Can I Challenge the Taking of My Land by a Gas Utility on the Basis of “Public Use”

A recent decision from a Texas Court of Appeals panel suggests that the answer is "yes," it is possible to challenge the taking of land by a public gas utility company on the basis of "public use." Generally, a government or a private company, like a utility, cannot take private land unless the proposed use of the land is for "public use."

While the issue was raised, discussed, and decided by a Texas court, the same issues are relevant here in North Carolina. Land takings by utility companies occur here in North Carolina and are authorized by North Carolina statute. While the Texas case is not binding on a North Carolina court, the reasoning is sound and could be persuasive to a North Carolina court if similar legal issues were to be raised.

The case at issue is captioned In re DeRuiter Ranch, LLC, Case No. 13-21-00001-cv (Tex. Court of Appeals, Sept. 28, 2021).

The landowner in that case is DeRuiter Ranch, LLC ("DeRuiter"). DeRuiter owns a 356-acre ranch in Lavaca County, Texas. A natural gas utility company, called Permian Highway Pipeline LLC ("Permian"), is currently constructing a 425-mile long natural gas pipeline which will traverse seventeen counties in Texas. Permian attempted to purchase an easement across DeRuiter's land for the pipeline, but DeRuiter refused. Subsequently, Permian filed legal proceedings for condemnation against DeRuiter pursuant to Texas eminent domain laws.

Like similar laws here in North Carolina, Texas allows certain types of private third parties to exercise the power of eminent domain to partially take private land to build such things as railroads and oil/natural gas pipelines. Further, like here in North Carolina, a Texas utility company can only take land pursuant to eminent domain if the company is taking the land for "public use."

In response to the eminent domain proceedings, DeRuiter challenged the question of whether the pipeline was really, actually, for public use. As part of the legal process, DeRuiter asked for information from Permian about who were the expected customers of the natural gas, sales contracts for the gas and similar. Permain refused and, essentially, said that they were a public utility, they were allowed under Texas law to take the land and that DeRuiter was not allowed to ask for information that might challenge Permain's claim that the taking was for public use. At the trial level, the court agreed.

But the Texas Court of Appeals reversed and said that DeRuiter was allowed to have the requested information. The Court of Appeals held that a landowner could challenge a land taking by a utility on the basis that the taking was not for "public use," was done for fraudulent reason, done in bad faith or was "arbitrary and capricious. Therefore, DeRuiter was entitled to the information because it might help prove that the taking for the pipeline was unlawful. The Court of Appeals noted that taking of land by a private entity is unlawful if the taking is done for the primary purpose of private economic benefit. Further, a mere declaration by the State legislature cannot change a private use or private purpose into a "public use."

As can be seen, the reasoning of the Texas court is reasonable and persuasive. Note that the Texas Court of Appeals did NOT decide that Permian was taking land from DeRuiter for a private use. Rather, the Court of Appeals decided that DeRuiter had the right to information that had a bearing on that question. It is reasonable to think that a North Carolina court might come to the same conclusion.

Moreover, there are judicial decisions in North Carolina where courts HAVE decided that certain takings of land are NOT for public use or public benefit. For example, Town of Apex v. Rubin, 2021 NCCOA 187 (N.C. Court of Appeals 2021), the court held that a municipal taking of land for installation of a sewer pipe was NOT for public use since the sewer line was for the benefit of private landowners in an adjacent residential subdivision.

For more information, and to schedule a confidential consultation with experienced and dedicated property law attorneys in Charlotte, contact Arnold & Smith, PLLC. Use our “Contact” page or give us a call at 704-370-2828. We handle land use, zoning and condemnation legal matters in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.