By Steve Shropshire
Over the last few decades, the United States has become increasingly dependent on natural gas as an alternative to traditional energy sources such as coal and heating oil. To meet demand, the United States has relied on Canadian supplies to make up the deficit between domestic natural gas supply and domestic demand. But now federal officials and energy industry representatives are warning that the existing domestic and Canadian supplies will not be sufficient to meet increasing U.S. demand over the next twenty years.
The United States will, therefore, need to look beyond Canada to fulfill its future natural gas demands. The good news is that the rest of the world has large reserves of natural gas. The bad news is that most of the reserves are located across the Pacific Ocean, which necessitates importation of liquid natural gas ("LNG") to U.S. shores. Currently there are only four LNG import terminals in the continental United States, creating a constraint on overseas natural gas imports.
The LNG industry has rushed to fill this vacuum in recent years, proposing approximately forty new LNG terminals for the North American coastline. Most of these proposals also include siting new pipelines to tie those terminals to existing distribution infrastructure and to add new capacity to the natural gas transmission system.
Several energy companies have initiated efforts to locate LNG terminals and natural gas pipelines in Oregon. The proposed pipelines chart a course over many miles of Oregon agricultural lands. This article uses the Oregon proposals as an example of how natural gas pipeline projects may impact agricultural lands and discusses the rights that agricultural landowners have when dealing with pipeline companies. These projects all involve federal regulatory oversight by the Federal Energy Regulatory Commission ("FERC"). Although we have used Oregon as an example, the article is equally applicable to agricultural lands across the country.
Current Oregon LNG Terminal and Pipeline Proposals
Natural gas becomes liquid at very low temperatures and in its liquid form can be transported in large quantities on a global scale, using LNG carrier ships. The proposed Oregon LNG terminals would receive deliveries from these ships, regasify the LNG, and transport the natural gas throughout the western United States using underground pipelines.
Currently, three companies have submitted applications to FERC for approval of LNG import terminals in Oregon. In addition, three pipeline companies have submitted separate FERC proposals for more than 600 miles of new natural gas pipelines. These proposed pipelines would increase the capacity of the natural gas transportation infrastructure in the state and accommodate the additional supply of natural gas from the proposed terminals. Many miles of these proposed pipelines would traverse Oregon farm and forest lands, including nursery properties. Before the energy companies can construct the pipelines, they must first acquire pipeline easements across impacted lands. Links to additional information about the locations of the proposed LNG terminals and pipelines appear at the end of this article.
As of March 2008, the three pipeline companies had submitted their final pipeline applications to FERC. FERC is expected to make permitting decisions on those applications by summer 2009. Under this schedule, the companies would begin acquiring property and easements for the pipelines in late summer 2009. Once they acquire sufficient land and easement rights, the pipeline companies will begin construction. The estimated start dates for construction of the proposed pipelines range from late 2009 to the second quarter of 2010.
Under federal law, FERC must determine whether proposed LNG terminals and pipelines are required for the public convenience and necessity. The applicant energy companies have a good deal of discretion regarding the route they propose for their pipelines. But the final pipeline siting decisions are usually made with input from multiple stakeholders such as FERC, local and state government agencies, and impacted property owners. More information about stakeholder involvement in the siting process is available here:http://ferc.gov/industries/gas/enviro/stakeholder.pdf.
If a pipeline will be on or will abut private property, the energy company must notify the landowner and provide information regarding the FERC siting proposal. Most landowners will probably already have been contacted by the energy companies prior to their FERC filings, with requests to survey the pipeline course over their properties.
Owners of property over which natural gas pipelines are to be located are constitutionally entitled to just compensation for the use of the land. Courts have interpreted "just compensation" as the fair market value of the uses of the land that are either temporarily or permanently foreclosed to the landowner, as well as any permanent devaluation of the property.
Under the federal Natural Gas Act, energy companies are granted the power of eminent domain to acquire the necessary property and easements to construct pipelines and locate equipment needed for pipeline operation. The purpose of providing the energy companies with eminent domain powers is to minimize holdout strategies by landowners when the companies are acquiring large tracts of land in the open market.
Compensation for the vast majority of owners of impacted property is determined prior to the use of eminent domain by an energy company. It is usually beneficial to both the landowner and company to avoid the time and expense of the legal proceedings involved in a condemnation claim. Nonetheless, in certain circumstances, condemnation may be unavoidable.
An energy company may use its condemnation power only if a landowner refuses to sell or the parties cannot come to an agreement about the amount of compensation to be paid for the use of the property. An energy company may bring a condemnation claim in state court or a claim in federal court if the landowner demands compensation in excess of $3,000. In either instance, state condemnation law controls.
Impacts to Agricultural Land
The impacts of a pipeline differ depending on the unique characteristics and use of each impacted property. The permanent easement for a natural gas pipeline is approximately 50 feet wide, with 75 to 100 feet needed during construction. The pipelines are generally placed about three feet deep, but may be as deep as seven feet in agricultural fields where deep tilling or other issues warrant a deeper trench.
Once construction is complete, the landowner may make use of the overlying property, subject to certain limitations. The landowner may not make any use of the easement that would impact the pipeline or prevent access to the pipeline for maintenance. For example, planting large trees and erecting structures with foundations would not be permitted within an easement. Less intensive uses, such as planting crops and constructing driveways are typically allowed. The permitted or prohibited uses on an easement through a specific property are determined in the easement negotiation process or in condemnation proceedings. It is therefore crucial for agricultural landowners to inventory the current uses of the impacted property and to consider all potential future uses they might want to make of that land.
Nursery owners may have unique needs for the easement areas that should be negotiated as specifically permitted uses. These uses may include the need to place or maintain subsurface facilities such as drain tiles, irrigation systems, and water recirculation systems. Above ground, landowners should obtain specific permission to locate container yards, material stock piles, or even greenhouses within the easement area.
Agricultural landowners who are contacted by a pipeline company should be aware of their rights and options under state law. In the easement negotiation process, it is important to retain the right to make desired uses of the affected land. If that is not possible, landowners are entitled to receive adequate compensation for the loss of rights, use, and property value caused by the pipeline and the pipeline easement. Information is key in such negotiations. Therefore, landowners should consider obtaining a professional appraisal of the property, along with an estimate of the financial impact of the construction and location of a pipeline on the property. It may also be helpful to consult with an attorney who is familiar with state condemnation laws and experienced in agricultural real property negotiations and transactions. As with any land transaction, the more information you have as a landowner, the better prepared you will be to drive the process to your desired outcome.
- Jordan Cove LNG Import Terminal — An onshore LNG import and storage terminal located on the bay side of the north spit of Coos Bay, Coos County, Oregon. Seehttp://www.jordancoveenergy.com.
- Pacific Connector Gas Pipeline — The proposed pipeline is approximately 230 miles long and 36 inches in diameter. It will transport up to 1 billion cubic feet per day of regasified LNG from the Jordan Cove LNG Import Terminal in Coos County, Oregon to interconnect with Northwest Pipeline Company in Douglas County, Oregon; Avista Corporation in Jackson County, Oregon; and Pacific Gas and Electric Company, Gas Transmission Northwest Corporation, and Tuscarora Gas Transmission Company at the terminus of the system in Klamath County, Oregon. See http://pacificconnectorgp.com.
- Oregon LNG Terminal — The proposed Oregon LNG Project site is located on the East Skipanon Peninsula near the confluence of the Skipanon and Columbia Rivers in Warrenton, Clatsop County, Oregon. See http://oregonlng.com.
- Oregon Pipeline Project — Affiliated with Oregon LNG's proposed liquefied natural gas terminal in Warrenton, Oregon, the proposed pipeline is approximately 120 miles long, in Clatsop, Tillamook, Washington, Yamhill, Marion, and Clackamas Counties, and would connect the Oregon LNG terminal with the existing Molalla Gate Station. See http://www.oregonpipelinecompany.com/pipeline.php.
- Bradwood Landing — A proposal to construct and operate an LNG import terminal at Bradwood, located at about mile 38 from the Pacific Ocean along the Columbia River, in Clatsop County, Oregon, and an associated 35-mile-long natural gas sendout pipeline that would extend across the Columbia River into Cowlitz County, Washington. See http://www.bradwoodlanding.com.
- Palomar Pipeline — The proposed Palomar Gas Transmission Project will consist of approximately 213 miles of new 36-inch-diameter pipeline leading from a point along the Columbia River in Clatsop County to a point approximately twenty miles east of Maupin, Oregon, through Clatsop, Columbia, Washington, Yamhill, Marion, Clackamas and Wasco Counties, Oregon. See http://www.palomargas.com.
- Port Westward LNG Facility — Located in Clatskanie, the project has not yet filed with FERC due to delays in obtaining land use approvals for the proposed terminal site. As of March 2008, the FERC Website lists the project as "on the horizon."