Ten years ago, James McAllen, owner of McAllen Ranch in Santillana, sued Forest Oil Corp. Forest had contracted use of the land from him, he said, and had buried radioactive, mercury-contaminated woodchips on his property along with other hazardous waste. 

He further claimed that in 1992, Forest donated pipes to the ranch to build a pen for some of his animals — in this case, an endangered species of rhinoceros — but the piping was similarly contaminated.  

The animals became sick, and McAllen himself contracted cancer that he blamed on exposure. One of his legs had to be amputated to control the disease.

But the company pointed to a settlement agreement McAllen had signed, which required him to arbitrate any claims connected to their use of the ranch. McAllen objected, and the subsequent suits carried them to the Texas Supreme Court (Forest Oil v. McAllen, 268 S.W.3d 51) after Forest appealed the trial and appellate judgments made against it. The Supreme Court ruled in Forest’s favor.

McAllen and Forest Oil worked with three arbitrators — one chosen by each party and the third chosen by these two. After 17 days, the arbitrators reached a split decision favoring McAllen, awarding $16 million in actual and exemplary damages and $8.5 million in attorneys fees.

McAllen filed a motion to confirm the award in trial court, but Forest fought the arbitration award before the appeals court. The company claimed that McAllen’s selection of arbiter was biased and impermissible. Ironically, Forest also claimed that the arbitration had been unlawful, as it usurped the jurisdiction of the Texas Railroad Commission, which should have had primary jurisdiction over the case.

The panel of judges ruled 2-1 in McAllen’s favor.

By Mary Ellis LaGarde

The lawsuit by the landowners is an obstacle for the phase of the pipeline that is planned from Cushing, Oklahoma to the Gulf coast of Texas. Another phase, from Alberta, Canada to Steele City, Nebraska, has been delayed by environmental concerns and still needs government approval. The finished pipeline will transport tar-sands oil from Canada to refineries on the Texas coast.

The lawsuit is being heard in the Ninth Court of Appeals in Beaumont, Texas, after District Court Judge Tom Rugg ruled against the landowners in September. A number of similar cases are making their way through the courts.

The landowners are hoping to build on the precedent of Texas Rice Land Partners Ltd. v. Denbury Green Pipeline-Texas LLC, a 2011 Texas Supreme Court case that opened the door for challenges to common-carrier status. In the Denbury case, a pipeline company tried to establish its status as a common carrier of carbon dioxide by filing an application with the Texas Railroad Commission. Landowners refused Denbury Green entry onto their land, and argued successfully in court that the company must do more to prove that it would be operating a pipeline that would be available for public use.