Case Information
*1 IN THE SUPREME COURT OF TEXAS
N O . 15-0225
D ENBURY G REEN P IPELINE -T EXAS , LLC, P ETITIONER ,
v.
T EXAS R ICE L AND P ARTNERS , L TD ., ET AL ., R ESPONDENTS
O N P ETITION FOR R EVIEW FROM THE C OURT OF A PPEALS FOR THE N INTH D ISTRICT OF T EXAS Argued September 15, 2016
J USTICE G REEN dеlivered the opinion of the Court in which C HIEF J USTICE H ECHT , J USTICE W ILLETT , J USTICE G UZMAN , J USTICE L EHRMANN , J USTICE B OYD , J USTICE D EVINE , and J USTICE B ROWN joined.
J USTICE J OHNSON joined in the judgment only.
We must decide whether Denbury Green Pipeline-Texas, LLC (Denbury Green) is a common
carrier pursuant to the Texas Natural Resources Code and the test we set out in
Texas Rice Land
Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC
( ).
I. Background and Procedural History
Denbury Green is an affiliate of Denbury Onshore, LLC, and both are wholly owned, indirect subsidiaries of Denbury Resources, a publicly traded holding company. James E. Holland, David C. Holland, and Texas Rice Land Partners, Ltd. (collectively “Texas Rice”) own approximately [1]
3,800 acres of land in Jefferson County, Texas. Thе land is leased and used for rice farming.
According to the affidavit testimony of Dan Cole, Denbury Green’s Vice President of Marketing and Business Development, Denbury Green was formed to build, own, and operate a carbon dioxide pipeline known as “the Green Line” as a common carrier in Texas. The Green Line became part of a pipeline network formed, at least in part, to transport carbon dioxide from Jackson, Mississippi (known as the “Jackson Dome” area), along with anthrоpogenic carbon dioxide (manmade CO ) from naturally occurring sources and producers located along the Green Line’s [2]
route. Cole stated that the Green Line’s route through Texas was designed to be close to refineries, plants, and other facilities that could use the line as a means to transport CO . In fact, the Green [2] [2] Line is the only pipeline currently available to those CO refineries, plants, and other industrial [2]
facilities. According to Cole, Denbury Green chose the pipeline’s specific location for its proximity to those industrial facilities, which could transport anthropogenic CO to oil fields, underground *3 storage reservoirs, or other locations where CO could be used or stored. As a result, Cole testified, the Green Line has served a public use since its completion in 2010, and it is currently used to transport CO owned by Denbury Green and its affiliates as well as CO owned by unaffiliated entities.
Before the Green Line’s construction began, Denbury Green sought permission from landowners across the proposed Gulf Coast route, including Texas Rice, to survey their property. In late 2007, Denbury Green attempted to survey two tracts of Texas Rice’s land in Jefferson County but was denied access. Not long after, in early 2008, Denbury Green filed a T-4 permit application with the Texas Railroad Commission to obtain common-carrier status, which would give it eminent domain authority pursuant to the Natural Resources Code. See T EX . N AT . R ES . C ODE § 111.019(a) (“Common carriers have the right and power of eminent domain.”). Shortly thereaftеr, the Railroad Commission granted Denbury Green a T-4 permit. Armed with the permit, Denbury Green filed suit against Texas Rice for an injunction allowing access to the Jefferson County tracts so that it could complete the pipeline survey. While the suit was pending, Denbury Green took possession of Texas Rice’s property pursuant to section 21.021(a) of the Texas Property Code, which allows a condemnor to take possession even while the property owner challenges the condemnor’s еminent domain authority. T EX . P ROP . C ODE § 21.021(a). Denbury Green then surveyed for and constructed the Green Line.
On cross-motions for summary judgment, the trial court found that Denbury Green was a
common carrier with eminent domain authority pursuant to the Natural Resources Code. The court
of appeals affirmed the trial court’s judgment.
Tex. Rice Land Partners, Ltd. v. Denbury Green
*4
Pipeline-Tex., LLC
,
On remand, Denbury Green adduced evidence not before this Court in to support its assertion of common-carrier status. Denbury Green produced transportation agreements with unaffiliated entities Airgas Carbonic, Inc. and Air Products and Chemicals, Inc (Air Products). Additional evidence included a transportation agreement between Denbury Green and Denbury Onshore, acting on behalf of itself and other working-interest owners that are unaffiliated with Denbury Green or any of its affiliates. [3]
Airgas Carbonic, a wholly owned subsidiary of Airgas, Inc., manufactures and distributes liquid CO , commonly selling its CO to customers in the industrial, medical, and food-processing [2]
*5 industries. In 2012, Airgas Carbonic began looking for a method to ship its out-of-state CO to the Houston area. Aware of the recently constructed Green Line, Airgas Carbonic approached Denbury Green and in January 2013 finalized a transportation agreement allowing Denbury Green to ship [2] CO , owned by Airgas Carbonic, from the Texas/Louisiana border through the Green Line to [4]
Brazoria County, Texas, where it is received and processed in a new Airgas Carbonic manufacturing plant. The CO is ultimately sold to Airgas Carbonic customers in the Houston area. The new [5] [2]
Airgas Carbonic plant began receiving and processing Airgas Carbonic’s CO delivered over the [2] Green Line in October 2013.
Air Products specializes in the manufacture and supply of industrial gases. Air Products began negotiating with Denbury Green in 2008, in anticipation of the Green Line’s construction. In 2010, the United States Department of Energy, through its Industrial Carbon Capture and Sequestration Program, selected Air Products to receive $285 million in funding for the development and operation of a system to capture and sequester CO from Air Products’s steam methane [2]
reformers located within the Valero Refinery in Port Arthur, Texas. By doing so, Air Products reduces the amount of CO released into the atmosphere by thе reformers. In order to remain [2]
economically viable, however, Air Products requires a CO pipeline to transport the captured CO [2] 2.
After finalizing its agreement with the Department of Energy, Air Products entered into a transportation agreement with Denbury Green. Under the agreement, Air Products first ships captured CO over a lateral pipeline connecting the Valero Refinery and the Green Line. The CO [2] [2] is then transported over the Green Line to the West Hastings Field in Brazoria County, Texas, where title and ownership of the CO transfers to Denbury Green. Once there, Denbury Green first uses [2]
the CO in its tertiary recovery operations, but the gas is ultimately sequestered underground once [2]
*6 oil and gas operations are abandoned. According to Air Products, approximately 51.5 million cubic feet of CO per day will be shipped over the Green Line and ultimately sequestered during the fifteen-year contract term.
Upon reviewing the evidence adduced on remand, the court of appeals concluded that “reasonable minds could differ regarding whether, at the time Denbury Green intended to build the Green Line, a reasonable probability existed that the Green Line would serve the public” and reversed the trial court’s order granting Denbury Green summary judgment. 457 S.W.3d 115, 121–22 (Tex. App.—Beaumont 2015, pet. granted).
II. Texas Rice I
To comport with the Texas Constitution, we held in that “[t]o qualify as a
common carrier with the power of eminent domain, the pipeline must serve the public; it cannot be
built only for the builder’s exclusive use.”
for a person intending to build a CO рipeline to qualify as a common carrier under Section 111.002(6) [of the Natural Resources Code], a reasonable probability must exist that the pipeline will at some point after construction serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier. . at 202 (footnotes omitted). For purposes of this test, “a reasonable probability is one that is more
likely than not.” Id. at 202 n.29. Additionally, once a landowner сhallenges common-carrier status, “the burden falls upon the pipeline company to establish its common-carrier bona fides if it wishes to exercise the power of eminent domain.” . at 202.
Under this constitutional framework, we held that Denbury Green was “not entitled to common-carrier status simply because it obtained a common-carrier permit, filed a tariff, and agreed *7 to make the pipeline available to any third party wishing to transport its gas in the pipeline and willing to pay the tariff.” Id . Affidavit testimony in Texas Rice I supported that Denbury Green was negotiating with parties to transport CO over the Green Line, but the testimony did not indicate whether the gas would be used solely by Denbury Green or for the benefit of other parties. Id . at 203. Additionally, record evidence supported only the possibility of future customers using the Green Line, but the record was devoid of any identified potential customers. . Moreover, the record included objective evidence of Denbury Green’s intent to use the pipeline solely for its own purposes. Id. Several statements on Denbury Green’s website suggested that Denbury Green’s intended use for the pipeline actually related to the eventual purchase and acquisition of all naturally occurring CO in the region in an effort to fully harness the Green Line for Denbury Green’s own tertiary recovery operations. . at 203–04.
Thus, the evidence before the Court in established only a possibility, and not
a reasonable probability, that the pipeline “at some point after construction” would serve the public.
Cf
.
State v. K.E.W
.,
III. Application of Test We review a grant of summary judgment de novo. SeaBright Ins. Co. v. Lopez , 465 S.W.3d
637, 641 (Tex. 2015). The movant must prove that there is no genuine issue of material fact and that
it is entitled to judgment as a matter of law. T EX . R. C IV . P. 166a(c);
Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding
, 289 S.W.3d 844, 848 (Tex. 2009). We review summary judgment
*9
evidence “in the light most favorable to the party against whom the summаry judgment was
rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding
contrary evidence unless reasonable jurors could not.”
Mann Frankfort
,
A. The Court of Appeals’ Interpretation of Intent as Central to the
Texas Rice I
Test
The court of appeals incorrectly interpreted the prefatory phrase “for a person intending to
build” that introduced the test when it held that “central to our inquiry is Denbury
Green’s intent at the time of its plan to construct the Green Line.”
In , our review of the еvidence was necessarily limited to Denbury Green’s
assertions that it intended the Green Line to be used by the public, but our determination that
Denbury Green was not entitled to summary judgment rested on the absence of evidence establishing
*10
a reasonable probability of the Green Line’s future public use.
Texas Rice I
,
failed to establish public use because, absent contrary evidence, the testimony suggested that Denbury Green would transport gas only for its own tertiary recovery operations. Id. at 203. The testimony “did not identify any possible customers and [Denbury Green] was unaware of any other entity unaffiliated with Denbury Green that owned CO near the pipeline route in Louisiana and [2]
Mississippi.” Id . Addressing Denbury Green’s claims on its wеbsite, we concluded:
Denbury Green’s representations suggesting that it (1) owns most or all of the naturally occurring CO in the region, (2) intends to purchase all the man-made CO that might be produced under current and future agreements, (3) see its access to CO as giving it a significant advantage over its competitors, and (4) intends to fully utilize the pipeline for its own purposes, are all inconsistent with public use of the pipeline . . at 204 (emphasis added). We therefore held that Denbury Green failed to establish a reasonable
probability that, “at some point after construction,” the Green Line would serve the public. .
The objective test balances the property rights of Texas landowners with our state’s robust public policy interest in pipeline development, while also respecting the constitutional limitations placed on the oil and gas industry. See id . at 197, 204. Prior to , a pipeline owner needed to do little more than “check[] a certain box on a one-page government form” to obtain common-carrier status. Id. at 199. Essentially, a pipeline owner only needed to assert that *11 it was a common carrier, and it became one. However, “[o]ur Constitution demands far more.” . To protect the rights of property owners, the Texas Constitution requires at least some objective evidence that a pipeline will probably serve the public for its owner to gain the power to condemn private property under the authority of eminent domain. . at 202. Contracts with unaffiliated entities that show non-pipeline-owned gas being transported for the benefit of the unaffiliated entity can be relevant to showing reasonable probability of future public use.
Texas Rice would have this Court hold that because the Airgas Carbonic contract was entered into after the Green Line was contemplated—and even after this Court’s holding in —it is irrelevant and, at most, raises a fact issue as to whether Denbury Green intended to make the pipeline available to the public. Simply put, this reading misunderstands the test and the reasoning behind it.
At oral argument, both partiеs expressed their belief that evidence of post-construction contracts is relevant to the common-carrier analysis. We agree. While post-construction contracts considered without any other relevant evidence would normally establish only a pre-construction possibility of future public use, such contracts can be relevant to showing a reasonable probability that, “at some point after construction,” a pipeline will serve the public. For examplе, such contracts can speak directly to whether specific, identified potential customers own CO near a pipeline’s route, as in this case. Moreover, when combined with other evidence, post-construction contracts could allow a reasonable observer to determine that, given the regulatory atmosphere and proximity of the pipeline to potential customers, at the time common-carrier status was challenged it was “more likely than not” that a pipeline would someday serve the public.
When considered in the light most favorable to Texas Rice, indulging every reasonable inference in its favor, Denbury Green conclusively established that there was a reasonable probability that, at some point after construction, the Green Line would serve the public. With evidence that Denbury Green entered into a contract in 2013 to transport CO for Airgas Carbonic, along with the [2]
proximity of the Green Line to potential customers such as Airgas Carbonic and Air Products, no longer could a reasonable fact-finder determine that a genuine fact issue exists as to whether the Green Line would, at some point after construction , do what it now most certainly does: transport [2] CO owned by a customer who retains ownership of the gas. The Airgas Carbonic contract does more than show that it is “more likely than not” that the Green Line will someday be used for public use; it shows that the Green Line is used for public use today . Most importantly, the Air Products transportation agreement supports Denbury Green’s contention that the pipeline route was designed in part to facilitate the transfer of gas owned by third parties. According to Air Products, “[w]ithout the Denbury Green Pipeline, the Air Products CO capture program would not have been economical and would not have been undertaken.” The proposed Green Line was not only within geographic proximity to Air Products’s reformers in the Valero Refinery, but it was the only pipeline close enough to transport Air Products’s CO . The close proximity, and lack of competing pipelines, caused Air Products to bеgin negotiating with Denbury Green in 2008, before the pipeline was constructed. It is true that the Air Products contract, standing alone, would not satisfy the Texas Rice I test because title to the CO transfers to Denbury Green at the end of its transport. Id. (“If Denbury consumes all the pipeline product for itself, it is not transporting gas ‘to . . . the public for hire.’”). However, when considered together with the Green Line’s proximity to identified potential *13 customers, including Air Products, and the Airgas Carbonic transportation contract, under which Airgas Carbonic rеtains title to the CO , the summary judgment evidence conclusively establishes that it was “more likely than not” that, “at some point after construction,” the Green Line would serve the public.
B. The Court of Appeals’ Requirement of a Substantial Public Interest
The court of appeals erroneously required that the reasonably probable future use of the
pipeline serve a “substantial public interest.”
In
Pate
, Coastal States Gas Producing Co. attempted to condemn a 1.84-acre tract to further
develop an oil and gas lease.
Pate
,
IV. Conclusion
After remand, the evidence in the summary judgment record before the trial court below was no longer limited to naked assertions or Denbury Green’s subjective beliefs, as it was when we considered Texas Rice I . We hold that the evidencе adduced by Denbury Green on remand established as a matter of law that there was a reasonable probability that, at some point after construction, the Green Line would serve the public by transporting CO for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier. Accordingly, we reverse the court of appeals’ judgment and reinstate the trial court’s judgment. *15 ____________________________________ Paul W. Green
Justice
OPINION DELIVERED: January 6, 2017
declaratory judgment claims prior to entry of final judgment. See Victory v. State , 158 S.W .2d 760, 763 (Tex. 1942). Finally, because Texas Rice’s claims for relief relied upon the trial court finding Denbury Green was not a common carrier, we hold that the trial court properly entered final judgment. See Lehmann v. Har-Con Corp. , 39 S.W .3d 191, 200 (Tex. 2001) (“A judgment that actually disposes of every remaining issue in a case is not interlocutory merely because it recites that it is partial or refers to only some of the parties or claims.”).
Notes
[1] Texas Rice Land Partners, Ltd. is a family limited partnership with David C. Holland as general partner and his three children as limited partners.
[2] The Greеn Line runs west along the Gulf Coast from the Texas/Louisiana border to the Oyster Bayou Field in Chambers County, Texas, and continues to the W est Hastings Field in Brazoria and Galveston Counties, Texas.
[3] Because we hold that the summary judgment evidence, including evidence related to unaffiliated shipping agreements, establishes Denbury Green’s common carrier status, infra at ___, we express no opinion on whether contracts between affiliated entities that may benefit unaffiliated working interest owners satisfy the test.
[4] According to the transportation agreement, Airgas Carbonic retains title to the CO shipped over the Green
[2] Line.
[5] The new plant liquefies and purifies CO originating from an Airgas Carbonic plant in Star, Mississippi.
[2]
[6] In its briefing, Denbury Green asks that we determine whether section 2.105 of the Business Organizations Code provides an independent grant of eminent domain authority for a common carrier. See T EX . B U S . O RGS . C O DE § 2.105. Because we hold that Denbury Green is a common carrier under Chapter 111 of the Natural Resources Code, we need not decide this quеstion.
[7] Texas Rice alleges that the trial court erred by entering final judgment on its remaining declaratory judgment counterclaims and Denbury Green’s declaratory judgment claims added after the trial court granted summary judgment on common-carrier status, without a trial or hearing additional evidence. In its April 4, 2014, hearing on the matter, the trial court denied Texas Rice’s motion to sever its counterclaims, granted leave for Denbury Green to amend its petition, and entered final judgment. Because Denbury Green’s amended claims raised no additional issues and could not result in any injury to Texas Rice, we hold that the trial court did not abuse its discretion when allowing Denbury Green to add