Similiar pipes, different rules

The Philadelphia Inquirer continues its in-depth series on the Marcellus Shale gas rush and regulatory capture of state and federal agencies by the gas industry. It probably doesn’t help that Gov. Tom Corbett is deep in the pocket of the gas companies:

When the owners of the Tennessee natural gas pipeline decided to expand the pipe in the Marcellus Shale region of Pennsylvania’s northern tier, the federal safety rules they had to follow filled a book.

For this interstate transmission line running north from the Gulf Coast, the regulations covered everything from the strength of the steel to the welding methods to how deep the pipeline must be buried.

Also in Bradford County, another company – Chesapeake Energy – is building a pipeline the same size as the Tennessee line, 24 inches in diameter. And it’s designed to operate at even higher pressure – up to 1,440 pounds per square inch.

But for this line, in this rural section of shale country, there are no safety rules at all.

Because the second line is classified as a “gathering” pipeline, carrying gas from well fields to transmission lines, safety rules are less stringent. And because that line is in a rural area, it’s totally unregulated.

Bill Wilson lives in neighboring Wyoming County, another crossroads for the new generation of powerful Marcellus gathering lines. He made a study of pipeline rules in his role as president of a group of landowners who negotiated gas and pipeline leases.

He says the calculation that balances safety regulations against population numbers treats rural residents as “collateral damage.”

“It’s all about money. You know that as well as I do,” he said.

One thought on “Similiar pipes, different rules

  1. Chesapeake Energy is a very … um.. special kind of company. Here in West Virginia they made a big show of locating their regional headquarters in Charleston, WV, but when the governor failed to engineer a favorable supreme court ruling in a case where they were being sued for cheating landowners out of royalties, they canceled the building after the groundbreaking had already take place.

    Chesapeake Energy puts brakes on new headquarters
    Anna Sale talks to Greg Collard about Chesapeake’s decision – 5/29

    By By Anna Sale
    May 30, 2008 · Chesapeake Energy announced it’s canceling plans to build a regional headquarters in Charleston. This comes one week after the West Virginia Supreme Court refused to consider an appeal of a $400 million verdict against natural gas companies.

    Chesapeake Energy announced yesterday that it is canceling its plans to build a regional headquarters in Charleston. The company made the decision after the Supreme Court refused to consider an appeal of a

    $405 million jury verdict against natural gas companies in Roane County.

    It was less than a year ago that Chesapeake executives and political dignitaries gathered for an elaborate groundbreaking ceremony for Chesapeake’s new eastern headquarters in Charleston.

    There was a catered lunch and a live band. Even a gas driller replaced the traditional golden shovels.

    McClendon: It’s is a great day for West Virginia. This is a day when everybody’s air conditioners are running and lots of electricity is being generated. Some of it from natural gas, most of it from coal, and so we all can love each other and get along here.

    Sale: That was Chesapeake’s CEO Aubrey McClendon who made the trip from Chesapeake’s headquarters in Oklahoma.

    McClendon had warned that he was very concerned about the $405 million gas royalties verdict. He told reporters that the decision had made Chesapeake reconsider building its regional headquarters in West Virginia.

    But at the groundbreaking, McClendon downplayed his worries.

    McClendon: We’ve had a few bumps in the road that some of you may have read about in the paper along the way, but the commitment from our employees and the direction that Governor Manchin is leading this state far outweigh any issues we’ve had to date.

    Sale: The Supreme Court’s unanimous decision last week not to consider the gas producers’ appeal apparently changed that.

    Chesapeake Energy announced in a statement on Thursday that it has canceled its plans to build its eastern headquarters in Charleston. The company declined a request for a follow-up interview. Chesapeake said in its statement that it is still committed to its operations in West Virginia, but it will manage them from leased space. It is not clear if this decision will result in fewer area jobs at Chesapeake.

    Chesapeake Energy was one of the companies seeking the appeal, along with NiSource. The Roane County jury found that Columbia Natural Resources, which Chesapeake now owns, and two other gas companies had illegally deducted production costs from the royalty checks it paid to landowners.

    Chesapeake called the Supreme Court’s refusal to hear the case stunning. Its statement read in part, “While we hold a less significant amount of the liability in the verdict, we do believe it sends a profoundly negative message about the business climate in the state. The reality of this decision is that nobody in West Virginia, similarly situated, has a guaranteed right of appeal in the judicial system.”

    Marvin Masters, one of the attorneys who represented landowners in the case, takes issue with that. He says it’s not accurate to imply that Chesapeake didn’t get their day in court.

    Marvin: A party appeals to the Supreme Court they first have to demonstrate some evidence that there was some error committed by the trial court. They submitted a very long and detailed brief of everything they thought maybe was wrong, but there just wasn’t anything there. So the Supreme Court did what it was supposed to do, and they denied them.”

    The Supreme Court’s decision was 5 to 0. Two circuit judges sat in on the case because two justices recused themselves. Justice Robin Davis stepped down because her husband, Scott Segal, was on the legal team representing the landowners. Justice Brent Benjamin declined to hear the case because his former law firm defended the gas companies.

    Marvin Masters says attacking West Virginia’s business climate is a way for to companies to shirk responsibility for the wrongdoing at issue in the case.

    Marvin: Maybe they don’t want to publicly admit that they defrauded 10,000 people and businesses in West Virginia because that’s what the jury found, that they had in fact done that. So maybe they just don’t want to admit it.

    Governor Joe Manchin, though, says he agrees with Chesapeake. Manchin has touted Chesapeake’s Charleston headquarter plans dating back to his 2006 State of the State address.

    Reached on a cell phone on Thursday, Manchin said he wishes the Supreme Court had heard the gas producers’ appeal.

    Manchin: I’m not a lawyer. Nor do I come from the legal, judicial branch of government. I can only tell you as an individual and a citizen, that an industry that has that much at stake in West Virginia and as far reaching as it’s been of our fabric, if you will, and not to say that it’s of importance enough to be heard, is frustrating to me. I don’t understand. So, yes, I would have thought, too, $400 million jury award that had far-reaching implications. It’s not just one person, but many, many, many. You would think that the reprieve would be at that level.

    Sale: Manchin said he had not yet talked to Chesapeake CEO Aubrey McClendon. He said he planned to encourage him to reconsider, but he wasn’t optimistic.

    Manchin proposed legislation in a special session last year that would have allowed gas companies to deduct production costs from royalty payments, but the legislature didn’t take it up.

    Now, Manchin says something needs to be done at the Capitol to fix a system that he says isn’t working.

    Manchin: It’s hard from the legislative standpoint to take when the judicial is taking such the opposite. I can tell you, there are probably a lot of legislators that want to revisit. I’m more than willing to sit down and talk and work with them. I would like to see the judicial branch be part of it so that we can fix the system right now that seems to not be working very well.

    Sale: Are you talking about looking at tort reform?

    Manchin: I think you have to look at everything, no matter what you may call it. I have just always said, West Virginia has to be in the market. That means we can’t be extreme one side or extreme the other.

    On Thursday, at the site of last year’s groundbreaking, a sign still stood marking the future regional headquarters for Chesapeake Energy. Two bulldozers were at work, pushing dirt around to control for erosion on the lot where there will now be no building.

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