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Oil and Gas Pipeline Companies Can Condemn Private Property in Ohio

Posted in Exploration & Production, Mineral Interest, Ohio, Pipelines, Real Estate, Regulatory

In Ohio, private pipeline companies regulated as common carriers or public utilities have the power of eminent domain to “condemn” or “appropriate” private property in certain situations. 

It is well known that the power of eminent domain is available to government authorities.  But, the reality of modern America is that carefully regulated private companies, not government entities, furnish much of the energy resources and utilities we enjoy everyday.  Pipeline companies that transport oil and gas to market are classic examples of private companies that do a job that serves the public welfare.  Accordingly, under certain circumstances pipeline companies have the power of eminent domain under both Ohio and federal law. 

Federal Law Allows Condemnation for Gas Pipelines in the “Public Interest.”

Currently, control of interstate natural gas pipeline construction is preempted by the federal Natural Gas Act, which assigns regulatory responsibility for almost all aspects of natural gas pipelines to the Federal Energy Regulatory Commission (“FERC”). 

Under the Natural Gas Act, natural gas companies have the right to condemn property for natural gas pipelines as long as FERC determines that the project is in the public interest and issues a certificate of public convenience and necessity to the company. 15 USC §717f.  Once that determination is made, a natural gas company may condemn property in federal district court where the property is located.  But despite federal jurisdiction, the Natural Gas Act requires the federal condemnation action to “conform” as closely as possible “with the practice and procedure in a similar action or proceeding in the courts of the State where the property is situated . . . .”  15 USC §717f(h).   Thus, even with federal jurisdiction for natural gas pipeline condemnation, State law remains critically important.

As its name indicates, the Natural Gas Act is focused primarily on gas.  FERC’s only authority over liquids pipelines is to regulate rates and commercial access to the pipeline. Neither the Natural Gas Act nor any other law grants pipeline companies a federal right to condemn property for hydrocarbon liquids pipelines (i.e., oil and natural gas liquids pipelines).  Consequently, pipeline companies must look to the law of each state, and the courts of each county, for the right to appropriate property for hydrocarbon liquids pipelines.  

Ohio Law Allows Pipeline Condemnation “As Necessary and for a Public Use.”

The right to appropriate property under Ohio State law comes from Article I, Section 19 of the Ohio Constitution, which states, “private property shall ever be held inviolate, but subservient to the public welfare.”

In Ohio, a company organized for the purposes of transporting natural or artificial gas, petroleum or its derivatives through tubing, pipes, or conduits, is designated a “private agency.”  ORC §1723.01 and ORC §163.01(B).  As such, the company may enter, inspect and appropriate as much property as is “necessary and for a public use.”  ORC §1723.01 and ORC §163.021(A).

Unlike Pennsylvania and other States, Ohio law does not allow a “quick take” of property but Ohio does have its own expedited procedure for a pipeline company to appropriate property.  It is also noteworthy that Ohio law explicitly allows an oil and gas pipeline company to install water pipelines necessary for petroleum development, transportation, and production on the appropriated property.  ORC 1723.05.

In any event, the burden is on the pipeline company to prove in each county court where the property is located, by a preponderance of the evidence, that an appropriation is “necessary and for a public use.”  ORC §163.021.  However, the Ohio Revised Code makes clear that an appropriation by a common carrier is a public use.  Ohio law also allows a pipeline company to raise a rebuttable presumption that the appropriation is necessary by passing a corporate resolution, and the company may raise an irrebuttable presumption that the pipeline is necessary if it obtains regulatory approval of the project. ORC §163.09.

Once a company’s right to use eminent domain is settled, there remains the question of just compensation.  In Ohio, with a few exceptions, a pipeline company may take possession of an appropriated parcel only after a jury determines the appropriate amount of compensation and payment is deposited with the court. 

Overall, even though federal and Ohio law give pipeline companies a clear and fairly expeditious right of eminent domain, the process is very technical and can be challenging.  The requirements of Ohio appropriations law (not to mention federal law relevant to gas pipelines) are addressed in at least thirty-three different statutes that describe an assortment of unusual trial procedures, distinct evidentiary obligations, and the interplay of various regulations.  Representation by counsel with a clear understanding of Ohio law, and experience with pipeline regulations is necessary to efficiently and successfully navigate appropriations proceedings.