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Need to Know

Is an Anaerobic Biodigester a Public Utility?

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Famous and infamous law enforcement officers abound in print, broadcast and film. Inspector Clouseau features prominently in the "Pink Panther" series as a mostly incompetent sleuth who solves cases fortuitously and with lots of help. (Is there a resemblance to Inspector Gadget?)  Inspector Javert, the main antagonist in Victor Hugo’s novel Les Miserables, is obsessed with the pursuit and punishment of Jean Valjean. Helen Mirren is unforgettable in the British television drama “Prime Suspect” as Detective Chief Inspector Jane Tennison.

Among the considerably less well-known here in the real world is Zoning Inspector Joel Staley of Westfield Township, Morrow County, Ohio. Situated in the central part of the state, the county comprises 16 townships, including Westfield which is about 40 miles north of Columbus.  

In April 2020, Mr. Staley filed a complaint in the Morrow County Court of Common Pleas against Emerald Bioenergy, LLC and other defendants who were later dismissed by the trial judge. The purpose was to enjoin Emerald from operating its anaerobic biodigester because it allegedly was located in a zoning district that prohibited such an operation. The court papers included the assertion that "[t]he stench and noise from the biodigester are constantly emitted from the defendant's premises at all times of the day and night. The people of Westfield Township are deprived of the enjoyment of their property."  (More about this claim later.)             

Emerald answered by stating, among other factors, "as long as at least fifty percent of the feedstock used in the biodigester is derived from parcels of land contiguous to or part of parcels otherwise devoted exclusively to agricultural use that are under common ownership or leasehold, the biodigester facility is an agricultural use exempt from township zoning under state law . . . .”

After hearing testimony and considering other evidence, the trial judge dismissed the complaint, finding that Emerald uses its land for agricultural purposes and operates as a public utility, and thus is not subject to township zoning laws. 

Dead set on vindicating its claim, the township appealed the decision to the Ohio Court of Appeals only to be, again, rebuffed – this time by a three-judge panel that upheld the lower court ruling.  What follows is a summary of the testimony and evidence presented in the trial court and later examined by the appeals court.     

Following the issuance of a permit by the Ohio Environmental Protection Agency (OEPA), Emerald’s biodigester was built in 2013 as a renewable energy facility. The biodigester is located on property owned by Ringler Energy, LLC, a company owned by Alex Ringler and leased to Emerald.   Mr. Ringler and his companies own 510 acres of property and agricultural operations contiguous to the biodigester site, including a sizable hog farm, row crops and other farming activities.

In 2014, the Public Utilities Commission of Ohio (PUCO) granted Emerald a permit to operate as a "Renewable Energy Resource Generating Facility", which allows it to produce methane gas by anaerobic digestion and subjects the company to all applicable PUCO rules and regulations.         

Mr. Ringler and Michael Oberfield, Chief Financial Officer of Renergy, Emerald's parent company, testified that the biodigester is integral to the adjacent Ringler farming operations. It directly accepts and processes 100% of the manure from the farm through a closed underground piping system. It also accepts other biological feedstocks, including food waste and biosolids, producing methane gas that is used to generate electricity. A small portion of the electricity powers the Ringler Farm, and the remainder is sold through Buckeye Power, Inc., a local electric co-operative, to the wholesale electric grid for public consumption. The facility also produces the fertilizer used on the Ringler property and other farms.

The township called as an expert witness John Bentine, a former PUCO attorney who also worked at the Attorney General's office as counsel to PUCO.  The apparent objective of his testimony was to establish that Emerald’s facility was a supersized operation, far transcending the needs of the farm surroundings. He testified that Emerald's generation capacity for electricity is 850 kilowatts, which is more than three times the 250-kilowatt statutory minimum size for renewable energy resources in Ohio subject to regulation.  He further stated that although Emerald does not generate electricity on the same scale as big coal-fired or nuclear units, it "nonetheless is a significant size in terms of its effect on the overall electric system, especially locally in the area" where it would serve between 500 and 800 homes.  He added that Emerald produces “renewable energy credits" that are sold into the public market.

At the outset, the biodigester got support from Morrow County and other authorities. The state of Ohio and the federal government have a variety of grants and tax incentives to encourage the development and use of renewable energy.  Emerald received a $500,000 grant and loan guarantees from the U.S. Department of Agriculture for its $5.5 million investment in the facility. It also received public utility and conversion facility tax exemptions from the state.

Patricia Davies, formerly County Director of Operations, currently serves as the County Auditor.  She testified that the state of Ohio decides whether an entity is a public utility for purposes of the personal property tax.  Emerald qualified for that determination, and the state has been taxing Emerald as a public utility since at least 2015.  Over the same period, Emerald has paid public utility taxes on both real and personal property to Morrow County, including Westfield Township, subject to its solid waste energy conversion facility tax exemption.  Ms. Davies worked with Emerald to establish the facility and to obtain federal and state government financial incentives, including grants and tax exemptions to build a renewable energy facility on the Ringler Farm.  She also helped Emerald on an interconnection agreement with Consolidated Electric Co-Op, a distribution utility, and on contractual and regulatory obligations to Buckeye Power.  

Emerald currently holds multiple OEPA permits regulating water, air quality and odors. The agency has inspected the Emerald facility and investigated odor complaints 10 to 15 times and has never found an odor violation.

 According to Mr. Oberfield, Emerald first became aware that the Township had a problem with the biodigester in late September, 2019, when the county prosecutor sent Emerald notice of a zoning violation.  The notice included a letter from Mr. Staley, stating "It has come to my attention that Emerald Bioenergy, LLC has lost its agricultural status and it no longer has an agricultural exemption. This has been determined by the Ohio EPA on 8/24/2018."  By separate letter, the prosecutor asserted that the biodigester was now an "industrial use" that no longer qualified for an agricultural exemption under the township zoning law or state law and that Emerald must cease its operations.  (Emerald appealed the zoning inspector’s decision and the notice of violation to the township board of zoning appeals, but the board never took action or set the matter for hearing.)            

Mr. Oberfield further testified that after Emerald received the notice of violation, it attempted to address the township’s concerns by immediately adjusting its feedstock mix to increase manure and eliminate biosolids.  He stated that since January 1, 2020, its feedstocks have been comprised of more than 50% hog manure from the adjacent Ringler farms, and it no longer accepts biosolids.         

In a judgment order handed down in February, 2021, the trial court ruled in favor of Emerald.  It found that Emerald is not subject to the zoning regulations of the township for two reasons: (1) it operates as a public utility and (2) by using at least 50% of its feedstock from hog manure, it qualifies as land used exclusively for agricultural purposes.

On appeal, Mr. Staley argued that the trial court was mistaken in recognizing Emerald as a “public utility.”  The appellate panel disagreed.

By statute, public utilities in Ohio are exempt from township land use restrictions.  However, as the state legislature did not define “public utility” as it relates to such exemption, its meaning has come from a series of court decisions that have produced a judicial test:  Is the nature of the entity’s operation a matter of public concern and is it available as a public service generally and without discrimination? 

“[O]ne must look at whether there: . . . is a devotion of an essential good or service to the general public which has a legal right to demand or receive this good or service. * * *  Further, this attribute requires an obligation to provide the good or service which cannot be arbitrarily or unreasonably withdrawn,” the panel wrote.         .         

“Emerald does not have the ability to arbitrarily or unreasonable withdraw its services, as it is a closed system which requires the methane it produces to be used to generate electricity,” the opinion continued.  “Emerald [without discrimination] provides electric energy to the Ohio energy grid, which is regulated, and [without discrimination] provides energy to consumers in the state Ohio and the regional electric power system. *  *  *  Testimony was also presented that Emerald is under contract to receive the waste stream it uses to generate the electricity, and that it would accept any qualified material from any customer willing to pay the requisite fee.”       

Although the appeals court found nothing amiss with the trial court’s holding that Emerald is a public utility and therefore exempt from the township zoning laws, another issue remained.  Under state law, a "public utility" cannot be deemed such if owns or operates a solid waste facility (unless the facility is publicly owned) and has been issued a permit by OEPA. 

“Upon review we find no evidence in the record to prove, or otherwise suggest, that Emerald was ever "issued a [solid waste] permit . . . [and] evidence was presented to the contrary,” the panel noted.  “The EPA has not classified the biodigester as a solid waste facility, nor does it require Emerald to obtain a solid waste permit.”

Given circumstances apparent from the beginning and overwhelmingly favoring Emerald, why did the township resort to litigation and then persist after losing in the trial court?  One can speculate about the wisdom of local officials who reflexively defer to public clamoring without  thoroughly understanding what’s going on.  The fact remains, however, that the alleged nuisances cited in the township’s complaint – odor and noise from the facility –  never were relevant issues in the case. 

The Westfield Township Zoning Inspector v. Emerald Bioenergy, LLC, No. 2021 CA 0001, Ohio Ct. App., Fifth Dist., Oct. 28, 2021

 

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