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January 16, 2013 Benjamin Rhem Jackson Walker L.L.P. [email protected]• 512.236.2012. Obtaining and Expanding Pipeline Capacity in the Shale Oil and Gas Revolution The Denbury Decision – Its Impact on Pipeline Construction and How the Legislature and Railroad Commission Will Respond. - PowerPoint PPT Presentation
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Obtaining and Expanding Pipeline Capacity in the Shale Oil and Gas
Revolution
The Denbury Decision – Its Impact on Pipeline Construction and How the
Legislature and Railroad Commission Will Respond
January 16, 2013
Benjamin RhemJackson Walker [email protected]• 512.236.2012
Discussion Outline
• The Denbury Decision
• Impact on Pipeline Construction
• Railroad Commission’s Response
• Legislature’s Response
The Denbury Decision
• The Facts:– Denbury was planning the route for a CO2
pipeline from Mississippi to East Texas for enhanced oil recovery
– Denbury was attempting to access the property of Texas Rice for survey purposes
– Landowners denied access– Denbury sued Texas Rice for an injunction to
allow it access to the property
The Denbury Decision• The Facts:
– On MSJ, trial court found that Denbury was a “common carrier” and has eminent domain authority under Nat. Res. Code § 111.019
– Trial court’s determination was based, in large part, on the Commission’s approval of the T-4 permit application
– Decision affirmed by the appellate court, relying on the fact that the pipeline “will be available for public use”
The Denbury Decision
• The 9th Court of Appeals’ decision was appealed to the Supreme Court
• The Issue:– Whether Denbury had established its
common carrier status as a matter of law because it had filed an application for a T-4 Permit with the Texas Railroad Commission, which the Commission had approved.
The Denbury Decision
• The Holding:– merely filing the paperwork and offering to make the
pipeline available for public use does not make the pipeline a “common carrier” with the power of eminent domain.
– “for a person intending to build a CO2 pipeline to qualify as a common carrier … 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 …”
The Denbury Decision• A New Standard:
– A T-4 permit alone does not establish common-carrier status
– Must demonstrate a “reasonable probability” that the pipeline will serve the public
• The Court did not hold that Denbury was not a common-carrier – only that Denbury was not entitled to a summary judgment on whether it was a common carrier under the Court’s new test
The Denbury Decision
• Concerns– Narrowly tailored decision as written
• Common-carriers• Intending to build• CO2 pipelines
– But how long until the Denbury approach is applied to other types of pipelines?
The Denbury Decision
• Concerns (cont.)– Litigation at every step – county-by-county
• Consistency– 456 District courts and 222 county courts at law– 678 potential venues
• Timeliness– Individual trials will greatly increase the time necessary
to develop needed infrastructure
– Regulatory uncertainty in Texas will cause investment dollars to go elsewhere
Response to Denbury
• Twofold process– Create more robust review at the
Commission?• Agency rulemaking
– Limit the approval or denial of T-4 permit to be solely within the jurisdiction of the Railroad Commission?• Amendment to Nat. Res. Code
The “New” T-4 Permit Process
• Create a more robust T-4 application process?– Evidentiary hearing process within the
Commission– Findings of fact and conclusions of law– Goal is to keep the permitting process within
the Commission’s domain
The “New” T-4 Permit Process
• What would a hearing at the Commission decide?– Whether third party shippers would want to use the
pipeline– Whether a public statement (i.e., tariff or
advertisement) that pipeline is available has been made
– Whether a “public use” has been established– Does the pipeline meet the legislative test to be a
“common carrier”
Legislature’s Response
• Amend Nat. Res. Code– Insulate the T-4 permitting process– Approval or denial of T-4 permit would be solely within
the jurisdiction of the Railroad Commission – Creates a process with one hearing, as opposed to
allowing multiple hearings within each county– Appeals of a T-4 permit decision would go to Travis
County District Court → Third Court of Appeals → Supreme Court
Ways to Influence the Outcome
• Engage the Commission – Follow the rulemaking– Submit comments– Don’t just say what you don’t like, but offer
constructive solutions• Contact trade associations and legislators
– House Committee on Land and Resource Management has held several hearings on the issue and needs to hear from you
QUESTIONS?