This article appears originally in the following publication: New Jersey Municipalities
Article by: Daniel J. O’Hern Jr.
Red Bank prevailed at the Appellate Division in its effort to prevent the installation of utility structures in its downtown business district
The Appellate Division recently rendered an opinion that provides guidance to any municipality that becomes involved in a dispute with a public utility over the location of a utility structure within the municipality. In New Jersey Natural Gas Company v. Borough of Red Bank and Red Bank RiverCenter Special Improvement District, Docket No. A-1096-12T4 ( App. Division 2014), the Appellate Division reversed the decision of the trial court that had granted New Jersey Natural Gas’s (NJNG) motion for summary judgment that allowed. NJNG to install scores of regulator structures in the sidewalks in the Borough of Red Bank’s downtown business district over Red Bank’s objections.
This decision is important for municipalities in several respects. First, the decision makes clear that a public utility does not have the absolute right to install a utility structure wherever it chooses within a municipality without municipal consent or input. Second, the decision sets forth several administrative paths through which such disputes may be resolved, all of which ultimately end up before the Board of Public Utilities (BPU).
Red Bank has a vibrant and successful downtown business district. That was not always the case. In 1991, the Red Bank River Center Special Improvement District (the “RiverCenter”) was established to revitalize Red Bank’s downtown business district, which had suffered decline. One of its signature efforts was a $1,800,000 streetscape project, completed in 1998.
This dispute arose when Red Bank and the RiverCenter learned that NJNG intended to replace all of the gas regulators (approximately 80) located below ground in downtown Red Bank to above ground locations in the sidewalks. Even though the regulators had been located below ground for decades in vaults, NJNG contended that regulators had become corroded in the vaults creating an imminent safety hazard requiring their immediate removal.Red Bank officials were concerned that the newly installed regulators would (1) be a hazard to pedestrians, (2) interfere with maintenance of the sidewalks and building facades, and (3) be subject to damage and vandalism. Red Bank officials also believed that the regulators could remain safely below ground if properly maintained.
Red Bank and the Red Bank RiverCenter were not pleased with NJNG’s plans for the regulators, but sought to work with NJNG to find an alternate solution. However, no agreement could be reached. The dispute eventually ended up in Court when NJNG filed an Order to Show Cause seeking injunctive and declaratory relief, including an order directing Red Bank to immediately issue the street opening permits. The trial court denied NJNG’s application for injunctive relief, finding that there was no imminent safety issue that could not otherwise be addressed by NJNG. The trial court, however, granted NJNG’s request to file a motion for summary judgment before any discovery could be taken on the issue of whether a public utility is entitled as
matter of law to determine the manner in which it will deliver natural gas to its customers, regardless of Red Bank’s objections
The trial court granted NJNG’s motion for summary judgment finding that under N.J,S.A. 48:9-17, the utility must obtain the authority from the municipality to provide service, but that a municipality “does not have the authority to dictate the manner in which such service was provided.” The trial court also rejected Red Bank’s arguments that the regulator was a “structure” that
required the issuance of a development permit pursuant to Red Bank’s Planning and Development Regulations. Both Red Bank and the RiverCenter felt strongly that the Trial Court had misapplied the law and that it could not be the case that a public utility had carte blanche to locate a utility installation anywhere within a municipality without some input or control by the municipality. Fortunately for Red Bank and all municipalities, the Appellate Division agreed with the arguments of Red Bank and the RiverCenter and authored an opinion that provides clarity on this subject.
The Appellate Division viewed as the central issue before them: whether the trial court’s expansive reading of N.J.S.A. 48:9-17 was correct. N.J. Natural Gas Co. v. Borough of Red Bank, at p. 18. The Court framed the inquiry as whether by enacting N.J.S .A. 48:9-17 the Legislature intended that all aspects of the delivery of gas service be exempt from local land use regulations, except “reasonable regulations with respect to the opening of streets, alleys, squares and public places.” Id. Under N.J.S.A. 48:9-17, gas companies are granted 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 it may lawfully operate.” Id. at p. 20. But, the utility must “first obtain the consent by resolution or ordinance of the governing body of such municipality for
the furnishing of gas therein and the approval of such consent by the [BPU] Commissioners. ”
The Appellate Division held that the trial court’s reading of N.J.S.A. 48:9-17 was too expansive and ignored other provisions of the Utility Statute (N.J.S.A. 48:9-25.4) and the Muncipal Land Use Law (MLUL) “that clearly provide the municipality with more power than simply regulating the opening and closing of streets and public places.” Id. at 22. Thus, “contrary to the trial court’s holding that the municipality could play no role in determining the location of a gas company’s distribution facility, even on public property, [N.J.S.A. 48:9-25.4] permits the governing body to designate the public street, road, highway or place, which may be occupied by [a gas company] for such purpose.” As recognized by the Appellate Division, if ” the municipality fails to do so, or designates an impracticable route, then the gas company may petition the BPU to designate the route.” Id. at 23, citing N.J.S.A. 48:9-25.4.
In addition, the Appellate Division agreed with Red Bank’s argument that regulator installations were not wholly exempt from the borough’s Planning Development Regulations. In this regard, the Court noted that “both historically and presently, applicable provisions of the MLUL make clear that the Legislature never denied municipalities the ability to exercise at least some of their traditional zoning powers simply because a public utility was involved.” Id. at 24. Under N.J.S.A. 40:55D-19, when a public utility is dissatisfied with a final zoning decision of a municipal agency; it has the right to appeal directly to the BPU. In this case, Red Bank had denied NJNG’s applications for street opening permits and it was directed to apply for a development permit. In the Appelldte Division’s view, once NJNG received that denial, it “was in position to appeal that decision to the board of adjustment, and thereafter to the court or BPU.” Id. at p.31, citing N.J.S.A. 40:55D-19.
There are two important takeaways from this decision for municipalities, First, be sure to exercise your rights under the MLUL or any applicable utility statute when a public utility seeks to install or erect a utility installation that is objectionable. The public utility should be forced to exhaust its administrative remedies with the municipality to create the proper record for Appellate review. Second, on occasion, municipalities need to fight what they believe is an erroneous court decision that creates bad precedent for municipalities. Despite the risks and expenses involved, Red Bank’s elected officials and business community had the courage to fight. Thanks to them, there is now an authoritative decision that provides support to any municipality that finds itself in a dispute with a public utility over the location of a utility installation.