Williams Natural Gas Co. v. City of Oklahoma City

890 F.2d 255, 1989 WL 139742
CourtCourt of Appeals for the Tenth Circuit
DecidedNovember 22, 1989
DocketNos. 89-6209, 89-6227 and 89-6228
StatusPublished
Cited by40 cases

This text of 890 F.2d 255 (Williams Natural Gas Co. v. City of Oklahoma City) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Williams Natural Gas Co. v. City of Oklahoma City, 890 F.2d 255, 1989 WL 139742 (10th Cir. 1989).

Opinion

BRORBY, Circuit Judge.

This appeal arises from the United States District Court for the Western District of Oklahoma, where that court denied appellant’s motion to construe federal condemnation rights under the Natural Gas Act and to disregard and stay the order of the Oklahoma County District Court. The order of the federal district court, issued May 30, 1989, effectively denied appellants full enforcement of a Federal Energy Regulatory Commission (“FERC” or “Commission”) certificate authorizing appellants to construct and operate a natural gas pipeline to service the PowerSmith Cogeneration Project’s (“PowerSmith”) cogeneration facility in Oklahoma City.1

We find the state court lacked jurisdiction to entertain a collateral challenge to the FERC certificate and, accordingly, we REVERSE.

I. Statement of the Case

The dispute has its genesis in the competition between appellee Williams Natural Gas Company (“Williams”) and appellant Oklahoma Natural Gas Company (“ONG”) for the contract to transport natural gas to the PowerSmith facility — a competition eventually won by Williams. In order to service PowerSmith, Williams needed to construct a twelve-mile extension of an existing interstate pipeline to PowerSmith. As an interstate “natural-gas company” under the Natural Gas Act (“NGA”), 15 U.S.C. §§ 717-717w (1988), Williams could not construct or operate the extension without applying to and receiving from FERC, pursuant to § 7(c) of the NGA, 15 U.S.C. § 717f(c), an authorizing certificate of public convenience and necessity.

ONG is the local distribution company with a city franchise to sell, transport and distribute natural gas to the general public in Oklahoma City. The city franchise grants ONG the right to construct, operate and maintain facilities in the public streets and other public ways for its distribution purposes. Williams’ pipeline construction would also require access to and use of the streets of Oklahoma City. Therefore, on October 18, 1988, before Williams was able to complete its application to FERC, ONG commenced the race to the courthouse and filed a declaratory judgment action in Okla[258]*258homa County District Court, asserting its franchise gives it the right to use City streets to the exclusion of a nonfranchised transporter. Williams and PowerSmith answered on November 10, 1988, asserting as a defense that the NGA, 15 U.S.C. §§ 717-717w, preempts Oklahoma franchise law and therefore Williams was not required to obtain a franchise.

On October 28,1988, ten days after ONG had filed its action in state court, Williams applied to FERC for the certificate of public convenience and necessity authorizing the construction and operation of the Pow-erSmith pipeline. ONG responded by protesting and intervening in opposition to Williams’ application. In its intervention, ONG contested FERC’s jurisdiction to regulate the proposed pipeline, questioned the sufficiency and substance of Williams’ application and urged the Commission to explore alternative proposals.

More specifically, in its challenge to FERC’s jurisdiction, ONG argued that the facilities proposed by Williams should be subject to local rather than federal regulation: “[T]he proposal, notwithstanding that it is cast as an application to expand service by an interstate pipeline, in fact relates to service in the nature of distribution or intrastate transportation,” and “[a]s such, the facilities are local in nature and should be subject not to FERC jurisdiction, but rather to local regulation....” Indeed, ONG argued, “[tjhis case cries out for local, not federal, regulation.”

On February 16, 1989, after denying ONG’s request for a hearing in the matter, FERC granted Williams a certificate authorizing and directing Williams to construct and operate the PowerSmith pipeline. As to ONG’s jurisdictional contentions, FERC found that the facilities proposed by Williams were within its jurisdiction and therefore subject to subsections (c) and (e) of § 7 of the NGA, 15 U.S.C. § 717f(c), (e). Williams Natural Gas Co., 46 Fed. Energy Reg. Comm’n Rep. (CCH) ¶ 61,160 (1989). In support of this finding FERC determined that the facilities proposed bore little resemblance to a local distribution system. Further, incorporating language from its previous decision in Panhandle Eastern Pipe Line Co., 42 Fed. Energy Reg. Comm’n Rep. (CCH) U 61,076 (1988), the Commission stated,

“[Ijrrespective of any local effects resulting from the by-pass, we believe that the transportation service at issue here essentially concerns Federal interests, that is, those embodied in developing interstate transportation policy that provides consumers with a variety of supply options by promoting a competitively priced spot market for natural gas.”

Williams, 46 Fed.Energy Reg.Comm’n Rep. (CCH) II 61,160 at 61,559 (quoting Panhandle).

On March 1, 1989, ONG filed with FERC a Request for Rehearing and Motion to Stay the FERC Order. FERC denied ONG’s motion to stay on March 31, 1989, and denied ONG’s request for rehearing on May 31, 1989. 47 Fed.Energy Reg. Comm’n Rep. (CCH) ¶ 61,308, 1989 FERC LEXIS 1363.2

Also on February 16, 1989, the same day FERC issued its order, the Oklahoma state court ruled in ONG’s declaratory judgment action. The court held, under Oklahoma law, ONG’s franchise insulates it from competition in Oklahoma City from non-franchisees. The state court specifically reserved for a later time (pending study of further briefs to be submitted by the parties) the issue whether federal law preempts the requirements of Oklahoma law and, thus, whether the authority of a FERC certificate negates the Oklahoma franchise requirement.

On March 28, approximately six weeks after the orders of FERC and the state court had been issued, Williams brought an action to enforce the FERC certificate in the United States District Court for the Western District of Oklahoma pursuant to [259]*259§ 7(h) of the NGA, 15 U.S.C. § 717f(h). Specifically, Williams sought to condemn rights of way across city streets to construct and operate the PowerSmith pipeline under the FERC certificate and to quiet Williams’ title to those rights of way as against ONG’s franchise rights. Thereafter, by order of April 18, the federal district court authorized Williams to condemn city rights of way “for the purpose of laying a pipeline” pursuant to the FERC certificate. However, the court’s order made no mention of Williams’ ability to “operate” the pipeline.

In response, on April 28, ONG sought and obtained from the state district court a temporary restraining order (“TRO”) enjoining Williams from constructing the pipeline across city streets. On May 1, the federal district court responded by enjoining enforcement of the state TRO, finding that it interfered with its jurisdiction and order permitting the construction.

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Bluebook (online)
890 F.2d 255, 1989 WL 139742, Counsel Stack Legal Research, https://law.counselstack.com/opinion/williams-natural-gas-co-v-city-of-oklahoma-city-ca10-1989.