On one hand, there's nothing terribly surprising about the Texas Supreme Court's opinion in Hlavinka v. HSC Pipeline Partnership, LLC, No. 20-0567 (May 27, 2022) holding that yes, "polymer-grade propylene" qualifies as an "oil product" under Texas statutes that allow a private pipeline company to take property to transport oil products, and that yes, a private pipeline counts as a public use. After all, the first sentence of the opinion sets the context for those of you who may not realize how important the energy industry is to that state:
Recognizing the important role that pipeline development plays in meeting our state's manufacturing and energy needs, the Legislature grants common carriers the right to condemn private property for the construction of pipelines that transport certain products.
Slip op. at 1.
But on the other hand, the very last portion of the opinion gives a hint that maybe the court is loosening up the rules about proving valuation in pipeline and other energy corridor takings.
We won't spend a lot of time on the statutory analysis ("oil product" includes polymer-grade propylene), or even on the public use issue (where the court applied precedent to conclude that as long a single member of the public is served by a private pipeline, the taking by a private common carrier is a public use), because there's not a lot new there, as we see it. You can read the court's analysis there if you are interested.
But we'd recommend reading the opinion from page 20, at least. There, the court dives into the valuation issue. Here, the owner testifed that he purchased the property to develop it as a pipeline. The land was pretty good for pipeline use (it is "directly between" two refining hubs), at least one pipeline already ran across the land at the time of the purchase, and by the time of trial, "closer to 25" pipelines criss-crossed the land. The owner sought to introduce evidence of his negotiations with other pipeline companies in the time immediately before the taking as comps.
The condemnor objected, asserting that the project rule (value resulting from the condemnation itself can't be used) meant this testimony was not admissible. The court rejected the argument, concluding that this was different - the testimony was to show the value of the property because of the condemnor's project, but because "purchasers other than HSC also value the easement's geographic qualities." Slip op. at 24.
Such a valuation is not based on value HSC created by its interest, but instead is based on the value of the easement were the Hlavinkas to sell it to another ready and willing market participant. The multitude of pipelines crossing the tract, including those parallel and adjacent to HSC’s pipeline—and the prices paid to secure those easements—is some evidence that the land is valuable to other pipeline carriers for its intrinsic qualities, notwithstanding HSC’s decision to condemn it.
Id.
The court distinguished "the ordinary condemnation case" in which there is no evidence of an existing market for the property interest being taken. Slip op. at 25 ("In the ordinary condemnation case, there is no credible evidence to suggest that, if the land had not been condemned, a pipeline easement could be sold to another."). But "[t]his is no ordinary condemnation case" because there are other pipeline projects (apparently this place is Pipeline Central - 25 pipelines already on the land!) and thus, a reasonable factfinder "could conclude that the [owners] could have sold to another the easement that they instead were compelled to sell to HSC." Slip op. at 25.
In light of what appears to be the frequency of pipelines criss-crossing Texas, we'd expect that -- despite the court's noting this case isn't "usual" -- that our Texas colleagues are going to be seeing more of this argument.
Hlavinka v. HSC Pipeline P'ship, LLC, No. 20-0567 (Tex. May 27, 2022)
