Pipeline Companies May Seek Eminent Domain

Pittsburgh Post-Gazette
14 November 2010
By Timothy McNulty

Sitting in his family's 1785 stone farmhouse, Fayette County's Jim Rosenberg may look out on his 49.5 acres one day soon and see a natural gas company digging a 50-foot-wide Marcellus Shale pipeline through his property -- regardless of whether he approved of it.

Unlike their immediate neighbors in rural Grindstone -- three miles east of Brownsville -- Mr. Rosenberg and his wife have already resisted requests to drill conventional natural gas wells on the property they've lived on since 1974. If gas companies make pleas to build a pipeline through their land, they plan to resist those too, but they may not have a choice.

It's the latest worry for those Pennsylvanians suspicious of the growing Marcellus Shale industry. Under applications currently before the Public Utility Commission in Harrisburg, pipeline companies would be able to use condemnation powers to gain rights-of-way, even from unwilling landowners.

Peregrine Keystone Gas Pipeline, a Fort Worth, Texas, company that builds and operates pipelines for transporting natural gas, is proposing a $16 million project in Fayette, Greene and Washington counties and has applied to the state to become a public utility, which would give it the quasi-governmental power to traverse private properties through eminent domain.

The company, which has utility status in Texas, says it has rarely used the condemnation power and would much rather pay upfront for rights-of-way than go through the complicated and costly eminent domain process. Peregrine Keystone vice president Loren Fuller notes the company has a spotless safety record and promises to avoid homes when laying its pipeline.

Furthermore, according to gas industry experts, the move toward public utility status by pipeline firms is likely driven more by long-term business strategy than the ability to get condemnation powers.

Plenty of rural Pennsylvania property owners are in favor of getting paid to host drilling rigs that bore a mile down to the Marcellus Shale deposit, or to grant easements to let "midstream" companies such as Peregrine build pipelines between wells and long-distance distribution pipelines. It is other owners such as Mr. Rosenberg who are worried by the latest move.

"If eminent domain seizes property from one private property owner and gives it to another private property owner, that is very problematic. Things like that I have a big problem with," said Mr. Rosenberg, an information technology technician who officially objected to Peregrine's utility application.

"It's common talk around here to hear people say, 'You might as well sign the lease, they're going to take it anyway.'

That's not true. ... People commonly believe it, but it's pretty important to be asking if this is a real thing, and to get an awful lot of clarification," he said.

Peregrine filed its application for public utility status in September, following a similar request in January by another pipeline firm called Laser Northeast Gathering in Susquehanna County. Both applications are being watched -- and in many cases criticized -- by other firms in the natural gas industry that worry utility status would invite unwanted government oversight of the state's fledgling midstream pipeline industry.

Utility status means extra regulation from the utility commission and a ceiling on rates and tariffs, which some firms want to avoid. Competing firms -- such as Laurel Mountain Midstream of Moon, which operates in the same counties as Peregrine -- complained to the PUC that utility status could give Peregrine exclusive pipeline rights to the area.

"The administrative granting of service territories to natural gas gatherers, and particularly exclusive service territories, runs contrary to the business of natural gas gathering, which is a competitive industry where market forces govern behavior, particularly with respect to siting," said the company's official complaint.

Pipelines are a major growth sector in the Marcellus-related gas industry. It looks like there will be a glut in the natural gas industry for some time -- with the amount of gas in excess of its demand -- a factor that should benefit pipeline companies that are paid to move and store it, explained Duquesne University energy industry expert Kent Moors.

Marcellus Shale gas may be cheaper than that produced elsewhere in the country and that will "move the more expensive gas out of the market. That's one of the reasons why, maybe, these companies are coming up from Texas," Dr. Moors said.

He said eminent domain power is not the big driver behind utility status -- companies that move gasoline and some hazardous materials are already recognized as public utilities by the state -- and the firms would rather avoid the procedure when negotiating for rights-of-way. If a landowner resists a utility easement request, the matter goes before a judicial board that determines a fair value, which is paid to the owner in exchange for the right-of-way.

Eminent domain's condemnation power is still an effective tool for the industry, said Dave Messersmith of the Penn State Cooperative Extension Marcellus Education Team in Wayne County. "If they are doing a project from point A to point B and one or two property owners in the way are not willing to negotiate right-of-way, that really makes that project one that isn't very viable," he said.

Peregrine would need 50 feet of right-of-way to dig its pipelines and bar property owners from building or planting
deep-rooted trees on a 30-foot-wide strip of land once it was laid.

"If there is one tree in the backyard that their grandkids swing on, we talk to landowners to accommodate avoiding things like that," said Mr. Fuller. "It's a business decision with condemnation. Instead of allocating for those legal proceedings, we'd much rather pay the landowner" upfront, he said.

Peregrine says 90 percent of the pipeline construction's costs would be funneled through local supplies and labor, benefiting the local economy.

Veronica Coptis, a community organizer for Fayette County's Mountain Watershed Association, counters that the fight is really about the bottom line for the powerful industry, using the privately held resources of Pennsylvanians.

"This is stepping on private property rights, whether people want these [pipelines] on their property or not," she said. "Where do we draw the line? What is the greater good? ... We're shading the black and white areas and making them more gray."

Tim McNulty: tmcnulty@post-gazette.com or 412-263-1581.