Untitled Texas Attorney General Opinion ( 1978 )

The Attorney General of Texas
July 27, 1979
JOHN L. HILL
Attorney General
Honorable Charles Herring Opinion No. H- 1217
General Manager
Lower Colorado River Authority Re: Authority of LCRA to
P. 0. SOX~220 permit another entity to use part
Austin, Texas 79767 of pipeline and consequences of
transaction.
Dear Mr. Herring:
You inform us that the Lower Colorado River Authority has received a
request from Entex, Inc., for a tap on the natural ‘gas pipeline owned by
LCRA which runs to an LCRA electric generating plant. Entex wishes to use
the pipeline to transport gas to schools in the Hays Consolidated School
System and to a subdivision. You ask several questions about this proposed
transaction.
You first ask whether LCRA has authority to engage in this transaction.
The statute creating the LCRA grants it “all powers, rights, privileges and
functions conferred by general law upon any district or districts created
pursuant to Section 59 of Article 16 of the Constitution” except as expressly
limited by the creating statute. Acts 1975, 64th Leg., ch. 74, S 2, at 160. It is
expressly authorized “to develop and generate . . . electric energy” and to
acquire, maintain, use, and operate any property necessary or convenient to
the exercise of its express powers. && S 2(b), (e). Thus, it is empowered to
own and operate its pipeline as property necessary or convenient to the
production of electricity.
Sections 51.121thtiugh 51.194 of the Water Code grant numerous powers
to all water control and improvement districts organized pursuant to article
16, section 59 of the Texas Constitution. See Attorney General Opinion H-
1195(1976). Section 51.137 provides as followr
The district may enter into a contract for the use by
another of its water, power, facilities, or service,
either inside or outside the district, except that a
contract may not be made which impairs the ability of
the district to serve lawful demands for service within
the district.
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Honorable Charles Herring - Page 2 (H-1217)
In our opinion, this provision authorizes the transaction you inquire about, so long
as the proposed contract will not impair LCRA’s ability to serve its lawful
customer demands.
You next ask whether LCRA would become a natural gas utility under the
Public Utility Regulatory Act. Section 3(c) of the Public Utility Regulatory Act,
article 1446c, V.T.C.S., defines “public utility” as follows:
The term ‘public utility’ or ‘utility’, . . . includes any . . .
river authority. . . now or hereafter owning or operating for
compensation in this state equipment or facilities for:
... .
(3) transmitting or distributing combustible hydrocarbon
natural or synthetic natural gas for sale or resale. . . .
Under the proposed contract, LCRA would receive compensation for owning
facilities used for transmitting natural gas for sale. It does not matter that Entex,
rather than LCRA, sells the gas; the determinative facts are that the gas is to be
sold and that LCRA receives compensation. LCRA would therefore become a
public utility subject to the jurisdiction of the Railroad Commission. V.T.C.S. art.
1446c, S 19(b).
You next ask whether the pipeline would become a,common carrier. We dealt
with the status of natural gas pipelines as common carriers in Attorney General
Opinion H-930 (1976). We noted that no Texas statute expressly declares natural
gas pipelines to be common carriers. Article 882, V.T.C.S., provides that the
common law shall prescribe their status. We stated the common law test as
follows:
[Al natural gas pipeline or a gas utility is a commoncarrier
if it holds itself out as available to transport gas to all who
may desire its services. Otherwise, it is a private carrier.
Attorney General Opinion H-830 (1976); see also Producers Transportation Company
v. Railroad Commission of California, 251 U.S. 228 (1920). Whether a particular
pipeline meets this test is a question of fact.
You ask whether LCRA could reserve the right to terminate service should it
need the pipeline to transport other fuel besides natural gas. The Public Utility
Regulatory Act provides in part:
The railroad commission shall have exclusive original juris-
diction. over the rates and services of gas utilities
P. 4872
L .
Honorable Charles Herring - Page 3 (R-1217)
distributing natural gas or synthetic natural gas in areas
outside the limits of municipalities, and it shall also have
exclusive original jurisdiction over the rates and services of
pipelines transmitting, transporting, delivering, or selling
natural gas or synthetic natural gas to gas utilities engaged
in distributing such gas to the public.
V.T.C.S. art. 1446c, S 19(b). Section 35 of article 1446~ authorizes the Railroad
Commission to establish standards with respect to services furnished by the
utilities it regulates. If LCRA becomes a public utility subject to Railroad
Commission jurisdiction, it would be subject to these provisions, and termination of
service provided under the proposed agreement would require Railroad Commission
approval.
You finally ask whether the transaction could be construed as the use of
public property for the benefit of’s private company. Article 3, section 51 of the
Texas Constitution prohibits the grant of public money to corporations. See also
Tex. Const. art. 3, S 52. However, the lease of public’property to a privat?%m
does not violate this provision where the transaction serves a public purpose and
where an adequate rental is paid. See Dodson v. Marshall, ll6 S.W.2d 621 (Tex. Civ.
APP. - Waco 1938, writ dism’d); Attorney General Opinions H-445 (1974); H-109
(1973). In our opinion, the proposed transaction serves a public purpose. The
Legislature has provided statutory authority for it, thereby indicating it is a proper
undertaking for a conservation and reclamation district. It will facilitate the
transportation of fuel to public schools and to consumers, an endeavor affected
with a public interest even when engaged in by private entities. See V.T.C.S. art.
1446c, S 2; art. 6050, S 3. So long as LCRA receives adequate consideration for the
use of its pipeline, the transaction will not grant an unconstitutional benefit to a
private entity.
SUMMARY
The Lower Colorado River Authority may contract to permit
use of a portion of its natural gas pipeline by a private
entity. Under the facts given, this transaction would cause
LCRA to become a natural gas utility as defined by section
3(c)(3) of article 1446c, V.T.C.S., and subject to regulation
by the Railroad Commission. As a natural gas utility, it
could not terminate service without commission approval.
Whether the pipeline would become a common carrier is a
fact question. The transaction as described would not grant
an unconstitutional benefit to a private entity.
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Honorable Chtrrles Herring - Page 4 (H-1217)
Very truly yours,
Attorney General of Texas
APPROVED:
C. ROBERT HEATH, Chairman
Opinion Committee
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