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Energy & the Law

Private Property Rights Rule Over Pipeline

Posted in Eminent Domain

In a vindication of landowners’ rights, the Texas Supreme Court prohibited a pipeline owner from using eminent domain to take private property.   In Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, the court said that a pipeline must show that it satisfies the requirements for common-carrier status before it will be allowed to use eminent domain.  (Note, this is a new opinion in the case, superceding the opinion delivered on August 26, 2011).

The court said that the Constitution’s protection of  private property rights requires more of a party seeking eminent domain power than ”checking the right boxes in one-page Railroad Commission form” through a process in which the landowners who will be affected have no participation.  The court rejected the proposition that all the pipeline had to prove was that the pipeline would be available for public use.  There must be a “reasonable probability” that the pipeline will at some point serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.

This case highlights the difference between Texas and other producing states.  See, for example, a Louisiana case allowing the use of “expropriation” as they call it there, if there is “any allocation to a use resulting in advantages to the public at large”.

This case has implications in many situations.  One that comes to mind is the producer who uses a wholly-owned pipeline subsidiary to move production across the lessor’s property, calling it a common carrier and invoking the right of eminent domain to overcome surface use restrictions in the lease.