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October 10, 1963


Appeal, No. 43, March T., 1963, from orders of Court of Common Pleas of Beaver County, Sept. T., 1961, No. 14, in re appeal of Independence Township School District from exemption granted by Beaver County Board of Assessment and Revision of Taxes, etc. Orders affirmed.


James E. Rowley, with him Myron E. Rowley, Ralph E. Smith, and Rowley, Smith & Rowley, for appellant.

John D. Ray, with him Alan C. Davis, and Ray & Good, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Roberts

[ 412 Pa. Page 304]


This appeal by Independence Township School District of Beaver County is from the orders of the court below which sustained the exemption from real estate taxes of certain buildings, fourteen tanks and seventy-two acres (of approximately 218 acres) of land owned by Laurel Pipe Line Company granted by the Beaver County Board of Assessment and Revision of Taxes for the years 1960 and 1961.

Laurel Pipe Line Company was Organized and incorporated as a Pennsylvania corporation on March 1, 1957, and was granted a certificate of public convenience by the Pennsylvania Public Utility Commission on March 8, 1957.*fn1 On March 18, 1957, the same

[ 412 Pa. Page 305]

    company was incorporated under the laws of Ohio. It was granted a certificate of public convenience by the Ohio authorities and began business as a public utility on March 25, 1957. The present Laurel Company is the result of merger of the two companies. The Ohio corporation became a parent company through acquisition of the shares of the Pennsylvania corporation. This acquisition was approved on October 1, 1957, by the Public Utilities Commission of Ohio, and on October 7, 1957, the parent company was granted permission to do business in Pennsylvania. The merger of the two companies was begun in July, 1959, and became effective January 1, 1960, following approval on November 23, 1959, by the Pennsylvania Public Utility Commission. The Commission's certificate of public convenience authorized Laurel Pipe Line Company, a foreign public utility, to engage in transporting, storing and distributing petroleum and petroleum products by means of pipelines and appurtenances for the public, extending generally westward from a point near Philadelphia to the vicinity of Pittsburgh, and then northwesterly to the Pennsylvania-Ohio border.

Laurel owns and operates a pipeline 446.5 miles in length extending from Westfield, New Jersey to Cleveland, Ohio, which transports three grades of gasoline, fuel oil for home heating, fuel oil for heating factories, diesel fuels and kerosene. These products are moved from east to west through the pipeline. Its Booth station in Delaware County receives Shipments of products from tank farms of its shippers in the Philadelphia and New Jersey area, which shipments are then moved westward to various take-off stations along the route.*fn2 From Booth station to Mechanicsburg, the pipeline is 24 inches in diameter. At Mechanicsburg,

[ 412 Pa. Page 306]

    the pipeline diminishes to 20 inches and continues to Eldorado and Duncansville in Blair County, at which point the line diminishes to 18 inches. After reaching the pumping station in Independence Township, Beaver County, the pipeline diminishes to 14 inches and continues approximately 100 miles to take-off stations in Cleveland, Ohio.

During the tax years 1958 and 1959, while Laurel's pumping station was under construction in Independence Township, property taxes were paid on the assessed valuation of all the land, consisting of approximately 218 acres. The tax year 1960 was the first year in which the facilities were completed and the station placed in operation. At this station (called Aliquippa) are fourteen tanks, several buildings and other facilities. No deliveries are made at Independence and no products are there received for shipment. The tank capacities were based upon studies made for anticipated transit volumes through 1965 and certain anticipated monthly cycles for each product to be shipped.*fn3 Ten of the tanks are used for specifically designated products and one tank is used for kerosene, a common product. Three tanks are used as utility tanks. As pointed out by the lower court, these tanks are used "much in the same manner as a railroad uses its sidings off the main line."

[ 412 Pa. Page 307]

The Board of Assesment and Revision of Taxes ruled that for the year 1960, the 72 acres of land actually used for the station were exempt from local taxes.*fn4 The court below sustained the exemption, and this appeal followed.

Appellant contends that Laurel Pipe Line Company is not a public service corporation or a quasi-public corporation rendering essential services to the public, but rather that it is basically a private corporation whose services are used by three refiners, Gulf, Sinclair, and Texaco, who own all of the stock of Laurel and who direct its affairs.*fn5 It is urged that the corporate veil be pierced and that Laurel and its shareholders be considered as one and the same entity. In the alternative, the contention is made that the facilities in the township are not essential to the overall operation of the pipeline and are, therefore, taxable.

In passing on the questions raised, we must determine the essential character of the corporation claiming exemption from taxation of its property. As already noted, Laurel Pipe Line Company, the Pennsylvania corporation, was organized for the transportation and storage or distribution of petroleum products by means of pipelines and subjected to the regulatory jurisdiction of the Pennsylvania Public Utility commission. It was vested with the right of eminent domain "for locating and constructing, or laying and operating, necessary pipes, pumps, tanks, pump houses,

[ 412 Pa. Page 308]

    structures, and offices and making connections and extending branches necessary and incident to the carrying on of its local or interstate business. ..." Act of June 2, 1883, P.L. 61, § 2, as amended, 15 P.S. § 2153. The Pennsylvania Public Utility Commission approved its purposes and its route, as well as its merger with the Ohio corporation, and issued to the parent corporation, after registration as a foreign corporation, a certificate of public convenience.

In Philadelphia Rural Transit Co. v. Philadelphia, 309 Pa. 84, 91, 159 Atl. 861, 863 (1932), this Court held: "The possession of the power of eminent domain is not what gives a corporation a quasi public status for there are quasi public corporations that do not possess this power; rather the fact that a corporation is quasi public is what entitles it to a grant of the power of eminent domain when the exercise of its functions requires it." The Legislature, by granting the right of eminent domain to pipeline companies, has recognized that they carry on an essential activity affected with a substantial public interest. The transportation of gasoline, kerosene, diesel and fuel oils so directly affects the daily needs of the Commonwealth and its citizens that any extended stoppages would create serious hardships in practically every area of our existence.

Undoubtedly, these and other considerations of public policy and welfare compel the conclusion that operations of pipeline companies are impressed with a public trust.

"The conferring upon a corporation by the State of the power of eminent domain is an official recognition of the fact that the corporation receiving this grant of power is engaged in a business so vital to the public welfare that it is really engaged in the administration of a public trust, and therefore it is entitled to the classification of a quasi public corporation

[ 412 Pa. Page 309]

    and the property essential to the administration of that trust is exempt from all taxation except that imposed directly by the sovereign." Philadelphia Rural Transit Co. v. Philadelphia, supra at 91, 159 Atl. at 863. See Longvue Disposal Corp. V. Board of Property Assessment, 375 Pa. 35, 99 A.2d 464 (1953); Conoy Township Supervisors v. York Haven Electric Power Plant Co., 222 Pa. 319, 71 Atl. 207 (1908).

The test of a public service corporation is not what the corporation has done or may attempt to do, but what it is authorized to do and may be compelled to do under its charter in the performance of the duties imposed. Pittsburgh & Lake Erie Railroad v. Allegheny County, 283 Pa. 220, 128 Atl. 840 (1925); Conoy Township Supervisors v. York Haven Electric Power Plant Co. supra.

The legislative authority to "exempt from taxation public property used for public purposes" is conferred by § 1, Article IX of the Pennsylvania Constitution. The succeeding section reaffirms the limitation of that authority by providing, "All laws exempting property from taxation, other than the property above enumerated shall be void." Article IX, § 2. To qualify for exemption, it must be established that the property is being used for a public purpose. The determination whether a proposed use is a public one is a question for ultimate judicial determination. West View Borough Municipal Authority Appeal, 381 Pa. 416, 113 A.2d 307 (1955); Dornan v. Philadelphia Housing Authority, 331 Pa. 209, 222, 200 Atl. 834, 841 (1938). The legislative declaration that the use to which property is being put is a public one, by reason of which the power of eminent domain is granted, although not conclusive, is entitled to prima facie acceptance. McSorley v. Fitzgerald, 359 Pa. 264, 59 A.2d 142 (1948); Dornan v. Philadelphia Housing Authority, supra.

[ 412 Pa. Page 310]

The court below found upon competent and adequate evidence that Laurel Pipe Line Company is a quasi-public corporation operating as a common carrier in the transportation of petroleum products in inter and intrastate commerce serving those who desire to use its facilities. Likewise, fully supported by the record is the court's finding that Laurel's actual use of the tanks and facilities at the Aliquippa station is an essential and integral part of the pipeline operation and necessary to its continued functioning as a public utility service. The operation of Laurel is described in the opinion of the court below, excerpts from which appear in the margin.*fn6

[ 412 Pa. Page 311]

If appellant's contention is sound, Laurel could be subjected to local taxation in every county, city, borough or township through which its line runs.*fn7 The

[ 412 Pa. Page 312]

    very existence or survival of quasi-public corporations would, in that event, rest in a real sense not with the Commonwealth but with the numerous local taxing bodies.

Appellant further contends that Laurel is not a quasi-public corporation because all of the stock in the company is owned by three stockholders. It urges that the corporate identity be ignored and the working tankage at Aliquippa be regarded as belonging to the three shareholders. In Harrisburg v. Harrisburg Railways Co., 319 Pa. 140, 179 Atl. 442 (1935), we held that even though one corporation owns all the capital stock of and receives all the dividends paid thereon by another corporation The two separately chartered corporations are separate and distinct legal entities. It is clear that stock ownership in Laurel does not compel the conclusion that Laurel is Gulf, Sinclair and Texaco.*fn8

Our attention has not been directed to any case in which this Court has refused to extend the exemption from local taxation where the corporation in question was vested with the power of eminent domain. Indeed, the lower court observed that this Court has never failed to extend the exemption to such a corporation, and its determination that Laurel Pipe Line Company is a public utility is in harmony with decisions of the Pennsylvania Public Utility Commission and the Pennsylvania Department of revenue,

[ 412 Pa. Page 313]

Bureau of Sales and Use Tax, involving this company.

The adjudication of the court below is without error, and its orders, therefore, must be affirmed.


Orders affirmed.

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