Monday, May 10, 2010

Companies seek eminent domain status to lay gas pipelines

By David Falchek
May 8, 2010

When Laurie and Brian Kaszuba of Dickson City received a $16,000 offer from a pipeline company to run a natural gas pipeline through their Great Bend property, they didn't see it as a windfall.

Having a natural gas line three feet below the surface with a right-of-way on the surface, would have made it more difficult to build their retirement home or subdivide the land. So they turned it down.

If pipeline companies eyeing the Marcellus Shale region have their way, property owners won't likely have that option.

Laser Marcellus Gathering LLC, of Houston, has applied to the Public Utility Commission to be declared a utility in Pennsylvania, a designation that would give the company the power to condemn any property it needs and to use eminent domain to obtain easements for pipelines.

The company is planning to build a 30-mile pipeline, costing about $37 million, to connect gas wells in western Susquehanna County and New York with the interstate Millennium pipeline that runs across New York state's southern tier.

The outcome of the request before the Public Utility Commission could change the way easements are negotiated. With the Marcellus gas rush well underway and millions of Pennsylvania acres leased by gas exploration companies, pipeline easements are the new wave of legalese to arrive in mailboxes throughout the Marcellus region. Susquehanna County, a hot-spot for shale gas, is destined host an underground web of pipes from every wellhead.

Unlike natural gas exploration companies, so-called "midstream" companies that gather gas have the option of becoming utilities. Several midstream companies have filed motions supporting Laser's bid.

While being treated as a utility exposes pipeline companies to a new layer of regulation, it also gives them a valuable tool that tilts negotiations with property owners in their direction, said Stephen W. Saunders, a Scranton environmental attorney.

"The company would be able to say 'negotiate with us or we'll just take your property through condemnation,'" Saunders said. "There's no requirement for a utility to negotiate at all. Eminent domain is a nice tool for a company to have in its back pocket."

Still many utilities negotiate in good faith with property owners to acquire the property outright or obtain easements. If negotiations fail, the utility may condemn the land and the matter goes to a Board of View, a quasi-judicial panel of real estate experts who determine the fair market value of the property. Chip Berthelot, president Laser Midstream, Laser Marcellus' parent company, said eminent domain is not the "overriding factor" in the company's pursuit of utility status. "We don't like to use condemnation and we do everything in our power to avoid that sort of confrontation with property owners," he said. The utility designation, he said, would require his company serve any customer, rather than being tied to one.

Meanwhile, property owners are groping their way through another type of agreement related to the acquisition of easement rights.

At most well development sites in other states, there also is right-of-way leasing, said David Messersmith, part of Penn State Cooperative Extension Marcellus Shale Team, which is providing information to the public about the industry.

Messersmith expressed a concern about that type of arrangement. "People aren't up to speed on the terms and the language of these things," Messersmith said.

A company may calculate their offer based on linear foot, by rod (16.5 feet), or by square footage, making it difficult for property owners to compare offers or determine a true market value. Rights-of-way could be anywhere from 8-to-30-feet off center. They limit land owners' activity on a significant swath of property for a lifetime or more, Messersmith said.

Some companies are blanketing the area with lease offers hoping to trade or sell rights-of-way in the future.

Laser is further along in its plans. While young, the company has an experienced management team and operates more than 80 gathering systems in Texas, Louisiana, and Arkansas. "We are exited about participating in the development of the Marcellus region," Berthelot said.

The Kaszubas challenged the Laser Marcellus' request before the PUC, but withdrew their objection when the pipeline path was rerouted around their property. They leased their mineral rights and they want to see the Marcellus region developed. But they don't trust the condemnation process.

"Under eminent domain, it doesn't matter what the property owner says or feels," he said. "People shouldn't be forced to have something on their property they don't want - at any price."




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