20100625final_order_no_32004.pdf

Office of the Secretary
Service Date
June 25 , 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF
INTERMOUNTAIN GAS COMPANY FOR A
DECLARATORY ORDER RELATING TO
THE RESALE OF NATURAL GAS ORDER NO. 32004
CASE NO. INT-IO-
On March 4, 2010, Intermountain Gas Company (a subsidiary of MDU Resources
Group) filed a Petition seeking a declaratory order from the Commission. More specifically, the
utility seeks an order from the Commission stating that the Commission lacks "economic
jurisdiction of the resale of natural gas by third party non-utilities for use in motor vehicles.
Application at 1 , 2. The Company requested that its Petition be processed under Modified
Procedure. Id. at 4.
On April 8, 2010, the Commission issued a combined Notice of Petition and Notice
of Modified Procedure in this matter. The Commission invited interested persons to file
comments regarding Intermountain s Petition no later than May 6 2010. On May 3 2010, Staff
filed a Motion for a seven-day extension of time to file comments in this case. The Commission
granted the Motion at its May 5 2010, decision meeting.
The Commission received written comments from the Treasure Valley Clean Cities
Coalition (TVCCC) and the Commission Staff. Intermountain did not file reply comments.
After reviewing the Petition and the comments, we grant the Petition as outlined in greater detail
below.
THE PETITION FOR DECLARATORY ORDER
A. Background
Intermountain Gas states that it has been approached by third-party non-utility
organizations requesting that Intermountain sell natural gas to them "for their resale for use in
motor vehicles for transportation purposes.Id. at 3. For example, Intermountain envisions that
non-utility third parties would "compress" natural gas (CNG) and resell the CNG to other
persons as fuel for their motor vehicles. The Company maintains that fleets of heavy duty
vehicles appear to be the largest growing segment of the CNG market. "Currently, there are a
number of western states that permit public CNG fueling stations including, but not limited to
ORDER NO. 32004
California, Washington, Utah and Wyoming.Id.Intermountain believes that there are
economic and environmental benefits for its customers and the State by encouraging the use of
CNG as an alternative transportation fuel. Id.
B. Legal Support/or the Petition
In its Petition, Intermountain Gas states that it is not aware of any Idaho Court
decision which has addressed the resale of natural gas as a transportation fuel. The Company
maintains that definitions in the Idaho Public Utilities Law (Idaho Code 99 61-116 (gas plant),
61-117 (gas corporation), and 61-129 (public utility)) do not specifically address the resale of
natural gas. Application at 3.
The Company did point to one Idaho Commission case and one California PUC case
to support its Petition. In Order No. 26514, this Commission found that Idaho Power Company
leasing of "dark" optic-fiber cables was not the provision of a public utility service as defined by
Title 62.1 Case No. IPC-96-9. In the California case, the California PUC ruled that persons
operating service stations that resell compressed natural gas for vehicular use, other than public
utilities, are not subject to rate regulation by the California Commission. In Re Pacific Gas and
Electric Company, 124 PUR 4th 107 at pp. 125, 126 (1991).
C. Federal Preemption
Intermountain Gas also notes that Section 404 of the Energy Policy Act of 1992 may
restrict the Commission s jurisdiction over the resale of natural gas. In particular, Section 404(b)
provides that:
The transportation or sale of natural gas by any person who is not otherwise a
public utility, within the meaning of State law, . . . to any person for use by
such person as a fuel in a self-propelled vehicle, shall not be considered to be
transportation or sale of natural gas within the meaning of any State law
regulation or order in effect before January 1 , 1989. This subsection shall not
apply to any provision of State law. . . to the extent that such provision has as
its primary purpose the protection of public safety.
Application at 4 citing Pub.L. 102-486, Title IV, 9404 (1992). Intermountain asserts that Idaho
Code 99 61-116, 61-117, and 61-129 were all enacted before January 1 , 1989.
I The tenn "dark fiber" nonnally refers to installed fiber optic cable that is not electronically activated to allow for
the transmission of infonnation. In Order No. 26514, the Commission found that Idaho Power s leasing of dark
fiber to Albertson s and the City of Boise does not constitute a "telecommunications service" as defined by Idaho
Code ~ 62-603((13)).
ORDER NO. 32004
As part of its declaratory order, Intermountain asks that the Commission continue to
regulate the safety of natural gas facilities operated by Intermountain, but only to the point where
Intermountain s facilities connect to the customer s metering device. Id. at 4. Intermountain
does not envision any changes to its existing rate tariffs. If its Petition is granted, Intermountain
proposes to sell natural gas to resellers utilizing its existing tariffs.
THE COMMENTS
A. TVCCC
TVCCC supported Intermountain s Petition. TVCCC described itself as a "local
group of advocates" supporting greater usage of CNG in motor vehicles. The group believed
that increasing CNG usage as a motor fuel will reduce dependency on "foreign oil, improve air
quality, and promote local economic development." Approval of the Petition will encourage the
expansion of the CNG markets for vehicle fuel in Idaho.
B. Staff
1. Idaho Law Commission Staff disagreed with Intermountain s assertion that Idaho
statutory law does not specifically address the resale of natural gas. Staff asserted that Idaho
Code 9 61-129 is directly on point. In pertinent part, Section 61-129 provides that
the term "public utility" as used in (the Public Utilities Law) shall cover cases
both where the service is performed and the commodity delivered directly to
the public or some portion thereof, and where the service is performed or the
commodity delivered to any corporation or corporations, or any person or
persons, who in turn, either directly or indirectly
. . .
delivers such commodity
to or for the public or some portion thereof.
Idaho Code 9 61-129 (emphasis added). In other words, Staff insisted the term "public utility
includes those persons or corporations who in turn deliver or resell a utility commodity (i.
natural gas) to the public or some portion thereof for compensation. Stoehr v. Natatorium Co.
34 Idaho 217 (1921); Humbird Lumber Co. v. Idaho PUC 39 Idaho 505, 228 P. 271 (1924).
2. California and Utah Law. Staff next asserted that the California PUC case cited by
Intermountain in its Petition is distinguishable. In that case, the California Commission was
reviewing an application filed by Pacific Gas & Electric Company seeking to recover its
expenses in developing a natural gas vehicle (NGV) program. In re Pacific Gas and Electric
Co.124 P.R. 4th 107 (July 2, 1991). To address concerns about air quality and the
importation of oil, the California Legislature directed the PUC to encourage utilities to develop
ORDER NO. 32004
markets for low-emission vehicles such as CNG vehicles. PG&E developed a program to
promote CNG usage as a motor vehicle fuel and subsequently sought cost recovery from the
California PUC. The Commission observed that the California law "specifically exempts retail
sales of CNG for use as a motor vehicle fuel" from PUC economic regulation.Id. at 125;
West's Ann. Cal. Pub. Util. Code 9 740.2 (1989). This section of the California Utility Code
was subsequently amended to delete references to "compressed natural gas fueled vehicles." In
other words, the California case was responding to specific state legislation that at the time
encouraged the development of infrastructure to support compressed natural gas vehicles.
Staff also observed that the Petition mentioned Utah law. Under the Utah Public
Utilities Law, the definition of "gas corporation" specifically excludes the sale of natural gas
where it is "compressed by a retailer of motor vehicle fuel on the retailer s property solely for
sale as a motor vehicle fueL" Utah Code Annotated 9 54-l(9)(c) (1953). Interestingly, the
Utah law allows a regulated natural gas utility (Questar) to sell CNG to the public but otherwise
limits the sale of CNG as a motor vehicle fuel to retailers of motor vehicle fuels. For example
Staff noted that petroleum retailers such as Chevron, Texaco and Phillips 66 sell CNG at some of
their public fueling stations. American Gas Magazine at p. 25 (April 2010).
3. Federal Law. After reviewing Section 404(b) of the 1992 Energy Policy Act, Staff
opined that this provision of the Energy Act preempts the Commission s economic regulation
over the sale of CNG for use as fuel in motor vehicles unless a contrary state provision was
enacted after January 1 , 1989. However, Staff asserted Congress did allow for States to avoid
preemption by enacting laws, regulations or orders concerning the regulation of CNG as
vehicle fuel after January 1 , 1989. Staff insisted that if Congress intended to permanently or
broadly preempt States from regulating in the area of CNG as motor vehicle fuel, then it would
not have limited the preemptive effect of Section 404(b) to merely preempting state laws and
orders issued before January 1 , 1989.
4. Safety. Staff asserted that if the Commission cannot exert economic jurisdiction
over the resale of CNG, then it should cede jurisdiction over the safety of the resale of CNG
activities to other safety authorities. Staff maintained that one of the duties of the State Fire
Marshall is to enforce the International Fire Code. Idaho Code 9 41-254. The International Fire
Code is adopted in Idaho Code 9 41-253. On a local level, fire departments or fire districts, and
2 This California legislation predated the Energy Policy Act of 1992 discussed supra.
ORDER NO. 32004
in areas where no organized fire department exists the county sheriff " shall assist the State Fire
Marshall in carrying out the provisions of the International Fire Code. Idaho Code 9 41-256(1).
Section 2208 of the International Fire Code establishes the safety requirements for facilities
dispensing CNG as a motor fuel. In addition, Section 2208.4 sets out the requirements for the
private CNG fueling of motor vehicles. Consequently, Staff insisted that safety issues applicable
to fueling CNG vehicles are adequately covered by the International Fire Code and under the
authority of the State Fire Marshall and other local agencies. Thus, safety concerns would be
subject to the jurisdiction of other agencies.
DISCUSSION AND FINDINGS
After reviewing the Petition and the comments, we begin our review by examining
Idaho law. We agree with Staff that the Idaho Public Utilities Law does provide the Commission
with jurisdiction over the resale of utility commodities. It is well settled that the primary goal of
construing a statute is to give effect to the intent of the Legislature. Sherwood v. Carter 119
Idaho 246, 254, 805 P.2d 452, 460 (1991). Administrative agencies are "clothed with power" to
construe the law "as a necessary precedent to administrative action.JR. Simplot Co. v. Idaho
State Tax Comm '120 Idaho 849, 854, 820 P.2d 1206, 1211 (1991). When interpreting a
statute, the Commission will normally give the language of the statute its ordinary, plain and
rational meaning in order to determine the intent of the Legislature. City of Boise v. Industrial
Comm '129 Idaho 906, 935 P.2d 169 (1997).
We find that Idaho Code 9 61-129 provides that the term "public utility" includes a
corporation "who in turn, either directly or indirectly . . . delivers such (utility) commodity to or
for the public or some portion thereof." (Emphasis added.) We find that the quoted language
from Section 61-129 clearly pertains to persons or corporations who in turn deliver or resell a
utility commodity to some portion of the public for compensation. Accordingly, we find that
there is no occasion for statutory construction because the intent of the statute is clear. As
explained in the Petition, Intermountain intends to sell gas to third parties who intend to resell
CNG to the public for the purpose of fueling motor vehicles.
We next find that Intermountain s reliance on our "dark fiber" case and the California
PUC case is misplaced. In the dark fiber case, Idaho Power was not providing a utility service to
the public. As noted infra at note 1 , this Commission held that the provision of dark fiber was
not a utility service. Order No. 26514. Likewise, the California case is distinguishable because
ORDER NO. 32004
that case turned on a California statute that directed the California Commission to encourage
utilities to develop markets for CNG vehicles. Moreover, this statute was subsequently amended
to delete the reference to CNG motor fuel.
Although we find that Idaho law grants the Commission authority over the resale of
natural gas, we must now examine whether our state statute is preempted by federal law. After
reviewing the legal analysis provided by Intermountain and the Staff, we determine that Section
404(b) of the Energy Policy Act of 1992 does preempt the Commission s authority over the
resale of natural gas for use as a fuel in motor vehicles. We recognize that the critical question in
any preemption analysis is whether Congress intended federal law to supersede state law.
Louisiana Public Service Comm v. FCC 476 US.C. 355, 106 S.Ct. 1890 (1986). Preemption
may occur, as in this case, when Congress enacts federal statutes that express a clear intent to
preempt state law. Id.
Section 404(b) provides in pertinent part that the sale of
natural gas by any person who is not otherwise a public utility, within the
meaning of state law, to any person for use by such person as a fuel in a self-
propelled vehicle shall not be considered to be transportation or sale of
natural gas within the meaning of any state law, regulation or order in effectbefore January L 1989. This subsection shall not apply to any provision of
State law. . . to the extent that such provision has as its primary purpose the
protection of public safety.
Application at 4; Pub.L. 102-486, 9 404(b) (1992) (emphasis added). The legislative history of
the Energy Policy Act indicates that Congress intended to reduce the Nation s dependence on
foreign oil and promote alternative fuels for motor vehicles. H.Report 102-474 (III) 1 32 (May
, 1991); 1992 U.A.N. 2534-1 (Presidential Statement). Consistent with the language set
out above, we find Congress intended to preempt the Commission s economic regulation over
the sale of natural gas when used as a fuel in a self-propelled motor vehicle.
Having determined that our jurisdiction over the economic resale of compressed
natural gas for use as a fuel in motor vehicles is preempted, we must now address the extent of
our safety jurisdiction. By the terms of Section 404(b), federal preemption does not apply to
state law to the extent that such law, rule, or order has "as its primary purpose the protection of
public safety.Id. As Staff noted in its comments, Section 2208 of the International Fire Code
establishes the safety requirements for facilities dispensing CNG as a motor fuel. The
International Fire Code is adopted in Idaho Code 9 41-253. The State Fire Marshall, local fire
ORDER NO. 32004
departments or districts, are primarily responsible for enforcing the International Fire Code.
Idaho Code 9 41-254.
Having found that our economIC jurisdiction is preempted, we find that it is
reasonable to cede our safety jurisdiction over the resale of CNG to other safety agencies. As is
the case with petroleum service stations, we determine that the safety jurisdiction for facilities
located on the "customer-side" of the meter should be the responsibility of those entities charged
with enforcing Section 2208 of the International Fire Code.
In summary, we find that Section 404(b) of the 1992 Energy Policy Act preempts the
Commission s jurisdiction over the resale of natural gas for use as fuel in motor vehicles. We
further find that Section 404 does not preempt any state law dealing with the resale of natural gas
as a motor vehicle fuel if such state law is primarily to protect the public safety. However, we
think the more reasonable approach is to allow those authorized state and local agencies to
enforce the safety requirements for facilities dispensing CNG as a motor fuel. As set out above
such authority resides in the State Fire Marshall and other local agencies. Consequently, we find
it reasonable to grant the Petition for a Declaratory Order.
ORDER
IT IS HEREBY ORDERED that Intermountain Gas Company s Petition for a
Declaratory Order is granted. Given the preemptive effect of Section 404(b) of the 1992 Energy
Policy Act, the Commission will not exert ratesetting jurisdiction over the resale of natural gas
for use as a fuel in motor vehicles. The Commission will continue to enforce our safety rules
and regulations up to the point that Intermountain s facilities connect to the customer s metering
device.
IT IS FURTHER ORDERED that the Commission Secretary serve a copy of this
Order on A vista Utilities, the State Fire Marshall, the Division of Building Services, and the
Boise Fire Department.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this case may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order or in interlocutory Orders previously issued in this case. Within
seven (7) days after any person has petitioned for reconsideration, any other person may cross-
petition for reconsideration. See Idaho Code 9 61-626.
ORDER NO. 32004
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DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this d--6
day of June 2010.
~d JI KEMPT , P SIDENT
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MARSHA H. SMITH, COMMISSIONER
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MACK A. REDFORD, COMMISSIONER
ATTEST:
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Commission Secretary
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ORDER NO. 32004