Public Utilities Are Not Exempt From Municipal Regulation

New Jersey Natural Gas Co. v. Borough of Red Bank, 438 N.J. Super. 164 (App. Div. 2014).  New Jersey Natural Gas (“NJNG”) proposed to remove underground gas regulators located in the Borough of Red Bank and replace them with above-ground regulators that would protrude through sidewalks.  The Borough was concerned that the new regulators would pose a hazard to pedestrians and interfere with mainenance of the sidewalks.  When NJNG filed applications for permits to open streets and sidewalks in order to do the gas regulator work, the Borough denied those applications.  NJNG filed an action in lieu of prerogative writ, and the Law Division granted summary judgment to NJNG, declaring, based on N.J.S.A. 48:9-17, that NJNG had sole discretion to determine how it would distribute natural gas service within a municipality, and that the Borough had no authority, pursuant to its land use powers or otherwise, to control the location of NJNG’s regulators.  The Borough appealed and won a reversal.  Judge Messano wrote the Appellate Division’s opinion, which awarded summary judgment to the Borough and dismissed NJNG’s complaint.

Siuce the issue was whether N.J.S.A. 48:9-17 exempted NJNG from municipal regulation, except for the “ministerial” act of issuing street opening permits, the Appellate Division’s review was de novo.  Judge Messano stated that the court needed to apply the plain language of that statute “sensibly, in the context of the overall scheme in which the Legislature intended the provision to operate.”  It was also necessary to harmonize multiple statutes, including the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., that applied in this area.

N.J.S.A. 48:9-17 gives gas companies the power to “lay conductors and install related facilities for conducting gas through the streets, alleys, squares and public places in any municipality or municipalities in which [those companies] may lawfully operate.”  Judge Messano rejected the notion that the statute does not cover gas regulators or the gas distribution line.  The contemplated above-ground regulators constituted “related facilities” that the statute does encompass.  The fact that the statute expressly addresses facilities that go “through” streets meant that above-ground regulators are covered.

Moreover, Judge Messano ruled, the Law Division’s broad reading of N.J.S.A. 48:9-17 overlooked other statutes that empower municipalities to regulate more than just the opening and closing of streets and public places.  One of those statutes is N.J.S.A. 48:9-25.4, which permits municipalities to designate the street or other location to be used for purposes of gas service.  Judge Messano found that the Law Division’s view of N.J.S.A 48:9-17 would have rendered nugatory that other section of the same statute, a violation of a “well-recognized” principle of statutory interpretation.  Additionally, N.J.S.A. 40:55D-19 and its predecessor statute, N.J.S.A. 40:55-50, whose history and caselaw elaboration Judge Messano carefully reviewed, likewise showed that municipalities have a role to play in this area.  N.J.S.A. 40:55D-19 “actually increased control over a public utility’s use of land within a municipality’s borders.”

NJNG could have contested the denial of its requested permits and/or the validity of the Borough’s development regulation in prerogative writ litigation.  Instead, NJNG asserted that the Borough had no power at all to regulate NJNG’s proposed installations.  That issue was the only one before the panel, and Judge Messano expressly stated that it  would have been “imprudent” for the panel to weigh in on the validity of the permit denials or the development regulations.