Pine Prairie Energy Center, LLC and Plains Marketing, L.P. v. Eddie Soileau, Sheriff and Ex Officio Tax Collector

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

14-5 c/w CW13-1300 and 14-142

PINE PRAIRIE ENERGY CENTER, LLC
AND PLAINS MARKETING, LP

VERSUS

EDDIE SOILEAU, SHERIFF AND EX OFFICIO TAX COLLECTOR,
PARISH OF EVANGELINE, STATE OF LOUISIANA AND DIRK
DEVILLE, ASSESSOR, EVANGELINE PARISH, STATE OF LOUISIANA

************

APPEAL FROM THE
THIRTEENTH JUDICIAL DISTRICT COURT
PARISH OF EVANGELINE, NO. 73106-B
HONORABLE THOMAS F. FUSELIER, JUDGE

************

J. DAVID PAINTER
JUDGE

************

Court composed of Sylvia R. Cooks, J. David Painter, and Phyllis M. Keaty,
Judges.

Cook, J., dissents.

AFFIRMED.

Brian A. Eddington
8941 Jefferson Hwy, Ste. 200
Baton Rouge, LA 70809
COUNSEL FOR DEFENDANTS-APPELLANTS:
Eddie Soileau, Sheriff and Ex Officio Tax Collector for Evangeline
Parish and Dirk Deville, Assessor for Evangeline Parish

Jesse R. Adams, III
Andre B. Burvant
201 St. Charles Ave., 51st Fl.
New Orleans, LA 70170
COUNSEL FOR PLAINTIFFS-APPELLEES:
Pine Prairie Energy Center, LLC, and Plains Marketing, LP and the
Industrial Development Board No. 1 of the Parish of Evangeline, State
of Louisiana, Inc.

Anthony L. Walker
1101 W. Main St.
Ville Platte, LA 70586
COUNSEL FOR PLAINTIFF-APPELLEE:
Industrial Development Board No. 1 of the Parish of Evangeline, State
of Louisiana, Inc.

PAINTER, Judge.

Defendants, Eddie Soileau, Sheriff for Evangeline Parish (the Sheriff), and

Dirk Deville, Assessor for Evangeline Parish(the Assessor), appeal the trial court‟s

grant of summary judgments filed by the Plaintiffs, Pine Prairie Energy Center,

L.L.C. (PPEC) and Plains Marketing, L.P., the parent company of PPEC. For the

following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

PPEC operates an underground natural gas storage facility and associated

facilities and pipelines located in Evangeline Parish (the PPEC project). PPEC

obtained the appropriate authorization for construction and operation of the PPEC

project from the Federal Energy Regulatory Commission in 2004. In May 2005, an

application was filed with the Evangeline Parish Police Jury (Police Jury) for the

establishment of Evangeline Parish Industrial Development Board Number 1 (the

IDB). The application included articles of incorporation indicating that the purpose

of the IDB was to acquire, own, and lease property to PPEC as a means of

encouraging PPEC to locate in the parish. An ordinance was adopted allowing

creation of the IDB, approving its articles of incorporation, and appointing a board

of directors.

In July 2005, the IDB entered into a memorandum of understanding with

PPEC agreeing to issue bonds to finance the acquisition and construction of the

project property, which would be owned by the IDB and leased to PPEC, and

agreeing that the property would not be subject to ad valorum property taxes. In

January 2006, the Police Jury and PPEC entered into an agreement affirming the

understandings and undertakings in the memorandum of understanding, including

the exemption from property taxes on the property during the lease period. On

March 20, 2006, the Assessor sent a letter to PPEC stating that the Assessor‟s
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Office would not consider the property covered by the lease to be subject to

taxation as long as it was owned by the IDB.

The Police Jury approved the issuance of bonds by the IDB. In January

2006, Chesapeake Energy Marketing sold the Chalk Pipeline to PPEC. In May

2006, PPEC conveyed the property comprising the PPEC project (the PPEC

project property) including the Chalk Pipeline, the CGT Meter Site, and the gas

storage facility, to the IDB and leased it back. In 2011, the Assessor placed the

PPEC project property on the tax rolls. PPEC objected and paid the taxes under

protest.

On January 25, 2012, PPEC and Plains Marketing, L.P. filed the suit

currently before this court on appeal under docket number 14-5 asserting that they

were not the owner of any of the property listed in the assessments, including the

gas storage facility property, the Chalk Pipeline and the CGT Meter Site, seeking a

declaratory judgment that the PPEC project property was exempt from taxation,

and that they were entitled to refund of the taxes paid under protest. The suit was

later amended to add the IDB as a party plaintiff. The Assessor determined that the

storage facility property had been conveyed to the IDB, cancelled the assessments,

and reissued them in the name of the IDB. The Sheriff refunded the taxes paid

under protest.

On January 29, 2013, PPEC, on its own behalf and on behalf of the IDB,

filed an additional suit, now before this court on appeal under docket number 04-

142, seeking recovery of taxes paid under protest and declaratory judgment that the

property at issue is owned by the IDB, and that, as such, it is exempt from property

taxes, as well as cancellation of the tax notices, and a permanent injunction

prohibiting the Assessor and the Sheriff from issuing any future tax assessments.

2

PPEC filed a motion for summary judgment in each suit. In the original suit,

in a motion filed on August 15, 2013, Plaintiffs asked for summary judgment as

follows:

1) Finding that Petitioners do not owe any ad valorem property taxes
on any property that is owned by the Industrial Development
Board No 1 of the Parish of Evangeline State of Louisiana, Inc.
(Evangeline Parish IDB);

2) Finding that the Chalk Pipeline and CGT Meter Site as defined in
the accompanying Memorandum are not owned by Petitioners as
they were conveyed to the Evangeline Parish IDB;

3) Finding that the property owned by the Evangeline Parish IDB is
exempt from ad valorem property taxation;

4) Ordering a refund of all unreimbursed ad valorem property taxes
paid by Petitioners under protest along with interest as provided by
law; and

5) Prohibiting the Sheriff and the Assessor and from issuing to
Petitioners any future assessments, tax bills, tax notices, tax liens,
notices of seizure or adjudications related to the Chalk Pipeline,
the CGT Meter Site or any other property as long as it is owned by
the Evangeline Parish IDB.

In the second suit, Plaintiffs asked for a partial summary judgment as

follows:

1 Finding that the Chalk Pipeline and CGT Meter Site are owned by
the IDB;

2 Finding that property owned by the IDB is public property and is
thus exempt from ad valorem property taxation;

3 Cancelling all assessments, tax notices, tax statements or bills issued
to the IDB and all assessments, tax notices, tax statements or bills
issued to PPEC regarding the Chalk Pipeline and the CGT Meter
Site;

4 Ordering a refund to PPEC of all ad valorem property taxes paid
under protest along with interest as provided by law; and

5 Declaring that any future assessments, tax bills, tax notices, tax
liens, notices of seizure or other adjudications related to the Chalk
Pipeline CGT Meter Site or all other property that is owned by the
IDB for as long as it is owned by the IDB are void ab initio, null,
illegal and of no effect.
3

After hearing arguments, the trial court granted Defendants a summary

judgment in the first suit and a partial summary judgment in the second suit.

Defendants filed a writ with this court asking for an unlimited appeal, which is

before this court under docket number 13-1300 and which this court referred to the

merits. Defendants appeal the judgments of the trial court, and this court has

consolidated the matters on appeal on its own motion.

DISCUSSION

Summary Judgment

Appellate courts review trial courts‟ ruling on motions for
summary judgment de novo. Sanchez v. Harbor Const. Co., Inc., 07–
0234, p. 4 (La.App. 4 Cir. 10/3/07), 968 So.2d 783, 786. “An
appellate court reviews a trial court‟s decision granting summary
judgment de novo using the same standard applied by the trial court in
deciding the motion for summary judgment.” Id. “„An appellate court
thus asks the same questions as does the trial court in determining
whether summary judgment is appropriate: whether there is any
genuine issue of material fact, and whether the mover-appell[ee] is
entitled to judgment as a matter of law.‟” Williams v. Mem’l Med. Ctr.,
03–1806, p. 13 (La.App. 4 Cir. 3/17/04), 870 So.2d 1044, 1052–53,
quoting Smith v. Our Lady of the Lake Hosp., Inc., 93–2512, p. 26
(La.7/5/94), 639 So.2d 730, 750.

“The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories, and admissions,
together with the affidavits, if any, show that there is no genuine issue
as to material fact, and that mover is entitled to judgment as a matter
of law.” La. C.C.P. art. 966(B)(2). As to the burden of proof, the
burden:

remains with the movant. However, if the movant will
not bear the burden of proof at trial on the matter that is
before the court on the motion for summary judgment,
the movant‟s burden on the motion does not require him
to negate all essential elements of the adverse party‟s
claim, action, or defense, but rather to point out to the
court that there is an absence of factual support for one or
more elements essential to the adverse party‟s claim,
action, or defense. Thereafter, if the adverse party fails to
produce factual support sufficient to establish that he will
be able to satisfy his evidentiary burden of proof at trial,
there is no genuine issue of material fact.

La. C.C.P. art. 966(C)(2). “The summary judgment procedure is
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designed to secure the just, speedy, and inexpensive determination of
actions.” MeritPlan Ins. Co. v. DeSalvo, 03–1493, p. 3 (La.App. 4 Cir.
3/24/04), 871 So.2d 461, 463. “The procedure is favored and shall be
construed to accomplish these ends.” La. C.C.P. art. 966(A)(2).

St. Bernard I, LLC v. Williams, 12-372, pp. 5-6 (La.App. 4 Cir. 3/13/13), 112 So.3d

922, 926, writ denied, 13-1008 (La. 6/14/13), 118 So.3d 1090.

Ownership of the Pipeline

Defendants assert that the trial court erred in finding that “the Chalk Pipeline

was conveyed to the IDB through an Act of Conveyance dated May 9, 2006, and a

Conveyance and Lease Addendum No. 1 dated November 12, 2007.”1

Defendants argue that the conveyance did not by its terms include the actual

pipeline but only “fee properties, lease and easements and rights of way.” Plaintiffs

assert that the actual pipeline is an accessory to the pipeline servitude and, as such,

was included in the sale of the servitude pursuant to La.Civ.Code art. 2461.

After reviewing the Act of Conveyance and the applicable law, we find that

the pipeline is an accessory to the pipeline servitude as argued by Plaintiffs. See

Ortego v. Sevarg Co., Inc., 550 So.2d 340 (La.App. 3 Cir. 1989). Therefore, we

agree that it was conveyed along with the servitudes.

Constitutionality of La.R.S. 51:1160

Defendants first assert that La.R.S. 51:1150 is unconstitutional because

La.Const. art. VII ' 21(A) provides the only basis for exemptions from ad valorem

property taxes as follows: “In addition to the homestead exemption provided for in

Section 20 of this Article, the following property and no other shall be exempt

from ad valorem taxation: (A) Public lands; other public property used for public

purposes.”

1
Defendants conceded ownership of the CGT Meter Site in their appeal brief.
5

Louisiana Revised Statutes 51:1160 states, with regard to municipal and

parish industrial development boards, that:

The corporation is hereby declared to be performing a public
function on behalf of the municipality or parish with respect to which
the corporation is organized and to be a public instrumentality of such
municipality or parish. Accordingly, the corporation and all properties
at any time owned by it and the income therefrom and all bonds
issued by it and the income therefrom shall be exempt from all
taxation in the state of Louisiana; provided, however, that the
corporation may require the lessee of each of the projects of the
corporation to pay annually to parish or municipal taxing authorities,
through the normal collecting agency, a sum in lieu of ad valorem
taxes to compensate such authorities for any services rendered by
them to such projects which sum shall not be in excess of the ad
valorem taxes such lessee would have been obligated to pay to such
authorities had it been the owner of such project during the period for
which such payment is made. Such payments to be made in lieu of
taxes together with any fees and charges of such public trust, to the
extent in the aggregate they do not exceed the amount of taxes that
would be paid if the lessee were the owner, shall constitute statutory
impositions within the meaning of R.S. 47:2128. Also for the purposes
of R.S. 51:708(1) and any amendment thereto or substitution therefor,
bonds issued by the corporation shall be determined to be securities
issued by a public instrumentality of a political subdivision of the
state of Louisiana.

“This statute is entitled to the presumption of constitutionality, and

[Defendants have] the burden of proving that the statute is unconstitutional.” Bd. of

Assessors of City of New Orleans v. City of New Orleans, 02-691, p. 14 (La.App. 4

Cir. 9/25/02), 829 So.2d 501, 509, writ denied, 02-2633 (La. 1/10/03), 834 So.2d

439.

We find that this statute does not, as Defendants argue, create a new class of

exempt property, rather, in it, the legislature clarifies that municipal and industrial

development boards are, by definition, performing a public function and, therefore,

fall into the class of organization covered by La.Const. art. 7 ' 21.

Defendants do not argue that the IDB is not a public entity, rather they argue

that it does not own the PPEC project property and that it is not public property

because that conveyance from PPEC to IDB is a simulation. Simulation is defined
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by La.Civ.Code art. 2025 as: “A contract is a simulation when, by mutual

agreement, it does not express the true intent of the parties.” Defendants assert that

the sale with option to purchase and lease-back show that there was not a true

intent to transfer ownership.

The party alleging that the purported sale was a simulation
bears the burden of proving with reasonable certainty that the sale was
simulated. Thompson v. Woods, 1525 So.2d 174 (La.App. 3 Cir.1988).
If any consideration is given for the conveyance, the sale is not a
simulation. Id.

Bennett v. Porter, 10-1088, pp. 9-10 (La.App. 3 Cir. 3/9/11), 58 So.3d 663, 671.

See also St. Bernard, 112 So.3d 922.

Further, La.R.S. 9:3371 states that:

Sale/lease-back commercial transactions involving immovable
or movable property with a fair market value in excess of twenty-five
thousand dollars and located within this state are hereby declared to
be valid and enforceable. Such transaction shall produce and result in
the legal consequences described in the written sale/lease-back
agreement between the parties and shall not be presumed to be a
simulation.

It is unquestioned that the PPEC property conveyed to the IDB and

subsequently leased back to PPEC had a commercial value in excess of twenty-five

thousand dollars. As stated in Entergy Louisiana, Inc. v. Kennedy, 03-166, p. 8

(La.App. 1 Cir. 7/2/03), 859 So.2d 74, 80, writ denied, 03-2201 (La. 11/14/03), 858

So.2d 430, “a transaction will not be set aside as a simulation if any consideration

supports the transaction; the reality of the transference is thus established.”

The Act of Conveyance contains the following description of the

consideration for that transaction:

This act of conveyance is made for and in consideration of
Vendee issuing its Taxable Industrial Development Revenue Bonds
(Pine Prairie Energy Center LLC Project) Series 2006 (the “Bonds”)
for the purpose of financing the acquisition, construction and
installation of all facilities necessary and appropriate in connection
with the establishment of natural gas storage, pipelines and related
handling and storage facilities within the Parish of Evangeline, State
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of Louisiana (the “Facility”) to be located on the Property, which
Facility and Property will be owned by Vendee and leased to Vendor
for a rental that is sufficient in amount to pay the principal of, interest
and premium on the Bonds when they become due pursuant to a Lease
Agreement dated of even date herewith by and between Vendee, as
lessor, and Vendor, as lessee.

The lease agreement by which the property was leased back to PPEC

provided for payments in lieu of taxation, or PILOT payments, on the storage

facility to the Sheriff and Ex Officio Tax Collector as follows:

Section 5.2 PILOT Payments

(a) Beginning with the calendar year following the year in
which the In Service Date has occurred, and for each calendar year
thereafter during the Lease Term, the Lessee shall make a PILOT
payment of $500,000, but if and only if the average of the annual ad
valorem inventory tax revenues applicable to natural gas in the Project
caverns for the prior three consecutive calendar years (the “Three Year
Average”) is less than $500,000, in which case the PILOT payment
applicable for such calendar year shall be the difference between
$500,000 and the Three Year Average (it being understood that the
Three Year Average for the first calendar year shall be $500,000, and
that the “Three Year Average” for the second such calendar year shall
be the average of the actual ad valorem inventory tax for such year
and the prior calendar year). For the avoidance of doubt, if the Three
Year Average for any calendar year is $500,000 or more, the Lessee
shall not be required to make any PILOT payment for such calendar
year pursuant to this paragraph.

....

(c) In addition to the foregoing, the Lessee shall make a
PILOT payment with respect to the pipeline commonly referred to as
the “LA Chalk Pipeline” which generally constitutes the pipeline
segment of approximately 33 miles of 24-inch diameter buried
pipeline, beginning at a point on the Louisiana Chalk Gathering
System commonly referred to as “Tennessee Junction” in Rapides
Parish, Louisiana (Section 34-T1S-R2W) and extending southward,
through the Parish to an existing point of interconnection with the
facilities of El Paso Field Services Company‟s Eunice Gas Processing
Plant in Acadia Parish, Louisiana (Section 12-T75-R2W). The PILOT
payment shall be only with respect to that portion of the LA Chalk
Pipeline that is situated in the Parish, shall be payable commencing
with respect to the calendar year after the year which such pipeline is
acquired by the Issuer, shall be in an amount not to exceed $45,000
per annum (payable in arrears) and shall be payable to the Sheriff on
or prior to December 31 of each year.

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....

Section 5.3 Obligation to Defease/Repay School Bonds. In
addition to PILOT payments set forth herein, the Lessee agrees to
make, on the date which is the earlier of (i) 13 months following the
In Service Date; or (ii) March 1, 2008, a payment in lieu of a PILOT
payment, which shall be made to the Paying Agent for the Pine Prairie
School District No. 4 General Obligation Bonds, which bonds were
issued on March 1, 2001 in the original principal amount of
$3,750,000 (the “School Bonds”). Such payment shall be in an
amount sufficient to defease or otherwise pay the principal and
interest on the School Bonds (at their then outstanding balance based
on the existing amortization schedules) in full or to provide for their
payment in full at the next available redemption date; provided that
the issuer thereof (x) may not agree to an increase in the principal
amount of such School Bonds or an increase in the interest rate or
other amounts which would be due the owners of the School Bonds;
and (y) may not agree to an amendment to the amortization schedule
which has the effect of postponing the payment of any principal or
interest or other amount; and (z) must continue to be current with
respect to payments of principal and interest thereon.

In light of these provisions, we conclude that there was valid consideration

for the conveyance and lease-back agreements and, as a result, that no simulation

occurred.

Defendants next argue that the property is not being used for a public

purpose. Defendants assert that in order to be considered as being used for public

purposes, the use must be direct use by the public. However, the Louisiana

Supreme Court, in considering the definition of public use in the context of

expropriation has stated that:

While actual public use of the servitude may play a role in the
appropriate case in determining whether the expropriation serves a
public purpose, we do not read the constitutional provision and the
statutes granting ExxonMobil its authority to expropriate private
property as restricting expropriating real estate to that on which the
pipeline itself is placed, nor do we interpret these provisions and
the jurisprudence as requiring direct public use as the sole factor
in determining whether the expropriated property will serve a
public purpose.

Exxon Mobil Pipeline Co. v. Union Pac. R.R. Co., 09-1629, p. 8 (La. 3/16/10), 35

So.3d 192, 197 (emphasis added). This court, in Town of Vidalia v. Unopened
9

Succession of Ruffin, 95-580, pp. 6-7 (La.App. 3 Cir. 10/4/95), 663 So.2d 315, 319

(footnote omitted), explained that:

Defendants in the case sub judice contend that in order to show
a public purpose, there must be “a general public right to a definite
use of the property, as distinguished from a use by a private individual
or corporation which may prove beneficial or profitable to some
portion of the public.” River & Rail Terminals, Inc. v. Louisiana Ry. &
Nav. Co., 171 La. 223, 130 So. 337 (1930). Despite this restrictive
language, the Louisiana jurisprudence has not defined “public
purpose” so narrowly. See Texas Pipe Line Co. v. Stein, 190 So.2d 244
(La.App. 4 Cir.1966), reversed on other grounds, 250 La. 1104, 202
So.2d 266 (1967) (“„actual public use‟ is not the criteria by which
public purpose is determined”). Rather, any allocation to a use
resulting in advantages to the public at large will suffice to constitute
a public purpose. Moreover, a use of the property by a private
individual or corporation, when such use is merely incidental to the
public use of the property by the state or its political subdivisions,
does not destroy an otherwise valid public purpose. In considering
this issue, the Louisiana Supreme Court has noted that:

“„public use‟ is synonymous with „public benefit,‟ „public
utility‟ or „public advantage,‟ and . . . authorize[s] the
exercise of the power of eminent domain to promote such
public benefit, etc., especially where the interests
involved are of considerable magnitude, and it is sought
to use the power in order that the natural resources and
advantages of a locality may receive the fullest
development in view of the general welfare.”

City of New Orleans v. New Orleans Land Co., 136 So. at 92.

In this case, the benefit to the public was outlined clearly in the affidavit of

Dr. William A. Ward, President of the IDB, wherein he stated, in pertinent part,

with regard to the PPEC Project that:

3.

In an effort to encourage Pine Prairie Energy Center, LLC
(“PPEC”) to acquire, construct and install a natural gas storage
facility, and the necessary equipment and pipelines (the “Project”), the
IDB authorized me, acting as President, to take any and all actions and
to sign any and all documents, instruments, contracts or writings that
would be necessary to encourage PPEC to locate the Project in
Evangeline Parish. The IDB specifically resolved that the acquisition,
construction, and installation of the Project would benefit the welfare
and economy of the citizens of Evangeline Parish and it was in the

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public interest of those citizens to encourage the location of the
Project in the Parish.

....

8.

The project has resulted in an investment of approximately
$700,000,000 in Evangeline Parish.

9.

During the construction phase of the Project, over 500
individuals were employed at the project.

10.

The project has resulted in the permanent creation of 20 full-
time jobs with wages double the average of Evangeline Parish.

11.

The construction and operation of the Project has generated
approximately $10,000,000 in sales and use tax for Evangeline Parish,
and Evangeline Parish is currently receiving approximately $1.2
million annually in ad valorem taxes on the natural gas stored at the
facility.

12.

Since the Project came on line, PPEC has made of $450,000 in
PILOT payments to Evangeline Parish under the Lease Agreement
and has also made significant financial contributions that support
various organizations and causes in Evangeline Parish.

13.

PPEC voluntarily provided the Evangeline Parish School Board
with $3.2 million to retire general obligation bonds that the
Evangeline Parish School Board issued in 2001 for use in significant
upgrades to school facilities in Pine Prairie, Louisiana.

In light of this information, which was not countered in any way by

Defendants, and the jurisprudence defining use for a public purpose, we find that

the PPEC project is beneficial to the public of Evangeline Parish and, thus, is being

used for a public purpose.

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CONCLUSION

Having so found, we agree with the trial court that there is no material fact

remaining but that Plaintiffs are entitled to judgment finding that the IDB is the

owner of the Chalk Pipeline, that all the PPEC project property is public property

being used for a public purpose and is therefore exempt from taxation for ad

valorem property taxes from the date of the conveyance of the property from PPEC

to the IDB, and that Defendants should be enjoined from issuing further tax

assessments, bills and/or liens, and from instituting any further enforcement

proceedings against PPEC or the IDB in connection with this property during the

term of the lease-back between those parties. Accordingly, the judgment of the trial

court is affirmed.

Costs of this appeal are assessed to Defendants-Appellants, Eddie Soileau,

Sheriff and Ex Officio Tax Collector for Evangeline Parish, and Dirk Deville,

Assessor for Evangeline Parish.

AFFIRMED.

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