Denbury Case Returns to Texas Supreme Court

Written by John McFarland of the Oil and Gas Lawyer Blog.

Texas Rice Land Partners v. Denbury is back before the Texas Supreme Court. The case that caused such controversy when originally decided by that court in 2012, involves when a pipeline company can exercise the right of eminent domain to condemn pipeline easements.

Denbury decided to build a pipeline to carry carbon dioxide from Mississippi to the Hastings Field in South Texas, to inject in the field for tertiary recovery. Denbury sought an easement across land owned by Texas Rice Land Partners, but Texas Rice refused. Denbury sought to condemn an easement across the property, but Texas Rice claimed that Denbury did not have authority to condemn an easement. In its first decision in the case, 363 S.W.3d 192 (Tex. 2012), the Texas Supreme Court held that Texas Rice had raised a fact issue as to whether Denbury had authority to condemn, and it remanded the case to the trial court for further proceedings.

Prior to the Denbury decision, pipeline companies routinely asserted the right to condemn by filing a form with the Texas Railroad Commission, form T-4, checking a box to say that the owner of the pipeline to be constructed elected to be a “common carrier” pipeline. A “common carrier” is a pipeline that holds itself out to transport oil, gas, or in Denbury’s case CO2, for others for hire. In the Denbury decision, the Court said that filing this form was not enough to grant condemnation powers:

[F]or a person intending to build a CO2 pipeline to 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.
The Court said that Denbury had not made that showing.
On remand,  Denbury presented evidence that it said would satisfy the Supreme Court’s test to qualify it as a common carrier, and the trial court agreed with Denbury and entered judgment for Denbury. Texas Rice appealed to the Beaumont Court of Appeals, which held that a fact issue still existed as to whether Denbury was a common carrier, and a trial should take place.  457 S.W.3d 115 (Tex.App.-Beaumont 2015). From that judgment, Denbury petitioned the Supreme Court to hear the case. The Supreme Court has asked all parties for briefs but has not yet granted Denbury’s petition. Briefs have now been filed by Denbury and Rice Land, and amicus briefs have been filed by Texas Pipeline Association, the Texas Civil Justice League, TransCanada Keystone Pipeline, EnLink Midstream Operating, Valero Refining, Enterprise Products, Sunoco Pipeline, Shell Pipeline, Koch Pipeline, Texas Oil & Gas Association, Energy Transfer Partners, and Plains Pipeline, all asking the Court to take the case; and by Texas Land & Mineral Owners’ Association, supporting Texas Rice. Our firm is counsel for Texas Rice in the appeal. Briefs can be found on the Texas Supreme Court website, here.

As can be seen from the industry amicus briefs filed, this is an important case for the pipeline industry. I recommend that those interested read the excellent amicus brief filed by The Person Whitworth firm for the Texas Land & Mineral Owners’ Association.