A legal fight over a parking lot and a barge might not sound exciting. But the battle over Bald Head Island’s transportation setup involves important questions about government’s proper limits.

The North Carolina Court of Appeals could clarify those limits. It will referee a fight between the village of Bald Head Island and a private company that provides island transportation services.

The southernmost North Carolina barrier island, Bald Head has no mainland road access. Public access is limited to boats. The village bans most “personal-use” cars. Island driving requires a village permit.

Bald Head Island Transportation operates a passenger ferry from Southport. It operates a tram system for island travel. The North Carolina Utilities Commission regulates both services. Rates have remained steady since 2010.

No one questions state regulators’ authority to oversee the ferry and tram. Disagreement arises over two other elements of the company’s business: a mainland parking lot and an “on-off” barge that transports commercial vehicles.

For years, neither the lot nor the barge attracted state regulators’ scrutiny. The situation changed when the estate owning the business looked into selling its property.

“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, Bald Head Island Transportation’s lawyer, on Nov. 29 at the Appeals Court. “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, state budget director under former Republican Gov. Pat McCrory, manages Raleigh-based SharpVue.

“At that point, the village turned to the Utilities Commission and asked it to regulate what had never been regulated before,” Nelson argued. “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 defends the Utility Commission’s decision. “What they said was it’s an integrated service,” attorney Marcus Trathen told the Appeals Court. “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.”

Appellate judges peppered Nelson and Trathen with questions.

“Why isn’t the barge a public utility?” Judge Chris Dillon asked. “Doesn’t it transport household goods for money?”

“It does not,” Nelson responded. “The barge is solely an intermodal link. It allows a commercial vehicle to drive onto the barge and then to drive off to the island. But the compensation is solely based on the space that the vehicle takes.”

“There’s a very specific and detailed definition of what a public utility is in North Carolina,” Nelson argued. “Nowhere is there any provision or hint that the commission would have jurisdiction over a parking lot or the type of barge that we’re talking about here. It’s simply not there. And, frankly, that should end the case.”

That argument didn’t appear to convince Judge Hunter Murphy. He cited a precedent case involving telephone directories. “Wasn’t that pretty much the argument the Supreme Court rejected in Southern Bell I, that there’s additional scope that can come under regulation even if it’s not a public utility?”

Dillon chimed in. “There’s some wiggle room. So why doesn’t the parking lot fall within that Supreme Court wiggle room?”

The company responded. “Of course it’s convenient, as any good business would do — make it as convenient as possible for people who are using the ferry, which is also why there’s a snack bar at the terminal, another convenience for the people who are going to use the ferry,” Nelson argued. “But that doesn’t mean that the snack bar would be regulated. Nor does it mean that the parking lot would be regulated.”

Trathen emphasized the village’s concerns. “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 serviced? Or do they just want to build a hotel there?”

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

The Appeals Court’s decision could have a major impact for Bald Head island’s future. It also could influence the future of government regulation in North Carolina.

Mitch Kokai is senior political analyst for the John Locke Foundation.