On December 2, 2014, the Texas Railroad Commission (the Commission) announced that it will adopt proposed amendments to Texas Administrative Code Article 16, Chapter 3, which affect the application procedure for securing a T-4 pipeline permit.  The amended 16 TAC § 3.70 takes effect on March 1, 2015.

The final adopted amendments are substantially the same as those originally proposed on July 8, 2014 and presented for public hearing on August 25, 2014.  The amended §3.70 leaves intact the most salient portions of the proposed revisions, which include (1) requiring operators to provide additional substantive information accompanying permit applications, (2) requiring submission of documentation supporting the classification sought, (3) requiring the operator to provide a sworn statement setting forth the factual basis for the classification sought, and (4) new timelines for application review and approval.  

After reviewing the public’s comments, the Commission made three additional modifications to the proposed amendments.  First, the Commission added text to amended § 3.70(a) to clarify that the amended rule does not apply to production flow lines that do not leave the lease.  Second, §3.70(b)(3) requires applicants claiming the power of eminent domain to include an “attestation to the applicant’s knowledge of the eminent domain provisions” of the Texas Property Code and in the Texas Landowner Bill of Rights.  Finally, the Commission inserted additional text to amended § 3.70(f) clarifying that the “classifications of a pipeline under this rule applies to extensions, replacements, and relocation of that pipeline.” 

Before adopting the proposed revisions, the Commission responded to comments and proposals submitted by the public.  Many landowner groups urged the Commission to adopt rules requiring operators to provide actual notice to affected landowners of the application and to allow comments and/or a hearing for same.  The Commission declined to make these additional amendments reasoning that the Commission “has no authority to determine transmission pipeline routing or siting” and that because “the permit does not determine where the pipeline will be built nor the legal rights of any person along the final route, there is no Commission action which requires individual notice to any particular person at the time the permit application is filed.”  

Other landowners and landowner-affiliated groups urged the Commission to adopt definitions and standards of proof for applicants seeking permits as common carriers.  The Commission declined to make the suggested changes noting that in Texas Rice Partners, Ltd. v. Denbury Green Pipeline, 363 S.W.3d 192 (Tex. 2012), the Texas Supreme Court stated “the parties point to no regulation or enabling legislation directing the Commission to investigate and determine whether a pipeline will in fact serve the public.” Thus the Commission disagreed with commenters who suggested the Texas Supreme Court urged the Commission to expand its review of T-4 applications to include investigation or testing of an operator’s common carrier assertions.  

With the amended rule taking effect on March 1, 2015, operators have a limited amount of time to consider upcoming T-4 applications and pipeline permit amendment or renewals.  Operators must pay special attention to drafting sworn statements and collecting the documents supporting permit applications as they will receive close scrutiny from landowners and their attorneys during negotiations for right-of-way acquisition and in any necessary condemnation proceedings. 

We can assist preparing outlines or draft statements that touch upon each element for common carrier status. Operators must also give careful consideration to whom it designates as the point of contact with the Commission and to whom it designates to provide the sworn statement.  The person appointed must not only be fully conversant with the details of the project, but also be fully prepared to testify in deposition or in any required condemnation proceeding. We stand ready to assist operators with these strategic considerations, which are not only important for regulatory permitting, but are also important in laying the groundwork to defend against landowner challenges to the right to take.