Proposed natural gas pipeline in Mass. would bring fuel but also issues of disclosure and eminent domain

(Please note: The following blog post was prepared by MAR Legal Staff: Michael McDonagh, general counsel; Ashley Stolba, associate counsel; and Justin Davidson, staff attorney)

The Tennessee Gas Pipeline Company, a subsidiary of Kinder Morgan, is in the planning stages of adding a natural gas pipeline to the Commonwealth. The proposal would extend an existing pipeline in New York from the state border in Richmond, MA to Dracut, MA. The goal of the pipeline is to bring additional natural gas to New England from other parts of the U.S. in order to meet current and future demands. According representatives of the Tennessee Gas Pipeline, the current plan is to begin construction in spring 2017 and for the pipeline to become active in November 2018.

There are advantages and disadvantages to such a project, and several that might affect your business. Here’s what REALTORS® need to know:

Eminent Domain

Eminent domain issues exist. Eminent domain is the power of a government entity to take private property for public use. The pipeline company must first obtain a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC) for “the construction or extension of any facilities…for the transportation in interstate commerce of natural gas.” (15USC §717f(c)). A FERC certificate confers on the developer eminent domain authority. (15 USC §717f(h)). This means that the FERC certificate provides a pipeline developer the authority to secure property rights to lay the pipeline if the developer cannot secure the necessary rights-of-way from landowners through negotiation. Eminent domain would likely be a last resort for the company. Also, it is important to note that the federal Natural Gas Act preempts any state or local law that would obstruct the federal law such as siting and zoning.

Easements

The Tennessee Gas Pipeline proposal is for an underground pipeline so the company will likely be seeking easements from property owners. They may seek larger temporary easements for construction and then a smaller permanent easement of approximately 50 feet once the construction is completed. The easements generally prohibit the erection of buildings and planting of trees so as not to hinder access to pipeline.

Disclosure:

The disclosure issues about the pipeline will be different for each individual property. Here some suggestions as to how to deal with several scenarios you might encounter:

  • If a property owner has already agreed to an easement, that easement would arguably serve as constructive notice and should be disclosed to any buyer.
  •  If the company has accessed the property or requested access to the property to survey it, disclosure to prospective buyers is recommended before an offer is made. Keep in mind the Attorney General’s 93A regulation “. . . any person or other legal entity subject to this act, (specifically includes all real estate licensees) who fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” Therefore, disclosure is recommended if broker has knowledge that the property has been surveyed.
  • Disclosure questions related to properties nearby, but not part of, the pipeline would need to be viewed in light of Massachusetts case law, specifically the Urman v. South Boston Savings Bank case dealing with “off site” defects. Urman held that generally a broker has a duty to disclose physical conditions which are known to the broker, but not known and not readily observable by the buyer and might affect the value or use of the property. Based on this ruling, it is recommended that if you represent the seller in an area included in the proposed pipeline route, you have discussions with your client regarding disclosures immediately. Although it is unclear as to whether disclosure would be required in light of the Urman case, the cautious decision would be to disclose known information, with your seller’s permission.
  • If you represent a prospective buyer who is seeking to purchase a home in an area included in the proposed pipeline route, it is recommended that you encourage your buyer to conduct his or her investigations regarding the proposal.

Environment:

Natural gas pipelines can impact the environment in several ways.  Potential impacts include habitat loss, changes in species movement, sedimentation, and air emissions. Because of these concerns pipeline projects are required to submit a draft Resource Reports to FERC. In accordance with the National Environmental Policy Act (NEPA), FERC will then prepare an Environmental Assessment (EA) or an Environmental Impact Statement (EIS). The purpose of these studies is to inform the public and the permitting agencies about the potential adverse or beneficial environmental and safety impacts of proposed projects and their alternatives.

Additional Information

            See the following links for more information on this topic:

http://www.bostonglobe.com/business/2014/06/08/company-proposes-natural-gas-pipeline-cross-massachusetts/uvoxHT3zECRockdVzTIADO/story.html