The Dragonpipe project (Mariner East 2) is being constructed as a “public utility” project, and that designation has caused a great deal of controversy. I came into the issue with a commonsense notion of what a “public utility” was, and I soon discovered that a “public utility”, for regulatory purposes, is not necessarily what it seems. (As with my other posts touching on legal and regulatory matters, I need to remind readers that I am not a lawyer myself. I can only provide a layperson’s opinion on topics like this.)
Having the status of “public utility” is crucial to Sunoco/ETP for the building of the Dragonpipe. It gives the company two critical powers: the ability to seize private property under eminent domain, and the ability to ignore local zoning laws. Without these, it would probably be impossible to build the pipeline. So the question of whether Sunoco/ETP is “really” a public utility is a central one.
Sunoco’s “public utility buildings” petition. As I asked people about public utility issues, they often referred to a “petition for public utility buildings” that Sunoco Logistics (prior to the merger with ETP) filed with the Pennsylvania Public Utility Commission (PUC) in March 2014. Sunoco asked the PUC to state that 35 new buildings (18 to house new pumps and 17 to house new valve systems) were “reasonably necessary for the convenience or welfare of the public” and therefore exempt from local zoning as “public utility buildings” The locations were scattered along the full length of the Dragonpipe.
There was an opportunity for interested parties to file objections, and several did. A key objection was that Sunoco was not really a public utility, so the PUC could not designate the 35 buildings as “public utility buildings”. Sunoco responded to the objections and filed an amended petition. Objections were filed to that as well, and Sunoco responded again. All the documents in the case were assigned to two of the PUC’s Administrative Law Judges (ALJs).
Initial decision: no, Sunoco is not a public utility. In July of 2014, the ALJs published their decision. They found that Sunoco was not a public utility, and the PUC therefore could not affirm the “public utility” status of the 35 buildings. In case you are interested in reading their decision in full, you can find it here . To summarize the key points, crudely:
- Sunoco is an interstate common carrier. It is regulated by the Federal Energy Regulatory Commission (FERC) as a common carrier, not as a public utility.
- The Pennsylvania Public Utility Code gives public utility status to companies that distribute natural gas “for the public, for compensation.” The Dragonpipe does not serve the public.
- Under previous decisions of the PA Supreme Court, to be a public utility the Dragonpipe would have to be “open to the use and service of all members of the public who may require it.” But the Dragonpipe is a private project, not open to the public.
On appeal: yes, Sunoco might be a public utility. Sunoco appealed the ALJs’ decision to the full PUC, which overruled the ALJs. The PUC decided that there was a possibility that Sunoco was indeed a public utility. The fact that it is not regulated as such by FERC does not mean it is not one under Pennsylvania law. The fact that Sunoco holds “Certificates of Convenience” from the PUC to distribute petroleum products is evidence that it could be considered a public utility. As for the concept that the pipeline does not serve the public, the decision says, “The commission has held numerous times that public utility services may be economically feasible only to entities that have large volumes of business and has also held that a retail component is not a requirement for public utility service.” It concludes, “There is a rebuttable presumption that Sunoco is a public utility in this Commonwealth.”
In overruling the ALJs, the PUC decided that there was a reasonable case that Sunoco was indeed a public utility, so there was no need to question that as part of this particular proceeding. All the ALJs needed to do was to decide whether the 35 buildings were “reasonably necessary for the convenience or welfare of the public”. With that, it handed the matter back to Sunoco and the ALJs.
But is Sunoco a public utility? We still don’t know. In the end, no further action was taken in the case. Sunoco might or might not be a public utility, but that would have to be decided in some other proceeding. And Sunoco never received “public utility” status for its 35 buildings. The ball seems to be in the company’s court, but the company has done nothing about it. That situation is in regulatory limbo, but Sunoco/ETP is proceeding as if the status had been confirmed.
The question of Sunoco/ETP’s status as a public utility is also being litigated in the courts by people objecting to Sunoco/ETP’s use of eminent domain. So far, those cases have mostly resulted in victories for Sunoco/ETP. The notable exception is Sunoco/ETP’s attempt to take land for NGL storage, in which a judge ruled that Sunoco/ETP did not qualify for eminent domain. There are many more cases that are not yet decided. I expect to report on some of them, and the NGL storage case, in the future.