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Red Oak Pipeline & Future Condemnation Proceedings in Texas


Jan 20 2020

Red Oak Pipeline

Texas landowners are all too familiar with large oil pipeline projects. These projects, while great for oil and gas companies, often negatively impact both the environment and local communities. Texas condemnation law allows oil companies and governmental entities to seize and acquire land for “public use” in order to clear a path for pipelines. That being said, the Red Oak Pipeline project creates the very real possibility that many Texas landowners will soon face condemnation proceedings. Here is what you need to know about the Red Oak Pipeline project and what you can do to protect your rights.

 

What is the Red Oak Pipeline?

The Red Oak Pipeline is the product of a joint venture between Plains All American Pipeline and Phillips 66 that will enable producers based out of Cushing, Oklahoma and the Permian Basin to transport oil to Houston and locations throughout the Gulf Coast. The Red Oak Pipeline will span 650 miles and will move approximately 400,000 barrels of oil per day. The project was announced in the middle of 2019 around the same time that the Liberty Pipeline project was announced. Plains All American and Phillips anticipate that the Red Oak Pipeline will begin operations sometime in the first quarter of 2021. The project is estimated to cost a total of $2.5 billion.

The parties have stated that they intend to make use of existing pipelines and utility corridors where possible in order to minimize environmental and community impact. However, due to the massive scope of the Red Oak Pipeline project, combined with the Liberty Pipeline project, the projects will undoubtedly impact Texas landowners by way of potential condemnation proceedings.

 

Who is behind the Red Oak Pipeline?

The Red Oak Pipeline project is a 50/50 joint venture between Plains All American Pipeline LP and Phillips 66. The parties have created a special limited liability company (LLC) called Red Oak Pipeline, LLC for purposes of the venture.

Plains All American “Plains” is a publicly traded limited partnership that was founded in 1998 and is headquartered in Houston, Texas. Plains owns approximately 37 million barrels of terminal and storage capacity, as well as 15,000 miles of crude oil pipelines. Phillips 66’s origin dates back to ConocoPhillips. The company is publicly traded on the New York Stock Exchange. Phillips is headquartered in Westchase, Houston, Texas and has over 14,000 employees worldwide.

 

Part of a Bigger Picture: Plains All American’s Sunrise II

The Red Oak Pipeline project is part of a much larger effort by Plains All American to serve the Cushing and Gulf Coast markets from Permian crude oil supplies. Producers in the Permian basin and Western Canada have faced challenges as oil production has exceeded capacity. The projects are part of a widespread effort to increase pipeline capacity. The Plains Sunrise Pipeline oil system was put into operation in the fourth quarter of 2018. The Sunrise extension can move about 500,000 barrels of crude oil per day from Midland to Colorado City and Wichita Falls, Texas. The extension has connections to Cushing, Oklahoma. The Red Oak Pipeline will serve to transport oil further from Cushing all the way to various strategic points on the Gulf Coast. .

 

How many miles is the Red Oak Pipeline Project?

The Red Oak Pipeline will be approximately 650 miles long. A new 30” pipeline will run from Cushing to Wichita Falls and Sealy, Texas. A new 30” pipeline will run between Sealy to Corpus Christi and Ingleside. A 20” pipeline segment will span from Houston to Beaumont.

 

Counties affected by the Red Oak Pipeline Project?

Since the Red Oak Pipeline project spans such a large distance, its construction will impact landowners in many Texas counties. Texas property owners in the following counties could face the very real possibility of Texas condemnation proceedings:

  • Bee County
  • Brazos County
  • Burleson County
  • Chambers County
  • Clay County
  • DeWitt County
  • Falls County
  • Fayette County
  • Goliad County
  • Gonzales County
  • Grimes County
  • Harris County
  • Hill County
  • Jack County
  • Hefferson County
  • Johnson County
  • Lavaca County
  • Liberty County
  • McLennan County
  • Montgomery County
  • Parker County
  • Refugio County
  • Robertson County
  • San Patricio County
  • Tarrant County
  • Washington County
  • Wichita County
  • Wise County

If you are a landowner in any of these counties, be on the lookout for communications from right-of-way agents that represent Red Oak Pipeline. These agents may contact you in order to survey your property in order to determine what portion of your land is being condemned in connection with the project. If you are contacted by such project representatives, say as little as possible and immediately contact an experienced Texas eminent domain lawyer. The Texas Landowner Bill of Rights grants you important protections in Texas condemnation cases, including the right to seek legal counsel and/or professional representation for assistance in such matters.

 

Project Timeline

The Red Oak Pipeline project was officially announced in the middle of 2019. Plains All American and Phillips 66 expect that the pipeline will be operational sometime in the first quarter of 2021. This is a very aggressive construction schedule, and it is not clear if the pipeline will be completed by then. However, if history is any indicator, the Sunrise Pipeline system opened ahead of schedule.

 

Why is this Pipeline Needed?

The Red Oak Pipeline is needed to address a large discrepancy between oil production and pipeline capacity. Oil producers in the Permian Basin and Western Canada have been producing oil at a rate that greatly exceeds the available pipeline capacity. When completed, the Red Oak Pipeline will go a long way towards moving the increased supply. Cushing is also the delivery point for U.S. crude futures contracts. Supply at storage facilities in Cushing have decreased significantly due to a lack of pipeline capacity.

 

You Have Rights as a Property Owner

Landowners and property owners in Texas have important rights and protections when faced with condemnation actions. The Texas Landowner Bill of Rights, as well as the U.S. and Texas Constitutions, forbid the seizure of your property without first providing just and adequate compensation. Unfortunately, governmental entities and large oil companies often seek to look after themselves first, and pay you as little as possible for your land and other damages.

If you are a landowner in Texas that has been contacted by an agent in connection with the Red Oak Pipeline project, it is important that you consult with an experienced Texas eminent domain lawyer as soon as possible and avoid signing any documents that are provided to you by agents for the oil companies without proper representation. An experienced eminent domain lawyer will assist you in determining whether said agents and/or representatives are operating in good faith, as these entities seeking to condemn your land must follow important procedures outlined by the Texas Property Code and applicable case law. Whatever deadlines may be initially imposed upon you, understand that you have time. Use it to learn and exert your rights!

 

Will you be Impacted by the Red Oak Pipeline Project?

If your property is in the path of the Red Oak Pipeline, it is possible that your land or property may be condemned. If you receive a notice or a visit from an agent for an oil or gas company, do not panic and do not sign any proposed agreements without proper representation. Rather, politely decline and state that you would like a chance to discuss the matter with your attorney. Contact a Houston eminent domain lawyer to discuss your options.

Our firm has successfully represented many landowners facing Texas condemnation actions for oil and gas pipeline projects. For any questions regarding Texas condemnation practices, the Red Oak Pipeline Project, or your options regarding the same, please do not hesitate to contact our office.

Everything You Need to Know About Just Compensation in Eminent Domain Cases


Dec 23 2019

Eminent Domain: Just Compensation

When the government (or any other condemning authority) takes your land for a public use, it is Constitutionally required to pay you just compensation. The U.S. Constitution, however, does not set forth the method or formula for determining eminent domain property value or just compensation. Rather, the standard for just compensation has evolved over several hundred years of interpretation by both the federal and state court systems. As a very general rule, just compensation is determined by paying the property owner the price that he or she would have received had the property been sold on the open market. This fair market valuation formula of just compensation in the context of eminent domain is subject to many additional standards, qualifications, and exceptions that can make the calculation more difficult and confusing.

In this article we explore the eminent domain compensation process and some of the different methods used to calculate just compensation. We also look at how the government (or other condemning authorities) goes about seizing your property, how the offer process works, and some tips to ensure that you receive a fair eminent domain payment.  This article is for informational purposes only and in no way replaces the need for you to seek professional legal advice.

 

What is Just Compensation for Eminent Domain

Just Compensation

Just compensation is the amount of money that a government entity or other condemning entity is required to pay a landowner when it takes a portion or the entire property. The amount of just compensation paid is typically the fair market value of the property as calculated by a real estate appraiser or other real estate professional. Where there is a partial taking of property, the eminent domain payment is equal includes the difference between the value of the property before and after the taking.

Just Compensation Constitutional Clauses

Just Compensation is a term that appears in the Fifth Amendment of the U.S. Constitution. The relevant language of the Fifth Amendment provides that “nor shall private property be taken for a public use, without just compensation.” Since it was written into the Constitution some 230 years ago, courts across the U.S. have interpreted and narrowed down the meaning of eminent domain just compensation.

The Texas Constitution contains a similar clause that provides: “No person’s property shall be taken…for a public use without adequate compensation…and only if the taking is for the State…or the public at large; or an entity granted the power of eminent domain under law.”

 

Taking and Just Compensation

Taking

A taking occurs where a government entity or other condemning authority  either seizes or deprives the owner of the property’s free use or enjoyment. While governments have been seizing private land for thousands of years, the right was first formally set-forth in the U.S. in the Fifth Amendment of the Constitution. The Fifth Amendment is commonly known as the “takings clause” and has been interpreted by courts to include the following:

  • A taking must serve a “public use”; and
  • Where a taking occurs, the government must pay “just compensation”

Unfortunately for landowners, the public use requirement has been defined broadly. A taking serves the public use as long as it is rationally related to the intended use of the property. This does not mean that the end use of the property will enable the public to use it. What it means is that provided it benefits the general public, like running an oil pipeline, the public purpose requirement will likely be met. For this reason, much of the litigation surrounding takings involves eminent domain just compensation.

The landowner will usually first become aware that the government seeks to take his or her property through eminent domain when a Notice of Condemnation is sent to the owner. In Texas, when you receive a Notice of Condemnation you have some important rights. If you have received a Notice of Condemnation, it is important to consult with an experienced Houston eminent domain lawyer as soon as possible to discuss your options.

 

Just Compensation 

Where a property has been taken for a public use, the question becomes: what is just compensation for eminent domain? Many landowners struggle with the value given to their property in eminent domain or condemnation cases. Fair market value does not take account of the value that owners assign to their properties. As a general matter, the property is worth what the owner could get for it on the open market, or the value that it appraises for (which is supposed to reflect its fair market value).

 

Factors of Just Compensation

There are several factors that make up fair market value for the purposes of calculating eminent domain just compensation.

Fair Market Value of Land

The fair market value of the land is the value that a landowner could sell the property for on the open market.

Fair Market Value of the Improvements

The fair market value of improvements accounts for the physical structures and other important features of the land. This includes things like houses and buildings.

Damages to the Remainder

This factor is relevant in partial takings of land. Where land is partially condemned, just compensation includes not only the fair market value of the part being physically taken, but also is a function of the difference between the remainder land before and after the taking. In addition to looking at the change in value from a reduction of size, it is also necessary to consider whether the property can still be put to its highest and best use, and a myriad of other factors that can damage the value of the remainder property.

Other Damages Caused by Taking

These are generally ancillary damages like the costs associated with replacing utilities servicing structures that remain on the land. For instance, if the taking will remove a buried oil tank servicing a dwelling, the entity will likely have to pay the costs for installing a new one.

Benefits

In the unlikely event that the condemnation provides benefits to your remaining property then the government may be able to deduct the value of such benefits from the total eminent domain payment to be made.

 

Methods for Property Valuation

Texas law provides important safeguards for landowners to ensure that they are adequately compensated in the event their property is seized through government action, eminent domain, or condemnation. Prior to the commencement of a formal condemnation action, the condemning entity must make an initial offer in writing to the landowner. The value of the offer must be supported by a written appraisal from a certified appraiser. If the parties cannot agree on the value then the entity can file a condemnation petition.

The appointed appraiser will consider factors like the size of the property, its current or potential use, zoning classification, and its current level of development. There are several different methods commonly used by appraisers to determine the fair market value of a property:

  • Sales Comparison Approach: a commonly used method that uses comparable sales of neighboring properties to justify the value placed on the target property;
  • Income Approach: generally used for income-producing properties like an apartment building. This approach involves some complex numerical and financial calculations but as a general matter the calculation determines the value of the property based upon the property’s rental income generation;
  • Cost Approach: less commonly used, this method looks at the value of the land and what the cost would be to build the existing structures and improvements on it. This calculation is used more in rural areas or for unique properties and situations  where there are not as many comparable sales to base the value on;
  • Damages to the Remainder: useful in partial condemnations, looks at the difference between the value of the property before and after the taking, and accounts for any other damages caused to the remaining land or structures such as the costs of replacing utilities servicing the property.

It is important to note that for business owners, damages do not generally include the loss of business income. So, if a business looses customers due a partial taking of land, the owner usually cannot recover for lost sales.

 

The Government’s Offer Isn’t Always “Just Compensation”

It is very important to keep in mind that just because you receive a Notice of Condemnation apparently supported by a written appraisal, that does not necessarily mean that you are being offered true just compensation. In fact, condemning entities typically do what they can to minimize the amount of just compensation paid. You have important rights under Texas law to ensure that you receive fair compensation for your property. An experienced Texas eminent domain lawyer can protect your rights and get you what you deserve for your property.

 

Little Known Facts (Tips)

There are some important points to keep in mind when faced with a condemnation action and determining whether you are being paid adequate compensation.

  1. The value of your property is not limited to its current use. This means that you are entitled to a valuation for the “highest and best use” use of the property. For instance, if you own vacant land that is seized, the value needs to account for the possibility of the construction of physical structures consistent with the property’s zoning classification and potential development, that is feasible, in the near foreseeable future.
  2. You may be entitled to have the government pay your legal fees if you are successful in preventing the government from condemning your property. If you are unsuccessful, some eminent domain law firms are willing to work on a contingency fee basis to help you recover just and adequate compensation for the eminent domain taking of your property.
  3. You may be entitled to reimbursement for relocation expenses. This can be especially important for difficult moves like relocating a business to another location.
  4. You are entitled to adequate compensation for partial takings of land. Calculating the fair market value for partial takings can be more difficult than condemnations of entire parcels. It is important to take into account all factors that result in a decrease in the value of your remaining property.
  5. Condemning one property may cause damages to another property. If you own adjacent parcels of land and the taking of one impacts the value of the other, you may be entitled to damages for the decrease in value to the remaining property.

 

Consult with an experienced Texas Eminent Domain Lawyer

If you are facing a condemnation action, it is important that you consult with an experienced Texas eminent domain lawyer as soon as possible. The Padua Law Firm works hard to ensure that your rights are protected and that you receive the full amount of just and adequate compensation that you are entitled to due to the taking via condemnation of your property. If you have any questions about eminent domain compensation or the condemnation process please contact us today for a free consultation.   Our firm handles most eminent domain and condemnation cases on a contingency fee basis, which means you pays us nothing unless we increase your compensation.

What are the Pipeline Easement Rates in Texas?


Dec 11 2019

By:   Alejandro L. Padua,  Attorney

Head of Eminent Domain and Condemnation Practice

Padua Law Firm, PLLC

Pipeline Easement Rates in Texas

If a pipeline company has contacted you about installing and operating a pipeline across your property, there are many factors to consider before negotiating and granting the pipeline easement or right of way agreement. An easement generally gives the pipeline company a legal property interest in your property for a specific purpose, usually the construction, operation, and maintenance of the pipeline. Although not the only important term, a primary concern is the monetary compensation the company is offering you in exchange for the easement.  The going rate of a pipeline easement in Texas reflects many factors, each of which you should be aware of and incorporate into your analysis..

  1. Location – Location – Location: Very similar to the age old saying in the context of real estate investment, the location of your property is very important in your analysis. The county in which your property is located is one of the first considerations in determining the price of the pipeline easement.  Furthermore, the location of your particular property within the county where it is located is also of primary importance.  Similar transactions in your county should be analyzed and  researched to ensure that the pipeline easement payment is an accurate reflection of the market.  Please note, however, that even though pipeline easements are routinely bought and sold on the open market like any other real property transactions, many Courts around the country have rejected the price per rod of a pipeline easement as well as the price per linear foot of a pipeline easement valuation methods.    Because of this counter-intuitive law, litigation involving pipeline rights of way are many times focused on different valuation methods and arguments that only experienced counsel, with the help of retained expert appraisers, land planners, and engineers, can properly prosecute in Court.
  2. Size of the Pipeline Easement: Generally, the more land (usually measured in linear feet, rods, acres, or square feet) the pipeline company wants to use, the more it will have to pay you. In the typical market for transactions of utility easements between pipeline and utility companies, the easements or right of ways are valued on a per rod or per linear-foot basis. Unfortunately, not all pipeline companies use these customary valuation standards and as stated above, Courts have also rejected that valuation method.
  3. Current and Proposed Future Uses of Your Property: The current use of your property has a direct correlation with your property’s value. For example,  depending on whether it is commercial retail space, industrial, utility easement or corridor, farming, ranching, housing, etc., the value of your property, and therefore an easement thereon, will depend on this particular use. The value of an easement could also increase if your property could be developed into a particular use in the reasonably foreseeable future.
  4. Product and Pressure of the pipeline: The type of product (i.e. crude oil, natural gas, natural gas liquids, etc.) and pressure of the pipeline are directly correlated to the safety of the pipeline. Generally, the higher the pressure and/or more toxic the product that will be flowing through the pipeline, the higher the cost of the easement. Be sure to ask the pipeline company for this information, as it may not provide it voluntarily.
  5. Macroeconomic Market Conditions of the Energy Industry: Though the energy sector is known for its boom and bust market cycles, usually the pipeline company seeking to condemn a right of way on your land is usually in good economic standing. You should make sure that the pipeline easement rate offered to you properly reflects favorable energy market conditions and corresponding pipeline activity if they are present.
  6. Effect of the Easement on the Rest of Your Property: When only part of your land is subject to the easement, it is known as a partial taking. The industry standard for calculating the value owed to you as the property owner is to determine the difference between the market value of all your property before the taking and the market value of the remaining property after the taking. This analysis also includes an analysis as to whether the construction of the pipeline will interfere with any of the activities currently allowed on the property, whether there will be a loss of agriculture on the land, and/or whether there will be any above-ground appurtenances such as compressors or valve sites. Another important factor to consider is the targeting of your property for future utility lines, as it is more attractive for another pipeline or utility company to lay a new line on property with already-existing utility lines. In sum, the more the remainder of your property is negatively affected by the Easement, the more the pipeline company should compensate you.
  7. Legal Terms of the Right-of-Way Agreement or Pipeline Easement: The legal terms of the right-of-way agreement are a vital point of negotiation for pipeline easement payments. Though it may seem tedious and not as important as the compensation or price per rod paid, carefully reading through all provisions of the agreement will save you from future conflict with the pipeline company, protecting the value of your property, and generally assure your interests are permanently protected. Read through this legal guide on important provisions of a pipeline easement agreement to make sure your bases are covered.
  8. Competency of Your Legal Counsel: If you decide to engage legal counsel to negotiate a favorable rate for a pipeline easement on your property, be sure to research and engage attorneys who have experience and success negotiating with pipeline companies because this is usually a big factor. The pipeline easement attorneys at Padua Law Firm, PLLC have fought for numerous property owners across Texas and have a track record of significantly increasing compensation from pipeline companies as well as permanently protecting the property rights via the legal terms of the agreements. Our attorneys are well connected to other real estate professionals, appraisers, land planners, and engineers who know how to fairly and accurately value property and fight for the compensation you deserve.

Ultimately, determining the rate for a pipeline easement is property-specific, easement-specific, pipeline-specific, and involves the consideration of several factors.  The process can become a complicated. The pipeline company, because it is in their best interest, will inevitably fight to keep the rate as low as possible, while you as the property owner must do the opposite. Don’t let the pipeline company’s experience and usually superior bargaining power undermine the value of your property. A prudent landowner should contact an attorney experienced in easement negotiations before executing a pipeline easement agreement.  If you would like professional counsel to help you negotiate the best pipeline easement rates on your property, contact Padua Law Firm for a free consultation at 713-840-1411 or email at info@padualaw.com.

Notice of Condemnation


Nov 18 2019

I Received a Notice of Condemnation. What are my rights?

 

What is a Notice of Condemnation?

A Notice of Condemnation is a formal written notice from the federal government, or state or local government, advising the property owner that it intends to acquire the property through the power of eminent domain. Think of the Notice of Condemnation as an initial reaching out of sorts, the preliminary stage of a condemnation action in Texas. Following the Notice of Condemnation, the government authority seeking to condemn the property will conduct an appraisal and make an initial offer. It is important not to panic when you receive a Notice of Condemnation or initial offer. There are important rights in Texas to protect landowners in condemnation cases.

 

Forms of Condemnation Notice

In Texas the Notice of Condemnation is the first formal communication you will receive from the condemning authority seeking to take your land. The Notice will have a specific description of the property to be condemned and advise you of any important meetings that property owners can attend for more information about the project and may advise you of important rights that you have.

Following the receipt of the Notice of Condemnation, the condemning authority will make an initial offer to purchase your property. This offer must be made in good faith and supported by one or more appraisals conducted by the condemning party. At this point you are free to attempt to negotiate a higher price. If you are unable to come to an agreement, the next step is for the condemning party to file a Condemnation Petition. Texas Code Sec. 21.012 expressly states that the condemning authority must have made a bona fide offer to purchase the property from the property owner prior to filing the Condemnation Petition.

Therefore, do not panic if you receive a Notice of Condemnation. Texas law grants landowners important rights in condemnation actions, one of which is this initial period of informal negotiations prior to the filing of a formal Condemnation Petition. It is important to use this period of time to discuss your options and rights with an experienced Texas eminent domain attorney.

 

What are my rights after receiving a Notice of Condemnation?

The Texas Landowner’s Bill of Rights sets forth the rights of property owners where a governmental authority or private entity attempts to take real property rightfully belonging to the owner. The Landowner’s Bill of Rights were created by the Texas Office of the Attorney General in an effort to curtail abusive practices against landowners. The condemning authority is required to provide a copy of the Landowner’s Bill of Rights to the owner at least 7 days before a final offer is made to purchase the property.

Other important rights granted to landowners under the Bill of Rights include:

  • Real property may only be taken for a public use
  • You are entitled to adequate compensation for the property taken
  • The condemning authority must provide you with a written appraisal from a certified appraiser advising you of the fair market value for the property
  • The condemning authority must make a good faith offer to buy the property prior to initiating formal condemnation proceedings
  • You can hire your own appraiser to determine the value of the property, as well as an attorney to both negotiate the price and represent you in court should an agreement fail to be reached

The limitation that property can only be taken for a public use is an important one. What this means is that the condemning entity can only take the property if it serves needs of the general public. Examples include the construction of roads, parks, and utilities, among others. An entity cannot use the power of eminent domain to take your property if the intended end use is for private economic development.

A condemning authority also cannot take your property without paying you what it is worth. Nor can it rightfully submit a lowball offer to a landowner. This is not to say that it does not happen, however. Having an experienced eminent domain attorney both advise you of important rights under Texas law and negotiate a fair price on your behalf can help even the playing field.

 

Gather information and determine what was provided

While preliminary, the Notice of Condemnation provides you with important information. First, it will include a description of the property to be taken. Second, it should notify you of the nature of the project, as well as any local meetings you can attend where you can be granted the opportunity to voice your disapproval of the project. Third, you may be provided with a copy of the Texas Landowner’s Bill of Rights, as well as be advised of other important rights, at the same time of the Notice of Condemnation or shortly thereafter. Again, the condemning entity must provide you with a copy of the Bill of Rights at least 7 days before making a final offer to buy the property.

It is important to spend this time educating yourself on your rights and the intended use of the property to be taken. Is the intended use really one that will benefit the public? If the intended use is supported, consider the amount of land they are proposing to take. If this exceeds what is needed for the project you may have a basis to object. It is also a good idea to spend some time determining the value of the property. Consider hiring an appraiser during the initial stages so you have a better idea of the fair market value prior to receiving an initial and/or final offer from the entity. A Texas eminent domain attorney can be invaluable resource throughout the initial condemnation stages, as well as formal proceedings should your case progress to that stage.

 

Contact an experienced Texas condemnation attorney as soon as possible

Receiving a Notice of Condemnation can be a stressful and confusing experience. Eminent domain laws are complex. Inexperienced landowners may not only unnecessarily lose a portion of, or even all their property, but they may lose a significant amount of money by not being paid adequate compensation for the condemned property. The Padua Law Firm has experience successfully representing landowners in all stages of the condemnation process. We do everything we can to help our clients to retain their property. Where condemnation cannot be prevented, we work hard to ensure that our clients receive maximum compensation. Please contact us at 713-840-1411 at any time to discuss your case.

Who Owns the Mineral Rights on Your Property? [SURFACE RIGHTS VS. MINERAL RIGHTS]


Oct 24 2019

Who Owns the Mineral Rights on Your Property?

Landowners in mineral rich states like Texas are often forced to consider the question: “Who owns the mineral rights to my property?” Unfortunately for landowners, the answer to this question is not as straight-forward as one may think. In this article we explore what mineral rights are under Texas law, the ownership of mineral rights and the ability to profit from them. If you have questions about the ownership of mineral rights on your property, consult with an experienced Texas mineral rights lawyer.

 

Who owns the mineral rights to my property?

  • Ownership of mineral rights in Texas is not always the landowners
  • As a general matter, mineral rights are conveyed with the sale of the land or property unless they are not included within the property’s Chain of Title
  • Texas law draws an important distinction between Surface Rights and Mineral Rights
  • Knowing who owns and controls the surface of the land, as well as the minerals underneath it, is essential to understanding a landowner’s mineral rights
  • It is often necessary to retain an experienced Texas mineral rights attorney to both examine the chain of tile and to ascertain your rights to the property’s minerals

 

Surface Rights vs. Mineral Rights in Texas

How do I know if I have mineral rights – Surface Rights vs. Mineral Rights in Texas

When a property is purchased in Texas there are typically two distinct types of rights that are conveyed by the sale: Surface Rights and Mineral Rights.

  • What are surface rights?

Surface rights refer to those things located on the entire surface of the landowner’s property. Thus, for example, if a landowner has surface rights to the property, he or she owns all physical structures located on the land.

  • What are mineral rights?

Mineral rights refer to the minerals and resources located beneath the surface of the land. While both surface and mineral rights are generally conveyed when the landowner acquires the land, it is far more common for the seller to retain mineral rights than surface rights (or for prior sellers in the chain of title of the property to have retained the mineral rights).

  • Surface and mineral rights under Texas law

To a layperson, the distinction between surface and mineral rights may seem at best confusing, and at worst a useless legal exercise. And yet, there have been plenty of cases where a landowner was prepared to sign a lucrative agreement for royalties, only to learn that he or she did not own the rights to minerals located beneath the surface. Even worse, if a third party owns the mineral rights to your property, such rights generally permit the use of the surface to access and extract the minerals located on the property. In other words, a third party may be able to construct roads and other physical structures on your land (as reasonably necessary to for exploration and production of minerals in the subsurface) even though you own the surface rights.

Landowners are not without recourse in such cases. Both the legislature and the courts have sought to limit the mineral owner’s ability to extract the minerals to the detriment of the landowner. The mineral owner may, for example, be subject to the Judicial Accommodation Doctrine. This doctrine requires that a mineral owner respect existing structures (or uses) located on the land, particularly those for agricultural use.

While these conflicts can and do arise, it is advisable to be proactive and determine the mineral rights to your property. Not only will you know your rights where a third party seeks to assert its mineral rights, but you will establish your ability to sell or lease mineral rights in exchange for royalties.

 

Who Owns the Mineral Rights on Your Property?

Who Owns the Mineral Rights on Your Property?

It is not enough for a landowner to assume that he or she owns both the surface and mineral rights to the property. The only way to determine your rights is to conduct a search of the public land records in the county where the property is located. All the deeds conveying the property must be reviewed. This is known as reviewing the property’s Chain of Title.

Unfortunately, the chain of title in mineral rich states like Texas can be difficult to determine. The reason for this is that mineral rights were likely conveyed several times. Such conveyances do not necessarily coincide with the conveyance of surface rights. Further complicating matters is the fact that deeds often contain errors and omissions. For instance, a deed could state that mineral rights are being conveyed to the new owner, but the party conveying the rights may not even own the rights due to a defect in a prior deed. Or a deed could be silent on the issue altogether, requiring the new owner to determine what rights he or she acquired.

Searching through the county records can be a difficult process for those lacking a legal education or experience in these matters. Unfortunately, land records in Texas are not as user-friendly as some other states, especially in some rural and remote counties. In Texas, it may be necessary to review “grantor/grantee” indexes in order to locate the correct deed. Once that deed is found, it is necessary to return to the index to locate the next deed (as well as all prior deeds). Further complicating the process is the need to review each deed in detail to determine what rights were conveyed. For these reasons, many people seek the assistance of an experienced Texas real estate lawyer to do the research for them.

 

How to Make Money From Mineral Rights

Once you have determined that you own the rights to the minerals located on your property, you can seek to sell or lease the rights to a third party. Prior to doing so, it is important to spend some time researching what the minerals are worth, as well as the extraction process and reputable companies. It is advisable to consult with a Texas mineral rights attoreny prior to entering into any agreement with a third party. Not only can a lawyer protect you from being taken advantage of but can also add important restrictions to the contract limiting the third party’s actions on the surface of the land.

 

Brother and sister Alex and Sara Padua

Contact an experienced mineral rights lawyer

If you need assistance determining whether you own the mineral rights to your property or have any other questions regarding mineral rights in Texas, consult an experienced Texas mineral rights attorney today.

Can the Government take Your Property? [What you need to know]


Sep 16 2019

Can the Government take Your Property? [What you need to know]

Condemnation, in simplest terms, is the acquisition of private property by a certain public or private entity for public use.

If you, as a landowner, are facing condemnation of your property, this concept may seem unjust and burdensome.

It may even seem like, for instance, the federal government and/or State of Texas and/or a local government can take ownership of your property simply because they want it.

This is not the case.

Fortunately, the authority that entities seeking to acquire land through condemnation does is not unlimited, and there are precise rules that must be followed in order to legally acquire property.

Moreover, if a federal, state, or private entity fails to adhere to these rules, then the property or its equivalent value must be returned to you.

 

Can the Government Take Your Property?

Can the Government Take Your Property? What right do they actually have? 

Under the concept of “eminent domain,” your property can be acquired for public use, meaning, that if the condemnation/=, or the taking of your property would serve to benefit the public in some form or fashion.

Example:  a city’s expanding of roads and access to utilities in  accommodation of an increasing population

In the above example the entity seeking to provide that public benefit can invoke the power of eminent domain to acquire all, or a part of your property.

To clarify, land that is acquired for the sale to a third party does not qualify as land acquired for “public use”.

To acquire your property, however, the government must provide you with fair and just compensation.

You, the landowner, are fundamentally entitled to this requirement.

For this reason, it is imperative to seek the counsel of an experienced eminent domain attorney to ensure that you are properly compensated.

 

A Brief History of the Fifth Amendment “Takings Clause” and Eminent Domain

The government derives its eminent domain powers through several sources. The concept dates back to the days before the United States became a sovereign country. In fact, the current Takings Clause of the U.S. Constitution is derived from the Magna Carta.

The Takings Clause was included in the Bill of Rights as the Fifth Amendment. Thomas Jefferson was concerned that the federal government would become too powerful and would simply take the land as it saw fit for its use. He included the Takings Clause as part of the Fifth Amendment, which reads that no person can “be deprived of life, liberty, property, without due process of law; nor shall private property be taken for public use, without just compensation.” The Fifth Amendment created a right to take private property for the government, but only if certain conditions were met.

The Texas Constitution, in Article 1, Section 17, also includes a Takings Clause that is similar in substance to the federal Constitution.

 

Defining “Just Compensation” as Part of Your Eminent Domain Rights

In order for the government to make a successful claim of eminent domain, it must provide “just compensation” for the taking. That process will generally involve the government employing its own appraisers and other experts to determine the value of the land.

Determining what constitutes just compensation can be complex, and the matter is further complicated in the case of partial condemnations. As a general rule, where an entire property is taken, the Government/Condemning Authority must pay the landowner an amount equal to the fair market value of said property (plus relocation costs in certain circumstances). Fair market value is generally the amount that the landowner could get if he or she were to sell the property to a third party who is a willing buyer in an arms-length transaction. In simplest terms, the price of the property if it were to sell in current market conditions. This value can be determined by using various valuation methods including, but not limited to, comparative market analysis and professional appraisal incorporating sales comparison approach, income approach, and replacement cost approach methods.

An appraisal to determine the fair market value will usually include variables such as:

  • The surrounding comparable properties;
  • The timing of the sale;
  • The type of property involved;
  • The condition of the property; and
  • Current use of the land (but also the highest and best use is considered as well)Current land values and construction costs
  • Local building codes and restrictions

It is not uncommon for the government’s appraisal value to be much lower than the property is actually worth, as the methods often implemented to value the property by the Condemning Authority or the government are sometimes tailored to fit its financial interests and, therefore, will present an inaccurate valuation of the property. Fortunately, you can rebut these appraisals with your own experts.

When challenging the just compensation requirement, it is imperative to have the assistance of an experienced eminent domain attorney. Not only can an attorney advise you of your rights, but he or she can assist you in maximizing your compensation. A lawyer will help you to prove that the property is worth its true fair market value and more than the Condemning Authority is offering or claims it to be worth and, in some cases, retain an experienced real estate appraiser, broker, or other experts to value your property both before and after the taking.

 

Examples of “Public Use”

The government cannot harm or take property unless it for public use. This definition is not as broad as you might think, but it still covers quite a few items. Public use examples commonly include the following:

  • Utility line expansion (oil, gas, water, etc.)
  • Creating new roads or expanding highways
  • Developing municipal infrastructure
  • Railway lines (or any other transportation services)
  • Creating parks, lakes, or other public recreational areas
  • Erecting public buildings
  • Building schools

In Texas, the government cannot generally take land if any of the following circumstances apply:

  • The land development would benefit a particular private party
  • The public-use is a mere pretext to benefit a private party
  • The project is solely for economic development

Things like community projects, sports complexes, and libraries are all considered generally valid reasons for the government taking property.

 

Take Action and Protect Your Property!

Take Action and Protect Your Property

Even though it may not seem like it in some situations, you still have rights if the government or any condemning authority notifies you that it plans to take your property. You can question everything about the process, from the procedure to the value of your property.

You can even bring an inverse condemnation claim against the government if it failed to follow the procedures set out by Texas law. You may be able to receive your property back, get money damages, or have zoning or other regulations that affect your property changed, depending on the circumstances.

You have rights under eminent domain proceedings, and an experienced Houston eminent domain attorney can help you assert them.

 

Contact Padua Law Firm for Eminent Domain Counsel Today

If you believe your property is being damaged or taken by the government without just compensation, you have rights. Let the  eminent domain attorney‘s at Padua Law Firm help you assert them. You can fight back against the government in many situations—and we can help. Call for a free consultation: 713-840-1411.

How to Fight Eminent Domain


Sep 06 2019

Both the economy and population in the State of Texas are booming. New homes and businesses require improved infrastructure. Development and infrastructure improvements require land. Unfortunately for property owners in Texas, that may include your land. Many landowners are unaware that Federal, State, local governments, and even private companies have the right to take private property for public use. This right is known as eminent domain.

Fortunately, you have legal rights to protect your interests when facing eminent domain actions.


What steps can I take to fight Eminent Domain in Texas?

  1. Say as little as possible to Government, State agency, or private entity¹ representatives when notified of an intent to take/purchase your property and/or acquire an easement;
  2. Determine the “public purpose” for the proposed use of the property and ascertain specific information regarding the taking;
  3. If there is both a public use and your property is needed, consult with an experienced eminent domain attorney to advise you of your rights and determine whether the proposed compensation is fair;
  4. Hiring or engaging a licensed appraiser or real estate broker may be necessary or beneficial to determine adequate and just compensation;
  5. Have your attorney negotiate with the Government, State agency, and/or private entity to reach a settlement and ensure that your rights and interests as a landowner are protected and preserved; and
  6. If a settlement is not possible, have your attorney contest the proposed compensation in court.

 

Consult with an Attorney

Consult with an Attorney

If you have received a Notice that your property will be taken from you through eminent domain, you need to contact an experienced eminent domain lawyer to represent you. Avoid communicating with any governmental entity or eminent domain authority directly, as any information that you provide could be used against you in future proceedings. Your attorney will help you to level the playing field and help you to identify possible legal challenges and contests in the eminent domain process, in an effort to ensure that you receive fair and just compensation for your property.

 

Know Your Eminent Domain Rights

Basis for Legal Challenges

The Government’s right to seize and convert land is not unlimited. While the power of eminent domain is evident, you, as a landowner, have important Constitutional and judicial rights to protect yourself and your property. Landowners in Texas are protected under both the U.S. Constitution and the Texas Constitution. The 5th Amendment of the U.S. Constitution states that land can only be taken for a “public use” and requires that the Federal Government provide landowners with “just compensation”. Similarly, the Texas Constitution requires that property owners be given “adequate compensation” when their property is “taken, damaged, or destroyed” for public use.

In addition to Constitutional Rights, the Federal and State Courts have imposed further limitations on the Government’s and other eminent domain entities’ power of eminent domain. A landowner’s ability to challenge an eminent domain action depends largely on challenging both the Government’s authority and the proposed compensation to be paid.

 

Common Defenses: How to Fight Eminent Domain

Common Defenses – How to Fight Eminent Domain

The following are some common defenses meant to highlight how to fight eminent domain in Texas:

        The Government Lacks a Sufficient Public Purpose for Condemnation

The “public purpose” requirement under the 5th Amendment of the Constitution has been subject to much litigation. As a general matter, a “public use” is one where the use of a private property will benefit the interests of the public. Litigation, and a basis for challenging an eminent domain action, typically arises where land is taken primarily for private purposes. The definition of what amounts to a public benefit has been broadened over the years through litigation. In the landmark case on the public use requirement, the Supreme Court held in Kelo v. City of New London, Connecticut, 545 U.S. 469 (2005), that general benefits which the community would enjoy from economic development were sufficient to constitute a public use.

The Kelo decision extended the definition of public use to for-profit development projects, allowing the Government to seize property for the purposes of allowing private developers to redevelop a portion of the city. Other examples of permissible public uses include expanding roadways, building schools, utilities, and even creating or expanding a pipeline route.  Pipeline cases are particularly common in Texas, with more and more landowners losing property to large oil companies.

While the definition of public use has been expanded over the years to include those that also involve private benefits, challenging an eminent domain action on the basis that the proposed use does not benefit the public can be a successful strategy.

        The Government Does Not Need to Condemn Your Property

Even where there exists a valid public use for the purposes of eminent domain, that does not imply that the condemnation is otherwise valid. The condemning authority will often attempt to carve out the most favorable route possible. For instance, consider an oil company proposing to run a pipeline through a much larger portion of your property than required. In such cases, it is possible to argue that the proposed use is arbitrary or capricious, and that your land (or a portion of your land) is not required.

        The Government Wants to Take Your Property Without Paying Just Compensation

For the majority of eminent domain cases, the most likely legal defense will focus on the just compensation requirement. The Constitution requires that the Government pay landowners “just” and “adequate” compensation for property that is taken. The Condemning Authority will often attempt to take a landowner’s property without paying just compensation. The primary reason: to save money. Often, the methods used to value the property by the Condemning Authority are tailored to fit its financial interests and, therefore, will present an inaccurate valuation of the property.

Determining what constitutes just compensation can be complex, and the matter is further complicated in the case of partial condemnations. As a general rule, where an entire property is taken, the Government/Condemning Authority must pay the landowner an amount equal to the fair market value of said property. Fair market value is the amount that the landowner could get if he or she were to sell the property to a third party. In simplest terms, the realistic price of the property if it were to sell in the current market conditions. This value can be determined by using various methods including, but not limited to, comparative market analysis and professional appraisal.

Where the Government/Condemning Authority is merely seizing a portion of the property (easement), just compensation also takes into account the difference between the fair market value of the property before it is taken and after it is taken. Such considerations are meant to account for any and all diminishments in the value of the remaining property. Consider, for instance, that a property previously unencumbered by existing pipeline easements is acquired by way of eminent domain to install a .50-mile-long section of pipeline. Once installed, the pipeline will cause the value of the entire property to diminish invariably due to a handful of associated risks that pipelines carrying crude oil, natural gas, volatile liquids, etc., carry with them, affecting not only potential buyer’s perception of the property, but the original condition of the property on the whole.

When challenging the just compensation requirement, it is imperative to have the assistance of an experienced eminent domain attorney. Not only can an attorney advise you of your rights, but he or she can assist you in maximizing your compensation. A lawyer will help you to argue that the property is worth more than the Condemning Authority is offering or claims it to be worth and, in some cases, retain an experienced real estate appraiser, broker, or other experts to value your property both before and after the taking.

Contact us today to discuss your rights or for questions about how to fight eminent domain in Texas.

Startup Companies Mistakes to Avoid and Tips to Keep In Mind


Jun 01 2018

It’s hard to believe that companies such as Uber, Amazon, and Netflix began their incredibly successful journeys as startups. Many other services Americans use on a frequent basis probably began as startups, too—Postmates, Dropbox, and Slack, to name a few. These companies are examples of strategic funding and marketing decisions made with the advice of great corporate lawyers that eventually led to the creation of large corporations.

Startup companies obviously have the potential to grow into largely profitable publicly held companies. However, many startups fail to appreciate the legal issues that can make or break them. If you are thinking about getting into the startup industry or are currently involved in one, be sure to consult with an experienced corporate and securities lawyer to advise you on conforming to the many legal requirements the industry presents.

Navigating the Path to Becoming a Successful Startup

Whether you are new to the startup industry or a startup guru, there are several legal issues you should keep an eye out for. Being proactive in assessing these issues will set your company on the right path to becoming profitable and marketable.

  •  Selecting the Right Type of Legal Entity from Early in the Company’s Development

Corporate formation is one of the most important steps in ensuring a startup’s success. The company and its founders need to assess their goals and choose the type of legal entity that best helps to further those goals. Further, the type of entity that is chosen must be able to insulate founders from personal liability and allow the business to issue equity compensation or receive venture capital funding. These are among the many factors that must be taken into consideration when deciding which legal entity is best suited for the startup from a legal, tax, and investment perspective.

  • Agreeing on and Properly Documenting Founders’ Roles and Responsibilities

Startups are often founded by a close group of colleagues, family, or friends. However, a casual nature of conducting business should be avoided. Each role and relationship within the company should be formalized in writing, including each person’s title and responsibilities. Decision-making protocols, dispute resolution mechanisms, and ownership and exit strategies should also be put into effect in policies and handbooks, as well as maintaining a company minute book with written resolutions that have been signed off on.

  • Complying with Securities Law when Raising Capital

Again, do not let the seemingly casual nature of a startup get you in trouble with securities laws. Federal and state securities laws and regulations are difficult to comprehend and failure to abide by them can lead to the downfall of any startup. Capital-raising and finding suitable investors for your particular business are both critical to the success of your startup and involve securities laws. An experienced securities attorney will identify any potential securities issues that your startup may face, and address them accordingly.

  • Properly Structure any Equity Plan for the Benefit of Executives and Employees of the Company

Establishing equity and incentive plans carries legal implications and tax consequences that must be adequately addressed. Some of the issues to consider in this area include how much equity should be designated for employees, and the consequences of an equity plan for future investors. These actions also implicate securities laws, meaning that a startup company is best advised to keep abreast of these issues through the advice of a corporate lawyer.

  • Properly document Customer, Supplier, Employee, and Other Key Third-Party Relationships

It is best practice to create forms and agreements that properly memorialize arrangements with customers, suppliers, and employees. Also important are well-drafted commercial contracts, which should include provisions that address indemnification and limitation of liability.

Successful Startups have Great Lawyers

The success of your startup company depends on a myriad of factors. Don’t let the legal and regulatory issues that arise in the startup formation process keep your company from reaching its full potential. The most effective way to navigate the many legal issues and requirements is to consult an experienced corporate and securities law attorney who can identify and address any potential issues and opportunities for growth. Taking this proactive measure will serve to further your startup’s goals and create a solid business foundation.

Bitcoin and Cryptocurrencies – Great Opportunity or Risky Business?


Apr 03 2018

Chances are that you have heard the terms “Bitcoin,” “Ethereum,” “virtual tokens,” or “cryptocurrency” at some point within the last couple of years. Someone has probably even told you to invest in them. Or maybe you’re an entrepreneur that wants to jump on this new wave of alternative capital raising for your venture. But first, what are they?
Cryptocurrency

Cryptocurrency is a form of digital currency that essentially removes the middle-man—banks and the government—from currency transactions. This new form of “money” boasts its unique level of security, drawing on the cryptography element of this trend.

Cryptography is the process of turning basic information into a complex code, making the information hard to access, steal, or alter. These codes, or algorithms, are used to create and control cryptocurrencies and their transactions. Through a system called “blockchain”, users are able to use these complex algorithms to keep records of balances and transactions and publicly verify their exchange of cryptocurrency.

Unlike conventional forms of currency, cryptocurrency exists in limited circulation, making it more valuable. As opposed to working on an inflationary model, crypto coins are deflationary, meaning that the number of coins in circulation will remain the same, but the value of the coins increases. Though cryptocurrency has not reached a point of payment ubiquity, it has a high investment appeal, which you should approach with caution.

Why is Cryptocurrency Becoming Popular?

As noted, cryptocurrencies offer a range of benefits in comparison to conventional currencies, including:

  • The ability to make transfers without an intermediary and without geographic limitation.
  • Finality of settlement.
  • Lower transaction costs compared to other forms of payment.
  • The ability to publicly verify transactions.
  • Personal anonymity and the absence of government regulation or oversight.

The benefits make it seem way too hard to pass up whether you want to invest or offer Initial Coin Offering (ICO). But, not so fast. The government is keeping a close eye on these transactions because they have been used to take advantage of many and are risky.

Dangers to Watch Out For

If you are considering investing in any coin offerings or cryptocurrencies, beware of the following risk factors:

  1. Minimized investor protections in the cryptocurrency and ICO markets, which can lead to more opportunity for fraud and manipulation.
  2. Unregistered ICOs may violate federal securities laws.
  3. The SEC has yet to approve listing and trading any exchange-traded products that hold cryptocurrencies or other assets related to cryptocurrencies.
  4. Amplified risk due to the cross-border nature of the cryptocurrency and ICO markets.

Hire Legal Counsel to Protect Your Investment or Help You Make your ICO Compliant

Because most offers and sales of digital assets are subject to the requirements of the federal securities laws, issuers must register offers and sales of digital assets unless a valid exemption applies. If the offerings are unregistered, issuers could potentially be liable for violations of the securities laws. If you want to raise capital or invest in coins or cryptocurrency offerings, make sure you obtain the proper information and legal guidance from a corporate lawyer experienced in startups, blockchain law and federal securities laws.

Securities exchanges that provide for trading in these securities must also register unless they are exempt. The facts and circumstances of each case, including the economic realities of the transaction, will be considered to determine whether a particular transaction involves the offer or sale of a security.

The ease, independence, and anonymity of cryptocurrencies and ICOs clearly come with strings attached. The many legal and regulatory hurdles and requirements are not easy to navigate, and failure to appreciate them can jeopardize your investment in this innovative market. Before investing in virtual assets and becoming a market participant, be sure to consult a lawyer with corporate experience to advise you on protecting your investment and ensuring it conforms with securities laws. Contact Padua Law Firm today at 713-840-1411.

Piercing the Corporate Veil – Minimizing Your Risk


Feb 26 2018

One of our roles as corporate lawyers is to use the business organizations code and applicable case law to protect our clients with the principles of limited liability. Indeed, that is why our various corporate forms exist – to shield shareholders and owners from personal liability for obligations of the corporate entities. However, in certain cases, the law must also protect people from those who try to take advantage of legal formalities to perpetrate fraud on another person or business. That is to say, a corporation or other corporate form should not be misused as an unfair device to achieve an inequitable result or perpetrate fraud.

For these reasons, the Supreme Court of Texas has identified instances where the corporate fiction can be disregarded. In Castleberry v. Branscum, our state Supreme Court allowed “piercing the corporate veil” when the corporate form is being used as a sham to perpetrate a fraud, as an alter ego of another corporation, or as a means of evading an existing legal obligation, achieve a monopoly, circumvent a statute, or justify a wrong. When a court pierces the corporate veil, it disregards the corporation, and holds its shareholders liable by imposing a type of vicarious liability for an underlying cause of action.

Shortly after the Supreme Court’s decision, there was push-back from the corporate world, and our legislature in Texas decided to limit the ability to pierce the corporate veil, focusing on cases with the presence of actual fraud. Still, it is important for honest entrepreneurs and founders of corporations and other business entities to minimize the risk that a court will impose liability by piercing its veil.

Below are a few ways to minimize such risk:

  1. Adequately capitalize and insure your business entity.
  2. Avoid using a corporation as a mere conduit or shell.
  3. Ensure that an owner does not exercise excessive control over a corporation.
  4. Comply with all corporate formalities.
  5. Keep separate books and records between a corporation and its shareholders.

While these principles hold true with LLCs as well, courts have also applied less weight to the control factor for LLCs compared to corporations. If you are an entrepreneur and have been using business organizations, our firm can help you navigate the sometimes-murky waters of veil piercing.

At Padua Law Firm PLLC, our corporate practice group has counseled a wide variety of small and medium sized businesses in their corporate structures, formations, asset protection, and related corporate matters and formalities.   Call us today to schedule a free consultation to discuss your case.