Vt. Gas land deals shrouded in secrecy

AARP Vermont shares the following article from the Burlington Free Press regarding pipeline land deal details not disclosed by Vermont Gas Systems.

 

By Zach Desparts, Free Press Media

Philip Beliveau believes his neighbors have a right to know how much Vermont Gas Systems paid him to extend the company's new natural gas pipeline through his St. George property.

He would tell them himself, but Beliveau is barred by a non-disclosure agreement he said Vermont Gas required him to sign.

 

Vermont Gas, which in July promised candor and openness after being fined by regulators for waiting months to disclose a massive project cost hike, has taken steps to keep details of the company's land deals secret.

By refusing to disclose full sums paid for parcels and requiring landowners to sign non-disclosure agreements, Vermont Gas shielded many details of land purchases from public view. A three-week Burlington Free Press investigation of thousands of public records unearthed only a fraction of Vermont Gas' payouts to landowners.

The utility's tactics disturb Beliveau, who sparred for months with Vermont Gas land agents before settling.

“It’s not ethical for them to keep it hidden,” Beliveau said. “It seems it should all be public record.”

Vermont Gas in May paid Beliveau $9,500 for an easement, land records reveal. But Beliveau said he was paid a larger sum for damages, based on the estimated depreciation to his property caused by the pipeline.

Opponents of the project, which include landowners, environmentalists and consumer advocates, decry Vermont Gas' secrecy around land deals as the latest example of a lack of transparency by Vermont's only gas utility. They say they have lost faith in the Department of Public Service to protect the interests of landowners and the greater public.

Of the $154 million projected cost of the project, Vermont Gas intends to ask ratepayers to pay up to $134 million. For that reason, opponents of the 41-mile pipeline believe ratepayers have a right to know where, when and for what purpose Vermont Gas incurred expenses.

“We firmly believe if those costs are going to be recouped in rates, the public has a right to know how much Vermont Gas is spending,” said Greg Marchildon of AARP Vermont, which acts as a consumer advocate.

Landowners want to ensure they are fairly compensated for their property while consumer groups seek to protect ratepayers from bearing the burden of extravagant spending by Vermont Gas.

Vermont Gas is close to securing all parcels needed to complete the pipeline, and has filed eminent domain proceedings against the remaining holdout landowners. Vermont Gas defends the company's practices as in compliance with regulators' expectations.

"We are open and transparent in everything we do," spokeswoman Beth Parent said.

Department of Public Service Commissioner Chris Recchia said he believes Vermont Gas' business practices are permissible, and declined to compel Vermont Gas to disclose more detailed expense reports before the project is finished.

Regulators approved the pipeline in December 2013 for $87 million, but Vermont Gas has since increased the price tag by 78 percent. The utility broke ground in June 2014 and plans to complete the pipeline late next year.

But to complete the company's largest pipeline expansion, Vermont Gas will first have to persuade the Public Service Board to permit the project to move forward. The board has yet to complete an investigation into whether the massive cost hikes evaporated the pipeline's economic benefit to Vermont.

Secret land deals

Vermont Gas compensates landowners along the pipeline route in two ways: land or easement purchases and damages.

Land purchases and easements — a narrow right-of-way through a property — are recorded on tax returns with town clerks. Damages, which compensate a landowner for a loss of land value because of the pipeline, are unrecorded in public records.

The Burlington Free Press examined property transfer tax returns in the eight towns along the pipeline route: Colchester, Essex, Williston, St. George, Hinesburg, Monkton, New Haven and Middlebury.

Vermont Gas spent $5.2 million on 235 easements and land purchases between 2013 and Sept. 30, land records state.

The company spent $9.8 million on land acquisition during that same period, according to an October expense report Vermont Gas filed with regulators. That report includes the only insight into land deals Vermont Gas has released publicly.

Of the $4.6 million spent by Vermont Gas through Sept. 30 on land acquisition unaccounted for in public records, spokeswoman Beth Parent said that money was spent on compensation, legal fees, administrative costs, appraisals, expert testimony and studies in support of eminent domain filings.

Parent refused to break the $9.8 million right-of-way budget into line items, detail how much Vermont Gas has spent compensating landowners, or say how many landowners were subjected to non-disclosure agreements.

"At this time, with sensitive negotiations and proceedings underway, the company cannot divulge further details about the budget or individual landowner agreements or filings," Parent said.

Parent defended non-disclosure agreements as standard practice in mediation.

Since 2014, Vermont Gas has refused reporters' requests for details about deals with individual landowners, arguing that doing so would compromise landowners' privacy. Parent last week declined to provide details of land deals even without releasing the names of landowners.

Don't ask, don't tell

Parent maintains Vermont Gas has been transparent because the company discloses all documents requested by regulators. She said Vermont Gas would provide additional details about land deals should the Public Service Board or Department of Public Service ask.

Recchia, head of the Department of Public Service, said he sees no reason to make such a request.

"I will see the information that I need to see when I need to see it," Recchia said.

Beyond the three-page, 11-line-item expense report filed in October by Vermont Gas, Recchia said he knows little about expenses incurred to date.

Regulators will vet Vermont Gas' expenses when the utility asks the Public Service Board to be compensated for the project, Recchia said. Auditing expenses before Vermont Gas completes the project would be premature, he believes.

"It’s not unusual for us not to know at this point," Recchia said. "These are private contractual agreements between Vermont Gas and private landowners."

Recchia said he believes non-disclosure agreements can protect landowners who wish to remain private. But after listening to transparency concerns raised by Monkton landowners at a series of public forums last year, Recchia in November 2014 asked Vermont Gas to no longer require non-disclosure agreements as a condition of closing.

Recchia said ratepayers have a right to know details of expenses Vermont Gas intends to recoup through rate increases, but agrees with the department's policy to wait to evaluate expenses until after the pipeline is operational.

“When they ask for any money to be recovered by ratepayers, we’ll get the information and we’ll assess it,” he said.

The commissioner said should he judge some of Vermont Gas' expenses to be imprudent, he will advise the Public Service Board against reimbursing those costs.

Recchia rejected the premise that Vermont Gas’ use of non-disclosure agreements and refusal to detail land deals represents a lack of transparency. The commissioner said he believes Vermont Gas has demonstrated openness throughout the project — even though the company waited more than five months to disclose a $32 million cost hike to the Public Service Board.

Recchia testified to the Public Service Board that Vermont Gas ignored his pleas during the spring of 2014 to report the new estimate to the PSB. Yet he praised the company’s communications with regulators on Monday.

“I think Vermont Gas has been forthright and transparent over the past year, and accurate,” Recchia said. “I think they were transparent and forthright before that, just not accurate.”

Opponents cry foul

Pipeline opponents argue Vermont Gas’ insistence on non-disclosure agreements and refusal to detail land deals misleads regulators and puts landowners at a negotiating disadvantage.

Maren Vasatka, a Monkton landowner and real estate agent by trade, said she believes Vermont Gas purposefully pays landowners more in damages than for the purchase of an easement. This keeps easement prices artificially low, she said, and keeps neighbors in the dark.

As damages are absent from public records, Vasakta said some landowners along the route had no idea their neighbors were being paid more than the sums recorded with town clerks.

“They weren’t aware there was other money being considered,” Vasatka said.

Vasatka and her husband wrangled with Vermont Gas for years over an easement through their property. In October, Vermont Gas tried a new approach and offered to buy their home and 17 acres for $560,000 — a sum 91 percent higher than the grand list value of the property . Vasatka and her husband took the deal, though they continue to oppose the pipeline and believe regulators have failed the public.
“It got to the point where the whole system is favoring Vermont Gas,” Vasatka said. “If we had any faith in the Department of Public Service and the Public Service Board to do the right thing, we’d continue to fight.”

Marchildon, of the AARP, said ratepayers deserve to know if Vermont Gas is paying more than fair market value for land in an effort to avoid lengthy eminent domain proceedings.

“I don’t want to be paying for something that could have been purchased for $10 that was purchased for $100,” Marchildon said.

Bristol attorney James Dumont, who represents landowners along the pipeline route, said public records often show only a fraction of what Vermont Gas pays to landowners.
Dumont said non-disclosure agreements only benefit Vermont Gas, since the pacts "prevent landowners from comparing notes with each other, and the public from knowing what's going on."

Dumont said when Vermont Gas asks the Public Service Board to raise rates to pay for up to $134 million of the project, the utility will have to justify every dollar spent. Dumont said he fails to see a reason why regulators would allow Vermont Gas to withhold expenses from public scrutiny.

“They can’t argue these are going to stay secret forever,” Dumont said.

Senator raises concerns

Sen. Chris Bray, D-Addison, said he has long been concerned how Vermont Gas' tactics may diminish the negotiation power of landowners.

Between secret land deals and the looming possibility of government-sanctioned land seizure, Bray said he understands how landowners can feel overmatched.

“You have a large corporation backed by a team of lawyers talking to individuals about eminent domain proceedings,” Bray said. “That’s a really threatening situation to be in.”

The three-term senator said all parties in a negotiation should have equal knowledge of a transaction. Bray struggles to see how that could be the case when landowners are barred from seeing how much their neighbors were compensated.
“In this situation you have one party with all the expertise, and they’re literally defining the market for others,” Bray said of Vermont Gas. “That, to me, puts citizens at a disadvantage.”

Bray said the burden of disclosing information should be on Vermont Gas, since landowners did not ask for the utility to plot a pipeline through their yards, woods and farmland.

The New Haven legislator said he was perplexed why regulators would decline to require Vermont Gas to provide more comprehensive quarterly expense reports, noting the series of cost hikes that have spurred two Public Service Board investigations.

“It would seem appropriate for the Department of Public Service to bring a higher level of scrutiny to projects exceeding their budget,” Bray said.

Tactics unchanged?

Philip Beliveau, the St. George landowner, agreed to terms with Vermont Gas six months after Recchia said he asked the utility to stop requiring non-disclosure agreements.

Beliveau said Vermont Gas land agents asked him to sign a non-disclosure agreement, and he felt he had no choice but to comply.
“I felt it was part and parcel of the agreement,” Beliveau said.

If Vermont Gas officials had said he could opt out of the secrecy pact, Beliveau said he would have.

Recchia said he was unfamiliar with Beliveau's case, but said he believed Vermont Gas had stopped forcing landowners to sign non-disclosure agreements at his request.

"My impression was they agreed to that condition,” Recchia said.

Parent did not respond to a request for comment on Beliveau's case, nor to a question asking Vermont Gas' interpretation of Recchia's request.

Vermont Gas hopes to secure easements from the remaining five landowners, in Hinesburg and Monkton, by the time crews resume construction next spring.