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Kentucky Appeals Court Rules Natural Gas Liquids Pipelines Can't Use Eminent Domain

The Kentucky Court of Appeals on Friday upheld a lower court’s decision that a natural gas liquids pipeline would not have the right of eminent domain in the commonwealth. The unanimous decision means that only utilities regulated by the Public Service Commission can invoke eminent domain in Kentucky.

The case wasfiled back in December 2013, when pipeline company Williams began work in Kentucky to lay 500 miles of pipe across the state. The Bluegrass Pipeline would hook up with existing pipeline in other states, and was designed to carry natural gas liquids (NGLs) from drilling operations in the Northeast to processing plants on the Gulf of Mexico. NGLs are byproducts of natural gas drilling; they’re hydrocarbons like propane, ethane and butane, and are used in manufacturing materials like plastics.

A grassroots resistance to the Bluegrass Pipeline grew, and many landowners expressed concerns about the pipeline crossing their property. Williams said publicly the company believed it had the power of eminent domain, but other legal experts in the commonwealth disagreed. Kentucky law on the subject was unclear.

Now, the Court of Appeals decision has cleared up the commonwealth’s eminent domain law. As Judge Janet Stumbo wrote in the unanimous opinion:

"We believe that the legislature only intended to delegate the state’s power of eminent domain to those pipeline companies that are, or will be, regulated by the PSC. In addition, the NGLs in Bluegrass’s pipeline are being transported to a facility in the Gulf of Mexico. If these NGLs are not reaching Kentucky consumers, then Bluegrass and its pipeline cannot be said to be in the public service of Kentucky. We therefore affirm the circuit court’s judgment that Bluegrass does not possess the ability to condemn property through eminent domain."

The Bluegrass Pipeline has since been put on hold, but this decision could affect other potential NGL pipeline projects. Kinder Morgan is exploring converting part of the existing Tennessee Gas Pipeline—which runs through 18 Kentucky counties—to carry NGLs, and this decision means the company couldn’t use eminent domain to acquire any additional land.

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