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Court told Keystone pipeline fails common-carrier test

BEAUMONT, Texas -- TransCanada faces court arguments from Texas landowners that its plans for the Keystone XL pipeline to transport Canadian tar-sands oil to coastal refineries don't give it the right to condemn their property.

One farmer, in an appellate hearing today in Beaumont, Texas, seeks to build on a state Supreme Court decision and what may be a groundswell of support for property rights and environmental protection in a state whose laws and courts have historically accommodated the oil and gas industry.

David Holland, whose cattle and rice farm lies next to a cluster of refineries, argues TransCanada doesn't qualify as a common carrier under state law and doesn't have a right to take an easement for the pipeline.

"Someone just can't avail themselves of the extraordinary power to take someone's property unless you can prove you fit in with the statutory scheme," Terry Wood, Holland's lawyer, told the appellate panel. "TransCanada's position seems to be as long as we say it with a lot of conviction, say it repeatedly and say it loudly, we should be able to avail ourselves" of condemnation powers.

Lawsuits by four landowners constitute the last hurdle blocking the pipeline's southern leg from Cushing, Okla., to the Gulf Coast. For the northern leg across the Canadian border, the Calgary-based pipeline and power company needs approval from the Obama administration, which has delayed a decision amid environmentalists' opposition.

"There's a lot of contemporary salience" for the landowners' fight, Lynn Blais, who teaches environmental and property law at the University of Texas in Austin, said in a phone interview. "This is a property-rights state. But while the courts will be sympathetic, I don't know whether the landowners will win. These are two of the most important interests to appear in court in Texas -- property owners and the oil industry."

Holland is trying to persuade the state appeals court to reverse a lower-court ruling accepting TransCanada's contention that it qualifies as a common carrier and therefore is allowed to take land through eminent domain for a pipeline easement.

"I've been told from the beginning that I would lose, that no landowner ever beats the pipeline companies in Texas," Holland said in a phone interview. "But the abuse has simply gotten so bad that landowners are not taking it any more."

A trial court ruled that TransCanada could start installing the pipeline while Holland appealed. Landowners, some of whom also claim the pipeline doesn't qualify as a common carrier under state law, so far have failed to stop construction of the 485-mile southern leg.

"What's at stake here is whether the state should allow a public agency to allow condemnation for private gain," Tom Smith of Public Citizen, a consumers' rights advocacy group, said in an email.

"TransCanada has yet to prove to the court that they are transporting the product for the public good or for the public for hire as required by law."

Pipeline companies have been accustomed to "checking the box" on a state regulatory form to claim common-carrier status without having to prove it, said Edward Vassallo, a Dallas property-rights attorney.

"Over time, many courts made it the rule, rather than the exception" by granting eminent-domain power to any pipeline, utility or school that requested it, Vassallo said.

"We may start to see the pendulum swinging back."

David Dodson, a TransCanada spokesman, said before Thursday's hearing that the company has met all legal requirements to prove Keystone is a common carrier.