Texas Supreme Court reverses decisions two state agency permits; Removes Denbury Green Pipeline common carrier status

By Steve Korris | Aug 30, 2011

The Texas Supreme Court reversed the common carrier status of the Denbury Green Pipeline on Aug. 26.

AUSTIN – Appellate judges in Beaumont invested too much power in state agency permits in two cases the Supreme Court of Texas decided on Aug. 26.

The Justices reversed Ninth District judges for granting eminent domain power to a private pipeline and for failing to review a trial over water contamination.

In the water case, the Supreme Court found Ninth District Chief Justice Steve McKeithen and Justices Hollis Horton and David Gaultney misread two laws and two precedents.

Justice Dale Wainwright wrote, "Of course, statutory remedies may preempt common law actions or other standards that may set the bar for liability in tort, but a permit is not a get out of tort free card."

Denbury Green Pipeline

In the pipeline case, (Jefferson County Case No. E181-923) the Supreme Court found McKeithen and Justice Charles Kreger improperly identified Plano energy company Denbury Green as a common carrier.

Justice Don Willett wrote, "Private property is constitutionally protected, and a private enterprise cannot acquire condemnation power merely by checking boxes on a one page form."

He wrote, "Nothing in Texas law leaves landowners so vulnerable to unconstitutional private takings."

The Justices remanded the case to Jefferson County District Judge Donald Floyd.

He ruled that farmer Mike Latta must allow Denbury Green to enter property of Texas Rice Land Partners in order to lay a line for carbon dioxide transmission.

McKeithen and Kreger affirmed Floyd in 2009, ruling an owner can acquire the right to condemn private property by checking a box on a Railroad Commission form.

They held a landowner can't challenge in court whether use of the line will be public.

Gaultney dissented, writing that the others shouldn't grant conclusive effect to Denbury Green's filings with the Railroad Commission.

"Declaring a use public or private is a judicial decision," he wrote.

"If Denbury is successful at trial, then it can proceed with the exercise of eminent domain powers, and appellant should be enjoined from interfering," he wrote.

His view prevailed at the Supreme Court.

"Unadorned assertions of public use are constitutionally insufficient," Willett wrote.

He wrote that Denbury Green injects carbon dioxide into existing oil wells to increase production and owns a natural reserve of the gas in Mississippi.

He wrote that while the Natural Resources Code plainly gives private pipelines the power of eminent domain, the authority is subject to special scrutiny by courts.

"Nothing in the statutory scheme indicates that the commission's decision to grant a common carrier permit carriers conclusive effect and thus bars landowners from disputing in court a pipeline company's naked assertion of public use," Willett wrote.

He wrote that the Railroad Commission's permit process undertakes no effort to confirm that an applicant's use will be public.

"Private property cannot be imperiled with such nonchalance, via an irrefutable presumption created by checking a certain box on a one page government form," he wrote.

"The Denbury Green pipeline would not serve a public purpose if it were built and maintained only to transport gas belonging to Denbury from one Denbury site to another."

Anthony Brocato, Charles Butler, Douglas Alexander and Amy Warr represented Texas Rice Land Partners.

Marcus Pitre and H. P. Wright represented Latta.

Melanie Reyes, Thomas Buchanan, Jack Strother, Michael Baker, Mitchell Beard, Kelli Strother, Lynne Liberator and Katharine David represented Denbury Green.

Jefferson County Case No. E181-923

Environmental Processing Systems

The water contamination case started in Liberty County, where Environmental Processing Systems obtained permits to inject wastewater deep into the earth.

FPL Farming, a nearby rice grower, sued for trespass damages based on migration of the water into its property.

At trial before District Judge Vann Culp, jurors found no trespass.

FPL Farming appealed, claiming Culp should have directed jurors to rule in its favor on a consent defense.

FPL Farming claimed it presented factually sufficient evidence of trespass and challenged the allocation of the burden of proof in Culp's jury charge, claiming he should have told jurors injury isn't an element of trespass.

McKeithen, Horton and Gaultney decided they didn't need to review the merits of the trespass claim or Culp's charges to the jury.

They held FPL Farming couldn't recover because the Texas Commission on Environmental Quality authorized the injections.

Now the Supreme Court returns the case to them for full review of the trial.

Wainwright wrote, "The court of appeals' reasoning is inconsistent with our general view of the legal effect of an agency's permitting process, the specific statute authorizing the TCEQ's process in this case, and our precedent regarding court review of agency actions."

He wrote that a permit is a negative pronouncement that grants no affirmative rights.

"A permit removes the government imposed barrier to a particular activity requiring a permit," he wrote.

When the board of law examiners grants an attorney a license, it doesn't preclude a private party from seeking damages for the attorney's malpractice, he wrote, and the Injection Well Act does not preempt any civil actions.

"In fact, the text states just the opposite," Wainwright wrote.

He wrote that the holding of the Ninth District conflicted with clear language of Texas administrative code.

"The statute specifically states that a permit does not authorize invasion of property rights, which is where the tort of trespass falls," he wrote.

He wrote that the Ninth District applied Supreme Court decisions that concerned water injections for oil and gas production.

"Mineral owners can protect their interests from drainage through means such as pooling or drilling their own wells," he wrote. "That is not necessarily the case when a landowner is trying to protect his or her subsurface from migrating wastewater."

Richard Baker represented Environmental Processing Systems.

Claudia Frost, Christopher Richart, Paul Mitchell, Brett Busby, Hutson Smelley and C. B. Stratton represented FPL Farming.

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