Sunday, February 3, 2008

Gas pipelines have few rules, property owners discover - Companies can - and do - build where they wish

By JAY PARSONS - The Dallas Morning News - Tuesday, January 29, 2008

GRAYSON COUNTY – The roar of an uninvited bulldozer woke up George and Barbara Woodroof on a recent Tuesday morning. Mr. Woodroof took a last look outside his bedroom window at the hill covered with oak trees.

A week later, bulldozers had cleared hundreds of trees and a wide swath of nature on the couple's property to make way for a 36-inch-wide, high-pressure natural gas line that passes 290 feet from their home.
The Woodroofs don't want the pipeline, but they can't stop Houston-based Energy Transfer Partners from taking their land. Neither can county or state officials. Neither can most courts.

The reach of the gas-drilling boom in Denton and Tarrant counties extends to properties miles from the nearest gas wells, adding a twist to the long-running debate over Texas' eminent domain laws.

Gas companies often use eminent domain powers similar to governments' to acquire land for pipelines. But unlike government, for-profit businesses condemn land largely without oversight or democratic process. They don't typically go through public hearings, environmental reviews or impact studies. Gas companies need only to fill out a one-page form and pay landowners for whatever land they take – a system far more lax than federal standards.

Texas has more than 43,000 miles of intrastate pipelines – the most of any state in the country. And more are coming as production increases in the Barnett Shale – an expansive gas pocket beneath 18 counties, including Denton and Tarrant. Gas production soared from 79 billion cubic feet in 2000 to 698 billion in 2006.

"Right now the Barnett Shale is very prolific," said James Tobin, a natural gas analyst for the federal Energy Information Administration. "There are a lot of new pipelines being built in and out of there by a number of different companies."

Gas companies and some government officials say new pipelines provide a public service – expanding the market to increase supply and decrease costs for consumers.

Here in Grayson County, the Woodroofs and at least 29 other landowners are taking their only legal recourse – asking courts to force Energy Transfer to pay more for their land. The company is building a 140-mile pipeline connecting its gas wells to distribution plants in East Texas, a feeding point for gas going to other parts of the country.

An Energy Transfer spokeswoman said the company needs more pipelines to handle the Barnett Shale's production and uses eminent domain as a "last resort."

Eminent domain

Eminent domain has become a hot topic across the state. Texans are more familiar with eminent domain in the hands of government. The state uses that authority to make room for new roads. Arlington used it to clear land for the new Dallas Cowboys stadium.

A lesser-known provision allows for-profit businesses to condemn property to build utility lines, including valuable high-pressure gas lines. Almost any utility company can acquire eminent domain power with little government vetting – a system that allows private companies to operate more quickly and less democratically than government.

"It's a huge problem," said state Sen. Craig Estes, R-Wichita Falls, who represents Grayson County. "It's property rights fundamental to our freedom. It'll be on the top of our legislative agenda in '09."

Mr. Estes and others agree private companies should retain eminent domain authority but insist state laws tilt too heavily against landowners.

For pipelines crossing state lines, more stringent federal rules kick in. That approval process takes an average of 15 months and includes environmental studies and a public announcement, according to the Energy Information Administration.

But none of that happens in Texas. The Railroad Commission – the state agency that oversees pipelines – acts only as a safety inspector and records repository.

Gas companies can build lines almost anywhere, though they must follow basic safety rules. There's no review process and no incentive to move lines away from houses or bury them deeper to minimize the impact on future development. Nor are they encouraged to use existing utility easements, leaving instead an uncoordinated web often affecting more landowners.

"To [companies], hooking up wells and getting the commodity to the market is the first and foremost concern," said Pat Nugent, executive director of the Texas Pipeline Association, which represents pipeline companies. "If you have crews out there who run into bureaucratic red tape, they would have a real problem with that."

The result is that landowners – and public officials who represent them – often don't know about a pipeline until a surveyor knocks on their door to stake out a route.

"We need to get some laws in this state so the landowners have some rights again," Mr. Woodroof said.


In the last session, Mr. Estes supported House Bill 2006 to ensure that landowners receive fair-market prices in eminent domain cases. Property rights groups backed the bill. So did the Texas Pipeline Association. The bill passed 125-11 in the House and 29-1 in the Senate. But Gov. Rick Perry vetoed it, saying it would raise the cost of public projects by more than $1 billion.

"That was probably the biggest slap in the face that has ever happened to property owners in the state of Texas," said Joe Maley, organization director for the Texas Farm Bureau, which claims more than 400,000 members.

Mr. Perry did sign a related bill, known as the Landowner's Bill of Rights, which takes effect Friday. It assures "adequate compensation." But there are often two different definitions for it – the condemner's and the landowner's.

In the Woodroofs' case, Energy Transfer valued their 5.6 acres at $104,000. The Woodroofs valued it at $1.4 million, which takes into account estimated long-term damage to their remaining 470 acres. The price is being contested.

Property rights advocates say companies have little incentive to negotiate prices with landowners. Even if landowners win more money for the land taken, they can't recoup court and legal fees.

Landowners also don't like the payment structure. Mineral rights owners receive a stream of royalty checks when companies drill a gas well. But when taking land to transfer that gas, companies write only a one-time check that landowners argue doesn't cover the long-term costs of developing around a pipeline.

"We're paying the price for the transportation of someone else's gas," said Sissy Shankles, who has three pipelines on separate easements on her land near Burleson.

Once a pipeline goes in, gas companies can limit what landowners put above it and up to 25 feet on either side of it. Pipeline companies said they will work with landowners, but some developers said the extra hurdles often raise costs.

"You think you own it, but you don't," said Bob Sanford, whose 440-acre property in Grayson County is being crossed by Energy Transfer.

Mr. Woodroof said he asked Energy Transfer to build the line farther south, away from his home. He also wanted a guarantee the pipes would be deeper than 3 feet to minimize the impact on future development. Both requests were denied, he said.

Energy Transfer "tries to work with landowners to accommodate requests when they can," spokeswoman Vicki Granado said, declining to discuss specifics. "In some cases, they can move lines, and in some cases they can't. As a company, they try really hard."

Mr. Woodroof said the company made no effort to work with him.

"The rules will change when someone hits a gas line and 10 houses burn down," said Michelle Jones, the Woodroofs' attorney. "That'll be when they do something."

Rules for building a gas pipeline in Texas
To build a pipeline in Texas, companies must:

Step 1: Fill out a one-page form, called a T-4, to obtain a permit from the Railroad Commission of Texas. Operators must renew the permit annually.

Step 2: Pick a route for the pipeline and request the affected landowners' permission to survey their properties. If landowners refuse, companies may sue for access. State or local government approval is not required.

Step 3: Make offers to landowners for taking easements up to 50 feet wide. If the two sides can't reach a deal, the company may condemn the property. At that point, a special commissioners court sets the price. Once a price is set, the company can begin construction – even if the landowner appeals. Landowners can contest only the price, not the company's right to their property. Landowners can't recover legal fees – even if courts rule in their favor.

Step 4: File a construction report with the Railroad Commission at least 30 days before work begins.

Step 5: Begin construction. Landowners retain access to the pipeline easements but are restricted in how that land can be used. Developers must obtain permission from pipeline companies to build roads or water lines over the pipelines. No structures can be built on top of a pipeline.

Note: Pipelines carrying toxic, so-called sour gas have additional restrictions.

SOURCE: Dallas Morning News research

Regulation of gas pipelines in Texas
Here's a look at the state's regulation of gas pipelines and the rights of affected landowners:

What's the issue? Energy companies can build pipelines almost anywhere without any government involvement or permission from landowners.

Who regulates gas pipelines? The Railroad Commission of Texas was established in 1891 to regulate the rail industry. But today's Railroad Commission has nothing to do with railroads, as that authority was transferred to the Texas Department of Transportation in 2005. Instead, the commission primarily oversees the energy industry.

What's the Railroad Commission's role? The commission's primary roles are to conduct pipeline safety evaluations and act as a records repository. If companies meet state standards and fill out the proper paperwork, the commission cannot stop a pipeline project or examine the proposed route before construction begins.

What rights do landowners have? Not many. Last year, the Legislature passed the Landowner's Bill of Rights, which becomes official Friday. The document spells out 10 rights, including the right to hire an attorney and the right to "adequate compensation," though the term is undefined. Landowners do not have the right to challenge the pipeline route, but they can go to a special commissioners court to seek more money from the pipeline company. Landowners can appeal that price through the court system but cannot recoup any legal fees.

Read more in the Dallas Morning News

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