DOVETAIL ENERGY, LLC, еt al. v. BATH TOWNSHIP BOARD OF ZONING APPEALS, et al.
Appellate Case No. 2021-CA-15
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT GREENE COUNTY
January 14, 2022
2022-Ohio-92
EPLEY, J.
Trial Court Case Nos. 2020-CV-198, 2020-CV-199, 2020-CV-200; (Civil Appeal from Common Pleas Court)
and
N. TREVOR ALEXANDER, Atty. Reg. No. 0080713, 41 South High Street, Suite 2600, Columbus, Ohio 43215
Attorneys for Appellees Dovetail Energy, LLC and Renergy, Inc.
JACK A. VAN KLEY, Atty. Reg. No. 0016961, 132 Northwoods Boulevard, Suite C-1, Columbus, Ohio 43235
Attorney for Appellees Pitstick Renewable Energy, LLC, Thomas V. and D. Lynne Pitstick
L. MICHAEL BLY, Atty. Reg. No. 0042074 & MATTHEW S. HAUER, Atty. Reg. No. 0099596, 2700 Stratacache Tower, Dayton, Ohio 45423
Attorneys for Appellants
OPINION
Rendered on the 14th day of January, 2022.
{1} Appellants, the Bath Township Board of Zoning Appeals, Bath Township, and the Bath Township zoning inspector (collectively, the BZA), appeal from a judgment of the Greene County Court of Common Pleas which determined that the biodigester facility owned by Appellee, Dovetail Energy, LLC, was not subject to township zoning regulations because it was a public utility pursuant to
I. Facts and Procedural History
Dovetail‘s Facility
{2} Dovetail, a renewablе energy company, owns and operates an anaerobic digestion facility in Bath Township. The operation, which processes solid waste materials and turns them into electric energy and fertilizer, is located on a parcel of land owned by Thomas and Lynne Pitstick and their corporate entity, Pitstick Renewable Energy, LLC. The parcel in question is surrounded by other Pitstick-owned land that is used for farming. The farming operations on the neighboring properties include a hog farm with a capacity of nearly 5,000 swine, a nursery, and cropland which grows corn, wheat, and soybeans on a rotating basis.
{3} While the process by which the biodigester works is a complex one, we think it can be distilled down to the following: the Pitstick hog farm provides Dovetail with millions of gallons of manure and other solid waste products, which arе stored in giant, underground holding tanks. The waste is then processed by bacteria in the digester to produce methane gas, and Dovetail uses the methane to produce electrical energy. Once the methane is removed, Dovetail treats the remaining material, called “effluent,” to turn
{4} A small portion оf the electricity produced by the Dovetail biodigester is used to power the Pitstick farm and adjacent fields; the farm‘s sole source of electricity is the biodigester. Most of the electricity produced, however, is sold by Dovetail to the PJM regional wholesale electric grid. This regional transmission organization is responsible for powering 12 states ranging from Illinois in the west to New Jersey in the east. In additiоn to the agreement with PJM, Dovetail also has an interconnection agreement with Ohio Edison.
Procedural History
{5} In 2013, Bath Township issued a zoning certification of agricultural exemption for an anaerobic digestion facility to be built on the Pitstick property. The building process took time, but by 2015, Dovetail began operations. In 2016, Bath Township issued a second zoning certification of agricultural exemption for improvements to the biodigester. It does not appear that the agricultural exemptions have been formally revoked.
{6} Soon after the Dovetail facility was completed, Bath Township began to get complaints about the noxious odor coming from the property and the increase of traffic due to trucks hauling solid waste to and from the facility. According to the record, residents living a mile away from Dovetail were affected by the smell.
{7} On September 6, 2019, the Pitsticks were informed that the activity on their property appeared to be in violation of
{8} Dovetail was then informed on September 25, 2019, that Bath Township had rejected its proposal to build two new fertilizer storage ponds. The township reasoned that the ponds did not fall under the agricultural use exception. In its BZA appeal, Dovetail argued twofold: the property was being used for agricultural purposes and it was a public utility. It further asserted that the decision was an unconstitutional taking.
{9} The appeals from Dovetail and the Pitsticks were consolidаted into a single public hearing on February 13, 2020. The proceeding included several exhibits and testimony from John Bentine, an expert who testified on behalf of Dovetail. Bentine testified that the Dovetail facility should qualify as a public utility and be immune from Bath Township zoning. Bath Township called Jacob Barnes to testify that the land and facility in question should not be eligible for the agricultural exception. Barnes did not, howеver, form an opinion about whether the Dovetail facility was a public utility. The BZA granted leave for the parties to file proposed findings of fact and closing arguments, and the parties submitted a document entitled “Joint Stipulated Findings of Fact” (“Stipulation“) on February 24, 2020.
{10} Ultimately, the BZA affirmed the decisions of the Bath Township zoning authority “with respect to their determination regarding the current and proposed usеs of
{11} Dovetail appealed the BZA‘s decision to the Greene County Court of Common Pleas pursuant to
{12} Bath Township has appeals, raising three assignments of error.
II. Remand to the BZA was not required
{13} In its first assignment of error, Bath Township argues that the trial court erred by not remanding the casе to the BZA to allow the Township to make arguments that the Dovetail facility was not a public utility. Dovetail, on the other hand, asserts that the trial court was not required to remand the matter for a hearing. Based on the plain language of the statute, we agree with Dovetail.
{14} When an appellate court reviews a decision by the common pleas court regarding an agency order, the appellate court utilizes two distinct standards of review. On a question of fact, our review is limited to an abuse of discretion. Key Ads, Inc. v. Dayton Bd. of Zoning Appeals, 2014-Ohio-4961, 23 N.E.3d 266, ¶ 13 (2d Dist.). On a question of law, however, the review is de novo. Id., citing Ohio Dept. of Commerce, Div. of Real Estate v. DePugh, 129 Ohio App.3d 255, 261, 717 N.E.2d 763 (4th Dist.1998). In this case, since we are reviewing the interpretation of statutes, the proper standard of review is de novo. See Dayton v. Johnson, 2d Dist. Montgomery No. 29057, 2021-Ohio-3519, ¶ 25 (“The interpretation of a stаtute is a question of law, which we review de novo.“).
{15}
{16} The plain language of the statute gives the trial court options. If it finds the decision of the agency to be incorrect, the trial court can either reverse, vacate, or modify the decision on its own, or send the сase back to the agency with further instructions. In this case, based on the information in the record before it, the trial court determined that the Dovetail facility was a public utility under
{17} Nevertheless, Bath Township asserts that the case should be remanded to the BZA for further arguments. It reasons that it was not given an opportunity to retain an
{18} Bath Township also cites several cases to bolster its position that the trial court was “required to remand the matter to the BZA for a hearing on the public utility exemption issue.” Appellants’ Brief at 11. These cases, though, use language that confirms the trial court may remand to the agency for further proceedings, but is not required to do so. For instance, State ex rel. Chagrin Falls v. Geauga Cty. Bd. of Commrs, 96 Ohio St.3d 400, 2002-Ohio-4906, 775 N.E.2d 512, ¶ 8, verifies that “common pleas courts have authority in
{19} We overrule Bath Township‘s first assignment of error and hold that
III. Dovetail‘s facility is a public utility
{20} In its second assignment of error, Bath Township argues that the trial court
{21} There is no dispute that
Except as otherwise provided in division (B) or (C) of this section, sections
519.02 to519.25 of the Revised Code confer no power on any board of township trustees or board of zoning appeals in respect to the location, erection, construction, reconstruction, change, alteration, maintenance, removal, use, or enlargement of any buildings or structures of any public utility or railroad, whether publicly or privately owned, or the use of land by any public utility or railroad, for the operation of its business.
{22} The Ohio Supreme Court has held that “public utilities possess certain common attributes or characteristics which courts employ in determining the nature of an entity‘s operations. The * * * most important attribute of a public utility is a devotion of an essential good оr service to the general public which has a legal right to demand or receive this good or service.” A & B Refuse Disposers, Inc. v. Ravenna Twp. Bd. of Trustees, 64 Ohio St.3d 385, 389, 596 N.E.2d 423 (1992). Moreover, “an entity may be
{23} The determination of whether an entity is a public utility for the purpose of exemption from zoning restrictions “requires consideration of several factors related to the ‘public service’ and ‘public concern’ characteristics of a public utility. It follows that a business claiming public utility status bears the burden of offering sufficient evidence on these factors[.]” A & B Refuse Disposers at 389. The determination is a mixed question of law and fact. Id. at 387.
Public Service
{24} An entity provides a public service if it (1) provides essential goods or services to the public which has a legal right to demand or receive them; (2) provides the goods or services to the public indiscriminately and reasonably; and (3) the obligation to provide the goods or services cannot be arbitrarily or unreasonably withdrawn. Id.; see also Westfield Twp. Zoning Inspector v. Emerald Bioenergy, LLC, 5th Dist. Morrow No. 2021 CA 0001, 2021-Ohio-3843, ¶ 40. There can be little doubt that electricity is a good or service.
{25} The partiеs stipulated that Dovetail “takes biologically derived and treated fuel sources * * * and converts them into electricity * * * for consumption by the public.” Stipulation, ¶ 37. It also “provides wholesale electrical generation services to the wholesale electric grid” by selling energy generated into the PJM wholesale energy market. Stipulation, ¶ 34. Dovetail‘s energy is used by PJM to provide energy to loсal utilities who serve customers, even those in Bath Township. Stipulation, ¶ 35. In fact, 81%
{26} Bath Township also admits that Dovetail “indiscriminately provides renewable energy credits through its PUCO renewable energy resource certification,” and its operations and PUCO certification “require it to provide renewable energy credits, which cannot be arbitrarily or unreasonably withdrawn.” Stipulation, ¶ 53.
{27} Based on the stipulations of the parties and other facts in the record, Dovetail provides a public service. The trial court did not err in making that same determination.
Public Concern
{28} The other characteristic of a public utility that cоurts consider is whether the entity conducts its operations “in such a manner as to be a matter of public concern.” A & B Refuse Disposers at 387. A public utility often occupies a monopolistic or oligopolistic position in the marketplace, and that “gives rise to a public concern for the indiscriminate treatment of that portion of the public which needs and pays for the vital good or service offerеd by the entity.” Id. Factors used to determine whether an enterprise conducts itself in such a way to be a matter of public concern include competition in the marketplace; the good or service provided; and regulation by a government authority. Id. No single factor is controlling. “Nevertheless, in a case where the business enterprise serves such a substantial part of the public that its rates, charges and methods of operation become a public concern, it can be characterized as a public utility.” Id., citing Indus. Gas Co. v. Pub. Utilities Comm. of Ohio, 135 Ohio St. 408, 412, 21 N.E.2d 166 (1939).
{29} In its decision, the trial court found several ways in which Dovetail and the energy it produces are public concerns. First, the court found that the generation of renewable energy is a matter of public concern as demonstrated by the legislature‘s policy and its statutory enactments. Entry at 19-20.
{30} The trial court also found evidence in the record that there was a lack of competition in the marketplace. Bath Township disputes this assertion and cites to Dovetail‘s expert John Bentine‘s testimony to make its point. His testimony, however, refutes more than supports the township‘s argument. Bentine testified that while there are more small generators than in the past, there is still only one wholesale electric market, the PJM wholesale market. Trial Tr. at 80-81. When specifically asked whether there is any competition to the wholesale market, Bentine stated: “No. Fully one hundred percent through PJM.” Trial Tr. at 91. So, even though customers do not get energy directly from Dovetail, they are exclusively served by the PJM marketplace to which Dovetail provides power.
{31} Dovetail is also heavily regulated by the government. Mike Oberfield, the CFO of Renergy (Dovetail‘s parent company), testified at the hearing that Dovetail is
{32} Finally, Dovetail is taxed as a public utility. The parties stipulated that “[t]he State of Ohio has determined the Dovetail facility is a public utility and its personal property has been taxed as a public utility since 2015.” Stipulation, ¶ 40. It was further agreed that Dovetail “does not receive any exemption from public utility personal property taxes and has been paying them to Greene Cоunty, including Bath Township, since 2015. The State Tax Commissioner annually values Dovetail‘s public utility property which is assessed and collected by Greene County.” Stipulation, ¶ 41.
{33} Based on our analysis of the “public service” and “public concern” factors, we conclude, as the trial court did, that Dovetail is a public utility for purposes of
IV. Proposed future development
{34} The third BZA appeal (and third assignment of error) dealt with Dovetail‘s propоsed construction of 23-million-gallon fertilizer storage ponds on a nearby property. Bath Township argues that “public utility status is not automatically conferred on an entity-wide basis; instead, the classification of an entity depends specifically on the ‘good or service’ which is provided to the public.” Appellants’ Brief at 23. Its claim, then, is that the evidence presented shows no “substantive relation to the production, distribution, or dissemination” of electrical energy. Id. It is simply for storing excess fertilizer after being processed through the digester. Id. Bath Township further contends that the trial court failed to consider the issue in its judgment entry.
{35} Dovetail, on the other hand, insists that the storage facilities are part of the operation of its business under
{36} While it is true that the trial court did not spend any time analyzing this particular BZA request other than to order the BZA to grant Dovetail‘s request for an exemption pursuant to
V. Conclusion
{37} The judgments of the trial court will be affirmed.
Copies sent to:
Catherine A. Cunningham
N. Trevor Alexander
Jack A. Van Kley
L. Michael Bly
Matthew S. Hauer
Hon. Michael A. Buckwalter