On Tuesday, August 27th, in a significant decision applying the Texas Supreme Court’s Denbury opinion, the Texarkana Court of Appeals upheld a trial court’s ruling that TransCanada Keystone Pipeline qualified as a “common carrier” and could acquire private property through eminent domain procedures in Texas. In its decision, the Court affirmed summary judgment in favor of TransCanada, holding that TransCanada had complied with the reasonable probability test set forth in Denbury. At the same time, the Court of Appeals upheld on similar grounds the denial of Crawford Family Farm Partnership’s motion to dismiss for lack of jurisdiction.

Crawford, whose land TransCanada sought to condemn, argued that TransCanada was not a common carrier because, as an interstate pipeline, it is not subject to every requirement of Chapter 111 of the Texas Natural Resources Code. The Court rejected Crawford’s argument based on the language of the statute, and held that interstate pipelines are not excluded from the definition of common carriers. It cited the recent decision by the Beaumont Court of Appeals in Rhinoceros Ventures Group, Inc. v. TransCanada Keystone Pipeline, L.P., as support for the proposition that TransCanada is a “common carrier” and that because “the Legislature did not use the words ‘interstate’ and ‘intrastate’” in the common carrier statute, it is “presumed that such terms were excluded for a reason.” 388 S.W.3d 405, 408 (Tex. App.—Beaumont 2012, no pet. hist.).

In upholding the trial court’s grant of summary judgment in favor of TransCanada, the Court of Appeals agreed that TransCanada had done “all that is required under the reasonable probability test established” in Denbury. That test focuses on whether an applicant can show a reasonable probability that the pipeline, at some point after construction, will serve the public. The Court relied on an affidavit submitted by TransCanada which stated that the pipeline would transport oil owned by third-party shippers unaffiliated with Keystone, that there were already binding agreements in place for the transportation of third-party oil, and that any shipper that complied with the FERC tariff for the pipeline could have access to the pipeline to ship its oil. The Court held that this affidavit satisfied the reasonable probability test.

As we have noted in the past, while the Denbury decision states that it is limited to the facts of that specific case, Texas courts continue to rely on Denbury’s reasonable probability test to determine whether an entity has properly claimed common carrier status. Companies seeking to exercise eminent domain should expect increased levels of scrutiny in condemnation proceedings. In this case, the Court focused on the presence of binding contracts and the future use of the pipeline by unaffiliated shippers and determined that TransCanada had satisfied the requirements of a common carrier. The case is Crawford Family Partnership v. TransCanada Keystone Pipeline, L.P., Cause No. 06-12-00113-CV.