INTRODUCTION

This appeal will determine whether the Franklin Circuit Court erred in issuing a

declaration of rights regarding a right of eminent domain that has never been exercised

nor threatened, sought by a plaintiff relying on associational standing, whose

representative "member" may not be a member at all and has no property that would be

taken even if the defendant has the right of eminent domain.

Assuming the Court were to conclude that there was a ripe, justiciable

controversy brought by a plaintiff properly relying on associational standing. this appeal

will address whether statutory language conferring the right of eminent domain to

companies developing pipelines to transport "oil, gas, or oil and gas products ... in public

service" applies to a common carrier transporting natural gas liquids, which are oil and

gas products, in a pipeline open to the public.

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ST A TEMENT CONCERNING ORAL ARGUMENT

Appellant believes that oral argument may be helpful to the Court in deciding the

issues presented. The issues regarding standing, ripeness, and justiciable controversy rest

on well-established legal principles, but, if the Court were to reach the merits of the

eminent domain question, oral argument may assist the Court in evaluating less-settled

issues such as the interplay between the "public service" requirement of KRS 278.502

and the "public use" requirement of KRS 416.675.

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STATEMENT OF POINTS AND AUTHORITIES

INTRODUCTION .............................................................................................................. i

STATEMENT CONCERNING ORAL ARGUMENT ................................................. ii

KRS 278.502 ........................................................................................................... ii

KRS 416.675 ........................................................................................................... ii

STATEMENT OF POINTS AND AUTHORITIES ..................................................... iii

STATEMENT OF THE CASE. ....................................................................................... 1

ARGUMENT ..................................................................................................................... 4

Blankenship v. Collier, 302 S.W.3d 665 (Ky. 2010) .............................................. 4

Veith v. Louisville, 355 S.W.2d 295 (Ky. 1962) ..................................................... 4

KRS 278.502 ........................................................................................................... 5

I. THE CIRCUIT COURT SHOULD HAVE REFUSED TO ISSUE A DECLARATORY JUDGMENT BECAUSE THERE IS NO RIPE, JUSTICIABLE CONTROVERSY. ..................................................................... 5

Kentucky Const. 112(5) ........................................................................................ 5

KRS 418.040 ........................................................................................................... 5

Appalachian Racing, LLC v. Family Trust Foundation o.lKy., Inc., 423 S.W.3d 726 (Ky. 1014) ........................................................................................ 5,6

Com. v. Ky. Retirement Sys., 396 S.W.3d 833,839 (Ky. 2013) ......................... 5, 6

Veith v. Louisville, 355 S.W.2d at 297 (Ky. 1962) ................................................. 6

Texas Municipal Power Agency v. Johnston, 405 S.W.3d 776 (Tex. App. 1st 2013) ........................................................................................................... 7

Wilson & Wilson v. City Council of Redwood City, 191 Cal. App. 4th 1559 (Cal. Ct. App. 2011 ) ............................................................................................. 7

Dravo v. Liberty National Bank and Trust, 267 S.W.2d 95 (Ky. 1954) ................. 7

KRS 416.61 O( 4) ...................................................................................................... 8

Ratliflv. Fiscal Court of Caldwell County, Ky., 617 S.W. 2d 36 (Ky. 1981) ........ 8

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KRS 418.065 ........................................................................................................... 8

Black v. Utter, 190 S. W. 2d 541 (Ky. 1945) ........................................................... 8

II. THE CIRCUIT COURT INCORRECTLY PERMITTED KURED TO INVOKE ASSOCIATIONAL STANDING ........................................................ 8

Harrison v. Leach, 323 S.W.3d 702 (Ky. 2010) ..................................................... 9

Assoc. Indus. 0/ Ky. v. Com., 912 S.W. 2d 947 (Ky. 1995) .................................... 9

Interactive Gaming Council v. Com. ex ret. Bro'wn, 425 S.W.3d 107 (Ky. App. 2014) ........................................................................................................... 9

Bailey v. Preserve Rural Roads of Madison COZinty. Inc., 394 S.W.3d 350 (Ky. 2011) ........................................................................................................... 9

Com. v. Hughes. 873 S.W. 2d 828 (Ky. 1994) ..................................................... 10

Veith v. Louisville, 335 S. W.2d 297 (Ky. 1962) ................................................... 10

Health Am. Corp. a/Ky. v. Humana Health Plan, Inc., 697 S.W, 2d 946 (Ky. 1985) ......................................................................................................... 10

Rusman v. Luckett, 391 S.W. 2d 694 (Ky. 1965) .................................................. 11

Rose v. Counselfor Better Education, Inc., 797 S. W. 2d 186 (Ky. 1989) ........... 11

Hunt v. Wash. State Apple Advertising Comm 'n., 432 U.S. 333 (1977) ............... 12

KRS 273.161(7) .................................................................................................... 12

KRS 273.187(1) .................................................................................................... 12

KRS 273.257(1) .................................................................................................... 12

KRS 273.207 ......................................................................................................... 12

KRS 273.161(8) .................................................................................................... 12

KRS 273.211 ......................................................................................................... 12

Sierra Club v. IV/orton.405 U.S. 727 (1972) ................................................... 12, 13

Valley Forge Christian College v. Americans United/or Separation o.lChurch and State, Inc .. 454 U.S. 464 (1982) ......................................................... 13

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III. BLUEGRASS PIPELINE HAS THE POWER OF EMINENT DOMAIN UNDER KRS 278.502, BECAUSE IT IS A COMMON CARRIER OF NATURAL GAS LIQUIDS, WHICH, AT A MINIMUM, ARE OIL AND GAS PRODUCTS . ............................................................................................... 13

KRS 278.502 .................................................................................................... 13, 14

KRS 416.675 ......................................................................................................... 13

A. KRS 278.502 is Not Limited To Public Utilities Regulated by the PSc. ................................................................................................................... 14

KRS 278.502 ................................................................................. 14

KRS 278.485 ................................................................................. 14

KRS 446.140 ................................................................................. 14

Stephenson v. Woochvard, 182 S.W.3d 162, 169-70 (Ky. 2005) .. 15

B. Bluegrass Pipeline, As a Common Carrier, is Providing a Public Service, and the Pipeline is a Public Use ............................................... 15

KRS 278.502 ................................................................................. 15

KRS 416.67S ................................................................................. 16

1. The "Public Service" and "Public Use" Questions Turn On the Same Analysis . .............................................................................. 16

KRS 278.502 ......................................................................................................... 16

KRS 416.675 ......................................................................................................... 16

KRS 416.67S(2)(d) ............................................................................................... 16

KRS 416.67S(2)(e) ................................................................................................ 16 2.

Public Service, and the Pipeline 'would be For a Public U~e . ...... 16

49 U.S.c. 1(1) (1988) ........................................................................................ 17

49 U.S.c. 1(3) (1988) ........................................................................................ 17

49 If.S.C. 60S02 ................................................................................................. 17

ICA, FERC.GOV, http://www.ferc.gov/legallmaj-ord-reg/ica.pdf (last accessed July 23, 2014) ............................................................................................ 17

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49 U.S.c. 1(4) (1988) ........................................................................................ 17

49 U.S.c. 6(1) (1988) ........................................................................................ 17

18 C.F.R. 342.1 ..................................................................................................... 17

18 C.F.R. 341.2 ..................................................................................................... 17

49 U.S.C. 1(5)(1988) ......................................................................................... 17

18 C.F.R. 341.11 ................................................................................................... 17

49 U.S.C. ~ 3(1) (1988) ....................... ,",.',.,.,""", .............. , ..... , ........ , ................. 17

NICHOLS ON EMINENT DOMAIN Ch. 7 7.05 (Matthew Bender, 3d ed.) ........ 17, 18

Chesapeake Stone Co. v. Moreland, 126 Ky. 656 (Ky. 1907) .............................. 18

EQT Gathering, LLC v. Tract oj Prop. Situated in Knott County, 970 F. Supp. 655 (E.D, Ky. 2013) ............................................................................................... 18, 19

KRS 278.502 ............................................................................................. 19,20,21

KRS 416.675 ................................................................................................... 20,21

"Milam v. Viking Energy Holdings, 370 S.W.3d 530 (2012) ................................. 20

In re Langford, 32 B.R. 746 (Bankr. W.O. Ky. 1982) .................................... 20,21

KRS 278.470 ................................................... , .......................................... , ... , 20, 21

C. NGLs are oil, gas, or oil and gas products under KRS 278.502 . ........ 22

KRS 278.502 .............. , ...... , ............... , .......................................... , 22, 24, 25

Edward S. Gilson, Jr., Oil and Gas Production, 1 KENTUCKY MINERAL LAW 4 (Short and Thomas eds, 1986),."",.,."", ... 22

What are natural gas liquids and hOvlI are they used?, U,S. ENERGY INFORMATION ADMINISTRATION (ApriI20, 2012), http://www,eia.gov/todayinenergy/detai1.cfm?id=5930 ,.,.".,""'" 22

40 C.F.R. 60,631 .................................................................................... 22

10 C,F,R, 500.2 ............ , ......................................................................... 22

40 CFR 60.631(3) , ................ , ................................... " .... , ..................... , ... 23

BLACK'S LA W DICTIONARY 1328 (9th ed, 2009) ................................... , .. 23

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KRS 353.51 0 ............................................................................................. 23

49 U.S.C. 601O! et. seq ................................................... ....................... 23

49 C.F.R. 195.2 ...................................................................................... 23

KRS 143A.OIO(2) ..................................................................................... 24

http://dictionary.reference.comlbrowse/rock?s=t ..................................... 24

http://dictionary.reference.comlbrowse/stone?s=t .................................... 24

Afid-American Pipe Line Co. v. lvfissouri P. R. Co., 298 F. Supp. 1112 (D. Kan. 1969) ..................................................................................... 24

AIilam v. Viking Energy Holdings, 370 S.W. 3d 530 (2012) .................... 25

CONCLUSION ............................................................................................................... 25

APPENDIX .................................................................................................................... A-I

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STATEMENT OF THE CASE

Appellant/Defendant Bluegrass Pipeline, LLC ("Bluegrass Pipeline") plans to

construct an underground pipeline that will transport natural gas liquids ("NGLs") in

interstate commerce (the "Pipeline"). I NGLs are hydrocarbons such as ethane, propane,

butane, and pentane. some of which (e.g., butane) can be burned for fuel, but which

generally are more valuable as raw materials to produce a range of products such as

plastics and fertilizers. 2 The safe and efficient transport ofNGLs by pipeline is an

essential component of the nation's industrial strategy.3 The Pipeline will be used for

safer transport ofNGLs (currently being transpOlied primarily by road, rail, and barge)

between producers of the NGLs and the petrochemical processing industry, including

producers and manufacturers in Kentucky.4 Contrary to the Circuit COUli's conclusion

that Bluegrass Pipeline is a private actor serving purely private interests, as will be

discussed below, Bluegrass Pipeline is a common carrier that will furnish transpOliation

services to the public on non-discriminatory terms at federally-approved rates.

In developing the Pipeline route, Bluegrass Pipeline has approached landowners

to discuss voluntary agreements to purchase right-of-way easements for the construction

of the Pipeline.s When property owners have declined to grant easements, Bluegrass

Pipeline has revised the proposed Pipeline route to avoid their property.6 This is

precisely what occurred with Franklin County landowner, Peru1Y Greathouse, on whom

I R.176 ~ 2. References to the appellate record are designated by "R" and page number. 2 R.n3 ~ 3. 1 R.I78-79, 225-26. 4 R.176 P 2. The primary transport, at least initially, would be between producers extracting NGLs from the Marcellu~ and Utica shale formations in Pennsylvania, West Virginia, and Ohio and processors located on the Gulf Coast. Id. However, others will be able to connect to the Pipeline along its path, as recognized by at least one substantial Kentucky processor-Westlake Chemical Corporation-which has recognized that it will be "able to interconnect with the Pipeline." R.I78. 5 R.176-77 ~ 3. 6 Id.

1

Appellee/Plaintiff Kentuckians United To Restrain Eminent Domain, Inc. ("KURED")

exclusively relied to establish associational standing in this lawsuit. 7 Bluegrass Pipeline

met with Mrs. Greathouse and her husband in October 2013 to discuss the Pipeline and to

express interest in purchasing right-of-way easements from them.s In November 2013,

the Greathouses declined to grant an easement to Bluegrass Pipeline.9 In response,

Bluegrass Pipeline revised its map to reroute the Pipeline, which eliminated the need to

cross the property owned the Greathouses. IO Therefore, Bluegrass Pipeline is not seeking

to acquire an easement from Penny Greathouse and made that decision not to seek an

easement from her prior to the filing of this action. I I

Even though Bluegrass Pipeline stopped seeking an easement from Mrs.

Greathouse and despite the fact that Bluegrass Pipeline had not initiated or threatened

eminent domain proceedings against her or any other Kentucky landowner, KURED fiied

this lawsuit on December 5, 2013 seeking a declaration that Bluegrass Pipeline does not

have the power of eminent domain. 12 KURED owns no property and has no individual

stake in what happens with the Pipeline. Instead, KURED relied on the doctrine of

associationaI standing to enable it to act as a plaintiff. 13 To attempt to establish

associational standing and the existence of a justiciable controversy, KURED relied on an

affidavit from Mrs. Greathouse stating that she is a member of KURED and that she is

7 R.lS0-S2. 8 R.lS0 ~ 2. 9 R.lSl ~ 4. 10 [do II [do See also R.lS2 ~ S. 12 R.l.

13R.2~3.

2

uncertain as to whether or not Bluegrass Pipeline has the right of eminent domain,

affecting her willingness to negotiate an easement with Bluegrass Pipeline. 14

RhJ.egrJl.Ss..Pi.rfJine.attr:w.pt~d to explore t~e.factual basis for KURED-; s assertion ". '!"-

of associational standing and the existence of a justiciable controversy through discovery.

Bluegrass Pipeline served discovery requests designed to obtain information regarding

KURED's members (if any), including whether they owned any real estate on the

proposed pipeline route, and whether there was any controversy between Bluegrass

Pipeline and anyone associated with KURED (or anyone else).15 KURED's objections

and responses disavowed reliance on any "member" other than Mrs. Greathouse and

raised questions as to whether KURED had any members based on the lack of reference

to any members in KURED's governing documents and whether KURED was formed for

anything other than the filing of this lawsuit against this defendant 16

Bluegrass Pipeline promptly requested depositions of Mrs. Greathouse and of

Lisa Aug, KURED's chairman of the board who verified KURED's written interrogatory

responses. KURED refused to provide depositions and moved for summary judgment--

not even three months after the complaint was tiled. 17 Bluegrass Pipeline moved the

Circuit Court to continue the hearing and to compel discovery regarding those threshold

jurisdictional issues. 18 The Circuit Court denied Bluegrass Pipeline's motion to compel

14 R.ll. 15 R.28-47. 16 R.1341nt. No 2; R.139 Req. No.2; R.143-48; R.1351nt. No.6. 17 RA8. 18 R.112. 19 RJ 52 .. _"., .... _ ' ..

3

On March 25, 2014, following briefing by the parties and a hearing on March 10,

2014, the Circuit Court entered an opinion and order granting summary judgment and

ruling that Bluegrass Pipeline does not have the right to invoke eminent domain.2o

ARGUMENT

This is an appeal from a summary judgment entered by the Franklin Circuit Court.

This Court reviews the summary judgment de novo to determine whethe~ the Circuit

Court properly concluded that there were no genuine issues of material fact and that

KURED was entitled to judgment as a matter of law. Blankenship v. Collier, 302 S. W.3d

665,668 (Ky. 2010). The Court "must also consider whether the Circuit Court gave

[Bluegrass Pipeline] an ample opportunity to respond and complete discovery before the

court entered its ruling." Jd. Here, the Circuit Court expressly refused to allow Bluegrass

Pipeline to complete discovery, or even take just two depositions to address critical

jurisdictional questions of standing and justiciability.

Beyond the Circuit Court's decision to deprive Bluegrass Pipeline of relevant

discovery, summary judgment was improper here for three basic reasons. First, KURED

failed to present a ripe, j Llsticiable controversy. Bluegrass Pipeline has not commenced

or threatened eminent domain proceedings against anyone, and the speculative possibility

that it might consider doing so in the future provides no "grist for the judicial mill."

Veith v. Louisville, 355 S.W.2d 295,299 (Ky. 1962). Second, KURED failed to establish

associational standing because the sole "member" on whom KURED relied to establish

associational standing has no standing in her own right, and because the doctrine of

associational standing does not exist to allow a corporation to be formed solely to pursue

a lawsuit. Third, even if these jurisdictional deficiencies did not exist, the Circuit Court

20 Opinion and Order R.259 (attached in Appendix at Tab I).

4

erred in concluding that Bluegrass Pipeline lacks the power of eminent domain because

Bluegrass Pipeline-a federal common carrier providing services to the public-falls

squarely within the grant of eminent domain conferred on operators of pipelines carrying

oil, gas, or oii and gas products in public service by KRS 278.502.

I. THE CIRCUIT COURT SHOULD HAVE REFUSED To ISSUE A DECLARATORY JUDGMENT BECAUSE THERE IS No RIPE, JUSTICIABLE CONTROVERSy.21

This lawsuit lacks the most fundamental prerequisite for a declaratory judgment

action, or any action in Circuit Court, which is the existence of a present and actual

controversy. Circuit Courts in Kentucky have original jurisdiction over "justiciable

causes" and are empowered to issue a declaratory judgment only when the case involves

"an actual controversy." Kentucky Const. 112(5); KRS 418.040. "For a cause to

justiciable, there must be a present and actual controversy presented in good faith by

parties with adverse interests in the subject to be adjudicated." Appalachian Racing. LLC

v. Family Trust Foundation a/Ky .. Inc., 423 S.W.3d 726, 735 (Ky. 2014).

The Circuit Court concluded that this case presents ajusticiable controversy. To

do so, the Circuit COllli misinterpreted the Appalachian Racing opinion. Referring to

that decision, the court stated that "the touchstone of justiciability is the presence of an

actual controversy, vigorously contested by the parties." (Op., at 11.) The Circuit Court

focused primarily on its conclusion that the parties are "truly adversarial," (id.), but that

alone does not establish justiciability. If the existence of adverse parties were the sole

requirement, then every situation in which two parties disagree would justiciable. For a

cause to be justiciable, one party must occupy a position that would "impair, thwaIi,

obstruct, or defeat the plaintiff in his rights." Com. v. Ky. Retirement Sys., 396 S.W.3d

21 Appellant raised this argument below at R. 160-164 and V.R. 3-10-14,

5

833, 839 (Ky. 2013) (quotation omitted). There must be an "existing state of facts upon

which [the parties'] rights may be fixed." Veith, 355 S.W.2d at 297. Ajusticiable

controversy cannot rest on disagreements over hypothetical possibilities. See id.

The Appalachian Racing case, for example, involved a challenge to regulations

adopted by the Kentucky Racing Commission and the Kentucky Revenue Cabinet. See

423 S. W.3d at 730-31. The Family Trust Foundation challenged those regulations and

asked the court to declare them invalid. Id. at 731. The case presented a justiciable

controversy because it \vas a dispute between the litigants over the present validity of

regulations that had actually been adopted. not over some future. speculative action by

state government. c";ee id. at 732-35. Cumpare .vith Veith. 355 S. W.2d at 297-99

(holding that no justiciable controversy existed when there was merely a possibility that

various public entities might take certain actions in the future).

The present and actual nature of the dispute in Appalachian Racing distinguishes

that case from this one. Here, KURED sought and obtained a declaratory judgment that

Bluegrass Pipeline does not have the right to use eminent domain to acquire easements

for the construction of the Pipeline. Unlike the patiies in Appalachian Racing who had

actually adopted regulations, Bluegrass Pipeline has not taken a single step to initiate

eminent domain proceedings against anyone in Kentucky, nor has it threatened such

action. The Circuit Court referenced comments by Bluegrass Pipeline representati-ves

that the company believes that it has eminent domain power, but does not like to use it.

(Op., at 9.) Expressing an opinion as to the ability to invoke eminent domain is not a

present action to assert that right by actually filing a condemnation action.

6

Although no Kentucky appellate decision has addressed this precise situation,

courts from other jurisdictions have held that the issue ofa condemnor's right to exercise

eminent domain is not ripe for judicial review until the filing of a condemnation action.

In Texas Municipal Pm-ver Agency v. Johns/on, 405 S.W.3d 776, 783-85 (Tex. App. 1st

2013), the court held that there was no ripe, justiciable controversy because the municipal

power agency had merely negotiated with the landowner and expressed a desire to use

eminent domain at some point. Another court reached a similar conclusion in Wilson &

'Wilson v. City Council ot'RedH'ood City, 191 Cal. App. 4th 1559.1581-85 (Cal. Ct. App.

2011), rejecti'ng as unripe and non-justiciable the pb.intiff's claim for declaratory relief to

address the ~ity's possible future use of eminent domain.

In the absence of actual, present condemnation activity by Bluegrass Pipeline, the

Circuit Court erroneously speculated as to what Bluegrass Pipeline might do in the future.

(E.g., Op., at 8 (noting that Bluegrass Pipeline "could change its mind at any time").)

The Circuit Court should not have relied upon speculation as the factual basis for a

declaratory judgment. "A declaratory judgment should not, or cannot, be made as to

questions which may never arise or which are merely advisory, or are academic,

hypothetical, incidental, or remote, or which will not be decisive of any present

controversy." Dravo v. Liberty Vational Bank and Trust, 267 S.W.2d 95, 97 (Ky. 1954).

Referring to Bluegrass Pipeline's efforts to acquire easements voluntarily and

rerouting the Pipeline to accommodate those not wishing to sell as a "tactic", the Circuit

Court expressed concern that this "dispute is capable of repetition yet evading review."

(Op., at 10.) That concern is unfounded. If Bluegrass Pipeline ever decides to file

condemnation proceedings instead of rerouting the Pipeline as needed, its authority to

7

invoke eminent domain cannot evade review. A landowner has the right to challenge a

condemnor's power to condemn the property in the answer to the condemnor's petition.

KRS 416.61 O( 4). If a landowner challenges condemnation authority, the cOLlli is required

to decide that issue ;;forth\vith" before condemnation can proceed any further. Id. Either

party may immediately appeal the decision on the petitioner's condemnation authority.

Ratl!flv. Fiscal Court of Caldwell County, Ky., 617 S.W. 2d 36, 38-39 (Ky. 1981).

Since the court is required to decide the petitioner's condemnation authority at the outset

of any condemnation action, the landowner will not incur litigation costs associated with

the vaJuatio'l phase ofthe case unless a court determines the right to condemn.

This efficient statutory procedure provides the landowner with a quick judicial

determination of condemnation authority and eliminates the need for a preemptive attack

on an unexercised power. "The Court may refuse to exercise the power to declare

rights ... if the declaration or construction is not necessary or proper at the time under all

the circumstances." KRS 418.065. And, a court may not exercise jurisdiction under the

Declaratory Judgment Act when "another statutory remedy has been especially provided

for the character ofthe case presented." Black v. Utter. 190 S. W.2d 541, 542 (Ky. 1945).

Such a remedy exists under the eminent domain statutes that allow the landowner to

immediately challenge the petitioner's condemnation authority. There. the evaluation of

eminent domain 'vvhen the right is actually invoked does not require a court to improperly

issue an advisory opinion on a hypothetical condemnation that may never be filed.

II. THE CIRCUIT COURT INCORRECTLY PERMITTED KURED To INVOKE ASSOCIATIONAL ST ANDING. 22

A plaintiff cannet invoke the jurisdiction of the courts without establishing

22 Appellant raised this argument below at R. 157-160 and V.R. 3-10-14.

8

standing~-i.e., ajudieially recognizab le interest in the subject matter of the case.

Harrison v. Leach, 323 S.W. 3d 702, 705 (Ky. 20 10). A plaintiffmust establish a

"personal stake" in the litigation and cannot rel y on the rights of OThers to establish

standing. See Assoc. Indus. olKy )'. Com, 912 S.W. 2d 947, 951 (Ky. 1995) . The

standing requirement ensures that a party with an actual stake in the outcome of the case

litigates vigorously and effectively to adjudicate that personal interest. Interactive

Gaming Council v. Com. ex rei. Brown, 425 S.W.3d 107, 112 (Ky. App. 20 14). The

requirement of standing is rooted in Kentucky 's constitutional requirement that courts

may only decide cases or controversies. See id at lIS.

KURED is not a landowner, and it therefore has no personal stake in determining

whether Bluegras'; Pipeline has the right to use eminent domain to condemn land in

Kentucky. Thus, KURED relies on associational standing as an exception to the personal

stake requirement. To establi sh associational standing, KURED must prove that "( I) its

members otherwise wo uld have standing to sue in their own right; (2) the interests it

seeks to protect are germane to its purpose; and (3) neither the claim asserted nor the

relief requested requires the pal1icipation of the individual members ." Bailey v. Preserve

Rural Roads olMadison County, Inc, 394 S.W.3d 350, 356 (Ky. 20 11 ). Kentucky now

fol lows the federal law elements cited in Bailey. Interactive Gaming. supra at lIS. The

Circuit Ceurt enoneously concluded that "KURED has associational standing th rough its

member, Penny Greathouse, who has individual standing as a landowner." (Op., at 5.)

Since KURED relies solely on Mrs. Greathouse to establish its associational

standing, it must demonstrate that she would have standing to sue in her own right. Sh,o

would not have standing. Bluegrass Pipeline approached Mrs. Greathouse to discuss

9

acquiring an easement for the Pipeline23 Bluegrass Pipeline never raised the topic of

eminent domain, but reluctantly responded to her repeated inquiries about that subject 2 4

When she declined to sell an easement, Bluegrass Pipeline rerouted the Pipeline to avoid

her property25 Bluegrass Pipeline reiterated during the summary judgment hearing that it

will not seek to obtain an easement from Mrs. Greathouse. These undisputed facts

establish that Mrs. Greathouse has no present personal stake in the Circuit Court's

adjud ication as to whether or not Bluegrass Pipeline has the right to invoke eminent

domain in Kentucky Th us. KURED has no standing either.

Hoping to manufacture an actual or present controversy, KURED relied on Mr8.

Greathouse's alleged uncertainty as to whether Bluegrass Pipel ine has the right of

eminent domain and its effect on her negotiations regarding a potential, voluntary sale of

an easement to Bluegrass Pipeline26 Even if such uncertainty once could have

established justiciable controversy, that uncertainty was moot when Bluegrass Pipeline

decided not to pursue an easement from her. See Com. v. Hughes , 873 S. W. 2d 828, 829-

30 (Ky. 1994). The Circuit Court found that Mrs. Greathouse had standing based upon

the possibility that Bluegrass could reroute the Pipeline and reassert its right to condemn

her property. (Op., at 7.) The mere possibilitv that Bluegrass Pipeline might seek to

acquire an easement from Mrs. Greathouse either through negotiations or condemnation

does not establish ajusticiable controversy. Veith, 335 S.W.2d at 297. See also Health

Am. Corp. ojKy. v. Humana Health Plan, [nc., 697 S.W. 2d 946, 947-48 (Ky. 1985)

(holding that fears or expectancies of potential harm do not create standing).

23 R.ISO l' 2 24 R. ISO- SI ~~ 2-3 . 25 R.IS2 11 8

26 R.II~5 .

10

The Circuit Court also stated, sua sponte. that the location of a pipeline "carrying

highly dangerous and toxic chemicals on the adjoining property gives Mrs. Greathouse a

continuing and real substantial interest in adjudicating Bluegrass' legal right to utilize

eminent domain to obtain an easement from her neighbors." (Op., at 7.) First, there is

no evidence or assertion in the record regarding any threat to land related to a highly-

regulated pipeline or that NGLs are "highly dangerous and toxic." Second, Mrs.

Greathouse did not express any concern about the substances that would be shipped

through the Pipeline or its possible location on adjacent property. The sole concern that

Mrs. Greathouse expressed in her affidavit was the effect that her alleged uncertainty

about eminent domain might have on her negotiations with Bluegrass Pipeline.:!7 Since

there is no possi~ility that Mrs. Greathouse will be engaged in negotiations with

Bluegrass Pipeline regarding an easement, she does not have a stake in the outcome of

this litigation. Therefore, the Circuit Court should have rejected KURED's claim of

associational standing based on Mrs. Greathouse.

Although KURED claims associational standing solely through Penny

Greathouse, the Circuit Court also gratuitously concluded that all members of KURED

have standing as citizens and taxpayers. (Op., at 8.) The cases cited by the Circuit Court

involve citizen and taxpayer challenges to actions taken by the government that regulate

the public at large. See Rusman v. Luckett, 391 S.W. 2d 694 (Ky. 1965); Rose v. Counsel

for Better Education. Inc., 797 S.\\!. 2d 186 (Ky. 1989). The Circuit Court's reliance on

those cases was inappropriate because Bluegrass Pipeline is not a governmental entity,

and, moreover, it has not attempted or threatened to use the power of eminent domain.

27 R.Il.

11

Finally. KURED does not satisfy the legal requirements to qualify for the naITOW

docTrine of associational standing. Associational standing was created for membership

associations (e.g., trade associations, labor unions, or bar associations). See Hunt v.

Wash. State Apple Advertising Comm 'n., 432 U.S. 333, 345 (1977). KURED is a

corporation formed for the sole purpose of filing this lawsuit that has done nothing other

than filing this action.28 While certain corporations can invoke associational standing to

represent their members, KURED has faiied to demonstrate that it has any members to

represent. A member of a non-profii corporation is "one having membership rights in a

corporation in accordance with the provisions of its articles of incorporation or bylaws."

KRS 273.161(7). A non-profit corporation is required to designate all classes of

members, or state that the corporation has no members, in its articles of incorporation or

its bylaws. KRS 273.187( 1). KURED has no bylaws, and its articles of incorporation do

not describe any classes of members, nor do they state that there are no members.29 The

failure to establish bylaws at the organizational meeting of KURED's board of directors,

see KRS 273.257(1), and the failure to include statutorily-required inforrnation regarding

whether KURED has actual members, see KRS 273.187( 1), call the legitimacy of

KURED as an entity into question. Regardless, KURED has no members with an injury

in fact on whom to base associational standing.30

Unless an organization truly represents an injured party, it is not meaningfully

different from the organization in Sierra Club v. Morton, which sought standing as a

28 See R.135 lnt. No.6. 29 R.139 Req. No.2; R 143--48. }O KURED does have dIrectors, but a director ofa non-profit corporation does not need to be a member of the corporation. KRS 273.207. A director ofa non-profit corporation is simply responsible for overseeing the ::tffairs of the corporation and can be virtually anyone. See KRS 273.161 (8). 273.207, 273.211. KURED presented no facts to show that its directors or anyone else have any "indicia of membership in an organization." Compare with Hunt, 432 U.S. at 344--45 (listing fact that only constituents of agency could be elected to leadership as factor supporting "indicia of membership in an organization").

12

"representative of the public"-an assertion that the U.S. Supreme Court rejected,

holding "that a mere interest in a problem ... is not sufficient by itself to confer

standing." 405 U.S. 727, 736-39 (1972). The judicial process should not be converted

"into no more than a vehicle for the vindication of the value interest of concerned

bystanders." Valley Forge Christian College v. Americans Unitedfor Separation of

Church and State, Inc:, 454 U.S. 464, 473 (1982). The mere fact that KURED was

organized to challenge Bluegrass Pipeline's ability to exercise eminent domain fails to

create jurisdiction without a member of KURED who has standing in her own right.

HI. BLUEGRASS PIPELINE HAS THE POWER OF EMINENT DOMAIN UNDER KRS 278.502, BECAUSE IT IS A COMMON CARRIER OF NATtJRAL GAS LIQUIDS, WHICH, AT A MINIM liM, ARE OIL AND GAS PRODlICTS.3 \

Assuming the Court were to conclude that the Circuit Court properly determined

that there was a ripe, justiciable controversy brought by a plaintiff with proper standing,

the Court still should reverse the Circuit Court's summary judgment because it

erroneously holds that Bluegrass Pipeline lacks the power to exercise eminent domain.

The source of Bluegrass Pipeline's ability to exercise eminent domain is KRS

278.502. This statute confers the right of eminent domain upon "[a]ny corporation or

partnership organized for the purpose of ... constructing, maintaining, or operating oil or

gas wells or pipelines for transporting or delivering oil or gas, including oil and gas

products, in public service."" KP,-S 278.502. In addition to the statute creating the

substantive right of eminent domain, KRS 416.675 also requires that any exercise of

eminent domain be for a "public use."

The Circuit Court rejected Bluegrass Pipeline's ability to exercise eminent

domain on two basic grounds. First, the court concluded that KRS 278.502 is limited to

31 Appellant raised this issue below at R. 164-174 and V.R. 3- 10-14.

13

utilities regulated by the Public Service Commission ("PSC"). (Op .. at 11-15.) Largely

because of its conclusion that Bluegrass Pipeline is not a utility regulated by the PSC, the

Circuit Court concluded that Bluegrass Pipeline would not be acting in "public service"

or providing a "public use." (Jd. at 14-16.) The Circuit Court erred by grafting a public

utility requirement onto KRS 278.502 that is contrary to the plain language of the statute.

The Circuit Court also erred in concluding that Bluegrass Pipeline, a federally-regulated

common carrier required to make its pipeline available to the public, will not be acting in

public service or providing a public use.

A. KRS 278.502 is Not Limited To Public Utilities Regulated by the PSc.

The first issue to address is the Circuit Court's erroneous conclusion that KRS

278.502 applies only to public utilities regulated by the PSc. While acknowledging that

nothing in KRS 278.502 actually refers to the PSC or utilities in any way, the Circuit

Court relied on the fact that KRS Chapter 278 is titled "Public Service Commission" and

concluded that the chapter "is dedicated to 'Public Utilities.'" (Op., at 11-12.) The court

stated that the PSC protects consumers and regulates public utilities and cited a 1992

amendment to KRS 278.485 (concerning PSC approval of rates to furnish gas to

landowners) as somehow reflecting legislative intent to limit KRS 278.502 to PSC-

regulated utilities. (hi. at 12-13./ The court also concluded that the reference to "public

service" in F~R~S 278.502 "strongly supports a finding that the power of eminent domain

in KRS 278.502 is limited to companies regulated by the PSc." (ld. at 14.)

The Circuit Court's conclusions contradict basic canons of statutory construction.

"Title heads. chapter heads, section and subsection heads or titles, and explanatory notes

and cross references, in the Kentucky Revised Statutes, do not constitute any part of the

law .... " KRS 446.140. Accordingly, the Circuit Court's reliance on the title of Chapter

14

278 directly contradicts Kentucky law. Instead, as the Kentucky Supreme Court has held

time and again, "The most logical and effective manner by which to determine the intent

of the legislature is simply to analyze the plain meaning of the statutory language: 'resort

must be had first to the words, which are decisive if they are clear. '" Stephenson v.

Woodward, 182 S.W.3d 162, 169-70 (Ky. 2005) (quotation omitted). The plain language

of KRS 278.502 makes no reference to public utilities or regulation by the PSC, but

refers unambiguously to "any" corporation or partnership that constructs, maintains, or

operates a pipeline to transpOli oil or gas, including oil and gas products, in public

service. If Bluegrass Pipeline fits within the scope of the statutory language, it is

immaterial whether it is a public utility regulated by the PSC.

Had the General Assembly intended to limit KRS 278.502 to Kentucky

jurisdictional utilities, it would have done so in the statute. Indeed, when it amended the

current version of KRS 278.502 in 1992, the General Assembly declined to pass a

proposal that would have limited the statute to utilities and required purposes approved

by the PSc.32 The Circuit Court erred in imposing a public utility requirement onto KRS

278.502 that does not appear in the statute itself

B. Bluegrass Pipeline, As a Common Carrier, is Providing a Public Service, and the Pipeline is a Public Use.

Because there is no extra-statutory requirement in KRS 278.502 that Bluegrass

Pipeline be a public utility regulated by the PSC, detelmining whether Bluegrass Pipeline

32 See R.227-28. Of course, the failure to adopt an amendment could occur for various reasons. The uncertainty of resorting to legislative history is why the fundamental axiom in statutory construction is to apply the statute as written, which is all that Biuegrass Pipeline asks here. Nevertheiess, the Circuit Court relied on the fact that the General Assembly amended an entirely different statute in 1992 as somehow evincing legislative intent to impose regulatory oversight on entities given a right of eminent domain by KRS 278.502. It would be quite puzzling of the General Assembly to express intent to impose a public utility requirement on KRS 278.502 by amending a different statute and declining to amend KRS 278.502 itself to express that intent.

15

has the right of eminent domain rests on the language of KRS 278.502 itself and the

"public use" requirement imposed by KRS 416.675 on all exercises of eminent domain.

Thus, it is necessary to determine whether Bluegrass Pipeline will be operating a pipeline

to transport oil, gas, or oil and gas products in public service and the related concept of

whether the exercise of eminent domain would be for a public use. In essence, the

Circuit Court held that Bluegrass Pipeline would not be transporting oil, gas, or oil and

gas products in public service or taking property for a public use because Bluegrass

Pipeline is a private company that would not be providing service tl) "consumers" in

Kentucky. (See Op., at 14-16.) This analysis is contrary to law.

/. The "Public Service" and "Public Use" Questions Turn On the Same Analysis.

As a threshold matter, the questions of public service (the term used in KRS

278.502) and public use (the term used in KRS 416.675) rest on the same analysis. KRS

278.502, which refers to public service, creates the substantive right of eminent domain.

KRS 416.675 merely ensures that any exercise of eminent domain, whether through KRS

278.502 or any other statute, be for a public use, rather than a private one. KRS 416.675

detines public use to include use of the property for operation of a common carrier. KRS

416.675(2)(d). KRS 416.675 also defines public use to include any use expressly

authorized by statute. KRS 416.67S(2)(e). As discussed below, Bluegrass Pipeline is a

common carrier, which is a public use under KRS 416.675(2)(d). Because KRS 278.502

expressly creates a right of eminent domain for operating pipelines transporting oil, gas,

or oil and gas products, that statutory authorization also is a public use, as defined by

KRS 416.675(2)(e) (i.e., a use expressly authorized by statute).

2. As a Common Carrier, Bluegrass Pipeline would be Providing a Public Service, and the Pipeline would be For a Public Use.

16

Because it will transport NGLs in interstate commerce, Bluegrass Pipeline is a

common carrier under the Interstate Commerce Act ("ICA") and is subject to regulation

by the Federal Energy Regulatory Commission ("FERC"). See 49 U .S.c. 1 (1) (1988);

49 U.S.c. 1(3) (1988).33 As a common carrier, Bluegrass Pipeline is required by

federal law to "to provide and furnish transportation upon reasonable request therefore:"

See 49 U.S.C. 1(4) (1988). Bluegrass Pipeline is required to establish initial rates for

the transportation ofNGLs and to keep those rates on file with FERC. See 49 U.S.c.

6(1) (1988); 49 U.S.c. 60502; 18 C.F.R. 342.1; 18 C.F.R. 34l.2. If the public rates

established by Bluegrass Pipeline for its transportation services are not 'just and

reasonable," then FERC can reject them. See 49 U.S.c. 1(5)(1988); 18 C.F.R. 341.11.

AdditionalIy, Bluegrass Pipeline cannot "make, give, or cause any undue or unreasonable

preference or advantage to any particular person, company, firm, corporation,

association, locality, port, [or etc.] .... " 49 U.S.C. 3(1) (1988).

The regulatory scheme to which Bluegrass Pipeline is subject and its status as a

common carrier mean that Bluegrass Pipeline will provide service to the public--

including the public in Kentucky. The Circuit Court took issue with the fact that

Bluegrass Pipeline is a private company, (Op. at 14), but this is immateria1.34 "[T]o be'

considered a public service, the crucial fact is not that the taking is made by either a

public or Ci private corporcltion, nor is it crt-Ictal that the serv'ice prov'ided is for free or for

a fee." NICHOLS ON EMINENT DOMAIN Ch. 7 7.05 (Matthew Bender. 3d ed.) (emphasis

J3 FERC has all of the duties and powers related to the establishment ofa rate or charge for the transportation ofoiliNGLs by pipeline that were vested on October I, 1977 in the Interstate Commerce Commission. See 49 U.s.c. 60502. FERC regulates interstate oil and NGL pipelines based on the ICA as it existed on October I, 1977. A copy of the 1977 version of the ICA is available on FERC's website as an appendix to the 1988 edition of the U.S. Code. See ICA, FERC.OOV, http://www.ferc.gov/legallmaj-oi"d-reg/ica.pdf(last accessed July 23,2014). 34 The court also characterized that Bluegrass Pipeline as being "unregulated," but this has no support in the record or the law. As set forth above, FERC regulates NGL pipelines.

17

added). Instead, "to be a public service, the public must have a right to make use of the

service offered at reasonable rates and without discrimination. Serving the public cannot

be the arbitrary choice or whim of the condemning party." NICHOLS 7.05. That

describes the essential character of a common carrier like Bluegrass Pipeline.

The leading treatise on eminent domain cited above echoes the analysis of

Kentucky's highest court in Chesapeake Stone Co. v. Moreland, 126 Ky. 656 (Ky. 1907).

In defining what makes a "public use," the court recognized that it was likely that there

would be relatively few users of the tramway at issue. Id. at 665. The court held.

however: "It is not the number of people who use the property taken under the law of

eminent domain that constitutes the use of it a public one; nor does the fact that the

benefits will be in a large measure local enter into the question." Jd. Rejecting notions

that these sorts of questions determine whether there is a public use, the court distilled a

simple test: "The controlling and decisive question is: Have the public the right to its use

upon the same terms as the person at whose instance the way was established? If they

have, it is a public use; if they have not, it is a private one." Id. Here, it is undisputed

that Bluegrass Pipeline will be available to the public on terms pre-approved by FERC.

It also is immaterial that, literally speaking, every member of the public would not

have a need for Bluegrass Pipeline's services. In EQT Gathering, LLC v. Tract afProp.

Situated in Knott County, 970 F. Supp. 665, 663 (E.D. Ky. 2013), the court held that

"[h]ighly regulated pipelines that carry highly t1ammable materials need not be fully open

to the public to be a public use." Jd. at 19-20. Rather, it is sufficient that the pipeline be

"available for use" by the relevant portion of the public, i. e., natural gas transportation

18

companies. Id. at 20. As in EQT Gathering, the relevant portion of the public will be

able to use the Pipeline.

The Circuit Court also decried a perceived lack of Kentucky users of the Pipeline.

(Op., at 14.) The test is not whether a common carrier can present a list of individuals

and entities that will use its services. What matters is whether the public has the right to

use the facilities, as discussed above. KRS 278.502 does not speak to providing service

to Kentucky users at all, but the record makes clear that the Pipeline will be available to

Kemuckyusers. For example, Westlake Chemical Corporation, which has operated

facilities in Calvert City, Kentucky for over two decades, voiced its support for the

Bluegrass Pipeline in a letter to the Kentucky Energy & Environment Cabinet.35 In

describing a $250 to $290 million expansion of its Kentucky facilities, Westlake noted

the abundant domestic supply of cost-competitive natural gas and NGLs and the need for

infrastructure investments to enable these raw materials to be brought to market in a cost-

etTective, efficient manner. 36 Westlake recognized that the Pipeline was a key example

of such investment that would make further investment by Westlake (and other similar

manufactures) in Kentucky viable. 37 Westlake offered its support for the Bluegrass

Pipeline, which Westlake recognizes to be a common catTier, because it can provide a

source of feedstock for Westlake's Kentucky plant and for others in its industry.38

Billegrass Pipeline confirmed that V'iestlake \vil1 be able interconnect \vith the Pipeline. 39

As a common carrier, Bluegrass Pipeline necessarily would do the same for other

Kentucky end users or producers ofNGLs.

35 R.178-79. 36 R.178. 37 / d. 38 Id. 39 Id.

19

Finally, contrary to the Circuit Court's conclusion, there is no need for Bluegrass

Pipeline to provide services to Kentucky "consumers" for the Pipeline to be in public

service or a public use. Nothing in KRS 278.502 or KRS 416.675 limits the right of

eminent domain to an entity providing services to "consumers." The Circuit Court

essentially rested its "Kentucky consumer" requirement on its erroneous conclusion that

KRS 278.502 is limited to public utilities regulated by the PSc. As discussed above,

there is no basis for that conclusion.

KURED argued below that Milam v. Viking Energy Holdings, 370 S.W.3d 530

(2012), somehow shows that KRS 278.502 is limited to companies providing services to

Kentucky consumers. In Milam, the court rejected the argument that a pipeline company

lacked the power of eminent domain because it was transporting natural gas from one

private company to another rather than directly to the public. See id. at 534-36. Nothing

in the case indicates an understanding that the statute applies to consumers, nor is there

any indication that the statute is limited to intrastate pipelines, as KURED has implied.

And, even if Amam could be read to indicate that an entity availing itself of KRS 278.502

must provide services in Kentucky, Bluegrass PIpeline will be available to manufacturers

and producers in Kentucky.

KURED also relied on In re Langford, 32 B.R. 746 (Bankr. W.D. Ky. 1982), for

the proposition that a pipeline must transport oil or gas for ultimate consumption by

Kentucky consumers in order to be considered a common carrier pursuant to KRS

278.470.40 Bluegrass Pipeline does not need to be a common carrier under KRS 278.470

40 "Every company receiving, transporting or delivering a supply of oil or natural gas for public consumption is declared to be a common carrier, and the receipt, transportation and delivery of natural gas into, through and from a pIpeline operated by any such company is declared to be a public use." KRS 278.470.

20

to avail itself of KRS 278.502 or to satisfy KRS 416.675. If anything, however, Langford

actually illustrates why Bluegrass Pipeline is in public service. The defendant in that

case refused to provide the plaintiff service because it was federally licensed only to

produce and transport its own natural gas. ld. at 748. The bankruptcy court concluded

that the defendant was not a common carrier under KRS 278.470 because, in its view, the

"public consumption" portion ofKRS 278.470 required ultimate use of the defendant's

gas by Kentucky consumers. See id. at 748-50. The court further explained that, even if

state law did afford a basis for the plaintiff to insist that the defendant transport the

plaintiff's gas, it would have been preempted because the defendant's federal license did

not authorize it to do this. ld. at 750. In contrast, Bluegrass Pipeline is federally

regulated as a common carrier and will provide transportation services to the public.

Indeed, the bulk of the capacity for the Pipeline will be contracted for by third parties,

and it will not be a "private" pipeline for the members of Bluegrass Pipeline as asselied

by KURED, unlike the private pipeline in Langford.

Bluegrass Pipeline is acting "in public service," and the Pipeline is a "public us'e"

because Bluegrass Pipeline is a federal common carrier that will furnish transportation'

services to the public upon reasonable request, in a nondiscriminatory manner, at a

reasonable and published rate. While KRS 278.502 does not require it there are end

users ofNGLs in Kentucky vvho can and will avail themselves of a completed Pipeline.

The availahiLiTY of the Bluegrass Pipeline for use by end users and producers ofNGLs is

what matters, not the number of users or the frequency of their use. Bluegrass Pipeline

will function much like an interstate highway for the transportation ofNGLs. Like an

interstate highway, the Pipeline may be used to a greater or lesser extent depending on a

21

variety of factors, and some segments of the public may have more cause to use it than

others. However. Bluegrass Pipeline is acting "in public service," and the Pipeline is a

"public use" regardless because the public has the right to use it.

C. NGLs are oil, gas, or oil and gas products under KRS 278.502.

The final component of KRS 278.502 to consider is whether Bluegrass Pipeline

will be transporting oil, gas, or oil and gas products. Although the Circuit Comi did not

address whether NGLs are oiL gas, or oil and gas products, KURED argued below that

they are not. Accordingly, it is necessary to address the nature ofNGLs to ensure that

KURED cannot claim that this Court could affirm the summary judgment on grounds

presented below that were not actually determined. The chemical makeup of NGLs, how

they are produced and transported, and the state and federal regulatory framework that

governs their production and transportation confirm that NGLs fall squarely within the

scope of oiL gas, or oil and gas products.

OiL gas, and their components, including NGLs, are hydrocarbons. 41 When

"natural gas" and "oil" are produced (extracted) from wells, they often contain a mixture

of naturally-occurring hydrocarbons, including the single-carbon molecule methane (the

"natural gas" most often used for home heating) and multi-carbon molecules (such as 47 .

ethane, propane, butane, and pentane). - The multI-carbon, hydrocarbon molecules are

NGLs.43 Thus, prior to being extracted and separated, NGLs are part of the same

~I R.223 ~ 3. See also, Edward S. Gilson, Jr., Oil and Gas Production, I KENTUCKY MINERAL LAW 4 (Short and Thomas eds. 1986) and What are natural gas liquids and how are they lIsed?, U.S. ENERGY INFORMATION ADMINISTRATION (April 20,2012), http://www.eia.gov/todavinenergyidetail.ctin?id=5930; 40 C.F.R. 60.631 (defining NGLs as "hydrocarbons" extracted from field gas); 10 C.F.R. 500.2 (defining "natural gas" to include "any fuel consisting in whole or in part of natural gas, including components of natural gas such as methane and ethane"). 42 R.223 ~ 3. 43 [d.

22

hydrocarbon pools of "oil" or "gas" located underground.44

Based on their chemical and physical origins and manner of production, NGLs are

properly considered oil or gas. Even if they were not, they are "oil and gas products."

NGLs are constituents in raw natural gas that may be separated from methane during the

processing and fractionation processes. See e.g. 40 CFR 60.631 (3) ("natural gas

processing means the separation of natural gas liquids (NGLs) or other non-methane

gases trom produced natural gas, or the separation ofNGLs into one or more component

mixtures. ,,).45 Only by depriving the word "product"" of all meaning could one reach the

conclusion that NGLs are not at least an "oil and gas product." See BLACK'S LAW

DICTIONARY 1328 (9th ed. 2009) (defining "product"" to include "the result of fabrication

or processing") (emphasis added).

Statutory and regulatory treatment ofNGLs also confirms that they are oil, gas,

or oil and gas products. KRS Chapter 353, which concerns oil and gas conservation,

broadly defines "oil" as crude oil, petroleum, and other hydrocarbons produced in a

certain way and "gas," in part, to include any hydrocarbons not defined as oil. KRS

353.510. NGLs are hydrocarbons. Similarly, federal law regulates NGL pipelines in the

same way that it regulates other petroleum-related products. See 49 U.S.C. 60101 et.

seq.46 Under both Kentucky and federal law, NGLs are treated in essentially the same

way as oil and gas. KURED argued below that NGLs are different from oil and gas

because other statutes defining other terms (in contrast to KRS 353.510, which defines

44 See id. 45 See also R.225 (explaining that NGLs are a "natural component of the natural gas (methane) stream [which are] not separated until they reach a downstream separator or fractionator'). 46 Federal law regulates certain liquids considered to be hazardous liquids, as defined by statute. Hazardous liquid is defined as "petroleum, petroleum products, or anhydrous ammonia," and "petroleum" expressly includes "crude oil, condensate, natural gasoline, natural gas liquids, and liquefied petroleum gas." 49 U.S.c. 60101 and 49 C.F.R. 195.2 (emphasis added).

23

"oil" and "gas") mention natural gas and NGLs separately. It is an unscientific and

artificial distinction. In detining terms in these other statutes, the General Assembly

ensured that the defined terms were interpreted broadly to accomplish the overall purpose

of the statutory schemes at issue by enumerating a comprehensive list of examples,

including items that essentially describe the same thing.47 Including terms with similar,

or even identical, meanings in a list of terms for purposes of ensuring that a defined term

is given the broadest possible meaning does not somehow redefine the terms used in the

list to make them exclusive of each other.

Case law further shows the need to interpret terms such as "gas" broadly. In Mid-

American Pipe Line Co. v. lvlissouri P. R. Co, 298 F. Supp. 1112, 1120 (D. Kan. 1969), a

case involving eminent domain concerning a gas pipeline, the court rejected the argument

that the anhydrous ammonia to be transported in the pipeline was not "gas" under the

statute. Testimony showed that anhydrous ammonia was produced by combining the

methan~ of natural gas with nitrogen from the air to produce a valuable fertilizer product.

The court declined to narrowly construe "gas" and held that a company piping anhydrous

ammonia had the power of eminent domain: "We cannot impute to the legislature an

intent to limit the transportation of a commodity by pipeline to certain component parts of

that commodity. This would be like saying a railroad may transport wheat, but not flour,

because it was authorized to haul glain." ld. at 1122.

Mid-American is particularly instructive because this Court has held that the tenns

47 For example, KRS 143A.0 I 0(2) defines "natural resources:' as "all forms of minerals including but not limited to rock, stone, limestone, shale, gravel, sand, clay, natural gas, and natural gas liquids which are contained in or on the soils or waters of this state." IfKURED's position were correct, this statute would mean that "rock" and "stone" are entirely different things. This would be a bizarre result, to say the least. See http:.i!dictionary.reference.com!browse/rock?s=t (defining "rock," in part, as "a stone of any size") and http://dictionary.reference.com/browseistone'?s=t(defining''stone,''inpart,as "a small piece of rock").

24

in KRS 278.502 should not be given an overly restrictive meaning. In Milam, supra, the

parties resisting condemnation argued that the power of eminent domain was not

available because the property was to be used for a gathering line, not a transmission line.

Id. at 534. The court acknowledged that administrative regulations differentiated

between these types of lines, but these distinctions could not narrow the general term

"pipeline" that was actually used in the statute. Id. at 535 ("Despite the regulatory

treatment of the different types of pipelines, there is no authority to extend this difference

to KRS 278.502, and we decline the Milam's request that we do so."). So, too, should

the Court decline KURED's request to impose arbitrary limitations on the terms "oil,"

"gas," and "oil and gas products."

The General Assembly granted the right of eminent domain to pipelines

transporting oil, gas, or oil and gas products. NGLs are oil, gas, or, at a minimum, oil

and gas products. The Circuit Court was unable to conclude otherwise, and KURED's

arguments to the contrary do not withstand scrutiny.

CONCLUSION

The Circuit Court elTed in entering summary judgment. The court erred in

concluding that KURED established the existence of a ripe, justiciable controversy to

resolve a right of eminent domain that Bluegrass Pipeline has never attempted nor

tp.reatened to exercise. The court erred in concluding that KURED established

associational standing. The court erred in concluding that Bluegrass Pipeline lacks the

power of eminent domain. For these reasons, this Court should reverse the Circuit

Court's summary judgment and remand this matter for' oceedings.

25

APPENDIX

A-I

INDEX

Opinion and Order of Franklin Circuit Court issued on March 25, 2014, R. 259 ................................................................................................ Tab 1

520999: 12:LEXINGTON

A-2

COMMONWEALTH OF KENTUCKY FRANKLIN CIRCUIT COURT

DIVISION I CIVIL ACTION NO. 13-CI-1402

KENTUCKIANS UNITED TO RESTRAIN EMINENT DOMAIN, INC.

v. 'OPINION and ORDER

BLUEGRASS PIPELINE COMPANY, LLC.

ENTERED cJO MAR 2 5 2014 flRANKLIN CIRCUIT COURT

SALLY JUMP, CLERK

PLAINTIFF

DEFENDANT

This matter is before the Court on the Plaintiff's Motion for Summary Judgment. Oral

arguments were held on Monday, March 10, 2014. The parties fully briefed the issues, and the

Court then took the case under submission. After review of the record and the parties' pleadings,

and thus being sufficiently advised, the Court hereby GRANTS Summary Judgment in favor of

the Plaintiff for reasons more fully explained below.

BACKGROUND

Plaintiff, Kentuckians United to Restrain Eminent Domain, Inc. (hereinafter "KURED")

is a non-profit, incorporated under the laws of the Commonwealth of Kentucky, whose purpose

is ''to protect Kentuckians from the threat of and attempts to exercise eminent domain by entities

not in public service to Kentuckians." Plaintiff's Motion/or Summary Judgment, p. 4.

Defendant, Bluegrass Pipeline Company, LLC (hereinafter "Bluegrass"), is a limited liability

company with its principal office in Tuls~ Oklahom~ but with a registered office in Frankfort,

Kentucky. Bluegrass is a joint venture of Williams Company and Boardwalk Pipeline Partners

which proposes a 24-inch pressurized underground pipeline for transporting natural gas liquids

(hereinafter "NGLs") (a mixture of pentane, propane, butane, isobutene, and ethane) from the

Marcellus and Utica shale formations in Pennsylvania, West Virginia, and Ohio, to the Gulf of

Page 1 of18

Mexico. Among KURED's members (and also serving on its Board of Directors) is Penny

Greathouse, a resident of Franklin County whose property is located along the initial path of the

proposed Bluegrass Pipeline. Ms. Greathouse has been approached by representatives of

Bluegrass to survey her property for a potential location of an easement for the pipeline, and has

spoken with Rich Ellis on four different occasions in which Mr. Ellis has said that the company

has the right of eminent domain, but did not like to exercise it. Affidavit of Penny Greathouse.

Plaintiff filed this action in Franklin Circuit Court on December 5, 2013 seeking a

declaration of rights under K.RS 418.040 as to the validity of the claim of Bluegrass that it has

the power of eminent domain under Kentucky law. Plaintiff seeks a ruling adjUdicating the right of Bluegrass to invoke KRS 278.502, K.RS 416.675, and KRS 278.470 to use eminent domain to

condemn properties to install a natural gas liquids pipeline through Franklin County and other

counties in Kentucky. The Court finds that an actual controversy exists between the parties.

Representatives from Bluegrass have repeatedly affirmed, in both public and private forums, its

right to invoke eminent domain in obtaining easements from landowners on the proposed

pipeline path. The assertion of the right by Bluegrass has a real and immediate bargaining

impact on the landowners from whom easements are sought, because landowners must weigh

into their calculations the vast cost and legal expense of challenging the right to condemn

advanced by Bluegrass. KURED vigorously disputes that claim and has raised a legitimate and

justiciable question as to whether Bluegrass has the right to invoke eminent domain under Kentucky statutes. This question can only be answered in a court of law.

Plaintiff argues it is entitled to a declaration that Bluegrass does not have the power of

eminent domain under Kentucky law for the proposed Bluegrass NGL Pipeline Project. In asserting this claim, Plaintiff argues this matter is ripe for review because an actual controversy

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exists. Bluegrass has represented to Ms. Greathouse and to Franklin County Judge Executive

Ted Collins in a letter from Wendell Hunt, Strategic Outreach Business Partner for the Company

dated August 1,2013, that it has eminent domain power under Kentucky statutes. KURED

argues it has associational or representational standing in this matter to maintain suit because at

least one member of the association has individual standing to sue. On the merits of the case,

Plaintiff argues that the Bluegrass Pipeline is not "in public service" as required by KRS 278.502

because it is transporting NGLs for distribution and export and because it is not regulated by the

Public Service Commission. The requirement that the pipeline be "in public service" is distinct

and in addition to the entity being labeled a common carrier for "public use." Plaintiff argues

that the Bluegrass Pipeline is neither because it is an interstate (as opposed to intrastate) pipeline

not serving Kentucky customers or producers. In addition to the "in public service" requirement,

Plaintiff alleges that the NGLs that will be transported through the pipeline are neither "oil or

gas" nor "oil and gas products" as prescribed by KRS 278.502.

On the other hand, Bluegrass argues that KVRED's claims are premature, legally

deficient, that KURED lacks standing, and that no justiciable controversy exists. It also asserts

there are genuine issues of material fact with respect to the threshold issues, and that summary

judgment should be denied. Procedurally, Bluegrass argues Plaintiff is not the type of

organization capable of asserting associational standing because it's not a membership

association such as a trade association, labor union, or bar association. Bluegrass argues that

KURED was formed for the sole purpose of filing this lawsuit, also alleging that K URED has no

bylaws and has not designated between all classes of members as required by a non-profit. It

also asserts that KURED cannot invoke associational standing based on Ms. Greathouse's

affidavit because Bluegrass is no longer seeking to acquire access to her property and has re-

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routed their proposed pipeline around her property before this lawsuit was filed, rendering the

controversy moot. On the merits, Bluegrass asserts that NGLS are "oil, gas, or oil and gas

products" under KRS 278.502 because they have "similar origins and chemical makeup, being

composed primarily of the elements hydrogen and carbon." Memorandum in Opposition to

PlaintiJrs Motion/or Summary Judgment, p. 11. Bluegrass maintains it is acting "in public

service" as a common carrier that will furnish services to the public, potentially including

manufacturers and producers in Kentucky.

Bluegrass has submitted a statement from Westlake Chemical Corporation, a chemical

company that has facilities in Calvert City, Kentucky, alleging that Westlake may possibly, at

some undefined time in the future, seek to interconnect with the pipeline "because it can provide

a source of feedstock for Westlake's Kentucky plant and for others in the industry." Id. at 16.

Bluegrass has not invoked eminent domain proceedings but has asserted its right to do so in

negotiating with approached landowners "voluntary" agreements to right-of-way easements for

the construction of the pipeline in exchange for payments.

STANDARD OF REVIEW

Summary Judgment is appropriate when the court concludes there is no genuine issue of

material fact for which the law provides relief. CR 56.03. Summary judgment should only be

granted when the facts indicate that the nonmoving party cannot produce evidence at trial that

would render a favorable judgment. Steelevest: Inc. v. Scansteel Servo Ctr., Inc., 807 S.W.2d

476,480 (1991). The record must be viewed in light most favorable to the party opposing the

motion for summary judgment and all doubts are to be resolved in that party's favor. Id

"Summary judgment is proper when it is manifest that the party against whom the judgment is

sought cannot strengthen his own case at a trial and the moving party would be entitled

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ultimately and inevitably to a directed verdict." American Inc., Co. v. Horton, 401 S.W.2d 758,

760-61 (Ky. 1966) (internal citation omitted). In this analysis, '"the focus should be on what is of

recordratherthanwhatmightbepresentedattrial." Welchv. Am. Puhl'gCo. a/Ky., 3 S.W.3d

724, 730 (Ky. 1999).

DISCUSSION

1. Standing

KURED has associational standing through its member, Penny Greathouse, who has

individual standing as a landowner. Ms. Greathouse was approached by agents of Bluegrass to

grant an easement on her property for the construction of the NGL pipeline and thus KURED has

standing to seek a declaration of rights on her behalf as to whether Bluegrass Pipeline Company

has the authority under Kentucky statutes to condemn. There are three requirements for an

association to assert associational standing: n(a) its members would otherwise have standing to

sue in their own right; (b) the interests it seeks to protect are germane to the organization's

purpose; and ( c) neither the claim asserted nor the relief requested requires the participation of

the individual members in the lawsuit." Com ex. reI. Brown v. Interactive Media and

Entertainment and Gaming Ass 'n, Inc., 306 S.W.3d 32,38 (Ky. 2010) (citing Hunt v.

Washington State Apple Adver. Comm 'n, 432 U.S. 333, 343 (1977), see also Bailey v. Preserve

Rural Roads a/Madison County, Inc., 394 S.W.3d 350, 356-57 (Ky. 2011). "While [Kentucky]

has not held that the precise requirements of federal associational standing apply in Kentucky

Courts, at least the first requirement must apply. An association can have standing only if its

members could have sued in their own right." Id. In City of Ashland v. Ashland FOP. No.3,

888 S.W.2d 667 (Ky. 1994), the Court granted the Fraternal Order of Police standing because

"the nature of police work was such that the lodge members had a real and substantial interest in

Page 5 of IS

who became future employees and in the employee pool from which the city would hire police."

ld. at 668. The Court also conferred standing on the police' association because it represented the

majority of city police. ld.

Defendant argues that KURED is not an organization that can invoke standing because it

does not represent an industry or a group's interest to engage in substantial activities to promote

that industry, and that the non-profit was only created to file this lawsuit. Bluegrass argues that

KURED does not meet certain indicia of a non-profit because it does not distinguish between all

classes of members and because it has no bylaws. The Court does not find Defendant's

argument persuasive. There is nothing in the case law that limits associational standing to

business, labor, or industry trade groups. There is no reason why the concept of associational

standing should not apply to citizens and taxpayers who join together to address common

problems or issues of public concern, so long as the dispute involves a case or controversy that

implicates the substantial rights of the membership.

In its Articles of Incorporation, KURED references its members and names its Board of

Directors, including Ms. Greathouse, and states that its purpose is ''to protect Kentuckians from

the threat of and attempts to exercise eminent domain by entities not in public service to

Kentuckians." After reviewing the discovery documents and affidavits. it is clear that KURED is

a membership organization, Penny Greathouse is a member of KURED, and KURED is

protecting the interests of its members by challenging Bluegrass's assertion that it has the right to

exercise the power of eminent domain.

Thus, KURED has associational standing if at least one member could sue in her own

right and if it demonstrates that its members have a real and substantial interest in the lawsuit.

Penny Greathouse's individual standing is the source from which KURED asserts it derives

Page 6 of18

associational standing. Standing exists where an individual has "a judicially recognizable

interest in the subject matter; interest may not be remote and speculative, but must be present and

substantial." City of Louisville v. Stock Yards Bank & Trust Co., 543 S.W.2d 328, 329 (Ky.

1992). Ms. Greathouse has been approached on four separate occasions by representatives from

Bluegrass attempting to obtain a voluntary easement through her property for the proposed

pipeline. She has also been told by the company that it possess the poyver of eminent domain

under Kentucky law but prefers not to exercise it. As a landowner who owns property in (or

near) the path of the pipeline, Ms. Greathouse has a personal stake in the outcome of the

controversy. She has a present and substantial interest in the outcome of this dispute, and that

interest is not remote or speculative. Bluegrass concedes that it has altered the proposed route of

the pipeline to adjoining property to Ms. Greathouse, but that alteration does not moot the

controversy. Bluegrass could change the route again and reassert its right to condemn Ms.

Greathouse's land. More importantly, the location of a pipeline carrying highly dangerous and

toxic chemicals on the adjoining property gives Ms. Greathouse a continuing real and substantial

interest in adjUdicating Bluegrass' legal right to utilize eminent domain to obtain an easement

from her neighbors. There is no indication in the record that Bluegrass has agreed to indemnify

Ms. Greathouse or other property owners adjacent to the proposed pipeline from any damages

from leaks, explosions, or other discharges ofNGLs that could affect her property.

The outcome of this declaratory action has an immediate effect on bargaining power in

negotiations between Bluegrass and Ms. Greathouse, other members ofKURED, and all

residents within the proposed pipeline path. Bluegrass seeks to obtain voluntary easements, but

invokes the threat of condemnation. This has an inevitable chi11ing effect on landowners who

may question the legal authority of Bluegrass, but who lack the means to engage in protracted

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litigation to resolve the legal dispute. These property owners are more likely to grant voluntary

easements based on Bluegrass' express or implied threat of condemnation. Bluegrass now

claims it is no longer seeking to acquire Ms. Greathouse's property and has re-routed the

proposed pipeline around her property. The company has admitted the pipeline path has been in

a constant state of flux I. Thus, Bluegrass could change its mind at any time and re-route the

pipeline back through her property. Ms. Greathouse, and other similarly situated landowners, are

forced to negotiate with Bluegrass without clear knowledge of whether the assertion of eminent

domain power by Bluegrass is valid. This clear and immediate impact on the bargaining process

by itself demonstrates the existence of a case or controversy that should be addressed through a

declaratory judgment. Thus, KURED has associational standing through its Board member and

member, Penny Greathouse.

Moreover, all members ofKURED have standing as citizens and taxpayers to challenge

the right of a private corporation to act in the name of the government of the people of Kentucky

to take private property for the benefit of purely private economic interests. Kentucky law has

long recognized the right of citizens and taxpayers to bring suits to challenge the wrongful

exercise of government power. See Russman v. Luckett, 391 S.W.2d 694, 696 (Ky. 1965), Rose

v. Councillor Better Education, Inc., 790 S.W.3d 186,201-02 (Ky. 1989) (a "properly formed

non-profit corporation, has the legal authority to sue ... We are cited no authority, and can find

none, that would enable us to pierce the corporate veil and legally cut off the rights of t.1-}e

individual corporate members."). Those cases are no less applicable when a private party acts on

behalf of the government to exercise, or threaten to exercise, the essential government power of

eminent domain.

I At oral argument, counsel for Bluegrass indicated that the route has been changed over 100 times to address the concerns of landowners, including those who may question the right of eminent domain.

Page 8 oil8

2. Justiciable Controversy

Once standing has been established, we now turn to whether a justiciable controversy

exists and whether this case is ripe for a decision. KRS 418.045 states, "any person ... whose

rights are affected by statute ... or who is concerned with any title to property ... provided always

that an actual controversy exists with respect thereto, may apply for and secure a declaration of

his rights or duties." In deciding ajusticiable controversy, '''The court will not decide

speculative rights or duties which mayor may not arise in the future, but only rights and duties

about which there is a present actual controversy presented by adversary parties, and in which a

binding judgment concluding the controversy can be entered. '" Veith v. City of Louisville, 355

S.W.2d 295,297 (Ky. 1962) quoting Black v. Elkhorn Coal Corporation, 26 S.W.2d 481 (Ky.

1930).

This case meets the requirements for an actual case and controversy. Bluegrass argues

that since it has not yet fIled an action seeking to condemn, that this matter is not ripe and that no

actual controversy exists. However, representatives from Bluegrass have stated numerous times

(to Judge Executive Ted Collins and to Ms. Greathouse) that under Kentucky'S statutes they

have the power to condemn, but that they would prefer to acquire land rights by reaching

voluntary agreements with landowners instead of relying on eminent domain. Bluegrass has

claimed it has no present intent to acquire an easement from Ms. Greathouse, but that does not

protect her in the future if Bluegrass decides to re-route, nor does it dispel a landowner's

justifiable uncertainty regarding the costs of defending a condemnation action. Property owners

and taxpayers in general have a right to determine whether Bluegrass' claim is valid because not

only does it affect their bargaining position, but it affects their legitimate interests and

Page 9 of18

substantive rights as citizens when a private company seeks to exercise the sovereign power of

condemnation.

A declaration of rights is necessary to determine whether Bluegrass has the right to

condemn so that Ms. Greathouse and other landowners, who are within the ever changing present

or future pathway of the proposed pipeline, can make infonned decisions considering all factors

when negotiating and deciding whether to grant an easement to Bluegrass and other private

entities. Moreover, the dispute is capable of repetition, but could still evade judicial review if

Bluegrass continues its policy of asserting the right to condemn, while altering the course of the

pipeline when landowners question its condemnation authority. This admitted tactic of

Bluegrass allows it to vastly increase its bargaining power over landowners without the means to

question or contest the asserted right of condemnation. Accordingly, the controversy is capable

of repetition yet evading review. See Lexington Herald-Leader v. Meigs, 660 S.W.2d 658 (Ky.

1983).

In deciding cases under the Declaratory Judgment Act, the statute itself emphasizes that

its provisions are "remedial; their purpose is to make courts more serviceable to the people by

way of settling controversies, and affording relief from uncertainty, and insecurity with respect

to rights, duties and relations, and are to be liberally interpreted and administered." KRS

418.080. See Hammond v. Smith, 930 S. W.2d 408 (Ky. App. 1996). Kentucky courts have long

held that "there can be a 'justiciable controversy' when an advance determination would

eliminate or minimize the risk of wrong action or mistakes by any of the parties." Combs v.

Matthews, 364 S.W.2d 647 (Ky. 1963). This dispute between these citizens acting through their

non-profit corporation, and Bluegrass, a private for-profit corporation that seeks to negotiate with

landowners from the powerful position of a sovereign authority with the power to condemn

Page 10 of18

property, is exactly the kind of