Opinion
Case No. CL18-2169
09-18-2018
VIRGINIA NATURAL GAS, INC., a Virginia public service corporation, Petitioner, v. COLONNA'S SHIP YARD INCORPORATED, Respondent.
OPINION AND ORDER APPROVING PETITION FOR EARLY ENTRY
The matter came before the Court for a two-day evidentiary hearing on the Application for Entry (the "Application") by Virginia Natural Gas pursuant to Virginia Code §§ 25.1-223 and 224, following its Petition to condemn an easement across the property of Respondent, Colonna's Ship Yard, Inc. With its Application, VNG seeks the right to enter upon Colonna's property before the trial on just compensation in order to construct the pipeline that is the subject of its Petition for Condemnation. For the reasons stated herein, the Petition is APPROVED.
I. FACTUAL BACKGROUND
VNG brought this eminent domain proceeding by a Petition for Condemnation filed on March 14, 2018, to acquire a thirty-foot-wide permanent easement (the "Easement") over property owned by Colonna's located at 100 S. Main Street, Norfolk, Virginia 23523 (the "Property"). On June 5, 2018 VNG filed its Application for Entry, alleging that the subject Easement is necessary for the construction of its Southside Connector Distribution Project and that it must begin construction under Respondent's property in the fall of 2018, before a trial on just compensation can be concluded.
On September 5 and 6, 2018, the Court conducted an ore tenus hearing on VNG's Application and Respondent's objections to the Court's jurisdiction. The Court received testimony from seven witnesses and admitted 31 exhibits into evidence. This Opinion states the Court's factual findings.
A. The Southside Connector Distribution Project
Currently, VNG relies upon two natural gas pipelines to bring natural gas into its Hampton Roads service area. VNG owns and operates a natural gas pipeline, which is referred to as the "Northern Line" or the "Dominion Line," running from Quantico to Norfolk, that supplies natural gas to VNG's distribution network serving Norfolk and the northern parts of Virginia Beach and Chesapeake (the "Northern Region"). The Northern Line supplies natural gas to VNG's Salter Street Gate Station in Norfolk, at which station the pressure of the gas is reduced and transported into the distribution network servicing the Northern Region. See Petitioner's Ex. 1.
VNG also relies upon a second natural gas supply line that it does not own, which is referred to as the "Southern Line" or the "Columbia Line," providing natural gas to VNG's distribution network serving the southern portions of Virginia Beach and Chesapeake, as well as Suffolk (the "Southern Region"). The Southern Line supplies natural gas to VNG's Gate 1 Southern Station, at which point the pressure of the gas is reduced and transported into the distribution network servicing the Southern Region. See id. The Southside Connector Distribution Project (the "Connector Pipeline") will consist of a nine-mile, 24-inch pipeline to connect the Northern Line and the Southern Line.
According to the testimony of VNG's witnesses, in the event of an interruption to either the Northern or Southern Line, VNG is presently unable to move a sufficient amount of natural gas through its existing system to the distribution network serviced by whichever supply line is experiencing the interruption. Completion of the Connector Pipeline, however, will allow VNG to move sufficient quantities of natural gas from the functioning supply line so that it can better serve those customers impacted by the interruption of supply. Specifically, the Connector Pipeline can extend natural gas supplied by the Northern Line past the Salter Street Gate Station to the Gate 1 Southern Station, which can then be used to supply the distribution network that serves the Southern Region. Similarly, the Connector Pipeline will allow VNG to move natural gas supplied by the Southern Line from the Gate 1 Southern Station to the Salter Street Gate Station, which can then be used to supply the distribution network that serves the Northern Region. See Petitioner's Ex. 15.
B. VNG's Proposed Work on Respondent's Property
A portion of the Connector Pipeline will be located on Respondent's property, which is adjacent to the Elizabeth River. The Easement will cover a total of 4,796 square feet on the Property and will be located entirely within an existing 80-foot reservation to the City of Norfolk and partially within a twenty-foot waterline easement in favor of the City of Norfolk. See Petitioner's Ex. 5, p. 1.
VNG intends to install the portion of the Connector Pipeline on the Property using a horizontal directional drill. VNG will begin the drilling south of the Property on South Main Street in Norfolk. At the time the pipeline crosses in the Property, it will be approximately 70 feet below the ground. Id. at pp. 2-3. The pipeline will then proceed north into the Elizabeth River. Id. The pipeline will be approximately 85 feet below the ground when it leaves the Property and enters the Elizabeth River. Id. The pipeline will then cross under the Elizabeth River and go through Harbor Park in Norfolk. Id. In addition to the drilling under the ground on the Property, VNG intends to place stakes and a tracking wire on the surface of the Property to ensure the alignment of the drill and the pipeline.
Pursuant to the Deed of Easement from the City of Norfolk, VNG may work in Harbor Park without interruption only between November and March. See Petitioner's Ex. 4, pp. 3-4. Because VNG needs to use Harbor Park to construct the segment of the pipeline being installed on Colonna's property, and because that drilling will end in Harbor Park, VNG must construct and install the pipeline on the Property beginning November 20 and concluding by March 31. VNG had expected to complete the construction under Colonna's property and across Harbor Park before March 31, 2018 and had mobilized its contractor and work equipment adjacent to the Property for that purpose in early January 2018. The agreement that VNG thought it had reached with Colonna's for that purpose, however, fell apart, causing VNG to miss the window that closed in March.
VNG has obtained all rights, permits, and authorizations to complete the Project, except for the right to construct the Project on Respondent's property. If VNG is able to access Respondent's property on or before November 1, 2018 to begin construction of the pipeline, it expects the pipeline to be completed by January 2019. If, however, VNG is unable to access Respondent's property now for purposes of constructing the Project, VNG will again miss its window to work in Harbor Park, and the Project will be delayed at least another year, during which the reliability risks that the Project is designed to resolve will continue and will grow.
C. VNG's Bona Fide Offer to Respondent for the Easement
Nancy Dove, MIA, SRA, a real estate appraiser licensed in Virginia, performed an appraisal to determine the market value of the proposed Easement and any financial impact on the remaining property. Her report dated March 6, 2018, was received into evidence as Petitioner's Exhibit 11. Ms. Dove concluded that the value of the Easement is $25,000, with no damages to the remainder. In her determination, Ms. Dove considered the impact, if any, that the Easement would have on Respondent's riparian rights. See Petitioner's Ex. 11.
On March 7, 2018, VNG offered Respondent $25,000 as just compensation for the Easement based on Ms. Dove's appraisal, which it provided to Respondent. See Petitioner's Ex. 12. Respondent never responded to VNG's offer.
II. LEGAL ANALYSIS
A. Jurisdiction
Virginia Code § 25.1-201 establishes the Court's jurisdiction over this condemnation action: "Jurisdiction of proceedings to condemn property under this chapter shall be in the circuit court of the county or city wherein such property, or the greater portion thereof proposed to be condemned is situated, unless otherwise specifically provided by law." Respondent's property is located in Norfolk.
Respondent objects to the Court's jurisdiction, as pleaded in its Answer and Grounds of Defense: "VNG is seeking to acquire more property than necessary to achieve its stated public use, in violation of Article I, Section II of the Constitution of Virginia and Va. Code § 1-219.1(C)." Id. at ¶ 7. This argument relates to language at the end of the first paragraph in VNG's proposed Easement. In the description of the uses to which VNG would put the Easement, including the construction, installation, and maintenance of its pipeline, the sentence ends as follows: "and to perform any additional activities deemed necessary or desirable by VNG, in its sole discretion." Petition for Condemnation, ¶ 7. VNG's corporate representative testified that he was not familiar with the reason for including language that gave VNG the right to do anything it deemed necessary or desirable and that such broad language was not necessary to construct the Connector Pipeline. Tr., Vol. 1, at 279.
Both counsel suggested in open court that the proposed language of the Easement could and should be easily modified. Respondent has offered no legal authority in support of its contention that an overbroad request, which may be curtailed or restricted by the final order of the Court, deprives the Court of jurisdiction to adjudicate the controversy. The Court finds that it has jurisdiction over this controversy notwithstanding the over breadth of the language of the requested Easement.
B. Application for Entry
The Court may approve VNG's application to enter on Respondent's property to begin its construction of the Connector Pipeline before the trial on just compensation if VNG proves the requirements under Virginia Code § 25.1-224(A) by a preponderance of the evidence:
1. A public necessity or an essential public convenience requires such entry for such purposes;
2. An emergency exists justifying such entry before the time when just compensation can be determined and the amount so determined paid into court; and
3. The interests of the owners of such property will be. adequately protected by (i) the payment into court for the benefit of the owners of the amount of the offer made in accordance with § 25.1-204 or (ii) if no offer is required by that section, by the payment into the court of the amount of a good faith estimate of the value of the property.
There is no real controversy that the first requirements of the statute is satisfied. The Project is a public necessity or essential public convenience requiring entry onto Respondent's property for the purpose of constructing and operating the Connector Pipeline. "The supply of natural gas for heating, cooking, and the generation of electricity is clearly a public necessity and essential." See Virginia Natural Gas, Inc. v. Sumner, 2018 Va. Cir. LEXIS 21, *7 (City of Chesapeake Feb. 23, 2018). By its Order dated March 15, 2018, the Virginia State Corporation Commission found that the Project was an ordinary extension or improvement in VNG's usual course of business, namely, its provision of natural gas service to its customers in Norfolk, Virginia Beach, Chesapeake, and Suffolk. Further, Respondent "does not contest the necessity of the VNG [P]roject." Respondent's Opp. to Petitioner's Application for Entry, p., 1.
The Court finds that the third requirement is also satisfied. VNG proposes to pay the amount representing the appraised value of the Easement into the Court for Respondent's protection, which was the amount of the offer made pursuant to Virginia Code § 25.1-204. Respondent takes issue with the sufficiency of that amount and contends that it will suffer significant business and operational losses with the pipeline under its property. Respondent presented no evidence or argument, however, that its interests would not be adequately protected by the payment of $25,000, which Ms. Dove has concluded to be the appraised value of the Easement. If Respondent proves the business losses alluded to in its designation of expert testimony, there is no evidence that VNG would be unable to compensate Colonna's for those losses. The Court thus finds that Colonna's interests will be adequately protected.
It is the second element of the statute, whether an "emergency" exists justifying early entry, that forms the essential controversy before the Court. Section 25.1-224(A)(2) does not define an "emergency." In a recent decision involving property owners who objected to this same VNG Connector Pipeline crossing their properties, the Chesapeake Circuit Court considered whether VNG had proven an emergency that justified early entry:
The word "emergency" is difficult to define precisely. The term is not a "word of art having a fixed and definite meaning, but must be interpreted and given the meaning indicated by its setting." "It takes color and significance from its surroundings. . . . It will be judged by the company it keeps."
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The severity or exigency of a given emergency will vary by degree depending upon the specific situation, the type of emergency, and the surrounding circumstances. For example, an emergency could be described as being a medical emergency, a public safety emergency, an emergency due to natural disaster or weather, a public health emergency, or constitute the basis or rationale for emergency legislation, etc.Sumner, 2018 Va. Cir. LEXIS 21, at *8-9 (internal citations omitted). See also City of Portsmouth v. City of Chesapeake, 205 Va. 259, 266 (1964) (the "word 'emergency' imports 'immediate necessity'").
A concept common amongst the various definitions is that "[t]he word 'emergency' imports [an] 'immediate necessity.'"
In articulating the "emergency" that justifies the Application for Entry, VNG testified that the risk of loss of service associated with the lack of a connection between the Northern and Southern Lines has increased and will continue to increase as the demand for natural gas in the Hampton Roads region grows. Since 2007, the number of customers in VNG's service territory has grown from 260,000 to approximately 300,000; and the number of customers continues to grow. Last winter, VNG experienced the five largest days of natural gas delivery in its history. See Petitioner's Ex. 13, p. 2.
The increased demand for natural gas service raises the risk that an interruption of supply from either the Northern or Southern Line would result in the loss of natural gas service to a significant number of firm, essential-use customers. Natural gas service outages, unlike electricity outages, require that VNG visit each affected customer meter to turn off service, resolve the outage condition, and then revisit each affected customer to relight each service, a process which takes a significant amount of time.
To highlight what it characterized as the looming risk of service interruptions to its customers, VNG emphasized the incidence of eleven service interruptions to commercial and industrial customers last winter, which its witness characterized as a "canary in the coal mine" indicating constraints in the delivery system that need to be addressed. Tr. Vol 1, p. 334. Colonna's vigorously contested the significance of these interruptions to "interruptible customers." It presented expert testimony suggesting that service interruptions to interruptible customers, who benefit from a reduced price in exchange for agreeing to allow VNG to interrupt their service as needed, constituted a normal and routine part of VNG's business and not any impending crisis. Even with those interruptions to no more than eleven of its 300,000 customers, Respondent argued, VNG's reliability rate was well over 99.99%, dispelling the notion that the handful of interruptible customers who experienced service interruptions last winter amounts to an "emergency" justifying early entry.
C. Respondent's Opposition to Immediate Entry
Much of Respondent's opposition to this application related to its strong opposition to the Project itself and the proposed placement of a high-pressure gas transmission line in the ground beneath its ship repair facilities. Whether the Project is needed and whether its location under a busy shipyard is advisable, however, are not before the Court for decision; and therefore the Court need not reach many of the arguments about why Colonna's vehemently opposes the Project.
Respondent argues, for example, that the Project will not help VNG better serve its customers because the Northern and Southern Lines are at full capacity. In this context, VNG argues that "capacity" means the amount of space in the pipelines and not the amount of gas that VNG can transport. In any event, the issue is not related to early entry and not before the Court.
Respondent also put on evidence purporting to show that the real purpose of the Project is to allow VNG to connect to the proposed Atlantic Coast Pipeline sometime in the future. The Court finds credible the testimony of VNG witnesses Flora and Yagelski that VNG would have constructed the Project regardless of whether ACP is constructed because of the reliability issues that the Project will resolve. To the extent that Colonna's invited the Court to disbelieve VNG witnesses and conclude that VNG's reasons for the Project were different from their testimony, the Court declines to so find. Moreover, this issue is not before the Court.
Finally, Colonna's emphasized that its business operations will suffer if this high pressure transmission line is installed with 660 feet of its ship repair sites. The alleged impact to Respondent is not one of the factors set forth in Section 25.1-224 and therefore is not relevant to the Court's decision. Moreover, the just compensation trial will determine the amount of compensation that VNG must pay to Respondent for the acquisition of the Easement and "the damages, if any, to [the] residue by reason of such taking and use by [VNG]." Va. Code § 25.1-230(1).
D. VNG Has Sufficiently Proven an Urgent Need
Director of Gas Supply for VNG, Kenneth Yagelski, testified that the need for the Connector Pipeline has existed for some time and becomes more pressing each year:
Q. Okay. Was there a real risk that service to firm customers could have been lost last year given the temperature and stress on the system?
A. There were events that occurred, contingency events on the upstream pipelines that did present a real risk for firm customers to lose service.
Q. And what were those events?
A. It was the one I mentioned earlier about the compressor outage in Chambersburg, Pennsylvania, on the Dominion Energy Transmission system. It was over a weekend. I could tell you I sat at my house with, you know, the pressure graph pulled up on my computer just watching it drop. And at some point we would have to enact a curtailment plan that actually impacts firm customers.
THE COURT: And if that happened when the Southside Connector was in place, you could have gotten gas that had come to you through the Columbia pipeline?
THE WITNESS: That's correct.
THE COURT: Somehow you would have gotten the gas from Columbia and directed it northward.Tr., Vol. 1, at 337-38.
THE WITNESS: That is correct.
BY MR. LACY:
Q. In your expert opinion, Mr. Yagelski, do you think that VNG should wait for its service to firm customers to be interrupted before there's a need or necessity to build this project?
A. Well, no. At that point it's too late. That's like, you know, putting your storm shutters on after the hurricane has hit the house. We need to plan ahead and be prepared for it.
Q. Would you say that there's an immediate necessity for this project?
A. I believe there is. And I believe there has been for several years. That necessity grows each day as we add more customers.
Q. Is it fair to say you've been perhaps one of the folks at VNG who's been leading the charge to get this project done?
A. I've been a leading advocate of this project since I joined the company in 2012.
Q. And even at that point, you saw the need down the road for this project?
A. Yes, I did.
The Court acknowledges the logic of Colonna's position that a need which VNG has recognized and worked to address for six or more years, does not fit the classic definition of an emergency. The Court does not, however, overlook VNG's construction schedule that would have the Connector Pipeline built and operational by January 2019 if early entry is granted. If the Court denied the application, VNG would be required to wait until the just compensation trial has concluded, at which time it will have missed the window to construct in Harbor Park, adding another year of delay to the Project The majority of the Project, already constructed, would sit idle for another year. VNG and its customers would realize no benefit from tens of millions of dollars already spent on the Project.
The application does not present an "emergency" as that word might be defined by a 911 operator or a firefighter, but the Court must consider the context in which the legislature used the word. Any project proposed by a condemning authority to enter upon property for the purpose of constructing works or improvements necessarily involves planning, designing, funding, amassing of resources, staffing, and attention to legal requirements. The inclusion of the term "emergency" in Title 25.1 of the Code suggests that it is not limited to tasks that must and should be completed in days or hours. In that context, the Court does find that there is an emergency—or an immediate necessity or pressing need—for VNG to enter onto Respondent's property without further delay to complete construction of the Project.
A host of federal decisions analyzing similar requests by public utility companies for early entry onto private property for the purpose of pipeline construction, while not directly applicable, nonetheless support the reasoning and the conclusion by the Court herein. The federal Natural Gas Act, 15 U.S.C. § 717f(h), gives a natural gas company the power to acquire property by eminent domain; but the Act does not expressly provide for possession prior to the determination and payment of just compensation, In a large body of cases where gas companies sought pre-trial entry in the form of a preliminary injunction, federal courts have routinely allowed such entry. See, e.g., E. Tenn. Nat. Gas Co. v. Sage, 361 F.3d 808, 830 (4th Cir. 2003) ("Congress passed the Natural Gas Act and gave gas companies condemnation power to insure that consumers would have access to an adequate supply of natural gas at reasonable prices."); Guardian Pipeline, L.L.C. v. 950.80 Acres of Land, 210 F. Supp. 2d 976, 979 (N.D. Ill. 2002) (immediate possession proper when condemnation order has been entered and preliminary injunction standards have been satisfied); Tenn. Gas Pipeline Co. v. New England Power, Inc., 6 F. Supp. 2d 102, 104 (D. Mass. 1998) ("[T]he district court does have the equitable power to grand immediate entry and possession where such relief is essential to the pipeline construction schedule."); Kern River Gas Transmission Co. v. Clark County, 757 F. Supp. 1110, 1116 (D. Nev. 1990) (granting immediate entry where gas company required to meet "complex contractual and logistical obligations to its customers and suppliers involving hundreds of millions of dollars").
The Court recognizes that none of these federal cases construed the meaning of the statutory "emergency" language of Virginia Code § 25.1-224 and thus are not directly applicable. Nonetheless, in extremely similar factual circumstances, these courts agreed that public utility companies should be permitted access to construct their natural gas pipelines without waiting for the conclusion of the just compensation trial.
E. Payment of VNG's Bona Fide Offer
The Court finds that Colonna's interests will be protected by VNG's payment into Court of $25,000, which represents the amount of its bona fide offer to Respondent. The Court denies Respondent's request to hold a separate hearing to determine the amount to be deposited under Section 25.1-224(A)(3). The statute only refers to the amount of the bona fide offer and does not require a separate proceeding to determine the amount of the deposit. Further, there is no evidence that VNG will be unable to pay the award to be determined at the just compensation trial. See Va. Code § 25.1-224(E).
CONCLUSION
For those reasons, set forth in the Court FINDS that it has jurisdiction over this matter, and that (1) public necessity and an essential public convenience require that Petitioner enter upon Respondents' property for the purpose of constructing its works or improvements thereon; (2) emergency exists justifying such entry before the time when just compensation can be determined by the Court at trial; and (3) the interests of Respondent will be adequately protected by VNG's deposit into the Court registry the sum of $25,000. The Easement may be used for the express purposes enumerated in the Easement document but not for "any and all additional activities deemed necessary or desirable by VNG." The uses of the Easement must relate to the installation and maintenance of the pipeline.
Counsel are directed to file written exceptions to this Order within fourteen days. Further endorsement by counsel are waived.
The Clerk is DIRECTED to mail and email a copy of this Order to all counsel of record.
It is so ORDERED.
Entered: September 18, 2018
/s/_________
MARY JANE HALL, JUDGE