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Texas Railroad Commission Approves Revised Oil & Gas Pipeline Rule

The Texas Railroad Commission approved a substantial amendment to its oil and gas pipeline permit rule on December 2, 2014, and the amendment has major significance for Texas landowners and Texas mineral owners. The rule is Texas Railroad Commission Rule 3.70, and the amended rule goes into effect on March 1, 2015.

The Railroad Commission received a substantial amount of written comment from individuals, oil companies and trade organizations. Comment and testimony was also received at the public hearing on the proposed amendment held in Austin, Texas on September 22, 2014. The amended Rule 3.70 and the discussion of public comments by the Commission’s General Counsel can be accessed here.

The amended Rule 3.70 provides that each operator of a pipeline or gathering system (other than production lines or flow lines that are general confined to the leased premises) must obtain a permit from the Commission and renew the permit annually. The permit application must now include the following:

1. the contact information for the person who can respond any questions concerning the pipelines construction, operation or maintenance;

2. the requested classification and the purpose of the pipeline as a common carrier, a gas utility or a private pipeline;

3. a sworn statement from the permit applicant that provides the pipeline operator’s factual basis in support of its requested classification and purpose, including, if applicable, attestation to the applicant’s knowledge of the eminent domain provisions in the Texas property code and the Texas Landowners Bill of Rights published by the Texas Attorney General;

4. documentation to provide support for the classification and purpose being sought for the pipeline and any other information requested by the Commission.

The memorandum to the Railroad Commission from its General Counsel on November 25, 2014, (which you can read here), summarizes many of the written and verbal comments about the proposed amended rule. Many commentators wanted the Commission to take a more active role in the route of a pipeline and in the determination of whether a pipeline was a common carrier pipeline or not. In Texas, whether a pipeline is a common carrier pipeline is hugely important. A common carrier pipeline has the right of condemnation (or “eminent domain”) if they cannot reach a pipeline easement agreement with the landowner. Other types of oil and gas pipelines do not have this power.

The comments in the memorandum by the Railroad Commission General Counsel make clear that the Commission does not believe it has authority to adjudicate whether a pipeline is a common carrier or not. The memorandum also notes that the Railroad Commission has no authority over the routing of a pipeline nor do they have authority to become involved in private property rights, including pipeline easement negotiations.

On the other hand, the amended rule provides that the Railroad Commission will make a determination of the “sufficiency” of the information provided with the permit application. What will constitute “sufficient” documentation of common carrier status remains to be seen. In addition, the Commission’s press release about the amendment states that: “Texas Railroad Commissioners have unanimously adopted pipeline permit rule amendments designed to clarify how a pipeline operator may be classified by the Commission as a common carrier.” That statement makes it sound as if the Commission is making a “common carrier” determination!

Readers may recall that in 2012, the Texas Supreme Court, in the case of Texas Rice Partners Ltd. vs. Denbury Green Pipeline, 363 S.W.3d 192, held in part that the fact that a pipeline permit applicant checked a block on the permit application that indicated that it was a common carrier pipeline did not in fact make the pipeline a common carrier line. That case is still good law. The amendment to Rule 3.70, while not providing for a forum or process for determination of whether a pipeline is a legitimate common carrier or not, will still be helpful to landowners who are negotiating a pipeline easement. The information that the Railroad Commission requires a pipeline operator to supply with its permit application should be the first thing that a landowner or their oil and gas pipeline attorney looks up when negotiating a pipeline easement.

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