By Travis Booher

“Money isn’t everything, Jett.” Leslie Benedict. 

“Not when you’ve got it.” Jett Rink

The ageless struggle between the oil man and the rancher continues. The Texas Supreme Court declined to review LaSalle Pipeline, LP v. Donnell Lands, L.P., (the link is the court of appeals opinion) a pipeline condemnation suit involving land in McMullen County. South Texas landowners deem the decision historic; pipeline operators are shaking their heads in disbelief.

LaSalle filed an eminent domain action to acquire temporary workspace easements and a permanent right-of-way over two tracts owned by Donnell: an 8,034 acre tract and a 46 acre tract. A 15.95 acre permanent easement would come out of the big tract, and a .97 acre easement from the small tract. After Donnell objected to a Special Commissioners’ award in the amount of $226,055, a jury awarded them $658,689: $19,206 for temporary workspace, $34,533 for permanent easements, and $604,950 for diminution in value to the remainder of the tracts. To no one’s surprise, LaSalle appealed.

On appeal, both parties questioned the validity of the other’s expert at trial. Ironically, both sides used the “comparable sales” method, although (not surprisingly) the experts came up with very different results.

Donnell’s expert reviewed sales data from McMullen and Webb counties, and opined that 4100 of the 8,034 acres was damaged 10% by the pipeline, while the small tract was damaged 25%. James Donnell agreed with his expert’s opinion (Are you surprised?), and estimated his damage would be somewhere around $900,000. Mr. Donnell also noted the easements would be a “black mark” on his deed for eternity.

LaSalle’s expert, on the other hand, testified that a pipeline would not diminish the market value of the remainder of the tracts, and relied on approximately 15 transactions in McMullen County (including several of the comparable sales used by Donnell). The expert also noted that differing land values did not simply result from the fact that some lands have pipelines and others do not. The expert also testified that he spoke with either a buyer or a seller in the McMullen County transactions, and the existence or absence of a pipeline had no bearing on the sales price.

It is worth noting that the court recognized that expert testimony is at best “something of a speculation”. Thus, it is up to the trier of fact – the jury – to determine the market value.  

To the delight of landowners, the court of appeals agreed with Donnell and the evidence it presented. However, the Court did agree to reduce the temporary workspace damages by $12,804, thereby giving LaSalle a hollow victory.

The precedential value of the decision has yet to be determined, but landowners are surely empowered by it, and pipeline operators must be cautious of it. Eagle Ford production must be moved by trucks and pipelines. How a buyer and seller may view a pipeline, however, will ultimately be up the buyer, the seller and the free market. Some landowners may view a pipeline right-of-way as a “black mark”, while others may view it as a good sendera to kill their next buck.

Ponder this one: Will those “black mark” landowners think the same about well locations when their royalty money starts flowing like the Frio River in a spring flood?