Monday, August 12, 2013

If They Can't Properly Manage Wood Chips, What Else Can Go Wrong?

Greg Lotorto, professional horticulturalist, got this response from the DCNR regarding wood chips that have been piled three feet deep up to 20 feet out from the Tennessee Pipeline right of way by Kinder Morgan. Photo taken in the Delaware State Forest, Milford Township adjacent the headwater wetland of Pinchot Brook, a DCNR-designated core habitat for endangered species, named for Gifford Pinchot, father of the American conservation movement.

To Kinder Morgan: We are everywhere, and we will catch every violation.

Dear Mr. Lotorto,

Thank you for your interest in the pipeline expansion project across the Delaware State Forest. As noted in your email, Assistant District Forester Tim Balch inspected the pipeline site on July 29th and instructed the company to reduce the chip piles along the right of way. We require un-merchantable woody material such as the wood chips be retained on site for long term nutrient retention. However, as you mention, these chips as piled have the potential to cause damage to the adjacent trees through bark and root damage. In addition these windrowed piles are unsightly. To meet the obligations of the Timber Sale Contract under which they conducted the line clearing they are required to “disperse chips such that chips are scattered throughout the surrounding state forest land. Also, chip piling is not permitted.”

DCNR/Bureau of Forestry is a resource management and not a regulatory agency. As such we do not issue violations as DEP might. Our power is through enforcing contract obligations including holding performance bonds. We will have the company properly disperse the wood chips in the near future to meet there obligations. Tim has not returned your subsequent phone calls as he been out of the office in staff meetings and directing other projects. He has been and will continue following through on this issue.

We will let you know when this issue is satisfactorily resolved. Please let me know if you have further questions.


Bradley Elison| District Forester, Delaware Forest District
PA Department of Conservation and Natural Resources
Bureau of Forestry | 2174A Rt. 611
Swiftwater, Pa 18370-7466
Phone: 570-895-4005 | Fax: 570-895-4041 |

Mr. Lotorto's original e-mail:

Mr. Ellison,

I am a resident of Pike county since 1987 and have enjoyed outdoor activities in the Delaware State Forest. The recent destruction caused by two gas pipelines causes me great concern for the future of our forests, streams and valuable wetlands.

I have been particularly following the Tennessee NEUP that is currently under construction. I realize that their permit to operate is from FERC, but I do not believe it should allow them to destroy our landscape. I believe that the forest belongs to the residents of the Commonwealth and it is the responsibility of the PA government (i.e. DCNR) to protect our resources.

Besides being an outdoorsman I am also a professional in the field of horticulture and resource management. I have a BS in Horticulture from Rutgers Univ. and a MA in Landscape Architecture. I have 40 yrs of experience in working with soils and trees. In a recent visit to the site of the TGP pipeline right of way near Schocopee Rd just above Pinchot Brook in Milford, I found an obvious problem with the contractor’s work. The ground up debris from the tree clearing operation has been pushed off of the ROW and spread around the existing trees. This debris is up to three feet thick and it is right up against the trees. First, I note that the TGP permit does not allow them to operate heavy equipment outside of their ROW. Second, the depth of this debris covering the tree roots is excessive and will cause the decline of these trees. Third, placing this much against the trunk of trees causes rot, disease and makes them susceptible to other pathogens. All of these issues were discussed with the assistant district forester on Monday 7/29/13. He said he had observed the site and had spoken to the project manager for TGP. He agreed that all three issues were problems and that the contractors would be instructed to correct the problem.

I am not completely satisfied with this response. I believe that there is already irreparable damage to the existing forest and TGP should be issued a violation. I have visited the site again on Sunday 8/4/13 and nothing has changed. I have left two messages at your office for the assistant district forester but have not received a response. This is just one location that I have monitored. I imagine that there are other locations with similar issues.

I request a reply to this email and some type of action. We have many concerned citizens in Pike County that are watching and ready to take action. We cannot allow TGP to move forward on this path of destruction.

If necessary we are prepared to go into the forest and fix the problem to save our forest. Realize that this will take many volunteers and will not look good for the reputation of TGP or DCNR. It goes without saying that the news media will be alerted if we do not get a satisfactory response and have to take matters into our own hands. I hope this will not be necessary now or in the future.


Gregory Lotorto

Saturday, July 27, 2013

8/3 Organizers Retreat and 8/4 Pipeline Tour


On Saturday 8/3, all concerned community members are invited to our permitted campsite in the Delaware State Forest in Milford PA for an afternoon and evening of training, presentations on pipeline progress, and how we are fighting back. The retreat agenda will begin at 1PM, refreshments and dinner will be provided. There are spots for 10 individuals to camp at the site overnight. Additional camping can be found anywhere in the Delaware State Forest by following the PA DCNR rules for small group, primitive campsites. Housing in and around Milford PA is available for those who wish to sleep indoors or in a guest bed. Please RSVP to reserve your spot and receive directions by filling out this form.

On Sunday 8/4, a tour of Milford pipeline construction and the proposed Milford Compressor Station site will take place. Elected officials, media, and any interested community members are invited to join. The first portion of the tour will be a short walk on Rifle Range Rd in the Delaware State Forest beginning at 10:15am to view the construction through (Gifford) Pinchot Brook headwater wetlands and failed remediation practices from pipeline construction in 2011. The tour will not enter the pipeline right of way, so please bring binoculars and closed-toe hiking shoes if you choose to leave the road into intermediately difficult terrain. Following the hike, a driving tour of the area will show the proposed Milford Compressor site location, the Milford Pipe Yard, the Horizontal Directional Drilling (HDD) pad for boring underneath I-84 and the Delaware River, and end atop Cummins Hill Rd where residents have been fighting to stop the destruction of their scenic ridge tops and loss of their property values. Please RSVP by filling out this form. 

      The Tennessee Gas Pipeline Northeast Upgrade (TGP NEUP) Project, when completed, will make the Tennessee Pipeline the largest “artery” transporting methane gas from the most densely drilled region of the Marcellus Shale. Methane from shale gas is developed using the controversial method of hydraulic fracturing, or “fracking”. Thousands of wells with almost as many environmental, health, and safety violations cited by state regulators have been drilled. Each uses millions of gallons of water, thousands of gallons of toxic chemicals, and hundreds of tons of dangerous silica sand surrounding the homes and businesses of our northeast Pennsylvania neighbors.

    The TGP NEUP includes 30" pipeline loops, adding volume to the aging Tennessee Pipeline system and increasing the incentive for thousands more “fracked” wells in northeast Pennsylvania. The existing system transports methane gas and was constructed in
Cummins Hill Rd - Milford PA, February 2013
the 1950s, presenting a danger of aging and corrosion. The project is currently under construction in Bradford, Wayne, and Pike County, Pennsylvania and Sussex, Passaic, and Bergen Counties in northern New Jersey. Tennessee Gas Pipeline Co. is a subsidiary of El Paso, which was acquired in 2012 by Kinder Morgan, the third largest energy company in the United States.

     The environmental footprint, which did not receive an Environmental Impact Study, includes 450 acres to be cleared, 90 streams, and 136 wetlands. In addition, numerous compressor stations must be expanded to push the gas through the pipe which creates air pollution.     In the winter and spring, hundreds of concerned community members organized marches, vigils, trainings, tours, and even civil disobedience in the way of clearcutting.

     Currently, five local concerned citizens are fighting an injunction placed upon them for civil disobedience actions they participated in near Milford, PA. They have entered a lawsuit of their own against Kinder Morgan for wetland violations and the Lenne Lenape Nation's
Cummins Hill Rd - Milford PA, July 2013
Sand Hill Band is suing because they were not consulted prior to construction, in violation of their treaty rights.

     Despite our filings in the courts and with regulators, Kinder Morgan's tree clearing and trenching equipment presses on.

Friday, May 31, 2013

Job Opening: FERC Commissioner

Do you have what it takes to wreck the environment, public health, and America's rural heritage?

Jon Wellinghoff, Federal Energy Regulatory Commission Chairman, has resigned and the Obama White House already has a job posting up on Craigslist! I wish Chairman Wellinghoff the best and hope he doesn't trip on his tail on the way out.

Tuesday, May 14, 2013

A Small Victory Against the Tennessee Pipeline in Pike County, PA

A small victory! As much as Kinder Morgan wishes to turn Milford, PA into a nineteenth century company town, residents still can't be guilty of trespass on public land. In a victory for Pike County's rural heritage, I was found not guilty today of trespassing for my March 4th parking job blockade of the Tennessee Pipeline access road in the Delaware State Forest.

To join the campaign, follow our blog, check our Events page, donate to our legal fund, or simply share with your friends and family.

Monday, May 13, 2013

Kinder Morgan Avoids Federal Taxes

This January article from Bloomberg News puts in perspective the recent $41,000 donation Kinder Morgan made to keep Milford Beach open in the Delaware Water Gap National Recreation Area. Milford Beach was due to close because of the federal government sequester.

Since Kinder Morgan bought Tennessee Gas Pipeline Co. last year, TGP hasn't paid federal taxes due to subsidies for pipeline companies. TGP effectively avoided paying 36 percent of their revenue to the federal budget. This is the kind of corruption that contributes to the deficit we're in and the reason cuts to our Park Service happened in the first place.

Congress Denies $1.5 Billion With Favor to Pipelines

For more than 60 years, the Tennessee Gas Pipeline has linked natural-gas wells in Texas to customers in the north. Until last year, it paid federal corporate income taxes on its earnings, setting aside $107 million in 2011 alone.

Then in August, Houston-based Kinder Morgan (KMP) Energy Partners LP bought the pipeline.

Because of a little-known subsidy that annually costs taxpayers hundreds of millions of dollars, Tennessee Gas’s bill dropped to zero and stayed there.

A pipeline owned by Kinder-Morgan along the Union Pacific Railroad line. Photographer: Tom Story/Bloomberg

Kinder Morgan is one of the biggest of about 90 tax-free publicly traded partnerships that have taken over the U.S. pipeline business and are expanding into the rest of the oil and gas industry, partly by gobbling up dozens of tax-paying companies. The break for these “master limited partnerships” will cost taxpayers about $1.5 billion from October 2010 through September 2015, Congress’s Joint Committee on Taxation estimated last January.

The product of an exception to a 1987 tax law, publicly traded oil and gas partnerships generated a record $16.7 billion in pretax profit in 2011, up from $7.2 billion in 2007. Their market value has swelled more than 12-fold in the past decade to about $340 billion. Founders such as Kinder Morgan’s Richard Kinder are now billionaires. Thirteen MLPs went public in 2012 in an otherwise lackluster year for stock debuts.

Ending Breaks

Congress broadened the break in 2008, adding $12 million a year to the cost borne by taxpayers. It may consider legislation this year to make more companies eligible, even as President Obama and congressional Republicans call for a corporate tax overhaul that includes eliminating some breaks. Canada ended a similar break in 2011, saving an estimated $500 million a year.

“The people who say they want deficit reduction, how do they justify expanding it” with subsidies, said Representative Keith Ellison, the Minnesota Democrat who sponsored an unsuccessful bill last year to end oil and gas tax breaks, including the one for MLPs. “These industries are some of the most profitable in the country.”

Kinder Morgan emphasizes that lawmakers set up the tax exemption. “Congress made a conscious decision to encourage investment in energy infrastructure through the MLP structure,” Larry Pierce, a spokesman for the company, said in a statement.

“The overall tax break is not huge,” said Park Shaper, president of Kinder Morgan Inc., which controls the Kinder Morgan partnerships.

IRS Encouragement

The Internal Revenue Service, which referees which kinds of businesses can form MLPs, is encouraging their spread. Among a record number of rulings on the matter last year, the IRS said in October that companies that convert natural-gas liquids into ethylene, an ingredient in plastics and antifreeze, could form MLPs. Dow Chemical Co. (DOW) was among stocks that rallied on the news as investors speculated the companies might spin off plants into tax-free vehicles.

U.S. corporations face two levels of taxation -- they pay corporate income tax at a top federal rate of 35 percent, and their shareholders pay again in personal income tax on dividends and capital gains.

MLPs legally avoid taxes by removing one of the layers. Though they have thousands of investors and are traded on exchanges, including the New York Stock Exchange, they are associations of individual partners. Each of those partners counts a share of the company’s profits as ordinary personal income.

The tax that partners pay on that income offsets to some extent the government’s loss of revenue from corporate taxes.

However, MLP investors often can defer those personal taxes through a complicated process by which they are allowed to recognize depreciation on the company’s assets.

‘Tax Shield’

As a result of this “tax shield,” as the benefit is known, about 20 percent of payouts to partners of a typical MLP are taxed immediately. The remainder is deferred, according to a Wells Fargo & Co. research note.

Because MLP’s regularly pay out all of their available cash to investors, they are especially popular in the current low- interest rate environment. Yields on 10-year Treasuries fell to less than 2 percent last year, compared with yields on the Alerian MLP Index (AMZ) of about 6 percent.

That has led a variety of companies connected to the energy industry to switch to the MLP structure.

New MLPs that went public in the past two years include CVR Partners LP, which uses refinery byproducts to make fertilizer, and Hi-Crush Partners LP, which digs up the sand used in the hydraulic fracturing of oil and gas wells.

Investor Risk

The proliferation of unconventional MLPs benefiting from the tax break may pose risks for investors who assume they can depend on stable cash payouts like those from pipelines, said Christopher Eades, who manages $4.2 billion in MLP securities at ClearBridge Advisors LLC in New York.

“People have gotten lulled into thinking that all MLPs are low-risk, high-yielding securities,” said Eades, who said he avoided most of last year’s “non-traditional” offerings. “While that’s generally true, you can’t make that statement for every MLP out there.”

In the months after Oxford Resources Partners LP, which operates coal mines in Appalachia, went public in July 2010, the price of its securities increased as much as 58 percent to $28.34. It has lost more than half of its value since last October, when it slashed its cash payout as a result of low coal demand, and now trades at about $5.

Tax Avoidance

In 1981, an oil producer subsidiary of Apache Corp. became the first publicly traded partnership. At the time, all partnerships, whether closely held or public, did not pay corporate income tax.

By the mid-1980s, such companies as Burger King and the Boston Celtics were creating listed partnerships, leading to concerns that U.S. tax receipts would erode. Congress acted in 1987 to bring them back on the tax rolls -- except for a few industries, notably oil and gas.

Lawmakers calculated that exempting energy companies, which accounted for most of the tax-free partnerships, would make the ban more likely to win support, said John Buckley, who as a Democratic congressional aide helped draft the law.

“You try to mitigate the political opposition by not touching the people who are currently using it,” he said. In addition, the Reagan administration maintained that building more pipelines would help the nation’s energy security.

Becoming Popular

The authors of the exception didn’t envision how popular the tax break would become. “It is an example of a decision that was made for one reason that has proved to be far more consequential than people thought,” said Buckley, now a tax professor at Georgetown University Law Center. “I don’t think anybody expected the dis-incorporations of pipeline assets that have occurred.”

As a result of the exception, more energy corporations that were subject to U.S. taxes shifted assets to publicly traded, tax-free partnerships. Lawmakers broadened the break in 2008, benefiting Kinder Morgan and other MLPs.

Amid lobbying from the trade association representing MLPs, lawmakers inserted a section into an energy bill that allows the partnerships to transport and store biofuels such as ethanol. By 2010, Kinder Morgan estimated it was handling 25 percent to 30 percent of the U.S. market for renewable fuels.

Lobbying Expenses

As the size of the MLPs has grown, so too has their clout in Washington. Taken together, the trade association and managers of the largest partnerships have tripled lobbying expenses since 2007, to about $7 million in 2011, according to disclosure forms compiled by Bloomberg. Williams Cos., the Tulsa, Oklahoma-based pipeline operator, alone spent $3.8 million.

The latest push in Congress seeks to expand the break further. Senator Chris Coons, a Delaware Democrat, proposes to extend the benefit to clean energy companies such as wind and solar producers, an industry that has relied on Democrats for support. Coons said the renewable energy industry should have the same advantages of fossil-fuel producers.

The measure will probably win support from pro-oil Republicans because it would help protect the original MLP tax break in a corporate overhaul, Coons said at an event in Washington last month, according to an account of his remarks in The Hill newspaper.

“This is a way that everybody can win,” The Hill quoted Coons as saying. Republicans who have signed on include Representative Ted Poe of Texas and Senator Lisa Murkowski of Alaska.

“We’re all for it,” said Shaper, the Kinder Morgan president. “It is an effective means to encourage investment.”

Obama Proposals

The Obama administration has gestured to both sides. In a framework for corporate tax reform issued last year, it proposed lowering the top corporate rate to 28 percent and covering the cost in part by eliminating breaks such as MLPs. In December, Energy Secretary Steven Chu endorsed the Coons proposal.

The MLP break is “a perfect example of how we end up in the mess we’re in,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former chief of staff for the Joint Committee on Taxation. “Those who don’t have the subsidy ask for it, rather than asking for its repeal. Subsidies like this expand and expand.”

Dozens of corporate tax expenditures cost the government as much as $151 billion in 2012, according to the Tax Policy Center.

Third Biggest

The MLP tax break helped create the third-largest energy company in North America in just 20 years. The market value including net debt of the Kinder Morgan partnerships, combined with parent Kinder Morgan Inc., is smaller than only Exxon Mobil Corp. and Chevron Corp.

Richard Kinder left Enron Corp. in 1996 after he was passed over for the chief executive officer’s job.

He lost out to a college classmate, Kenneth Lay.

Shortly after he departed, Kinder and Bill Morgan bought the general partner of a publicly traded pipeline partnership for $40 million from Enron, which was shifting focus from operating pipelines to trading gas and power.

Kinder later described the acquisition as a collection of “sleepy, old pipelines.” At the time, there were about 19 publicly traded energy MLPs together worth about $9 billion, according to data compiled by Bloomberg. Most were stable, slow- growing businesses akin to toll roads, charging fees to energy companies for hauling hydrocarbons across the country.

Buying Spree

Kinder embarked on a 15-year buying spree, using his tax advantage to outbid competitors for pipeline assets. That allowed him to regularly increase the amount of cash his partnership paid out to members, earning him a premium market value and returning an annualized 19 percent over the subsequent decade. Kinder Morgan and its related companies have 75,000 miles of pipelines, enough to circle the globe three times.

Since Kinder took over in 1997, the main partnership he oversees, Kinder Morgan Energy Partners LP, has made more than $12 billion before taxes. The partnership set aside about 3 percent for taxes, such as payments in other countries and payments to state governments. The federal corporate income tax rate is 35 percent.

Tennessee Gas Pipeline Co., acquired by Kinder Morgan Energy in August, said in regulatory filings that it set aside a total of 36 percent for federal and state taxes in the three full years before its sale.

Pierce, the spokesman for Kinder Morgan, said the company is now part of the partnership, which doesn’t pay U.S. corporate income taxes.

$3.4 Billion

He added that Kinder Morgan Inc., the general partner that controls the company’s partnerships, pays federal corporate income taxes amounting to $3.4 billion since 1997.

That growth has rewarded Kinder and the other founders of MLPs, creating some of the newest fortunes in Texas. He’s now the richest man in Houston, with a fortune Bloomberg estimates at $10 billion. The previous holder of the title, Dan Duncan, ran the second-biggest MLP, Enterprise Products Partners LP (EPD), before he died in 2010. Forbes estimated his net worth at about $9 billion.

To contact the reporter on this story: Zachary R. Mider in New York at;
To contact the editor responsible for this story: Jeffrey McCracken at

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