20100513Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERALL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE, ID 83720-0074
Idaho Bar No. 3366
Tele: [phone]
Fax: [phone]
E-mail: don.howell(ßpuc.idaho.gov
RECEIVED
ZOla KAY l 3 AM 9: 59
IDAHO ~--UB,qÇt'. )0
UTiliTIES Ci.Mh~I:;.:iO¡~
Attorney for Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PETITION OF )
INTERMOUNTAIN GAS COMPANY FOR ) CASE NO. INT-G-IO-Ol
A DECLARATORY ORDER RELATING )
TO THE RESALE OF NATURAL GAS FOR )
USE IN MOTOR VEHICLES ) COMMENTS OF
) COMMISSION STAFF
)
COMES NOW the Commission Staff by and through its attorney of record, Donald
L. Howell, II, and respectfully submits these comments in the above referenced case.
On March 4,2010, Intermountain Gas (a subsidiar of MDD Resources Group) filed
a Petition seeking a declaratory order from the Commission. More specifically, the utilty seeks
an order from the Commission stating that the Commission lacks "economic jurisdiction of the
resale of natural gas by third party non-utilties for use in motor vehicles." Application at 1, 2.
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 fie
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 fie comments in this case. The Commission
granted the Motion at its May 5, 2010, decision meeting.
COMMENTS OF COMMISSION STAFF 1 MAY 13,2010
THE PETITION FOR DECLARATORY ORDER
A. Background
Intermountain Gas states that it has been approached by third-pary non-utilty
organizations requesting that Intermountain sell natural gas to them "for their resale for use in
motor vehicles for transportation puroses." ¡d. at 3. For example, Intermountain envisions that
non-utilty third paries 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,
California, Washington, Utah and Wyoming." ¡d. Intermountain believes that there are
economic and environmental benefits for its customers and the State by encouraging the use of
CNG as a transportation fueL. ¡d.
B. Legal Support for 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 the Idaho Public Utilities Law (Idaho Code §§ 61-116,61-117,61-129) does not
specifically address the resale of natural gas. Application at 3. The Idaho statutes referenced by
Intermountain Gas in its Petition are set out below.
61-116. GAS PLANT. The term "gas plant" when used in this act includes all
real estate, fixtures and personal property owned, controlled, operated or
managed in connection with or to faciltate the production, generation,
transmission, delivery or fuishing of gas (natual or manufactured) for light,
heat or power.
61-117. GAS CORPORATION. The term "gas corporation" when used in
this act includes every corporation or person, their lessees, trustees, receivers
or trustees appointed by any cour whatsoever, owning, controllng, operating
or managing any gas plant for compensation, within this state, except where
gas is made or produced on and distributed by the maker or producer through
private property alone solely for his own use or the use of his tenants and not
for sale to others.
61-129. PUBLIC UTILITY. The term "public utilty" when used in this act
includes every common carrer, pipe line corporation, gas corporation,
electrical corporation, telephone corporation, water corporation, and
wharfinger, as those terms are defined in this chapter and each thereof is
hereby declared to be a public utilty and to be subject to the jurisdiction,
COMMENTS OF COMMISSION STAFF 2 MAY 13,2010
control and regulation of the commission and to the provisions of this act:
provided, that the term "public utility" as used in this act 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 or mediately or immediately,
performs the services or delivers such commodity to or for the public or some
portion thereof.
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's leasing
of "dark" optic-fiber cables was not the provision of a utility service as defined by Title 62. i
Case No. IPC-E-96-9. In the California case, the California PUC ruled that persons operating
service stations for the resale of compressed natural gas for vehicular use, other than public
utilties, are not subject to rate regulation by the California Commission. In Re Pacifc Gas and
Electric Company, 124 PUR 4th 107atpp.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 otherwse a
public utilty, 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 primar purose the protection of public safety.
Application at 4, citing Pub.L. 102-486, Title IV, § 404 (1992). Intermountain asserts that Idaho
Code §§ 61-116, 61-117, and 61-129 were all enacted before January 1, 1989.
As par 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
i The term "dark fiber" normally refers to installed fiber optic cable that is not electronically activated to allow for
the transmission of information. In Order No. 265 i 4, the Commission found that Idaho Power's leasing dark fiber
to Albertson's and the City of Boise does not constitute a "telecommunications service" as defined by Idaho Code §
62-603((13)). Staff believes that the facts in the Petition are distinguishable because the offering of dark fiber was
not a utility service unlike the resale of natural gas.
COMMENTS OF COMMISSION STAFF 3 MAY 13,2010
does not envision any changes in its existing rate tariffs. If its Petition is granted, Intermountain
proposes to sell natural gas to resellers utilzing its existing tariffs.
STAFF COMMENTS
1. Idaho Law. In its Petition, Intermountain Gas states that it is unaware of any
Idaho Cour or Commission decision which addresses the resale of natural gas for use as a
transportation fueL. The Commission Staff agrees with this assessment. The Company further
asserts that Idaho statutory law "does not specifically address (the) resale of natural gas;
however, Idaho Code Sections 61-116, 61-117 and 61-129 may bear indirectly on this issue." Id.
Staff believes that Idaho Code § 61-129 is directly on point. In pertinent par, Section 61-129
provides that
the term "public utility" as used in (the Public Utilties 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 tum, either directly or indirectly. . . delivers such commodity
to or for the public or some portion thereof.
Idaho Code § 61-129 (emphasis added). In other words, the term "public utilty" includes those
persons or corporations who in tum deliver or resell a utilty commodity (i.e., 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). In this instance,
Intermountain Gas stated that third parties intend to resell compressed natural gas to the public
for use as motor vehicle fueL.
The primar 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). The staring
point for construing a statute is the literal wording of the statute. Wolfe v. Farm Bureau
Insurance, 128 Idaho 398,404,913 P.2d 1168,1174 (1996). When interpreting a statute, courts
will normally givethe 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 'n, 129 Idaho 906, 935
P .2d 169 (1997). 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 'n, 120
Idaho 849, 854, 820 P .2d 1206, 1211 (1991). There is no occasion for judicial construction of a
COMMENTS OF COMMISSION STAFF 4 MAY 13,2010
statute unless it is ambiguous, absurd, or in conflct with other statutes. Gibson v. Bennett, 140
Idaho 270, 108 P.3d 417 (2005).
Idaho Code § 61-129 provides that a person or corporation that in tum, delivers a
utilty service or commodity to the public is a public utilty. As explained in the Petition,
Intermountain foresees sellng natural gas to its customer, who in turn, wil compress the gas and
sell the CNG for motor vehicle fuel to the public.
2. Other States. The California PUC case cited by Intermountain in its Petition is
distinguishable. In that case, the California Commission was reviewing an application fied by
Pacific Gas & Electric Company seeking to recover its expenses in developing a natural gas
vehicle (NGV) program. In re Pacifc Gas and Electric Co., 124 P.U.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 utilties to develop 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 § 740.2 (1989). This
section of the California Utilty 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.
The Petition also mentions Utah law. Under the Utah Public Utilties 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 1953 § 54-2-1 (9)(c). Interestingly, the Utah law
allows the local gas distribution company (Que star) 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,
petroleum retailers such as Chevron, Texaco and Philips 66 sell CNG at some of their public
fueling stations. American Gas Magazine at p. 25 (April 2010).
3. Federal Preemption. Staff now turns to Section 404(b) of the Energy Policy Act of
1992. The Supremacy Clause of the United States Constitution declares that the federal
2 This California legislation predated the Energy Policy Act of i 992 discussed supra.
COMMENTS OF COMMISSION STAFF 5 MAY 13,2010
Constitution and the laws of the United States "shall be the supreme law of the land." Ar. VI,
Cl. 2. Once constitutional authority is evident, the inquiry turns to the scope of federal
preemption. Louisiana Public Service Comm 'n v. FCC, 476 U.S. 355, 368-69, 106 S.Ct. 1890,
1998-99 (1986). Preemption may occur when Congress enacts federal statutes that express a
clear intent to preempt state law or where federal law acts as a barrier to state regulation. Id.
The critical question in any preemption analysis is whether Congress intended federal law to
supersede state law. Id.
Section 404(b) provides in pertinent par that the sale of
natural gas by any person who is not otherwise a public utilty, 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 primar purpose the
protection of public safety.
Application at 4; Pub. L. 102-486, § 404(b) ( 1992) (emphasis added). Consistent with the
language of Section 404(b) set out above, it is Staffs belief that federal law was intended to
preempt 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. If Congress
intended to permanently preempt states from regulating the area of compressed natural gas, 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. Indeed, this appears to be the case with the
statute in Utah.
4. Safety Regulation. 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 primar purose the
protection of public safety." Id. In its Petition, Intermountain Gas suggests that the Commission
should continue to regulate the safety and natural gas facilties "but only to the point where
Intermountain's facility or pipeline connects to the customer's metering device." Application at
4. The California PUC agreed with this proposition and held that safety on the "service station
side of the meter should be the responsibility of others just as gasoline pump safety is." PG&E,
124 P.U.R. 4th at 125.
COMMENTS OF COMMISSION STAFF 6 MAY 13,2010
Staff believes that if the Commission canot exert economic jurisdiction over the
resale of CNG, then it should cede jurisdiction over the safety of the resale of CNG activities.
One of the duties of the State Fire Marshall is to enforce the International Fire Code. Idaho
Code § 41-254. The International Fire Code is adopted in Idaho Code § 41-253. On a local
level, fire deparments or fire districts, and "in areas where no organized fire deparment exists
the county sheriff," shall assist the State Fire Marshall in carring out the provisions of the
International Fire Code. Idaho Code § 41-256(1). Section 2208 of the International Fire Code
sets out the safety requirements for facilties dispensing CNG as a motor fueL. In addition,
Section 2208.4 sets out the requirements for the private CNG fueling of motor vehicles.
Consequently, it appears that the safety regulations applicable to fueling CNG vehicles are
covered by the International Fire Code and under the authority of the State Fire Marshall and
others.
STAFF RECOMMENDATION
In summary, Staff concludes that Section 404(b) preempts the Commission's
economic regulation for the resale of CNG for use as motor vehicle fueL. In addition, Staff also
asserts that the International Fire Code prescribes the safety requirements for CNG fueling
stations. Consequently, Staff recommends that the Commission grant the Petition.
Respectfully submitted this 13th day of May 2010.
Donald L. How , II
Deputy Attorney General
bls/N:INT-G-IO-OI_dh_ Comments
COMMENTS OF COMMISSION STAFF 7 MAY 13,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF MAY 2010, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. INT-G-10-01, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
KATHERINE BARNARD DIR
MANAGER REG AFFAIRS
INTERMOUNTAIN GAS CO
222 FAIRVIEW AVE NORTH
SEATTLE WA 98109
E-MAIL: Kathie.bamard(fcngc.com
STEPHEN R THOMAS
MOFFATT THOMAS ET AL
101 S CAPITOL BLVD
STE 1000
BOISE ID 83702
E-MAIL: srt(frnoffatt.com
~SECRETA .. -=
CERTIFICATE OF SERVICE