South Carolina-to-Jacksonville pipeline could use old eminent domain laws to take needed land

SAVANNAH | Energy giant Kinder Morgan plans to build its Palmetto Pipeline across 210 miles of Georgia to tie into an existing pipeline and bring gasoline and diesel from the Gulf Coast and ethanol from South Carolina to terminals in North Augusta, S.C., Richmond Hill, Ga., and Jacksonville.

Petroleum pipelines have a peculiar past in Georgia. Their history was built on support of national defense in World War II and altered in the 1990s by angry and influential plantation owners.

Now, a new chapter that's unfolded with a series of bureaucratic missteps is testing a 20-year-old Georgia law for only the second time.

As currently mapped, the pipeline would affect 396 landowners over a dozen Georgia counties as it snakes along the Savannah River and down the coast to Florida.

The vast majority is private property. Kinder Morgan will try to reach agreements with landowners for one-time payments for the perpetual use of a 50-foot-wide strip of their land. Landowners will retain ownership and continue to pay property taxes on the land.

Where they don't agree and the pipeline can't be re-routed, Kinder Morgan will need to condemn property through eminent domain.

That issue is at the heart of the Georgia law on petroleum pipelines that proof of a public need is necessary to secure the right to exercise eminent domain. But it wasn't always that way.

Pipeline companies won the right to condemn property to protect the homeland in World War II, said Joe Tanner, of Joe Tanner and Associates, an environmental consulting and lobbying firm in Atlanta.

"They were given right of eminent domain way back then," said Tanner, a former director of the Georgia Department of Natural Resources.

'RED HILL PLANTATIONS'

The law stayed that way until an effort to build across Georgia's "red hill plantations,'' Tanner said.

Georgia actually resisted pre-war efforts to construct two pipelines that eventually ran as far north as North Carolina, according to a history recounted in a 2015 University of Iowa Law Review article, "Transporting Oil and Gas: U.S. Infrastructure Challenges."

Georgia lawmakers were protecting the interests of the railroads, but heightened national security concerns wouldn't allow them to continue to do so for long. In July 1941, even before the U.S. entered the war, Congress passed the Cole Act, which gave interstate pipelines the power of eminent domain in cases where the president determined it necessary for national defense.

Two pipelines crossing Georgia were built in 1941 and 1942. Two other pipelines, the Big Inch and Little Big Inch running from Texas oil wells through refineries in the Midwest and ultimately to the East Coast were crucial to the war effort.

Federal eminent domain authority for oil pipelines expired in 1943, and condemnation rights reverted to the states. It's now governed by a hodgepodge of state laws, many of them - including those of Florida and South Carolina - granting petroleum pipelines nearly the same blanket authority that the federal government gave as it braced for a world war.

PECANS AND QUAILS

That's where Georgia law stood until 1993, when a pipeline running through the Fort Valley pecan orchard of a state representative leaked thousand of gallons of gasoline, fouling his well.

The pipeline's owner, Colonial Pipeline, also was planning to route a new pipeline through the Red Hills region, home to quail plantations and their wealthy owners.

That proved unwise.

In response to the leaks, the General Assembly placed a year-long moratorium on pipeline companies' eminent domain right. And then-Gov. Zell Miller gave Tanner the task of working with landowners to come up with legislation limiting the rights of pipeline companies once the moratorium expired.

Tanner recalled that pipeline companies were accustomed to getting what they wanted with little resistance.

"The president of one of the companies came up on Capitol Hill and asked to see me. I went in, and he almost accosted me, saying 'Who the hell do you think you are? This is a national defense issue.'"

During World War II it was, Tanner replied, but no longer.

"That's when they revoked eminent domain," Tanner said. "[The pipeline executive] got religion in working out the final compromise."

That compromise gave the pipeline companies two regulatory hoops to jump through before they could condemn property. They must get a certificate of need from the Georgia Department of Transportation and a permit from the Environmental Protection Division.

These rules apply only to petroleum pipelines. The siting of interstate natural gas pipelines is governed by the Federal Energy Regulatory Commission.

Tanner, whose company has offered its services to Kinder Morgan, sees the use of eminent domain as inevitable in this case.

OUTDATED DATA

On Feb. 13, Kinder Morgan applied for its certificate of need from the Georgia DOT, making it only the second company to test this procedure.

After public outcry and a consultation with the Georgia attorney general's office, the DOT announced it would conduct one public hearing, the minimum required by law. It's scheduled for April 21 in Richmond Hill near where the pipeline makes its right turn toward Florida.

In a letter dated March 18, DOT deputy Commissioner Todd Long requested more information from Kinder Morgan to justify the need for its pipeline.

But some of what Long requested was already available publicly, such as the pipeline capacity, which the company has said repeatedly will be 167,000 barrels per day. Long also asked the amount and percentage of petroleum that would be made available to Georgians. Kinder Morgan has stated at its open houses, the transcripts of which were submitted to DOT, that the Richmond Hill terminal will be able to handle 25,000 barrels per day.

At a recent meeting and in a discussion with the Savannah Morning News earlier this month, company executives upped the volume estimate of what's ultimately to be delivered to Georgia markets in the Augusta, Savannah and Jacksonville areas from 50% to 60% of the pipeline's capacity.

What Kinder Morgan hasn't offered, and DOT hasn't openly requested, is evidence the pipeline will increase competition, decrease prices, produce a net increase in jobs or provide a safety net for gasoline supply in Georgia.

The only other application for a needs certificate - the one ultimately granted to Colonial Pipeline in 2007 - gave details of the cost savings of that pipeline, indicating it would beat then-available shipping and trucking by 10 cents per gallon.

No such specificity has been provided by Kinder Morgan. And some of what the company has provided appears to be outdated.

"Currently, marine transport is the only source of supply to Savannah and Jacksonville markets," the company wrote in its application, explaining that the pipeline would minimize the effects of a hurricane on the gasoline supply to Savannah.

That's no longer how Savannah gets its gasoline, said Chad Gleaton, Savannah terminal manager for Associated Petroleum Carriers, a trucking company.

For about four years, trucking gasoline from inland terminals in Macon and North Augusta has been the nearly exclusive means of getting the product to the pump for a competitive price.

"I'd say out of 100 gallons of fuel 95 are pulled from alternate terminals," Gleaton said. "Before that it was just the opposite. It's been wonderful for us. It's created a market we never knew existed. If the trucks ever stop coming, the Savannah economy is going to be affected tremendously."

'SHOW ME THE MONEY'

Kinder Morgan's estimates of delivery volumes to Georgia markets come with the caveat that the company doesn't control the actions of its shippers. But it also refuses to reveal who its shippers are or what tariffs they'll pay, citing confidentiality agreements.

In an interview with the Savannah Morning News, Kinder Morgan executives Allen Fore and Brian Williams again declined to provide the tariffs. Tariff information would only become public after the pipeline is in operation, they said.

"If you have an additional supply that wasn't there before and there's a competitive choice and options for gas stations or whatever it may be, that should have a positive impact on prices," said Fore, vice president for public affairs. "It should, but there are a lot of other market influences that are way beyond our control that we can't guarantee that."

CRITICS ZERO IN

Critics say the only way to analyze whether prices would decrease is to compare the pipeline's rates to current transportation options. The tariff schedule submitted to federal regulators outlined a tiered system that favors high volume over low but didn't indicate actual rates.

"They're asking for the most intrusive government power that's out there, to take private land, and they don't feel obligated to give us the details of their pricing structure?" asked Ryan Chandler, vice president for business development at Savannah-based Colonial Group Inc., which is not affiliated with Alpharetta-based Colonial Pipeline Company.

The 25,000 barrels per day promised for a Richmond Hill terminal outstrips the Savannah metropolitan area's 20,000 barrel per day consumption, Chandler said.

Moreover, demand is down 15 percent statewide from a peak in 2005 to 2012, according to the federal Energy Information Administration. That trend is expected to continue. And shippers are likely to bypass Savannah in favor of the Jacksonville market where they can make more money.

A check of prices on April 6 indicated the lowest wholesale pre-tax price for branded gas in Jacksonville was $1.6716 a gallon compared to $1.6235 in Savannah. In a business that scrutinizes price to the fourth decimal place, that's a huge difference, Chandler said.

He said he fears that big oil, particularly ExxonMobil, co-owner of the existing Plantation Pipeline the Palmetto will connect into, will be able to control the supply chain into Savannah and ultimately force out competition.

"How is it our state would ever be interested to allow a Texas company to disadvantage Georgia companies, expose Georgia jobs to risk and potentially create a fuel supply monopoly dominated by big oil companies out of Texas?" asked Chandler, whose company already competes with about two dozen marketers in getting gasoline into Savannah, handling up to 15 percent of the market share.

Steve Caley, an attorney with Atlanta-based GreenLaw, which represents environmental interests in the pipeline discussion, also finds the data vacuum troubling. It cripples public participation in evaluating Georgians' need for the pipeline, he said.

"Show me the money," Caley said. "Not only should it be disclosed to DOT, but the public has the right to comment on the application. How can you comment if you're not given the basic information?"