Should pipeline companies be able to use eminent domain for natural gas liquids? | Michigan Radio
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Should pipeline companies be able to use eminent domain for natural gas liquids?

Aug 2, 2016

There’s been a big push to build new pipelines to move natural gas from well heads, to the people who need it. If it’s considered in the public interest, pipeline companies can get the power of eminent domain. That allows them to route their lines through people’s land, whether the landowner likes it or not.

But what happens when they’re carrying other products - like propane, butane, or ethane - byproducts of natural gas production?

Pipeline companies move in

The quiet hills of eastern Ohio have become a popular spot for oil and gas development. Organic farmer Mick Luber says recent years have brought a compressor station and multiple well sites so close, they wake him up at night.

“For the first year that they were fracking, it was hard for me to go outside. I felt so bad hearing the roar of all this stuff,” he says. “It’s nice to have the cicadas that drown them out.”

Then pipeline companies, like Kinder Morgan, came knocking on Luber’s door.

“They wanted to come right down through this main field, and go up over the top of that hill. There’s a spring right up there. That’s the most fertile part of this farm,” he says.

Another company, Marathon, made a deal with Luber’s neighbor, and is already building a pipeline on the southern border of his 65-acre farm. Shell is also planning a line here.

So when Kinder Morgan showed up, Luber said no - no pipeline, not even a survey. “I told them I didn’t want it,” he says.

Kinder Morgan sued.

What's in the pipeline?

One of the main arguments in Luber’s defense: the contents of Kinder Morgan’s pipeline. Not natural gas for home heating, but ethane to make plastics for the Canadian company NOVA Chemicals. Ethane, along with propane, and butane, are known as natural gas liquids.

"You tell me anybody in this country that doesn't use plastics in some way, and that plastics aren't critically important to their everyday lives, from cups to medical devices, to automobiles."

They’re byproducts of natural gas that’s being fracked in the region. Increasingly, landowners are arguing that they shouldn’t have to give up their property rights for companies to transport these liquids to make plastics, especially if they’re being sent to other countries.

Kinder Morgan spokesperson Allen Fore says: yes, they should. He says plastics are in the public interest.

“You tell me anybody in this country that doesn’t use plastics in some way, and that plastics aren’t critically important to their everyday lives, from cups to medical devices, to automobiles,” says Fore.

Kicking the ball to state courts

Surprisingly, the federal government doesn’t have much authority when it comes to settling these kinds of disputes between companies and landowners.

The Federal Energy Regulatory Commission (FERC) has authority over siting routes for typical natural gas pipelines. But it’s a totally different story for liquid gas products like ethane.

“FERC has no authority to regulate natural gas liquids in the United States,” says Rich Raiders, an attorney representing about a dozen Pennsylvania landowners in an eminent domain case brought by Sunoco Logistics. “FERC’s authority is strictly limited to natural gas.”

Raiders says when FERC has authority—as it does for siting typical natural gas pipelines—landowners are part of the routing discussions.

“That’s an all-public, eyes-open discussion,” Raiders says. “Whereas for a natural gas liquids line, that’s between the individual landowner and the pipeline company, and no government entity is involved at all.”

And that means eminent domain issues are getting sorted out by courts.

In Kentucky, the State Supreme Court recently upheld a lower court ruling, which found a pipeline company is not a public utility and therefore cannot use eminent domain for natural gas liquids pipelines. But in Pennsylvania, pipeline companies that want eminent domain power can get certified as a “public utility” by the state Public Utility Commission.

However, to do that, they have to show their project will benefit the people of the Commonwealth. One of the highest-profile cases where these issues are colliding is Sunoco’s Mariner East project. It includes two pipelines—a new one, and an older one that’s been repurposed.

Both will carry natural gas liquids. The new line begins in Ohio, near Mick Luber’s farm in Harrison County, and runs through Pennsylvania to the Marcus Hook Industrial Complex near Philadelphia. From there, Raiders says liquid gas is being shipped to Europe.

Raiders argues the fact that this gas is being produced for export clearly demonstrates that the project is not serving a public need of the Commonwealth—and therefore is not covered under eminent domain laws.

Sunoco would not agree to an interview for this story. But in an email, the company says the Mariner East project will also provide propane for heating fuel to markets in Pennsylvania. In addition, Sunoco says the pipeline is already considered a utility under a 1930s certification granted by the Public Utility Commission for its original pipeline.

In July, Pennsylvania’s Commonwealth Court agreed with the company’s stance, granting eminent domain power in all 17 counties in the pipeline’s path. Sunoco says it has come to an agreement with the majority of landowners. But some residents are still bringing eminent domain fights to the courts.

“The bottom line is when they’re approaching landowners in Ohio, they have this big stick called eminent domain,” says Nicholas Anderson, an attorney representing a landowner in Harrison County, Ohio. “And they say look, ‘We’ll give you ‘X’ number of dollars per linear foot. But if you don’t accept that, we’re just going to take your property.’ And that is where we have a problem.”

The Line 6B project

In Michigan, some landowners say a company’s power of eminent domain should be limited, based on what’s in the pipes. The Michigan Public Service Commission granted Enbridge status as a public utility to replace its Line 6B, the pipeline that ruptured in Marshall in 2010. That gave the company authority to take eminent domain action against landowners to get more land for their new pipeline. Michigan law allows this for the transport of crude oil and petroleum products. Some landowners fought against Enbridge, saying it only has the power to take land if it is moving crude oil or petroleum products, and they’ve had some success in court, as InsideClimate News reports:

When Enbridge successfully applied to the Michigan Public Service Commission to install and operate the new Line 6B, the company said the pipeline would be used to transport crude oil and petroleum. However, in its letter to Weathers and others along the pipeline's route, Enbridge said it needed the property to build and operate a pipeline "for the transportation of crude petroleum, and any product, by-product and derivatives thereof, whether liquid or gaseous, or any material or substance that could be conveyed through a pipeline."

The subtlety is that the commission didn't approve an application for Enbridge to ship anything beyond crude oil and petroleum products, despite letters to landowners claiming Line 6B could be used for any and all substances.

Lawyers seized on that fine point, and the judges agreed.

A test of the argument against natural gas liquids

Ohio attorney Nicholas Anderson used a similar argument in court: that a company should not have the power of eminent domain to transport natural gas liquids.

“Pure ethane, pure butane, pure propane, which are gases at standard temperature and pressure, do not properly fit within the definition of petroleum, under any definition that we can find,” says Anderson.

"You can't stop the vigilance. People have got to keep standing in their way."

That argument did not fly. Anderson’s clients are appealing.

But farmer Mick Luber has had better luck. Kinder Morgan re-routed its pipeline around his farm.

Still, Luber doesn’t see it as a victory.

“Well, as long as these guys are still doing this stuff, what is the victory, you know? You can’t stop the vigilance. People have got to keep standing in their way,” says Luber.

Kinder Morgan says Luber got what he wanted. But the company wants to make it clear: it can’t re-route its pipeline for every landowner who has a problem with it.

Julie Grant is a reporter with the environment news program, The Allegheny Front.