Court Hearing on Legality of Canyon Sale

Scenic Treasure Sale Source of Controversy

Oct. 8, 1998

By Rick Steelhammer

Gazette STAFF WRITER

Environmentalists said they were heartened by comments state Supreme Court justices made during Wednesday's hearing on their suit over the sale of a 3,200-acre tract of scenic Blackwater Canyon to a timber company.

"I'm just short of ecstatic," said West Virginia Sierra Club president Jim Sconyers. "From their remarks, it seems that their thoughts and beliefs - particularly about the power company's corporate structure - are similar to mine."

The Sierra Club, the West Virginia Highlands Conservancy and the West Virginia Wildlife Federation are asking the Supreme Court to force the state Public Service Commission to hold a hearing to determine the legality of the Blackwater Canyon sale.

The land had been owned by West Virginia Power and Transmission Corp., a subsidiary of West Penn Power, which in turn is a wholly owned subsidiary of Allegheny Power - which recently changed its name to Allegheny Energy. In 1997 the tract, which had been owned by the power company subsidiary since 1953, was sold for $4.85 million to Canyon Lands Inc., which in turn sold the land for $5 million to Allegheny Wood Products of Petersburg.

Environmentalists argued that the sale was made by a regulated public utility and, as such, should have been preceded by a PSC hearing to determine whether the transaction served the public good.

The PSC, however, has ruled that the sale did not require such a hearing since it was made by the power company's real estate subsidiary, and not the power-generating, rate-charging public utility itself. It is that ruling that conservation groups are contesting before the high court.

During Wednesday's hearing, Tom Michael, attorney for the conservation groups, argued that Allegheny Power's filings with the Securities and Exchange Commission show that the power company owns and controls the subsidiaries involved in the Blackwater sale. "The issue is one of control, and the facts show that Allegheny Power controlled this property," Michael said.

Allegheny Power attorney James K. Brown contended that the subsidiary that sold the Blackwater property was a land company and "not a public utility asset" subject to PSC regulation.

"It was private land sold by a private corporation to another private corporation," Brown said.

"The question should be who's pocket the money goes in," said Justice Elliott Maynard.

"It all goes to Allegheny Power's stockholders," Michael responded.

Justice Larry Starcher held up a power company marketing promotion and an article promoting the company's environmental stewardship, which an aide had retrieved off the Internet.

Both publications listed Allegheny Power and the subsidiaries in the Blackwater sale as being units of the same system. One company brochure even credited Allegheny Power, and not the subsidiary, with donating 600 acres of canyonland in 1953 to help the state create Blackwater Falls State Park.

"Are you saying that you have the right to hold yourself out to the public as one thing, then hide behind the corporate veil on another?" Starcher asked.

John McFerrin, president of the Highlands Conservancy, said after the hearing he was confident that the Supreme Court would order the PSC to hold a hearing to take up the issue of whether the sale of the canyon was in the public interest.

He predicted that the PSC would rule that the sale would not pass the public interest test, since the land, often featured in state tourism promotions, is "the crown jewel of West Virginia's tourism industry."

"Just the other evening there was a TV commercial inviting people to see wonderful West Virginia, and one of the spots in the commercial was Blackwater Canyon," McFerrin said. "...It would be nice not have to tell people we've sold it to a timber company."