Northern Natural Gas v. Diane Munns , 377 F.3d 817 ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 03-1889
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Northern Natural Gas Co.; Northern *
Border Pipeline Company, *
*
Plaintiffs - Appellees, *
*
v. *
*
Iowa Utilities Board, Utilities *
Division, Department of Commerce; *
Allan T. Thoms, *
* Appeal from the United States
Defendants, * District Court for the Southern
* District of Iowa.
Diane Munns, *
*
Defendant - Appellant, *
*
Susan Frye, *
*
Defendant, *
*
Mark O. Lambert; Elliott Smith, *
*
Defendants - Appellants. *
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Submitted: February 10, 2004
Filed: August 11, 2004 (Corrected 9/21/04)
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Before MELLOY, McMILLIAN, and COLLOTON, Circuit Judges.
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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.1
The Honorable Harold D. Vietor, United States District Judge for the Southern
District of Iowa.
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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. § 717et 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
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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
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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).
2
All told, the gas companies claimed the Iowa provisions were preempted by
the Natural Gas Act, the Natural Gas Policy Act, 15 U.S.C. §§ 3301-3432, the
National Environmental Policy Act (NEPA), 42 U.S.C. §§ 4321-4370a, the Natural
Gas Pipeline Safety Act, 49 U.S.C. §§ 60101-60128, regulations adopted by the
FERC, 18 C.F.R. Parts 154, 157, 284, and 380, and regulations adopted by the United
States Department of Transportation, 49 C.F.R. Parts 190-199.
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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. CSX Transp., Inc. v.
Easterwood, 507 U.S. 658, 663 (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 (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 (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 (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 (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. The Court held that the Michigan statute was preempted, because it
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regulated in a field that the NGA occupied. Id. at 300. The Court concluded that the
State's efforts to regulate the issuance of securities ultimately was designed to ensure
that gas companies would charge "reasonable rates" and properly maintain their
facilities. Id. at 307. Because the "central purpose" of the state law was to regulate
"rates and facilities of natural gas companies" -- things over which the FERC has
"comprehensive authority" -- the Court declared that the state statute was preempted.
Id. at 308-09. The Court observed that the NGA had equipped the FERC adequately
to address the precise concerns that the Michigan statute purported to manage. Id. at
309.
We believe it follows from Schneidewind that the Iowa provisions regulate in
an occupied field, and are thus preempted by the Natural Gas Act. The NGA confers
on the FERC authority over the issues addressed by the Iowa statutory and regulatory
provisions. The NGA specifically provides that the FERC will oversee the
construction and maintenance of natural gas pipelines through the issuance of
certificates of public convenience and necessity. See 15 U.S.C. § 717f(c). The FERC
has authority to regulate the construction, extension, operation, and acquisition of
natural gas facilities, see id. § 717f(c)(1)(A), and does so through its extensive and
detailed regulations concerning applications for certificates. See generally 18 C.F.R.
Part 157, Subpart A.
Many of the FERC's regulations relate to environmental concerns. The FERC's
standard conditions for granting blanket certificates of public convenience and
necessity include compliance with many environmental statutes and regulations
generally, 18 C.F.R. § 157.206(b), and the FERC Plan specifically. Id.§ 157.206(b)(3)(iv). To implement the NEPA, the FERC also requires companies to
prepare an environmental impact statement for certain major pipeline construction
projects and for certain projects to develop underground natural gas storage facilities.
Id. § 380.6(a)(2), (3). Applicants for certificates under the NGA typically must
submit an environmental report that addresses a range of environmental issues,
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including water use and quality, vegetation, geological resources, soils, and land use.
Id. § 380.12(a), (d), (e), (h), (i), (j). Applicants for projects that will involve soil
disturbance must submit a report detailing the "proposed mitigation measures to
reduce the potential for adverse impact to soils or agricultural productivity," and how
such measures compare to the FERC Plan. Id. § 380.12(i)(5). Thus, in analyzing the
proposed projects of companies under its jurisdiction, the FERC considers
environmental concerns, and specifically addresses the issues of soil preservation and
land restoration -- the very areas which the Board wishes to regulate.
The Court in Schneidewind also took note of the "imminent possibility of
collision between" the Michigan statute and the NGA, which "further demonstrate[d]
the NGA's complete occupation of the field[.]" 485 U.S. at 310. As the district court
observed, there is substantial potential for collision between the Iowa provisions and
the FERC Plan, because the Iowa regulations impose additional requirements in a
number of areas. For example, the Iowa regulations require that all topsoil up to 36
inches be separated when excavating, Iowa Admin. Code r. 199-9.4(1)(a), while the
FERC Plan requires that "at least 12 inches of topsoil" be removed. FERC Plan
section IV.B.3. The Iowa rules require that at least three passes be made with deep
tillage equipment following replacement of any agricultural soil, Iowa Admin. Code
r. 199-9.4(4)(a), while the FERC Plan only requires companies to "[p]low severely
compacted agricultural areas with a paraplow or other deep tillage implement."
FERC Plan section V.C.2. And the Iowa regulations are more specific than the FERC
Plan regarding permanent drain tile repairs, and specifically require temporary
repairs. Compare Iowa Admin. Code r. 199-9.4(2) with FERC Plan section IV.C.
In this case, the Iowa Utilities Board refused to grant a waiver for Northern
Natural Gas's construction project, stating in part that the requirements under the
FERC Plan were not as stringent as the Iowa regulations. This decision represents
the sort of "disagreement between state and federal authorities" that further
demonstrated the NGA's complete occupation of the field in Schneidewind. 485 U.S.
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at 310. As in Schneidewind, the imminent possibility of collision between the Iowa
provisions and the federal regulatory scheme affects the ability of FERC to "achieve
the uniformity of regulation which was an objective of the Natural Gas Act," id., and
further demonstrates that the Iowa provisions regulate in an occupied field.
The Board members argue that the Iowa regulations are not preempted, because
they do not conflict with the FERC Plan, and language in the FERC Plan even
contemplates supplemental state environmental regulation. Schneidewind, however,
did not rely on an actual conflict between federal and state regulations, or even on a
specific intent by the FERC to preempt state law. The broad powers that the FERC
had at its disposal in regulating the rates and facilities of natural gas companies were
sufficient to demonstrate an implicit intent of Congress to preempt state regulation
through occupation of the field. Id. at 309 & n.12. We think it is undeniable that
Congress delegated authority to the FERC to regulate a wide range of environmental
issues relating to pipeline facilities, and we agree with the conclusion of the Second
Circuit that "[b]ecause FERC has authority to consider environmental issues, states
may not engage in concurrent site-specific environmental review." Nat'l Fuel Gas
Supply Corp. v. Pub. Serv. Comm'n, 894 F.2d 571, 579 (2d Cir. 1990). Accordingly,
we are obliged to hold that the Iowa provisions regulate in an area over which the
FERC exercises authority granted by Congress, and that Iowa Code chapter 479A and
the attendant administrative regulations, Iowa Administrative Code chapters 199-9
and 199-12, are preempted.
B.
We have considered carefully whether a line of administrative decisions by the
FERC, beginning with Maritimes & Northeast Pipeline, L.L.C. ("Maritimes"),
impacts the preemption analysis that flows from Schneidewind. In Maritimes, the
FERC interpreted language in a certificate issued to Maritimes & Northeast Pipeline
Company in 1997. In that certificate, the FERC provided that "[t]he Commission
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encourages cooperation between interstate pipelines and local authorities," but further
stated that "this does not mean that state and local agencies, through application of
state and local laws, may prohibit or unreasonably delay the construction of facilities
approved by this Commission." Maritimes and Northeast Pipeline, L.L.C., 80 FERC
¶ 61,136, 1997 WL 465608, at *13 n.40 (July 31, 1997). In its subsequent order, the
FERC explained that "[a]lthough the Natural Gas Act and the regulations
promulgated by the Commission pursuant to that statute generally preempt state and
local law, the Commission has encouraged applicants to cooperate with state and
local agencies with regard to the siting of pipeline facilities, environmental mitigation
measures, and construction procedures." 81 FERC ¶ 61,166, 1997 WL 812154, at *7
(Nov. 4, 1997) (quoting Iroquois Gas Transmission Sys., L.P., 59 FERC ¶ 61,094,
1992 WL 510728, at *2 (Apr. 28, 1992)).3 The Commission acknowledged that "as
held by the [Second Circuit] in National Fuel, the NGA preempts state and local
agencies from regulating the construction and operation of interstate pipeline
facilities." Maritimes, 1997 WL 812154, at *8. But the FERC went on to say,
"[n]evertheless, as a matter of policy, in part to implement the National
Environmental Policy Act of 1969 (NEPA), the Commission has imposed upon
applicants a requirement that they cooperate with State and local authorities." Id.(emphasis added). The FERC has required such cooperation through conditions
placed in newly issued certificates of public convenience and necessity. Id.In discussion that has created some confusion about the scope of preemption
of state environmental regulations, the FERC continued in Maritimes by saying that
"[i]f a conflict arises . . . between the requirements of a State or local agency and the
Commission's certificate conditions, the principles of preemption will apply and the
federal authorization will preempt the State or local requirements." Id. at *9. The
3
See also USG Pipeline Co., 82 FERC ¶ 61,117, 1998 WL 64137, at *9 & n.21
(Feb. 11, 1998); Tenn. Gas Pipeline Co., 95 FERC ¶ 61,169, 2001 WL 469985, at *10
(May 3, 2001); E. Tenn. Natural Gas Co., 102 FERC ¶ 61,225, 2003 WL 933916, at
*17 (Feb. 27, 2003).
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FERC rejected the contention that the gas company in Maritimes needed not go
beyond federal standards to comply with more stringent or additional requirements
imposed by the State, saying it did "not view the concept of conflict so broadly." Id.According to the FERC in Maritimes, a "rule of reason" must govern whether
"additional costs or delays are unreasonable in light of the Commission's goal to
include State and local authorities to the extent possible in the planning and
construction activities of pipeline applicants." Id. In the end, the FERC directed the
company that the certificate of public convenience and necessity, which was
conditioned on cooperating with state and local regulators, did in fact mandate
compliance with certain state environmental requirements. Id.; see also NE Hub
Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 339, 346 n.13 (3d Cir.
2001) (concluding that field of natural gas regulation was occupied by federal law,
but that FERC required gas company to comply with state regulations through
conditions in certificate); cf. U.S. Telecom. Ass'n v. FCC, 359 F.3d 554, 567 (D.C.
Cir. 2004) (federal agencies may condition their approval on the decision of a State
or local agency, "so long as there is a reasonable connection between the outside
entity's decision and the federal agency's determination.").
There is language in the Maritimes line of decisions to suggest that the FERC,
if it were considering the issuance of a new certificate to Northern Natural Gas for its
project in Iowa, might well require -- as a matter of FERC policy -- compliance with
certain Iowa regulations that would not cause unreasonable cost or delay in a pipeline
construction project. In this case, however, Northern Natural Gas is operating
pursuant to a blanket certificate issued by the FERC in 1982, and there is no claim
that the certificate includes conditions regarding state regulation comparable to those
set forth in Maritimes. The Board members in this litigation have not challenged the
validity of Northern Natural Gas's certificate, or the manner in which the FERC treats
various natural gas companies through the issuance of different types of certificates.
The State of Iowa would seem to have a strong case to make with the FERC that
protection of Iowa's valuable natural resources warrants at least the same level of
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cooperation by natural gas companies with state authorities that the FERC required
of gas companies in other States through certificates discussed in the Maritimes line
of decisions. But whether there is an avenue for the Board to seek relief from the
FERC, in the way of Maritimes-like conditions on Northern Natural Gas's blanket
certificate or otherwise, is not before us.
The preemptive effect of the NGA, as defined in Schneidewind, does not
depend on whether the FERC intends to preempt state authority. Congress occupied
the field of interstate natural gas rates and facilities by delegating broad powers to the
FERC to regulate that field. The FERC, in the exercise of its regulatory authority, has
elected as a matter of policy to require that certain companies cooperate with state
and local authorities even though the field of regulation is occupied by federal law.
That policy decision by the FERC, featured in newer certificates and enforced though
adjudications such as Maritimes, does not change the preemptive effect of the NGA
as enacted by Congress. Moreover, the FERC itself in Maritimes endorsed the
holding of the Second Circuit in National Fuel, see Maritimes, 1997 WL 812154, at
*8, a decision that fully supports our conclusion that the Iowa environmental
provisions must be declared preempted.
* * *
At oral argument, the Board members acknowledged that if the environmental
provisions of Chapter 479A were preempted, then the other statutory sections would
not be severable, and the entire chapter of the Code, as well as the accompanying
regulations, would be preempted. As a result, we need not consider the district court's
alternative holding that certain provisions of Iowa law conflicted with the Contract
Clause. The judgment of the district court is affirmed.
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