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Eminent Domain, Texas Pipelines and Texas Landowners’ Rights: Update on the Denbury Case

The Denbury case was one of the most important developments in Texas oil and gas law in the past year, and this blog reviewed the March, 2012 Texas Supreme Court ruling here. In summary, the Denbury case involves a landowner who objected to a private energy company’s use of the eminent domain statute to appropriate his land for a gas pipeline. The Court found for the landowner.

The decision in March not only denied Denbury Green Pipeline‘s motion for a rehearing, but also clarified the Court’s original opinion (see my post here) in several respects. The Court added that “private” means a pipeline that is limited in its use to wells, stations, plants, and refineries of the owner. The Court went on to say that a “common carrier” means that the company is transporting gas for hire and therefore implies more customers for the gas than just the owner of the pipeline. The Court upheld its view from the prior ruling that the Denbury pipeline was for private use only.

In August, the latest decision by the Texas Supreme Court ruling in Denbury was issued, written by Justice Wainwright with Justice Johnson concurring. The two justices joined the main decision issued in March and reaffirmed that simply checking a box on a Texas Railroad Commission form is not sufficient to make a company a “common carrier” under the law. However, they issued this separate opinion to distinguish their views on the scope of the Court’s holding.

This opinion agreed that some affiliate relationship is not sufficient to support a finding that gas transport is for the public’s benefit, but stated that the Court should take care not to issue pronouncements exceeding the scope of the dispute at hand. This latest decision points out that the scope of the term “affiliate” used in the Court’s previous opinion is broader than the referenced definitions of “affiliate” in natural resource statutes and regulations. This could lead to an interpretation of “affiliate” from the Court’s decision that is broader than intended by the Legislature. Justice Wainwright wrote, “[T]he Court’s use of this broad term could result in a conclusion that an entity owning just one share of the pipeline owner’s stock is an ‘affiliate’ and the pipeline owner is therefore not a common carrier, without any evidence of control.” Justice Wainwright emphasized that the Court can protect property rights under the Constitution without undermining Texas’s law of corporate entities’ separateness. The opinion goes on to state that the disqualifying affiliate relationships should be more clearly set out, as it is important to both property owners and the energy industry.

Finally, the opinion points out that the Court received fourteen amici curiae in this case and many involved confusion over the language of the Court’s decision, which Justice Wainwright noted the Legislature could also address for further clarity. Many have called for the Legislature to address this issue of eminent domain and common carrier status in the next session this year. Those in the oil and gas industry will keep a close watch on how these Denbury decisions and any resulting legislation effect eminent domain law for other pipeline projects in the future. These cases may include a similar case involving the Keystone XL pipeline, which may also end up before the Texas Supreme Court.

See Our Related Blog Posts:

Texas Landowners’ Easement Rights Case Clarified by Texas Supreme Court

New Ammunition for Negotiation of Oil and Gas Pipeline Easements for Texas Property Owners

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