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

Governor Beshear Should Add Regulation of Natural Gas Liquids Pipeline Siting, and Condemnation Power of Non-Utility Pipelines, To August 19 Special Session Call  Posted: July 17, 2013

Governor And General Assembly Should Close The Gap On Oversight Of The Routing And Impacts Of Natural Gas Liquids Pipelines

The Problems

Under current federal and Kentucky law, there is no comprehensive governmental review of the impacts of any proposed natural gas liquids pipeline on public health and safety, land, air and water resources, and local communities in Kentucky.

Under current Kentucky law, a private natural gas liquids pipeline company shipping natural gas liquids through the state, might be able to condemn other people’s property even though that pipeline company is not regulated as a public utility by Kentucky.

The Solution

The Governor should place “regulation of natural gas liquids pipelines” and “eminent domain powers of non-utility pipelines” on the call for the August, 2013 Special Session of the General Assembly.

The General Assembly should amend state law to give the Kentucky State Board of Electric Generation and Transmission Siting the power to review any natural gas liquids pipeline proposal, and to limit the power of eminent domain to pipelines that are regulated as public utilities by the Public Service Commission.

The Background

The proposed “Bluegrass Pipeline” project, a joint venture of Williams Co. and Boardwalk Pipeline Partners, is intended to transport mixed “Natural Gas Liquids” from the areas where natural gas is being produced from the Marcellus and Utica shale formations in West Virginia, Ohio, and Pennsylvania, to the Gulf region for further processing and use. The project highlights a major gap in the oversight of the location, routing, and health, safety, and environmental impacts of interstate pipelines transporting these flammable, combustible petroleum liquids.

What are “Natural Gas Liquids?”

Natural gas liquids are petroleum hydrocarbons extracted during natural gas production, including ethane, propane, normal butane, isobutane and natural gasoline. Various NGLs are used as raw materials by the petrochemical industry, as feedstocks by refiners in the production of motor gasoline, and as fuel by industrial and residential users. Ethane is a “highly flammable gas and a dangerous fire hazard,” and propane, butane, and isobutane are flammable gases.


NGL Pipelines fall into a category of low-occurrence, but high-hazard risks. When they occur, pipeline ruptures often have catastrophic consequences. Accidental pipeline releases can result from a variety of causes, including natural disasters, excavation and other outside force damage, internal and external corrosion, mechanical failure, and operator error. Leaks from pipelines can contaminate soil and groundwater.

Why Isn’t the Routing of Natural Gas Liquids Pipelines Regulated?

Interstate pipeline transportation of the methane fraction of produced natural gas is regulated under the Natural Gas Act. The Federal Energy Regulatory Commission (FERC) requires that any new pipeline first receive a “Certificate of Public Convenience and Necessity,” and the National Environmental Policy Act requires that the direct, indirect, and cumulative impacts of such a pipeline be evaluated and the consequences mitigated. The public has multiple opportunities to be heard in conjunction with the application, and in the environmental review process.

There is no comparable FERC jurisdiction over the construction, siting, or environmental consequences of a natural gas liquids pipeline, even though the natural gas liquids are produced from the same wells as the methane. Natural Gas Liquids are instead regulated under the Interstate Commerce Act, which does not provide a process for advance government review of the routing and necessity for a NGL pipeline. FERC jurisdiction is limited to review and approval of the tariffs (rates and terms under which the pipeline will transport NGLs).

The Kentucky Public Service Commission has taken the position that it does not have jurisdiction to require that a proposed NGL pipeline apply for a “Certificate of Public Convenience and Necessity.”

The standards for physical construction of NGL pipelines are established under the Pipeline and Hazardous Materials Safety Administration within the U.S. Department of Transportation, but there is no permitting process and there are no federal or state standards for siting setbacks regarding communities, homes, parks, and other properties.

Finally, in those Kentucky counties with zoning and planning, few if any of the zoning ordinances have provisions regarding the siting of natural gas liquids or other pipelines.

Do NGL Pipeline Companies have the right to condemn lands in Kentucky?

Kentucky law is unclear on this, but an argument could be made that even though these pipelines are not “public utilities” under Kentucky law, a private NGL pipeline company has the right to condemn other people’s lands. The power to condemn land should be limited to public utilities providing services to Kentuckians, and not to a private interstate pipeline shipping hazardous liquids from other states through Kentucky.

The Solution: Amend Kentucky Law To Require A Construction Certificate For Any NGL Pipelines, and Clarify That The Right To Condemn Lands For Pipelines Is Limited To Regulated Kentucky Public Utilities

In response to the lack of state oversight of the siting of “merchant power plants” that were not regulated by the Public Service Commission since they proposed to sell electricity in the wholesale marketplace, the General Assembly created the “Kentucky State Board on Electric Generation And Transmission Siting” in 2002, and required that merchant electric power plants, non-regulated electric transmission lines, and, after a 2012 amendment, pipelines transporting carbon dioxide, obtain a “construction certificate” from the Board after consideration of and mitigation of adverse impacts.

KRS 278.704 through 278.712 could be amended to include “natural gas liquids pipelines” in order that the proposed pipelines receive the same advance scrutiny that merchant power plants do, and to add public safety and environmental standards for review and approval of NGL pipelines. KRS 278.714, which addresses nonregulated electric transmission lines and carbon dioxide pipelines, is too limited in focus (i.e. impacts on scenic beauty) to provide the type of comprehensive review of impact on nearby property owners, air and noise pollution, compatibility with surrounding areas, and setbacks that are needed for routing pipelines capable of catastrophic failure, explosions, and leakage.

Regarding condemnation, state law should be clarified so that only those pipelines that are owned by companies regulated as “public utilities” in the Commonwealth have the power to take other people’s property.

In order to protect the landowners and communities in the proposed Bluegrass Pipeline corridor, and to assure that all proposed NGL pipelines in the expanding shale gas marketplace are properly scrutinized, this issue should be added by the Governor to the call for the August 2013 Special Session.

If you agree, then:

Call the Governor’s Office at 502-564-2611 and ask that “the Governor place the “regulation of natural gas liquids pipelines” and “limiting eminent domain powers to utility-owned pipelines” on the call for the August, 2013 Special Session of the General Assembly.

Call your state Senator and state Representative at 502-564-8100 and ask them to urge the Governor to add these issues to the “Special Session Call,” and to amend Kentucky’s laws to limit the power of condemnation for pipelines to utilities, and to require state review of any proposed natural gas liquids pipeline.

If you want to email your state Senator or state Representative, or you are unsure who represents you, go to the Legislative Research Commission website at www.lrc.ky.gov and click on “Who’s My Legislator.”

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