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Texas Court of Appeals Interprets Pipeline Easement

The Texas 14th Court of Appeals recently interpreted a pipeline easement and that interpretation may have application for many other pipeline easements in existence in Texas. The case is Texas Land & Cattle II, Ltd. v ExxonMobil Pipeline Company.

Texas Land & Cattle (TLC) owned real property in Harris County, Texas. ExxonMobil owned a pipeline easement across this property. ExxonMobil was the successor in interest to Humble Oil Company who originally obtained the easement. The easement granted the right to operate a pipeline for the “transportation of oil or gas”. The easement did not define oil or gas.

ExxonMobil had transported gasoline and diesel through this pipeline since 1995. TLC sued ExxonMobil on the grounds that transporting gasoline and diesel was not allowed by the easement. TLC believed the terms “oil and gas” included only crude oil or crude oil petroleum, but not any refined products. ExxonMobil claimed that the plain and ordinary meaning of the terms “oil and gas” as used in an easement have always included refined products like gasoline and diesel. The trial court denied the motion for summary judgment filed by TLC and granted the relief sought by ExxonMobil.

The Court of Appeals addressed the single issue in the case, which was the meaning of the term “oil and gas” as used in the easement. The Court first noted that they are required to give easements their plain, ordinary and generally accepted meaning and that when an easement is unambiguous, it must be interpreted by a court as a matter of law. The Court reviewed the definition of oil and gas from dictionaries and industry reference books that appeared to include refined petroleum products, such as gasoline. The Court also noted that some Texas courts have found that the terms “natural gas” or “gas” in a deed or lease includes all constituent elements of gas, including refined products such as gasoline. The Court concluded that the terms “oil and gas” in the easement included refined products such as gasoline and diesel, and so ExxonMobil was not violating the terms of the easement.

The easement involved in this litigation was signed in 1919. As a practical matter, contemporary pipeline easements solve the problem by providing in the easement that the pipeline can be used for transportation of “oil, hydrocarbon liquids and the products thereof, natural gas, natural gas liquids and the products thereof”. However, there are plenty of these old easements still out there and still being used. As a result, the opinion of the Court of Appeals is instructive for these older easements.