 Good morning your honors the matter before the court this morning is the case entitled in ray petition of conservation law foundation docket number 2017 1 6 2 Representing the conservation law foundation is Sandra Levine Representing the appellee Vermont gas systems is Craig Nolan and representing the appellee Department of Public Service is Daniel Burke Okay, thank you counsel Good morning your honors morning may it please the court. I'm Sandra Levine. I'm the Representing conservation law foundation the appellent in this proceeding. I'd like to reserve two minutes of time for rebuttal That is going to be up to you, but we're happy for you to do. Thank you This case concerns the Vermont gas pipeline in Addison County, Vermont More specifically concerns the public utilities Commission rule for reevaluating a proposal when a significant change occurs as This court knows the Vermont gas pipeline is a large energy project Large energy projects are reviewed by the public utilities Commission Which must make a determination about the overall value of the project its environmental impacts and whether or not the project will promote the general good of the state The project was first reviewed by the Public Utilities Commission in 2013 at that time the estimated cost of the proposal was $86 million Six months later in July of 2014 the estimated cost of the proposal jumped to a hundred and twenty one million dollars and Six months after that the estimated cost of the proposal jumped again to a hundred and fifty three million dollars During the same time period Other energy supplies including cleaner renewable resources became more available and their costs decreased These changes in the energy markets combined with the cost increase for the pipeline significantly lessened the overall value of the pipeline proposal Fortunately, the Public Utilities Commission has a rule to address this very matter and it provides a common sense solution Where circumstances significantly change a reevaluation is required Conservation law foundation is asking this court to require the Public Utilities Commission to follow its own rule So isn't the issue here not whether a reevaluation is called for but Whether the mechanism whether the rule that you say they should follow actually says what you say it says or whether the rule 60b process is the more appropriate process to review changes not in the terms of the certificate But in the underlying Considerations that led to its award in the first place Certainly both the rule 60b process a remand proceeding and the amendment process exists side by side The Commission knew that when the Commission Established the rule the Commission wrote the rule the Commission wrote the rule following an earlier proceeding regarding the The Velco transmission line where there was also a significant cost increase So it knew about the issue of cost increases and how those will be reevaluated It then wrote the rule which allowed for and provided clearly that Significant changes will be subject to an amendment procedure when you're talking about the regulatory history, and I'm hoping you can One of the things I'm struggling with is that I look at the regulatory history that was provided in the supplemental printed case And it looks like this this 5.408 5.409 in the current language as separate distinct pieces Was proposed by the Department of Public Service with an explanation that it was intended to mean exactly What they say it means now You're saying it means something very different The board adopted that and the only comment the board made when it adopted that is we're accepting their comments and their proposal Which might suggest that they understood it to mean what the proponents said it was going to mean The board adopted it and acknowledged that we will deal with the way they didn't specifically call out cost increase as part of a Significant change they said we just it is part and parcel of what is a significant change The public is the starting point for this proceeding is the Public Utilities Commission rule itself That rule sets forth when a new or amended permit is required It specifically states that an amendment for a certificate of public good Quote shall be required for a substantial change in the approved proposal Rule goes on to state what a substantial change is and it describes that as any change in the approved proposal That has the potential for a significant impact with respect to any of the statutory criteria Or the general good of the state so what is if I can interrupt you please it? What is our standard of review here with respect to the I'm going to call it the board I know the name was changed, but it's still a little bit hard With respect to the board's interpretation of its own rule Under these circumstances certainly the appellate's wrongly claim that the Public Utilities Commission decision is entitled to deference This court has clear and very thoughtful precedent that laid out most notably in the 2006 case of Levine versus Wyeth Which was later affirmed by the United States Supreme Court? It's clear there that no difference. I'm well aware of that As you may know it's clear there that there is no deference where the meaning of the rule or statute is clear on its face Here there's no deference for pure issues of law and Determination of the meaning of a rule or statute is an issue You're arguing aren't you that there's plain language here and that and that that is That's what controls, but what exactly is the plain language that you're you're pointing to that's Clear on its face the plain the rule states that a an amendment shall be required for a substantial change in the approved proposal And then goes on to describe what a substantial changes and that is a change that has the potential for a significant impact so it's is it significant impact that that you're saying is plain and and evident on its face it is two parts to it first is is there a change in the proposal and The estimated cost is an aspect of the proposal. It was evidence that was submitted by the By the applicant to the public utilities Commission They relied on the cost of the proposal in determining whether this project had value relative to other Energy supplies going forward. There was a change that there was a change in the value in the estimated cost in 2013 then they're compared to 2014 six months or a year later isn't the language that's really at issue is what is an approved process another another proposal in other words the application might Indicate the cost But the board doesn't actually approve the cost in an approved proposal Certainly the board does not specifically approve the cost, but it approves the overall Project it approves the proposal it has to make decisions regarding each of the section 248 criteria Including the environmental impacts the economic impacts and whether the project will promote the overall public will promote the General good of the state in doing so it necessarily relies on the estimated cost of the project How else can it determine the economic benefits and how else can it determine the long-term value of this proposal compared to other Energy sources that it will be competing with what is that what is the test that you're arguing for here when we're looking at The issue of cost alone as potentially being a significant change Is there a percentage? Are you adopting the test out of? 5.409 what what are you asking for here? The rule itself identifies what sort of changes and including cost changes would be significant Those are changes that would have the potential to affect the the outcome as to any of the criteria determination is to any of the criteria Certainly that doesn't cover de minimis changes, and there's a number of cases concerning that I think common sense would say that when the cost of a proposal Nearly doubles. It's appropriate to step back take a look does this to continuing on this course of action? It will it continue to be appropriate when the cost is nearly doubles. It's not just the cost It's not just the number of the estimated cost, but what are the rate? What's the ramifications of that cost? What will the what energy supplies will this pipeline replace? We'll simply be replacing other fossil fuels oil, which was what they which is what was argued at the public utilities Commission Or going forward is it going to be replacing other cleaner lower carbon? Energy supplies and that's important. This is a pipeline that will be in place for somewhere between 50 and 100 years Vermontra certainly have the the right to rely on decisions of the public utilities Commission to know that the Projects that are approved make sense over the long term make sense over the life of the project And that's exactly what was not reviewed and what was not allowed to be reviewed because the amendment was not Permitted to go forward. What wouldn't you concede you've been heard on this very issue in other words? Wasn't this case pending and then it was remanded because the 60 B Hearing was going forward and your concerns that you're raising about the costs were heard there. Were they not? No, they weren't certainly the the other reviews do not replace the need for the amendment proceeding This is asking you whether it replaces it, but I'm asking you would you concede that your concerns on this issue that brings you here today have been heard no they Public utilities Commission considered a remand proceeding I think it can say there was a remand proceeding the standards and the burdens approved for different in those two proceedings and The remand proceeding was a far narrower proceeding. There were limitations as to what was being compared for for this project versus other energy supplies Certainly some of the evidence may overlap between the two proceedings But in in an amendment proceeding It is the applicant who has all the access to the information who is required to come forward and demonstrate that its project continues to be justified Conversely in a remand proceeding, it's other parties who are required to come forward They don't have the evidence and demonstrate that a different result would be likely those are very different standards It's far more onerous to the remand standard is far more onerous and the amendment Appropriately recognizes that it's up to the applicants to demonstrate the continued viability of their project going forward The applicant certainly had full notice of the requirement that a Amendment may be sought it chose not to seek an amendment and it cannot now claim hardship For its own failure to do so and next want to address the practical effect That issue of the remands there weren't any appeals from the decisions of those remands for those Are those considered final orders? Those are final orders on the remand proceeding. Yes, but they do not replace The request for an amendment the requirement that the Public Utilities Commission rule has a process in place that an amendment Is needed when there are substantial changes to to a project Can I one of the change you've cited two changes and one has to do with the costs and I that I get more Intuitively the notion that changes in the market can require somebody to come back I mean aren't these projects often long-term projects that require a fair amount of investment and is it is at your position that Project that made economic sense at the time And and investments have been made and you can come back and say no now You got to reopen it because the market has changed Those two changes work in tandem in this case in this proceeding, you know one without the other might not Might not present the need for an amendment. That's not what's before this court today But certainly when those two matters are combined the cost is a change in the proposal If you're building a house or putting a new roof on your house and a contractor shows up with a proposal to do The work for X amount of dollars and then a week later shows up and says oh, it's 2x. Sorry about that That is a change in the proposal and that's specifically what the rule states a change in the proposal if it's significant Requires an amendment so in a remand proceeding and I understand the standards and burdens are different and that that's a Significant reason why it's important you to have this alternate process But but in the remand proceeding they would still consider the board would the commission would still consider What the new reported actual costs are going to be relative to what they thought they were and any market changes and whether that would undermine its Finding of public good that that under I mean those considerations are all still at the core of its review aren't they They can be but they you know public utilities commission can manage that that process It can depending on what what time horizon it will look out and will it compare The differences in energy Supplies going out five years ten years twenty years or for the life of the project the statutory criteria are clear as to what is that the Proposal needs to promote the general good of the state over the lifetime of the project and that was not considered Again, I'm just in to find the last issue is the practical effect, and I certainly recognize that this pipeline has been built But and a New evaluation does not change that fact on the ground However, a new evaluation could impose additional conditions It could certainly address and remedy or at least mitigate the higher costs of the project as to what the cost recovery would be It could also increase investment in cleaner energy supply or limit the use of the project to simply replacing higher carbon fossil fuels going forward in Conclusion this court should reverse the public utilities commission decision and Require the mock gas systems to seek a new or amended permit for its Addison national natural gas pipeline project Okay, thank you very much council. Thank you. May please the court. Good morning. Good morning Craig Nolan for Vermont gas systems The issue before the court is very narrow It's whether the PUC committed compelling error by interpreting its own rule 5408 To apply to physical changes consistent with PUC and act 250 precedent That's the issue before the court The chief justice I believe asked about the standard review I'd like to hear what you have to say about and the standard review here is clear It's been said time and time again, and that is the PUC as a ministry of agency is Is entitled to substantial deference with regard To its interpretation of rules it promulgates pursuant to authority vested in it by the legislature Deference this court has expressed that deference standard in different ways And that has included compelling error whether they have committed compelling error and there was no compelling error here in the Commission's Interpretation of its own rule. We've had discussion already this morning about that rule There's a phrase approved proposal The Commission explained exactly what that means. It's the project The Commission has Very clear in its opinion It did not approve the cost or cost estimate of this project In the considered it it did your honor. Yes, it did So what is the purpose of rule 5.409? Which I characterize as a monitoring rule that when the costs project costs skyrocket Well, actually it says project increases by 20% What's the purpose of that if not to require an amendment to the initial proposal? so 5.409 was proposed originally by the department and you'll hear later from the department But 5.409 was proposed in combination with 5.408. They were adopted together the purpose of 5.409 It's a safety valve It requires a utility to Notify the Commission when costs estimate has increased by 20% The question is where do you go from there? Legislative history has been discussed It was originally proposed by the department that there would be an explicit provision in 5.409 That the Commission would reopen the proceeding that's different than seeking an amendment and What happened here was exactly that with the Commission's request for the remand right the Commission twice Requested this court to remand the case So that it could consider under rule 60 whether to reopen and So but that this takes me to this flip side of the question I asked your colleague right because this came from the department They explained that that the reason for this disclosure was so that you could have a you could then go back and reopen under 60b and and they specifically included language in their proposal that Specified that but then the board now Commission Said we adopt their proposal, but actually didn't keep in the reopening language, which then creates I guess an ambiguity as to whether it was intended to reject that and and have this been a provision that augments 408 by providing requiring notice or we don't think there's any ambiguity here for a couple reasons one the Commission then the board Did not adopt all the language proposed by the department instead it reserved to itself maximum discretion in how to handle these situations if if 5409 the the reporting Requirement were intended to fold into an amendment process that's described in 5408 5409 would have been part of 5408 Well, you just told us it was ignite ignited Enacted at the same time they weren't but they are enacted as separate proposals They work in tandem, but it was not enacted as part of that and there is no there is no Cross-reference that if there is more than 20% then the board will determine whether to proceed I realize that but I just don't see the point of that statute if it doesn't do anything other than initiate a review through an amendment process That the Commission The purpose is so that the Commission is aware that cost estimates have increased by 20% so that the Commission can then take the appropriate action Which is which is it could open in investigation or like it did here? rightly so it can commence a proceeding under rule 60 and why rule 60 because Although there's one process here We have two different outcomes of the 248 proceeding two different Documents we have a CPG that CPG Authorizes the approved proposal and what is that approved proposal the CPG is very clear It is 41 miles of pipeline several distribution mains and Three gate stations That's what the CPG is it is a construction permit It has some conditions as many permits do such as obtain all permits on the other hand Construction permitted it the CPG is a certificate of public good So there's a consideration that's folded in that doesn't just look at zoning permits and building options That's right. We're not simply looking at whether it's a purple pipe pipeline, and that's going to be aesthetically Okay No, there is a decision a final order a judgment issued by the Commission Separate from the CPG that final order that judgment that decision what Makes a determination and authorizes in this case a CPG issue authorizes the issuance of the CPG the permit and The cost estimate of the project is Considered under section 248 of course But it's not approved the pipelines approved But the cost item is considered in whether to issue the permit the CPG Authorizing the pipeline who has the burden in the 60 b proceed The move in has the burden all right, but you control the information concerning costs Well, your honor, I wouldn't necessarily agree with that in this particular case There were two remands that resulted in two extensive proceedings The both involved hearings before the Commission both involved testimony before the Commission the second Proceeding the second remand lasted approximately a year during which there was significant discovery so in any dispute The one party or the other may have the information But there was an opportunity for discovery and of course the public service board Excuse me the the public service department was involved as well So there was plenty of opportunity here. I think fundamentally the difference is we have a CPG here That's about physical changes the legislative history supports that the jurisprudence supports that and the Commission Interpreted its own rule in a rational manner, but then my question is this the Commission said Section 248 proceedings involve review and approval approval of the construction of proposed facilities Not the approval of the recovery of construction costs from rape payers costs are going to be recovered only after of utility files for a rate adjustment Demonstrating construction costs are known and measurable and that the construction Facility is used and useful So under this standard where there's no amendment to a proposal for a CPG You come in and you estimate the cost of my new windmill is going to be a hundred dollars And it becomes nine hundred dollars and now are you actually going to impose that increase on the rate payers because it happened Well that the short answer is no You're going to see in the next few months the appeal from the heavily litigated rate case In which the company sought to recover its construction costs up to a limit And so as the as the Commission pointed out that is yet another avenue where costs are Considered and approved to the extent that they are recovered from rate payers. So CLF was asked Haven't you been heard They've been heard three times. They were heard in the first remand. They didn't appeal that decision They were heard in the second remand. They didn't appeal that decision and they were heard extensively during the rate case that will Soon be in this courtroom So they've been heard on this issue This this is an argument that says we want yet another bite at the apple. This has been litigated they've been heard and The the board or the Commission has used the appropriate mechanism But for my gas systems is not going to be held to its original estimate of cost when it goes before the PUC to look at the rate the forgetting my terminology the Recovery of Ray recovery. Yeah. Yes. It's not going to be held to the initial cost estimate when it goes back, right? The Commission had complete discretion To determine what rates what how much of the project would be recovered through rates based on Used in usefulness and based primarily on prudence Unprudence, which is something I don't want to go in today but essentially there was a significant examination of Management's performance and a determination by the Commission as to what monies were prudently spent and I'll go back to the remains during the remands the Commission could have looked at the estimate increase and Decided we're going to reopen this thing. We're going to decide whether or not We should whether or not we should authorize this by looking at all all all the factors That was a mess You can answer that if you want, but I'd like you to do it on speakerphone. Yes See, I saw Ms. Lavee Use her That didn't work out so well for me but that there was an opportunity to Put the brakes on this project if it wanted to during the first remand and the second remand This project has been scrutinized multiple times and CLF has had all of its issues and concerns reviewed at this point each of those each one of those is it I mean I It deals with the pipeline, but in the rate process It sounds like the standard that's being applied doesn't really ask the question of whether this project given costs and benefits is in the public interest it asks you could you could wrongly predict the cost But then have ultimately Spent way more than you said you were going to spend but have done so prudently so you know pass it on to the rate pair But it's still not a project that would have been in the public interest in the first place. I don't know how You know Justice Robinson what I would say is this is that the the estimation process itself is subject to a review for prudence and so You get at that issue in the rate case But during both remand one or remand two The Commission could have determined that at that estimated cost. It was not in the public in this in the public's Best interest that there was not an economic need for it and therefore it could have reopened and Modified or rescinded the CPG during either those proceedings and had CLF wanted to Be heard in this court about those decisions. It had every right to appeal, but it's not you saying That the only mechanism to challenge a cost increase is through a 60 b proceeding and that The flip side of that coin is that increase cost can never trigger and a an amendment procedure under 5408 outside of the 60 b review well You're a cost increase Accompanied by a physical change So we're gonna understand the physical change sure, but you're standing alone Standing alone. It doesn't matter how much the cost increase you don't get a 248 Rule 408 review for an amended procedure except through 60 b mechanism Well, you don't get it through 5408 because that is only looking at the approved proposal Which is the the facility itself? You can get it through rule 60 because that's where cost estimates are considered That's because they were considered under 248 through the 248 proceeding Could could the Commission decide? It would use some other mechanism An investigation or some other sort of proceeding that was neither 5408 requiring an amendment or rule 60 They certainly have Broad discretion. They certainly could consider could consider promulgating a rule to that effect or Modifying 5409 if it wanted to but rule 60 works because the cost considerations were analyzed in Proceeding that led to a final order a final order that authorized the CPG I Have eaten up the department's time. I had promised them three minutes. Thank you very much We get three minutes left Yeah, yeah, there's no there's no time left. Thank you 45 seconds remaining. All right. Thank you very much Thank you your honors in the 45 seconds I will just acknowledge that the appellies noted there is no ambiguity here when there is no ambiguity There is absolutely no deference that should be afforded to the determination made by the public utilities Commission The rule is clear on its face and conservation law foundation is simply asking this court to require the public utilities Commission to follow Its rule as written. Thank you The next hearing for the court is scheduled for 11 this afternoon or this morning