Denbury takes common carrier case to Texas SC, pipeline groups and TCJL file amicus briefs in support

In February, the Ninth Court of Appeals reversed a Beaumont judge’s ruling recognizing Denbury Green Pipeline-Texas as a common carrier – creating a “roadmap for endless litigation in every county touched by a pipeline project,” according to one tort reform group.

Denbury filed a petition for review with the Texas Supreme Court on June 3, claiming the opinion will have widespread impact throughout the pipeline industry unless remedied by the high court.

To no avail, Denbury had requested the Ninth Court rehear the case in March, asking justices to “reconsider the standards it applies to the common carrier determination and the uncontroverted evidence that demonstrates Denbury Green’s common carrier status under the Supreme Court’s new Texas Rice test.”

The “test” requires the pipeline builder to show evidence the pipeline will eventually be used by unaffiliated third parties.

Denbury argues the Ninth Court misinterpreted the Texas Rice test, “heavily weighting the scales against pipeline development,” states Denbury’s petition for review.

On June 8, three groups filed amicus briefs in support of Denbury: TransCanada Keystone Pipeline, Texas Civil Justice League and the Texas Pipeline Association.

“The [Ninth] Court of Appeals’ opinion is a roadmap for endless litigation in every county touched by a pipeline project,” states TCJL’s amicus brief. “But by the time such litigation works its way through the civil justice system, the cost and delay will stymie not only the proposed project at issue, but projects that may [be] on the drawing board for the future.”

If not reversed, TCJL argues the Ninth Court’s decision will slow down the Texas economy for the foreseeable future.

For the better part of a decade, the case has bounced between courts and began when Jefferson County landowners James E. Holland and David C. Holland, their business Texas Rice Land Partners and tenant Mike Latta, were approached by Denbury to conduct a survey on their land.

Denbury had plans to build a gas pipeline through the Hollands’ property.

When the landowners declined, Denbury claimed the pipeline would be for public use, exercising the right of eminent domain – the legal authority for a government entity or a private entity authorized by the government to take private property for public use.

In 2008, 172nd District Court Judge Donald Floyd ruled Denbury was a common carrier, and the Ninth Court agreed, but the Supreme Court reversed and remanded the case back to Jefferson County.

Once back in his court, Floyd reviewed summary judgment evidence showing that unaffiliated parties intended on using the Denbury pipeline and once again said the pipeline met common carrier status, prompting another appeal from the landowners.

When the case came before the Ninth Court for a second time, justices considered a new standard for determining common carrier status that was developed by the Supreme Court when it heard the Denbury Green case.

The standard requires evidence that there is a “reasonable probability that at some point after construction the pipeline will serve the public by transporting gas for at least one customer who uses the pipeline to transport CO2 that the customer either keeps or sells to someone other than an affiliate of the pipeline company.”

The landowners have argued that Denbury will use the pipes to carry its own CO2, which means it is not a “common carrier” and Denbury had no right to use eminent domain to take the Hollands’ land.

Denbury argues the Ninth Court measured common carrier status at the wrong point in time, maintaining the degree of public use is not an issue so long as there is some public use.

In its Feb. 12 opinion, the Ninth Court found a question remains on whether the pipeline would serve the public, reversing Floyd’s ruling and remanding the case for further proceedings.

In its amicus brief, the Texas Pipeline Association argues the Ninth Court applied a subjective public use test fundamentally different from the objective test crafted by the Supreme Court.

The association says the Ninth Court’s test:

- Is one of subjective intent (virtually always a question of fact), rather than objective probability (more likely a question of law);

- Requires a pipeline to have proof of public use when the project is first conceived, rather than when the court makes the public use determination;

- Suggests a pipeline must prove public use with absolute certainty, rather than a reasonable probability; and

- Focuses on the extent of use rather than the character of use.

“None of these components of the court of appeals’ test is supported by (the Supreme Court’s) decision in Texas Rice I or other Texas law,” states the association’s brief.

“In its apparent intent to foreclose Denbury Green from exercising the power of eminent domain, the court of appeals has crafted a standard that threatens to effectively foreclose any pipeline from exercising that power. This Court should, therefore, reverse the court of appeals’ decision in the respects challenged by Denbury Green.”

Denbury is represented in part by Marie Yeates of Vincent & Elkins LLP in Houston.

The Texas Pipeline Association is represented Marnie McCormick, attorney for the Austin law firm Duggins Wren Mann & Romero.

Attorney George Christian represents TCJL.

TRLP is represented in part by attorney William Christian.

Supreme Court case No. 15-0225

Ninth Court case No. 09-14-00176-CV

Trial court case No. E181-923