Texas Farmers Urge Appeals Court to Block Keystone Pipeline

TransCanada Corp. (TRP) should be barred from building the Keystone XL pipeline to transport Canadian tar-sands crude to Gulf Coast refineries, pipeline opponents urged a Texas appeals court, citing a new state-court precedent.

Landowners opposing Keystone XL argued in a state appellate court in Beaumont today that TransCanada doesn’t meet the definition of a “common carrier” under a 2011 Texas Supreme Court ruling and shouldn’t be allowed to use state eminent- domain laws to obtain easements across their properties.

“The Texas Supreme Court ruling said the ownership of land is connected to our very freedom,” Anthony Brocato, the landowners’ lawyer, said at the hearing. “If someone, for their private profit, comes to take what belongs to you, they have to follow the letter of every law and show precisely and specifically that they have the right.”

Pipeline opponents claim last year’s high-court decision withholds condemnation powers from interstate pipelines that transport out-of-state crude into Texas. Only intrastate pipelines transporting hydrocarbons within state borders should be allowed to use eminent domain, the landowners, known as Rhinoceros Ventures Group Inc., have said in court filings.

Pipeline Hub

If the appeals court agrees with that interpretation, Calgary-based TransCanada and other companies may lose condemnation powers that were used to install about 44,000 miles (70,800 kilometers) of interstate pipelines in Texas since 1917, according to state regulatory commission records.

Tom Zabal, TransCanada’s lawyer, has argued that the high- court ruling doesn’t apply to the Keystone XL, which will carry some West Texas crude to coastal refineries via a pipeline hub in Cushing, Oklahoma.

“Will this pipeline carry Canadian crude? Ultimately, it might,” Zabal told the judges today. “But first we’re bringing oil that’s produced in Texas back into Texas.”

He said landowners who want to change eminent-domain laws should lobby lawmakers in the state capital rather than litigate condemnation cases one at a time.

“Appellants can go make their arguments in Austin to the Legislature,” Zabal said in court filings. “It is not this court’s job to take that drastic step of rewriting Texas’s common-carrier eminent-domain statutes in that manner.”

Refining Industry

Zabal told the judges that a ruling in the landowners’ favor could endanger the Texas refining industry, which supports thousands of jobs.

“If we cut off the arteries of these oil and gas pipelines to the heart of the Texas refining industry, which is right here in Jefferson County, they’re not going to have any feedstocks to operate those refineries,” he said. “Are we going to shut them down because we can’t bring in oil from outside of Texas? That’s where their argument leads.”

Brocato replied that Texans voted in 2010 to amend the state constitution to bolster private property rights and specifically prevent eminent domain laws from being used just to create jobs or boost the general economy. He said if pipelines like the Keystone are allowed to “flood the market” with out- of-state crude, regional oil prices might collapse and harm the Texas mineral owners and producers that state pipeline regulations were designed to protect.

Court Permission

In lawsuits all along the Keystone XL’s route through East Texas, TransCanada has consistently won court permission to start building the southernmost leg of its 2,151-mile pipeline between western Canada and the U.S. refining industry complex on the Texas coast. State law lets pipelines begin construction while landowners protest the condemnations in court.

In addition to Rhinoceros, four other groups of Texas landowners are also fighting TransCanada’s attempts to cross their lands. Those challenges are in various stages of the condemnation process.

Some of these landowners sued TransCanada after negotiations broke down over the price the pipeline offered for the easements. Others sued over concerns the pipeline would contaminate delicate aquifers or restrict how farmers and ranchers can use their own lands.

Four of the remaining Keystone condemnation cases, including the Rhinoceros case, involve parcels in Jefferson County, near Beaumont. The fifth involves a family farm in Lamar County, in northeast Texas.

The case is Rhinoceros Ventures Group Inc. v. TransCanada Keystone Pipeline LP, 09-12-00128, Court of Appeals, Ninth District of Texas (Beaumont).

To contact the reporter on this story: 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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