JMEH Partner Justin Hodge at the firm’s Houston Offices.

The Texas transportation and energy industries’ need for new infrastructure often brings them into conflict with landowners whose properties are required for these expansions. This tension has only increased in recent years, as economic and population growth have produced a need for ever greater quantities of energy, and the infrastructure necessary for its production and delivery. Transportation projects have been similarly affected by these growth conditions. Recent examples in both industries are the high speed rail project from Houston to Dallas and the pipelines being built from the Permian Basin to the Gulf Coast. Land requirements therefore have risen at a commensurate rate.

Naturally, landowners are generally not thrilled when an entity makes an offer for their land ahead of a planned construction project. They are even less happy when they realize the entity can often seize the land anyways via eminent domain if the offers are rejected. Making matters worse, these initial offers are often artificially low. Landowners who reject these low-ball offers and fight for compensation in the courts regularly receive settlement amounts several times greater than the offer they rejected. This however, leads to the additional problem of a lengthy legal process, as well as forcing the landowner to pay court costs, expert fees, and legal bills – the total cost of which can absorb large portions of the settlement.

There have been attempts to address this issue legislatively. In 2015, a bill would have allowed landowners to recover legal fees if their cases succeeded. It passed the Senate but not the House. This legislative session, a bill was proposed that would require a condemning entity to reimburse legal fees if a resolution for the landowner was greater than the entity’s final offer by 20% or more. The bill was revised to remove this language – and it passed the Senate. Since then, it has been referred to the House Land and Resource Management Committee.

There are two sides to this issue. On one hand, condemning authorities have argued this type of legislation would adversely affect the construction process – and stifle the economic benefits these projects produce. They assert such legislation would increase the propensity for landowners to take matters to court (currently, only 15% do) and the construction process would become more costly and lengthy as a result.

Property owners and their representatives disagree. They argue there’s little evidence to compel the notion such legislation would actually dampen industry growth. Florida, for example, robustly grows despite an eminent domain law that permits reimbursement of legal costs. They also suggest that without such a law, the legal costs associated with fighting a large corporate or government entity will continue to prevent landowners from being made whole.

These issues stir the passions of many because both property rights and oil and gas are embedded in the people and politics of the State of Texas.

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