Texas Supreme Court Affirms its Decision in Denbury Pipeline Case


March 3, 2012

This week, the Texas Supreme Court denied Denbury Green Pipeline's motion for rehearing in Texas Rice Land Partners v. Denbury, leaving essentially untouched its conclusion that pipelines must prove that they serve the public in order to exercise eminent domain power.

I wrote about this case a couple of weeks ago. See my prior discussion here. Pipeline companies had deluged the Court with briefs after its initial opinion, claiming that the Court's decision will halt pipeline construction across the state.

While denying Denbury's motion for rehearing, the Court did issue a revised opinion that made some changes to its language. The Court's opinion adds language responding to some of the arguments of the friend-of-the-court briefs filed by other pipeline companies; and the revised opinion changes the holding as follows:

We accordingly hold that for 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 also added a footnote to its holding: "Our decision today is limited to persons seeking common-carrier pipeline status under Section 111.002(6) [of the Natural Resources Code]. We express no opinion on pipelines where common-carrier status is at issue under other provisions of the Natural Resources Code or elsewhere." (Section 111.002(6) relates only to pipelines that transport carbon dioxide. Other provisions of the Code cover pipelines that carry natural gas and hydrocarbons.)

James Mann, an Austin attorney and lobbyist for the pipeline industry, was quoted in the Houston Chronicle as commenting that "It's unclear to us just how bad this opinion is. If it only affects CO2 pipelines, it can be survived. If the same holdings are applied to all other types of pipelines, it is disaster for the oil and gas industry." Kent Sullivan, a lawyer with Sutherland Asbill & Brennan in Houston, said that the opinion represents "a substantial shift in power or potential leverage" for landowners. Sullivan predicted that the issue is likely to be a topic in the 2013 legislative session.