Couple's fight with pipeline company pits Texans' love of oil vs. love of land (Video)
Jan. 28, 2012 at midnight
Updated Jan. 28, 2012 at 7:29 p.m.
The Play: Part 4
Jimmy and Kathy Gips, of Cuero, are involved in a legal battle with pipeline company Kinder Morgan over property that was seized using the company's right of eminent domain. Even though the couple won a special commissioner's court hearing, Kinder Morgan has appealed the decision and the case is on its way to district court. Work has already started on the Gipses' land although no contract has been signed by both parties.
What is eminent domain?
Once used mainly to make way for roads and highways, the "public good" of supplying the rest of the country with oil and gas allows pipeline companies to compel landowners to sell. If they don't reach an agreement, the company can sue for condemnation of the property, forcing a sale.
The land is taken in a 50-foot wide easement, with a pipeline running down the center of it.
If the landowners and the company don't reach an agreement beforehand, the case is heard by three special commissioners. The commissioners are local landowners charged with determining what the land is worth and what the landowners should be paid in damages for the property.
They decide what the land being taken for an easement is worth. If the landowners and the company agree on the ruling, the matter is settled. If either side does not agree they can appeal to district court, then the court of appeals and, finally, the Texas Supreme Court.
The Play: Eagle Ford Shale series
Sept. 25: CHANGE ON THE HORIZON
Oct. 30: CUERO, THE HUB
Dec. 18: PRIZE OF OIL: AT WHAT PRICE?
Today: GET IT IN WRITING
Feb. 26: LIFE IN THE OIL FIELD
March 25: LESSONS LEARNED FROM THE BARNETT SHALE
April 29: KARNES COUNTY, CYCLE OF BOOM AND BUST
CUERO - Blue eyes narrowed, Kathy Gips lifted her chin and stepped closer to the barbed wire fence lining her pasture land.
Eyeing the workmen on her land, she crossed her arms, a petite blond woman perched ramrod straight in the long shadow of her husband.
"It feels like we're being run over," she said, stopping to press her lips together.
Jimmy Gips looked down at his wife of 24 years and the laugh lines on his face sagged into lines of frustration.
"It is our land after all. Don't we matter?" he said, ruffling his sandy hair.
The Gipses are one of hundreds in the Crossroads with pipelines crisscrossing their property. For the Gipses and others, their worries aren't about fracking or possible pollutants. For them, the problems start with two legal words: eminent domain.
The Eagle Ford Shale play has unlocked thousands of barrels of oil from the dense brittle rock formation that lies in the depths below their feet. But the oil has to make it to market, and to do that efficiently companies need pipelines. They will buy the right to put in the steel lines, but if you don't cooperate, these private companies use their power of eminent domain - the legal authority to take privately owned land for the public good.
The Eagle Ford Shale play is booming, but the pipelines being laid to get the glut of oil to market have put those two Texas passions - landownership and the oil business - on a collision course.
THE FIGHT BEGINS
The sky glittered blue, and a northern wind tugged at the Gipses' clothes, pulled at their hair and sent the smell of the land, a mix of dried grass and the sweet stench of cow manure, into their nostrils.
In May, the Gipses got a call from a Kinder Morgan landman. The company wanted to run a pipeline through their property and wanted to start negotiations. But negotiations skidded to a halt when the company offer came in for $23.98 a foot, 15 percent less than what the Gipses got for a pipeline crossing the same stretch of land before.
Kathy Gips got a certified letter informing her she was being sued. Kinder Morgan was going to use eminent domain to condemn the land it wanted for the pipeline.
The deck was stacked against the couple. Kinder Morgan held all the cards, and the multimillion dollar company knew it. There was one thing they hadn't counted on - the Gipses aren't the kind of people used to being run over. They decided to fight.
Michael Sheppard is a tall man with a sharply cut profile and a ready smile that belies his years of legal experience. Sheppard, the district attorney covering DeWitt, Goliad and Refugio counties since 1997, cut his legal teeth on oil and gas law in the 1980s, and he knows his business. He was the obvious choice to represent Kathy and Jimmy Gips.
His firm, Crain and Sheppard, has handled more than 1,200 pipeline negotiations in the past three years, dozens of them with Kinder Morgan. Sheppard handled two other eminent domain cases with Kinder Morgan, but both were settled after being heard by special commissioners, one of the first steps in condemnation proceedings. Working as the DA, Sheppard has his hands full, so he limits the number of civil cases he'll take on, examining the quality of the case to weigh out if it's worth the trouble.
He took the Gipses' case.
Eminent domain is the big hammer pipeline companies use, but most try to keep things friendly.
Kinder Morgan is different, Sheppard contends.
"They use the power of eminent domain to strong-arm people. They've got so much money they want to spend and they aren't going to spend any more. They use the process and what the landowner has to go through - which is very expensive for the landowner - and they use it to their advantage," he said.
WHAT KINDER MORGAN SAYS
When a deal closes later this year, the Houston-based company, Kinder Morgan, will be the largest pipeline company in the United States and the fourth largest in North America. The company, formed by former Enron executives in 1997, will own more than 67,000 miles of pipeline across the United States.
The pipeline being laid across the Gipses' land will have the capacity to run more than 300,000 barrels of oil a day from Cuero to the Houston Ship Channel. It will cost $220 million and includes 61 miles of newly constructed pipeline and 109 miles of existing natural gas pipeline, crossing the land of 49 tracts in DeWitt County.
Only three lawsuits have gone all the way through the condemnation process, but the company started condemnation proceedings against the owners of 14 tracts the pipeline will cross in DeWitt County.
Kinder Morgan representatives filed most of these claims in mid-August.
In fact, a flurry of activity happened in the district clerk's office that month. A new law went into effect Sept. 1 changing how pipeline companies have to deal with landowners. The law requires the company to make good-faith offers to landowners before filing a lawsuit and gives landowners more time to respond to the pipeline company offers.
Larry Pierce, a spokesman for Kinder Morgan, said the company uses eminent domain rights only after all reasonable efforts have been made to make a deal with the landowner.
Despite having a reputation for rough tactics, Kinder Morgan hasn't filed as many condemnation proceedings as other companies in the area. Both ETC and Enterprise Pipeline have filed more than 40 eminent domain claims in DeWitt County to make way for their respective lines.
It is Kinder Morgan's approach to making deals with landowners that singles them out.
The same pipeline now being laid in the Gipses' property will be put into Ed Southern's land in the coming days in Cuero. The line was mapped to barrel straight through a grove of live oaks on the retired Navy man's property. Southern knew he was dealing with a tough company - "Do you know what eminent domain is?" were the first words out of the Kinder Morgan landman's mouth when they met to negotiate - and he couldn't afford a legal battle to keep the pipeline off his land. But he decided to fight to save some of his trees and Kinder Morgan rerouted the line to spare some trees after Southern's story appeared in the Victoria Advocate.
Pierce declined to comment on either Southern or the Gipses' condemnation proceedings.
When it comes down to it, and the legal paperwork is in their hands, most landowners choose to settle out of court. Choosing to fight is a difficult, time-consuming and expensive endeavor.
"For every Jimmy Gips there is who chooses to fight them, there are 50 landowners who don't," Sheppard said.
THE LAW OF THE LAND (AND WHICH WAY IT LEANS)
The law in Texas leans toward oil and gas interests, Sheppard said.
"The Supreme Court of Texas has not rendered an opinion contrary to the interests of oil companies in probably more than a decade, and that's a source of much discussion and debate within the legal community," Sheppard said, leaning forward in his leather desk chair to make the point. "I don't think we have a Supreme Court that looks out for the interests of landowners."
Decades ago when conservative Democrats held political power in Texas, the state supreme court routinely ruled in favor of landowners rights. That changed about 20 years ago when corporate energy companies stepped up and shifted the court's focus. The justices to the state's High Court are elected to their seats, and oil companies started pouring money into election coffers.
The companies know their power. During condemnation proceedings, companies will simply appeal the case all the way to the state Supreme Court in Austin, certain in the knowledge that the court will side with them, Sheppard said.
The O'Connor vs. Exxon case is a good recent example.
T. Michael O'Connor, the Victoria County sheriff, was part of one of the more recent battles duked out between oil companies and landowners. In the early 1990s, Exxon ended a lease on the O'Connor family ranch in Refugio County. But before the company left, someone trashed the wells, throwing enough junk down the holes that when another company tried to reopen the wells a few years later, they were unusable.
The O'Connor family embarked on an 18-year legal odyssey. Court after court ruled in their favor. Each time Exxon appealed the ruling. Finally, the case was heard by the state Supreme Court. After delaying their ruling for two years, the court sided with Exxon in 2009.
Kinder Morgan filed a lawsuit against Kathy Gips in July. According to eminent domain law, once condemnation proceedings have begun, there's no going back for the landowner, aside from striking a deal with the company outside of court. The land will be taken one way or another. The only question is how much the land is worth.
The district judges appointed three special commissioners, all local landowners, to decide the value of the Gipses' land: John Schlinger, of Yoakum, Ron Ledbetter, and Jim Mann, both of Cuero.
On a hot morning in September, they met at the district court annex, a small squat building across the street from the elegant red brick of the DeWitt County Courthouse. The commissioners sat on one side of the table while Kinder Morgan representatives, their lawyer, the Gipses and Sheppard pulled chairs up to the other side.
By the time the commissioners asked to be alone to discuss what they'd heard, the sun was high overhead.
The Gipses were hopeful. They felt local landowners would understand where they were coming from, what the land that has been in their family for generations was worth.
After an hour, the commissioners called everyone back to announce their decision. They agreed with the Gipses; the amount Kinder Morgan had offered to pay wasn't enough. They ordered Kinder Morgan to pay the Gipses $42.50 a foot for the easement.
The couple left the courthouse smiling. It seemed the fight was over.
Then Kinder Morgan appealed the decision to district court.
The Gipses sighed, met with Sheppard, and prepared to continue the fight. They didn't want to go to court, Kathy Gips said. They sent another offer to the company, trying to settle the issue, sign a contract and be done with it.
Kinder Morgan sent back a brief reply, declining the offer.
Then the company cut the barbed wire fence on the property and started planning for the pipeline.
"Land ownership is sacred in Texas. You don't mess with somebody else's property unless you want to take your life in your hands," Sheppard said, shaking his head.
POWER OF THE PUBLIC GOOD
In early December, the Gipses got a notice that Kinder Morgan had paid a bond allowing the company to continue pipeline construction on their land. At first they didn't believe it, that a company could get the power to come on their property while they were still in the middle of a legal dispute.
Jimmy Gips drove out that day, stepped from his truck and asked the men what they were doing on his land. Workmen were staking the easement to designate where the pipeline would be laid.
He tried to stay calm, telling them the issue was still in litigation, that nothing had been decided yet, and they needed to leave his property. The men were polite and packed up and left.
But they came back. One month later, workmen clipped the barbed-wire fence and started bulldozing the property.
Gips drove out again and found a Kinder Morgan landman on the site. Sharp words were exchanged, but the Kinder Morgan pipeline continued to be built.
Once, cutting a fence in Texas was a felony, but Kinder Morgan had eminent domain. They had the power to be on the land, and, suddenly, Jimmy realized the hard truth - there was nothing he nor his wife could do about it.
The Gipses' experiences with most other companies have been good. Hawk Field Services, a subsidiary of Petrohawk, put in a pipeline on that same stretch of land last year. While the company was putting the line in, one of the Gipses' cattle escaped from the pasture. The workmen tried to get the heifer back into the pasture, but the frantic animal ran, terrified. They finally maneuvered her back into the fenced area, but she had run too hard and dropped dead a few hours later. The landman called Jimmy Gips to apologize. Their contract with the company didn't have any requirements about the cattle, but the man insisted on paying for the loss. Gips donated the $1,500 Petrohawk paid him to St. Michael's Catholic School; Petrohawk then matched his donation.
"They stepped up and did the right thing, even though, legally, they didn't have to," Jimmy Gips said.
WHY THEY FIGHT
The Gipses stood on the roadside, watching the men work. The mint green steel hulls of the line already had been delivered to the site and would be in the ground in a matter of days.
Because the Gipses are still in a legal dispute with Kinder Morgan, they don't have a contract written by Sheppard to protect them. Unlike the other lines on their place, this one will be buried 36 inches, instead of the 48 inches they prefer.
A red pickup motored by them slowly, heading to the pipeline site. The workers inside looked down, avoiding Jimmy Gips' eyes.
"Tree killers!" Jimmy Gips called merrily, with a wave of his hand. "I like to have fun with them. The problem is they just don't get my sense of humor."
Back at their office in Cuero, Kathy Gips hauled out a manila folder, thick with papers.
They have dealt with pipeline companies before - already two pipelines are buried on one side of the pasture and three on the other side across the road. They also have leased their mineral rights, and a rig on the horizon will pay them royalties when the oil starts flowing.
She keeps track of everything. Every phone call, every conversation and every bit of legal paperwork that is involved in these deals ends up in one of these folders.
Kathy Gips paused for a moment and stared down at the papers in her hands.
They never wanted to be noticed or known. It wasn't their goal to become crusaders. But now they are taking on the largest pipeline company in America.
The next step will be a trial in district court. The case already is on the docket, and Sheppard expects to be representing the Gipses sometime this year. If either side chooses to appeal, the case will go to the 13th Court of Appeals in Corpus Christi. If there is an appeal of that court's ruling, it'll be in the hands of the state Supreme Court, if the justices choose to hear it.
"We won't make any money in this deal. We're probably going to come out losing money on this thing, but it's what we have to do," Jimmy Gips said.
Kathy Gips nodded.
"If we back down from this, what are our kids going to say? If you're going to stand for something, you've got to stand to the end, and that's what we're doing," she said. "This could drag on for years. We could be 100 years old and still be dealing with Kinder Morgan, but it's the right thing to do."
To read the series so far, click below:
Part 4 sidebar: Judon Fambrough’s 10 things to know when leasing