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Denbury Green Pipeline-Texas, Llc v. Texas Rice Land Partners, Ltd.

Texas Supreme Court
60 Tex. Sup. Ct. J. 201, 2017 WL 65470, 510 S.W.3d 909 (2017)
ELI5:

Rule of Law:

To establish common-carrier status and the power of eminent domain, a pipeline company must show a reasonable probability that, at some point after construction, the pipeline will serve the public. Evidence of post-construction contracts with unaffiliated customers who retain ownership of their gas, combined with other objective factors like the pipeline's proximity to potential customers, can be sufficient to satisfy this test as a matter of law.


Facts:

  • Denbury Green Pipeline-Texas, LLC (Denbury Green) was formed to build and operate a carbon dioxide (C02) pipeline known as the 'Green Line'.
  • Denbury Green designed the pipeline's route along the Texas Gulf Coast to be in close proximity to refineries, plants, and other industrial facilities that could become potential customers for C02 transport.
  • In late 2007, Denbury Green sought permission to survey two tracts of land owned by Texas Rice Land Partners, Ltd. (Texas Rice) for the proposed pipeline route, but was denied access.
  • In 2008, before the pipeline was constructed, Air Products and Chemicals, Inc. began negotiating with Denbury Green to use the proposed pipeline to transport C02 from a refinery in Port Arthur, Texas.
  • After the pipeline was completed in 2010, Denbury Green finalized a transportation agreement with Airgas Carbonic, Inc., an unaffiliated company, to transport C02 owned by Airgas through the Green Line.
  • Denbury Green also finalized its agreement with Air Products to transport C02; however, under this specific contract, title and ownership of the C02 would transfer to Denbury Green's affiliate at its destination.

Procedural Posture:

  • Denbury Green obtained a T-4 common-carrier permit from the Texas Railroad Commission.
  • Denbury Green sued Texas Rice in trial court seeking an injunction to survey its property.
  • The trial court granted summary judgment for Denbury Green, finding it was a common carrier.
  • Texas Rice, the appellant, appealed to the court of appeals, which affirmed the trial court's judgment.
  • Texas Rice appealed to the Texas Supreme Court, which, in Texas Rice I, reversed and remanded the case, establishing a new test for common-carrier status.
  • On remand to the trial court, Denbury Green presented new evidence and was again granted summary judgment.
  • Texas Rice, the appellant, appealed again, and the court of appeals reversed the summary judgment, finding a genuine issue of material fact existed.
  • Denbury Green, the appellant in this instance, appealed to the Texas Supreme Court.

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Issue:

Does a pipeline company establish its status as a common carrier with the power of eminent domain, as a matter of law, when it presents evidence of post-construction transportation contracts with unaffiliated third parties and the pipeline's strategic proximity to potential customers?


Opinions:

Majority - Justice Green

Yes. A pipeline company establishes its status as a common carrier when it demonstrates a reasonable probability that the pipeline will serve the public at some point after construction. The test is an objective one, not a subjective inquiry into the company's intent at the planning stage. Post-construction contracts are highly relevant evidence to determine whether a pre-construction probability of public use existed. In this case, Denbury Green's contract with Airgas Carbonic—an unaffiliated entity that retains ownership of its gas—is definitive proof that the pipeline now serves the public. When combined with the pre-construction negotiations with Air Products and the pipeline’s strategic location near other potential customers, the evidence conclusively establishes that it was more likely than not that the pipeline would serve the public. The court rejected the notion that the public use must be 'substantial,' holding that a reasonable probability of serving even one unaffiliated customer is sufficient to satisfy the test.



Analysis:

This decision clarifies and refines the 'reasonable probability' test for common-carrier status established in Texas Rice I. By confirming that post-construction evidence, such as transportation contracts, is relevant to proving pre-construction probability of public use, the court provides pipeline companies a clearer evidentiary path to secure eminent domain authority. This holding lowers the bar for pipeline companies, as they do not need to have contracts fully executed before beginning condemnation proceedings, so long as they can later produce objective evidence of public use. The ruling strengthens the position of pipeline developers against landowner challenges and may streamline the process of acquiring land for infrastructure projects in Texas.

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