Aug 17

What to Expect:  Lawyers & “Just Compensation”

“Send lawyers, guns and money
Dad, get me out of this, ha”

Lyrics by Warren Zevon, Lawyers, Guns & Money

This is Part 1 of a two-part collaborative blog on the subject of property rights and eminent domain, particularly as it applies to energy and utility companies.  Projects most likely to involve eminent domain with energy and utility companies are underground natural gas storage fields and pipelines, electric transmission lines and wind farms.

What makes this conversation different is that it will balance the experience of a property owner with the experience of an attorney who also works with energy companies.

Part 1 covers two primary issues:  What should you expect from your lawyer; and how can you level the playing field particularly in the area of “just compensation.”

As a property owner, 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.

Legal Care is like Health Care

Property Owner Mike Benard: A good lawyer is to be prized in the same manner as a good doctor.  Always remember, however, that you are the single best advocate for your own legal care, just as you are for your own health care.  As they say out west, you have to saddle your own horse.  You cannot outsource your involvement and responsibility.  That responsibility means being actively involved, doing your homework on the issues, and researching websites on the issue, such as this one which deals specifically with energy companies, or the Castle Coalition which deals broadly with eminent domain at: http://www.castlecoalition.org/

Tenacity, assertiveness, urgency and stamina are four character traits that stand you well in the defense of your property rights.  If you are the kind of person who avoids conflict, this is not the battlefield for you.

Lawyer Matt Jarrell advises: Property owners should expect to make their own decisions – from hiring a lawyer to dealing with litigation, if it comes to that.  I agree that the property owner is the best advocate for his or her rights.  Your responsibility is to understand the facts, the risks, the strengths and weaknesses of your situation, the technical issues, as well as the legal issues involved in negotiating or, if necessary, trying the case based on the value of your property.

If you hire an attorney, make sure that he or she can explain those issues to you and can offer understandable recommendations about how to proceed.  If you do not understand your lawyer, chances are it is his fault, not yours.

Level the Playing Field

Property Owner Mike Benard: Private property rights are so fundamental that founding fathers such as Samuel Adams described it as an “essential” right, and wrote, “that no man can justly take the property of another without his consent.”  [Samuel Adams – A Life, by Ira Stoll, © 2008, p. 48]

That said, it is not a level playing field legally, economically or ethically for private property owners.  Eminent domain is about the use of power over the individual.  Ultimately, power corrupts; and the power of eminent domain in the hands of government – which is transferred to a business – creates a sense of entitlement; and it creates an atmosphere ripe for abuse.

Your objective is to level that playing field as much as you can.

A specific example is the constitutional protection regarding just compensation. The quiet secret of the energy industry is that it has sweetheart lease deals with government entities that are very different from the just – or unjust — compensation it offers private property owners next door.  In plain words, to the energy companies, state governments are big and scary.  Property owners are not.  There is nothing like power to get respect. This must change.

How different are such leases?  In the case of underground natural gas storage leases, private property owners usually receive a “one-time payment.”

In contrast, lease agreements with state governments often include a bonus payment, plus a “withdrawal royalty payment.”  In other words, every time an energy company withdraws gas from the underground storage field in order to send it through a pipeline, the state gets paid.  This is often calculated in the form of a 25-year annuity stream back to the state.  In some contracts, a royalty is also paid on the volume of gas injected in addition to the volume of gas withdrawn for transmission through pipelines.

In our case in Bedford County, PA, our neighbor is the Pennsylvania Game Commission.  Refer to the following link for the Game Commission’s announcement of its gas storage lease amendment with Spectra Energy as part of the Steckman Ridge Project:
http://www.pgc.state.pa.us/pgc/cwp/view.asp?A=11&Q=175346&pp=12&n=1

Scroll down the page till you see the bold headline:  BOARD APPROVES GAS STORAGE LEASE AMENDMENT.

If energy companies pursuing your property rights are also dealing with government entities – whether state or local – you can shine a bright light on any lease agreements with those government entities.  There are a number of actions you can take:

  1. Find out if the energy project encompasses public lands – whether at the township, state or federal level.
  2. Make government officials and the energy companies aware of the fact that you want to know the terms and amount of their lease agreements.
  3. Use internet search engines to track information on government lease agreements in your state or elsewhere in order to compare terms and amounts.  This is known as benchmarking to evaluate comparable reference points.

Our website can help because it focuses specifically on energy company “takings” under the power of eminent domain.

The current practice of determining “just compensation” by energy companies constructs what I view as a theoretical formula using paid “expert witnesses,” who proudly announce the value of your property or property rights using various techniques.

In the real world, however, true value is determined by what someone actually pays for something – not what an expert tells you that someone should pay.  If you go on Antiques Roadshow, for example, an expert tells you that grandma’s rocking chair is worth $1,000; but if you sell it for $1,500 – that is the true value of the rocking chair.

Comparable value should be based on reality not theory.  In other words, what did the energy company pay to the government for its lease agreement?  Obviously, it considered that amount to be “just compensation.”

Lawyer Matt Jarrell: Eminent domain is offensive to many people; and there is a lot of play in the “just” of “just compensation.”  The tradition of energy companies paying state governments more money than they pay private property owners is unlikely to continue unchallenged in today’s more transparent world.  We are going to see more property owners arguing for compensation that is comparable in value to what the energy companies are paying the government for its lease.

Whatever distaste you might have for the principle of eminent domain or how it is implemented in the court system, the relationship between you and the company does not automatically have to be adversarial.  From a legal perspective, this is a business transaction and, whether you like it or not, you are the “seller” – recognizing that you are “selling” property and/or property rights against your will because of the taking power of eminent domain which government has given to an energy company.

For a window of time, you are in a position to negotiate with the gas company.  Some right-of-way agents will be aggressive and some will be polite, but they all want to get the deal done without going to court.

Expect to feel pressured into making a fast decision – either by the circumstances, or by the statements or insinuations of the landman or right-of-way agents.

Don’t let this put you on the defensive or cause you to have an emotional response.  The landman will often feel some urgency to avoid an impasse.  It is always better to use that sense of urgency to actively explore, and perhaps increase, common ground than to react negatively and allow barriers to further discussions take you closer to litigation that might be unnecessary.

Ask questions.  If something doesn’t seem right or doesn’t fit, say so.  The more you know about the facts and the market, the more seriously the landman is going to take you.  You cannot be the advocate for yourself that you need to be if you do not understand how the company is making the economic argument it makes with respect to the value of your property.  Though the threat of eminent domain is real and weighs against you, the company does not want to employ it, and that fact weighs against the company.

In Part 2 of this conversation, we’ll talk about using the power of numbers to strengthen your position and review the upside and the downside of group dynamics.

Aug 3
O Canada!
icon1 admin | icon2 Recent Posts | icon4 08 3rd, 2009| icon3No Comments »

Spectra Energy & Industry Is Just As Bad In Canada

A first-rate piece of journalism from the Canadian Vancouver Sun provides keen insight into how unfairly property owners are treated when it comes to government and energy companies seizing property rights.

Here is the link to this report by Pete McMartin:
http://www.canada.com/news/national/Pipeline+bomber+taps+into+frustration+energy+companies/1853131/story.html

In the event the link does not last, here is a pdf file: property-rights-in-canada

McMartin’s article is ostensibly about a pipeline bomber in the Peace River Region around Vancouver, in the province of British Columbia (BC), Canada.  The core of the story, however, is a lucid explanation of how government and energy companies punish property owners.  These are the very folks they should try to win over, because they own the key asset (the land) coveted by energy companies and government.

The threat and fact of eminent domain (or “expropriation”) in Canada is as bad as it is in the US.  EnCana Corporation and Spectra Energy are the industry “stars” in the article.

As Reporter McMartin notes:
Locals had little say in the pace of that change [driven by the energy industry]. Under provincial law, subsurface mineral rights superseded the surface property rights of landowners, and if an oil or gas company wanted access to a farm or acreage, there was little a landowner could do about it. Leases and rents could be negotiated, and sometimes the location of wells, but that was about it.

Canadian landowners have the option of appealing to the provincial government’s Mediation and Arbitration Board, which is an arm of the Ministry of Energy, Mines and Petroleum Resources.

But as the article notes:
Many landowners, however, quickly came to mistrust the board. Many felt its only purpose was to grease the way for the oil and gas companies.

Sounds like the Federal Energy Regulatory Commission (FERC) here in the US.

As landowners told Reporter McMartin:
“There’s no doubt about it,” Ken Vause said. “They’re a kangaroo court. All they’re there for is to facilitate the oil and gas industry getting on our lands.”

We’re having flashbacks as we read this.  In the case of our own Spectra Energy seizure of property rights in Bedford County, PA (under the Steckman Ridge Project), the FERC project manager, Maggie Suter, declared:  “This is a done deal.”

She said this to our attorney at the time, Tony DePastina, while the project was still in a proposal stage – or so we thought.

Back to our Canadian friends:  Even the chairwoman for the Canadian Mediation and Arbitration Board, Cheryl Vickers, admitted:  “It was a mess,” when she took over the chair in 2007.  “(The mediation and Arbitration Board) had no credibility,” according to the Vancouver Sun article.

The article went on to report the experience of Ken Vause and his family when Spectra Energy arrived on the scene in Vancouver.  As the article notes, “landowners weren’t necessarily anti-oil-and-gas.”

In fact, Ken Vause and his family “had not only accommodated the industry, they had been a part of it.  Ken worked on drilling rigs himself.  It helped pay for his farm, he said,” according to the article.

When Spectra Energy arrived, however, the Vauses “found themselves in the fight of their lives.”  Reporter McMartin shares this account:
Another company, Spectra Energy Midstream Corp., wanted access to their land to lay a pipeline. At first, the Vauses thought they could live with it, but then they found out it would run straight through one of their working fields. They ended up going to mediation, then arbitration.

The Vauses hired a lawyer: Spectra brought a battery of lawyers and industry professionals to the table. Both stages went against the Vauses, and Spectra was granted access to their spread. The couple then asked the B.C. Supreme Court for a judicial review of the decision, but were refused because of time limitations.

The Vauses were ordered to pay 90 per cent of Spectra’s legal costs for the judicial review application.

The money the Vauses ended up getting from Spectra for access to their land – about $19,000 – didn’t cover half their legal fees and expenses.

Spectra spokesman Rosemary Filba said the Vauses had “a somewhat unrealistic idea what fair compensation would be” and that Spectra has good relationships with the thousands of other landowners it deals with in the region. “It’s an unfortunate situation,” she said.

Ah, yes, once again an “unfortunate situation” for property owners – but not energy companies.  Our experience is that property owners who settle with Spectra Energy do not do so because they are happy.  They do so because they have a legal gun pressed against their temple.  So the notion that “thousands of other landowners” are happy is a casual lie the energy industry loves to invoke.

One wonders whether Spectra spokesperson Rosemary Filba can provide copies of any lease agreements Spectra Energy may have with government entities in Canada.  Those documents would provide a very realistic idea of “what fair compensation would be.”

Spectra Energy and the energy industry have a long and secret history of sweetheart lease deals with government while property owners are treated shabbily.

The treatment of Canadian property owners is particularly inhospitable when one realizes that current Spectra Energy CEO Greg Ebel is a native of Canada.  He began his career in Toronto, and received his BA degree at York University, Canada’s 3rd largest university, and spent 4 years working for the Canadian government.

Hmmmm.  Is the government-industry picture coming into focus?

Spectra Energy has a large presence in Canada with multiple projects in Ontario, British Columbia and elsewhere.

In Spectra Speech, “just compensation” means “compensation just for us.”  After all, if Spectra Energy paid landowners fairly for seizing their property rights, that could impact million-dollar paydays for its CEO and other members of the executive team.

It might reduce the amount of money Spectra Energy has to buy good PR to compensate for its shabby treatment of property owners.

For example, early this year, Spectra Energy announced it would financially support eight Canadian and US amateur athletes “competing for their national teams in winter sports.”

While Spectra Energy did not disclose the amount of money it would spend, the Calgary Herald reported that that company would spend $214,000 over three years.  For details, see our blog on “Just Compensation” at this link:
http://www.spectraenergywatch.com/blog/?p=257

We salute Reporter Pete McMartin and his journalistic colleagues across North America who are beginning to tell the story of how an entrenched industry and government abuse the rights of property owners.

If one thinks about it — between the government and the gas companies — landowners are confronted by the equivalent of an energy cartel that effectively controls prices and competition, thus short changing property owners who possess the key asset (the land).

Oh, Canada.

Jul 23

FERC is Rubber Stamp for Pipeline Companies, Says PA Legislator

How’s this for straight talk from a Pennsylvania state legislator:

  • The current system of siting natural gas pipelines is broken.
  • The Federal Energy Regulatory Commission (FERC) is a rubber stamp for the pipeline companies.
  • Property owners are paying the price.

This is the view of Representative Curt Schroder (R – East Brandywine), who is now doing something about it. He 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,” according to a press release issued by Representative Schroder’s office.

Here is the full quote from that statement:

“The current system of siting natural gas pipelines is broken,” said Schroder.  ”The Federal Energy Regulatory Commission has been acting as a rubber stamp for the pipeline companies and property owners are paying the price.  Their land is being devoured by easements, and natural resources are being threatened.  Homeowners are left to plead their cases to an unresponsive federal bureaucracy in Washington, D.C.  FERC is not cognizant of the needs of our communities and is unresponsive to our residents.”

Schroder’s Pennsylvania House Bill 1817 seeks to establish an “Interstate Compact” among neighboring states which would “have the power to govern the siting of interstate natural gas pipelines within their area, replacing the Federal Energy Regulatory Commission (FERC) which presently has exclusive authority when it comes to siting.”  [Emphasis added.]

According to the text of the House Bill, the proposed “Mid-Atlantic Area Natural Gas Compact Act” would comprise eight states plus the District of Columbia. Eligible parties are: Delaware, Maryland, New Jersey, New York, Ohio, Pennsylvania, Virginia, West Virginia and the District of Columbia.

In addition, states next to any of those states could eventually be added.

Co-sponsors of Mid-Atlantic Area Natural Gas Compact Act

The seven co-sponsors in the Pennsylvania House of Representatives are: Tom C. Creighton (R – Lancaster County); Gordon Denlinger (R – Lancaster County); Seth M. Grove (R – York County); William C. Kortz II (D – Allegheny County); Barbara McIlvaine Smith (D – Chester County); Duane Milne (R – Chester County); and Thomas P. Murt (R – Montgomery and Philadelphia Counties).

Pennsylvania is the site of much natural gas activity in the form of wells, storage fields and pipelines. Storage fields and pipelines usually mean the threat of eminent domain and the seizure of private property rights isn’t far behind.

For example, property owners in Chester County, PA, are fighting a pipeline project pushed by Williams Transco. In York County, property owners are fighting a pipeline project pushed by Texas Eastern, which is owned by Houston-based Spectra Energy. See the blog post on what is happening in York County at this link: http://www.spectraenergywatch.com/blog/?p=293

Conversation with Representative Curt Schroder

In a telephone conversation with Mr. Schroder, he explained that House Bill 1817 is now in the Consumer Affairs Committee of the Pennsylvania House, chaired by Joseph Preston, Jr. (D – Allegheny County) and Robert W. Godshall (R – Montgomery County)

Chairman Preston, Jr. has the sole authority to determine which bills are brought up for a vote in the committee, according to Schroder. He added that Chairman Preston has agreed to hold a hearing on the bill, though a date has not yet been set.

Should the bill pass the committee, it will go to the entire house for a vote. Then it goes to the Senate for a similar process.

The main opposition to this legislation will come from energy companies that will fight any change in the status quo, according to Schroder. They like the cozy relationship they have with FERC and they will oppose this vigorously.

Opportunity for Property Owners

Here is an opportunity for property owners across the state to make their views known on this important legislation. They should do two things:

1) Call, write or e-mail Chairs Joseph Preston and Robert Godshall and tell them you are interested in this legislation because it will help protect the rights of Pennsylvania property owners and help level the playing field with the energy companies.  (Refer to their contact information below.)

2) Call, write or e-mail YOUR Pennsylvania representative and ask them to support House Bill 1817 – and even consider signing on as a co-sponsor.

In the meantime, Here is the link to the press release on House Bill 1817:

http://www.curtschroder.com/?sectionid=19&sectiontree=19&itemid=338

Here is a pdf file of the bill:     PA HB 1817

And here is contact info for Chairs Preston and Godshall:

Hon. Joseph Preston Jr.

332A Irvis Office Building

PO Box 202024

Harrisburg, PA 17120-2024

(717) 783-1017

Fax: (717) 787-7520

Home page: http://www.pahouse.com/preston/

Hon. Robert W. Godshall

150 Main Capitol Building

PO Box 202053

Harrisburg, PA 17120-2053

(717) 783-6428

Fax: (717) 787-7424

E-mail: rgodshal@pahousegop.com

Jul 15

Salute to Someone Who Helped Start This Website

Charles W. Rubendall II has served for some time as outside counsel for Spectra Energy in central Pennsylvania.  He works for Keefer Wood Allen & Rahal, a law firm in Harrisburg.

Mr. Rubendall is the author of a huff-and-puff letter to landowners in May 2008 in which he suggested that landowners were not represented by an attorney — despite his knowledge to the contrary.

At the end of the letter (which, ironically, copied the landowners’ attorney) the Spectra Energy lawyer threw down a demand:   “… we expect your counsel to be active and responsive on your behalf so that we can proceed with negotiations in lieu of legal action.”

I marvelled as I read this piece of minor league writing.  Translating the Spectra Speech, Mr. Rubendall and Spectra Energy were really telling all the property owners who received this letter:  Listen up, bumpkins, we dictate terms because we have the power of eminent domain.  You accept what we offer and tell us you’re happy.  Got it!?

In a response to him that same month, I advised him:

“As you know, most folks are like mirrors – they reflect the way they are treated.  It is true that many of the Bedford folks live in a rural setting rather than the sophisticated, urban setting of Harrisburg.  But these are smart folks and you underestimate them at the peril of your client’s interest.  I am certain that Steckman Ridge, LP has placed much confidence in your ability to see this project to a successful conclusion rather than muck it up with poorly considered theatrics.”

What is noteworthy about his letter is that it was part of the tipping point for establishing this website and the unprecedented level of resistance among Bedford County property owners opposed to Spectra Energy’s seizure of our property rights.

Mr. Rubendall, who is more than a half century in age, prefers the youthful sounding nickname Chip or Chipper.  On one hand Chip is a diminutive of Charles.  On the other hand, such a nickname could also come from “chip off the old block” or perhaps “chip on his shoulder.”

According to his bio, Mr. Rubendall is a Yale University graduate who appears to show disdain for Pennsylvania juries.  He filed an injunction asking Federal Judge Kim R. Gibson to forbid Bedford County property owners from presenting various economic loss arguments as they sought just compensation because the jury would be “confused, misled and distracted … and waste time.”  (This is an excerpt of the actual wording presented to the judge.)

Presumably, there is no point in Spectra Energy’s Yale-educated contract lawyer wasting his time talking to Pennsylvania jurors — or to landowners — about economic loss issues that reduce or eliminate just compensation for the seizure of private property rights.

In practice, Attorney Rubendall and his client Spectra Energy believe that landowners are entitled to just compensation in theory — as long as they don’t actually try to achieve it.

At the end of the day, the good news is that Mr. Rubendall and his client Spectra Energy got what he wished for – an “active and responsive” set of landowners.  That, in turn, has led to a network of contacts in several states who are fighting to protect property rights at many different levels.

For that, we salute Mr. Rubendall and Spectra Energy.  Perhaps Mr. Rubendall and the firm he works for should consider providing a rebate to his client since he cost the company more in the long run.  And the meter is still running.

Rubendall Letter -- Click image to enlarge.


Jul 9

Spectra Energy = Invasive Species
Attacks Environment & Property Values

In York County, Pennsylvania, Texas Eastern – a pipeline company owned by Spectra Energy – is pursuing a proposed natural gas pipeline project that will connect with Steckman Ridge.  If my arithmetic is correct, Spectra Energy will add 36.1 miles of new pipeline (36- and 30-inch diameter); and replace 25.9 miles of existing 24-inch pipeline with larger 36-inch diameter pipe.

Part of this pipeline threatens to destroy portions of what is known as the Canopy Woodland Corridor in Hellam Township.  That is in addition to private property invasion.  And of course, it didn’t take Spectra long to veer off the existing utility right-of-way.

You can follow it on the Federal Energy Regulatory Commission (FERC) website under the project name of TEMAX and TIME III (Docket number CP09-68).  In the meantime, here is the link to a project summary on Spectra Energy’s website: http://www.spectraenergy.com/what_we_do/temax_timeiii

Spectra Energy describes this as a “growth project” – the growth of an invasive species where property rights are concerned.

Property owners in York County are getting energized.  You can tell that they are fast learners as one property owner said, they already “have a good sense of the Spectra ‘charm’ and … they do not trust them or believe anything they say.”

For property owners everywhere who deal with energy companies – whether for pipelines, underground storage fields or drilling, here are four watch outs in terms of behavior:

1) Beware of the ‘charm offensive’ — Energy company representatives – Spectra Energy, for example – go out of their way to be polite, up to a point.  In fact, they substitute good manners for fair treatment of property owners.

2) Beware of ‘divide & conquer’ – Energy companies prefer to isolate and separate property owners; and they always prefer to deal privately with government entities (whether at the township or the state level).

3) Compare offers and & check your wallet — Government entities almost always get a better deal than private property owners.  This is the quiet secret of the energy industry.  Make sure any deals with government are in the public domain.  For more information, refer to our blog on the “Landowner Bill of Rights.”  (See section 1 a, b, and c).  Here is the link: http://www.spectraenergywatch.com/blog/?p=287

4) Do not depend on the ‘kindness of strangers’ — Stay involved, informed and active.  You are your own best advocate for your property rights.  Join with other property owners to raise your voice and demand a level playing field.

Reporter Carl Lindquist of The York Dispatch published a clear and comprehensive article on the current state of the pipeline and its impact on property owners.  Here is a pdf file of the article:  pipeline-york-dispatch6-22-09

In his news report, Lindquist said that some 270 properties “could be affected.”

Among them are Susie Buchmyer’s family.  Their home sits on two acres of mostly wooded land.  The underground gas pipeline – approximately 3 feet in diameter – not only threatens a wide swath of mature trees, but also their septic system and driveway.

By the way, we’re talking about a 50-feet-wide cut for the right of way.  That is wider than the minimum width of two lanes on an interstate.  And once that property is seized and the pipeline is buried, there will be restrictions on how property owners can use that stretch of their own property:  No re-planting of trees, no building.  But they will still have the privilege of paying taxes on property they are restricted from using.

Property owner Susie Buchmyer is quoted in the article as saying:

“I think I have to speak loudly enough to let them (the company) know I’m a force to be reckoned with,” she said.  “I want to get them as (least) invasive as I can on my property. … I’m going to battle them the best I can in whatever way I can,” she said.

Separately, she told this blogger, “Spectra Energy is an invasive species similar to gypsy moths.  How ironic that I had my trees sprayed three weeks ago in order to protect them from this blight and, under the power of eminent domain, Spectra Energy would have the right to destroy them.”

Currently, Spectra Energy is tip toeing around the threat of eminent domain or “taking” the property rights of landowners; but FERC spokeswoman Tamara Young-Allen acknowledges that “the use of eminent domain is common” for natural gas pipelines, according to the article.

Just ask property owners who have dealt with Spectra Energy elsewhere.

May 30

Time to Level Playing Field for Property Owners

Wake Up:  Legislators & Regulators

Property owners are key stakeholders in any mineral rights leasing transaction, whether for recovery, storage, transmission or generation of power.  Property owners possess the fundamental asset – the land and property rights – without which, there is no energy project for recovery, storage, transmission or generation.

The power of eminent domain in the hands of government — which is usually transferred to a business — creates a sense of entitlement; and it creates an atmosphere ripe for abuse.  It is not a level playing field legally, economically or ethically for private property owners.

Therefore, landowner property rights need to be protected under law.  In a constructive effort to guide legislators and regulators, here are five principles.

5 Principles to Guide Lawmakers & Regulators:

1) Transparency on Lease Agreements: Property owner lease agreements shall not be less than lease agreements for government entities including local, state, and federal government (e.g., state game lands, federal forest lands, etc.).

a) Energy companies usually have very different lease agreements with state governments than with private property owners.  These lease agreements with the state are much better than the lease agreements with private property owners. It has nothing to do with the size of state lands.  It has everything to do with industry politics.

b) Since public lands are owned by taxpayers, citizens have a right to know what energy companies have stipulated in their lease agreements with government entities.  For example, in the case of underground natural gas storage leases, private property owners usually receive a “one-time payment.”  In contrast, lease agreements with state governments often include a bonus payment, plus a “withdrawal royalty payment.”  In other words, every time an energy company withdraws gas from the underground storage cavity it has seized through eminent domain, the state gets paid.  This is often calculated in the form of a 25-year annuity stream back to the state.

c. In some contracts, a royalty is also paid on the volume of gas injected in addition to the volume of gas withdrawn for transmission through pipelines.

2) Property Owners to be Treated as Key Stakeholders: Informational meetings such as “open houses” and “community meetings” that are hosted by energy companies and/or government entities must include property owner advocates on the agenda.  These are readily available from academic institutions or public interest groups, or from landowner organizations.

3) Transparency on Eminent Domain: Where a government body (local, state, federal) holds the power of eminent domain, landowners will be permitted to attend the same meetings with energy companies regularly held by government entities on specific projects involving landowners’ property.  Meeting schedules and agendas will be communicated in a timely manner to all landowners involved in project reviews that affect or potentially affect their property so that they may attend at their own expense.

4) Energy Priorities: If geological data indicate that there is an opportunity to recover new gas or minerals in the area of a proposed storage field (e.g., Marcellus Shale next to Oriskany Sandstone formation), exploration and recovery efforts will precede storage field development.

5) Accountability on Royalty: Reports from meters for any leasing transaction, whether for recovery or storage of minerals, or generation of power must be made public (i.e., available to landowners and others) on a quarterly basis.  An independent party, agreed to by landowners and paid for by the energy company, will provide an assessment of the quarterly meter reports.  In the case of underground natural gas storage wells, every injection well must be metered (i.e., one meter per storage field is not acceptable; there must be a meter on every injection well).

Energy company lease agreements with states are much better than the lease agreements with private property owners.  It has nothing to do with the size of state lands.  It has everything to do with industry politics.  This is particularly troubling when private property rights have been seized via eminent domain — a form of “taking” that can only occur under the badge of government.

May 19

Independent Duke Employee Website Responds to Blog;

Property Owners Have Posted on the Employee Site

 

We previously wrote about the troublesome “family tree” connection between Duke Energy and Spectra Energy.  See link:  http://www.spectraenergywatch.com/blog?p=243

In that blog, we noted:

  • Spectra Energy was spun off from Duke energy in 2007.
  • Before that, in 1999 (we recently learned), an employee-controlled website rose to challenge the integrity of Duke management and its treatment of employees.
  • At least 7 former Duke Energy execs are running the show at Spectra Energy.

This corporate gene pool raises an important issue for property owners and other stakeholders:  If a company cannot persuade its own employees that it is ethical and acting in their best interests – how can it possibly be credible with external stakeholders, including property owners?

Recently, I received a cordial response from the “webmaster” at: http://www.dukeemployees.com/

In addition to explaining that the website started in 1999, the webmaster noted that “Duke Energy has encountered its own difficulties over property rights, and yes, pipelines were involved.”

Four links were offered to illustrate the point (see below).  The first two are reprints of news coverage; and the last two are from a property owner who contacted the Duke employee website.

The four postings offer lessons for landowners who are fighting energy companies to protect their property rights.  Following are excerpts that highlight those lessons:

  • “Opponents say that the pipeline would make money for Duke at the expense of local landowners, the environment and public safety. It would transmit natural gas from Tennessee to markets in North Carolina, they say, with little benefit to those along the way.”  [From “Pipeline Battle,” an article from the Winston-Salem Journal by Michael Biesecker, November 17, 2002.]
  • Virginia Property Owner Olen Gallimore, quoted in the same article (emphasis added): “There’s nothing patriotic about stealing people’s land,” says Gallimore, who owns about 170 acres near Poplar Camp, land that surrounds the rustic home built with timber he cut himself. “I’ve worked 30 years to get what I’ve got. When somebody tries to take what’s yours, you have to fight.  [From “Pipeline Battle,” an article from the Winston-Salem Journal by Michael Biesecker, November 17, 2002.]
  • New Mexico Property Owners Roy & Louise Dearing who contacted the Duke employee website:  “I don’t know if you remember about the 12 people who were killed by a pipeline explosion (El Paso Natural Gas). It was only 20 miles from our home; we could see the fire ball from it. Duke Energy never slowed down with their plans to put this Compressor Station in.” [From “Peaceful Home Becomes A Nightmare,” a property owner message posted with permission, August 6, 2002.]

When someone wants to know whether you are trustworthy, they can always look at demonstrated performance, your track record.  Energy companies like Spectra Energy have a track record that communities and property owners can evaluate. 

In addition, they often have “family trees” that let you look at the corporate gene pool to better understand the company’s value system – whether it has one, and whether it actually practices those values consistently.

Remember, Duke Energy and Spectra Energy are branches from the same tree.

Pipeline Battle

http://www.dukeemployees.com/duke1-03.shtml#pipeline

 Duke Energy Steam-rolls Pipeline

http://dukeemployees.com/duke202.shtml#pipeline

 Peaceful Home Becomes a Nightmare

http://www.dukeemployees.com/duke902.shtml#nightmare

 Citizen Victorious Over Duke

http://www.dukeemployees.com/duke1402.shtml#citizen

 

May 14

Spectra Spew:

Reuters Looks at Water Quality Issues Tied to Spectra Energy in Clearville, PA

Spectra Energy continues to pick up more press coverage, but not the kind it wants to share with its Board of Directors.  Reuters’ Reporter Jon Hurdle, published an article earlier this month titled, “Gas drillers battle Pennsylvania pollution concerns.”

Here is the Reuters news link:
http://www.reuters.com/article/internal_ReutersNewsRoom_BehindTheScenesMOLT/idUSTRE5422TG20090503?pageNumber=1&virtualBrandChannel=0

Reporter Hurdle visited Clearville, among other Pennsylvania communities, and interviewed property owners Angel and Wayne Smith and Sandra McDaniel.

Noting that “Spectra Energy Corp is drilling to establish an underground gas storage facility,” the reporter visited one of the nearby injection well sites and his description isn’t pretty:

“… three pipes spewed metallic gray water into plastic-lined pits, one of which was partially covered in a gray crust.  As a sulfurous smell wafted from the rig, two tanker trucks marked ‘residual waste’ drove from the site.”

One surprising revelation is that companies apparently are not required to disclose which chemicals are used in so-called fracking fluids.  Fracking fluids are a stew of chemicals – some said to be carcinogenic – that are used in well drilling operations.

According to the Reuters news report:
“The composition of fracking fluid has been unregulated since the oil and gas industry won exemptions in 2005 from federal environmental laws including the Clean Water Act and the Safe Drinking Water Act.”

The Reuters report goes on to note, however, that:

“Fracking chemicals include benzene, a carcinogen, plus toluene, methanol, and 2-butoxyethylene, a substance that can reduce human fertility and kill embryos, according to Damascus Citizens for Sustainability, a group that opposes drilling.”

Reuters Reporter Jon Hurdle walked portions of the properties of Sandra McDaniel and Angel and Wayne Smith.  Hurdle writes that Wayne Smith:

“… wonders whether tainted water is responsible for the recent deaths of four of his beef cattle, and his own elevated blood-iron level.

“Smith would like to get his water tested for the full range of fracking chemicals but he can’t do that without specifics on the fluid’s composition.

“‘We don’t know what’s in it,’ he said.  ‘They won’t tell us.’”

They won’t tell us.

On the other hand, if the gas industry doesn’t tell, it can’t lie.  Refer to the “Pious Mouse Wash 1” blog post to see how the definition of lying is a defense for gas companies:

http://www.spectraenergywatch.com/blog/?p=213

Apr 30
Dead Sea Grass
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Spectra’s “Pipeline Asset” Kills Sea Grass Beds in Florida

The Florida Department of Environmental Protection (DEP) recently fined one of Spectra Energy’s “pipeline assets” for killing sea grass beds in Florida.

The St. Petersburg Times reported that:  “[Florida] State environmental regulators announced Friday that they are fining a natural gas company more than $200,000 for killing sea grass beds in Tampa Bay.”
Link: http://www.tampabay.com/news/environment/water/article995078.ece

The April 25th news report identifies the guilty company as Gulfstream and explains that:  “Gulfstream is a Tampa-based company formed by a partnership between Oklahoma’s Williams Cos. and Spectra Energy of Texas.”

According to Reporter Craig Pittman, Gulfstream was building a 17-mile pipeline and:  “used a technique called horizontal direct drilling, cutting its hole for the pipeline a minimum of 3 feet down from the bay’s bottom.  To lubricate the drill, the company used a chemical called bentonite, which is made from volcanic ash.”

There was a “frac-out” when the bentonite chemicals “broke out of the hole” and “The chemical spill smothered the sea grass beds, the DEP found.”

“Nearly an acre of sea grass beds was affected by chemical release, the [Florida] DEP found. More than a half-acre of sea grass sustained further damage from the grounding of the cleanup barges,” according to the news report.

Gulfstream Natural Gas is described as one of Spectra Energy’s “pipeline assets,” according to the company’s website.  See link:
http://www.spectraenergy.com/what_we_do/businesses/us/assets/gulfstream/

Apr 27

Spectra Speak:  “Just Compensation” = Compensation Just for Us

“… nor shall private property be taken for public use, without just compensation.”
– 5th Amendment to US Constitution, Bill of Rights

Spectra Energy knows how to spend money in the right places: from generous compensation for its execs and board members, to sports sponsorships.

For example, last week, the company announced it would financially support eight Canadian and US amateur athletes “competing for their national teams in winter sports.”  See link:
http://www.spectraenergy.com/news/releases/2009/apr/20090423_01.asp

The corporate press release did not disclose the amount of funding donated by Spectra Energy, but according to Allen Cameron, reporting in the Calgary Herald, “Spectra is doling out a total of $214,000 over three years to the Olympic hopefuls.”  See link:  http://www.canada.com/sports/2010wintergames/Canadian+doesn+into+funding+irony/1530062/story.html

Corporate social responsibility?  Or a smarmy way to achieve community and political “buy in” (so to speak) in order to offset issues like eminent domain “takings” and environmental problems?

There are variations on this theme in communities across North America where Spectra Energy is seizing property rights and dismissing property owners with the confident application of its power of eminent domain – thanks to government.

Spectra representatives show up at local 4H events, buy the prize steer and give it back to the youngster who raised it.

They hope the sound of local applause will drown out the invasive sound of their seizure of private property rights in those same communities.  And it’s easier than treating property owners as key stakeholders who possess the vital asset Spectra Energy desperately needs to secure its profitable business model.

Here is a test of value:  Who would be hurt the most if property rights could no longer be seized by Spectra Energy?  Hint:  Property owners would throw a party and not invite Spectra Energy – even if they offered to buy the potato salad.  On the other hand, Spectra Energy would be in deep tapioca.  That speaks to who possesses the most valued asset.  For many property owners, Spectra Energy’s seizures significantly diminish the value of their property.

As a business, Spectra Energy has many assets – but property owners are not one of them.  Property owners’ asset – THEIR land – is seized by Spectra Energy under the power of government via eminent domain (or expropriation in Canada).

Spectra Energy gives lip service to the notion of “just compensation” but is dismissive of it in reality.  It tells landowners – in writing – that they have a right to seek just compensation in court, then files a motion with the federal judge asking him to forbid property owners from making various economic loss arguments because it would confuse, mislead and distract the jury.  See the April 3 blog titled “Words vs. Deeds” at this link: http://spectraenergywatch.com/blog/?p=187

This is the same company that:

  • Paid its CEO Fred Fowler nearly $5 million in compensation last year, according to the Associated Press.  Now that’s “just compensation” in the gas industry!  Fowler retired as CEO at the end of 2008 and now sits on the board of directors.
  • Refuses to offer landowners the same (and better) lease agreement it willingly signed with their next-door neighbor, the Pennsylvania Game Commission, for use of public lands (i.e., taxpayer funded lands).
  • Dismisses landowners in press accounts as greedy and wanting more than their damages are worth, according to Susan Waller, Spectra Energy’s VP of Stakeholder Outreach.  (Stakeholder Outreach!)  This is the same Ms. Waller who admitted in a July 1, 2008 e-mail, that storage capacity “is a vital tool in providing the market with timely access to its contracted supplies.”  (Emphasis added.)

This “vital tool” – seized by Spectra Energy from property owners – will allow it to use a different (and more profitable) pricing model to charge its customers for storing their gas under our property, the “vital tool.”

Apr 22

Spectra Energy – Who’s Your Daddy?

Duke Energy: Legacy of Spectra Energy’s Past – What Kind of Corporate Culture Would Create This Level of Animosity Among Its Own Employees?

Family trees often reveal character traits – and that’s as true of companies as it is for individuals.

Spectra Energy’s family tree shows a significant link with Duke Energy. As the Spectra Energy website reveals, its U.S. roots began with Panhandle Eastern Pipeline Company in 1929. See link:http://www.spectraenergy.com/who_we_are/history/

After a series of corporate “begats,” the company’s name was changed to PanEnergy in 1996. The following year, Duke Power and PanEnergy merged to form Duke Energy. Ten years later, in 2007, Spectra Energy was spun off from Duke Energy.

This family tree offers insight into the behavior and corporate culture we are dealing with at Spectra Energy – especially when one considers that at least 7 former Duke Energy executives are running the show at Spectra Energy.

At least four members of the current executive leadership team at Spectra Energy came from Duke Energy, including Gregory Ebel, Spectra Energy’s current CEO. See link: http://www.spectraenergy.com/who_we_are/leadership/

At least three members of Spectra Energy’s Board of Directors came from Duke Energy, including Fred Fowler “who led the successful spin-off of Spectra Energy from Duke Energy in 2007,” according to the Spectra Energy website. Mr. Fowler was Spectra Energy’s first CEO. See link:http://www.spectraenergy.com/who_we_are/board/

The point? Check out a very unusual website called the Duke Energy Employee Advocate at: http://www.dukeemployees.com/

This independent-from-the-company website accuses the Duke Energy management team of lying to employees. There are references in the website to current executives at Spectra Energy – from their Duke Energy days. And they are not flattering references.

Hmmm. Could there be a family resemblance?

The site is a bulletin board of issues, commentary, reproductions of news articles, letters to politicians and so on. It is exceedingly negative about its employer, Duke Energy, its leadership team and the company’s ethics.

The stated purpose of the site is centered around “improving benefits and equitable treatment,” including (and perhaps especially): “The restoration of retirement-pension benefits lost to the cash balance conversion.”

Judging from dates used on the website, the Employee Advocate might have started in the year 2000. If that is correct, we have an employee-controlled website that for approximately 9 years has slammed Duke Energy for its lack of integrity.

What kind of corporate culture would drive this level of animosity among its own employees? If a company cannot persuade its own employees that it is ethical and acting in their best interests – how can it possibly be credible with external stakeholders and audiences (including property owners)?

For example, following is an excerpt from commentary on Fred Fowler, Spectra Energy’s first CEO and former Duke Energy exec. The setting appears to have been a talk to employees about safety. This excerpt begins with the headline:

Fast Freddie Fowler Flounders

Employee Advocate – www.DukeEmployees.com – September 27, 2004

http://www.dukeemployees.com/duke2.shtml#flounders

“Fred Fowler came on like a storm trooper, declaring all the great things that he was going to push through. He formed a committee. Management was going to be held accountable for safety. There were going to be zero accidents on the job. There were going to be zero deaths on the job. In fact, no one was even going to get sick on the job!

….

“Mr. Fowler is not much on admitting mistakes. This may be a holdover from serving in the old management regime for so long.

.…

“He will probable [sic] never be referred to as an inspirational executive.”

I contacted the Duke Energy Employee Advocate website to see if someone would be willing to share more insight into the gene pool that begat these two corporate cultures. No response has been received yet, perhaps because they want to maintain anonymity.

In the meantime, landowners who wonder whether they can trust energy companies might want to visit this employee-controlled website and learn what employees think.

Apr 16

Spectra Energy’s “Inquiry Report” – Will This Dog Hunt?

With all of its piety in preparing a 32-page inquiry into improper and unethical behavior toward landowners, what is the toughest conclusion found by Spectra Energy?

We might hold a contest modeled after “American Idol” to see which statement in the report would get the most votes. The problem is the lyrics in this 32-page report are hard to follow – in fact, the writing is downright convoluted.

To set the stage, however, remember this inquiry involved at least:

  • 5 high-level officers of the company (perhaps more in reality);
  • 1 VP who was not supposed to be involved, according to company protocol (but that was not disclosed except on this blog – see post for April 10, 2009, Pious Mouse Wash 2);
  • Some number of outside lawyers;
  • Interviews with multiple Right-of-Way (ROW) agents and project engineers;
  • Interviews with 17 landowners

As we have previously noted, the mountain labored mightily and brought forth a mouse – a pious mouse. Does the pious mouse have any teeth when it comes to speaking truth to the power of Spectra Energy?

One modest candidate for a best-in-class admission by a gas industry company is the following, found near the end of the report. Let’s step through key excerpts in this chain of pain and you will begin to see the challenge.

Feel free to consult the attached pdf to better follow the music and lyrics: “Inquiry Report – Response to Benard Allegations” filed with FERC 1-22-09 (pp. 26-27 of report, pp. 29-30 of pdf). spectra-energy-inquiry-report-1-0931

“Allegation #3 (Finding 8) – There was no general disposition or tactical effort for Project Representatives to use eminent domain as a threat to coerce landowners to execute agreements. … There was no evidence that Project Records or Project Representatives participated in or witnessed any threats to use eminent domain. (Finding 8(a))” [p. 26 of report, p. 29 of pdf]

BUT:

“There may have been a single ROW agent that [sic] diverted from the principles of the ROW Training in dealing with certain members of the Landowner Group. … Taking the landowners allegations at face value but without admitting the truth of the allegations, this particular ROW agent’s behavior may have been considered intimidating or bullying with the ROW agent’s alleged statements referencing the certainty of the Project’s approval by FERC and emphasizing the issue of eminent domain.” [emphasis added, pp. 26-27 of report, pp. 29-30 of pdf]

You’ve got to love the line, “Taking the landowners allegations at face value but without admitting the truth of the allegations….”

Therein lies the code breaker to Spectra Energy’s Inquiry Report: The object was never to admit the truth of any of the allegations.

Think about it:

  • What kind of liability would that create for a publicly held corporation like Spectra Energy?
  • Every executive involved in this inquiry depends on Spectra Energy for his or her economic livelihood. What are the odds that a zealous investigator would emerge? This was the “clean up” crew.
  • A serious finding on unethical behavior would likely embarrass the executive leadership team and the board of directors. (Collectively, this is a group of 22 individuals, nearly all white males with the exception of 2 white females and two persons of color, from a company that says it is committed to “embracing diversity and inclusion” in its corporate charter. Perhaps they should be embarrassed already.)
  • A serious finding on unethical behavior might also impact Spectra Energy’s relations with the Federal Energy Regulatory Commission (FERC).
  • And what about Spectra Energy’s reputation inside the gas industry? (As in, “You people are attracting unwanted attention to gas industry activities – what are you thinking!”)

Too much risk – legally and from a reputation standpoint. Spectra Energy might have gained some credibility if it had added one outsider to the inquiry team (which I suggested to them); but that would have threatened control of the “lid” on this inquiry.

This dog was never going to hunt, not publicly anyway.

Apr 13

Spectra Speak:  “Reaching Mutually Agreeable Resolution”

Conventional wisdom says, if you are proud of your work, you sign it.  The Spectra Energy “Inquiry Report:  Response to Benard Allegations,” is anonymous when it comes to pride of authorship.  It admits only that:

“An investigation team consisting of three high level Spectra Energy employees whose responsibilities do not involve the Project [i.e., Steckman Ridge] were assigned to perform an internal inquiry ….” [p. 1 of report, p. 4 of pdf, “Inquiry Report – Response to Benard Allegations” filed with FERC 1-22-09]  spectra-energy-inquiry-report-1-093

In response to my question, I learned that the members of this high-level team are:

  • Tom Stanton, Associate General Counsel in Spectra Energy’s Waltham, Massachusetts, office;
  • Jim Haynes, Vice President of Human Resources, Houston;
  • Katherine Maidens, Right of Way Manager, Houston.

I was further informed that the report was reviewed and edited by Joe Ramsey, Group VP and Richard Kruse, VP of Regulatory Services and Chief Compliance Officer.

The report was also touched to some extent by Vinson&Elkins, which describes itself as “a Global Law Firm Serving Business Clients.”
Link:  http://www.vinson-elkins.com/

Interviews with 17 property owners were conducted by Messrs. Ramsey and Haynes and, of course, Ms. Waller.  Her participation, as previously noted, was in violation of the original protocol for the alleged investigation established by Mr. Kruse; and not acknowledged in the final report submitted to the Federal Energy Regulatory Commission.  (See “Pious Mouse Wash 2,” post for April 10, 2009.)

There are repeated references in the 32-page report to “reaching mutually agreeable resolution through negotiations.”  Or similar words.  For example, page 22 of the report (p. 25 of the pdf), we find:

“… it is the Project’s intent to amicably resolve all outstanding concerns to the mutual satisfaction of the landowner and the Project.”

But we’ve seen this movie before.  For some time during 2008 (before it was pulled down), Spectra Energy proudly ran a 3-minute video of then-CEO Fred J. Fowler in which he declared:

“We define success by building mutually beneficial relationships … and conducting our business with an unwavering sense of integrity, stewardship and accountability.”

While the report takes pains to define “lying” (apparently for good reason), it does not explain what Spectra Energy means by the “mutual satisfaction of the landowner and the Project.”

Would mutually beneficial relationships mean, for example, that property owners could expect the same lease agreements that Spectra Energy (and gas companies) gives for use of public lands that are under the supervision of the Pennsylvania Game Commission?  Note that public lands means the taxpayer (e.g., property owners) paid for them.

Uhm, no – that’s not going to happen.  How could we dare think that citizens should receive the same treatment that big business gives to government (taxpayer funded government)?  Sorry, we got a little light headed there.

Instead, property owners who deal with the gas industry soon learn to translate “Spectra Speech.”

For example, Property Owner Jim Gipson tells a hilarious story about his offer to Spectra Energy to give them his property rights for free.  As Gipson told the Spectra Energy agent, if the company would give the gas to the elderly and the needy for free, he would give them his property rights for free.

The Spectra Energy representative howled in protest, “No – we can’t just give it away!”  To which Jim replied, well you want me to give away my property rights for free so you can charge somebody else for the gas storage under my property!  You can see and hear Jim’s story on our website video.

Perhaps the theologians at Spectra Energy – and elsewhere in the gas industry – could explain what is meant by “mutually beneficial relationships?”  Hint:  We’re back to words vs. deeds, principles vs. platitudes.

Since the company is interested in definitions, perhaps they will like this one.  It is a definition of fraud by William K. Black, former Director of the Institute for Fraud Prevention, who now teaches Economics and Law at the University of Missouri, Kansas City.  Black was interviewed recently on Bill Moyers Journal.

Link: http://www.pbs.org/moyers/journal/04032009/watch.html

“Fraud is deceit. And the essence of fraud is, ‘I create trust in you, and then I betray that trust, and get you to give me something of value.’  And as a result, there’s no more effective acid against trust than fraud, especially fraud by top elites, and that’s what we have.”

That is worth repeating when it comes to gas industry and Spectra Energy behavior:  “And the essence of fraud is, ‘I create trust in you, and then I betray that trust, and get you to give me something of value.’”

Sound familiar?  And it is not the same as lying.

More to come about Pious Mouse Wash – stay tuned.

Apr 10

From the very beginning of its alleged investigation, Spectra Energy had what it considered a strict protocol for ensuring an “independent” investigation into complaints about unethical behavior toward landowners – never mind they were investigating themselves.

The key to independence, they said, was that no employee involved in the Steckman Ridge Project would work on this investigation.

Richard Kruse, Spectra Energy’s VP of Rates & Regulatory Affairs & Chief Compliance Officer, was scrupulous about this in a conference telephone call back on June 20, 2008.

Spectra Energy would set up an independent group to investigate with an objective set of eyes.  None of the people involved in this alleged investigation would have any involvement with the Steckman Ridge Project, he declared.

While that is hardly a high hurdle for ensuring integrity, it turned out to be untrue.  In other words, Spectra Energy could not even meet its own standard for “independence and objectivity.”

The unnamed player in this corporate morality drama is Susan Waller, Spectra Energy’s VP of Stakeholder Outreach, who was part of the investigation and who interviewed two of the landowners in violation of the company’s strict protocol for ensuring “independence.”

Hired by Spectra Energy in May 2008, Waller quickly moved into an advocacy role for the Steckman Ridge Project.  In news coverage, for example, Ms. Waller dismissed property owners as folks who simply want to be paid more money than their damages are worth.

This from an executive whose total compensation is likely 6 figures; and whose former CEO (Fred Fowler) received nearly $5 million dollars last year in compensation.

To compound its problem, Spectra Energy does not even acknowledge its ethical failure in its final report – though I had a conversation with two of its executives about this issue back on September 24, 2008, during our interview as part of the alleged “investigation” in Rochester, NY.

During that Sept. 24th interview, Group VP Joe Ramsey and Human Resource VP Jim Haynes acknowledged that Susan Waller had conducted two of the interviews with landowners but she wouldn’t be doing anymore; and they realized her actions violated the protocol set down by Chief Compliance Officer Richard Kruse.  In fact, they appeared to be embarrassed when I told them I was aware that she had conducted interviews.

Perhaps that is why the legal theologians at Spectra Energy spent so much time on p. 27 of the “Inquiry Report” parsing the definition of a lie.  (See post for April 8, “Pious Mouse Wash 1.”)  [See also p. 27 of document titled, “Inquiry Report – Response to Benard Allegations,” p. 30 of pdf, “Allegation #4, Finding 9”] spectra-energy-inquiry-report-1-092

In my recent telephone conversation with Group VP Joe Ramsey (see April 3rd  post “Words vs. Deeds”), he said, “The fact that we did not disclose this is an act of omission, not commission.”   Hmmm, I’m flipping through my 32-page Inquiry Report but cannot find a definition for “omission.”

I thought it might be under “lie” on p. 27; but nothing further is there.

More to come next week about the Pious Mouse Wash – stay tuned.

Apr 8

Energy Industry:  We Didn’t Do Nothing

The above sentiment captures the view of landowners in Bedford County, PA, who have suggested that Spectra Energy needs a new slogan to run beneath its corporate name plate:  “We didn’t do nothing.”

In January, Spectra Energy filed with the Federal Energy Regulatory Commission (FERC) the results of its self investigation into complaints about abusive and unethical behavior toward landowners during the Steckman Ridge Project.  A pdf file of the “Inquiry Report” is attached.  spectra-energy-inquiry-report-1-091

The resulting 32-page document is an illustration of the ancient proverb about the mountain laboring mightily and bringing forth a mouse.

A pious mouse to be sure.

On p. 27 of the document (p. 30 of pdf), readers are treated to the Webster dictionary definition of “lying” to support the company’s assertion that, “There is no evidence of willful ‘lying’ by any Project Representative to landowners.”  The document goes on:

“The verb to lie, as defined by Webster’s Dictionary, is defined as, ‘to make an untrue statement with the intent to deceive.’  Allegations of lying typically involve a ‘he said/she said’ scenario or in the case of response to a question which is provided within the context of a general statements [sic] in lieu of technical or specific detailed response.”

[“Inquiry Report – Response to Benard Allegations,”
filed with FERC January 22, 2009
p. 27 of document, p. 30 of pdf, “Allegation #4, Finding 9”]

Got that?

The statement is so labored you can hear the heavy breathing of ten gas industry lawyers behind it.  Do half-truths, statements of omission, and dissembling have separate definitions?  (In contrast, listen to the landowners’ stories on the video that runs on the About Us page of this website, as well as on YouTube.)

The 32-page “Inquiry Report” is so bad it’s good, in terms of what it reveals about Spectra Energy and the natural gas industry.  At least 5 or 6 highly paid executives were involved in the production of this document, originally promised on June 11, 2008 by former CEO Fred Fowler (who is still on the board of directors and who received nearly $5 million in compensation last year, according to the Associated Press).

One can assume that many more hands were touching, sanding, and refitting the nouns and verbs for the final version.

Hold that thought:  Does any reasonable person believe that Spectra Energy – or any company in the natural gas industry – is going to produce an “independent” inquiry report that will find the company liable in some manner?

Any manner?  A teeny-tiny bit?

In future blog posts, we’ll break down an analysis of the pious mouse into easily digestible chunks.  Stay tuned for Part 2 of the Pious Mouse on Friday, April 10.

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