Public Interest of Pipeline Takes Focus in Damages Spat

PHILADELPHIA (CN) — The Third Circuit appeared critical Wednesday that a Kinder Morgan subsidiary should rely on federal law to pay less than fair-market value for land it seized via eminent domain to build an interstate pipeline.

“With all due respect, it sounds like it’s all about money here,” U.S. Circuit Judge Michael Chagares said Wednesday afternoon while Elizabeth Witmer of Saul Ewing delivered oral arguments for the pipeline company. “A little less money in your client’s pocket.”

The appeal stems from an order in 2012 that allowed Tennessee Gas Pipeline to acquire a little more than 7 acres of land in Pike County, Pennsylvania, owned by King Arthur Estates.

Though King Arthur claimed that it was entitled to more than $3 million as just compensation after factoring in professional fees and development costs, Scranton-based U.S. District Richard Caputo rejected that bid last year.

Attorney Witmer urged the Philadelphia-based federal appeals court to affirm Wednesday, saying that Caputo correctly calculated just compensation under the Natural Gas Act by using federal law rather than state.

“The objective of the NGA is to build a national network of natural gas transmission lines,” she said. “If any one of those states has a scheme that would frustrate the purposes of building the networks it would stop the entire project.”

Witmer also likened her client’s pipeline project to Amtrak’s crusade to build tracks up the east coast, saying that Tennessee Gas was fulfilling a public goal of creating “railroads for natural gas.”

She argued that this mission fits with the text of the Natural Gas Act: "Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest."

U.S. Circuit Judge Joseph Greenaway Jr. seemed skeptical, however, that the public objective alone overcomes state law.

“We do that all the time,” Greenaway said. Different states render different benefits to their citizens based on different laws.”

Arguing for King Arthur at the hearing meanwhile, attorney John Stieh said there was “absolutely no need” to abide by federal law in this case.

“No state would say that just compensation would be less than fair-market value,” Stieh said. “That easement is a matter of property law. There is no federal law about easements.”

Steih complained that Judge Caputo’s ruling ignored the distinction between the federal government taking property for a federal use project and for a private project.

“It is a private taking under federal law under federal interest but it is not a public use,” Stieh said. “Private versus public is a major distinction. We’re talking about a private entity doing something for its business oriented purposes which has an effect on the public.”

The lawyer then accused the pipeline company of being concerned only about profit.

U.S. Circuit Thomas Ambro focused on Witmer’s failure to name any outrageous takings laws that would make the use of federal law in easement cases necessary.

“If there isn’t anything out there that’s so egregious that there might not need a case for a federal uniform law,” Ambro said.

The judges did not signal when they plan to rule.

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