Tenneco, Inc. v. Sutton

• Decision Date: 09 December 1981
• Docket Number: 80-29-B.,Civ. A. No. 80-17-B
• Citation: 530 F. Supp. 411
• Parties: TENNECO, INC., a Delaware corporation acting by and through its Division, Tennessee Gas Pipeline Company v. SUTTON, Raymond T., Commissioner of Conservation and Assistant Secretary, Office of Conservation, Department of Natural Resources, State of Louisiana. INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA v. SUTTON, Raymond T., Commissioner of Conservation and Assistant Secretary, Office of Conservation, Department of Natural Resources, State of Louisiana, and Guste, William, J., Jr., Attorney General of the State of Louisiana.
• Court: U.S. District Court — Middle District of Louisiana

530 F. Supp. 411

TENNECO, INC., a Delaware corporation acting by and through its Division, Tennessee Gas Pipeline Company v. SUTTON, Raymond T., Commissioner of Conservation and Assistant Secretary, Office of Conservation, Department of Natural Resources, State of Louisiana.

INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA v. SUTTON, Raymond T., Commissioner of Conservation and Assistant Secretary, Office of Conservation, Department of Natural Resources, State of Louisiana, and Guste, William, J., Jr., Attorney General of the State of Louisiana.

Civ. A. Nos. 80-17-B, 80-29-B.

United States District Court, M. D. Louisiana.

December 9, 1981.

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Burt W. Sperry, Shotwell, Brown & Sperry, Monroe, La., for Tenneco, Inc.

Gene W. Lafitte, John W. Wilson, Deborah B. Price, Liskow & Lewis, New Orleans, La., for Interstate Natural Gas Ass'n of America.

Carmack M. Blackmon, Baton Rouge, La., for Raymond T. Sutton and William J. Guste, Jr.

Dennis Vidrine, Lafayette, La., for Raymond T. Sutton.

Shelly C. Zwick, Asst. U. S. Atty., Baton Rouge, La., Jerome Nelson, Jerome N. Feit, J. Paul Douglas, Federal Energy Regulatory Commission, Washington, D. C., for plaintiff intervenor Federal Energy Regulatory Commission.

R. Gordon Kean, Jr., William R. D'Armond, Leonard L. Kilgore, III, Sanders, Downing, Kean & Cazedessus, Baton Rouge, La., for intervenor as defendant Louisiana Chemical Assn.

POLOZOLA, District Judge:

I. INTRODUCTION

These cases¹ involve a constitutional challenge to Act 732 of the 1979 Regular Session of the Louisiana Legislature, La. R.S. 30:607 (Act 732), Regulation 14 issued by the Louisiana Department of Natural Resources, Article IX, Section 2(B) of the Louisiana Constitution of 1974, and the Natural Gas Policy Act of 1978, 15 U.S.C. ? 3301, et seq. (NGPA). For reasons which follow, the Court finds that the NGPA is constitutional and that Act 732, Regulation 14 and Article IX, Section 2(B) of the Louisiana Constitution of 1974 are invalid under the Supremacy and Commerce Clauses of the United States Constitution.

II. STATEMENT OF THE CASE

Tenneco, Inc.,² the Interstate Natural Gas Association of America (INGAA)³ and the Federal Energy Regulatory Commission (FERC)⁴ challenge the constitutionality of Act 732, Regulation 14 issued thereunder by the Louisiana Department of Natural Resources, and Article IX, Section 2(B) of the Louisiana Constitution of 1974 on the grounds that this Act, regulation and constitutional provision are invalid under the Commerce,⁵ Supremacy,⁶ and Due Process Clauses⁷ of the United States Constitution and the NGPA and the Natural Gas Act (NGA).⁸ Named as defendants in these suits are Raymond T. Sutton,⁹ and William J. Guste,¹⁰ The Louisiana Chemical Association (LCA)¹¹ has intervened as a defendant in both actions.

Tenneco and FERC contend that Act 732, Regulation 14, and Article IX, Section 2(B) of the Louisiana Constitution of 1974 are constitutionally invalid because they: (1) infringe upon an area preempted by Congress by the NGA and the NGPA, and thus violate the Supremacy Clause of the United States Constitution; (2) accord to Louisiana's residents a preferred right of access to natural gas produced within the State of Louisiana over consumers in other states and thus provide a means to obstruct and burden the transmission of natural gas from Louisiana into other states in violation of the Commerce Clause; and (3) deprive Tenneco and certain members of INGAA of their freedom to contract without serving any legitimate state purpose, and thus are violations of the Due Process Clause of the Fourteenth Amendment to the United States Constitution.

The defendants deny that the statute, legislation and constitutional provision involved in this case are invalid. Defendants further contend that there is no case or controversy for the Court to determine in this case. In essence defendants contend that the State of Louisiana acted in a constitutional manner because Act 732 does not interfere with or conflict with the provisions of the NGPA. Defendants further contend in a counterclaim filed herein that the NGPA is unconstitutional because: (1) it exceeds the authority of Congress under the Commerce Clause; (2) it violates the provisions of the Tenth Amendment of the United States Constitution; and (3) it violates the Intergovernmental Immunities Doctrine of the United States Constitution.

After the suit was filed, the plaintiffs filed a motion for summary judgment which was denied by the Court. Thereafter, a trial on the merits was held by the Court. The parties have now filed extensive briefs with the Court, together with proposed findings of fact and conclusions of law.

III. THE ISSUES PRESENTED

There are six basic issues the Court must determine:

(1) whether there is a case or controversy for the Court to decide;

(2) whether the NGPA is unconstitutional because it violates the Commerce Clause, the Tenth Amendment and the Intergovernmental Immunities Doctrine of the United States Constitution;

(3) whether the decision rendered in State of Oklahoma, et al. v. Federal Energy Regulatory Commission, 494 F.Supp. 636 (W.D.Okla.1980), affirmed, 661 F.2d 832 (10 Cir. 1981) is binding on the defendants under the doctrine of res judicata;

(4) whether Article IX, ? 2(B) of the Louisiana Constitution, Act 732 and Regulation 14 violate the Supremacy Clause of the United States Constitution because they establish a regulatory scheme directly affecting interstate commerce in conflict with the NGPA;

(5) whether Article IX, ? 2(B) of the Louisiana Constitution, Act 732 and Regulation 14 violate the Commerce Clause of the United States Constitution by granting natural gas consumers in Louisiana a preferred right of access over consumers in other states to natural gas produced in Louisiana (6) whether these same provisions of Louisiana law violate the Due Process Clause of the Fourteenth Amendment by depriving or limiting the freedom of contract of Tenneco and other similar companies without serving any legitimate state interest.

IV. THE CONSTITUTIONAL PROVISIONS, STATUTES AND REGULATIONS INVOLVED IN THIS CASE

The Court believes that a summary of the applicable constitutional provisions, statutes and regulations is necessary to a proper understanding and resolution of the issues involved in this case.

A. FEDERAL CONSTITUTIONAL PROVISIONS

Under the Commerce Clause, the Congress is granted the power and authority to regulate commerce "among the several States".¹² The Supremacy Clause provides that the United States Constitution and laws made pursuant thereto "shall be the supreme Law of the Land."¹³ The Due Process Clause of the Fourteenth Amendment to the United States Constitution prohibits the state from depriving any person of "life, liberty, or property without due process of law."¹⁴ Under the Tenth Amendment to the United States Constitution, "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States...".

B. THE NATURAL GAS ACT

The NGA was passed in 1938 in order to give the federal government regulatory power over those areas where the states could not act. The NGA gave the Federal Power Commission (FPC)¹⁵ broad authority to establish just and reasonable rates for the interstate transportation and interstate sale and resale of natural gas¹⁶ and to issue certificates for the interstate transportation and sale of natural gas and the construction and operation of facilities for such sales and transportation.¹⁷ Retail sales for ultimate public consumption and production and gathering were specifically exempted from the FPC's jurisdiction.¹⁸ However, sales for resale by producers have been held subject to regulation under the NGA.¹⁹ Section 7 of the NGA prohibits any person from selling or transporting natural gas in interstate commerce without first obtaining a certificate of public convenience and necessity from the Commission.²⁰ In addition, Section 7(c)(2) provides that the Commission may issue certificates of public convenience and necessity authorizing an interstate pipeline to transport natural gas for high-priority users where the user purchases the gas directly from a producer or produces the gas itself.²¹ The Commission may also attach to such certificates such reasonable terms and conditions as the public convenience and necessity may require.²² Finally, the NGA prohibits the termination of certificated service without the prior approval of the Commission.²³

C. THE NATURAL GAS POLICY ACT OF 1978

On April 20, 1977, President Carter submitted his National Energy Plan to the Congress. The natural gas provisions of this plan were designed to resolve the jurisdictional limitations of the NGA and to alleviate gas shortages resulting from inadequate natural gas supplies in the interstate pipeline system.²⁴

In passing the NGPA, Congress hoped to encourage the production and exploration of natural gas sources and to maintain adequate supplies of natural gas in the interstate markets.²⁵

The key elements of the NGPA are: (1) extension of controls to the intrastate natural gas market,²⁶ (2) phased deregulation of new natural gas,²⁷ and (3) an attempt to provide to interstate pipelines and their customers parity of access to new supplies of natural gas and to gas presently flowing in the intrastate market.²⁸ "Parity of access permits an interstate pipeline to purchase, and producers and intrastate pipelines to sell, gas not presently committed to the interstate market under the same pricing, certification and abandonment rules that apply to buyers and sellers in the intrastate market."²⁹ The NGPA, as part of a comprehensive national energy plan, regulates the prices of various categories of natural gas, provides for incremental pricing of natural gas used for certain industrial purposes, establishes curtailment policies with respect to essential agricultural...