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Texas Supreme Court Rules Pipeline Can Take Land by Eminent Domain

| 3 min read
Former Associate
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by Rachel M. Lynn

On January 6, the Texas Supreme Court ruled that the Denbury Green Pipeline-Texas LLC (“Denbury Green”) could take private property by eminent domain. In Denbury Green Pipeline-Texas LLC v. Texas Rice Land Partners Ltd., the decision turned on the question of whether or not Denbury Green qualified as a “common carrier” under the Texas Natural Resource Code. Typically, the power of eminent domain is granted to governmental entities rather than private institutions. Under Texas law, however, a common carrier has the right and power of eminent domain.

Denbury Green created a carbon dioxide pipeline known as “the Green Line,” which begins in Jackson, Mississippi, and runs through Texas along CO2 refineries. During construction, Denbury Green planned for CO2 to travel to the refineries, and eventually to oil fields, underground storage reservoirs, or other locations where CO2 can be used or stored. Before construction began, Denbury Green applied for and received common carrier status from the Texas Railroad Commission. Armed with the common carrier identification, Denbury Green purported to use the power of eminent domain to take private land in Texas for the construction of the pipeline. When the case made its way to the Texas Supreme Court, the pipeline was already constructed and in use.

The test utilized by the court to determine Denbury Green’s common carrier status was whether or not the pipeline would serve the needs of the public, not only those of the builder. To pass this test, the court noted, the pipeline would need to provide reasonable proof of a future customer. The court stated that simple assertions that a pipeline would eventually be used for the public and self-identifying with the Texas Railroad Commission as a common carrier would not meet the test.

To reasonably prove that the Green Line would have a future customer, Denbury Green cited a contract with an unaffiliated entity for the transport of CO2, entered into after Denbury Green completed construction of the pipeline. The court coupled the contract with the close proximity to CO2 refineries to find a pre-construction intent that the pipeline would at some point be used for the needs of public, qualifying the pipeline as a common carrier. Therefore, the court granted summary judgment to the pipeline, and allowed the pipeline to keep the private property taken with the eminent domain power.

Of note, the contract for the transport of CO2 was entered into after Denbury Green completed construction of the pipeline, and after Denbury Green had already purported to use the power of eminent domain. The court found that this post-construction contract showed a pre-construction intent to serve the public. This finding is significant because transportation contracts are often entered into after the actual construction of the pipeline, easing the requirements for pipelines to qualify as a common carrier, and thus receive the power to take private property through eminent domain.

The full text of the decision can be found here.