Supreme Court: Natural Gas Act Does Not Preempt State Antitrust Laws | Practical Law

Supreme Court: Natural Gas Act Does Not Preempt State Antitrust Laws | Practical Law

The US Supreme Court held in Oneok, Inc. v. Learjet, Inc. that state-law antitrust claims intended to obtain damages for high intrastate retail gas prices are not preempted by the Natural Gas Act (NGA).

Supreme Court: Natural Gas Act Does Not Preempt State Antitrust Laws

Practical Law Legal Update 5-609-8267 (Approx. 3 pages)

Supreme Court: Natural Gas Act Does Not Preempt State Antitrust Laws

by Practical Law Antitrust
Published on 22 Apr 2015USA (National/Federal)
The US Supreme Court held in Oneok, Inc. v. Learjet, Inc. that state-law antitrust claims intended to obtain damages for high intrastate retail gas prices are not preempted by the Natural Gas Act (NGA).
On April 21, 2015, the US Supreme Court held in Oneok, Inc. v. Learjet, Inc. that the Natural Gas Act (NGA) does not preempt state law antitrust claims intended to obtain damages for excessively high retail gas prices (No. 13-271 (Apr. 21, 2015)). The NGA allows the Federal Energy Regulatory Commission (FERC) to evaluate the reasonableness of natural gas companies' rates and practices affecting those rates. However, FERC's jurisdiction is limited to:
  • Interstate transportation of natural gas.
  • Interstate sale of natural gas for resale (wholesale).
  • Companies who transport or sell interstate natural gas.
In Oneok, respondents, a group of institutions that purchase natural gas from petitioners, interstate pipelines, alleged that respondents violated state antitrust laws by reporting false information to the natural gas market indices that formed the basis for respondents' natural gas contracts. Natural gas indices affect the prices of both retail and wholesale natural gas. Petitioners argued that the NGA preempted any state-law antitrust claims, as FERC has sole jurisdiction over wholesale gas prices, and sought summary judgment. The district court reasoned that the NGA preempted the claims because the challenged practice affects wholesale as well as retail prices. The Ninth Circuit reversed, holding in a narrow reading that the NGA did not preempt the state law antitrust claims because the claims centered on obtaining damages for excessively high retail, not wholesale, prices.
The Supreme Court affirmed. The Court noted that when a practice affects both jurisdictional (wholesale) and non-jurisdictional (retail) sales, the NGA will only preempt claims that fall squarely in its jurisdiction. The Court reasoned that its precedent in NGA cases created a jurisdictional bright line, giving FERC jurisdiction over wholesale claims and the states jurisdiction over retail claims. The Court found that in this case, the states had jurisdiction because the claims were based on state antitrust law aimed at practices affecting retail prices, and were therefore not within the field that the NGA preempts.
The Court noted that its decision does not apply to conflict preemption for conflicts between state antitrust law and federal rate-setting processes.
Justice Scalia and Chief Justice Roberts dissented, arguing that the Court's NGA precedent in fact supports NGA preemption of all state antitrust claims, and noted that pipelines should not have to ensure their behavior is in line with all 50 states' natural gas regulations.