Shale Daily / NGI All News Access

Texas Supreme Court Remands Eminent Domain Case

The Texas Supreme Court has for a second time reversed a court of appeals judgement in a case involving a pipeline company's use of eminent domain for a public use project and has remanded the case to a district court "for further proceedings consistent with this opinion."

The court decision would require the pipeline to provide reasonable proof it is a "common carrier" with customers other than its owners in order to invoke eminent domain rights.

Oil and gas industry representatives had urged the court to revisit its 2011 decision in the case, saying it could stymie efforts to build pipelines to serve growing production in the state's shale plays (see Shale Daily, Feb. 14).

The case (No. 09-0901), which was argued before the Texas Supreme Court last April, pitted Denbury Green Pipeline-Texas LLC against Texas Rice Land Partners, which refused to let Denbury survey two pieces of land in Jefferson County, TX, for a proposed pipeline to connect Denbury's Jackson Dome carbon dioxide (CO2) reserve in Mississippi to oil wells in the Hastings Field in Brazoria and Galveston counties. Denbury took the landowners to court, where Denbury was initially found to be a "common carrier" that could invoke eminent domain, and Texas Rice was enjoined from interfering with the company's "right to enter and survey" its proposed pipeline route across Texas Rice land.

Texas Rice fought the ruling to the Texas Supreme Court, which last August reversed the lower court decision, saying that pipeline companies can only use eminent domain when the project in question is for public use. The decision about whether Denbury's pipeline would serve a public or a private use should not have been decided by the Railroad Commission of Texas, which had issued the company a permit to operate the pipeline in 2008, the court said in its 2011 decision.

In an opinion delivered Friday by Justice Don R. Willett, the court said that a company "cannot acquire unchallengeable condemnation power...merely by checking boxes on a form and self-declaring its common-carrier status...if a landowner challenges an entity's common-carrier designation, the company must present reasonable proof of a future customer, thus demonstrating that the pipeline will indeed transport 'to or for the public for hire' and is not 'limited in [its] use to the wells, stations, plants and refineries of the owner.'"

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