                      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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