Texas Railroad Commission Revises Common Carrier Permit Application Rule

In the 2012 case of Texas Rice Land Partners, Ltd., et al., v. Denbury Green Pipeline-Texas, LLC, 363 S. W. 3d 192 (Tex. 2012), the Texas Supreme Court held that the routine and ministerial issuance of a common carrier pipeline permit to Denbury Green did not conclusively establish the pipeline’s status as a common carrier as a matter of law, thereby enabling the pipeline to exercise eminent domain powers over private property. Consequently property owners now have the right to challenge that status in state court. The Texas Railroad Commission took note of the criticisms lodged against its rules and procedures, and on December 2, 2014, the Commission promulgated changes to its permitting rule, which is located in Title 16, Part 1, Chapter 3 of the Texas Administrative Code, Rule § 3.70. The new rule is effective on March 1, 2015.

Denbury filled out an Application for Permit to Operate a Pipeline in Texas, designated as Form T-4, identifying itself as a “common carrier” pipeline by filling out and checking the appropriate box on the form. The permit was granted in a few days, and Denbury immediately brought a legal action to condemn a strip of land it wanted for a pipeline right of way. Until the Supreme Court stepped in, landowners had no redress in the courts to challenge this exercise of eminent domain power granted to the pipeline by the Texas law. Following this decision, many lawsuits have been filed to challenge the common carrier status of certain pipelines.

Briefly, the revised and enhanced Rule § 3.70 provides that : (a) each pipeline operator shall obtain a permit, renewable on an annual basis, from the Commission; (b) The application will be submitted on an approved Commission form which is accompanied by documentation or information which describes the requested classification (common carrier, gas utility line or private line), including a sworn statement providing the factual basis for the proposed classification that may also require attestation of the applicant’s knowledge of the eminent domain provisions of the Texas Property Code and the Texas Landowner’s Bill of Rights, and any other information sought by the Commission; (c) the Commission will make a timely determination that the application is complete; (d) may take action to grant within 45 days any completed application when the Commission is satisfied that the pipeline will be operated in accordance with the laws of the state; and e) the applicant is on notice that the permit may be revoked at any time after a hearing if the Commission determines that the pipeline is not being operated in accordance with state law and the rules of the Commission.

The Commission stated that it had no authority to go beyond these provisions. For instance, it rejected a suggestion that the revised rules also require an independently conducted environmental review of the pipeline’s impact. As stated by the Commission in the preamble to the final rule:

“The permitting process simply determines which regulatory classification is to be applied to a pipeline; it does not determine the route a pipeline must or should take. The permitting process does not determine property rights. The Commission has neither the power to require, approve, or deny the building of a pipeline along a particular route nor the power to determine what rights landowners along that route might or might not have. The Commission’s duty is to determine the proper classification of a pipeline and thereafter to apply its rules and regulations to that pipeline. Litigation over the rights of a property owner or a pipeline’s easement is not a Commission matter; it is a courthouse matter”.