Mar 12 2012

Property Rights — Back!

Environmentalists & Tea Party Fight Property Rights Abuses;

Plus Sensenbrenner’s H.R. 1433 ‘Property Owner’s Protection Act’

Will Fuel Broader Eminent Domain Discussion

 

New Coalition for Property Rights in Texas includes environmentalists & Tea Party members. Photo courtesy of David McFatridge

The ‘sleeper’ issue of shale gas extraction is waking up; and the energy industry is not happy to have sunlight detailing the adverse effects of eminent domain on private property rights.
We are seeing a renewed focus on eminent domain “taking” – in all its variations:
  • Two courts in Texas have recently ruled in favor of landowners vs. energy & pipeline companies.  One involves an appeals court reinstating a restraining order on TransCanada for its Keystone Pipeline project.  Though such legal victories can be short lived, one Texan observed, “This is pretty big for Texas!” 1
  • New Texas statewide coalition for private property rights is supporting landowners in the path of the Keystone XL pipeline there.  The coalition includes environmentalists and Tea Party conservatives who say the pipeline project tramples property rights and endangers water supplies in East Texas. 2
  • Challenges are also developing to Texas Rule 37, which landowner advocates say “takes away the mineral owner’s right to negotiate a fair and equitable lease.”
  • The U.S. House passed Congressman James Sensenbrenner’s (R-WI) Property Rights Protection Act (H.R. 1433).  The House bill enjoyed bipartisan support including Representatives Maxine Waters (D-CA), who is a co-sponsor with Sensenbrenner; Sheila Jackson Lee (D-Texas) and Lamar Smith (R-TX).  It now goes to the Senate.3

The Property Rights Protection Act is a start to correcting the abuses of eminent domain – but only a start, because it addresses just part of the problem referred to as “economic development takings.”  The infamous example of this was the 2005 Supreme Court decision on Kelo vs. New London, Connecticut. 4

3rd Rail – Natural Resource Takings

The new House Bill does not address the “third rail” of eminent domain takings, known as “natural resource development takings.”

This is the form of eminent domain taking where government and energy companies join to seize private property rights (surface and/or subsurface) for gas/oil pipelines, compressor stations, underground nat gas storage reservoirs and more.

I call it the third rail of eminent domain because, to date, even property rights advocates like the Institute for Justice (which helped take the Kelo case to the Supreme Court) decline to step up to natural resource development takings because, they tell me, of the “public use” interpretation of the courts.

Not so at the grass roots level where there is increasing demand for change.  From Texas to New Jersey, citizens are challenging the domestic energy cartel comprised of government and industry.

Domestic Energy Cartel

It is not stretching a point to say that eminent domain puts landowners in a face-off with the equivalent of a cartel comprised of energy companies and government, because the power of eminent domain allows corporations – backed by government – to control pricing and competition (i.e., “just compensation” and what constitutes “public interest”).  By definition, that is a cartel.

This is not remotely connected to free-market capitalism.

Private property owners do not have much, if any, leverage when it comes to negotiating “just compensation” (the sound of laughter is coming from the energy companies).

This profitable power of “taking” is why energy companies want “forced pooling” in Pennsylvania; and why New York State has “compulsory integration.” Texans who value their property rights must deal with “Rule 37,” another variation of eminent domain by which government regulators permit gas & oil companies to seize mineral rights from private property owners.

Texas Coalition for Property Rights

Texans are fighting back.  According to a media advisory issued by the Coalition for Private Property Rights:

“’Texas politicians talk tough on eminent domain, but with Keystone we have a pipeline acting as a ‘common carrier’ and bludgeoning private property owners with eminent domain when there’s a real question whether it meets the legal requirements to do so,’ said Debra Medina, former Republican gubernatorial candidate and director of We Texans.”

Last month, the Coalition held press conferences in Dallas, Houston, Austin and San Antonio.  As reported by the Dallas/Fort Worth Star-Telegram (emphasis added): “… the [Keystone XL] pipeline dispute seems certain to reopen a legislative debate over eminent domain powers, which governmental entities and so-called common carriers such as utilities and pipelines use to acquire land for public projects after compensating the owner.”  (Energy companies are laughing again.)

Calvin Tillman, former mayor of DISH, Texas, told this writer that property rights abuse is what unifies the Coalition.  These groups include:  We Texans, Independent Texans, Texans for Accountable Government, and Texans Uniting for Reform and Freedom.

Texas Rule 37

DISH, Texas, is a small community that sits atop the Barnett Shale area, near Fort Worth. Tillman has 5 years of experience dealing with the energy industry and regulators as an elected official in DISH, including two terms as mayor.

In a statement he released on the subject of Texas Rule 37, Tillman says: 5

“The utilization of the Rule 37 exception takes away the mineral owner’s right to negotiate a fair and equitable lease.  Furthermore, it is being used to intimidate property owners into signing leases that solely benefits the production company.”

He continues:  “Rule 37 does not encourage a free market, with a competitive bid process.… because mineral owners are constantly threatened with ‘If you don’t sign for x dollars, we will take your minerals for free.’  How are you supposed to negotiate a ‘fair market price’ under those conditions?”

Finally, Tillman comments on the other half of the domestic energy cartel – government regulators in Texas (emphasis added):

“The State of Texas has allowed this abuse for far too long.… The three Railroad Commissioners take large amounts of campaign contributions from the very companies they are transferring this property to.  … this gives the distinct impression of crony capitalism, not the free market system we expect in Texas.”

Links & Resources

1 Two recent Texas court decisions related to private property rights & eminent domain:

  • Court of Appeals, 6th Appellate District for the State of Texas – March 2, 2012, No. 06-12-00026-CV; RE:  The Crawford Family Farm Partnership:  “Now, therefore, it is ordered that TransCanada Keystone Pipeline, L.P., is restrained from entering on the Crawford Family Farm Partnership and from performing any and all on-site activities that disturb the surface or subsurface of the land, pending this Court’s determination of the petition for writ of mandamus or further order from this Court.”  Pdf file of Appellate decision:  Court_of_Appeals_Order[1]   
  • Supreme Court of Texas – March 2, 2012, No 09-0901; Texas Rice Land Partners v. Denbury Green Pipeline-Texas.  In its Conclusion, the Texas Supreme Court states:  “Pipeline development is indisputably important given our State’s fast-growing energy needs, but economic dynamism – and more fundamentally, freedom itself – also demand strong protections for individual property rights.”  A copy of the 18-page decision can be downloaded at this link: http://stateimpact.npr.org/texas/2012/03/02/texas-supreme-court-reinforces-denbury-decision/

2 Texas becomes a battleground in Keystone XL pipeline controversy, by Dave Montgomery, Dallas/Fort Worth Star-Telegram, February 21, 2012 – http://www.star-telegram.com/2012/02/21/3752596/texas-becomes-a-battleground-in.html

3 House votes to overturn Supreme Court Decision on eminent domain, by Pete Kasperowicz, THE HILL, February 28, 2012 – http://thehill.com/blogs/floor-action/house/213129-house-votes-to-overturn-supreme-court-property-rights-decision

See also:

  • Property Rights Protection Act (H.R. 1433) – now referred to Senate – text of bill:

http://thomas.loc.gov/cgi-bin/query/F?c112:4:./temp/~c112YJt8wH:e533:

  • Congressman’s Sensenbrenner’s (R-WI) website for comments:

http://sensenbrenner.house.gov/News/DocumentSingle.aspx?DocumentID=282349

4 Kelo v. City of New London, Wikipediahttp://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

5 Oil and Gas Companies Are Allowed to Take Privately Owned Mineral Interests Without Compensation, Statement on Texas Rule 37 by Calvin Tillman, Former Mayor of DISH, TX.  February 2012.   Texas Rule37

NOTE:  This article is cross-posted on the Accountability Central website at this link:   http://www.accountability-central.com/voices-featured-commentators-and-bloggers/mike-benard-columns/  Accountability Central is part of the Governance & Accountability Institute, Inc.

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