Taking Gas

by Martin Harris

If you were working your way through the upper grades of the public K-12 education system a certain number of decades back, you’ll recall the expression we used to describe an unexpected failure-to-achieve in a test, on the playing field, or during an after-school (of course) quick hand of seven-card stud: “taking gas”. Without recognizing the probable WWII origins of the phrase, we used it for negative occasions ranging from the serious (College Entrance Board exams) to the frivolous (spilled milk-shake) and it could be heard in schools and at drug-store soda fountain counters across New England for a while. For unknown-to-us reasons, it never became a permanent part of the teen-age vocabulary, but maybe it should be brought back into adult conversation, briefly, in the context of an ethane pipeline across one of the three States which loftily disdains drilling into its own rock-formations for the fossil fuel but has no principled compunctions against using it after importing it from less “green-respectful” States where its production results in all the usual energy, economic, and environmental benefits: Vermont. In-State underground pipelines of the aptly-named “Vermont Gas Company” presently connect to the Trans-Canada pipeline at Highgate and move the product as far south as Burlington, and now the Company wants to extend the pipeline to Middlebury and (phase 2) beyond, to Rutland. There isn’t a good in-State history for this sort of thing: you may recall the failure of a plan to extend a pipeline north from Bennington to Rutland during the Kunin administration because of Hollywood-retirees in the Manchester-Danby corridor complaining that such lower-cost energy would stimulate employment in Rutland and thereby unfairly increase their own expenses for gardeners and housekeepers. And the excavation work would kill the grass, too. You might say that the project’s failure at literally taking gas, northward, was shown by its figuratively taking gas, permit-wise.

For taking gas (literally, not figuratively) southward from Burlington, Vermont Gas Co. will need a pipeline right-of-way across Other Peoples’ Land, some public but mostly private. Under 12 VSA 1040, such “public-service” enterprises as VGC can be awarded eminent-domain rights fo such services as “transmission of…gas” and under 30 VSA 112 the value of the “taking” (a little Fifth Amendment language, there) shall be “the value of the property on the day the petition is presented to the Board”. And therein lies the question, because all square feet of land are not of equal value: land in use for corn is worth a lot less than land in use for buildings on its surface or pipelines beneath its surface. Here’s the math.

Presently, average US farmland value is about $2600/acre, which works out to 6 cents/square foot, and a 3-foot-wide pipeline across a square acre (209 feet on a side) would occupy 626 square feet, worth just under $38, and that only if corn can’t be grown above the pipeline. If corn can be grown, just as it was before excavation, construction, and backfill, and if such earth-moving is completed during the crop off-season, damages to the owner and grower are zero. But value of the buried pipeline is enormous, as recent sales between and among industry players have shown. Is the grower entitled to a piece of the action, or must he just “take gas”, compensation-wise? Just that question was the subject of a lengthy op-ed in the 13-14 April Wall Street Journal, where author Christopher Denton, writing for the Landowner Coalition of New York State, argues that “in New York, as in many States (think Vermont, with its “day of petition” rule) the courts use a system of “before-and-after” to determine the value to be paid for the right-of-way…because a farmer can grow crops on the land…the land is worth the same before and after. Effectively the farmer receives a pittance while …while the pipeline company enjoys a windfall of economic opportunity.” His recommendation: that eminent domain privileges across OPL acreage awarded by State government to just such client companies as Vermont Gas be replaced by a renewable rental agreement between pipeline operator and land-owner. He points out that, thanks to a quirk in NY law, just such a pipeline agreement was recently negotiated.

The location was Susquehanna County in PA and Broome County in NY and the pipeline purpose was “gas-gathering”, not “gas transmission”, so the Laser Northeast owners-operators couldn’t get their r.o.w. through State-sponsored condemnation: he then goes some math to show how the annual rental rates, adjustable for inflation, start out at $3.50 per lineal foot of route. Compare that to a one-time payment of maybe 18 cents under no-loss-of-cropland-use eminent domain. Denton calculates that, under NY eminent domain, LN might have paid $1000/acre which works out to 2 cents/sf. After building the Millenium Pipeline at a total cost of $150 million, Denton continues, LN then sold it: for $750 million.

Governments, and of course their in-favor “public service” company clients, prefer eminent domain over negotiation: the pols can then preen before the many consumer/voters on their skill at keeping infra-structure costs, and then consumer utility costs, down, while casually ignoring the damage to the few land-owner/voters; and the companies’ executives can then please their shareholders with evidence of profitable investment-management, and claim their options- and pay-boost rewards at the next annual meeting. But such public works can be done (and more equitably to all parties, Denton argues) by negotiation rather than eminent domain. Think Rockefeller Center in NYC: both sides of the real-estate deal profited when the 48th -51st Streets location was agreed upon without governmental force.

Here’s Denton’s closing summation: “If New York State’s land-owners must suffer the indignity of being denied the opportunity to develop their natural gas deposits, they should at least be fairly compensated for the economic opportunity taken from them as other States’ gas passes through their lands”. You can see the parallels to the Vermont situation.

To do otherwise, (a little non-legal language here) would be for the State to use its power to force some of its land-owners, the few remaining and governmentally-rhetorically-glorified Vermont farmers, to “take gas”.