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.