Pipeline Companies Fight for Right to Take Property

Photo by Dave Fehling/StateImpact Texas

A case before the Texas Supreme Court could have big consequences for landowners and pipeline companies.

The Texas Supreme Court could decide by later this week if it will reconsider its opinion on the use of eminent domain by companies to take private land. At issue: companies that want to build pipelines to transport oil and gas as the need surges with increased drilling.

Those companies say the opinion the Court issued last August is now allowing the owners of private land to hold pipeline companies “hostage” and “extort” money from them.

In a petition filed by a pipeline company ETC NGL Transport, the company contends that “without the right of eminent domain, acquiring easements is a much more lengthy and expensive process—if it can be done at all.”

In a petition filed by the Texas Oil and Gas Association (TXOGA), the group predicts there will be “a devastating impact on an industry that serves as the economic engine for the State’s economy.”

Dave Fehling/StateImpact Texas

Natural gas pipeline under construction in Chambers County

Keith Strama, an attorney for TXOGA, talked with StateImpact Texas and warned of dire consequences.

“It would have a chilling effect on the ability to build infrastructure at a time when energy is driving the Texas economy and revolutionizing the energy landscape of the nation,” said Strama.

What led to all this? It began when a Plano-based company, Denbury Green Pipeline, was building a project from Mississippi to the oil fields south of Houston. The pipeline would cross into Texas near Beaumont. Denbury wanted to survey some property in rural Jefferson County.

But the landowner and a tenant farmer refused to let the survey crew onto their rice farm. So Denbury sued, getting a county court to order the landowner to allow the survey crew access. The court’s reasoning was that in Texas, the law gives pipeline companies eminent domain, the right to take property for such use. Texas law requires that the landowner be paid, of course. But maybe not paid enough.

The landowner, David Holland of Texas Rice Land Partners, fought the ruling all the way to the Texas Supreme Court. Was Holland wasting his time and money thinking he could prevail in front of the court that has been criticized as being too “business friendly?”

“Oil-gas pipelines never lose in the Texas Supreme Court. We’re seeing that now, that’s because nobody asked them,” Holland told StateImpact Texas.

The answer they got is what has the oil and gas industry up in arms. The court sided with the landowner, saying that companies can use eminent domain and the “condemnation” process to gain access and “take” private property in Texas only when it’s for public use.

In the Denbury case, the court found that the only independent authority judging whether the pipeline was public or private was the Texas Railroad Commission (RRC), which issues permits to pipeline companies. But the court found that the commission does nothing to investigate a claim of public use. Instead, it relies on a simple form filled out by the company which can check a box, indicating the pipeline will be a public “common carrier” as opposed to a “private line.”

“Private property is constitutionally protected, and a private enterprise cannot acquire

Texas Supreme Court

Texas Supreme Court Justice Don Willett

condemnation power merely by checking boxes on a one-page form,” wrote Justice Don Willett.

“They followed the law,” said Holland.

The court did not, said the oil and gas industry. It’s a “misreading of the Texas Constitution,” said TXOGA in a brief to the Court.

“This case is already being cited in numerous filings around the state, that landowners are trying to stand in the way of infrastructure development,” said TXOGA’s Keith Strama.

Strama denies that in the past, pipeline companies were using the threat of eminent domain to short-change landowners.

“There has been no evidence that landowners are not receiving fair compensation in eminent domain cases in Texas,” Strama told StateImpact.

Dave Fehling/StateImpact Texas

Gas pipeline cross ranch in Chambers County, Texas

Holland, the rice farm owner, disagrees. He said the threat of eminent domain gave pipeline companies an advantage. He predicted that with landowners now having more power to challenge the pipeline companies, the price to “take” land may go up.

“It will cost the pipeline companies that have attempted to use condemnation to get discounts. It’s not going to cost the ones that negotiate with the landowners without the threat of condemnation,” Holland said.

Some landowners are supporting the Denbury Green Pipeline project and it’s use of eminent domain. A rancher in Chambers County and a landowner in Brazoria County, both with oilfields on their properties, said in briefs to the court that Denbury was within its rights to build the pipeline. They said the pipeline, designed to bring carbon dioxide gas from Mississippi, would help rejuvenate their oilfields. The CO2 gas is injected into the oil deposits, causing the oil to expand and allowing it to be piped to the surface.

Parties from both sides of the issue have been filing petitions with the Texas Supreme Court. Court officials told StateImpact Texas that justices will be meeting this week to decide if they will let their opinion stand or if they should change portions of it to clarify their position. They could also agree to re-hear the case, which would be rare. That happens only once or so a year in the dozens of cases decided by the Court.