Law of the Land: How TransCanada Will Leave Its Mark on Texas Property Rights

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April 20, 2012 | 5:00 AM

By Mose Buchele

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Texas politicians love giving lip service to the sanctity of private property. They also talk a lot about the benefits of the state’s robust oil and gas industry. But what happens when those two things come into conflict?

Some run for the hills, some pick sides, and sometimes laws are changed.

You’d be forgiven for being a little confused as you hear about the legal battles unfolding between Texas property owners and the pipeline company TransCanada. After all, Governor Rick Perry just signed legislation strengthening private property rights last year.

In fact, after vetoing similar legislation in 2007, he made it an emergency issue during the legislative session.

“I don’t suppose there’s anything that’s more important than our private property rights in the state of Texas,” he told Texas Agriculture Commissioner Todd Staples at the signing ceremony for Senate Bill 18.

That bill, and an earlier law passed in 2005, were part of a shift among states in response to a U.S. Supreme Court decision called Kelo Vs. The City of New London. It held that governments and authorized private companies could seize private land for economic development. Many states, including Texas, reacted by strengthening their laws in favor of landowners. The reforms in 2005 said that eminent domain can’t be used solely for economic development in Texas. Last year’s law says government can’t seize land for any reason other than public use.

But it’s not quite that simple.

Loopholes and Lobbying

“Senate Bill 18 exempted common carrier pipelines from all of those [eminent domain] restrictions. So they don’t apply,” Lynn Blais, a professor of property law at UT Austin’s School of Law told StateImpact Texas.

A “common carrier” is a business that is available for hire to transport people or property. In this case it means pipelines that agree to carry oil, natural gas or other substances for energy companies. In Texas, if pipeline companies are designated as common carriers, they have the power to seize land much like a public utility.

And just how did they get that power?

Blais thinks it’s the same reason an exemption was included that allows Cowboy Stadium to exercise eminent domain.

“I think it’s lobbying. I mean it’s basically the power of a particular interest group to get their exception into this bill,” she said.

In all, there are at least 13 broad categories which are exempted from restrictions in the new eminent domain law (the sections and subsections of exceptions may leave the final number open for interpretation). Those include exemptions for projects that most people would not be surprised by, like “transportation projects,” to exemptions that may prove more controversial like a “sports and community venue,” “underground storage operations” for natural gas, and “waste disposal” projects.

Necessary Evil?

While all those exceptions have raised the ire of property rights activists, others say they are part of a system that allows important infrastructure to be built in America.

“There was actually never very much controversy in the legislative process with respect to what I would call the traditional users of condemnation,” James Mann said during an interview the other day in his office.

Mann is a is a self-described “pipeline lawyer” who does a lot of work for the The Texas Pipeline Association. He does not work for TransCanada. His office window offers an enviable view of the Texas Capitol, where the recent eminent domain legislation was drafted.

“I’ve always said the reason we condemn for roads, and the reason we condemn for pipelines, is so the people that are against it will be able to put gasoline in their cars and drive down to the road so they can protest it,” said Mann.

But those protestors don’t always drive to the capital. Sometimes they drive to the courthouse. And that’s where the story of eminent domain laws in Texas begins to get complicated.

An Uncommon Carrier

Within months of Governor Perry’s signing of Texas new eminent domain laws, the Texas Supreme Court made its own foray into how pipeline companies can seize land in Texas.

In the case Texas Land Rice Partners Vs. Denbury Green Pipeline, the company Denbury Resources was sued by landowners after it tried to use eminent domain to build a carbon dioxide pipeline to use in the extraction of natural gas. The court sided with the landowner, and in doing so threw into question the whole way pipeline companies go about calling themselves “common carriers” in Texas.

“In Denbury Green, what you have is an acknowledgment by the Supreme Court that if a common carrier pipeline is going to have eminent domain power unrestricted. That is more power than local governments to exercise eminent domain. There has to be some process as to who is designated a common carrier,” said UT’s Lynn Blais.

Property right advocates like to say that before the Denbury decision, all pipeline companies had to do to gain eminent domain authority was simply check a box on a form. Lawyer James Mann believes that’s an oversimplification, saying the act has far-reaching consequences. But the court’s decision called the process “a gaming of the permitting process to allow a private carrier to wield the power of eminent domain,” and called for a more thorough process to award common carrier status.

“[The decision] also allows that issue to be litigated repeated up and down a pipeline route,” says Mann.

Which brings us to Transcanada’s Pipeline.

The Law of the Land

“I’d like to believe what’s happening is that TransCanada is simply acting contrary to the law at this time. Wishing it were a different way,” said lawyer William Pieratt Demond, sitting in a conference room with his father, and partner, John Pieratt.

The father-son team is representing Lamar County farmer Julia Trigg Crawford in her lawsuit against the Canadian pipeline Company. Crawford is one of the landowners fighting TransCanada’s efforts to condemn her land. She’s become an icon for property-rights activists in the state, and her legal case could be the impetuous for further developments in how land can be seized in Texas.

Pierrat Demond says he doesn’t expect the case will go all the way to the State Supreme Court, but if it does it would clarify existing law.

“One of the questions that would be presented, that the Supreme Court would probably answer, would be at what stage in the process does [TransCanada] have to meet the burden [of proving they’re a common carrier] . They clearly said in Denbury that it is their burden to meet,” said Pieratt Demond.

And there may be no better time to bring a property rights case before the state’s highest court.

The Denbury decision is not the only one that the Court has issued in the last year that favors private property owners. In February, the Court found in favor of ranchers who had sued their local groundwater authority over limits to how much water they could pull form their land. Then the next month the Court found in favor of a landowner who challenged the Texas Open Beaches Act.

“It’s a re-awakening of the private landowner,  that we do have rights and that eminent domain is a very powerful tool that can be misapplied,” said John Pieratt.

For it’s part, TransCanada argues that it has nothing to fear from a legal challenge because it’s acting well within it’s rights.

“We qualify as a common carrier,” Jim Prescott, a spokesperson for TransCanada told StateImpact Texas.”And we’re very confident that the gulf coast project [the new name for the pipeline that is planned through Texas] meets the definition under the law of the state of Texas as a common carrier pipeline.”

If the Courts agree, as attorney James Mann thinks it will, pipeline companies will breath a sigh of relief right at a time when an unprecededented amount of oil and gas infrastructure is being proposed for Texas.

If the Courts find in favor of Trigg Crawford, and set more limits on common carrier status in the state, the decision will mark another victory, and powerful legal precedent, for those who would further limit the power of eminent domain.

Or the high Court could chose a third way. It could look at the law and punt the whole thing back to lawmakers in Austin.

“They’re not going to tell the legislature what to do, but they’re going to say what appears to be happening now isn’t working,” said Blais.

Any way you cut it, the conflict between some landowners and TransCanada will have left its legal mark on the landscape of Texas property law.