November 30, 2013 § Leave a comment
The Beaumont Court of Appeals recently affirmed the Denbury decision in Crosstex NGL Pipeline, LP v. Reins Road Farms-1, Ltd. Again, the common carrier status of a pipeline was placed under scrutiny. Crosstex’s pipeline at issue was to transport natural gas liquids (NGLs). The Natural Resources Code provides common carrier status for crude petroleum pipelines. The court distinguished between a substance in its natural state and NGLs, which can only be derived by processes above the wellhead. Therefore, NGLs did not fall within the meaning of crude petroleum and common carrier status under this statute was not attained. The Beaumont Court of Appeals then analyzed whether the pipeline met the public use requirement under the Texas Business Organizations Code to be a common carrier. Using the Denbury analysis, the Beaumont Court of Appeals agreed the trial court could properly find the pipeline lacked sufficient public use to qualify as a common carrier. The important point to highlight is that Denbury’s guidelines for proving common carrier status appears applicable to more than just pipelines that transport carbon dioxide.  Crosstex NGL Pipeline, L.P. v. Reins Road Farms-1, Ltd., No. 09-12-00563-CV, 2013 WL 2250747, at *5 (Tex. App.—Beaumont May 23, 2013, no pet. h.).  Id. at *1.  Id. at *3-4.  Id. at *4.  Id.  Id. at *6 (noting, like Denbury, that Crosstex’s website was inconsistent with the evidence presented on common carrier status).
November 30, 2013 § Leave a comment
Changes in the evaluation of rural recreational development are best exemplified through the case of LaSalle Pipeline, LP v. Donnell Lands, L.P. To fuel electricity demands in South Texas, LaSalle Pipeline, LP (“LaSalle”), a gas utility corporation, sued to condemn an easement for a sixteen-inch gas pipeline running a total of 4.4 miles across the 8,034 acre Donnell Family Ranch and for another pipeline easement extending about 1,400 feet across a 46 acre tract. The special commissioners appointed in the case awarded the Donnells $226,000 in total compensation for the pipeline easements, to which the Donnells objected.
At trial, Philip McCormick (the Donnells’ appraiser), whose opinion was based on paired sales data from both McMullen and Webb Counties, testified that the existence of the pipeline and the permanent easements diminished the market value of the two tracts. McCormick justified his use of the sales in Webb County as relevant because, like the subject property, they were South Texas ranch lands with the highest and best use of rural recreational and agricultural land.
Although, on average, the paired sales used by McCormick reflected an approximately 20% diminution in the value, he damaged the tracts at 10% and 25%. McCormick testified that the first tract would suffer a 10% decrease in value due to the pipeline, and the second, smaller, tract, would experience a 25% decrease in value, concluding that the damages for the diminution in value to the remainder totaled $843,490. LaSalle’s appraiser testified that there were no damages to the remainder due to the pipeline and permanent easements. After considering these facts, the jury awarded the Donnells a total compensation of $658,689, which included an award of $604,950 for damages to the remainder of their property.
LaSalle appealed to the San Antonio court of appeals arguing that the damages awarded by the jury were not supported by legally or factually sufficient evidence, primarily challenging McCormick’s value opinion for the remainder damages was based on sales outside of McMullen County. The San Antonio court of appeals upheld the jury award, including the compensation awarded for remainder damages. In doing so, the Court granted appraisers great latitude in determining how to calculate the amount of remainder damages in two important ways. First, the Court confirmed that appraisers could expand the area in which their paired sales are located, noting that paired sales need not be from the same county. Second, appraisers’ data did not have to precisely mirror the value opinions they offer. Relying on Gammill v. Jack Williams Chevrolet, Inc., the Court affirmed that expert testimony is unreliable if there is too great an analytical gap between the data and the opinion proffered.
The Court held that the gap between McCormick’s data and his opinion was not too great to invalidate his opinion because: (1) the opinion he offered (10% and 25% damage) was in close proximity to the 20% damage that his data showed, (2) he offered an explanation as to why there was a difference between his data and his conclusion, and (3) the jury’s award was substantially below McCormick’s total damage estimate.
LaSalle represents a major win for Texas landowners and a setback for the energy companies that are eager to transport the newly discovered natural gas produced from the Eagle Ford Shale in South Texas across large recreational ranches. Although LaSalle did not apply strict standards to the admissibility of appraisers’ testimony, it did set out some guidelines for appraisers to follow. To ensure that their testimony is admissible, appraisers should adhere to the following:
1) If the appraiser uses any comparable or paired sales outside the immediate vicinity (or county) of the subject property, he or she should be prepared to demonstrate that the sales have similar characteristics to the subject property.
2) If there are any gaps between the appraiser’s data and the opinion he or she offers, he or she should be able to explain why the gaps exist.
 LaSalle Pipeline, LP v. Donnell Lands, L.P., 336 S.W.3d 306 (Tex. App.—San Antonio 2010, pet. denied).  Id. at 310.  Id. at 309.  Id. at 310-11.  Id.  Id. at 311.  Id.  Id. at 316.  Id. at 309.  Id. at 315-16.  Id. at 321.  See id. at 317-18.  See id. at 316; see also City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 182 (Tex. 2001) (“Comparable sales need not be in the immediate vicinity of the subject property, so long as they meet the test of similarity”).  See LaSalle, 336 S.W.3d at 318.  Id. at 317; Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998).  LaSalle, 336 S.W.3d at 317-18.
October 29, 2012 § Leave a comment
The chairman of the Texas Railroad Commission, Barry Smitherman, spoke about the benefits of the Keystone pipeline at the energy conference hosted by the Greater Houston Partnership last weekend. In his speech, he mentioned the immense amount of profit possible from investment in the line. But who is making all the profit? Definitely not the landowner whose land is condemned so that a private company can install a hazardous pipeline for the transport of oil from tar sands in Canada. Whenever the issue of eminent domain has come up in relation to the Keystone XL pipeline or to energy expansion in general, the landowner’s rights have been swept under the rug. The best way to fight for your rights is to know them (jmehcondemnation.com). Once we know our rights, protests against condemnation will evolve into civil litigation in favor of the landowner. But to get to this point, we must understand our rights as landowners in the face of eminent domain proceedings.