Keystone Pipeline Sparks Property Rights Backlash

As the White House and Congress battle it out over the controversial Keystone XL pipeline, the Canadian company that wants to build it is still using its land-seizure powers to get property easements for the ambitious project.

And it’s ruffling some feathers in a politically conservative patch of Texas.

Several landowners along the proposed pipeline route say TransCanada has bullied them into selling their property by asserting “eminent domain” authority, the same power that governments use to seize land for highways and other public infrastructure projects. A property rights coalition tracking the condemnation proceedings has uncovered at least 89 land condemnation lawsuits involving TransCanada in 17 counties from the Red River to the Gulf Coast — cases that could test the limits of a private company's power to condemn property.

One of the landowners, Lamar County farmer Julia Trigg Crawford, will face off with the pipeline giant on Friday morning at a court hearing in Paris, Texas. Crawford got a rare restraining order halting any further encroachment on her land until questions surrounding TransCanada's right to condemn her property for the pipeline can be resolved.

“I’m just an angry steward of the land,” Crawford said. “A foreign-owned, for-profit, nonpermitted pipeline has taken a Texan’s land. Doesn’t sound right, does it?”

Crawford is opposed to the pipeline, which would carry tar sands oil from Canada, and has concerns about potential contamination of a creek she uses for crop irrigation. Her 600-acre farm, which straddles the Red River on the Oklahoma border, also contains numerous archaeological remnants of a Caddo Indian village.

The land seizure proceedings are continuing even though the White House rejected TransCanada’s application for an international pipeline permit, which included the proposed Gulf Coast segment that would run from Cushing, Okla., to Houston and Port Arthur. The company is exploring options to build the southern piece of the pipeline without a presidential permit, but either way it says it won't stop seeking land for the project.

“We don’t need a presidential permit in order for us to obtain the easements that we need for the right of way for this project,” said TransCanada spokesman Terry Cunha. He said the company already had 99 percent of the easements it needed for the Texas segment and was working on snapping up the remaining holdouts.

TransCanada has a major financial interest in completing the 435-mile Gulf Coast segment because of a major glut of oil sitting in storage tanks in Cushing. TransCanada's customers would like to move the oil down to North America's largest collections of refineries, where a premium is being paid for the crude. Once the segment was complete, it could carry as much as 830,000 barrels of oil a day to refinery row.

TransCanada has an existing international network of pipelines that connects Alberta in Canada to Nebraska, Illinois and Oklahoma. The Keystone XL pipeline would expand the company's capacity to transport oil from Canada, and add a route to the coast.

Politically, the fight over the Keystone XL pipeline has generally fallen into the familiar partisan pattern: Environmentalists and Democrats are trying to either kill it or reroute it, while the oil and gas industry and Republican lawmakers are promoting it as a job creator.

Gov. Rick Perry, both as a presidential candidate and a pro-business conservative, has slammed the Obama administration for trying to "appease environmental radicals," and hails the pipeline as a way to help the United States gain energy security and independence.

But the controversy generated by TransCanada’s use of land condemnation power has pushed the debate into a new realm, and it is prompting calls in Texas — including from conservatives — for more oversight and increased landowner protections.

“We need to make sure the property owners are properly treated and their property rights aren’t completely trampled,” said Sen. Kevin Eltife, R-Tyler, whose conservative East Texas district contains several of the counties TransCanada wants to cross with its pipeline. “You can’t just come in and roll over people."

Eltife says legislative hearings, and possibly legal reforms, are needed to clarify how pipeline companies use eminent domain to acquire pipeline right-of-way on private land.

The issue has even sparked some comparisons to Perry's ill-fated Trans-Texas Corridor, a massive transportation project that rural landowners viewed as an unprecedented land grab.

“This is everything we fought against with the Trans-Texas Corridor. It’s an eminent domain nightmare, a clear-cut violation of property rights," said T.J. Fabby, a Waxahachie Republican trying to unseat incumbent state Rep. Jim Pitts in the GOP primary.

"Eminent domain was never meant to be used to confiscate somebody’s property for private use."

Former Perry gubernatorial rival Debra Medina, a Republican from the Ron Paul wing of the GOP, is another critic. She said the pipeline flight shows how "crony capitalism" has stacked the deck in favor of big business interests while running roughshod over small business owners and average Texans.

Medina and other critics are hoping that legal challenges to TransCanada's eminent domain authority will lead to limitations on a private company's power to condemn land.

Under Texas law, only pipelines that are deemed “common carriers” — the pipeline world's equivalent of a public road — can condemn property for easements. The state Natural Resources Code says that to gain common carrier status, oil pipeline companies must agree to transport oil “for hire” from any company, without discrimination, based on published fees that are regulated by the state.

The Texas Constitution also gives protections to landowners in property seizure cases by requiring that eminent domain only be exercised for “public use.”

According to TransCanada, the pipeline meets the common carrier status because it transports oil owned by other companies, with whom it has delivery contracts. Cunha, the spokesman, says it’s in the public’s interest because the oil will help the United States meet its demand for energy.

“We’re delivering something in the public need,” he said. “We’re delivering petroleum that is much needed in the U.S., to address the consumption needs of the U.S.”

Critics say the pipeline is designed to meet the profit needs of a single company and doubt whether its claim of eminent domain authority meets the "common carrier" and "public use" tests.

"The primary purposes of this project is to get Canadian crude to the refineries. There is no public use aspect to this project," said carpenter David Daniel, who reluctantly signed over an easement to TransCanada after he said the company convinced him he would lose his property under eminent domain. "It’s an international commodity that will be sold on the world market.”

But property owners face daunting odds against pipeline companies, because the court system is the only avenue for fighting their condemnation cases, and until recently the state courts routinely dismissed challenges to a pipeline's status as a common carrier — a status companies have claimed they get from the Texas Railroad Commission.

That changed last year, when the Texas Supreme Court ruled that Plano-based Denbury Resources was a private carrier that wanted to build a CO2 pipeline for its own use, and couldn't use eminent domain to get an easement on a Houston-area rice farm.

In his opinion for the majority, Justice Don Willett wrote that "even when the Legislature grants certain private entities 'the right and power of eminent domain,' the overarching constitutional rule controls: no taking of property for private use."

The ruling sent shockwaves through the oil and gas lobby, which is now urging the Supreme Court to rehear the case.

One problem made clear in the ruling is that there is no agency that is specifically charged with determining whether or not a company is acting in the broader interest of the public or meets the standard of being a “common carrier.”

For years, pipeline companies have claimed common carrier status by checking off a box on a “T-4” pipeline permit form at the Texas Railroad Commission and promising to submit itself to rate regulation, should that ever come to pass.

But the Texas Supreme Court ruled that checking a box on a form isn't good enough, and the Railroad Commission says the pipeline permit is mostly just a registration document and doesn't involve fact-finding about common carrier status or bestow any land condemnation rights on any person or company.

"That ultimate determination would have to be made by the courts,” said commission spokeswoman Ramona Nye. "We have no authority over eminent domain."

Eltife, the senator from Tyler, said the lack of administrative authority over such fundamental property rights disputes has left Texas property owners in a precarious situation.

"It’s kind of a no man’s land," Eltife said. "At this point I don’t know who is speaking up for the property owners."