Appeals Court upholds transfer of Bald Head Island ferry, barge to new private owner

The North Carolina Court of Appeals has affirmed the state Utilities Commission’s decision to permit the $56 million sale of the Bald Head Island ferry system to a new private owner. The Village of Bald Head Island had opposed the sale.

In an unsigned, unpublished opinion Tuesday, a unanimous three-judge appellate panel rejected the village’s arguments. The decision paves the way for the sale of the ferry, a barge system, and a related mainland parking area to SharpVue Capital.

“The Village argues that the Commission erroneously ‘accorded only minimal consideration to competent evidence’ of multiple risks of the proposed transfer that have bearing on whether the transfer is justified by public convenience and necessity,” appellate judges wrote. “The Village, otherwise, does not challenge the Commission’s findings as to the benefits of the transfer. We have carefully reviewed the Commission’s order and conclude that the Commission made ample findings supported by the evidence, taking all testimony and evidence into consideration when concluding that both standards are met in this case, and that the findings support the Commission’s conclusions of law.”

“In sum, the Commission directly addressed the potential risks identified by the Village and stated that ‘although [Intervenor] identified several risks it believes are associated with the transaction, the Commission concludes that ratepayers are reasonably protected from these risks and that they are outweighed by the benefits of the Transfer,’” the Appeals Court decision continued. “The Commission noted that the matter was not about rates and that the current rates being charged remain reasonable and that there was no request at this time to change those rates.”

Chief Judge Chris Dillon and Judges Allegra Collins and Julee Flood served as the panel hearing the case.

In a separate legal dispute before a different panel, the state Appeals Court upheld on Oct. 15 the state Utilities Commission’s decision to regulate a mainland parking lot tied to the Bald Head Island ferry. But appellate judges rejected the commission’s regulation of a related barge operation that transports goods to the island.

The ruling was tied to an ongoing legal dispute over the 2022 sale of the ferry system, barge, and associated parking.

Bald Head Island Limited owns Bald Head Island Transportation, a regulated public utility that operates the island’s ferry service. Based on a 2022 complaint from the Village of Bald Head Island, the Utilities Commission determined that it had authority to regulate the mainland parking lot and barge service that BHIL owns and operates along with the ferry.

“The Village’s complaint conferred jurisdiction upon the Commission to enter a judgment declaring the utility status of BHIL and its Parking and Barge Operations through their relationships with BHIT and its Ferry Operations,” wrote Judge Hunter Murphy for the Appeals Court’s majority. “The Commission properly concluded that it may regulate the sale of BHIL’s Parking Operations because BHIL, as parent, utilizes the unregulated Parking Operations to service its wholly-owned subsidiary’s regulated Ferry Operations, and this relationship has an effect on the rates and service of the regulated ferry utility.”

“The Commission erred in concluding that BHIL’s non-utility Barge Operations are ancillary to BHIT’s utility Ferry Operations and in concluding that it may regulate the sale of these non-utility assets and operations,” Murphy added. “We affirm the Commission’s order as to the Parking Operations as modified, … and we reverse the Commission’s order as to the Barge Operations.”

Judge Fred Gore joined Murphy’s opinion. Dillon agreed with Murphy and Gore about upholding Utilities Commission regulation of the Bald Head Island parking lot. Dillon would have asked the commission to revisit its decision about the barge.

“I agree with the majority that the Barge Operation is not ancillary to the Ferry Operation, in that the Barge Operation is not integral in providing residents ferry transportation to the Island,” Dillon wrote in a partial dissent. “However, it may be that the Barge Operation, to the extent it provides transportation of household goods or passengers for compensation, is itself a public utility, subject to regulation by the Commission for those activities.”

Murphy, Gore, and Dillon heard oral arguments in the case in November 2023. The dispute arose after the estate owning the parking lot and barge looked into selling the operations.

“The Village of Bald Head Island expressed interest in purchasing both the utility and nonutility functions but did not offer a market-value price,” argued Kip Nelson, the lawyer representing Bald Head Island Transportation. “That’s really the impetus of how this case started. After the village was unwilling to offer a market-value price, the owners turned to and announced their intention to sell the operations to SharpVue Capital.”

Lee Roberts, now chancellor at the University of North Carolina at Chapel Hill, served as managing partner for Raleigh-based SharpVue during much of the legal dispute.

“At that point, the village turned to the Utilities Commission and asked it to regulate what had never been regulated before,” Nelson argued last November. “The commission, of course, accepted that invitation and — in an unprecedented decision — held that it could expand its jurisdiction to cover what it deems important or in the public interest.”

The village’s attorney, Marcus Trathen, defended the commission’s decision. “What they said was it’s an integrated service,” he argued. “There’s no need for the ferry if you don’t have the barge. People aren’t going to come over [to the island] if they can’t eat, if there’s nothing in their house, if they can’t get supplies. They’re not going to come on the ferry. It’s an interconnected service. You’ve got to have one to have the other.”

Trathen emphasized the village’s concerns about the future of the parking lot and barge. “In an environment where these are piece parts, and you’re selling it to the highest bidder, who knows what happens to parking?” he asked. “Does a buyer care about whether the ferry is served? Or do they just want to build a hotel there?”

The village’s lawyer warned of the potential for “grave consequences for the island” if the Appeals Court reversed the Utilities Commission’s decision. “Would people invest in the island if they can’t be ensured fair and reasonable public access?”

Bald Head Island is the southernmost of North Carolina’s barrier islands. The public can access the Island only by boat, according to court filings. The village bans most “personal-use” cars from the island. The village requires a special permit for most car operations.

The passenger ferry runs between Southport and Bald Head island. The Utilities Commission issued a certificate in 1995 for the ferry and its associated island tram system to operate as a regulated public utility. Rates for those services were last set in 2010.

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