Appellate Case: 25-3046 Document: 124-1 Date Filed: 07/06/2026 Page: 1
FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS July 6, 2026
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------RUSS MEHL; EDMUND GROSS;
TRUDY BOYER; STEVE ANDERSON;
GREGORY STEADMAN; PJ
STONEBERGER; ROBIN GUDDE;
REGEANA SHELTON; DAVID J.
REBEIN; DANIEL B. GIROUX;
MICHAEL T. JILKA; ELI DEUTSCHER;
DARYL GREGG; LUKE OBORNY;
NEAL WARD; MARIA RICE; GERALD
SMITH; USHA RAFFERTY, individually
and on behalf of a class of similarly
situated residents of Kansas,
Plaintiffs - Appellants,
v. No. 25-3046
BP ENERGY COMPANY; SOUTHWEST
ENERGY, LP; MACQUARIE ENERGY,
LLC; ROCKPOINT GAS STORAGE,
LLC; TENASKA MARKETING
VENTURES; CIMA ENERGY, LTD.;
SOUTHWEST ENERGY
CORPORATION; BP CANADA
ENERGY MARKETING CORP.;
MERCURIA ENERGY AMERICA, INC.;
NEXTERA ENERGY MARKETING,
LLC; SPOTLIGHT ENERGY, LLC;
WILLIAMS ENERGY RESOURCES
LLC; CIMA ENERGY, LP; CONCORD
ENERGY, LLC; ETC MARKETING,
Appellate Case: 25-3046 Document: 124-1 Date Filed: 07/06/2026 Page: 2
LTD.; KANSAS GAS SERVICE,
Defendants - Appellees.
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------PJ STONEBERGER; ROBIN GUDDE;
REGEANA SHELTON, individually and
on behalf of a class of similarly situated
residents of Kansas,
Plaintiffs - Appellants,
v. No. 25-3047
BP ENERGY COMPANY; CIMA
ENERGY, LTD., a/k/a CIMA Energy, LP;
MACQUARIE ENERGY, LLC;
SOUTHWEST ENERGY
CORPORATION, a/k/a Southwest Energy,
LP,
Defendants - Appellees.
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------RUSS MEHL; EDMUND GROSS;
TRUDY BOYER; STEVE ANDERSON;
GREGORY STEADMAN, all individually
and on behalf of a class of similarly
situated residents of Kansas,
Plaintiffs - Appellants,
v. No. 25-3049
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BP ENERGY COMPANY; SOUTHWEST
ENERGY, LP; MACQUARIE ENERGY,
LLC; ROCKPOINT GAS STORAGE,
LLC; ETC MARKETING, LTD.;
TENASKA MARKETING VENTURES,
Defendants - Appellees.
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------DANIEL B. GIROUX; MICHAEL T.
JILKA; DAVID J. REBEIN,
Plaintiffs - Appellants,
v. No. 25-3050
BP CANADA ENERGY MARKETING
CORP.; BP ENERGY COMPANY;
MACQUARIE ENERGY, LLC;
TENASKA MARKETING VENTURES;
SOUTHWEST ENERGY, LP;
MERCURIA ENERGY AMERICA, INC.,
Defendants - Appellees.
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------MARIA RICE; GERALD SMITH; USHA
RAFFERTY, all individually and on behalf
of all others similarly situated,
Plaintiffs - Appellants,
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v. No. 25-3051
SOUTHWEST ENERGY, L.P.;
NEXTERA ENERGY MARKETING,
LLC; MACQUARIE ENERGY, LLC;
SPOTLIGHT ENERGY, LLC;
WILLIAMS ENERGY RESOURCES,
LLC; CIMA ENERGY, L.P.; TENASKA
MARKETING VENTURES; CONCORD
ENERGY, LLC,
Defendants - Appellees.
In re: WINTER STORM URI NATURAL
GAS LITIGATION
------------------------------ELI DEUTSCHER; DARYL GREGG;
LUKE OBORNY; NEAL WARD,
individually and on behalf of all others
similarly situated,
Plaintiffs - Appellants,
v. No. 25-3052
TENASKA MARKETING VENTURES;
MACQUARIE ENERGY, LLC,
Defendants - Appellees.
Appeals from the United States District Court
for the District of Kansas
(D.C. No. 6:24-CV-01073-DDC-ADM)
(D.C. No. 6:23-CV-01195-DDC-ADM)
(D.C. No. 6:23-CV-01192-DDC-ADM)
(D.C. No. 6:23-CV-01245-DDC-ADM)
(D.C. No. 6:24-CV-01005-DDC-ADM)
(D.C. No. 6:23-CV-01249-DDC-ADM)
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Samuel J. Walenz of Foulston Siefkin LLP, Wichita, Kansas (Jay F. Fowler and Clayton J. Kaiser of Foulston Siefkin LLP, Wichita, Kansas; Scott C. Nehrbass, Lee M. Smithyman, James P. Zakoura, and Jacob T. Schmidt of Foulston Siefkin LLP, Kansas City, Kansas, with him on the briefs), for Plaintiffs-Appellants.
Beatrice C. Franklin of Susman Godfrey L.L.P., New York, New York (Stephen R. McAllister and Megan M. Carroll of Dentons US LLP, Kansas City, Missouri; and Alan R. Pfaff of Wallace Saunders, Wichita, Kansas; William R.H. Merrill, Alexandra Foulkes Grafton, and Megan E. Griffith of Susman Godfrey LLP, Houston, Texas; Michael Yuffee of Baker Botts L.L.P., Washington D.C.; Casey L. Jones of Hinkle Law Firm LLC, Wichita, Kansas; Richard C. Pepperman II, Amanda F. Davidoff and Michael P. Devlin of Sullivan & Cromwell LLP, New York, New York; Jeffrey D. Morris of Berkowitz Oliver, LLP - KCMO, Kansas City, Missouri; Stephen Crain and Bradley J. Benoit of Bracewell LLP, Houston, Texas; Matthew D. Moderson of Stinson LLP, Kansas City, Missouri; Andrew Zeve and Kyle A. Mason of White & Case LLP, Houston, Texas; Chantale Fiebig, Claire L. Chapla and Laurel Zigerelli of Weil, Gotshal & Manges LLP, Washington, D.C.; Shane A. Rosson and Tyler E. Heffron of Triplett Woolf Garretson LLC, Wichita, Kansas; Johanna Spellman of Latham & Watkins LLP, Chicago, Illinois; Louis Layrisson and Liam O’Rourke of Baker Botts L.L.P., Houston, Texas; Casey O. Housley of Sanders Warren & Russell, LLP, Overland Park, Kansas; David T. McDowell, Mary E. Green and William B. Thomas of McDowell Hetherington LLP, Houston, Texas; Nathan M. Saper of Latham & Watkins LLP, Los Angeles, California; Nicholas J. Boyle and Melissa Arbus Sherry of Latham & Watkins LLP, Washington, D.C.; Robert J. Malionek of Latham & Watkins LLP, New York, New York; William Perry Brandt of Sandberg Phoenix & Von Gontard, PC, Kansas City, Missouri; John F. Bash, III of Quinn Emanuel Urquhart & Sullivan, LLP, Austin, Texas; Todd E. Shadid of Klenda Austerman LLC, Wichita, Kansas; David E. Harrell, Jr. and Deanna Markowitz Willson of Troutman Pepper Locke, Houston, Texas; Torsten M. Kracht of Hunton Andrews Kurth LLP, Washington, D.C.; Christopher M. Pardo of Hunton Andrews Kurth LLP, Boston, Massachusetts; Leah Nommensen of Hunton Andrews Kurth LLP, Houston, Texas; Seth E. Montgomery of Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, California; Tristan L. Duncan, Steven D. Soden and Holly Pauling Smith of Shook, Hardy & Bacon LLP, Kansas City, Missouri, with her on the briefs), for Defendants-Appellees.
Before HOLMES, Chief Judge, HARTZ, Circuit Judge, and GARCIA *, District Judge.
*
The Honorable Matthew L. Garcia, U.S. District Judge, District of New Mexico, sitting by designation.
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HARTZ, Circuit Judge.
Plaintiffs are Kansas residential consumers of natural gas. They purchase gas
from local distributors who in turn purchase gas from interstate wholesalers. They
have sued the wholesalers for violating the Kansas Consumer Protection Act
(KCPA), K.S.A. §§ 50-623–643, alleging that the wholesalers profiteered during a
winter-weather emergency that brought arctic temperatures to the State, causing
unprecedented increases in state-regulated retail natural-gas prices. The rates charged
by these wholesalers are regulated by the Federal Energy Regulatory Commission
(FERC) under the Natural Gas Act (NGA), 15 U.S.C. §§ 717–717z.
The issue before us is whether the NGA preempts Plaintiffs’ claims against the
wholesalers. We hold that it does. As the Supreme Court has said, it is “well settled”
that “Congress occupied the field of matters relating to wholesale sales and
transportation of natural gas in interstate commerce.” Schneidewind v. ANR Pipeline
Co., 485 U.S. 293, 305 (1988). These lawsuits directly target such sales. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s judgment.
I. BACKGROUND
This appeal arises from the consolidation of five class actions. Each action was
brought by residential consumers within a distinct geographical region in Kansas—
“with each region having its own natural gas distributor.” In re Winter Storm Uri
Natural Gas Litig., 772 F. Supp. 3d 1246, 1251 (D. Kan. 2025). The regional
distributors are Kansas Gas Service (KGS), Kansas Municipal Gas Agency (KMGA),
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Black Hills, Midwest Energy, and Atmos Energy Corporation (Atmos). See id. But
Plaintiffs did not sue these distributors, and the distributors are not parties. Rather,
Plaintiffs sued 14 “natural gas producers or suppliers” from whom these distributors
purchased gas during Winter Storm Uri. Id. They allege that Defendants sold natural
gas to distributors “at exorbitant prices in excessively one-sided transactions,”
violating the KCPA. See id. Because many of the allegations are identical, we
describe the background facts and allegations common to all the complaints. (We
follow the district court’s practice of citing only to the record of the first filed case
(Mehl v. BP Energy Co., No. 23-1192). See id. at 1252–53.)
A. Factual Background
1. The natural-gas market
In general, natural gas travels through three steps of commerce to reach a
consumer. First, producers and suppliers drill wells and pump natural gas, which they
process and deliver to interstate pipelines. Next, the interstate pipelines deliver the
gas to local distributors and, in some instances, directly to large business consumers.
Finally, these distributors resell the gas to businesses and residential consumers in
their markets. The natural-gas market thus encompasses wholesales (that is, sales of
gas for resale) and retail transactions (direct-to-consumer sales).
Local distributors typically negotiate three types of agreements with
wholesalers: baseload-gas, callable-gas, and spot-gas contracts. Each type of contract
serves a distinct purpose; together, they help distributors hedge against fluctuations
in gas prices while providing flexibility. The pricing for natural gas in each contract
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is often tied to publications by S&P Global Platts (Platts), described by Defendants
as “the leading independent provider of benchmark prices for commodities markets,
including the natural-gas market.” Aplees. Br. at 7. In that role, Platts “collects data
on natural-gas trades and publishes both daily and monthly price indexes for various
trading locations for natural gas.” Id. (internal quotation marks omitted).
Local distributors negotiate baseload-gas contracts months in advance for
quantities that reflect historical usage. For instance, a contract for baseload gas may
be negotiated in the summer so that natural gas can be scheduled for storage and
delivery when natural-gas usage is high. The price for baseload gas is usually tied to
a “first of the month” price survey (a monthly price) published in the Platts Inside
FERC Gas Market Report. Aplts. App., Vol. 1 at 190 (First Amended Class-Action
Complaint). Callable-gas contracts allow distributors to reserve additional volumes of
gas in case the seasonal use turns out to be higher than historical usage levels. These
additional volumes of natural gas are typically purchased as needed at a price
determined on the day of the call for purchase, with prices based on the Platts Gas
Daily market report. Suppliers often charge to reserve this additional gas. And
distributors make spot-gas purchases when demand exceeds the combined volumes of
their baseload gas and reserved callable gas. Distributors contract for spot gas “at the
time or near the time of use,” and for “a premium above the Gas Daily price for the
day of use.” Id. at 191. Ordinarily, the cost of the gas to the distributor is
automatically passed on to the consumer.
2. Winter Storm Uri
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In February 2021, Winter Storm Uri hit Kansas. The storm’s subzero
temperatures not only spiked demand for gas but also created serious supply
challenges because wellheads froze throughout the midcontinent region. The net
effect: natural-gas prices soared. See In re Winter Storm Uri, 772 F. Supp. 3d at
1253. Although Platts’ February first-of-the-month index prices for sectors in the
region were between $2.545 and $2.580/MMBtu, the storm caused prices to rise as
high as $622.785/MMBtu, 20 times the 15-year peak. See Aplts. App., Vol. 1 165–71
(First Amended Class-Action Complaint); In re Winter Storm Uri, 772 F. Supp. 3d at
1254.
The Kansas Governor declared a State of Disaster Emergency. See Rec. Nat.
Gas Prices and Potential Sys. Reliability Issues from Unprecedented and Sustained
Cold Weather, No. 21-GIMX-303-MIS, at 1 (Kan. Corp. Comm’n, Feb. 15, 2021)
(emergency order), http://estar.kcc.ks.gov/estar/ViewFile.aspx?Id=20da2a43-e05a4255-aee4-deb442fcb6fb [https://perma.cc/HCY3-HFQY]. And the Kansas
Corporation Commission (KCC)—the state regulator that oversees intrastate and
retail natural-gas sales—ordered local distributors and others “to do all things
possible and necessary to ensure” natural-gas service “continue[d] to be provided to
their customers in the State.” Id. at 3. The KCC also authorized local distributors
incurring “extraordinary costs associated with” doing so to “defer those costs” “to
minimize the financial impacts of [the storm] on ratepayers over a reasonable time
frame.” Id.
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In response to the KCC’s order, Kansas natural-gas distributors “made
substantial purchases of natural gas at the prevailing spot price to ensure their
storages of natural gas would not run low.” Aplts. App., Vol. 1 at 169 (First
Amended Class-Action Complaint). All five distributors deferred the costs for these
purchases and shifted them downstream to their consumers. The KCC approved a
ten-year repayment window for KGS and Atmos consumers. Black Hills struck a
settlement agreement with the KCC that enabled it to recover its excess costs from its
consumer base over a five-year term. 1 KMGA relied on a different public mechanism
(a legislative low-interest loan program) to do the same. And Midwest Energy
recovered its charges from consumers over a two-year period.
After Winter Storm Uri, FERC’s Office of Enforcement investigated the
wholesale transactions during the storm to determine whether there had been market
manipulation or other misconduct. See FERC, 2021 Report on Enforcement 79–80
(2021), https://ferc.gov/media/fiscal-year-2021-annual-report-enforcement
1
As Plaintiffs note, the KCC “opened dockets to resolve how ratepayers would ultimately pay for Defendants’ charges to” three distributors—KGS, Atmos, and Black Hills. Aplts. Br. at 16. Each docket resulted in a unanimous settlement agreement. Before approving the financial plans underlying the distributors’ proposed settlements, the KCC received testimony from the local distributors, expert agency staff, and consumer advocates. After doing so, it “independent[ly]” assessed whether each proposed settlement agreement was (1) “supported by substantial competent evidence in the record as a whole,” (2) would “establish just and reasonable rates,” and (3) was “in the public interest.” E.g., Order Approving Unanimous Settlement Agreement on Kansas Gas Services’ Financial Plan at 8–12, Application of Kansas Gas Serv. for the Recovery of Qualified Extraordinary Costs and Issuance of a Fin. Order, No. 22-KGSG-466-TAR (Kan. Corp. Comm’n Aug. 18, 2022) https://kcc-connect.kcc.ks.gov/s/order/a1Jcr000005QUcFEAW/221488 [https://perma.cc/Z5K2-J938].
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[https://perma.cc/B9T4-TNSY]. The investigation did not result in any enforcement
action.
B. The Litigation
Plaintiffs filed five class-action suits (six including the consolidated suit)
claiming violations of the KCPA and seeking to recover the “extraordinary or excess
costs” that “Defendants’ sales imposed” on “Plaintiffs’ distributors, that Plaintiffs’
distributors passed through to Plaintiffs and other customers” during Winter Storm
Uri. Aplts. Br. at 16. Plaintiffs assert that Defendants’ transactions in the wholesale
market impacted the retail market, where they are “captive”—that is, unable to
negotiate the prices they pay for the gas. Id. at 17. They allege that Defendants “cut
each of Plaintiffs’ distributors’ baseload supplies of gas,” forcing the local
distributors into “the exponentially higher-priced spot market.” Id. at 12. “Then,
every Defendant entered that market to charge unconscionable prices.” Id. Plaintiffs
contend that “[a]ll the while,” the “actual supply of natural gas [during Winter Storm
Uri] was always available for sale at baseload rates.” Id. at 15. And “even if a
Defendant was not one who cut [a distributor’s] baseload supply, every Defendant
was more than willing to sell them spot gas at exponentially higher and
unconscionable prices, all in the middle of a declared disaster.” Id. at 15–16.
Defendants moved to dismiss jointly and individually. The district court
granted Defendants’ joint motion (denying the individual motions as moot), holding
that FERC’s exclusive jurisdiction over the interstate wholesale natural-gas market
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under the NGA preempts Plaintiffs’ state-law claims. See In re Winter Storm Uri, 772
F. Supp. 3d at 1252. We agree.
II. DISCUSSION
We review de novo a district court’s grant of a motion to dismiss, accepting as
true the well-pleaded allegations of the complaint. See Nakkumpun v. Taylor, 782
F.3d 1142, 1146 (10th Cir. 2015). We also consider the documents incorporated by
reference into the complaint. See id.
A. Preemption
“The Supremacy Clause provides that ‘the Laws of the United States’ (as well
as treaties and the Constitution itself) ‘shall be the supreme Law of the Land . . . any
Thing in the Constitution or Laws of any state to the Contrary notwithstanding.’”
Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 376 (2015) (quoting U.S. Const., art. VI,
cl. 2). Under this provision, Congress may enact statutes that preempt (that is,
invalidate) state law. See id.
We have recognized three types of preemption: (1) “express preemption,
which occurs when the language of the federal statute reveals an express
congressional intent to preempt state law”; (2) “field preemption, which occurs when
the federal scheme of regulation is so pervasive that Congress must have intended to
leave no room for a State to supplement it”; and (3) “conflict preemption, which
occurs either when compliance with both the federal and state laws is a physical
impossibility, or when the state law stands as an obstacle to the accomplishment and
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execution of the full purposes and objectives of Congress.” US Airways, Inc. v.
O’Donnell, 627 F.3d 1318, 1324 (10th Cir. 2010) (internal quotation marks omitted).
Defendants primarily argue field preemption. 2 They contend that the NGA
field-preempts Plaintiffs’ KCPA claims because those claims challenge transactions
and practices in the interstate wholesale natural-gas market, a market that Congress
carved out for federal oversight. We first address the NGA’s background and
structure and then turn to our preemption analysis.
B. The Natural Gas Act
A century ago the States regulated the production and gathering of natural gas,
the transportation of the gas to distributors, and the distribution to local consumers.
See Oneok, 575 U.S. at 378. But then the Supreme Court held that the Dormant
Commerce Clause prohibited state regulation of “the interstate shipment and sale of
gas to local distributors for resale.” Id. (emphasis added). To fill this “regulatory
gap,” Congress enacted the NGA, id., declaring that federal regulation of the
transportation and sale of natural gas “in interstate and foreign commerce is
necessary in the public interest,” 15 U.S.C. § 717(a).
2
They also argue that conflict preemption precludes Plaintiffs’ claims. Defendants’ conflict-preemption argument is that Plaintiffs challenge index prices that were informed by wholesale trades, and FERC has the sole authority to declare wholesale prices unreasonable. Because FERC investigated wholesale trades following Winter Storm Uri and determined that they were reasonable, “[s]tate and federal law would be in direct conflict if Defendants’ wholesale prices now were to be declared unlawful under the KCPA.” Aplees. Br. at 17; see id. at 37–41. But we need not address conflict preemption, because Defendants prevail on field preemption.
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The NGA empowers FERC (initially the Federal Power Commission) to
regulate rates for “the wholesale sale of gas in interstate commerce.” Ark. Elec. Coop Corp. v. Ark. Pub. Serv. Comm’n, 461 U.S. 375, 378 (1983). It is “a
comprehensive scheme of federal regulation of all wholesales of natural gas in
interstate commerce.” Schneidewind, 485 U.S. at 300 (emphasis added) (internal
quotation marks omitted); see Ill. Nat. Gas Co. v. Cent. Ill. Pub. Serv. Co., 314 U.S.
498, 507 (1942) (FERC maintains “extensive control over the rates at which [natural]
gas is sold for resale”). This scheme grants FERC jurisdiction over “the
transportation of natural gas in interstate commerce” and “the sale in interstate
commerce of natural gas for resale for ultimate public consumption for domestic,
commercial, industrial, or any other use.” 15 U.S.C. § 717(b) (emphasis added).
(Sales over which FERC has jurisdiction are sometimes referred to as jurisdictional
sales. See Oneok, 575 U.S. at 379.) The statute also gives FERC jurisdiction over
“natural-gas companies engaged in such transportation or sale, and . . . the
importation or exportation of natural gas in foreign commerce.” 15 U.S.C. § 717(b);
see Schneidewind, 485 U.S. at 308 (“[T]he control of rates and facilities of natural
gas companies[] are precisely the things over which FERC has comprehensive
authority” (emphasis added)).
The NGA requires that wholesale natural-gas rates and charges be “just and
reasonable.” 15 U.S.C. § 717c(a). If FERC deems that any wholesale rate, charge, or
classification within its jurisdiction, or “any rule, regulation, practice, or contract
affecting such rate, charge, or classification is unjust, unreasonable, unduly
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discriminatory, or preferential, [FERC] shall determine the just and reasonable rate,
charge, classification, rule, regulation, practice, or contract” and order its
determination to be “observed and in force.” Id. § 717d(a) (emphasis added).
Similarly, “where existing rates are unjust, unduly discriminatory, preferential,
otherwise unlawful, or are not the lowest reasonable rates,” Congress empowers
FERC (not the States) to “order” that rate be decreased. Id.
But Congress was careful to preserve for the States an oversight role in the
country’s natural-gas market. As the Supreme Court has recognized, the NGA was
crafted with “meticulous regard for the continued exercise of state power, not to
handicap or dilute it in any way.” Oneok, 575 U.S. at 388 (internal quotation marks
omitted). Accordingly, the NGA does not govern retail sales made directly to
consumers or “the local distribution of natural gas.” 15 U.S.C. § 717(b) (emphasis
added); see Panhandle E. Pipe Line Co. v. Pub. Serv. Comm’n of Ind., 332 U.S. 507,
517 (1947) (the NGA excluded “[d]irect sales for consumptive use” from FERC’s
exclusive jurisdiction, leaving this role to the States). Also exempted from federal
jurisdiction are sales by intrastate distributors who receive the gas at the border of or
within a State when all the gas is consumed within that State and the transactions are
subject to regulation by the State. See 15 U.S.C. § 717(c).
C. Field Preemption in This Case
Defendants contend that the NGA field-preempts Plaintiffs’ KCPA claims
because those claims challenge transactions and practices in the interstate wholesale
natural-gas market, a market subject to FERC’s exclusive jurisdiction. Plaintiffs do
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not dispute that the conduct they challenge consisted of interstate wholesale
transactions. Instead, they argue that Defendants’ misconduct in the federal
wholesale market affected the state retail market in such a manner that they may
maintain a state-law consumer-protection claim against wholesale-market
participants. 3 In effect, Plaintiffs’ argument is that the impact of these wholesale
transactions on the retail market was so extensive during Winter Storm Uri that
jurisdiction should fall to the States. We are not persuaded.
Oneok is the leading case. The plaintiffs asserted state-law antitrust claims
against interstate-pipeline companies. See Oneok, 575 U.S. at 383. Plaintiffs were “a
group of manufacturers, hospitals, and other institutions,” id. at 376, that had bought
“large quantities of natural gas directly from interstate pipelines for their own
consumption” and “believe[d] that they overpaid in [those] transactions due to the
interstate pipelines’ manipulation of the natural-gas indices,” id. at 383. (Because
these were retail transactions (direct sales to ultimate consumers), they were not
subject to regulation by FERC.) Among the practices challenged by the plaintiffs in
Oneok was the interstate pipelines’ deceptive conduct in the natural-gas market,
including “false price reporting, wash trades, and anticompetitive collusive
3
Plaintiffs argue that our preemption analysis must consider two
presumptions—(1) “that Congress has not preempted state law in areas traditionally regulated by the States,” Aplts. Br. at 29 (internal quotation marks omitted), and (2) “that Congress did not act to remove all means of judicial recourse for those injured by illegal conduct,” id. at 31 (internal quotation marks omitted). We question the relevance of the asserted presumptions to this case. But in any event, we need not consider them here. When the Supreme Court has directed how to analyze preemption under a specific statute, we are reluctant to depart from that direction.
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behavior.” Id. at 383 (internal quotation marks omitted). The pipelines allegedly
submitted deceptive reports of actual and fictitious jurisdictional and
nonjurisdictional sales. See In re W. States Wholesale Nat. Gas Antitrust Litig., 715
F.3d 716, 725, 730–35 (9th Cir. 2013), aff’d sub nom., Oneok, Inc. v. Learjet, Inc.,
575 U.S. 373 (2015). As a result, index prices—which are used to price both
jurisdictional and nonjurisdictional sales—were artificially raised. See Oneok, 575
U.S. at 381–83.
The defendants responded that the state-law antitrust claims were fieldpreempted by the NGA. Although the antitrust suit sought “damages for excessively
high retail natural-gas prices stemming from interstate pipelines’ price
manipulation,” the defendants “point[ed] out that [the] antitrust claims target[ed]
anticompetitive activities [the manipulation of price indices] that affected wholesale
(as well as retail) rates,” and that the NGA “grants FERC authority to keep wholesale
rates at reasonable levels.” Id. at 384.
The Supreme Court rejected the field-preemption argument. See id. at 384–88.
The Court began its analysis by stressing that the NGA “was drawn with meticulous
regard for the continued exercise of state power, not to handicap or dilute it in any
way.” Id. at 385 (internal quotation marks omitted). After all, the NGA “expressly
provides that States retain jurisdiction over intrastate transportation, local
distribution, and distribution facilities, and over the production or gathering of
natural gas.” Id. at 379 (internal quotation marks omitted). “Accordingly,” said the
Court, “where (as here) a state law can be applied to nonjurisdictional as well as
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jurisdictional sales, we must proceed cautiously, finding pre-emption only where
detailed examination convinces us that a matter falls within the pre-empted field as
defined by our precedents.” Id. at 385. It continued, “Those precedents emphasize the
importance of considering the target at which the state law aims in determining
whether that law is pre-empted.” Id. In particular, “the significant distinction for
purposes of pre-emption in the natural-gas context is the distinction between
measures aimed directly at interstate purchasers and wholesales for resale, and those
aimed at subjects left to the States to regulate.” Id. (internal quotation marks
omitted).
The Court concluded that the antitrust lawsuits before it were “directed at
practices affecting retail rates—which are firmly on the States’ side of [the] dividing
line” between state regulation not preempted by the NGA and regulation so
preempted. Id. at 386 (internal quotation marks omitted). “Support[ing] [the] finding
of no pre-emption” was that antitrust laws “are not aimed at natural-gas companies in
particular, but rather all businesses in the marketplace,” and “are far broader in their
application than, for example, the [state] regulations [field-preempted as to interstate
wholesale commerce] in Northern Natural [Gas Co. v. State Corporation
Commission of Kansas, 372 U.S. 84 (1963)], which applied only to entities buying
gas from fields within the State.” Id. at 387.
We have little doubt that what Plaintiffs are targeting in this case are
wholesale (jurisdictional) transactions. The alleged misconduct on which they base
their claims is that “Defendants cut each of Plaintiffs’ distributors’ baseload supplies
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of gas[] tied to the $2.55/MMBtu first-of-the-month prices, and forced them into the
exponentially higher-priced spot market.” Aplts. Br. at 12. This alleged misconduct is
entirely in the interstate wholesale market—namely, transactions between Defendants
and the distributors from whom Plaintiffs bought gas in the retail market.
Although Plaintiffs complain of the increase in retail prices, that increase was
a direct result of the increase in wholesale prices. This is in sharp contrast to the
situation in Oneok, where the price increases resulted from “marketplace conditions,”
575 U.S. at 389, such as price indices, that independently affected both wholesale
and retail prices—the manipulation of the indices would raise nonjurisdictional rates
even if, for some reason, the jurisdictional rates were unaffected. Here, retail prices
to consumers were affected only because distributors had to pay increased wholesale
prices.
Plaintiffs offer two arguments against our conclusion. First, they contend that
the impact of their claim on Defendants’ wholesale transactions is legally irrelevant
because their claim is “about the natural consequences at the retail level of
Defendants’ actions,” and the inevitable effect on wholesale sales is simply a result
of the fact that “[t]he wholesale and retail markets are not hermetically sealed from
each other.” Aplts. Reply Br. at 5 (internal quotation marks omitted). If the effect on
wholesale sales were legally consequential, they argue, “the Court would have
decided Oneok the other way.” Id.
But this argument ignores the very reason why the Supreme Court resolves
preemption issues under the NGA by looking at whether the target at which the state
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regulation (here Plaintiffs’ lawsuits) aims is the retail market or the interstate
wholesale market. Knowing the target of the lawsuit is essential because any state
action that regulates retail sales will have some effect on the wholesale market and
any action regulating wholesale sales will affect the retail market. Given the
interconnected nature of the natural-gas market, litigants could always argue that
whatever the activity prohibited by state regulation, the regulation is preempted
(because the activity affects wholesale markets—the argument by the pipelines
rejected in Oneok) or is not preempted (because the activity affects retail markets—
the argument of Plaintiffs here). The Supreme Court decided that the way out of this
conundrum is to identify the direct target of the state regulation.
Perhaps it will be difficult in some circumstances to determine whether the
target is jurisdictional transactions or nonjurisdictional transactions. But we think it
safe to say that the target decision cannot be based solely on the fact that the
jurisdictional and nonjurisdictional markets necessarily affect each other. If, for
example, the contention is that the target is jurisdictional transactions, the contention
must be founded on more than the fact that jurisdictional transactions are affected by
the allegedly improper nonjurisdictional transactions. If that cross-market effect
suffices to establish the target, then every challenge would have both jurisdictional
and nonjurisdictional transactions as its target. The direct-target test would resolve
nothing.
Indeed, as suggested two paragraphs ago, Oneok rejected an argument based
on just such cross-market effects when it held that the lawsuit in that case was not
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preempted. The defendant pipelines in Oneok engaged with the plaintiffs through
retail sales (outside the purview of the NGA), not transactions in the wholesale
market, which would have been governed by FERC. See Oneok, 575 U.S. at 384. 4
They argued, however, that if their retail transactions were subject to state antitrust
laws, then any liability they incurred as a result could impact wholesale rates, which
are under FERC’s exclusive jurisdiction. See id. (pipelines sought certiorari “to
resolve confusion in the lower courts as to whether the Natural Gas Act pre-empts
retail customers’ state antitrust law challenges to practices that also affect wholesale
rates”); id. at 377 (pipelines “contend that the state antitrust claims advanced by their
direct-sales customers ([the plaintiffs]) fall within” the preempted field “of matters
relating to wholesale sales and transportation of natural gas in interstate commerce”
(emphasis and internal quotation marks omitted)). That effect on wholesale rates was
4
Plaintiffs recognize that in Oneok the Supreme Court characterized the transactions at issue as direct purchases of natural gas. But they contend that the opinion was incorrect to do so because “the plaintiffs did not, in fact, all” make such direct purchases. Aplts. Br. at 35. The Oneok plaintiffs’ briefings themselves, however, described the claims as involving direct-to-consumer retail transactions. See Br. for Resp’ts at 1, Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015) (No. 13-271), 2014 WL 6613095, at *1 (explaining respondents “purchased gas [from petitioners] at inflated rates through retail contracts”). The defendants’ briefing did too. See Br. for Pet’rs at 11, Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (2015) (No. 13-271), 2014 WL 4681794, at *11 (“Respondents allegedly paid higher prices because they bought gas [from petitioners] in retail transactions with prices pegged to the indices”); id. at *i (“Respondents’ alleged damages resulted from retail gas purchases” and “[t]he question presented is: Does the Natural Gas Act preempt state-law claims challenging industry practices that directly affect the wholesale natural gas market when those claims are asserted by litigants who purchased gas in retail transactions”). And even if the Supreme Court got its facts wrong, the precedential weight of the opinion must be based on what the Court thought the facts were.
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not enough to satisfy the direct-target test. As the district court in this case nicely put
it, the Supreme Court “distinguished between” federal and state power “based on
whether the regulation”—here, Plaintiffs’ lawsuit attacking Defendants dealings with
distributors—“aimed at the wholesale market or retail market, regardless of the
ripple effect it might have in the other market.” In re Winter Storm Uri, 772 F. Supp.
3d at 1262.
Plaintiffs’ argument in this case is the mirror image of the rejected argument
made by the pipelines in Oneok. The improper conduct that Plaintiffs challenge
consisted solely of interstate wholesale transactions within the exclusive jurisdiction
of FERC. Their claim that this litigation aims directly at nonjurisdictional
transactions rests on the ripple effects of wholesale transactions on downstream retail
transactions. However Plaintiffs attempt to frame their argument here, their suit aims
directly at interstate wholesale transactions and practices. All the allegedly improper
activity of which Plaintiffs complain concerned the prices set for interstate wholesale
sales of natural gas under the exclusive jurisdiction of FERC, not “background
marketplace conditions,” id., such as price indices, that independently affected both
wholesale and retail prices. This cannot suffice.
Adding to our confidence in the resolution of this case is Supreme Court
precedent interpreting the Federal Power Act (FPA). Because the FPA and NGA
divide jurisdiction between FERC and the States similarly, the Supreme Court has
“routinely relied on NGA cases in determining the scope of the FPA, and vice versa.”
Hughes v. Talen Energy Mktg., 578 U.S. 150, 164 n.10 (2016).
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In FERC v. Electric Power Supply Association (EPSA), 577 U.S. 260, 281
(2016), decided less than a year after Oneok, the Supreme Court said that a FERC
regulation does not trespass the jurisdictional lines in the electricity markets “just
because it affects—even substantially—the quantity or terms of retail sales.” The
Court explained: “It is a fact of economic life that the wholesale and retail markets in
electricity, as in every other known product, are not hermetically sealed from each
other,” and “transactions that occur on the wholesale market have natural
consequences at the retail level.” Id. The Court concluded that “[w]hen FERC
regulates what takes place on the wholesale market, as a part of carrying out its
charge to improve how that market runs, then no matter the effect on retail rates, [the
FPA] imposes no bar” to the federal regulation. Id. at 281–82. The obvious corollary
is that FERC had exclusive authority over the interstate wholesale rates during
Winter Storm Uri, despite their impact on retail prices. (We note that FERC
examined wholesale natural-gas market activity during the storm and took no action.
See FERC, 2021 Report on Enforcement 79–80.)
Plaintiffs’ second argument against our conclusion that their claims are
preempted is that we must focus on the breadth of the statute creating their cause of
action, rather than the specific conduct of which they complain. We disagree. To be
sure, they correctly point out that the KCPA is a general law of broad applicability
that is hardly focused on the natural-gas market. And we acknowledge that the
general applicability of the state antitrust law in Oneok was a data point that
“support[ed] a finding of no pre-emption” in that case. 575 U.S. at 387.
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But we do not read Oneok as saying that the general applicability of the state
statute is dispositive. Indeed, that feature of the state antitrust law in Oneok is
mentioned only after the Court concluded that the lawsuit at issue was “firmly on the
States’ side of the dividing line” between preempted and nonpreempted regulation.
Id. at 386 (internal quotation marks omitted). The general applicability of the state
antitrust law does not come up in the opinion until the Court is responding to the
dissenting Justices. See 575 U.S. at 387 (rejecting the dissent’s argument that
“Schneidewind created a definitive test for pre-emption in the natural gas context that
turns on whether the matter on which the State asserts the right to act is in any way
regulated by the [NGA]” (internal quotation marks omitted)).
The Oneok Court looked at the specific claims presented in the case, rather
than just the antitrust statute in general. At the outset of the opinion, the Court
described the issue before it as “whether the federal Natural Gas Act pre-empts these
lawsuits.” 575 U.S. at 376 (emphasis added). In comparing the claims in Oneok to
precedent denying federal preemption, the Court said that the “lawsuits [in Oneok]
are directed at practices affecting retail rates.” Id. at 386 (first emphasis added). And
in distinguishing a precedent finding preemption, the Court explained that in the prior
case a “state inquiry” into the reasonableness of wholesale natural-gas purchases had
been “pre-empted because it was directed at jurisdictional sales in a way that [the
Oneok] respondents’ state antitrust lawsuits are not.” Id. at 389 (emphasis added).
The Oneok “lawsuits” therefore withstood preemption because they did “not seek to
challenge the reasonableness of any rates expressly approved by FERC. Rather, they
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[sought] to challenge the background marketplace conditions that affected both
jurisdictional and nonjurisdictional rates.” Id. This analysis, which is the heart of the
Supreme Court’s opinion, would have been superfluous if the general scope of the
state antitrust law was enough to escape preemption.
Our reading of Oneok (as requiring a claim-specific preemption analysis) finds
further support in the Supreme Court’s consideration of field preemption under
federal statutes governing nuclear safety. See English v. Gen. Elec. Co., 496 U.S. 72,
82 (1990). In English the plaintiff brought suit under the common-law tort of
intentional infliction of emotional distress—another law (not a statute) of general
applicability. See id. The Court had previously held that federal statutes had
“occupied the entire field of nuclear safety concerns, except the limited powers
expressly ceded to the States.” Id. (internal quotation marks omitted). It resolved the
preemption issue by closely examining “whether petitioner’s tort claim is so related
to the radiological safety aspects involved in the operation of a nuclear facility that it
falls within the pre-empted field.” Id. at 85 (emphasis added) (citation, ellipsis,
brackets, and internal quotation marks omitted). The Court did not simply hold that
the emotional-distress tort survived preemption because the cause of action was a law
of general applicability encompassing much more than distress from nuclear-safety
concerns. Instead, it focused on the particular claim, rather than the cause of action.
The Court concluded that although “the claim for intentional infliction of emotional
distress at issue here may have some effect” on “decisions made by those who build
or operate nuclear facilities concerning radiological safety levels,” “this effect is
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neither direct nor substantial enough to place petitioner’s claim in the pre-empted
field.” Id.
This focus on the actions complained of seems sound to us. The preemption of
a state-law claim in an arena of federal governance should be judged by whether the
conduct the claim is aimed at is conduct exclusively regulated by the federal
government, not by whether the legal theory supporting the claim is general or
specific, although the legal theory may provide insight into the purpose and effect of
the claim.
Finally, we note that the field preemption of Plaintiffs’ suit does not suggest
that the NGA preempts the KCPA—or any other generally applicable state statute—
in its entirety. The problem for Plaintiffs is that the specific theory of their lawsuit
improperly extends the KCPA into FERC’s jurisdiction.
III. CONCLUSION
We AFFIRM the district court. Plaintiffs’ claims are field-preempted.
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