Eminent Domain Moves Front and Center in Battle Against Pipelines

Battles are erupting all over the country against fossil fuel pipelines.

Alexandra Klass University of Minnesota Law School

Alexandra Klass
University of Minnesota Law School

At Standing Rock in North Dakota against the Dakota Access Pipeline.

In Nebraska against Keystone XL.

In Appalachia against the Atlantic Coast Pipeline, the Mountaineer Gas Pipeline, the Mountain Valley Pipeline, and most recently, the proposed TransCanada Columbia Gas Pipeline — planned to come under the Potomac River and C&O Canal near Hancock, Maryland.

In all these battles, there are environmental arguments and arguments about jobs and the economy.

But front and center are battles over the use of eminent domain for private gain.

Alexandra Klass is a professor of law at the University of Minnesota Law School. She has written extensively on eminent domain.

“We know from the publicity over Keystone XL and the Dakota Access Pipeline that pipeline companies, like transmission companies, have the power of eminent domain if they get the appropriate permits or if the work gets defined as a public use by statute,” Klass told Corporate Crime Reporter.

“Those exist in the intermountain West as well, but there are also extensive eminent domain rights for mining companies and other types of mineral development companies to exercise eminent domain not just for infrastructure projects like oil and gas pipelines, but for all sorts of access issues.”

“The history of it is fascinating. The mining industry was the ticket to an economy for these states. And these eminent domain rights were often written into the state constitution or into state statutes. And they are quite extensive. The rest of the country did not go along with that.”

“I found it ironic that all of the property rights organizations were getting so upset about government abuses of eminent domain with regard to economic development takings, like in the Kelo case. But they never said anything about private party eminent domain. At least in the Kelo case, it was about local government exercising that power of eminent domain. There is public participation. If you don’t like what the county commissioners are doing, you can vote them out. There is opportunity for public input. You may or may not agree with their decision to give the property to a new corporate headquarters. But at least the government is the plaintiff in that case and is operating ostensibly on behalf of the public.”

“But you had all of these other situations where a private entity had eminent domain authority. And these property rights groups didn’t want to talk about that. They were only interested in showing that government entities were abusing eminent domain. But certainly there were probably even more examples of that from the private sector. That was my effort to provide some of the history of eminent domain and to show that the use of eminent domain was more widespread. And as it turns out, pipeline eminent domain and transmission line eminent domain has become much more controversial since the Keystone XL pipeline.”

“There are a few reasons for that. Because of fracking, we were having this huge energy infrastructure build out that we really haven’t seen since the 1950s. In the 1950s, we didn’t have environmental groups. We didn’t have the same number of property rights groups. Now we are having this build out. The Kelo case has emboldened property owners to say — we can push back on eminent domain. After Kelo, lots of states changed their laws, at least with regard to economic development takings. That has spilled over a little into energy infrastructure takings.”

“And we also have much more opposition to building fossil fuel infrastructure than we had before. We have alternatives. We have renewable energy. We have a vision to move away from oil and gas. And eminent domain is an incentive like any other incentive — this is a property rights incentive that was given to private companies to encourage them to build oil and gas pipelines and electric transmission lines. In most other countries, the government does that.”

“In this country, we delegate it to private parties. If we delegated the building of highways to private parties, we would give them eminent domain authority as well.”

“But there is now a question as to whether the eminent domain incentive should be taken away because at least in some states like New York, there is a question as to whether we should be making it easier to build this type of fossil fuel infrastructure.”

“Here is an analogy that may be helpful in illustrating my concerns about eliminating eminent domain authority by statute for all economic development takings as opposed to ensuring there are additional procedural safeguards in place to limit its use on a case by case basis.”

“It is similar to the problem with having with police overuse of firearms in low income and minority communities. Many agree that this is a serious problem and that there needs to be increased safeguards and procedures to ensure that police officers do not misuse weapons in these situations.”

“Nevertheless, I don’t know of anyone advocating that we should confiscate all firearms from police officers. Instead, most agree that the use of firearms is necessary in some circumstances, but that such use must be more carefully controlled so that on a case by case basis they are not misused. That is how I feel about government use of eminent domain — both for economic development purposes as well as for more traditional public projects.”

If you were to try and develop a political science of eminent domain, how would you describe a liberal on eminent domain and a conservative?

“I’m not a political scientist. That’s a tough question for me. It doesn’t break down into liberal and conservative. It doesn’t map cleanly over our other liberal conservative divides. We have private property rights activists and environmental groups working together on these projects. Same with Kelo – you had these libertarian groups working with the NAACP. Often, you have lower income and minority neighborhoods subject to urban renewal eminent domain proceedings, like in Poletown.”

“These current alliances between environmental groups and property rights advocates work for fossil fuel infrastructure — their interests are mostly aligned. But more broadly those coalitions might fall apart.”

You don’t see the potential for eminent domain healing the political divide in the country?

“I tend not to think so. Eminent domain is a tool. It’s a way to facilitate projects. In theory, none of these developers want to use eminent domain. Most pipeline companies say they use eminent domain, if at all, for maybe two percent of the properties involved in a project. Most of the time, you want to use voluntary negotiations and voluntary easements to deal with this. Typically, if you want someone’s property, you are supposed to buy it and buy it in a voluntary transaction.”

“But what do we use eminent domain for? There is an opportunity for individual landowners to say — I can hold up this entire multibillion dollar project by saying no. Or by asking for a ridiculous amount of money for my property. It messes up the voluntary negotiations. You use eminent domain to get past those roadblocks. But you hope you don’t have to. It facilitates these projects.”

“If you get rid of eminent domain, you are not going to get rid of all projects. If the particular pipeline company or transmission company wants to pay enough, they can still build it.”

Nobody is advocating getting rid of eminent domain, right?

“Some people are. What projects are you going to allow it for? Highways? I’m sure the people whose land was taken for the interstate highway system would like to have their properties back from the 1950s.”

I don’t see public advocates saying — let’s get rid of eminent domain

“They are not going to say that publically — it’s seen as too radical. Among libertarian groups, there is a goal of taking away government power. That includes eminent domain. They are not going to say that.”

But many of the liberal groups in Nebraska were saying — no eminent domain for private gain.

“What does that mean?” Klass asks.

It means a narrowing of the public use doctrine — so that it doesn’t include — we’re taking land for General Motors to create jobs. Narrow it down to public use — like highways.

“To build a pipeline, you have to show there is a need for a pipeline,” Klass says. “Historically, that’s what these public utility commissions have done. They ask — do we really need more oil coming through here? If the answer is no — you don’t get the certificate of need. You don’t meet the economic case for the certificate of need. Or there is a determination that the environmental impacts are going to be too high.”

“There is a push to tighten up the definition of public use. And the question becomes — how do we do that in a way that is good public policy that isn’t going to eliminate some good projects like the redevelopment projects I mentioned.”

What should we be looking for in terms of breaking developments on eminent domain?

“Most of the oil pipeline and transmission line issues will play out in the states. It’s the states that are in charge of those.”

The President elect says — he likes eminent domain and he has used it a lot in his businesses.

“He’s a real estate developer.”

Is there anything he could do to expand it?

“It’s quite broad right now. The Kelo decision said — we define public use broadly. Any narrowing that has happened has happened at the state level. Congress did try to pass laws to narrow eminent domain at the federal level — but then you begin to interfere with states rights. And that didn’t go very far.”

“The federal government uses eminent domain for federal projects like highways, but they are wary of using it because of political backlash. Most of this is going on at the state level. Even Keystone XL.”

“Let’s say President Trump approves that permit for the Keystone XL pipeline on day one, which he said he will do. That doesn’t mean the pipeline gets built. It just resurrects the lawsuit that has been on hold in Nebraska over whether you can use eminent domain in Nebraska for oil pipelines.”

“Nebraska has changed its law twice on this. There was a case in the Nebraska Supreme Court to determine whether this new law was constitutional or not. And then President Obama denied the federal permit, so the case in Nebraska was moot.”

“Eminent domain for the most part is a matter of state law. Unless a Trump administration were to do something drastic and preempt all state laws — and that is very unlikely — this will continue to play out in the states.”

Do you do any consulting for companies on eminent domain issues?

“I haven’t. No one has asked.”

Would you?

“It would depend on the project.”

[For the complete q/a format Interview with Alexandra Klass, 30 Corporate Crime Reporter 47(11), December 5, 2016, print edition only.]

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