Years After Landmark Ruling, Court To Rehear "Bizarre" Pipeline Case

Nearly five years after issuing a ruling cheered by property rights advocates, the Texas Supreme Court is set to rehear a case pitting two Texas brothers against a pipeline company that seized their land through eminent domain.

David Holland walks among the dozens of pipeline markers scattered across his Beaumont-area farm.

David Holland let out an exasperated chuckle as he considered where his family's eight-year-long legal fight has now delivered them: back to the Texas Supreme Court for a second time to fight a company's request to access their land in order to bury a pipeline, which it did anyway six years ago.

“It's an enormous, tangled mess,” he said.

The  state's highest civil court has agreed to rehear the case, which could hold major implications for current and future battles between Texas landowners and pipeline operators, though it still may not fully resolve the Holland's convoluted legal saga.

The legal fight began in 2008, when David and James Holland sought to keep a company from surveying their Beaumont-area cattle ranch and rice farm to run a carbon dioxide pipeline underneath. Though the brothers had allowed a few dozen other pipelines to crisscross their property, Denbury Green Pipeline-Texas offered too little compensation to account for the damage it might inflict on the land, they said. 

The company swiftly sued and convinced a state district court that its pipeline was a “common carrier” — available for public use — meaning the company was allowed to condemn the land through eminent domain. So Denbury built the pipeline. For six years, it has transported carbon dioxide from the Louisiana bank of the Mississippi River to the Hastings oilfield, south of Houston, where the gas bolsters oil production.

End of story? Hardly.

The Hollands appealed the lower court’s decision all the way to the Texas Supreme Court, and won. Last Friday — nearly five years after a landmark ruling for property rights advocates — the state’s highest civil court agreed to hear the case a second time.

The justices are set to revisit the case as the Texas Legislature is considering whether to tighten eminent domain laws to benefit landowners. Meanwhile, pipeline skirmishes persist across Texas, including Big Bend-area landowners’ long-shot effort to thwart the Trans-Pecos natural gas pipeline through the largely untouched region.    

The broadest questions the case asks are these: How much evidence must the company offer that its pipeline is open to others? And when must the company show it? 

Landowners say they want fair offers for the hassle of giving up their land and want it to be tougher for companies to strip them of their bargaining power by invoking eminent domain. Pipeline companies argue that a more stringent test would bog down efforts to transport the resources that fuel Texas’ economy. 

In the case’s first go-around, Denbury argued that it needed only to mark a “common carrier” line a Texas Railroad Commission permit application — an honor system that property rights owners griped about for years (The commission regulates pipeline safety, but it has no authority over pipeline routing, nor does any other state agency.)

In 2011, the Texas Supreme Court disagreed in a ruling that property rights owners cheered. 

"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 the statutory common carrier requirements," the majority wrote.

The justices handed the case back to the lower courts, instructing them to use a “reasonable probability” test: consider whether the pipeline “will at some point after construction serve the public by transporting gas for one or more customers.”

Those instructions are the source of the current squabbling.

Attorneys for Denbury argue that the company clearly meets that standard. They point to two contracts with separate parties. With that evidence, the attorneys asked the court for a summary judgment — a speedy ruling that avoids a trial.  

But an appellate court in Beaumont disagreed. It sided with the Hollands, who argued that Denbury failed to meet the Texas Supreme Court’s test, in part, because it didn't forge those deals until after it built the pipeline.

In one deal, negotiations began with an email from a representative of Airgas Carbonic, a Georgia-based company. It wrote to Denbury: “Given the recent ruling about your pipeline, I thought it might be advantageous for you to have another company transport some CO2 down this line.” 

Citing that email, the appeals court wrote: “We cannot say that the Airgas contract, reached after the Green Line’s completion, speaks to Denbury Green’s intent at the time of its plan to construct the Green Line.”

Only a jury could properly weigh Denbury’s intentions in a full-fledged trial, the appeals court said.

Backed by several pipeline giants and industry groups, Denbury contends that the Beaumont court misconstrued the Supreme Court’s test, tilting the balance too heavily in favor of landowners and threatening to slow down and add costs to pipeline construction across Texas.

The ruling contains “legal errors” that are “wreaking havoc on the Texas pipeline industry,” the company stated in one filing.

“It’s extremely significant,” Tom Zabel, an attorney for Denbury, said of the high court's re-hearing of the case. Recent court decisions, he added, had delayed some projects and even thwarted a few altogether.

For cases that do go to trial, he and other pipeline advocates say, local juries have been increasingly generous to landowners in recent years — at least when Texas’ oilfields were booming.

The Hollands and their supporters counter that pipeline companies are managing just fine. In its brief, the Texas Land and Mineral Owners Association, which represents landowners, calculated that Texas pipeline companies had added more than 25,000 miles to the state’s network since 2012.

Property rights advocates argue that Texas already grants pipeline companies major advantages by allowing them to build across private property before litigation is resolved — as happened on the Holland farm. And pipeline companies can tap eminent domain with minimal government oversight, unlike electric utilities seeking to build on private land. The Texas Public Utility Commission vigorously vets power line proposals, just as the Texas Department of Transportation gathers public input for its projects.

“Landowners often have limited resources to challenge multimillion dollar corporations from improper and unconstitutional takings,” the landowner association wrote. “If land is going to be seized by eminent domain, the ‘common carrier’ burden should be met at the time of the taking, not years after the fact.”

David Holland, in a phone interview, offered a simple solution for companies hoping to avoid legal delays: Offer more-attractive deals upfront and “don’t sue people.”

If the courts ultimately say that Denbury’s pipeline is not a common carrier, the company could be required to rip the $1 billion project out of the ground. But the Supreme Court is unlikely to do so even this second time around, since it’s still considering narrower questions. A win for the brothers might just return the case to the lower courts — again — for a jury trial. 

Gazing at the wider picture, Holland called it "incredibly bizarre" that a company is still asking a court’s permission to access his land years after it buried a pipeline there.

“It’s a pending nightmare,” he said. 

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