Ohio Supreme Court accepts ‘petroleum’ decision for review

UPDATE: The Ohio Supreme Court has dismissed the appeal in Sunoco Pipeline, L.P., v. Carol A. Teter, Trustee, granting Appellee-Sunoco Pipeline's Motion to Dismiss.  In late July 2017, Sunoco filed a Suggestion of Mootness/Motion to Dismiss the appeal, asserting the matter had been rendered moot due to Sunoco's re-routing of the pipeline around the Appellant's property.  Because the pipeline had since been installed (in Spring 2017), and there was no longer any need to appropriate an easement over the Appellant's property (or any other property), Sunoco claimed the matter was moot.  The Ohio Supreme Court agreed and dismissed the case on September 13, 2017.  This means the Ohio Supreme Court will not decide the question whether the term "petroleum," as used in R.C. Chapter 1723 includes the finished product natural gas liquids propane and butane.  As such, the Seventh District Court of Appeals' determination that propane and butane fall within the term “petroleum” as used in R.C. 1723.01 (when they are derived from splitting raw material or wet gas into its component parts) remains the law in that jurisdiction.

Original post from June 29, 2017:

The Ohio Supreme Court will be deciding an appeal from a decision of the Seventh District Court of Appeals, arising out of an appropriation action. Among other issues, the Seventh District determined:

1. Propane and butane fall within the term “petroleum” as used in R.C. 1723.01 (when they are derived from splitting raw material or wet gas into its component parts);
2. As such, a company organized to transport such products through pipes falls under R.C. 1723.01 and is a common carrier under 1723.08;
3. A company formed under R.C. 1723.01 to transport propane, butane and/or ethane has eminent domain authority if it is a public use; and
4. The Mariner East pipeline project is necessary and for public use, because the product is used to heat homes and as additives to gasoline (some of the necessities of life). It is not a private enterprise that would only be providing economic benefit to Ohio.

As for necessity and public use, the landowner had argued that the uses claimed by Sunoco were speculative and not accurate; that the pipeline has no “off ramps” in Ohio and, instead, 100 percent of the product will be shipped and consumed outside of Ohio, and there is no evidence that the propane or butane will come back to Ohio for heating or gasoline use. The landowner argued that the benefits inure to a private company and that the intended purpose of allowing private companies to appropriate land is when the company is a common carrier that will build intrastate energy infrastructure—not for transport of Ohio resources outside of Ohio. 

The court of appeals ultimately determined that the Mariner East pipeline constitutes a public use, because: it will transport propane and butane from fractionation plants in Harrison County, Ohio, to Pennsylvania; the product could be transported to Ohio for use in heating homes and as a winter additive to gasoline for cars; the product could be shipped overseas and sold; due to shale development in Ohio, the infrastructure is needed to provide an effective means of transporting the product; given the uses for propane and butane, some products will return to Ohio.  Further, because the pipeline company is a common carrier (which, by definition, provides citizens with necessities such as electricity and water), here, the product will be used to heat homes/additives for gasoline—it is not a private enterprise.   

The landowner attempted appeal to the Ohio Supreme Court, raising four propositions of law which, in essence, were:

1. Whether the term “petroleum” includes the finished product/natural gas liquids propane and butane.
2. Does the Ohio Constitution forbid Ohio courts from relying solely on speculation and potential economic benefits to determine public use.
3. Whether necessity for a taking can be established by the appropriating entity’s determination that the project will be reasonably convenient and useful (i.e., necessary for a public use).
4. Whether a property owner is entitled to a stay in an appropriation action as of right upon posting of bond.

The Ohio Supreme Court has accepted only the first proposition of law: “The term ‘petroleum’ does not include the finished product natural gas liquids propane and butane for purposes of R.C. Chapter 1723.”