Texas Oil and Gas Attorney Blog
The Railroad Commission of Texas (the RRC) is planning to amend their permit rule for oil and gas pipelines. The section to be amended, section 3.70, involves the pipeline permit procedure. The RRC invited comments on the changes until August 25, 2014. The issue has become a hot topic, especially since Texas already has substantial case law on what constitutes a common carrier.
Current Texas Law
Texas law requires that to be considered a common carrier a pipeline must serve a “public purpose” in carrying products for third parties for compensation, as discussed in the Denbury Green opinion by the Supreme Court of Texas. (You can access my previous blog post about this case here). In the Denbury Green case, the Supreme Court said that when a landowner challenges a pipeline’s claim of common carrier status, the burden is on the pipeline company to prove it meets the definition of a common carrier.
Under the RRC rules in effect and discussed in Denbury, a pipeline company merely had to check a box on the permit form indicating that they are a common carrier. This has lead to litigation about whether a pipeline actually qualifies as a common carrier or not.
The proposed amendment intends to allow a private carrier to have common carrier status as long as certain documentation is supplied to the RRC. The documentation would include a sworn statement by the company detailing its common carrier claim. The RRC would then have 45 days to review the documentation. The RRC would have power to revoke the permit if the company violates the law and requires permits be renewed on an annual basis.
The issue of common carrier status is an important one because common carrier status confers the right of eminent domain (also known as condemnation) to obtain easements for the pipeline. If a pipeline that is not classified as a common carrier must negotiate an easement with landowners, much like any other private real estate transaction.
As a Texas lawyer who spend a considerable amount of time negotiating pipeline easements, I’m concerned that the rule change may not be good for landowners. There is a lot of definitive Texas law defining common carrier status, and now the Railroad Commission proposes replacing that law with an administrative determination. There should also be a way for a landowner to challenge the RRC determination that a pipeline crossing that owner’s land is common carrier, and that is not included in the proposed change although the RRC claims the ultimate authority to determine common carrier status will remain with the courts. Finally, the landowner has the best incentive to keep the pipeline companies honest by having the ability to challenge common carrier status. This is not to cast any aspersions on the RRC: they generally do a good job. However, there are 426,000 miles of pipeline in Texas, and one wonders where the staff and funds will come from to do a thorough review in this era of diminished budgets.
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