No Tanks v. P.U.C.

No Tanks v. P.U.C.
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MAINE SUPREME JUDICIAL COURTReporter of Decisions
Decision:	1997 ME 167
Docket:	PUC-96-719
Argued:	June 12, 1997
Decided:	July 23, 1997	

Panel:  WATHEN, C.J., and ROBERTS, GLASSMAN, RUDMAN, and LIPEZ, JJ.

NO TANKS INC.

v.

PUBLIC UTILITIES COMMISSION



WATHEN, C.J.


	[¶1]  No Tanks Inc. (No Tanks) appeals from an order of the Public
Utilities Commission (Commission) approving an agreement between
Northern Utilities Inc. (Northern) and its affiliate Granite State Gas
Transmission Inc. (Granite State) and rejecting a second agreement
between Northern and its affiliate Portland Natural Gas Transmission System
(Portland Gas).  Pursuant to the terms of the first agreement, Granite State
is to provide storage and delivery of liquified natural gas to Northern from a
storage tank to be constructed in Wells.  The second agreement provided for
the delivery of gas to Northern by means of a pipeline to be constructed by
Portland Gas.  
	[¶2]  No Tanks, a nonprofit citizens organization of ratepayers and
residents of the Wells area, opposes the first agreement and the
construction of the storage tank.  It argues on appeal that the Commission
erred in limiting the scope of its review to economic analyses and in
excluding safety and environmental concerns.  It also argues that the
Commission abused its discretion by failing to require Northern to give more
careful consideration to an alternative source of gas supplies.  Finding no
error, we affirm the judgment.
	[¶3]  Northern is the sole local distributor of natural gas in Maine. 
Granite State is an interstate gas pipeline company that presently delivers
gas to Northern over two separate pipelines.  Granite State leases one of the
pipelines from Portland Pipe Line Company and uses it to deliver Canadian
gas to Northern. The lease will terminate in April 1998, and Northern has
entered into agreements with Granite State and Portland Gas to obtain
replacement supply sources.  Northern filed the two agreements with the
Commission seeking review and approval pursuant to 35-A M.R.S.A. § 707(3)
(1989),{1} which provides that no public utility may contract with an
"affiliated interest" without Commission approval.  Both Granite State and
Portland Gas are affiliated with Northern within the statutory meaning of
"affiliated interests."{2}  Northern also requested that the Commission
conduct a prudence review for ratemaking purposes.
	[¶4]  No Tanks argues that the Commission erred by failing to review
and regulate safety and environmental impacts of the proposed storage tank. 
We find no support in the law for this argument.  The Commission correctly
ruled that it has no authority to adjudicate safety and environmental issues
related to the Wells tank facility because such regulation is preempted by
federal law.{3}  In Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988),
the United States Supreme Court held that the Natural Gas Act, 15 U.S.C. §
717 et seq., has occupied the field in regulating rates and facilities of
interstate natural gas companies{4} to the exclusion of state law.  The Court
found that a Michigan statute requiring pre-issuance review of long-term
securities issued by interstate natural gas companies was a "regulation of the
rates and facilities of natural gas companies used in transportation and sale
for resale of natural gas in interstate commerce." Schneidewind, 485 U.S. 
at 306.  Thus the statute was preempted as "an attempt to regulate matters
within the Federal Energy Commission exclusive jurisdiction."  Id. at 308.   
	[¶5] Granite State proposes to use the Wells tank to sell natural gas in
interstate commerce and the tank is an interstate natural gas pipeline
facility subject to regulation by the Federal Energy Regulatory Commission
(FERC).  The siting of the facility is subject to FERC approval pursuant to the
Natural Gas Act and the Natural Gas Pipeline Safety Act, 49 U.S.C. § 60101
et seq.  Pursuant to the latter Act, the U.S. Department of Transportation
has promulgated comprehensive safety standards for all pipeline and storage
facilities and administers an inspection program to ensure compliance with
its standards. 49 C.F.R. pt. 193 (1996).  Granite State must obtain a
certificate of public convenience and necessity from FERC authorizing the
construction and operation of the Wells tank.  15 U.S.C. § 717f(c) (1994). 
Its application must include environmental impact information pursuant to
18 C.F.R. § 157.14(a)(6-d) (1996), and a certification of compliance with the
applicable standards pursuant to 49 U.S.C. § 60104(d)(2) (1994).  A
Commission review of safety and environmental issues surrounding the
siting of the Wells tank would be an attempt to regulate matters within
FERC's exclusive jurisdiction contrary to the preemption rule announced in
Schneidewind.  See National Fuel Gas Supply v. Public Service Comm'n, 894
F.2d 571 (2nd Cir. 1990) (state law requiring certificate of environmental
compatibility and public need for interstate pipeline preempted by FERC).  
	[¶6]  No Tanks argues that there can be no preemption unless the
Commission's review actually conflicts with a FERC decision.  Since FERC
has not yet made a decision on Granite State's filing for a certificate, no
conflict has occurred.  No Tanks completely misconstrues and ignores the
well established law concerning federal preemption.  The Court in
Schneidewind held that federal law occupied the field of regulating the rates
and facilities of interstate natural gas.  Thus any state attempt to regulate is
preempted.  Even under a conflicts analysis, which the Schneidewind court
discussed as an alternative ground for its decision, "the state law may be
preempted even though 'collision between the state and federal regulation
may not be an inevitable consequence.'"  Schneidewind 485 U.S. at 310
(citation omitted).  As the Second Circuit stated in National Fuel:

Because FERC has authority to consider environmental issues,
states may not engage in concurrent site-specific environmental
review.  Allowing all the sites and all the specifics to be
regulated by agencies with only local constituencies would delay
or prevent construction that has won approval after federal
consideration of environmental factors and interstate needs. . . .

894 F.2d at 579. See also Kern River Gas Transmission v. Clark County,
Nevada, 757 F. Supp. 1110, 1114 (D. Nev. 1990) (local government safety
standards can not be applied to interstate pipeline if they conflict with FERC
requirements or unduly delay or encumber its construction);  ANR Pipeline
Co. v. Iowa State Commerce Comm'n, 828 F.2d 465, 470 (8th Cir. 1987)
("[T]he NGPSA leaves nothing to the states in terms of substantive safety
regulation of interstate pipelines, regardless of whether the local regulation
is more restrictive, less restrictive, or identical to the federal standards.").
	[¶7]  Next, No Tanks challenges the Commission's determination that
Northern's agreement with Granite State represents a prudent acquisition
of resources for rate-making purposes.   The Commission found that the
proposed storage tank is the best option for meeting the short-term gap in
supply and that it is a long-term economic source of gas for peak demand
periods.  No Tanks argues that the Commission erred by failing to require
Northern to give greater consideration to an alternative source of supply. 
Contrary to No Tanks' contention, there is competent and substantial
evidence in the record to support the Commission's determination that
Northern's decision and course of conduct was one "which [a] reasonable
manager would have made or followed in light of the circumstances then
existing and known or which reasonably could have been known."  Re
Seabrook Involvements by Maine Utilities, 67 P.U.R. 4th 161 (Me. P.U.C.
1985).
	The entry is:
					Judgment affirmed.
                                                               
Attorney for plaintiff

Thomas J. Connolly, Esq. (orally)
P O Box 7563
Portland, ME 04112-7563

Attorneys for defendants:

Carol A. MacLennan, Esq. (orally)
Public Utilities Commission
18 State House Station
Augusta, ME 04333-0018

Paul B. Dexter, Esq. (orally)
Susan L. Geiser, Esq.
Leboef, Lamb, Greene & Macrae, L.L.P.
260 Franklin Street
Boston, MA 02110-3171
(for Northern Utilites)

Wayne R. Jortner, Esq.
Office of Public Advocate
112 State House Station
Augusta, ME 04333-0112

William J. Sheils, Esq.
Perkins, Thompson, Hinckley & Keddy
P O Box 426
Portland, ME 04112-0426
(for Portland Natural Gas Transmission System)

FOOTNOTES******************************** {1} 35-A M.R.S.A. § 707(3) provides in part that: No public utility may . . . contract with any affiliated interest until the commission finds that the contract or arrangement is not adverse to the public interest and gives the contract or arrangement its written approval. Because we reach our decision on federal preemption grounds, we need not decide whether the Commission has statutory authority to consider safety and environmental concerns pursuant to a section 707 public interest review of an affiliated interest transaction. {2} Northern and Granite State are wholly owned subsidiaries of Bay State Gas Company. Natural Gas Development Inc., a wholly owned subsidiary of Granite State, owns a 17.5% partnership interest in Portland Gas. {3} The Commission did not preclude the presentation of evidence of safety or environmental factors that would affect the costs of the facility. No evidence of this nature was submitted by No Tanks. {4} A 'natural gas company" under the NGA is an individual or corporation "engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of gas for resale." 15 U.S.C. § 717a(6)(1) (1994).