Court Opinion

ID: 3217669
Source: CourtListenerOpinion
Date Created: 2016-06-28 18:14:32.297627+00
Date Added: 2024-06-11T14:30:22.290389
License: Public Domain

[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.

JWW/d 0621