Judges address ‘public utility’ questions

In a case of first impression in this state, the Indiana Court of Appeals has determined that BP Products North America Inc.'s petroleum refinery plant in northern Indiana isn’t a public utility as defined by state statute when it acts as a sort of conduit and provides natural gas and other services such as steam and wastewater to other private companies nearby.

But that ruling also affirmed a regulatory commission’s finding that the oil company is serving as an indirect public utility when it sells water to a local city for processing and sale to local customers.

The unanimous ruling came today in BP Products North America, Inc. and United States Steel Corp. v. Indiana Office of Utility Consumer Counselor and Northern Indiana Public Service Co., No. 93A02-0905-EX-490, as an appeal from the Indiana Utility Regulatory Commission’s decisions in 2009.

In 2008, the IURC received a request from BP relating to its operations at the Whiting refinery plant along Lake Michigan. As part of its crude oil refining operation, BP generates electricity and natural gas obtained from Northern Indiana Public Service Co. to power its plant and it also transmits excess gas, electricity, steam, and water to adjacent and on-site entities through private contracts – such as the nearby U.S. Steel plant and other companies. The refinery also sends low pressure raw service water to the city wastewater treatment facility to process and pass along to customers.

The BP request asked the IURC to determine that it wasn’t acting as a public utility in providing these materials or services or alternatively that it could be considered a "public utility" under Indiana Code Section 8-1-2-1(a).

The state commission determined in May and June 2009 that BP was not a public utility in connection to its natural gas transportation to a tenant on its property, but that it was considered a public utility with its provision of steam, electricity, water, and wastewater and sewer services. The commission also found that BP was acting as a public utility when selling water to the city.

On appeal, the state’s intermediate appellate court disagreed, reversing the IURC decision on those points and finding the commission misapplied state statute and relevant caselaw.

The judges found that caselaw doesn’t support the principle that an entity that serves only itself isn’t a public utility, but that it’s one that is dedicated to public use under a common law duty to serve all who apply or an entity that may be “impressed with public interest.” Finding no Indiana cases directly on point, they turned to several from other jurisdictions such as Wisconsin and Pennsylvania that have interpreted what constitutes a public utility.

“Because BP served these selected companies – a special class of entities that did not make up the indefinite public – it was engaged in a private activity, not the provision of services directly or indirectly to the public,” Senior Judge John Sharpnack wrote for the panel, which included Judges Nancy Vaidik and Cale Bradford. “Thus, as to these entities, the Commission which erroneously interpreted both the controlling statutes and related caselaw, must vacate its orders and allow BP to proceed outside its jurisdiction.”

The judges saw BP’s contract with the City of Whiting in a different light. "The contract provides for the provision of water to an entity that is a mere conduit serving the undifferentiated public, at least indirectly. Accordingly, BP is acting as a public utility when it sells water to the City," wrote the judge.

On the issue of supplying electricity, the appellate court also found that the IURC had erred in determining that BP is an “electricity supplier” as defined by I.C. Section 8-1-2.3-1 – in large because it wasn’t a “public utility.”

The case is affirmed on the city water aspect and reversed and remanded on the other issues.