Land Grab: Property Owners Fight Back Against Pipeline IOUs

By RJ Vogt | April 28, 2019, 8:02 PM EDT

Mountain Valley Pipeline sued hundreds of Virginia and West Virginia residents in 2017, eventually winning permission to build across their lands before having to pay for that right. Landowners in the case are expected to appeal to the Supreme Court next month. (AP)

When the land men first came for his property nearly two years ago, Elijah Howard tried to negotiate on his own, without a lawyer.

The agents represented Mountain Valley Pipeline, a joint venture by five energy companies that aims to transport two billion cubic feet of natural gas through 303 miles of West Virginia and Virginia, Howard's home state.

MVP wanted permission to lay a 42-inch wide steel pipe underneath less than half an acre of Howard's remote mountain top land, and agents said they'd pay him for it. But their initial offer was "hardly anything," he recalls: Court documents show the pipeline appraised his tracts at $342, even though it later asserted agents had offered at least $3,000.

Howard rejected them at first, considering that the route would prevent future building on that part of his plot. But after a little back-and-forth, he thought he and the land men had agreed to a higher price point, one that felt fair.

"Two weeks later, I got served with a stack of papers about a foot thick," he told Law360, laughing.

The lawsuit marked Howard's introduction to the world of pipeline eminent domain disputes. Thanks to a law called the Natural Gas Act, gas companies wield the same authority as the government to seize private land for public use as long as they pay owners "just compensation."

With increasing regularity, companies even convince courts to let them begin building before agreeing to a payment amount via a controversial "take first, pay later" legal theory.

Three recently filed or soon-to-be filed U.S. Supreme Court petitions have challenged that theory, aiming to slow down a process that pressures unrepresented landowners to settle and forces others to cede their land without seeing a dime of payment for months and even years.

Most of the time, it never gets to that point. Land agents aim to seal deals without getting lawyers involved, as they did with Howard. According to a spokesperson for The Williams Cos. Inc., an energy giant behind another project called the Transco pipeline, only a quarter of property owners typically hire attorneys to represent them during pre-eminent domain negotiations.

Chris Johns, an eminent domain attorney and professor at the University of Texas School of Law, said the lack of representation stems from the fact that most people don't realize the negative impact a pipeline can have on a property's resale value.

As a result, he estimated that 70% to 85% of people just take original offers or negotiate on their own for a slightly higher sum.

"They think, 'Wow, I did such a great job,'" Johns said. "But we've seen cases where we got people five times what they were originally offered. There are other cases where we've gotten people 20 times what they were originally offered. It just depends on how lowball the original offer is.

"Anybody who knows the impact wouldn't do it without a lawyer," he added.

January 2018 drone footage shows pipeline construction across Gary and Michelle Erb's land. The couple has not been paid for the land's use. (Institute for Justice)

Going It Alone

MVP's website states that it only turns to eminent domain as a "very last resort" against those who won't come to terms. Howard fell in that camp alongside more than 230 other Virginia and West Virginia landowners who were sued en masse in October 2017, less than two weeks after the Federal Energy Regulatory Commission certified MVP's planned route.

For Howard, the land in question wasn't actually his homestead, so he felt like he had little to lose by turning down MVP's pre-suit offer, answering the summons and fighting back in court. When he spoke with local eminent domain attorneys, however, he balked at their 30% to 40% contingency fees.

Instead, Howard opted to represent himself — pro se against a pipeline system expected to have cost an estimated $4.6 billion by the time it's operational later this year.

"I come from a family that likes to wheel and deal," he said.

Research into the difference that representation makes in pipeline eminent domain cases is limited. But according to a ProPublica investigation of nearly 200 eminent domain cases the federal government brought while building a southern border fence in 2006 to 2008, those with representation tripled their opening bids on average, while unrepresented landowners either took what was offered or managed an average 33% increase.

Local attorneys told Howard that going it alone would be hard, and looking back on the experience, he agreed that self-representation felt lopsided.

For one, he was frustrated that pro se litigants have no access to PACER, the electronic court records system. Instead, he relied on certified mail to file and receive documents. The pipeline company had sued Howard alongside all the other holdouts in his district, so the docket was extensive: Howard said he ended up receiving almost 80,000 pages in his mailbox.

Like his son Elijah, Delmer Howard represented himself in eminent domain litigation against Mountain Valley Pipeline, filing handwritten motions and briefs by mail. (Annie Pancak | Law360)

"The first day of federal court, the pipeline had a motion and asked all the attorneys who were representing landowners about it," he recalled. "I thought, 'I don't remember reading anything about that,' but then I got it that evening in the mail.'"

He was also surprised to learn that the pipeline could win permission to build without needing to compensate owners first, especially considering the fact that he's the one paying taxes on the land. Howard's father, Delmer Howard, also represented himself pro se in the case and summed up his feelings on the rushed process in a handwritten court filing.

"MVP is in a hurry not every one else," he scrawled. "If it takes yrs for a fair trial so be it ... To be in a hurry to save time, most of the time it will cost you. And, the time for justice is all the time."

Elijah Howard declined to share how much he or his father ultimately received in compensation, and MVP did not respond to repeated requests for comment. But Howard said he was happy the pipeline ended up paying him more than the pre-lawsuit sum he'd negotiated.

Howard is one of the rare landowners who've successfully handled eminent domain litigation on their own. More commonly, unrepresented defendants default before ever responding to a pipeline's complaint. One MVP case in West Virginia saw nearly one in four defendants fail to appear in court.

Paul Montemuro, a landowner in Pennsylvania whose refusal to agree with land men got him sued by the PennEast Pipeline Co. in February 2018, told Law360 he didn't want to "burn up money" for an attorney. He defaulted in the case, and the pipeline won permission to build on nearly an acre of his property in August.

According to Montemuro, a private firm appraised his land at $50,000. PennEast's bond with the court is just $10,000.

He said he had no idea about the bond or the easement the court already granted until contacted for this story. PennEast did not respond to requests for comment, but its website notes landowners "may return to using their property after construction as they had prior to construction," with the exception of building or planting trees atop the right of way.

Click to view interactive version

Challenging the Status Quo

While the rapid process of pipeline eminent domain cases leaves unrepresented landowners on unequal footing, those with attorneys are making a stand by appealing the so-called "quick-take" orders.

Six separate circuit courts have upheld the gas companies' practice of building on land prior to payment. Most recently, the Fourth Circuit sided with pipelines in February on a consolidated set of three district appeals that included Howard's case.

In its ruling, the court noted that forcing MVP to wait and determine just compensation would have caused the company "irreparable harm," in the form of $40 million to $50 million in lost revenue per month. Landowner interests, on the other hand, were taken care of as long as MVP paid the court security deposits equal to the "appraised value of the easements," the court wrote.

Johns, the Texas professor, represented landowners on the Fourth Circuit appeal. He told Law360 that they are preparing to ask the Supreme Court in May to hear the case, which would mark the third such bid in as many months.

The other two, stemming from the Eleventh and Third circuits, involve Williams' Transco pipeline. Both argue that when Congress passed the Natural Gas Act in 1938, it didn't intend to grant judges the power to give private companies immediate possession of land before deciding just compensation.

Gary and Michelle Erb are two of the landowners leading the charge on the Third Circuit petition. The married couple bought a 72-acre property near Conestoga, Pennsylvania, in 2009, going on to build their dream home and start planning another for their son.

Gary and Michelle Erb have asked the U.S. Supreme Court to weigh in on whether pipelines can take private land and pay for it later. (Institute for Justice)

In early February 2017, Transco sent the family a letter offering a low six-figure sum for a 6-acre slice of land right through the heart of their property. If the Erbs rejected the bid, the letter said, then they'd be sued and offered only the appraised value — a number 77% smaller than the company's final offer.

"Should we initiate legal proceedings, we will seek ... immediate possession of the rights of way," the letter concluded.

A spokesperson for Transco told Law360 "it is not uncommon for easement offers to exceed the appraised value ... in order to avoid litigation." But the Erbs rejected the deal they considered a "lowball offer."

Within two weeks, Transco had filed suit and asked a judge to let building begin immediately.

"Transco will eventually obtain possession of the properties at issue; the only question is the timing of possession," a judge ruled in granting the injunction. "It is natural for some landowners to want to delay possession ... but there is no legal basis for further delay."

Though they've had attorneys from Day One, the Erbs remain unpaid more than two years after Williams sued them, even as the pipeline has begun operations. Having watched excavators tear up their yard and ruin their hunting grounds, the family plans to move in a few months. Michelle Erb said she's uncomfortable with potentially explosive gas running so close to home.

"Pipeline companies do this every day, for a living," Gary Erb said. "They prey on the uneducated private landowner to essentially steal their land for private gain."

Only one circuit court has ruled that "quick-take" seizures by pipelines are unlawful. In a 1998 decision against Northern Border pipeline, the Seventh Circuit found that, because the rights to the land do not officially transfer until payment is agreed upon, a pipeline lacks the authority to build anything beforehand.

The Erbs hope the Northern Border precedent will be enough to convince the justices of an ongoing circuit split worth their attention. But according to Jeffrey Simmons of Foley & Lardner LLP, who's represented other pipelines in condemnation cases, the high court is unlikely to buy the argument or take up the case.

Despite the Northern Border ruling, he said a consensus has formed that making pipelines wait could "become a nightmare."

"The problem with [Northern Border] as a practical matter is that, if they can't take it right away, it can delay the project for years," Simmons said. "And from the courts' view, there's very little question that they'll get the property eventually."

Simmons added that "there's nothing inherently unfair" about letting construction proceed quickly and allowing the parties to work out the price later.

But Robert McNamara, an Institute for Justice attorney representing the Erbs, countered that a high court ruling on the case could give people like his clients more room at the table.

"In the usual eminent domain situation, the deck is stacked against landowners," he said. "But in a natural gas condemnation, you can't even get dealt into the game."

--Editing by Katherine Rautenberg.

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