Environment
1:59 pm
Fri August 15, 2014

Bluegrass Pipeline's Developer Is Appealing Eminent Domain Ruling

The proposed Bluegrass Pipeline project stirred up opponents who were against the idea for environmental and property rights grounds.
Credit Erica Peterson, Kentucky Public Radio

Despite the fact that the proposed Bluegrass Pipeline has been suspended, the companies behind the project are appealing a circuit court decision that found they don’t have the right of eminent domain.

The pipeline would have carried natural gas liquids—like butane, ethane and propane—from drilling operations in the Northeast through Kentucky to processing plants on the Gulf Coast. The NGLs are used in manufacturing materials such as plastics and synthetic rubber, and some Kentucky residents expressed concerns about widespread water contamination if the pipe were to be built and leak.

In May, the companies behind the project announced they were suspending capital investment in the project due to a lack of customer commitments. This was after a number of setbacks, including a ruling from Franklin Circuit Judge Phillip Shepherd that the Bluegrass Pipeline wouldn’t have the power of eminent domain in Kentucky.

Representatives of Bluegrass Pipeline parent company Williams said at the time that the company would seek to use eminent domain only as a last resort, but they believed they had the power under Kentucky law.

But other legal experts disagreed about whether Williams would be able to use eminent domain. At the time, residents argued that not knowing whether that was a possibility was making it difficult to decide whether to reach a deal with the company on easements.

Now—even though the project is ostensibly scuttled—the Bluegrass Pipeline is appealing Judge Shepherd’s decision. The lawsuit filed late last month argues that the case wasn’t handled correctly in circuit court, and that projects like the Bluegrass Pipeline should be able to use eminent domain under Kentucky law.

Bluegrass Pipeline is acting “in public service,” and the Pipeline is a “public use” because Bluegrass Pipeline is a federal common carrier that will furnish transportation services to the public upon reasonable request, in a nondiscriminatory manner, at a reasonable and published rate. While KRS 278.502 does not require it there are end users of NGLs in Kentucky who can and will avail themselves of a completed Pipeline. The availability of the Bluegrass Pipeline for use by end users and producers of NGLs is what matters, not the number of users or the frequency of their use. Bluegrass Pipeline will function much like an interstate highway for the transportation of NGLs. Like an interstate highway, the Pipeline may be used to a greater or lesser extent depending on a variety of factors, and some segments of the public may have more cause to use it than others. However, Bluegrass Pipeline is acting “in public service,” and the Pipeline is a “public use” regardless because the public has the right to use it.

Williams spokesman Tom Droege declined comment, citing the pending litigation. But he added: “We continue to engage in discussions with potential customers and still believe the proposed Bluegrass Pipeline project is the best long-term solution in the marketplace.”

The project's website calls the pipeline "a project ahead of its time," and also leaves open the possibility that the pipeline could become viable in the future.

The original plaintiff in the circuit court case—the group Kentuckians United to Restrain Eminent Domain—hasn’t filed a brief in the appeal yet. But the Kentucky chapter of the American Civil Liberties Union has weighed in, supporting the original decision.

Attorney Randy Strobo, who worked with the ACLU on the brief, said there are key differences between the U.S. and Kentucky constitutions on eminent domain.

“There are certain constitutional limitations that our Kentucky constitution puts on the state’s eminent domain authority,” he said. “Those include you have to receive just compensation, the exercise of that authority can’t be arbitrary, and it has to be for a public use. And that ‘public use’ term is what we’re concerned with.”

Strobo said there could be serious constitutional implications if Shepherd’s ruling is reversed.

A decision in the appeal likely won’t happen for several months.