The U.S. Fifth Circuit Court of Appeals has vacated a district court ruling and unanimously agreed that pipeline owners — and not the Port of Houston Authority (PHA) — must pay to relocate oil, gas and products pipelines that cross the Houston Ship Channel.

The three-judge panel issued its opinion on Jan. 30 in Air Liquide, et al, v. U.S. Army Corps of Engineers and the Port of Houston Authority, No. 02-20442. The PHA had appealed a January 2003 decision by the U.S. District Court, which had ruled that the PHA, and not the companies, should pay the cost of lowering pipelines to accommodate deepening of the ship channel for barge traffic (see Daily GPI, Feb. 21, 2002).

At issue is more than $100 million of costs to relocate pipelines to accommodate mandated work by the U.S. Army Corps of Engineers. Pipeline owners filed a lawsuit in 1998 to require the authority to pay for the relocation of their privately owned pipelines, but PHA argued that the relocation was mandated by the Corps as part of the deepening and widening project, and that both federal law and the pipeline licenses required the pipeline owners to bear the costs of relocation.

Besides Air Liquide America Corp., other plaintiffs to the lawsuit included EGP Fuels Co., Equilon Pipeline Co. LLC, Exxon Pipeline Co., Florida Gas Transmission Co., Houston Pipe Line Co., HSC Pipeline Partnership LP, Mobil Chemical Co., Mobil Pipeline Co., Seadrift Pipeline Corp., TE Products Pipeline Co. Ltd. Partnership, Texas Eastern Transmission Corp., Ucar Pipeline Ltd., Chevron Chemical Co., Chevron Pipeline Co., Dynegy Midstream Services, Teppco Crude Oil LLC, Duke Energy Transport and Trading Co., Black Marlin Pipeline Co., Texas Ship Channel LLC and Tejas South Pipeline Partnership.

“The Port of Houston Authority is pleased with the unanimous decision from the Fifth Circuit,” said Jim Edmonds, PHA chairman. “We pursued the appeals process because we strongly believe in the importance of navigational servitude and our role to maintain and protect the ship channel. As owner of the land under the water of the ship channel, the Port Authority sought to protect the interests of Harris County taxpayers.”

In its 18-page opinion, the appeals court ruled that the provision in the Rivers and Harbors Acts of 1899 requires that “pipelines and other structures beneath navigable waters are to be relocated at no expense to the United States if required by federal navigation interests or projects.” Pipeline owners had contended, among other things, that they should not have to pay for the pipe relocation costs under Texas law and that the PHA was in control of what the Corps had instructed it to do — that is, require the pipeline owners to relocate the pipes.

However, Circuit Judge Rhesa Hawkins Barksdale, who wrote the unanimous opinion, said “this contention neglects a crucial distinction: the Corps, not the Port, required owners to relocate their pipelines…The Corps has the authority, under the federal navigational servitude, to require owners to pay the relocation costs according to the original permits, as necessitated by the project.” Barksdale cited the U.S. Congress’s “navigational servitude,” which is the power to control navigation derived from its power to regulate commerce. The Corps is given congressional authority to implement navigation projects.

The court also found that each pipeline owner has a permit and a license requiring that they must pay to relocate their pipelines at their cost. “The licenses issued by the Port provide that, should pipeline relocation be necessary to accommodate deepening and widening the channel, the owner will, ‘at its cost and expense and without cost or expense to the Port…remove, relocate, lengthen, deepen or otherwise conform’ its pipeline to the project.”

“This decision forces the pipelines to honor the commitments they made when signing the licenses, which includes paying for required relocation costs,” said Tom Kornegay, PHA executive director.

The PHA owns and operates the public facilities located along the Port of Houston, a 25-mile long complex of diversified public and private facilities designed for handling general cargo, containers, grain and other dry bulk materials, project and heavy lift cargo, and other types of cargo. Each year, more than 6,600 vessels call at the port, which ranks first in the United States in foreign waterborne tonnage, second in overall total tonnage and sixth largest in the world.

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