TransCanada Faces Texas Landowners in Court Over Pipeline

TransCanada Corp. (TRP) shouldn’t be allowed to use eminent-domain laws to seize land to build the southern leg of its Keystone XL Pipeline near Beaumont, Texas, lawyers for property owners told a judge.

A recent Texas Supreme Court decision may give the landowners the right to prevent TransCanada from taking land for the pipeline, Terry Wood, an attorney for Texas Rice Land Partners, said at a hearing in state court in Beaumont today.

That decision limited the ability of pipeline owners to condemn property under certain circumstances. The landowners in Beaumont are fighting to keep Calgary-based TransCanada from immediately entering their properties and starting construction before lawyers and lawmakers have explored what the ruling means.

“This is a case of what’s expedient for the pipeline company versus the constitutional rights of landowners,” Wood told Jefferson County Court at Law Judge Tom Rugg Sr. Wood urged Rugg to stall condemnation of Texas Rice Land’s property.

“You realize you might be asking me to delay the resolution of this case for years,” Rugg told Wood.

“That is a possibility,” Wood replied.

The judge gave lawyers until Sept. 21 to provide additional briefing and promised to rule by Sept. 24.

‘Statutory Authority’

“I am concerned that the rights of landowners not be trampled unless there’s clear statutory authority to do so,” he said.

Tom Zabel, TransCanada’s lawyer, told Rugg the pipeline operator believes it has the right under an 1899 Texas statute to start construction without obtaining so-called writs of possession through condemnation proceedings such as the ones today in Beaumont. He said the company has filed the appropriate paperwork and posted the required bonds and should be allowed to proceed as pipelines have traditionally done in Texas.

“Once we’ve done that, we’re entitled to the easements we’re seeking. It’s that simple,” Zabel told Rugg. “The Texas Legislature came up with this scheme because it wanted to encourage oil and gas exploitation, and you can’t have oil and gas without pipelines. This is something that’s been determined in Texas for more than 100 years.”

Zabel said the supreme court ruling doesn’t apply to the type of pipeline TransCanada is planning with the Keystone XL.

‘Game Changer’

The ruling, which also involved Texas Rice Land Partners in a lawsuit against a different pipeline, was a “game changer” with statewide implications for pipeline companies, Wood said in an interview after the hearing.

“Before that decision, the pipelines just assumed that, if they said it loud enough and enough times, they had the right” to condemn private property for pipelines, Wood said.

TransCanada began construction last month on part of the 36-inch (91-centimeter) Keystone XL pipeline, which is designed to bring oil from tar sands of western Canada to the Texas Gulf Coast, Brad Johnson, a company spokesman, said in an interview after the hearing. The initial stretch of pipeline will connect Cushing, Oklahoma, and Nederland, Texas, he said.

TransCanada told Rugg that county judges have a ministerial duty to issue writs of possession if a pipeline fulfills statutory requirements of the eminent-domain law. Zabel said TransCanada doesn’t actually need the writs to access easements and sought them only to bolster the company’s position should a landowner bring in the sheriff to bar the gate.

‘Common Carriers’

In an interview after the hearing, Rugg said the Texas Supreme Court ruling, in part, requires pipelines to be “common carriers” in order to use eminent domain where land owners have balked at allowing easements.

Critics of the Keystone XL, some of whom were gathered with protest banners outside the Beaumont courthouse today, claim the ruling also requires that pipelines operate for the public good in order to use eminent domain.

“One thing the ruling has done is open the eyes of the more substantial landowners to say, ‘Hey, we really can fight these people,’” Rugg said in the interview. “You don’t have to be very bright to know that the bigger fight you put up, the more money they will put on the table.”

The case is TransCanada Keystone Pipeline LP v. Texas Rice Land Partners Ltd., 0118867, County Court at Law, Jefferson County, Texas (Beaumont).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Laurel Brubaker Calkins in state court in Beaumont, Texas, at laurel@calkins.us.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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