Eminent Domain and Property Rights


A cornerstone of civilization is property rights.  Without property rights in a world of scarce goods, there is chaos.  It is no coincidence that those societies that have had a greater respect for property rights are the same societies that have achieved much greater wealth.

Unfortunately, in America, the supposed land of the free, property rights have become less respected in many ways through the years.  Taxation itself is an infringement on property rights - the property being the money you have earned.

But there is also the use of eminent domain, where the government will physically seize property, including houses, supposedly for the public good.  How violating property rights by taking people’s houses is good for the public, I’m not sure.

There is a case in Pennsylvania, just south of Pittsburgh, where Sunoco Logistics Partners is building a pipeline to transport natural gas.  The company lobbied the Pennsylvania Public Utility Commission to affirm its status as a “public utility”.  This enables it to take advantage of state law in using eminent domain.

Ronald and Sallie Cox owned a home with beautiful views in which they thought they were secure in.  They had lived in it for over 10 years when a representative for Sunoco Logistics Partners approached them about building a pipeline.

After the homeowners refused to grant permission to build a pipeline on their large property, Sunoco sent a letter stating that it had the power of eminent domain and made an offer to the Coxes, basically forcing their hand to accept.

The good news is that there has been quite an uproar with all of the properties involved where this pipeline is being built.  There is pressure on legislators from both sides and there will be many court battles on this issue.

The bad news is that this is a company with deep pockets that has the ability to lobby politicians.  In addition, some politicians see the benefit (for them) of having greater tax revenues by allowing the pipeline.

Perhaps some who defend the pipeline are doing so because they see the need for more energy.  And perhaps some who criticize the pipeline are doing so for environmental reasons.  But the real issue here is property rights.  If property rights are respected, then the other issues should become moot.

The 5th Amendment

The last part of the 5th Amendment to the U.S. Constitution reads “nor shall private property be taken for public use, without just compensation.”

While I believe we would be much better off today if our elected politicians were to actually follow the Constitution, it still doesn’t make the Constitution perfect.  This clause in particular, I have great difficulty with.

“Just compensation” is a very subjective term.  The government is going to judge what is “just” in what it pays to take the property?

The only just compensation is what the owners of the property are willing to sell it for without any threats of seizure.  If Sunoco really wants that property bad enough, then they should offer the couple what they need to.  If the couple refuses to sell it or permit a pipeline on it, even for a really high price, then that is too bad for Sunoco.  The company can buy up other property or make agreements with other property owners and build the pipeline around them.

In a free society where property rights are fully respected, I can’t imagine a situation where eminent domain is just.  Regardless of whether it is to build a school, build a road, build a pipeline, or build a business, there is no justice in using the force of government to seize other people’s property, even if they are “compensated”.

The use of the phrase “public good” is a fallacy.  Who is the public?  It is the same people who own property themselves, whether it is houses or anything else.  The shareholders of Sunoco are also property owners and I don’t think they would like it if someone came in and took all of their shares at a price not determined by willing buyers and sellers.

If a company or government wants a piece of land, they can obtain it the way the rest of us typically do.  They can buy it.  If the owners refuse to sell, then that should be their right as the owners of the property.