The Texas Railroad Commission, that regulates the oil and gas industry, recently proposed a new rule to close the so-called ’T-4’ loophole that’s long allowed private pipeline companies to claim common carrier status by simply checking a box on a one-page form and gain eminent domain authority. In 2011, the Texas Supreme Court said in its Denbury Green decision that companies need to prove they’re truly a public use pipeline, known as a common carrier, before they obtain or exercise eminent domain powers. It quickly became an issue with the Keystone Pipeline, which TransCanada claimed to be a Texas common carrier and used eminent domain for its private international pipeline.
The proposed rule would give the Commission the ability to revoke a permit if a company violates the law, giving the Commission enforcement powers that it currently doesn’t have. It would also mandate permits must be renewed on an annual basis. The legislature contemplated at least four bills to fix the problem last year, but none of them passed. While the Railroad Commission rule makes an effort to quell the controversy, it stops short of fixing the problem.
The rule is still too vague, not specifying what documents would be required to prove a company meets the statutory requirement of a common carrier, and lacks a mechanism for landowners to challenge a pipeline that affects their property. For instance, there would be no hearing process before the Commission. The Commission would determine, without public comment or hearing from landowners, whether or not a pipeline meets the classification sought within 45 days of a completed permit application. The rule would apply to new permits, amendments, renewals, and cancellations of existing permits. So existing permit holders would eventually be required to submit to the new renewal process and be subject to the requirements to prove its a common carrier.
The Railroad Commission has a reputation of being too cozy with the industry its supposed to regulate. Commissioners rely heavily on the industry to fund their campaigns. Property rights groups prefer an un-biased, genuine third party, like the State Office of Administrative Hearings, verify whether or not a pipeline meets the statutory requirements of a common carrier.
It appears landowners would still have their day in court to challenge any determination by the Commission, which is costly, but an important protection for property owners to have their day in court preserved. Ultimately, it’s crucial that the state has some mechanism in place to review whether or not private pipeline companies meet the legal requirements as a common carrier public use pipeline prior to eminent domain authority being conferred. Since there is nothing in place today, it’s forced landowners into expensive legal battles in court - in essence to do the state’s job for them. Needless to say, it’s not working for landowners or for the companies since it creates a needless, cumbersome and expensive process that protracts the final decision months and even years.
The proposed rule appears in the Texas Register today and public comments will be accepted through 12 noon on August 25 on the Commission’s web site here. Select the rule to amend the T4 pipeline permit procedures and comments should refer to Gas Utilities Docket No. 10366.