The eminent domain attorneys at Sever Walker Padgitt are actively investigating inverse condemnation cases involving natural gas storage throughout the State of Indiana. Landowners in certain parts of Indiana have significant natural gas storage rights. In some instances this storage right is currently being used by natural gas storage operators without compensation to the landowner. Federal and state law allows landowners the right to bring an inverse condemnation action against these gas storage operators. If successful the landowner can be reimbursed for all attorney fees, costs and may receive substantial compensation.
Natural Gas Basics:
Natural gas is distributed from wells throughout the country via a system made up of approximately 1.3 million miles of pipeline. Although natural gas pipelines are in continual operation the demand for natural gas by the consumer fluctuates widely. Natural gas storage projects provide huge benefits to suppliers by allowing them to provide consistent supplies of natural gas year round. In addition, storage facilities benefit the pipelines by allowing continuous transportation of natural gas year round which increases the mechanical efficiency of the pipelines and thereby reduces costs. Finally, natural gas operators can use storage to generate substantial profits by storing gas during period of low demand and price and selling during high demand and higher prices.
Indiana has approximately 28 to 30 active natural gas storage facilities located in 16 different rock units within the State.
Eminent Domain and the Natural Gas Act:
To facilitate the construction of natural gas storage projects, gas companies are allowed to use the federal power of eminent domain in order to secure property rights under the Natural Gas Act. When a gas company uses the power of eminent domain to secure a gas storage right they must pay just compensation for that right. In these situations the biggest question for landowners is to how to properly value the property right taken. Another way to consider the problem is; how does a landowner determine the value of the right to store natural gas in a geological formation 3,000 feet below the surface of one’s property.
Value of the Storage Right
Natural underground storage rights can have a significant value. There are several methods that could be used to prove compensation for landowners. For example, you could consider the present fair market value of the storage easement based upon a capitalization of the retail income to be reasonably derived for the right to store the gas.
It is important to note that when using any method that your expert find a true market. Natural gas operators will argue that the storage right is worth only $50.00 an acre “because that is what they have always paid.” In providing just compensation eminent domain requires that a market is used whereby a willing buyer and willing seller agree to a price without undue influence. In essence the market is established by arm’s length transactions. Where a natural gas provider uses examples of previous sales under the threat of eminent domain a true market does not exist. When a market has only one buyer and when that buyer could force a sale using the power of eminent domain that transaction is de facto not a market transaction. Otherwise the storage operator would have the power of eminent domain and the power to determine the amount of just compensation.
Theories that Work!
At Sever Walker Padgitt we have developed several theories using true market transactions that result in significant per acre compensation for landowners. The correct approach for each landowner may vary given their circumstances. Using these theories we believe that a strong argument can be made for just compensation that far exceeds that which is traditionally offered by gas storage companies.
If you believe that your underground natural storage rights are being used without your permission and without compensation please call the emient domain landowner attorneys of Sever Walker Padgitt at 888-318-3761 for a free consultation.
