The Use of the Eminent Domain Power For Crude Oil Pipelines

The Penn Live editorial page offers a simplistic answer to a complex question. In Pennsylvania, the Public Utility Commission authorizes pipeline companies to become public utilities. With the “Certificate of Public Convenience”, pipeline companies have the authority to acquire by condemnation.

The eminent domain power is a harsh remedy. Providing the eminent domain power to pipeline companies is frustrating because the main purpose of the pipeline company is to move oil through the State or from a mineral source within the State out of State. In either event, the article probably has it wrong.

Eminent domain probably is required to assure the pipeline companies the opportunity to move the crude oil around. On the one hand, the process is offensive in good times. On the other hand, our Nation needs the prompt delivery and the substantial resource available from minerals within our nation.

Inevitably, the pipeline companies will win out. The questions are, how do owners obtain fair payment and how does the State obtain reasonable fees for allowing the eminent domain to proceed.

When legislation grants pipeline companies eminent domain power, it can provide specific caveats as to how much is to be paid to the owners, be it at a foot basis, percent of total property value basis or any other reasonable basis. However, the present “just compensation” theories simply do not make the owners whole!

At the moment, pipeline companies can apply to the Pennsylvania Public Utility Commission to become public utilities. That means more regulation and oversight for the pipeline company, but it also gives the company the much coveted “certificate of public convenience,” another way of saying eminent domain.

Two companies — Peregrine Keystone Gas Pipeline and Pentex Pipeline — have cases before the PUC to become public utilities. While these companies argue that they are now ready and willing to provide utilities to the public, it’s clear that a major part of their motivation to be a public utility is to gain eminent domain rights. Both companies have plans to construct pipelines in the Marcellus Shale region.

This is a regulatory mess. If Pennsylvania continues down this route, some Marcellus pipeline companies are likely to get public utility status and some won’t.

This provision for pipeline companies was created for those that deliver gas directly to the public. Marcellus pipeline firms that carry gas from wells to refineries are very different.