Lakehead Pipeline v. Commerce Comm'n
Annotate this Case
NO. 3--97--0524
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 1998
LAKEHEAD PIPELINE COMPANY, ) Petition for Review
LIMITED PARTNERSHIP ) of an Order of the
) Illinois Commerce
Petitioner-Appellant, ) Commission
)
v. )
)
ILLINOIS COMMERCE COMMISSION, ) No. 96--0145
ILLINOIS DEPARTMENT OF )
AGRICULTURE, ILLINOIS DEPARTMENT)
OF TRANSPORTATION, ILLINOIS )
ENVIRONMENTAL PROTECTION AGENCY )
MCHENRY COUNTY, KENDALL COUNTY, )
KANE COUNTY, VILLAGE OF MOKENA, )
CITY OF WOODSTOCK, CITY OF )
PLANO, COMMUNITIES AGAINST )
THE PIPELINE, ROBERT POLLACK. )
)
Respondents-Appellees. )
MODIFIED UPON DENIAL OF REHEARING
Justice BRESLIN delivered the opinion of the court:
This controversy concerns a challenge to the Illinois Commerce
Commission's (Commission) authority to regulate a proposed
interstate pipeline under the Common Carrier by Pipeline Law
(Pipeline Law), (220 ILCS 5/15-100 et seq. (West 1996)).
Petitioner Lakehead Pipe Line Company (Lakehead) and amici curiae
assert that the Commission exceeded its lawful authority when
reviewing Lakehead's application for a certificate in good standing
under section 15-401 of the Pipeline Law, (220 ILCS 5/15-401 (West
1996)). Lakehead also claims that the Commission erroneously
interpreted the "public need" requirement of 15-401(b), resulting
in an unlawful interference with interstate commerce and an
arbitrary denial of Lakehead's application. We hold that the
Commission did not exceed its lawful authority and that its
interpretation and application of the Pipeline Law is reasonable
and does not conflict with the commerce clause of the United State
Constitution, (U.S. Const., art I, 8 clause 3). Thus, we
affirm.
I. FACTS
Lakehead is a limited partnership which owns the United States
portion of the world's longest liquid petroleum pipeline. With its
Canadian affiliate, Interprovincial Pipe Line, Inc. (IPL), Lakehead
transports crude petroleum and other liquid hydrocarbons along
approximately 3,200 miles of pipeline across North America from the
Northwest Territories and the Province of Alberta to refineries in
the Midwest as well as the Provinces of Ontario and Quebec. Within
Illinois, Lakehead operates a 116.64 mile stretch of pipe referred
to as line 6A. Line 6A went into service in 1969. It enters
Illinois from Wisconsin near Harvard and follows a route through
McHenry, Kane, Cook, DuPage and Will Counties. It then proceeds to
Indiana and enters that state near Griffith, Indiana. Line 6A was
generally constructed upon rights-of-way acquired from public
utilities, as well as easements and fee interests purchased from
private landowners. It did not require the use of eminent domain.
As part of a system expansion program, Lakehead began adding
new pumping stations to line 6A to meet a greater demand for crude
petroleum along its system. When Lakehead determined that 6A's
practical capacity was reached, which it said resulted in rationing
during peak periods, it decided to construct a new 24-inch pipeline
that it refers to as line 14. Proposed line 14 will track through
several Illinois counties, including DeKalb, Kane, and Kendall
counties, and is to interconnect with line 6A in Mokena, Illinois.
The new line is part of a large expansion program named System
Expansion Program II, which calls for greater transportation of
crude oil by Lakehead and IPL to and through Illinois. A new route
was determined to be desirable due to the significant development
in the counties along line 6A since 1969, and the fact that
proposed line 14 would traverse predominantly rural and
agricultural land. Its total cost is estimated to be $300 Million.
Before beginning construction, Lakehead sought the issuance of
a certificate in good standing under section 15-401 of the Pipeline
Law, which is a first step toward acquiring eminent domain
authority. During the application process, Lakehead made clear
that it sought to negotiate with landowners and municipalities
along the proposed route, but it noted that it may eventually need
condemnation authority in order to achieve its goal. Several
counties, municipalities, and state agencies intervened, as did
numerous landowners. Landowners formed an organization titled
Communities Against the Pipeline (CAP) in order to form an
organized group of landowners in opposition to line 14.
An extended hearing with numerous witnesses and exhibits was
held before a Commission hearing examiner. At the hearing,
Lakehead presented evidence regarding the fact that it properly
filed its application, and that it was fit, willing and able to
construct the line and maintain it safely and effectively. It also
argued that there was a public need for the line and the route
chosen was consistent with the public's need and convenience. With
respect to need, Lakehead's witnesses testified that there would be
substantial growth in the demand for crude oil during the next
decade. There was testimony that the demand flowed from the
increased demand for refined petroleum products. Representatives
from Midwest refineries that purchase crude oil from Lakehead
stated that they needed increased supplies of Canadian crude oil in
order to maintain competitive rates in the markets for refined
petroleum products and that the capacity restraints had a negative
economic impact on refiners. However, representatives acknowledged
that their future demands for crude oil could be met with the
current pipeline system established in the Midwest of which
Lakehead controls 40% of the market. Lakehead also offered
testimony that the purchase of crude oil from its system could
result in savings to refiners which could be passed on to
consumers. Mark Turri, an employee of Mobil Oil Corporation, said
that Canadian crude oil would be cheaper and that an adequate
supply of Canadian crude would ultimately benefit consumers.
Canadian oil consultant Timothy Partridge pointed out, however,
that Canadian crude oil production capabilities would decline after
2002.
William Gould, a senior economic analyst for the Commission,
testified that the interest of refiners, shippers, and producers
should be viewed as business interests rather than public
interests. In his opinion, as long as the public had an adequate
supply of refined petroleum products at reasonable prices, public
convenience and necessity were being served. Since there was no
evidence that an adequate supply of refined products were not
available at reasonable prices, Mr. Gould stated that there was no
public need for line 14. He testified that Lakehead merely
demonstrated a private interest in wanting to deliver more Canadian
crude oil to refineries in the midwest.
Along the same line, there was the testimony of James
McDonald, who was ruled not to be an expert but whose testimony
could be accepted for its factual content, and Merton Miller, a
Nobel Laureate in Economics. Both stated that any barrel of oil
that would be shipped via the proposed line would simply displace
crude oil which arrives from other points on other lines. This is
the case because all of the Midwest refineries were operating at or
near capacity and the supply of crude oil already significantly
exceeded the capacity of the refineries. According to Miller, a
new line would only assist in giving Lakehead a greater market
share. It would not result in any benefit to the public because
the aggregate supply would not change and thus the price of crude
oil would not be affected. Any benefit from the new line would
flow entirely to Lakehead and Canadian oil producers.
At the close of the hearing, the examiner concluded that the
need and demand for more capacity on Lakehead's system were the
relevant considerations for certification under section 15-401 and
that such need and demand were clearly established. Thus, having
determined that the statutory prerequisites of section 15-401 had
been met, the examiner recommended that the application be granted.
The Commission rejected the examiner's recommendation. It
determined that Lakehead failed to demonstrate a public need for
the new line. In doing so, the Commission stated that it agreed
with the analysis proposed by its staff that public need must be
assessed by looking to the demand for refined petroleum products
and not only crude oil per se. Public need, according to the
Commission, must be determined not by looking to the needs of any
individual or number of individuals, but by looking to the public
at large since "[t]he public *** is greater than a limited number
of market players." The Commission concluded that Lakehead failed
to support its claim that line 14 would have a positive price
effect on the market for refined products and that since the
consuming public did not lack an adequate supply of refined
petroleum products at adequate rates, and there was no shortage or
crisis, no public need for Line 14 existed. Lakehead's application
was therefore denied and it appeals. On appeal, Lakehead is
supported by amici briefs from numerous oil and pipeline companies
and associations.
II. DISCUSSION
A. Scope of Commission Authority
On appeal from the Commission, this court's review is limited
to considering whether: (1) the Commission acted within its
authority; (2) state or federal constitutional rights have been
infringed; (3) the decision is supported by substantial evidence;
(4) adequate findings were made to support the decision . Citizens
United For Responsible Energy Development, Inc. v. Illinois
Commerce Comm'n, 285 Ill. App. 3d 82, 673 N.E.2d 1159 (1996). The
burden of proof on all issues raised on appeal rests with the
appellant. 220 ILCS 5/10-201(d) (West 1996); United Cities Gas Co.
v. Illinois Commerce Comm'n, 163 Ill. 2d 1, 643 N.E.2d 719 (1994).
The first issue we will address is whether the Commission
exceeded its lawful authority. More specifically, the first issue
is whether the Commission exceeded its authority by interpreting
section 15-401(b) of the Pipeline Law as requiring it to determine
whether Lakehead, a pipeline carrier operating in interstate
commerce, met the statute's requirements including the requirement
that there be a public need for line 14.
Lakehead contends that the Commission's review is limited in
interstate pipeline cases because it may not regulate the
interstate markets involving transportation by common carriers.
Lakehead argues that the Commission only has "prudential control"
over certification applications, which does not include the right
to determine whether there is a need for line 14.
Section 15-401(b) lists the necessary requirements for a
pipeline to be issued a license to operate as a common carrier by
pipeline in Illinois. In relevant part it provides:
"(b) Requirements for issuance. The Commission,
after a hearing, shall grant an application for a
certificate authorizing operations as a common
carrier by pipeline, in whole or in part, to the
extent that it finds that the application was
properly filed; a public need for the service
exists; the applicant is fit, willing, and able to
provide the service in compliance with this Act,
Commission regulations, and orders; and the public
convenience and necessity requires issuance of the
certificate." 220 ILCS 5/15-401(b) (West 1996).
Once certified under section 15-401, a pipeline carrier may then
pursue eminent domain authority which is authorized by section 8-
509 of the Pipeline Law, (220 ILCS 5/8-509 (West 1996)). 220 ILCS
5/15-101 (West 1996).
The plain language of section 15-401(b) directs the Commission
to determine if a public need exists, and whether the public
convenience and necessity requires the proposed service, when
considering every application submitted. Lakehead insists,
however, that such a directive causes the Commission to exceed its
lawful authority in interstate commerce cases and places an undue
burden upon such commerce. Lakehead relies principally upon our
supreme court's decision in Service Pipe Line Co. v. Ruder, 19 Ill. 2d 332, 167 N.E.2d 419 (1960).
The Ruder Decision
Ruder concerned an interstate pipeline that brought a
condemnation action without first applying to the Commission for
approval. The circuit court dismissed the action and on direct
appeal the court affirmed, holding that an application to the
Commission was a condition precedent to the exercise of
condemnation power. In reaching its decision, the court disagreed
with the pipeline's argument that it had broad authority to
exercise a state's power of eminent domain without government
supervision. The court concluded that federal legislation had not
completely preempted the state's authority to regulate in the area,
and that a state could exercise "prudential control" over an
interstate utility's activities which will involve the power of
eminent domain. Ruder, 19 Ill. 2d at 335, 167 N.E.2d at 421. In
concluding, the court noted that it could not rule on the scope of
the Commission's authority and stated that there was no need to do
so absent the Commission's exercise of authority beyond that which
it is conceded to have. Ruder, 19 Ill. 2d at 337, 167 N.E.2d at
422. Over 37 years later, the question concerning the Commission's
authority is now before this court. In interstate pipeline cases
where the only interest in certification is the acquisition of
condemnation authority, does the Commission exceed its lawful
authority by enforcing the statutory prerequisites of the Pipeline
Law?
Our state has a "firm policy of limiting its regulatory
jurisdiction over interstate commerce within constitutional
bounds***." Ruder, 19 Ill. 2d at 335, 167 N.E.2d at 422. The
question of the necessity of eminent domain, however, remains,
within constitutional parameters, a legislative function. St. Louis
Connecting R.R. Co. v. Blumberg, 325 Ill. 387, 156 N.E. 298 (1927).
Unless preempted by the federal government, state law governs
certification, which is a necessary first step in acquiring eminent
domain power. See Iowa RCO Ass'n v. Illinois Commerce Comm'n, 86
Ill. App. 3d 1116, 409 N.E.2d 77 (1980). Thus, to the extent that
it does not conflict with federal law, section 15-401(b) and the
Pipeline Law must be applied.
Lakehead argues that this interpretation permits the
Commission to proceed beyond the prudential control noted in Ruder.
We disagree. Section 15-401 does not put the Commission in a
situation in which it exercises more than prudential control. The
Commission remains solely in charge of supervising and protecting
the public's general welfare with respect to public utilities. See
220 ILCS 5/4-101 (West 1996). Through section 15-401, it must
determine whether this state deems the project worthy of
certification so as to potentially permit condemnation authority.
It does not determine whether the pipeline should enter the market.
In fact, the Commission concedes that Lakehead is free to build a
pipeline under a federal scheme just as it built line 6A, without
first acquiring certification. But in so doing, Lakehead will have
no condemnation authority.
Interstate Commerce
Lakehead and amici maintain, however, that the requirement to
demonstrate public need for a service impermissibly burdens and
discriminates against interstate commerce.
The commerce clause of the United States Constitution grants
Congress the power "to regulate commerce *** among the several
states." U.S. Const., art I, 8 clause 3. While this language
gives it very broad powers to regulate matters involving interstate
commerce to the exclusion of the states, (Retail Clerks
International Ass'n v. Schermerhorn, 375 U.S. 96, 11 L. Ed. 2d 179,
84 S. Ct. 219 (1963)), it does not remove a state's power to
regulate issues of local import when Congress does not exercise its
authority (California v. Thompson, 313 U.S. 109, 85 L. Ed. 1219, 61 S. Ct. 930 (1941)). When Congress does not act to preempt local
legislation, states and local governing bodies retain the authority
to regulate matters within the general police powers even though
interstate commerce is affected. Lewis v. BT Investment Managers,
Inc., 447 U.S. 27, 64 L. Ed. 2d 702, 100 S. Ct. 2009 (1980); Edward R.
Bacon Grain Co. v. City of Chicago, 325 Ill. App. 245, 59 N.E.2d 689 (1945). But, such regulation may not conflict with free trade
among the states, (Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 3 L. Ed. 2d 1003, 79 S. Ct. 962 (1959)), and may not isolate a
state in a veil of economic protectionism (Wyoming v. Oklahoma, 502 U.S. 437, 454, 117 L. Ed. 2d 1, 22, 112 S. Ct. 789, 800 (1992);
Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 79 L. Ed. 1032, 55 S. Ct. 497 (1935)).
In a case in which a statute's effect on interstate commerce
is incidental, the Supreme Court describes the relevant
considerations to determine a statute's validity as follows:
"Where the statute regulates even-handedly to
effectuate a legitimate local public interest, and
its effects on interstate commerce are only
incidental, it will be upheld unless the burden
imposed on such commerce is clearly excessive in
relation to the putative local benefits.
[Citation]. If a legitimate local purpose is
found, then the question becomes one of degree.
And the extent of the burden that will be tolerated
will of course depend on the nature of the local
interest involved, and on whether it could be
promoted as well with a lesser impact on interstate
activities." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 178, 90 S. Ct. 844, 847
(1970).
The public need aspect of the statute serves to protect and
restrict the exercise of such powers as eminent domain. This is a
legitimate purpose as it regulates the traditional state power of
eminent domain by ensuring freedom from unnecessary and nonorderly
intrusions upon private property. When weighing the state's
interest in controlling condemnation authority against Lakehead's
desire to supply transport greater amounts of fuel crude oil by
potentially employing the State's authority, we believe the burden,
if any exists, is not excessive. Indeed, the statute does not
appear to place any burden on interstate commerce since it is not
restricting any federal scheme or interstate traffic. In terms of
the effect on an interstate pipeline, it merely works to regulate
the use of a state's sovereign power. See Missouri-Kansas-Texas
R.R. Co. v. State, 712 P.2d 40 (Sup. Ct. Okl. 1985) (state statute
regulating right to exercise eminent domain authority complemented
effectuation of pipeline and did not conflict with Interstate
Commerce Act). However, the state is not required to provide
condemnation powers and, absent Federal legislation, may decide in
its discretion whether such authority is proper. See Blumberg, 325 Ill. at 394, 156 N.E. at 301. Without proof that the statutory
prerequisites of the Pipeline Law have been met, certification and
condemnation authority will not follow.
Lakehead also argues that section 15-401(b), as interpreted by
the Commission, discriminates against interstate commerce.
Lakehead contends that the Commission erred by requiring Lakehead
to demonstrate a local public need.
While we agree with Lakehead that requiring proof of a local
public need would conflict with the commerce clause, (see Kern
River Gas Transmission Co. v. Clark County, Nevada, 757 F. Supp. 1110 (D. Nev. 1990)), we do not agree that the Commission required
such a demonstration. A local public need was one method of
proving need as contemplated by the statute, but the Commission did
not rule out interstate necessity. Accordingly, we find no
constitutional infringement, nor do we find that the Commission
exceeded its legal authority when reviewing Lakehead's application.
Its enforcement of the Pipeline Law does not cause it to improperly
intrude into the realm of interstate commercial regulation.
B. Commission Interpretation of Section 15-401(b)
Lakehead and amici also insist that the Commission erred when
it interpreted section 15-401(b), creating an onerous burden for
its application which lead to an arbitrary denial. They assert
that the Commission adopted a definition for "public need" which
was unsupported by authority and was an abandonment of its prior
decisions.
The primary rule of statutory construction is to ascertain and
give effect to the intent of the legislature. Bruso v. Alexian
Brothers Hospital, 178 Ill. 2d 445, 451, 687 N.E.2d 1014, 1016
(1997). In determining the legislature's intent, the court
considers the plain and ordinary meaning of the statute's language
in the overall context of its reason and necessity and its stated
purpose. Illinois Bell Telephone Co. v. Illinois Commerce Comm'n,
282 Ill. App. 3d 672, 676, 669 N.E.2d 628, 630-31 (1996). When the
legislature amends a statute, it is presumed that it intended a
change in the law. In re Petition of the Board of Trustees of the
Mokena Public Library District, 287 Ill. App. 3d 1064, 680 N.E.2d 743 (1997); People v. Krause, 273 Ill. App. 3d 59, 651 N.E.2d 744
(1995). The interpretation of a statute by an agency charged with
its administration is accorded great deference and will only be
reversed if erroneous. Archer-Daniels-Midland Co. v. Illinois
Commerce Comm'n, 293 Ill. App. 3d 459, 687 N.E.2d 1144 (1997).
Given the broad delegation of authority to the Commission, this
court must rely on the Commission's interpretation of the statute
if there is a reasonable debate as to its meaning. Peoples Gas,
Light & Coke Co. v. Illinois Commerce Comm'n, 175 Ill. App. 3d 39,
52, 529 N.E.2d 671, 680 (1988).
Prior to 1986, certification statutes like the statute
involved here required a demonstration of "public convenience and
necessity" before a project could proceed. Numerous cases centered
upon the interpretation of "necessity" which was squarely addressed
in Wabash, C. & W. Ry. Co. v. Commerce Comm'n ex rel. Jefferson
Southwestern R. Co., 309 Ill. 412, 141 N.E. 212 (1923). There the
court stated that if a matter "is of sufficient importance to
warrant the expense of making it, it is a public necessity."
Wabash, C. & W. Ry. Co., 309 Ill. at 418, 141 N.E. 214. The court
pointed out, however, that the word necessity cannot be strictly
defined as there are different degrees of necessity. It is a
relative rather than an absolute term. With respect to public
utilities and necessity, the court held that the Commission had a
right to look to current and expected conditions when investigating
whether there is a public necessity for a project. Wabash, C. & W.
Ry. Co., 309 Ill. at 418-19, 141 N.E. at 215.
In 1986 the legislature passed the Illinois Commercial
Transportation Law (Transportation Law), (Ill. Rev. Stat. 1987, ch.
95 «, par. 18c-1101 et seq.), which included specific requirements
to license pipeline carriers. Previously, pipelines requiring
eminent domain authority applied for certificates of public
convenience and necessity under repealed section 55 of the Illinois
Public Utilities Act (Public Utilities Act), (Ill. Rev. Stat. 1977,
ch. 111 , par. 56). Unlike section 55, however, the Transportation
Law required not only a demonstration of "public convenience and
necessity," but also "a public need for the service." Ill. Rev.
Stat. 1989, ch. 95«, par. 18c-8201. In 1996, the legislature
transferred the source of the Commission's regulatory authority
from the Transportation Law to Article XV of the Public Utilities
Act, (220 ILCS 5/15-100 et seq. (West 1996)). Shortly thereafter,
the legislature amended section 15-401 by adding a list of criteria
for the Commission to consider when determining whether
certification is required by public convenience and necessity. See
220 ILCS 5/15-401(b) (West 1996). The legislature has not defined
"public need" and has not set forth criteria to consider when
determining whether there is a public need for a particular
service.
Because of the changes in 1986 and 1996, we must presume that
the legislature intended to change the law with respect to
certifying pipelines. In this instance it appears to have elevated
the requirements for certification, and its failure to provide a
statutory definition of public need at any time strongly suggests
that it intended to allow the Commission to exercise a flexible
approach toward these matters. Cf. Freight Forwarders Institute v.
United States, 409 F. Supp. 693 (N.D. Ill. 1976); see also Ranquist
v. Stackler, 55 Ill. App. 3d 545, 370 N.E.2d 1198 (1977)
(importance of agency interpretations and use of agency in certain
matters recognizes the existence of complex situations that require
varying solutions and expertise unavailable in statutes).
Nevertheless, Lakehead and amici insist that the Commission's
interpretation is erroneous as it fails to take into account the
proper considerations when determining if there is a public need
for line 14.
For direction in determining what group should be considered
when investigating public need, the Commission turned to the
Supreme Court's decision in Roy v. Illinois Commerce Comm'n, 322 Ill. 452, 153 N.E. 648 (1926). In the context of discussing public
necessity and convenience, the Roy court stated that the
"convenience and necessity required to support an order of the
commission is that of the public and not any individuals or number
of individuals." Roy, 322 Ill. at 458, 153 N.E. at 648. The
Commission adopted this same approach in this case, determining
that the public is larger than a limited number of market players
and the need of a few refiners does not in and of itself establish
a public need. A public need, in the Commission's opinion, cannot
be defined as involving only a limited number of private interests.
We can find no fault with this reasoning which takes into
account the public as a whole. Lakehead argues that the
Commission's interpretation is erroneous because it excludes
business and industrial interests. It argues that businesses are
part of the public and thus demonstrate "a public need" when
industrial concerns require added service. Lakehead seeks support
from Iowa RCO Ass'n v. Illinois Commerce Comm'n, 86 Ill. App. 3d
1116, 409 N.E.2d 77 (1980). Iowa RCO Ass'n is of little
assistance, however, because there the court was faced with the
question of whether a pipeline qualified as a public utility
because it was demonstrated to be for public use within the meaning
of what is now section 3-105 of the Public Utilities Act, (220 ILCS
5/3-105 (West 1996)), which defines which corporations are public
utilities. The pipeline delivered oil to several companies with
which it was affiliated. However, several nonaffiliated refineries
wished to use the line and the pipeline agreed to furnish the
requested service. The Commission and the court thus determined
that there was a sufficient showing of a public use. Iowa RCO
Ass'n, 86 Ill. App. 3d at 1118, 409 N.E.2d at 80.
This demonstration is of no value here where public need is at
issue rather than use. In the context of public need, it is
appropriate to look at the larger group of the general public to
see if it requires the service, not whether some components of the
public are in fact using the service. Only by looking to the
public at large can one determine whether there is an actual
existing or expected popular need for the proposed service which
should not be denied. This broader understanding of public has
been consistently employed by our courts. Thompson v. Illinois
Commerce Comm'n, 1 Ill. 2d 350, 115 N.E.2d 622 (1953); Illinois
Highway Transportation Co. v. Illinois Commerce Comm'n, 404 Ill. 610, 90 N.E.2d 86 (1950); Illinois Central R.R. Co. v. Illinois
Commerce Comm'n, 395 Ill. 303, 70 N.E.2d 64 (1946); Chicago Rys.
Co. v. Commerce Comm'n, 336 Ill. 51, 167 N.E. 840 (1929); West
Suburban Transportation Co. v. Chicago and West Towns Ry. Co., 309 Ill. 87, 140 N.E. 56 (1923).
Lakehead also argues that the Commission erred in construing
"need." It argues that the Commission's decision essentially
results in a requirement that there be an absolute necessity for a
service or a demonstration that a facility is indispensably
requisite.
The Commission's order describes its approach as one which
searches for a present need by looking for evidence of a current
public desire, or a determination as to whether a line is necessary
to meet foreseeable future demand. It does not require a
demonstration of absolute necessity. Therefore, we reject this
argument and conclude that the Commission's interpretation was
reasonable.
Additionally, Lakehead contests the Commission's approach as
being an arbitrary departure from the Commission's previous
decisions.
Reviewing courts give Commission decisions great deference
because they are "judgment[s] of a tribunal appointed by law and
informed by experience." United Cities Gas Co. v. Illinois Commerce
Comm'n, 163 Ill. 2d 1, 12, 643 N.E.2d 719, 725 (1994); Village of
Apple River v. Illinois Commerce Comm'n, 18 Ill. 2d 518, 523, 165 N.E.2d 329, 332 (1960); Archer-Daniels-Midland, 293 Ill. App. 3d at
463, 687 N.E.2d at 1147. However, the Commission is not a judicial
body and its orders do not have the effect of res judicata; the
Commission, as a regulatory body must have the authority to address
each matter before it freely, even if it involves issues identical
to a previous case. Mississippi River Fuel Corp. v. Illinois
Commerce Comm'n, 1 Ill. 2d 509, 116 N.E.2d 394 (1953). But, if the
Commission drastically departs from past practices, its decisions
are entitled to less deference. Citizens Utility Board v. Illinois
Commerce Comm'n, 166 Ill. 2d 111, 651 N.E.2d 1089 (1995); Business
and Professional People For the Public Interest v. Illinois
Commerce Comm'n, 136 Ill. 2d 192, 555 N.E.2d 693 (1989).
The approach taken in this docket was not a novel one. In
1988 in Illini Carrier, Ill. Com. Comm'n 87-0421 (Oct. 28, 1988),
the Commission determined whether a need for a particular service
existed by examining the abilities of other carriers in a specific
region. Illini Carrier was specifically discussed and followed in
this case. Furthermore, in 1994 in Illini Carrier, Ill. Com.
Comm'n P91-0001 (July 27, 1994), the Commission rejected
essentially the same public need argument presented here. Although
that case was reversed on appeal on other grounds, (Illini Carrier,
L.P. v. Illinois Commerce Comm'n, 288 Ill. App. 3d 835, 681 N.E.2d 1022 (1997)), it stands as evidence that the Commission has not
acted arbitrarily. Most recently in Quantum Pipeline Co., Ill.
Com. Comm'n 96-0001, 96-0318 (Dec. 17, 1997), the Commission, as in
this case, determined whether there was a public need based upon an
examination of the needs of the general public, not the needs of a
few individuals. Furthermore, the need of the general public was
a common thread in other decisions. See Mid-America Pipeline Co.,
Ill. Com. Comm'n T88-0065 (March 22, 1989) (pipeline would assist
in alleviating nationwide shortage of antifreeze); Mid-American
Pipeline Co., Ill. Com. Comm'n 86-0101 (Sept. 17, 1986) (pipeline
would prevent plant closing). Accordingly, we find no arbitrary
departure and we hold that the Commission's interpretation is
reasonable.
C. Substantial Evidence and Adequate Findings
Lakehead further posits that the Commission's decision was not
supported by substantial evidence.
On appeal, the Commission's findings are accepted as prima
facie true. 220 ILCS 5/10-201(d) (West 1996); People ex rel.
Hartigan v. Illinois Commerce Comm'n, 148 Ill. 2d 348, 592 N.E.2d 1066 (1992). This court will reverse the Commission's decision if
the appellant demonstrates that the findings are not supported by
substantial evidence based upon a review of the entire record. 220
ILCS 5/10-201(e)(iv)(A) (West 1996); Continental Mobile Telephone
Co. v. Illinois Commerce Comm'n, 269 Ill. App. 3d 161, 645 N.E.2d 516 (1994). The appellant must show that the opposite conclusion
is clearly evident. Illinois Bell, 282 Ill. App. 3d at 679, 669 N.E.2d at 632.
Refinery representatives said that their foreseeable needs
could be met through other available sources. CAP evidence
demonstrated that the current supply of crude substantially
exceeded the capacity of Midwest refineries. Additionally,
professor Miller testified that crude delivered via Line 14 would
have no impact on market prices because the aggregate supply would
not change. In his opinion, the benefits would flow entirely to
Lakehead and its producers. In sum, no positive price effect could
be demonstrated. This evidence supports the conclusion that
Lakehead failed to demonstrate a public need for line 14 as opposed
to a private need or desire. Therefore, we hold that the
Commission's decision was supported by substantial evidence in the
record.
Lakehead also argues that the Commission's decision fails to
provide adequate findings.
The Commission is not required to provide findings on each
evidentiary claim; its findings are sufficient if they are specific
enough to enable the court to make an informed and intelligent
review of its order. 220 ILCS 5/10-201(e)(iii) (West 1996); City of
Chicago v. Illinois Commerce Comm'n, 281 Ill. App. 3d 617, 666 N.E.2d 1212 (1996). In other words, it must state the facts
essential to its ruling so that the court can properly review the
basis for the decision. Business and Professional People for Public
Interest v. Illinois Commerce Comm'n, 279 Ill. App. 3d 824, 665 N.E.2d 553 (1996).
The Commission thoroughly discussed its reasoning and
supported its decision by citations to the record. With respect to
public need, it summarized the arguments and evidence with
particularity and clearly addressed its method of approach. After
carefully reviewing the order, we conclude that the Commission has
provided sufficient findings and analysis in order for this court
to perform an informed judicial review.
III. CONCLUSION
Finally, we note that the Canadian Association of Petroleum
Producers argues that the Commission's decision contravenes the
1994 North American Free Trade Agreement (NAFTA). However, the
NAFTA argument was not specifically raised in Lakehead's
application for rehearing and is therefore waived. 220 ILCS 5/10-
113 (West 1996); Centerville Township v. Illinois Commerce Comm'n,
5 Ill. 2d 72, 124 N.E.2d 882 (1955); Governor's Office of Consumer
Services v. Illinois Commerce Comm'n, 242 Ill. App. 3d 172, 607 N.E.2d 1322 (1992).
For the foregoing reasons, the decision of the Illinois
Commerce Commission is affirmed.
Affirmed.
SLATER, J., concurs.
Justice Holdridge specially concurring:
After considering the Lakehead's petition for rehearing, I
believe I must write separately to address what appears to be its
fundamental argument in its petition for rehearing. Lakehead
maintains that this court has fundamentally misconstrued our
supreme court's definition of "prudential control" in Service
Pipeline Co. v. Ruder, 19 Ill. 2d 322 (1960), which Lakehead argues
clearly prohibits the Commission from denying eminent domain power
to interstate carriers based upon the Commission's assessment of
public need, if that assessment considers any factors other than a
need for the service by an entity other than the one proposing to
construct or condemn.
Lakehead maintains that under Ruder the Commission has no
authority to treat interstate common carriers by pipeline as if
they are traditional Illinois utilities and has no power to
evaluate overall conditions in interstate transportation markets
when assessing public need for a proposed pipeline. Lakehead also
maintains that Ruder is "clear" in holding that the Commission
cannot deny eminent domain certification to an interstate carrier
engaged in interstate commerce nor assess whether public
convenience or need require the proposed additional service. To do
so, Lakehead maintains under Ruder, would amount to an
impermissible state interference in interstate commerce
If the Ruder decision in fact held as Lakehead maintains, I
would be convinced that its position in the instant matter is
correct. If we had misread or misapprehended Ruder, I would accept
Lakehead's admonition, and grant its petition for rehearing. As it
is, I have searched the Ruder decision high and low, and simply
cannot find the holdings that Lakehead believes are clear in that
decision. Ruder did not place any limits upon the Commission's
methodology or authority to consider an interstate pipeline
carrier's application for the use of the state's power of eminent
domain. In fact, as the majority points out, the Ruder court
recognized that the very issues that Lakehead brings before this
court would someday be ripe for decision. The Ruder court observed
only that a constitutional conflict may "lurk behind" the
Commission's exercise of prudential control over interstate utility
projects for which the power of eminent domain is to be employed.
Ruder, 19 Ill. 2d at 333-34.
As I believe that Ruder does not support Lakehead's
contentions in its petition for rehearing, I concur in the decision
as modified upon denial of the petition for rehearing.
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 1998
LAKEHEAD PIPELINE COMPANY, ) Petition for Review
LIMITED PARTNERSHIP ) of an Order of the
) Illinois Commerce
Petitioner-Appellant, ) Commission
)
v. )
)
ILLINOIS COMMERCE COMMISSION, ) No. 96--0145
ILLINOIS DEPARTMENT OF )
AGRICULTURE, ILLINOIS DEPARTMENT)
OF TRANSPORTATION, ILLINOIS )
ENVIRONMENTAL PROTECTION AGENCY )
MCHENRY COUNTY, KENDALL COUNTY, )
KANE COUNTY, VILLAGE OF MOKENA, )
CITY OF WOODSTOCK, CITY OF )
PLANO, COMMUNITIES AGAINST )
THE PIPELINE, ROBERT POLLACK. )
)
Respondents-Appellees. )
MODIFIED UPON DENIAL OF REHEARING
Justice BRESLIN delivered the opinion of the court:
This controversy concerns a challenge to the Illinois Commerce
Commission's (Commission) authority to regulate a proposed
interstate pipeline under the Common Carrier by Pipeline Law
(Pipeline Law), (220 ILCS 5/15-100 et seq. (West 1996)).
Petitioner Lakehead Pipe Line Company (Lakehead) and amici curiae
assert that the Commission exceeded its lawful authority when
reviewing Lakehead's application for a certificate in good standing
under section 15-401 of the Pipeline Law, (220 ILCS 5/15-401 (West
1996)). Lakehead also claims that the Commission erroneously
interpreted the "public need" requirement of 15-401(b), resulting
in an unlawful interference with interstate commerce and an
arbitrary denial of Lakehead's application. We hold that the
Commission did not exceed its lawful authority and that its
interpretation and application of the Pipeline Law is reasonable
and does not conflict with the commerce clause of the United State
Constitution, (U.S. Const., art I, 8 clause 3). Thus, we
affirm.
I. FACTS
Lakehead is a limited partnership which owns the United States
portion of the world's longest liquid petroleum pipeline. With its
Canadian affiliate, Interprovincial Pipe Line, Inc. (IPL), Lakehead
transports crude petroleum and other liquid hydrocarbons along
approximately 3,200 miles of pipeline across North America from the
Northwest Territories and the Province of Alberta to refineries in
the Midwest as well as the Provinces of Ontario and Quebec. Within
Illinois, Lakehead operates a 116.64 mile stretch of pipe referred
to as line 6A. Line 6A went into service in 1969. It enters
Illinois from Wisconsin near Harvard and follows a route through
McHenry, Kane, Cook, DuPage and Will Counties. It then proceeds to
Indiana and enters that state near Griffith, Indiana. Line 6A was
generally constructed upon rights-of-way acquired from public
utilities, as well as easements and fee interests purchased from
private landowners. It did not require the use of eminent domain.
As part of a system expansion program, Lakehead began adding
new pumping stations to line 6A to meet a greater demand for crude
petroleum along its system. When Lakehead determined that 6A's
practical capacity was reached, which it said resulted in rationing
during peak periods, it decided to construct a new 24-inch pipeline
that it refers to as line 14. Proposed line 14 will track through
several Illinois counties, including DeKalb, Kane, and Kendall
counties, and is to interconnect with line 6A in Mokena, Illinois.
The new line is part of a large expansion program named System
Expansion Program II, which calls for greater transportation of
crude oil by Lakehead and IPL to and through Illinois. A new route
was determined to be desirable due to the significant development
in the counties along line 6A since 1969, and the fact that
proposed line 14 would traverse predominantly rural and
agricultural land. Its total cost is estimated to be $300 Million.
Before beginning construction, Lakehead sought the issuance of
a certificate in good standing under section 15-401 of the Pipeline
Law, which is a first step toward acquiring eminent domain
authority. During the application process, Lakehead made clear
that it sought to negotiate with landowners and municipalities
along the proposed route, but it noted that it may eventually need
condemnation authority in order to achieve its goal. Several
counties, municipalities, and state agencies intervened, as did
numerous landowners. Landowners formed an organization titled
Communities Against the Pipeline (CAP) in order to form an
organized group of landowners in opposition to line 14.
An extended hearing with numerous witnesses and exhibits was
held before a Commission hearing examiner. At the hearing,
Lakehead presented evidence regarding the fact that it properly
filed its application, and that it was fit, willing and able to
construct the line and maintain it safely and effectively. It also
argued that there was a public need for the line and the route
chosen was consistent with the public's need and convenience. With
respect to need, Lakehead's witnesses testified that there would be
substantial growth in the demand for crude oil during the next
decade. There was testimony that the demand flowed from the
increased demand for refined petroleum products. Representatives
from Midwest refineries that purchase crude oil from Lakehead
stated that they needed increased supplies of Canadian crude oil in
order to maintain competitive rates in the markets for refined
petroleum products and that the capacity restraints had a negative
economic impact on refiners. However, representatives acknowledged
that their future demands for crude oil could be met with the
current pipeline system established in the Midwest of which
Lakehead controls 40% of the market. Lakehead also offered
testimony that the purchase of crude oil from its system could
result in savings to refiners which could be passed on to
consumers. Mark Turri, an employee of Mobil Oil Corporation, said
that Canadian crude oil would be cheaper and that an adequate
supply of Canadian crude would ultimately benefit consumers.
Canadian oil consultant Timothy Partridge pointed out, however,
that Canadian crude oil production capabilities would decline after
2002.
William Gould, a senior economic analyst for the Commission,
testified that the interest of refiners, shippers, and producers
should be viewed as business interests rather than public
interests. In his opinion, as long as the public had an adequate
supply of refined petroleum products at reasonable prices, public
convenience and necessity were being served. Since there was no
evidence that an adequate supply of refined products were not
available at reasonable prices, Mr. Gould stated that there was no
public need for line 14. He testified that Lakehead merely
demonstrated a private interest in wanting to deliver more Canadian
crude oil to refineries in the midwest.
Along the same line, there was the testimony of James
McDonald, who was ruled not to be an expert but whose testimony
could be accepted for its factual content, and Merton Miller, a
Nobel Laureate in Economics. Both stated that any barrel of oil
that would be shipped via the proposed line would simply displace
crude oil which arrives from other points on other lines. This is
the case because all of the Midwest refineries were operating at or
near capacity and the supply of crude oil already significantly
exceeded the capacity of the refineries. According to Miller, a
new line would only assist in giving Lakehead a greater market
share. It would not result in any benefit to the public because
the aggregate supply would not change and thus the price of crude
oil would not be affected. Any benefit from the new line would
flow entirely to Lakehead and Canadian oil producers.
At the close of the hearing, the examiner concluded that the
need and demand for more capacity on Lakehead's system were the
relevant considerations for certification under section 15-401 and
that such need and demand were clearly established. Thus, having
determined that the statutory prerequisites of section 15-401 had
been met, the examiner recommended that the application be granted.
The Commission rejected the examiner's recommendation. It
determined that Lakehead failed to demonstrate a public need for
the new line. In doing so, the Commission stated that it agreed
with the analysis proposed by its staff that public need must be
assessed by looking to the demand for refined petroleum products
and not only crude oil per se. Public need, according to the
Commission, must be determined not by looking to the needs of any
individual or number of individuals, but by looking to the public
at large since "[t]he public *** is greater than a limited number
of market players." The Commission concluded that Lakehead failed
to support its claim that line 14 would have a positive price
effect on the market for refined products and that since the
consuming public did not lack an adequate supply of refined
petroleum products at adequate rates, and there was no shortage or
crisis, no public need for Line 14 existed. Lakehead's application
was therefore denied and it appeals. On appeal, Lakehead is
supported by amici briefs from numerous oil and pipeline companies
and associations.
II. DISCUSSION
A. Scope of Commission Authority
On appeal from the Commission, this court's review is limited
to considering whether: (1) the Commission acted within its
authority; (2) state or federal constitutional rights have been
infringed; (3) the decision is supported by substantial evidence;
(4) adequate findings were made to support the decision . Citizens
United For Responsible Energy Development, Inc. v. Illinois
Commerce Comm'n, 285 Ill. App. 3d 82, 673 N.E.2d 1159 (1996). The
burden of proof on all issues raised on appeal rests with the
appellant. 220 ILCS 5/10-201(d) (West 1996); United Cities Gas Co.
v. Illinois Commerce Comm'n, 163 Ill. 2d 1, 643 N.E.2d 719 (1994).
The first issue we will address is whether the Commission
exceeded its lawful authority. More specifically, the first issue
is whether the Commission exceeded its authority by interpreting
section 15-401(b) of the Pipeline Law as requiring it to determine
whether Lakehead, a pipeline carrier operating in interstate
commerce, met the statute's requirements including the requirement
that there be a public need for line 14.
Lakehead contends that the Commission's review is limited in
interstate pipeline cases because it may not regulate the
interstate markets involving transportation by common carriers.
Lakehead argues that the Commission only has "prudential control"
over certification applications, which does not include the right
to determine whether there is a need for line 14.
Section 15-401(b) lists the necessary requirements for a
pipeline to be issued a license to operate as a common carrier by
pipeline in Illinois. In relevant part it provides:
"(b) Requirements for issuance. The Commission,
after a hearing, shall grant an application for a
certificate authorizing operations as a common
carrier by pipeline, in whole or in part, to the
extent that it finds that the application was
properly filed; a public need for the service
exists; the applicant is fit, willing, and able to
provide the service in compliance with this Act,
Commission regulations, and orders; and the public
convenience and necessity requires issuance of the
certificate." 220 ILCS 5/15-401(b) (West 1996).
Once certified under section 15-401, a pipeline carrier may then
pursue eminent domain authority which is authorized by section 8-
509 of the Pipeline Law, (220 ILCS 5/8-509 (West 1996)). 220 ILCS
5/15-101 (West 1996).
The plain language of section 15-401(b) directs the Commission
to determine if a public need exists, and whether the public
convenience and necessity requires the proposed service, when
considering every application submitted. Lakehead insists,
however, that such a directive causes the Commission to exceed its
lawful authority in interstate commerce cases and places an undue
burden upon such commerce. Lakehead relies principally upon our
supreme court's decision in Service Pipe Line Co. v. Ruder, 19 Ill. 2d 332, 167 N.E.2d 419 (1960).
The Ruder Decision
Ruder concerned an interstate pipeline that brought a
condemnation action without first applying to the Commission for
approval. The circuit court dismissed the action and on direct
appeal the court affirmed, holding that an application to the
Commission was a condition precedent to the exercise of
condemnation power. In reaching its decision, the court disagreed
with the pipeline's argument that it had broad authority to
exercise a state's power of eminent domain without government
supervision. The court concluded that federal legislation had not
completely preempted the state's authority to regulate in the area,
and that a state could exercise "prudential control" over an
interstate utility's activities which will involve the power of
eminent domain. Ruder, 19 Ill. 2d at 335, 167 N.E.2d at 421. In
concluding, the court noted that it could not rule on the scope of
the Commission's authority and stated that there was no need to do
so absent the Commission's exercise of authority beyond that which
it is conceded to have. Ruder, 19 Ill. 2d at 337, 167 N.E.2d at
422. Over 37 years later, the question concerning the Commission's
authority is now before this court. In interstate pipeline cases
where the only interest in certification is the acquisition of
condemnation authority, does the Commission exceed its lawful
authority by enforcing the statutory prerequisites of the Pipeline
Law?
Our state has a "firm policy of limiting its regulatory
jurisdiction over interstate commerce within constitutional
bounds***." Ruder, 19 Ill. 2d at 335, 167 N.E.2d at 422. The
question of the necessity of eminent domain, however, remains,
within constitutional parameters, a legislative function. St. Louis
Connecting R.R. Co. v. Blumberg, 325 Ill. 387, 156 N.E. 298 (1927).
Unless preempted by the federal government, state law governs
certification, which is a necessary first step in acquiring eminent
domain power. See Iowa RCO Ass'n v. Illinois Commerce Comm'n, 86
Ill. App. 3d 1116, 409 N.E.2d 77 (1980). Thus, to the extent that
it does not conflict with federal law, section 15-401(b) and the
Pipeline Law must be applied.
Lakehead argues that this interpretation permits the
Commission to proceed beyond the prudential control noted in Ruder.
We disagree. Section 15-401 does not put the Commission in a
situation in which it exercises more than prudential control. The
Commission remains solely in charge of supervising and protecting
the public's general welfare with respect to public utilities. See
220 ILCS 5/4-101 (West 1996). Through section 15-401, it must
determine whether this state deems the project worthy of
certification so as to potentially permit condemnation authority.
It does not determine whether the pipeline should enter the market.
In fact, the Commission concedes that Lakehead is free to build a
pipeline under a federal scheme just as it built line 6A, without
first acquiring certification. But in so doing, Lakehead will have
no condemnation authority.
Interstate Commerce
Lakehead and amici maintain, however, that the requirement to
demonstrate public need for a service impermissibly burdens and
discriminates against interstate commerce.
The commerce clause of the United States Constitution grants
Congress the power "to regulate commerce *** among the several
states." U.S. Const., art I, 8 clause 3. While this language
gives it very broad powers to regulate matters involving interstate
commerce to the exclusion of the states, (Retail Clerks
International Ass'n v. Schermerhorn, 375 U.S. 96, 11 L. Ed. 2d 179,
84 S. Ct. 219 (1963)), it does not remove a state's power to
regulate issues of local import when Congress does not exercise its
authority (California v. Thompson, 313 U.S. 109, 85 L. Ed. 1219, 61 S. Ct. 930 (1941)). When Congress does not act to preempt local
legislation, states and local governing bodies retain the authority
to regulate matters within the general police powers even though
interstate commerce is affected. Lewis v. BT Investment Managers,
Inc., 447 U.S. 27, 64 L. Ed. 2d 702, 100 S. Ct. 2009 (1980); Edward R.
Bacon Grain Co. v. City of Chicago, 325 Ill. App. 245, 59 N.E.2d 689 (1945). But, such regulation may not conflict with free trade
among the states, (Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 3 L. Ed. 2d 1003, 79 S. Ct. 962 (1959)), and may not isolate a
state in a veil of economic protectionism (Wyoming v. Oklahoma, 502 U.S. 437, 454, 117 L. Ed. 2d 1, 22, 112 S. Ct. 789, 800 (1992);
Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 79 L. Ed. 1032, 55 S. Ct. 497 (1935)).
In a case in which a statute's effect on interstate commerce
is incidental, the Supreme Court describes the relevant
considerations to determine a statute's validity as follows:
"Where the statute regulates even-handedly to
effectuate a legitimate local public interest, and
its effects on interstate commerce are only
incidental, it will be upheld unless the burden
imposed on such commerce is clearly excessive in
relation to the putative local benefits.
[Citation]. If a legitimate local purpose is
found, then the question becomes one of degree.
And the extent of the burden that will be tolerated
will of course depend on the nature of the local
interest involved, and on whether it could be
promoted as well with a lesser impact on interstate
activities." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 178, 90 S. Ct. 844, 847
(1970).
The public need aspect of the statute serves to protect and
restrict the exercise of such powers as eminent domain. This is a
legitimate purpose as it regulates the traditional state power of
eminent domain by ensuring freedom from unnecessary and nonorderly
intrusions upon private property. When weighing the state's
interest in controlling condemnation authority against Lakehead's
desire to supply transport greater amounts of fuel crude oil by
potentially employing the State's authority, we believe the burden,
if any exists, is not excessive. Indeed, the statute does not
appear to place any burden on interstate commerce since it is not
restricting any federal scheme or interstate traffic. In terms of
the effect on an interstate pipeline, it merely works to regulate
the use of a state's sovereign power. See Missouri-Kansas-Texas
R.R. Co. v. State, 712 P.2d 40 (Sup. Ct. Okl. 1985) (state statute
regulating right to exercise eminent domain authority complemented
effectuation of pipeline and did not conflict with Interstate
Commerce Act). However, the state is not required to provide
condemnation powers and, absent Federal legislation, may decide in
its discretion whether such authority is proper. See Blumberg, 325 Ill. at 394, 156 N.E. at 301. Without proof that the statutory
prerequisites of the Pipeline Law have been met, certification and
condemnation authority will not follow.
Lakehead also argues that section 15-401(b), as interpreted by
the Commission, discriminates against interstate commerce.
Lakehead contends that the Commission erred by requiring Lakehead
to demonstrate a local public need.
While we agree with Lakehead that requiring proof of a local
public need would conflict with the commerce clause, (see Kern
River Gas Transmission Co. v. Clark County, Nevada, 757 F. Supp. 1110 (D. Nev. 1990)), we do not agree that the Commission required
such a demonstration. A local public need was one method of
proving need as contemplated by the statute, but the Commission did
not rule out interstate necessity. Accordingly, we find no
constitutional infringement, nor do we find that the Commission
exceeded its legal authority when reviewing Lakehead's application.
Its enforcement of the Pipeline Law does not cause it to improperly
intrude into the realm of interstate commercial regulation.
B. Commission Interpretation of Section 15-401(b)
Lakehead and amici also insist that the Commission erred when
it interpreted section 15-401(b), creating an onerous burden for
its application which lead to an arbitrary denial. They assert
that the Commission adopted a definition for "public need" which
was unsupported by authority and was an abandonment of its prior
decisions.
The primary rule of statutory construction is to ascertain and
give effect to the intent of the legislature. Bruso v. Alexian
Brothers Hospital, 178 Ill. 2d 445, 451, 687 N.E.2d 1014, 1016
(1997). In determining the legislature's intent, the court
considers the plain and ordinary meaning of the statute's language
in the overall context of its reason and necessity and its stated
purpose. Illinois Bell Telephone Co. v. Illinois Commerce Comm'n,
282 Ill. App. 3d 672, 676, 669 N.E.2d 628, 630-31 (1996). When the
legislature amends a statute, it is presumed that it intended a
change in the law. In re Petition of the Board of Trustees of the
Mokena Public Library District, 287 Ill. App. 3d 1064, 680 N.E.2d 743 (1997); People v. Krause, 273 Ill. App. 3d 59, 651 N.E.2d 744
(1995). The interpretation of a statute by an agency charged with
its administration is accorded great deference and will only be
reversed if erroneous. Archer-Daniels-Midland Co. v. Illinois
Commerce Comm'n, 293 Ill. App. 3d 459, 687 N.E.2d 1144 (1997).
Given the broad delegation of authority to the Commission, this
court must rely on the Commission's interpretation of the statute
if there is a reasonable debate as to its meaning. Peoples Gas,
Light & Coke Co. v. Illinois Commerce Comm'n, 175 Ill. App. 3d 39,
52, 529 N.E.2d 671, 680 (1988).
Prior to 1986, certification statutes like the statute
involved here required a demonstration of "public convenience and
necessity" before a project could proceed. Numerous cases centered
upon the interpretation of "necessity" which was squarely addressed
in Wabash, C. & W. Ry. Co. v. Commerce Comm'n ex rel. Jefferson
Southwestern R. Co., 309 Ill. 412, 141 N.E. 212 (1923). There the
court stated that if a matter "is of sufficient importance to
warrant the expense of making it, it is a public necessity."
Wabash, C. & W. Ry. Co., 309 Ill. at 418, 141 N.E. 214. The court
pointed out, however, that the word necessity cannot be strictly
defined as there are different degrees of necessity. It is a
relative rather than an absolute term. With respect to public
utilities and necessity, the court held that the Commission had a
right to look to current and expected conditions when investigating
whether there is a public necessity for a project. Wabash, C. & W.
Ry. Co., 309 Ill. at 418-19, 141 N.E. at 215.
In 1986 the legislature passed the Illinois Commercial
Transportation Law (Transportation Law), (Ill. Rev. Stat. 1987, ch.
95 «, par. 18c-1101 et seq.), which included specific requirements
to license pipeline carriers. Previously, pipelines requiring
eminent domain authority applied for certificates of public
convenience and necessity under repealed section 55 of the Illinois
Public Utilities Act (Public Utilities Act), (Ill. Rev. Stat. 1977,
ch. 111 , par. 56). Unlike section 55, however, the Transportation
Law required not only a demonstration of "public convenience and
necessity," but also "a public need for the service." Ill. Rev.
Stat. 1989, ch. 95«, par. 18c-8201. In 1996, the legislature
transferred the source of the Commission's regulatory authority
from the Transportation Law to Article XV of the Public Utilities
Act, (220 ILCS 5/15-100 et seq. (West 1996)). Shortly thereafter,
the legislature amended section 15-401 by adding a list of criteria
for the Commission to consider when determining whether
certification is required by public convenience and necessity. See
220 ILCS 5/15-401(b) (West 1996). The legislature has not defined
"public need" and has not set forth criteria to consider when
determining whether there is a public need for a particular
service.
Because of the changes in 1986 and 1996, we must presume that
the legislature intended to change the law with respect to
certifying pipelines. In this instance it appears to have elevated
the requirements for certification, and its failure to provide a
statutory definition of public need at any time strongly suggests
that it intended to allow the Commission to exercise a flexible
approach toward these matters. Cf. Freight Forwarders Institute v.
United States, 409 F. Supp. 693 (N.D. Ill. 1976); see also Ranquist
v. Stackler, 55 Ill. App. 3d 545, 370 N.E.2d 1198 (1977)
(importance of agency interpretations and use of agency in certain
matters recognizes the existence of complex situations that require
varying solutions and expertise unavailable in statutes).
Nevertheless, Lakehead and amici insist that the Commission's
interpretation is erroneous as it fails to take into account the
proper considerations when determining if there is a public need
for line 14.
For direction in determining what group should be considered
when investigating public need, the Commission turned to the
Supreme Court's decision in Roy v. Illinois Commerce Comm'n, 322 Ill. 452, 153 N.E. 648 (1926). In the context of discussing public
necessity and convenience, the Roy court stated that the
"convenience and necessity required to support an order of the
commission is that of the public and not any individuals or number
of individuals." Roy, 322 Ill. at 458, 153 N.E. at 648. The
Commission adopted this same approach in this case, determining
that the public is larger than a limited number of market players
and the need of a few refiners does not in and of itself establish
a public need. A public need, in the Commission's opinion, cannot
be defined as involving only a limited number of private interests.
We can find no fault with this reasoning which takes into
account the public as a whole. Lakehead argues that the
Commission's interpretation is erroneous because it excludes
business and industrial interests. It argues that businesses are
part of the public and thus demonstrate "a public need" when
industrial concerns require added service. Lakehead seeks support
from Iowa RCO Ass'n v. Illinois Commerce Comm'n, 86 Ill. App. 3d
1116, 409 N.E.2d 77 (1980). Iowa RCO Ass'n is of little
assistance, however, because there the court was faced with the
question of whether a pipeline qualified as a public utility
because it was demonstrated to be for public use within the meaning
of what is now section 3-105 of the Public Utilities Act, (220 ILCS
5/3-105 (West 1996)), which defines which corporations are public
utilities. The pipeline delivered oil to several companies with
which it was affiliated. However, several nonaffiliated refineries
wished to use the line and the pipeline agreed to furnish the
requested service. The Commission and the court thus determined
that there was a sufficient showing of a public use. Iowa RCO
Ass'n, 86 Ill. App. 3d at 1118, 409 N.E.2d at 80.
This demonstration is of no value here where public need is at
issue rather than use. In the context of public need, it is
appropriate to look at the larger group of the general public to
see if it requires the service, not whether some components of the
public are in fact using the service. Only by looking to the
public at large can one determine whether there is an actual
existing or expected popular need for the proposed service which
should not be denied. This broader understanding of public has
been consistently employed by our courts. Thompson v. Illinois
Commerce Comm'n, 1 Ill. 2d 350, 115 N.E.2d 622 (1953); Illinois
Highway Transportation Co. v. Illinois Commerce Comm'n, 404 Ill. 610, 90 N.E.2d 86 (1950); Illinois Central R.R. Co. v. Illinois
Commerce Comm'n, 395 Ill. 303, 70 N.E.2d 64 (1946); Chicago Rys.
Co. v. Commerce Comm'n, 336 Ill. 51, 167 N.E. 840 (1929); West
Suburban Transportation Co. v. Chicago and West Towns Ry. Co., 309 Ill. 87, 140 N.E. 56 (1923).
Lakehead also argues that the Commission erred in construing
"need." It argues that the Commission's decision essentially
results in a requirement that there be an absolute necessity for a
service or a demonstration that a facility is indispensably
requisite.
The Commission's order describes its approach as one which
searches for a present need by looking for evidence of a current
public desire, or a determination as to whether a line is necessary
to meet foreseeable future demand. It does not require a
demonstration of absolute necessity. Therefore, we reject this
argument and conclude that the Commission's interpretation was
reasonable.
Additionally, Lakehead contests the Commission's approach as
being an arbitrary departure from the Commission's previous
decisions.
Reviewing courts give Commission decisions great deference
because they are "judgment[s] of a tribunal appointed by law and
informed by experience." United Cities Gas Co. v. Illinois Commerce
Comm'n, 163 Ill. 2d 1, 12, 643 N.E.2d 719, 725 (1994); Village of
Apple River v. Illinois Commerce Comm'n, 18 Ill. 2d 518, 523, 165 N.E.2d 329, 332 (1960); Archer-Daniels-Midland, 293 Ill. App. 3d at
463, 687 N.E.2d at 1147. However, the Commission is not a judicial
body and its orders do not have the effect of res judicata; the
Commission, as a regulatory body must have the authority to address
each matter before it freely, even if it involves issues identical
to a previous case. Mississippi River Fuel Corp. v. Illinois
Commerce Comm'n, 1 Ill. 2d 509, 116 N.E.2d 394 (1953). But, if the
Commission drastically departs from past practices, its decisions
are entitled to less deference. Citizens Utility Board v. Illinois
Commerce Comm'n, 166 Ill. 2d 111, 651 N.E.2d 1089 (1995); Business
and Professional People For the Public Interest v. Illinois
Commerce Comm'n, 136 Ill. 2d 192, 555 N.E.2d 693 (1989).
The approach taken in this docket was not a novel one. In
1988 in Illini Carrier, Ill. Com. Comm'n 87-0421 (Oct. 28, 1988),
the Commission determined whether a need for a particular service
existed by examining the abilities of other carriers in a specific
region. Illini Carrier was specifically discussed and followed in
this case. Furthermore, in 1994 in Illini Carrier, Ill. Com.
Comm'n P91-0001 (July 27, 1994), the Commission rejected
essentially the same public need argument presented here. Although
that case was reversed on appeal on other grounds, (Illini Carrier,
L.P. v. Illinois Commerce Comm'n, 288 Ill. App. 3d 835, 681 N.E.2d 1022 (1997)), it stands as evidence that the Commission has not
acted arbitrarily. Most recently in Quantum Pipeline Co., Ill.
Com. Comm'n 96-0001, 96-0318 (Dec. 17, 1997), the Commission, as in
this case, determined whether there was a public need based upon an
examination of the needs of the general public, not the needs of a
few individuals. Furthermore, the need of the general public was
a common thread in other decisions. See Mid-America Pipeline Co.,
Ill. Com. Comm'n T88-0065 (March 22, 1989) (pipeline would assist
in alleviating nationwide shortage of antifreeze); Mid-American
Pipeline Co., Ill. Com. Comm'n 86-0101 (Sept. 17, 1986) (pipeline
would prevent plant closing). Accordingly, we find no arbitrary
departure and we hold that the Commission's interpretation is
reasonable.
C. Substantial Evidence and Adequate Findings
Lakehead further posits that the Commission's decision was not
supported by substantial evidence.
On appeal, the Commission's findings are accepted as prima
facie true. 220 ILCS 5/10-201(d) (West 1996); People ex rel.
Hartigan v. Illinois Commerce Comm'n, 148 Ill. 2d 348, 592 N.E.2d 1066 (1992). This court will reverse the Commission's decision if
the appellant demonstrates that the findings are not supported by
substantial evidence based upon a review of the entire record. 220
ILCS 5/10-201(e)(iv)(A) (West 1996); Continental Mobile Telephone
Co. v. Illinois Commerce Comm'n, 269 Ill. App. 3d 161, 645 N.E.2d 516 (1994). The appellant must show that the opposite conclusion
is clearly evident. Illinois Bell, 282 Ill. App. 3d at 679, 669 N.E.2d at 632.
Refinery representatives said that their foreseeable needs
could be met through other available sources. CAP evidence
demonstrated that the current supply of crude substantially
exceeded the capacity of Midwest refineries. Additionally,
professor Miller testified that crude delivered via Line 14 would
have no impact on market prices because the aggregate supply would
not change. In his opinion, the benefits would flow entirely to
Lakehead and its producers. In sum, no positive price effect could
be demonstrated. This evidence supports the conclusion that
Lakehead failed to demonstrate a public need for line 14 as opposed
to a private need or desire. Therefore, we hold that the
Commission's decision was supported by substantial evidence in the
record.
Lakehead also argues that the Commission's decision fails to
provide adequate findings.
The Commission is not required to provide findings on each
evidentiary claim; its findings are sufficient if they are specific
enough to enable the court to make an informed and intelligent
review of its order. 220 ILCS 5/10-201(e)(iii) (West 1996); City of
Chicago v. Illinois Commerce Comm'n, 281 Ill. App. 3d 617, 666 N.E.2d 1212 (1996). In other words, it must state the facts
essential to its ruling so that the court can properly review the
basis for the decision. Business and Professional People for Public
Interest v. Illinois Commerce Comm'n, 279 Ill. App. 3d 824, 665 N.E.2d 553 (1996).
The Commission thoroughly discussed its reasoning and
supported its decision by citations to the record. With respect to
public need, it summarized the arguments and evidence with
particularity and clearly addressed its method of approach. After
carefully reviewing the order, we conclude that the Commission has
provided sufficient findings and analysis in order for this court
to perform an informed judicial review.
III. CONCLUSION
Finally, we note that the Canadian Association of Petroleum
Producers argues that the Commission's decision contravenes the
1994 North American Free Trade Agreement (NAFTA). However, the
NAFTA argument was not specifically raised in Lakehead's
application for rehearing and is therefore waived. 220 ILCS 5/10-
113 (West 1996); Centerville Township v. Illinois Commerce Comm'n,
5 Ill. 2d 72, 124 N.E.2d 882 (1955); Governor's Office of Consumer
Services v. Illinois Commerce Comm'n, 242 Ill. App. 3d 172, 607 N.E.2d 1322 (1992).
For the foregoing reasons, the decision of the Illinois
Commerce Commission is affirmed.
Affirmed.
SLATER, J., concurs.
Justice Holdridge specially concurring:
After considering the Lakehead's petition for rehearing, I
believe I must write separately to address what appears to be its
fundamental argument in its petition for rehearing. Lakehead
maintains that this court has fundamentally misconstrued our
supreme court's definition of "prudential control" in Service
Pipeline Co. v. Ruder, 19 Ill. 2d 322 (1960), which Lakehead argues
clearly prohibits the Commission from denying eminent domain power
to interstate carriers based upon the Commission's assessment of
public need, if that assessment considers any factors other than a
need for the service by an entity other than the one proposing to
construct or condemn.
Lakehead maintains that under Ruder the Commission has no
authority to treat interstate common carriers by pipeline as if
they are traditional Illinois utilities and has no power to
evaluate overall conditions in interstate transportation markets
when assessing public need for a proposed pipeline. Lakehead also
maintains that Ruder is "clear" in holding that the Commission
cannot deny eminent domain certification to an interstate carrier
engaged in interstate commerce nor assess whether public
convenience or need require the proposed additional service. To do
so, Lakehead maintains under Ruder, would amount to an
impermissible state interference in interstate commerce
If the Ruder decision in fact held as Lakehead maintains, I
would be convinced that its position in the instant matter is
correct. If we had misread or misapprehended Ruder, I would accept
Lakehead's admonition, and grant its petition for rehearing. As it
is, I have searched the Ruder decision high and low, and simply
cannot find the holdings that Lakehead believes are clear in that
decision. Ruder did not place any limits upon the Commission's
methodology or authority to consider an interstate pipeline
carrier's application for the use of the state's power of eminent
domain. In fact, as the majority points out, the Ruder court
recognized that the very issues that Lakehead brings before this
court would someday be ripe for decision. The Ruder court observed
only that a constitutional conflict may "lurk behind" the
Commission's exercise of prudential control over interstate utility
projects for which the power of eminent domain is to be employed.
Ruder, 19 Ill. 2d at 333-34.
As I believe that Ruder does not support Lakehead's
contentions in its petition for rehearing, I concur in the decision
as modified upon denial of the petition for rehearing.
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