Court Opinion

ID: 620098
Source: CourtListenerOpinion
Date Created: 2011-12-31 00:42:03+00
Date Added: 2024-06-11T17:50:50.878648
License: Public Domain

Case: 10-50106     Document: 00511711097         Page: 1     Date Filed: 12/30/2011

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                        December 30, 2011

                                       No. 10-50106                        Lyle W. Cayce
                                                                                Clerk

TRAVIS COUNTY, TEXAS,

                                                  Plaintiff–Appellee,
v.

FLINT HILLS RESOURCES, L.P.; KOCH PIPELINE CO., L.P.,

                                                  Defendants–Appellants.

                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 1:08-CV-934

Before HIGGINBOTHAM, CLEMENT, and OWEN, Circuit Judges.
PER CURIAM:*
        Travis County, Texas (the County or grantor), owns property subject to a
pipeline easement in favor of Flint Hills Resources, L.P. A petroleum pipeline
passing through the easement is owned by Flint Hills and operated by Koch
Pipeline Co., L.P., to whom we will refer collectively as Flint Hills or grantee.
The County contracted to sell the tract on which the easement is located, and the
buyer proposed to build a railroad spur over the pipeline to connect with a
nearby railroad track.        The County sought declaratory judgment that the

        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
   Case: 10-50106   Document: 00511711097      Page: 2   Date Filed: 12/30/2011

                                  No. 10-50106

easement gives the County an unconditional right to construct a spur over the
pipeline. The district court granted summary judgment in favor of the County.
Flint Hills appeals. We reverse and remand.
                                        I
      Flint Hills constructed an underground pipeline through the County’s
property pursuant to a 1989 easement between the parties’ predecessors-in-
interest. The pipeline and ten-foot wide easement run along the entire eastern
boundary of the County’s property. A railroad track runs parallel to and about
50 feet east of that boundary. The pipeline lies between the inner boundary of
the easement and the railroad track. The only means of accessing the railroad
track from the County’s property is to erect a spur over or across the pipeline
easement.
      In 2008, the County contracted to sell the property to Balcones Resources
(Balcones). Balcones subsequently informed Flint Hills of its desire to construct
a rail spur over Flint Hills’ pipeline and easement. Flint Hills objected that the
easement prohibits construction of a rail spur over the pipeline but offered to
waive its objection if Balcones reimbursed Flint Hills for safety modifications
necessary to accommodate the spur. The principal modification necessary to
accommodate a rail crossing over the pipeline is lowering the pipeline from a
depth of four feet required by the easement to a depth of six feet, the depth
necessary to meet the current industry safety standard. Flint Hills estimates
that the necessary modifications will cost more than $575,000.
      The County has alleged that the sale of the property from the County to
Balcones has been postponed due to the dispute regarding the easement. The
County filed suit in Texas state court, seeking declaratory judgment that the
easement gives the County a right to build a rail spur across the easement.
Flint Hills subsequently removed the case to federal court.

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         Both parties moved for summary judgment. Flint Hills contends that the
easement expressly prohibits the construction of a railroad spur over or across
its pipeline and that in any event, the costs of complying with safety regulations
associated with the construction of such a spur are to be borne by the constructor
of the spur by virtue of a Texas statute.1 The District Court ruled in favor of the
County, concluding that the easement provided an “unconditional right” to
construct a rail spur on the property, and ordering Flint Hills to either cease
using the pipeline or pay for necessary safety modifications. This appeal
followed.
                                                  II
                                                  A
         We review de novo the district court’s grant of summary judgment,
applying the same standards as the district court.2 Summary judgment shall be
granted when “the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”3
         The parties agree that Texas substantive law governs construction of the
easement.           Under that law, “[t]he rules of contract construction and
interpretation apply to easement agreements.”4 All parties contend that the
easement is unambiguous, and we agree. Interpretation of an unambiguous
contract is a matter of law, also subject to de novo review.5 Our primary
objective when interpreting contracts is “to ascertain and to give effect to the

         1
             TEX. HEALTH & SAFETY CODE ANN. §§ 756.121-.123.
         2
             Travelers Lloyds Ins. Co. v. Pac. Emp’rs Ins. Co., 602 F.3d 677, 681 (5th Cir. 2010).
         3
             FED. R. CIV. P. 56(a).
         4
             DeWitt Cnty. Elec. Coop. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999).
         5
             Temple-Inland Forest Prods. Corp. v. United States, 988 F.2d 1418, 1421 (5th Cir.
1993).

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intentions of the parties as expressed in the instrument.”6 To achieve this
objective, we “examine and consider the entire writing in an effort to harmonize
and give effect to all the provisions of the contract so that none will be rendered
meaningless.”7
      We conclude that, even assuming that the easement contemplates that the
County could construct a railroad spur over or across the pipeline, the easement
also contemplated that the pipeline would be buried at a depth of four feet at the
time it was constructed. The easement does not expressly require Flint Hills to
relocate its pipeline to a lower depth to accommodate a railroad spur. At best,
the easement agreement is silent as to who pays costs when the County desires
to build a structure across the easement that entails relocation of the pipeline
within the easement to a depth below four feet. In the face of this silence, we
conclude that sections 756.121-.123 of the Texas Health and Safety Code govern.
These sections of the Texas Code apply only when there is no written agreement
“to the contrary” between the owner of the easement and the party desiring to
place or maintain construction across a pipeline.8
      We first explain our conclusion that the express provisions of the easement
agreement are silent as to which party shall bear the costs of relocating the
pipeline when the grantor desires to build a railroad spur, as contemplated by
the parties, and the construction will require the pipeline to be relocated to a
depth greater than that contemplated by the written terms of the easement.
                                             B
      The fifth paragraph of the easement provides:

      6
          R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980).
      7
          Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (emphasis removed).
      8
          TEX. HEALTH & SAFETY CODE ANN. § 756.121(a).

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      GRANTOR reserves the right to use said premises for the following
      purposes:

            (1) Cultivation
            (2) Access by rail or railroad
            (3) Parking
            (4) Drainage improvements
            (5) Utility Lines
            (6) Any other usage which does not materially interfere with
            the operation or maintenance of GRANTEE’s pipeline;

      and, in connection therewith, it is expressly agreed that GRANTOR
      shall have the right to construct and maintain upon the premises
      fences, roads, rail spurs, parking lots, drainage improvements,
      utility lines and other items which do not materially interfere with
      the operation of GRANTEE’s pipeline. Provided GRANTOR shall
      not have the right to construct any structure or building over said
      pipeline after such pipeline has been constructed.

      The district court determined that the language reserving the right to use
the premises for “access by rail and railroad,” and the express reservation of “the
right to construct . . . rail spurs,” gave the County an “unconditional right” to
construct a rail spur over the pipeline. It therefore ordered Flint Hills to either
discontinue use of the pipeline or pay for safety modifications necessary to
accommodate the spur.
      In so holding, the court rejected two other constructions of Paragraph 5
advanced by Flint Hills. First, the court determined that the final sentence of
the paragraph—which provides that the grantor “shall not have the right to
construct any structure or building over said pipeline after such pipeline has
been constructed ”—did not prohibit the construction of a rail spur. The court
rejected Flint Hills’ argument that the word “structure” should be interpreted
broadly to mean “any construction.”         The court reasoned that such an
interpretation must fail because the easement expressly reserves the right to
construct a rail spur over the easement.

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      The district court also rejected Flint Hills’ argument that, because the
proposed spur would materially interfere with the operation of the pipeline, the
material interference clauses prohibit its construction. Paragraph 5 contains
two material interference clauses. The first reserves the right to use the
premises for “[a]ny other usage which does not materially interfere with the
operation of GRANTEE’s pipeline.” The second is in the list of items which the
parties “expressly agreed” could be constructed: “fences, roads, rail spurs,
parking lots, drainage improvements, utility lines and other items which do not
materially interfere with the operation of GRANTEE’s pipeline.” The district
court determined that the clauses applied only to “any other usage” and “other
items,” respectively, and not to each reserved usage and item.
      We do not reach whether the District Court properly interpreted either the
meaning of “structure” as used in this easement or whether the clauses
regarding material interference with the operation of the pipeline also modified
the grantor’s reserved right to use the premises for access by rail or railroad.
Because Flint Hills does not seek to prohibit the construction of the railroad spur
but only seeks to require the County to pay the cost of complying with applicable
pipeline safety regulations that will be incurred as a result of the railroad spur,
we assume, without deciding, that the proposed railroad spur at issue is not a
“structure” within the meaning of the clause in the easement that would
otherwise prohibit “any structure or building over said pipeline after such
pipeline has been constructed.” We also assume that the easement contemplated
that the grantor might construct a railroad spur over the pipeline after the
pipeline was constructed.
      The easement agreement expressly contemplates that the pipeline could
be buried at a depth of four feet. Neither party has offered evidence of or briefed
what safety regulations were in effect at the time the pipeline was constructed.
Accordingly, on the record before us, we can only conclude that the parties

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contemplated at the inception of the easement that a four-foot depth was
sufficient for all purposes of their agreement. The easement does not expressly
require Flint Hills to relocate its pipeline to a lower depth in the event that the
County desires to erect a railroad spur across the easement. The easement itself
is silent as to whether the subservient estate,9 owned by the County, must pay
all costs associated with the exercise of the right to build a railroad spur over the
pipeline easement, which is the dominant estate,10 including costs associated
with burying the pipeline at least six feet deep necessitated by the construction
of the railroad spur.
      An analogy may perhaps make clearer the difference between provisions
in an easement that permits the parties to do certain things and an easement
that expressly allocates the cost of undertaking those activities.                It is not
uncommon in Texas for an easement to require a pipeline to be buried below
“plow depth” and to specify what that depth will be. The easement may also
provide, as the County’s easement provides in this case, that the subservient
estate may be used for “cultivation” or to grow crops. It is at least conceivable
that an owner of the subservient estate might desire to grow vegetation that
necessitated plowing beneath the agreed-upon plow depth. An easement like the
one hypothesized does not altogether prohibit the owner of the subservient
estate from such cultivation. The owner of the pipeline would have no basis for
objecting to the contemplated use of the subservient estate if the owner of the
latter agreed to pay all costs associated with the cultivation, including costs to
bury the pipeline deeper. The pipeline owner could not prohibit such a use
under these circumstances. But the easement could not be construed to require
the pipeline owner to pay the cost of burying the pipeline at a greater depth than

      9
          See Street v. Sinclair Pipeline Co., 386 S.W.2d 350, 352 (Tex. 1965).
      10
           See id.

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                                     No. 10-50106

the parties agreed in order to accommodate the right of cultivation. At best, the
easement is silent as to who will bear those costs. Similarly, we conclude that
at best, the easement before us is silent as to who would bear the costs of burying
the pipeline to a greater depth than expressly agreed if the construction of a
railroad spur across the easement is desired by the owner of the subservient
estate.
      The County points out in its brief that after suit was filed, it surveyed the
pipeline’s depth at seven locations, and at four of those points, the pipeline is
buried less than 4.5 feet below the surface and at one point is only 1.8 feet below
the surface. This is irrelevant. First and foremost, the parties have stipulated
that even were the pipeline buried at a uniform depth of 4.5 feet, as Flint Hills
alleged, the pipeline would still have to be buried at a depth of six feet to comply
with federal regulations, and expenditures would be necessary to bury it at a
depth of six feet.
      On the record before us, we assume without deciding that the County has
the right to construct a railroad spur across the pipeline easement. It is beyond
dispute that the easement only requires that the pipeline be buried at a depth
of four feet. The parties agree that the pipeline will have to be buried to at least
a depth of six feet to comply with federal regulations if the spur is built. We
therefore consider the applicability of Texas’s Health and Safety Code, which
Flint Hills contends governs the present dispute.
      The contemplated railroad spur is unquestionably “[c]onstruction” across
a “[p]ipeline facility” within the meaning of section 756.121 of the Texas Health
and Safety Code, and the County or its prospective grantee, Balcones, would be
a “[c]onstructor” within the meaning of that provision.11 The first issue that we

      11
           TEX. HEALTH & SAFETY CODE § 756.121 provides:

      (1) “Construction” means a building, structure, driveway, roadway, or other

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must resolve is whether subchapter H of that Code, within which the sections
in contention are found, applies. Subchapter H applies “unless there is a written
agreement . . . to the contrary between the owner or operator of the affected
pipeline facility and the person that places or causes a construction to be placed
on the easement or right-of-way of a pipeline facility.”12 Notably, this section
does not say that subchapter H is inapplicable whenever there is a written
agreement. Obviously, a written easement agreement is a written agreement.
Subchapter H is only inapplicable when there is a written agreement “to the
contrary.”
      The County argues that section 756.122 does not apply because there is an
agreement “to the contrary” to the provisions of subchapter H in which section
756.122 is found. The County contends that the easement contemplates that a
rail spur may be constructed and that the easement “anticipates the need for
Flint Hills and Koch Pipeline to place their pipeline at a sufficient depth to
accommodate the property owner’s reserved uses, which includes a rail spur.”

      construction any part of which is physically located on, across, over, or under
      the easement or right-of-way of a pipeline facility or that physically impacts or
      creates a risk to a pipeline facility.

      (2) “Constructor” means a person that builds, operates, repairs, replaces, or
      maintains a construction or causes a construction to be built, operated,
      repaired, maintained, or replaced.

      (3) “Pipeline facility” means a pipeline used to transmit or distribute natural
      gas or to gather or transmit oil, gas, or the products of oil or gas.

      12
           TEX. HEALTH & SAFETY CODE § 756.122(a) provides:

      (a) This subchapter applies to a construction or the repair, replacement, or
      maintenance of a construction unless there is a written agreement, including
      a Texas Department of Transportation right-of-way agreement, to the contrary
      between the owner or operator of the affected pipeline facility and the person
      that places or causes a construction to be placed on the easement or
      right-of-way of a pipeline facility.

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But this is demonstrably faulty reasoning. The easement provides that the
pipeline would be buried at a depth of only four feet. The agreement does not
provide what happens when federal regulations require a depth greater than
four feet if the County decides to build a railroad spur across the pipeline. There
is no express agreement that addresses this contingency.
      To determine whether the written easement agreement between Flint
Hills and the County is “contrary to” subchapter H, we must consider section
756.123. The only argument that the County makes regarding section 756.123
is that it would violate the United States Constitution by abrogating existing
contractual rights. We need not consider this question, however, since the
County failed to support this bald assertion with argument or authority.13
      We conclude that the easement agreement is not “to the contrary” of any
provisions in subchapter H. Our focus is on the substantive provisions of that
subchapter, contained in section 756.123, which provides:
             A person may not build, repair, replace, or maintain a
      construction on, across, over, or under the easement or right-of-way
      for a pipeline facility unless notice of the construction is given the
      operator of the pipeline facility and:

                      (1) the operator of the pipeline facility determines that
                the construction will not increase a risk to the public or
                increase a risk of a break, leak, rupture, or other damage to
                the pipeline facility;

                       (2) if the operator of the pipeline facility determines
                that the construction will increase risk to the public or the
                pipeline facility, the constructor pays the reasonable,
                necessary, and documented cost of the additional
                fortifications, barriers, conduits, or other changes or
                improvements necessary to protect the public or pipeline
                facility from that risk before proceeding with the construction;

      13
           See N.W. Enters., Inc. v. City of Houston, 352 F.3d 162, 183 n.24 (5th Cir. 2003).

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                     (3) the building, repair, replacement, or maintenance
               is conducted under an existing written agreement; or

                     (4) the building, repair, replacement, or maintenance
               is required to be done promptly by a regulated utility
               company because of the effects of a natural disaster.14
      Notice was given, so that is not at issue. Nor are subsections (1) or (4) at
issue. The parties have stipulated that construction of the railroad spur over the
pipeline will increase risk to the public within the meaning of subsection (2), and
it is undisputed that the County has not paid or agreed to pay the costs
necessary to protect the public from that risk. Subsection (2) applies unless
subsection (3) is applicable. The question, then, is whether “the building, repair,
replacement, or maintenance is conducted under an existing written agreement.”
As we have seen, there is no express agreement that the County has the right
to build a railroad spur without burying the pipeline to a depth required by
federal regulations or paying Flint Hills the cost of complying with those
regulations.
      Under these circumstances, section 756.123(2) governs. The County or its
grantee may not proceed to build the railroad spur until “the constructor pays
the reasonable, necessary, and documented cost of the additional fortifications,
barriers, conduits, or other changes or improvements necessary to protect the
public or pipeline facility from that risk before proceeding with the construction.”
                                    *      *       *
      For the foregoing reasons, we REVERSE the summary judgment entered
by the district court and REMAND for further proceedings consistent with this
opinion.

      14
           TEX. HEALTH & SAFETY CODE ANN. § 756.123.

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