LOUISVILLE, Ky. (WDRB) – The battle over whether the Bluegrass Pipeline is built in Kentucky may hinge on a legal, not an environmental, question: Can the project's developers condemn land if they can't come to terms with property owners?
Pipeline officials say Kentucky law clearly gives them the power of eminent domain, but opponents disagree. For its part, a review by the state Energy and Environment Cabinet concluded that the project can't use condemnation.
A lawsuit filed earlier this month in Franklin Circuit Court is asking a judge to rule whether the Bluegrass Pipeline qualifies for condemnation in acquiring the easements needed for the project, which would carry as many as 400,000 barrels a day of natural gas liquids through 13 Kentucky counties along a mostly underground route from Pennsylvania to the Gulf of Mexico.
Kentuckians United to Restrain Eminent Domain filed the lawsuit on a behalf of Penny Greathouse, a Franklin County land owner who alleges in court documents that she was told by a pipeline representative that developers have the right to condemn land. The project has requested an easement on her farm, she said in an affidavit filed in the case.
"Whether that power exists has a significant bearing on whether I will agree to negotiate an easement with Bluegrass Pipeline, and the terms of that negotiation," she said.
Kentucky law allows condemnation when land is taken for a "public use" -- ownership by state or other government entities, as well as by public utilities or "common carriers" that transport oil or natural gas. Roads, railroads and dams are examples of projects for which state law permits eminent domain.
Even when property is condemned, landowners receive payments based on the value of the property.
The pipeline's developers believe they have the ability to condemn land. In a letter filed in the lawsuit, pipeline executive Wendell Hunt told Franklin County Judge-Executive Ted Collins that three specific state statutes allow eminent domain.
Those include sections of state law that:
Allow condemnation by companies that are "engaged in or proposing to engage in, constructing, maintaining, or operating oil or gas wells or pipelines for transporting or delivering oil or gas, including oil or gas products, in public service."
Consider every company "receiving, transporting or delivering a supply of oil or natural gas for public consumption" to be a common carrier.
Pipeline opponents have argued that the project doesn't qualify as a public service because it would transport natural gas liquids -- hydrocarbons separated from natural gas during hydraulic fracturing, or "fracking" operations – between private companies.
But would the pipeline operator qualify as a "common carrier" – a linchpin of the argument made to Franklin County Circuit Court?
"Bluegrass Pipeline meets the criteria of a common carrier under Kentucky law because it will provide open access to any potential customer that is willing to meet the Bluegrass Pipeline's tariff conditions and pay the tariff rate," Hunt, the pipeline agent, wrote in his August 1 letter.
Under Kentucky law, common carriers ship oil or natural gas – the law is silent on natural gas liquids – for public consumption.
A previous court ruling on common carriers was part of a July staff opinion by Kentucky Public Service Commission executive director Jeff Derouen in response to a letter from Tom FitzGerald, director of the Kentucky Resources Council. (FitzGerald, a Louisville attorney, is representing the plaintiffs in the Franklin Circuit lawsuit.)
Derouen's opinion noted a bankruptcy court's decision in a 1982 case involving a natural gas producer, who had attempted to get a common carrier to carry his gas. The court found that Kentucky law "applies only to companies engaged in the transportation of gas ‘for public consumption' – that is, for ultimate use by Kentucky consumers," according to an excerpt of the decision Derouen cited.
Meanwhile, Kentucky lawmakers have pre-filed bills for the 2014 General Assembly that would require additional steps before the pipeline developers could seize easements from reluctant property owners. The proposed legislation includes, for example, making oil and gas pipeline projects eligible for condemnation only if they're regulated by the Public Service Commission.
But Jim Waters, president of the Bluegrass Institute, a libertarian-leaning think tank, said the proposed changes to condemnation law are "unnecessary" and "overkill." The General Assembly already has strengthened the law, giving more protections to private property owners, in the wake of a 2005 U.S. Supreme Court ruling that allowed private developers to seize private property, Waters said.
"There are much more important and immediate issues that need to be addressed," said Waters, who accused legislators pushing the condemnation laws of trying to get "political mileage."
The joint venture pursuing the pipeline -- Boardwalk Pipeline Partners L.P. and the Williams Cos. – had acquired more than 50 percent of the easements needed for the project's right of way in Kentucky as of Dec. 5. A Williams spokesman has said the company doesn't comment on pending lawsuits.
In an interview with WDRB in November, Williams director of corporate development Bill Lawson said eminent domain is the "course of last resort."
"It's our best interest to work with landowners and to find those that are interested in having us cross their property," Lawson said.
The pipeline debate has been particularly bitter in Kentucky, where opponents have questioned the safety records of the developers and the wisdom of routing a hazardous materials pipeline through the region's karst geology.
Williams' plans call for construction to begin in 2014.
In an interview, Greathouse said pipeline agents have made four or five proposals for part of her Franklin County farm since last April. The offers, which started around $200,000, have climbed to more than $600,000, she said.
Greathouse said a declaratory judgment by the court is important "for everyone who is involved, so they don't feel pressured to take the first offer."