Panhandle Eastern Pipe Line Co. v. Michigan Public Service Com'n

• Decision Date: 10 October 1950
• Docket Number: No. 27,27
• Citation: 328 Mich. 650,44 N.W.2d 324
• Parties: PANHANDLE EASTERN PIPE LINE CO. v. MICHIGAN PUBLIC SERVICE COMMISSION (MICHIGAN CONSOLIDATED GAS CO., Intervenor).
• Court: Michigan Supreme Court

Page 324

44 N.W.2d 324

328 Mich. 650

PANHANDLE EASTERN PIPE LINE CO. v. MICHIGAN PUBLIC SERVICE COMMISSION (MICHIGAN CONSOLIDATED

GAS CO., Intervenor).

No. 27.

Supreme Court of Michigan.

Oct. 10, 1950.

Stephen J. Roth, Atty. Gen., Edmund E. Shepherd, Sol. Gen., Lansing, Charles M. A. Martin, Albert J. Thorburn, Archie C. Fraser, Asst. Attys. Gen., for defendant-appellant.

Dyer, Angell, Meek & Batten, Detroit, James W. Williams, Lansing, of counsel, for intervenor and appellant.

Ballard, Jennings, Bishop & Ellsworth, Lansing, Robert P. Patterson, New York City, Samuel H. Riggs, Detroit and Robert M. Morgenthau, New York City, of counsel, for plaintiff and appellee.

Before the Entire Bench.

BOYLES, Chief Justice.

The issue in this case is whether the direct sale of natural gas to local consumers in Michigan by the plaintiff, an interstate pipe-line company, is within the jurisdiction of the Michgan public service commission.

The Panhandle Eastern Pipe Line Company (hereinafter called Panhandle), a Delaware corporation, is engaged in the interstate transportation of natural gas by pipe line from Texas and other States into Michigan. It is an interstate natural gas pipe-line company, subject to regulation by the Federal power commission under the Federal Natural Gas Act, 15 U.S.C. § 717 et seq., 15 U.S.C.A. § 717 et seq. It sells the greater part of its natural gas to local public utilities for resale for ultimate consumption. A part of its natural gas is sold by it direct to local industrial consumers, known as 'direct industrial sales.' In 1945 it entered into a contract with the Ford Motor Company to sell natural gas direct to said company at its Dearborn plant for its own consumption. The plant of said company is within a municipality already served by the Michigan Consolidated Gas Company, a public utility engaged in selling natural gas to consumers in said municipality after having been granted a certificate of public convenience and necessity to do so. Panhandle also sought other local customers, and publicly announced an intention to sell directly to other industrial consumers when possible.

The said Michigan Consolidated Gas Company filed a complaint with the Michigan public service commission and, after notice and a hearing, the commission ordered that Panhandle 'cease and desist from making direct sales and deliveries of natural gas to industries within the State of Michigan, located within municipalities already being served by a public utility, until such time as it shall have first obtained a certificate of public convenience and necessity from this commission to perform such services.'

Section 2 of P.A.1929, No. 69, C.L.1948, § 460.502, Stat.Ann. § 22.142, under which the Michigan public service commission assumed jurisdiction to make said order, provides: 'No public utility shall hereafter * * * render any service for the purpose of transacting or carrying on a local business * * * in any municipality in this state where any other utility or agency is then engaged in such local business and rendering the same sort of service, * * * until such public utility shall first obtain from the commission a certificate that public convenience and necessity requires or will require such * * * operation, * * *.'

Panhandle, claiming that said order of the Michigan public service commission prohibited it from selling natural gas in this State direct to a local consumer for its own use, filed in the circuit court of Ingham county the bill of complaint in the instant case to set aside and enjoin enforcement of the commission's order. It added to its bill of complaint the motion made by it before the Michigan public service commission, in which it sought the dismissal of the petition filed there by the Michigan Consolidated Gas Company, and making the claim: 'That the Michigan public service commission has no jurisdiction over the subject matter of the sale of natural gas, a commodity in interstate commerce, by Panhandle Eastern Pipe Line Company to Ford Motor Company,' and that: 'Panhandle Eastern Pipe Line Company has the right to sell and deliver gas to industrial consumers without regulation by the Michigan public service commission of such interstate commerce.'

In the circuit court the Michigan Consolidated Gas Company intervened in the case and, after an extended hearing, the circuit judge entered a decree permanently restraining the Michigan public service commission from interfering in the direct sale of natural gas by Panhandle to the said Ford Motor Company or other industrial users in the State of Michigan. From said decree, the Michigan public service commission and the intervenor Michigan Consolidated Gas Company appeal.

Panhandle construes the order of the Michigan public service commission as an absolute denial of the right of Panhandle to sell natural gas in this State direct to local consumers for their own consumption and use; in other words, that said order denies Panhandle a certificate of public convenience and necessity to sell natural gas direct to local consumers. We do not so construe the order. It is, however, a direct order by the Michigan public service commission, finding that it does have jurisdiction to determine whether a certificate of public convenience and necessity shall be granted to Panhandle to carry on said operation. It denies the right of Panhandle to sell natural gas to the Ford Motor Company or other local consumers for their own consumption, without first obtaining a certificate of public convenience and necessity from the commission. It leaves that door open for a hearing before the Michigan public service commission as to whether or not public convenience and necessity requires the granting of such a certificate to Panhandle, after a proper hearing on that question. The statute states what the commission shall take into consideration in determining the question of public convenience and necessity, and what the certificate shall provide. C.L.1948, § 460.505, Stat.Ann. § 22.145. If the commission, after such a hearing, should deny such a certificate to Panhandle, the statute affords it a remedy for review in the courts; and, on the contrary, if at such hearing the commission should grant such a certificate to Panhandle, the intervenor herein or any other interested party would likewise have the same right of review. The statute so provides. C.L.1948, § 460.506, Stat.Ann. § 22.146.

In the instant case the bill of complaint was filed and the decree entered in the circuit court, and also the appeal therefrom taken to this Court, prior to the decision of the United States supreme court in Panhandle Eastern Pipe Line Co. v. Public Service Commission of Indiana, 1947, 332 U.S. 507, 68 S.Ct. 190, 191, 92 L.Ed. 128. The statute law of the State of Indiana requires that a certificate of public convenience and necessity be obtained from the Indiana public service commission as a prerequisite to engaging in the operation of a public utility. Burns' Ind.Stat.Ann. § 54-601. In that respect the Indiana law is substantially the same as the statute law of this State, C.L.1948, § 460.502, Stat.Ann. § 22.142, supra. The decision of the United States supreme court in the Panhandle-Indiana case, supra, is so conclusive of the issue now before us that we quote from and adopt it at length, as follows:

'Broadly the question is whether Indiana has power to regulate sales of natural gas made by an interstate pipe-line carrier direct to industrial consumers in Indiana. More narrowly we are asked to decide whether the commerce clause, Const. Art. I, s8, by its own force forbids the appellee, Public Service Commission, to require appellant to file tariffs, rules and regulations, annual reports, etc., as steps in a comprehensive plan of regulation preliminary to possible exercise of jurisdiction over rates and service in such sales. ¹

'Panhandle Eastern transports natural gas from Texas and Kansas fields into and across intervening states, including Indiana, to Ohio and Michigan. In Indiana it furnishes gas to local public utility distributing companies and municipalities. These in turn supply the needs of over 112,000 residential, commercial and industrial consumers.

'Since 1942 appellant also has sold gas in large amounts direct to Anchor-Hocking Glass Corporation for industrial consumption. ² Shortly before beginning this service appellant had informed a number of its customers, local distributing companies in Indiana, that it intended to render service directly to large industrial consumers wherever possible. ³ Pursuant to that policy, since these proceedings began direct service has been extended to another big industrial user. ⁴

'In 1944 the Commission initiated hearings relative to direct service by Panhandle Eastern to Indiana consumers. It concluded that 'the distribution in Indiana by Panhandle of natural gas direct to consumers is subject to regulation by this Commission under the laws of this state,' notwithstanding any alleged contrary effect of the commerce clause upon appellant's direct sales to industrial users. Accordingly it issued its order of November 21, 1945, for the filing of tariffs, etc., as has been stated.

'Early in 1946 Panhandle Eastern brought this suit in a state court to set aside and enjoin enforcement of the order. * * *

'The trial court vacated the orders and enjoined the Commission from enforcing them. It accepted appellant's view of the effect of the commerce clause on its operations. The Supreme Court of Indiana reversed that judgment and denied the relief appellant sought. [Public Service Commission v. Panhandle Eastern Pipeline Co., 224 Ind. 662], 71 N.E.2d 117. It held first that the Commission's orders amounted to an unequivocal assertion of power to regulate rates and service on appellant's direct industrial sales and thus presented squarely the question of the Commission's jurisdiction over such sales as affected by the...