Petition of South Jersey Gas Co.

• Decision Date: 06 July 1988
• Citation: 544 A.2d 402,226 N.J.Super. 327
• Parties: , 95 P.U.R.4th 525 In Matter of the Petition of SOUTH JERSEY GAS COMPANY against Sunolin Chemical Company and the B.F. Goodrich Company.
• Court: New Jersey Superior Court — Appellate Division

Page 327

226 N.J.Super. 327

544 A.2d 402, 95 P.U.R.4th 525

In Matter of the Petition of SOUTH JERSEY GAS COMPANY

against Sunolin Chemical Company and the B.F.

Goodrich Company.

Superior Court of New Jersey Appellate Division.

Argued June 2, 1988.

Decided July 6, 1988.

Michael T. Mishkin, Washington, D.C., for appellants SunOlin Chemical Co. and The B.F. Goodrich Co. (McCarter & English, Newark, attorneys, Richard C. Cooper and Steven N.J. Wlodychak, Newark, of that firm, on the brief, Squire, Sanders & Dempsey, Washington, D.C., counsel pro hac vice, Keith R. McCrea and Michael T. Mishkin, Washington, D.C., of that firm, also on the brief).

Judith B. Appel, Deputy Atty. Gen., for respondent New Jersey Bd. of Public Utility Com'rs (W. Cary Edwards, Atty. Gen., attorney, Andrea M. Silkowitz, Asst. Atty. Gen., of counsel, Judith B. Appel, on the brief).

Ira G. Megdal, Cherry Hill, for respondent South Jersey Gas Co. (Davis, Reberkenny & Abramowitz, attorneys, Ira G. Megdal, David R. Oberlander and Arthur E. Donnelly, III, on the brief).

James R. Lacey, Newark, for intervenor Public Service Elec. and Gas Co. (James R. Lacey and Shawn P. Leyden, attorneys).

Kenneth P. Westreich, Roseland, for intervenor New Jersey Natural Gas Co. (Conway, Reiseman, Mattia & Sharp, attorneys).

Intervenors Public Service Elec. and Gas Co., New Jersey Natural Gas Co. and Elizabethtown Gas Co. filed a joint brief, James R. Lacey and Shawn P. Leyden, Newark, Kenneth P. Westreich and Nicholas W. Mattia, Jr., Roseland, Mary Patricia Keefe and Paul J. Chymiy, Elizabeth, on the brief.

Before Judges FURMAN, BRODY and SCALERA.

The opinion of the court was delivered by

SCALERA, J.A.D.

This case involves a consideration of the right of the New Jersey Board of Public Utility Commissioners (Board) to assume jurisdiction to regulate as a public utility the activities of a supplier of methane-rich fuel in this State.

SunOlin Chemical Company (SunOlin) and B.F. Goodrich (Goodrich) are appealing the decision of the Board holding that SunOlin is a public utility because it is providing such product "for public use." We affirm.

SunOlin is a chemical company that processes refinery "off gasses" into industrial gasses like hydrogen and ethylene. In so doing, it also produces a methane-rich gas that can be burned as fuel in place of natural gas. In 1986 SunOlin entered into a contract to sell this type of fuel to Goodrich. As a result, on February 13, 1987, South Jersey Natural Gas (So. Jersey) filed a petition with the Board seeking to restrain this sale to Goodrich, to which So. Jersey had previously sold natural gas as a fuel.

The Board transmitted the matter to the Office of Administrative Law for a determination of whether SunOlin was a public utility subject to the jurisdiction of the Board. Intervenor status was accorded to several public utilities as well as others, including the rate counsel from the Public Advocate, the Department of Commerce and Economic Development, New Jersey Industrial Energy Users, the Industrial Customer Group, Public Service Electric and Gas Company (PSE & G), New Jersey Natural Gas Company (N.J. Natural Gas) and Elizabethtown Gas Company (Elizabethtown).

SunOlin stipulated before the Administrative Law Judge (ALJ) both that it "owns, operates, manages or controls pipeline or gas system, plant or equipment in the State of New Jersey" and further that it "operates under privileges granted by this state or a political subdivision thereof" as provided by N.J.S.A. 48:2-13. Thus, the only remaining issue became whether its activities amounted to a "public use" as required by that statute for the Board to acquire jurisdiction. On June 10, 1987, the ALJ issued his initial report in which he recommended that the Board treat SunOlin as a public utility within the meaning of N.J.S.A. 48:2-13.

The Board followed this recommendation commenting that SunOlin's activities were "clothed in the public interest to such an extent as to require" its regulation and ordered SunOlin to cease and desist from sales of such methane-rich fuel in New Jersey without Board approval. This appeal follows and involves the participation of various parties as noted by their appearances above.

So. Jersey is a regulated public utility engaged in natural gas distribution in all or part of the seven southern counties of the State, serving 180,000 customers, of which 16 are large-volume industrial customers. Its total gas sales revenue for 1986 was approximately $220 million and its net income for that year was approximately $10 million.

Goodrich's Pedricktown plant, which manufactures polyvinyl chloride resins and acrylic latexes, is located within So. Jersey's franchised territory. The plant has been purchasing gas from So. Jersey for use in its process dryers on a non-interruptible basis under a large-volume tariff and also uses interruptible gas in its boilers.

SunOlin operates its facility in Claymont, Delaware, adjacent to the Sun Refining and Marketing Company's Marcus Hook, Pennsylvania refinery. It processes refinery off-gasses into ethylene, ethylene oxide, hydrogen, carbon monoxide and carbon dioxide. Incident thereto, it also harvests a quantity of salable methane-rich material, the subject of the present controversy. SunOlin also owns a pipeline system consisting of eight lines running across the Delaware river into New Jersey, one of which was a spare six-inch stainless steel line. This pipe now carries the methane-rich fuel to Goodrich and continues south to DuPont's Chambers works in Deepwater. The rest of the pipes are used to carry other products such as nitrogen, hydrogen and petroleum products.

In the beginning of July 1983, Goodrich, seeking to lower its fuel costs, had met unsuccessfully with So. Jersey concerning transportation of gas from the southwest. Goodrich then contacted SunOlin hoping to use the latter's pipelines to transport less expensive natural gas. Instead, SunOlin advised Goodrich that it could sell methane-rich fuel to Goodrich as a cheaper alternative to natural gas fuel. Ongoing negotiations were conducted through late 1983 when SunOlin advised Goodrich that it was no longer interested in selling the fuel. Subsequently, during 1983-1984 several other large user potential customers in New Jersey were contacted by SunOlin but no contracts were consummated, apparently because of the ready availability of less expensive natural gas in the northeast.

In November or December 1985, DuPont was building a "Linde Plant" at its Deepwater facility which would manufacture ethylene which had been purchased from SunOlin and transported to DuPont in the pipeline that ran through Goodrich's plant. SunOlin then also targeted as potential customers for methane-rich fuel, Goodrich and DuPont's Chambers works as well as So. Jersey itself. However, only the negotiations with Goodrich have produced an agreement thus far.

As stated above, the DuPont Chambers plant was conveniently located at the end of the same pipeline being used to supply Goodrich with the methane-rich fuel, sparking SunOlin's interest in selling it to DuPont. Although SunOlin was much more interested in supplying the Chambers and Linde plants, negotiations led to a draft agreement to sell to DuPont's Repauno plant which would require SunOlin to make a substantial capital investment. However, DuPont decided to use its own gas from Texas and Louisiana. SunOlin also actively attempted to sell methane-rich fuel to the other large industrial users in that part of the State but sales contracts were never consummated.

SunOlin's argument on this appeal is essentially that its present activities amount to no more than limited competition by a private company in an area of business in which regulated companies also deal and that its present enterprise does not reach the level of "public use" implicated by the statute and authorizing Board regulation.

The applicable standard of review is dependent upon whether the Board's decision may be categorized as a finding of fact or interpretation of a statute. Findings of fact by administrative agencies are upheld so long as they are supported by substantial credible evidence. E.g., In re Bridgewater Tp., 95 N.J. 235, 246, 471 A.2d 1 (1984); Atkinson v. Parsekian, 37 N.J. 143, 149, 179 A.2d 732 (1962). If, on the other hand, the Board's determination rests on the interpretation of a statute, a legal issue, the court is not in any way bound by the agency's determination. Mayflower Securities Co. v. Bureau of Securities, 64 N.J. 85, 93, 312 A.2d 497 (1973). The courts will, however, give substantial weight to the agency's interpretation of a statute which it is charged with enforcing. Matter of Board of Educ. of Town of Boonton, 99 N.J. 523, 534, 494 A.2d 279 (1985), cert. den. sub nom. Kramer v. Public Employment Relations Comm'n, 475 U.S. 1072, 106 S.Ct. 1388, 89 L.Ed. 2d 613 (1986). The facts of this case are not seriously disputed and the Board's findings are based on credible evidence in the record. Thus, we view the issue primarily as one of law. That approach leads us to confront the necessity of defining the parameters of the statutory "public use" standard and to apply it to the facts in this case.

The controlling jurisdictional statute is N.J.S.A. 48:2-13 which states in part,

The term "public utility" shall include every ... corporation ... that now or hereafter may own, operate, manage or control within this State any ... pipeline [or] gas, ... plant or equipment for public use, under privileges granted ... by this State or by any political subdivision thereof. [Emphasis added.]

In other words, the statute requires, "i.e., (1) that [a company] owns, operates, manages or controls a [gas or pipeline] system for public use, and (2) that [the company] does this under privileges granted by the State or any of its political subdivisions." Lewandowski v. Brookwood Musconetcong River, etc., Ass'n., 37...