Hughes v. UGI Storage Company

• Decision Date: 12 November 2020
• Docket Number: No. 453 C.D. 2019,No. 454 C.D. 2019,453 C.D. 2019,454 C.D. 2019
• Parties: Carl F. HUGHES and Ellen B. Hughes, h/w, and Bruce D. Hughes and Margaret K. Hughes, h/w, individually and on behalf of all others similarly situated, Appellants v. UGI STORAGE COMPANY John Albrecht, individually and on behalf of all others similarly situated, Appellant v. UGI Storage Company
• Court: Pennsylvania Commonwealth Court

243 A.3d 278

Carl F. HUGHES and Ellen B. Hughes, h/w, and Bruce D. Hughes and Margaret K. Hughes, h/w, individually and on behalf of all others similarly situated, Appellants

v.UGI STORAGE COMPANY

John Albrecht, individually and on behalf of all others similarly situated, Appellant

v.UGI Storage Company

No. 453 C.D. 2019

No. 454 C.D. 2019

Commonwealth Court of Pennsylvania.

Argued: December 11, 2019

Decided: November 12, 2020

Nicholas E. Chimicles and Andrew W. Ferich, Haverford, for Appellants.

Stanley Yorsz, Pittsburgh and J. David Smith, Williamsport, for Appellee

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE CHRISTINE FIZZANO CANNON, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE FIZZANO CANNON

Carl F. Hughes and Ellen B. Hughes, husband and wife, Bruce D. Hughes and Margaret K. Hughes, husband and wife, individually and on behalf of all others similarly situated, and John Albrecht, individually and on behalf of all others similarly situated (collectively, Appellants), appeal from the March 25, 2019 order of the Court of Common Pleas of Tioga County (trial court), which sustained the preliminary objections of UGI Storage Company (UGI) and dismissed Appellants’ respective petitions for appointment of a board of viewers pursuant to Section 502(c) of the Eminent Domain Code, 26 Pa.C.S. § 502(c). For the reasons that follow, we now affirm, albeit on other grounds.¹

Facts and Procedural History

This matter returns to this Court following our March 13, 2017 opinion and order vacating the trial court's April 4, 2016 orders sustaining UGI's preliminary objections and dismissing Appellants’ petitions for appointment of a board of viewers. See Hughes v. UGI Storage Company (Pa. Cmwlth., Nos. 629 and 630 C.D. 2016, filed March 13, 2017), 2017 WL 962449 ( 2017 Opinion ). The 2017 Opinion further directed that the matter be remanded to the trial court for an evidentiary hearing to address the potential impact of our Supreme Court's decision in Robinson Township v. Commonwealth , 637 Pa. 239, 147 A.3d 536 (2016) (known as Robinson IV ), as well as this Court's decision in In re Sunoco Pipeline, L.P. , 143 A.3d 1000 (Pa. Cmwlth.) ( Sunoco ), appeal denied , 164 A.3d 485 (Pa. 2016). The 2017 Opinion set forth the following underlying facts:

UGI [ ] filed an application with the Federal Energy Regulatory Commission (FERC) in 2009 seeking to operate underground natural gas storage facilities, including a gas storage field (the Meeker Storage Field). UGI further sought to delineate a 2,980[-]acre protective buffer zone (Meeker Buffer Zone) around the Meeker Storage Field. On October 10, 2010, FERC granted UGI's application to operate the Meeker Storage Field and certified portions of the Meeker Buffer Zone for those areas to which UGI had property rights. The FERC order indicated that UGI "may file a further application to include other areas within the certificated buffer zone at a later date, [after] complying with [FERC's] landowner notification requirements."^[2]

To date, UGI has not acquired rights to properties of the Appellants which are located within the Meeker Buffer Zone. UGI has further failed to implement the owner notification program as part of the eminent domain process, but has used and continues to use the benefit of the complete protective Meeker Buffer Zone.

On November 5, 2015, John Albrecht, on behalf of himself and a class of similarly[ ]situated individuals, filed a Class Action Petition with the trial court for the appointment of a [b]oard of [v]iewers pursuant to Section 502 of the [ ] Eminent Domain Code. ... On November 13, 2015, [the Hughes Appellants] filed an Amended Petition for the appointment of a [b]oard of [v]iewers pursuant to the [Eminent Domain] Code. All parties alleged that UGI effected a de facto taking of certain subsurface mineral rights within a buffer zone surrounding UGI's Meeker Storage Field—a buffer zone for which UGI sought certification and that was partially certified by FERC.

....

UGI thereafter filed preliminary objections for both matters on January 14, 2016, asserting that the Petitions should be dismissed on grounds that UGI does not have the power of eminent domain and Appellants did not establish a de facto taking occurred.

2017 Opinion, slip op. at 2-4 (citations and footnote omitted) (footnote added).

Following remand, the trial court conducted an evidentiary hearing on January 18, 2019. See Reproduced Record (R.R.) at 550a-81a. By opinion and order filed March 25, 2019, and amended April 23, 2019,³ the trial court again sustained UGI's preliminary objections and dismissed Appellants’ petitions seeking the appointment of a board of viewers for UGI's purported de facto taking of their subsurface mineral rights.

The trial court explained that the primary issue in the matter was "whether UGI possesse[d] the power of condemnation with regard to Appellants’ properties without a [c]ertificate of [p]ublic [c]onvenience issued by the appropriate regulatory body." Tr. Ct. Op., 3/25/19, at 1. The trial court noted Appellants’ allegation that UGI "had used its power of eminent domain, conferred upon it by [FERC], to take oil and gas rights in the Marcellus Shale and Utica Shale regions owned by said Appellants in Tioga County." Id. The trial court identified the three factors that must be established in order to have a de facto taking, namely that (1) the condemning party must have the authority to condemn, (2) there are exceptional circumstances that substantially deprive the property owner of the beneficial use and enjoyment of their land, and (3) the deprivation is the direct, necessary, and unavoidable result of the exercise of the power to condemn. Id. at 1-2. Ultimately, the trial court concluded that no de facto taking occurred here because UGI lacked the power to condemn and that it was not necessary to examine the remaining factors. Id. at 6.

In reaching this conclusion, the trial court concurred with UGI's contention that FERC is the controlling regulatory body herein, noting that FERC's exclusive jurisdiction over the transportation and sale of natural gas in interstate commerce for resale was authorized pursuant to Section 717(a) of the Natural Gas Act (NGA), 15 U.S.C. § 717(a). Tr. Ct. Op., 3/25/19, at 2. The trial court noted that Section 717f(h) of the NGA, 15 U.S.C. § 717f(h),⁴ grants the power of eminent domain to the holder of a certificate of public convenience and necessity that cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way. Tr. Ct. Op., 3/25/19, at 2. The trial court stated that "UGI has the power of eminent domain under the NGA after it has received [c]ertification from FERC." Id. In other words, "FERC and the NGA require that UGI [ ] obtain FERC certification relative to the Meeker Buffer Zone before it possesses the power of eminent domain." Id. at 3.

The trial court indicated that UGI's existing eminent domain power pertained solely to the land certified by FERC and that uncertified parcels of the Meeker Buffer Zone, such as Appellants’ properties, did not fall within FERC's regulatory scope. Id. Assuming, arguendo , that UGI operated under state jurisdiction, the trial court noted that the Pennsylvania Public Utility Commission (PUC), the state regulatory body, had not issued UGI a certificate of public convenience to include the Meeker Buffer Zone. Id.

Consistent with the remand directives set forth in the 2017 Opinion, the trial court reviewed the decisions in Robinson IV and Sunoco . With regard to Robinson IV , the trial court noted that the Pennsylvania Supreme Court declared Section 3241 of the Oil and Gas Act to be unconstitutional as it authorized a private corporation, which did not possess a certificate of public convenience, to take real property for the storage of natural gas.⁵ Tr. Ct. Op., 3/25/19, at 6. The trial court further noted that in Sunoco , this Court held that the issuance of a certificate of public convenience is prima facie evidence of the public need for a proposed service and authorizes the entity receiving the same to exercise the power of eminent domain. Tr. Ct. Op., 3/25/19, at 4 (citing Sunoco , 143 A.3d at 1018 ). The trial court then cited the following passage from Sunoco :

Jurisdiction over the certification and regulation of public utilities in the Commonwealth is vested in the PUC through the Public Utility Code.^{[6 ]} However, simply being subject to PUC regulation is insufficient for an entity to have the power of eminent domain. ... Section 1104 of the [Public Utility] Code, 66 Pa.C.S. § 1104, requires that a public utility must possess a [c]ertificate of [p]ublic [c]onvenience issued by [the] PUC ... before exercising the power of eminent domain.

Tr. Ct. Op., 3/25/19 at 4-5 (citing 143 A.3d at 1003 ). Ultimately, the trial court concluded that Robinson IV and Sunoco support its position that UGI was "not clothed with the power of eminent domain as to [ ] Appellants’ oil and gas rights in the [p]roperty." Tr. Ct. Op., 3/25/19, at 6.

Finally, the trial court addressed Section 1511(a)(3) of the Business Corporation Law of 1988 (BCL), 15 Pa.C.S. § 1511(a)(3), which grants a public utility "the right to take, occupy and condemn property" for storage of natural or artificial gas. Tr. Ct. Op., 3/25/19, at 5. The trial court noted that Section 1511(f) of the BCL, 15 Pa.C.S. § 1511(f), addresses the effect on other statutes and specifically provides that subsections (a) through (e) of Section 1511 "shall not be construed to ... affect or modify any of the provisions of ... [Section 1104 of the Public Utility Code,] 66 Pa.C.S. § 1104 (relating to certain appropriations by the right of eminent domain prohibited) ...." Id. The trial court stated that Section 1104 of the...