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Circuit Court Approves Use of Eminent Domain for Pipeline Construction

January 25, 2019

A federal appeals court affirmed a ruling granting the companies building the NEXUS natural gas pipeline in Ohio and Michigan eminent domain authority for a right of way to build the pipeline across private property.

The U.S. Sixth Circuit Court of Appeals affirmed the U.S. District Court for the Northern District of Ohio’s injunction granting NEXUS Gas Transmission access to the property of landowners who had refused the company’s requests for right-of-way across their properties to construct a natural gas pipeline.

The ruling allows NEXUS, a partnership between DTE Energy of Detroit and Spectra Energy of Houston, to exercise the right of eminent domain under the federal Natural Gas Act (NGA) to build the $2 billion, 255-mile pipeline, which will stretch from eastern Ohio northwest into southeastern Michigan. From there, the line will extend east to a hub in Canada, from which the natural gas will be exported.

Mixed Response to Requests

The legal dispute dates to November 2015, when NEXUS requested the Federal Energy Regulatory Commission (FERC), which has jurisdiction over interstate gas pipelines, to authorize the company to build the pipeline through parts of Ohio and Michigan.

After an obligatory public notice and comment period, FERC issued a certificate of public convenience and necessity, determining tracts along NEXUS’s proposed pipeline route were necessary for the pipeline’s construction. This enabled NEXUS to exercise the right of eminent domain to condemn the properties of any affected landowners who refused to grant easements to the company.

Although most landowners in the path of the pipeline negotiated easements with NEXUS, some refused to do so. This prompted NEXUS to file an eminent domain action against them in the District Court in October 2017, at which point all but three of the remaining landowners, who owned a 1.4-acre parcel of land NEXUS wanted to cross, reached easement agreements with the firm.

In April 2018, the District Court ruled in favor of NEXUS and ordered the three landowners to provide immediate access to their property. Instead, the landowners appealed the decision to the Circuit Court.

Met the Requirements

In affirming the District Court’s ruling, the Circuit Court on December 7, 2018 confirmed NEXUS had received a certificate of public convenience and necessity from FERC, the tract of land at issue was necessary for the pipeline’s construction, and the company was unable to reach a voluntary agreement with the three landowners, “all of which are necessary elements for exercising eminent domain under the NGA,” the court wrote.

The Circuit Court also agreed with the lower court’s finding that failure to grant the injunction would cause NEXUS irreparable harm because building the pipeline around the three landowners’ property would cost an additional $353,000, with the company losing as much as an additional $800,000 per day to retain its construction crew throughout any delay.

Big Economic Benefits

Studies by Michigan State University and the consulting firm Economic & Policy Resources estimate construction of the pipeline will generate 6,800 jobs, more than $650 million in wages, and $830 million in total economic activity.

NEXUS has estimated the pipeline will generate $412 million in tax revenues during its first five years of operation, of which approximately $125 million will go to school districts in Ohio and Michigan.

The court’s decision to allow NEXUS to exercise eminent domain will benefit people in Michigan, Ohio, and across the nation, says Tim Benson, a policy analyst at The Heartland Institute, which publishes Environment & Climate News.

“This ruling is welcome news and should be seen as such by the residents of Ohio and Michigan,” said Benson. “We desperately need new pipeline infrastructure in this country, as it will make oil and gas transport more efficient, cut transportation costs, and reduce regional price differences while improving safety.

“Growth of oil and gas production in the United States over the past decade has been an economic game changer,” Benson said. “Without new pipelines, we can’t take full advantage of those gains.”

Considers Ruling Significant

This court ruling is a significant defeat for anti-fossil fuel activists, says Tom Randall, president of Winningreen, an energy communications firm.

“This is a real setback for those spreading the ‘keep it in the ground’ message,” said Randall. “That message, and the policies that flow from it, would hamstring the United States precisely at a time when America, thanks to its abundant fossil fuels, has become a global energy superpower.”

Bonner R. Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow.

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Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org