danlow of Honigman, Miller, Schwarte & Cohn, Lansing, Mich., for Michigan Gas Utilities Co.

OPINION OF THE COURT

ROBERT HOLMES BELL, District Judge.

This case presents a challenge to a prospective exercise of regulatory jurisdiction by the Michigan Public Service Commission ("MPSC"). In a seven-count complaint, plaintiffs allege the MPSC is without authority to regulate a proposed delivery of liquid ethane to Nation Steel Corporation.¹ Now before the Court are two motions which place at issue only four of the seven counts. Plaintiffs move for voluntary dismissal of count VII, without prejudice, and for summary judgment as to counts I, II and III.

I

The facts material to the present motions are not disputed. National Steel Corporation ("National Steel") operates a steel mill facility near Detroit known as Zug Island. In contemplation of supplying the Zug Island fuel needs with liquid ethane, National Steel has entered into an agreement to purchase ethane in Canada and have it delivered by pipeline directly to Zug Island. The ethane is to be purchased from the plaintiff "ethane sellers," Dome Petroleum Limited, Dow Chemical Canada, Inc., NOVA, Petro-Canada, Inc., and Shell Canada, Inc. From the ethane sellers' storage facility in Windsor, Ontario, the ethane is to be transported by Dome NGL Pipeline, Ltd. and Dome Pipeline Corporation ("Dome Pipeline") via the Eastern Delivery System to a point approximately 2800 feet from Zug Island. At this point, National Steel plans to construct interconnect facilities and a service lateral pipeline for the actual delivery of ethane to Zug Island. It is the proposed delivery by Dome Pipeline to National Steel at the interconnect facilities which the MPSC seeks to regulate.

Under § 2 of Act 69 of the Michigan Public Acts of 1929, ("Act 69"), a public utility such as Dome Pipeline, must obtain a certificate of public convenience and necessity from the MPSC before commencing construction or operation of a public utility plant or system or before rendering any service for the purpose of transacting or carrying on a local business where any other utility is then engaged in such local business or rendering the same sort of service. M.C.L. § 460.502, M.S.A. § 22.142. For purposes of Act 69, liquid ethane is a "gas," the furnishing of which is regulable thereunder. Dome Pipeline Corp. v. Public Service Comm'n, 176 Mich.App. 227, 232, 439 N.W.2d 700 (1989). Zug Island is already being furnished natural gas by another utility, Michigan Consolidated Gas Company. Therefore, the MPSC asserts a certificate of public convenience and necessity is prerequisite to commencement of the proposed delivery of ethane. Plaintiffs challenge this assertion on several grounds.

II

In count VII of the complaint, plaintiffs contend the threatened exercise of regulatory jurisdiction is ultra vires and violative of Michigan law. Originally named as defendants were the MPSC and its commissioners, William E. Long, Edwyna G. Anderson and Matthew McLogan. On August 16, 1988, however, the claims against the MPSC, an arm of the State of Michigan, were dismissed because barred by the Eleventh Amendment. Now, plaintiffs seek voluntary dismissal of the count VII claim against the individual commissioners as well. In so moving, they acknowledge (1) the claim alleges a violation of state law; (2) that the commissioners are state officials; (3) that the commissioners have a colorable basis for the threatened exercise of authority; and (4) that the claim is effectively against the state and is barred by the Eleventh Amendment. See Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). They ask the Court to dismiss the claim without prejudice. In opposing the motion, defendants contend dismissal should be ordered with prejudice.

Essentially, plaintiffs' motion is based on the correct recognition that this Court, by virtue of the Eleventh Amendment, lacks subject matter jurisdiction over the claim. This defect having been made clear, the court has no choice but to dismiss the claim, Fed.R.Civ.P. 12(h), without prejudice, for the Court is without authority to address the merits. See Winslow v. Walters, 815 F.2d 1114, 1116 (7th Cir.1987); Verret v. Elliott Equipment Corp., 734 F.2d 235 (5th Cir.1984); Melo v. United States, 505 F.2d 1026, 1030 (8th Cir.1974). Accordingly, plaintiff's motion for voluntary dismissal without prejudice must be granted.

III

Counts II and III are two halves of one claim. Plaintiffs allege the threatened exercise of jurisdiction is barred under the Supremacy Clause, U.S. Const., Art. VI, cl. 2, because it conflicts with federal law. The proposed pipeline transportation of ethane is subject to regulation by the Federal Energy Regulatory Commission ("FERC") under the Interstate Commerce Act, 49 U.S.C. § 1(1)(b).² To the extent the MPSC's exercise of jurisdiction would conflict with the FERC's authority, plaintiffs contend, federal law must prevail, preempting Act 69.

Application of the pre-emption doctrine is a function of congressional intent, express or implied. The standards which guide the Court are summarized in Louisiana Public Service Comm'n v. Federal Communications Comm'n, 476 U.S. 355, 368, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986):

Pre-emption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), when there is outright or actual conflict between federal and state law, e.g., Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962), where compliance with both federal and state law is in effect physically impossible, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963), where there is implicit in federal law a barrier to state regulation, Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law, Rice v. Sante Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947), or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress. Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581 (1941). Pre-emption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may preempt state regulation. Fidelity Federal Savings & Loan Assn. v. De La Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982); Capital Cities Cable Inc. v. Crisp, 467 U.S. 691, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984).

The Interstate Commerce Act ("ICA") does not contain explicit pre-emptive language. Of the various circumstances from which pre-emptive intent may be inferred, plaintiffs focus on two.

A

First, they contend that, in the ICA, Congress has legislated comprehensively, occupying the field of regulation regarding interstate pipeline transportation of oil. By designating oil pipelines "common carriers," Congress is said to have brought a vast body of law to bear, including duties to furnish transportation upon reasonable request; to establish reasonable through routes, with reasonable facilities; to make reasonable rules and regulations with respect to operation of the routes; and to establish just and reasonable rates in connection with such transportation. 49 U.S.C. § 1(4).

Indeed, the obligations imposed on oil pipelines as common carriers under the ICA are stated in broad, general terms.³ They are not so comprehensive, however, as to justify the inference that Congress intended to completely occupy the field of regulation. In fact, the nature of the regulatory authority here asserted by the MPSC highlights a critical void in the federal regulatory scheme. The purpose of the Act 69 certification requirement is to enable the MPSC to prevent needless multiplication of utilities serving the same local territory so as to avoid wasteful duplication of facilities and keep capital investment at the lowest figure consonant with satisfactory service. Huron Portland Cement Co. v. Michigan Public Service Comm'n, 351 Mich. 255, 267, 88 N.W.2d 492 (1958). These interests "are of essentially local concern and vital to the State of Michigan." Panhandle Eastern Pipe Line Co. v. Michigan Public Service Comm'n, 341 U.S. 329, 334, 71 S.Ct. 777, 780, 95 L.Ed. 993 (1951) ("Panhandle/Michigan"). Notwithstanding their importance, such interests are ignored in theory and in practice under the federal regulatory scheme. Under these circumstances, the Court cannot infer congressional intent to occupy the field and thereby pre-empt state regulation of the proposed delivery of ethane.

Plaintiffs maintain the imminent possibility of collision between state law and federal law requires pre-emption, citing Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 108 S.Ct. 1145, 99 L.Ed.2d 316,...