Texas Supreme Court Declines to Clarify Texas Eminent Domain Law Re: Keystone XL Pipeline

On September 6, 2013, the Texas Supreme Court (the "Court") declined to clarify whether the statutory condemnation system set forth in the Texas Property Code (specifically, the interpretation of Tex. Gov't Code §21.021) requires a court to make a "preliminary finding" of common carrier status before awarding temporary possession to a pipeline company.  The court's refusal to weigh in on the dispute represents a missed opportunity to clarify the statutory framework at a time of increasing pipeline projects fueled by the continued expansion of oil and gas drilling activity in Texas.

Texas Rice Land Partners, L.P., James E. Holland and David C. Holland (collectively, "TRL") own farmland in Jefferson County, Texas.  In re Texas Rice Land Partners, Ltd., 402 S.W.3d 334, 336 Tex. App."”Beaumont 2013.  TransCanada Keystone Pipeline, L.P. ("TransCanada") is the owner and operator of the U.S. portion of the planned 2,151 mile crude petroleum Keystone Pipeline System designed to bring Canadian oil sands to Mid-West and Gulf Coast refineries.  TransCanada filed a petition for condemnation for an easement across TRL's farmland after unsuccessful negotiations.  The trial court issued TransCanada's requested writ of possession and awarded TRL $20,808 as compensation for the easement. 

TRL filed a petition seeking mandamus relief from the trial court's order, alleging, among other things, that TransCanada did not possess eminent domain power.  Chapter 21 of the Texas Property Code provides that a "condemnor may take possession of the condemned property pending the result of further litigation . . . ." (Tex. Gov't Code §21.021).  While ultimately finding that the trial court's failure amounted to harmless error and upholding the write of possession, the Beaumont Court of Appeals held that "there must be evidence in the record that reasonably supports TransCanada's assertion that it is an entity with "˜eminent domain authority' and it was error for the trial court to refrain from making such a preliminary finding."  In re Texas at 339-340. 

TransCanada filed a petition for writ of mandamus with the Texas Supreme Court urging the Court to direct the Beaumont Court of Appeals to vacate the portion of its opinion requiring a trial court, if requested, to make a "preliminary finding" as to a condemnor's eminent domain authority prior to granting a writ of possession.  In its petition, TransCanada argued that "the court of appeals improperly engrafted a requirement onto the statute"”previously rejected by [the Court] and numerous other courts"”creating a mechanism for landowners to significantly delay public projects, and undermining the well-established aim of the statute to put the condemnor in immediate possession upon posting the requisite security."  Rather than allowing a dissatisfied landowner to pursue his rights through the judicial review process outlined by the Texas statutory condemnation framework that provides for, among other things, damages if the court ultimately decides against the condemnor, this requirement provides an avenue for additional court proceedings over a relatively discrete issue that can impede a pipeline company from taking possession of the easement.  A single tract owner can now delay an entire pipeline project by challenging the pipeline company's power of eminent domain under this decision and pursuing litigation on the matter.  

Identifying the issue as a potentially widespread complication in the Texas oil and gas landscape, a number of industry participants filed amicus briefs urging the Court to wade into the issue, including Kinder Morgan Energy Partners, LP, Anadarko Petroleum Corporation, Enbridge Pipeline LP, DCP Midstream, LLC, Texas Midstream Gas Services, LLC, Summit Midstream Partners, LLC and the Texas Pipeline Association.  Despite the urging of the pipeline industry and the continued uncertainty regarding the issue of eminent domain in Texas, the Court denied TransCanada's petition for writ of mandamus and missed an opportunity to clarify important and long-standing Texas case law.