February 7,200O

The Honorable Tim Curry Tarrant County Criminal District Attorney 401 West Belknap Street Fort Worth, Texas 76196-0201 Opinion No. JC-0179

Re: Whether the Tarrant Regional Water District may lease to aprivate telecommunications carrier
excess capacity in a fiber-optics cable installed to operate the Water District’s pipeline, and related questions (RQ-0115-JC)

Dear Mr. Curry:
The Tarrant Regional Water District (the “Water District”) has acquired pipeline easements running from Tarrant County to reservoirs located in Henderson, Navarro, and Freestone counties in east Texas. See Letter from Honorable Tim Curry, Tarrant County Criminal District Attorney, to Honorable John Comyn, Attorney Genera1 ofTexas, at 1(Sept. 20, 1999) (on file with Opinion Committee) [hereinafter “Request Letter”]. To run water from the reservoirs to Tarrant County, the Water District intends to install a water pipeline and a fiber-optics cable, which will operate the pipeline with a“Supervisory Control and Data Acquisition (SCADA) System.” Id. at2. The Water District will have excess capacity inthe fiber-optics cable formany years. See id. You ask generally whether the Water District may lease to a telecommunications carrier “all or part of the excess capacity of the bandwidth provided by the fiber optics cable” until the Water District needs the additional capacity. See id. Because the Water District has statutory authority to lease property to any person, see TEX.WATERCODEANN.549.225 (Vernon Supp. 2000), we conclude that the Water District isnot precluded by statute from doing so, although whether any particular easement permits the installation or lease offiber-optics cable is aquestion offact. You ask us to assume, in reaching this conclusion, that atelecommunication carrier’s use ofpart ofthecapacity ofthe fiber-optics cable “will not cause the cable to be any larger or cause any more detriment to the landowner’s land than ifthe use ofthe fiber optics cable was limited to the SCADA operation ofthe water pipeline, which the Water District has determined to be necessary.” Id. at 2.

You specifically ask seven questions:
1. Does the language ofthe subject pipeline easements submitted [with the Request Letter] authorize the Water District as a matter of law to install a fiber optics cable for the purpose of operating its pipelines with a SCADA system?The Honorable Tim Curry - Page 2 (X-0179)

2. Is the test for answering the above a factual inquiry as to whether ornot the fiber optics cable use ofthe pipeline easement was

“reasonably within contemplation during the acquisition ofthe rightof-way” or “whether the grantor could have reasonably contemplated such uses as within the easement at the time he granted it”?
3. Are the contemplated additional uses ofthe fiber optics cable by leasing the excess capacity to a telecommunication carrier a “private use” prohibited by Texas law?
4. Even ifthe lease of the excess fiber optics cable capacity to a telecommunication carrier is“aprivate use,” isthe additional use still permitted under the “apportionment of easements doctrine”?

5. Is such fiber optics cable sharing also authorized by the powers expressly delegated to the Water District by the Texas Legislature or those powers which exist by implication?
6. Is the additional use of the fiber optics cable by a telecommunication carrier, assuming that it causes no more damage to the land already burdened with a pipeline easement than if the cable were limited to the Water District’s authorized SCADA use,

“an additional burden” which entitles the landowner to additional compensation, or an “incidental use” for which the landowner receives no additional compensation?

7. Is this an illegal “recoupment”? Request Letter, supra, at 3,8,16, 18,20.

You first ask usto construe the language ofthepipeline easements, and your second question suggests why this office cannot do so: because it involves a “factual inquiry.” You tell us that the easements: specifically provide for (I) “_ all necessary electric and

communication lines

. for thepurpose ofoperating and maintaining the said pipeline”; (2) “

. one water transportation pipeline, with all equipment and appurtenances incidental thereto. .“;and (3) “

. one water transportation pipeline and appurtenant facilities, including all necessary electric and communication lines

. asmay be necessary for the purposes of operating such pipeline.”
Id. at 2.The Honorable Tim Curry - Page 3 (JC-0179)

Whether any particular easement allows the Water District to install afiber-optics cable at all or to lease excess fiber-optic cable capacity requires acourt to, among other things, construe the documents and examine the grantor’s intentions. “The test whether an easement acquired by a public body may be burdened with” aparticular use is whether the grantor reasonably could have contemplated such ause as within the easement at the time the easement was granted. Tex. Att’y Gen. Op. No. DM-420 (1996) at 9 (citing City ofSweetwater v.McEntyre, 232 S.W.2d 434 (Tex. Civ. App.-Eastland 1950, writ refd n.r.e.) andMilam County v.Akers, 181 S.W.2d 719 (Tex. Civ. App.-Austin 1944, writ ref d w.o.m.). The understanding of the parties to the easement may be relevant to the documents’ construction, and that understanding cannot be decided without examining factual evidence. See Tex. Att’y Gen. Op. No. DM-420 (1996) at 9. This office cannot resolve fact-based questions. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0032 (1999) at4 (stating that question offact isbeyond purview ofthis office); JC-0027 (1999) at 3(stating that questions of fact cannot be addressed in attorney general opinion); JC-0020 (1999) at2(stating that investigation and resolution of fact questions cannot be done in opinion process). Skipping to your tifih question, we conclude asamatter oflaw that the proposed fiber-optics cable lease may be within the Water District’s express statutory powers. Section 49.225 of the Water Code explicitly authorizes a general-law district, including the Water District, to lease real
or personal property to any person. See TEX.WATERCODEANN.549.225 (Vernon Supp. 2000). “The lease may contain the terms and provisions that the board determines tobe advantageous tothe district.” Id. The proposed lease of excess fiber-optics cable capacity is a lease of property to a person under section 49.225.
The fiber-optics arrangement you describe is analogous to the arrangement this office approved in Attorney General Opinion H-1217. See Tex. Att’y Gen. Op. No. H-1217 (1978) at I. There, the Lower Colorado River Authority, awater district organized under article XVI, section 59 ofthe Texas Constitution, asked whether itcould permit aprivate corporation, Entex, to use part of the natural-gas pipeline owned by the River Authority and running to the River Authority’s electric generating plant. See id. at I. The statute applicable to the River Authority, former Water Code section 51.137, repealed by Act ofMay 25, 1995,74th Leg., R.S., ch. 715, 5 40, 1995 Tex. Gen. Laws 3755, 3802, authorized adistrict to “enter into acontract 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 ofthe district to serve lawful demands for service within the district.” SeeTex. Att’y Gen. Op. No. H-1217 (1978) at 1(quoting former TEX.WATERCODEANN. 451.137, repealed by Act ofMay 25,1995,74th Leg., R.S., ch. 715, §40, 1995 Tex. Gen. Laws 3755,3802). The opinion concludes that section 51.137 authorized a private corporation’s use of the River Authority’s natural-gas pipeline “so long as the proposed contract will not impair” the River Authority’s “ability to serve its lawful customer demands.” Id. at 2. Section 49.225 of the Water Code, which applies tothe Water District, among other provisions, appears to have replaced section 51.137 ofthe Water Code: the same legislation that repealed section 51.137 adopted section 49.225
as ageneral provision applicable to all general-law districts. See Act of May 25, 1995,74th Leg., R.S., ch. 715, 52, sec. 49.225, 1995 Tex. Gen. Laws 3755, 3775.The Honorable Tim Curry - Page 4 (JC-0179)

In response to your third question, we conclude that the Water District’s proposed lease of
excess fiber-optics cable capacity to aprivate telecommunications corporation is not a prohibited “private use” ofpublic funds so long asthe Water District receives adequate consideration from the telecommunications firm in exchange. Again, we considered asimilar question inAttorney General Opinion H-1217. See Tex. Att’y Gen. Op. No. H-1217 (1978) at 3. That opinion concludes that Entex’s use of the River Authority natural-gas pipeline is not an unconstitutional use of public property for private benefit so long asthe River Authority is adequately compensated for the use of the pipeline:

Article [III], section 5I of the Texas Constitution prohibits the grant

ofpublic money to corporations. See also Tex. Const. art. [III], 552. However, the lease of public property to a private entity does not violate this provision where the transaction serves apublic purpose and where an adequate rental is paid. See Dodson v. Marshall, 1I8 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 apublic purpose. The Legislature has provided statutory authority for it, thereby indicating it is a proper undertaking of 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, 5 2; art. 6050, §3. So long asLCRA receives adequate consideration for the
use of its pipeline, the transaction will not grant an unconstitutional benefit to aprivate entity.
Id. Thus, the Water District may lease excess fiber-optics cable capacity to aprivate entity without running afoul of constitutional restrictions on the use ofpublic Iimds ifthe Water District receives consideration from the private telecommunication corporation commensurate with the value ofthe fiber-optics cable capacity. Having so concluded, we need not answer your fourth question, which is contingent upon a conclusion that the proposed lease arrangement is aprohibited “private use.”

You askwhether alease ofexcess fiber-optics cable capacity to atelecommunications carrier,

“assuming that itcauses no more damage tothe land already burdened with apipeline easement than ifthe cable were limited to the Water District’s authorized SCADA use,” constitutes an “additional burden” forwhich the landowner receives additional compensation, or an“incidental use” for which the landowner is not entitled to additional compensation. Request Letter, supra, at 18. The “incidental use doctrine,” for which you cite Mellon v.Southern Pacific Tramp. Co., 750 F. Supp. 226 (W.D. Tex. 1990) appears to apply only to railroad rights ofway, which are bundles of rights
more substantial than easements. SeeMellon, 750F. Supp. at229-30 (inpart quoting Western Union Tel. Co. v.Pennsylvania R.R., 195 U.S. 540,570 (1904)). We do not understand the Water District to have more than an easement, so we do not believe that the incidental use doctrine, as articulated in Mellon, applies.The Honorable Tim Curry - Page 5 (JC-0179)

Nevertheless, we agree that the landowners here may have a claim for additional compensation. Just as the question ofwhether aparticular easement permits the Water District to install fiber-optics cable orto lease its excess fiber-optics cable capacity, the question ofwhether the easement grantor must be compensated for the installation or lease involves interpretation of the easement itself and the resolution of numerous fact questions. Where an easement is granted for general purposes, the subservient estate includes the use required atthe time ofthe grant as well as the right to use the easement for any purposes incidental to the use to which the property has been put. See Clutter v.Davis, 62 S.W. 1107, 1108 (Tex. Civ. App.-Dallas 1901, writ refd); 31A TEX. JUR.30Easements &Licenses inReal Property 567 (1994). For example, inJoyce v. Texas Power & Light Co., 298 S.W. 627 (Tex. Civ. App.-El Paso 1927, no writ), the court stated in dicta that Texas Power & Light Company, which had aright to condemn land necessary to erect poles and lines to transmit electric current, would not lose that right by also erecting telephone wires. Id. at 629. Such a secondary use “may or may not amount to an additional or other servitude upon the land,” the court said. Id. Whether a secondary use constitutes an additional burden for which the grantor must be compensated is aquestion that cannot be resolved in the opinion process. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0032 (1999) at4(stating that question offact isbeyond purview ofthis office); JC-0027 (1999) at 3 (stating that questions of fact cannot be addressed in attorney general opinion); JC-0020 (1999) at 2 (stating that investigation and resolution of fact questions cannot be done in opinion process). Finally, you ask whether the proposed lease constitutes “an illegal ‘recoupment.“’ Request Letter, supra, at 20. “The ‘recoupment theory,“’ you state, “refers to a means by which the government can finance apublic project by taking more property rights than necessary forthe project itself to later resell or lease to third parties to generate income for the government with which it might pay project costs.” Id.; seeAtwood v. Willacy County Navigation Disc., 271 S.W.2d 137,141 (Tex. Civ. App.-San Antonio 1954, writ ref d n.r.e.), appenl dism ‘d, 350 U.S. 804 (1955) (per curiam) (explaining recoupment theory). Texas courts do not appear tohave adopted therecoupment theory. See Atwood, 271 S.W.2d at 141-42. But we understand you to question whether using the easement for the proposed lease exceeds the power of eminent domain and is therefore illegal because proceeds from the lease may help pay the costs of the construction or operation of the pipeline.

A governmental body in Texas exceeds itspower ofeminent domain when “and only when” it “condemns land for ause unconnected with its legitimate purpose[], simply to meet the costs of its proper objectives.” Atwood, 271 S.W.2d at 141. “[Tlhe mere fact that a municipal district, through its legitimate operations, may be expected to meet its expenses and even pay forthe construction costs of its plant and facilities[] does not render its exercise of the power of eminent domain illegal.” Id. Assuming the facts are as you represent them, the proposed lease does not appear to exceed the Water District’s power of eminent domain. Presumably, the Water District has acquired the easements for the purpose of constructing pipeline to transport water from distant reservoirs to District constituents. Ifthe fiber-optics cable isnecessary to operate the pipeline and the easementsThe Honorable Tim Curry - Page 6 (JC-0179)

permit its installation and lease, the proposed lease use appears incidental to alegitimate purpose of the Water District. See TEX.CONS. art.XVI, 559(a). Conversely, itdoes not appear that the Water District has acquired the easements solely to install afiber-optics cable so that itcould lease capacity to a telecommunications company and thereby raise money. Thus, the proposed lease does not appear illegally to exceed the Water District’s power of eminent domain.
SUMMARY
Whether aparticular easement encompasses an easement to install fiber-optics cable to operate awater pipeline or the authority to lease excess fiber-optics cable capacity is a question of fact. Section 49.225 of the Water Code does not, as a matter of law, preclude the Tarrant County Regional Water District from leasing
excess fiber-optics cable capacity to atelecommunications company. So long as the Water District receives from the telecommunications company adequate compensation for the use ofthe fiber-optics cable capacity, the lease does not constitute an unconstitutional private grant ofpublic property.

Attorney General of Texas

ANDY TAYLOR First Assistant Attorney General

CLARK KENT ERVIN Deputy Attorney General - General Counsel

ELIZABETH ROBINSON Chair, Opinion Committee Kymberly K. Oltrogge Assistant Attorney General - Opinion Committee