City of Utica v New York Susquehanna & W. Ry. Corp.

[*1] City of Utica v New York Susquehanna & W. Ry. Corp. 2006 NY Slip Op 52653(U) [21 Misc 3d 1118(A)] Decided on December 12, 2006 Supreme Court, Oneida County Tormey, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 12, 2006
Supreme Court, Oneida County

City of Utica, New York, Plaintiffs,

against

New York Susquehanna & Western Railway Corp., NEW YORK REGIONAL INTERCONNECT, INC., and ONEIDA COUNTY INDUSTRIAL DEVELOPMENT CORPORATION, Defendant.



CA2006-1313



APPEARANCES:

JOSEPH P. GIRUZZI, ESQ.

Assistant Corporation Counsel

Attorney for Plaintiff - City of Utica

One Kennedy Plaza

Utica, New York 13502

PAUL T. SHEPPARD, ESQ.

Hinman, Howard & Kattell, LLP

Attorneys for Defendant - NY Susquehanna

700 Security Mutual Building

80 Exchange Street, PO Box 5250

Binghamton, New York 13902-5250

JAMES J. BARRIERE, ESQ.

Couch White, LLP

Attorneys for Defendant - NY Regional (NYRI)

540 Broadway, PO Box 22222

Albany, New York 12201

KEVIN G. MARTIN, ESQ.

Kernan & Kernan, PC

Attorneys for Defendant - Industrial

258 Genesee StreetUtica, New York 13502

MICHAEL J. GRYGIEL, ESQ.

Hiscock & Barclay

Attorneys for Observer-Dispatch

50 Beaver Street

Albany, New York 12207-2830

James C. Tormey, J.

This combined Article 78 proceeding and declaratory judgment action was commenced by the City of Utica by the filing of an amended notice of petition on August 17, 2006. In the amended notice of petition the city sets forth 10 causes of action seeking in the main a declaration that the agreement between defendant-respondent, New York Susquehana and Western Railway Corp., hereinafter NYS & W, and defendant-respondent, New York Regional Interconnect, Inc., hereinafter NYRI, is invalid, null and void and to enjoin the construction of a power transmission line on property in the City of Utica. The city further requests an order enforcing the terms of a certain PILOT agreement between the Oneida County Industrial Development Agency, hereinafter OCIDA, and NYS & W and prohibiting OCIDA from consenting to the defendant NYS & W's use of its property for the construction of power lines through the City of Utica.

The undisputed facts or documented evidence establishes that NYRI is proposing to build a high-voltage transmission line from Oneida County to Orange County. The proposal involves building transmission line towers of up to 120 feet in height that will carry 1,200 megawatts of high voltage direct current (HVDC). The proposed line would be located in part in the City of Utica within the NYS & W's right-of-ways. The submittals further disclose that an energy transmission system lease agreement (ETSLA) was entered into between NYS & W and Niagara Reinforcement, LLC, on or about November 21, 2003. That lease agreement authorized Niagara Frontier to use portions of the NYS & W's right-of-way, including those in the City of Utica, for the construction operation and maintenance of a high-voltage direct current transmission line. That ESTLA was subsequently assigned on July 17, 2006 by Niagara Frontier to NYRI. The lease agreement provided that the rights to use the railroad property were "subject and subordinate to each and all of the [foregoing] following ". . . underlying fee interest, conditions, covenants, easements, encroachments, leases, licenses, mortgages, indentures, reversionary interests, zoning restrictions and other legislative and regulatory limitations". Moreover, Section 8.02 of the lease made use of the railroad property contingent upon the lessee "obtaining, at its sole cost and expense, all permits and government approvals required to implement the Approved Plans for the Transmission System." In that regard, NYRI can only use the railroad property if it can obtain all required government approvals.

On May 31, 2006, an application was filed by NYRI pursuant to Section 122 of the Public Service Law with the NYS Public Service Commission seeking approval to construct a [*2]high-voltage direct current transmission line of approximately 190 miles in length from Oneida County to Orange County. The city has appeared in that application process and has opposed the plan. It is further established that NYS & W is a rail carrier and maintains railroad facilities and operations in upstate New York including lines in Oneida County and the City of Utica. Those facilities in Oneida County were obtained in 1982. In and around that same time OCIDA entered into a payment in lieu of tax (PILOT) agreement with NYS & W. Because OCIDA became the owner of the property it was tax exempt pursuant to the agreement. Payments were, however, made by the railroad in lieu of taxes to the various municipalities. It further appears that in April 1982 NYS & W received authorization from the Interstate Commerce Commission and the New York State Department of Transportation to acquire and operate railroad lines in Oneida County. In 1996, the existing PILOT agreement between NYS & W and OCIDA was extended until April 15, 2002. Although negotiations have allegedly occurred, there has been no further extension of that agreement. OCIDA and NYS & W have, however, continued to operate under the prior agreement. Under the terms of the PILOT agreement NYS & W can sublease its railroad facilities with the prior written consent of OCIDA "which consent may not be withheld or delayed" (Lease agreement Section 9.2A). Additionally, the PILOT agreement in Section 11.1 provides that "at any time during the lease term [NYS & W] shall have the option to terminate this agreement upon filing, with [OCIDA], a certificate signed by an authorized representative of [NYS & W] stating [NYS & W's] intention to do so pursuant to Section 11.1 and upon compliance with the requirements set forth in Section 11.2 hereof. Upon said occurrence, and upon [NYS & W's] compliance with the conditions to early termination, [OCIDA] is obligated to sell all of its right, title and interest in and to the said railroad facilities to [NYS & W] for the purchase price of one dollar ($1.00)."

NYRI moved to dismiss the notice of petition on a myriad of grounds including lack of personal [FN1] and subject matter jurisdiction, standing, ripeness and failure to exhaust administrative remedies. Similarly, NYS & W moved to dismiss the proceeding on the grounds that the Public Service Commission had sole jurisdiction to determine the issues presented, that the city lacked standing, that the city's claims were premature and otherwise lacked merit. OCIDA answered the amended petition and complaint and sets forth affirmative defenses and objections in point of law including lack of standing, that the action was premature and not ready for determination, that the proceeding failed to state a cause of action, and that the claims therein were not reviewable in an Article 78 proceeding. Memoranda of Law were submitted in support and opposition to the request to dismiss. The city in its memorandum in response asserts that it is not seeking to challenge the Public Service Commission's jurisdiction on permitting issue but rather is seeking to resolve the property rights issues raised by defendant-respondent's actions.

The motions to dismiss and objections seeking dismissal are granted. In essence, the city seeks to prohibit the building of a high-power transmission line within its jurisdiction. It contends that such construction violates its ordinances and is violative of public policy. The determination of if and where a power transmission line should be sited is, however, in the first [*3]instance within the jurisdiction of the Public Service Commission (see Public Service Law Article 7). A detailed application, public comment, hearings and decision process is set forth in that article. It is for the Public Service Commission, after following the provisions of that article, to render a decision granting or denying an application as filed or to grant upon such "terms, conditions, limitations, modifications of the construction or operation of the facilities that the commission may deem appropriate" (PSL Section 126). Moreover, "the commission . . . except as provided in subdivision two of this section, may not grant a certificate for the construction or operation of a major utility transmission facility, either as proposed or as modified by the commission, unless it shall find and determine: (f) that the location of the facility as proposed conforms to applicable state and local laws and regulations issued thereunder, all of which shall be binding upon the commission, except that the commission may refuse to apply any local ordinance, law, resolution or other action or any regulation issued thereunder or any local standard or requirement which would be otherwise applicable if it finds that as applied to the proposed facility such is unreasonably restrictive in view of the existing technology, or of factors of cost or economics, or of the needs of consumers whether located inside or outside of such municipality." (PSL 126(1)(f)). Once a certificate is granted by the Public Service Commission . . . "no state agency, municipality or any agency thereof may require any approval, consent, permit, certificate or other condition for the construction or operation of a major facility . . ." (PSL Section 130). Moreover, the courts do not have jurisdiction to hear cases concerning matters which could be decided in the proceeding before the Public Service Commission. (PSL Section 129 and 130). Indeed, PSL Section 128 provides that a court's power to review is generally limited to the final order issued by the Public Service Commission. (See Matter of Upset, Inc. v. Public Service Commission, (3 Dept. 1977) (57AD 2d 208, 394 NYS2d 81 ).

Here an application to build transmission lines is pending before the Public Service Commission. The commission will determine whether to approve the application to build these power lines and also determine the route of the lines and the conditions and limitations on the construction it deems appropriate. Indeed, the commission may determine that the route of the line will not go through the City of Utica or that all facilities in the city rather than being placed on 120-foot towers be placed underground. Moreover, the commission will determine whether the facilities shall conform to local and state regulations or whether those regulations are deemed unreasonably restrictive. After the commission makes those determinations the city can challenge in court the commission's determinations. The city before commencing this proceeding must, therefore, exhaust the administrative procedures before the commission. Thus, the city s causes of action seeking to prohibit the building of this line and to nullify the lease option agreement between NYRI and NYS & W, which are dependant upon the Public Service Commission's approval, must be dismissed as premature and beyond the jurisdiction of the court. Similarly, the city's claims that the lines violate its own ordinances and require DOT approval are not ripe for review until the commission determines the issue of whether the proposed facilities shall conform with state and local laws and regulations.

I further conclude that the city's cause of action against OCIDA and the railroad with regard to its PILOT agreement must be dismissed for lack of standing. The city is not aggrieved and cannot be considered a third-party beneficiary entitled to enforce the contract between OCIDA and NYS & W. (See generally Board of Education Goshen School District v. Town of [*4]Walkins, IDA 222AD2d 475 Tedesh v Roosevelt Raceway Association 183AD2d 874). Furthermore, I find no basis to support the city's Article 78 cause of action demanding that the OCIDA deny consent to NYS & W's lease agreement with NYRI. Indeed, even if the PILOT agreement consent was denied by OCIDA, the railroad could simply terminate the agreement for $1.00. Finally, although the PILOT agreement between OCIDA and the railroad has yet to be extended, the title of its property is still in OCIDA, and, therefore, the property is tax exempt. Although the City has forcefully raised many issues in this matter, the merits of the proposed power line project were not the subject of this decision. The amended petition is dismissed without prejudice.

Submit Order accordingly.

__________________________________

Hon. James C. Tormey

Justice of Supreme Court

Dated: December _______, 2006

Syracuse, New York Footnotes

Footnote 1: The issue of lack of personal jurisdiction was subsequently withdrawn by counsel for NYRI at oral argument.