The Energy Law Blog : Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

By Emma J. Hinnigan

In ExxonMobil Pipeline Co. v. Union Pacific Railroad Co., 08-2347 (La. App. 1. Cir. 5/13/09), the First Circuit held that ExxonMobil was not entitled to expropriate land owned by Union Pacific because the expropriation was not for a public purpose. ExxonMobil wanted to build an access road so that it could perform routine service and maintenance on one of its ethylene pipelines. Under Louisiana law, a common carrier does have the right to expropriate private property for use in its common carrier business. However, to exercise this right, the common carrier must prove that the expropriation is for a public and necessary purpose. For there to be a public purpose, there must be a general public right to a definite use of the property, as distinguished from the public benefiting due to property being used by a corporation or an individual. The court held that ExxonMobil failed to prove that the expropriation served a public purpose because only ExxonMobil would be able to use the access road due to a locked gate. Further, the routine inspection and maintenance of such a pipeline does not promote the health, safety and morals of the public, which is typically considered a public purpose. Judge Kuhn dissented. In his dissent, he explained that the expropriation of private property to perform routine service on a pipeline does serve a public purpose. He further noted that ExxonMobil did not have to prove that the public would have direct use of the access road to establish a public purpose.
 

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by Kelly Becker

In Barasich, et al. v. Shell Pipeline Co. LP, et al., 2008 U.S. Dist. Lexis 47474 (E.D. La. 6/19/08), at issue was, inter alia, whether a group of commercial oyster fishermen could bring a class action against a group of defendants that owned land-based storage tanks or pipelines that burst as a result of Hurricane Katrina, causing a release of crude oil that allegedly damaged the aquatic wildlife, estuaries, and plaintiffs’ interest in their oyster leases. At the outset, the court reaffirmed its earlier ruling that the plaintiffs failed to state a claim for alleged damages to non-proprietary State-owned natural resources, including marine estuaries. Thus, the only question was whether the plaintiffs could pursue a class action for the remaining claim of purported damage to their individual oyster leases. 

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In Davis v. Provost, 2007-1519 (La. App. 3 Cir. 4/2/08), -- So. 2d --, the Louisiana Court of Appeal for the Third Circuit reinforced an earlier holding that 1977 La. Acts No. 514 § 1, which allowed the acquisition of a predial servitude through acquisitive prescription, was not retroactive. In Davis, the plaintiffs filed a Petition for Declaratory Judgment seeking access to their property by crossing over a bridge that the defendants had allegedly locked. One of the defendants filed a reconventional demand, alleging that he had exercised for over thirty years a right-of-way over the bridge to gain access to his sugarcane field. The trial court agreed and ruled in favor of the defendant.

            The court of appeals vacated and remanded. The court of appeals first noted that the Louisiana Civil Code of 1870 explicitly disallowed the acquisition of a predial servitude through acquisitive prescription. Not until January 1, 1978, when 1977 La. Acts. No. 514 § 1 became effective, could someone obtain a predial servitude through acquisitive prescription. Relying on its earlier holding in Griffith v. Cathey, 99-923 (La. App. 3 Cir. 2/2/00), 762 So. 2d 29, the court held that 1977 La. Acts No. 514 § 1 was not retroactive. Because the defendant filed his reconventional demand on May 17, 2006, the court held that thirty years had not passed, and the trial court had erred in ruling in favor of the defendant. The court remanded for further factual findings.

            The ruling may have a significant impact on pipeline servitudes and their ownership. 

            To read the full opinion, click here.

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By Katie Caswell

In Rose v. Tennessee Gas Pipeline Co., plaintiff, owner of an undivided interest in property across which Defendant Tennessee Gas Pipeline Co. (“TGP”) held a pipeline “easement” or “right of way” obtained in an expropriation proceeding, appealed from the district court’s dismissal of her claims against TGP as time barred by prescription. 2007 WL 4111191 (5th Cir. Nov. 20, 2007). The United States District Court for the Eastern District of Louisiana concluded that TGP did not owe plaintiff a duty to maintain the canal it constructed pursuant to the 1964 expropriation judgment. As a result, the district court held that no continuing tort was at issue and the case therefore prescribed. On appeal, plaintiff argued that TGP did have a continuing duty to maintain and thus the prescriptive period was interrupted. TGP asserted that because it was granted a “right of way and easement” pursuant to the expropriation proceedings rather than by means of a conventional agreement, no servitude existed and thus Louisiana’s suppletive law on servitudes was not implicated. The 5th Circuit disagreed and concluded that the expropriation judgment did in fact create a servitude, implicating Louisiana’s suppletive rules; specifically, that the dominant estate owner “must not ‘aggravate’ the condition of the servient estate.” In reaching this conclusion, the 5th Circuit found that the use of the common law terms “right of way” and “easement” in the expropriation judgment did not work any substantive change in the law because it is well-know that “myriad common law terms have seeped interstitially into Louisiana judicial opinions…” Further guiding the 5th Circuit’s opinion was the conclusion that the interest granted to TGP met the definition of a servitude. Moreover, TGP only resorted to expropriation when it was unable to negotiate a conventional servitude with the plaintiff’s predecessor-in-interest. Therefore, the 5th Circuit held that Louisiana’s suppletive rules applied and if implicated by plaintiff’s claims, such rules would impose duties upon TGP. As such, the 5th Circuit remanded the case to the district court to determine whether the judgment of expropriation disposed of any applicable provisions or whether the parties did or did not contract out of Louisiana’s suppletive law on servitudes; specifically, whether TGP was under a continuing duty to conduct preventative maintenance with respect to the width of the canals in which its active pipelines lay so as to prevent the erosion on plaintiff’s property. 

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In 2002, Jupiter Energy Corporation ("Jupiter") applied to the Federal Energy Regulatory Commission ("FERC") for a determination that two of its pipelines in the Gulf of Mexico were not for the primary purpose of transporting gas -- a purpose within the FERC's regulatory jurisdiction -- but were instead for the primary purpose of gathering gas -- a purpose beyond the FERC's regulatory jurisdiction.  Relying on a 1966 order that the pipelines in question were a transport system, the FERC determined that the pipelines were for the primary purpose of transporting gas.  Jupiter appealed, and the Fifth Circuit vacated and remanded. 407 F.3d 346 (5th Cir. 2005). 

On remand, the FERC arrived at the same conclusion, and Jupiter again appealed.  Once again, the Fifth Circuit vacated and remanded. No. 05-61173 (5th Cir. March 15, 2007).  The panel concluded that several features of the pipelines weighed in favor of the finding that their primary purpose was the gathering of gas.  Specifically, the panel held that "[t]he glaring shortfall in the Commission's order is the lack of a reasoned explanation to support its disregard of the length, diameter, operating pressure, and non-physical factor's of Jupiter's system, which all weigh in favor of a gathering function."

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In 1988, FERC, pursuant to the Natural Gas Act of 1938, issued Standards of Conduct to regulate natural gas pipelines' interactions with their marketing affiliates.  The Standards required pipelines and ther marketing affiliates to function independently and imposed restrictions the the sharing of information between them.  In 2004, FERC extended the reach of the Standards so that they applied to the pipeline companies' relationship not only with marketing affiliates but other entities in the industry. 

In National Fuel Gas Supply Corp. v. Federal Energy Regulatory Commission, 468 F.3d 831 (D.C. Cir. 2006),, the D.C. Circuit struck down the order extending the reach of the Standards of Conduct.  The court found that "FERC's asserted factual premises d[id] not withstand scrutiny and that the Order [did] not reflect the reasoned decisionmaking required by the Administrative Procedure act."

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