Gas and Eminent Domain

Landowners Fight Eminent Domain in Pa. Gas Field

By MICHAEL RUBINKAM Associated Press
LAPORTE, Pa. January 31, 2012 (AP)

When federal regulators approved a 39-mile natural gas pipeline through northern Pennsylvania's pristine Endless Mountains, they cited the operator's assurances that it would make sparing use of eminent domain as it negotiated with more than 150 property owners along the pipeline's route.

Yet a few days after winning approval for its $250 million MARC 1 pipeline in the heart of the giant Marcellus Shale gas field, the company began condemnation proceedings against nearly half of the landowners — undercutting part of the Federal Energy Regulatory Commission's approval rationale and angering landowners.

Some of the landowners are now fighting the company in court, complaining that Central New York Oil and Gas Company LLC steamrolled them by refusing to negotiate in good faith on monetary compensation and the pipeline's location. Their attorneys say CNYOG has skirted Pennsylvania's eminent domain rules.

The company, a subsidiary of Inergy LP of Kansas City, Mo., insists it's trying to reach a "fair settlement" with all property owners and wants to be a good neighbor.

The dispute could foreshadow eminent domain battles to come as more pipelines are approved and built to carry shale gas to market in states like Pennsylvania, New York and Ohio.

The company promotes the MARC 1 pipeline as key infrastructure in developing the Marcellus Shale, a rock formation underneath Pennsylvania and surrounding states that experts believe holds the nation's largest reservoir of gas. The MARC 1, a high-pressure steel pipeline 30 inches in diameter, will connect to major interstate pipelines and the company's own natural gas storage facility in southern New York state.

CNYOG hopes to start construction soon and finish by July, but it awaits permits from Pennsylvania environmental regulators and the U.S. Army Corps of Engineers.

It also needs to answer the legal challenge from residents.

Many of the complaining landowners say they favor natural gas drilling and some have leased land to gas drillers. What rankles them is that FERC has invested CNYOG with the power of eminent domain, taking away their bargaining power.

"Once the government becomes involved, this is what happens. Because you lose that leverage," said Amy Gardner, who, with her husband, faces condemnation of part of their 175-acre parcel in Sullivan County.

The Gardners say CNYOG offered less than a third of the amount that another pipeline company had previously paid them to install a gathering line on their land. The difference? Gathering lines — smaller pipelines that take gas from the wellhead to a transmission line or processing facility — are not regulated by the federal government and companies that operate them don't have condemnation power.

Amy Gardner said a company representative who made them the lowball offer told them to "take it or leave it."

"There's no negotiating with this company. They come and they tell you what they're going to do. They're telling you what they're going to pay. And they're counting on the government to enforce it," Gardner said in a recent interview at the Sullivan County Courthouse, where a judge has scheduled a mid-February hearing on the landowners' concerns.