On July 12, 2011, the Indiana Court of Appeals held that an oil refinery that sold natural gas to a third-party tenant on its property was a “public utility” within the meaning of Indiana Code section 8-1-2-87.5(b). In BP Products v. Indiana Office of Utility Consumer Counselor, 964 N.E.2d 234 (Ind. Ct. App. 2011), the court reversed a previous order from the Indiana Utility Regulatory Commission (“IURC”) which determined that BP was not a public utility with respect to its provision of natural gas to Marsulex – a tenant on BP’s property that provided materials necessary to BP’s manufacturing process. If an entity is considered a “public utility” as defined by that statute, it must obtain certifications from the IURC prior to engaging in transportation of gas.
BP purchased natural gas from Northern Indiana Public Service Company (“NIPSCO”), which it then sold to Marsulex at cost. While the refinery only transported natural gas on its own premises where it was ultimately consumed, the court determined that BP’s sale of natural gas to Marsulex fell under subsection (b)(2) of I.C. 8-1-2-87.5. That section makes a public utility of any entity that “is engaged in the transportation of gas solely within this state on behalf of any end use consumers…” Marsulex was an “end use consumer” because it then provided materials necessary to BP’s manufacturing process. In its holding, the court analogized US Steel Corp. v. N. Ind. Pub. Serv. Co., 951 N.E.2d 542 (Ind. Ct. App. 2011) where US Steel purchased natural gas from NIPSCO and provided it to a third-party tenant on property owned by US Steel. There, the IURC concluded that US Steel was, pursuant to I.C. 8-1-2-87.5(b), a public utility for the purpose of distributing natural gas to its tenant and upheld the IURC order on appeal. The reasoning of US Steel proved to be compelling.
Jeremy Fetty is a partner in the law firm of Parr Richey Obremskey Frandsen & Patterson with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.