New rules proposed on eminent domain process for new pipelines

08/12/2014 11:44 AM

08/12/2014 3:31 PM

To be frank, the idea of a pipeline running across his prairie really ticked off cattleman Pete Bonds. But not to be paid a fair price for the land only made him madder.

Bonds, who owns 1,000 acres northwest of Fort Worth near Saginaw, said the pipeline company wanted a 50-foot easement and was using the power of eminent domain to condemn and grab it.

Eventually Bonds settled out of court — “I got plenty to do besides sit around a courtroom” — but he thought the pipeline’s power to take his land was simply too much.

“They were making us do something we didn’t want to do,” Bonds said. “But the law in Texas has given them such a big stick.”

As a result, Bonds, who is president of the Texas and Southwestern Cattle Raisers Association, and others are keeping a close eye on the Texas Railroad Commission’s recent efforts to more tightly regulate the states’ network of oil and gas pipelines.

Responsible for 426,000 miles of interstate and intrastate pipelines carrying natural gas, hazardous materials and other substances, the agency has been criticized for not doing much more than rubber-stamping applications by pipeline companies that want to lay pipe across the state.

The agency has proposed a set of rules designed to provide more transparency when a pipeline operator seeks what is known as “common carrier” status: a designation that automatically gives the operator the power of eminent domain to seize land.

According to the commission’s general counsel, the proposed rules would create a more developed process that would bring “greater confidence” in the common carrier classification and provide more “certainty for both pipelines and landowners.”

The agency is accepting comments on the proposed rules until Aug. 25.

“We’d like to think that it is the intent of the Railroad Commission to have a more robust process for making that determination,” said Jason Skaggs, executive director of government and public affairs for the cattle raisers.

Thure Cannon, president of the Texas Pipeline Association, said the group is preparing comments and looking over the proposed rules, “making sure the mechanics of the rule can work.” Otherwise, he characterized the agency proposal only as “more burdensome.”

“The pipeline industry thrives on a predictable regulatory environment,” Cannon said. “And as long as we know the rules, we will abide by them.”

But Zach Brady, a Lubbock attorney who represents landowners in eminent domain disputes, said the new process “feels a whole lot like the old process with a few extra pieces of paper attached to it.” He thinks more needs to be done to verify the veracity of the information being provided.

“I think that [the eminent domain power that comes with common carrier status] is an extraordinary amount of power for a company to have over someone’s property,” Brady said. “I don’t think they solved the problem.”

‘Economic dynamism’

Currently, it’s as simple as checking a few boxes on a form.

If a company wants to get a permit for a new pipeline, it simply submits a one-page form and puts an “x” in the “common carrier” box. A different box is checked to designate if the pipeline could be used by another company, meaning that it is for the public’s common good.

There is no public hearing, and no notice to landowners is required. Once a company fills out the paper and selects a pipeline path, it has authority to condemn property through eminent domain.

Landowners wanting to stop a pipeline from crossing their property can go to court, but litigation can be costly and drag on for years after the pipeline is built.

The proposed rules stem from a 2011 Texas Supreme Court decision in Texas Rice Land Partners v. Denbury Green Pipeline that criticized the commission, saying the record suggests that accepting an entity’s paperwork without review was performing “a clerical rather than an adjudicative act.”

The court said the commission had apparently never denied a permit.

“A private enterprise cannot acquire unchallengeable condemnation power … merely by checking boxes on a one-page form,” Justice Don Willett wrote in a stinging rebuke.

“Pipeline development is indisputably important given our state’s fast-growing energy needs, but economic dynamism — and more fundamentally, freedom itself — also demand strong protections for individual property rights,” he wrote.

Initially, the commission, in court documents, said the Denbury decision would likely make it more difficult to obtain permits and could “significantly impact the development of needed pipeline infrastructure within the state.”

Then, during the last legislative session, several bills were proposed to change the process and from that came the proposed rules. If the rules are adopted, pipeline operators would submit a sworn statement and if asked, provide documentation and any other information needed to support the application.

The commission would have 45 days to review the permit. There are also new provisions for renewing or amending a permit and to revoke a pipeline permit after a hearing.

Mary Ross McDonald, director of the pipeline safety division, has determined that “the permitting process will include a more developed inquiry into the issue of a pipeline’s public use, thereby providing more credibility to the commission’s process,” the commission wrote.

Administrative review

Call them crazy, but since a pipeline owner is taking someone’s property forever, Brady and other attorneys think that more due process should be required upfront, before the transmission line is built.

First, Brady said, nothing in the proposed rules allows landowners to question the proof being offered in the permit, much less be notified about what the pipeline operator plans to do. Forty-five days also isn’t enough time to mount a defense, he said.

Luke Ellis, an Austin attorney specializing in eminent domain cases, said operators refuse to show in court why their pipelines should be common carriers, claiming it is proprietary information. Getting that information can be difficult.

“There needs to be more meat on the bone to prove common carrier status,” Ellis said. “There isn’t any routing process that exists. … They can just pick the way they want.”

Brady and Ellis suggest that a system similar to that used by the Texas Public Utility Commission for locating power lines might be warranted.

Everyone affected by a power line location is notified and has a chance to talk about it. Hearings are held before anything happens. The PUC has used this process for years, they said.

Cannon, however, said there is nothing to keep a landowner from going to the courthouse.

“The rule does not change the landowners’ right to take this to District Court, if they want to,” Cannon said.

Ellis said that is true. But though he persuaded a Johnson County jury this year to order a pipeline operator to pay $1.6 million for an easement to cross property in Mansfield — 20 times more than the company offered originally — that case started in 2007 and appeals may take two more years, he said.

In the meantime, the pipeline was built and buried.

Bonds agrees. While he finally settled with the pipeline company, he still didn’t get paid what he thought the land was worth and the pipeline was not built where he wanted it, he said.

“I know we have to have pipelines and we’ve got to get this oil and gas” to market, said Bonds, whose family has owned the ranch northwest of Fort Worth since the 1930s.

“You can’t fight them,” Bonds said, adding that the entire process “kind of p---es you” off.

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