Eminent Domain and Marcellus Shale

The recent approval by FERC of a 39-mile natural gas pipeline in the Endless Mountains of northern Pennsylvania has precipitated a wave of eminent domain proceedings as Central New York Oil & Gas forges a path for its pipe. However, the company’s widespread use of eminent domain conflicts
with the assurances it gave to FERC when it sought approval of the project, as it told the Commission that it would obtain the necessary land “through negotiated agreements with landowners, thus minimizing the need” to condemn land. Despite these assurances, the Associated Press recently reported http://www.kmph.com/story/16637154/landowners-fight-eminent-domain-in-pa-gas-field) that CNYO&G was preparing condemnation papers against dozens of landowners while FERC was still in the process of considering its application for the pipeline.

CNYO&G began eminent domain proceedings almost immediately after securing FERC’s approval,
and of the 152 individual property owners along the Endless Mountain route, 74 found themselves in court within days of the approval. While CNYO&G stated that it attempted to negotiate in good faith with landowners, and claimed that it reached compromises with the majority of affected individuals, the company has threatened to withdraw any offer of compensation if landowners challenge the amount tendered. Additionally, because FERC’s ruling empowered CNYO&G with the threat of condemnation, some landowners have claimed that it has been able to offer significantly lower
amounts than it might otherwise have to. Landowners may thus be finding themselves in the uncomfortable position of having to accept an extremely low offer or seek a more realistic market value in court.

As the natural gas industry continues to experience explosive growth http://www.ingaa.org/Foundation/Foundation-Reports/Studies/7828/9115.aspx),
its demand for pipelines will similarly increase, and it will be interesting to see what, if any, impact CNYO&G’s striking reliance on eminent domain will have on the construction of future pipelines. Will FERC be as willing to rely upon assurances that companies will only use eminent domain as a last resort? Will states take the unlikely step of bolstering the compensation of landowners through new legislation or regulations? Will landowners begin to more widely refuse offers of compensation and
seek redress in the courts?

Further extraction of natural gas from the Marcellus Shale rock formation that lies underneath six northeastern states (http://geology.com/articles/marcellus-shale.shtml) will lead to the construction of new pipelines, or additions to existing pipelines in the same region as the Endless Mountain pipe.
Similarly, as companies exploit significant natural gas deposits located throughout the country (http://www.ehelpfultips.com/list_of_shale_gas_formations_in.htm), new pipelines will undoubtedly be required. The fight being waged in northern Pennsylvania is therefore a possible prologue to a nationwide battle over the ability of private companies to use eminent domain to secure routes for
their natural gas pipelines.

Susan Kraham