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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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

KRC Testifies On Bluegrass NGL Pipeline  Posted: September 9, 2013

Statement Before The Interim Joint Committee on
Natural Resources and the Environment
September 5, 2013

Chairmen Carpenter and Gooch, Members of the Interim Joint Committee, I’m Tom FitzGerald and I am Director of the Kentucky Resources Council, Inc., a nonprofit environmental advocacy organization providing, without charge, legal and technical assistance on low- and fixed-income individuals, communities, local governments, and other organizations on a range of environmental and energy issues. The Council, which I have directed since 1984, has worked with landowners and local governments in counties that are in the path of the proposed Bluegrass Natural Gas Liquids Pipeline, advising landowners of their rights concerning site surveys and easements, eminent domain and current regulatory framework for this type of hazardous material pipeline. I appreciate this opportunity to briefly outline the concerns that the Council has, and to share some concerns I’ve heard from landowners with whom I have interacted at the several community meetings that have been held across the path of the pipeline.

The benefits and burdens, risks and opportunities of projects such as this Bluegrass Pipeline Natural Gas Liquids (NGL) Pipeline project, and of the competing Kinder-Morgan / MarkWest proposed repurposed Tennessee Gas natural gas pipeline, are never equally distributed. And while the mixture of hydrocarbons, typically including ethane, propane, pentane or natural gasoline, butane, and isobutane, that are described as “natural gas liquids,” have economic value to the producers and consumers, the production, transportation, and separation of the various hydrocarbons through fractionation, of these NGLs impose risks and burdens - on the communities where natural gas is extracted from shale and other geologic strata through hydraulic fracturing, those through which the NGLs are transported by rail or pipeline, and those hosting facilities where the various components of the NGLs are separated and processed for use.

Among the burdens that are imposed on communities through which NGL pipelines are routed, are limitations on the use and value of property of individual landowners; impacts on roads, and land and water resources of local communities; and on local governments whose capacity for emergency response, including fire, police, EMT, public health and environmental response services are already stretched thin and must now plan for a new hazard of relatively low probability but of catastrophic consequence potential – the potential for leaks and releases, fires and explosions associated with a pressurized NGL pipeline with the capacity of 200,000 barrels of liquids per day, expandable to 400,000.

In the time allotted to me, I’d like to address three issues of concern to the folks that I represent, that the proposed pipeline has brought to the forefront: the need for a state-level routing review of this and other hazardous liquids pipelines; the need to more clearly define and limit the power of eminent domain; and finally, the failure of the Energy and Environment Cabinet to develop regulations addressing oil and gas production and transportation, despite a legislative mandate to do so in 2003, when local governments were pre-empted from regulating any aspect of the oil and gas industry.

I. There is a need for advance state-level review of the necessity and routing of proposed NGL pipelines

As I began to research the regulatory framework for NGL pipelines, I became very concerned that, unlike the pipelines carrying the methane fraction of the extracted natural gas, which are regulated under the Natural Gas Act as to the necessity for the pipeline, by the Federal Energy Regulatory Commission (FERC), there is no "certificate of public convenience and necessity” required for a NGL pipeline, and no comprehensive oversight of the routing of the pipeline. FERC’s role with respect to NGL pipelines, even though they come from the same well as the methane that is regulated under the Natural Gas Act and for which a CPCN is required from FERC, is limited to tariffing (rates and terms) of NGL pipelines after construction and before use.

Given the significant increase in the production of NGLs from the Marcellus and Utica shale plays and others in the nation, there is a need for advance scrutiny of new and repurposed NGL pipelines, and for that reason, a number of Fiscal Courts, several legislators, and a significant number of your constituents across the Commonwealth have called for a state siting process similar to what was created to address merchant power plants. There are several states that have siting processes for these hazardous liquid pipelines, and there is a need for a comprehensive, advance review in order to minimize risks to built and natural communities, public and private property, and surface and groundwater resources. We had asked that the issue, and that of eminent domain, be placed on the special session call, but the Governor declined to do so. We still believe that a special session would help assure landowners that they are not under threat of condemnation, and that the routing would be reviewed in advance of construction.

It is true that natural gas liquid transportation by pipeline is not new to Kentucky, as those of you who recall the explosion in the Floyd County community of Ivel in November of 2004, when a segment of four-inch NGL pipeline failed, causing fires, explosions, nine injuries, 3 hospitalizations, and the destruction of five homes. The risk of catastrophic failures of NGL pipelines is a legitimate concern, particularly for the repurposed portions of former natural gas pipelines that are older, not necessarily welded to current standards, and for which the maximum pressure is close to the minimum necessary to maintain the NGLs in liquid state.

The risk of leaks causing damage to land and water resources, however, is as much a concern. You will likely hear, or have heard, that the frequency of pipeline-related incidents is less than rail. Yet the volume spilled from pipeline incidents, individually and in the aggregate, tends to be much higher than from the loss of a rail car or rail cars.

The risk of leaks from a buried natural gas liquids pipeline is not merely theoretical. The natural gas liquid pipeline leak that occurred in Parachute, Colorado between December and early January, 2013, is still under investigation and in the process of being remedied. According to the Williams company, what happened at the Parachute Gas Plant in Colorado is that a “failed pressure gauge was the source of the hydrocarbon fluids we found in March near our Parachute Gas Plant in Colorado. The leak was stopped on January 3, 2013, at 12:33 a.m. The gauge was part of a valve set on a 4-inch natural gas liquids pipeline that belongs to Williams Partners. Our evaluation of data from two flow meters on the 4-inch natural gas liquids pipeline showed that the pressure-gauge leak started on December 20, 2012. Based on our analysis that employed Environmental Protection Agency methodology regarding the evaporative properties of natural gas liquids, we estimated that about 80 percent of the leaked volumes vaporized before entering the soil. By the time the leak was stopped on January 3, 2013, the company estimates up to 241 barrels of natural gas liquids entered the soil at the valve location.”

I found the incident instructive and disturbing, particularly in light of the proposed route, which would traverse karst terrain with vulnerable groundwater resources. Instructive because the leak detection monitoring was apparently ineffective, since the leak had been ongoing for two weeks prior to it being discovered “by accident” according to an AP April 3, 2013 article.

Disturbing because this was a line “seep” that was not detected by monitoring pipeline pressure and according to the AP, company officials acknowledged that the integrity of buried pipelines cannot be easily checked. Williams representative said that unless leaked liquid natural gas or oil “would have come up to the surface, or a pipeline lost pressure, there’s no other way to my knowledge to know if there’s a leak. AP April 3, 2013.

Disturbing because the remediation involved the pumping of groundwater in order to strip out the NGLs, resulted in 180,000 gallons of contaminated groundwater and recovery of 5,900 gallons of liquid hydrocarbons. Since that time, with an additional 1,432 gallons recovered, one can assume an additional volume of contaminated groundwater associated with the release. The risks of “seeps” demands that careful attention be paid, in advance of routing, to the vulnerability of water resources.

In the absence of FERC review of the proposed pipeline, the Corps of Engineers review of requests for authorizations under the Clean Water Act for stream and wetland crossings, is likely the only advance federal agency approval, other than the spot inspections that the Department of Transportation Pipeline and Hazardous Material Safety Administration will conduct. Given the significant number of stream, river, and other waterbody crossings that the 500+-mile pipeline will entail, that in the absence of FERC review of the pipeline proposal, we, and several of the affected counties, have called on the U.S. Army Corps of Engineers (COE) to require a comprehensive Environmental Impact Statement (EIS) for the entire Bluegrass Pipeline project (including the existing gas line to be repurposed, since there will be some new construction associated with that portion of the line). We have notified the COE that we believe they must do so, and have called on the Bluegrass Pipeline partners to voluntarily commit to development of an EIS irrespective of whether one is required.

We look forward to working with you to develop a state-level review process on the routing of and mitigation of risks and impacts of, NGL pipelines.

II. The laws governing the power of eminent domain should be clarified and narrowed in order to assure that the power is limited to public utilities in service to Kentuckians.

A representative of the Williams Company, one of the two partners in this proposed project, has publicly stated a belief that the Bluegrass Pipeline project will possess the right of condemnation, or eminent domain, under Kentucky law. No such right exists under the Interstate Commerce Act, so any power to condemn the property of landowners in Kentucky exists, if at all, under state statute.

The Council believes, after considerable research on the available state and federal case law, and after researching the nature of the proposed pipeline, that the company likely does not have the power of eminent domain for a project of this nature. The issue is not settled, however, and the distinct possibility exists that individual landowners may be sued in the event that they do not “willingly” grant an easement to the project. I bracket the word “willingly,” since I believe that any negotiation for an easement that occurs under the implied or explicit threat of condemnation, is inherently unfair.

In response to the Kelo decision, the General Assembly amended the Eminent Domain Act to clarify the intent of all of the various grants of eminent domain authority found in the state statutes. Further clarification is needed regarding what is intended by the phrase “in public service” in KRS 278.502, so that landowners need not fear that a decision to deny an easement will enmesh them in a condemnation action in which, even if successful, they will incur significant costs and expenses in vindicating their right to be left alone.

The General Assembly has the opportunity to address the Court of Appeals decision in Milam v. Viking Energy, upholding the right of a company to condemn the lands of another for the installation of a proprietary gathering line. The power to condemn the property of others should be limited to regulated utilities, and not be available to private non-utility companies seeking access to or through the lands of others.

III. The Energy and Environment Cabinet should act promptly to respond to a decade-old mandate, and in the absence of a commitment to act, the statute should be revisited to impose a firm statutory deadline.

Ten years is long enough for landowners across the Commonwealth to wait for the Energy and Environment Cabinet to do its job. In 2003, those of you who were serving will recall that in response to efforts by the Letcher County Fiscal Court to regulate damage associated with gathering lines, the General Assembly amended KRS 353.500(2) to provide that

governmental responsibility for regulating all aspects of oil and gas exploration, production, development, gathering, and transmission rests with state government. The department shall promulgate regulations relating thereto and take all actions necessary to assure efficient oil and gas operations and to protect the property, health, and safety of the citizens of the Commonwealth in a manner consistent with KRS Chapter 353, and to the exclusion of all other nonstate governmental entities except as provided in KRS Chapter 100. The department shall promulgate regulations relating to gathering lines within six (6) months after June 24, 2003. Nothing in this section shall be construed as limiting the rights of local governmental units to regulate the use of streets, highways, and rights-of-way. The department shall report quarterly to the Legislative Research Commission beginning July 1, 2003, through December 31, 2004. The report shall detail progress made in carrying out this section, and the efficacy of the regulatory programs implemented.

Had the Cabinet acted in a timely manner to discharge the responsibilities imposed under this statute, we might not find ourselves in the position of having no standards for setbacks for pipelines from sensitive natural resources, public facilities and private homes, and other areas where the risks of siting a hazardous material pipeline are considered too great. Had the Cabinet done its job, we would have a better handle on the impacts of transmission of hydrocarbon liquids on the property, health, and safety of the citizens of the Commonwealth. The Cabinet’s inaction, first justified on the basis of awaiting the results of a peer-review under the STRONGER program, no longer holds water since that review was completed years ago.

Committee members, I want to thank you for holding this meeting, for the opportunity to highlight some areas of particular concern, and I look forward to working with you as I have since 1978, either in a special session or during the regular 2014 session, to make those changes to state law needed to provide landowners and local communities assurance that proper advance review of the public safety and environmental impacts of routing, construction, and operation of the proposed pipeline occurs, and to more clearly limit the power of eminent domain to public utilities in service to Kentuckians.

Thank you.

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