Eminent domain isn’t solid ground for oil industry

By Jennifer Hiller
San Antonio Express-News

Texas is in the midst of a shale drilling boom, but the oil and gas industry is concerned that an eminent domain fight over a carbon dioxide pipeline near Beaumont could slow that down.

The pipeline is operating, but the energy industry is asking the Texas Supreme Court to reconsider its August opinion giving the Beaumont property owners the right to challenge the pipeline’s right to take their property under eminent domain.

The court’s decision basically means that landowners now can challenge whether a pipeline is “common carrier” — one that moves product for other companies — or is a private line, which wouldn’t have eminent domain rights.

While property rights advocates have cheered the opinion, the energy industry says it’s throwing it into a state of uncertainty during a shale boom.

“Can we build it? If we build it, how long will it take? Can we tell our customers we can be complete in a number of months, or will it take three years because we have to litigate?” asked James Mann, an Austin attorney representing pipeline companies. He filed a friend of the court brief on behalf of seven business and trade associations asking the court to rehear the case.

“We have massive drilling going on in the Eagle Ford Shale and also in the Permian Basin. We have to build thousands of miles of pipe to bring that to market,” Mann said.

In Texas Rice Land Partners Ltd. and Mike Latta versus Denbury Green Pipeline-Texas, an appeals court said the pipeline had the right of eminent domain simply because it had declared itself a common carrier on a Texas Railroad Commission form.

But the Texas Supreme Court said having a company mark an “x” in a box on a form wasn’t enough to entitle a company to take private property.

‘Such nonchalance’

“Private property cannot be imperiled with such nonchalance, via an irrefutable presumption created by checking a certain box on a one-page government form,” the unanimous opinion says. “Our Constitution demands far more.”

The court reversed the court of appeals judgment and sent the case back to district court.

Nothing has been scheduled at district court, and the state Supreme Court can do anything from issuing a new opinion to nothing, letting the decision stand. But Mann said if the
court reconsiders, it likely will happen by April 9, 180 days after the pipeline company asked for a rehearing.

It would be rare — but not unheard of — for a court that was unanimous in its decision to rehear a case.

Bill Peacock of the Texas Public Policy Foundation said the court made the right decision.

“If you boil it all down, the question before the Supreme Court was whether property owners get their day in court. The court said property rights are so important, that yes, they do,” he said.

Peacock said when other public uses, such as roads or transmission lines, are under consideration, property owners can challenge an eminent-domain taking. Letting owners challenge a private pipeline would merely put pipelines on similar footing, he said.

Although the pipeline is operating, the trial court still will have to consider whether Plano-based Denbury Green had the right to take the property.

“Texas law gives them the right to take possession and build their line even while litigation is still happening,” said Amy Warr, an attorney with Alexander Dubose & Townsend in Austin, which handled the Supreme Court appeal for Texas Rice Land Partners.

‘Across the board’

For now, the decision is being “brought up across the board in every pipeline case we do,” Houston oil and gas attorney Tom Zabel said.

Oil and gas attorneys also are watching a McMullen County case on appeal to the state Supreme Court.

That case deals with whether the value of the rest of a ranch would be devalued by a pipeline’s presence. A jury awarded more than $600,000 in damages to Donnell Lands, a family partnership that has owned land in McMullen County for generations.