461 Crawford Family Farm P’ship v. TransCanada Keystone Pipeline, L.P

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.

Crawford Family Farm P’ship v. TransCanada Keystone Pipeline, L.P., 409 S.W.3d 908 (Tex. App.—Texarkana 2013, pet. denied) held that a nongovernmental entity had the power to exercise the power of eminent domain to compel the grant of a pipeline right-of-way over a landowner’s property because the entity established itself as a common carrier pursuant to the Texas Natural Resources Code. TransCanada Keystone Pipeline, L.P. (“TransCanada”) contemplates the installation and operation of a network of over 2,100 miles of pipeline for the transmission of crude petroleum which originates in Canada, traversing markets within the midwest United States to Cushing, Oklahoma, and then through Texas to its ultimate destination in the Port Arthur, Texas area.  TransCanada, through condemnation, acquired an easement for a buried pipeline across the property of Crawford Family Farm Partnerships (“Crawford”) in Lamar County.  Crawford appealed arguing that TransCanada did not have the power to exercise eminent domain because it was not a “common carrier” under the Texas Natural Resources Code (the “Code”).

In Texas, “[c]ommon carriers have the right and power of eminent domain.”  In the exercise of that power, “a common carrier may enter on and condemn the land, rights-of-way, easements, and property of any person or corporation necessary for the construction, maintenance, or operation of the common carrier pipeline.”

A person is a common carrier subject to the provisions of this chapter if it:

“(1) owns, operates, or manages a pipeline or any part of a pipeline in the State of Texas for the transportation of crude petroleum to or for the public for hire, or engages in the business of transporting crude petroleum by pipeline . . . .”

Crawford argued that the language preceding subsection (1) above limits common carrier status to entities subject to all of the provisions of Chapter 111 of the Code.  Based upon Crawford’s strict compliance argument, Crawford further contended “that because TransCanada is an interstate pipeline, it cannot subject itself to all of the provisions of Chapter 111.”  Crawford’s premise was based primarily upon the fact that an interstate crude oil pipeline is not subject to the rate-setting powers of the Texas Railroad Commission, but is subject to that jurisdictional power of the Federal Energy Regulatory Commission (“FERC”).  Because TransCanada could not subject itself to all the provisions of Chapter 111 of the Code, Crawford argued that TransCanada could not meet the definition of common carrier.

The court disagreed with Crawford’s analysis and explained that “the language preceding the definition of ‘common carrier’ does not specifically state that such common carrier is subject to all of the provisions of the chapter.”  Crawford misinterpreted the opening phrase as being prescriptive, rather than descriptive.  The court stated “the language ‘subject to the provisions of this chapter’ is merely descriptive of the type of common carrier to which reference is made.”

Crawford also contended that interstate pipelines were not included as “common carriers.”  However, the definition of common carrier makes no distinction between intrastate and interstate pipelines.  The court reasoned that, “had the Legislature intended to exclude interstate petroleum pipelines from the definition of common carrier, it could have easily done so with an express limitation.”  “Chapter 111 . . . places no express limitation on the grant of eminent domain power to persons transporting crude petroleum by interstate pipeline.”  “[T]he Legislature’s silence with respect to terms used elsewhere in a statute is indicative of its intent.”  “[E]very word excluded from a statute must be presumed to have been excluded for a purpose,” and “[t]he Legislature has drawn intrastate/interstate distinctions in other sections of” the Code.  “We do not infer from the statute’s language . . . that the Legislature intended its purposes to be anything other than what was expressly stated.”

In addition to arguments relating to TransCanada’s failure to qualify as a Texas common carrier with eminent domain authority, Crawford also claimed that TransCanada’s contemplated pipeline was not for public use.  To establish that the pipeline is for a public use, the pipeline company seeking to exercise the power of eminent domain “must do more than transport its own product to one of its other facilities or to those facilities of its affiliates, . . . [it] must demonstrate a reasonable probability that third party customers will use the pipeline.”  To qualify as a common carrier under Chapter 111.002(6) of the Code:

[A]reasonable probability must exist that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.

TransCanada produced undisputed evidence that it would transport crude petroleum owned by third-party shippers unaffiliated with TransCanada or its parent companies or affiliates.  Thus, because TransCanada complied with the reasonable probability test, it established itself as a common carrier with eminent domain authority.

The requirement of evidence as to the public purpose probably added little to Denbury, but the construction of the Code to include interstate pipelines as common carriers under the Code, and to specifically grant the power of eminent domain to interstate pipelines, was significant.