Ohio Valley Jobs Alliance, Inc. v. Pub. Serv. Comm'n of W. Va.

• Decision Date: 01 November 2018
• Docket Number: No. 18-0249,18-0249
• Court: West Virginia Supreme Court
• Parties: Ohio Valley Jobs Alliance, Inc., Richard Goodman, Frances Olenick, Joseph Olenick, David Dami, Jamie Vanhorn, and Jason Nuzum, Petitioners v. The Public Service Commission of West Virginia, West Virginia State Building and Construction Trades Council, AFL-CIO, ESC Brooke County Power I, LLC, and West Virginia Oil and Natural Gas Association, Respondents

Ohio Valley Jobs Alliance, Inc., Richard Goodman, Frances Olenick,Joseph Olenick, David Dami,Jamie Vanhorn, and Jason Nuzum, Petitioners v. The Public Service Commission of West Virginia,

West Virginia State Building and Construction Trades Council, AFL-CIO,

ESC Brooke County Power I, LLC,

and West Virginia Oil and Natural Gas Association, Respondents

No. 18-0249

STATE OF WEST VIRGINIA SUPREME COURT OF APPEALS

November 1, 2018

(Public Service Commission of West Virginia No. 17-0521-E-CS)

MEMORANDUM DECISION

Petitioners Ohio Valley Jobs Alliance (OVJA), Richard Goodman, Frances Olenick, Joseph Olenick, David Dami, Jamie Vanhorn and Jason Nuzum appeal the Public Service Commission of West Virginia (Commission) order granting a siting permit to ESC Brooke County Power I, LLC (ESC Brooke) for construction and operation of a natural gas powered wholesale electric generating facility in Brooke County, West Virginia.¹ Petitioners allege the Commission should have required ESC Brooke to submit a hypothetical tax estimate as part of its application, and that the Commission otherwise erred in finding that the project did not offend the public interest, and that the project would have a substantial positive impact on the local and state economies. While we agree with Petitioners that the Commission should have required the hypothetical tax estimate, weaffirm given the substantial and uncontroverted weight of the evidence in favor of granting the siting permit.²

Because this case does not present a new or significant issue of law, and for the reasons set forth herein, we find this case is suitable for disposition in a memorandum decision pursuant to Rule 21(c) of the West Virginia Rules of Appellate Procedure.

I. Facts and Procedural History

Pursuant to West Virginia Code § 24-2-11c (2018 Repl. Vol.), ESC Brooke filed an application with the Commission for a siting permit authorizing the construction and operation of a natural gas powered wholesale electric generating facility.³ The proposed plant is not a public utility, but rather a federally authorized and regulated exempt wholesale generator (EWG). So, ESC Brooke will not make retail sales to West Virginians, and therefore the project will not affect ratepayers. Instead, ESC Brooke will make wholesale sales on the open energy market. ESC Brooke remains wholly responsible for the costs of construction of the proposed plant, which are estimated to be $884 million.

The proposed plant location is a twenty-acre portion of the Cross Creek Wildlife Management Area in Brooke County, owned by the West Virginia Division of Natural Resources (WVDNR). ESC Brooke and WVDNR entered into an Option to Lease Real Property relating to the twenty acres. The Lease Agreement and a Master Sublease Agreement with the Brooke County Commission provide for a minimum lease payment to the Brooke County Commission of approximately $19 million dollars over a thirty-year period for use of the property, and additional compensation of $1 million dollars at the closing of the project's financing.

ESC Brooke, the Brooke County Commission, the Brooke County Board of Education, the Sheriff of Brooke County, and the Assessor of Brooke County entered intoa PILOT (Payment In Lieu of Taxes) Agreement.⁴ The PILOT Agreement states that ESC Brooke is exempt from ad valorem property taxes for a period of thirty years, and instead will make payments in lieu of taxes to be distributed to the Brooke County Board of Education and the Brooke County Commission. The property, being owned by the WVDNR, does not produce any ad valorem tax revenue at present, but the project would generate a minimum of $7,331,751 over the thirty-year term, subject to a CPI escalator of a minimum 2.5% per year. Evidence was presented to the Commission indicating that this type of agreement is designed to make West Virginia more competitive than, or at least on equal footing for business ventures with, for example, Pennsylvania, which has a different and more lenient tax calculation for electrical power generation as well as lower property taxes than that of Brooke County, which borders Pennsylvania.

ESC Brooke's extensive application contains a thorough explanation of the site location decision, environmental impact analysis, the PILOT Agreement, associated leases, and a lengthy discussion of the anticipated economic impact of the proposed project among other things. The Commission conducted a tour of the proposed site with representative parties and held a public comment hearing. Consistent with the procedural schedule set forth in a June 30, 2017 order, the parties were directed to file briefs and the Commission held an evidentiary hearing. The day before the evidentiary hearing, ESC Brooke, the West Virginia State Building and Construction Trades Council, AFL-CIO (Trades Council), the Commission staff attorneys, WVONGA, and the Department of Commerce filed a Joint Stipulation and Agreement for Settlement, jointly recommending that the siting permit be granted, subject to certain conditions.

ESC Brooke also represented that it had entered into a Memorandum Agreement with the Trades Council for which it sought Commission approval. The Memorandum Agreement ensures that to the extent reasonably possible, the workers used in the construction of the facility will be local workers who will be paid union wages. The Memorandum Agreement was admitted into evidence at the evidentiary hearing, which lasted for two days.

ESC Brooke presented its case for the siting permit, reiterating the points made in its application and appendix that detailed the practical aspects of the project such as gas procurement and construction.⁵ It also presented witness testimony as to the economic impacts to Brooke County and to West Virginia. Tom S. Witt, Ph.D, aneconomist, testified concerning the economic impact of the project. Dr. Witt generated a report projecting that a three-year construction period would result in 3,795 job years, $263.2 million in employee compensation, and $331 million in value added. Dr. Witt projected that in the first full year of the plant's operation, the project would result in 1,164 full and part-time jobs, $73.3 million in employee compensation, and $112.7 million in value added. He also estimated that $177.5 million per year of natural gas would be sourced through long-term fuel agreements, in addition to a gas interconnection at a cost of $55 million. Consequently, the total economic impact is estimated to be more than $880 million during construction and $287.4 million during operation. Moreover, the Trades Council, the Department of Commerce, WVONGA, the WVDNR, and even the Commission staff all presented witnesses whose testimony supported the substantial positive economic impact of the project.

As to the tax abatement under the PILOT Agreement, Commission staff requested that ESC Brooke provide an analysis of the hypothetical taxes it would have paid without aid of the tax abatement. ESC Brooke responded that the project would not be built in West Virginia without the PILOT agreement, but rather would simply be moved 800 feet into Pennsylvania for construction there because of that state's more lenient tax structure. Specifically, at the evidentiary hearing, ESC Brooke contended:

1. The [WVDNR] is not selling the property but leasing it to [ESC Brooke] and has not offered to sell the property.

2. In the event the [WVDNR] was selling the property, it is vacant, has no infrastructure, is not improved, and is a former coal mine site.

3. [ESC Brooke] would not own and develop the power plant without the PILOT [Payment in lieu of taxes agreement] and . . . no other prospective purchasers have approached the [WVDNR] to acquire the land, so presumably ad valorem taxes would still be $0.

After considering the evidence presented, the Commission entered an order on February 20, 2018, granting the siting certificate subject to the conditions outlined in the Joint Stipulation proposed by all parties save the Petitioners herein, and also subject to theMemorandum Agreement between ESC Brooke and the Trades Council. This appeal followed.

II. Standard of Review

We employ a highly deferential standard of review when examining an order of the Public Service Commission:

" ' "[A]n order of the public service commission based upon its finding of facts will not be disturbed unless such finding is contrary to the evidence, or is without evidence to support it, or is arbitrary, or results from a misapplication of legal principles." United Fuel Gas Co. v. The Public Service Commission, 143 W. Va. 33, 99 S.E.2d 1 (1957).' Syllabus Point 5, in part, Boggs v. Public Service Comm'n, 154 W. Va. 146, 174 S.E.2d 331 (1970)." Syllabus Point 1, Broadmoor/Timberline Apartments v. Public Service Commission, 180 W. Va. 387, 376 S.E.2d 593 (1988).⁶

As we have explained, our role is not to substitute our judgment for that of the Commission:

In reviewing a Public Service Commission order, we will first determine whether the Commission's order, viewed in light of the relevant facts and of the Commission's broad regulatory duties, abused or exceeded its authority. We will examine the manner in which the Commission has employed the methods of regulation which it has itself selected, and must decide whether each of the order's essential elements is supported by substantial evidence. Finally, we will determine whether the order may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable. The court's responsibility is not to supplant the Commission's balance of these interests with one more nearly to its liking, but instead to assure itself that theCommission has given reasoned consideration to each of the pertinent factors.⁷

Ultimately, we summarize our analysis as follows: "(1) whether the...