United States Steel Corp. v. Northern Ind. Pub. Serv. Co.

• Decision Date: 09 June 2011
• Docket Number: No. 93A02-1006-EX-632,93A02-1006-EX-632
• Parties: UNITED STATES STEEL CORPORATION and ARCELORMITTAL INDIANA HARBOR, INC., Appellants, v. NORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellee.
• Court: Indiana Appellate Court

UNITED STATES STEEL CORPORATION

and ARCELORMITTAL INDIANA HARBOR, INC., Appellants,

v.NORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellee.

No. 93A02-1006-EX-632

COURT OF APPEALS OF INDIANA

Filed: June 9, 2011

FOR PUBLICATION

ATTORNEYS FOR APPELLANTS:

JOHN F. WICKES, JR.

TODD A. RICHARDSON

JOSEPH P. ROMPALA

Lewis & Kappes

Indianapolis, Indiana

ATTORNEYS FOR APPELLEE:

ROBERT L. HARTLEY

MAGGIE L. SMITH

Frost Brown Todd LLC

Indianapolis, Indiana

APPEAL FROM THE INDIANA UTILITY REGULATORY COMMISSION

The Honorable David Lott Hardy, Chair

The Honorable James D. Atterholt and

The Honorable Carolene R. Mays, Commissioners

Cause Nos. 43369 and 43363

OPINION - FOR PUBLICATION

MATHIAS, Judge United States Steel Corporation ("U.S. Steel") and ArcelorMittal Indiana Harbor, Inc. ("ArcelorMittal"¹ ) (collectively, the "Steel Producers") appeal from the final order of the Indiana Utility Regulatory Commission (the "Commission"), which is defended by Northern Indiana Public Service Company ("NIPSCO"). On appeal, the Steel Producers raise several issues, which we restate and renumber as follows:

I. Whether the Commission correctly determined that U.S. Steel's provision of electricity to ArcelorMittal made U.S. Steel a public utility as defined by statute;

II. Whether the Commission correctly determined that U.S. Steel violated Indiana's Service Area Assignments Act by selling electricity service to ArcelorMittal within NIPSCO's exclusive electric service area;

III. Whether the Commission correctly determined that U.S. Steel's transportation of natural gas to ArcelorMittal made U.S. Steel a public utility as defined by statute;

IV. Whether the Commission correctly determined that U.S. Steel violated NIPSCO's gas tariff;

V. Whether the Commission properly dismissed the Steel Producers' complaint against NIPSCO.

NIPSCO cross-appeals and, claiming that the Commission failed to address three claims raised in NIPSCO's complaint, seeks a declaration from this court that the Commission's silence on these issues did not amount to an implicit resolution of these claims against NIPSCO and that these claims therefore remain viable theories of recovery in NIPSCO's separate federal court action seeking damages from U.S. Steel. In the alternative, if wedetermine that the Commission did resolve these issues against NIPSCO, NIPSCO requests remand to the Commission with instructions to enter specific findings on these issues.

We affirm in part, reverse in part, and remand with instructions.

Facts and Procedural History

U.S. Steel owns and operates a large, integrated steel-making operation in northwest Indiana known as Gary Works. Gary Works covers some 3,000 acres along the south shore of Lake Michigan and lies within NIPSCO's electric and gas service territories. U.S. Steel owns and operates a wide variety of steel production and finishing facilities located within Gary Works.

U.S. Steel consumes a large amount of electricity and natural gas in the operation of Gary Works. Some of the electricity consumed at Gary Works is supplied by cogeneration facilities owned and operated by U.S. Steel within Gary Works. The remaining electricity needed by U.S. Steel for Gary Works is supplied by NIPSCO under a special contract negotiated with U.S. Steel and approved by the Commission in 1999.

NIPSCO delivers, but does not supply, all of the natural gas consumed at Gary Works. U.S. Steel purchases its own supplies of natural gas in the market and has it transported to NIPSCO, which then transports the gas through its local distribution system and delivers it to Gary Works. The interconnections and meters at which NIPSCO delivers electricity and natural gas to U.S. Steel are located near the GaryWorks property line. U.S. Steel uses its private infrastructure to distribute the electricity and gas delivered by NIPSCO to the various operations within Gary Works.

ArcelorMittal, a competitor of U.S. Steel, owns and operates another large steel-making operation in northwest Indiana, known as East Chicago Works. In 2003, ArcelorMittal and U.S. Steel entered into an agreement to swap facilities located within their respective industrial complexes. Effective November 1, 2003, U.S. Steel became the owner of the Pickle Line located within East Chicago Works, and ArcelorMittal became the owner of the Plate Mill located within Gary Works. The transaction conveyed full right, title, and interest in the Plate Mill and its operations to ArcelorMittal. U.S. Steel retained ownership of the underlying Gary Works real estate, which it leased to ArcelorMittal for a nominal annual rent under a long-term ground lease agreement.

For those not familiar with Gary Works, the size, scope and complexity of its operations are difficult to understand. The Plate Mill is located deep within Gary Works, several miles from the Gary Works property lines. The Plate Mill houses three facilities: (1) a pre-heat facility used to heat slabs of steel, (2) a rolling mill used to flatten heated slabs of steel into plate steel, and (3) a heat treat facility used to temper steel and give it specific, customer-ordered properties.

Upon acquiring ownership of the Plate Mill in November 2003, ArcelorMittal began to operate the heat treat facility, but not the pre-heat facility or the rolling mill. ArcelorMittal did not arrange with NIPSCO for delivery of electricity or gas to the Plate Mill. Instead, ArcelorMittal purchased electricity and gas service for the Plate Mill fromU.S. Steel. This arrangement was a continuation of U.S. Steel's previous distribution of gas and electricity to itself when it owned the Plate Mill. NIPSCO was aware that U.S. Steel distributed electricity to the Plate Mill after ownership was transferred to ArcelorMittal, but claims that it believed that ArcelorMittal was not operating the Plate Mill at that time and that U.S. Steel was therefore only transmitting the minimal amount of electricity necessary for "plant protection." Appellant's App. pp. 11, 13.

In May 2007, ArcelorMittal publicly announced its intention to reopen the Plate Mill in September 2007. Because ArcelorMittal had already begun operating the heat treat facility, this announcement represented ArcelorMittal's decision to expand operations at the Plate Mill to include operation of the pre-heat facility and the rolling mill. As a result, NIPSCO contacted ArcelorMittal about providing electricity and gas service to the Plate Mill.

Over the summer of 2007, the Steel Producers and NIPSCO met numerous times regarding electricity and gas service to the Plate Mill. The parties reached an agreement under which NIPSCO installed an electricity sub-meter inside Gary Works on U.S. Steel's privately-owned electricity distribution lines to measure the flow of electricity to the Plate Mill. Pursuant to the agreement, electricity delivered by NIPSCO would flow through the interconnection between NIPSCO and U.S. Steel and across U.S. Steel's internal electricity distribution system to NIPSCO's sub-meter at the Plate Mill. NIPSCO would bill ArcelorMittal based on the readings of the sub-meter, and for the purposes of billing U.S. Steel, NIPSCO would subtract the sub-meter readings from the readings ofU.S. Steel's meter. This arrangement was implemented in the fall of 2007, and since that time, ArcelorMittal has purchased all of the electricity consumed at the Plate Mill from NIPSCO in this manner.

NIPSCO did not agree to implement a similar sub-metering arrangement for natural gas service to the Plate Mill. Rather, NIPSCO informed the Steel Producers that NIPSCO's gas meter for the Plate Mill could not be installed on U.S. Steel's internal gas lines and that the meter had to be located near the existing NIPSCO meter at the Gary Works property line. According to NIPSCO, a new dedicated service line would have to be installed to allow NIPSCO to transport natural gas directly to the Plate Mill. Due to the location of the Plate Mill within Gary Works, this new service line would be over three miles long. The Steel Producers proposed alternative arrangements and requested written confirmation from NIPSCO that its transportation of natural gas to the ArcelorMittal Plate Mill did not violate any natural gas transportation tariffs or contracts. After NIPSCO declined to provide such assurances, no further progress was made toward an agreement regarding gas service to the Plate Mill.

As the date for reopening the Plate Mill drew closer, U.S. Steel sought assurances from NIPSCO that NIPSCO would not take legal action against U.S. Steel for acting as a public utility based on its provision of electricity and gas service to ArcelorMittal. NIPSCO's corporate counsel subsequently advised U.S. Steel that NIPSCO would not provide the requested assurances unless U.S. Steel resolved a separate, unrelated contract dispute pending before the Indiana Court of Appeals. U.S. Steel refused, and since thefall of 2007, ArcelorMittal has arranged for and purchased its own natural gas from suppliers other than NIPSCO and has paid U.S. Steel for the interstate and intrastate transportation and delivery of that natural gas for its use at Gary Works. U.S. Steel has, in turn, arranged and paid NIPSCO for the transportation of ArcelorMittal's natural gas within Indiana for the benefit of ArcelorMittal. NIPSCO delivers ArcelorMittal's gas to a point near the property line of Gary Works, and U.S. Steel uses its internal distribution infrastructure within Gary Works to deliver that gas to ArcelorMittal and its Plate Mill.

On September 27, 2007, the Steel Producers filed an informal complaint against NIPSCO with the Commission's Consumer Affairs Division (the "CAD") seeking a determination that their actions with regard to electricity and gas service to the Plate Mill did not violate any tariff, contract, or other utility law requirement and asking the CAD to undertake an investigation of NIPSCO for its allegedly unreasonable behavior in refusing to provide the requested assurances. On...