630 Saner v. BridgeTex Pipeline Company, LLC, No. 11-14-00199-CV, 2016 WL 4009973 (Tex. App.—Eastland July 21, 2016, pet. denied)
Tuesday, July 17th, 2018
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
Saner v. BridgeTex Pipeline Company, LLC, No. 11-14-00199-CV, 2016 WL 4009973 (Tex. App.—Eastland July 21, 2016, pet. denied) (Condemnation for crude oil pipeline)held that in order “to satisfy the constitutional ‘public use’ requirement, . . . a person intending to build a pipeline” for crude petroleum under the Natural Resources Code Section 111.002(1) must demonstrate that a reasonable probability exists that “the pipeline will at some point after construction serve the public by transporting crude petroleum for one or more customers who will either retain ownership of their crude petroleum or sell it to parties other than the carrier.”
BridgeTex Pipeline Company, LLC (“BridgeTex”) was engaged in the construction of a pipeline for the transportation of crude petroleum from the Permian Basin to the Texas Gulf Coast. In 2013, the Texas Railroad Commission (“TRC”) designated BridgeTex as a common carrier and granted it a T-4 permit. BridgeTex, through condemnation, acquired an easement for a crude petroleum pipeline that would run across Walter B. Saner’s (“Saner”) land. Saner challenged the proposed taking by arguing that the pipeline was not built for a constitutional public use.
The Texas Supreme Court held in Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex. LLC (“Denbury”) that “[t]o qualify as a common carrier with the power of eminent domain, [a] pipeline must serve the public; it cannot be built only for the builder’s exclusive use.” The court established a test for determining what qualifies as a public use for a carbon dioxide pipeline by holding that “under Section 111.002(6), a reasonable probability must exist that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.” The Denbury court limited its decision to “persons seeking common-carrier pipeline status under Section 111.002(6)” applicable to carbon dioxide pipelines.
The court agreed with other Texas Court of Appeals in concluding that, despite Denbury’s limitation to carbon dioxide pipelines, the reasonable probability test applied to other provisions of the Natural Resources Code, “including the provision granting common carrier status to crude petroleum pipelines.” Accordingly, the court held that “to satisfy the constitutional ‘public use’ requirement . . . a person intending to build a pipeline under Section 111.002(1)” must demonstrate that a reasonable probability exists that “the pipeline will . . . serve the public by transporting crude petroleum for one or more customers who will either retain ownership of their crude petroleum or sell it to parties other than the carrier.”
The evidence introduced included testimony that BridgeTex had entered into a transportation services agreement with a third-party shipper; “BridgeTex was in negotiations with twelve to fourteen other third-party shippers who may either become contract shippers or spot shippers;” “BridgeTex had received five unsolicited applications from prospective spot shippers;” and that “the pipeline would be connected to seven to ten refineries, not owned by BridgeTex, along the Texas Gulf Coast.” The court held that the evidence introduced at trial satisfied Denbury’s reasonable probability test; thus, the pipeline was built for a constitutional public use.
The significance of this case is the holding which extends the application of Denbury’s reasonable probability test to the Natural Resources Code Section 111.002(1), which grants common carrier status to crude petroleum pipelines.