[co-author: Isabelle Rowan]

The Louisiana Second Circuit Court of Appeal’s recent decision in ETC Tiger Pipeline, LLC v. DT Midstream, Inc.^[1] highlights the limitations of exclusive personal servitude owners’ rights relative to preservation and protection of their property interests in Louisiana. In 2010, Red River Louisiana I LP (“Red River”) granted ETC Tiger Pipeline, LLC (“ETC”) a Servitude of Use for a Pipeline on certain parts of their lands in DeSoto Parish, Louisiana (the “ETC Servitude”) which was to serve ETC’s 42-inch natural gas pipeline running from Panola County, Texas through DeSoto Parish and into Richland Parish, Louisiana. Under the servitude’s language, Red River conveyed an “exclusive servitude of use sixty feet (60’) in width and eighteen thousand three hundred seventy-six and one-tenth (18,376.10’) linear feet, more or less, for the purpose of constructing, maintaining, inspecting, operating, patrolling, repairing, replacing, renewing, and removing, in whole or in part, one (1) pipeline for the transmission of natural gas, its products, byproducts, and derivatives….BUT ONLY as to the location specified for such servitude on the sketch attached hereto as Exhibit A” (Emphasis added). inspecting, operating, patrolling, repairing, replacing, renewing, and removing, in whole or in part, one (1) pipeline for the transmission of natural gas, its products, byproducts, and derivatives….BUT ONLY as to the location specified for such servitude on the sketch attached hereto as Exhibit A” (Emphasis added).

In October 2022, DTM contacted ETC to inform ETC it was planning to construct a pipeline that would cross the ETC Servitude as well as the property of ETC. ETC refused to enter into a Servitude Agreement with DTM to cross their property, and ETC objected to DTM’s proposed route. Again, in March 2023, DTM informed ETC of a newly-routed planned pipeline that would cross the ETC Servitude, and ETC objected. ETC alleged that they did not have to allow other pipelines to cross their servitude pursuant to the exclusivity language of the ETC Servitude; ETC maintained it purchased “exclusive” property rights when constructing the pipeline and to allow other pipelines to cross the servitude was an encroachment on their property rights. Additionally, ETC stated that because DTM could not meet its strict safety standards for potential pipeline crossings, ETC was within its purview to deny DTM’s proposal. The trial court granted ETC a temporary restraining order and preliminary injunction to stop DTM from constructing a pipeline in finding that the case falls squarely under La. C.C.P. art. 3663. The court based its ruling on the clear wording of the ETC Servitude, holding both that (i) ETC has an exclusive servitude and (ii) the crossings anticipated in the servitude do not include a pipeline crossing. DTM appealed, and Louisiana’s Second Circuit reversed.

Louisiana’s civil law regime divides servitudes into two types: predial and personal.^[2] A personal servitude is a charge on a thing for the benefit of a person,^[3] and a predial servitude is a charge on a servient estate for the benefit of a dominant estate.^[4] A right of use, however, is a unique type of land right because both the rules of usufruct, a type of personal servitude,^[5] and predial servitudes govern it, where compatible.^[6] Because the right of use Red River granted ETC does not create both a servient and dominant estate, Louisiana’s Second Circuit found the ETC Servitude to be a personal servitude rather than a predial servitude. The right of use conferred a benefit to ETC as opposed to a “dominant” estate. However, the appellate court did not base its reversal of the district court’s decision on the distinction between personal and predial servitudes; instead, the reversal was founded in general contract interpretation principles.

ETC contended that the word “exclusive” means the “use of unlimited depth” and the right to prevent other pipelines from crossing. However, under the guide of Louisiana Civil Code article 2046,[7] the appellate court determined that the one-time use of the word “exclusive” did not entitle ETC to block other pipelines at undefined depths. Instead, the appellate court found that “exclusive” only meant to depths ETC occupied to build its first pipeline. Additionally, the ETC Servitude contained language regarding limitations on future crossings; the court reasoned this provision would not have been included had “exclusive” truly meant only ETC could utilize all depths of the burdened property. The court noted that the right of use language in the ETC Servitude did allow ETC to prevent use that “may unreasonably damage, destroy, injure and/or interfere with” ETC’s use of the servitude. However, the record demonstrated that ETC did not prove that safety was an actual concern, rather the record reflected that ETC’s concern centered on gaining a “commercial benefit” from a crossing. The appellate court held that the district court erred in its interpretation of “exclusive” in the right of use’s language and subsequently reversed the grant of a temporary restraining order and a preliminary injunction in ETC’s favor.

Judge Thompson concurred with written reasons to express his opinion on the effects of an agreement’s ambiguity on a landowner. Thompson objected to ETC’s argument advocating for the expansion of “exclusive” to mean ETC had the sole purview to monetize all widths, lengths, and depths of land covered in the right-of-use agreement. From Thompson’s view, had the appellate court upheld the district court’s decision, the effects would have been to shrink the rights of landowners and expand the rights of grantees in ways that directly conflict with Louisiana property law. Additionally, Thompson contended that had Red River and ETC meant the servitude to truly be “exclusive” in the way ETC argued, the Exhibit attached to the right of use would have contained diagrams to show the right of use covering the entire plane of earth spanning from the Earth’s crust to its core. Thompson declined “to disrupt the progression of the oil and gas industry by expanding by thousands of vertical miles the dimensions and extent of the servitude” and instead relied upon a plain reading of the language contained in the agreement.

In an amicus brief filed by Governor Jeff Landry, during his tenure as Louisiana Attorney General, he emphasized the drastic consequences a finding for ETC would cause within the State of Louisiana. Landry wrote that finding for ETC would stymie the pipeline growth the industry needs in Louisiana, one of the few states in which pipeline projects have progressed recently. To meet the nation’s ever-increasing demand for natural gas, estimates have shown a necessary pipeline capacity increase of 23% by 2030; and such an increase is estimated to cost $25 billion.^[8] To achieve this end, the industry relies on states like Louisiana, and other areas favorable to pipeline development, to have clear and predictable legal rules in place. The ETC decision demonstrates Louisiana’s commitment to protecting pipeline development within state borders and should serve as a warning to industry to avoid employing anticompetitive practices and capricious attempts to monetize or expand rights at the expense of necessary infrastructure development.

References

^[1] ETC Tiger Pipeline, LLC v. DT Midstream, Inc. and DTM Louisiana Gathering, LLC, 384 So. 3d 458 (La. App. 2d Cir. 4/10/24).

^[2] La. Civ. Code art. 533.

^[3] La. Civ. Code art. 534.

^[4] La. Civ. Code art. 646.

^[5] Louisiana Civil Code article 534 states that the kinds of personal servitudes are: usufruct, habitation, and rights of use.

^[6] Louisiana Civil Code article 645 states that a right of use is regulated by application of the rules governing usufruct and predial servitudes to the extent that their application is compatible with the rules governing a right of use servitude.

[7] Louisiana Civil Code article 2046 states “[w]hen the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties’ intent.”

^[8] Elizabeth Elkin, Pipeline Brawl Rattles Industry Desperate to Build, yahoo!finance (June 11, 2024, 8:22 PM CDT).