Locke Lord QuickStudy: Fifth Circuit Holds the Word “Replace” in Easement Grant is Ambiguous

Locke Lord LLP
April 14, 2015
Neither the courts of Texas nor Louisiana have directly addressed the meaning of the word “replace” in the context of a pipeline easement and, in particular, whether replacement requires the removal of the old pipeline or allows abandonment in place.  On March 24, 2015, in a case of first impression, Angus Chemical Company v. Glendora Plantation, Incorporated, No. 14-30416 (2015), the U.S. Fifth Circuit held, that under Louisiana law, the term “replace” is ambiguous.  It further held that (1) the abandonment in place of the old pipeline after the installation of the new pipeline did not constitute the operation of two pipelines in violation of the grant and (2) the installation of fiber optic cables for operating the plant was within the easement’s allowance for incidental equipment and appurtenances.

The facts are relatively straight forward. Angus Chemical owned a plant and a wastewater treatment facility.  Between these two facilities, Angus’ predecessor acquired an easement and built a 12” pipeline in 1979.  After a series of leaks beginning in 2007, Angus sought permission to abandon the 12” line and to replace it with a 16” line. All landowners, except Glendora Plantation, agreed.  After fruitless negotiations, Angus filed a declaratory judgment action seeking a declaration that it could lay a 16” pipeline including fiber optic cable and abandon the 12” pipeline. 

Following institution of the suit, Angus abandoned the 12” line and laid the 16” line with fiber optics cables.  
The declaratory judgment action raised three issues regarding the easement grant: Whether the easement grant (1) permitted Angus to abandon the 12” pipeline in place, (2) authorized Angus to construct the 16” pipeline and (3) authorized Angus to install fiber optic cable.  In answering these questions, the trial court considered the language of the grant, which provided in pertinent part:

[Grantor] does hereby grant, bargain, sell and convey unto [Grantee], … its successors and assigns, … a right of way and easement with the right to construct, maintain, inspect, operate, protect, alter, repair, replace and change the size of a pipeline for the transportation of liquids, gases, solids in either singular or mixed form or any other substances which can be transported through pipelines, together with all incidental equipment and appurtenances, either above or below ground, including but not limited to filtering devices, valves, meters, drips and other necessary and convenient installations, on, over, under, across and through the following described property, along a route to be selected by the Grantee.

The trial court held Angus had the authority under the easement grant (1) to construct the 16” pipe, (2) to abandon the 12” pipeline in place and (3) to install fiber optic cables.

On appeal, the Fifth Circuit focused on whether the term “replace” implies removal of the object being replaced.  Concluding that “it is too much of a stretch to say that the Agreement is clear and unambiguous in its language when there are multiple reasonable interpretations of the implications of the word ‘replace,’” the Court held “[w] e find that there is a material fact issue as to whether the Agreement requires the removal of the 12” pipeline, and on that basis, we conclude that awarding partial summary judgment to Angus was improper. [emphasis in original]”

With respect to the issue of whether installing the 16” line and abandoning the 12” line constituted the operation of two lines (all seemed to agree that only one line was permitted by the easement), the Court, citing several dictionaries, held that “applying the accepted definitions of the terms ‘operate’ and ‘maintain,’ we conclude that … Angus is neither operating nor maintaining two pipelines.”

As to the fiber optic installation (and it seems clear that this fiber optic system was related to the plant and was not for the benefit of cable operators), the Court held Angus’ installation of the fiber optic cables was proper: 

Glendora emphasizes that the primary purpose of the fiber optic cables is to allow Angus to remotely operate the wastewater treatment plant from its main plant, while the only right Angus had was to operate a pipeline to transfer wastewater between the two plants.  This does not change the fact, however, that the fiber optic cables would give Angus the convenience of controlling the flow and pressure of wastewater running through the pipeline with the new technology… we conclude that the installation of fiber optic cables was proper under the Agreement and AFFIRM the district court’s ruling as to this issue. [emphasis in original].

Based on the holdings in this case, the careful drafter of pipeline easements may want to include a stipulation that replacement of a line requires the removal of the original line. Without that stipulation, any future dispute regarding the word “replace” will require a factually intensive examination of the surrounding facts by the court. And although in the context of this case, the Court found that Angus was not operating two pipelines, the prudent drafter may want to also include definitions for “maintain” and “operate” to foreclose future disputes regarding their meanings.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.