Filed 10/25/10 NOS. 4-09-0702, 4-09-0718 cons.
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
PLIURA INTERVENORS, ) Direct
Petitioner-Appellant, ) Administrative
v. (No. 4-09-0702) ) Review of the
THE ILLINOIS COMMERCE COMMISSION; and ) Illinois Commerce
ENBRIDGE PIPELINES (ILLINOIS), L.L.C., ) Commission
Respondents-Appellees. ) No. 07-0446
------------------------------------- )
TURNER INTERVENORS, )
Petitioner-Appellant, )
v. (No. 4-09-0718) )
THE ILLINOIS COMMERCE COMMISSION; and )
ENBRIDGE PIPELINES (ILLINOIS), L.L.C., )
Respondents-Appellees. )
_________________________________________________________________
JUSTICE STEIGMANN delivered the opinion of the court:
In August 2007, respondent, Enbridge Pipelines (Illi-
nois), L.L.C. (Enbridge Pipelines), filed an application for a
certificate in good standing and other relief pursuant to section
15-401 of the Public Utilities Act (220 ILCS 5/15-401 (West
2008)). In July 2009, corespondent, the Illinois Commerce
Commission, approved Enbridge Pipelines' application, which (1)
certified it as a "common carrier by pipeline" and (2) authorized
the construction, operation, and maintenance of an oil pipeline.
Petitioners, Pliura Intervenors and Turner Intervenors
(collectively, Intervenors), appeal, both arguing that the
Commission erred by determining that (1) Enbridge Pipelines was
fit, willing, and able to construct, operate, and maintain an oil
pipeline and (2) a public need for the pipeline existed. We
disagree and affirm.
I. BACKGROUND
A. The Corporate Structure of Enbridge and Its
Southern Access Expansion Project
Enbridge, Inc. (Enbridge), is an energy transportation
and distribution corporation headquartered in Alberta, Canada,
that, among other business interests, has a "liquids transporta-
tion unit." That unit's purpose, in pertinent part, is to
transport oil from producers and shippers in western Canada to
markets and refineries in the United States and eastern Canada
through an integrated oil pipeline network that spans approxi-
mately 1,900 miles across North America. Enbridge's oil pipeline
network includes its "Mainline System," which is composed of (1)
the "Lakehead System"--the United States portion of its network
that transports oil to seven Great Lakes states, including
Illinois--and (2) the oil pipeline system of its wholly owned
subsidiary, Enbridge Pipelines.
In December 2005, Enbridge began its "Southern Access
Expansion Project" (expansion project), which focused on "facil-
ity improvements, expansions, and enhancements designed to ensure
adequate, efficient, and economic transportation service[s] for
producers, and users of crude petroleum." In April 2007, the
Commission certified two of Enbridge's affiliates as common
carriers by pipeline, which authorized them to construct, oper-
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ate, and maintain the expansion project. The first phase of the
expansion project concerned the construction of a new pipeline in
Wisconsin that ran parallel to the Lakehead System. The second
phase concerned, in pertinent part, a new pipeline from phase
one's termination point to Enbridge's terminal near Pontiac,
Illinois. Enbridge claimed that when completed, the expansion
project would allow it to transport an additional 400,000 barrels
per day (bpd) to its Pontiac terminal.
B. Enbridge Pipeline's Application for
Certificate in Good Standing
In August 2007, Enbridge Pipelines filed an application
for certificate in good standing and other relief pursuant to
section 15-401 of the Act (220 ILCS 5/15-401 (West 2008)). The
application sought approval from the Commission to (1) construct
an oil pipeline extension spanning 170 miles from its terminal
near Pontiac to its 13-million-barrel oil storage facility in
Patoka, Illinois, which it termed its "Southern Access Extension
Project" (pipeline extension) and (2) acquire, when necessary,
private property to construct the pipeline extension under
eminent domain as authorized by section 8-509 of the Act (220
ILCS 5/8-509 (West 2008)).
In support of its application, Enbridge Pipelines noted
that the United States Department of Energy projected a 30%
increase in United States oil consumption from the 20.7 million
bpd consumed in 2005 to 26.9 million bpd by 2030, based on
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increases in population and economic activity. Noting that
Illinois (1) is a leading consumer of energy in the United States
and (2) produced only 3% of the oil required to meet that demand,
Enbridge Pipelines argued that the five refineries located in or
near Illinois required a constant, adequate, and dependable
supply of oil, which its pipeline extension could provide.
Enbridge Pipelines contended that its pipeline exten-
sion would, in pertinent part, benefit Illinois by increasing its
ability to deliver Canadian oil to various Illinois markets and
refineries. In particular, Enbridge Pipelines asserted that the
pipeline extension would afford United States refineries an
additional initial capacity of 400,000 bpd for further movement
from its Patoka storage facility to various markets and refiner-
ies in the southern, eastern, and western regions of the United
States. Enbridge Pipelines further noted that by obtaining and
processing oil from Canada, refineries would enjoy lower supply
costs, dependable sourcing, and expeditious delivery. Enbridge
Pipelines claimed that such advantages benefit Illinois consumers
in the form of (1) lower prices for petroleum-based products, (2)
increased and consistent oil availability, (3) refinery stability
that results in consistent tax revenues for local economies, (4)
decreased supply disruptions caused by natural phenomenon such as
hurricanes or world insurrection, and (5) additional oil delivery
options through increased competition.
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Enbridge Pipeline's application noted that as a pub-
licly traded company on both the Toronto and New York stock
exchanges, Enbridge had a total capitalization of $14.2 billion
and earnings to common shareholders of $616 million. Appended to
its application, Enbridge Pipelines included Enbridge's 2006
annual report, which documented, in pertinent part, its financial
strength. In this regard, Enbridge Pipelines (1) represented
that Enbridge had committed the financial capital to construct
the pipeline extension and (2) touted its "clear" commitment
toward that goal.
C. The Testimony and Evidence Presented to the Commission
We first note that the initial "direct testimony" in
this case was presented to the Commission in the form of (1)
filed written statements that documented the questions posed by
the respective parties' counsel and the corresponding witnesses'
answers absent the opposing party and (2) direct oral testimony
at a March 2009 hearing before the Commission, in which the
opposing party was afforded the opportunity to cross-examine
witnesses' on their respective written and oral statements.
1. The Pipeline Extension Director's Testimony
In October 2007, the director of the pipeline extension
filed his testimony with the Commission, in which he confirmed
that he had verified Enbridge Pipelines' August 2007 application
for certificate in good standing and for other relief. In
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adopting the application's content as part of his oral testimony,
the director reiterated that Illinois plays a "major role in the
international and interstate transportation network for crude
petroleum." The director claimed that the pipeline extension
would enhance Illinois' role by allowing southern Illinois
refineries to satisfy increased demand, which would strengthen
its economy and reduce the instability that volatile markets
inflict on an ever-tightening world oil supply. With regard to
its financial stability, the director noted Enbridge's (1) prior
construction and current operation of two oil pipelines and one
natural gas pipeline in Illinois and (2) $2 billion investment to
enhance its integrated oil pipeline network.
The director (1) acknowledged that he could not quan-
tify the specific monetary benefit that would accrue to Illinois
citizens if the Commission approved the pipeline extension, but
(2) characterized Patoka as an "important crude oil hub" that
"will enhance Illinois' position as an important part of this
vital transportation network," and (3) stated that the pipeline
extension was designed to deliver a maximum of 800,000 bpd.
2. Enbridge Pipeline's Expert Testimony
In October 2007, Enbridge Pipeline's economics expert,
who was retained to provide testimony regarding the benefits
Illinois would experience if the Commission granted Enbridge
Pipeline's application, filed his written testimony. The expert
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explained that the pipeline extension was part of the expansion
project that Enbridge had undertaken. With regard to that
project, the expert noted the following substantial benefits
Illinois consumers would enjoy: (1) a present-value savings of
$407 million based on the mitigating effect increased oil produc-
tion would have on gasoline prices, distillate, and jet fuel; (2)
improved regional security as dependency on uncertain oil sup-
plies from South American and the Middle East are replaced by a
stable flow of Canadian oil; (3) gains in "regional economies"
based on planned refinery upgrades, oil storage expansion, and
pipeline expansion as the anticipated secure supply of Canadian
oil replaces the recent history of foreign oil disruptions; (4) a
commitment from Illinois refineries to expand their respective
facilities to accommodate the additional oil; (5) increased
security and safety benefits through local and expanded oil
storage facilities; and (6) additional employment opportunities.
In opining that the Commission should grant Enbridge
Pipeline's application, the expert noted the following:
"[T]he [pipeline e]xtension *** is extremely
important to Illinois and its consumers. In
addition to providing access to a secure
source of petroleum for many years to come,
the [pipeline e]xtension *** will likely
provide Illinois consumers with substantial
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savings in the event of any crisis that oc-
curs in the future, especially if the tight
spare capacity that exists today continues,
as is likely, in the future."
The expert (1) explained that his $407 million present-
value-savings estimate was based on the 400,000 bpd that would
flow to Patoka--and eventually the "world supply"--if the Commis-
sion approved Enbridge Pipelines' application and (2) acknowl-
edged that he had not confirmed information regarding proposed
refinery upgrades but instead, relied on the representations made
in Enbridge Pipeline's application.
3. The Commission's Evaluation of Enbridge
Pipeline's Financial Stability
In January 2008, a senior financial analyst in the
Commission's financial-analysis division filed her written
testimony, concluding that "[t]hrough its relationship with
Enbridge ***, Enbridge [Pipelines] is capable of financing the
construction, operation[,] and maintenance of the proposed
pipeline from near Pontiac to Patoka." In particular, the
analyst noted that as of August 2007, the pipeline-extension cost
was estimated at approximately $500 million. Enbridge Pipelines
planned to finance these construction costs with short-term
intercompany loans from Enbridge. After completing the pipeline
extension, Enbridge Pipelines planned to refinance the debt with
a combination of short- and long-term debt capitalization pro-
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vided by Enbridge.
The analyst further noted that two investor services
had rated Enbridge as financially stable with either a minimal or
moderate credit risk, whose business risk profile was one of the
lowest in the industry based on its long-term energy contracts.
As of September 2007, Enbridge had $3.2 billion of unused credit
facilities that it planned to use to support Enbridge Pipelines'
short-term financing. The analyst also opined that based on its
stable credit rating, Enbridge had sufficient access to capital
from debt and equity markets to refinance Enbridge Pipelines'
short-term construction loans.
4. The Intervenors' Expert Testimony
In January 2008, the Intervenors' economic expert, who
was retained to evaluate the expert opinions of Enbridge Pipe-
lines' economic expert, filed his written testimony. That expert
concluded, in pertinent part, that a public need did not exist
for the pipeline extension because Enbridge Pipelines' expert did
not consider all the significant costs and benefits. Specifi-
cally, the Intervenors' expert noted the following deficiencies:
(1) the analysis failed to consider the costs and benefits of
transporting 400,000 bpd from Pontiac to Patoka, which in essence
"double counts" benefits he had previously attributed to the
expansion project; (2) the claimed benefits from increased oil
production are independent of the location of the pipeline
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extension because the analysis does not delineate the Illinois-
specific price impact of the expansion project; (3) the claimed
increased oil-production benefits ignore the negative impacts
regarding the depletion of an exhaustible resource and the
increased production of "greenhouse" gases; and (4) the analysis
does not accurately measure economic benefits because it fails to
"account for economic losses in other areas that result from the
pipeline extension's expenditures."
D. The Commission's Determination
In July 2009, the Commission issued its order, meticu-
lously documenting, in pertinent part, the parties' arguments
regarding (1) Enbridge Pipelines' fitness, willingness, and
ability to construct, operate, and maintain the proposed pipeline
extension and (2) whether a public convenience and necessity
required issuance of the certificate in good standing under
section 15-401 of the Act (220 ILCS 5/15-401 (West 2008)).
1. The Commission's Determination That Enbridge
Pipelines Was Fit, Willing, and Able
In determining that Enbridge Pipelines was fit, will-
ing, and able to construct and maintain the proposed pipeline
extension, the Commission relied on its senior financial ana-
lyst's testimony, stating as follows:
"[The s]enior [f]inancial [a]nalyst[]
testified [that] '[t]hrough its relationship
with Enbridge, *** Enbridge [Pipelines] is
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capable of financing the construction, opera-
tion[,] and maintenance of the proposed pipe-
line from near Pontiac to Patoka.' *** In
support of her opinion, [the analyst] de-
scribed in detail the analysis she performed,
and the bases for her conclusions. She also
noted that Enbridge operates the world's
longest crude oil and liquids pipeline system
in Canada and the [United States].
The Commission observes that no similar
analyses were performed by parties who dis-
agree with [the analyst's] conclusions re-
garding [Enbridge's] fitness.
As a condition of this [o]rder, Enbridge
*** shall fulfill its commitments to provide
such financial support as is reasonably nec-
essary for the construction and operation of
the proposed pipeline *** and Enbridge [Pipe-
lines] shall fulfill its commitments to ob-
tain such financial support from Enbridge
***."
2. The Commission's Determination That
a Public Need Existed
In determining that Enbridge Pipelines had shown a
public convenience and necessity for the proposed pipeline
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extension, the Commission quoted the following definition of
"public need":
"In the context of public need, it is appro-
priate 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."
Lakehead Pipeline Co. v. Illinois Commerce
Comm'n, 296 Ill. App. 3d 942, 955, 696 N.E.2d
345, 354 (1998).
Relying on this definition, the Commission determined
that the pipeline extension would provide (1) Illinois, as well
as our nation, additional oil supplies from a friendly ally and
(2) access to a secure and reliable energy supply that assists
our nation in achieving our energy needs, which benefits Illinois
citizens either directly or indirectly. (The Commission also
determined that the record did not support a finding authorizing
Enbridge to acquire land under eminent domain, a determination
that the parties do not raise in this appeal.)
This appeal followed.
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II. ANALYSIS
Before addressing the Intervenors' claims, we briefly
discuss the statutory licensing procedure and our standard of
review.
A. The Statutory Licensing Procedure
Section 15-401 of the Act, which describes the require-
ments to operate as a common carrier by pipeline, provides, in
pertinent part, the following:
"(a) No person shall operate as a common
carrier by pipeline unless the person pos-
sesses a certificate in good standing autho-
rizing it to operate as a common carrier by
pipeline. No person shall begin or continue
construction of a pipeline or other facility,
other than the repair or replacement of an
existing pipeline or facility, for use in
operations as a common carrier by pipeline
unless the person possesses a certificate in
good standing.
(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
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finds that the application was properly file-
d; a public need for the service exists; the
applicant is fit, willing, and able to pro-
vide 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(a), (b) (West 2008).
B. The Standard of Review
"A reviewing court generally gives substantial defer-
ence to the decisions of an administrative agency because of its
experience and expertise." Alhambra-Grantfork Telephone Co. v.
Illinois Commerce Comm'n, 358 Ill. App. 3d 818, 821, 832 N.E.2d
869, 872 (2005). With regard to such decisions, a reviewing
court's powers are limited because it exercises a statutory
jurisdiction pursuant to the Act, rather than general appellate
jurisdiction. City of Chicago v. Illinois Commerce Comm'n, 264
Ill. App. 3d 403, 408, 636 N.E.2d 704, 707-08 (1993). Under this
strict statutory standard, a reviewing court's reversal, in whole
or in part, of a Commission's rule, regulation, order, or deci-
sion is limited to the following circumstances: (1) the Commis-
sion's findings were not supported by substantial evidence, (2)
the Commission lacked jurisdiction, (3) the Commission's determi-
nation violated the state or federal constitution or laws, or (4)
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the proceedings or manner in which the Commission arrived at its
determination infringed on the appellant's state or federal
constitutional rights. 220 ILCS 5/10-201(e)(iv) (West 2008);
Commonwealth Edison Co. v. Illinois Commerce Comm'n, 398 Ill.
App. 3d 510, 514, 924 N.E.2d 1065, 1074 (2009). "'Substantial
evidence' means more than a mere scintilla" but "does not have to
rise to the level of a preponderance of the evidence." Common-
wealth Edison Co., 398 Ill. App. 3d at 514, 924 N.E.2d at 1074.
"[O]n appeal from an order of the Commission, its
findings of fact are to be considered prima facie true; its
orders are considered prima facie reasonable; and the burden of
proof on all issues raised in an appeal is on the appellant."
Commonwealth Edison Co., 398 Ill. App. 3d at 514, 924 N.E.2d at
1074. Thus, the Commission's findings and conclusions on ques-
tions of fact will not be disturbed unless they are against the
manifest weight of the evidence. Illinois-American Water Co. v.
Illinois Commerce Comm'n, 331 Ill. App. 3d 1030, 1036-37, 772
N.E.2d 390, 395 (2002). "To warrant reversal, the appellant must
show that the opposite conclusion is clearly evident." Illinois-
American Water Co., 331 Ill. App. 3d at 1037, 772 N.E.2d at 395.
C. The Intervenors' Claims That the Commission Erred by
Approving Enbridge Pipelines' Application
1. The Commission's Determination Regarding
Enbridge Pipelines' Fitness
The Intervenors argue that the Commission erred by
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determining that Enbridge Pipelines was fit, willing, and able to
construct, operate, and maintain an oil pipeline. Specifically,
they contend that "[i]t was insufficient for the Commission to
accept [Enbridge Pipeline's] representation without separate
verification that *** Enbridge *** had both the ability and the
obligation to fully fund [the pipeline extension]." (Emphasis in
original.) We disagree.
In this case, the Intervenors essentially urge this
court--without citation to any competent authority--to create a
new statutory requirement within section 15-401(b) of the Act
(220 ILCS 5/15-401(b) (West 2008)) where none presently exists.
Specifically, that as a matter of law, evidence of adequate
funding provided by an applicant's parent organization--which the
Intervenors concede Enbridge can provide--can only be demon-
strated when the parent has indemnified its subsidiary. We
decline the Intervenors' invitation to do so.
Here, the Commission's determination that Enbridge
Pipelines was fit, willing, and able to construct, operate, and
maintain the pipeline extension was based, in pertinent part, on
the following evidence: (1) that Enbridge Pipelines is a subsid-
iary of the world's longest crude oil and liquids pipeline system
in Canada and the United States; (2) the business rationale for
the integration of Enbridge's expansion project with Enbridge
Pipelines' extension pipeline; (3) the Commission's financial
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analysis that Enbridge Pipelines was capable of financing the
pipeline extension through Enbridge; (4) two independent investor
services rated Enbridge's financial stability and credit risk
favorably; and (5) the reasonable and achievable manner in which
Enbridge Pipelines would finance its short- and long-term debt
associated with the construction of the pipeline extension.
Moreover, realizing the general corporate relationship
and specific financial relationship between Enbridge and Enbridge
Pipelines, the Commission conditioned its approval of Enbridge
Pipelines' application to operate as a common carrier by pipeline
on (1) Enbridge's fulfillment of its commitment to provide such
financial support as is reasonably necessary for the construction
and operation of the pipeline extension and (2) Enbridge Pipe-
lines' acquisition of such financial support from Enbridge.
Given our standard of review, we conclude that the
Commission's determination that Enbridge Pipelines was fit,
willing, and able to construct, operate, and maintain the pipe-
line extension was not against the manifest weight of the evi-
dence. See Commonwealth Edison Co., 398 Ill. App. 3d at 514, 924
N.E.2d at 1075 (a reviewing court can neither reevaluate the
credibility or weight of the evidence nor substitute its judgment
for that of the Commission).
2. The Commission's Determination That a Public Need Existed
The Intervenors also argue that the Commission erred by
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determining that a public need for the pipeline existed. Specif-
ically, they contend that the Commission did not have authority
to consider evidence of regional, national, or global benefits
when determining whether the public convenience and necessity
required issuance of the certificate authorizing the pipeline
extension. We disagree.
Though we are not bound by the Commission on questions
of law, we give substantial deference to an interpretation of an
ambiguous statute by the agency charged with the administration
and enforcement of the statute. Commonwealth Edison Co., 398
Ill. App. 3d at 514, 924 N.E.2d at 1074. A reviewing court will
not substitute its interpretation of a statutory provision for a
reasonable one adopted by the agency charged with the statute's
administration. Davis Bancorp, Inc. v. Board of Review of the
Department of Employment Security, 393 Ill. App. 3d 135, 141-42,
911 N.E.2d 1125, 1132 (2009).
In this case, the Intervenors essentially challenge the
Commission's interpretation of the undefined statutory terms
"public need" and "public convenience and necessity." In partic-
ular, they argue for a narrow interpretation of those terms by
asserting that the "Commission must consider the public need of
Illinois citizens, not Midwesterners, [United States c]itizens,
or citizens of the world." However, given the Commission's (1)
broad authority to interpret statutes that it is charged with
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administering (Commonwealth Edison Co. v. Illinois Commerce
Comm'n, 322 Ill. App. 3d 846, 854, 751 N.E.2d 196, 203 (2001))
and (2) broad interpretation of those terms has been consistently
affirmed by the appellate and supreme court of this state (see
Lakehead Pipeline Co., 296 Ill. App. 3d at 955, 696 N.E.2d at 354
(listing cases that stand for this proposition)), we reject the
Intervenors' claim that the Commission's interpretation was
unreasonable or erroneous.
Moreover, we similarly reject any notion that because
the Commission's focus regarding public convenience and necessity
was broad, the citizens of Illinois would not experience a
discrete benefit once the pipeline extension was operational.
Here, the evidence presented regarding public convenience and
necessity concerned (1) the location of the pipeline extension,
(2) the additional oil capacity that pipeline extension would
transport, (3) the destination of the oil to a major hub within
Illinois for further travel throughout the United States, (4)
current market factors affecting the stability of alternate
sources of oil, (5) projections of increased oil demands, (6)
increased revenues for local economies, and (7) increased market
competition resulting in lower prices for petroleum-based prod-
ucts.
Accordingly, we conclude that the Commission's determi-
nation that the pipeline extension would benefit Illinois citi-
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zens either directly or indirectly was supported by more than a
mere scintilla of evidence.
III. CONCLUSION
For the reasons stated, we affirm the Commission's
judgment.
Affirmed.
McCULLOUGH, J., concurs.
TURNER, J., dissents.
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JUSTICE TURNER, dissenting:
For the following reasons, I respectfully dissent.
The Commission determined Enbridge was fit, willing,
and able to construct, operate, and maintain an oil pipeline.
The record fully supports that finding. However, it is undis-
puted the record contains no evidence of Enbridge Pipelines'
independent financial ability. Instead, the record indicates
Enbridge Pipelines depends solely upon Enbridge for its finances
and obligations. While the record shows Enbridge's commitment to
finance Enbridge Pipelines for the pipeline's construction and
maintenance, the record does not demonstrate Enbridge's oral
commitment legally requires it to support, maintain, and finance
Enbridge Pipelines. Moreover, Enbridge did not join Enbridge
Pipelines in the application for the certificate in good stand-
ing, nor did the Commission require Enbridge to become a party as
a condition for approval of the application. Thus, in my view,
the record fails to support the Commission's finding Enbridge
Pipelines is fit and able to construct, operate, and maintain the
proposed pipeline. Accordingly, I would reverse the Commission's
order.
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