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In the News: Eminent Domain and the Sunoco Pipeline Case

The power of the government to pursue its policy interests often has the unfortunate consequence of depriving individuals of their private property rights.  Both the need to obtain property for public use and the need to regulate private activity to achieve certain government objections can lead to such deprivation.  One such type of intervention involves the government actually taking private property for public use. Takings by the government for the public use usually occur when the government expressly declares property to be taken under its power of eminent domain.   Alternatively, government attempts to implement land use regulations can also effectively deprive landowners of all of the economically beneficial uses of a piece of property without substantially advancing a legitimate state interest.

Although no formal exercise of eminent domain occurs in these situations, these regulatory takings, known as inverse condemnations, also constitute takings for public use.  In both of these situations, the Fifth Amendment to the United States Constitution entitles the affected landowners to receive just compensation for their lost property.  Since both eminent domain and inverse condemnation impair the property rights of landowners and can present a wide range of complex legal issues, the assistance of competent legal counsel might be appropriate.

Although the right of eminent domain had been traditionally limited by common law to government entities, such as the Pennsylvania Department of Transportation (PennDOT), a recent decision by the Commonwealth Court has interpreted the Pennsylvania Business Corporation Law as expanding this right to Sunoco Logistics, a privately owned public utility corporation.  In this highly publicized and hotly contested case, the Court held that Sunoco Logistics maintains the power of eminent domain as a public utility corporation subject to regulation by the Public Utility Commission (the “PUC”), giving Sunoco Logistics the power to condemn private property for the purposes of laying the Mariner East II pipeline.  The Mariner East II project was originally meant to export natural gas to Europe. As part of the initial phase of this project, an existing pipeline was repurposed in order to deliver close to 70,000 barrels of natural gas a day.  But the brutally cold winter of 2014 and the lack of cheap heating fuel options in the Mid-Atlantic region led Sunoco to add two off-loading terminals to satisfy consumer demand.

This change in the pipeline infrastructure converted the Mariner East II pipeline from an exclusively interstate pipeline subject to regulation by the Federal Energy Regulatory Commission (“FERC”) into an interstate and intrastate dual use pipeline subject to regulation by both FERC and the PUC.  Upon determining that the Mariner East II pipeline qualified as an intrastate pipeline,  the PUC granted Sunoco Logistics a certificate of public convenience for a 351-mile long pipeline that travels through 17 counties. Having received this certificate of public convenience, Sunoco Logistics initiated the process to condemn properties across the Commonwealth of Pennsylvania in anticipation of construction.  Aggrieved landowners began to object to these condemnations on the grounds that the pipeline would not serve a public need.  Although Sunoco won the appeals of decisions rendered by the Courts of Common Pleas of Cumberland and Washington Counties, landowners have filed petitions for the allowance of an appeal with the Pennsylvania Supreme Court, seeking to overturn these decisions.  While these appeals are pending, the future of the Mariner East II pipeline and the landowners’ property interests remain uncertain.

In the event that an entity with the power of eminent domain does not appropriately value the private property and compensate the owners for an express or regulatory taking, the landowners can fight back against the condemnor and seek just compensation through legal proceedings.  Fortunately, Pennsylvania’s Eminent Domain Code provides a number of due process protections to landowners whose property has been taken by eminent domain or inverse condemnation.  Condemning entities, including pipeline companies, are required to immediately pay their estimate of the fair market value of the condemned property.  Oftentimes though, these estimates can be self-serving and drastically undervalue the taken property.  In the event that a landowner finds that the condemning entity undervalued the condemned property and did not pay just compensation for the property, the landowner can challenge this valuation by petitioning for the appointment of a board of viewers.  The board will conduct an evidentiary hearing regarding the valuation of the condemned property, determine its actual value, and award additional just compensation if merited in the case.  In order to provide landowners with the financial means necessary for reviewing the propriety of the condemnor’s estimated just compensation, the Eminent Domain Code provides landowners with a right to limited reimbursement of legal, engineering, and appraisal fees incurred as a result of a condemnation action.  This right to reimbursement enables a landowner to obtain a professional review of the condemnor’s valuation of the taken property in order to determine the likelihood of successfully contesting the condemnor’s valuation before the board of viewers.

Kozloff Stoudt Attorneys, one of the top law firms in Reading, PA, provides representation of municipalities, utility companies, and property owners in a wide variety of municipal matters, including condemnations and exercises of  eminent domain, rights of way, zoning and land use planning, land acquisition, sheriff sale purchases, municipal bond issues, property tax appeals, municipal contract drafting and negotiations, budget approval, challenges to Sunshine Act violations, Right to Know Law open records requests, civil service practices and insurance protection.  Our Berks County lawyers continue a proud tradition of representing both local agencies and residents of Southeastern Pennsylvania in both transactional and litigation matters that dates back over 70 years.

Whether a client needs to retain Kozloff Stoudt’s legal services for general counsel or representation in just a single matter, we can provide knowledgeable and creative solutions to the legal issues confronting Berks County and Southeastern Pennsylvania. Contact their office today by calling 610-370-6700 or filling out a consultation form on their website.

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