Arkansas Charcoal Co. v. Arkansas Public Service Commission

Citations: 299 Ark. 359; 773 S.W.2d 427; 1989 Ark. LEXIS 336Docket: 89-13

Court: Supreme Court of Arkansas; July 3, 1989; Arkansas; State Supreme Court

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In July 1986, Arkansas Charcoal Company (ACC) and TXO Production Corporation (TXO) entered into two agreements: a 'Gas Sales Agreement' and an 'Option to Purchase Facilities.' TXO was to construct a gas pipeline connecting its wells to ACC’s plant, while ACC committed to purchasing up to 400 million British thermal units of natural gas daily and covering the pipeline's construction costs. In January 1987, TXO began gas sales to ACC, leading ACC to terminate its gas supply with Arkansas Western Gas (AWG). Subsequently, AWG petitioned the Public Service Commission (PSC) to compel TXO to comply with state regulations and obtain a Certificate of Environmental Compatibility and Public Need (CECPN) under the Utility Facility Environmental and Economic Protection Act (UFEEPA).

After a public hearing, the PSC issued Order No. 38 on May 17, 1988, determining that TXO's pipeline was a 'major utility facility' requiring a CECPN prior to construction and ordering TXO and ACC to cease pipeline operations. TXO and ACC's petitions for rehearing were denied, leading them to appeal the orders. The Court of Appeals affirmed that the pipeline was a 'major utility facility' but found that TXO and ACC had complied with the act by submitting an environmental impact statement, thus reversing the PSC's cease and desist order.

The Supreme Court granted certiorari to review the case and upheld the Appeals Court's reversal of the cease and desist order. It clarified that the UFEEPA applies to public utilities, underscoring the legislative intent to regulate the construction of new utility facilities while emphasizing the need to balance environmental concerns with the demand for utility services. The court noted that the definitions in the act confirm its focus on public utilities and their obligations under the law.

The PSC and AWG allege that TXO and ACC breached the law by constructing a major utility facility without a required certificate of environmental compatibility and public need, as stipulated by Ark. Code Ann. 23-18-510(a). However, the act defines "major utility facility" as a "major public utility facility," which TXO and ACC did not construct, as their pipeline is private and does not necessitate such a certificate. The PSC and AWG's argument hinges on the broad definition of "person" in Ark. Code Ann. 23-18-503, suggesting the act encompasses both public and private utilities. Yet, the act specifies that a "person" must be constructing a "major utility facility" to be subject to its requirements. The 1977 amendments to the act replaced "public utility" with "applicant," allowing others to apply for a certificate but not mandating that they obtain one. Furthermore, Ark. Code Ann. 23-18-528(2) provides eminent domain powers only to applicants granted a CECPN, implying the act is intended for public utilities, as granting such powers for private purposes would be unconstitutional. Consequently, a determination is needed regarding whether TXO and ACC qualify as public utilities. The PSC did not establish this status prior to issuing Order #38. The Court of Appeals' review is limited to examining if the commission's findings are supported by substantial evidence and whether it acted within its authority. Ultimately, TXO and ACC were not found to operate as public utilities, which are defined as entities supplying the public with essential services like electricity, gas, or water.

UFEEPA defines a public utility as any entity involved in the production, storage, distribution, sale, or delivery of electricity or gas to the public. A key feature of a public utility is its readiness to serve an indefinite segment of the public. In this case, TXO sold gas to only one additional industrial user in Arkansas apart from ACC and expressed no intention to build pipelines for more customers. The status of public utility is not determined by the number of customers but by the willingness to serve anyone seeking service. TXO’s assertion of the right to refuse service and a lack of evidence indicating the pipeline was constructed for broader public use led to the conclusion that neither TXO nor ACC provided public service. The court affirmed in part and reversed in part, clarifying that "person" encompasses various entities, and reiterating that public utilities must operate to serve the public for compensation.