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Arkansas Midland, Magellan Pipeline Settle on Easement

5 min read

Arkansas Midland Railroad Co. last week settled its easement dispute over Magellan Pipeline Co.’s $200 million pipeline project from Fort Smith to Little Rock.

Arkansas Midland challenged the 100-foot easement awarded to Magellan Pipeline last month by Pulaski County Circuit Court Judge Alice Gray. The easement allowed Magellan’s 210-mile pipeline to run under the railroad’s tracks in North Little Rock, near the Central Airport Road crossing.

Arkansas Midland had moved the case to U.S. District Court in Little Rock on March 31 and wanted a preliminary injunction and temporary restraining order to prevent Magellan from going forward with its construction plans under the railroad tracks. It cited safety issues.

“They were able to address those concerns,” Midland’s attorney, Bruce Tidwell of Friday Eldredge & Clark LLP of Little Rock, told Arkansas Business last week. “It was a good resolution for everyone.”

The pipeline will transport petroleum products from Fort Smith to Little Rock and is on track to open in the middle of the year, said Bruce Heine, a spokesman for Magellan Midstream Partners LP of Tulsa, the parent company of Magellan Pipeline.

The 12-inch underground steel pipeline will have the capacity to deliver 75,000 barrels a day of gasoline, diesel and jet fuel. A barrel equals about 42 gallons.

“We’re going to have jet fuel available at our terminal in North Little Rock, which will be helpful for the” Little Rock Air Force Base and Clinton National Airport in Little Rock, Heine said.

It will be the only petroleum products pipeline coming into Little Rock.

“It’s a great infrastructure improvement for Arkansas,” said Randy Zook, president and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas. “I think it ultimately it will lead to more competitive gas pricing in central Arkansas.”

‘It’s Very Troubling’

But not everyone is happy with the project.

“It’s very troubling to know that jet fuel is going to be going under our creeks,” said Danna Schneider, who is a member of the Clarksville City Council and the Arkansas River Valley Safe Water Collation. “Nobody knew anything about it. It just flew under the radar.

“We’re a little bit upset about it,” she said.

The Arkansas Midland Railroad was concerned about the pipeline being placed under the company’s tracks in North Little Rock. The short-line freight railroad has a total of 112 miles of tracks over five lines in Arkansas. And about two trains would travel across pipelines every day.

“Placement of the pipelines under Arkansas Midlands’ track will undoubtedly cause interruptions in train traffic during the construction phase as Magellan bores under track,” Allen Dewayne Swindall, president of Arkansas Midland, said in an affidavit filed in the case. “And, if problems arise during construction, such interruptions may be prolonged and negatively impact Arkansas Midland’s ability to service its customers.”

Tidwell said the concerns of the railroad’s engineers and the pipeline officials, however, have been addressed.

Heine, Magellan’s spokesman, said the operation of the Arkansas pipeline will meet all the applicable laws and regulations, including the environmental requirements.

“Pipelines remain the safest, most reliable and cost-effective mode of transportation for liquid energy,” he said in an email response to questions from Arkansas Business.

Magellan Midstream Partners LP touts that it owns the longest refined petroleum products pipeline system in the country. “We can tap into nearly 50 percent of the nation’s refining capacity and store more than 95 million barrels of petroleum products such as gasoline, diesel fuel and crude oil,” the company said on its website.

In 2013, Magellan announced it was considering a pipeline project from Fort Smith to Little Rock.

Magellan owns and operates a terminal in Fort Smith. It wanted to extend its pipeline system, which originates in Houston and runs through the middle of the country, to Little Rock, Heine said.

Once the pipeline is operational, “all the refineries in Oklahoma and Kansas will then have access to the Little Rock pipeline, which is a very positive step for the state of Arkansas,” Heine said.

Magellan entered into an agreement with Ozark Gas Transmission LLC, a subsidiary of Spectra Energy Partners LP of Houston, to use its existing 160-mile pipeline for a portion of the route from Magellan’s terminal in Fort Smith to Little Rock, according to a May 2014 Magellan news release.

Magellan said it planned to extend that pipeline to its Fort Smith terminal and the Little Rock market with approximately 50 miles of pipe. Magellan also is improving the entire pipeline system to handle the extra volume of petroleum.

Stalemate Reached

Magellan began talking with Midland’s representative in September 2015 in an attempt to gain approval to build its pipeline 25 feet under the railroad tracks in North Little Rock, according to its petition filed last month in Pulaski County Circuit Court.

Negotiations continued for the next six months but then reached a stalemate in March.

Magellan said in the lawsuit that it needed to take possession of the land for the construction project.

The piece of land was appraised at $1,120, but Magellan said it would pay three times that amount for the easement and right-of-way agreement.

Midland, however, didn’t agree.

Magellan then filed court papers to take immediate possession of the property on March 25. Six days later, Judge Gray approved Magellan’s request and awarded it the land. The compensation for the property was to be determined later.

The day after Gray’s ruling, Arkansas Midland filed papers to transfer the case to U.S. District Court in Little Rock.

The railroad said in its court filings that the state court didn’t have the jurisdiction to award the easement. Instead, that jurisdiction belonged to the Surface Transportation Board, it said.

Swindall, president of Arkansas Midland, said in an affidavit that he was worried about the construction of the project.

“Anytime boring is conducted under railroad track there is significant risk of creating voids in the track substructure which could alter the track profile and undermine the track structure,” Swindall said. “This increases the risk and severity of train derailments.”

Swindall also said that it was unclear what other risks may be encountered with the disruption of the track structure.

Magellan’s Heine said the project will have a number of benefits, including the employment of 750 workers to build the new segments and the enhancement of the existing segment of the system.

And once the pipeline system is operational, “it will significantly reduce the number of petroleum trucks on I-40 from eastward and westward origins en route to central Arkansas,” Heine said in a statement to Arkansas Business.

Tidwell said the paperwork will be filed soon to have the case dismissed from federal court.

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