August 21, 2017

August 21, 2017

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Texas Supreme Court Clarifies Common Carrier Test re: Transportation Agreements

On January 6, 2017, The Texas Supreme Court held in Denbury Green Pipeline-Texas, LLC v. Texas Rice Land Partners, Ltd. that evidence establishing a reasonable probability that a pipeline will, at some point after construction, serve even one customer unaffiliated with the pipeline owner is sufficient to qualify Denbury Green Pipeline-Texas LLC as a common carrier as a matter of law.

Historically, common-carrier status was established by self-identification on Texas Railroad Commission permitting forms.  In 2012, in a case between the same parties (Texas Rice I), the Texas Supreme Court established the common-carrier test which required that for a person “intending to build” a pipeline 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.” The case was remanded to allow Denbury Green to show “reasonable proof of a future customer.”

On remand, Denbury Green produced transportation agreements with unaffiliated entities, including one finalized in January of 2013. Disregarding the 2013 agreement, the court of appeals reversed the trial court’s order granting Denbury Green’s summary judgment, holding 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.”  The Texas Supreme Court reversed, finding that the court of appeals incorrectly applied the Texas Rice I test by focusing on intent.  The court instead held that post-construction contracts, reviewed with other evidence, such as a pipeline’s proximity to potential customers or lack of competing pipelines in the area, could establish that “at some point after construction” a pipeline will serve the public.  

A copy of the opinion can be found here.

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About this Author

Christina A. Denmark, Energy Attorney, Steptoe & Johnson Law Firm
Of Counsel

Christina Denmark focuses her practice in the areas of energy and mineral title law.  Ms. Denmark brings unique experience to her practice in the energy department, as she previously was a trial attorney who concentrated her practice on the defense of toxic tort and personal injury claims.  She handled litigation claims for individuals and companies, as well as acted as national coordinating counsel.

512-749-9586
Kurt Kreiger, Energy Attorney, Steptoe Johnson Law Firm
Member

Kurt Krieger focuses his practice in the areas of utility regulation and energy law. He has experience representing interstate natural gas pipeline companies, midstream companies, and gas and electric utilities before the Federal Energy Regulatory Commission (FERC), and state and commonwealth public service (or utility) commissions.  His experience includes counseling gas and electric companies on economic, safety and facility siting regulation, and counseling and drafting commercial agreements pertaining to energy-related transactions.

Mr. Krieger has experience with all types of state and federal rate-related, rate-making, tariff, facility expansion, certificate, complaint, and rule-making matters, and federal enforcement proceedings before the FERC.  He developed, implemented, and managed a FERC compliance program for interstate natural gas pipeline companies and gas and electric utilities, counseled extensively on rate, tariff, and certificate matters, standards of conduct and code of conduct issues; and developed training on numerous energy-related and regulated utility topics. He previously counseled clients on coal mine health and safety matters, and on federal tax and general business aspects of corporate acquisitions, mergers, reorganizations, and executive compensation.

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