PUC didn't decide 11-2-19a

A number of court cases have contested Sunoco’s right to use eminent domain as a public utility, and Sunoco has almost always prevailed. But there is a recent Commonwealth Court decision concerning a case out of Lebanon County that casts doubt on Sunoco’s status.

The case was appealed by Concerned Citizens of Lebanon County, so I’ll refer to it as the “CCLC case”. It  could be of critical importance to Sunoco, because Sunoco has thus far been able to hide behind the alleged public-utility status of the Dragonpipe (Mariner East pipeline system) to avoid compliance with zoning laws and to seize land through eminent domain. Sunoco’s delicate legal house of cards could collapse if the courts find that the Dragonpipe is not a “public utility service.”

In the CCLC case, the Commonwealth Court avoided ruling on the issue of public utility status. In spite of that, the case did bring up issues that could eventually undermine Sunoco’s “public utility” claim. I’ll have more to say on that toward the end of this post. First, though, let me provide some information about the background of the case and what the court did decide.

Some background. This case arrived at Commonwealth Court as a result of a decision of the Zoning Hearing Board (ZHB) of West Cornwall Township, Lebanon County. The ZHB upheld a zoning permit issued to Sunoco to build two structures housing pipeline pumping equipment for Mariner East 1. Sunoco needed the pump station, one of 18 across Pennsylvania, because high pressure was required to maintain the liquid state of the highly volatile liquids that were being transported.

When a permit was issued, a local citizen’s group (Concerned Citizens of Lebanon County) appealed to the ZHB and subsequently to the county Court of Common Pleas. A tangled series of legal moves and countermoves ensued, stretching out for five years. The case was passed back and forth between the ZHB and the county Court of Common Pleas twice.

The CCLC case was ultimately appealed to Commonwealth Court. The ZHB decision to uphold the permit for the structures was based on a clause in the local zoning ordinance that referred to “public utilities exemptions”. Commonwealth Court, in a decision dated October 23, 2019, has now issued a narrow ruling in favor of the citizens’ group and rejecting the validity of the permit issued to Sunoco.

There were four major issues before the Commonwealth Court:

  • Did the appellants (the Concerned Citizens group) have standing to appeal the ZHB decision?
  • Did the ZHB and county court err in upholding the zoning permit?
  • Is ME1 a public utility service?
  • Should the ZHB have considered environmental impacts under Section 27 of the PA Constitution (the “green amendment”)?

As often happens in contentious appeals, the court made a narrow ruling. It skirted all but the first two of these issues. On the first issue, of standing, they found that the appellants did indeed have standing to appeal. (Details below.) The Court also found that the permit was issued in error and reversed the county court decision.

CCLC presented evidence at the ZHB hearing to show that ME1 is not a public utility exempt from zoning rules but is a private pipeline for three priority shippers with whom Sunoco has long-term contracts (10-to-15 years) and that have been using ME1 to export the NGLs overseas for plastics manufacturing. CCLC alleged that Sunoco should be ordered to go through a conditional use hearing and comply with the Pennsylvania Constitution’s Article 1 Section 27, known as the Environmental Rights Amendment.

But Commonwealth Court did not rule on whether ME1 is a “public utility service” or whether the green amendment applies in this case.

Presumably, they did not take up those issues because they didn’t need to—the case was decided based on narrower grounds. Still, some important points about public utility status were discussed, and they may have ramifications in other similar cases in the future. More on that later. (The green amendment issues were not really addressed at all.)

The opinion also makes it clear that the decision is only about “the accessory support and maintenance structures”—it does not address “the legality of Sunoco’s general operation of ME1 at this Site”.

Here is what the court did find.

Did the appellants have standing for an appeal? The court found that the appellants did have standing to file an appeal because some members of Concerned Citizens of Lebanon County, the umbrella group to which the appellants belonged, lived close enough to the pumping station that fragments of the buildings there could hit their property in the event of an explosion. Sunoco had argued that the appeal was primarily an objection to the operation of ME1 and not an objection to the structures themselves, but the court found that the danger from the structures themselves was enough to confer standing. (One member of the three-judge panel dissented on this point.)

Did the local zoning ordinance have an “implied” exemption for public utilities? The court found that there was not actually an independent exemption for public utilities stated in the zoning ordinance. The Court said that the ordinance contains limitations to public utility exemptions that may otherwise apply, but it did not create any exemptions.

Those two findings were enough for the court to reverse the decisions of the lower court (the Court of Common Pleas) and the ZHB. The result: Sunoco is not entitled to an exemption from zoning requirements for its pump station buildings.

What happens next in this case? The situation now is that Sunoco has built structures for which it does not have a zoning permit. Sunoco could appeal the Commonwealth Court decision to the state Supreme Court, or it could take down the buildings (which seems very unlikely).

I will update readers on this case when there are significant events to report. In the rest of this blog post, I will try to summarize an issue that this case did not resolve: Sunoco’s claim of status as a public utility.

Why hasn’t the PUC ruled on the “public utility” status of ME1? Sunoco has frequently used a claim of status as a public utility to avoid zoning rules and to employ eminent domain to seize property for the Mariner East system. It is remarkable that that public utility status has never been confirmed by the PUC.

At one point, Sunoco asked the PUC for exemptions from local zoning pursuant to Section 619 of the Municipalities Planning Code. (Under that Section, a public utility corporation’s building may be exempted from zoning if the PUC finds, after a hearing, that “the present or proposed situation of the building in question is reasonably necessary for the convenience or welfare of the public.”) But then, Sunoco withdrew that request. Here is that story.

When Sunoco converted Mariner East 1 to transport highly volatile natural gas liquids (NGLs), it needed to install pumps at 18 locations across the state to maintain the high pressure required to keep NGLs liquid. Each of these pump stations required an enclosure to protect the electronics and other components of the pump, and to reduce pump noise. In March 2014, Sunoco petitioned the PUC, requesting the Section 619 exemption from zoning, as noted above, for each of the pump stations (including the pump station in West Cornwall Township).

In the initial petitions, Sunoco described its ME1 service as being for the interstate transportation of NGLs. That was a problem: the PUC doesn’t have jurisdiction over interstate pipelines. So, in May 2014, the petitions were amended to state that intrastate service would be offered. Some of the 18 affected municipalities filed objections.

In July 2014, a panel of PUC Administrative Judges issued a decision ruling that Sunoco did not meet the definition of a “public utility corporation”, and the ME1 service was not a “public utility service”. Sunoco objected and was granted some exceptions in October 2014. The full PUC then decided to remand the petitions back to the Administrative Judges to hold further hearings to determine whether Sunoco really was a public utility, as it related to ME1.

But those hearings never took place. Instead, Sunoco (presumably fearing it would lose the case) withdrew its petitions and said it would deal with each municipality individually.

As the Court states in the CCLC case, “…the PUC never issued a final decision on whether Sunoco is a public utility corporation with regard to ME1 and whether the repurposing of ME1 for transporting NGLs constituted a public utility service.” This statement by Commonwealth Court may have implications for other cases and therefore may end up being an important outcome of this case, regardless of exactly what happens next in Lebanon County.