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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

Declaratory Judgment Challenges Kentucky-American Water Company's Power To Condemn Land For Pipeline Project  Posted: September 27, 2008
COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
CIVIL ACTION NO. 08-CI-1574
DIVISION NO. I

PENNY AND EDWARD GREATHOUSE,
FRAN PINKSTON,and ELIZABETH FELGENDREHER PLAINTIFFS

V. PETITION FOR DECLARATION OF RIGHTS

KENTUCKY AMERICAN WATER COMPANY DEFENDANT

* * * * *

INTRODUCTION

This action arises under the provisions of the Kentucky Declaratory Judgment Act, KRS 418.040 et seq., seeking a declaration of rights between the Plaintiffs, Penny and Edward Greathouse, Fran Pinkston, and Elizabeth Felgendreher, and the Defendant, Kentucky American Water Company (“KAWC”), concerning the power of KAWC, a private, for-profit water utility, to acquire certain private easements through eminent domain in order to construct a water transmission pipeline in Central Kentucky. An actual controversy exists between the parties in that KAWC has asserted in correspondence with landowners that “eminent domain proceedings are open to us to complete the construction of the pipeline,” (See Attachment A to Affidavit of Elizabeth Felgendreher), and Plaintiffs dispute KAWC’s assertion that it has the power of condemnation as to their properties for construction of the proposed transmission main. Accordingly, a declaration of rights is appropriate in this case.

PARTIES

1. Plaintiffs Penny and Edward Greathouse own agricultural land in Franklin County, located at Highway 1262, 1810 Woodlake Road. The Greathouses have been approached by KAWC in an effort to obtain an easement on their property for the purposes of building a transmission main as part of the Kentucky River Station II project.

2. The Greathouses are uncertain as to their right to freely decline KAWC’s request for an easement and are unsure if KAWC has the right to condemn an easement on their property should they decline KAWC’s request. This uncertainty affects the Greathouses’ legal status in relation to KAWC. An affidavit executed by the Greathouses and evidencing the communications from KAWC, is attached and incorporated herein by reference as if fully set forth below.

3. A declaration of rights determining whether KAWC has the power of eminent domain in this instance would resolve that uncertainty.

4. Plaintiff, Fran Pinkston, resides on property she owns located on 3393 Jones Lane in Franklin County and was approached by KAWC in an effort to obtain an easement on her property for the purposes of building a transmission main as part of the Kentucky River Station II project.

5. Ms. Pinkston is uncertain as to her right to freely decline KAWC’s request for an easement and is unsure if KAWC has the right to condemn an easement on her property should she decline KAWC’s request. This uncertainty affects Ms. Pinkston’s legal status in relation to KAWC. An affidavit executed by Ms. Pinkston and evidencing the communication from KAWC, is attached and incorporated herein by reference as if fully set forth below.

6. A declaration of rights determining whether KAWC has the power of eminent domain in this instance would resolve that uncertainty.

7. Plaintiff, Elizabeth Felgendreher, owns property located on Highway 460 (Georgetown Road) and State Route 1262 in Franklin County and was approached by KAWC in an effort to obtain an easement on her property for the purposes of building a transmission main as part of the Kentucky River Station II project.

8. Ms. Felgendreher is uncertain as to her right to freely decline KAWC’s request for an easement and is unsure if KAWC will have the right to condemn an easement on her property should she decline KAWC’s request. This uncertainty affects Ms. Felgendreher’s legal status in relation to KAWC. An affidavit executed by Ms. Felgendreher and evidencing the communications from KAWC, is attached and incorporated herein by reference as if fully set forth below.

9. A declaration of rights determining whether KAWC has the power of eminent domain in this instance would resolve that uncertainty.

10. Defendant, Kentucky American Water Company, is a private, for-profit water company, organized under the laws of the Commonwealth of Kentucky, with its principal office at 2300 Richmond Rd., Lexington, KY, 40502.

11. KAWC owns and operates facilities used to distribute water to approximately 116,978 customers in Bourbon, Clark, Fayette, Gallatin, Grant, Harrison, Jessamine, Owen, Scott, and Woodford counties. It provides wholesale water service to Midway, Nicholasville, North Middletown, Georgetown, Versailles, East Clark County Water District, Jessamine-South Elkhorn Water District, and Harrison County Water Association. It directly or indirectly provides potable water service to over 326,000 persons.

12. KAWC contains two divisions. The Central Division, containing all facilities and operations other than in Gallatin, Owen, and Grant Counties (the Northern Division), contains the majority of KAWC’s customers and facilities, with an estimated 97% of the total customers, or 113,850 persons.

13. On April 25, 2008, the Kentucky Public Service Commission approved KAWC’s application for a Certificate of Convenience and Necessity to construct Kentucky River Station II (“KRS II”), a water treatment plant adjacent to Pool 3 on the Kentucky River, and 30.59 miles of 42-inch ductile iron transmission main to connect KRS II to its Central Division’s distribution system. The proposed transmission main would begin at KRS II, in Franklin County, travel across Franklin County into Scott County, before entering Fayette County and connecting to the Central Division’s distribution system. The decision of the Public Service Commission is under appeal to the Franklin Circuit Court.

14. To construct the proposed transmission pipeline, according to KAWC, it is necessary for KAWC to obtain 104 easements from private landowners residing in Fayette, Franklin, and Scott counties. While KAWC at the time of the filing of a data request response in December 10, 2007, KAWC indicated that it had obtained ten (10) of these necessary easements, sixteen (16), or fifteen percent (15%), of the landowners had refused to grant KAWC an easement to construct the transmission main. Public Service Commission Case No. 2007-00134, Response to Hearing Data Requests, Item 1 of 15 (December 10, 2007). To the extent that the easements over these properties are necessary for completion of the transmission line project, the existence vel non of a right of condemnation materially affects the properties of the Plaintiffs and the viability of the KRS II Project.

JURISDICTION AND VENUE

15. KRS 418.040 vests this court with jurisdiction over an action by a plaintiff seeking a declaration of rights where an actual controversy exists.

16. KRS 418.045 provides that any person “whose rights are affected by statute, municipal ordinance, or other governmental regulation . . . or who is concerned with any title to property” may apply to secure a declaration of rights and duties. Since only entities authorized by statute can exercise the power of eminent domain, KAWC’s power of eminent domain, if any, is defined by statute.

17. Declaratory relief is appropriate in this case under KRS 418.065 since the requested declaration of rights will terminate the uncertainty and controversy that exists in this situation.

18. Venue is appropriate in this Court pursuant to KRS 452.400, which provides that an action for an estate or interest in real property or for an injury to real property “must be brought in the county in which the subject of the action, or some part thereof, is situated.” Since each plaintiff owns property in Franklin County and the power of KAWC to condemn an easement through those properties is the subject of this action, Franklin County is an appropriate venue to bring this action.

STATUTORY BACKGROUND

19. Paragraphs 1-18 are incorporated by reference.

20. The power of eminent domain is defined by the Kentucky Constitution and the Kentucky General Assembly, and only entities authorized by statute can exercise such power.

21. The General Assembly has granted certain powers to water utilities to condemn property, and to use public rights of way. Under KRS 416.140, a company authorized under the laws of the Commonwealth to conduct the business of producing or supplying water or who is engaged in the business of transmission or sale of water may construct and maintain transmission or distribution lines “under, on along, and over” any right-of way used as a state, county or public way. KRS 96.547 gives any city utility, with an exception not applicable here, the same rights with respect to condemnation as given to corporations and partnerships under KRS 278.502 and 416.130. Non-stock, non-profit water associations supplying water to no less than 100 customers (of which KAWC is not one) are authorized to exercise the power of eminent domain under KRS 416.340.

22. KRS 96.080 is codified in a KRS Chapter entitled, “Utilities in Cities.” It provides that, “[a]ny person constructing, maintaining or operating waterworks or pipelines for the supply of water to a municipality may condemn lands and material necessary to carry out these purposes in the manner described in the Eminent Domain Act of Kentucky.”

23. The Plaintiff is not aware of any statutory grant of authority that would allow KAWC, a private for-profit water company selling to multiple water districts and communities at wholesale, in addition to retail customer within and outside of Fayette County, to condemn private property located in Franklin County for the purpose of installing a transmission main for conveying water from a treatment plant to multiple customers in other counties.

COUNT I

PLAINTIFFS ARE ENTITLED TO A DECLARATION THAT KENTUCKY AMERICAN WATER COMPANY HAS NO STATUTORY AUTHORITY TO CONDEMN PRIVATE PROPERTY FOR A TRANSMISSION LINE THAT WILL SERVE TO SUPPLY WATER TO MULTIPLE DISTRICTS AND COMMUNITIES INSIDE AND OUTSIDE OF FAYETTE COUNTY

24. Numerical paragraphs 1-23 are incorporated herein by reference as if fully set forth below.

25. KAWC does not have the authority to condemn private land to construct a transmission line under KRS 416.140 since this statute only authorizes construction of transmission lines under state, county, or public right-of-ways. To the best of Plaintiffs knowledge and belief, the easements sought from the Plaintiffs in this instance are not within those rights-of-way.

26. KAWC does not have the authority to condemn private land to construct a transmission line under KRS 416.130 because KAWC is not a nonstock, non-profit water association. KAWC is a private, for-profit water company that issues stock.

27. KAWC does not have the authority to condemn private land to construct a transmission line under KRS 96.547 because KAWC is not a city utility.

28. KRS 96.080 does not provide KAWC authority to condemn land in Franklin County in this case. KRS 96.080 has been construed, in a case involving the prior codification of KRS 96.080 at KS 4814d-1, to provide a right of condemnation to the holder of a franchise to provide water to a municipality, only of “such land or other property as may be necessary to carry into effect his franchise contract.” Thomas v. City of Horse Cave, 61 S.W.2d 601, 604 (Ky. 1933). KAWC’s power of eminent domain, to the extent that it exists, is derivative of the power of the franchisor Lexington Fayette Urban County Government, and in this case, LFUCG would have no condemnation power in order to facilitate a transmission line that would serve customers other than its residents.

29. KAWC entered into a franchise agreement with LFUCG on May 16, 1995 to, in part, construct and maintain a waterworks system and pipelines and transport water through its mains and pipelines in Fayette County. The franchise is limited to lands inside Fayette County.

30. There is nothing in the KAWC application for the KRS II Project, the hearing testimony from the PSC decision, or in the Commission’s order that limits sale or distribution of, or dedicates the water that will be treated and transmitted from the KRS II project to residents in Fayette County, or which limits the construction, maintenance, or operation of the Pool 3 waterworks or transmission pipeline for the supply of water “to a municipality.”

31. KAWC had in fact proposed to reserve 5 MGD of production and transmission capacity for the KRS II project to communities other than Fayette County, and on that basis had asserted that the KRS II project was a regional water solution.

32. As a company engaged in the delivery and sale of waters to numerous entities other than to customers in Fayette County, KAWC does not fall within the ambit of KRS 96.080 as “a person constructing, maintaining or operating waterworks or pipelines for the supply of water to a municipality[.]”

33. Alternatively, to the extent that KAWC did fall within that description, under the Thomas decision, the power to condemn would extend only so far as necessary to enable the company to meet the franchise terms of supplying water to Fayette County.

34. Nothing in the Thomas decision nor in the statute itself enables a private for-profit water company selling to multiple water districts and communities at wholesale, in addition to retail customers within and outside of Fayette County, to condemn land in Franklin County in order to serve retail and wholesale customers in counties other than Fayette.

35. The grant of the power of eminent domain is to be strictly construed against the condemning party and in favor of the property owner. 26 Am. Jur.2d Eminent Domain §24.

36. There appears to be no other statutory authority that would allow KAWC to condemn private property in this case, as there is no general grant of power to a privately owned for-profit water utility to condemn private lands for the construction or maintenance of transmission or distribution lines.

CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, for the reasons above stated, Plaintiffs respectfully request that this Court:

1. Accept jurisdiction over this petition for a declaration of rights,

2. Determine and declare that Kentucky American Water Company, a private for-profit water company, does not, under Kentucky law, have the power of eminent domain to condemn easements on private property in Franklin County for the purposes of constructing a transmission line related to the KRS II project, and

3. For any and all other relief to which Plaintiffs appear entitled.



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