Interesting Legal Question Regarding Principle of Eminent Domain In Pipeline Rights-of-way

Are pipeline land takings in the public interest if oil, gas headed overseas?

By L.M. Sixel  April 4, 2018 Updated: April 4, 2018 1:27pm   houstonchronicle.com

(Excerpt)

Pipeline companies in Texas and other states have long had the power to take land under the eminent domain principle that projects to transport energy to heat homes, generate electricity and produce fuels are in the public interest.

But what if the public is in Europe, South America or Asia?

As natural gas and crude oil produced in Texas are increasingly exported, environmentalists, property rights advocates and legal specialists are promoting a novel legal argument to block pipelines, asserting that projects that help ship energy out of the country don’t benefit the American public and should not be eligible for eminent domain takings. In fact, they note, exporting energy may hurt the public’s interest by decreasing domestic supplies and raising costs. Australia, for example, exported so much liquefied natural gas, or LNG that domestic supplies dwindled and prices doubled for Australian consumers.

“Public use does not include shipping (gas) to China,” said David Bookbinder, chief counsel for the Niskanen Center, a property rights advocacy in Washington. “We’re saying no.”

The argument has not been tested in court, but the Niskanen Center is already preparing challenges against land takings for pipelines feeding LNG export terminals and considering intervening in existing cases to aid property owners fighting eminent domain actions. Analysts said the issue of whether energy exports are in the public interest also could provide a new line of attack for environmentalists, who have been largely unsuccessful in legal challenges based on the impact of pipelines on natural resources and climate change.

Link to complete article.

https://www.houstonchronicle.com/business/article/Are-pipeline-land...

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Replies to This Discussion

Skip, excellent question. I think the "eminent domain rights" have been abused and not only by pipelines.

Kathy, land owners often feel abused by takings.  This will be a sticky legal question for the courts.  If litigated in Louisiana, I think our courts would turn back flips finding a way to affirm eminent domain for pipelines connected to export facilities.  Too much money at stake and too much political influence to think they would do otherwise.

I agree Skip.  

I do not have the answer.  My family reaps the benefits from our NG and oil being transported across tracts of land that I am sure some of which were taken by eminent domain proceedings and I am sitting in a house powered by electrical lines, phone lines, water lines, and roads, etc and I am sure some of the land for these utilities were taken by eminent domain.

However, when you see the care taken going across a National Forest tract or you find out that the railroad right of ways are leased on a yearly basis or you see the companies avoid certain landowners, you do feel abused by the taking. Of course, there have been times we have been overpaid for a pipeline and were glad to get it.

Like I said though, I do not have a good answer.

My sense is that pipeline takings will continue, in Louisiana at least, by the police power of the state. It's already been done that way with forced pooling.

What harms one may benefit the many.  Not just for pipelines but for compulsory pooling statutes.  In Louisiana, unlike any other state, there are material protections for unleased (non-consent) mineral interests (UMIs).  Compared to our surrounding states, the provisions favoring UMIs in the mineral code are substantial.

Gone but not forgotten - KB.

http://gohaynesvilleshale.com/UMI-Basics

The LRS Title 30:10 statute has deep roots in Louisiana and beyond that go back to the co-ownership of open-range livestock on The Commons. Come time to gather up and cull the herd, flock or whatever, it was impossible to sort who owned what until the whole bunch was penned. Any owner who did not participate that year in the roundup, well, his animals were sold off with the rest and the owner was paid the balance due after the seller's expenses. The seller was not entitled to a profit under the theory of unjust enrichment, but is entitled to a fee for supervision. The key to  this was the law of co-ownership, with origins in French, Roman or German legal codes of yore, I can't remember which. There have been lots of different takes on that law, and no end to O&G attorneys over the succeeding hears trying to work it in favor of their clients.

Skip:

Upon discussion with friends, this is what we came up with:

"This is true from a theoretical point.  Much as the article points out, a mere domestic spur line may be enough to quell the counterargument.  Also, any line that intersects with any hub or interconnection would likely be ultimately exempt from ruling against common carriers, as who is to say which molecules end up where.

Another possible point would be to allude to the offset of a trade imbalance, which could alternately serve the public good by way of the commerce clause (we have imbalances with Mexico and China, for example).  But this would be more of an indirect or derivative argument.

It is intriguing in that such a case has not been tried, but given that the phaseout of barriers to exports of crude and other petroleum products and streams was so recent, it was bound to come up.  I wonder if there was such a problem contemplated around WWII are immediately previous to same…"

Counterpoint: 

"I doubt if there was any contemplation around WWII because there was not the general resistance to either eminent domain or oil/gas production and transport that there is now. Additionally there was the argument that they were shipping to overseas US territories. Once the war started no one was going to do much arguing about what they built, but according to [redacted] there was a real shortage of materials to build any pipelines which weren't obviously connected to the war effort or even to drill wells. They pulled old pipe uphole and reused it for most of the thirties (it was cheaper than new pipe) and through the war because of shortages.

It will be interesting to see if there are cases which come up. I suspect that some may end up in federal courts because of interstate commerce laws. We shall see. The way things are, folks file injunctions and or sue at the drop of a hat. Bet it ends up as class action somewhere."

Just a couple of industry folks' musings...

It's always interesting to hear the musings of the industry.  :-)

if the company that is specifically buying up leases or wells for the purpose of supplying NG to their plant for LNG export, then that may be grounds for attacking a proposed taking of land for a pipeline.  Such a scenario is highly  unlikely.  NG pipelines have a huge mix of inputs and outputs.   Attorney's can always come up with a wide variety of arguments and attacks on all sorts of projects that involve permitting through various state or federal agencies, and they frequently tie up projects for a long period, but I think that's all these suits will do - delay matters.  Unless we are talking about a pipeline that goes only to an LNG plant, and the LNG plant will only be exporting the NG outside of the US, will such a case stand up.  And, who knows, if the NE US continues to fight pipelines, we may be shipping LAa.LNG to New England.  That would further diminish the "public interest" argument..

Considering the tariff war's potential impact on tubular steel product prices, LNG may be the only way the NE gets natural gas.  Wouldn't that be ironic.  Marcellus gas is piped south to the Gulf Coast, is converted to LNG and then is transported by tanker to the NE.  Talk about a dysfunctional energy scenario.

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