The 14th [Houston] Court of Appeals has affirmed a trial court summary judgment in a dispute between midstream companies over whether a new fractionator was a joint venture asset.
Mont Belvieu Caverns, LLC; Enterprise Products of Texas Operating LLC; and Enterprise Products Operating LLC v. DCP Partners MB II LLC; DCP NGL Services, LLC; and Phillips 66 Company (No. 14-25-00085-CV; April 14, 2026) arose from a dispute over the interpretation of a joint venture to own and operate franctionation facilities in Chambers County. In 1985, the parties entered into an operating agreement under which Enterprise owned 75%. The agreement initially covered two fractionators, West Texas Fractionator (Frac I) and the Seminole Fractionator (Frac II). In the 1990s West Texas Fractionator II (Frac III) was added. This fractionator operates independently of the other two and is a standalone Joint Venture asset.
In 2006 Enterprise invited Phillips to participate in the expansion of Frac III. Phillips opted instead to become Non-Participating Owners in the expansion as permitted by the operating agreement. Proceeding as the sole Participating Owner, Enterprise went ahead and completed the project, becoming entitled to the immediate benefits of the expansion. Phillips would not share any revenues until Enterprise had recovered 300% of its investment in the expansion. Again in 2006, Enterprise informed Phillips that it was considering a new Fractionator (Frac IV) to be built on Enterprise-owned land north of the original site. Enterprise decided against using a new deisobutanizer in Frac IV, opting to use its excess capacity and save $24 million. Enterprise offered Phillips participation in this project as well, and Phillips again elected to become a Non-Participating Owner. Again, Enterprise would recover 300% of capital before Phillips’ share commenced.
Enterprise completed the construction of Frac IV in 2010 and an expansion in 2012. Up until September 2020, it reported quarterly to Phillips regarding recovery of Enterprise’s construction costs. Enterprise then sued Phillips seeking a declaration that Frac IV was “a solely-owned asset of Enterprise and not the Joint Venture.” Phillips vigorously disputed that claim. Both parties moved for summary judgment. The trial court granted Phillips’ motion and denied Enterprise’s. Enterprise appealed.
In an opinion by Justice Bridges, the court of appeals affirmed. After reviewing various provisions of the operating agreement, the court sided with Phillips. Enterprise argued first that the contractual definition of “Facilities” did not include “independent, geographically distinct fractionators with only a nominal connection to” other jointly-owned assets. In other words, the agreement only covered Frac I and Frac II. Second, Enterprise asserted that the agreement limited the location of “Facilities” through a metes and bounds description of a nine-acre tract that includes Frac I and Frac II. Because Frac IV was built on a separate tract, Enterprise asserted, it can’t be a Joint Venture asset.
The court rejected these arguments based on the plain text of the agreement. First, the agreement specified no geographical limitation on “Facilities.” Enterprise obviously knew this because it followed the agreement’s requirement to send the Frac IV proposal to other Joint Venture members. The agreement also provides that the parties may expand the “Facilities” beyond the original site. And even if the agreement required a new facility to have a physical connection with the original site, Frac IV’s pipe rack connected it to the original site, both feeding the new facility and carrying away finished products produced by the new facility. It also used Frac III’s excess deisobutanizer capacity.
Enterprise tried to argue that the whole affair with Frac IV had been a “mistake.” This argument mystified the court, given that Enterprise complied with the operating agreement for many years prior to bringing suit. As the court stated, “Enterprise could not then unilaterally withdraw the offer [to participate or elect not to] once it had been accepted by Phillips.” Just because Phillips, in accordance with the agreement, elected to become a Non-Participating Owner that didn’t contribute to construction costs didn’t mean Frac IV wasn’t a Joint Venture asset. The court thus affirmed the trial court’s final judgment in favor of Phillips.
