Date: 03-30-1998

Case Style: Cenex Pipeline, L.L.C. v. Fly Creek Angus, Inc.

Case Number: 98-369

Judge: Russell C. Fagg

Court: District Court, Yellowstone County, Montana

Plaintiff's Attorney: Allen D. Gunderson and Todd D. Gunderson of the Gunderson Law Firm, Billings, Montana

Defendant's Attorney: Peter T. Stanley, Billings, Montana

Description: Cenex Pipeline LLC owns an eight-inch pipeline that transports fuel between Laurel and Glendive. The pipeline was built over forty years ago and is currently in need of repair. Cenex wants to replace a 76-mile portion of the pipeline between Billings and Hysham, and in the process, shift the location of the pipeline from its current placement in the Yellowstone River Valley onto drier and less populated land. Pursuant to that goal, the initial conceptual and straight-line route that Cenex proposed for the new pipeline traversed a portion of ranch land owned by Fly Creek Angus, Inc., which is owned and operated by Anita and Rod McCloy.

When it selected the route, Cenex relied heavily on input from the approximately thirty-five landowners who were affected by the route. In combination with its own survey techniques, Cenex contacted landowners whose land it desired to cross with the pipeline and sought their suggestions about obstacles such as roads, river beds, and topography that might affect the precise location of the pipeline.

Representatives from Cenex first met with McCloys in January 1997, at which point they discussed placement of the pipeline over Fly Creek and the probable need to adjust the straight-line route in a number of places due to rugged terrain and McCloys' preferences. By that time, Cenex had already met with and begun work in order to gain approval of the project from the State Department of Environmental Quality and other state agencies.

In April 1997, Cenex representatives accompanied Rod McCloy and drove the proposed route over Fly Creek. Based upon its own observations of the terrain, as well as suggestions and the preferences of Rod, Cenex adjusted the route and eventually staked a new one. A month later, environmental experts joined Rod and the Cenex representative on another reconnaissance of the route, at which point they made further adjustments to accommodate a number of environmental concerns and Rod's suggestions.

Cenex had, for many months, been negotiating with other landowners about the final route and regarding the compensation that they would receive for giving Cenex the right-of-way. In fact, by August 1997, Cenex had reached agreement with every landowner except Fly Creek, and acquired rights over almost the entire pipeline route.

During this same period, an environmental assessment was being performed for the DEQ. The assessment evaluated the environmental impact of the new pipeline, and ultimately formed the basis for the DEQ's determination of whether a more comprehensive environmental impact statement would be necessary prior to approval of the project. A draft assessment was published and issued to the public on August 1, 1997, and shortly thereafter a meeting was held in Hysham to receive public comment on the project; a written comment period was also established.

On August 7, 1997, Cenex completed the final survey regarding the Fly Creek route. On August 10, Rod suggested additional changes to the route, which had the effect of involving three new landowners; Cenex was able to reach an agreement with these new landowners. However, Fly Creek still did not accept Cenex's offer to purchase the right-of-way, even with these additional route changes. In fact, at the public meeting in Hysham on August 21, Rod made the additional suggestion that part of the pipeline be rerouted from the Fly Creek ranch onto property south of Fly Creek owned by Bill Fisher. Although he did not at that time discuss his proposal with Fisher, in September, Rod communicated the proposal directly to the individuals who were still in the process of performing the environmental assessment. Those persons, however, did not conduct an onsite investigation of the route that Rod suggested over Fisher's property.

On October 15, 1997, Cenex filed a complaint for condemnation against Fly Creek in the District Court for the Thirteenth Judicial District in Yellowstone County. Cenex alleged that pursuant to § 69-13-104, MCA, it had the authority to exercise the power of eminent domain, and that the taking was necessary based upon the public good and Fly Creek's rejection of its offer to purchase the right-of-way. Cenex sought a permanent easement and 50-foot right-of-way, including the right to construct and operate fiber optic cables, as well as a right of ingress and egress for access to the pipeline and a 25-foot temporary construction easement. The complaint did not refer to Fisher's property.

The DEQ published its environmental assessment on December 24, 1997. It stated that it "slightly preferred" the route on Fisher's land to the route proposed by Cenex. The DEQ's preference was based on the fact that the Fisher route was slightly shorter and better avoided streams and springs than the route proposed by Cenex. A period for public response was established. During that period, Fly Creek and others submitted responses. Neither Cenex nor Fisher were among those who submitted a response. Fisher testified that he did not even learn of Rod's proposal to reroute part of the pipeline over his property until January 1998, after the public response period had ended, and that had he been aware of it, he would have prepared a response to the DEQ. The record showed that he did not receive a copy of the environmental assessment until after February 10, 1998. Fisher further testified that he initially told Cenex in approximately August 1997 that the steep terrain made it infeasible for the pipeline to traverse his property, and that he was not interested in giving Cenex a right-of-way. Testimony from Cenex similarly established that it had not considered the route over Fisher's property as a serious alternative.

After receiving the responses, the DEQ issued a final determination on February 5, 1998. The notice adopted the environmental assessment and found that an environmental impact statement was not necessary. It stated that it had examined three alternative routes, and that all three could receive state permits. The alternatives included: (1) the current right-of-way; (2) a right-of-way adjacent to Interstate Highway 94; and (3) the route proposed by Cenex. The DEQ noted that public comments suggested that the route proposed by Cenex be supplemented by the alternative route over Fisher's property, and it also stated that the route over Fisher's property was "slightly preferred to the proposed route." Cenex then effectively obtained all of the necessary permits to begin construction of the pipeline over its proposed route.

Outcome: The District Court found that it was in the public's best interest that the pipeline be moved from its current location. The District Court also found that Cenex had considered the terrain and the alternatives for relocation, and that the route which it developed had minimal impact on landowners and the environment and, therefore, was a reasonable and proper route. In reliance on the expert testimony, Fisher's own testimony, and a video presentation of the Fisher property, the District Court stated that the alternative route that Rod had suggested over Fisher's property was "not a practical alternative." It went on to conclude that Cenex was not arbitrary or capricious in its choice of a route for the pipeline, that the greatest public good requires the relocation of the pipeline, and that the least private injury would occur if the pipeline was placed along the route proposed by Cenex. Accordingly, it ordered the taking of the property and awarded Cenex the 50-foot permanent easement, as well as a temporary 25-foot construction easement and a right of access to the pipeline.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: For more information about this case see 1998 MT 334, 971 P.2d 781 (Mont. 1998).