Texas Court Makes Proving Common-Carrier Status More Difficult

Attorneys Warn, “You’d Better Do More Than Check The Box”
By Patrick R. Byrd and Lara D. Pringle, Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P., Houston | January 2012, Vol. 239 No. 1

On Aug. 26, 2011, the Supreme Court of Texas issued its opinion in Texas Rice Land Partners Ltd. v. Denbury Green Pipeline-Texas LLC (No. 09-0901), which provides landowners yet another avenue by which to frustrate and delay common carriers’ acquisition of pipeline easements. Simply put, this decision makes life a little more difficult for companies trying to exercise the power of eminent domain.

In the Denbury case, the central issue was whether Denbury Green Pipeline-Texas LLC (“Denbury Green”) had established itself as a “common carrier” of carbon dioxide. “Common carrier” is a specific term used in the Texas Natural Resources Code (the “Code”). Sections 111.019(a) and 111.002(6) of the Code provide, respectively, that “[c]ommon carriers have the right and power of eminent domain,” and, further, a company qualifies as a common carrier for carbon dioxide if it “owns, operates, or manages, wholly or partially, pipelines for the transportation of carbon dioxide . . . to or for the public for hire….”

Ultimately, the Texas Supreme Court ruled that Denbury Green failed to establish its common-carrier status and, in the process, gave a future landowner fighting eminent domain another arrow in his or her quiver.

In March 2008, Denbury Green sent to the Texas Railroad Commission its one-page “Form T-4” application to construct and operate a carbon dioxide pipeline running from the Texas-Louisiana border to Brazos and Galveston counties. As part of the Form T-4, Denbury Green checked the box indicating that the pipeline would be operated as “a common carrier.” Denbury Green further checked the common-carrier box indicating that the gas was to be “[o]wned by others, but transported for a fee.”

Denbury Green also, pursuant to the Code, submitted its application letter to the Commission stating that it agreed to be subject to the duties and obligations placed on common carriers by the Code. About a week later, the Commission granted Denbury Green’s T-4 application confirming Denbury Green’s common-carrier status. Denbury Green also filed a tariff with the Commission setting out the terms for its transportation of carbon dioxide in the proposed pipeline. It appeared that Denbury Green had complied with all regulations in the Texas Natural Resources Code to establish itself as a common carrier.

After this initial application process, Denbury Green began surveying the land along the anticipated route. During its surveying efforts, a landowner, Texas Rice Land Partners, and its lessee, Mike Latta (collectively “Texas Rice”), repeatedly refused to allow Denbury Green entry onto their land. Denbury Green then brought an injunction action requesting access to the land. Both parties moved for summary judgment on a number of issues, the central one being whether Denbury Green qualified as a common carrier under the Code.

The district court found that Denbury Green qualified for common-carrier status and enjoined Texas Rice from interfering in Denbury Green’s surveying efforts. The Court of Appeals in Beaumont agreed. The Texas Supreme Court, however, reversed the decisions of the lower courts. The Supreme Court concluded that there was some question as to whether Denbury Green’s pipeline was for public use, and, in turn, whether Denbury Green qualified as a common carrier with the ability to exercise eminent domain. The Supreme Court sent the case back to the district court for further proceedings.