BY LORIE WOODWARD CANTU
For many landowners, eminent domain isn’t an abstract legal construct, but a force that alters their land and their lives.
In the Hill Country, residents are coping with the paths of power lines sited to support subdivisions popping up like bluebonnets. Throughout South Texas, thanks to the development of the Eagle Ford Shale, landowners face the prospect of oil and gas pipelines, roads and other industrial infrastructure. In Northeast Texas, landowners are bracing for the potential construction of Lake Marvin Nichols that could flood 70,000 acres and result in an additional taking of up to 10 times that amount to mitigate for the reservoir’s construction.
“Texas is growing and changing,” said Greg Simons, president of the Texas Wildlife Association (TWA). “More people mean more demands for all types of infrastructure – roads, transmission lines, pipelines, reservoirs, schools and on and on. It all has to go somewhere. In Texas more than 90 percent of the land is privately owned, so in most cases private landowners have to bear the burden.”
Eminent domain is nothing new. Some claim that the earliest known use of eminent domain can be found in the Bible. Massachusetts, during its days as a colony, executed the first provision for compensation for the laying of highways in 1639.
What has changed over time is the scope and frequency of eminent domain activities. Through the years, government has granted more entities the authority to use it, including gas or electric corporations, groundwater conservation districts, and common carrier pipelines.
David K. Langford, vice president emeritus of TWA, said, “When eminent domain got its start, it was governed by elected officials, those who were held responsible by the voters. That’s not the case anymore. In my opinion, the power of eminent domain should only come with public accountability.”
Projects are bigger. For example, the Competitive Renewable Energy Zone (CREZ) transmission lines designed to carry wind energy from the Panhandle and West Texas to the Metroplex and I-35 Corridor has stretched across almost 3,600 miles to date, impacting thousands of landowners along the way.
Land holdings are smaller, meaning more landowners are potentially in the pathway of any given project. In the Barnett Shale, some suburban residents had to contend with energy pipelines literally in their backyards.
“Eminent domain is an equal opportunity challenge,” Simons said. “No landowner, no matter how large or how small, is exempt. Making sure that it’s implemented fairly and judiciously is something that concerns all landowners.”
THE STATE OF EMINENT DOMAIN LAW IN TEXAS
Because of a confluence of factors, the profile of eminent domain has been raised. Over the course of the past 10 to 15 years, agriculture and landowner groups have collectively advocated for eminent domain reform in Texas.
“Working together, a strong coalition of like-minded agriculture, wildlife, and private property rights groups, have championed significant eminent domain reform,” Simons said.
Milestones include the passage of Proposition 11 in 2009. The constitutional amendment, which passed with an 81 percent majority, prohibited the taking of private property for economic development or as means to raise tax revenue. It also limited the Legislature’s power to grant the power of eminent domain in the future unless it is approved by a two-thirds vote of all members of the House of Representatives and the Senate.
Then, in 2011, SB 18, the culmination of five years of effort, was signed into law.
The bill contained three major components: a comprehensive ban on the “public benefit” use of eminent domain, overriding the decision in the landmark case of Kelso v. New London, in which eminent domain powers were controversially expanded; a requirement that owners of land that is subject to a proposed easement must be provided with a comprehensive assessment of their property’s value and that these assessments cannot be subject to confidentiality agreements; and the requirement that any government entity which is considering invoking eminent domain powers must make a bona fide offer to the property owner to sell the property voluntarily. This offer must include a 30-day decision period and must be of equal to or greater than the value in the assessment.
“There’s no doubt that we’ve made great progress on behalf of landowners,” Simons said. “But there’s also no doubt that work remains to be done.”
At the time of publication, TWA was working in conjunction with legislators and like-minded groups to draft legislation with the goal of addressing some of landowners’ most pressing concerns.
TARGET AREAS FOR REFORM
While eminent domain can be invoked for a wide variety of projects, the rapidly growing need for transmission lines and oil and gas pipelines is the focus of many landowners’ concerns. One Panhandle attorney whose practice focuses on eminent domain reported handling over 200 cases, primarily power line and pipeline cases, in the past four years.
“Most reasonable people will not object to the responsible and judicious use of eminent domain in pursuit of the public good,” said Langford. “The objections arise when an entity condemns property and the landowner has a legitimate question of whether the general public or a private entity is going to benefit from the taking.”
In the case of both transmission lines and oil and gas pipelines, the line dividing public benefit and private benefit is thin and gray.
OIL AND GAS PIPELINES
As of August, according to the Texas Railroad Commission, Texas is home to 425,939 miles of oil and gas pipelines. The Legislature has granted oil and gas companies a great deal of power including eminent domain, which comes as part of the common carrier designation. A common carrier is a pipeline that will allow products from more than one company to be carried. Currently, the oil and gas companies indicate common carrier status themselves by marking the form that they submit to the Railroad Commission notifying the agency of the pipeline’s construction.
“Common carrier status, which is self-determined by energy companies, confers the power of eminent domain,” Simons said. “There is no government oversight of pipeline routing, so the companies have the power to site the lines where they want and take the land they need.”
The Railroad Commission provides the following information on its website:
“The Railroad Commission (RRC) is limited in its authority to those powers delegated by the Legislature by statutory enactments. Regarding pipelines, the Railroad Commission has authority over intrastate pipelines (those that originate and end within the State of Texas) for pipeline safety and pipeline rate regulation.
In Texas, pipelines are not required to be permitted before being built. There is no statutory or regulatory requirement that a pipeline operator seeks or receives from the Railroad Commission either a determination that there is a need for the pipeline capacity or prior approval to construct a pipeline and related facilities.
Additionally, the Railroad Commission does not determine or confer common carrier status for pipelines. The pipeline operator reports to the Railroad Commission the status of a pipeline as a gas utility, common carrier or private line. Commission does not have any authority over a common carrier pipeline’s exercise of its statutory right of eminent domain (emphasis added).
Generally, the Railroad Commission has no authority over the routing or siting of intrastate or interstate pipelines. The pipeline route is determined by the pipeline’s owner/operator. The exception to this is when the pipeline contains ‘sour gas’ (hydrogen sulfide) because of its potential toxicity at certain levels….”
The Railroad Commission is currently considering new regulations to strengthen the agency’s review of common carrier status. The energy companies are opposed, claiming additional review will unnecessarily slow their progress.
“The current law puts landowners at a distinct disadvantage, even if they are negotiating with the most upstanding corporate citizen,” Langford said. “By ‘checking the box’, unelected individuals have the ability to condemn and take someone else’s land.”
When the CREZ lines began their march across Texas, the PUC, at the Legislature’s direction, allowed private utility companies to bid on the construction projects and carry them out on behalf of the state of Texas. By granting the transmission service providers a Certificate of Convenience and Necessity, the Public Utility Commission gave the companies the power of eminent domain. The companies were also given the right to charge back their costs for the projects, plus earn a reasonable profit.
An October article in the Texas Tribune on the CREZ lines’ completion said: “Electric ratepayers will bear the burden, but few have yet seen their bills creep up. The commission has approved CREZ fees from just three transmission service companies, with other filings winding through the system.
The new fees, [Terry] Hadley [spokesman for the PUC] said, will likely add several dollars to a residential customer’s monthly bill.”
“The companies are guaranteed the right to make a profit and the companies’ rate payers may number in the hundreds of thousands, minimizing the individual cost,” Langford said. “And yet, the utilities maintain that it is too costly to pay landowners, whose property is damaged and devalued by the construction of a transmission line, true market value. As a result, landowners often bear an inordinate amount of the burden for society’s infrastructure.”
While the Fifth Amendment of the U.S. Constitution and Article I, Section 17 of the Texas Constitution guarantee that a property owner will receive just compensation for the taking, just compensation is not defined.
“Eminent domain transactions should reflect regular real estate transactions where a willing buyer interacts with a willing seller, allowing market forces to come to bear,” Langford said. “Currently, there is no incentive for condemning entities to give a fair market value nor is there a disincentive for bringing low-ball offers.”
In many cases, the sticking point is over “damages to the remainder.” The question is how much has the land been devalued by the power line’s construction? Historically, the utilities acknowledge very limited damage ascribing it only to a narrow corridor on either side of the new construction.
From a landowner’s perspective the damage, which ultimately affects the land’s market value, is much more extensive. The construction of a power line and its attendant easement creates a corridor for other easements. Several contiguous easements through a property can change the land’s character, making it more suitable for industrial or corridor use. Plus, the service providers can hang additional lines, such as fiber optic cables, from the towers, increasing the company’s revenues, without benefiting the landowners.
“Putting emotional value aside, real property like land is a storehouse of wealth, a natural resource-based bank account,” Simons said. “Condemnors are making money off a path that cuts across a landowner’s bank account, diminishing its value. The law says landowners should be made whole.”
Damages generally are calculated using a paired analysis in which an appraiser compares sales of two properties similar to the one in question. One has a power line. One doesn’t. They both have sold. The difference between the two is perceived to be the damages. The problem with this is approach is that it is very subjective and often fails to account for all of the variables.
“The only thing that precludes reasonable people from getting fair market value is whether you have reasonable people on the other side of the negotiation,” Langford said.
If the government and property owner cannot agree on that compensation then, ultimately, they head to the court house for a special commissioners’ hearing. If landowners choose to seek financial betterment, they may be forced to give up other gains such as surface reclamation or access limitations that they negotiated previously.
“Landowners find themselves having to choose between financial betterment and the considerations that they negotiated to protect their land,” Simons said. “To add insult to injury, landowners have to finance their own legal fees, even if they are successful in court. The utilities, on the other hand, can count them as a business cost and charge them back to the rate payers.”
He continued, “Why should a landowner pay for defending himself if the action was brought against his property in the name of public good? Shouldn’t the public bear the cost for the benefit and the damage resulting from delivering the benefit? If the condemnors had to pay court costs perhaps it would create an incentive for fair market-based offers on the front end.”
In addition, landowners whose land is taken for transmission line construction can be held responsible for injury or death sustained by any people constructing or working on the power line because neither the government nor the transmission company indeminifies the landowner.
“Landowners aren’t building the power lines,” Langford said. “Why should they be liable for them?”
To keep up with eminent domain reform and other legislative issues, check the TWA website, www.texas-wildlife.org. Members can subscribe to regular updates and newsletters from association staff. Information on membership is also available on the website.