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Texas energy regulators adopt rule to beef up gas, oil pipeline-permit requirements

Houston (Platts)--4 Dec 2014 602 pm EST/2302 GMT


Texas regulators this week adopted a rule that will boost requirements for pipeline developers seeking to obtain a coveted classification for their pipelines that would allow them to seek authority to condemn surface land under the doctrine of eminent domain.

Industry groups largely accepted the regulation as not being too onerous, but several groups representing surface landowners say it does not go far enough to protect their property rights against the power of the pipelines.

On Wednesday, the Texas Railroad Commission unanimously adopted pipeline permit rule amendments that require pipeline operators to verify their claim to be a common carrier when applying for a T-4 permit to operate a pipeline or when renewing, amending or canceling an existing permit.

Under state law, a pipeline or pipeline system can be classified as a common carrier, a gas utility or private line operator, but only common carrier pipelines can use the power of eminent domain to secure their right of way.

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The state defines common carrier pipelines as pipes that are contracted to carry crude oil, natural gas or carbon dioxide for hire. The commission action seeks to address complaints by surface landowners that under the old rules it was too easy for a pipeline to gain the common carrier status, by simply checking a box on the permit application.

In 2011, the state Supreme Court handed down a decision that held that pipeline companies need to prove that they are common carriers before being allowed to condemn surface property along their rights of way.

The state legislature in the last two sessions tried and failed to pass legislation to clarify the issue of when and how to grant pipelines the power to use eminent domain.

The TRC's adopted rule amendments, which will take effect March 1, 2015, will require applicants for a pipeline permit to include additional documentation "such as a contract or tariff for third-party transportation" supporting their request for a common carrier classification, according to a TRC statement.

In addition, pipeline developers will be required to include with their permit applications "a sworn statement providing the operator's factual basis supporting the classification being sought for the pipeline."

The rule change also gives TRC the power to revoke a T-4 permit if it finds that the pipeline is not being operated in accordance with state laws and TRC rules and regulations.

Thure Cannon, president of the Texas Pipeline Association, said the rule change will require pipeline companies "to submit much more documentation than they have in the past," which could result in the delay of some pipeline projects. "Basically what it did was change this from a registration process to an application process," he said.

But he added that pipeline developers likely will accommodate themselves to the new rule quickly.

Phil Gamble, an Austin attorney who frequently represents pipeline companies, said he thought the rule change "addressed some of the shortcomings" that others had found in the previous rule.

"The landowners are the big winners in my mind because they still retain the right to challenge the commission decision in their local district court," he said.

But representatives of some landowners groups disagreed that they had come out as the winners in regard to the rule.

John Strawn, a board member of Texas Pipeline Watch, said he was disappointed in the final rule saying it was too weak to present much protection for surface landowners.

"I'd like to see some stronger wording regarding eminent domain and who could use it," he said.

He complained that members of the TRC were too biased in favor of the energy industry when it came to settling conflicts between the industry and other interested parties.

"I really wouldn't expect them to turn on their buddies and do anything very strong," he said.

Eric Opiela, of the South Texans Property Rights Association, said the commission largely ignored about 400 public comments calling for a rule with more teeth than the draft rule the TRC staff originally proposed in August.

The rule change "doesn't benefit the pipeline companies and doesn't benefit the landowners," he said. "I don't know that anyone's happy with it." Cyrus Reed, conservation director of the Lone Star Chapter of the Sierra Club, said the state legislature ultimately will have to once again take up the issues revolving around pipelines' eminent domain powers.

"We look forward to working with the legislature to give landowners -- and the environment -- additional protections," he said.

--Jim Magill, jim.magill@platts.com
--Edited by Valarie Jackson, valarie.jackson@platts.com

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