Indiana Farm Gas Production Co., Inc. v. Southern Indiana Gas and Elec. Co.

• Decision Date: 14 March 1996
• Docket Number: No. 93A02-9408-EX-476,93A02-9408-EX-476
• Citation: 662 N.E.2d 977
• Parties: Util. L. Rep. P 26,513 INDIANA FARM GAS PRODUCTION CO., INC., Appellant-Petitioner, v. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY and Office of Utility Consumer Counselor, Appellees-Respondents.
• Court: Indiana Appellate Court

Page 977

662 N.E.2d 977

Util. L. Rep. P 26,513

INDIANA FARM GAS PRODUCTION CO., INC., Appellant-Petitioner, v. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY and Office of

Utility Consumer Counselor, Appellees-Respondents.

No. 93A02-9408-EX-476.

Court of Appeals of Indiana.

March 14, 1996.

Appeal from the Indiana Utility Regulatory Commission; The Honorable John F. Mortell, Chairman, Cause No. 38239.

Robert L. Hartley, Jr., Timothy E. Hollingsworth, Mark A. Drummond, Henderson Daily Withrow & Devoe, Indianapolis, for appellant.

George A. Porch, Bamberger Foreman, Oswald & Hahn, Evansville, Daniel W. McGill, Barnes & Thornburg, Indianapolis, for Southern Indiana Gas and Electric Company.

OPINION

SHARPNACK, Chief Judge.

Indiana Farm Gas Production Company ("IFG") appeals the decision of the Utility Regulatory Commission ("Commission") dismissing its petition to require Southern Indiana Gas and Electric Company ("SIGECO") to transport gas from IFG's well. This is the third opinion that has been written in this case. The first two are reported as Southern Indiana Gas & Elec. Co. v. Indiana Farm Gas Prod. Co., 540 N.E.2d 621 (Ind.Ct.App.1989), reh'g granted, 549 N.E.2d 1063, trans. denied (hereinafter "Farm Gas I ") and Southern Indiana Gas & Elec. Co. v. Indiana Farm Gas Prod. Co., 549 N.E.2d 1063 (Ind.Ct.App.1990) (hereinafter "Farm Gas II ").

IFG raises several issues for our review which we reduce to the dispositive issue of whether the Commission had jurisdiction to resolve the dispute between these parties. We affirm.

The background for this appeal is well stated in Farm Gas I as follows:

"IFG is an Indiana corporation with offices in Evansville. SIGECO is a public utility engaged in the business of providing gas and electricity service to the public in portions of southwestern Indiana; its main offices are in Evansville.

SIGECO purchases most of its gas from Texas Gas Transmission Corporation, an interstate pipeline. SIGECO in conducting its business owns and operates an underground storage field, named Oliver Field, in Posey County. IFG leased a tract of land, which was adjacent to Oliver Field, and commenced drilling operations for natural gas. Natural gas was found and the well was named the Travers well.

IFG entered into a contract with Indiana Farm Bureau Cooperative Association, Inc., to sell gas produced from Travers well to Farm Bureau to be used at Farm Bureau's Mt. Vernon refinery. Farm Bureau is a customer of SIGECO, and SIGECO has a pipeline running from Oliver field to Farm Bureau. IFG does not have transmission pipeline facilities for natural gas of its own.

IFG filed a petition with the Indiana Utility Regulatory Commission, pursuant to I.C. 8-1-2-87.6, ¹ for an order requiring SIGECO to transport the gas from Travers well to Farm Bureau. IFG 'pre-filed' the evidence it intended to present at the hearing on the petition, pursuant to a pre-hearing order issued by the Commission.

SIGECO filed a motion to dismiss the petition for a want of jurisdiction since IFG failed to establish, either in the petition or in the 'pre-filed' evidence, that: 1) the gas at issue was 'Indiana produced natural gas;' or 2) IFG 'owned the gas.'

On August 12, 1987, the Commission denied the motion to dismiss. The Commission found that IFG presented a prima facie case by establishing in the pre-filed evidence that:

1) IFG was the owner of a lease to explore and extract natural gas; 2) the leasehold estate was in Indiana; 3) the well, which was drilled to extract the gas, was on the leasehold premises; 4) the gas was of pipeline quality; and 5) the transporting company, SIGECO, had adequate capacity to accept and transport the volume of gas involved. The Commission determined that proof of 1-3 was sufficient to give rise to rebuttable presumption that the gas was 'Indiana produced' and that the gas produced would be 'owned' by IFG.

The Commission based its conclusion on the assumption Indiana courts would likely apply the 'rule of capture' to storage gas, which is gas which has been previously severed from realty, but is injected into the ground for storage. Thus, IFG likely 'captured' the storage gas (assuming that the gas was storage gas) and 1-3 gave rise to a rebuttable presumption that the gas to be extracted will be 'owned' by IFG. The Commission also determined that the statute applied to both 'native gas' and 'storage gas.'

On September 1, 1987, SIGECO filed a petition for rehearing and reconsideration, or, in the alternative, to certify the legal issues to this court. On March 30, 1988, the Commission entered an order on SIGECO's petition granting in part and denying in part. The Commission granted the petition in part by determining that the statute should be applied only to 'native' gas and not 'storage' gas. The Commission denied the petition in all other respects."

Farm Gas I, 540 N.E.2d at 622-623 (footnote omitted).

On appeal, we first treated SIGECO's motion to dismiss as an Ind.Trial Rule 12(C) Motion for Judgment on the Pleadings. Because the Commission considered matters outside the pleadings (the "pre-filed" evidence), we then treated it as a motion for summary judgment under T.R. 56.

Agreeing with SIGECO, we reversed the Commission's order and remanded the case for an adjudication in favor of SIGECO on IFG's petition. Id. at 625. Specifically, we found:

"A petitioner, in a proceeding brought under this statute, has the burden of proving all essential elements. The issues of the situs of production and marketable title to the natural gas once extracted are threshold jurisdictional issues which must be proven by the petitioning party. The Commission is not authorized to answer these issues.

The above issues must either: 1) be without dispute; 2) have been established by agreement of the parties; or 3) have been conclusively established in a prior proceeding. Here, the petitioner could have elected to file an action for declaratory judgment in a trial court of general jurisdiction in order to determine the 'ownership' of the gas."

Id. Because the case required the Commission to determine whether the natural gas at issue was SIGECO's personal property or gas which was subject to being reduced to the possession and ownership of IFG, we held, "[u]ltimately this is a question of property law, which is outside the scope of delegated authority and expertise of the Commission." Id.

IFG filed a petition for rehearing with this court. On rehearing, we modified our decision. Farm Gas II, 549 N.E.2d at 1064. Specifically, we stated in part:

"After hearing oral argument we reconsider this matter, vacate portions of our previous opinion, and now remand to the Commission to proceed with a hearing on the merits.

* * * * * *

The dispositive issue upon rehearing is: Did this court improperly order summary judgments [sic] in favor of the moving party [SIGECO] which had not supported its motion by any affidavits or sworn testimony?

* * * * * *

In the original briefing of this matter SIGECO seemed to treat its motion as an Ind.Tr.R. 41(B) motion and IFG argued it as if it were an Ind.Tr.R. 12 motion. This Court decided to treat the motion as an Ind.Tr.R. 56 motion, and a review of the previous decision will explain why. We now stand by our decision that this matter should be treated as a Rule 56 motion. We do this because the Commission considered matters outside of the pleadings. Specifically, the Commission considered IFG's prefiled testimony.

In our original opinion we ordered the Commission to enter an adjudication in favor of SIGECO. We, in effect, ordered the Commission to grant summary judgment against the non-moving party, IFG, even though SIGECO had not supported its motion by affidavits or testimony as provided by Ind.Trial Rule 56(C) and (D).

The motion filed by SIGECO relied upon prefiled testimony submitted by IFG. After considering the oral arguments presented by the parties on the petition for rehearing, we find it was erroneous to rely upon the prefiled testimony as a basis for ordering judgment against IFG. The prefiled testimony was not given under oath. It may be changed or withdrawn until the witness appears at a hearing and swears that the prefiled testimony is his true testimony.

The Commission should hold a hearing upon the issues presented by IFG's petition including a determination of jurisdiction.

Therefore, we vacate the order previously entered and remand this matter back to the commission for further proceedings consistent with this revised opinion."

Id.

Upon remand, the Commission held an evidentiary hearing and then dismissed the case. The Commission concluded, on the authority of Farm Gas I, that it lacked jurisdiction over the disputed questions of property ownership upon which the resolution of the case depended. The Commission stated:

"Although the evidentiary record in the Cause is extensive, the portion of the original Court of Appeals opinion which was not vacated by the subsequent opinion on rehearing renders evaluation and weighing of this evidence unnecessary. Based on the pleadings and the evidence of record, it is clear that ownership of the gas in the Travers Well is in dispute, and that Petitioner has not conclusively established its ownership in an action for declaratory judgment in a trial court of general jurisdiction.... Based upon the evidence of record, taken together with the two Court of Appeals opinions, we find that Petitioner has failed to invoke jurisdiction pursuant to I.C. 8-1-2-87.6 and that its Petition must therefore be dismissed."

Record, pp. 648-649. IFG now appeals the Commission's dismissal.

We need not address the merits of IFG's arguments concerning the jurisdiction of the Commission and the applicability of the rule of capture to storage gas because we are bound by our holding in Farm Gas I that the Commission lacked jurisdiction through the "law of the case" doctrine. Under this doctrine, an appellate court's...