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Bluegrass Pipeline delayed until 2016

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By Randy Patrick

Developers’ plans to complete the Bluegrass Pipeline have been postponed.

The same day the Kentucky House of Representatives held its first hearing on legislation that would prohibit builders of natural gas liquids pipelines from acquiring easements through condemnation, and Gov. Steve Beshear said he favors such limits, the Tulsa, Okla., energy company Williams announced it has delayed its deadline for finishing the project from late 2015 to mid-to-late 2016.

The company, which is developing the pipeline as a joint venture with Boardwalk Pipeline Partners Ltd. of Owensboro and Houston, said Wednesday it is changing its target in-service date to “better align with the needs of producers.”

In an end-of-the-year 2013 business report released Feb. 19, Alan Armstrong, Williams’ president and CEO, said in a statement: “We continue to engage in ongoing discussions with potential customers regarding commitments to this large-scale, integrated solution that connects Marcellus-Utica natural gas liquids to diverse domestic markets, fractionation, storage and export facilities in the Gulf Coast.”

Scott Carney, a Williams spokesman said Thursday the project involves “complex interactions” that are affected by such variables as market conditions and drilling schedules.

“There’s no mystery here. It’s just adjusting our schedule” to match those of the producers, he explained.

Carney said the company has acquired about 67 percent of the easements it needs in Kentucky to build the pipeline, which would go through Nelson County from north to south, and into Hardin County, where it would connect with an existing natural gas pipeline that would be repurposed to carry natural gas liquids.

Natural gas liquids are valuable hydrocarbon byproducts of the hydraulic fracturing process used to collect natural gas. They are used to create a variety of goods, from plastics to propane.

Landowners, especially in central Kentucky, have voiced concerns about NGLs because the liquids are volatile and explosive, and given the region’s karst topography, could contaminate groundwater supplies if there is a leak.

The developers have been troubled by setbacks this month.

Last week, Stanley Horton, Boardwalk’s president and CEO, stated that the company faced “challenging market conditions.”

Falling natural gas prices were mentioned as a reason the company’s net income dropped from $306 million to $253.7 million last year. After Boardwalk held an earnings call Feb. 10, its stock price plunged from $24.09 to $13.01 a share from the previous day.

Williams’ fourth-quarter earnings call was scheduled for this Thursday morning. The company’s unaudited net income for 2013 was estimated to be $430 million, down from $859 million for 2012. Its share price fell from $1.37 to 62 cents.

Williams Partners, said in another press release that its $165 million decrease in net income was mostly because of a 39 percent decrease in natural gas liquids profits and lost production at its Geismar petrochemical plant in Louisiana, which exploded in June, killing two workers and injuring almost 80.

Last week Carney confirmed Williams had removed from Nelson County four land agents who had been negotiating easements.

On Wednesday, the House Judiciary Committee, chaired by Democrat John Tilley of Hopkinsville, met to hear Tilley’s bill, HB 31, which would strengthen protections against the use of condemnation, or eminent domain, by private developers of natural gas liquids pipelines. The right of eminent domain would be available only for pipelines designated as “common carriers” of products for public use, and would require approval of the state Public Service Commission.

The committee didn’t vote on the bill but may do so next week.

Beshear that day issued a statement supporting the legislation.

“Although we have been advised that existing law does not permit companies to use eminent domain for private purposes like the Bluegrass Pipeline, I would welcome legislation that will clarify and codify that point,” he said.

Williams has said repeatedly that it prefers to negotiate with landowners and would use condemnation only as a last resort.

“The eminent domain discussion isn’t coming from us,” Carney said.

“On the one end they say they’re not using eminent domain, but on the other hand, they don’t want to see the eminent domain law strengthened,” Mike Zoeller, a Nelson County landowner and opponent of the pipeline, said Thursday. “I think it’s hypocrisy on their part.”

Zoeller said he wouldn’t speculate as to whether or not the delay would make any difference.

“So many variables are involved, it’s anybody’s guess what it could mean,” he said.

However, he added that it could give lawmakers more time to enact eminent domain legislation, if not in the 2014 regular session, then during a special session.

“It may give us more time to talk to property owners,” he said.

Much could happen in a year due to market conditions and opposition to the project, he added, including the possible withdrawal of investors and partners.

Sonya Unnoppet, another Nelson County landowner, said in an email Thursday the announcement of the delay is “good news,” but it doesn’t mean landowners can let down their guard.

“We Kentucky landowners still have to push hard to get this legislation passed to protect us from this private, multibillion-dollar company using eminent domain to take our farms,” she said, referring to the proposals before the legislature.

She said Williams and Boardwalk have learned that “they can’t push us around. This is a fight we will not give up on.”

Carney said he couldn’t comment on the legislative proposals because the companies “have ongoing litigation.”