Right of Way or Wrong of Way? Midstream Companies Need to Check Agreements Before Converting Existing Pipelines to Transport Carbon Dioxide

Pipelines running across landscape

A major shift has occurred in recent years toward global carbon neutrality. In December 2021, President Biden signed an executive order setting the goal of achieving a 65% emissions reduction from federal operations by 2030, and an ultimate goal of net-zero emissions by 2050. More recently, President Biden signed into law the Inflation Reduction Act, which will steer tens of billions of dollars into carbon capture and storage programs.  

Roughly 5,000 miles of carbon dioxide pipelines exist in the United States today, mostly used to transport carbon dioxide for enhanced oil recovery operations. The Biden administration envisions a network of pipelines connected to permanent geologic storage sites, including areas in the Gulf of Mexico and Upper Midwest. To accomplish this, a recent study by Princeton University projected 65,000 miles of carbon dioxide pipelines will be needed by 2050—a far cry from the 5,000 miles that currently exist. Although many proposed projects involve the construction of new pipelines (primarily across several Midwest states), the possibility exists to convert existing oil and natural gas pipelines to ship carbon dioxide as well. 

Aside from the obvious engineering and safety concerns that must be addressed before converting an existing pipeline for carbon dioxide transportation, significant legal considerations must also be resolved. In fact, one of the first things a company should do before converting an existing pipeline is review any and all agreements concerning the pipeline’s rights of way.  

Because pipelines can run across long distances to deliver products, the pipelines often run across state lines, under roads, across fields, through parks, and may be close to homes, businesses, schools, or other communal areas. Pipelines are usually constructed pursuant to agreements with landowners for the use of narrow strips of land. The right of way agreement, also known as an easement (or, in Louisiana, a servitude), typically provides the exact amount of land comprising the pipeline corridor, whether one or more lines can be built, and what substances can be transported in each line, and grants access to the property for inspection, repairs maintenance, testing, or for emergencies. Rights of way also identify areas where certain activities are prohibited, both to protect public safety as well as the integrity of the pipeline.  

Unlike natural gas pipelines that cross one or more state lines and are regulated by the Federal Energy Regulatory Commission, there is no federal government agency authorized to oversee the routing of proposed carbon dioxide pipelines. Instead, state laws shape where pipelines are sited and how developers can acquire rights of way. In cases where a landowner refuses to grant a right of way, some states allow expropriation through eminent domain. States that allow the exercise of eminent domain often do so only if the pipeline has common-carrier status, which typically requires open access for use by other parties. Notably, not all states have designated pipelines carrying carbon dioxide common-carrier status. Therefore, depending on the state and applicable laws, an existing pipeline that was constructed using eminent domain through its common carrier status may lose this protection if it converts to carbon dioxide transportation.  

Despite the availability of eminent domain in many states, most developers acquire rights of way through negotiations and contracts with the property owner. Because of this, however, it is important that pipeline operators have a clear understanding of each and every right of way affecting the pipeline, including the terms governing what may or may not be transported in the pipeline. For example, it is not uncommon for a pipeline to be constructed across various tracts of land each subject to a different right of way agreement. In that situation, the right of way for one section of the pipeline may be governed by an agreement permitting the transportation of any product through the pipeline. However, the next segment of the pipeline may be subject to a right of way that allows only for transportation of natural gas, or may even expressly prohibit the transportation of carbon dioxide over that owner’s property.  

Because each state has different—and often changing—requirements governing the transportation of carbon dioxide, and because existing pipelines are often subject to different right of way agreements, it is in a pipeline operator’s best interest to consult with an attorney before converting existing pipelines to carbon dioxide transportation to ensure the viability and success of the project.  

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