$1 Billion of Border Wall Funding Blocked by Federal Judge

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Image Courtesy of Getty Images

Judge Haywood Gilliam, a U.S. District Court Judge based in Oakland, California put a stopper in the President’s border wall ambitions when he issued a preliminary injunction to stop $1 billion of border wall funding.

The money, which came in the form of a now halted transfer of funds from the Pentagon’s counterdrug funding, would’ve been used to expand and enhance border barriers. Further, though the possibility is untested and therefore speculative, the order may also jeopardize an additional $1.5 billion the administration was planning to divert. So far, the President’s Office had planned to use $8.1 billion for border wall purposes.

Judge Gilliam, an Obama nominee, issued the order on the reasoning that the administration’s diversionary transfer of funds was unconstitutional because its legal authority to use the funds was restricted to addressing “unforeseen” needs. Naturally, the government argued that the need to build the border wall was unforeseen, an argument that Judge Gilliam rejected.

In his decision, the Judge pointed to the numerous requests the administration had made for border wall funding as evidence that the project was anything but unforeseen. He also cited recent news events such as the lengthy government shutdown earlier this year, which resulted in $1.375 billion for border-wall construction. He further opined that permitting the administration to divert counterdrug funds in light of numerous Congressional funding denials would violate fundamental notions of separation of powers.

The President, predictably unhappy with this legal result, vowed that the appeal would be swift.

The ruling was the result of a lawsuit brought jointly by the Sierra Club and the Southern Border Communities Coalition who sought to legally oppose the President’s wall. However, though the order constitutes a setback, there are limits to Judge Gilliam’s decision. For example, the order only prohibits construction operations from occurring at certain border zones in the states of Texas and Arizona. Further, the order does not stop the President’s Office from diverting funding from alternative sources towards border wall construction.

Though the reasoning behind Judge Gilliam’s decision was primarily to ensure the constitutional separation of powers, the order has the short-term effect of halting wall construction which provides relief for landowners whose property will be bisected by the wall. Landowners should be aware that this order does not immediately impair the government’s ability to seize land via eminent domain. Therefore, individuals with property at the border should stay current on legal developments concerning wall construction.

Written by Christopher Chan

New Executive Orders Seek to Shorten Pipeline Approval Process

 

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Image Courtesy of Chip Somodevilla/Getty Images.

President Trump issued two executive orders last month with the intent of speeding up the pipeline permitting process. The orders are the “Promoting Energy Infrastructure and Economic Growth” and the “Issuance of Permits with Respect to Facilities and Land Transportation Crossings at the International Boundaries of the U.S.” The first attempts to stop state governments from prohibiting pipeline development by applying authority created by Section 401 of the Clean Water Act. The second states that the authority to give presidential permits for trans-border pipelines is held by the President and is no longer delegated to the State Department.

The orders appear consistent with the President’s often professed goal of reducing approval times for proposed projects.

Though the Promoting Energy Infrastructure order contains a variety of points designed to promote the Administration’s energy policy, its chief purpose is to curtail the ability of state governments to use Section 401 to block energy projects. Under the section, corporations need state certifications before constructing energy projects such as pipelines within the state’s borders. This need for certification is persists even when federal authority for the project has been granted.

A recent trend involving state activity around Section 401 has been the denial of energy permits on the grounds of water quality. New York state has denied requests to approve several pipelines under 401 for example. A coal export terminal proposed in Washington state was also denied on Section 401 grounds.

Primarily, the order instructs the Environmental Protection Agency (“EPA”) to revise its guidance to states regarding Section 401. Specifically, the order instructs the EPA in the following ways:

– Must consult with states, tribes, and federal agencies concerning existing guidance on Section 401, taking into account appropriate inclusion factors for certification, and the scope of information necessary for states and tribes need to act on a request

– Must issue new guidance within 60 days of the order

– Must publish the proposed revisions within 120 days

– Must finalize new rules within 13 months of the order

– After finalization of the rules, must conduct interagency review with each agency that issues 401 permits

Though the text of the order is unambiguous, and the timelines for revision and implementation are clear and arguably aggressive, it’s still uncertain the extent to which the order can shift existing regulatory processes. The power of the state to review pipeline permits under 401 is statutory. Therefore, neither an executive order or EPA rules can shift the law. Congress can materially affect the statutes which create the power of state review under Section 401, but no legislation currently proposed is likely to interfere with the statute anytime soon.

The full extent of the President’s order will have to be evaluated at a later date. However, landowners in the path of proposed pipelines restricted by state approval under Section 401 may experience a shift in the statute’s implementation fairly soon.

Written by Christopher Chan

Texas Central Partner’s Houston to Dallas High-Speed Rail Project Derailed by a Leon County Judge?

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Image Courtesy of Wikipedia

As has been widely reported, Texas Central Partners (“TCP”), a privately owned, Dallas based company, has announced ambitious plans to build a 240-mile high-speed rail line (“HSR”) between Houston and Dallas. The project is estimated to cost $15 billion dollars and will use imported Japanese bullet trains to transport passengers between the two cities at airline-competitive speeds of around 300 km/hour. TCP estimates that the project will cut down on congestion and provide $36 billion in economic benefits to the State of Texas, including a $2.5 billion direct tax contribution. However, before any of these purported benefits are to materialize, TCP must acquire the land necessary to build the train, which is where the project has hit a snag.

In order to figure out which pieces of land it must acquire for the project, TCP needs to conduct surveys of various parcels to analyze them for suitability. To do this, it must enter private property along the train’s theoretical route. Landowners understandably, are less than enthusiastic about the prospect of a private company entering their land to size it up for purchase. Their unhappiness only deepens when they realize that if they are unwilling to sell, TCP may be able to use eminent domain to forcibly take the land against their will.

The issue came to a head recently in a Leon County courtroom, when Judge Deborah Evan of the 87th Judicial District Court ruled that TCP and its co-litigant, Integrated Texas Logistics Inc., couldn’t legally be considered a railway company, and therefore, didn’t have the power to survey private property. The ruling was a victory for the landowner-plaintiffs, Jim and Barbara Miles, who sued TCP to stop it from entering their land. Texans Against High-Speed Rail (“TAHSR”), an anti-HSR landowner organization believes the decision is a material setback for TCP. On the other hand, the company, which plans to appeal the decision, maintains that the judgment will not impede the progress of its plans.

Public pronouncements aside, the solution to the problem may not be as clear as each side is making it out to be. The fundamental problem is that two different judges have reached opposite conclusions about the TCP’s right to survey. Even as Leon County rules in favor of landowners, denying TCP the right to conduct surveys on private land, the 334th Judicial District Court in Harris County granted TCP the right to survey private land. The Harris County decision, handed down in 2017, came in the form of a default judgment signed by Judge Steven Kirkland. In it, the court held that TCP was a railroad company and therefore could enter private land for the purpose of conducting surveys.

It’s clear that the ability of TCP to survey land for acquisition, a critical link in its project development, has encountered tangible legal resistance. What this means for the HSR’s construction timeframes, or the fate of the project itself, remains to be seen.  With competing rulings from judges in two parts of the State, this survey issue will likely need to be resolved by the courts of appeal, and potentially, the Texas Supreme Court.

For those interested in more details concerning the use of eminent domain in Texas, the annual Houston-based eminent domain conference will be held July 18-19, 2019. For more information concerning location and registration, please see the following link: http://www.cvent.com/d/y6qlr8.

Written by Christopher Chan

New Session, New Bills – The 2019 Legislature’s Push for Eminent Domain Reform

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Image Courtesy of Texas Legislature Online

Texas landowner advocacy groups are working with State politicians to reform eminent domain. Eminent domain, though a deeply concerning issue for those affected and an important area of law in the context of the oil industry’s importance to the State economy, failed to receive serious treatment to address perceived shortcomings in its administration during the previous legislative session in 2017. A bill proposed by Sen. Lois Kolkhorst, R-Brenham that purported to improve the situation of landowners facing eminent-domain proceedings, ultimately got nowhere.

For 2019, landowner organizations have joined forces with legislators to attempt to bring eminent-domain reform to landowners. The Texas Farm Bureau (“TFB”), an advocacy group that represents the interests of farmers is among them. The TFB’s goal is to obtain meaningful protections for landowners in the current legislative session. Specifically, they have taken issue with deficiencies in the way initial offers for land acquisition, made by entities with the power of eminent domain, are valued. The TFB believes condemning authorities often “low-ball” landowners during the initial offer process, offering a price for the land significantly below fair market value. It would like to see legislation address the problem.

The TFB would also like private entities using eminent domain to obtain land to be required to hold public meetings. When a public entity such as the Department of Transportation uses eminent domain to acquire land for a project, it must also hold a meeting, open to the public, where its representatives will field questions and hear comments on its activities. Private entities are not currently required to adhere to this practice, a purported deficiency the TFB would like to see fixed.

Finally, under the current law, condemning authorities are not required to include minimum protections in their draft documents to obtain easements. Landowners can have these protections included, but they must be the initiating party. Due to a lack of parity in legal experience between condemning authorities and landowners, the net result is often that landowner’s rights are not fully realized in easements. The TFB would like to see legislation passed during this session that would require condemning authorities to include these landowner protections in the documents they draft.

House Bill 99 and Senate Bill 421 being sponsored by Rep. DeWayne Burns, R-Cleburn and Sen. Kolkhorst, represent the legislature’s most current attempt to rectify these concerns.  Firstly, the proposed legislation would prohibit a private entity from offering less than fair market value. If a private entity were found to act in a contrary manner, and provide a low-ball offer anyway, then it would be required to pay the difference between that offer and the property’s fair market value back to the landowner. The bill would also require private entities to hold public meetings on their activities, holding them to the same standard as public entities. Finally, the legislation would require condemning authorities to include a set of minimum landowner protections in the easements they draft.

Only time will tell if the Bills pass with these provisions intact. If they survive, however, landowners should consider it a win for their rights.

Written by Justin Hodge and Christopher Chan

Air Force Pollution Forces Farm to Liquidate

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Image Courtesy of Santa Fe New Mexican

The owners of Highland Dairy Farm (“Highland”) in Clovis, New Mexico are being forced to close down due to chemical contamination which has been sourced to a nearby Air Force Base. The farm is owned by Art Schaap, a 54-year-old, 4th generation dairy farmer in CurryCounty. The property was contaminated by a blend of chemical toxins known as PFAS that spread from Cannon Air Force Base. Though PFAS contaminations have been known to occur around military bases, this particular exposure is especially noteworthy because it is the first time PFAS toxins have directly threatened the United States’ food supply.

The widespread nature of the toxic exposure has caused Highland to close its doors. It has had to dispose of 15,000 gallons of milk, a volume roughly equivalent to 240,000 children’s lunch cartons. Its 4,000 cows, which have also been contaminated, cannot be sold for either their milk or beef, and the farm plans to exterminate them. The farm has also been forced to lay off all 40 of its employees, and its contaminated land is thought to be unsellable. More personally, Schaaf has expressed concerned for his health, as well as his wife’s, fearing that they may suffer life threatening consequences from possible exposure.

The Department of Defense (“DoD”) has reportedly known about the issue for years but has failed to make public disclosures. The Air Force also had knowledge of the danger of these chemicals, but likewise, failed to provide adequate warning. PFAS chemicals have been known to be toxic to humans and the environment since 2000. Exposure to these toxins have been linked to cancer, liver problems, thyroid disease, immune system damage, high cholesterol, and many other health problems. Last year, the DOD acknowledged that groundwater around 121 military bases has been contaminated.

PFAS is the abbreviation for a family of family of toxic compounds known as per-and-polyflouralkyl substances. While there are thousands of chemical sub-types within the family, the most widely understood are the perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA) variants. However, the less common variants are also harmful. What makes the PFAS chemicals so dangerous is their ability to harm a wide variety of biological systems, even if exposure levels are low. The concern is that the environmental harm won’t just end at Highland farms. Also located closeby is the Ogallala Aquifer, the nation’s largest Aquifer, which stretches 174,000 miles and touches parts of eight states. If the contaminants infiltrate the water, the Aquifer’s sheer size could rapidly spread the poison over a large geographic area.

In causing Highland to close, the PFAS contamination has harmed New Mexico’s dairy business, one of the state’s most important economic sectors. Indeed, the dairy industry is the leading agricultural industry in the state and generates more than $1.3bn annually. Curry County, where Highland is located, is home to 25 dairies alone, which make it one of the top 20 counties for milk production in the nation. In turn, these 25 farms host a total of ~82,000 milk cows producing 1.9 billion pounds of milk.

The problem has gained the attention of New Mexico lawmakers. Senator Tom Udall has met with Schaap and other dairy farmers. Governor Michelle Grisham, Congressman Ben Lujan, and Senator Martin Heinrich have called for deeper EPA involvement. Specifically, they want federal regulations and drinking water standards for PFOS and PFOA chemicals developed and enforced. The EPA has stated its plan to regulate the chemicals but has not proposed language that would require immediate cleanup, something which has not gone unnoticed by residents.

Because the government’s action stripped the Schaaps’ dairy of its value, they may have standing to sue the Federal Government for damages. Such a case would proceed under an inverse condemnation theory, a sub-type of eminent domain which applies to instances where the government has taken private property but has failed to pay the just compensation required by the Constitution’s 5th Amendment. It is still unclear how the Schaaps’ will choose to proceed. But given the near-zero salvage value of their farm, an inverse condemnation action may be one of the few options available in the effort to recover some of Highland’s value.

Written by Christopher Chan

Tragedy: Deadly Explosion Highlights Dangers of Pipeline Sabotage

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Image Courtesy of Yahoo News

A community in Mexico is reeling after the deadliest pipeline explosion in recent memory claimed over a hundred lives and injured dozens more. At the end of last month, a pipeline located in a poverty-stricken region of the State of Hidalgo was sabotaged causing a massive explosion. The pipeline tampering was carried out by a gang of fuel thieves who drilled a series of holes in the hope of stealing fuel. Motivated by the possibility of reselling stolen fuel on the black market, roving gangs have been a thorn in the side of the Mexican energy economy for years. The sabotaged pipeline is owned by the government-controlled oil company, Petroleos Mexicanos, also known as Pemex, and connects to the Tula refinery located north of Mexico City.

Illegal pipeline tampering, a dangerous, but lucrative criminal practice has been a persistent problem in Mexico. Historically, however, it was a relatively small issue, and both government authorities and energy companies had largely left the problem unaddressed. Energy companies had gotten used to writing off the thefts as business costs. However, the scope of the problem has worsened dramatically in recent years with fuel thefts rising at a dramatic rate. Last year, there were over 12,500 illegal taps, an increase of 27 times compared with the previous decade. Last year alone, the value of stolen fuel resold on the black market aggregated to over three billion USD.

In response, the new President of Mexico Andres Manual Lopes Obrador has vowed swift justice. The government has implemented a plan of making strategic fuel diversions with the goal of eliminating transport through the most frequently targeted pipelines. However, this approach has manifested a serious downside. Diverting fuel away from certain pipelines means that a portion of the transport infrastructure is effectively underutilized. This means that the remaining portion of the infrastructure must compensate. Unfortunately for energy consumers, the logistics of the governments’ plan have not proceeded smoothly. The strategic underutilization has actually resulted in slower deliveries which has created fuel shortages. The lines at fuel pumps have multiplied in length. The practical effect of the governments’ plan is that the incentive to steal fuel has become stronger than ever.

In addition to the diversionary scheme, the government has deployed 4,000 military personnel to address the problem. The President has also enacted an initiative to move the country away from a pipeline dependent transportation infrastructure. He has vowed to allocate government funding to increase the number of fuel delivery trucks by 25%. Currently, it is too early to tell what the long-term effectiveness of these measures will be.

Part of the tragedy involving the Pemex line is fuel shortage related. The pipeline had actually been shut down as part of the government’s strategy to prevent theft. However, the pipeline had been reactivated mere hours before the tampering. Shortly after criminals breached the pipeline, hundreds of villagers from the nearby town of Tlahuelilpan, flocked to the scene, lured by the prospect of free gasoline in the midst of the shortage. Video taken right before the blast show the crowd of villagers, including whole families, flocking to the breach with containers of various kinds, hoping to collect some of the fuel. The government responded quickly, dispatching military units to control the crowd, but had limited success. Two hours after the breach was made, a spark or flame ignited the pressurized fuel, causing a catastrophic explosion. The resulting fire took four hours to extinguish. Investigators speculate that a spark generated by static electricity of clothing is what ignited the fuel.

The initial blast left 79 dead and 81 injured. In the month since the incident, the death toll has risen to over 130, with more than a dozen still in critical condition. The staggering numbers quickly overwhelmed local emergency services, and many of the injured were transported to Galveston, Texas for treatment. The Pemex blast is the deadliest explosion in recent memory, surpassing the 2010 explosion in San Martin Texmelucan de Labastida, a city in the State of Puebla, which claimed almost 30 lives. The 2010 blast was also caused by pipeline tampering. In the United States, pipelines are actually considered a safer alternative to transporting volatile materials compared to trucks. In addition to being prone to leaks, trucks carry the risk of exposing combustible materials to vehicular collisions. However, the U.S. is largely free from the type of highly organized criminal elements that openly seek to undermine active pipelines in Mexico. What this explosion demonstrates is the extreme damage that a pipeline breach can create, regardless of the cause.

Written by Christopher Chan

Advances in Pipeline Technology Give Rise to New Threat: Cyberattacks

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Image Courtesy of the U.S. Government Accountability Office

There are currently some 2.7 million miles of pipeline transporting hazardous substances across the United States. These pipelines often run through multiple states and expose both remote areas and highly populated urban areas to accidents, operating mistakes, and intentional harm caused by hostile actors. Threats falling in the last category have traditionally been limited to physical attacks on pipeline integrity in attempts to cause harmful breaches. However, the high technology age has given rise to a new spectrum of technologically driven threats that can be initiated through purely electronic means. Safeguarding the nation’s pipeline infrastructure against these threats is an ongoing task requiring methodical and meticulous analysis.

In addition to being a vital part of the US economic system, the energy sector is a popular target for hostile factions seeking to harm the United States and her interests. Between 2013 and 2015, attacks on the Energy Sector accounted for 35% of a total 796 reported critical infrastructure cyber incidents. The task of providing oversight of the various government agencies, pipeline operators, and third-party security elements that constitute the nation’s pipeline security system falls to the Department of Homeland Security’s (“DHS”) Transportation Security Administration (“TSA”). The TSA administrates oversight through its Pipeline Security Program (“PSP”), the nation’s effort to monitor the overall status of pipeline security.

Operators of interstate pipelines transporting hazardous substances such as oil and natural gas must follow TSA guidelines to prepare against physical and cyber threats. Troublingly, a 92-page report published on December 18, 2018 by the US Government Accountability Office (“GAO”) has highlighted a number of weaknesses in the TSA’s current security scheme. The report also provided a number of recommended improvements that, if implemented, could enhance the program’s effectiveness. The report was inspired by the data-driven realization that pipelines increasingly utilize networked computer systems in their operation. These computer systems, like most others, are vulnerable to cyberattack, providing potential pipeline saboteurs an additional avenue of attack.

One area of weakness the report identified in the current guidelines is ambiguity in the definitions used to describe critical pipeline facilities. A pipeline system is often made up of multiple component parts. In addition to the pipeline itself, a system may include pump stations, refineries, and storage facilities. In theory, critical facilities, facilities essential the operation of the system, should be identified and reported for further risk analysis. The GAO report found that under the current guidelines, 34 of America’s top 100 critical pipeline systems deemed as “highest risk” have not identified any critical facilities. The report attributes this shortcoming in reporting outcomes to the guidelines’ inability to precisely define critical facilities. Therefore, the current analysis of risk and vulnerability of critical facilities is incomplete.

The GAO report also found that the TSA, which conducts pipeline security reviews, has not conducted these reviews in a methodical or consistent manner since 2010. Rather, the reporting frequency of the TSA fluctuates wildly from 2010 to present day. The GAO report generally attributes the TSA’s failure to consistently administrate security reports to shortcomings in staff. Between 2010 and 2018, the number of staff members in the TSA’s pipeline security branch has fluctuated between 1 and 14 members. The report also discussed a failure to update risk assessment methodology since the metrics were first established in 2014. As a result, the metrics are out of date and fail to reflect current threats to pipeline operators.

Understandably, the last few points may read as a lot of ruckus over what sounds intangible. How does the secure operation of pipelines link with academic distinctions in reporting systems? The significance of these shortcomings becomes easier to place if we remember to think of the threat to pipeline security as being digital, as well as physical. Even a few years ago, before computers were so heavily integrated into pipeline systems, attacks on America’s energy supply by hostile factions had to be physical. Security was therefore a matter of preventing criminals from cutting open pipes with blowtorches or from shutting down a pump station by cutting the powerline. Now, attacks can be launched against pipeline computers from remote locations at any time. For example, a hostile foreign power could hack into a US pipeline terminal and disrupt energy delivery from thousands of miles away.

Thus, dealing with these threats is more complicated than setting up barbed-wire fencing and conducting regular car patrols. Successfully stopping attacks on pipelines in the digital age requires the implementation of a robust security system, built from reliable data, and maintained with meticulous and regular updates. That’s why definitions and reporting frequency are crucial. As the GAO points out, the governmental agencies in charge of this security have plenty of work ahead of them to make these systems fully effective in the age of cyber-attacks.

For landowners whose property is already burdened with a pipeline, or for landowners facing the prospect of a pipeline being installed on their land, the GAO report highlights the very real evolution in the threats that pipelines are vulnerable to. The digital revolution, with all it’s marvelous advances, has provided terrorists, environmental extremists, and hostile foreign powers a new channel through which they can sow chaos and destruction by attacking America’s energy systems. Landowners forced to bear this additional risk should ensure they are adequately compensated for their burdens.

 

Written by Christopher Chan

Save the Butterflies: The Border Wall’s Unusual Foe

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Image Courtesy of Travel Notes.

Though the prolonged government shutdown failed to produce the funding necessary to construct the entire border wall, a pre-existing allocation of $1.6 billion will fund 33-miles of border barrier, with a portion of the barrier built in Texas. Construction of the partial border barrier will be split between Federal and private lands. The pre-construction efforts of the Texas portion have given rise to an unusual opponent, the National Butterfly Center.

The National Butterfly Center (“Center”) is a nonprofit organization which owns roughly 100 acres of land in the City of Mission in Hidalgo County, South Texas. It purchased the land to create a preservation corridor for endangered species. The Center’s land is adjacent to the US-Mexico Border and is home to as many as 200 different butterfly species that migrate through the area at various times of the year. It is also home to roughly 400 different bird species, and a variety of land animals. The center has a variety of hiking trails for visitor use.

Maps produced by U.S. Customs and Border Protection place the wall on top of a pre-existing levee. As such, six miles of the wall will separate the Center’s land effectively slicing it into two distinct portions of 70-acres and 30-acres. The larger 70-acre portion of the property will be cut off from the rest of the center. In other words, 70% of the Center’s property will be behind the border wall. The latest design has the wall at 36 feet high, with an 18-foot concrete base augmented by 18 feet of steel bollards. The Center estimates that the government will bulldoze 200,000 square feet of land for the construction. The wall includes a 150-foot paved enforcement zone and will be fitted with cameras and flood lights. U.S. Customs and Border Protection and the Army Corps of Engineers have awarded a $145 million contract to SLSCO, a Galveston firm, to build the first installment.

The Center predicts that the construction will vastly disrupt the operation of its conservation efforts. In addition to the gross reduction in conservation land, the Center believes the wall will harm land animals in particular, who depend on their ability to freely move around the acreage for foraging and reproduction. However, some avian species, including the Ferruginous Pygmy Owl that only flies 6 ft. in the air, will also be impacted by the wall. The Center also believes the wall will create a flooding hazard by reducing the ability of water to drain, which could reduce the lands viability as a habitat. It has also expressed concern that the wall’s flood lights will affect nocturnal animal’s day-night cycles.

So far, the Center has been subjected to government surveyors who are measuring the land in preparation for construction. The Center was not given advance notice of workers entering the property, nor were they given notice that the contractors would begin cutting down trees. Though landowners do have protections regarding land seizures, Federal Law allows the Department of Homeland Security to bypass environmental restrictions. In fact, the current Administration waived the National Environmental Policy Act, the Endangered Species Act, and 26 other environmental statutes in order to expedite construction of the wall. Federal law also permits the Federal Government to take private property via eminent domain for public use. The resolution of these lawsuits can take years. Indeed, a number of eminent domain actions initiated by the Bush administration against private landowners for the first border wall project over a decade ago are still active. However, it should be pointed that the issue of possession, whether the government may be granted legal access to the property it seeks to acquire and begin construction,  is typically resolved within a matter of weeks after the filing of the lawsuit. The continued existence of outstanding lawsuits is largely due to issues over the amount of compensation owed, not whether the project itself can be built. In many cases, the project’s construction is completed long before the compensation amount owed is resolved.

The Center regards the possible use of eminent domain to build the wall as unconstitutional as well as contrary to its environmental aims and is determined to fight the government as long as they can. Because they are a non-profit organization, the Center has relied on volunteers and crowdfunding as a means to raise money for legal fees and have so far received ~$80,000 out of a target $100,000. The Center entered the legal battlefield against the Federal Government in December 2017 after contractors arrived on the Center’s property with chainsaws and heavy machinery. Over a year later, on February 12, 2019, the Center filed a restraining order against the Federal Government.

On February 14, 2019, U.S. District Court Judge Richard Leon ruled against the National Butterfly Center and dismissed its suit against the Federal Government. This ruling effectively renders the Center’s request for a temporary restraining order moot. Judge Leon found that the due process rights of the Center were not violated by the Federal Government’s actions.

Despite this major blow to the Center’s fight against the Federal Government, not all hope is lost. In the recently passed compromise spending bill, U.S. Representative Henry Cuellar added language protective of the Center. The compromise spending bill includes $1.375 billion for 55 miles of border wall but renders five cultural sites in the Rio Grande Valley “off limits” to construction of the border wall. These five cultural sites include the National Butterfly Center, the Bentsen-Rio Grande Valley State Park, the Santa Ana National Wildlife Refuge, La Lomita Catholic Church, and the tract of land soon to be home of the SpaceX commercial spaceport. Should President Trump sign the spending bill, the National Butterfly Center may be able to rest easy.

Written by: Christopher Chan and Graham Taylor

Update: The Permian Basin Fracking Boom is Here to Stay

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Image Courtesy of PLH Group

Advances in hydraulic fracturing, known more commonly as fracking, have given rise to a domestic energy revolution with global economic and geopolitical impact. As has been widely reported, the US has become a major exporter of oil for the first time in decades. Indeed, the US is now the world’s top producer, with a national production of just under 12 million barrels per day, an increase of 2 million barrels per day since last year.

For those unaware, fracking is the process of using a mixture of highly pressurized water and sand to break apart oil-rich shale deposits so that the oil can be pumped to the surface. Shale deposits have long been known to exist in the continental United States. However, the technology required to access these deposits has only recently become cost effective. Massive cost reduction initiatives on the part of shale oil producers has dropped the breakeven cost per barrel by ~50%, from about $60 per barrel to around $30 per barrel.  As a result, fracked oil is now cost competitive to liquid crude across a wide range of price levels, cementing America’s foothold in the modern global energy economy.

At the heart of America’s newly accessible supply is a massive shale deposit in Texas known as the Permian Basin. This region—roughly the size of South Dakota—has become a key pillar in this new era of American energy production. In addition to the sheer size of the deposit, the Permian benefits from certain geological properties that make it uniquely able to benefit from low-cost fracking techniques. First, the Permian’s shale deposits are often several layers thick, with some layers as thick as 1000 feet. This geology helps to make Permian deposits more robust and gives the region a natural counterbalance to one of the downsides of the fracking process, which is that deposits dry up quickly. Second, the Basin is conveniently located near the Gulf of Mexico. This gives Permian producers easy access to coastal refineries as well as the port, where the product can be loaded onto ships for international export.

The rise of the Permian has also had profound geopolitical impacts, enhancing America’s capabilities and relationships with both allies and adverse interests. America’s vast production has allowed it to be less dependent on foreign oil, thus increasing energy security. It has also made new tools available to the government to achieve its political ends. Sanctions on Iran and Venezuela, two oil producing nations, have not affected US consumers, who are insulated by the Permian’s robust supply. The Permian has also driven down global prices, a benefit to consumers. What amplifies the Permian’s impact on global markets is the fact that OPEC never anticipated that the fracking revolution would develop to this scale. For decades, the Cartel occupied a comfortable position as the world’s major supplier, but the fracking boom has disrupted years of conventional thinking. The size of the Permian Basin, both in terms of production rate and reserves, rivals entire nations in terms of output. In fact, if the Permian Basin were made the 15th member of OPEC, it would be the Cartel’s third largest member nation, behind Saudi Arabia and Iraq. Experts expect it could surpass the world’s current number one field, Saudi Arabia’s Ghawar field, in three years or less.

The rate of buildup in Permian production is immense. Just in the last year, the Basin’s production rose by roughly 1 million barrels per day. The buildup has fueled a construction frenzy, not only of the production facilities themselves, but of the pipeline infrastructure necessary to move the product to refineries, and ultimately, markets. Over a dozen construction projects of pipelines terminating in the Gulf coast are expected to be completed by mid-2020. These pipelines are known as gathering lines and are used to transport fracked product to the coast for refinement and sale. They are large diameter installations which can transport hundreds of thousands of barrels per day. The aggregate value of these projects is in the billions.    [Add a couple sentences about resulting State-wide condemnation and eminent domain here].  The carrying capacity provided by these pipes alone could cause US exports out of the Gulf coast region to quadruple. Accompanying this explosive growth is a booming labor market, which has its own economic consequences. The huge influx of people into the region has raised apartment rents through the roof. The demand for workers is so high that restaurants have even begun advertising their wages on billboards to attract wait staff who are deeply tempted to pursue other opportunities as energy workers. Because population growth has outstripped available housing, huge numbers of trailers have been moved into the region to house the workers. Traffic has become clogged with production vehicles, dump trucks hauling sand, and workers commuting to drill sites.

Hopefully, readers now have a clearer understanding of just how profoundly impactful the Permian Basin’s growth has been, not just domestically, but globally. This pattern of development is expected to continue into the foreseeable future.  Landowners with property located between the Permian Basin and the Gulf Coast are advised to stay current on projects which may affect them.

 

Written by Christopher Chan

Prout v. Caltrans: A Lesson in Legal Timing

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Road construction in California. Photo courtesy of the Sacramento Bee.

As we know, the private property rights in the United States, though extensive, are not absolute. Using the power of eminent domain, the government can forcibly seize private property for public purposes, if they provide the Constitutionally mandated compensation. Going a little deeper, it’s important to mention that there are three main sub-types of eminent domain. These are physical takings, regulatory takings, and inverse condemnation.

In physical takings, the government performs some action that results in the occupation of private land. In regulatory takings, the government imposes a legal burden so expansive that it deprives the landowner the use of their property. An example might be environmental regulation that prohibits any kind of land developments. If the regulation deprives the land of all economically beneficial uses, it would essentially make the land worthless. Finally, inverse condemnation is a situation where a landowner has brought a claim against the government for compensation. In these cases, the landowner is alleging that government action has resulted in the taking of their land or has caused uncompensated property damage to occur.

There are exceptions to inverse condemnation, however. In a recent California case, Prout v. California Department of Transportation, the Court held that the California Department of Transportation (“Caltran”) did not have to pay the landowner compensation even though it physically occupied the landowner’s property. The exception turned on the fact that the property was legally subject to “dedication.”

Approximately twenty years before the case, the land owner, Loren Prout, dedicated a small strip of land to the state. Briefly, dedication is the donation of private property for public use. This dedication went unaccepted by the government for approximately two decades. Then, in 2010, Caltrans began physically occupying the dedicated strip as part of its work to modify a highway. They did not compensate the landowner for this use.

The landowner sued for inverse condemnation, arguing that Caltrans’ behavior amounted to a physical taking of his property. During its analysis of case documents, Caltrans discovered the twenty-year-old dedication, and argued that there was no taking because Prout had already dedicated the land to the government. Prout countered by pointing out that the government had failed to formally accept the dedication, even though the dedication was offered two decades ago.

The Court held against the landowner on two counts. First, it decided that the government had accepted the dedication by implication. The basis for the implied acceptance was the fact that Caltrans began using the land for its construction process. Second, the Court held that Prout had failed to voice his grievances with the terms of the dedication in a timely manner. The Court pointed out that Prout could’ve objected to the dedication before the onset of this case but failed to do so. Therefore, the Court held for the government.

The case is a lesson for both governments and private property owners on the importance of timeliness in the legal process. Though two decades seems like a generous period, neither the government nor the land owner managed to act in their own interest within that time. If they had, the outcome of the case might very well have been different, particularly from the landowner’s perspective. In fairness to the landowner, knowledge on matters of legal timing, particularly as it concerns niche real estate issues such as dedication, are not common knowledge. Landowners may wish to be conscientious about obtaining qualified legal advice if they have uncertainty, particularly when the government’s ability to occupy their land is at stake.

 

Written by Christopher Chan