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Texas Supreme Court Reinforces Denbury Decision, Favors Landowners
March 2, 2012 | 1:28 PM
By Terrence Henry - State Impact
Pipeline companies are finding themselves with a new obstacle: defenders of private property rights.
Dave Fehling of StateImpact Texas contributed reporting to this article.
The Texas Supreme Court sure is busy as of late. Today they released an updated opinion in the Texas Rice Land Partners v. Denbury Green Pipeline-Texas case that could have big implications for the oil and gas industry and private landowners in Texas. The bottom line is this: the court reinforced their original ruling today and denied a request to hear the case again, and that’s unwelcome news for the pipeline industry in Texas.
The decision was originally made last fall. At issue was who decides whether or not a pipeline is a “common carrier,” i.e. one that can be used by other companies and is therefore considered a public project. If a pipeline company can justify that it’s a public project, that allows it to use eminent domain to construct and operate pipelines on private property, regardless of how the landowner affected may feel about it. (Read more on the case in our earlier story, Pipeline Companies Fight for Right to Take Property.)
In the Denbury decision, as it’s come to be known, the Texas Supreme Court sided with landowners, stating that “private property is constitutionally protected, and a private enterprise cannot acquire condemnation power merely by checking boxes on a one-page form.” That one-page form is what pipeline companies send to the Railroad Commission of Texas in order to get “common carrier” status, which is what they use to justify their use of eminent domain.
Today’s opinion strengthens the court’s siding with landowners.
In a few additional footnotes to the original opinion, the court said today that a natural gas pipeline “cannot wield eminent domain to build a private pipeline, one limited in [its] use to the wells, stations, plants, and refineries of the owner. A common carrier transporting gas for hire implies a customer other than the pipeline owner itself,” they wrote. And that “to qualify as a common carrier with the power of eminent domain, the pipeline must serve the public; it cannot be built only for the builder’s exclusive use.”
“I can’t discern this changes anything of importance,” Amy Warr, an attorney for the Texas Riceland Partners, told StateImpact Texas. “We’re happy.”
Keith Strama, counsel for the Texas Oil & Gas Association, is less pleased. His group petitioned the court to re-hear the case.
“We’re concerned it will mean more case-by-case litigation” of pipeline eminent domain disputes, he told StateImpact Texas, “imperiling the development of the state’s pipeline infrastructure to meet growing demands of oil and gas production. But we think it is limited to only CO2 and hydrogen” pipelines, he said.
Strama also told StateImpact Texas that he believes the ruling won’t affect the ongoing battle between a farmer and the Keystone XL pipeline in northeast Texas. In that case, a private landowner is questioning the company’s claim of eminent domain to route the pipeline through her farm. There should be “no impact from the ruling or the order on the Keystone pipeline, it is not relevant to [it],” he told StateImpact Texas. He said that the Denbury decision has to do with the issue of private vs. public use, and that Keystone XL “is clearly a pipeline that will have multiple users, making it public and qualifying it for eminent domain under Texas law.”
In an earlier comment to StateImpact Texas, TransCanada, who will own and operate the Keystone XL, said that the pipeline will be available “for hire” to any company that wishes to use it, “as long as the product meets specs.”
Warr, who represents the landowner side of the dispute, says it isn’t clear whether the ruling applies to pipelines other than those for natural gas. “It left the issue hanging,” she told StateImpact Texas, “to be decided another day, possibly by a court or by legislature.”
As for the farmer battling the pipeline, Julia Trigg Crawford, she intends to continue fighting her case. In late April she sees TransCanada in court, despite losing a restraining order against the company last week. “The burden of proof is now on the pipeline after Denbury,” she told StateImpact Texas recently. “That’s the one glimmering light in Texas law right now that gives any power to us.” Days after she lost her restraining order, TransCanada announced they intended to start construction this year on a section of the Keystone XL pipeline from Cushing, Oklahoma to refineries in Port Arthur, Texas.