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Ruling Could Prove Important for New Texas Pipelines

A case is winding its way through the courts could be especially important in light of the large number of new oil and gas pipelines being constructed in Texas today. The case was heard by theTexas Court of Appeals in Tyler last year and is currently being heard by the Texas Supreme Court.

The case, Enbridge Pipelines (East Texas) LP v. Gilbert Wheeler, Inc., concerns landowners seeking property damages for the pipeline company’s violation of a pipeline right of way easement agreement. There are two main issues. The first issue is whether the cost to restore the property is the proper measure of damages for the breach of contract alleged by the landowners. The second issue is whether the Court of Appeals erred by holding that the landowners waived their claims by failing to submit a jury question on the nature of the property injury.

Factual Background

Gilbert and Katherine Wheeler own a 153 acre tract of land in Shelby County, Texas. The property was wooded and the Wheelers had a cabin where they enjoyed relaxing in the natural surroundings. In 2007, the Wheelers began negotiations for a pipeline easement with Enbridge for a pipeline. From the start, Mr. Wheeler was specifically concerned about maintaining the trees on the property. The easement agreement, drafted by the Wheeler’s son, was signed by both parties and filed with the Shelby County Deed Records. The agreement stated in part that “The Grantee agrees to lay the pipeline by using the boring method and without any excavation on said easement.” Alas, when construction began, the Enbridge contractors bulldozed the land, uprooted the trees, and disrupted a stream, all within sight of the cabin! What a nightmare!

Trial Court and Court of Appeals

The Wheelers filed a lawsuit for breach of contract and trespass and sought the cost to restore the property. The trial court found for the Wheelers and awarded them $300,000.00 as costs to restore the property. The Tyler Court of Appeals, in a decision written by Chief Justice James T. Worthen in February 2013, reversed the trial court’s judgment and entered judgement that the Wheelers should recover nothing. The primary basis for this ruling was that the jury was not asked to determine whether the injury to the Wheeler’s land was temporary or permanent.

In connection with the damages issue, the Court of Appeals noted existing Texas law:

“Where land is found to have been permanently injured, the landowner is entitled to recover the difference in the value of the property before and after its injury or, in cases where there is no reduction in market value, the landowner may recover intrinsic value damages. See Yancy, 836 S.W.2d at 340; see also Porras v. Craig, 675 S.W.2d 503, 506 (Tex.1984) (discussing recovery of intrinsic value damages arising from destruction of ornamental vegetation). On the other hand, where the injury to the land is found to be temporary, the plaintiff can recover the amount necessary to place it in the same position it occupied before the injury, i.e., the cost to restore. See Trinity & S. Ry. v. Schofield, 72 Tex. 496, 10 S.W. 575, 576-77 (1889); Weaver Constr. Co. v. Rapier, 448 S.W.2d 702, 703 (Tex. App.-Dallas 1969, no writ)”. In this case, if the injury was permanent, the Wheelers could be awarded the cost to restore their land. If the injury was temporary, they could recover the diminution in market value due to the destruction, or the intrinsic value of the destroyed trees, vegetation and stream. Because of an omitted jury question, they got nothing. This is an incredibly unjust result.

Texas Supreme Court

Now these issues will be examined by the Texas Supreme Court. Oral argument took place February 27, 2014. No opinion has been published so far. The parties briefs can be accessed here. Whichever way the Texas Supreme Court decides will have repercussions for both landowners and pipeline companies.

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