MEMORANDUM

TO: MONTANA, SOUTH DAKOTA, NEBRASKA, KANSAS, OKLAHOMA AND TEXAS LIVESTOCK ASSOCIATIONS

FROM: KAREN BUDD FALEN main@buddfalen.com or 307-632-5105

BUDD-FALEN LAW OFFICES, LLC

CHEYENNE, WYOMING

VIA: E-MAIL & U.S. MAIL

DATE: AUGUST 27, 2009

RE: INFORMATION FOR NEWSLETTER/PUBLICATION

Because of the recent activity in your states regarding the TransCanada Keystone XL and other pipelines, I have been asked to prepare some information regarding the use of eminent domain by pipeline and other companies within your states. Because this information may be of interest to your members, I am also transmitting this to you for possible inclusion in your publications. Please feel free to use this information as you wish. Should you have any questions, please do not hesitate to contact me.

PRIVATE PROPERTY AND EMINENT DOMAIN

Both as enacted and originally drafted, the Fifth Amendment to the U.S. Constitution strictly prohibited unauthorized takings by government officials by permitting the taking of private property (1) only for a public use and (2) only when the legislature made just compensation available. James Madison’s original draft of the Fifth Amendment for the U.S. Constitution provided that “No person shall be . . . obligated to relinquish his property, where it may be necessary for public use, without a just compensation.” 1 Annals of Cong. 451-52 (J. Gales ed. 1834). In the absence of a congressionally authorized taking, individuals have a Fifth Amendment right to exclude the government and others from exercising dominion over their land, not because the “right to exclude” is inherent in the Fifth Amendment, but because the Fifth Amendment protects that interest from invasion in the absence of a taking for which compensation is available. See Kaiser Aetna v. United States, 444 U.S. 164, 169, 180 (1979).

Most state Constitutions have similar protections for private property. For example, Article VI of the South Dakota Bill of Rights states that “Private property not taken without just compensation . . . . Private property shall not be taken for public use, or damaged, without just compensation, which will be determined according to legal procedure established by the Legislature. . . .” The Montana Constitution Article II, section 29 states, “Private property shall not be taken or damaged for public use without just compensation to the full extent of the loss having been first made to or paid into court for the owner. In the event of litigation, just compensation shall include necessary expenses of litigation to be awarded by the court when the private property owner prevails.” The Nebraska Constitution states “All persons are by nature free and independent, and have certain inherent and inalienable rights; among these are life, liberty, the pursuit of happiness, and the right to keep and bear arms for security or defense of self, family, home, and others, and for lawful common defense, hunting, recreational use, and all other lawful purposes, and such rights shall not be denied or infringed by the state or any subdivision thereof. To secure these rights, and the protection of property, governments are instituted among people, deriving their just powers from the consent of the governed.”

Based upon these limitations, “eminent domain” is the power to take private property for a public use by the state, municipality or by a private corporation authorized by the state or federal government to perform “functions of a public character.” Condemnation is the actual exercise of the power of eminent domain. The power of eminent domain is founded on the Fifth Amendment of the U.S. Constitution because eminent domain is to be limited to a “taking” of private property for a public purpose after the payment of just compensation.

In order for a government or a private corporation authorized to perform a “function of a public character” to condemn private property, the company or government must show that the taking of private property is necessary for a “public purpose.” In some states, the public purposes for which private property can be taken are specified in state statute or the state Constitution. For example, Kansas statutes grant condemnation authority to pipeline companies operating as “agencies for public use,” and the Montana statutes grant condemnation authority for all public uses authorized by the government of the United States, common carrier pipelines and many other enumerated projects.

It seems like private property owners are seeing an increase in the number of companies seeking eminent domain authority for oil or natural gas pipelines, power lines, and other energy transmission projects. One such project is TransCanada’s Keystone XL project which proposes a crude oil/tar sands pipeline from the Canadian border through Montana, South Dakota, Kansas, Nebraska, Oklahoma and Texas. These states all generally recognize that pipeline companies have the power of eminent domain, reasoning that the transport of crude oil/tar sands is a public purpose. However, that is not the end of the “public purpose” inquiry. Each of these states have state required processes which will determine HOW this public purpose will be managed. For example, questions like scope of the condemnation authority, mitigation measures, reclamation requirements, bonding etc. have to be answered individually in each of the states. Additionally in TransCanada’s case, the United States’ State Department is in the process of preparing a National Environmental Policy Act (“NEPA”) document which considers questions like pipeline alternatives, mitigation measures, economic costs and benefits, environmental impacts, etc. These determinations will govern the scope of the condemnation authority exercised by TransCanada and other similar companies. These decisions all involve public/citizen input allowing landowners to have input into the scope of TransCanada’s project and its condemnation authority.

While landowners are understandably concerned about the condemnation authority that may ultimately be exercised by TransCanada, it is important to recognize that there are still significant opportunities available to influence the scope of this authority and ultimately the scope of the pipeline. Participation in state and federal governmental decision making processes will have an impact on the location of the pipeline as well as its environmental and economic impacts. It is not a foregone conclusion that landowners just have to accept a company’s initial proposals. While TransCanada and other similar companies will likely be awarded condemnation authority, how that authority is exercised and the protections used on each parcel of land is still open to vast influence. There is still opportunity to protect your private property rights before the exercise of the commendation authority is even authorized through participation in the State Department NEPA process or the state regulatory process. Landowners and local governments should take advantage of these processes before individual landowners are served with a court complaint for condemnation.

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