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Vol. 19, No. 13 Week of March 30, 2014
Providing coverage of Bakken oil and gas

Court resolves ROW rub

ND landowners lose legal appeal regarding Alliance pipeline from Tioga gas plant

Jannelle Steger Combs

For Petroleum News Bakken

A legal fight over 4.36 acres of right of way condemned for construction of a gas pipeline made its way to the 8th Circuit Court of Appeals. Alliance Pipeline L.P. operates more than 2,000 miles of oil and natural gas pipelines in North America. In 2011, Alliance undertook to build a 79-mile-long underground pipeline from Hess Corp.’s gas processing plant near Tioga, N.D. to a connection in an Alliance mainline near Sherwood, N.D. The Alliance mainline runs from western British Columbia to the market hub in Chicago.

Leonard and Ione Smith are an elderly couple who own land near Sherwood. On Jan. 25, 2012, Alliance applied to the Federal Energy Regulatory Commission for a certificate of public convenience and necessity. FERC published notice of the application in the Federal Register on Feb. 7, 2012. FERC must issue a certificate of public convenience and necessity before a natural gas pipeline can be built in the United States. Along with the certificate, the recipient would gain the authority to condemn land along the proposed pipeline route under the power of eminent domain.

In February 2012, Alliance’s representatives visited the Smiths’ farm to attempt to purchase an easement across their land. Since the Smiths were in poor health, the Alliance representatives were directed to Guy Solemsaas, who is the son of Ione and stepson of Leonard Smith, who also happens to live next to the Smiths. Solemsaas told Alliance that neither he nor the Smiths would negotiate a sale of an easement across the Smiths’ lands.

On April 13, 2012, Alliance visited the Smiths again and served them with a state court summons and petition to enter and survey the property. The state court granted that petition on May 15, 2012. Finally on Sept. 20, 2012, FERC granted Alliance its certificate of public convenience and necessity for the pipeline. On Oct. 16, 2012, Alliance brought a condemnation action against two parcels of land owned by the Smiths, which comprised 4.36 acres. Alliance moved for summary judgment of condemnation and for immediate use and possession of the acreage. Both motions were granted Nov. 2, 2012.

What the court thought

The Smiths challenged the FERC certificate in the condemnation action. The federal district court and the court of appeals refused to allow the collateral attack on the administrative certificate. While indicating that it would not rule on the issue, the court of appeals did note that the Smiths received notice of the FERC application. “Perhaps the Smiths, as an elderly couple in rural North Dakota, should not be charged with notice of the Federal Register. But their counsel in the state court proceeding to enter and survey their land (who also represents the Smiths in this proceeding) can claim no such lack of notice,” wrote the appellate court.

The Smiths’ attempt to challenge the procedure used by Alliance in the condemnation action also was unsuccessful. North Dakota state law provides for a jury trial to determine the value of condemned land; however, the court of appeals found that the federal rules superseded state law.

The last substantive argument the Smiths proffered was that Alliance failed to negotiate in good faith before they commenced the condemnation action. The federal courts are split as to whether negotiation with landowners requires good faith, or not. This opinion, however, does not reach that issue; instead it states that even if good faith is required, Alliance met its burden. Alliance was able to purchase easements from 90 percent of the landowners, and they provided information as to how they calculated their offer.

The Smiths also argued that the court granting immediate use and possession of the land was in error. Since the Smiths would need to have succeeded on the merits of the underlying action and arguments, that argument was foreclosed. Alliance had deposited its offered $3,000 per acre payment for the easement rights, and the court found that any prejudice to the Smiths’ property could be outset by that deposit. In fact the Tioga Lateral pipeline began construction in October 2012 and had an official in-service date of Sept. 1, 2013.

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