Northern Natural Gas Co. v. Iowa Utilities Bd.

• Decision Date: 11 August 2004
• Docket Number: No. 03-1889.,03-1889.
• Citation: 377 F.3d 817
• Parties: NORTHERN NATURAL GAS CO.; Northern Border Pipeline Company, Plaintiffs — Appellees, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; Allan T. Thoms, Defendants, Diane Munns, Defendant — Appellant, Susan Frye, Defendant, Mark O. Lambert; Elliott Smith, Defendants — Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

377 F.3d 817

NORTHERN NATURAL GAS CO.; Northern Border Pipeline Company, Plaintiffs — Appellees, v. IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; Allan T. Thoms, Defendants, Diane Munns, Defendant — Appellant, Susan Frye, Defendant, Mark O. Lambert; Elliott Smith, Defendants — Appellants.

No. 03-1889.

United States Court of Appeals, Eighth Circuit.

Submitted: February 10, 2004.

Filed: August 11, 2004.

Appeal from the United States District Court for the Southern District of Iowa, Harold D. Vietor, J.

David Jay Lynch, argued, Des Moines, IA, for appellant.

Bret Alan Dublinske, argued, Des Moines, IA (Helen C. Adams, on the brief), for appellee.

Before MELLOY, McMILLIAN, and COLLOTON, Circuit Judges.

COLLOTON, Circuit Judge.

Appellants Diane Munns, Mark Lambert, and Elliott Smith, members of the Iowa Utilities Board (collectively "the Board members"), appeal the district court's¹ grant of summary judgment and entry of a permanent injunction in favor of appellees Northern Natural Gas Company and Northern Border Pipeline Company in this case involving natural gas pipeline regulation. We affirm.

I.

This appeal concerns the efforts of the State of Iowa to regulate the environmental effects of the construction and maintenance of interstate natural gas pipelines, as well as its attempt to delineate private damage remedies for certain harms caused by natural gas companies. This is our court's second consideration of Iowa laws regulating the construction of natural gas pipelines. In ANR Pipeline Company v. Iowa State Commerce Commission, 828 F.2d 465, 473 (8th Cir.1987), we held that Iowa statutes regulating the safety of interstate natural gas pipelines were preempted by federal law. We found that Iowa regulatory provisions relating to environmental protection, such as topsoil preservation, were not severable from the safety provisions, and were thus preempted as well. Id. Our court reserved decision, however, on the possibility that "Iowa may be able to enact legislation to protect its valuable topsoil and other aspects of the environment, and to provide private damage remedies, as long as the state regulations do not conflict with existing federal standards." Id.

Taking note of the court's statement, the Iowa legislature moved the environmental provisions preempted only by reason of their non-severability to a separate chapter of the Iowa Code, Chapter 479A. The Iowa legislature passed this statute in 1988 "to confer upon the utilities board the power and authority to implement certain controls over the transportation of natural gas to protect landowners and tenants from environmental or economic damages...." Iowa Code § 479A.1. The Iowa Utilities Board has promulgated regulations to implement Iowa Code chapter 479A: Iowa Administrative Code chapter 199-12, which provides for various pipeline reporting and inspection requirements, and Iowa Administrative Code chapter 199-9, which requires the restoration of agricultural land following pipeline work. These land restoration standards address topsoil separation and replacement, removal of rock and debris, drain tile repair, revegetation, and erosion control, among others matters.

Northern Natural Gas and Northern Border Pipeline transport and sell natural gas in interstate commerce, and are subject to regulation by the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (NGA), 15 U.S.C. § 717 et seq. When natural gas companies seek to construct, extend, acquire, or operate facilities for the transportation or sale of natural gas in interstate commerce, the NGA requires that such companies must be granted a "certificate of public convenience and necessity" by the FERC. 15 U.S.C. § 717f(c)(1)(A). Such certificates are granted only when the FERC finds that a company is willing and able to comply with the requirements, rules, and regulations of the federal regulatory scheme. Id. § 717f(e).

In 2001, Northern Natural Gas sought to upgrade one of its pipelines near DeWitt, Iowa. The company was authorized to do so under a "blanket certificate" of public convenience and necessity granted by the FERC on September 1, 1982. See Northern Natural Gas Co., Div. of InterNorth, Inc., 20 FERC § 62,410, 1982 WL 40871 (Sept. 1, 1982). With certain restrictions, a blanket certificate allows pipeline companies to engage in activities such as constructing new facilities without seeking further approval from the FERC. See 18 C.F.R. §§ 157.203, 157.208. All activities undertaken pursuant to a blanket certificate must be consistent with such environmental statutes as the Clean Water Act, 33 U.S.C. § 1251, et seq. (2000), and the Clean Air Act, 42 U.S.C. § 7470, et seq. (2000). See 18 C.F.R. § 157.206. In 2001, in accordance with FERC regulations, Northern Natural Gas also asserted an intent to abide by the FERC's "Upland Erosion Control, Revegetation and Maintenance Plan" ("FERC Plan") in performing the upgrade. See 18 C.F.R. § 157.207(b)(3)(iv). The FERC Plan sets a minimum national standard for land restoration, and addresses many of the same environmental issues covered by Iowa's land restoration standards. This plan specifies standards for topsoil preservation, revegetation, removal of rock, erosion control, and other matters, but the requirements often differ to varying degrees from the land restoration standards established by the Iowa regulations.

To proceed with the upgrade project, Northern Natural Gas requested that the Iowa Utilities Board waive certain land restoration rules contained in Iowa Administrative Code chapter 199-9, citing its agreement to comply with the FERC Plan. See Iowa Admin. Code rs. 199-1.3, 199-9.2(2) (waiver provisions). The Board refused to grant a waiver, stating in part that "the FERC Plan does not require restoration of the affected land to a condition as good as or better than provided in the Board's rules." (Joint App. at 468).

The gas companies brought suit in the district court seeking injunctive relief and a declaratory judgment that the Iowa statutory and regulatory provisions were preempted by various provisions of federal law, including the Natural Gas Act and implementing regulations promulgated by the FERC, and violated the Contract Clause of the United States Constitution.² The parties filed cross-motions for summary judgment.

The district court granted the motion for summary judgment filed by the gas companies on the preemption claim, and also entered a permanent injunction prohibiting Iowa from enforcing Iowa Code chapter 479A and Iowa Administrative Code chapters 199-9 and 199-12. The district court concluded that the Iowa provisions were preempted by federal law, because the field in which Iowa seeks to regulate is occupied by federal law, and because there is actual conflict between the Iowa provisions and federal law. The court pointed to various regulations of the FERC promulgated pursuant to the NGA and the NEPA, as well as the FERC Plan, in determining that federal law preempts the Iowa provisions. Alternatively, in the event that preemption did not invalidate all of Iowa Code chapter 479A, the district court also found that an Iowa statutory provision regarding reversion of rights-of-way, Iowa Code § 479A.27, violated the Contract Clause of the United States Constitution, Art. I, § 10, cl. 1, and granted the motion for summary judgment of the gas companies on this claim. The Board members timely appealed.

This court reviews grants of summary judgment de novo. Murphey v. City of Minneapolis, 358 F.3d 1074, 1077 (8th Cir.2004). We will affirm the grant of summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).

II.

A.

Under the Supremacy Clause of the Constitution, Art. VI, cl. 2, state law will be preempted when it conflicts with or frustrates federal law v. Easterwood, 507 U.S. 658, 663, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993). It is familiar doctrine that there are three primary ways that federal law may preempt state law. First, state law is preempted where Congress has expressly stated that it intends to prohibit state regulation in an area. Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541, 121 S.Ct. 2404, 150 L.Ed.2d 532 (2001). Second, Congress may implicitly preempt state regulation of an area through occupation of a field. Id. A field is occupied when the federal regulatory scheme is "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947). Finally, even if Congress has not completely precluded the ability of States to regulate in a field, state regulations are preempted to the extent they conflict with federal law. Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984). Such a conflict will be found "when it is impossible to comply with both state and federal law, or where the state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress." Id. (citations omitted).

We agree with the district court that Iowa Code chapter 479A and the implementing administrative code provisions regulate in a field that is occupied by federal law. Since our decision in ANR Pipeline Company v. Iowa State Commerce Commission, the Supreme Court decided Schneidewind v. ANR Pipeline Company, 485 U.S. 293, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988), which provided substantial guidance with respect to the federal occupation of the field concerning the transportation and sale of natural gas. In Schneidewind, the Supreme Court examined a Michigan statute that required natural gas companies to obtain state approval prior to issuing long-term securities. Id. at 296-98, 108 S.Ct. 1145. The Court held that the Michigan statute was preempted, because it regulated in a field that the NGA occupied....