Dome Pipeline Corp. v. Public Service Com'n

• Decision Date: 18 May 1989
• Docket Number: Docket No. 100809
• Citation: 176 Mich.App. 227,439 N.W.2d 700
• Parties: , 103 P.U.R.4th 514 In the Matter of the Application of Dome Pipeline Corporation for Authority to Construct and Operate Dual Liquid Hydrocarbon Pipelines in Lenawee, Monroe and Wayne Counties. DOME PIPELINE CORPORATION, Guardian Industries Corporation and National Steel Corporation, Plaintiffs-Appellants, v. PUBLIC SERVICE COMMISSION, Michigan Consolidated Gas Company and Michigan Gas Utilities Company, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 700

439 N.W.2d 700

176 Mich.App. 227, 103 P.U.R.4th 514

In the Matter of the Application of Dome Pipeline

Corporation for Authority to Construct and Operate

Dual Liquid Hydrocarbon Pipelines in

Lenawee, Monroe and Wayne Counties.

DOME PIPELINE CORPORATION, Guardian Industries Corporation and National Steel Corporation, Plaintiffs-Appellants, v. PUBLIC SERVICE COMMISSION, Michigan Consolidated Gas Company and Michigan Gas Utilities Company, Defendants-Appellees.

Docket No. 100809.

Court of Appeals of Michigan.

Submitted Aug. 4, 1988.

Decided April 3, 1989.

Released for Publication May 18, 1989.

Conner, Harbour & Thomas, P.C. by Pat C. Conner and Francis E. Bentley, Ann Arbor, for Dome Pipeline Corp.

Alan L. Schlang, Northville, for Guardian Industries Corp., Northville.

Hill, Lewis, Adams, Goodrich & Tait by Robert B. Webster and Douglas H. West, Detroit, and Babst, Calland, Clements & Zomnir, P.C. by Richard M. Zomnir, of counsel, Pittsburgh, Pa., for Nat. Steel Corp.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Don L. Keskey and Henry J. Boynton, Asst. Attys. Gen., for Public Service Com'n.

Foster, Swift, Collins & Coey, P.C. by William K. Fahey, Lansing, and David P. Van Note and Daniel L. Schiffer, Detroit, for Michigan Consolidated Gas Co.

Honigman, Miller, Schwartz & Cohn by Daniel J. Demlow, Ronald E. Christian and Frederick M. Baker, Jr., Lansing, and William F. Braeuninger and John E. Palincsar, Monroe for Michigan Gas Utilities Co.

Before DANHOF, C.J., and CYNAR and DENEWETH, ^* JJ.

DENEWETH, Judge.

Plaintiffs appeal as of right from an order of the Michigan Public Service Commission denying Dome Pipeline's application for authorization to construct a lateral pipeline to connect Dome's existing pipelines to Guardian Industries Corporation for the purpose of making deliveries of liquid ethane.

Plaintiff Dome Pipeline Corporation is a Delaware corporation, authorized to transact business in Michigan, which is a wholly-owned subsidiary of Dome Petroleum Corporation, a North Dakota corporation, which is in turn wholly owned by Dome Petroleum, Ltd., a Canadian corporation. Dome Pipeline owns and operates the Eastern Delivery System (EDS), a liquid hydrocarbon pipeline system, in the United States, and is part owner, and sole operator, of those portions of the Cochin Pipeline System located within the geographical boundaries of the United States.

The Dome Pipeline system, or those portions here in question, consists of two 12 3/4-inch liquid hydrocarbon pipelines. The EDS runs from Marysville, Michigan, to Port Huron, across the international border to Sarnia, Ontario, then to Windsor, and then to Green Springs, Ohio. The Cochin Pipeline extends from Fort Saskatchewan, Alberta, to Sarnia, traversing North Dakota, Minnesota, Iowa, Illinois, Indiana, Ohio, Michigan, and Ontario. Through the majority of the Michigan routes, the two lines are parallel and occupy the same right of way. The two pipelines join at the Riga pump station in Lenawee County, proceed northeast to Detroit, then cross into Canada under the Detroit River.

From their inception, the Cochin and EDS systems have been used only for the transportation of material in liquid state, such as ethane, ethylene, propane and butane. Under Dome's Federal Energy Regulatory Commission tariffs, materials in other than liquid state may not be transported in this pipeline.

Plaintiff Guardian Industries is a Michigan corporation which operates a large glass manufacturing plant in Carlton, Michigan. The glass-making process requires large quantities of clean burning fuel. Guardian agreed to purchase liquid ethane from Dome Petroleum, as this represented a significant savings over the price charged by the local gas company, Michigan Gas Utilities Company, operating under PSC approved tariffs. Subsequently, Guardian arranged to purchase liquid ethane from other out-of-state producers.

Plaintiff Dome Pipeline was to transport the liquid ethane purchased by Guardian. Dome Petroleum would be acting as the agent for the five out- of-state suppliers. Dome petitioned the PSC for permission to construct the necessary lateral pipeline to Guardian Industries to allow for delivery of ethane in its liquid state. Special facilities are needed for receiving the gas and converting it to burnable form, since it arrives under extreme pressure, far different from ethane in the gaseous state in which this commodity is typically delivered to retail customers by utility companies. Dome contended that it was merely transporting gas already purchased by Guardian Industries from Guardian's own out-of-state suppliers, and that this transportation service was not subject to regulation by the PSC. The PSC, however, held that transportation of natural gas, whether in liquid or gaseous form, is subject to commission jurisdiction. The PSC determined that Dome Pipeline must first obtain a certificate of public convenience and necessity to transport the ethane.

The issue presented is whether an interstate common carrier of liquid hydrocarbons is a gas public utility under the public utility act, 1929 P.A. 69, M.C.L. Sec. 460.501 et seq.; M.S.A. Sec. 22.141 et seq., which must first obtain a certificate of public convenience and necessity before transporting liquid ethane to an industrial customer in Michigan. Plaintiffs maintain that the PSC has jurisdiction only if Dome Pipeline is a utility transporting gas for public use.

Plaintiffs first argue that liquid ethane is not a "gas" for purposes of the public utility act. Plaintiffs base this argument on definitions of "gas" found in the petroleum act, 1929 P.A. 16, M.C.L. Sec. 483.1 et seq.; M.S.A. Sec. 22.1341 et seq., the natural gas act, 1929 P.A. 9, M.C.L. Sec. 483.101 et seq.; M.S.A. Sec. 22.1311 et seq., and the public utility commission act, 1919 P.A. 419, M.C.L. Sec. 460.51 et seq.; M.S.A. Sec. 22.1 et seq. We find it unnecessary to review the definitions of "gas" found in these acts because we agree with defendants that the public utility act is not in pari materia with the other acts. Statutes are not in pari materia if their scope and aim are distinct and unconnected. Palmer v. State Land Office Board, 304 Mich. 628, 8 N.W.2d 664 (1943). We find that the PSC's decision that ethane is a gas, in this statutory context, is correct.

Plaintiffs also argue that ethane in its liquefied form and as handled, transported, and sold commercially is not within the common understanding of the term "gas." Physically and thermodynamically, ethane under pipeline conditions behaves as a liquid.

The PSC argues that the more salient question is the physical characteristics and use of the product being supplied. Ethane is a gas when taken from the ground and when used.

We find no merit to plaintiffs' argument that the common meaning of the term "gas" in its commercial sense excludes ethane. In Public Service Comm of the State of New York v. F.P.C., 177 U.S.App.D.C. 245, 543 F.2d 392 (1976), the gas in question was methane, but it had been manufactured from naphtha, a liquid. The court held that it was not natural gas. The PSC distinguished this case since the question presented was an interpretation of provisions of the Federal Natural Gas Act, which has no counterpart in Michigan law. The PSC felt that the case therefore had no bearing on the Michigan Legislature's understanding of the term "gas" as used in the public utility act. Also, the case is distinguishable because the commodity in question was the result of a chemical transformation rather than a simple change of physical state (as from gas to liquid).

Plaintiffs also cite Summers Appliance Co. v. George's Gas Co., Inc., 244 Ark. 113, 424 S.W.2d 171 (1968) (gas subject to regulation by the Arkansas Public Service Commission did not encompass liquid petroleum gas; thus, liquid petroleum distributors were not public utilities), and Allied New Hampshire Gas Co. v. Tri-State Gas & Supply Co., Inc., 107 N.H. 306, 221 A.2d 251 (1966) (liquid petroleum gas company not subject to regulation as a utility by the New Hampshire Public Utilities Commission). However, in the Summers Appliance case, the court was not dealing with liquefied natural gases (LNG) such as ethane, but with liquefied petroleum gases (LPG), butane and propane, which are distributed by truck, not by pipeline. In the Allied New Hampshire Gas Co. case, the court was also dealing with an LPG, namely propane. The court there noted that historically its public service commission had never regulated businesses distributing propane by truck. Thus, both of these cases are clearly distinguishable. We find that the ethane at issue here constitutes a "gas" for purposes of the public utility act.

We next address plaintiffs' argument that Dome Pipeline cannot be considered a public utility because it does not and will not provide a service to the public. Plaintiffs cite Michigan Consolidated Gas Co. v. Sohio Petroleum Co., 321 Mich. 102, 32 N.W.2d 353 (1948). We find the case distinguishable on two grounds. First, the Court there held that, in order to be a carrier for hire, a person must be equipped for carrying the property of other persons for compensation in some form. In that case, Sohio Petroleum Company was merely gathering and transmitting gas owned by it from its own wells. In the instant case, however, Dome Pipeline proposes to transport gas purchased by Guardian Industries, to which it will, on paper, have title, and which previously belonged to five major multinational gas companies. Thus, Dome Pipeline purports to be transporting the property of other persons, and is thus a carrier for hire.

Second, in the Sohio case, the Court held that a corporation which merely produced natural gas from its own wells, and piped and sold it to a single contract purchaser, was not engaged in the business of "buying and selling" natural gas, since it merely sold but did not buy. Again, in the...