Last week, the U. S. Supreme Court handed down an important decision on the jurisdictional reach of the Natural Gas Act (NGA).  The Court concluded that the NGA does not pre-empt a long-running group of state-law antitrust suits aimed at alleged misconduct by natural gas pipelines.

In Oneok, Inc. et al. v. Learjet, Inc. et al., No. 13-271, the Court considered claims brought as class actions and consolidated in 2003 as the Western States Wholesale Natural Gas Antitrust Litigation in federal court in Nevada.  The plaintiffs are manufacturers, hospitals, and other institutions that buy natural gas directly from interstate pipelines.  These purchasers sued more than a dozen pipelines for reporting false information to natural gas price indexes, claiming injury because contract prices, based on the price indexes, were inflated by the allegedly false reports.

The pipelines sought summary judgment on the ground that the NGA pre-empted plaintiffs’ state-law antitrust claims. The District Court granted summary judgment in defendants’ favor, but the Ninth Circuit reversed. The Supreme Court granted certiorari to clarify the reach of the NGA and, in a 7-to-2 decision, affirmed the Ninth Circuit’s ruling, despite an amicus opinion, and argument, by the U.S. Solicitor General, that the NGA preempted plaintiffs’ claims.  The case now goes back to the trial court where the Plaintiffs may continue to prosecute their claims.

While the NGA  gives the Federal Energy Regulatory Commission (FERC) the authority to determine whether rates charged by natural-gas companies or practices affecting such rates are just and reasonable, 15 U. S. C. §717d(a),  it also limits FERC’s jurisdiction to the transportation of natural gas in interstate commerce;to wholesale sales for resale of natural gas; and to natural-gas companies engaged in such transportation or sale. §717(b). The States have jurisdiction over retail sales and distribution.

The Supreme Court majority held that, although the alleged manipulation of gas indexes may have affected prices used in interstate and retail transactions, state-law antitrust claims were not pre-empted because the suits were aimed at obtaining damages only for excessively high prices in retail transactions, to which the NGA does not apply.

Writing for the Court, Justice Stephen Breyer emphasized that the NGA “was drawn with meticulous regard for the continued exercise of state power.” Thus, where a practice affects non-jurisdictional as well as jurisdictional sales, preemption can be found only where the target at which the state-law claims aim falls within the pre-empted field.  Here, the majority said that respondents’ claims are aimed at practices affecting retail rates, a matter “firmly on the States’ side of [the] dividing line.”

The case is being returned to the District Court to resume proceedings on the merits of state-law antitrust claims, and potentially, damage claims, after a twelve-year detour through the thickets of federal preemption law.

Notably for the industry, Justice Scalia and Chief Justice Roberts expressed in dissent the concern that the Court’s decision may impair “uniformity of regulation” because now “pipelines will have to ensure that their behavior conforms to the discordant regulations of 50 States – or, more accurately, to the discordant verdicts of untold State antitrust juries.”