Verdict still pending on Oneok eminent domain case

By Sarah Pridgeon

A decision is awaited from Judge John R. Perry as to whether Oneok Partners will be able to claim its right of eminent domain on the two final pieces of private land needed to complete the Bakken Pipeline. Judge Perry is currently considering the written closing arguments submitted by Oneok and the defendants, Bush Ranches and Watson Land LLC.

Oneok is seeking to condemn easements on the properties for construction and operation of the natural gas liquids (NGLs) pipeline. The Bush property consists of approximately half a mile of easement, while the Watson land runs for 2.5 miles on fee land plus a mile on land leased from the State of Wyoming.

The right to invoke eminent domain rests on Oneok proving three things: that the public interest and necessity require the project or use of eminent domain to be authorized by the Wyoming Constitution; that the project has been planned and located in the manner most compatible with the greatest public good and least public injury; and that the property in question is necessary for the project.

Regarding the first element, Attorney Steve Jones, of Jones and Maxon Law Office, argued in his closing statement on behalf of the landowners that the project has no direct benefit whatsoever to the people of Wyoming. He pointed out that no user or consumer of NGLs will be able to buy from the Bakken pipeline and no supplier of NGLs who could tie into the Bakken line was identified during the case.

“No one will benefit on the consuming end. And no one in Wyoming will benefit on the producing end,” said the statement.

Oneok’s Attorney, Isaac N. Sutphin of Holland and Hart, in response noted the clear intent of the Wyoming Legislature to promote pipelines as in the public interest in the company’s closing statement. Oneok also claimed to have “presented significant and undisputed evidence that its project presents a benefit to Wyoming and the United States.”

Several benefits were highlighted: the Bakken Pipeline will provide a transportation mechanism to get the oversupply of unmarketable raw NGLs to fractionation facilities and then on to market; tax revenues for Wyoming, including Crook County; construction jobs; and taxes and revenues associated with workers staying in hotels, eating in restaurants and shopping in local grocery stores along the route.

“Sales and use taxes do not count as direct benefits that would pass the Grover Irrigation test,” argued the defendants’ statement, however, referring to a case involving Grover Irrigation and Land Company that established court precedence.

Oneok expressed the opinion that the second element – the location of the pipeline – was the only one actually contested by the defendants. “The landowners simply contend that the entire pipeline (not just the portions that would be constructed across their properties) should be rerouted at some unspecified location in northern Wyoming, and running west of the Bear Lodge mountains. However, there was simply no evidence that such a route would cause the least private injury for the same amount of public good,” said its statement.

Oneok claimed to have taken a long list of considerations into account when selecting the route: tie-ins with existing NGL lines, physical limitations such as topography, landowner concerns, cost, reliability and safety, minimizing the number of landowners and amount of government property impacted and minimizing the impact on archaeological sites, wetlands and sensitive biological features.

“It is this type of thorough study that bolsters the long-standing directive that the route selected by the condemner is to be given great deference by the Court,” said the closing statement.

“Defendants in this action wholly failed to demonstrate that any alternative route or change to any other aspect of the project would result in less private harm. The Defendants’ entire case involved a futile attempt to prove a hypothetical, speculative harm that may occur at some unspecified time in the future if the pipeline leaked or ruptured,” said Oneok’s statement. “Oneok contends that such evidence is irrelevant in this condemnation case.”

“Mr. Bob Eberts said that the company had looked only at one other alternative,” responded the landowners. “But his knowledge of the effort was poor. He was the project manager but was not involved in the route selection. No one in charge of the route selection for the Oneok Bakken Pipeline testified… Someone else had to tell him about why the company chose the route that it did.”

Regarding the private harm that Oneok acknowledges will occur during construction, specifically in disturbance to landowners’ property, the company pointed out that this will happen wherever the pipeline is constructed. The closing statement also noted that the company is obliged by law to restore the surface of the land as close to its original condition as possible to mitigate this harm.

Oneok did not contest the evidence of the four geologists who testified during the case – Dr. Arden Davis, Dr. Perry Rahn, Seth Wittke and Brian Reck – that gypsum beds exist in the Spearfish Formation under the defendants’ properties. It did, however, contest the evidence of the landowners’ expert witness, Richard Kuprewicz, of a ‘Murphy’s Law’ hypothetical for a rupture.

“On cross examination, he admitted numerous pipelines throughout the United States have been successfully built through areas with karst formation,” said Oneok’s statement. “He further admitted he was not aware of a single breach that resulted in groundwater contamination. It is nothing more than unsupported speculation and conjecture; a worst case scenario that, by his own admission, has never occurred.”

“It is crystal clear that…a better route should have been chosen,” said the landowners’ statement, however. “A route that goes west of the Bear Lodge mountains would have avoided the Spearfish Formation with all of its gypsum karst and the potential for devastating sinkholes. It would have avoided landslide-prone areas and unstable slopes present along the route.”

Although Oneok testified that the pipeline would be able to handle such disasters, including sinkholes up to 100 feet wide, the defendants argued that this avoids “the central and uncontroverted point that the pipeline route selected by the Plaintiffs was a reckless choice.”

Molly Atkins, Oneok’s Department of Transportation Compliance Manager, was also said to have testified to routine inspections along the lines and an increase in the frequency of inspections in the area of the landowners’ properties.

“As testified to by Rahn, Davis and Wittke, it was apparent to them all that a geological study should have been done before any pipeline route was chosen. But the Plaintiff recklessly chose the route it did without analyzing the geological hazards,” retorted the landowners’ statement.

“The contention that a release would result in catastrophic groundwater contamination is likewise unfounded,” commented Oneok. NGLs, the closing statement explained, are classified as Highly Volatile Liquids, which means they boil when exposed to atmospheric conditions and turn to gas, which is released to the air.

While higher-end hydrocarbons will be present in the liquid and are slower to evaporate, Kyle Pearson testified that these elements would float and continue to evaporate, as they are essentially insoluble in water.

“This, the very claim at the heart of the Defendants’ case, was refuted by the weight of the evidence. This simply illustrates the implausibility of the Defendants’ position and demonstrates why the arguments were misplaced,” said Oneok’s statement.

The landowners, conversely, stated that the idea of the NGLS readily vaporizing is a “myth” and that Kyle Pearson eventually admitted under cross-examination that heavy hydrocarbons will not readily evaporate and are therefore water pollutants.

“While Molly Atkins… claimed that there has never been an NGL spill in PHMSA records, going back approximately six years, showing no water contamination, this is disingenuous under the circumstances since it ignores the realities of typical siting conditions and the elevated risk associated with the Plaintiff’s Crook County pipeline route and fails to mention that PHMSA release records are seriously incomplete and this NGL stream composition is different to many other NGL pipelines.”

Oneok addressed the final condition under discussion – the necessity of the property to the project – by pointing out that easements have been obtained along the alignment contiguous to the Bush and Watson properties, making the necessity reasonable. It also claimed that the route has been revised upon request from the defendants and that “the only testimony regarding the necessity of the properties came from Oneok.”

The landowners’ statement, on the other hand, claimed that, since the “wrong route was recklessly chosen,” their property cannot be heard to be necessary.

“The route chosen was so irresponsible that it should not be going through the Defendants’ property. It should be going through other property, in some other part of Crook County,” said the statement.

A final point of dispute that was addressed in the closing statements was whether or not Oneok had made “reasonable and diligent efforts to acquire the property through good faith negotiations” before the case was initiated.

Oneok’s closing statement claimed that testimony from its land men, Buz Bohmeyer and Rob Adams, about extensive back and forth negotiations had gone “completely undisputed,” claiming that the evidence proves the company offered far in excess of market value and worked diligently to accommodate the landowners whenever possible. The landowners, said Oneok, were offered $7500 per acre, five times the market value, and the company claimed it is still willing to continue negotiations.

The defendants, on the other hand, claimed not to have had opportunity to refute these claims but pointed out two problems with the negotiations that show the bargaining did not meet the required statutes. Their closing statement claimed that the offer process was restarted in January of this year, followed by “strong-arm tactics” to close the deal during the same month – the offer was not left on the table for 65 days as required by the statute.

The landowners’ closing statement also claimed that there was no discussion of the reclamation process to be undertaken on disturbed property. “To call the two-sentence paragraph contained in [the letters] is laughable,” they said.

In conclusion, the landowners’ statement claimed that Oneok “could not prove that it was entitled to exercise eminent domain in this case” and asked that the fact the company has already begun construction of its pipeline in other parts of Wyoming not be considered as a factor in the court’s decision.

“The Plaintiff undertook such operations at its own risk, without any court determination regarding the eminent domain, and such operations should not prejudice the outcome.”

Oneok’s statement concluded, on the other hand, by claiming that, “This case was never about geology and groundwater. Rather, it is, and always has been, about Oneok’s right to obtain [access to] a property necessary for its project; a project that is indisputably in the public’s interest.”

“As this Court is well aware, this matter has been pending for far too long. The Defendants have delayed this project for many months in a protracted effort to create issues where none exist. Oneok…should not be subjected to further delay.”

A court decision is expected imminently. In the meantime Oneok official note that construction activities are continuing in authorized areas of Crook County and other parts of eastern Montana, Wyoming and northern Colorado while they await the judge’s order.