Denbury v. Texas Rice "Texas Rice II": The Texas Supreme Court Affirms Common Carrier Status

by Jackson Walker
Contact

Jackson Walker

On Friday, January 6, 2017, the Texas Supreme Court issued its long-awaited decision in Denbury Green Pipeline-Texas v. Texas Rice Land Partners (“Texas Rice II”), reversing the 9th Court of Appeals and reinstating the trial court judgment finding that a pipeline company, Denbury, had conclusively established its common carrier status through the presentation of a transportation agreement, entered after the pipeline was constructed, with at least one unaffiliated customer.

Almost five years ago, the Texas Supreme Court issued its revised decision in the controversial case of Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC (“Texas Rice I”), holding that merely “checking the box” on the appropriate Railroad Commission application form does not make the pipeline a “common carrier” with the power of eminent domain.  Instead, the Supreme Court held that pipelines must also show that a reasonable probability exists 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.  For more information and background on the dispute, read about Texas Rice I.

After establishing the common carrier test in Texas Rice I, the case was remanded to determine whether Denbury was, in fact, a common carrier pipeline consistent with the test provided by the Supreme Court.  Relying in part on the fact that Denbury had entered into transportation service agreements with two shippers, Airgas Carbonic, Inc. and Air Products and Chemicals, Inc., the trial court granted summary judgment in favor of Denbury, having determined that a reasonable probability existed that the Denbury pipeline would serve the public.

However, the 9th Court of Appeals held that “reasonable minds could differ regarding, whether at the time Denbury Green intended to build the Green Line, a reasonable probability existed that the Green Line would serve the public.”  In so holding, the Court of Appeals required that the pipeline company have the “intent at the time of its plan to construct the Green Line” to serve the public and not only itself and thus held that the transportation service agreements were not relevant and could not be considered because they were entered after construction had commenced.  The court of appeals also required that the reasonably probable future use of the pipeline serve a “substantial public interest,” and concluded that a fact issue existed about whether the public interest was substantial given the relative size of the respective uses of the pipeline by Denbury and by third parties. The Supreme Court rejected both principles.

In its decision, the Supreme Court explained that the Court of Appeals improperly focused on the intent of a party at the time the pipeline was contemplated rather than the direct evidence establishing a reasonable probability of the pipeline’s future public use, even if the intent was formed and the evidence created after the construction of the pipeline.

Specifically, it held that Denbury:

conclusively established that there was a reasonable probability that, at some point after construction, the Green Line would serve the public. With evidence that Denbury Green entered into a contract in 2013 to transport CO2 for Airgas Carbonic, along with the proximity of the Green Line to potential customers such as Airgas Carbonic and Air Products, no longer could a reasonable fact-finder determine that a genuine fact issue exists as to whether the Green Line would, at some point after construction, do what it now most certainly does: transport CO2 owned by a customer who retains ownership of the gas.

The Supreme further rejected the Court of Appeal’s holding that fact issues existed concerning whether the public use would be “substantial,” holding that “evidence establishing a reasonable probability that the pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner is substantial enough to satisfy public use under the Texas Rice I test.”

In addition to clarifying that the intent for the pipeline to serve the public can be formed and supported by evidence after the pipeline is constructed and affirming that use by even one unaffiliated customer is substantial enough to convey common carrier status, this decision clearly establishes at least two factors that would weigh in favor of a pipeline company seeking to meet the Texas Rice I test: a transportation service agreement with at least one unaffiliated customer and proximity of the pipeline to potential customers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jackson Walker | Attorney Advertising

Written by:

Jackson Walker
Contact
more
less

Jackson Walker on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.