Illinois Natural Gas Co. v. Central Illinois Public Service Co.

Background

A local gas distributor, Central Illinois Public Service Company, asked the Illinois Commerce Commission to require Illinois Natural Gas Company to extend its pipeline and supply gas because local supply was inadequate. Illinois Natural Gas, a wholly owned Illinois subsidiary of an interstate pipeline company, said its purchases and deliveries were part of interstate commerce and that federal law required approval from the Federal Power Commission before any new construction or sales for resale. Illinois courts sided with the state regulator, finding the sales to local distributors were intrastate once pressure was reduced before delivery.

Reasoning

The Court examined whether Congress already put wholesale interstate gas sales and pipeline extensions under national control. It found the Natural Gas Act expressly covers the transportation and sale of natural gas in interstate commerce for resale and gives the Federal Power Commission power to approve or deny facility extensions and connections. Because the gas moved in continuous interstate streams and the sales to distributors fit the Act’s definition of wholesale interstate sales, the federal law displaced the Illinois order. The Court held that Section 7 requires a federal certificate before extending facilities or selling in a market already served by another interstate gas company.

Real world impact

The ruling prevents state regulators from forcing pipeline construction or wholesale sales into markets already served without Federal Power Commission approval. Companies that buy, transport, and sell gas as part of interstate systems must seek federal certificates for expansions and sales for resale; the Federal Commission will assess supply, need, finances, and rates. This decision reverses the state order and places such disputes under federal, not state, control.