Bloomberg News

TransCanada Keystone Pipeline Temporarily Halted in Texas

December 11, 2012

TransCanada Corp. (TRP) must temporarily stop work on part of its Keystone XL pipeline while a Texas judge evaluates a landowner’s challenge that the line was permitted to carry only crude oil, not bitumen obtained from Canadian tar sands.

Michael Bishop, who granted TransCanada an easement across his property in Nacogdoches County, obtained a temporary restraining order from Texas County Court at Law Judge Jack Sinz on Dec. 7. The order blocks the company from working on Bishop’s property for two weeks while allowing work on other sections of the pipeline to proceed.

“He’s saying we can’t transport anything but crude oil, which is what we’re primarily going to carry,” Tom Zabel, TransCanada’s lawyer, said in a telephone interview today. “We’re trying to get a hearing on Thursday to dissolve the order.”

“Under Texas law, TransCanada has been granted the legal authority to construct this pipeline,” David Dodson, TransCanada’s spokesman, said in an e-mailed statement. “Construction has commenced on the property that is the subject of the temporary restraining order, and the product the Gulf Coast Pipeline will transport is crude oil. Mr. Bishop’s request does not impact overall construction, and we are on track to bring this pipeline into operation in late 2013.”

Multiple Sites

Sinz granted Bishop’s temporary restraining order without notifying TransCanada, saying Bishop “has been defrauded and denied his constitutional rights,” according to the order.

Calgary-based TransCanada has been battling landowners and environmental groups at multiple sites along the southernmost leg of its 2,151-mile pipeline between western Canada and the U.S. refining industry complex on the Texas Gulf coast.

So far, none of the legal challenges has permanently halted construction work on the pipeline, which will carry liquefied bitumen obtained by heating tar sands, along with traditional crude oil produced from fields in North Dakota, Oklahoma and western Texas, Zabel said.

Bishop, a 64-year-old chemist who owns a biofuels company, claims the Keystone pipeline is only permitted to carry crude oil that is liquid under normal atmospheric temperatures and pressure. Bitumen is “solid at atmospheric temperature and pressure and must be diluted for transport via pipeline,” he said in his complaint.

Tar Sands

The U.S. Internal Revenue Service ruled last year that crude oil isn’t the same as tar sands, and that “tar sands oil” isn’t subject to the U.S. excise tax on petroleum, Bishop said in his complaint. He said TransCanada has “intentionally misled and misrepresented” the nature of its product to regulators, landowners and the public in order to obtain permits and eminent domain rights to push its project through.

“It is also a fact that the firm used coercion and intimidating tactics to obtain the property in question and that acting on the validity of their claim, I settled under duress,” Bishop said in an affidavit filed with his request for a restraining order.

Bishop said in a phone interview today that TransCanada didn’t try to negotiate with him before survey crews trespassed on his 20-acre property near Nacogdoches, located about 100 miles northeast (161 kilometers) of Houston, a year ago.

Existing Easement

He said he offered TransCanada free use of a six-acre existing pipeline easement along the edge of his land. He balked when the company selected a route “that comes straight through my front yard,” obliterating 75 percent of his family’s vegetable garden and bringing the pipeline within 120 feet of his home of more than 20 years.

“I’ll give the money back, that’s not the issue,” Bishop said by phone of the settlement in which TransCanada paid him more than 10 times its original offer for his easement. “I just want them to leave my homestead alone.”

Bishop has also filed a separate lawsuit in state court in Austin against Texas pipeline regulators. In that action, he is challenging Keystone’s certification as a common carrier under state law.

The case is Bishop v. TransCanada Keystone Pipeline LP, CV1213077, County Court at Law, Nacogdoches County, Texas.

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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