The mandatory relocation of pipelines and other utilities crossing navigable waterways has become a hot topic in Louisiana.  The U.S. Army Corps of Engineers, in partnership with the Louisiana Department of Transportation and Development (LADOTD), is in the midst of a project to deepen the existing Mississippi River Ship Channel to provide deep draft navigation along the lower portion of the Mississippi River from the Gulf of Mexico to Baton Rouge.  The project has significant implications for pipelines traversing under the Mississippi River and its tributaries.

Under the Commerce Clause of the U.S. Constitution, the federal government has a navigational servitude for the use, control and regulation of navigable waters of the United States and submerged lands thereunder for commercial purposes, including navigation and flood control.  (The Corps’ regulations at 33 C.F.R. § 329.4 define navigable waters of the United States as “those waters that are subject to the ebb and flow of the tide and/or are presently used, or have been used in the past, or may be susceptible for use to transport interstate or foreign commerce.”)  The Rivers and Harbors Act of 1899, 33 U.S.C. § 401 et seq., prohibits construction activities within navigable waters unless the work has been approved by the Secretary of the Army.  For over 100 years, the Corps has regulated construction within navigable waters by issuing permits under Section 10 of this statute.  These “Section 10 permits” provide that pipelines and other structures beneath navigable waters are to be relocated at no expense to the United States if required by federal interests.

Disputes have inevitably arisen regarding the cost of projects involving navigable waterways and associated utility relocations.  In response, Congress passed the Water Resources Development Act (WRDA) to provide funding and a cost allocation scheme for such projects, including cost-sharing provisions applicable to the Corps and state or local project sponsors. Congress later amended the WDRA to address the cost of utility relocations, including relocations associated with so-called “deep-draft harbor” projects (the WDRA first provided that a “deep draft harbor” was one in excess of 45 feet; that depth has since been amended to 50 feet).  The current version of the statute provides:

(a) Construction

(1) Payments during construction. The non-Federal interests for a navigation project for a harbor or inland harbor, or any separable element thereof, on which a contract for physical construction has not been awarded before the date of enactment of the Water Resources Reform and Development Act of 2014 (Public Law 113-121) [enacted June 10, 2014] shall pay, during the period of construction of the project, the following costs associated with general navigation features:

(A) 10 percent of the cost of construction of the portion of the project which has a depth not in excess of 20 feet; plus

(B) 25 percent of the cost of construction of the portion of the project which has a depth in excess of 20 feet but not in excess of 50 feet; plus

(C) 50 percent of the cost of construction of the portion of the project which has a depth in excess of 50 feet.

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(4) Utility relocations. The non-Federal interests for a project to which paragraph (1) applies shall perform or assure the performance of all relocations of utilities necessary to carry out the project, except that in the case of a project for a deep-draft harbor and in the case of a project constructed by non-Federal interests under section 204 [33 U.S.C. § 2232], one-half of the cost of each such relocation shall be borne by the owner of the facility being relocated and one-half of the cost of each such relocation shall be borne by the non-Federal interests.

33 U.S.C. § 2211(a)(1) and (4).

Applying the WDRA and the federal navigational servitude, courts have held that the Corps’ authority to compel utility relocations is broad, operating to the exclusion of any competing or conflicting interests.  Courts have also addressed the issue of cost allocation for relocation work under different factual scenarios that may arise in this context.  For example, in United Texas Transmission Co. v. U.S. Army Corps of Engineers, 7 F.3d 436 (5th Cir. 1993), the court dealt with a utility, UTTCO, that refused to relocate its pipelines under the Hillebrandt Bayou after the Corps demanded the relocation in connection with a flood control project undertaken by the Corps and the Jefferson County Drainage District as local sponsor.  UTTCO demanded written confirmation from the Corps and Drainage District that its expenses would be reimbursed before lowering its pipelines.  The Corps and Drainage District refused, and the Corps ultimately revoked UTTCO’s Section 10 permits.  Litigation ensued.  Considering the matter, the U.S. Fifth Circuit looked at four possible relocation scenarios:

There are essentially four factual situations that could be encountered when the Corps orders relocation of pipelines running under a navigable stream pursuant to a § 10 permit. The orders could require relocation of pipelines (1) wholly within the original banks of the stream; (2) wholly outside the original stream banks (e.g., when a stream is widened but not deepened, or at least not enough to require relocation of the portion of the pipeline lying beneath the original stream bed); (3) almost entirely inside the original stream banks but with some incidental involvement of relatively insignificant portions of the pipeline or related facilities located outside the original boundaries; or (4) both inside and outside the original stream banks, with substantial work in each area.

Under our interpretation of the permit language, the correlative rights and obligations of the permit holder and the Corps differ significantly, depending on which type of relocation situation is implicated in the particular order.

For the first category, the court found that the plain language of the Section 10 permits gave the Corps the authority to order relocations inside the boundaries of the original permitted area at the pipeline owners’ expense.

For the second category, the court found that pipelines situated wholly outside of the original permitted area are by definition not within navigable waters.  As such, they cannot be subject to the federal navigational servitude, and pipeline owners cannot be compelled to relocate them.

For the third and fourth categories, the court reviewed prior caselaw holding that the cost of “incidental work” on adjoining lands outside of the navigational servitude shall be borne by the permit holder.  The court continued to recognize this rule, but it distinguished between situations involving “incidental” work outside of the permitted area and situations involving “substantial” work both inside and outside of the permitted area:

In [United States v.] 597.75 Acres [of Land, 241 F. Supp. 796 (W.D. La. 1965)], the district court stated that “a reasonable interpretation [of the permits] would also require that such incidental work on adjoining lands as is necessary to accomplish [the relocation within the waterway’s banks] be effected at [the permit holders’’] expense.”  In Tenneco[, Inc. v. Greater Lafourche Port Com., 427 F.2d 1061 (5th Cir. 1970)], we elaborated on this point, stating that incidental alterations include “changes the pipeline company must make ‘necessary to accomplish [the] purpose’ of relocation within the riverbed.”  We continue to recognize this exception, first discussed in 597.75 Acres and reiterated in Tenneco.  In other words, when a project requires relocation work to be done principally within the original boundaries of the stream (the work “herein authorized” by the permits or within the bounds of the pre-existing navigational servitude) but some incidental work must be done in adjacent areas outside the banks as well (as a consequence of the work required inside the banks), the permit holders will be responsible for the entire cost of relocation of the pipelines.

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The final situation that might be involved when the Corps orders relocation is that in which the permit holder might be required to make substantial relocations of portions of the pipelines both within and without the original banks of the stream.  We today hold that when the scope of the government project requires substantial work (as distinguished from incidental work), not only within the original banks but outside as well, the sponsoring governmental agency or subdivision shall be responsible for all reasonable costs incurred by the permit holder in relocating those portions of its facilities situated outside the original permit boundaries, i.e., outside the original stream banks.  Of course, the permit holder will remain responsible for the costs attributable to the relocation work within the permit area.

The court found that some portion of the relocation work at issue would necessarily involve segments of pipelines situated under the bed of the bayou as it existed at the times the permits were granted (i.e., the original permitted area) and that the work would be “substantial” rather than “incidental.”  Although the court found that the fourth category of relocation was implicated, it noted that UTTCO never attempted to show precisely how much of its pipe lay within the original permit boundaries and what portion of the total relocation cost it would have incurred had it complied with the Corps’ relocation order.  Moreover, the Court found that the Corps had the authority to revoke UTTCO’s permits given UTTCO’s refusal to comply with the Corps’ order.  As a result, UTTCO lost the option to relocate its pipelines, leaving no alternative but to remove those portions of the pipelines that interfered with the project.  The court emphasized that UTTCO’s conduct was improper self-help:

If UTTCO had only complied with the Corps’ order (even under formal protest), relocated the pipelines, and sued for compensation for the portions of its private easements that were taken and for the costs associated with the relocation in the fastlands [lands contiguous to but outside of the original banks], then under the reasoning set out above, UTTCO clearly would have been entitled to recover.  UTTCO did not, however, follow this course.  Instead, UTTCO delayed the project by demanding assurances of full compensation—to which it was not entitled—before it would begin work on the relocation.  As it turns out, UTTCO’s recalcitrance constitutes a valid cause for the Corps to revoke the § 10 permits.  As UTTCO never challenged the Corps’ authority to order the relocation, but nevertheless refused absolutely to relocate the pipelines, we cannot say that the Corps abused its discretion by revoking UTTCO’s permits.

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Had UTTCO timely relocated its pipelines pursuant to the orders of the Corps, thereby preventing revocation of the § 10 permits that had allowed the pipelines to cross the bayou in the first place, UTTCO might have been successful in recovering, through the instant litigation, the costs incurred in relocating those portions of the pipelines that were situated outside the original stream bed—costs that clearly would not have been merely incidental to relocating the portions of the pipelines situated inside the original stream bed.  But unfortunately for UTTCO, that was not the course of action it pursued; so we must affirm the judgment of the district court.

Regarding the current project to deepen the Mississippi River Ship Channel, there is no question that Congress authorized the project as a deep draft harbor.  Accordingly, the LADOTD and pipeline owners will equally split the cost to relocate pipelines interfering with the Project pursuant to the WRDA.  The only exception to a straight 50/50 split would be if a relocation requires a pipeline owner to incur more than “incidental” costs for work outside of the permitted area.  Should a dispute arise whether “substantial” work is required outside of the permitted area, pipeline owners would be wise to comply with the Corps’ directives, perform the relocation work (under formal protest if necessary), and seek judicial intervention to avoid the revocation of their permits.  Additionally, given the nature of working in dynamic hydrological conditions, pipeline owners should ensure that construction agreements for relocation work include a well-defined scope and force majeure provisions to lessen exposure arising from circumstances beyond the parties’ control.