February 28, 2017 Articles

Denbury: Property Owners, Pipeline Companies, and Eminent Domain Authority

Courts struggle to find a balance between protecting landowners’ property rights and encouraging pipeline development.

J. Laurens Wilkes, William R. Taylor, and Sean B. Solis – February 28, 2017

In Texas, the Denbury decisions exemplify this struggle. 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 conclusively established it was a common carrier with eminent domain authority. Denbury Green Pipeline-Tex., LLC v. Tex. Rice Land Partners, Ltd., 2017 WL 65470 (Tex. Jan. 6, 2017). In its second opinion in the case, the court held that (1) the court of appeals improperly focused on Denbury’s intent at the time of its plan to construct the pipeline; (2) 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 postconstruction contracts with unaffiliated entities; and (3) 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, though, will be left to the lower courts in interpreting and applying this decision.

This struggle to find a balance in the eminent domain context is not unique to Texas. Pennsylvania, North Dakota, and Oklahoma, for example, all have different statutory schemes to grant eminent domain authority to pipeline companies; but the courts and regulatory bodies in these states all face the similar challenge of applying the law to the facts to determine when a pipeline company should be granted eminent domain authority. This decision usually turns on whether and to what extent the pipeline will serve the public. 

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