Companies halt Bluegrass Pipeline but say project could be revived if demand increases

gkocher1@herald-leader.comApril 28, 2014 

Two companies are halting the proposed Bluegrass Pipeline, a project that drew vocal opposition because it would have put a natural gas liquids pipeline through 13 Kentucky counties.

Williams Co. and Boardwalk Pipeline Partners announced Monday that they had suspended investment in the project because it had not received the necessary customer commitments to move forward. The companies said they would continue to have discussions with potential customers to determine their needs.

Opponents were pleased by the news, but they expressed caution, too.

"I'm glad because I didn't want it anyway," said Penny Greathouse, a landowner in Woodford and Franklin counties. "Of course, they're not giving up; they're just waiting to see if they can get more people on board."

Susie Quick, a Woodford County farmer who kept opponents informed about the status of the pipeline through emails, wasn't ready to proclaim victory, either.

"I tell you, people are very cautious because it doesn't really mean they're abandoning it," Quick said. "It means they're abandoning it for now. ... I think all the activism and the media attention it got probably made it a lot less appealing to do this pipeline through Kentucky. And maybe a company will think twice before planning such a venture."

In an online question-and-answer page about the pipeline's status, company officials said opposition did not factor into the decision to halt the project.

"Our decision was based on the need to have customers shipping natural gas liquids on the pipeline," according to the Q&A. "Without firm agreements from customers, we could not justify continuing to spend capital on this project. If our discussions with customers lead to agreements to ship on the pipeline and it makes economic sense to pursue the project at a later date, we will."

Quick insisted the opposition was a factor in the companies' decision to suspend investment in the pipeline.

"They're not going to say a bunch of nuns and their sympathizers have prevented a pipeline from going through," Quick said. "They would sound even stupider to their investors than they already do."

She was referring to the Sisters of Loretto, a group of Roman Catholic nuns in Marion County who had objected to the pipeline and had posed questions about its benefit to the communities in which it would be built.

Bluegrass Pipeline was a joint venture of Boardwalk Pipeline Partners and the Williams Co. to bring natural gas liquids from Pennsylvania to Gulf Coast processing facilities.

The pipeline would have gone through Northern and Central Kentucky before connecting with existing pipelines in Breckinridge County. From there, the liquids would head south.

Bluegrass Pipeline would have carried ethane, propane, butane, isobutene and pentane liquids used by the agriculture, petrochemical and plastics industries, and for home heating.

By February, the pipeline had secured about two-thirds of the easements necessary in Kentucky, a company official said.

In March, a Franklin Circuit Court judge ruled that Bluegrass Pipeline could not use eminent domain to take private property for construction of the pipeline through Kentucky.

Judge Phillip Shepherd held that the power of eminent domain was "an essential attribute of a sovereign government" that cannot be delegated to a private company such as Bluegrass Pipeline "without a clear legislative mandate that such a delegation is in public interest."

"There has been no such clear and explicit delegation of this power to Bluegrass for its proposed ... pipeline," Shepherd wrote.

Bluegrass Pipeline officials said the eminent domain issue did not affect the decision to halt the project.

"Our decision to stop investing capital in this project is based upon the lack of customer commitments at this time," the company said in the online question-and-answer forum. "As we have said throughout the easement acquisition process, we prefer to work one-on-one with landowners in good-faith negotiations to acquire easements, and successfully acquired two-thirds of the route in Kentucky using this approach."

So what happens to the easements filed in county courthouses?

"In most cases, we made agreements with landowners called options — Bluegrass Pipeline has the option to purchase and ultimately build the pipeline using the landowner's granted easement within three years of the agreement," the Q&A said. "Landowners with whom we have agreements in place received an upfront, nonrefundable payment upon signing the agreement. If we exercise our easement option to build the pipeline before the option expires (typically within the three-year time frame), we will pay them the remainder of the amount in the agreement.

"If we do not exercise the easement option within the three-year time frame, the option will expire and the landowner will not receive the remaining payment. The land rights revert back to the current landowner."

Tom FitzGerald, an attorney for the Kentucky Resources Council, said pipeline opponents wouldn't be able to breathe easier until those options expire.

"At that point, three years out, Williams and Boardwalk are going to have to make a decision: Do we exercise these options in order to get these easements and pay the additional money that it is going to require?" FitzGerald said. "That's really when you're going to be able to tell whether the project as proposed will go forward."

There is still another project involving a natural gas liquids pipeline in Kentucky, FitzGerald said. That project would "repurpose" part of Kinder Morgan's Tennessee Gas Pipeline, which now carries natural gas from Greenup County in northeastern Kentucky through Morehead and Campbellsville to the Tennessee line. Because that pipeline already is in the ground, Kinder Morgan didn't have to survey land or reach easement agreements with landowners.

"We had two competing projects going head-to-head, both of which were trying to get the same output, and neither of which would be justified if the other went forward," FitzGerald said. "So now we've got the Tennessee Gas Pipeline. It will be interesting to see what happens with it. ... At this point, I don't think either of them got the firm commitments they need to justify going forward."

Meanwhile, Greathouse said opponents needed to continue to be vigilant in case Williams Co. and Boardwalk Pipeline Partners decide to resurrect the Bluegrass Pipeline.

"They have said they're out of it for right this minute, but they have put a lot of money up for advertisements," easements, and community grants for new playground equipment or public safety improvements, Greathouse said. "They've got a lot of money invested in this, and it's going to be really hard for them to just walk away."

Greg Kocher: (859) 231-3305. Twitter: @HLpublicsafety.

Lexington Herald-Leader is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service