Court Affirms Public Utility Regulations Preempt Local Zoning Ordinance in Pennsylvania | Practical Law

Court Affirms Public Utility Regulations Preempt Local Zoning Ordinance in Pennsylvania | Practical Law

A Pennsylvania appellate court recently affirmed that the authority of the Pennsylvania Public Utility Commission preempts local zoning ordinances regarding the location of public utility facilities, including gas pipelines to be constructed in residential districts. The court upheld the longstanding principle that public utilities should be regulated by one statewide agency.

Court Affirms Public Utility Regulations Preempt Local Zoning Ordinance in Pennsylvania

by Practical Law Real Estate
Published on 05 Mar 2018 • Pennsylvania
A Pennsylvania appellate court recently affirmed that the authority of the Pennsylvania Public Utility Commission preempts local zoning ordinances regarding the location of public utility facilities, including gas pipelines to be constructed in residential districts. The court upheld the longstanding principle that public utilities should be regulated by one statewide agency.
On February 20, 2018, in The Delaware Riverkeeper Network v. Sunoco Pipeline L.P., the Commonwealth Court of Pennsylvania held, consistent with prior law, that a municipality's zoning laws were preempted by the Pennsylvania Public Utility Commission's (PUC) authority to approve the construction of a petroleum pipeline ().

Background

In 2012, Sunoco declared its intent to transport natural gas from Pennsylvania, Ohio, and West Virginia to a refinery in Marcus Hook, Pennsylvania for storage, processing, and distribution.
The construction of the new pipeline, the Mariner East 2 (ME2), was planned to run parallel to, and mostly within the existing right of way of, the Mariner East 1 (ME1) pipeline. The ME2 pipeline would significantly expand the capacity of the ME1 pipeline from 70,000 barrels per day to 275,000 barrels per day.
Sunoco planned to construct a portion of the ME2 pipeline through a residential district in West Goshen Township (the Township). In 2014, the Township amended its zoning ordinance regulating the location and setback requirements for pipelines, which effectively prohibited pipelines in residential districts.
The PUC and the Public Utility Code (Code) regulate the intrastate movement of natural gas and petroleum products, but not the physical pipelines themselves. The PUC approved Sunoco's pipeline to transport petroleum and natural gas within Pennsylvania. Sunoco obtained Certificates of Public Convenience (CPCs) from the PUC, allowing it to construct the pipeline through various counties.
In May 2017, the plaintiffs filed for an injunction against Sunoco, claiming the pipeline violated the Township's zoning ordinance. Sunoco responded that:
  • The PUC had exclusive jurisdiction over the regulation of public utilities.
  • The plaintiffs' attempt to enforce the zoning ordinance was preempted by state law.
At trial, plaintiffs argued that the Township could enforce the local zoning ordinance against a public utility if the ordinance does not involve specific activities that the PUC regulates, specifically because the PUC does not regulate the location of pipelines. The trial court disagreed with plaintiff because there was no case law to support its contention and ultimately denied the plaintiffs' motion for injunctive relief.
On appeal, amongst other theories, the plaintiffs argued:
  • The ME2 pipeline is not a public utility facility.
  • The Township's authority was not preempted by the PUC's authority because the PUC does not regulate the location of pipelines.

Outcome

The Pipeline is a Public Utility

Sunoco maintained that it is a public utility and the ME2 pipeline is part of its public utility facilities. In a previous Pennsylvania Supreme Court eminent domain case, Sunoco was held to be a regulated public utility. Sunoco argued that decision applies in the current context.
The appellate court held that Sunoco is a public utility and the pipeline is a public utility facility subject to the PUC's authority. The court also found that the ME2 pipeline is an intrastate pipeline regulated by the PUC.
As a regulated public utility, Sunoco is allowed to upgrade facilities and expand capacity as needed as long as it conforms to the Code.

Preemption

The plaintiffs claimed that the Township's authority was not preempted by the PUC because:
  • The PUC does not specifically regulate the location of pipelines, while it does regulate the location of electrical wires and other public utility facilities.
  • Municipalities have zoning authority to regulate matters of health, safety, and welfare, even when the matter involves a public utility.
The appellate court found that the Township's zoning ordinance was preempted by the PUC based on both field preemption and conflict preemption.

Field Preemption

Under the doctrine of field preemption, a local statute is not valid if the state statute reveals the intent of the legislature to occupy the entire field of an area of law.
Throughout a long line of cases, Pennsylvania recognized the importance of having a single agency in charge of regulating public utilities so that the public welfare is not adversely affected by public utilities having to navigate different regulations for each locality.
The appellate court noted that the Supreme Court of Pennsylvania previously ruled that:
  • Public utilities are subject to state-wide jurisdiction under a single agency.
  • Townships are expressly excluded from regulating public utilities unless there is an express grant of power to the townships by the legislature.
The court also noted that the PUC has original jurisdiction over matters concerning extension and expansion and the location of utility facilities, which is what Sunoco intended to do by constructing the ME2 pipeline. Therefore, the appellate court determined that the legislature intended the PUC to occupy the field of public utility regulation.

Conflict Preemption

Under the doctrine of conflict preemption, a municipal ordinance is not valid if:
  • It is contradictory or inconsistent with a state statute.
  • Compliance with both local and state law is impossible.
  • It stands as an obstacle to the execution of the full purposes and objectives of a state law.
The appellate court reiterated that the purpose of the PUC and Code was to have one state-wide commission regulate public utilities because utilities affect the welfare of the entire state. The court found that allowing municipal zoning would create blatant conflict with the authority of the PUC, even if the PUC does not have any specific regulations concerning the location of pipelines.

Practical Implications

This case is significant because it highlights the difficulties faced by municipalities, property owners, and public utilities in planning, constructing, and operating public utility facilities. While zoning laws play an important part in municipal planning, there may be instances when state and federal laws preempt local ordinances to better serve the public welfare.
Although no appeal has yet been filed, the case will likely go in front of the Pennsylvania Supreme Court to determine the scope of the Environmental Rights Amendment (ERA) of the Pennsylvania Constitution. The appellate court rejected the plaintiffs ERA argument, holding that the ERA and related environmental concerns do not trump all other legal issues at stake. The Pennsylvania Supreme Court has a more expansive view of the scope of the ERA.
For more information about zoning laws and regulations, see Practice Note, Zoning and Land Use Law for Owners and Developers: Overview.