Court Opinion

ID: 9624309
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:57:46.714912+00
Date Added: 2024-06-11T18:05:43.272294
License: Public Domain

Schroeder, J.,
dissenting: In my opinion the findings made by the State Corporation Commission of Kansas were sufficiently specific to comply with its own Rule and Regulation No. 82-1-232 relating to all proceedings before the commission and filed with the Revisor of Statutes pursuant to K. S. A. 1965 Supp. 77-415, et seq.
The question before the commission was whether direct line sales by interstate gas pipeline companies operating in and through the state of Kansas from their pipelines to industrial and/or commercial customers within the state of Kansas, where the sale of such gas was not intended for resale, are subject to supervision and control by the Kansas commission.
The commission found from the evidence and admissions that *239such sales were being made in the state of Kansas by the appellees and, therefore, issued its order as set forth in the court’s opinion. Obviously, more specific findings are unnecessary to determine a question of jurisdiction.
The jurisdiction of the State Corporation Commission under K. S. A. 66-101, et seq., does not, however, extend to interstate utilities. Therefore, the commission erred in concluding that it had jurisdiction to regulate the sales in question.
The statute under which the commission herein asserts jurisdiction was construed in State, ex rel., v. Sinclair Pipe Line Co., 180 Kan. 425, 304 P. 2d 930, where the court said:
“Clearly tire legislature intended regulation by the commission to apply only to such activities as pipe lines, when they were operated for public use in intrastate commerce. . . .” (p. 439.)
In the Sinclair case the court was not commenting on whether or not the state had the right and power to regulate interstate pipelines under the Federal Constitution. It was interpreting the intent of the Kansas legislature expressed in the public utility statutes. The court in holding that Sinclair’s operations were not under the provisions of the Kansas public utility statutes said Sinclair had not held itself out to serve the public generally, and Sinclair’s operations were wholly in interstate commerce.
Regulation of the interstate operations and facilities of interstate natural gas companies is precluded under the provisions of the Natural Gas Act and the Commerce and Supremacy Clauses of the Constitution of the United States.
By the passage of the Natural Gas Act (15 U. S.C. A. §717, et seq.) the authority to regulate interstate natural gas companies and their operations, sales for resale, and facilities became vested in the Federal Power Commission.
In its occupancy of the field of regulation of interstate natural gas companies, the Federal Power Commission has taken unto itself the regulation of all of the facilities of such companies, whether devoted exclusively to their mainline transmission facilities, to their wholesale sales for resale, or to their direct sales for consumption. The Natural Gas Act did not leave to the states the power to regulate the facilities of such interstate natural gas companies devoted exclusively to direct sales for consumption. (See, § 1 [b] of the Natural Gas Act, 15 U. S. C. A. § 717 [b].)
The Federal Power Commission’s authority to require certification and thus to regulate and control the direct sales facilities of inter*240state natural gas pipeline companies is now firmly established. In Panhandle Eastern Pipe Line Co. v. Federal Power Com’n, (1956), 232 F. 2d 467, cert. den. 352 U. S. 891, 1 L. Ed. 2d 86, 77 S. Ct. 129, the court said:
“What the Commission does say, and rightly we think, is that in considering the question of issuing a certificate of public convenience and necessity for the construction or operation of facilities for the transportation of natural gas to a new customer either direct or resale it, as part of the express certificate authority given it by Section 7 (c) of the Act, 15 U. S. C. A. § 717f (c), over the transportation of natural gas, is, among other things, fundamentally concerned with the effect the issuance of the certificate would have on the applicant pipe line’s present service to its existing customers. This control over gas transportation by the Commission is completely independent of the sale of the gas and just as important. It is a separate subject of regulation irrespective of whether the particular gas is thereafter sold for resale or direct to consumers. Federal Power Commission v. East Ohio Gas Co., 1950, 338 U. S. 464, 468, 70 S. Ct. 266, 94 L. Ed. 268.” (p. 471.) (Emphasis added.)
Certification of direct sales facilities by the Federal Power Commission is not automatic. In the exercise of such authority the Federal Power Commission must find that the applicant for the certificate is able and willing to do the acts and perform the service proposed and to conform to the rules and regulations of the commission, and must find that such proposed service, sale and construction is, or will be, required by the present or future public convenience and necessity. In this respect the Federal Power Commission has a wide range of discretionary authority.
Where state and federal regulation conflict, state regulation must give way to federal regulation under the Supremacy Clause of the United States Constitution. (Free v. Bland, [1962], 369 U. S. 663, 8 L. Ed. 2d 180, 82 S. Ct. 1089.)
The pre-emptive scope of the Natural Gas Act was recently restated in Northern Gas Co. v. Kansas Comm'n, (1963), 372 U. S. 84, 9 L. Ed. 2d 601, 83 S. Ct. 646, reh. den. 372 U. S. 960, 10 L. Ed. 2d 14, 83 S. Ct. 1011. There the Supreme Court of the United States said if there is possible conflict between state and federal regulation state regulation must yield. It further said its cases have consistently recognized a signficant distinction, which bears directly upon the constitutional consequences, between conservation measures aimed directly at interstate purchasers and wholesalers for resale, and those aimed at producers and production. The former, it was said, cannot be sustained when they threatened the achievement of the comprehensive scheme of federal regulation. Thus, *241the action of the Kansas commission was held to be an invalid intrusion into the field pre-empted by the Natural Gas Act. In the opinion it was said:
“. . . although collision between the state and federal regulation may not be an inevitable consequence, there lurks such imminent possibility of collision in orders purposely directed at interstate wholesale purchasers that the orders must be declared a nullity in order to assure the effectuation of the comprehensive federal regulation ordained by Congress.” (p. 92.)
In my opinion the order issued herein by the State Corporation Commission of Kansas clearly invades an area of regulation preempted by the Federal Power Commission.
It is respectfully submitted the order of the lower court setting aside the order of the Kansas State Corporation Commission dated April 28,1965, as invalid and void, should be affirmed.
APPENDIX A
Now on this May 17, 1966, this matter comes regularly on to be heard, the respective parties appearing by their respective counsel of record, the parties respectively having theretofore filed their written briefs with the court, the court heard oral argument, after which Applicant Cities Service Gas Company filed its Requested Findings of Fact and Conclusions of Law, which were adopted by Intervenors Northern Natural Gas Company and Natural Gas Pipeline Company of America. Thereupon the court took such matter under advisement and fixed time in which Respondent was permitted to submit its Requested Findings of Fact and Conclusions of Law, which thereafter was timely filed.
Now on this June 15, 1966, the Court makes the following Findings of Fact and Conclusions of Law, to wit:
Findings of Fact
No. 1
On January 21, 1964, the State Corporation Commission of the State of Kansas (Commission) issued an order in Docket No. 73,100-U, entitled “In the Matter of the Issuance of a Show Cause Order Concerning Certain Pipeline Companies,” ordering all interstate gas pipeline companies operating within the State of Kansas to Show Cause:
A. Why they should not be required to obtain a certificate of convenience and necessity from the Commission.
R. Why they should not be required to file with the Commission *242rate tariffs or charges made for intrastate sales to their mainline industrial customers in Kansas.
C. Why their intrastate operations in Kansas should not be subject to the provisions of Section 66-104, General Statutes of Kansas, 1961 Supp.
Said Order further required the following named pipeline companies to appear at a public hearing at the Commission s hearing room at 10:00 A. M., on Monday, March 16, 1964, to present evidence and to be examined in connection with the above listed findings:
Cities Service Gas Company Colorado Interstate Gas Company Kansas-Colorado Utilities, Inc.
Michigan Wisconsin Pipe Line Company Natural Gas Pipeline Company of America Panhandle Eastern Pipe Line Company Zenith Gas System, Inc. Northern Natural Gas Company.
No. 2
Pursuant to the requirements of said Order, the interstate pipeline companies summoned thereby, with one exception not here material (Zenith Gas System, Inc., informed the Commission by letter that it would abide by the Commission s ultimate ruling and made no further appearance), appeared before the Commission, and, either by affidavit or by presentation of evidence, disclosed their system-wide and Kansas operations and evidence touching on the question of the authority of the Kansas Commission to institute the regulations proposed by said Order.
No. 3
The evidence thus presented establishing the following:
A. All of the responding companies are interstate natural gas companies subject to regulation and regulated by the Federal Power Commission under the authority of the Natural Gas Act, 15 U. S. C. 717.
R. All of the responding companies operate in Kansas pipelines which transport natural gas in and through Kansas. With two exceptions, Kansas-Colorado Utilities, Inc., and Colorado Interstate Gas Company, all of the pipelines of such companies operating in Kansas transport gas which is either produced or purchased entirely in states other than Kansas or which contains commingled quantities *243of gas produced and purchased in other states. All of the pipelines of such companies operating in Kansas terminate in states other than Kansas and some or all of the gas transported through such pipelines is transported to other states for sale.
C. Sales of gas in Kansas from such interstate operated pipelines were at the time of the hearings as follows:
(1) Michigan Wisconsin Pipe Line Company makes no sales of gas in Kansas.
(2) Kansas-Colorado Utilities, Inc., makes no mainline direct industrial sales in Kansas.
(3) Colorado Interstate Gas Company made one direct sale of gas in Kansas. This sale, to an alfalfa dehydrating company in Finney County, Kansas, was held by the Commission in 1954 not subject to its jurisdiction.
(4) Northern Natural Gas Company makes several sales for resale in Kansas, and one direct sale of gas in Kansas to its wholly owned subsidiary, Northern Gas Products Company, for processing and extraction of liquid hydrocarbons.
(5) Natural Gas Pipeline Company of America makes in Kansas five sales for resale and three direct industrial sales in Kansas.
(6) Panhandle Eastern Pipe Line Company makes two direct sales in Kansas from its gathering lines and four direct sales in Kansas from its transmission lines.
(7) Cities Service Gas Company, whose main markets are in Kansas and Missouri, makes numerous sales for resale and several hundred direct industrial sales in Kansas.
(8) In addition, Cities Service Gas Company makes several hundred non-industrial direct sales of gas under right-of-way agreements, underground gas storage leases, to its employees located at its company plants and field sales for operation of oil and gas pumps. The evidence failed to disclose whether any of the other companies made such non-industrial direct sales in Kansas, except Michigan Wisconsin Pipe Line Company, whose affidavit disclosed that no sales of any kind were made in Kansas.
(9) All of the direct sales made by such interstate pipeline companies in Kansas are made under individual contracts, privately negotiated at arm’s length bargaining.
(10) None of such companies has held itself out to serve the public generally or has dedicated its property to public use with respect to such sales.
*244No. 4
After the record was closed and the matter taken under advisement, the Commission issued on June 8, 1965, an Order dated April 28,1965, which Order required:
A. Any natural gas company which makes or contemplates making any direct sale of natural gas from any of its facilities located in Kansas to a Kansas consumer to have a certifícate of public convenience and necessity from the Commission and any such company now making such direct sales not now having such a certificate to make application for such a certificate covering such territory as necessary to include its direct line consumers or, in the alternative, to cease furnishing gas to said consumers; and
B. Any natural gas company required to have a certificate of public convenience and necessity by the first paragraph to file rate tariffs for charges made for “such intrastate direct sales” or copies of the contracts under which such sales are made with the Commission for Commission approval within thirty days from the official mailing date of said Order.
No. 5
The Commissions Order dated April 28, 1965, contains various sections, the first of which is a section entitled “Statement of the Case.” In this section, the Commission copied the issues outlined in the January 21, 1964, Show Cause Order. The next section, entitled “Issues Before the Commission,” purports to define the issues of the case. These outlined issues appear to enlarge the scope of the proceedings to include all direct sales of interstate pipelines to industrial customers whether mainline or any line. The next portion of the Order is headed “Findings of Fact and Conclusions of Law.” This section contains a finding of fact that certain interstate pipeline companies made direct line sales from their pipelines to industrial and/or commercial customers and contains conclusions of law based upon this finding which appear not to limit the issues to mainline, commercial, direct line or any other type of sale. The first paragraph of the ordering section of the Order appears not to be limited to mainline sales, but appears to cover all sales. The second paragraph of the ordering section, however, appears to be limited to “such intrastate direct sales.” It cannot be determined from the Order as read in its entirety whether or not it purports to cover only intrastate sales and whether it is limited to mainline industrial sales or whether it is intended to cover all sales, *245although the second paragraph of the ordering section appears to be specifically confined to intrastate direct sales. Nor is any determination made as to what, if any, operations and sales the Commission believed to be in intrastate commerce. The Order contains no summary of the allegations and contentions of the parties, nor summary of the evidence.
No. 6
Applications for rehearing and various other motions were filed with the Commission and on June 24, 1965, the Commission issued an order overruling said motions and applications.
No. 7
A Petition for Judicial Review was timely filed with this Court by Cities Service Gas Company, and motions to intervene in these proceedings by Northern Natural Gas Company and Natural Gas Pipeline Company of America were granted. The Commission’s Order was stayed pending judicial review by order of this Court dated July 12, 1965, the effectiveness of which Stay Order was extended to Northern Natural Gas Company and Natural Gas Pipeline Company of America by order dated July 26,1965.
No. 8
The Federal Power Commission now regulates direct mainline sales to industrial consumers of Applicant-Intervenors to the following extent: The FPC passes upon applications to make a direct sale; FPC certificates are required to install any facility to serve such an industrial consumer; interstate pipeline companies may not withdraw service from such industrial consumers without FPC consent and approval. The FPC does require its approval of contracts negotiated between industrial consumers and interstate pipeline companies, but otherwise exercises no regulation of the rates charged said industrial consumers.
Conclusions of Law
No. 1
Applications for rehearing having been timely filed with the Commission by the parties to these proceedings and overruled by the Commission and Application for Judicial Review having been timely filed with this Court pursuant to the provisions of K. S. A. 66-118c, this Court has jurisdiction of the subject matter of this action and the parties to this proceeding.
*246No. 2
The Commission's Show Cause Order of January 21, 1964, limited the issues of the proceedings before the Commission to intrastate operations and intrastate sales to mainline industrial customers. The Commission’s Order dated April 28, 1965, if construed as applying to interstate operations and sales and to sales other than mainline industrial sales, is an unlawful attempt to enlarge the issues without notice and hearing and without due process of law, and is, therefore, invalid and void.
No. 3
The Commission’s Order of April 28, 1965, is vague, uncertain, ambiguous, inconsistent and incomprehensible and is, therefore, invalid and void, in that it cannot be determined from the Order to what sales and operations it is intended to apply or to what activities of the respondent pipeline companies it is designed to cover. The fact that the Commission’s able counsel explained in their briefs and arguments that the Commission considered any sale not for resale to be the subject matter of their Show Cause Order, hearing, and subsequent Order, and that the use of such words as “intrastate” and “intrastate sales” etc. in their orders were merely meant to be descriptive as to activity within Kansas, cannot be construed as a retroactive modification of said orders, and in nowise clarifies either the Show Cause Order of January 21, 1964, or the Order of April 28,1965, as they were issued.
No. 4
All of the operations, activities and sales of the respondent pipeline companies in the State of Kansas are in interstate commerce.
No. 5
Neither the Federal Natural Gas Act of 1938 (15 U. S. C. A. 717), nor the Commerce Clause of the Constitution of the United States by its own force, precludes state regulation of rates of direct sales of natural gas sold by interstate pipelines to local consumers.
No. 6
The jurisdiction of the Commission under the provisions of K. S. A. 66-101, et seq., extends only to those persons performing the functions specified in K. S. A. 66-104, who have dedicated their property to public use and hold themselves out to serve the public generally.
*247No. 7
The Commissions Order of April 28, 1965, is invalid and void and should be set aside.
It Is, Therefore Ordered that the Commission s April 28, 1965, Order involved herein be and the same is hereby set aside (the same being unlawful).