The North American shale boom along with more stringent environmental regulations disfavoring the burning of coal have anointed natural gas as the fuel for today and the immediate tomorrow. Pipeline construction, front-end engineering services associated with pipeline construction, and increased gas production, all point toward adding pipeline infrastructure to accommodate future growth. While the Keystone XL Pipeline is the prime example, new pipelines in the Northeast, as well as additional infrastructure to move natural gas liquids and crude oil from relatively new producing areas such as Marcellus and Bakken are currently being considered or constructed. In addition, gathering systems, transmission lines and distribution lines must be constructed. With the planning and construction of new pipelines comes opposition. As part of the arsenal of doctrines used by opponents to pipelines, challenges to the authority to condemn property for pipelines have become more frequent, and take several forms. Because in many states, companies constructing gas distribution lines possess eminent domain authority, acquisition of right of way for distribution line projects may be subject to these attacks regardless of size or location.
Texas is an excellent example. With a portion of the Keystone XL Pipeline passing through East Texas, and the construction of various gathering systems and distribution lines to address different shale plays around the state, litigation concerning authority to condemn property for pipeline construction is ongoing in Texas. These attacks on authority stem generally from state constitutional provisions that are modeled on the U.S. Constitution and permit certain parties to take private property for public use provided adequate compensation is made.
Challenges to pipeline authority now often arise from a claim the property being taken and the pipeline to be constructed on it are not for "public use." The battle is usually pitched on whether or not certain identified products are being carried, the pipeline company is a "common carrier" or whether the pipeline will actually serve the public. In Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, L.L.C., 363 SW 3d 193 (Tex. 2012) the Texas Supreme Court concluded a carbon dioxide pipeline owner could not obtain the power of eminent domain by securing a permit from the state and claiming to offer the use of the pipeline to the public. In rejecting the pipeline owner's claim of authority, the Texas Supreme Court required in order to build a C02 pipeline and qualify as a common carrier in Texas there must be evidence and reasonable probability the pipeline will at some point serve the public rather than just the pipeline owner's facilities and affiliates.
Eminent domain authority of local gas distribution line owners seeking right-of-way can be subject to challenge. In addition to common carrier status--which carries with it the power of eminent domain--Texas, ipso facto, makes a person a common carrier if it "owns, operates, or manages a pipeline or any part of a pipeline in the state of Texas for the transportation of crude petroleum to or for the public for hire…." In a 2013 case from Beaumont, Texas the appellate court affirmed a trial court's ruling that "natural gas liquids" are not the same as crude petroleum. The pipeline owner lost the challenge that it was a petroleum pipeline, and because its pipeline was to serve only affiliates – also failed the public use test to be a common carrier.
Many states authorize eminent domain power to pipeline owners, including distribution line owners. Their power to condemn is often restricted to certain products (such as petroleum) or only to pipelines that qualify as common carriers. However, gas distribution line and gathering line owners should be aware of the limitations on eminent domain authority, as well as the exact authority granted by each State before undertaking right-of-way condemnation action.
Given the timeline, advance planning, and costs associated with construction of pipeline infrastructure, and the need to deliver product timely and on schedule, pipeline owners cannot afford to be restrained or enjoined from either condemning necessary property or constructing a pipeline because of the failure to demonstrate authority to exercise eminent domain power. Anticipation and planning can neutralize claims that a pipeline is not a common carrier, is not condemning the property for public use, or has not demonstrated the pipeline owner's governing body has authorized it to act. With challenges to pipeline eminent domain authority increasing, it is prudent for companies, regardless of the pipeline or line sought to be constructed, to address, evaluate, and resolve their position on issues of authority at the threshold and planning stages of pipeline construction.