Murray Energy loses appeals court decision on REX pipeline dispute

A three-judge panel at the U.S. Sixth Circuit Court of Appeals on Aug. 15 supported a U.S. District Court and rejected a claim by coal producer Murray Energy in a fight with Rockies Express Pipeline LLC over a gas pipeline built over the Century longwall mine in Ohio.

Plaintiff Rockies Express Pipeline (REX) was unsuccessful in privately obtaining from Ohio landowners easements along the right-of-way for an interstate natural-gas pipeline that the Federal Energy Regulatory Commission had authorized the gas company to build and operate. REX then filed the instant action in federal court seeking the necessary easements through eminent domain. The complaint named as interested parties defendants Murray Energy, Consolidated Land and American Energy, which own or are associated with the Century coal mine in Ohio. That mine lies beneath a tract of land over which REX intended to run its pipeline and on which it sought an easement.

The district court determined that these Murray companies suffered no compensable damages to the coal mining operations as a result of the pipeline. The appeals court on Aug. 15 affirmed that decision.

Between 1999 and 2003, the Murray companies spent $450m to purchase the necessary subsurface mineral rights and open their Century mine, which works the Pittsburgh coal seam near another, long-established Murray mine called Powhatan No. 6. The companies have contracts with purchasers of the coal they extract from the Century mine that extend to 2021, the court noted. They negotiated the contracts on the assumption that they would remove all of the mine’s coal, including a portion known as the 6 West Panel.

REX is a natural gas company that built and now operates the REX-East Pipeline, the easternmost portion of a high-speed pipeline transporting natural gas from supply basins in the Rocky Mountains to eastern Ohio.

In 2007, REX filed an application seeking from FERC a “certificate of public convenience and necessity” authorizing the construction and operation of the REX-East Pipeline. The Murray companies intervened in the proceeding and proposed a different route for the pipeline, one that did not go over their mine. They were concerned that the land subsidence incident to longwall mining would place excessive stress on the pipeline, creating a potential for rupture. REX responded that it would take measures to mitigate the effects of subsidence and claimed that changing the route would impact nearly 350 additional acres of mostly forested land and increase costs by approximately $40m.

In May 2008, FERC approved REX’s application. FERC concluded that it was unnecessary to reroute the pipeline around the Century mine because REX had proposed an adequate framework for a subsidence mitigation plan and had agreed to cover all costs associated with “monitoring or mitigation of the pipeline should mining advance in close proximity to the pipeline,” including the cost of moving the pipeline to avoid damage from mining.

However, FERC made its approval of the pipeline subject to Environmental Condition 147, which required REX, before laying any pipe over the Century mine, to file with FERC, “for review and written approval,” a “construction and operations plan, developed in collaboration with the Murray Companies, for the segment of the pipeline that traverses the coal mining reserves held by the Murray Companies.”

REX and the Murray companies then discussed pipeline construction. The Murray companies expressed concerns, and REX directed its experts to refine their studies and reports to address those concerns. In December 2008, REX filed its plan with FERC. In it, REX explained the measures it would take to build a pipeline that would maintain structural integrity during mining.

The appeal of the Murray companies in this case fails for several reasons, said the appeals court. That includes that it is a collateral attack on the essential factual findings made by FERC in its decision to approve the REX-East Pipeline.

“Moreover, the coal companies seek relief from the district court that FERC could not provide: the Natural Gas Act allows the courts, not FERC, to entertain eminent domain actions brought by certificate holders,” said the court opinion. “However, the basis of the companies’ damage claims requires ignoring or attacking the essential fact findings made by the FERC. That we may not allow.”

The Murray companies sought to recover only the costs incurred in mining the 6 West Panel on an expedited basis to avoid any possible damage to the overlying segment of pipeline. Because REX thought such damages were outside the scope of the district court’s earlier ruling in this matter, the parties sought clarification from the district court. The court clarified that costs incurred from mining early did not fall within the parameters of what it ruled was recoverable. It deemed these costs “self-inflicted,” incurred wholly as a result of “wary speculation” as to what mining regulators would do. The court concluded that the companies had no damages if they did not suffer “pipeline-related damages arising from how [they] mined 6 West by necessity.”

Murray Energy spokesman Gary Broadbent said in an Aug. 16 statement about the court decision: “We continue to review the decision and evaluate our options.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.