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Article of Interest

Eminent Domain Update: Pipelines
By:  Eric Opiela, Eric Opiela PLLC

Controversy over the Keystone XL pipeline has brought the private use of the public power of eminent domain to the fore, but the little-known common-carrier provision has been around for over a century in Texas. Recent rulings, however, have begun to circumscribe the exercise of eminent domain by private entities and put it in its proper place as a last resort to ensure a public benefit.

From the nineteenth century until last year, the Texas Supreme Court has approved of the taking of private land for public benefit by private entities delegated such power by the Texas Legislature. See, e.g., Borden v. Trespalacios Rice & Irrigation Co., 86 S.W. 11 (1905); West v. Whitehead, 238 S.W. 976 (Tex. Civ. App.—San Antonio 1922, writ ref’d). Both the United States and Texas Constitutions recognize the power of government to take private property for public use, with just compensation; the Texas Constitution specifically allows the Legislature to delegate this power to private entities. U.S. Const. Amend. V; Tex. Const. Art. I, Sec. 17. The Legislature has delegated this power to common carriers in the Natural Resources Code, which defines a common carrier as a company that “owns, operates, or manages, wholly or partially, pipelines for the transportation...to or for the public for hire....” Tex. Nat. Res. Code, Secs. 111.019; 111.002(6) (2012).

The Natural Resources Code, however, expressly precludes the use of eminent domain for pipelines that are limited in their use to wells of the owner. Tex. Nat. Res. Code, Secs. 111.003(a) (2012). This was the root of the Supreme Court’s decision earlier this year reigning in the use of eminent domain by entities in Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas LLC, 363 SW3d 192 (Tex. 2012). The Court reversed a decision allowing Denbury Resources to condemn private property for a carbon-dioxide pipeline. The issue before the court was whether a common-carrier permit issued by the Texas Railroad Commission granted Denbury the right to use eminent domain and precluded the landowner from challenging that authority.

The court of appeals held that a pipeline owner could obtain the right of eminent domain merely by checking a box on a form filed with the Railroad Commission declaring it was a common carrier, and this election was not subject to challenge by landowner in court. The Supreme Court reversed, noting that the Railroad Commission made no independent inquiry whether the use was public or private and did not provide an opportunity to challenging landowners for notice and hearing. Therefore the permit did not conclusively establish status as a common carrier. The Court also held that a mere declaration that a pipeline would be for public use was not sufficient to establish public use: "[E]ven when the Legislature grants certain private entities 'the right and power of eminent domain,' the overarching constitutional rule controls: no taking of property for private use."

The Keystone XL pipeline has resulted in at least two ongoing cases that will further define common-carrier status. In November 2012, the Beaumont Court of Appeals in Rhinoceros Ventures Group Inc. v. TransCanada Keystone Pipeline LP, (09-12-00128-cv) confirmed that common-carrier status extended to interstate carriers who transport oil and gas through pipelines within the state. In another ongoing Keystone XL case, a Nacogdoches County Court on December 7, 2012, granted landowner Michael Bishop a temporary restraining order against TransCanada’s proceeding with survey work on his property. Bishop claims that TransCanada is not a common carrier of oil and gas products because the Keystone XL carries tar sands, otherwise known as bitumen, rather than oil. The case is ongoing, and no final ruling has been issued in the matter. In a separate case currently on appeal from the Lamar County District Court, TransCanada Corp. v. Crawford, the district court granted a no-evidence summary judgment against a landowner in favor of TransCanada on a basis similar to the Beaumont Court of Appeals in Rhinoceros Ventures. Crawford alleged that common-carrier status could not be available for a pipeline that had no planned public entry or exit points within Texas other than those owned by the pipeline itself. These two cases are not likely to be the last regarding the Keystone XL, or its and other pipelines’ common carrier status. With recent rapid developments in the Texas oil and gas industry, this topic will surely result in further refinement of common carriers’ eminent-domain powers.

Eric Opiela is a Karnes County rancher who practices law in Austin. He chairs the South Texans’ Property Rights Association’s Eminent Domain Committee.