Two Loud Cheers for the Texas Supreme Court for Saying “No!” to Private Condemnation

The news from Texas is that the state supreme court has ruled against Denbury Resources, a privately owned oil producer that sought to use eminent domain in order to take a right of way for a carbon dioxide pipeline. Denbury produces oil from wells in Texas but the carbon dioxide (used to pressurize underground oil deposits to aid in efficient oil extraction) comes from Louisiana.

In Texas,  pipelines have the power of eminent domain, when they are “common carriers,” meaning that their pipelines are available for use by others who want to use them to transport fluids or slurries to another location. So far, so good — that kind of  pipeline is sort of like a railroad: anybody can pay the tab and ship its freight.

But in this case, the pipeline, owned by Denbury, would not do that. It would only transport stuff owned by Denbury and transport it to oil wells also owned by Denbury. So how can Denbury be a “common carrier” and how can its use of the pipeline be “public,” asked the Texas Supreme Court. Good question. The short answer: If you want to wield the awesome power of eminent domain because you are a “common carrier,” you have to be one — i.e., there has to be some meaning to the word “common.” Here, there was none.

The Texas Supreme Court decision can be read as a simple case of statutory construction. The enabling statute grants the power of eminent domain to common carriers, so if you are not one of them, you don’t get the power, and courts are not required to assume otherwise just because the pipeline folks checked a box labelled “common carrier” on an application form used by the Texas Railroad Commission (which regulates such stuff). That seems simple enough. As the old, politically incorrect joke punchline used to put it: no tickee – no washee. But it really isn’t so simple because historically, going back at least to the 19th century, American courts have been most reluctant to actually examine the issues placed before them in right-to-take cases and have indulged in presumptions favorable to condemnors to an astonishing degree — i.e., the U.S. Supreme Court went so far at to assert that a condemnor’s decision to take private property is “well nigh conclusive,” without explaing why that is so.

Historians have shown that this judicial attitude arose in the railroad construction era (and even before then) because judges thought that development of the country was a good thing that should be encouraged. In theory, that may be OK, but their Lordships never explained, either then or now, why this pro-development policy should be pursued on the backs of innocent citizens who have the misfortune of winding up in the path of some public or not-so-public project, especially when its economic outcome promotes and enhances the economic wellbeing of the condemnor.

Moreover, it was one thing to embrace this approach when takings were few and took mostly narrow strips of vacant farm land for railroad rights of way. But it became an altogether different story in mid-twentieth century, when urban redevelopment takings became a process of mass displacement of urban dwellers from their homes and businesses by the hundreds of thousands per year. Judges tell us that they must be ever watchful in adjusting the common law to changing social conditions in society. So why not adhere to this salutary policy in the field of eminent domain?

If it’s a good thing to generate wealth — and it is — no rational or moral reason appears why the government should lend its sovereign power to A so he can forcibly take the land of B, and use it to make oodles of money, some of which presumably (at least in theory) will trickle down to the community at large, while B gets undercompensated in the name of “just” compensation.  It seems outrageous to us for the courts to formulate a rule of compensability whereby B’s business can be destroyed without compensation, while the prosperity of A’s business is enhanced in the process. To us it seems positively indecent to compel B to thus subsidize A without being indemnified for all economic losses caused by the taking. Whatever that may be, it is neither “public” use, nor “just” compensation.

The Texas Supreme Court’s decision, rare as it is, is an instance of a state court taking a real look at the exercise of the power of eminent domain and, instead of just rubber-stamping the condemnor’s plans, asking if the statutory words invoked by the would-be condemnor actually match reality. And that is not a bad thing. On the historical record, it seems justified to draw at least a tentative conclusion that some state court judges have reacted to the outrageous Kelo decision the same way as the great majority of the population — they concluded that Kelo smells to high heaven, particularly when one reflects on the fact that infliction of this outrage on the hapless condemnees turned out to be for nothing — the City of New London gave the Supreme Court a line of what turned out to be BS about its plans, namely, that the taking for the Fort Trumbull redevelopment project would work economic and social wonders for poor, needy New London, even as New London was getting a favorable rating on its general obligation bonds for its sound economy and tax revenue flow. And so, the Fort Trumbull redevelopment project wasted somewhere north of $100 million (a minimum of $80 million) with nothing, absolutely nothing to show for it.

So let’s have two cheers for the Texas Supreme Court. Why only two instead the traditional three? Answer: because that court is yet to drop the other shoe and bring some realism to its fomulation of what constitutes “just compensation.” After all, the constitutional framers must have had something in mind when they included that phrase in the text of the Fifth Amendment. So stay tuned on that one, but bring some snacks to nibble on as you wait — that may take a long time.