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Landowners Challenge TransCanada's Keystone Pipeline

Keystone Pipeline Eminent Domain

First Posted: 07/20/11 08:54 AM ET Updated: 09/19/11 06:12 AM ET

Sue Kelso, born Sue White, is fiercely attached to a 180-acre slice of southern Oklahoma farmland. The property, about two hours north of Dallas, has been in the family since Kelso's parents, the late A.L. and Dollie White, purchased the first 80 acres in 1941. They added 100 more in 1950.

Now, the Calgary-based pipeline company TransCanada wants to run its proposed Keystone XL pipeline -- which would carry oil harvested from Alberta's tar sands through six states to the Texas Gulf Coast -- under the White family's land. Kelso, 69, and her aging siblings ultimately refused, so TransCanada has invoked the power of eminent domain to do it anyway.

The White clan is fighting the company's claim to right-of-way in court.

"My mom and dad had eight children, but one passed away when we were young, so seven of us grew up there," Kelso said in a telephone interview. "We farmed peanuts and at times we had vegetable crops that we sold -- cucumbers, peas and green beans. But we mostly farmed peanuts. We made money doing that, and we worked for other people hoeing and pulling cotton," she said.

"My dad was blind. He was legally blind when my mother married him. She was only 17. We scratched our living out of that dirt," Kelso added. "That farm meant the world to my mom and dad and they said they were going to leave it to us to care for, and that's what we intend to do."

They've got an uphill battle.

TransCanada's spokesman, Terry Cunha, emphasized that in neither this, nor in any other case, is the company seeking to seize property -- even though the legal process is known rather harrowingly as "condemnation." Rather, he said, the company only seeks to obtain easement rights to build and maintain its pipeline.

"Our commitment is to treat landowners with respect, to work with them and come to the best possible solution," Cunha said. "We do everything reasonable to avoid using eminent domain. We have always followed this process in negotiating rights of way from landowners along 35,500 miles of pipe."

But that's of little comfort to Kelso. "It's wrong," she said. "That is our land, and it's not fair that a foreign company can come in and condemn it."

Whatever the merits of the White family's case, public concern over pipeline safety -- and scrutiny of the actions of pipeline companies -- has been heightened by a recent rupture in a line belonging to Exxon-Mobil, which allowed some 42,000 gallons of oil to seep into the Yellowstone River in Montana earlier this month.

Indeed, environmental groups quickly linked the two pipelines, arguing that the Exxon-Mobil spill clearly demonstrates that the risks of TransCanada's venture are too high.

On Friday, seven Democratic senators, led by Sheldon Whitehouse of Rhode Island, sent a letter to Secretary of State Hillary Clinton echoing that sentiment. They called for a review of the permitting process.

"We write to express our continuing concerns regarding TransCanada's proposed Keystone XL pipeline," the letter began. "One need look no further than the ongoing impacts on the Yellowstone River in Montana from a leak in ExxonMobil's Silvertip pipeline to recognize that such risks are very real."

The White family is deeply worried about spills, too, and their story is one of several highlighted in a report published in April by the environmental group Friends of the Earth. In it they argue that TransCanada has been bullying property owners as it tries to secure the rights to run its 2,000 miles of pipeline through the American heartland.

"Eminent domain is supposed to be used for the public good," said Alex Moore, an activist with Friends of the Earth. "Yet TransCanada is suing and threatening American farmers and ranchers with eminent domain so it can build a pipeline that will serve no one but TransCanada and Big Oil."

The tales gathered in the group's April report include people like David Daniel, a carpenter from Winsboro, Texas, who said he first learned his property was included in TransCanada's pipeline plans when he discovered that the company had hammered survey stakes into his land. "No one from the company had asked his permission -- or even notified him after the fact," the report stated. "When he denied the company further access to his land, their Houston law firm threatened to take his property through eminent domain."

Letters sent over the last year to landowners in various states by TransCanada, or by its agents, suggest that it regards eminent domain as a path of last resort -- though one the company is certainly willing to take.

But Cunha, TransCanada's spokesman, said any suggestion that the company was bullying landowners was false, and that the company has diligently followed federal and state guidelines for pursuing legal easement deals with property owners in all states the proposed pipeline would traverse. He also disputed stories of wanton trespass.

"We don't just show up and start trespassing and laying stakes down without permission," Cunha said.

Meanwhile, the White family's challenge, which questions TransCanada's right to invoke eminent domain in the first place, is unusual. By many measures, it would seem a losing proposition.

"The majority of time property owners do lose," said Catherine Tedone Newman, the executive director of the Owners' Counsel of America, an organization dedicated to protecting the rights of property owners in eminent domain cases. "But they lose for the good of the public. What you're really trying to do is advocate for individual rights," Newman said. "That's what our founding fathers based our country on."

Eminent domain is a fickle business and the details vary from state to state. What's certain, though, is that the law tends to favor local governments and developers who can legitimately claim that a greater public purpose is being served by whatever infrastructure project or economic enhancement is being undertaken -- from utility wires and freeways, to schools, pipelines, railroad tracks and ports.

Directly challenging a claim to eminent domain, therefore, is far less common than refusing to accept the financial terms proposed by a company to compensate property owners for the use of their land.

Kelso said land agents representing TransCanada originally offered her family $1,300 for a 50-foot easement for the pipeline itself, which would cut across the southwest corner of the property, along with a 25-foot temporary easement on either side for equipment. According to court filings, that number was eventually increased to $2,123 for use of the land.

The family still grazes cattle there, and another of the White's daughters, Doris Lynn, still lives with her husband on the land. Kelso and her husband, Waylan, who now live just over the border in Texas, have built a retirement home on the property.

"My brother and sister-in-law have cows on the place," Kelso said. "It takes forever for that grass to come back, and TransCanada told us they wouldn't pay for pasture damage if we didn't take the deal."

So they thought about it. After all, the Whites weren't strangers to pipelines. Four oil or natural gas lines -- artifacts of deals made by their now-deceased parents -- already slip underfoot at the property. Even Cunha said the company was close to a deal with the family.

But after reading up on the Keystone XL pipeline and its proposed cargo -- a thick, tarry form of oil called bitumen, which is diluted with other petroleum byproducts and pumped at higher pressures and temperatures than conventional crude -- Kelso said she and her family became nervous and backed away.

A spill on their property, she said, would be too much to bear.

Last August, TransCanada filed a condemnation suit on the property. In January, the Whites fought back, arguing in a filing with Oklahoma's Bryan County District Court that TransCanada's claim ought to be dismissed because, among other things, the pipeline would serve no public good, no legislature had ever granted eminent domain for the right to move bitumen, and as a foreign corporation it has no right to eminent domain.

From the filing:

The Landowners' property cannot be legally taken by TransCandada Keystone Pipeline, LP because the property would be taken: (1) by a privately-owned, foreign corporate entity; (2) by an entity owned and controlled by a privately-owned, foreign corporate entity; (3) for the benefit of a privately-owned foreign entity; (4) for the benefit of a foreign government; and (5) other reasons outside the scope of any public use for which property of citizens of Oklahoma and the United States may legally be taken under the Oklahoma statutes, the Oklahoma Constitution, or the United States Constitution.

The White family's attorney, Harlan Hentges, put it more simply: "It's not that it's an oil pipeline, it's that the public gets no use from the pipeline. That's the problem," Hentges said. "The pendulum is swinging against eminent domain," he added. "We're not tilting at windmills, here. This is a good fight to fight."

TransCanada fired back in February, arguing in essence that the White's challenge had no real merit, and that TransCanada's claim to eminent domain was as legitimate as any other -- not least because its Keystone operation is not a "foreign corporation," but a limited liability partnership legally registered in Delaware. The oil from Alberta, it also argued, meets state standards, and the pipeline itself would serve the public good by creating jobs and delivering roughly $1.25 billion in economic benefits to Oklahoma alone -- at least according to one study.

Critics have disputed those numbers. They've also questioned the company's pursuit of easements when the the U.S. State Department has not yet granted the company permission to build.

Cunha argued that it only made business sense to pursue easement deals while waiting for the State Department to deliberate, so that the company is poised to begin building as soon as one is issued.

In the event the permit is denied, he said, landowners get to keep the money.

To date, TransCanada has secured 90 percent of its needed easement deals, Cunha said. In the remaining 10 percent of the cases, he added, negotiations over what constitutes fair market value for the use of various properties are ongoing, and the company expects that it will reach agreements with most cases.

Whether that will prove overly optimistic remains to be seen. In Oklahoma alone, TransCanada has filed at least 59 suits seeking condemnation of properties, though Cunha said the White family's case was the only one to his knowledge in which a landowner was not challenging the price offered, but the company's right to eminent domain on its face.

Sue Kelso, meanwhile, said she's now convinced that no price is high enough. But she also said that she isn't holding her breath that her family's efforts -- or those anywhere else -- will stop the Keystone XL pipeline from ultimately being built.

"They'll get it though there anyway," she said. "Let's face it, all they've got to do is dangle a dollar in front to these politicians and they'll think it's the most wonderful thing in the world."

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