IV. SURVEY OF FEDERAL CASE LAW

There have been fewer than a dozen reported court cases under the Acts. This reflects, first, the overall philosophy of OPS in avoiding regulations opposed by the pipeline industry and settling all enforcement actions and to the industry's desire to maintain a cordial working relationship with the agency. ²⁷ Second, most of the reported cases have arisen out of efforts by states and localities to exert stronger safety standards on pipeline operators. These efforts have been largely unsuccessful, thus discouraging similar challenges to OPS primacy.

The general rule emerging from these cases is that state and local governments are preempted from imposing any safety regulations on interstate pipeline operators, but that they may be able to impose other requirements, such as user fees, local franchise-type restrictions, and environmental safeguards, so long as they do not conflict with OPS safety regulations. The Acts contain an express preemption regarding interstate facilities:
   A State authority may not adopt or continue in force safety standards for interstate pipeline facilities or interstate pipeline transportation. ²⁸

But the Acts also carve out a special role for states in regulating intrastate facilities:
   A State authority that has [been certified to administer the intrastate gas or liquid programs] may adopt additional or more stringent safety standards for intrastate pipeline facilities or intrastate pipeline transportation only if those standards are compatible with the minimum standards prescribed under this chapter. ²⁹

The regulatory scheme created by Congress attempts to prevent state and local governments from imposing safety standards on interstate pipelines that could conflict with various federal requirements or constitute a burden on interstate commerce. On the other hand, states are encouraged to adopt their own standards for intrastate facilities, so long as they do not conflict with minimum federal standards.

The difficulty has come in trying to decipher what constitutes "safety" standards, whether states and localities may adopt any of their own standards (even if they are identical to the federal ones), and whether preemption prevents localities from exercising their traditional police powers and their right to control city-owned property.

The first major attempt by municipalities to exert control over pipelines arose soon after passage of the NGPSA in 1968, with the adoption of an ordinance in 1970 by Terrebonne Parish, Louisiana, regarding construction standards for new pipelines. The ordinance provided that no new pipeline could be built across public property without a permit and that any such pipeline crossing a ditch, bayou, or canal must be covered by at least six feet of dirt. United Gas Pipeline Company sought to construct a short segment of new pipeline that would connect to an interstate line and contended that it did not need any type of special permission from the parish.

The district court held that Terrebonne Parish could not enact a local ordinance that regulated the construction, installation, or operation of gas or liquid pipelines. Even if the parish adopted standards that were identical to the federal ones, it could not enforce them, the court held. In short, Congress has left nothing to the states with respect to regulation and control" of interstate pipelines. ³⁰

This general rule has been reaffirmed by other courts insofar as it applies to interstate gas ³¹ lines. A 1987 Eighth Circuit case involved an Iowa statute granting the State Commerce Commission authority to supervise all gas and liquid pipelines and to act as agent for OPS in administering the interstate gas program. The Commerce Commission adopted a rule requiring pipeline operators to provide the Commission with notice of any proposed construction, setting public notice and hearing for the state permit, and allowing the Commission to impose safety conditions on the permit. In addition, the statute provided for the resolution of damage claims relating to pipeline construction and proof of the company's financial capacity to pay potential claims. When the company failed to secure a permit in a timely manner, the Commission assessed a fine and the company sought declaratory judgment.

The court struck down the entire Iowa permitting process, with the exception of user fees levied by the Commission to finance the state's delegated interstate safety program. ³² Despite the fact that Iowa had adopted the federal safety standards and merely sought notice from the company prior to construction so that it could carry out its inspection responsibilities under the federal program, the court rejected the state's position. The court held that the state permit program was designed to address the same subject matter and activity as is regulated by the federal statute. ³³ The court's reasoning was that by retaining the right to deny or impose conditions on the permit, the Commission had inherently limited the federal government's ability to control new pipeline construction under The Natural Gas Act.

State efforts to affect the siting of new interstate gas lines have also been struck down. As noted earlier, The Natural Gas Act gives FERC jurisdiction over all applications to construct gas pipelines. New York, however, attempted to require an interstate applicant to obtain a state certificate of environmental compatibility and public need from the New York Public Service Commission. The state admitted that FERC had preemptive authority over the bulk of the siting process, but contended that New York could fill in the interstices of the federal permitting process by conducting site-specific environmental assessments. The court rejected this approach, stating:
   Congress placed authority regarding the location of interstate pipelines - in the present case affecting citizens of four states in addition to New York - in the FERC, a federal body that can make choices in the interests of energy consumers nationally, with intervention afforded as of right to relevant state commissions. 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 need, with the increased costs or lack of gas to be borne by utility consumers in other states. ³⁴

The Terrebonne rule has also been extended to interstate liquid pipelines. Despite having lost the ANR case, Iowa attempted to subject interstate liquid lines to the state's permitting process. Again, the Eighth Circuit struck down the state's regulatory scheme, stating that Congress' grant of exclusive authority to OPS precludes state decision-making in this area altogether and leaves no regulatory room for the state to either establish its own safety standards or supplement the federal safety standards. ³⁵

Local efforts have not fared much better. On July 8, 1986, an interstate oil pipeline owned by Williams Pipe Line Company and traversing Ramsey County and the City of Mounds View, Minnesota, failed at 4:20 a.m., releasing vaporized and liquid gasoline into the air. The liquid gasoline quickly ran down the streets of Mounds View, into the gutters and storm sewers. About 20 minutes later, sparks from a passing automobile caused the gasoline to ignite. The explosion killed two persons and seriously injured a third.

The Mounds View City Council subsequently adopted an ordinance prohibiting the restart or repair of the pipeline without the City's approval. The company filed suit, seeking to enjoin the City from interfering with the pipeline's operations. The City countersued, claiming a public nuisance and seeking relief under the HLPSA's citizen suit provisions. Ramsey County also sued to revoke the license under which it had allowed Williams' predecessor to use public property to locate the line.

The court ruled in favor of the pipeline operator on every count and enjoined Mounds View and Ramsey County from interfering with the operations of the interstate pipeline. On both common law claims raised by the local governments, the court clearly perceived a threat to a national pipeline network:
   Hazardous liquid pipelines run through 21 states, and presumably through small and large plots of land belonging to vast numbers of persons. Were each of these landowners entitled to demand compliance with their own safety standards, the clear Congressional goal of a national standard for hazardous liquid pipeline safety would be thwarted. ³⁶

The Mounds View case also demonstrates the obstacles that have confronted private parties seeking relief under the Acts' citizen suit provisions. To the author's knowledge, there has never been a successful citizen's suit brought under the Acts against a pipeline operator.

The Acts provide that a plaintiff may file a private enforcement action against either OPS or an operator for safety violations, provided he gives OPS and the alleged offender 60 days' notice and neither OPS nor the Justice Department has begun and diligently is pursuing an administrative ....[or].... judicial proceeding for the violation. ³⁷ Mounds View, however, faced the same problem that is faced by most private persons seeking relief from violations of the Acts. After that city's accident, OPS launched an investigation, issued an order requiring hydrostatic testing of the line, a metallurgical examination of the failed pipe, and an operational reliability analysis. The agency also issued a notice of a proposed civil penalty against Williams. To the court, such actions were sufficient to show that OPS was in fact "diligently" pursuing administrative action.

Most localities and private parties do not have the financial resources or stamina to wait years before filing a citizens suit. The Mounds View action was filed so soon after the accident that OPS could still characterize its response as "diligent". But for many other localities, such as Fredericksburg, which has been threatened by a defective pipeline for 16 years, a citizens suit may have a greater chance of success. To date, OPS' pattern of protracted, piecemeal remedies to dangerous pipeline defects has served to shield the companies and the agency from citizens suits.

The only two cases that have upheld a state or local government's efforts to regulate pipelines have involved intrastate facilities in California. The first involved the City of Santa Monica, which in 1941 granted a franchise to a predecessor of Shell Oil Company for the operation of a crude oil intrastate ³⁸ pipeline under the city's streets. When the company's franchise expired, Shell sought renewal. When the parties were unable to reach agreement, the company sued, alleging City interference with interstate commerce, state constitutional violations, and preemption under the HLPSA.

The court dismissed the company's first two claims and held that the HLPSA did not, as a matter of law, preempt a municipality from imposing "all" safety standards on an intrastate pipeline. In reaching this conclusion, the court first drew a distinction between interstate and intrastate pipelines, holding that the HLPSA specifically allowed "any State agency" to impose additional, compatible regulations on intrastate pipelines. Second, the court interpreted the term "State agency" to include municipalities, largely because of legislative language suggesting that local governments should have a voice in enacting safety legislation and improving local pipeline safety programs. ³⁹

The other case involved an effort by the State of California to impose more stringent testing requirements on intrastate liquid pipelines. Southern Pacific Pipe Lines, Inc., an interstate carrier with lateral delivery lines in California, challenged an OPS regulation defining the term "interstate pipeline". The court upheld OPS' characterization of the California lines as intrastate facilities, but for jurisdictional reasons failed to reach the question whether the state could impose such testing requirements. ⁴⁰

Taken together, the two California cases and the preemption analysis utilized in Tenneco suggest several opportunities for state and local governments to take a more active role in the regulation of gas and liquid pipelines, particularly intrastate facilities. Most importantly, the Santa Monica decision confirms the right of municipalities to impose local franchise fees on the operation of pipelines across public property. In addition, the Southern Pacific decision further confirms that state and local governments, working through their state's certification program, can insist upon a number of additional safety and environmental protections that OPS does not require. Even municipalities, using their right to collect franchise fees, may be able to persuade operators to take additional safety measures that the locality may not otherwise have a right to require.