Air Liquide America Corp. v. U.S. Army Corps of Engineers

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS January 30, 2004
FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk

No. 02-20442

AIR LIQUIDE AMERICA CORPORATION; EGP FUELS COMPANY; EQUILON
PIPELINE COMPANY, LLC; EXXON PIPELINE COMPANY; FLORIDA GAS
TRANSMISSION COMPANY; HOUSTON PIPE LINE CO.; HSC PIPELINE
PARTNERSHIP LP; MOBIL CHEMICAL COMPANY, an unincorporated
division of Mobil Oil Corporation; MOBIL PIPELINE COMPANY;
SEADRIFT PIPELINE CORPORATION; TE PRODUCTS PIPELINE COMPANY
LIMITED PARTNERSHIP; TEXAS EASTERN TRANSMISSION CORP.; UCAR
PIPELINE INCORPORATED; CHEVRON CHEMICAL CO.; CHEVRON PIPELINE
CO.; DYNEGY MIDSTREAM SERVICES; TEPPCO CRUDE OIL LLC,

Plaintiffs-Counter Defendants-
Appellees-Cross-Appellants,

DUKE ENERGY TRANSPORT AND TRADING COMPANY,

Plaintiff-Counter Defendant-Appellee,

AIR PRODUCTS INCORPORATED; AIR PRODUCTS MANUFACTURING
CORPORATION; BLACK MARLIN PIPELINE COMPANY;
TEJAS SHIP CHANNEL LLC; TEJAS SOUTH PIPELINE PARTNERSHIP,

Intervenor Plaintiffs-Appellees-Cross-Appellants,

versus

US ARMY CORPS OF ENGINEERS,

Defendant-Counter Claimant-
Appellant-Cross-Appellee,

PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, TEXAS,

Movant-Appellant-Cross-Appellee.
 AIR LIQUIDE AMERICA CORPORATION; EGP FUELS COMPANY;
EQUILON PIPELINE COMPANY LLC; EXXON PIPELINE CO.;
FLORIDA GAS TRANSMISSION COMPANY; HOUSTON PIPE LINE CO.;
HSC PIPELINE PARTNERSHIP LP; MOBIL CHEMICAL COMPANY,
an unincorporated division of Mobil Oil Corporation;
MOBIL PIPELINE COMPANY; SEADRIFT PIPELINE CORPORATION;
TE PRODUCTS PIPELINE COMPANY LIMITED PARTNERSHIP;
TEXAS EASTERN TRANSMISSION CORP.; UCAR PIPELINE INC.

Plaintiffs-Appellees-Cross-Appellants,

DUKE ENERGY TRANSPORT AND TRADING COMPANY,

Plaintiff-Appellee,

versus

PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, TEXAS,

Defendant-Appellant-Cross-Appellee.

Appeal from the United States District Court
for the Southern District of Texas
__________________________________________________________________

Before BARKSDALE, DeMOSS, and BENAVIDES, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

At issue is cost-allocation for privately owned pipelines

under the Houston Ship Channel (channel) being relocated as part of

the project by the United States Army Corps of Engineers and the

Port of Houston Authority to widen and deepen the channel. The

Corps and the Port appeal the partial summary judgment awarded the

pipeline owners: inter alia, the Port was held responsible for the

relocation cost. Owners’ conditional cross-appeal is from the

2
district court’s denial of their alternative summary judgment

claim: that the project was for a deep-draft harbor; and that,

accordingly, the Port would have to bear half of the relocation

cost.

The principal sub-issues are: whether, as held by the

district court, the Port must bear the cost, pursuant to TEX. WATER

CODE § 60.102 (relocation cost to be borne by district if it

“required” the relocation); and, if not, whether, in requiring

Owners to relocate the pipelines at their expense, the Corps was

properly enforcing both the federal navigational servitude and the

Corps’ associated federal permit authority.

Texas law does not control. Consistent with, inter alia, the

Corps’ well-settled authority to enforce its permits, Owners were

required to relocate their pipelines at their expense. Concerning

Owners’ conditional cross-appeal, the project was not for a deep-

draft harbor; therefore, the Port was not required to bear half of

the relocation cost. VACATED in PART; AFFIRMED in PART; and

RENDERED.

I. The Rivers and Harbors Act of 1899, 33 U.S.C. § 401 et seq.,

prohibits construction in navigable waters of the United States

unless the work has been approved by the Secretary of the Army.

Pursuant to this Act, and for more than 100 years, the Corps has

regulated such construction, in part by issuing permits under § 10

of that Act. 33 U.S.C. § 403. These § 10 permits provide, inter

3
alia, that pipelines and other structures beneath navigable waters

are to be relocated at no expense to the United States if required

by federal navigation interests or projects. In the 1940s and 50s,

the Corps issued § 10 permits to Owners to install pipelines

beneath the channel. Each permit mandates pipeline-relocation as

required by navigation needs and at no cost to the government.

Similarly, when the Texas legislature granted ownership of the

land under the channel to the Port in 1927, the Port was given

authority to franchise or lease the land for limited periods and

purposes. See Act of March 11, 1927, 40th Leg., R.S., ch. 292,

1927 Tex. Gen. Laws 437. Accordingly, in addition to a federal §

10 permit, each Owner holds a license from the Port. One license

condition is that Owners must relocate their pipelines at their

cost if necessary for the channel.

In 1967, the House Committee on Public Works authorized a

study for improving deep-draft channels, including the channel.

The reconnaissance report for this study was completed in 1980.

The next step was the Water Resources Development Act of 1986

(WRDA-86), Pub. L. No. 99-662, 100 Stat. 4082 (1986); 33 U.S.C. §

2201 et seq. It contained the following cost-allocation provision:

The non-Federal interests [here, the Port] for
a [harbor navigation project] shall perform or
assure the performance of all relocations of
utilities necessary to carry out the project,
except that in the case of a project for a
deep draft harbor [deeper than 45 feet] one-
half of the cost of each such relocation shall
be borne by the owner of the facility being

4
 relocated and one-half of the cost ... shall
be borne by the non-Federal interests.

33 U.S.C. § 2211(a)(4) (emphasis added).

The feasability study for the project was completed in 1987.

In May 1995, the Corps published a draft report for public review

that recommended proceeding with the channel’s expansion. The

draft report stated that Owners would bear the cost for relocation

of approximately 130 pipelines. No Owner responded to the Corps

about this notice.

The final version of the notice — the Limited Reevaluation

Report (LRR) — was published in November 1995. The LRR estimated

the pipeline relocation cost would exceed $100 million; and, as did

the draft report, the LRR stated that Owners would bear that cost.

Again, the Corps received no response from Owners. At the end of

the comment period, the LRR was incorporated in the Chief of

Engineers’ Report (Chief’s Report), which was transmitted to

Congress by the Secretary of the Army.

The project was authorized by the Water Resources Development

Act of 1996 (WRDA-96), Pub. L. No. 104-303, 110 Stat. 3658 (1996);

33 U.S.C. § 2330 et seq. That Act provided: “[t]he removal of

pipelines and other obstructions that are necessary for the project

shall be accomplished at non-Federal expense”, id. § 101(a)(30),

110 Stat. at 3666; and the project would be “substantially in

accordance with the plans, and subject to the conditions, described

in” the Chief’s Report, id. § 101(a), 110 Stat. at 3662. Again,

5
one condition in that report was for the relocation cost to be

borne by Owners.

As required for commencing the project, the Port entered into

a Project Cooperation Agreement (PCA) with the Corps in June 1998.

42 U.S.C. § 1962d-5b(a); see Pub. L. No. 99-662, 100 Stat. 4082,

4083 (1986). Shortly thereafter, as requested by the Port, the

Corps, by removal-notices to Owners, enforced the § 10 permit

conditions and instructed Owners to relocate their pipelines at

their expense because of the project’s requirements. Owners

complied.

In November 1998, however, Owners filed this action, seeking

a declaration that the Corps’ removal-notices were void.

Simultaneously, Owners filed an action in state court, claiming:

pursuant to TEX. WATER CODE § 60.102, the Port had “required” the

relocation and was therefore responsible for the cost; and the

Port’s not paying it was an unconstitutional taking. In the

alternative, Owners’ state action claimed the project was for a

deep-draft harbor pursuant to WRDA-86, subject to its mandated

cost-sharing among the Port and Owners.

The state action was removed by the Port and consolidated with

this action. The Port counterclaimed, seeking a declaration that

either WRDA-96 or the § 10 permits required Owners to pay the

relocation cost.

6
 In early 2002, on cross-motions for summary judgment, the

district court granted partial judgment to Owners, holding: WRDA-

96 did not amend the cost-sharing provisions of WRDA-86; pursuant

to WRDA-86, state law was to answer the cost-allocation question;

under Texas law, that cost was to be borne by the Port; and the

licenses issued by the Port (placing cost with Owners) were

preempted by Texas law. The district court amended the Corps’

removal-notices to Owners to reflect this ruling. On the other

hand, the district court rejected Owners’ alternative claim that

the project was for a deep-draft harbor.

II.

A summary judgment is reviewed de novo. E.g., Texas Soil

Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 648-49 (5th

Cir. 2002). The Corps and Port contest the Port’s being liable for

the relocation cost and the amendment of the Corps’ removal-

notices. If those rulings are vacated, Owners contest the not-

deep-draft-harbor-project ruling.

A.

1.

As the district court concluded, the language in neither WRDA-

86 nor WRDA-96 explicitly allocates the relocation cost. The

district court ruled that Texas law required the Port to bear it.

Taking a similar approach, Owners contend that WRDA-86, not

WRDA-96, establishes the Port’s cost liability. Support is found

7
in the WRDA-86 conference report: “This [cost allocation] question

is to be resolved between the non-Federal interest [Port] and the

Owners of the facilities being relocated”. H.R. CONF. REP. NO. 99-

1013, at 205 (1986). Along this line, Owners claim the Port must

bear the cost pursuant to TEX. WATER CODE § 60.102, which provides:

“If a district in the exercise of powers conferred by this

subchapter [port improvement] ... requires the relocating ... of

any ... pipeline, the relocating ... shall be done at the sole

expense of the district”.

The Corps and Port maintain: WRDA-96, not WRDA-86, controls

cost-allocation; and WRDA-96 places it on Owners. As discussed in

part, infra, it is not necessary to resolve whether WRDA-86 or

WRDA-96 controls. In any event, TEX. WATER CODE § 60.102 does not

apply. First, to trigger that section’s application, the Port had

to “require” the relocation. It did not (and cannot) do so.

Second, as discussed infra, the federal navigational servitude

(applied through the § 10 permits) cannot be “trumped” in the

absence of a clear Congressional waiver.

As quoted in part earlier, TEX. WATER CODE § 60.102 provides:

“If a district in the exercise of the powers conferred by this

subchapter or in the exercise of the power of eminent domain or the

police power requires the relocating ... of any ... pipeline, the

relocating ... shall be done at the sole expense of the district”.

8
(Emphasis added.) This provision is not applicable because the

Port did not require the relocation – the Corps did.

In this regard, the district court held, and Owners contend:

The Corps issued the removal notices at the
Port’s request, acting as the Port’s agent in
requiring the owners to relocate the
pipelines. The Port cannot escape its
obligation to pay by shunting its order
through an agent.

Air Liquide America Corp. et al. v. United States Army Corps of

Eng’rs, et al., No. H-98-3982 at 5 (S.D. Tex. filed 25 Jan. 2002).

Under Texas law, for an agency relationship, the agent must be

under the control of the principal; “even though one acts for and

in behalf of another, if he is not under that other person’s

control, the relation of agency does not exist”. Daily Int’l Sales

Corp. v. Eastman Whipstock, Inc., 662 S.W.2d 60, 64 (Tex. App.

2001). In this instance, agency would require the Port’s being “in

control” of the Corps; for quite obvious reasons, the Port is not.

By requiring removal of an obstacle to a navigable waterway, the

Corps was acting pursuant to power delegated to it by Congress. It

was pursuant to this power, not the Port’s request, that the Corps

required the relocation.

Owners contend the Port required removal through the Corps by:

undertaking, initiating, and financing the project; signing a PCA

with the Corps; and requesting the removal-notices from the Corps.

First, the Corps, not the Port, sought Congressional approval for

the project. Second, Congress authorized the project and provided

9
the funds for construction of the navigation features, subject to

partial reimbursement by the Port. Third, the Port’s entering into

the required PCA with the Corps in no way establishes that the Port

required the relocation. To the contrary, the Port determined that

it could not require pipeline relocation at Owners’ expense.

Therefore, the Port requested the Corps to exercise its § 10 permit

authority under the federal navigational servitude.

Owners contend that, but for the Port’s partial reimbursement,

role in the PCA, and request that the Corps enforce the § 10

permits, there would have been no project. This misunderstands the

meaning of “require” in § 60.102. These were necessary components

of the project but certainly not sufficient on their own to cause

the project to be undertaken. Restated, in order for the Corps and

the Port to proceed, an agreement was required — the PCA. The PCA

provided that the Corps would accomplish relocation, which it

agreed to do through its § 10 permits. The PCA did not require the

Corps to exercise its permit authority; and it certainly did not

empower the Port to mandate the Corps to require pipeline

relocation.

In support of their construction of state law, Owners point to

TEX. WATER CODE § 50.052 (now repealed). It provided: if the

district required relocation or alteration in its construction of

any properties, it “shall be done at the sole expense of the

district or authority”. The Harris County Flood Control District

10
(an entity analogous to the Port) sought an opinion on whether,

under § 50.052, it would be required to bear the cost for

lengthening a bridge. Texas’ Attorney General opined: “[I]f the

district widens the channel so as to render the bridge unusable,

the district may reasonably be said to have acted to require the

‘relocation ... rerouting ... or alteration in construction of ...

properties’”. OP. TEX. ATT’Y GEN. NO. MW-412 (1981) (citing TEX. WATER

CODE § 50.052).

Owners contend that § 60.102 applies to the Port in the same

way. This contention neglects a crucial distinction: the Corps,

not the Port, required Owners to relocate their pipelines.

Similarly, the Port’s request for removal-notices by the Corps did

not obligate it to issue them. See, e.g., California v. Sierra

Club, 451 U.S. 287 (1981).

2.

The Corps has the authority, under the federal navigational

servitude, to require Owners to pay the relocation costs according

to the original permits, as necessitated by the project. See

United Texas Transmission Co. (UTTCO) v. United States Army Corps

of Eng’eers, 7 F.3d 436 (5th Cir. 1993), cert. denied, 512 U.S.

1235 (1994). Because neither WRDA-86 nor WRDA-96 includes a clear

Congressional waiver of the navigational servitude, we need not

reach which Act controls for cost-sharing.

11
 Congress derives the power to control navigation from its

power to regulate commerce. Gibbons v. Ogden, 22 U.S. (9 Wheat.)

1, 230-31 (1824). This power has been recognized to impose a

“navigational servitude”, described as follows:

All navigable waters are under the control of
the United States for the purpose of
regulating and improving navigation, and
although the title to the shore and submerged
soil is in the various states and individual
owners under them, it is always subject to the
servitude in respect of navigation created in
favor of the Federal government by the
Constitution.

Gibson v. United States, 166 U.S. 269, 271-72 (1897) (emphasis

added). This servitude operates to the exclusion of any competing

or conflicting right. See United States v. Virginia Elec. & Power

Co., 365 U.S. 624, 627-28 (1961).

The navigational servitude includes the right to authorize

improvements to harbors and bays, as well as the power to determine

what will be deemed an obstruction to navigation. See Pennsylvania

v. Wheeling and Belmont Bridge Co., 59 U.S. (18 How.) 421, 431

(1855). Pursuant to § 10 of the Rivers and Harbors Act of 1899,

Congress delegated this power to regulate such obstructions to the

Secretary of War (now Secretary of the Army). It bears repeating

that each Owner (or predecessor in interest) obtained a § 10 permit

prior to construction of its pipeline.

a.

12
 Addressing Owners’ “contractual agreement[s]”, the district

court held: “The licenses [issued by the Port, requiring Owners’

to bear relocation cost,] are preempted by the Texas Water Code”.

Air Liquide, No. H-98-3982 at 5. As discussed supra, when title to

submerged lands was granted to the Port in 1927, the Texas

Legislature gave the Port “the right, power and authority to abate

and remove any and all encroachments or structures of any kind now

or hereafter existing on said property, save such as may have been

constructed under permit from the United States War Department

[later the Corps]....” Act of March 11, 1927, 40th Leg., R.S., ch.

292, 1927 Tex. Gen. Laws 437, 439 (emphasis added). The licenses

issued by the Port provide that, should pipeline relocation be

necessary to accommodate deepening and widening the channel, the

Owner will, “at its cost and expense and without cost or expense to

the Port ... remove, relocate, lengthen, deepen or otherwise

conform” its pipeline to the project.

The district court ruled that Texas law preempted the

licenses, in part because “[t]he Port, as a creature of the state,

is bound by the regulations the state places on it”. Air Liquide,

No. H-98-3982 at 5. But, as discussed supra, Texas law does not

apply to the relocation. Again, the Corps, not the Port,

“required” it. The reason the relocation was necessary - the

project - was contemplated by the licenses. Through them, Owners

agreed that, in the event “any installation [of pipelines] made

13
under authority of this license shall interfere with the widening,

deepening or other revision or improvement of the Houston Ship

Channel”, Owners would bear the relocation cost.

b.

Even if the Port-issued licenses do not control on cost-

allocation, Owners would nevertheless be bound by their agreement

with the Corps in the § 10 permits. As discussed, because the

channel is a navigable waterway of the United States, each Owner

had been required, consistent with the federal navigational

servitude, to obtain a § 10 permit prior to laying a pipeline. In

each permit, Owners: acknowledged they were not receiving an

interest in property; and agreed that, should the Corps require,

Owners would remove any obstruction (e.g., its pipeline) at no cost

to the government.

Our court’s decision in 1993 in UTTCO held that § 10 permit-

holders must pay for the relocation of any portion of a pipeline

located within the original permit area. UTTCO, 7 F.3d at 441.

The permits in UTTCO, as in this action, required removal of

obstructions “without expense to the United States”, but did not

explicitly require owners to bear the cost. Id. at 439.

Nevertheless, our court held that the federal navigational

servitude provided authority to enforce the terms of those permits

at owner expense.

[N]o one seriously contests the rule that the
cost of relocating the portion of a pipeline

14
 lying between the original banks of the bayou
(i.e., the work that was either “herein
authorized” under ¶ (f) of the permits or
covered by the navigational servitude) must be
borne by the pipeline owner.

Id. at 444.

It was only after UTTCO that the Corps, in October 1995,

issued written guidance — Policy Guidance Letter 44 — for when it

will assert its power to require removal of an obstruction to

navigation at the expense of the owner of the obstruction. When

Texas and the Port determined that they did not have the authority

to require relocation of more than 100 pipelines under the

navigable waterway, they requested the Corps to secure their

relocation under the authority of its federal navigational

servitude and the corresponding § 10 permits.

The Chief’s Report was then sent by the Corps to Congress

concerning this authority and with a specific cost-allocation

provision, noting that all relocation costs would be borne by

Owners. Congress relied on this report in deciding to approve the

project and formally incorporated the Chief’s Report in the

authorizing legislation — WRDA-96. Pub. L. No. 104-303, §

101(a)(30), 110 Stat. 3658, 3662-66 (1996).

Despite this, the district court ruled: “The adoption of the

chief’s report went only as far as its engineering and design

recommendations, not its admonishments on cost allocation”. Air

Liquide, No. H-98-3982 at 5. The cost data in the LRR,

15
incorporated in the Chief’s Report, reflects, however, that

relocation costs are to be borne by Owners. For example, the LRR

includes tables listing individual Owners, their specific § 10

permits, and the number and size of their pipelines.

Indeed, portions of the LRR discuss requiring Owners to bear

pipeline relocation costs according to the § 10 permit power.

(E.g., “The cost for removal and replacement of pipelines and

docking facilities located within the area of navigation servitude

are not included in the cost estimate because these costs are owner

costs, not project costs.”)

Owners contend, erroneously, that WRDA-86 precludes the Corps’

exercising § 10 permit authority to enforce the navigational

servitude. For obvious reasons, Congressional waiver of this

servitude must be express. See, e.g., United States v. Cherokee

Nation of Okla., 480 U.S. 700, 707 (1987) (holding waiver of

navigational servitude “will not be implied, but instead must be

‘surrendered in unmistakable terms’”) (quoting Bowen v. Public

Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52

(1986)). There is no waiver in WRDA-86; the federal navigational

servitude remains.

In sum, the Corps properly exercised its navigational

servitude over the pipelines and waterway covered by the § 10

permits, requiring Owners to remove those pipelines at their

expense.

16
 B.

In their conditional cross-appeal, Owners claim the project is

for a deep-draft harbor within the meaning of WRDA-86: one

“authorized to be constructed to a depth of more than 45 feet”. 33

U.S.C. § 2241(1) (emphasis added). As discussed, WRDA-86 provides

that obstruction relocation costs for a deep draft harbor project

are to be divided equally between Owners and the non-Federal

interest (here, the Port). 33 U.S.C. § 2211(a)(4).

In support, Owners contend that the design depth of 47 feet

for the entrance channel of the project makes it one for a deep-

draft harbor. They contend also that over-depth dredging and

advance maintenance have resulted in a channel depth greater than

45 feet.

The reasoning by the district court provides the correct

answer to these contentions: “The depth of the entrance is not the

depth of the channel.... When it adopted the chief’s report,

Congress authorized the construction of a 45-foot-deep harbor, not

a deep-draft harbor”. Air Liquide, No. H-98-4982 at 4 (emphasis

added).

III.

For the foregoing reasons, those parts of the judgment

allocating the pipeline relocation cost to the Port and amending

the Corps’ removal-notices to Owners are VACATED; that part of the

17
judgment concerning the project not being for a deep-draft harbor

is AFFIRMED; and judgment is RENDERED for the Corps and Port.

VACATED in PART; AFFIRMED in PART; and RENDERED

18