March 29, 2024

Homeland

Some Iowans skeptical of eminent domain in Bakken pipeline development

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The following is part I of an occasional series exploring the major issues facing Iowa landowners and economic stakeholders in Texas-based Energy Transfer Partners’ proposed Dakota Access crude oil pipeline slated to be laid through 18 Iowa counties. The series will explore the debate over eminent domain, environmental concerns and job creation associated with the project.

KELLOGG —At the Side Tracks Tap in Kellogg’s downtown strip June 5, Elaine Mattingly stood next to the bar and discussed strategy. Next to the billiards table while a band set up at the front of the small-town pub for a Friday night set, the Newton resident was providing information about the Dakota Access crude oil pipeline — a proposed project she opposes.

“I’m concerned with several aspects of the proposed pipeline. I’m concerned that we’re incentivizing dirty fuels, I’m concerned for my Jasper County and Iowa neighbors whose land has the potential to be forcibly used for this purpose, for private gain and not necessarily for the public good,” Mattingly said.

Through word of mouth, Mattingly helped gather a group of about 10 people to debate potential problems with the pipeline project over bottles of But Light and Side Tracks’ pizza. The meeting took place just 5 miles from a farm field where 30-inch diameter pipe intended for the Dakota Access project is being stockpiled.

The 1,134-mile oil pipeline would carry 570,000 barrels of crude oil per day underground through the state, connecting the North Dakota Bakken crude oil fields with a hub in Patoka, Ill., leading to gulf coast refineries.

Organized by locals, members of the Bakken Pipeline Resistance Coalition and Iowa Citizens for Community Improvement— a nonprofit organization fighting the development of the Dakota Access project — small meetings like the Side Tracks gathering have been popping up all along the 18 county pipeline route. Another was scheduled June 29 at the Newton American Legion Post 111.

The 3-member, governor-appointed Iowa Utilities Board has set aside weekdays from Nov. 12 through Dec. 2 for a tentative public hearing to decide if the Dakota Access project meets Iowa Code’s public good conditions to grant Texas-based Energy Transfer Partners the authority to use eminent domain to obtain private land for the pipeline’s construction.

Although the final hearing is five to six months away, ETP has yet to secure permission from enough landowners to lock up IUB approval. Records obtained from the Jasper County Auditor’s office show Dakota Access has acquired signed agreements for 63 parcels of land in Jasper County.

The total number of voluntary easements filed for the pipeline varies depending on the organization providing figures. Nathan Malachowski of Iowa CCI said his organization has been contacting county auditors offices across the 18-county pipeline route to compile a list of affected landowners. Iowa CCI estimates that 15 to 20 percent of Iowa landowners contacted by Dakota Access have signed easements.

Dakota Access spokeswoman Vicki Anderson Granado said June 9 the company has collected voluntary easements from nearly 60 percent of tracts along the pipeline route.

Easements and 

interactions

Keith Puntenney is one of the roughly 1,200 affected land owners and is fighting the pipeline’s development. He has managed his family’s farmland in Boone and Webster counties since 1974. Puntenney argues the pipeline serves no public purpose to the state of Iowa and does not meet IUB’s conditions. The landowner is also a licensed IRS estate and gift tax attorney, retired after 32 years in practice.

Dakota Access, LLC contacted Puntenney in December 2014, shortly after ETP’s public informational meeting in Boone. The pipeline’s tentative path requires the use of 2.54 acres of his farmland. The IUB informed the attorney he had 30 days to file a land use plan with ETP, if he had future intentions with his property that would be disturbed by the placement of an underground oil pipeline.

Puntenney filed his land use plan with the ETP on Jan. 13, detailing his intent to allow MidAmerican Energy to use his site to expand a newly constructed 110 unit wind farm just north of his property. Aside from his environmental concerns, Puntenney said he would receive $8,000-$9,000 per year from MidAmerican for the use of his land instead of the one-time payment offered by ETP. His land use plan provided the pipeline company with dimensions of the wind turbines, including a required 60-foot diameter base with over 500 yards of concrete that would go 15 feet below ground level.

The plan also went into depth of a new pattern tile system which he planned to install this year in preparation for the wind turbines. In his letter, Puntenney wrote “nothing in this tile pattern anticipates a pipeline project crossing this property.”

He said Dakota Access still pursued the property and a land agent made contact requesting access to survey the land.

Landowner options

But for landowners who do not have Puntenney’s legal background, there are places to find advice. Kristine Tidgren is a staff attorney for the Iowa State University’s Center for Agricultural Law and Taxation. Her department will not encourage a landowner to favor or reject voluntary easements from Dakota Access’s, but will offer information before the landowner enters into negotiations with private companies.

She said the main issue seen by CALT staff is a lack of procedural understanding with the voluntary easements.

“It can seem a little overwhelming. Sometimes people almost feel they need to sign, or they’re going to really miss out on something,” Tidgren said. “We urge them to take a step back and take the time they need to consult a private attorney, to go through the contract proposal and to think about all the implications in signing it.”

Tidgren urges all landowners who contact the center not to “succumb to the pressure to sign” the easements without properly examining the contract.

“Just to be aware, when the contract is drafted it’s drafted by the pipeline company’s attorney, so, of course, they’re going to draft it in the best way possible for the client,” she said. “We try to encourage the landowner to put themselves in an equal bargaining position by having an attorney of their own review it.”

In the easement sent by Dakota Access to Puntenney March 11, 2015, he was offered a one-time $21,259.19 payment for the use of 2.54 acres of farmland. Broken down, payment for the permanent easement and temporary work space amounted to $16,228.99 and $5,029 for crop damages projected during the pipeline’s construction. This is estimating the land would produce 165 bushels of corn per acre. As Dakota Access detailed in the 2014 public meeting, the crop damage compensation is offered on an annual sliding scale based on the easement’s production capability as determined by Dakota Access — 100 percent reimbursement the first year, 80 percent the second and 60 percent the third year.

Land owners who have signed easements are also allowed seven days to reconsider and cancel the agreement by Iowa law. This form was included in the contract sent to Puntenney.

Another concern for many landowners and environmentalists is what happens to the pipeline after it’s not longer in production. In November, Dakota Access representative told Jasper County landowners they anticipated the Bakken oil fields to be in production for decades. But many farms — like Puntenney’s — are century farms and will stay in families, and in production, for generations.

Iowa Code 479B.32 (4) gives landowners the right to require the pipeline company to remove the unused pipeline after its been inactive for five years. But easement contracts examined by CALT has found this option omitted by ETP.

“As long as the landowner does not bargain that away unknowingly — if the easement were to revert back to the landowner — the pipeline company would remain owning the pipe and the landowner could require the pipeline company to come take that out of their land,” Tidgren said.

The law also states the pipeline company would have to pay for any damages associated with the removal of the pipe. Tidgren said her department has not directly seen evidence of easements negotiating away these rights, they simply have not addressed it.

“Those are the types of things to look for. It is possible to bargain those rights away, so you have to make sure that if you sign a contact that you haven’t given up rights the law would give automatically,” she said. “Just to be cautious. I would probably want that removal provided under the law (to be in the contract) to make sure some judge down the road doesn’t interpret that contract to mean that the contractual right has been bargained away.”

Regulatory debate

A 14-page letter released June 12 by IUB Engineer Jeffrey O’Neal detailed 90 questions and deficiencies in the design of the proposed pipeline included in Dakota Access’s construction permit petition. The letter states Dakota Access misidentified the Big Sioux Wildlife Management area, failed to account for a newly constructed road and does not clearly delineate the pipeline route.

According to IUB spokesman Don Tormey, the board has granted the use of eminent domain to private companies only seven times since 2000. These projects were proposed by companies such as MidAmerican Energy, Ames Municipal Electric System, and ITC Midwest, LLC. Two of the projects were pipelines — not for crude oil transport — and the other five instances were for electric transmission lines. The IUB denied one eminent domain request during that time frame for an electric transmission project.

Sen. Rob Hogg (D-Cedar Rapids) was a co-sponsor of a Senate bill attempting to strengthen Iowa’s eminent domain laws. Senate File 506 failed to reach the floor for vote by the full Senate, but it would have required ETP and other private companies to retrain voluntary easements from 75 percent of affected landowners and increase liability insurance requirements from $250,000 for the entire project to $500,000 per affected county. But he’s still confident the IUB will not approve the use of eminent domain.

Although Iowa Code only requires the $250,000 minimum in liability insurance, Hogg said legislators felt the IUB’s authority to require additional liability coverage beyond the minimum was enough oversight to negate the need for any further legislation. Hogg said ETP would still be responsible for the full financial cost associated with a leak or spill regardless of their initial liability insurance.

But according to at 2013 annual report submitted to the Securities and Exchange Commission, the oil and pipeline company admits it might not have the cash on hand to manage all pending and future environmental liabilities.

“We may incur substantial environmental costs and liabilities because of the underlying risk inherent to our operations. Although we have established financial reserves for our estimated environmental remediation liabilities, additional contamination or conditions may be discovered, resulting in increased remediation costs, liabilities for natural resource damages that could substantially increase our costs for site remediation projects. Accordingly, we cannot assure you that our current reserves are adequate to cover all future liabilities, even for currently known contamination.”

The subsection found on pages 44-45 of the report outlines what ETP sees as “adverse affects” on its ability to transport hazardous liquid material — crude oil — from evolving environmental regulations and pipeline integrity programs by the EPA and U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA). In an earlier passage, the company states:

“In addition, states have adopted regulations similar to existing PHMSA regulations for intrastate gathering and transmission lines. At this time, we cannot predict the ultimate cost of compliance with applicable pipeline integrity management regulations, as the cost will vary significantly depending on the number and extent of any repairs found to be necessary as a result of the pipeline integrity testing,” the company wrote. “We will continue our pipeline integrity testing programs to assess and maintain the integrity of our pipelines. The results of these tests could cause us to incur significant and unanticipated capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipelines.”

Contact Mike Mendenhall at mmendenhall@jaspercountytribune.com