The issue in this case, Right-Way Sand Co. v. S. Tex. Pipelines LLC, No. 01-23-00573-CV, 2024 WL 1862861 (Tex. App.—Houston [1st Dist.] Apr. 30, 2024, pet. filed) was whether South Texas Pipelines LLC (“STX”), a subsidiary of Enterprise Products Partners L.P., had the power of eminent domain to condemn an easement across the appellants’ (“Landowners”) land for a new pipeline to transport polymer grade propylene (PGP).
STX filed suit against the Landowners seeking to exercise statutory power to condemn an easement. In response, the Landowners challenged STX’s power to condemn, arguing that the PGP that STX sought to transport was not a substance qualifying for the power of eminent domain granted to pipelines under Texas statutes.
In Hlavinka v. HSC Pipeline P’ship, LLC, 650 S.W.3d 483, 494 (Tex. 2022), the Texas Supreme Court held that PGP is an “oil product” qualifying for statutory condemnation authority under section 2.105 of the Business Organizations Code because it is derived from crude oil. The Landowners sought to distinguish Hlavinka arguing that the PGP in Hlavinka which was derived from the catalytic fracturing and distillation of oil, whereas the PGP that STX would transport “might” come from the dehydrogenation of propane from a gas well rather than from crude petroleum or oil.
The appellate court rejected the Landowners’ argument, reasoning that Tex. Nat. Res. Code §111.019 provides the power of eminent domain in relation to “crude petroleum,” which the Hlavinka court held includes natural gas liquids. The court also cited to several definitions under Tex. Nat. Res. Code § 115.001(3), (5), and (7)(X), and concluded that the PGP produced by processing gas from a gas well through dehydrogenation would constitute a “petroleum product” since that phrase includes “liquid … derived from … gas.” Further, because these definitions define “oil” as including “crude petroleum oil,” and because PGP is a “petroleum product,” in the court’s view PGP produced from dehydrogenated gas would also necessarily be an “oil product’ under section 2.105 of the Business Organizations Code.
