In a decision that could have far-reaching effects on the Texas oil and gas industry, the Texas Supreme Court has reaffirmed its initial ruling in Texas Rice Land Partners Ltd. v. Denbury Green Pipeline-Texas, LLC. Last fall the Court held that a landowner may challenge the constitutionality of a common carrier pipelineâ€™s exercise of eminent domain authority on the basis of whether the pipeline will be used for public purposes. Under prior law Railroad Commission certification of the pipelineâ€™s common carrier status was sufficient to establish public use.
Along with a number of other amici, including the Texas Pipeline Association and Texas Oil & Gas Association, TCJL asked the Court to reconsider its decision to address industry concerns that existing and future pipeline projects could be subject to costly and time-consuming litigation in local courts along the pipeline right-of-way. If this type of expensive bottleneck indeed develops, it could significantly affect the burgeoning production of oil and gas from Texasâ€™ shale formations by making it more difficult and expensive to acquire the necessary right-of-way for the variety of liquids necessary to tertiary recovery operations.
While the Court modified its opinion when it reissued its decision on March 2, it did not change the basis of the original holding: landowners may mount a constitutional challenge in local courts to pipeline common carrier status. Although the Denbury case itself concerned a carbon dioxide pipeline and the Courtâ€™s decision deals specifically with the section of the Natural Resources Code governing such pipelines, the Courtâ€™s reasoning is not so limited. It remains to be seen whether and to what extent additional challenges to the eminent domain authority of common carriers will result from the Denbury decision.