mpbenard | 
08 25th, 2009| 
Educate Yourself & Talk to Neighbors
“Send lawyers, guns and moneyDad, get me out of this, ha”Lyrics by Warren Zevon, Lawyers, Guns & Money
This conversation will focus on using the power of numbers to strengthen your position and review the upside and the downside of group dynamics.
Dual Perspective
As noted in Part 1, my experience includes a transformative two-year eminent domain fight with Houston-based Spectra Energy, backed by the power of the Federal Energy Regulatory Commission. This website was motivated by that event; and it focuses specifically on property rights that come under pressure from energy and utility companies.
Matt Jarrell is a Shareholder and Director at Sherrard German & Kelly, P.C., a law firm headquartered in Pittsburgh, PA. Matt is a member of his firm’s Financial Services, Corporate and Litigation Groups. In addition, he counsels energy companies involved in the transmission and distribution of oil and gas. This includes exploration and production companies. Matt served as our attorney during our two-year fight with Spectra Energy over property rights in Bedford County, associated with the Steckman Ridge Project.
Matt’s experience is in the court of law. My experience is in the court of public opinion. For example, I held the top communications job at Kodak as VP and Director of Communications & Public Affairs for more than a dozen years before retiring in 2006.
Property Owner Mike Benard: David Soete, Senior Resource Specialist at the Upper Delaware Council, recalls the advice a wise farmer gave a group of landowners at a seminar:
“The biggest fear of the natural gas companies is that you will educate yourself and talk to your neighbors.”
Paul Stup, a Clearville, PA, property owner and a former vice president of the Bedford County Farm Bureau, points out:
“In my dealings with FERC (Federal Energy Regulatory Commission) I’ve always had the feeling that the less I knew, the better off they were.”
So educate yourself rather than depend on the kindness of strangers from the energy companies and government. Pay attention to the procedural deadlines and participate, whether it is with the Federal Energy Regulatory Commission (FERC) or with the Township Commission. Remember, the energy companies will be diligent about filing deadlines.
For example, if yours is a FERC project, register on the FERC website so you can follow the docket and its timeline. File your own comments because you will want your position on any proposed “taking” of property rights on the record.
Talk to Neighbors & Create Allies
As soon as possible in the process, begin contacting and organizing other property owners who are impacted by the same project. Negotiate and bargain as a group. This is the last thing in the world energy companies want. They prefer compliant and solo property owners so they can pick you off one-by-one. Use the power of the group to raise your voice and tell your story by contacting other property rights activists, legislators, news media, and public policy groups.
Our fight with Spectra Energy (dubbed the Steckman Ridge Project) led to the development of this website which focuses specifically on property rights that come under pressure from energy and utility companies. We are now helping and responding to inquiries from property owners in Pennsylvania, Texas, Oklahoma, Massachusetts and elsewhere.
In addition, we have the distinction of being told by a Spectra Energy VP that he has never seen this level of property owner resistance in 26 years with the gas industry.
Share Ideas & Talent
The value of a group is not only a united front that challenges the energy industry. There is also value in shared ideas and a division of labor that comes with group dynamics.
Find out what skills are possessed by various neighbors. Someone who is a member of a state farm bureau or an environmental organization may have grassroots lobbying and network experience. Others may be internet wizards who can do deep dives into research on the energy companies and the issue. Some groups in other Pennsylvania counties have lawyers among their property owners. Take advantage of the experience and talent in your community.
To increase the power of your voice, hold community meetings and informational workshops to spread the word. Even in today’s economy, most people are property owners and property accounts for much of their economic wealth. In other words, it is in their self interest to pay attention and get involved because the energy or utility industry project will impact their property value.
In Pennsylvania, just to cite one state, energy companies are becoming more active. Spectra Energy, for example, opened an office in Pittsburgh; and the company is active in York County among other locations. Property rights issues and battles are going to be with us for a long time.
Regarding group dynamics, remember the 80/20 rule: In any organization, 20% of the members will do 80% of the work. So keep the group going and don’t get discouraged. You will have an impact on the energy industry.
Regarding legislators — remember that eminent domain only functions under the power or badge of government. In our case, a staffer for one congressman was quoted as telling a reporter (emphasis added): “It’s an important project, but it is a private agreement between a business concern and residents, and the congressman generally does not enter into those things.”
Private agreement? Good grief. Eminent domain can only happen under the badge of government. If you hear that from a legislator, you have a teachable moment to educate him or her. If this were a private matter, you could break off “negotiations” and your life would be simpler. But you can’t do that because the energy company has been given the power of eminent domain over your property rights by the government.
On the other hand, seek out and support legislators who “get it” where property rights issues are concerned. Here are two examples of legislators working to level the playing field for property owners.
PA House Bill 1817
Pennsylvania state government representative Curt Schroder (R - East Brandywine) has introduced legislation with the support of seven cosponsors (Democrats and Republicans) “that will provide regional control over the placement of natural gas pipelines in communities across Pennsylvania.” In other words, Pennsylvania House Bill 1817 challenges the FERC monopoly on these kinds of decisions. Here is a link for more information: http://www.spectraenergywatch.com/blog/?p=311
Congressman Jim Gerlach (PA - R, 6th District) is working across the aisle in Washington with Joe Sestak (PA – D, 7th District) to pass a bill that would create an Office of Public Advocate inside the Department of Justice to represent the interest of property owners at FERC. Refer to H.R. 1921.
Gas Industry Culture
Lawyer Matt Jarrell: The gas business, especially in the Appalachian Basin, is as old as dirt. The gas pipeline business is heavily regulated, both in how a business operates and in how much money it can make. Put those two things together and it is not hard to see how some corporate cultures might come to be perceived over time as rigid and formulaic – like a battleship.
People in charge of areas within these battleships can get used to rigidity and even get comfortable with it. Since the processes big pipeline companies use to achieve their business goals are often large scale and controlled by regulatory mandate, there is less need for adaptability in many contexts. If a situation arises where the company needs to adapt on the fly, you sometimes find out just how hard it can be to turn a battleship.
When landowners throw up meaningful roadblocks to a company’s land acquisition strategy, it stresses the system; and the rigidity of some corporate cultures can make change very difficult. In that context, the Benards (who are my clients) represented a one-in-a-million event. They were not fighting for economic gain; and the energy industry is not used to dealing with folks who will fight on principle and invest to locate and obtain the tools to do so effectively even if there is no economic gain.
I cannot understate what that kind of informed tenacity can achieve on behalf of the larger battle for property rights. But it is important to understand that their willingness to fight what they believe to be a basic inequity was matched by the tenacity of their desire to educate themselves about the economic, legal, technical and business issues involved in the case. Only by understanding those issues could the Benards effectively advocate for themselves.
Generally, there is strength in numbers where “numbers” equate to large chunks of land and where the owners of those properties educate themselves and negotiate wisely. The bigger the chunk of land, the greater the bargaining power of landowners, in part, because the potential downside to a company from a landowner friendly court decision on the issue of just compensation is greater.
A company will try to make deals with individual landowners in order to diminish the bargaining power of the others. It is therefore beneficial to make sure all landowners are informed and educated. Information sessions and workshops can be useful, but can have a negative effect if the information conveyed is either flawed or not communicated effectively. Pooled funds can be used to retain experts or consultants to offer opinions on property value that provides ammunition in negotiations.
While there can be strength in numbers, be sensitive to whether the group’s efforts are presenting a solid, single-block negotiating team or whether negative group dynamics are eroding progress to reach an agreement. Many, if not most, attorneys will advise you to consider striking your own deal if you sense that the group is actually hurting its own cause and you are not in a position to stop it from doing so.
3 Options on Legal Fees
As a general rule, you have three options regarding legal fees and the representation that comes with them. The three options are:
- Flat fee – a set fee for a pre-determined amount of work. Expenses and expert witness fees are above that.
- Contingency fee – percentages vary, but it is common for an attorney to take one-third of the final award or settlement (though the percentage can be higher or lower). Expenses and expert witness fees are above that.
- Hourly billings — $200/ per hour or higher; expenses and expert witness fees are above that.
The method of payment is not necessarily an indicator of how well an attorney will perform. You simply must do due diligence on any attorney you or the group might want to retain. As you do, keep in mind the following:
- The landowner might be happy to know exactly what the attorney will cost.But, an attorney working on a flat fee has little economic incentive to perform beyond the minimum after he receives all or most of the fee.
- An attorney paid on a contingency basis theoretically will be motivated to do a good job because his “take” will be a share of what he negotiates or wins from the gas company. Sometimes, this translates to a focus on keeping costs down and not spending significant time learning about, and working on, the case in order to develop the strongest arguments available. The expectation being that, as the case grinds along, the energy company will increase its offer to an amount acceptable to the landowner; and enough to justify the attorney’s time on the matter.
- Attorneys who require monthly payments based on time spent most likely will be expensive, particularly where complicated issues such as underground gas reservoirs or storage rights might be involved that require considerable review and, in some cases, efforts to create new legal arguments. And there is no guarantee that the attorney paid on an hourly fee basis will outperform any other attorney.
You need to make the decision that is best for you; but you also need to be aware of what financial implications are involved.
Not the Lottery
When it is all said and done, do not expect to feel as though you won the lottery. While huge lease bonuses and royalty rates have been observed in the natural gas world over the last few years, these generally are tied to efforts to drill wells and produce what is referred to as native gas reserves.
Those higher financial numbers do not generally apply to situations where a gas company wants a strip of surface land in order to lay a pipeline, or the right to take certain geologic strata deep within the earth in order to create an underground natural gas storage field that has been approved by a regulatory agency like the Federal Energy Regulatory Commission (FERC).
The dry-as-bones legal issue in eminent domain cases is what is being taken and what is it worth? Fifty-foot-wide strips of land in the woods might mean very much to the owner of the property, but the real issue is going to be how an appraiser calculates the fair market value of that fifty-foot-wide strip, usually based on comparable sales of similar land in similar areas.
Often the fair market value of the property being taken (whether it is a fifty-foot strip in the woods, or a section of earth thousands of feet below the surface) will not reflect the grief and inconvenience to the landowner of losing his ability to use that property, let alone the trying, strained, and costly times in negotiation and litigation.
With this in mind, you should educate yourself on the issues and develop an understanding of what you think your property is worth as soon as possible. While the launch of eminent domain court actions is not the end of the world or your ability to negotiate, it does mean that the company, the party with greater resources, gains leverage because litigation marches on, whether the parties want it to or not. And from that point on, you must measure your resolve not just in what you think you should get paid, but also in what you are willing to pay to get it.