The Texas Supreme Court has reversed a Houston [1st] Court of Appeals decision affirming a sizable judgment in favor of a fracking water supplier in a breach of contract case.
Equinor Energy LP v. Lindale Pipeline (No. 24-0425; March 13, 2026) arose a contract dispute between a producer and a supplier of water for the producer’s fracking operations. In 2009 the parties agreed to a deal under which Lindale would build an underground pipeline to supply Equinor’s predecessor’s operations. The agreement obligated the operator to finance construction of the pipeline, upon the completion of which the operator would take ownership. Lindale agreed to serve as the exclusive supplier of water on the pipeline at below-market rates. The contract further provided that if Lindale couldn’t keep up the supply through the pipeline, the operator could use other suppliers.
Equinor acquired the operator a few years later. As technology advanced, Equinor sought to use a better and cheaper method of water supply that utilized lay-flat hoses. When Equinor started buying water from other suppliers, Lindale sued for breach of contract. Equinor responded that the wells serviced by outside water were not “on the pipeline” and not covered by the contract. The trial court determined that the contract was ambiguous and submitted it to the jury, which decided for Lindale and awarded $26 million in damages. The court of appeals affirmed. Equinor sought review.
In an opinion by Justice Sullivan, the court reversed and rendered judgment for Equinor. The contract defined “pipeline” as “the freshwater pipeline, lateral lines, related facilities, well-site appurtenances, rights-of-way, easements, and permits owned by [Equinor].” Not seeing the wells themselves on this list, Equinor argued that the exclusivity clause didn’t cover water bought for the wells and transported through pipes or hoses other than the pipeline. The question was whether “on” the pipeline meant that Lindale was only the exclusive provider of water flowing through the pipeline (Equinor’s position) or exclusive supplier of wells attached to the pipeline (Lindale’s position). The court parsed the dictionary definition of “on” and concluded that the word’s various definitions could support either party’s view.
Turning to the structure of the exclusivity clause, the court observed that Lindale’s position would require it to add something to the contract, either “oil wells,” “drilling,” or “operations.” This would render the following reading: “Lindale is the ‘exclusive water provider and pumper [for oil wells] on the Pipeline.’” The court didn’t take that option for obvious reasons. Looking to the exception clause, the court noted that it used the phrase “through the pipeline.” “In other words,” the court stated, “the function of a pumper ‘on the Pipeline’ is to get ‘water through the Pipeline,’ not to pump water into conduits next to the Pipeline.” Lindale argued that since the map attached to the contract showed the locations of both the pipeline (and associated appurtenances) and the then-existing wells, the exclusivity clause incorporated the map by reference. Not so, opined the court. The map may show the wells, but it can’t expand the contract language. Under the plain meaning of the contract, the wells were outside the scope of the exclusivity clause. There was nothing ambiguous about it.
The court held that as a matter of law Equinor didn’t breach the contract and that the trial court erred in submitting the contract to the jury. It reversed and rendered for Equinor.
