Face Challenges Confidently

309 Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex. LLC

Tuesday, September 8th, 2015

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas LLC, 363 S.W.3d 192 (Tex. 2012),held that the grant of a T-4 permit to a pipeline company by the Texas Railroad Commission (“TRC”) did not conclusively establish the company’s status as a common carrier and confer on the company the power of eminent domain.  The burden is on the company seeking to exercise the power of eminent domain to establish that it is a common carrier.  Texas Rice refused Denbury Green access to Texas Rice’s property to survey the proposed location of a carbon dioxide pipeline. Denbury Green filed suit claiming to be a common carrier and requesting a permanent injunction preventing Texas Rice from denying it access to the property.   Denbury Green prevailed on summary judgment, primarily based on the T-4 permit granted by the TRC.   The principal issue was whether a landowner can challenge in court the eminent domain power of a pipeline company holding a common carrier permit to operate a pipeline issued by the TRC.
The court began its review by analyzing Section 111.002(6) of the Texas Natural Resources Code, which “states a person is a common carrier if he: owns, operates, or manages, wholly or partially, pipelines for the transportation of carbon dioxide . . . to or for the public for hire, but only if such person files with the commission a written acceptance of the provisions of this chapter expressly agreeing that, in consideration of the rights acquired, it becomes a common carrier subject to the duties and obligations conferred or imposed by this chapter.
A common carrier, as defined by the Texas Natural Resources Code, has the “‘right and power of eminent domain.’”   The court noted that “while these provisions plainly give private pipeline companies the power of eminent domain, that authority is subject to special scrutiny by the courts,” because Article 1, Section 17 of the Texas Constitution “‘prohibits the taking of property for private use.’”
The court reviewed the TRC’s administrative process in granting an applicant common carrier status, which did not include any inquiry or adjudication as to whether the pipeline would be used for public or private purposes.
Apparently, in order to receive a common-carrier permit, the applicant need only place an “x” in a box indicating that the pipeline will be operated as a common carrier, and to agree under Section 111.002(6) to subject itself to “duties and obligations conferred or imposed” by Chapter 111.  Under these minimal requirements, Denbury Green reported itself as a common carrier and obtained a permit a few days later.
“Private property cannot be imperiled with such nonchalance, via an irrefutable presumption created by checking a certain box on a one-page government form.”   The court held “that the T‑4 permit alone did not conclusively establish Denbury Green’s status as a common carrier and confer the power of eminent domain.”   “[A] permit granting common-carrier status is prima facie valid.  But once a landowner challenges that status, the burden falls upon the pipeline company to establish its common-carrier bona fides if it wishes to exercise the power of eminent domain.”
The Court rejected Denbury Green’s argument that making the pipeline available for public use was sufficient to establish common carrier status.  “[T]o qualify as a common carrier 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.”   There was some evidence that Denbury Green intended to fully utilize the pipeline for its own purposes, and therefore, Denbury Green did not establish common carrier status as a matter of law.
The significance of this case is the holding that the T‑4 permit issued by the TRC is prima facie valid, but when a landowner challenges the company’s right to exercise the power of eminent domain, the burden is on the pipeline company to establish that it is a common carrier.  The pipeline must be for a public use and not just for a private use.