© 2017 The Texas Lawbook.
By Janet Elliott
AUSTIN (Jan. 9) – After a nine year fight in Texas courts to establish that its carbon dioxide pipeline is a common carrier, Denbury Green walked away from the Supreme Court of Texas Friday with a big win.
The court determined that Denbury Green Pipeline-Texas met its burden by showing it had a post-construction contract to transport another company’s product, thus meeting a “reasonable probability” test the court had adopted for Denbury four years earlier.
Lawyers for pipeline interests praised the ruling as restoring stability to pipeline planning after the Supreme Court’s 2012 opinion in Texas Rice I shook the industry. Advocates for landowners said the decision gives pipelines a sort of get-out-of-jail-free card by letting them retroactively prove eminent domain authority.
Texas Rice Land Partners had long opposed access to its 3,800-acre rice farm for the pipeline project. A provision in Texas law allowed Denbury Green to take possession of the land and complete the pipeline while the company’s eminent domain authority was being challenged.
Marie Yeates, who represents Denbury Green, said the court clarified how its earlier ruling will apply.
In deciding the closely watched case, the Supreme Court overturned a decision from the Ninth Court of Appeals in Beaumont that reversed the trial court’s summary judgment for Denbury. Lawyers for pipeline interests had criticized the court of appeals for ignoring evidence generated after a pipeline is first proposed.
The Supreme Court said the lower court incorrectly applied the Texas Rice I test by overly focusing on the initial plan for the pipeline to transport carbon dioxide for its Denbury’s own use in injection wells at the newly acquired Hastings Field south of Houston.
Justice Paul Green said the court of appeals had disregarded relevant evidence submitted by Denbury, including a contract with Airgas Carbonic to transport its carbon dioxide and the pipeline’s proximity to other potential shippers.
“As a result, by shifting the analysis to one focused on intent, the court of appeals ultimately ignored relevant evidence supporting Denbury Green’s common-carrier status,” said Green.
The opinion states the court of appeals erroneously required that the reasonably probable future use of the pipeline serve a “substantial public interest.”
“Existential arguments related to the power and importance of the individual notwithstanding, we hold that evidence establishing a reasonable probability that the pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner is substantial enough to satisfy public use under the Texas Rice I test,” said Green.
Justice Phil Johnson joined in the judgment only.
Decision Disappoints Landowners
Austin eminent domain lawyer Chris Johns said the ruling “takes a lot of wind out of the sails” of property rights advocates who were encouraged in 2012 when the court held that Plano-based Denbury Resources did not prove that its Green Line was a common carrier.
Now, said Johns, the court has adopted an “incredibly broad definition of public use” that allows a pipeline to be used by only one third party to establish that it is operating in the public interest.
“The barrier to taking somebody’s property was really low in the first place, and now it is even lower,” said Johns. “You can get your hand caught in the cookie jar and come up with a contract after you took the property to justify that taking.”
Johns teaches a course on eminent domain and private property rights at the University of Texas School of Law. He is a founding partner at Johns Marrs Ellis & Hodge.
Dallas appellate lawyer Richard B. Phillips of Thompson & Knight said the decision provides guidance about what kind of evidence is sufficient to show that the owner of a proposed pipeline is a common carrier.
“The Supreme Court rejected parts of the court of appeals ruling that would have made it harder to establish common carrier status,” said Phillips. “But the ruling did not disturb a prior decision that a company building a pipeline as a common carrier has the burden to show that there is a reasonable probability that the line will be used by one or more customers who are not affiliated with the pipeline owner.”
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