Supreme Court pipeline fee case could raise costs

The ranchers, led by Leonard Hoffmann and neighboring landowners in McKenzie County, first fought over how much WBI should pay for easements across their land. WBI, a natural gas pipeline company, argued compensation should be tied to the difference in land value with and without the easement — a figure that can be minimal. The landowners wanted the court to consider comparable pipeline payments in the area, a more owner-friendly approach in a region where pipeline access is a recurring issue.

That fight settled, but the legal bill did not. The landowners say they spent about $300,000 pursuing the case, and a trial court ordered WBI to cover those costs under North Dakota law. The US Court of Appeals for the Eighth Circuit reversed that ruling in March, holding that because WBI’s authority came through the Natural Gas Act, it could rely on federal compensation rules that do not necessarily include attorney fees.

That distinction is the heart of the case now heading to Washington on Nov. 9. The Supreme Court will consider whether a private company exercising federally authorized eminent-domain powers must still follow state compensation laws. The Institute for Justice, representing the ranchers, says Congress never gave pipeline companies a free pass from state protections that go beyond the Fifth Amendment’s “just compensation” floor.

For investors, this is not about one legal invoice. It is about the economics of getting steel in the ground. Pipeline companies win when they can standardize route costs and keep land acquisition disputes contained. Landowners and states win when compensation is broader and litigation is fully recoverable. If the court strengthens state-law protections, it could lift the true cost of expansion for interstate gas operators, especially in regions where rights-of-way are contested and every easement negotiation becomes a potential template for the next one.

The timing is important for a sector that the market still treats as a relatively stable toll road. Midstream names such as Kinder Morgan, Williams and ONEOK have benefited from demand for gas transport, exports and power-generation infrastructure. But a ruling that shifts more bargaining power toward landowners would add another layer of friction to an industry already navigating regulatory scrutiny and infrastructure vulnerability. Recent pipeline disruptions globally underscore how fragile the network can be, and why legal and physical risk premiums are both rising.

Technically, the market has been rewarding the group. Kinder Morgan’s shares are trading above both its 50-day and 200-day moving averages, while ONEOK remains well above its longer-term trend line after a strong run. That backdrop suggests investors have been willing to pay for dependable cash flow and pipeline growth. A Supreme Court decision that increases right-of-way costs would not break the thesis, but it could compress returns at the margin and favor operators with the strongest balance sheets, the deepest existing corridors and the least exposure to greenfield expansion.

My view: the market is underestimating how important this case could be for the next wave of US pipeline buildout. The biggest winners would be landowners, states defending stronger property protections and existing operators with entrenched networks. The losers would be developers trying to expand interstate systems on cheaper assumptions about easement costs. If you want exposure, focus on the firms already moving gas through existing infrastructure rather than those that need to fight every mile in court. This is exactly the kind of legal precedent that can quietly reprice a capital cycle.