LAPORTE, Pa. – A pipeline operator assured federal regulators it would minimize using eminent domain against private landowners if given approval to lay a 39-mile natural gas pipeline in northern Pennsylvania's pristine Endless Mountains.
Yet the company was readying condemnation papers against dozens of landowners even as the Federal Energy Regulatory Commission was considering its application for the $250 million MARC 1 pipeline. Within two days of winning approval, Central New York Oil & Gas Co., LLC went to court to condemn nearly half the properties along the pipeline's route — undercutting part of the regulatory commission's approval rationale and angering landowners who are now fighting the company in court.
Eminent domain would give the company the right to excavate and lay the 30-inch diameter pipeline on private property. Landowners would not lose their properties and would be compensated.
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.
Some of the complaining landowners say the company steamrolled them by refusing to negotiate in good faith on either monetary compensation or the pipeline's route. Their attorneys say the company has skirted Pennsylvania's eminent domain rules governing compensation.
Residents are fighting the pipeline on two fronts: challenging the eminent domain proceedings in court and appealing the approval by FERC. Because those challenges are pending, commission spokeswoman Tamara Young-Allen declined Tuesday to comment on whether the agency was misled.
The pipeline operator, a subsidiary of Inergy LP of Kansas City, Mo., insists it's trying to reach a "fair settlement" with all residents and wants to be a good neighbor.
The company promotes the MARC 1 pipeline as key infrastructure in developing the Marcellus Shale, a vast rock formation underneath Pennsylvania and surrounding states that experts believe holds the nation's largest reservoir of gas. The high-pressure steel pipeline will connect to major interstate pipelines and the company's own natural gas storage facility in southern New York state.
Central New York Oil & Gas hopes to start construction soon and finish by July, but awaits permits from Pennsylvania environmental regulators and the U.S. Army Corps of Engineers.
It also faces the residents' legal challenge.
Many of them say they favor natural gas drilling and some have leased land to gas drillers. What rankles them is that the federal government has invested the company 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 the company offered them less than a third of the amount they got from another pipeline company that installed 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 federally regulated and companies that operate them don't have condemnation power.
Amy Gardner said a CNYOG company representative who made them the lowball offer told them to "take it or leave it." She would not publicly disclose what the company had offered.
"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.
The company insists it has met its obligation to negotiate and has reached private agreement with more than 80 percent of the landowners. Its attorney, Michael Wright, said there were several "meet-in-the-middle cases" involving compromise.
"It's not like we were sitting silently until the FERC order and rushed to the courthouse," said Wright, who is based in Vestal, N.Y. "To say we did not attempt to negotiate in good faith is incorrect."
Amounts offered by the pipeline company range from a few hundred dollars to tens of thousands of dollars, depending on the amount of property taken. Court papers it filed in late December valued damages at 37 condemned properties in Sullivan County at $310,900 — from a low of $120 to a high of $39,570 for land owned by the Pennsylvania Game Commission.
The pipeline has been controversial since it was first proposed two years ago.
The regulatory commission considers all applications for new interstate pipelines. It received 22,000 comments on the MARC 1 project, many concerned about environmental and safety impacts. The Environmental Protection Agency also worried about potential damage to the forest ecosystem, noting the pipeline will cross dozens of pristine waterways in an area popular with hikers, hunters and fishermen.
The commission ultimately determined the pipeline would not significantly impact the environment and allowed it to proceed.
The regulators were also supposed to consider whether there would be an "unneeded exercise" of eminent domain — the often-contentious legal process by which the government, or a party such as a public utility, takes private property for public benefit.
The power of eminent domain has traditionally been invoked for highways, railroads, schools and other public buildings. Property owners are supposed to receive fair-market value for their land, and can appeal in court if they're unhappy with the amount they've been offered.
The regulators said last year that they relied on the company's assertion it was acquiring land "through negotiated agreements with landowners, thus minimizing the need" to condemn people's land.
In reality, Central New York Oil & Gas had already prepared to take dozens of landowners to court. Within two days of getting the commission's approval on Nov. 14, it began eminent domain proceedings in court against 74 of 152 property owners along the pipeline's route through the mountains of Bradford, Lycoming and Sullivan counties.
The company isn't taking homes or booting people off their land. Rather, it needs easements for the part of each property through which the pipeline will run.
Deborah Goldberg, an attorney for the environmental group Earthjustice, said the large number of condemnations suggests that the pipeline company "never made a serious effort to get negotiated agreements with the landowners that the landowners thought were fair." Earthjustice has intervened in the pipeline challenge.
Goldberg suggests the pace of settlements quickened because condemnation takes leverage away from the property owner.
Wright, the company attorney, acknowledged that Central New York Oil & Gas told landowners that if they challenged the company in court, forcing it to incur legal expenses, then any deal on the table would be withdrawn.
Some landowners aren't interested in the money. They're more concerned about the pipeline's route.
The company told Bob Swartz that it plans to cut a 50-foot-wide, 400-foot-long gash through an ancient stand of trees across the front of his property. When Swartz proposed an alternate route through an open field that would preserve his trees and views, the company said it wasn't interested and offered instead to pay him for the wood.
"That's not negotiation. It was their way or no way, and 'we'll see you in court.' It's the little guys against Goliath," said Swartz, who has challenged the company in court.
Another landowner, Lisa Richlin, has appealed to federal regulators to force Central New York Oil & Gas to abandon plans for an access road along her property. Richlin said the road is at the bottom of a long hill and around a sharp bend where there have been many accidents, at least one of them fatal.
When Richlin pressed the company to use an alternate route a short distance away, she said, the company told her that would cause a six-month delay.
"I want them to go elsewhere. I don't want somebody to die because of stupidity," she said.
In a statement, the company said it has accommodated dozens of landowner requests for route changes, but can't do more because of "environmental, cultural and biological restrictions as well as other land use constraints."