Eminent Domain Victory & Timeline
May 22, 2015
The Kentucky Court of Appeals affirmed the Franklin Circuit Court decision that Bluegrass Pipeline LLC did not have the power of eminent domain, since it was not a utility regulated by the Public Service Commission (PSC). The unanimous 3-0 decision will impact not only the Bluegrass and Kinder-Morgan "repurposing" projects, but will also prevent Kentucky oil and gas producers from using the threat of eminent domain to site gathering lines and wells. Only the regulated natural gas utilities can invoke the power under the court's decision. Many thanks to Tom FitzGerald and KURED, and all the citizens, non-profit groups, and elected officials who have stood up for our rights!
July 29, 2014
Attorneys representing Bluegrass Pipeline appealed Judge Phillip Shepherd's decision.
Bluegrass Pipeline announced that the project is "ahead of its time" and suspended capital spending due to "an insufficient level of firm customer commitments to ship products on the pipeline."
Circuit Judge Phillip Shepherd granted a summary judgment in favor of the group Kentuckians United to Restrain Eminent Domain (KURED), represented by Tom FitzGerald of the Kentucky Resources Council. The judge stated that Bluegrass Pipeline cannot even suggest to landowners that it has eminent domain power. "Landowners ... are entitled to know that the law does not support Bluegrass' assertion of the power of eminent domain."
bluegrass pipeline Background
On March 6, 2013, Boardwalk Pipeline Partners and Williams announced the intent to form a joint venture that would develop an uncommon type of hazardous liquids pipeline, known as the "Bluegrass Pipeline," to transport "Natural Gas Liquids (NGLs)," from the Marcellus and Utica shale formations in Ohio, West Virginia, and Pennsylvania to the Gulf Coast.
Natural gas liquids (NGLs) primarily supply the petrochemical industry and come out of the ground with natural gas during a process called “fracking” in “wet shale” areas. Companies are drilling in wet shale so they can boost profits by selling both methane and natural gas liquids.
The domestic abundance of natural gas has been followed by a glut of natural gas liquids, and companies like Williams are looking to build infrastructure to export both products to other countries where the prices are higher, including an export facility to send Bluegrass contents overseas. Exports are already driving up propane prices in Kentucky.
According to a U.S. PHMSA Valve Study, with a pipeline of this volume and pressure, even a “moderate incident” could cause significant damage within a 1000-foot radius, and a “significant incident” could cause damage within 5000-foot radius. Even though it’s understood that all pipelines eventually leak, company representatives indicated at a community meeting that their setback requirement from homes is 50 feet. Granting a right-of-way leaves nearby neighbors and their property value at risk even though they do not receive compensation for the danger and do not want to live near a high-pressure hazardous liquids pipeline.
Additionally, Williams Co's safety record has been cause of much concern, including two major incidents in the first half of 2013. The first was an NGL pipeline leak in Parachute, CO that went unnoticed for 2 weeks. The groundwater there is still contaminated with cancer-causing benzene. The second incident was a petrochemical plant explosion in June 2013 which resulted in two deaths and injured more than 100 people.
Kentucky businesses and citizens can not hook up to the pipeline to use its contents. The hazardous liquids running through the pipeline would have no commercial use until the contents are separated at a fractionation plant in Louisiana.
Likewise, it is highly unlikely that Kentucky producers of natural gas liquids would hook up to the Bluegrass Pipeline to transport NGLs. NGL production in Kentucky is just under 14,000 barrels per day, according to the Kentucky Oil and Gas Association. So, if every Kentucky NGL producer began diverting their product it would constitute less than 4% of Bluegrass Pipeline’s daily maximum capacity. The CEO of Williams told investors that the company is seeking commitments for the pipeline in the range of 50,000 barrels a day, or $200 million per year for 15 years. In other words, long-term contracts to purchase NGLs from Pennsylvania and West Virginia close the door to Kentucky producers.
Also, transporting NGLs from where they are currently being produced in Kentucky to the proposed route of the Bluegrass Pipeline does not make economic sense, would take away a raw material for Kentucky refiners, and mean these products end up in Louisiana and overseas rather than being available for Kentucky manufacturers. Finally, there has been no commitment to hire Kentuckians to fill any permanent or temporary construction jobs in Kentucky. At a Scott County community meeting, company reps would not commit to hiring locally.
Also, transporting NGLs from where they are currently being produced in Kentucky to the proposed route of the Bluegrass Pipeline does not make economic sense, would take away a raw material for Kentucky refiners, and mean these products end up in Louisiana and overseas rather than being available for Kentucky manufacturers.
Finally, there has been no commitment to hire Kentuckians to fill any permanent or temporary construction jobs in Kentucky. At a Scott County community meeting, company reps would not commit to hiring locally.
The easement is a bad deal for landowners
Granting an easement makes the landowner a “servient” tenant, and Bluegrass Pipeline LLC the PERMANENT and “dominant” tenant. A standard easement places many limitations on property use, including growing trees, building structures, or making other improvements if the company doesn’t allow it, and would also allow additional pipelines to be constructed without landowner permission or additional payment, despite what company executives are sharing at community meetings. The company would inspect property - flying, driving, or walking – at least 26 times per year.
At current NGL prices, the proposed pipeline would carry $8-$16 million worth of NGLs to the Gulf of Mexico every day, or $3-$6 billion per year. Given these figures, the projected payout to Kentucky landowners for a PERMANENT easement would be worth less than week's worth of NGL flowing through Kentucky land. The annual tax revenue projection of $13.6 million, which has not been substantiated by the Kentucky Department of Revenue, also pales in comparison to the value of the liquids flowing through the state.
Finally, Bluegrass Pipeline is a Limited Liability Corporation (LLC), and company reps indicated at a community meeting in Scott County that parent companies Williams and Boardwalk would not sign easements. What if the LLC is is denied insurance coverage for a large incident in the community, as was the case in an Ivel, KY NGL incident, and not capitalized to cover damages?
The proposed route puts more than two dozen Kentucky counties at risk. The new construction portion of the route would pass through 120 miles of karst terrain and through counties with “tens of thousands of sinkholes,” according to a leading hydrogeologist in the state. Survey stakes have been seen over caves, through natural springs, and near sinkholes.
The planned route would cross more than 700 waterways, including the Ohio and Kentucky Rivers, and the Mississippi River in three spots. As of 10/27/13, the company’s website indicates that a pipeline bridge will be built above the high water mark for most waterways.
Groundwater risk is underscored by a few examples of past incidents: 1) In the winter of 1988-89, Georgetown lost its water supply when gasoline was detected in the spring that supplies the city. Customers had to be issued bottled water for several weeks. 2) A Williams NGL pipeline in Parachute, CO leaked for two weeks at the end of 2012 and benzene, a known carcinogen, is still present in the groundwater.
The pipeline would not benefit those who buy or inherit the land
When the pipeline leaks hazardous liquids, those who suffer the consequences will not likely be those who were compensated.
NGL pipelines are far less common and more volatile than natural gas lines. While there are nearly 7,134 miles of natural gas transmission lines in Kentucky, there are only 38 miles of NGL pipeline. A short stretch of NGL pipeline in Kentucky, only four inches in diameter, experienced a major explosion in 2004, destroying five homes and injuring nine people.
As the general public, lendors, and insurance underwriters become more aware of the dangers of hazardous liquids pipelines such as Bluegrass or when incidents begin occurring, they could revisit lending and underwriting policies. Additionally, the property and neighboring property may lose value and usefulness for future generations who never receive any compensation.