T.B. Farms, Ltd. v. Grand Prix Pipeline, LLC

Court of Appeals of Texas·Decided March 27, 2025·No. 01-23-00243-CV·Published

Opinion

Opinion issued March 27, 2025

In The

Court of Appeals

For The

First District of Texas

Madison County, Texas pursuant to statutory “common carrier” condemnation rights.1 See TEX. NAT. RES. CODE § 111.002. We affirm.

I. Background

An overview of the law governing common-carrier pipelines and their powers of eminent domain is useful in understanding the background to this case. Accordingly, we begin with an overview of the applicable law, followed by a summary of the facts specific to this case. A. Common-carrier pipelines “[T]he Legislature grants common carriers the right to condemn private property for the construction of pipelines that transport certain products. The Texas Constitution, however, limits the exercise of this eminent domain power to purposes that serve a ‘public use.’” Hlavinka v. HSC Pipeline P’ship, LLC, 650 S.W.3d 483, 487 & n.2 (Tex. 2022) (citing TEX. CONST. art. I, § 17(a)–(b)). “Public use” is thus a “constitutional requirement that a pipeline common carrier must fulfill to exercise eminent-domain authority.” Id. at 494.

Under the Natural Resources Code, a person qualifies as a common carrier if it “owns, operates, or manages a pipeline or any part of a pipeline in the State of

1 Pursuant to its docket-equalization authority, the Supreme Court of Texas transferred this appeal from the Tenth Court of Appeals to this Court. See Misc.

Docket No. 23-9017 (Tex. Mar. 21, 2023); see also TEX. GOV’T CODE § 73.001(a)

(authorizing transfer of cases). We are unaware of any conflict between the precedent of that court and of this Court on any relevant issue. See TEX. R. APP. P.

41.3.

Texas for the transportation of crude petroleum to or for the public for hire, or engages in the business of transporting crude petroleum by pipeline.” TEX. NAT. RES. CODE § 111.002(1). Natural gas liquids (“NGLs”)—the materials being transported through the pipeline at issue here—“are liquid hydrocarbons that fall under the umbrella of crude petroleum.” Hlavinka, 650 S.W.3d at 493 n.29.

If an entity qualifies as a common carrier, it has the power of eminent domain to condemn private property for the construction of a pipeline. “The Legislature has cultivated two sources of condemnation authority for pipelines, one in Business Organizations Code Section 2.105, and the other in Natural Resources Code Chapter 111.” Id. at 491. These statutes “provide alternative paths” under which a common carrier obtains the power of eminent domain. Id. at 492.

Under the Natural Resources Code, “[c]ommon carriers have the right and power of eminent domain,” including the right to “enter on and condemn the land, rights-of-way, easements, and property of any person or corporation necessary for the construction, maintenance, or operation of the common carrier pipeline.” TEX. NAT. RES. CODE § 111.019(a)–(b). Under the Business Organizations Code, an entity “engaged as a common carrier in the pipeline business for the purpose of transporting oil, oil products, gas, . . . liquefied minerals, or other mineral solutions has all the rights and powers conferred on a common carrier by Sections 111.019– 111.022, Natural Resources Code.” TEX. BUS. ORG. CODE § 2.105.

Like all condemning authorities, common-carrier pipelines must follow the procedures set out in Chapter 21 of the Texas Property Code to condemn property. See TEX. PROP. CODE § 21.011; Amason v. Nat. Gas Pipeline Co., 682 S.W.2d 240, 242 (Tex. 1984). Chapter 21 establishes a “two-part procedure involving, first, an administrative proceeding, and then if necessary, a judicial proceeding.” Id. at 241. In the administrative phase, the condemning authority is required to make various disclosures and then to make a bona-fide offer to the landowner to acquire the property voluntarily. See TEX. PROP. CODE §§ 21.0111–.0113.

If the condemnor and the landowner cannot agree on damages for a voluntary taking, the condemnor must file a condemnation petition in the appropriate court. See id. §§ 21.012–.013. The trial court then appoints three disinterested real-property owners who reside in the county as special commissioners, and the special commissioners conduct hearings, assess damages, and file an award reflecting their opinion of the value of the land to be taken. See id. §§ 21.014–.016. If satisfied with the special commissioners’ award, the condemnor can pay the amount to the landowner or deposit that amount into the registry of the court. See id. § 21.021(a).

Any party to the condemnation proceedings can object to the special commissioners’ award by filing a written objection in the trial court. See id. § 21.018(a). Filing a timely objection vacates the special commissioners’ award

and converts the administrative proceeding into a judicial one, with the condemnor as plaintiff and the landowner as defendant. Amason, 682 S.W.2d at 242. In that event, the trial court must “cite the adverse party and try the case in the same manner as other civil causes.” TEX. PROP. CODE § 21.018(b).

During this judicial phase of the condemnation proceedings, “the condemnor may take possession of the condemned property pending the results of further litigation if the condemnor”: (1) pays the landowner the amount awarded by the special commissioners or deposits that amount into the registry of the court; (2) deposits a surety bond into the registry of the court to cover any damages that may be awarded by the court in excess of the amount awarded by the special commissioners; and (3) executes a bond to cover any additional costs that may be awarded to the landowner. Id. § 21.021(a). B. The Grand Prix pipeline The pipeline at the center of this case is the Grand Prix pipeline (“the Pipeline”). It is an approximately 720-mile pipeline that transports NGLs across the state, from the Permian Basin area of west Texas to Mont Belvieu.

The Pipeline was originally owned and operated by Targa NGL Pipeline Company, LLC (“Targa NGL”), an affiliate of Targa Resources Corp. Targa NGL applied for and received the necessary permits from the Texas Railroad Commission for construction and operation of the pipeline, including a T-4 permit

classifying the pipeline as a common carrier.2 With the Railroad Commission’s approval, Targa NGL later transferred all of the Pipeline’s mileage to another Targa affiliate, Targa Downstream LLC, as the operator of the pipeline, and to Appellee Grand Prix Pipeline, LLC (“Grand Prix”) as the owner and economic operator of the pipeline. Grand Prix is a joint venture between Targa Resources and Blackstone Energy Partners. Targa Downstream constructed the pipeline and now runs its day-to-day operations, and Grand Prix is the owner of the pipeline.

Grand Prix filed tariffs with both the Railroad Commission and the Federal Energy Regulatory Commission setting forth the rules and regulations under which it would accept product for transport through the Pipeline. Both tariffs state that “[b]y nominating Product, the Shipper warrants and guarantees that the Shipper has good title to all Product tendered and delivered hereunder and agrees to hold Carrier harmless for any and all loss, cost, liability, damage and/or expense resulting from failure of title thereto.” Grand Prix also has reserved five percent of the Pipeline’s capacity for unaffiliated “walk up” shippers seeking to transport permissible NGLs under the terms and conditions of its tariffs.

2 A T-4 permit is a document issued by the Railroad Commission that generally allows pipeline operators to install and operate intrastate pipelines in Texas. See 16 TEX. ADMIN. CODE § 3.70(a). Upon issuance, it reflects the pipeline operator’s requested classification as a common-carrier line, a private line, or a gas-utility line. See id. § 3.70(b)(2). Applications for a T-4 permit must be supported by “a sworn statement from the pipeline applicant providing the operator’s factual basis supporting the classification.” Id. § 3.70(b)(3).

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