Coastal States Gas Transmission Co., Inc. v. Alabama Public Service Com'n

• Decision Date: 08 April 1988
• Citation: 524 So.2d 357
• Parties: COASTAL STATES GAS TRANSMISSION COMPANY, INC. v. ALABAMA PUBLIC SERVICE COMMISSION, et al. 86-1129.
• Court: Alabama Supreme Court

Page 357

524 So.2d 357

93 P.U.R.4th 546

COASTAL STATES GAS TRANSMISSION COMPANY, INC. v. ALABAMA PUBLIC SERVICE COMMISSION, et al.

86-1129.

Supreme Court of Alabama.

April 8, 1988.

G. Sage Lyons and Charles L. Miller, Jr. of Lyons, Pipes & Cook, Mobile, for appellant.

Thomas L. Stewart and Michael G. Kendrick of Gorham, Waldrep, Stewart & Kendrick, Birmingham, for appellee Alabama Public Service Comm'n.

Joseph S. Johnston of Johnston, Hume & Johnston, Mobile, and Robert C. Black of Hill, Hill, Carter, Franco, Cole & Black, Montgomery, for appellee Mobile Gas Service Corp.

Dudley C. Reynolds, and Haydn M. Trechsel of Bradley, Arant, Rose & White, Birmingham, for amicus curiae Alabama Gas Corp.

BEATTY, Justice.

This is an appeal by Coastal States Gas Transmission Company, Inc. ("Coastal States"), from an order of the Montgomery Circuit Court. That order upheld an order of the Alabama Public Service Commission ("Commission") that required Coastal States to comply with Commission regulations before selling natural gas to industrial customers in Mobile.

Coastal States is a subsidiary of Coastal Corporation. Coastal States owns and operates pipelines in connection with its sales of natural gas to select customers under private contracts. Coastal States entered into private gas purchase and sale contracts with Mobile Bay Refining Company and Union Carbide Corporation. Pursuant to these contracts, Coastal States constructed a pipeline 4,100 feet in length from the Union Carbide plant to the Phillips Petroleum pipeline and constructed another pipeline along Viaduct Road in Mobile from the Phillips Petroleum pipeline to Mobile Bay Refining Company. Coastal States has contacted certain industrial customers of Mobile Gas Service Corporation: Mobile Bay Refining Company; Union Carbide Corporation; Alabama Dry Dock and Shipbuilding Company; Scott Paper Company International Paper Company; Eagle Chemical; Diamond Shamrock; and American Cyanamid. It seems clear from testimony adduced by Coastal States' vice president that Coastal States intended to sell natural gas to whatever customers were available if it could make money doing so.

The cause was begun by a complaint filed with the Commission by Mobile Gas Service Corporation ("Mobile Gas"), which requested that the Commission declare Coastal States a utility and prohibit it from constructing "any plant, property, or facility for the sale, delivery, or furnishing" of gas without a certificate of convenience and necessity. In due course, a hearing was held, after which the Commission held that Coastal States was a utility under Code of 1975, § 37-4-1, that it must file tariffs, and that it must comply with other regulations prior to serving any customer.

That order was appealed to the Montgomery Circuit Court, which affirmed the order of the Commission.

The Commission and Mobile Gas argue that the activities of Coastal States, described above, place it within the definition of a "public utility" provided by Code of 1975, § 37-4-1(7):

"(7) Utility. Such term shall mean and include every person, not engaged solely in interstate business, that now or may hereafter own, operate, lease or control:

"...

"b. Any plant, property, or facility for the manufacture, storage, distribution, sale, or furnishing to or for the public of natural or manufactured gas for light, heat or power or other uses."

Each party argues that the substantial weight of the evidence below was in its favor. Since the controlling issue is one of law, however, i.e., whether Coastal States is a "utility," this Court is not bound to apply a presumption that the Commission's order is just and reasonable. Vann Express, Inc. v. Bee Line Express, Inc., 347 So.2d 1353 (Ala.1977).

Is Coastal States a public utility subject to the jurisdiction of the Commission? At bottom, this question is one of the interpretation of the phrase "to or for the public" contained in § 37-4-1(7)(b).

The subject is not a novel one in this jurisdiction. In Alabama Power Co. v. Cullman County Electric Membership Corp., 234 Ala. 396, 174 So. 866 (1937), this Court was called upon to decide whether the Cullman County Electric Membership Corporation was, as the term was defined in § 9742 of the Code of 1923, a "public utility." It should be noted that the definition of a public utility in the Code of 1923 is identical to that contained in the Code of 1975. It was contended by Alabama Power Company that the Cullman County Electric Membership Corporation was a public utility operating without a certificate of convenience and necessity in competition with Alabama Power Company's business. This Court held that because the statute creating the Cullman County Electric Membership Corporation authorized it to act as a utility in specific terms, its operations were controlled by the statute creating it, rather than by the laws governing public utilities in general. In recognizing this exception to the public utility statutes, this Court compared the functions of municipal corporations with those of quasi-public corporations and added:

"It is contemplated in both that all the inhabitants in the described territory shall be eligible to obtain the service by complying with the reasonable conditions. So that they are both serving and constituted to serve the public in that area--an essential element of a utility, State ex rel. Wood v. Consumers' Gas Trust Co., 157 Ind. 345, 61 N.E. 674, 55 L.R.A. 245." 234 Ala. at 401, 174 So. at 869.

In Southern Liquid Gas Co. v. City of Dothan, 253 Ala. 350, 44 So.2d 744 (1950), this Court commented again upon the nature of a public utility. In that case, the plaintiff gas company sought to recover certain money it had paid the city, under protest, as business license fees based upon gross receipts, when, as it alleged, it was not a public utility, even though it distributed artificial gas by tanks, drums, etc. Thus, plaintiff contended, as applied to it the ordinance under which those fees were imposed was void. This Court wrote:

"[Plaintiff sought to recover] on the theory that a license was exacted from the plaintiff under an ordinance adopted by the municipality prescribing a license against those engaged in the gas distributing business and that the city adopted the ordinance under authority of § 745, Title 37, Code of 1940, as amended [to read as follows:] 'Public utilities.--The maximum amount of privilege or license tax which the several municipalities within the state may ... assess and collect of ... gas companies ... shall not exceed three percent of the gross receipts of the business ... in the municipality for the preceding year. ...' Pursuing the foregoing theory it is alleged [in the complaint] that the plaintiff is not a public utility and therefore cannot be taxed under an ordinance alleged to have been adopted pursuant to the statute. It is argued that it must be assumed on demurrer that the ordinance was so adopted."

253 Ala. at 353, 44 So.2d at 746-47. In deciding that the allegations of the pertinent counts failed to state causes of action, this Court added:

"The true question to be decided is whether the city has the power to adopt the ordinance. The pleader cannot restrict this question by alleging that the ordinance was adopted under one statute if the city had the right to adopt the ordinance under another statute. A demurrer ... does not admit erroneous conclusions of law. ..."

253 Ala. at 353-54, 44 So.2d at 747. The Court then explained why the demurrer was not well taken:

"There can be no doubt that the city had ample authority subject to constitutional restrictions to provide a license under the provisions of § 735 [authorizing municipalities to license businesses, etc.]. It is true that the amount of the license tax is the amount provided for in § 745 [establishing the maximum amount of license tax imposed by a municipality upon public utilities] ... but this does not mean that the amount in § 745 [not to exceed 3% of gross receipts per year] could not be used in fixing the amount under § 735."

253 Ala. at 354, 44 So.2d at 747. It was apparently argued by the City of Dothan that the demurrer was sufficient because on its face the complaint (count 2) showed that the plaintiff was a public utility. The Court rejected that argument with this pertinent discussion of the then-statutory definition, which is identical to the present one:

"The statute, § 302, Title 48, Code of 1940, defines 'the term "utility," when used in this chapter, [to] mean and include every person, not engaged solely in interstate business that now or may hereafter own, operate, lease or control * * * (4) Any plant, property, or facility for the manufacture, storage, distribution, sale or furnishing to or for the public of natural or manufactured gas for light, heat or power or other uses.' In discussing subsection (3) of this statute, formerly § 9742(3) of the Code of 1923, this court pointed out that a corporation organized under general laws applicable to all corporations even though it has the power to engage in the utility business, is not a utility until it engages in such service or holds itself out to do so. Alabama Power Co. v. Cullman County Electric Membership Corp., 234 Ala. 396, 174 So. 866. In the foregoing case it was further shown that an essential element of a utility is that it is both serving and is constituted to serve all the inhabitants in the area who comply with reasonable conditions. In the case at bar there is nothing to show that appellant was organized as a utility or is acting as such. The mere fact that it is 'a gas distributing company, distributing artificial gas by tanks, drums, cylinders or otherwise' does not show that it must do so upon compliance by its customer with certain conditions."

253 Ala. at 354, 44 So.2d at 747.

In Miller v. Hillview Water Works Project, Inc., 273 Ala. 267, 139 So.2d 337 (1962), this Court once again commented upon the nature of a...