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New rules proposed on eminent domain process for new pipelines

Max B. Baker | Fort Worth Star-Telegram

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,” said Bonds. “But the law in Texas has given them such a big stick.”

As a result, Bonds, 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 inter- and intra-state 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.

It now 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 association is preparing comments and looking over the proposed rules, “making sure the mechanics of the rule can work.” Otherwise, he would only characterize the agency proposal 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.”

Related: Governor admits dodging pipeline debate

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

The court pointed out that the commission apparently had 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, stated that 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 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 also are new provisions for renewing or amending an existing permit and to revoke a pipeline permit after conducting 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, attorneys like Brady think that more due process should be required up front, before the transmission line is built.

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

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

“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 impacted by a power line location is notified and has a chance to talk about it. Hearings are held before anything happens. It is a process that the PUC has used 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 while he convinced a Johnson County jury earlier this year to pay $1.6 million for an easement to cross property in Mansfield — 20 times more than what it offered originally — that case started in 2007 and the appeals process may take another two 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.

“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 “kinda p—es you” off.

Max B. Baker, 817-390-7714 Twitter: @MaxBBaker

 

This article was written by Max B. Baker from Fort Worth Star-Telegram and was legally licensed through the NewsCred publisher network.

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