Hughes v. UGI Storage Company

Eminent Domain; De Facto Taking

Hughes v. UGI Storage Company, 243 A.3d 278 (Pa. Cmwlth. 2020), allocatur granted June 8, 2021, appeal docket 49-50 MAP 2020

Owners of property located in buffer zone for underground natural gas storage facilities commenced a class action against the natural gas company, UGI Storage Company (UGI), alleging that UGI effected a de facto taking of certain subsurface mineral rights within the buffer zone surrounding the storage field and seeking appointment of a board of viewers under the Eminent Domain Code. Commonwealth Court summarized the relevant background as follows:

UGI [ ] filed an application with the Federal Energy Regulatory Commission (FERC) in 2009 seeking to operate underground natural gas storage facilities, including a gas storage field (the Meeker Storage Field). UGI further sought to delineate a 2,980[-]acre protective buffer zone (Meeker Buffer Zone) around the Meeker Storage Field. On October 10, 2010, FERC granted UGI’s application to operate the Meeker Storage Field and certified portions of the Meeker Buffer Zone for those areas to which UGI had property rights. The FERC order indicated that UGI “may file a further application to include other areas within the certificated buffer zone at a later date, [after] complying with [FERC’s] landowner notification requirements.”

To date, UGI has not acquired rights to properties of the Appellants which are located within the Meeker Buffer Zone. UGI has further failed to implement the owner notification program as part of the eminent domain process, but has used and continues to use the benefit of the complete protective Meeker Buffer Zone.

On November 5, 2015, John Albrecht, on behalf of himself and a class of similarly[ ]situated individuals, filed a Class Action Petition with the trial court for the appointment of a [b]oard of [v]iewers pursuant to Section 502 of the [ ] Eminent Domain Code. … On November 13, 2015, [the Hughes Appellants] filed an Amended Petition for the appointment of a [b]oard of [v]iewers pursuant to the [Eminent Domain] Code. All parties alleged that UGI effected a de facto taking of certain subsurface mineral rights within a buffer zone surrounding UGI’s Meeker Storage Field—a buffer zone for which UGI sought certification and that was partially certified by FERC.

….

UGI thereafter filed preliminary objections for both matters on January 14, 2016, asserting that the Petitions should be dismissed on grounds that UGI does not have the power of eminent domain and Appellants did not establish a de facto taking occurred.

Slip op. at 2-3 (footnotes omitted). The trial court sustained UGI’s preliminary objections and dismissed the petitions. On appeal, Commonwealth Court vacated the trial court’s orders and remanded the matter to the trial court for an evidentiary hearing. Following the hearing, the trial court concluded that UGI lacked the power of eminent domain and again sustained UGI’s preliminary objections and dismissed the petitions seeking appointment of a board of viewers. The class members appealed to Commonwealth Court.

Commonwealth Court disagreed with the trial court that UGI lacked the power of eminent domain, concluding that it is “clothed with the power of eminent domain both by the Commonwealth, via Section 1511(a)(3) of the [Business Corporations Law], and the federal government, via Section 717f(h) of the [Natural Gas Act] as regulated by FERC” Slip op. at 11 (emphasis in original). However, Commonwealth Court affirmed the court on different grounds – that because UGI could not yet undertake a formal condemnation of the subject property, UGI could not be the subject of a de facto condemnation proceeding, reasoning that:

…while UGI is clothed with the power of eminent domain under federal law, UGI would need to take additional steps to update its FERC certification relative to the Meeker Buffer Zone, specifically with respect to Appellants’ properties, before it could exercise that power of eminent domain over Appellants’ properties. In our 2017 Opinion, we explained that FERC’s October 10, 2010 order issued UGI a certification to operate certain portions of the Meeker Buffer Zone where UGI had already acquired property rights, and provided that UGI “may file a further application to include other areas within the certificated buffer zone at a later date, [after] complying with [FERC’s] landowner notification requirements.” 2017 Opinion, slip op. at 2. Section 717f(h) of the NGA confirms the ability of the holder of a FERC certification, such as UGI, to exercise the power of eminent domain, but only after the certification includes the property at issue. 15 U.S.C. § 717f(h); see also Parrott, 776 F.2d at 129; Steckman, 2008 WL 4346405, at *13. UGI’s failure to obtain certification from FERC evidencing Appellants’ properties are a necessary part of the Meeker Buffer Zone precludes UGI from exercising the power of eminent domain over such properties. This failure also precludes a finding that a de facto taking occurred here, since Appellants cannot establish that any purported deprivation of the beneficial use and enjoyment of their properties “is the immediate, necessary and unavoidable consequence of the exercise of the power to condemn,” the third prong necessary to find a de facto taking. Norberry One Condo. Ass’n, 805 A.2d at 68 (citation omitted) (emphasis added). This is not to say, however, that Appellants may not have other available remedies in tort. See, e.g., Bowman v. Columbia Gas Transmission Corp. (6th Cir., No. 87-3166, filed July 6, 1988), 1988 WL 68890 (affirming jury award of punitive damages to landowners in trespass action given willful and outrageous character of natural gas company’s actions); Humphries v. Williams Nat. Gas Co., 48 F. Supp. 2d 1276 (D. Kansas 1999) (holding gas company’s condemnation action under section 717f(h) of the NGA did not preempt all of landowner’s pre-condemnation state law claims, such as trespass); Griffith v. Millcreek Township, 215 A.3d 72 (Pa. Cmwlth. 2019) (discussing difference between de facto taking and trespass); McMaster v. Township of Bensalem, 161 A.3d 1031, 1036 (Pa. Cmwlth. 2017); In re Condemnation by Dep’t of Transp., of Right-of-Way for State Route 1032, Section B02, in Borough of Rochester, 137 A.3d 666, 670-73 (Pa. Cmwlth. 2016); Kennedy v. Consol Energy Inc., 116 A.3d 626, 636 (Pa. Super. 2015) (“It is well-settled law that in order to establish a claim for trespass, a plaintiff must prove an intentional entrance upon land in the possession of another without a privilege to do so.” (citing Kopka v. Bell Tel. Co., 371 Pa. 444, 91 A.2d 232, 235 (1952); Restatement (Second) of Torts § 164 (Am. Law. Inst. 1965))); Poole v. Township of District, 843 A.2d 422, 424-25 (Pa. Cmwlth. 2004); Restatement (Second) of Torts §§ 158 (Liability for Intentional Intrusions on Land) & 159 (Intrusions Upon, Beneath, and Above Surface of Earth) (Am. Law. Inst. 1965).

 

Slip op. at 17-18 (emphasis in original).

While concurring with the majority that UGI is a public utility with eminent domain powers, President Judge Leavitt dissented in part as to the majority’s conclusion that UGI could not be the subject of a de facto condemnation proceeding because UGI could not yet undertake a formal condemnation of the subject property. The President Judge reasoned that while the majority’s conclusion that “the lack of inclusion of [Landowners’] properties in the FERC certification affects UGI’s ability to exercise its power of eminent domain over [Landowners’] properties” is technically correct, it failed to account for the difference between a de jure and de facto condemnation. A petition filed under Section 502(c) is reserved for the situation where an “interest has been condemned without the filing of a declaration of taking.” 26 Pa. C.S. § 502(c). Concluding that UGI’s actions prefatory to a declaration of taking diminished the value of Landowners’ property, President Judge Leavitt would conclude:

That UGI needs certification from FERC to pursue a lawful condemnation of Landowners’ property is irrelevant to whether UGI has effected a de facto condemnation of Landowners’ property incident to its maintenance and operation of the Meeker Storage Field. UGI has announced to the federal government and to the world that UGI intends to use Landowners’ property to prevent natural gas from escaping the Meeker Storage Field. Landowners’ allegations that UGI’s actions have deprived Landowners of their ability to develop their mineral rights may be difficult to prove, but they state a de facto condemnation claim. Under Section 502(c) of the Eminent Domain Code and the above-reviewed precedent, Landowners are entitled to make their evidentiary case that, in fact, a taking has occurred. Mountaintop Area Joint Sanitary Authority v. St. Jude Church, 73 Pa.Cmwlth. 185, 457 A.2d 1024 (1983) (holding that trial court, not board of viewers, determines the factual question of whether a de facto taking has occurred).

The majority’s decision immunizes UGI from liability for its intentional actions that are alleged to have diminished Landowners’ beneficial use of their property. Not even government condemnors enjoy such an immunity. I would reverse the trial court’s order and remand this matter to the trial court for a hearing on the factual question of whether a de facto condemnation of Landowners’ property has occurred.

Slip op. at MHL-9 – 10.

In dissent joined by President Judge Leavitt, Judge McCullough likewise reasoned that “this is not case of de jure condemnation, and, thus, it was not necessary for Appellants to prove that UGI has specified their property for condemnation in a FERC Certificate.” Slip op. at PAM-5. Specifically, Judge McCullough reiterated the reasoning set forth in her dissenting opinion in the court’s prior decision before remand:

[UGI] has already obtained certification from [FERC] to utilize and devote a substantial portion of a “buffer zone” to protect its natural gas interests and storage field boundary. [Appellants] are quarantined in a small part of the “buffer zone.”

….

Despite the fact that UGI has not received certification from FERC to obtain [Appellants’] property or commenced a de jure condemnation, the end result is that the brunt of the harm has been inflicted, and the wound remains and will continue to remain. [Appellants] are isolated on an island in a “buffer zone” in which oil and gas drilling cannot occur. UGI’s actions and conduct are a matter of public record and any person interested in [Appellants’] subsurface mineral rights would discover through the exercise of due diligence that UGI has [a FERC Certificate]. It should come as no surprise, then, that [Appellants] have asserted a de facto taking, alleging that UGI has essentially placed an ever-present dooming cloud over their island in the “buffer zone,” and, as a result, they are unable to enter into lucrative leases with third[ ]parties for oil and gas exploration.

Accepting the allegations in [Appellants’] petitions as true, I would conclude that they are sufficient to entitle [Appellants] to the appointment of viewers and that the [court of common pleas] erred in granting UGI’s preliminary objections. Accordingly, I would reverse the trial court’s order and remand to the trial court to convene a hearing on the merits of [Appellants’] claims and any factual issues related thereto.

Hughes v. UGI Storage Co. (Pa. Cmwlth., Nos. 629 and 630 C.D. 2016, filed March 13, 2017) (unreported) (McCullough, J., dissenting), slip op. at 2-4, 2017 WL 962449 (internal citations omitted).

Upon review and consideration, I am not convinced that anything has occurred on remand following our decision in 2017, or during this second round of appeal, that could alter the position that I have previously taken. Hence, I continue to adhere to it today and, for the reasons stated above, respectfully dissent.

Slip op. at PAM-7 – 8.

The Pennsylvania Supreme Court granted allocatur as to the following issue, as stated by the Petitioners:

Does the Commonwealth Court’s holding eviscerate the well recognized principles of a de facto taking claim under eminent domain jurisprudence by impermissibly imposing du jure taking elements on a de facto taking claim?

For more information, contact Kevin McKeon or Dennis Whitaker.

For more information, contact Kevin McKeon or Dennis Whitaker.