Texas Supreme Court Forbids Taking of Land for Private Pipelines

In a potentially important recent decision, Texas Rice Land Partners v. Denbury Green Pipeline the Texas Supreme Court has invalidated the use of eminent domain for a private pipeline to be owned by an oil company. Gideon Kanner has some good commentary on the decision here.

In Texas and many other states, public utilities and other “common carriers” have the power to use eminent domain to acquire land for their operations. In this case, however, Denbury, an oil company, sought to use eminent domain for a pipeline that would only transport carbon dioxide to and from its own facilities, without providing any service to the general public. In theory, the public would have the right to use the pipeline, but in practice no one but Denbury would have any reason to do so. The Texas Supreme Court quite rightly concluded that a “common carrier” taking must actually serve the general public, not just the carrier itself:

To qualify as a common carrier with the power of eminent domain, the pipeline must serve the public…. [E]xtending 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….

We accordingly hold that to qualify as a common carrier of CO2 under Chapter 111 [of Texas law], 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 or sell it to parties other than the carrier.

The case has been remanded for the trial court. In order to prevail there, Denbury would have to prove that its pipeline will transport carbon dioxide for the general public and not just its own use.

Some press commentary suggests that this decision will have a major impact on future pipeline takings in Texas. That may be so. But Texas eminent domain law contains several other loopholes that make it easy for private interest groups to get government to condemn property for their own benefit. As I discuss in this article and here, Texas’ post-Kelo eminent domain reform law includes a very broad definition of “blight” that enables almost any property to be declared blighted and transferred to private parties. Oil companies and others seeking to use eminent domain for private pipelines might be able to get the land they want by having it declared blighted. This might require greater political clout than the direct private exercise of eminent domain under Chapter 111. The oil company in question would have to lobby the local government or redevelopment agency. However, Texas oil companies certainly have plenty of political influence.

UPDATE: I have not been able to find a link to the decision online. It is, however, available on Westlaw and Lexis.

UPDATE #2: I have corrected some minor errors in the initial version of this post. Because I made the corrections within a few minutes of the original posting, I am not going to describe them in detail, since I don’t think there was any time for the mistakes to influence public discourse on the case.