Eminent Domain Rights Dusted Off as Pipelines Trace Path Across Arkansas

Magellan Pipeline Co. LP successfully won eminent domain on a 0.17-acre piece of property adjacent to this gas pipeline crossing on East Valentine Road near Jacksonville.
Magellan Pipeline Co. LP successfully won eminent domain on a 0.17-acre piece of property adjacent to this gas pipeline crossing on East Valentine Road near Jacksonville. (Tre Baker)
(To view an interactive map of the proposed Plains and Eastern Clean Line route by Arkansas county, click here.)

The construction of a new pipeline or transmission line typically requires the consent or begrudging acceptance of a host of private landowners.

Those landowners are notified of the pending construction and are offered a sum for what is usually a permanent easement, as well as additional access for the construction of the line.

But those negotiations don’t always go easily, as landowners reject the new presence on their property or the sum offered to use the land.

Several energy projects in various phases of completion are in the works across Arkansas, drawing increased attention to the process of eminent domain used to obtain access to land, as well as some of the difficulties companies face in building their projects.

At least three major projects — the Plains All American Pipeline Diamond Pipeline, the Magellan Midstream Partners Little Rock pipeline and the Clean Line Energy Partners Plains & Eastern Clean Line transmission line — are expected to navigate large swaths of land, with two of them stretching from one side of the state to the other. The Diamond Pipeline will transport crude oil, the Magellan pipeline will move refined petroleum products, including gasoline and jet fuel, and Clean Line will send electricity across its lines.

Court documents, legislative resolutions and interviews with landowners show that there is at least some resistance to all three projects.

Eminent Precedent

Stephen Clowney, an associate law professor at the University of Arkansas School of Law, said state law gives a “fairly wide variety of entities” the power of eminent domain. Governmental entities and oil, gas and utility companies all can use eminent domain when the right criteria are met.

For companies, Arkansas law requires status as a “common carrier” to invoke eminent domain. That could apply to a variety of industries, including railroads and pipeline companies.

But Clowney said there are some key differences between the state and federal interpretations of eminent domain. “Arkansas law is actually more protective of landowners than the federal law,” Clowney said.

Clowney pointed to the U.S. Supreme Court’s 2005 ruling in Kelo v. the City of New London, which found that the Connecticut city could use eminent domain to seize private land for economic development purposes. He said in Arkansas, land can be seized through eminent domain, but it has to be for a clear public use and the landowner must be compensated. The state’s high court has not ruled so broadly as to allow economic development takings, he said.

While landowners may be able to argue that they did not receive a fair amount for the land, a direct challenge to a company’s ability to claim eminent domain is rarely successful, Clowney said.

“It’s very, very difficult as long as they’re paying you,” Clowney said. “It’s very difficult to win these cases.”

Legal Challenges

Despite the seemingly uphill battle, a group of landowners has gone to Johnson County Circuit Court to challenge the eminent domain authority of the Diamond Pipeline’s planners.

The landowners claim there is no public use for the pipeline and that Plains All American is not a common carrier, as defined by Arkansas Code Annotated 23-15-101. That statute states that “[a]ll pipeline companies operating in the state are given the right of eminent domain and are declared to be common carriers, except pipelines operated for conveying natural gas for public utility service.”

“An actual controversy exists between the parties in that the Defendant has asserted that it has the right to condemn private property of the Petitioners in order to obtain easements for the pipeline if the Petitioners do not voluntarily grant an easement to Defendant,” attorneys for the landowners wrote in a complaint filed Jan. 21. “The Petitioners dispute this right.”

The company has sought to dismiss the complaint. A hearing is scheduled on that motion for June 19.

Lonnie Turner, an attorney for the landowners, did not respond to a phone message seeking comment.

Brad Leone, director of corporate communications and stakeholder relations for Plains All American, the parent company of Diamond Pipeline LLC, said in a statement emailed to Arkansas Business that “Diamond Pipeline LLC conducted a thorough review to identify a suitable route for a new pipeline.”

“These efforts included paralleling existing utilities and pipelines and avoiding culturally sensitive areas where possible. We want to have good relationships with landowners, as we hope to have our pipelines in service for a long time, so we offer fair compensation for all easements and work with individual landowners to address concerns or issues associated with crossing their property, where possible,” Leone said.

Clowney, who reviewed the complaint, said that it seemed unlikely that the landowners would succeed in their lawsuit.

“The plaintiffs argue that this isn’t a public use because the pipeline will not transport oil from or to ‘a single citizen of the State of Arkansas.’ Intuitively, that may seem like a decent argument,” Clowney said in an email. “However, the case law of the Supreme Court of Arkansas has never required any certain number of in-state users to find a public use. So long as the pipeline company allows future Arkansas companies access to the pipeline, then this is almost certainly a public use.”

Clowney cited the court’s 1968 ruling in Hale v. Southwest Arkansas Water District, which stated “we feel that we would be unduly restrictive in our interpretation of the right of eminent domain if we required a utility to have a going business before it laid its first trunk line for the distribution of its product.”

The Diamond Pipeline case isn’t the only pipeline-related case that’s gone to court.

The Magellan Pipeline Co. LP, a subsidiary of Magellan Midstream Partners, has filed more than a dozen eminent domain petitions around the state after landowners either failed to respond to their offers or they could not come to a voluntary agreement. Several of those cases were quickly resolved — all in favor of Magellan — but some are pending.

Like any construction project, pipelines and transmission lines require a significant amount of planning before breaking any ground.

Companies obtain state and federal approvals, and the environmental impact and the number of affected landowners are also frequently weighed.

After affected landowners are notified of the planned construction of a line, the negotiations begin.

Bruce Heine, the director of government and media affairs for Magellan Midstream Partners, said in a statement that the company tries to work with landowners and “strives to establish and maintain positive relationships with all landowners along our pipeline routes.”

“We are actively working with several landowners to reach mutually agreeable terms for easement agreements,” Heine said. “Generally, the value of an easement agreement is reached by using a third party market study and historical land values. We always use our best efforts to reach mutually agreeable terms with all landowners when working on easement agreements.”

Leone, with Plains All American, said in a statement that the company has constructed 2,300 miles of pipeline since 2007.

“Our experience has been that we are usually able to reach mutually acceptable terms with landowners,” Leone said. “In the event there is a landowner who refuses to negotiate an easement, and assuming there is not a viable alternative, we would have no choice but to pursue legal remedies to secure the easement, following the procedures laid out in state law and regulations. This includes offering fair compensation for the property, restoring the land to as close to prior condition as reasonably possible and paying for any surface damages which cannot be repaired by surface restoration.”

Clean Line

Chris Hardy, an associate at Clean Line, said in an interview that his company also tries to work with landowners to reach voluntary agreements. He said Clean Line offers compensation packages for landowners that go beyond what is required by law.

The company offers payment for 100 percent of the fair market value of the land, annual or up-front payments for every structure and additional payments for impacts to timber or irrigation.

Hardy said that discussions about eminent domain wouldn’t begin until the line has a final route, but that eminent domain would be a “last resort.”

“Throughout American history, if you look at how significant infrastructure projects are developed ... they’ve all utilized eminent domain to finalize the acquisition of certain easements that were necessary to complete those projects. Eminent domain is necessary for whenever you build a major piece of public infrastructure,” Hardy said.

The company is currently awaiting approval of a final environmental impact statement from the U.S. Department of Energy. Construction is expected to begin in 2016.

Clean Line said in a statement that it had distributed 5,000 notices and hosted more than 40 public meetings about the project since 2009. The Department of Energy has also distributed 35,000 notices since 2013 and held 11 public hearings, according to the company.

The department and Clean Line have also placed more than 140 public notices in the state’s newspapers.

But at least some landowners disagree that they were given ample warning.

Brad Hill, who lives in Van Buren County near Damascus, said his first notice about the line came on Dec. 16. Eventually he found that the company had identified a 1,000-foot corridor across his property where the line could be routed, part of which included his house.

Hill said he doesn’t plan to accept any offer from the company for his land because it isn’t for sale.

Hill, who has lived on the property since 1999, said the line would hurt his health and safety, as well as the security, value and marketability of his property.

“This project would make my property worthless for my purposes,” Hill said.

The Arkansas Senate also passed a resolution during this year’s session that opposed the project.

“The United States Department of Energy should reject the application of Clean Line Energy Partners, LLC, for its Plains & Eastern Clean Line transmission project in its entirety by selecting the no-action alternative under the Draft Environmental Impact Statement or, at a minimum, require the project avoid, minimize, and mitigate for adverse impacts,” the resolution states.