FILED
IN THE SUPREME COURT
OF TEXAS
11 October 12 P3:34
BLAKE. A. HAWTHORNE
CLERK

No. 09-0901
In the Supreme Court of Texas
TEXAS RICE LAND PARTNERS, LTD. AND MIKE LATTA,
Petitioners,
v.
DENBURY GREEN PIPELINE-TEXAS, LLC,
Respondent.

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS
FOR THE NINTH DISTRICT COURT OF TEXAS

AMICUS CURIAE BRIEF IN SUPPORT OF REHEARING

FULBRIGHT & JAWORSKI L.L.P.
Stephen K. Carroll
State Bar No. 03891700
Fulbright Tower
1301 McKinney, Suite 5100
Houston, TX 77010-3095
Telephone: (713) 651-5151
Telecopier: (713) 651-5246
scarroll@fulbright.com
Counsel for Amicus Curiae
Energy Transfer Partners, L.P., Enterprise Products Partners L.P., Explorer Pipeline Company,
Shell Pipeline Company LP, and TransCanada Keystone Pipeline, L.P.

 TABLE OF CONTENTS

Page
TABLE OF AUTHORITIES .............................................................................................. ii
STATEMENT OF INTEREST OF AMICUS CURIAE .................................................... 1
WHY REHEARING SHOULD BE GRANTED ............................................................... 1
ARGUMENT...................................................................................................................... 2
I.

II.

The Court Erred by Implicitly Overruling the “Holding Itself Out”
Common Carrier Standard and Replacing It With an Unduly
Onerous and Impracticable Standard ........................................................... 2
A.

Common Carrier Law As It Was ...................................................... 2

B.

Common Carrier Law Under the Court’s New Standard .................. 4

The Court’s Dicta Regarding Affiliates Should Be Stricken ....................... 7

CONCLUSION .................................................................................................................. 9
CERTIFICATE OF SERVICE ......................................................................................... 10

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 TABLE OF AUTHORITIES
Page(s)
CASES
Burnett v. Riter,
276 S.W. 347 (Tex. Civ. App.—Beaumont 1925, no writ) ........................................... 2
Collins Pipeline Co. v. New Orleans E., Inc.,
250 So. 2d 29 (La. Ct. App. 1971) ................................................................................. 3
Dyer v. Tex. Elec. Serv. Co.,
680 S.W.2d 883 (Tex. App.—El Paso 1984, writ ref’d n.r.e.) ...................................... 3
Housing Auth. of City of Dallas v. Higginbotham,
135 Tex. 158, 143 S.W.2d 79 (1940) ......................................................................... 3, 7
Mayhew v. McFarland,
137 Tex. 391, 153 S.W.2d 428 (1941) ........................................................................... 2
Tex. Rice Land Partners Ltd. v. Denbury Green Pipline-Tex., LLC,
54 Tex. Sup. Ct. J. 1732, 2011 Tex. LEXIS 607 (Tex. Aug. 26, 2011) ............... passim
Vardeman v. Mustang Pipeline Co.,
51 S.W.3d 308 (Tex. App.—Tyler 2001, pet. denied) .................................................. 8
United States v. La. & Pac. Ry. Co.,
234 U.S. 1 (1913) ........................................................................................................... 3
West v. Whitehead,
238 S.W. 976 (Tex. Civ. App.—San Antonio 1922, writ ref’d)................................ 3, 7
RULES AND STATUTES
Tex. R. App. P. 11 ............................................................................................................... 1
Texas Nat. Res. Code Ann. § 111 (Vernon 2011) ....................................................... 1, 4, 7

ii

 STATEMENT OF INTEREST OF AMICUS CURIAE
The amici are five companies1 who, like Respondent Denbury Green PipelineTexas, LLC (“Denbury”), have the power of eminent domain. They share Denbury’s
interest in ensuring the Court’s faithfulness to Chapter 111 and the myriad cases
interpreting its provisions. These amici own and operate common carrier pipelines, are in
the process of constructing common carrier pipelines, are applying through use of a T-4
permit application for the right to use eminent domain to construct a common carrier
pipeline, or may in the future apply for a permit to construct a common carrier pipeline.
They believe that the Opinion issued on August 26, 2011, is fundamentally at odds with
existing case law, which law has well served the citizens of this State for decades.
Accordingly, pursuant to Tex. R. App. P. 11, amici file this brief in support of the
Motion for Rehearing filed by Denbury and ask that it be granted. Amici are jointly
sharing in the preparation cost of this brief.
WHY REHEARING SHOULD BE GRANTED
Two principle reasons compel rehearing and affirmation of the judgment below, or
at the very least, a modification of the Court’s Opinion. First, the Court substituted
decades-old case law – the workable and universally understood “holding itself out”
requirement to establish common carrier status – with an entirely unworkable “reasonable
probability” test that will result in ad-hoc decision making, jeopardizing the efficient

1

The amici are Energy Transfer Partners, L.P., Enterprise Products Partners L.P., Explorer
Pipeline Company, Shell Pipeline Company LP, and TransCanada Keystone Pipeline, L.P.

1

 transport of energy throughout our state. This sea-change in Texas eminent domain law
is not acknowledged by the Court.
Second, the Court unnecessarily appears to prohibit a refinery or processing plant
owner from having an affiliate construct a common carrier pipeline to its refinery or
plant. This limitation is unnecessary and not grounded in any purpose that will better
serve the energy needs of Texas residents.
Much of the Court’s opinion appears aimed at addressing abuses of the gas
industry, but those abuses are phantom. The Court has attempted to fix a problem that
did not exist and in turn created one. At the very least, the new standard imposed by the
Court creates far too heavy of a burden.
ARGUMENT
I.

The Court Erred by Implicitly Overruling the “Holding Itself Out” Common
Carrier Standard and Replacing It With an Unduly Onerous and
Impracticable Standard
A.

Common Carrier Law As It Was

A common carrier is an entity engaged in transporting goods for hire, and who
holds itself out as being ready and willing to indiscriminately transport the goods of any
party who chooses to avail itself of the service. Mayhew v. McFarland, 137 Tex. 391,
153 S.W.2d 428, 431 (1941). The critical test, to determine whether a corporation is a
common carrier, is whether the corporation “holds [it]self out” as being available to
transport for anyone who chooses to ship products in the pipeline. Burnett v. Riter, 276
S.W. 347, 349 (Tex. Civ. App.—Beaumont 1925, no writ). Because it is the “holding

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 out” that determines common carrier status, an entity may be a common carrier even if it
is only transporting products owned by its shareholders. Collins Pipeline Co. v. New
Orleans E., Inc., 250 So. 2d 29, 34-35 (La. Ct. App. 1971); West v. Whitehead, 238 S.W.
976, 978 (Tex. Civ. App.—San Antonio 1922, writ ref’d). The real criterion of whether
an entity is a common carrier is not determined by the extent of use is being made of the
pipeline, but rather by what right the public has to use the pipeline. United States v.
La. & Pac. Ry. Co., 234 U.S. 1, 24 (1914); see Dyer v. Tex. Elec. Serv. Co., 680 S.W.2d
883, 885 (Tex. App.—El Paso 1984, writ ref’d n.r.e.). If a corporation “holds itself out,”
then such facts conclusively make it a public use, and the extent of probable use by the
public is not a question for the courts and may not be inquired into. Housing Auth. of
City of Dallas v. Higginbotham, 135 Tex. 158, 143 S.W.2d 79, 84 (1940).
As a result of this settled law, numerous common carrier pipelines have been
constructed across Texas that are ready, willing and able to indiscriminately transport the
product of any party who chooses to avail itself of that service. In accordance with what
was settled law, the entities operating pipelines may add laterals and segments to attach
new markets or supplies and may do so initially in some instances by only transporting
the products of affiliates, and the common carrier pipelines are in many instances
connected to refineries and other facilities owned by their affiliates. Nevertheless, they
are “holding themselves out” to transport the product of any entity, and third parties have
the ability to avail themselves of the service offered. These existing common carrier
pipelines are not part of a closed system that cannot be used by third party shippers.

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 Instead, the pipelines are available to third party shippers, and there is a possibility of use
by third party shippers.
B.

Common Carrier Law Under the Court’s New Standard

Without explaining why it disowned the “holding itself out” common carrier
criterion, the Court minted a new standard. Now, in order to qualify as a common carrier
of CO2 under Chapter 111, the applicant must prove that a “reasonable
probability . . . exist[s], 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.” Op., at 13.
The new reasonable probability test is unworkable. The practical effect of the
Court’s Opinion is that it is turning common carriers into guarantors. Thus, by obtaining
a permit and constructing a common carrier pipeline, one is now necessarily
guaranteeing, forever it would seem, that third parties, over whom it has no control, will
use its pipeline with no interruption. This is unworkable.
The Court’s reasonable probability test appears to be aimed at precluding oil and
gas companies from anointing themselves with condemnation powers. Id. at 8. But the
“holding itself out” test accomplished that same end. That is because the “holding itself
out” test incorporates a “possible requirement” test – it must be possible that a third party
may use the pipeline because the common carrier has invited it to do so. For example, if
the pipeline is a closed system, then there is no possibility that others might use it and
hence no right to condemn and a gas company could not claim common carrier status.

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 Plainly put, without acknowledging it, Texas Rice Land Partners Ltd. v. Denbury
Green Pipeline-Texas, LLC overrules settled Texas law common carrier pipeline
eligibility requirements, replacing it with an unworkable standard. And because there is
neither a need nor a justification in this case for the Court to replace the “holding itself
out” test with a reasonable probability standard, it remains unclear why the Court has
taken this step.
Further, the Opinion defines reasonable probability as one that is more likely than
not. Op., at 13 n.28. But when a new common carrier pipeline is being planned, actual
transportation will not begin until months or even years after the entity begins surveying
properties anticipated to be needed for pipeline easements. The Court’s opinion requires
common carriers to prove, months or years before transportation will begin, that it is
more likely than not that third parties will ship in the pipeline. While an expression of
interest by third parties is anticipated, a firm commitment is not realistic.

Market

conditions, company acquisitions and divestitures, and the discovery of new fields, are all
subject to change, and as a result third parties are unlikely to enter into contracts to ship
months or years before the pipeline is completed.
In this context, proof that it is more likely than not that third parties will use the
line, will always be subject to at least some doubt. However, to successfully acquire the
easements necessary to build the common carrier, the pipeline company must now
convince every single court that it is more likely than not that these third parties, that
have expressed an interest but are uncommitted, will ship in the common carrier line. If

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 the issue is tried in 30 different courts, what are the chances that one or more of them
determines it is not more likely than not? Then the pipeline project cannot proceed. The
new standard established by the Court could make the construction of new common
carrier pipelines in Texas very questionable.
Applicants will likely not be able to prove the future actions of third parties. The
impracticability of the reasonable probability standard is compounded by the Court’s
holding that the putative common carrier also prove that the third party “customers . . .
will either retain ownership of their gas or sell it to parties other than the carrier.” Id. at
13. In actuality, third parties are free to sell their product to whomever they want, and an
entity’s common carrier status should not be dependent upon the decisions of third parties
– which is why the “holding itself out” is the existing standard not just in Texas, but
throughout the country. See supra at p. 3. Moreover, the Court has created a nearly
impossible standard. How is the common carrier applicant to prove what third parties
might do in the future, i.e., to whom they might sell the gas transported in the pipeline?
The public use served by a common carrier pipeline, which is making available a
pipeline to allow important products to be transported, should not be dependent upon
whether or not third parties decide to ship in the pipeline or to stop doing so to reap a
competitive advantage and it should not be dependent upon a carrier’s ability to prove to
whom the third parties will sell their gas. Amici thus ask that the Court withdraw its
Opinion and confirm the validity of the “holding itself out” test.

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 II.

The Court’s Dicta Regarding Affiliates Should Be Stricken
Problematically, in two different portions of its Opinion, the Court has held that an

affiliate does not count as a third party. On page 10, the Opinion states:
The relevant statutes also confirm that a CO2 pipeline owner is not a
common carrier if the pipeline’s only end user is the owner itself or an
affiliate.2
And in footnote 22, the Court states:
We further note that the pipeline does not serve a public use if it only
transports gas for a corporate parent or affiliate. . . . Transporting gas solely
for the benefit of a corporate parent or other affiliate is not a public use of
the pipeline.
Op., at 10 & n.22.
The Court’s determination that an “affiliate” in the common carrier context is not
a third party is wrong.

Many common carriers own facilities at the end of their

transportation service. Greyhound buses deliver passengers to Greyhound bus terminals.

2

Section 111.003(a), Texas Natural Resources Code, does not provide that a pipeline is not a
common carrier if the pipeline’s only end user is the owner itself or an affiliate. First, section
111.003(a) describes a closed system, where the pipeline’s use is limited to the pipeline owner
only. A common carrier would be prohibited from only carrying product from its wells to its
refinery, where no third party could use the system. Section 111.003(a) does not, however,
prohibit a common carrier pipeline from transporting third-party products to a refinery owned by
the pipeline. In that instance it would be part of a transportation system defined in section
111.002. Second, section 111.003(a) says nothing about affiliates. The Court’s decision,
without explanation, to disregard the separate identity of corporate entities is puzzling, especially
since existing settled case law specifically approves common carrier status where the pipeline
carries the product of related entities. West v. Whitehead, 238 S.W. 976, 978 (Tex. Civ. App.—
San Antonio 1922, writ ref’d); Housing Auth. of City of Dallas v. Higginbotham, 135 Tex. 158,
143 S.W.2d 79, 84 (1940) (“that [the common carrier’s] stockholders are also stockholders in a
corporation which will be primarily benefited by [the common carrier’s] construction,” will not
deprive it of its public character).

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 Continental Airlines delivers passengers to terminals operated by Continental Airlines.
Similarly, owners of refineries should not be prohibited from having an affiliate construct
a common carrier pipeline to the refinery.

The identity of the end user of the

transportation of a common carrier has never been a factor in determining whether the
transporter is common carrier or not, so long as third parties have the right and ability to
use the transportation service, indiscriminately and on a pro rata basis.
It is one thing to hold that an entity is not a common carrier if the pipeline is part
of a closed system, which no third party can ever use.3
It is quite another thing to suggest that where there is a public necessity for a
common carrier pipeline, i.e., a public necessity to transport products from the pipeline’s
beginning to the pipeline’s end, and where the common carrier holds itself out as ready,
willing and able to indiscriminately transport anyone’s product on a pro rata basis, that
the pipeline is not a common carrier if the third-party shippers desire to sell their product
3

It is not at all clear that the Denbury pipeline is not being used by third parties or that it cannot
be used by third parties. Denbury presented the proof of common carrier status required by
existing Texas law. Vardeman v. Mustang Pipeline Co., 51 S.W.3d 308 (Tex. App.—Tyler
2001, pet. denied). In Vardeman, Mustang subjected itself to the jurisdiction of the Texas
Railroad Commission by declaring on its T-4 application for a permit to operate a pipeline that it
would be a common carrier. Id. at 313. Mustang held itself out to the public for hire as
evidenced by its tariff on file with the Texas Railroad Commission. Id. By such actions,
Mustang became a common carrier subject to the jurisdiction of the Texas Railroad Commission.
Id. Denbury has also taken these actions. Even if they are relatively easy to do, they subject
Denbury to the jurisdiction of the Texas Railroad Commission, and obligate Denbury to
indiscriminately transport the CO2 of any entity who desires to ship in the pipeline.
Based at least in part upon information contained in a website, that may not be accurate or
complete, the Court has now changed the rules, and remanded the case to the trial court.
Denbury will and should have the opportunity to demonstrate its common carrier status under
any new standards established by the Court.

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 at the end of the line to a facility owned by an affiliate of the common carrier pipeline.
The Court should therefore strike the noted language from its Opinion.
CONCLUSION
Amici respectfully request that the Court grant Respondent’s motion for rehearing,
vacate its August 26, 2011 Opinion and issue a new opinion either affirming the
judgment below or modifying its Opinion consistent with the principles stated above.

FULBRIGHT & JAWORSKI L.L.P.

/s/ Stephen K. Carroll
Stephen K. Carroll
State Bar No. 03891700
Fulbright Tower
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Telephone: (713) 651-5151
Telecopier: (713) 651-5246
scarroll@fulbright.com
Counsel for Amicus Curiae
Energy Transfer Partners, L.P., Enterprise
Products Partners L.P. Explorer Pipeline
Company, Shell Pipeline Company LP, and
TransCanada Keystone Pipeline, L.P.

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 CERTIFICATE OF SERVICE
I certify that on October 12, 2011, a copy of the above Amicus Curiae Brief in Support of
Rehearing was delivered by certified mail, return receipt requested, and via email on
October 12, 2011, to the following:
Anthony G. Brocato
550 Fannin Street, Ste. 230
Beaumont, TX 7701-0000

Charles M. Butler III
2722 S. Oakland Circle E
Aurora, CO 80014

Amy Warr
Alexander Dubose & Townsend
515 Congress Ave., Ste. 2350
Austin, TX 78701

Douglas W. Alexander
Alexander Dubose & Townsend LLP
515 Congress Ave., Ste. 2350
Austin, TX 78701

Marcus A. Pitre
P.O. Box 186
Port Neches, TX 77651-0186

Harry P. Wright
Wright & Pitre
P.O. Box 186
Port Neches, TX 77651-0186

Appellate Counsel for Petitioners
Melanie Suzanne Reyes
Flowers Davis P.L.L.C.
1021 E Southeast Loop 323, Ste. 200
Tyler, TX 75703

Michael L. Baker
Strong Pipkin Bissell & Ledyard LLP
595 Orleans St., Fl 14
Beaumont, TX 77701-3214

Thomas H. Buchanan
Flowers Davis P.L.L.C.
1021 E. Southeast Loop 323, Ste. 200
Tyler, TX 75703

J. Mitchell Beard
Flowers Davis, PLLC
1021 E. Southeast Loop 323, Ste. 200
Tyler, TX 75701

Jack T. Strother
Denbury Resources, Inc.
5320 Legacy Dr.
Plano, TX 75024-317

Kelli H. Strother
2208 Sturgis
Frisco, TX 75034

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 Katharine D. David
Haynes and Boone, LLP
1 Houston Center
1221 McKinney St., Ste. 2100
Houston, TX 77010-2007

Lynne Liberto
Haynes and Boone, LLP
1 Houston Center
1221 McKinney St., Ste. 2100
Houston, TX 77010-2007

Appellate Counsel for Respondent
/s/ Stephen K. Carroll
Stephen K. Carroll

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