Pipelines, property values, and insurance

What happens to your property values or homeowners insurance a pipeline company takes your land to gouge a path for its fracked methane or oil? It affects the property values not just of your land, but of your neighbors’, and yours and their property insurance. It also opens the pipeline company and associated businesses to civil lawsuits. And FERC’s assertion that federal law supersedes state and local laws for eminent domain does nothing to stop such lawsuits; many such lawsuits are winning lately. Not even the federal government is immune from pipeline lawsuits.

Stop the Pipeline has a good article, mostly about land near fracking wells: LOSS OF PROPERTY VALUES, DIFFICULTY GETTING MORTGAGES AND HOME INSURANCE,

“Another illustration is the gentleman who has had 63 acres for sale now for several years. He purchased the property as an investment, and now has three pipelines and an above ground valve. He can not give this property away. As he reaches retirement age his retirement has been stolen from him. This is no different than Enron or any other scandal, only it has been made legal thievery. There are two other pieces of property that have been for sale for several years, one of which is a large parcel of about 70 acres and the other is about 10 acres.”

The insurance industry has been studying this issue for years, and wants to steer clear of it. In No fracking insurance: how long until no pipeline insurance? I quoted a a white paper that says:

Claims may also result from the pipelines required to transport gas extracted from the fracked wells. Pipeline leaks and other conceivable failures may affect local air, water and soil, damage property, sicken and/or kill livestock and cause bodily injury. The likelihood of such claims will increase as more wells are drilled and demand for pipeline and transportation infrastructure continues to expand.

These claims are particularly likely to arise given a number of recent high-profile incidents involving defective pipelines that caused property damage, significant injury and death. Although none of these incidents involved pipelines used in fracking operations, the media have focused attention upon the harm that may arise from their defects. Media reports have not only addressed the potential risk of such defects, but have also emphasized the lack of meaningful regulations with regard to many pipelines used in fracking activities, including pipelines used in the Marcellus Shale. In light of this media coverage, any accident involving the failure of pipelines used in fracking is likely to be followed by an onslaught of lawsuits filed on behalf of allegedly injured parties.

It’s not just the specific pipeline company, either. As a CBS News story said about fracking drilling lawsuits:

It said “prohibited risks” apply to landowners who lease land for shale gas drilling and contractors involved in fracking operations, including those who haul water to and from drill sites; pipe and lumber haulers; and operators of bulldozers, dump trucks and other vehicles used in drill site preparation.

That’s prohibited as in prohibited for coverage by insurance companies.

If insurance companies won’t cover it, that in itself could be evidence of decreased property value or hazard that could feed into a lawsuit. And if the coverage prohibitions don’t stop with the specific fossil fuel company, maybe the lawsuits don’t have to, either. Hm, would a shell company for a specific pipeline would protect the actual owners from such lawsuits?

And now there are legal precedents for pipelines. PR from Johns Marrs Ellis & Hodge LLP 24 March 2014, Texas Landowners Win $2.1 Million Judgment Against Pipeline Company Over Lower Property Value: Case marks third landowner victory in pipeline easement disputes,

North Texas family members have won a $2.1 million verdict against a pipeline company after their parcel of land lost value because an easement was taken for a gas line. This marks the third time Texas property owners recently have prevailed in similar eminent domain cases.

The Johnson County dispute represents a fundamental debate between the pipeline industry and Texas landowners: Does a pipeline devalue only the narrow easement strip or some larger portion of the overall property? The jury agreed that land outside the easement lost value.

“This verdict sends a strong message that pipeline easements often cause significant damages to property beyond the easement area,” says Austin-based eminent domain attorney Luke Ellis of Johns Marrs Ellis & Hodge LLP, who represented the family partnership at trial. “Unfortunately, many Texas landowners don’t realize that they have a constitutional right to seek just compensation for such damages.”

Apparently some pipeline companies have promised state and local governments lots of tax revenue from their pipelines. But at least one pipeline company was successfully sued for lowballing that. Amanda Bohman wrote for Newsminer 27 May 2010 (updated 26 December 2012), Borough applauds attorney for lawsuit win as pipeline owners ponder next move,

Assembly members said Wednesday they are pleased with an Anchorage judge’s decision to raise the taxable value of the trans-Alaska oil pipeline.

But they aren’t rushing to spend the expected $5 million windfall to the Fairbanks North Star Borough.

“It will probably take forever before we see any of the money,” Assemblyman Hank Bartos said.

If not every pipeline company is honest with local governments about taxable value of their own pipeline, why should we believe them about property values where they want to take rights of way? How about that question Spectra’s Susan Waller wouldn’t even listen to:

Susan Waller with the Sabal Trail Transmission says “one concern (from residents) is that it’ll impact the value of the land.” Which she adds isn’t true, but could affect vegetation.

If the pipeline won’t affect land values, why doesn’t Spectra buy up all the land and sell it later at a profit? Maybe a judge should decide whether it’s true….

Not even the federal government is immune from lawsuits. Laurel Calkins wrote for Bloomberg News 6 November 2013, Texas Farmer Wins Entry of Default in Keystone Lawsuit,

A Texas farmer has won an entry of default against the U.S. Army Corps of Engineers, which failed to respond to a federal lawsuit claiming it illegally granted environmental permits to TransCanada Corp. (TRP)’s Keystone XL pipeline….

“Public hearings should’ve been held in accordance with the law,” Bishop said in his original petition, filed in April. He claims the agency “yielded to political pressure and expedited the permit” in violation of federal environmental regulations.

That’s right, if USACE can successfully be sued for improperly expediting an environmental permit, not even you, FERC, are immune from such lawsuits.


2 thoughts on “Pipelines, property values, and insurance

  1. In the above article referencing property values, I read where Susan Waller stated the pipeline may affect vegetation. If so, how long before livestock and people that eat the vegetation are affected?

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