News
Legal Staff, Mass. Association of REALTORS® , 7/16/2014
Proposed
natural gas pipeline in Mass. would bring fuel but also issues of disclosure
and eminent domain
(Please note: The following
blog post was prepared by MAR Legal Staff: Michael McDonagh, general counsel;
Ashley Stolba, associate counsel; and Justin Davidson, staff attorney)
The Tennessee Gas Pipeline Company,
a subsidiary of Kinder Morgan, is in the planning stages of adding a natural
gas pipeline to the Commonwealth. The proposal would extend an existing pipeline
in New York from the state border in Richmond, MA to Dracut, MA. The goal of
the pipeline is to bring additional natural gas to New England from other parts
of the U.S. in order to meet current and future demands. According
representatives of the Tennessee Gas Pipeline, the current plan is to begin
construction in spring 2017 and for the pipeline to become active in November
2018.
There are advantages and
disadvantages to such a project, and several that might affect your business.
Here’s what REALTORS® need to know:
Eminent Domain
Eminent domain issues exist. Eminent
domain is the power of a government entity to take private property for public
use. The pipeline company must first obtain a certificate of public convenience
and necessity from the Federal Energy Regulatory Commission (FERC) for “the
construction or extension of any facilities…for the transportation in
interstate commerce of natural gas.” (15USC §717f(c)). A FERC certificate
confers on the developer eminent domain authority. (15 USC §717f(h)). This
means that the FERC certificate provides a pipeline developer the authority to
secure property rights to lay the pipeline if the developer cannot secure the
necessary rights-of-way from landowners through negotiation. Eminent domain
would likely be a last resort for the company. Also, it is important to note
that the federal Natural Gas Act preempts any state or local law that would
obstruct the federal law such as siting and zoning.
Easements
The Tennessee Gas Pipeline proposal
is for an underground pipeline so the company will likely be seeking easements
from property owners. They may seek larger temporary easements for construction
and then a smaller permanent easement of approximately 50 feet once the
construction is completed. The easements generally prohibit the erection of
buildings and planting of trees so as not to hinder access to pipeline.
Disclosure:
The disclosure issues about the
pipeline will be different for each individual property. Here some suggestions
as to how to deal with several scenarios you might encounter:
-
If a property owner has already agreed to an easement, that easement would arguably serve as constructive
notice and should be disclosed to any buyer.
- If the company has accessed the property or
requested access to the property to survey it, disclosure to prospective buyers is recommended
before an offer is made. Keep in mind the Attorney General’s 93A
regulation “. . . any person or other legal entity subject to this act,
(specifically includes all real estate licensees) who fails to disclose to
a buyer or prospective buyer any fact, the disclosure of which may have
influenced the buyer or prospective buyer not to enter into the
transaction.” Therefore, disclosure is recommended if broker has
knowledge that the property has been surveyed.
- Disclosure questions related to properties nearby, but
not part of, the pipeline would
need to be viewed in light of Massachusetts case law, specifically the Urman
v. South Boston Savings Bank case dealing with “off site” defects. Urman
held that generally a broker has a duty to disclose physical conditions
which are known to the broker, but not known and not readily observable by
the buyer and might affect the value or use of the property. Based on
this ruling, it is recommended that if you represent the seller in an area
included in the proposed pipeline route, you have discussions with your
client regarding disclosures immediately. Although it is unclear as to
whether disclosure would be required in light of the Urman case,
the cautious decision would be to disclose known information, with your
seller’s permission.
- If you represent a prospective buyer who is seeking to
purchase a home in an area included in the proposed pipeline route, it is recommended that you encourage your buyer to
conduct his or her investigations regarding the proposal.
Environment:
Natural gas pipelines can impact the environment in several ways. Potential
impacts
include habitat loss, changes in species movement, sedimentation, and air emissions.
Because of these concerns pipeline projects are required to submit a draft
Resource Reports to FERC. In accordance with the National Environmental Policy
Act (NEPA), FERC will then prepare an Environmental Assessment (EA) or an
Environmental Impact Statement (EIS). The purpose of these studies is to inform
the public and the permitting agencies about the potential adverse or
beneficial environmental and safety impacts of proposed projects and their
alternatives.