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Evidence of Loss Based Upon Interference with Property Owner’s Ability to Extract Gas by Hydrofracking Disallowed as Speculative

The Third Department affirmed Supreme Court’s determination that respondents’ expert would not be allowed to testify at trial in this condemnation proceeding.  Petitioner brought the condemnation proceedings to obtain perpetual easements for underground gas storage in the “Oriskany Sand” beneath the surface of the land owned by the respondents.  The respondents hired a geologist to testify that the easement will interfere with any future attempts to extract gas by hydrofracking and sought compensation for the claimed lost gas-development rights.  The Third Department wrote:

The  extent to which a  condemnation limits a  claimant’s property rights is determined  by  the language  used  in the appropriation and the underlying purpose of the taking, and  “[t]he quantum of the title to be taken will not be extended by implication”….Here, petitioner’s easement  explicitly reserves  to  respondents  “the right to grant oil, gas and other mineral rights to others in formations other than the Oriskany Sand” and limits that reservation of rights only by  precluding respondents  from “grant[ing] or convey[ing] gas  storage rights” (emphasis  added) that interfere with petitioner’s easement. * * *

If …hydrofracking in the Marcellus formation does eventually prove to pose an unacceptable risk to petitioner’s storage space – a claim that petitioner does not now make – it may choose at that time to undertake appropriate measures  to acquire whatever  additional rights may prove to be necessary, and, of course, to compensate the affected landowners   appropriately. As petitioner has not yet made any such acquisition, the court properly precluded respondents from presenting evidence on their claims relative to development rights in the Marcellus formation. Matter of Central N.Y. Oil & Gas Co., L.L.C. (LaDue), 515347, 3rd Dept, 6-13-13

 

 

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No Investment Tax Credit for Company which Delivered Natural Gas, as Opposed to Processing or Manufacturing a Product

The Third Department upheld the NYS Tax Appeals Tribunal’s determination that the petitioner, Brooklyn Union Gas Company, was not entitled to an investment tax credit (ITC) because it was in the business of delivering natural gas, not producing or processing a product as those terms are construed for an ITC under the Tax Law:

The record amply supports, for purposes of our limited review, the Tribunal’s determination that petitioners’ integrated system  was  primarily one  of  distribution and  delivery  rather than processing or manufacturing.  The  vast  majority  of petitioners’ 11,000-mile system, both  in terms  of size and  cost, is comprised of pipes and  mains  through  which  natural gas  flows.  No material change occurs to the natural gas while in the pipes and mains, as these serve as the primary means for delivering the product. Viewing the system as a whole, the modifications made by petitioners to the gas  –  while important –  do  not  result in a significant change  in the product.  Matter of Brooklyn Union Gas Company v NYS Tax Appeals Tribunal, 514825, 3rd Dept, 6-6-13

 

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Electricity-Steam Generation Rate Changes Did Not Qualify as a “Rule” Under the State Administrative Procedure Act

In affirming the NYS Public Service Commission’s approval of electricity/steam generation rates, the Third Department determined that the “long-term cost allocation method” did not qualify as a “rule” and therefore did not trigger the notice requirements of the State Administrative Procedure Act:

The part of the order determining the long-term cost allocation method does not constitute a rule because it  does not impose “‘a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers'” … .   As such, the notice provisions of the State Administrative Procedure Act do not apply (see State Administrative Procedures Act §§ 102 [2] [a]; 202 [1] [a]…).   Further, the notices issued by the Commission in connection with the planning proceeding satisfied procedural due process by clearly indicating that the planning case included consideration of the long-term impacts of cost allocation, and petitioner was provided sufficient opportunity to be heard on the issue … .  We have considered petitioner’s remaining arguments and find them to be likewise without merit.  Matter of City of New York v NYS Public Service Commission, et al, 515472, 3rd Dept, 4-11-13

 

 

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