“What’s in the Pipeline,” an article in Vol. 79 of the Texas Bar Journal, raises concerns about speculative and allegedly inaccurate land valuation in condemnation cases involving pipelines. Although the authors correctly point out that City of Harlingen v. Estate of Sharboneau prohibits fact-finders from considering speculative future uses and developments when valuing a property for damages, they fail to mention that “the objective of the judicial process in the condemnation context is to make the landowner whole.” Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 625 (Tex. 2002) (citing Tex. Const. Article I) (emphasis added). In order to ensure that this occurs, the law requires every factor that may influence a willing buyer and willing seller in a market transaction be considered, including the highest and most profitable use of the property. See State v. Windham, 837 S.W.2d 73, 77 (Tex. 1992) (“In deciding the market value, the jury is permitted to consider all of the uses to which the property is reasonably adaptable and for which it is, or in all reasonable probability will become, available within the foreseeable future.”) (emphasis added).
The authors’ suggestion that the admission of all the uses to which a property is reasonably adaptable “creates more uncertainty for the oil and gas industry” is misplaced. As part of a highest and best use analysis, expert appraisers are required to conduct a careful investigation of all available uses to which a property may be put. The Appraisal Institute’s definition of highest and best use is “the reasonably probable use of property that results in the highest value.” The Appraisal of Real Estate 332 (14th ed., Chicago: Appraisal Institute 2013) (emphasis added). Under this definition, a property may have several available uses and purposes, but only one use that results in the highest value.
Despite the authors’ criticism of the Fort Worth and San Antonio Courts of Appeals’ pipeline opinions in Crosstex DC Gathering Co., J.V. v. Button and LaSalle Pipeline, LP v. Donnell Lands, L.P., the United States Supreme Court has made clear that an “owner must be compensated for what is taken” which includes the “fair market value for all available uses and purposes.” United States v. Chandler-Dunbar Water Power Co., 229 U.S. 53, 81 (1912) (emphasis added). Following this same basic principal, the Texas Supreme Court made clear that “our Constitution and law enshrine landownership as a keystone right, rather than one ‘relegated to the status of a poor relation.’” Tex. Rice Land Partners v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d 192, 204 (Tex. 2012) (citing John Locke, Second Treatise of Government Ch. IX, §124 (C.B. McPherson ed., Hackett Publishing Co. 1980) (1690). Simply put, when delegated the power of eminent domain, pipeline companies must compensate landowners for the highest value for what is taken — not the value that satisfies a “budget for future infrastructure projects.”