In a January 8, 2025, vote along party lines, the three Democratic Commissioners of the Pennsylvania Public Utility Commission (PA PUC or Commission), led by Chairman Stephen DeFrank, reversed nearly a decade of PA PUC enforcement practice and asserted jurisdiction over Pennsylvania landlords as gas pipeline operators if they have behind-the-meter gas distribution systems on their properties. The Commission claimed jurisdiction not only over underground and aboveground piping but also internal piping in buildings. The move will require, with limited exceptions, landlords throughout the commonwealth — regardless of size — to comply with federal gas pipeline safety laws, including the regulations of the federal Pipeline Safety and Hazardous Materials Administration (PSHMA), in the same manner as natural gas distribution companies and gas pipeline operators. The newly found jurisdiction will impose onerous registration, operation, maintenance, and reporting requirements upon landlords — which may ultimately result in higher rent for tenants. The case is Pennsylvania Public Utility Commission, Bureau of Investigation and Enforcement v. Westover Property Management Company, L.P., Docket Nos. C-2022-3030251 & P-2021-3030002 (Order entered Jan. 8, 2025).
In 2012, the Pennsylvania Legislature enacted Act 127 that vested the PA PUC with the authority to enforce federal gas pipeline safety laws. The legislation was intended to address the burgeoning number of gas pipelines being constructed and operated in the commonwealth as a result of the development of the Marcellus Shale gas industry. In exchange for enforcing federal law, the PUC is reimbursed for its costs by the federal government. Initial guidance by the Commission stated that it would not consider gas systems operated entirely on the operator’s property to be pipelines to which federal gas safety laws would apply. This exemption covered most landlords in the commonwealth. The Commission and landlords operated under this understanding until approximately 2021, when the Commission’s Bureau of Investigation & Enforcement (I&E) began investigating landlords as master meter operators and threatening enforcement actions if the landlords would not voluntarily agree to subject themselves to Commission jurisdiction. A targeted landlord was Westover Property Management Company (Westover), one of the largest apartment complex operators in the commonwealth, which elected to contest I&E’s actions as governmental overreach. After approximately three years of litigation, the Commission finally made a decision on the Westover case — which holds broad-reaching implications for not only apartment complexes but also educational institutions, health care facilities, shopping centers, and other operators of behind-the-meter gas distribution facilities. They are all now, in theory, gas pipeline operators and subject to regulation and enforcement action by the Commission.
The two dissenting Republican Commissioners expressed concern that the PA PUC’s assertion of expansive jurisdiction fails to consider overlapping jurisdiction of other government entities under the Uniform Construction Code and the International Fuel Gas Code, as adopted by the Pennsylvania Department of Labor & Industry and enforced by local municipalities. They expressed particular concern about the expansion of PA PUC jurisdiction over the internal gas distribution system of a single structure. Rather than an all-or-nothing approach to jurisdiction, the Republican Commissioners suggested that a further Act 127 Implementation Order with input from all relevant stakeholders would have been preferable.
Westover has 30 days from the entry of the order to appeal to the Commonwealth Court of Pennsylvania. The Commission’s decision may also spark a legislative debate concerning how to ensure that gas pipelines at apartment complexes are safe while, at the same time, not imposing onerous and costly regulatory requirements upon landlords who never had an intent to be gas pipeline operators.
