Kinder Morgan Cochin L.L.C. v. Simonson

[Cite as Kinder Morgan Cochin L.L.C. v. Simonson, 2016-Ohio-4647.]
COURT OF APPEALS
ASHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
KINDER MORGAN COCHIN LLC JUDGES:
Hon. Sheila G. Farmer, P. J.
Plaintiff-Appellee Hon. William B. Hoffman, J.
Hon. John W. Wise, J.
-vs-
Case No. 15 COA 044
ROBERT M. SIMONSON, TRUSTEE
OPINION
Defendant-Appellant
CHARACTER OF PROCEEDING: Appeal from the Court of Common Pleas,
Case No. 15-CIV-215
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: June 27, 2016
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
GREGORY D. BRUNTON DANIEL J. PLUMLY
DANIEL J. HYZAK ANDREW P. LYCANS
BRUCE A. MOORE CRITCHFIELD, CRITCHFIELD &
REMINGER CO., LPA JOHNSTON
65 East State Street, 4th Floor 225 N. Market Street, P. O. Box 599
Columbus, Ohio 43215 Wooster, Ohio 44691
[Cite as Kinder Morgan Cochin L.L.C. v. Simonson, 2016-Ohio-4647.]
Wise, J.
{¶1} Defendant-appellant Robert M. Simonson, Trustee, appeals the decision
of the Ashland County Court of Common Pleas granting summary judgment in favor of
Appellee Kinder Morgan Cochin LLC.
STATEMENT OF THE FACTS AND CASE
{¶2} Over the last five years, Ohio has experienced an increase in oil and gas
development in the Utica and Marcellus Shale regions. The development of the Utica
Shale in Ohio has dramatically changed the oil and gas industry in Ohio. (T. at 14-15). It
was only within the last few years that the technology was developed to exploit this
resource. (T. at 41). While previous production in the state consisted primarily of oil and
natural gas, many of the wells which have been drilled in the Utica Shale recently
primarily produce "wet gas," meaning natural gas liquids such as ethane, propane, and
natural gasoline. (T. at 14-15, 33). Due to the significant number of wells which now
produce wet gas, gas producers have been looking for ways to bring the substances
produced in these wet gas fields to market. (T. at 14-15, 40). Unlike natural gas, wet
gas must go through a fractionation or separation process prior to transport and is
transported as a liquid rather than a gas. (T. at 41, 46).
{¶3} Appellee Kinder Morgan Cochin, LLC operates a petroleum products
pipeline system from Saskatchewan, Alberta, Canada, through parts of the United
States and Canada, to Windsor, Ontario, Canada. Kinder Morgan responded to these
newly created transportation needs by assessing the industries' interest in a new
interstate pipeline system that would move ethane and propane from Ohio to Canada.
The proposed pipeline system is called Utopia. In order to evaluate the economic
Ashland County, Case No. 15 COA 044 3
viability of the Utopia Pipeline Project, Kinder Morgan's business development team
engaged numerous petroleum producers and shippers operating in the region in order
to determine whether the project had the necessary support to justify its enormous
projected cost. (T. at 14-15). The interest assessment phase of the project was
conducted primarily through an "Open Season" wherein Kinder Morgan sought out
shipping commitments for the completed project. Id. During the Open Season, Kinder
Morgan secured a transportation agreement with Nova Chemicals for approximately
90% of the Utopia Pipeline's initial transportation capacity, which allowed it to proceed
from the interest assessment phase to the development phase.
{¶4} In accordance with its pipeline development schedule, Kinder Morgan was
required to apply for and receive approval of its proposed tariff structure from the
Federal Energy Regulatory Commission (FERC). Kinder Morgan obtained FERC
approval of its proposed tariffs pursuant to a Declaratory Order issued in 2015. (T. at
16). Under the FERC Declaratory Order, Kinder Morgan is required to "keep 10 percent
of the capacity of the pipeline available for ... walk-up shippers ... [whose] rates also
have to be approved by the Federal Energy Regulatory Commission." Id. Under FERC
rules, walk-up and public shippers alike cannot be discriminated against when it comes
to transportation of petroleum on the Utopia Pipeline. (T. at 54). This is true even if they
happen to elect more than their specifically allotted 10% capacity due to specific
nondiscriminatory allocation procedures set by FERC. Id. In addition to needing FERC
approval of its tariffs, Kinder Morgan was required to obtain additional pipeline permits
from the Ohio Environmental Protection Agency, the Army Corp. of Engineers, along
with review/consultation with the U.S. Fish and Wildlife Service and the Ohio Historic
Ashland County, Case No. 15 COA 044 4
Preservation Office, before any construction of the Utopia Pipeline could begin (the
"Pipeline Permits"). (T. at 24).
{¶5} Of critical importance in the underlying lawsuit is the fact that the required
Pipeline Permits would not be granted by the relevant bodies until Kinder Morgan had
completed certain civil, archeological and environmental surveys on every tract of land
situated along the Utopia Pipeline route. (T. at 10). Further, completion of the
applications for the necessary Pipeline Permits required that Kinder Morgan have
access to every tract of land situated along the Utopia Pipeline route. (T. at 11).
{¶6} Given the exacting requirements of the Utopia Pipeline's permitting
process, Kinder Morgan's survey access to Appellant Robert Simonson's property was
essential to ensuring that the information provided in its Pipeline Permit applications
was correct. Id. Delays in the permitting process would cause delays in the
development schedule, thereby risking Kinder Morgan's ability to meet its contractual in-
service dates. (Id. at 5). For these reasons, Kinder Morgan's completion, submission,
and approval of the Pipeline Permit applications was vital for Kinder Morgan to ensure
its investors and committed shipper that it would be able to meet its contractual
obligations. Id.
{¶7} Kinder Morgan contacted Appellant and requested permission to enter
onto his property for the purpose of conducting such pipeline surveys but was ultimately
informed that Kinder Morgan would have to seek legal action because an agreement
could not be reached. (See Affidavit Certificate of Daniel J. Hyzak, Esq.)
{¶8} On October 30, 2015, Appellee Kinder Morgan Cochin LLC ("Kinder
Morgan") filed a Complaint for Declaratory Relief; Temporary Restraining Order;
Ashland County, Case No. 15 COA 044 5
Preliminary Injunction; Permanent Injunction against Robert M. Simonson, Trustee
("Simonson"). The Complaint sought an order granting Kinder Morgan access to
Simonson's property for the purpose of conducting surveys, inspections and
examinations under R.C. §163.03. The Complaint further sought a temporary restraining
order, preliminary injunction, and permanent injunction barring Simonson from
obstructing Kinder Morgan's access to his property to conduct such surveys, inspections
and examinations.
{¶9} That same day, Kinder Morgan filed a Motion for Temporary Restraining
Order and Preliminary Injunction and Permanent Injunction (hereinafter "Motion").
{¶10} On November 23, 2015, the trial court held an evidentiary hearing on the
Motion. At the beginning of that hearing, the court expressed its understanding that the
purpose of the hearing was essentially to determine the definition of petroleum. (T. at 7).
The trial court further indicated that it felt the Fifth District Court of Appeals' decision in
Ohio River Pipe Line, L.L.C. v. Henley, 144 Ohio App. 3d 703 required a finding that
"petroleum" includes "natural gas liquids" such as ethane and propane. (T. at 35-37).
{¶11} On December 10, 2015, the trial court issued a judgment entry finding
that: (1) Kinder Morgan is a common carrier; (2) this Court's decision in Henley required
a broad reading of the term "petroleum" as used in R.C. § 1723.01 and that natural gas
liquids fell within such a broad reading; and (3) the trial court did not need to determine
whether the proposed pipeline constitutes a public use in order to allow access pursuant
to R.C. §163.03. The trial court held that Kinder Morgan could enter onto Simonson's
property and enjoined Simonson from interfering with Kinder Morgan's "statutory right"
to enter the property and conduct surveys.
Ashland County, Case No. 15 COA 044 6
{¶12} Appellant Simonson now appeals, assigning the following errors for
review:
ASSIGNMENTS OF ERROR
{¶13} “I. THE TRIAL COURT ERRED IN HOLDING THAT THE TERM
PETROLEUM, AS USED R.C. § 1723.01, INCLUDES NATURAL GAS LIQUIDS SUCH
AS ETHANE AND PROPANE AND GRANTING A PERMANENT INJUNCTION BASED
UPON THAT HOLDING.
{¶14} II. THE TRIAL COURT ERRED IN HOLDING THAT KINDER MORGAN
QUALIFIES AS A COMMON CARRIER UNDER OHIO LAW WITH REGARD TO THE
UTOPIA PIPELINE PROJECT AND GRANTING A PERMANENT INJUNCTION BASED
UPON THAT HOLDING.
{¶15} III. THE TRIAL COURT ERRED IN HOLDING THAT KINDER MORGAN
HAD PREVAILED UPON THE MERITS, THEREBY ENTITLING IT TO A PERMANENT
INJUNCTION, WITHOUT FIRST DETERMINING WHETHER KINDER MORGAN'S
PROPOSED USE OF SIMONSON'S PROPERTY WOULD CONSTITUTE A PUBLIC
USE SUCH THAT KINDER MORGAN COULD INVOKE AN EMINENT DOMAIN
STATUTE TO ENTER ONTO SIMONSON'S PROPERTY.
Permanent Injunction
{¶16} The standard of review for this Court regarding the granting of an
injunction by a trial court is whether the trial court abused its discretion. Perkins v.
Quaker City, 165 Ohio St. 120, 125, 133 N.E.2d 595 (1956). In an action for a
temporary or permanent injunction, the plaintiff must prove his or her case by clear and
Ashland County, Case No. 15 COA 044 7
convincing evidence. Franklin Cty. Dist. Bd. of Health v. Paxon, 152 Ohio App. 3d 193,
202, 2003–Ohio–1331, 787 N.E.2d 59 (10th Dist.).
{¶17} Clear and convincing evidence has been defined by the Supreme Court of
Ohio as that measure or degree of proof that will produce in the mind of the trier of facts
a firm belief or conviction as to the allegations sought to be established. Cross v.
Ledford, 161 Ohio St. 469, 477, 120 N.E.2d 118 (1954). It is intermediate, being more
than a mere preponderance, but not to the extent of such certainty as is required
beyond a reasonable doubt, as in criminal cases. Id. It does not mean clear and
unequivocal. Id.
{¶18} In determining whether to grant injunctive relief, courts take into
consideration the following four factors: (1) the likelihood or probability of a plaintiff's
success on the merits; (2) whether the issuance of the injunction will prevent irreparable
harm to the plaintiff; (3) what injury to others will be caused by the granting of the
injunction; and, (4) whether the public interest will be served by the granting of the
injunction. Corbett v. Ohio Bldg. Auth., 86 Ohio App. 3d 44, 49, 619 N.E.2d 1145 (10th
Dist.1993).
I.
{¶19} In his First Assignment of Error, Appellant argues that the trial court erred
in holding that the term petroleum, as used R.C. §1723.01, includes natural gas liquids
such as ethane and propane. We disagree.
{¶20} In Ohio River Pipeline LLC v. Henley, 144 Ohio App. 3d 703, this Court
held that “petroleum,” as used in R.C. §1723.01, included refined substances and
petroleum by-products, and was not limited to natural substances. In reversing the trial
Ashland County, Case No. 15 COA 044 8
court’s holding that the term petroleum means only naturally occurring substances and
not petroleum by-products, this Court stated:
We must read R.C. Title 1723 as a whole to understand to what
substances the legislature referred in using the term “petroleum.” R.C.
1723.06 uses the term “oils” instead of “petroleum.” The statute does not
distinguish between the two words but uses them interchangeably.
Elsewhere in the Revised Code, the legislature has defined the words
“petroleum” and “oil” synonymously. See R.C. 3737.87; R.C. 3746.01;
R.C. 1509.01. The Ohio Supreme Court has recognized that it is helpful to
look to definitions elsewhere in the Revised Code to determine the
meaning of terms not defined in a particular statute. See Akron Transport
Co. v. Glander (1951), 155 Ohio St. 471, 44 Ohio Op. 435, 99 N.E.2d 493.
{¶21} In construing statutory terms, we are guided by the legislature's use of the
same terms defined elsewhere in the Revised Code. See Cablevision of the Midwest,
Inc. v. Gross (1994), 70 Ohio St. 3d 541, 639 N.E.2d 1154.
{¶22} As stated above, the Ohio legislature has defined “petroleum” and “oil” in
other sections of the Revised Code to include refined petroleum liquids.
{¶23} R.C. §3737.87(J), which refers to underground storage tanks, provides:
‘Petroleum’ means oil or petroleum of any kind and in any form,
including, without limitation, crude oil or any fraction thereof, petroleum,
gasoline, kerosene, fuel oil, oil sludge, oil refuse, used oil, substances or
additives utilized in the refining or blending of crude petroleum or
petroleum stock, natural gas, natural gas liquids, liquefied natural gas,
Ashland County, Case No. 15 COA 044 9
synthetic gas usable for fuel, and mixtures of natural gas and synthetic
gas.
{¶24} R.C. §3746.01(L) also contains the identical definition of petroleum.
{¶25} Other courts have also construed the term “petroleum” to include refined
petroleum products. See Nat. Gas & Oil Corp. v. Hamby (Mar. 20, 1981), Muskingum
App. No. CA 80-27, unreported, 1981 WL 6185, citing Alexander v. Buckeye Pipe Line
Co. (1978), 53 Ohio St. 2d 241, 374 N.E.2d 146.
{¶26} In the instant case, the evidence showed that, within the petroleum
industry, “petroleum” included the refined products that Kinder Morgan intends to
transport through the pipeline. The trial court heard undisputed testimony from Allan
Campbell that within the petroleum pipeline industry, the definition of petroleum includes
natural gas liquids such as ethane and propane. (T. at 9).
{¶27} Further, Webster's Third New International Dictionary (1993), defines
“propane” as a gas that occurs naturally in crude petroleum and natural gas. Therefore,
propane is a “natural gas”.
{¶28} Based on the foregoing, we find that the trial court did not err in finding
that the term petroleum as used in R.C. §1723.01 includes the natural gas liquids
ethane and propane.
{¶29} Appellant’s First Assignment of Error is overruled.
II.
{¶30} In his Second Assignment of Error, Appellant argues the trial court erred in
holding that Kinder Morgan qualifies as a common carrier under Ohio law with regard to
the Utopia Pipeline project. We disagree.
Ashland County, Case No. 15 COA 044 10
{¶31} R.C. §1723.08 provides:
With respect to the transporting by it of natural gas, petroleum, coal
or its derivatives, water, and electricity, a company described in section
1723.01 of the Revised Code is a common carrier and is subject to the
duties and liabilities of a common carrier under the laws of this state. A
company described in section 1723.01 of the Revised Code includes any
firm, partnership, voluntary association, joint-stock association, company,
or corporation, wherever organized or incorporated, when engaged in the
business of transporting petroleum through tubing, pipes, or conduits as a
common carrier.
{¶32} At the hearing in this matter, Kinder Morgan provided testimony that it was
in fact a common carrier pipeline “engaged in the business of transporting petroleum
through tubing, pipes, or conduits.” (T. at 15-17).
{¶33} Upon reviewing the relevant case law, we find that “common carrier” is
consistently defined as “one who undertakes to transport persons or property from place
to place, for hire, and holds itself “ ‘out to the public as ready and willing to serve the
public indifferently.’ ” Harper v. Agency Rent–A–Car, Inc. (C.A.5, 1990), 905 F.2d 71,
quoting Burnett v. Riter (Tex.App.1925), 276 S.W. 347, 349; 13 Ohio Jurisprudence 3d
(1995) 567, Carriers, Section 1. The common carrier must hold ‘itself ready to serve the
public impartially to the limit of its capacity.’ Id. “The fundamental test of common
carriage is whether there is a public profession or holding out to serve the public.” New
England Transrail, L.L.C. Construction, Acquisition, and Operation Exemption, STB
Finance Docket No. 34797, 2007 WL 1989841, (June 29, 2007).
Ashland County, Case No. 15 COA 044 11
{¶34} Here, we find that the evidence presented supports the trial court’s finding
that the Utopia Pipeline is a common carrier pipeline. Testimony was presented that
Kinder Morgan holds itself out to be a common carrier and that the pipeline will be
available to anyone wanting to transport their petroleum products. (T. at 16-18).
Testimony was presented that Kinder Morgan held an “Open Season” wherein anyone
who wanted to reserve capacity of the Utopia Pipeline to transport petroleum was able
to sign a transportation agreement with Kinder Morgan. (T. at 15-16). Evidence was
also presented that both Kinder Morgan and its committed shipper, Nova Chemicals
Corp. both recognized Kinder Morgan as a common carrier in their Transportation
Services Agreement. (See Nov. 23, 2015 Hearing).
{¶35} Based on the evidence presented, we find that the trial court did not err in
finding that Appellee Kinder Morgan is a common carrier with regard to the Utopia
Pipeline.
{¶36} Appellant’s Second Assignment of Error is overruled.
III.
{¶37} In his Third Assignment of Error, Appellant argues that the trial court erred
in failing to determine whether Kinder Morgan's proposed use of Simonson's property
would constitute a public use. We disagree.
{¶38} In the case sub judice, Appellee’s action for a restraining order and
injunction were filed pursuant to R.C. 1723.01 and 163.03, which provide as follows:
{¶39} R.C. 1723.01 Power to enter upon and appropriate land
If a company is organized ... for transporting natural or artificial
gas, petroleum, coal or its derivatives, water, or electricity, through tubing,
Ashland County, Case No. 15 COA 044 12
pipes, or conduits, or by means of wires, cables, or conduits; for storing,
transporting, or transmitting water, natural or artificial gas, petroleum, or
coal or its derivatives, or for generating and transmitting electricity; then
such company may enter upon any private land to examine or survey lines
for its tubing, pipes, conduits, poles, and wires, ... and may appropriate so
much of such land, or any right or interest therein, as is deemed
necessary for the laying down or building of such tubing, conduits, pipes,
dams, poles, wires, reservoir, plant, powerhouse, storage yards, wharves,
bridges, workshops, receiving and delivery structures or facilities, pumping
stations, and any other buildings, structures, appliances, or facilities
necessary to the purposes of such companies, ...
{¶40} R.C. 163.03 Entry for surveys, examinations, etc.; notice; restitution
for damages
Any agency may, upon the notice prescribed in this section, prior to
or subsequent to the filing of a petition pursuant to section 163.05 of the
Revised Code, enter upon any lands, waters, and premises for the
purpose of making such surveys, soundings, drillings, appraisals, and
examinations as are necessary or proper for the purpose of the agency
under sections 163.01 to 163.22, inclusive, of the Revised Code, and such
entry shall not constitute a trespass. Notice of such proposed entry shall
be given to the owner or the person in possession by such means as are
Ashland County, Case No. 15 COA 044 13
reasonably available not less than forty-eight hours nor more than thirty
days prior to the date of such entry.
The agency shall make restitution or reimbursement for any actual
damage resulting to such lands . . .
{¶41} As set forth above, Appellee is only at the preliminary survey stage. No
Petition to Appropriate has yet been filed, which is when a hearing on “public use” and
“necessity” would be determined.
{¶42} Based on the statutes as set forth herein, we find that the trial court
correctly held that Appellee Kinder Morgan has the right to enter onto Appellant’s
property for the purpose of surveying same to determine the potential viability of the
Utopia Pipeline project.
{¶43} Appellant's Third Assignment of Error is overruled.
{¶44} For the reasons stated in the foregoing opinion, the judgment of the Court
of Common Pleas of Ashland County, Ohio, is hereby affirmed.
By: Wise, J.
Farmer, P.J., and
Hoffman, J., concurs.
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