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Corporation’s Lease of U.S. Government Easement Affirmed
Canova v. Shell Pipeline, 290 F.3d 753 (5th Cir. 2002).

Jason Dare, 3L
Kristen M. Fletcher, J.D., LL.M.

When the U.S. Government acquires property for public use through its Takings Clause powers and reserves the right to assign the property, the government may legally lease the property to a private entity for commercial purposes. Hence, the Fifth Circuit ruled that the Department of Energy was permitted to lease a pipeline easement it acquired for Strategic Petroleum Reserve purposes to Equilon, a private oil company.

The Bayou Choctaw Pipeline
In 1979, the U.S. Department of Energy acquired a 50 foot by 37 mile pipeline easement and right-of-way, known as the “Bayou Choctaw Pipeline,” from Louisiana property owners, including plaintiff-appellant Carlo Canova, pursuant to its eminent domain powers. Under the Takings Clause of the Fifth Amendment, the federal government may obtain or condemn private property for public use, provided just compensation is given to the property owners. The Department of Energy’s public use for the property was to connect two oil facilities in Louisiana to improve the Strategic Petroleum Reserve (SPR) pursuant to the Energy Policy and Conservation Act. According to the Declaration of Taking filed in the Middle District of Louisiana, the takings were “[a] perpetual and assignable easement and right-of-way” designed to create and maintain the Bayou Choctaw Pipeline; “reserving, however, to the landowners, their heirs and assigns, all such rights and privileges as may be used without interfering with. . .the rights and easements hereby acquired.”1   

The Strategic Petroleum Reserve Management Office decided to lease the Bayou Choctaw Pipeline to defendant Equilon Pipeline Company in May 1997, citing a need to reduce costs and increase revenue from the area. Despite the government reserving a priority right to use the property and a right to conduct annual tests on the pipeline, Equilon was free to conduct its profitable commercial oil transportation through the pipes. Equilon’s only obligations were to make regular lease payments to the Department of Energy and perform necessary maintenance work.

Furious that a private company could use his land for its own corporate gain, Canova originally filed the claim as a class action in state court, not wanting to include the U.S. Government as a party. The claim, however, was removed to U.S. District Court for the Middle District of Louisiana, with the U.S. being classified as a necessary party. The district court granted the defendants’ motion for summary judgment and dismissed the case, “holding that the easement taken by the [U.S. was] not restricted in scope to uses furthering the [SPR], and that the lease with Equilon in any case serve[d] the [SPR] purposes.”2 Canova appealed that decision to the Fifth Circuit.

Scope of the Easement
According to the Fifth Circuit, federal common law controls in this case because the interest the government took was an “easement,” which does not appear in Louisiana civil law.3 Specifically, the court determined that the interest taken by the U.S. government was an easement in gross, meaning that the easement benefits an identifiable person instead of a particular piece of property. Easements in gross are traditionally non-transferable, except for commercial purposes such as “for a pipeline, telegraph and telephone line, or railroad right of way.”4

Canova argued that because the government mentioned the SPR in its Declaration of Taking, the easement was limited in scope to SPR purposes and that leasing the pipeline to Equilon for private gain was beyond that scope. The United States responded that the reference to the Strategic Petroleum Reserve was a recitation of the legitimate public purpose of the taking, but was not a limitation on the permissible scope of the easement’s use.

The Fifth Circuit held for the government finding that the word “assignable” in the Declaration of Taking phrase “perpetual and assignable easement and right-of-way” meant transferable from one person to another. Because only the government can use the easement for SPR purposes, the Fifth Circuit held that the word “assignable” would have no meaning if the government could not transfer the easement to another entity.5

Second, the court noted another explanation for the inclusion of the language referring to the SPR. The federal Declaration of Takings Act requires “a statement of the authority under which and the public use for which said lands are taken.”6 The reference to the SPR, therefore, followed by a citation to the Energy Policy and Conservation Act, was consistent with the statutorily mandated recitation of purpose. The government also included other public uses for the condemned land including “for such other uses as may be authorized by Congress or by Executive Order,” which the court found to be “strong if not conclusive evidence” that the property right created was not itself limited in scope to SPR purposes.7

Finally, because Equilon’s intended use of the easement was the same as the government’s (oil transportation), there was no additional burden placed on Canova’s underlying fee simple estate. The court noted that an additional burden might be found when the “commercial enterprise or public utility use is no longer the same, for example where a railroad easement is used or leased for the construction of telephone lines, or where an agricultural easement holder uses the easement for recreation.”8 For these reasons, the Fifth Circuit held that the easement was not limited in scope to SPR purposes.

Canova also argued that the lease to Equilon was not authorized by an act of Congress. He reasoned that should the government stop using any SPR property, then the property must remain unoccupied until the same government entity begins using it again. The Fifth Circuit ruled that this argument was adverse to the specific language of the Energy Policy and Conservation Act that “the Secretary may use, lease, maintain, sell, or otherwise dispose of storage and related facilities acquired. . ..”9 Therefore, the Fifth Circuit upheld the district court’s ruling in favor of Equilon and the federal government.

ENDNOTES
1. Canova v. Shell Pipeline, 290 F.3d 753 (5th Cir. 2002).
2. 290 F.3d at 755.
3. Federal common law uses the term “easement,” while Louisiana civil law uses the terms “predial and personal servitude” when classifying such lands.
4. 290 F.3d at 757 (citing 25 AM. JUR. 2D Easements and Licenses in Real Property § 102 (1996)).
5. 290 F.3d at 758.
6. 40 U.S.C. § 258(a)(1) (2002).
7. 290 F.3d at 758-59.
8. Id. at 759.
9. 42 U.S.C. § 6239(f)(1)(D) (2002).

University of Mississippi