Denbury, Round Two

In April, the Texas Supreme Court granted a petition for review in the condemnation case Denbury Green Pipeline-Texas, LLC v. Texas Rice Land Partners, Ltd. The petition for review can be accessed here. Denbury is a pipeline company running a carbon dioxide pipeline from southeast of Baton Rouge to the Hastings Field, south of Houston. Texas Rice Land Partners is a Texas cattle ranch and rice farm that was initially enjoined from interfering with Denbury’s construction of the pipeline across ranch property.  The Beaumont Court of Appeals reversed the trial court’s summary judgment ruling in favor of Denbury that Denbury was a common carrier with eminent domain rights under the Texas Natural Resources Code. Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 457 S.W.3d 115, 120 (Tex. App.—Beaumont 2015, pet. granted).The appeal has drawn a number of amicus curiae briefs covering a wide assortment of legal points from various industry players, ranging from midstream companies briefing statutory construction issues to the Texas Oil & Gas Association’s argument that the burdens placed by the Beaumont Court on eminent domain threaten the basic structure of John Locke’s philosophical concepts that underpin property rights.  This is the second time that this now seven-and-a-half-year-old dispute is before the Texas Supreme Court. The first time (Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192 (Tex. 2012)), the Court held that to condemn property as a common carrier, the condemnor had the burden to establish a reasonable probability that the carbon dioxide pipeline at issue would be used to transport carbon dioxide for customers other than the pipeline owner.The primary issues the Texas Supreme Court faces this go-round are: (1) whether the test for common-carrier status is objective or subjective (i.e., based on the intent of the pipeline’s owner); (2) whether evidence of the reasonable probability is limited to the time the owner planned to build the pipeline or can also include evidence of contracts signed after the pipeline is constructed; and (3) whether public use must be “substantial” for the pipeline to be a common carrier. The Texas Supreme Court’s decision on these key issues stands to significantly impact the midstream industry for years to come. Conrad Hester & Chris DachniwskyThompson & Knight LLP