United States: Texas Supreme Court Clarifies Common Carrier Test For Pipeline Companies

On January 6, 2017, the Texas Supreme Court clarified the test for common carrier status under the Texas Natural Resources Code and held that Denbury Green Pipeline-Texas, LLC ("Denbury") conclusively established it was a common carrier with eminent domain authority. Denbury Green Pipeline-Texas, LLC v. Tex. Rice Land Partners, Ltd., 2017 WL 65470 (Tex. January 6, 2017). In its second opinion in the case, the Court held that: (i) the Court of Appeals improperly focused on Denbury's intent at the time of its plan to construct the pipeline; (ii) the test is that there must be a "reasonable probability" that, "at some point after construction," the pipeline will serve the public, which Denbury conclusively established through, among other evidence, its post-construction contracts with unaffiliated entities; and (iii) the reasonably probable future use of the pipeline does not have to serve a "substantial public interest."

While the opinion arguably eases the burden placed on pipeline companies by not requiring them to prove such a "reasonable probability" at the time the company intends to build the pipeline, pipeline companies still must do much more than the prior "check the box" test on a Texas Railroad Commission T-4 form. How much more will be left to the lower courts in interpreting and applying this decision.

Background and Denbury I

Denbury was formed to build, own, and operate a carbon dioxide pipeline known as the "Green Line." The pipeline's route through Texas was designed to be close to various refineries, plants, and other facilities that could use the Green Line to transport carbon dioxide.

The Denbury case began when Texas Rice Land Partners, Ltd. ("Texas Rice") refused to allow Denbury to survey two tracts of land it owned in Jefferson County. Denbury filed a T-4 permit with the Texas Railroad Commission to obtain common carrier status, which would give it the power of eminent domain. After obtaining the permit, Denbury filed suit against Texas Rice to obtain access to the land. While the suit was pending, Denbury took possession of Texas Rice's property pursuant to the Texas Property Code, which permits possession even while the property owner challenges the eminent domain authority.

The trial court granted Denbury's motion for summary judgment and held that Denbury was a common carrier with eminent domain authority. The Court of Appeals affirmed, but the Texas Supreme Court reversed and remanded, holding that "the pipeline must serve the public; it cannot be built only for the builder's exclusive use." Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d 192, 200 (Tex. 2012). Accordingly, the Court held that the pipeline must demonstrate a "reasonable probability" that, "at some point after construction," the pipeline will "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." Id. at 202. The Court remanded the case to the trial court and afforded Denbury the opportunity to produce "reasonable proof of a future customer, thus demonstrating that [the Green Line] will indeed transport to or for the public for hire...." Id. at 204.

On remand, Denbury set forth various pieces of evidence, including: (i) transportation agreements with two unaffiliated entities; and (ii) a transportation agreement between Denbury and Denbury Onshore, which was acting on behalf of itself and other working-interest owners that are unaffiliated with Denbury.

Nevertheless, the Ninth District Court of Appeals held that there were fact issues as to whether, "at the time Denbury Green intended to build the Green Line, a reasonable probability existed that the Green Line would serve the public." Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC , 457 S.W.3d 115, 121-122 (Tex. App.—Beaumont 2015, pet. granted) (emphasis added). Focusing on Denbury's intent at the time of its plan to construct the pipeline, the Court of Appeals rejected Denbury's evidence of post-construction transportation contracts. Denbury appealed, and the Texas Supreme Court was again called upon to apply the test articulated in Denbury I to the facts of the case.

Denbury II—The Texas Supreme Court's January 6, 2017 Decision

The Court first held that the Court of Appeals incorrectly focused on the intent of Denbury at the time of its plan to construct the Green Line. The Court pointed out that the phrase "for a person intending to build" that was set forth in the Denbury I opinion was merely a reference to who must prove common carrier status. Denbury, 2017 WL 65470, at *4.

As a result of this error, the Court of Appeals disregarded Denbury's post-construction transportation agreements. Moreover, according to the Court, the Court of Appeals disregarded evidence that the Green Line's future public use could be supported by its proximity to other carbon dioxide shippers once construction was completed. In sum, by focusing on intent at the time of construction planning, the Court of Appeals ignored relevant evidence that supported Denbury's common carrier status.

The Court proceeded to clarify and contextualize the Denbury I test by stating that the test balances the property rights of Texas landowners with the state's "robust public policy interest in pipeline development" while also respecting constitutional limits placed on the oil and gas industry. Id. at *5. The Court reiterated its sentiment that pipeline companies' prior ability to simply "check[ ] a certain box on a one-page government form" and become common carriers was inconsistent with the Texas constitution. Id. Rather, to protect the rights of property owners, pipeline companies must adduce "at least some objective evidence that a pipeline will probably serve the public" to gain eminent domain power. Id.

The Court then analyzed Denbury's evidence and, in the process, identified categories of evidence that support a finding of common carrier status. The Court noted that, in general, post-construction contracts, combined with "the regulatory atmosphere," "proximity of the pipeline to potential customers," and other evidence can help prove common carrier status under the Denbury I test. Id. Regarding Denbury, the Court noted that one of the contracts—a 2013 transportation agreement with Airgas Carbonic—proved that the Green Line transports carbon dioxide by a customer who retains ownership of the gas. This contract, combined with another agreement and the proximity of the Green Line to identified potential customers, "conclusively establishe[d] that it was 'more likely than not' that, 'at some point after construction,' the Green Line would serve the public." Id.

Finally, the Court held that the Court of Appeals incorrectly required that the reasonably probable future use of the pipeline serve a "substantial public interest." Id. at *6. That is not the test, according to the Court, and the Court of Appeals improperly imposed a heightened standard on Denbury. The case relied on by the Court of Appeals to derive this heightened standard, according to the Court, may have found a "direct, tangible and substantial interest" in the taking in that particular case, but it did not impose this standard on all takings. Id. (citing Coastal States Gas Producing Co. v. Pate, 309 S.W.2d 828 (Tex. 1958)). Rather, "[t]o the extent that the degree of service to the public was woven into our test in [Denbury I], we held that for the pipeline to serve the public it must 'transport[ ] gas for one or more customers who will either retain ownership of the gas or sell it to parties other than the carrier." Id. (emphasis in original) The Court stated that the test set forth in Denbury I that there must be 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." Id.

Potential Implications

While many viewed the Denbury I and subsequent Court of Appeals decisions as a potential paradigm shift in favor of the landowner and property rights, the Denbury II decision suggests that the potential change in eminent domain rights is perhaps more moderate. The development and application of the test articulated in Denbury II will take time as lower courts address this standard, but it appears to be a middle ground between the original "check the box" test and a more comprehensive intent test.

Importantly, the decision highlights that initial planning for pipeline projects may need to include careful consideration of which aspects of a pipeline project may be used by unaffiliated companies and how long it may take to have proof of this fact. And, if this planning is not done carefully, landowners may have an ability to challenge a pipeline company's status as a common carrier and its right to condemn land. In Denbury II, the key pieces of evidence were post-construction agreements that were obtained years after Texas Rice's initial legal challenge. Nevertheless, there still had to be agreements and evidence at the time the facts were presented to the Court for a decision, and this may have ultimately tipped the scales in their favor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

William R. Taylor
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions