Court Opinion

ID: 4018436
Source: CourtListenerOpinion
Date Created: 2016-07-25 07:21:53.034508+00
Date Added: 2024-06-11T07:44:57.040502
License: Public Domain

Opinion filed July 21, 2016

                                     In The

        Eleventh Court of Appeals
                                   __________

                              No. 11-14-00199-CV
                                   __________

                        WALTER B. SANER, Appellant
                                        V.
         BRIDGETEX PIPELINE COMPANY, LLC, Appellee

                      On Appeal from the 220th District Court
                            Comanche County, Texas
                         Trial Court Cause No. CV17313

                                  OPINION
       This is a condemnation case. Walter B. Saner owns a tract of land in
Comanche County. BridgeTex Pipeline Company, LLC instituted condemnation
proceedings to obtain an easement for a crude petroleum pipeline running across
Saner’s land. The trial court found that BridgeTex’s proposed taking was for a
common carrier pipeline, which is a statutorily permitted public use. In one issue,
Saner asserts that the trial court erred when it found that the pipeline was for “public
use” as required by Article I, Section 17 of the Texas constitution.1 We affirm.
                                         Background Facts
        BridgeTex is a limited liability company engaged in the location and
construction of a pipeline in Texas for the transportation of crude petroleum. The
pipeline is intended to transport crude petroleum from the Permian Basin to the
Texas Gulf Coast. In January 2013, the Texas Railroad Commission designated
BridgeTex as a common carrier and granted it a T-4 permit. Pursuant to its
designation as a common carrier, BridgeTex exercised the power of eminent domain
and obtained an easement by condemnation across Saner’s real property in
Comanche County.              The special commissioners determined the amount of
compensation to which Saner was entitled to be $5,930. Saner did not challenge the
amount of the compensation award in the trial court. Instead, he only challenged the
commissioners’ finding that the easement was for public use.
        The parties litigated the “public use” question in a one-day bench trial. The
trial court ruled in favor of BridgeTex and entered written findings of fact and
conclusions of law. Among other things, the trial court found that “BridgeTex is a
common carrier, the Pipeline will be operated as such, and the taking herein of
Defendant’s Property for the Pipeline is for a public use.”
                                                Analysis
        In one issue, Saner asserts that the trial court erred when it found that the
pipeline built across his property by BridgeTex was for “public use.” “The Texas
Constitution safeguards private property by declaring that eminent domain can only
be exercised for ‘public use.’” Tex. Rice Land Partners, Ltd. v. Denbury Green
Pipeline-Tex., LLC, 363 S.W.3d 192, 194 (Tex. 2012) (quoting TEX. CONST. art. I,

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           Saner challenged the constitutionality of various provisions of the Texas Natural Resources Code
at trial but has not raised these issues on appeal.

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§ 17). The ultimate question of whether a particular use is a public use is a judicial
question to be decided by the courts as a matter of law. Id. at 198 n.16.
      Denbury involved a carbon dioxide (CO2) pipeline company that had been
granted the power of eminent domain by the Railroad Commission as a “common
carrier” pipeline company pursuant to the provisions of the Natural Resources Code.
Id. at 194–95; see TEX. NAT. RES. CODE ANN. § 111.002(6) (West 2011) (applicable
to pipelines for the transportation of carbon dioxide). The Texas Supreme Court
held that the common carrier permit granted by the Railroad Commission did not
conclusively establish the pipeline owner’s power of eminent domain. Denbury, 363
S.W.3d at 195. Instead, the court held that a landowner can challenge the eminent-
domain power of the pipeline company by contesting whether the proposed pipeline
will in fact be public, rather than private. Id.
      The court held in Denbury that “[t]o qualify as a common carrier with the
power of eminent domain, [a] pipeline must serve the public; it cannot be built only
for the builder’s exclusive use.” 363 S.W.3d at 200 (emphasis added). The court
explained that “extending the power of eminent domain to the taking of property for
a private use cannot survive constitutional scrutiny” and that “[t]he Denbury Green
pipeline would not serve a public use if it were built and maintained only to transport
gas belonging to Denbury from one Denbury site to another.” Id. (emphasis added).
This recognition of what does not qualify as public use is mirrored in
Section 111.003 of the Natural Resources Code, which denies common carrier status
to pipelines “that are limited in their use to the wells, stations, plants, and refineries
of the owner.” NAT. RES. § 111.003 (West Supp. 2015).
      After recognizing what does not qualify as public use, the court established a
test to determine what does qualify as public use for a carbon dioxide pipeline. See
Denbury, 363 S.W.3d at 202. The court held that, “for a person intending to build a
CO2 pipeline to qualify as a common carrier under Section 111.002(6), a reasonable
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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.” Id. (footnotes
omitted); cf. Coastal States Gas Producing Co. v. Pate, 309 S.W.2d 828, 833 (Tex.
1958) (holding that “[n]o hard and fast rule can be laid down for determining public
use . . . each case is usually decided upon the basis of its own facts and the
surrounding circumstances”). But the Denbury court also provided that “[o]ur
decision today is limited to persons seeking common-carrier pipeline status under
Section 111.002(6),” applicable to carbon dioxide pipelines, and that “[w]e express
no opinion on pipelines where common-carrier status is at issue under other
provisions of the Natural Resources Code or elsewhere.” Denbury, 363 S.W.3d at
202 n.28.
      Like the pipeline company in Denbury, BridgeTex was designated as a
common carrier pipeline company by the Railroad Commission.                 However,
BridgeTex’s designation as a common carrier pipeline company arose under another
provision of the Natural Resources Code. Section 111.002(1) provides that a person
is a common carrier if it “owns, operates, or manages a pipeline or any part of a
pipeline in the State of Texas for the transportation of crude petroleum to or for the
public for hire, or engages in the business of transporting crude petroleum by
pipeline.” NAT. RES. § 111.002(1).
      Despite Denbury’s limitation to carbon dioxide pipelines, our sister courts
have applied its “reasonable probability” test to other provisions of the Natural
Resources Code, including the provision granting common carrier status to crude
petroleum pipelines. See Crawford Family Farm P’ship v. TransCanada Keystone
Pipeline, L.P., 409 S.W.3d 908, 922 (Tex. App.—Texarkana 2013, pet. denied)
(applying Denbury reasonable probability test to crude petroleum pipeline); see also
Crosstex NGL Pipeline, L.P. v. Reins Rd. Farms-1, Ltd., 404 S.W.3d 754, 761 (Tex.
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App.—Beaumont 2013, no pet.) (applying Denbury reasonable probability test to
natural gas liquids pipeline). In Crosstex, the Beaumont Court of Appeals addressed
the self-imposed limitation in Denbury and nonetheless held that “we are not
persuaded the Court’s reasoning concerning the process of obtaining a T–4 permit
applies only to carbon dioxide lines.” Crosstex, 404 S.W.3d at 761. Saner expressly
acknowledges in his brief that Denbury’s reasoning “is broadly applicable to crude
oil.”
        We find the reasoning of our sister courts persuasive. There is no distinction
between crude petroleum common carriers under Section 111.002(1) and carbon
dioxide common carriers under Section 111.002(6) that would justify a departure
from Denbury’s reasonable probability test. See NAT. RES. § 111.002(1), (6). Both
provisions reference the constitutional “public use” requirement and grant common
carrier status only when the pipelines are operated “to or for the public for hire.” Id.
And both provisions are subject to Section 111.003, which, as stated previously,
denies common carrier status to private pipelines, i.e., pipelines “that are limited in
their use to the wells, stations, plants, and refineries of the owner.” Id. § 111.003.
We join our sister courts in concluding that Denbury’s reasonable probability test
applies to other types of common carrier pipelines. Accordingly, to satisfy the
constitutional “public use” requirement, we hold that, for a person intending to build
a pipeline under Section 111.002(1), a reasonable probability must exist that the
pipeline will at some point after construction serve the public by transporting crude
petroleum for one or more customers who will either retain ownership of their crude
petroleum or sell it to parties other than the carrier. See Denbury, 363 S.W.3d at
202.
        With Denbury in mind, the trial court in this case found that “there is a
reasonable probability that the Pipeline will, at some point after construction, serve
the public by transporting crude oil for one or more customers, not affiliated with
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BridgeTex, who will either retain ownership of their crude oil or sell it to parties
other than BridgeTex.” This finding is supported by the record. A representative of
BridgeTex testified at trial that BridgeTex has entered into a transportation services
agreement with a shipper, who is not an affiliate or subsidiary of BridgeTex, and
that this shipper is obligated to ship 10,000 barrels of crude oil a day through the
pipeline for seven years. The representative also testified that BridgeTex was in
negotiations with twelve to fourteen other third-party shippers who may either
become contract shippers or spot shippers. He explained that the Federal Energy
Regulatory Commission requires BridgeTex, as a common carrier, to set aside ten
percent of the pipeline’s capacity for spot shippers, who are essentially walk-up
customers. He further testified that, although the pipeline was still a couple of
months away from start-up, BridgeTex had received five unsolicited applications
from prospective spot shippers and that two of the applications had been approved
while three were in the process of approval. The representative also explained that
the pipeline will be connected to seven to ten refineries, not owned by BridgeTex,
along the Texas Gulf Coast.
      Irrespective of the holding in Denbury and the evidence offered at trial
satisfying its reasonable probability test, Saner challenges whether the pipeline built
across his property is for public use. He contends that the pipeline is not for public
use because “[o]nly crude oil producers will use the pipeline.” Saner contends that
“public” should be defined as “everyone or the masses.” He asserts that the Texas
constitution requires what he refers to as “actual use” by the public. Actual use by
the public, according to Saner, is exemplified when “[a] member of the general
public is a customer and he uses the electric line grid system that goes all the way to
house [sic] when he plugs in an appliance.” Saner explains that “[s]o when a
transmission line comes to a house and connects to the house, one can pull off the
transmission line as much electricity as needed as a member of the general public.
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This is what is contemplated by the phrase ‘public use’ in the Texas Constitution.”
Saner asserts that the pipeline is not available for public use because there are “strict
requirements [that] tend to exclude the public from use” and “[t]he minimum use
requirement on this pipeline is a 50,000 barrel shipment.”
        BridgeTex asserts that Saner’s definition of “public use” conflicts with settled
law. We agree. In Housing Authority of City of Dallas v. Higginbotham, the Texas
Supreme Court addressed the constitutionality of condemning land for government-
funded low-income housing. 143 S.W.2d 79, 84 (Tex. 1940). The appellant in
Higginbotham challenged the taking because the housing would not be available to
the public generally but only to persons of low income. Id. at 84. The court held
that “[t]he question of whether or not in a given case the use is a public one depends
upon the character and not the extent of such use.” Id. The court further stated that:
        It is immaterial if the use is limited to the citizens of a local
        neighborhood, or that the number of citizens likely to avail themselves
        of it is inconsiderable, so long as it is open to all who choose to avail
        themselves of it. The mere fact that the advantage of the use inures to
        a particular individual or enterprise, or group thereof, will not deprive
        it of its public character.
Id. More recently, the Texas Supreme Court held that a taking of property in
downtown Austin by eminent domain for a “chilled water loop” was constitutional
when:
        [T]he chilled water service is available to any customer that applies,
        though pricing for the service is determined by the cost of connecting
        the customer to the chilled water loop. While district cooling may be
        limited in its geographic scope, it is available to all who apply and agree
        on pricing with the City. We hold that the district plant here was
        serving a public use.
City of Austin v. Whittington, 384 S.W.3d 766, 784–85 (Tex. 2012).
        In the case before us, Saner does not deny that, per Federal Energy Regulatory
Commission requirements, 10% of the pipeline’s capacity will be reserved for

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“walk-up” spot shippers, but takes issue with the apparent 50,000 barrel minimum
shipping requirement. In addressing the constitutional requirement of “public use,”
we do not find any meaningful way to distinguish the 50,000 barrel minimum
shipping requirement from the low-income requirement in Higginbotham or the
costs imposed in City of Austin. Accordingly, we conclude that the pipeline’s 50,000
barrel minimum shipping requirement does not violate the “public use” requirement
of the Texas constitution. But our inquiry does not end here.
      Saner also asserts that, “[e]ven if two or five, or a hundred crude oil producers
join together using a private pipeline to maximize their profits, this still does not
constitute ‘public use’ as contemplated by the Texas Constitution” because “[c]rude
oil producers are not the public under the Texas Constitution.” He further claims
that “it is not the case that by virtue of (either claimed or proven) common carrier
status it can be assumed that the ‘public use’ requirements of the Texas Constitution
have been met.” We do not find Saner’s interpretation persuasive.
      The evidence offered at trial supported the trial court’s findings that a
reasonable probability exists that the pipeline will at some point after construction
serve the public by transporting crude petroleum for one or more customers who will
either retain ownership or sell it to parties other than BridgeTex. Accordingly, the
trial court did not err when it determined that the pipeline built across Saner’s
property was for “public use” as required by Article I, Section 17 of the Texas
constitution. We overrule Saner’s sole issue.
                                   This Court’s Ruling
      We affirm the judgment of the trial court.

July 21, 2016                                               JOHN M. BAILEY
Panel consists of: Wright, C.J.,                            JUSTICE
Willson, J., and Bailey, J.

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