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Supreme Court of Texas rules in against landowner and in favor of pipeline company on power to condemn

January 12, 2017 Posted in Articles

On January 6, 2017, the Supreme Court of Texas handed down its latest opinion in the decade-long Texas Rice v. Denbury Green litigation over a pipeline company’s power to condemn private property.  The Court began its opinion reciting the test from its 2012 opinion to demonstrate common carrier status, in which the Court had to consider if the pipeline company had established “as a matter of law a reasonable probability that, at some point after construction, the [subject pipeline] would 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.” The Court, foreshadowing its ultimate determination early in the opinion, noted that the pipeline company “satisfied the test established in Texas Rice I and is a common carrier. . . .”

The Court first concluded that the lower court of appeals – who had ruled in favor of the landowner and against the pipeline company – incorrectly applied the intent test established in the Court’s prior opinion.  The Court clarified that the intent test it previously established required the showing of a “reasonable probability that, at some point after construction, the [subject pipeline] would 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.”

Rather than limiting its analysis, for example, to actual agreements to ship on behalf of others in place at the time of planning or construction of the pipeline, the Court instead held that post-construction “contracts can be relevant to showing a reasonable probability that, ‘at some point after construction,’ a pipeline will serve the public.”  The Court went on to hold that the recent evidence presented by the pipeline company at the trial court, including a contract executed years after the pipeline was actually installed in the ground, “conclusively established that there was a reasonable probability that, at some point after construction, the [subject pipeline] would serve the public.”  The Court also held that the lower appellate court incorrectly required a heightened standard of public use because to meet the public use requirement in Texas a pipeline company must only offer “evidence establishing a reasonable probability that the pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner . . . .”

The Court’s holding in its most recent opinion may have a significant impact on pipeline takings in Texas.  A copy of the Supreme Court of Texas’ opinion can be found here: http://www.txcourts.gov/media/1436866/150225.pdf.  Prior to the issuance of the Court’s opinion, Barron, Adler, Clough & Oddo, LLP filed a friend of the Court brief arguing in favor of additional protections for landowners.   A copy of the Firm’s brief can be viewed here: http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=fa38bfbb-0d73-489a-a879-57f0a1d5d34d&coa=cossup&DT=BRIEFS&MediaID=a088f225-ba14-4cba-817c-9c12f8664259.

If your property may be impacted by a pipeline project, please contact one of the experienced attorneys at Barron, Adler, Clough & Oddo, LLP, or our client development specialist Ellen Schneider, at 512-478-4995 to help protect your rights.”

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