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Pennsylvania Eminent Domain Blog

Pennsylvanians vs. FERC

March 9th, 2016 | by Mike Faherty

A group of Pennsylvania residents have challenged the operations of the Federal Energy Regulation Commission (FERC). The suit may push FERC to improved responsiveness to its obligation to regulate for safety. One correction of the following story is suggested. The article states that each time FERC approves a pipeline, the project is automatically granted eminent domain power. That is true for the natural gas pipelines per the Natural Gas Act. By contrast, FERC also approves hazardous liquids pipelines. These pipelines are not eligible for FERC eminent domain power, because that power is not contained in the controlling Interstate Commerce Act. The Sunoco Pipeline Mariner East 2 is one such hazardous liquids pipeline which was approved by FERC without eminent domain power.

Suit claims bias toward industry

A court filing contends a federal agency whose funding is based on the flow of gas is controlled by the companies it oversees.

104 pipelines have been approved across the U.S. in the last five years.

34 of those pipelines were in Pennsylvania.

20 percent of the Federal Energy Regulatory Commission’s budget comes from pipelines and the natural gas industry.

A federal agency that receives all of its funding from the energy industry it regulates has never rejected a pipeline plan, demonstrating bias and corruption, a lawsuit contends.

The Federal Energy Regulatory Commission, designed to be self-funded, independent and nonpartisan, receives its money from fees paid by the companies it oversees. One of those fees is based on the volume of gas moving through a pipeline. The more gas that flows, the more money the commission receives.

Some Pennsylvania residents say they believe that’s why the agency has approved dozens of pipeline projects stretching through the state  and has approved every pipeline application it received in the past 30 years. Those decisions have angered several state landowners who are fighting plans that allow pipelines to tunnel through their backyards.

About 20 percent of the commission’s budget comes from pipelines and the natural gas industry. The rest comes from electricity, hydropower and oil companies.

Each time the federal agency approves a pipeline, the pipeline project is automatically granted eminent domain status. The commission does not have authority to grant eminent domain status. That power comes from the Natural Gas Act. The act says if an easement can’t be negotiated for a project the agency has authorized, the pipeline builder has the right of eminent domain.

In the last five years, the commission approved 104 pipelines across the country, including 34 in Pennsylvania, according to a PennLive/The Patriot-News analysis.

Before the Marcellus Shale boom, the agency approved two to four a year in the state. Once drillers unlocked a stockpile of natural resources, that number climbed to five to 10 a year, as numerous pipelines were planned to move oil and gas to market. With each new pipeline, company negotiators show up at Pennsylvania homes, ask- ing landowners to accept an easement, which is a one-time payment for the pipeline on their properties.

Landowners can negotiate the price, but they can’t challenge eminent domain.

Commission decisions aren’t reviewed by Congress or the president, according to the agency’s budget language. The decisions can be challenged only in federal court, which would require money that many Pennsylvania residents say they don’t have.

A lawsuit filed last week in U.S. District Court in Washington, D.C., challenges the commission’s relationship with industry. It accuses the commission of regulatory capture, a situation in which corporations control regulators.

“Pipelines have a 100 percent approval rate with FERC. There’s bias and corruption,” said Maya van Rossum, the Delaware riverkeeper and leader of the Delaware Riverkeeper Network. She and the network filed the lawsuit against the commission, calling it a “corrupt, rogue agency.” They took issue with the PennEast Pipeline, a 114-mile line planned for Pennsylvania and New Jersey.

A commission spokeswoman said the agency would not comment on the lawsuit or any claims made in association with it.

The agency evaluates the need for a project based on market demand and then looks at environmental and safety aspects, Commissioner Cheryl La-Fleur said last year.

The agency is designed to be nonpartisan and independent, but it rarely seems to work that way in practice, almost always following the president’s agenda.

No more than three of the five commissioners, who are nominated by the president and approved by the Senate, can be from the same political party. But much like the Supreme Court, their decisions can appear in line with political ideology.

For example, President Barack Obama made natural gas development a part of his Clean Power Plan to fight climate change and reduce carbon emissions. Similarly, in 1983, President Ronald Reagan wanted to deregulate the natural gas industry, saying American consumers were being hurt by government regulations that created higher gas bills.

Then commission Chairman C.M. Butler III told the Senate Energy and Natural Resources Committee there would be “a disaster in the gas market” if the rules weren’t changed, according to a March 1983 Associated Press report.

With prices fixed by law instead of the free market, producers would lose customers and possibly go bankrupt, he said.

At the time, there were artificially high prices during the 1980s gas glut, while the simultaneous oil glut offered low prices. Butler told the Senate that consumers would switch to the cheaper energy “and the result will be a disaster in the gas market.” The commission largely supported Reagan’s proposal, saying it would reduce prices because “the price of gas follows the price of oil.”

Article written by Candy Woodall |