Editor’s note: This is a guest column written by Charlie Melancon. The viewpoints expressed are those of the author and do not necessarily reflect those of 10/12 Industry Report or its staff.
An ongoing court case over Louisiana pipelines could have far-reaching and dangerous consequences for Louisiana landowners and for future investments in the Bayou State. The issues at stake could affect regulatory structures, permitting customs, and property rights.
In 2009, midstream energy company Energy Transfer was granted permanent and exclusive rights to construct, operate, and maintain pipelines along a stretch of land across North Louisiana. After paying for and securing these rights, Energy Transfer constructed a high-volume natural gas transmission pipeline stretching from Panola County, Texas to Richland Parish, Louisiana.
The guarantee of exclusive rights to this land is critically important. These rights helped to ensure that Energy Transfer was able to make the enormous investments needed to obtain permits, perform environmental reviews, gain community feedback, and build out the necessary infrastructure for this new pipeline. In addition, these exclusive rights, which are not uncommon with Louisiana pipelines, give companies security in knowing that other pipelines cannot cross that area and potentially disrupt their own operations.
Unfortunately, not all energy companies acknowledge or adhere to the rights of others. This is what is happening in Louisiana and to Energy Transfer, as other energy companies are now seeking to circumvent Energy Transfer’s rights and undermine the company’s investments in an effort to fast track their own pipeline projects.
The primary issue has been the Louisiana Energy Gateway (LEG) pipeline project. In May of last year, LEG attorneys notified Energy Transfer that their proposed pipeline project would cross Energy Transfer’s pipeline 42 times. While it is not unprecedented for pipelines to cross one another, these crossing requests are usually limited to one or two per request, making LEG’s 42 crossings request an outlier.
Astoundingly, LEG’s request also provided just 14 days for Energy Transfer to respond with any responses and objections. It is entirely unreasonable to believe that this was sufficient time for a company to assess the implications and effects of 42 crossings on their pipeline. Not surprisingly, Energy Transfer objected to both the project and its timeframe, which led LEG to claim the company is engaging in “anti-competitive” behavior.
LEG has been joined in its efforts by energy company New Generation Gas Gathering (NG3). NG3’s new project demands that Energy Transfer approve an astounding 113 distinct crossings across its pipeline, a first-of-its-kind request that is magnitudes greater than normal crossing requests. Like LEG, NG3 is also treating Energy Transfer’s objections as anti-competitive. This is absurd.
A closer look at the LEG and NG3 requests underscores how these companies are seeking to undermine permitting norms to boost their own profits. Both companies are classifying their proposed pipelines as gathering lines, which are traditionally small pipelines less than a foot in diameter that run with lower pressure and flow rates than transmission lines. But the actual project plans show their intent for these new pipelines to be hundreds of miles long and as much as 42 inches in diameter.
LEG and NG3 are incentivized to incorrectly classify these pipelines as gathering lines because it helps skip important regulatory processes such as gathering stakeholder reactions. If the projects were treated as transmission lines, Louisiana landowners, environmental groups, state agencies, and other interested parties would have an opportunity to comment and raise concerns.
Presumably, landowners in the state would have plenty of concerns to voice in light of the precedent that rulings against Energy Transfer’s property rights could have. If landowners lose the ability to challenge claims to their property, particularly when they have no legal basis, then they can expect their property to lose value and become vulnerable to frivolous claims that may just succeed. It would be a refutation of the property rights that were properly acquired by landowners – often at great expense.
Fortunately, the courts have thus far sided with Energy Transfer’s concerns, with one Louisiana judge finding that LEG is “facing the consequences of the business risk” from an approach that “was not well thought out.”
The oil and gas industry plays a crucial role in the Louisiana economy, supporting 346,000 jobs and more than $54 billion in investments. This economic activity is made possible by a stable regulatory environment and respect for property rights. Louisiana courts should continue to stand by companies and landowners that have made good-faith investments in the state, and reject the reckless approaches being advanced by less responsible actors.
Charlie Melancon is a former Democratic member of Congress and Louisiana Secretary of Wildlife and Fisheries.
