TEXAS RICE LAND PARTNERS, LTD. v. DENBURY GREEN PIPELINE-TEXAS, LLC No. 09-0901.
Texas Rice Land Partners, Ltd. and Mike latta, Petitioners, v. Denbury Green Pipeline-Texas, LLC, Respondent.
Supreme Court of Texas.
Opinion Delivered: August 26, 2011.
Justice WILLETT delivered the opinion of the Court.
The Texas Constitution safeguards private property by declaring that eminent domain can only be exercised for "public use."
This property-rights dispute asks whether a landowner can challenge in court the eminentdomain power of a Co pipeline owner that has been granted a common-carrier permit from the Railroad Commission. The court of appeals answered no, holding that (1) a pipeline owner can conclusively acquire the right to condemn private property by checking the right boxes on a onepage form filed with the Railroad Commission, and (2) a landowner cannot challenge in court whether the proposed pipeline will in fact be public rather than private. We disagree. Unadorned assertions of public use are constitutionally insufficient. Merely registering as a common carrier does not conclusively convey the extraordinary power of eminent domain or bar landowners from contesting in court whether a planned pipeline meets statutory common-carrier requirements. Nothing in Texas law leaves landowners so vulnerable to unconstitutional private takings. We reverse the court of appeals' judgment and remand to the district court for further proceedings consistent with this opinion.
Denbury Resources, Inc. is a publicly traded Delaware corporation that owns all of Denbury Operating Company. Denbury Operating Company has no employees or physical assets, but owns all the stock of two subsidiaries—Denbury Green Pipeline-Texas, LLC (Denbury Green) and Denbury Onshore, LLC. Denbury Resources and its affiliates (collectively Denbury) share corporate officers and are all located in the same offices in Plano, Texas.
Denbury is engaged in tertiary recovery operations that involve the injection of C into existing oil wells to increase production. Denbury owns a naturally occurring C reserve in Mississippi known as Jackson Dome, and desired to build a C pipeline from Jackson Dome to Texas oil wells to facilitate tertiary operations on the wells. The record contains some evidence that, in the future, Denbury might purchase man-made or "anthropogenic" C from third parties and transport it in the pipeline.
In March 2008, Denbury Green applied with the Railroad Commission to operate a C0
In April 2008, eight days after Denbury Green filed its application, the Commission granted the T-4 permit. In July 2008, the Commission furnished a letter to Denbury Green, stating:
In November 2008, Denbury Green filed a tariff with the Commission setting out terms for the transportation of gas in the pipeline. The administrative process for granting the permit was conducted without a hearing and without notice to landowners along the proposed pipeline route.
Texas Rice Land Partners, Ltd. has an ownership interest in two tracts along the pipeline route. When Denbury Green came to survey the land in preparation for condemning a pipeline easement, Texas Rice Land Partners and a lessee, rice farmer Mike Latta (collectively Texas Rice), refused entry. Denbury Green sued Texas Rice for an injunction allowing access to the tracts.
The court of appeals affirmed, concluding that Denbury Green had established as a matter of law its common-carrier status.
A. Common Carriers and the Power of Eminent Domain
The Natural Resources Code regulates C pipelines serving as common carriers. Three Code provisions are particularly relevant.
(b) In the exercise of the power of eminent domain granted under the provisions of Subsection (a) of this section, a common carrier may enter on and condemn the land, rights-of-way, easements, and property of any person or corporation necessary for the construction, maintenance, or operation of the common carrier pipeline.
While these provisions plainly give private pipeline companies the power of eminent domain, that authority is subject to special scrutiny by the courts. The power of eminent domain is substantial
The legislative grant of eminent-domain power is strictly construed in two regards. First, strict compliance with all statutory requirements is required.
B. The T-4 Permit Granted By the Railroad Commission Does Not Conclusively Establish Eminent-Domain Power
The parties dispute whether Denbury Green was entitled to summary judgment on the issue of whether it is a common carrier. We hold at the outset that the T-4 permit alone did not conclusively establish Denbury Green's status as a common carrier and confer the power of eminent domain.
Nothing in the statutory scheme indicates that the Commission's decision to grant a common-carrier permit carries conclusive effect and thus bars landowners from disputing in court a pipeline company's naked assertion of public use. As stated above, the right to condemn property is constitutionally limited and turns in part on whether the use of the property is public or private. We have long held that "the ultimate question of whether a particular use is a public use is a judicial question to be decided by the courts."
Further, the record, rules, and statutes before us indicate that the Commission's process for granting a T-4 permit undertakes no effort to confirm that the applicant's pipeline will be public rather than private. The Commission's website states that the Commission "does not have the authority to regulate any pipelines with respect to the exercise of their eminent domain powers."
The Railroad Commission's process for handling T-4 permits appears to be one of registration, not of application. The record suggests that in accepting an entity's paperwork, the Commission performs a clerical rather than an adjudicative act. The registrant simply submits a form indicating its desire to be classified as a common (or private) carrier. No notice is given to affected parties. No hearing is held, no evidence is presented, no investigation is conducted. It is true that Commission regulations covering Co pipelines (1) state that permit applications will be granted if the Commission is satisfied "from such application and the evidence in support thereof, and its own investigation" that the pipeline will "reduce to a minimum the possibility of waste, and will be operated in accordance with the conservation laws and conservation rules and regulations of the commission," and (2) require C pipelines to comply with certain safety requirements.
C. The Test for Common-Carrier Status
To qualify as a common carrier with the power of eminent domain, the pipeline must serve the public. As explained above, extending the power of eminent domain to the taking of property for a private use cannot survive constitutional scrutiny. The Denbury Green pipeline would not serve a public purpose if it were built and maintained only to transport gas belonging to Denbury from one Denbury site to another. As a constitutional matter, we can see no purpose other than a purely private one in such circumstances.
The relevant statutes also confirm that a C pipeline owner is not a common carrier if the pipeline's only end user is the owner itself or an affiliate. Section 111.002(6) states a person is a common carrier if it owns or operates a pipeline "for the transportation of carbon dioxide . . . to or for the public for hire." If Denbury consumes all the pipeline product for itself, it is not transporting gas "to . . . the public for hire." Nor can such an arrangement be characterized as transportation of gas "for the public for hire." The term "for the public for hire" implies that the gas is being carried for another who retains ownership of the gas, and that the pipeline is merely a transportation conduit rather than the point where title is transferred.
Denbury Green contends that merely making the pipeline available for public use is sufficient to confer common-carrier status. We disagree, for two reasons. First, this argument is inconsistent with the wording of Section 111.002(6). The statute provides that a common carrier owns or operates a C pipeline "to or for the public for hire, but only if such person files with the commission a written acceptance" agreeing to become "a common carrier subject to the duties and obligations conferred or imposed by this chapter." Denbury Green points out that Chapter 111 contains common-carrier requirements such as the obligation to publish a tariff in Section 111.014, and the obligation not to discriminate among shippers in Section 111.016. But Denbury Green's reading of Section 111.002(6) would confer common-carrier status and eminent-domain power even when the pipeline will never serve the public by transporting Co "to or for the public for hire" under the statute—and indeed when there was never any reasonable possibility of such service—so long as the owner agrees to be subject to the Chapter 111 common-carrier regime. As we read the statute, the language that the pipeline be owned or operated "to or for the public for hire" is a separate requirement for common-carrier status, and the statute, in addition, requires the owner or operator to agree to subject itself to Chapter 111. Denbury Green's interpretation would read out of the statute the language that the pipeline be operated "to or for the public for hire." Such a reading contravenes two settled rules: (1) that every word in a statute is presumed to have a purpose and should be given effect if reasonable and possible;
Second, Denbury Green's construction leads to a result that we cannot believe the Legislature intended, namely a gaming of the permitting process to allow a private carrier to wield the power of eminent domain. Suppose an oil company has a well on one property and a refinery on another. A farmer's property lies between the oil company's two properties. The oil company wishes to build a pipeline for the exclusive purpose of transporting its production from its well to its refinery. Only about 50 feet of the proposed pipeline will traverse the farmer's property. The farmer refuses to allow construction of the pipeline across his property. The oil company knows that no party other than itself will ever desire to use the pipeline. In these circumstances, the application for a common-carrier permit is essentially a ruse to obtain eminent-domain power. The oil company should not be able to seize power over the farmer's property simply by applying for a crude oil pipeline permit with the Commission, agreeing to subject itself to the jurisdiction of the Commission and all requirements of Chapter 111, and offering the use of the pipeline to non-existent takers. "A sine qua non of lawful taking . . . for or on account of public use . . . is that the professed use be a public one in truth. Mere fiat, whether pronounced by the Legislature or by a subordinate agency, does not make that a public use which is not such in fact . . . ."
We accordingly hold that to qualify as a common carrier of C under Chapter 111, a reasonable probability must exist, at or before the time common-carrier status is challenged, that the pipeline will serve the public by transporting gas for customers who will either retain ownership of their gas
Consistent with judicial review of Commission determinations generally, a permit granting common-carrier status is prima facie valid,
D. Denbury Green Was Not Entitled to Summary Judgment
Under our test, Denbury Green did not establish common-carrier status as a matter of law. A Denbury Green vice president attested that Denbury Green was negotiating with other parties to transport anthropogenic C in the pipeline, and that the pipeline "can transport carbon dioxide tendered by Denbury entities as well as carbon dioxide tendered from other entities and facilities not owned by Denbury." This affidavit does not indicate whether Denbury Green itself intended to use all of that gas for its own tertiary recovery operations. As discussed above, a carrier is not a common carrier if it transports gas only for its own consumption. The witness also stated in his deposition that the C carried in the pipeline would be owned by affiliate Denbury Onshore, but that there was "the possibility we'll be transporting other people's C02 in the future." He did not identify any possible customers and was unaware of any other entity unaffiliated with Denbury Green that owned C near the pipeline route in Louisiana and Mississippi. This evidence does not establish a reasonable probability that such transportation would ever occur.
Further, the record includes portions of Denbury's own website that suggest the pipeline would be exclusively for private use. In describing the pipeline project, the site states:
As the dissent in the court of appeals noted, these statements are "some evidence Denbury intends to fully utilize the Green Pipeline as an essential part of its tertiary oil production operations. Denbury's description of the pipeline's purpose indicates the C02 it transports in the pipeline will be its own . . . "
Private property is constitutionally protected, and a private enterprise cannot acquire condemnation power merely by checking boxes on a one-page form. We reverse the court of appeals' judgment, and remand this case to the district court for further proceedings consistent with this opinion.
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