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Energy & the Law

Denbury Part II: Big Changes Coming in Texas Pipeline Condemnations ?

Posted in Construction, Eminent Domain

ernieCo-Author Martin P. Averill

Is Denbury’s Green Pipeline a common carrier? That question is alive and well in Texas. In Texas Rice Land Partners Ltd. v. Denbury Green-Texas Pipeline, LLC,  the Beaumont court of appeals reversed a summary judgment granted by the trial court to Denbury, applying the Texas Supreme Court’s “reasonable probability” of public use standard (announced in the original Denbury Green appeal).  The case will now be in the hands of a Jefferson County jury unless the Texas Supreme Court reviews the decision.

What’s Next?

This decision is likely to strike fear in the hearts of pipeline operators.  For many decades in Texas, the power to condemn private land for a pipeline project was nearly absolute.  Landowners were relatively powerless to prevent a taking.  The original Denbury Green decision gave landowners a way to challenge a pipeline’s right to take their property. Pipeline operators will now likely face extended battles in courthouses throughout the state, including discovery and other procedures that never would have been allowed in years past.

Takeaways

  • Texas Business Organizations Code §2.105’s “fill-in-the-blank” process is not an independent ground for common carrier status—the pipeline operator still must meet the “reasonable probability” of public use standard.
  • Denbury’s proofs were not sufficient to rule out an issue of fact for a jury to decide. The public-versus-private intent of the operator must be judged at the inception of the plan to construct the line.  Contracts executed well after that time, as Denbury’s were, are not definitive.  The court also noted that whether these contracts establish a public use is a matter for “reasonable jurors” to decide.
  • The subjective beliefs of an operator are not probative; for instance, anticipating future contracts, third party use, or availability for public use.  A use is a public use “only when there results to the public some definite right or use in the business or undertaking to which the property is devoted.”
  • Contracts between Denbury Green and Denbury Onshore, ratified by some other small working interest owners, were not enough to establish public use, at least for purposes of summary judgment.  Also, ExxonMobil did not ratify these contracts for its 9.7% interest, and other interest owners do not take title to nor possession of CO2.
  • The public interest in a pipeline project must be substantial.  According to the court, “Specifically, the evidence raises a fact issue regarding whether the taking serves a substantial public interest.”
  • A jury trial is the best way to decide issues of knowledge and intent. Those faccts are rarely appropriate for summary judgment.

Lagniappe

Here is a link to an excellent presentation by Marty to the Energy Law Section of the Houston Bar Association.

Here is another pipeline reaction.