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Wednesday, February 4, 2015

Battles are Inevitable as Pipelines Cut Across New Ground, With Eminent Domain Remaining the Industry Trump Card

A 2-part series from SNL Financial takes a look at the battles going on between landowners and companies that have plans for pipeline construction.

From part 1:
Eminent domain is the power to take private property for public use with just compensation to the landowner. Though eminent domain is often thought of as the government's right to take land for activities such as highway building, the authority also can be awarded to private entities to carry out projects with a broader societal purpose, including the transportation of resources. The process of exercising this authority puts property owners and companies into negotiations over the value of the land; this is most often the stage of eminent domain implementation that goes to court. 
Pipelines view this power as one to be used only when all other options fail, according to Cathy Landry, the Interstate Natural Gas Association of America's communications director. 
"I can tell you that interstate natural gas pipelines make every attempt to negotiate with affected landowners on rights of way and other agreements," Landry said. "This makes sense because it is in the pipeline's best interest to achieve a consensual agreement with the landowners with which it will have a long-term relationship. Still, there are times when pipelines and landowners cannot reach agreement and eminent domain must be used. But I'd like to stress that pipelines use it judiciously." 
Neinast, a former FERC staff attorney, explained that interstate gas pipelines receive the power of eminent domain under the Natural Gas Act, or NGA. If FERC, the federal agency with oversight over interstate gas pipeline projects, decides a pipeline is in the public interest under the NGA — meaning the public's need for the pipeline's energy deliveries outweighs any negatives to landowners along the route and to the environment — it grants a certificate to the developer that includes the power of eminent domain. The laws of most states give state-regulated pipelines — such as intrastate transmission lines and distribution lines — the right of eminent domain. 
Neinast said she has seen oil pipelines have more difficulties with eminent domain than gas pipelines. An oil pipeline's customers are often affiliated, which keeps the pipeline from being considered a common carrier eligible for the power of eminent domain. The issue has come up recently with the Keystone XL crude oil pipeline project. Sens. Bob Menendez, D-N.J., and Maria Cantwell, D-Wash., issued statements saying project developer TransCanada Corp. should not be allowed to use eminent domain and have proposed legislative language that would limit a "foreign-owned business entity" to acquiring land for pipeline facilities only "from willing sellers." Meanwhile, the state high court in Nebraska upheld legislation that gives the governor the same authority as the Public Service Commission to grant TransCanada permission to use eminent domain and build its pipeline in the state. 
Elefant said the system is tilted in pipelines' favor. Once FERC finds that a pipeline is in the public interest and grants a certificate, Elefant said, "That finding is final and can't be collaterally attacked in the eminent domain proceeding." 
"That's why I am so bothered by FERC's rather lax analysis of need — because it is the basis of a taking," said Elefant, who frequently represents landowners in their dealings with pipelines. "Nor can landowners argue that the pipeline failed to negotiate in good faith. Although Section 717(h) of the NGA appears to impose a negotiation requirement — it says that if a pipeline can't acquire land by contract, it can use eminent domain, which suggests that there needs to be an attempt to negotiate — a majority of courts say the pipeline need not negotiate at all. Those courts that have found that a duty to negotiate exists have said that it is satisfied by the company making a single offer, even if it's low."
And from part 2:
When Jeff Insko was approached by Enbridge Inc. about imposing an easement on his property in Michigan, he found himself facing a steep learning curve, with seemingly severe consequences. 
"When the land agents [representing Enbridge] first came to our door and talked to us about what they were going to do on our property, the first thing that we said was, 'Well, what if we just say no?' — at which point [the agents] pulled out the Michigan state eminent domain laws." 
With little knowledge of this corner of the law, Insko felt ill-equipped to debate property rights with a multibillion-dollar company set on pursuing a pipeline replacement project. 
"They wanted to take down all these trees, [and] we had to negotiate for the value of these trees. To us they're invaluable, and to the pipeline they don't mean a thing," Insko said in a recent interview. "We got an estimate for the trees, and the land agent says: 'Well, that number's crazy. We'd be better off just taking the whole property for that kind of money.' What we didn't realize is that when he says [that], they can't take the whole property — that's not what eminent domain means at all." 
With the shale boom in full swing, the U.S. has begun to see an enormous build-out of natural gas and oil pipelines, bringing with it the potential for a steep rise in the use of eminent domain to secure pipeline rights of way. Insko was among the growing number of landowners thrust into the position of haggling with pipeline companies over property values and versing themselves in eminent domain law. 
Insko has since become a landowner advocate, and he has found that his initial uncertainty and anxiety over the process is common. When first approached by a pipeline builder, many landowners often do not know the basics of eminent domain, he said.
Read all of part 1 by clicking here.

Read all of part 2 by clicking here. 

Photo by btr. Used under Creative Commons license.

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