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

Complaint Seeks Court Ruling On Whether Bluegrass Pipeline Company LLC Can Condemn Property For Natural Gas Liquids Pipeline  Posted: December 5, 2013

COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
CIVIL ACTION NO. ____
DIVISION NO. ____

KENTUCKIANS UNITED TO RESTRAIN EMINENT DOMAIN, INC. PLAINTIFF

V. COMPLAINT AND PETITION FOR A DECLARATION OF RIGHTS

BLUEGRASS PIPELINE COMPANY, LLC
DEFENDANT

Serve: CT Corporation System
306 W. Main Street, Suite 512
Frankfort, Kentucky 40601

* * * * *

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 Plaintiff Kentuckians United To Restrain Eminent Domain, Inc. (“KURE”) and the Defendant Bluegrass Pipeline Company LLC (“Bluegrass”), as to the validity of the claim asserted by Bluegrass of the right to invoke KRS 278.502 in order to condemn properties in furtherance of the installation of a natural gas liquids pipeline through portions of Franklin and other counties in Kentucky.

An actual controversy exists between the parties in that Bluegrass has asserted that it has the right to condemn property under KRS 278.502, KRS 416.675(2)(d), and KRS 278.470, if needed in order to obtain easements for the construction and installation of the proposed pipeline, and Kentuckians United to Restrain Eminent Domain, on behalf of Board member Penny Greathouse and other members, dispute that claim. Accordingly, a declaration of rights is appropriate in this case.

PARTIES

1. Kentuckians United to Restrain Eminent Domain, Inc., (“KURE”) is a non-profit corporation incorporated under the laws of the Commonwealth of Kentucky, whose members are united “to protect Kentuckians from the threat of and attempts to exercise eminent domain by entities not in public service to Kentuckians.”

2. Among the KURE members directly affected by the proposed Bluegrass Pipeline is Penny Greathouse, who owns property located in Franklin County and who has several times been approached by agents for Bluegrass seeking to acquire an easement across her property in order to locate a portion of the proposed “Bluegrass Pipeline,” which is a 24-inch pressurized pipeline for transporting natural gas liquids (an unfractionated mixture of pentane, propane, butane, isobutane, and ethane) from the Marcellus and Utica shale formations in Pennsylvania, West Virginia, and Ohio, to the Gulf of Mexico. Ms. Greathouse is also a member of the Board of Directors of KURE.

3. KURE has representational standing to maintain this action on behalf of Ms. Greathouse in order to vindicate her legally recognizable interest as a property owner in being safe from the prospect of eminent domain being invoked in support of the pipeline project, and to secure a declaration of rights on her behalf with respect to granting or declining to grant an easement in light of the claim by Bluegrass to have the power of eminent domain.

4. Bluegrass Pipeline Company LLC, is a limited liability company with a principal office at One Williams Center, Tulsa, Oklahoma, 74142, and a registered office in Kentucky at 306 W. Main Street, Suite 512, Frankfort, Kentucky, 40601. Agents of Bluegrass have approached Ms. Greathouse in an effort to acquire an easement for the construction and installation of the proposed natural gas liquids (“NGL”) pipeline. A representative of Bluegrass has indicated to Ms. Greathouse that the company believes it has the power of eminent domain in support of the proposed pipeline. The affidavit of Penny Greathouse is attached as Appendix A to this complaint and petition for declaration of rights.

JURISDICTION AND VENUE

5. KRS 418.040 vests this court with jurisdiction over an action by a plaintiff seeking a declaration of rights, “either alone or with other relief,” where an actual controversy exists, and this Court “may make a binding declaration of rights, whether or not consequential relief is or could be asked.”

6. An actual controversy exists between the parties regarding the claim of Bluegrass Pipeline Company LLC to the power to condemn property pursuant to KRS 278.502, KRS 416. 675(2)(d), and KRS 278.470.

7. 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. That statute further provides that the enumeration of instances in KRS 418.045 where a declaratory judgment may be prayed and granted under KRS 418.040 “does not exclude other instances…whether such other instance be of a similar or different character to those” enumerated in KRS 418.045. KURE, on behalf of member Penny Greathouse and other KURE members who have been approached regarding the grant of an easement by agents of Bluegrass, has representational standing to seek a declaration of rights on their behalf with respect to whether the statutes identified by Bluegrass Pipeline Company LLC as supporting their claim of eminent domain authority, provide such authority.

8. 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, and is squarely within the remedial purpose of KRS 418.040 to 418.090 announced in KRS 418.080, since a declaration of rights would afford “relief from uncertainty and insecurity with respect to rights, duties and relations” as between KURE and its members, and Bluegrass Pipeline Company LLC.

9. Venue is appropriate in this Court inasmuch as the principal offices of both Bluegrass and KURE in Kentucky are located in Franklin County, and because the property of KURE Board member Penny Greathouse is located in Franklin County.

COUNT I

I. PLAINTIFF IS ENTITLED TO A DECLARATION THAT BLUEGRASS PIPELINE COMPANY LLC DOES NOT HAVE THE POWER OF EMINENT DOMAIN UNDER KENTUCKY LAW FOR THE PROPOSED BLUEGRASS NGL PIPELINE PROJECT

10. Numerical paragraphs 1-9 are incorporated herein as if fully set out below.

11. By letter dated August 1, 2013, Bluegrass representative Wendell Hunt asserted in a letter to County Judge Executive Ted Collins that:

"In Kentucky, we have eminent domain power as provided by Kentucky Revised Statutes (KRS): KRS [Section] 278.502, KRS [Section] 416.675(2)(d) and KRS [Section] 278.470. Bluegrass Pipeline meets the criteria of a common carrier under Kentucky law because it will provide open access to any potential Kentucky customer that is willing to meet the Bluegrass Pipeline’s tariff conditions and pay the tariff rate."

August 1, 2013 Letter from Wendell Hunt to County Judge Executive Collins (The letter is attached as Appendix B).

12. Additionally, as reflected in the Affidavit of Penny Greathouse, Bluegrass Agent Rich Ellis has represented directly to Ms. Greathouse that the company has the power of eminent domain.

13. KRS 278.502, the first of the three statutes cited by Bluegrass, provides in full that:

278.502 Condemnation for pipelines and related facilities, including rights of ingress and egress.

Any corporation or partnership organized for the purpose of, and any individual engaged in or proposing to engage in, constructing, maintaining, or operating oil or gas wells or pipelines for transporting or delivering oil or gas, including oil and gas
products, in public service may, if it is unable to contract or agree with the owner after a good faith effort to do so, condemn the lands and material or the use and occupation of the lands that are necessary for constructing, maintaining, drilling, utilizing, and operating pipelines, underground oil or gas storage fields, and wells giving access thereto and all necessary machinery, equipment, pumping stations, appliances, and fixtures, including tanks and telephone lines, and other communication facilities, for use in connection therewith, and the necessary rights of ingress and egress to construct, examine, alter, repair, maintain, operate, or remove
such pipelines or underground gas storage fields, to drill new wells and utilize existing wells in connection therewith, and remove pipe, casing, equipment, and other facilities relating to such underground storage fields and access wells. The proceedings for condemnation shall be as provided in the Eminent Domain Act of Kentucky.

KRS 278.502 (Italics added).

14. By its terms, the grant of eminent domain powers under this statute is limited to entities engaged in or proposing to engage in transporting “oil or gas” or “oil or gas products” “in public service.”

15. The proposed “Bluegrass Pipeline” is, according to numerous statements released by the project proponents, intended to transport natural gas liquids from the Marcellus and Utica shale gas producing formations in Pennsylvania, West Virginia, and Ohio, to the petrochemical and export markets in the U.S. Gulf Coast.

16. Natural gas liquids are not “oil or gas,” nor are they “oil or gas products” as those terms are used in KRS 278.502.

17. Interstate transportation of natural gas liquids by pipeline through the Commonwealth is not transportation of delivery of oil or gas, or oil and gas products, “in public service,” as that term is used in KRS 278.502.

18. Bluegrass Pipeline Company LLC is not a public utility regulated by the Kentucky Public Service Commission pursuant to KRS Chapter 278, and thus is not “in public service” as that term is used in KRS 278.502.

19. Since the proposed Bluegrass Pipeline will not be transporting or delivering oil or gas, or oil or gas products, in public service, it does not have any right to invoke KRS 278.502 in order to condemn an easement in support of the project.

20. The second statute mentioned in the August 1, 2013 Hunt letter as a source of the company’s right of eminent domain is KRS 416.675(2)(d), which provides in full that:

416.675 Public use required -- No condemnation for indirect benefit –Exemption.

(1) Every grant of authority contained in the Kentucky Revised Statutes to exercise the power of eminent domain shall be subject to the condition that the authority be exercised only to effectuate a public use of the condemned property.

(2) "Public use" shall mean the following:
(a) Ownership of the property by the Commonwealth, a political subdivision of the Commonwealth, or other governmental entity;
(b) The possession, occupation, or enjoyment of the property as a matter of right by the Commonwealth, a political subdivision of the Commonwealth, or other governmental entity;
(c) The acquisition and transfer of property for the purpose of eliminating blighted areas, slum areas, or substandard and insanitary areas in accordance with KRS Chapter 99;
(d) The use of the property for the creation or operation of public utilities or common carriers; or
(e) Other use of the property expressly authorized by statute.

(3) No provision in the law of the Commonwealth shall be construed to authorize the condemnation of private property for transfer to a private owner for the purpose of economic development that benefits the general public only indirectly, such as by increasing the tax base, tax revenues, or employment, or by promoting the general economic health of the community. However, this provision shall not prohibit the sale or lease of property to private entities that
occupy an incidental area within a public project or building, provided that no property may be condemned primarily for the purpose of facilitating an incidental private use.

(4) The exercise of the power of eminent domain for the acquisition of property financed by state road funds or federal highway funds shall be exempt from the provisions of this section.

KRS 416.675 (2006).

Adopted in the aftermath of the U.S. Supreme Court Kelo decision, KRS 416.675 does not provide an independent grant of condemnation authority, but instead by its plain language imposes “conditions” those grants of eminent domain authority found elsewhere in the Kentucky Revised Statutes.

21. KRS 416.675(2)(d) does not grant Bluegrass Pipeline Company LLC any power or right to invoke eminent domain in order to obtain easements for the Bluegrass Pipeline project.

22. The final source of authority cited in the August 1, 2013 Hunt letter is KRS 278.470, which provides in full that:

278.470 Companies transporting oil or gas by pipeline are common carriers.

Every company receiving, transporting or delivering a supply of oil or natural gas for public consumption is declared to be a common carrier, and the receipt,transportation and delivery of natural gas into, through and from a pipeline operated by any such company is declared to be a public use.

23. KRS 278.470 does not grant any right of eminent domain, and is instead a legislative declaration that companies receiving, transporting, or delivering “oil or natural gas” “for public consumption” are deemed to be common carriers under Kentucky law, and the use of pipelines for such purposes is deemed to be “a public use.”

24. The Bluegrass Pipeline project will not be receiving, transporting, or delivering “oil or natural gas” as the phrase is used in KRS 278.470, but is instead intended to transport natural gas liquids by pipeline.

25. The Bluegrass Pipeline project will not be receiving, transporting, or delivering oil or natural gas “for public consumption” as that term is used in the statute, since the transportation of the natural gas liquids is for a limited customer base to which the natural gas liquids will be delivered or sold after being processed by the joint venture in Louisiana, and because the unfractionated natural gas liquids would be transported through the Commonwealth and are not intended to serve or be used by Kentucky consumers.

26. The Bluegrass Pipeline project will not be a “common carrier” as that term is used in KRS 278.470, since it is not intended to transport “oil or natural gas” “for public consumption,” as those term are used in the statute.

27. There is no source of authority under Kentucky law granting eminent domain authority to the Bluegrass Pipeline Company LLC for the proposed Bluegrass NGL Pipeline project.

CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, for the reasons above stated, Plaintiff respectfully requests that this Court:

1. Accept jurisdiction over this complaint and petition for a declaration of rights;

2. Docket this complaint and petition for a declaration of rights for early hearing as authorized under KRS 418.050;

3. Determine and declare that Bluegrass Pipeline LLC does not possess any power or authority under the laws of the Commonwealth of Kentucky to utilize eminent domain in support of the proposed Bluegrass NGL Pipeline project, and specifically, that KRS 278.502, KRS 416.675, and KRS 278.470 confer no eminent domain authority to Bluegrass Pipeline LLC for the proposed Bluegrass NGL Pipeline; and

4. Grant such other relief pursuant to KRS 418.055 based on the declaratory judgment, order, or decree, as the Court deems necessary or proper, and to which Plaintiff may appear entitled.

Respectfully submitted,


____________________________
TOM FITZGERALD
Kentucky Resources Council, Inc.
213 St. Clair Street, Suite 200
Post Office Box 1070
Frankfort, Kentucky 40602-1070
(502) 875-2428
(502) 875-2845 (fax)
KBA ID# 22370
fitzkrc@aol.com

Counsel for Plaintiff Kentuckians
United To Restrain Eminent Domain, Inc.



















APPENDIX A

AFFIDAVIT OF PENNY GREATHOUSE


































APPENDIX B

AUGUST 1, 2013 LETTER FROM WENDELL HUNT, BLUEGRASS PIPELINE COMPANY LLC TO FRANKLIN COUNTY JUDGE EXECUTIVE TED COLLINS

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