Earlier today the Ninth District Court of Appeals in Beaumont issued an opinion with potentially significant implications for common carrier pipelines. In Crosstex NGL Pipeline, L.P. v. Reins Road Farms-1, Ltd. (No. 09-12-00563-CV), the issue before the court of appeals was whether a Jefferson County trial judge had abused his discretion when he denied Crosstex’s (the “pipeline”) request for an injunction against to prevent Reins Road Farms-1 (the “landowner”) from interfering with the pipeline’s attempt to survey the landowner’s property for a planned natural-gas-liquids (NGL) pipeline. Crosstex claimed that it had common carrier status and would likely prevail in a lawsuit to enforce its eminent domain power. The landowner responded that the pipeline did not possess the power of eminent domain because the proposed pipeline would not be for public use or be used to transport crude petroleum within the meaning of Chapter 111, Natural Resources Code. The trial judge sided with the landowner, finding that an NGL pipeline is not covered by Chapter 111.
On appeal, the pipeline asserted that the definition of “crude petroleum” includes natural gas liquids and that the pipeline was a common carrier under Chapter 111. After conducting a review of the statutory language of §111.002(1), the court of appeals concluded that natural gas liquids are not “crude petroleum” under that section on the basis that: (1) Chapter 111 contains no explicit definition of “crude petroleum”; and (2) in other parts of the Natural Resources Code the legislature has drawn a distinction between crude petroleum and by-products derived from crude, such as gas oil, casinghead gasoline, natural gas gasoline, and dist1llate. The court of appeals further cited evidence given by the pipeline’s vice-president of corporate operations, who explained at the injunction hearing the process by which natural gas liquids are extracted, compressed, and processed from crude gas. The court thus held that the trial court did not abuse its discretion in finding that Chapter 111 did not apply to a NGL pipeline.
The pipeline then argued that even if Chapter 111 did not apply, the pipeline is still a common carrier under §21.05, Business Organizations Code, which defines as a “common carrier” a pipeline that transports oil, oil products, gas, carbon dioxide, salt brine, and other mineral solutions and gives the pipeline eminent domain powers under Chapter 111 based on availability for public use. The landowner argued that the pipeline was not a common carrier because the pipeline would only be used to transport the pipeline’s own NGL to its own processing plants. The court of appeals found conflicting evidence on this point and concluded that the trial court’s decision that the pipeline will not be used for public use was reasonable and should not be disturbed. Citing Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, the court of appeals ruled that although the pipeline had a T-4 permit for the line issued by the Railroad Commission, the question before the court was whether the pipeline would actually serve the public. The court of appeals thus held that the trial court did not abuse its discretion and affirmed the order denying the pipeline injunctive relief.