LAPORTE, Pa. ? When federal regulators approved a 39-mile natural gas pipeline through northern Pennsylvania's pristine Endless Mountains, they cited the operator's assurances that it would make sparing use of eminent domain as it negotiated with more than 150 property owners along the pipeline's route.
Yet a few days after winning approval for its $250 million MARC 1 pipeline in the heart of the giant Marcellus Shale gas field, the company began condemnation proceedings against nearly half of the landowners ? undercutting part of the Federal Energy Regulatory Commission's approval rationale and angering landowners.
Some of the landowners are now fighting the company in court, complaining that Central New York Oil and Gas Company LLC steamrolled them by refusing to negotiate in good faith on monetary compensation and the pipeline's location. Their attorneys say CNYOG has skirted Pennsylvania's eminent domain rules.
The company, a subsidiary of Inergy LP of Kansas City, Mo., insists it's trying to reach a "fair settlement" with all property owners and wants to be a good neighbor.
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.
The company promotes the MARC 1 pipeline as key infrastructure in developing the Marcellus Shale, a rock formation underneath Pennsylvania and surrounding states that experts believe holds the nation's largest reservoir of gas. The MARC 1, a high-pressure steel pipeline 30 inches in diameter, will connect to major interstate pipelines and the company's own natural gas storage facility in southern New York state.
CNYOG hopes to start construction soon and finish by July, but it awaits permits from Pennsylvania environmental regulators and the U.S. Army Corps of Engineers.
It also needs to answer the legal challenge from residents.
Many of the complaining landowners say they favor natural gas drilling and some have leased land to gas drillers. What rankles them is that FERC has invested CNYOG 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 CNYOG offered less than a third of the amount that another pipeline company had previously paid them to install 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 regulated by the federal government and companies that operate them don't have condemnation power.
Amy Gardner said a company representative who made them the lowball offer told them to "take it or leave it."
"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.
Amounts offered by CNYOG range from a few hundred dollars to tens of thousands of dollars, depending on the amount of property taken. Court papers filed by CNYOG in late December say it valued damages at 37 condemned properties in Sullivan County at $310,900.
The pipeline has been controversial since it was first proposed two years ago.
FERC, which considers all applications for new interstate pipelines, received 22,000 comments on the MARC 1 project, with many expressing concern 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.
FERC ultimately determined the pipeline would not significantly impact the environment and allowed it to proceed.
The commission was 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.
Indeed, the commission said last year its approval relied on the company's assertion that it was acquiring land "through negotiated agreements with landowners, thus minimizing the need" to condemn people's land.
In reality, the company had prepared condemnation papers for dozens of properties even before winning commission approval on Nov. 14. Within a few days, it began eminent domain proceedings against 74 of 152 property owners along the pipeline's route through the mountains of Bradford, Lycoming and Sullivan counties.
Deborah Goldberg, an attorney for the environmental group Earthjustice, said the large number of condemnations suggests that CNYOG "never made a serious effort to get negotiated agreements with the landowners that the landowners thought were fair." Earthjustice has intervened in the case and is challenging the pipeline's approval.
While most of the landowners receiving condemnation papers have since settled ? the company says private agreement has been reached with more than 80 percent of the landowners ? Goldberg suggested the pace of settlements has quickened because condemnation takes leverage away from the property owner.
The company insists it has met its obligation to negotiate. 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."
Wright acknowledged, however, that CNYOG 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.
CNYOG 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 CNYOG 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 result in 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."
Some landowners who didn't bother fighting the pipeline say the company still managed to leave a bad taste.
Linda Gavitt of Sonestown said she signed with CNYOG because she didn't feel it was worth it to hire a lawyer to fight for more money. Even as she signed the paperwork, she got a hint of the company's negotiating stance.
"They said that other people were holding out because they wanted more money," Gavitt recalled. "They said, `We're not paying more money because this is a federal line that's going to go through no matter what, and $2 a foot is what we pay.'"
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