Big K Corp. v. Public Service Com'n of Utah

• Decision Date: 28 September 1984
• Docket Number: No. 18643,18643
• Citation: 689 P.2d 1349
• Parties: BIG K CORPORATION, dba Diamond Transport, Plaintiff, v. PUBLIC SERVICE COMMISSION OF UTAH; Brent H. Cameron, Chairman, David R. Irvine, Commissioner, and James M. Byrne, Commissioner, Defendants.
• Court: Utah Supreme Court

Page 1349

689 P.2d 1349

BIG K CORPORATION, dba Diamond Transport, Plaintiff, v. PUBLIC SERVICE COMMISSION OF UTAH; Brent H. Cameron Chairman, David R. Irvine, Commissioner, and James M. Byrne, Commissioner, Defendants.

No. 18643.

Supreme Court of Utah.

Sept. 28, 1984.

Merlin O. Baker, A. Robert Thorup, Irene Warr, Salt Lake City, for plaintiff.

David L. Wilkinson, Atty. Gen., Stephen Lewis, C. Reed Brown, William S. Richards, Mark Boyle, Donald B. Holbrook, Elizabeth Haslam, Randall N. Skanchy, Salt Lake City, for defendants.

STEWART, Justice:

The plaintiff, Big K Corporation dba Diamond Transport, a motor common carrier, applied to the Utah Public Service Commission for a certificate of convenience and necessity to transport fluids used in drilling wells for oil over irregular routes between points within the state of Utah, with the exception of Uintah and Duchesne Counties. The PSC denied the application, holding that Big K had failed to show that the service provided by existing carriers was deficient. On this appeal, Big K argues that the Commission misconstrued the "deficiency of service" standard and therefore failed to determine whether Big K's proposed service would provide a better service to shippers in northern and central Utah than is provided by the existing carriers. We hold that the Commission erred as a matter of law in its construction of the "deficiency of service" standard.

I.

Prior to its application to the Utah PSC, Big K had obtained authority from the Public Service Commission of Wyoming to transport drilling fluids between points within the state of Wyoming. Big K was also authorized by the Interstate Commerce Commission to transport drilling fluids between the states of Utah, Wyoming, Colorado, and Idaho.

Big K's application for intrastate authority in Utah was protested by eight drilling fluid carriers. ¹ Its proposal was to use one of its existing terminals in Evanston, Wyoming, to service recently developed northeastern Utah oilfields located in the newly discovered and partially developed Overthrust Belt area, and it also proposed to open a new terminal in Holden, Utah, to service new drilling activity in central Utah. The terminals of all but one of the protestants are located near Vernal in proximity to the eastern Utah oil fields, which are old, established areas of oil exploration and production. ² Those fields are separated from the northeastern areas by the Uintah Mountains. Land transportation between Vernal and the latter fields is long and round-about.

Big K operates a fleet of thirty-one trucks for hauling drilling fluids. Drilling activity has increased in Utah significantly over the past twenty years. From 1976 to 1981, drilling activity increased statewide some 165%. The Commission found that drilling activity would likely continue to increase in the future because of the discoveries in the Overthrust Belt which is thought to extend the length of the state. The Overthrust Belt is one of the major oil discoveries in the continental United States during the past several decades.

In support of its application, Big K adduced the testimony of six shippers who supported the proposed service. Three oil drillers who operated in areas distant from Vernal testified that the long distances the drilling fluids were hauled had caused them delays, increased their expenses, and compounded the problems of adequate water service. Big K also adduced evidence that oil drilling in Utah had increased consistently over the past two decades and was likely to continue to increase.

The protestants sought to establish that no need existed for additional service in northeastern and central Utah. Their evidence indicated that they were able and willing to provide additional service to the shippers located in the areas Big K proposed to serve, that their equipment for transporting oil drilling fluids was under-utilized, and that they had not refused service to any shipper.

In a two-to-one decision, with Commissioner David Irvine concurring and dissenting, the Commission held that Big K met the requisite fitness criteria to qualify for a certificate of public convenience and necessity. Specifically, Big K was found to be financially stable; its prior operations were in compliance with the various regulatory provisions of the law, and its operational capabilities were sufficient to enable it to perform the proposed service. The Commission also ruled, however, that there was no public need for the additional service. The Commission stated:

We now turn to the second requirement, public need for the proposed service. This requirement normally causes new applicants the most trouble. It puts a considerable burden on an applicant because, if the proposed service duplicates that existing, we have consistently held that an applicant must show either deficiencies in the existing service (something more than sporadic, de minimis failures), or a prospective growth in the market sufficiently substantial to justify additional service....

What may be loosely termed the "deficiency in service" requirement does afford existing carriers considerable protection from increased competition. It also protects their investment in operating rights, which may be substantial.

In addition, the Commission found that "drilling activity in Utah will likely continue to increase, [and the] potential need for additional service of the type sought in the application [and] the present and immediately foreseeable level of activity" did not indicate a need for additional service. The Commission also found that the equipment of the protestants was under-utilized and that they had not refused to service the shipping public. The Commission concluded that Big K had failed to show a public need for the proposed service because there was no "deficiency of service."

Commissioner Irvine concurred in the findings and conclusion that Big K met the fitness criteria, but dissented on the standard to be applied in determining public need. In his view, the majority misconstrued this Court's holding in Lake Shore Motor Coach Lines, Inc. v. Bennett, 8 Utah 2d 293, 333 P.2d 1061 (1958). Specifically, he disagreed with the majority that Lake Shore required a finding of a "deficiency of service," at least as the Commission construed that term, before the Commission could grant new authority. He contended that a deficiency of service was only one factor among several to be weighed in determining whether public convenience and necessity required the authorization of new service.

II.

It is axiomatic that we accord the ruling of the Public Service Commission differing degrees of deference according to the nature of the issue reviewed. Utah Department of Administrative Services v. Public Service Commission, Utah, 658 P.2d 601, 608-09 (1983). With respect to factual issues, the scope of our inquiry is whether the findings are supported by substantial evidence. We will not reweigh conflicting evidence. It is our duty to determine only whether there is substantial evidence to support a finding. See id. at 608-09; Harry L. Young & Sons, Inc. v. Public Service Commission, Utah, 672 P.2d 728, 729 (1983). In determining whether the Commission correctly construed general principles of law, whether statutory or case law, we generally do not defer to the Commission. Utah Department of Administrative Services v. Public Service Commission, Utah, 658 P.2d 601, 608 (1983); Utah Light & Traction Co. v. Public Service Commission, 101 Utah 99, 118 P.2d 683 (1941); Mulcahy v. Public Service Commission, 101 Utah 245, 117 P.2d 298 (1941). Cf. Trotta v. Department of Employment Security, Utah, 664 P.2d 1195, 1198 (1983). Even with respect to the Commission's construction of its organic statute, we do not defer unless the Commission by virtue of expertise and experience with the regulatory scheme is in a superior position to give effect to the regulatory objectives to be achieved or the terms of the statute make clear that the Commission was intended to have broad discretion in construing those terms. Salt Lake City Corp. v. Department of Employment Security, Utah, 657 P.2d 1312, 1316 (1982).

In reviewing the Commission's application of the "deficiency of service" test in the motor carrier industry, we are concerned with the terms of the governing statute and our own case law construing that statute with respect to the extent to which the statute contemplated that regulation rather than competition was to be relied upon to further the public interest in motor common carriage.

III.

The Motor Vehicle Act of 1935 subjected the motor carrier industry to governmental regulation as the primary means of protecting and furthering the public interest. ³ Prior thereto, the policy of the state was to rely upon the forces of competition in a free market place, subject to the general protection of the antitrust laws, to provide reasonable rates and adequate service. Under the new statutory policy, free entry into the market place was displaced by entry wholly controlled by the Public Service Commission. U.C.A., 1953, § 54-6-5 empowers the Commission to authorize new service by granting a certificate of convenience and necessity if the Commission finds that "the public convenience and necessity require the proposed service or any part thereof." "Necessity" means "reasonably necessary and not absolutely imperative.... Any service or improvement which is desirable for the public welfare and highly important to the public convenience may properly be regarded as necessary." Mulcahy v. Public Service Commission, 101 Utah 245, 250-51, 117 P.2d 298, 300-01 (1941).

The issue in this case is whether the public convenience and necessity would be served by granting new authority to Big K or whether existing carriers should be protected from that competition. Lake Shore Motor Coach Lines, Inc. v. Bennett, 8 Utah 2d 293, 297, 333 P.2d 1061, 1063 (1958), set out the following...