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Amid tough session for UT, bill could cut utility easement income, too


Highlights

The Rio Grande Electric Cooperative’s $220,000 easement fee is projected to exceed $500,000 in 2024.

A House bill would give the cooperative and hundreds of other easement holders new power to contest fees.

It’s been a tough legislative session for the University of Texas System.

Chancellor Bill McRaven scuttled plans for a campus of sorts in Houston under pressure from angry lawmakers. A proposal to transfer the university-owned, city-operated Lions Municipal Golf Course in Austin to the state parks department has won easy Senate approval. And the UT System’s 14 academic and health campuses are virtually certain to see a decline in appropriations when the two-year budget is finalized.

Now the Legislature is considering House Bill 1882, which would dramatically increase the power of hundreds of electric utilities, pipeline companies, oil and natural gas operators, and other companies to challenge and potentially reduce fees that the system charges for easements on its vast West Texas lands. The system estimates that it would lose $60 million in easement fees over the next six years.

Revenues from easements, oil and gas production, ranching and other activities on the system’s 2.1 million acres, an endowment established by the state in the 1800s, benefit 14 UT System campuses and 13 Texas A&M University System campuses and agencies. The two systems collected a total of $25.9 million in easement revenue in their most recent budget year.

In a twist, HB 1882 was filed at the behest of just one easement holder, the Rio Grande Electric Cooperative Inc. The cooperative has seen its fee for a 35-mile transmission line in Hudspeth County, which borders Mexico, rise from $55,000 in 1994 to $220,000. The UT System projects that the price will jump to $531,000 in 2024. Easement holders must pay a fee once every 10 years.

“The way they’ve been increasing prices, I’m scared to death thinking about where this is ultimately going to get to,” said Dan Laws, general manager and chief executive of the Rio Grande cooperative, which has an annual budget of $42 million.

The cooperative provides power to 6,300 residential and commercial customers in a 750-mile stretch of West Texas that includes Big Bend National Park and rural communities such as Presidio and Marfa. Laws said $50,000 would be a reasonable easement charge.

UT System officials say the rates are adjusted periodically as a result of market surveys and are standardized for various types of uses, and, in the case of a transmission line, they are based on the length of the line and its voltage. What’s more, the officials note, the cooperative is the only easement holder out of more 500 that has contested — unsuccessfully, thus far — its fee using an appeal process established in 2011 by the Legislature at the cooperative’s request.

That appeal process gives the UT System Board of Regents the final say on fees.

“It’s an in-house appeal process, and folks are telling me that it’s kind of a wink and a nod kind of appeal process,” state Rep. Tracy O. King, D-Uvalde, the author of HB 1882, said last week during a hearing of the House Land and Resource Management Committee.

King said during an interview later that he wasn’t accusing the UT System of dealing in bad faith.

“I think they’ve done exactly what the law requires them to do,” he said. “It’s just that the law doesn’t require them to do a whole lot.”

His measure would allow an appraiser or an arbitrator to set the price in a dispute using a procedure that focuses mainly on the value of the land along the easement, which would be less than the going rate for using the land for an easement, according to system officials.

King’s measure would also violate the Texas Constitution, according to a system white paper and testimony by its general counsel for university lands.

The system points to a passage in Article 7 of the Constitution that grants the Board of Regents authority to manage the investments and assets of the Permanent University Fund endowment. Although that passage does not specifically mention lands, they are part of the fund’s holdings, the system says.

Moreover, UT officials note, the state Government Code says the regents have “exclusive management and control of the lands.”

“The result of HB 1882, if it passes, is that this would be a direct transfer of money from higher education and these institutions (of the UT and A&M systems) to the companies that have easements that go across university lands,” Carrie Clark, general counsel for the lands, told the House panel.

The cooperative says the Government Code passage is a law that the Legislature is free to amend. It says the passage in the Constitution cited by the UT System applies to investments, such as stocks and bonds, and not to the lands.

The relevant passage in Article 7, the cooperative says, states that any land sales “shall be … on such terms as may be provided by law.” In other words, the cooperative contends, the Legislature can regulate easement transactions because they essentially amount to a temporary sale of a portion of the land.

As things currently stand, the cooperative is essentially being held hostage, Laws said.

“It would cost us over $30 million to relocate the line,” he said. “Most every other easement they have is an investor-owned company. Those folks have a pocketful of money and don’t have time to mess with this kind of stuff. They just pay it and move on.”

HB 1882 remains pending in committee.

“Based on past history, it’s going to be very difficult to pass a piece of legislation that is going to prevent UT from taking in as much money as they possibly can, particularly in this legislative session when the budget is tight,” King said. “But you never know. We might get surprised.”



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