It's reassuring when the law conforms to what average people think is right and fair. We now have four Kentucky judges — at the circuit and appeals court levels — who say state law confers the power of eminent domain on pipeline companies only if they are public utilities.
This will strike most people as only right and fair. It's also great news that protects Kentuckians' property rights against proposals for building new pipelines and also when easements are sought to re-purpose old pipelines.
We're not talking about plans by regulated utilities delivering natural gas into homes and businesses for cooking and heating.
We're talking about companies that want to transport highly explosive by-products, such as propane, butane and ethane, from drilling sites to petrochemical processors.
A 3-0 ruling by the Court of Appeals last month upheld Franklin Circuit Judge Phillip Shepherd's 2014 decision. Shepherd decided in favor of a citizens group that challenged the Bluegrass Pipeline Co.'s assertions that it could condemn land for construction of a pipeline that would carry natural gas liquids (NGLs) from shale gas fields north of Kentucky to the Gulf coast.
The company appealed on grounds that the citizens lacked standing to sue because the company had not yet invoked eminent domain. The company also argued that Kentucky law grants it the power to force unwilling owners to sell.
The appeals court panel rejected both arguments.
"If the eminent domain issue remains unresolved, it would give Bluegrass an unfair advantage during the negotiation process," wrote Judge Janet Stumbo. Judges James H. Lambert and Jeff S. Taylor concurred.
The three judges also affirmed Shepherd's ruling that only utilities regulated by the Public Service Commission have the power of eminent domain and that a pipeline moving NGLs to the Gulf coast does not constitute public service.
Bluegrass Pipeline called off its project, citing lack of customer demand. But another company, Kinder Morgan, is seeking permission to convert an old pipeline that runs through Kentucky to carry NGLs.
Attorney Tom FitzGerald of the Kentucky Resources Council, who represented the citizens group, said the latest ruling affirms that "the oil and gas industry will need to find a new business model — one that relies on good-faith, truly voluntary negotiations rather than threatened or actual efforts to condemn."
The Kentucky Oil and Gas Association filed a brief seeking to overturn the property owners' win. The industry can ask for a rehearing or appeal to the state Supreme Court.
Interestingly, despite all the lip service paid to the sacredness of individual property rights, the legislature has shown little interest in protecting Kentuckians' property rights from the oil and gas industry.
Nor has the legislature shown any interest in protecting neighbors and the environment by enacting public processes for deciding where new pipelines should be sited.
Fortunately for Kentuckians, earlier legislators, who enacted the laws on eminent domain, had a clearer view of the public interest and their duty to protect it.