Opinion issued May 17, 2016




                                     In The

                              Court of Appeals
                                    For The

                         First District of Texas
                            ————————————
                             NO. 01-15-00266-CV
                           ———————————
                UNOCAL PIPELINE COMPANY, Appellant
                                       V.
       BP PIPELINES (ALASKA) INC., CONOCO PHILLIPS
  TRANSPORTATION ALASKA, INC., AND EXXONMOBIL PIPELINE
                       CO., Appellees


                   On Appeal from the 165th District Court
                           Harris County, Texas
                     Trial Court Case No. 2013-06244A


                                 OPINION

      Appellant, Unocal Pipeline Company (“Unocal”), filed a suit for declaratory

judgment seeking resolution of controversies arising from its withdrawal from the

Trans-Alaska Pipeline System and the accompanying Trans-Alaska Pipeline
System Agreement. Unocal and the appellees, BP Pipelines (Alaska) Inc., Conoco

Phillips Transportation Alaska, Inc., and ExxonMobil Pipeline Co. (“the

Remaining Owners”) filed cross-motions for summary judgment regarding

interpretation of the transfer provisions in the agreement. On appeal, Unocal argues

that the trial court erred in its construction of the transfer provisions in the

agreement and in concluding that other portions of the dispute were not ripe.

      We reverse the trial court’s judgment and render in part and remand in part.

                                   Background

      In 1970, a group of oil companies including the Remaining Owners and

Unocal or their corporate predecessors entered into a series of agreements for the

purpose of constructing, operating, and maintaining the Trans-Alaska Pipeline

System (“TAPS”) for bringing oil from the Prudhoe Bay area of Alaska to the City

of Valdez, Alaska. The parties first procured a series of lease agreements with the

United States, the State of Alaska, and private individuals to secure easements and

rights-of-way for constructing TAPS. The parties agree that, specifically relevant

to the present dispute, the right-of-way agreement with the United States

government provided for a dismantlement, removal, and restoration requirement

(“DR&R obligation”):

      [U]pon the completion of use of all, or a very substantial part, of the
      Right-of-Way . . . Permittees shall promptly remove all improvements
      and equipment, except as otherwise approved in writing by the
      Authorized Officer, and shall restore the land to a condition that is


                                         2
      satisfactory to the Authorized Officer or at the option of Permittees
      pay the cost of such removal and restoration.”

Additionally, the leases, including the Trans-Alaska Pipeline Agreement itself,

generally contain obligations for dismantling and removing the pipeline and

restoring the land to some extent.

      The federal right-of-way lease also contains provisions governing transfers

of the rights and obligations under the right-of-way. Section 22 of that lease

provides that the “Permittees,” including Unocal, cannot transfer any of their

interests under the lease without obtaining prior written consent from the

government and that, to obtain such consent, the transferee must demonstrate that

it is capable of performing all of the liabilities and obligations of the transferor

relating to the interest to be transferred. Section 22.G provides:

      A Permittee seeking to be divested in whole or in part of its right, title,
      and interest in and to the Right-of-Way and this Agreement in
      connection with a Transfer shall be released from its liabilities and
      obligations (accrued, contingent, or otherwise) to the United States
      under this Agreement to the extent and limit that the Transferee
      assumes unconditionally the performance and observance of each
      such liability and obligation, provided:

             (1) All provisions of this Agreement with respect to the
             approval or disapproval of the Transfer have been fully
             complied with to the satisfaction of the Secretary;

             (2)    The Secretary has consented in writing to the Transfer;
             and

             (3) Thereafter the Transfer and the attendant assumption
             agreement, if any, are in fact duly consummated on the basis of


                                           3
             the documents previously presented to the Secretary for his
             review, and the Secretary is so notified in writing by the parties
             to the Transfer.

      Subsequently, in 1970, the parties entered into an agreement governing the

design, construction, ownership, maintenance, and expansion of TAPS (the “TAPS

Agreement”). Relevant to the dispute here, Article III of the TAPS Agreement

addressed the ownership of TAPS. Section 3.1 provides that

      TAPS (including but not limited to all fee titles, easements, leases,
      permits, rights-of-way and other interest in land) shall be owned by
      the Parties hereto with each Party’s undivided interest in TAPS . . .
      being equal to its percentage of ownership (“Percentage of
      Ownership”) in TAPS as set forth [in this section].

Section 3.4 sets out ownership of Record Title to certain land rights, providing,

      All land rights, including but not limited to fee titles, easements,
      leases, permits, rights-of-way and other interests in land, required for
      the design, construction, operation and maintenance of TAPS shall be
      conveyed to or acquired for the Parties. . . . All instruments and
      conveyances evidencing such land rights or the trust instruments
      relating thereto shall indicate each Party’s respective interest therein
      which interest will be the Party’s Percentage of Ownership as it
      appears in [this section].

      Article VII of the TAPS Agreement governs transfers of interest in TAPS.

Section 7.2 provides for a preferential right to purchase, stating that

      An OWNER may sell, transfer or otherwise dispose of all or any part
      of its undivided interest in TAPS but only by a sale for cash and only
      after offering such interest to all other OWERNS who are hereby
      granted the preferential right to purchase such interest (but not a lesser
      or different interest) on the same terms offered by or to any bona fide,
      prospective purchaser, who is ready, willing and able to purchase
      same.


                                           4
It then sets out the mechanism for effectuating the preferential right of purchase. It

provides, in relevant part:

      If more than one OWNER desires to join in the purchase of such
      interest then, unless otherwise agreed by the purchasing OWNERS,
      all such OWNERS shall purchase the same proportionately in the ratio
      that their Percentage of Ownership in TAPS prior to said purchase
      bear to each other.

      Section 7.8 governs transfers to successors and assigns. It provides, in

relevant part:

      Any transfer of an undivided interest in TAPS shall be subject to this
      Agreement and shall require the transferee to assume all of the
      obligations of an “OWNER” and a Party under this Agreement and all
      commitments made pursuant hereto and its proportionate part of all
      costs and expenses of TAPS. Any such transferee shall be deemed to
      be an OWNER and a Party under this Agreement upon (i) the
      execution by such transferee of a Ratification Agreement confirming
      and adopting this Agreement and (ii) the execution of an Enabling
      Agreement by a Parent Corporation, if any, of such transferee.

      Article VIII of the TAPS Agreement sets out the term of the Agreement,

including the discontinuance of operation by a party. It states that the original term

was for thirty years, to be followed by five-year renewal terms. The original term

began July 31, 1977, and ran until July 31, 2007.

      Section 8.1 states, “If, at the end of any Agreement Term, less than two

Parties desire to continue operations hereunder, this Agreement shall terminate.”

      Section 8.2 provides for the “Discontinuance of Operations by One or More

Parties,” and its provisions apply “[i]f at the expiration of any Agreement Term,



                                          5
any one or more of the Parties hereto desire to discontinue operations hereunder

and any two Parties hereto desire to continue operations hereunder[.]” Section

8.2(b) sets out the notice requirements. Section 8.2(c) provides:

      Upon the completion of all transfers and undivided interests in TAPS,
      the Parties desiring to continue operations hereunder shall formally
      amend Table I in Section 3.1 of this Agreement [setting out
      percentages of ownership interests] to reflect the Percentages of
      Ownership in TAPS each has acquired from the Party or Parties
      desiring to discontinue operations.

      Section 8.2(d), entitled “Rights of Parties—Determination of Salvage

Value” provides:

      The Parties desiring to continue operations hereunder may do so
      following the applicable Agreement Term, but the Party or Parties
      who have elected not to continue operation hereunder shall not be
      charged with any part of the expenses, costs and liabilities thereafter
      incurred in the operation, maintenance and repair of TAPS except as
      provided in subsection (f) hereof, and such Party or Parties
      discontinuing operations hereunder shall not be entitled to accept any
      further tenders of shipment. All Parties owning an interest in TAPS
      shall endeavor mutually to agree within sixty (60) days after
      termination of the applicable Agreement Term, upon the reasonable
      net salvage value of the TAPS properties, including transferable
      interest in land, material, equipment and all other items of value
      (herein called “Net Salvage Value”), and if such Parties are unable to
      mutually agree upon such salvage value within the time fixed, then the
      matter shall be submitted to arbitration, using the procedure set forth
      in Section 11.1 hereof.

      Section 11.1, entitled “Arbitration Procedure,” applies whenever “[a]

determination of Net Salvage Value” pursuant to Subsection (d) of Section 8.2 is to

be made. In that event, “within ten (10) days after it has been determined that the



                                          6
Parties cannot mutually agree upon the Net Salvage Value, the Party or Parties

desiring to discontinue operations shall select one arbitrator and the Parties

desiring to continue operations hereunder shall select another arbitrator.” Those

arbitrators then select a third. Section 11.1 further provides:

      It shall be the duty of the arbitrators promptly to arrive at a decision as
      to Net Salvage Value or Salable Value, as the case may be, and the
      decision of any two of said arbitrators in writing shall be binding upon
      all Parties hereto.

      Section 8.2(e), entitled “Conveyance to Parties Desiring to Continue

Operations,” provides:

      Upon establishing the Net Salvage Value as above provided, the
      Parties desiring to continue operations shall pay to the Party or Parties
      desiring to discontinue operations its or their proper proportion of
      such Net Salvage Value (such proper proportion being determined as
      to each Party desiring to discontinue operations hereunder by
      multiplying such Party’s Percentage of Ownership times the Net
      Salvage Value) and upon receipt of such payment, such Party or
      Parties shall convey to the purchasing Parties all of its or their interest
      in TAPS and all rights in connection therewith. Such conveyance shall
      contain a special warranty of title, shall be made subject to this
      Agreement and shall require the transferees to assume the obligations
      accruing under this Agreement subsequent to the last day of the
      Agreement Term during which such Party or Parties made the election
      to discontinue operations hereunder as to the interest covered thereby,
      each transferee severally assuming such obligations insofar as they
      relate to the interest acquired by it. . . .

Section 8.2(f) provides for a sale to a third party in lieu of acceptance of the Net

Salvage Value.




                                           7
      Section 8.3 provides for the disposition of properties upon termination of the

TAPS Agreement. It provides, in relevant part, “Upon termination of this

Agreement, TAPS shall be either continued in operation by the Parties under a new

agreement, sold in place for continued operation or salvage by others, or salvaged

by the Parties as they may agree unanimously.”

      The parties also entered into an operating agreement in 1977 which

expressly integrated the TAPS Agreement, stating “This Operating Agreement and

the TAPS Agreement constitute the entire agreement between Owners as to the

design, construction, ownership, expansion, operation and maintenance of the

System.” (“TAPS Operating Agreement”). Section 13 of the TAPS Operating

Agreement provides:

      Successors and Assigns. Owners agree with each other that so long as
      this Operating Agreement remains in force and effect, all sales or
      other transfers or assignments of interests in the System must be made
      pursuant to the provisions of the TAPS Agreement and shall be made
      subject to this Operating Agreement. All obligations and liabilities of
      the selling Owner shall be assumed by the purchaser in the same
      manner as obligations and liabilities under the TAPS Agreement.
      Such purchaser shall be required to execute a ratification of this
      Operating Agreement and shall thereafter be one of the Owners
      hereunder for all purposes contemplated by this Operating Agreement.
      The rights, duties and responsibilities of Operator under this
      Operating Agreement shall not be assignable without the consent of
      all Owners except as herein expressly authorized.

      Pursuant to section 8.1 of the TAPS Agreement, Unocal gave notice of its

intent to withdraw from TAPS at the end of the Agreement Term ending July 31,



                                         8
2012. After it issued its withdrawal notice, the Remaining Owners elected to

continue without Unocal. However, Unocal was unable to complete its withdrawal

due to disputes between it and the Remaining Owners regarding key aspects of the

TAPS Agreement. These included the inability to agree upon the Net Salvage

Value (“NSV”) of Unocal’s undivided interest in TAPS; a dispute over the intent

of the TAPS Agreement with respect to whether the DR&R obligation in the

rights-of-way agreements subject to the TAPS Agreement transfer to the

Remaining Owners or remain with the withdrawing owner; and a dispute over

whether Unocal is required to pay the Remaining Owners its portion of the NSV if

the value is negative.

      To receive a release from the United States and Alaska for its proportionate

share of the DR&R obligation outlined in the rights-of-way agreements, Unocal

filed a declaratory judgment suit seeking a declaration that when it ceases

operations and reverts its ownership to the Remaining Owners, it also transfers the

DR&R obligation. Unocal also sought a declaratory judgment regarding the

construction of section 8.2(e) of the TAPS Agreement, which it calls the “shall

pay” provision. It sought a declaration that section 8.2(e) provides for the

Remaining Owners to pay it in the event of a positive NSV, but no payment is

required by either party in the event of a negative NSV.




                                         9
      The parties filed cross-motions for summary judgment on this issue, and the

trial court granted the Remaining Owners’ motion. It determined that the TAPS

Agreement does not transfer to the Remaining Owners or require the Remaining

Owners to assume the DR&R obligation undertaken by Unocal in the right-of-way

leases. The trial court subsequently granted summary judgment in favor of the

Remaining Owners on the “shall pay” claim, reasoning that the issue was not ripe

because the NSV of Unocal’s interest in TAPS had not yet been determined. It

dismissed Unocal’s declaratory judgment claim on that issue for want of

jurisdiction. This appeal followed.

                                Standard of Review

A.    Summary Judgment

      We review the trial court’s grant of a summary judgment de novo. Tex. Mun.

Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d 184, 192 (Tex. 2007);

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To prevail on

a traditional summary judgment motion, the movant bears the burden of proving

that no genuine issues of material fact exist and that it is entitled to judgment as a

matter of law. TEX. R. CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc.

v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

      When both parties move for summary judgment on the same issues and the

trial court grants one motion and denies the other, we review both parties’



                                         10
summary judgment evidence and determine all questions presented. Dorsett, 164

S.W.3d at 661; FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872

(Tex. 2000). Each party bears the burden of establishing that it is entitled to

judgment as a matter of law. City of Santa Fe v. Boudreaux, 256 S.W.3d 819, 822

(Tex. App.—Houston [14th Dist.] 2008, no pet.); see also TEX. R. CIV. P. 166a(c)

(“The judgment sought shall be rendered forthwith if . . . there is no genuine issue

as to any material fact and the moving party is entitled to judgment as a matter of

law on the issues expressly set out in the motion or in an answer or any other

response.”). If we determine that the trial court erred, we render the judgment that

the trial court should have rendered. Dorsett, 164 S.W.3d at 661; FM Props., 22

S.W.3d at 872. If the trial court’s order does not specify the grounds for its

summary judgment ruling, we affirm the summary judgment if any of the theories

presented to the trial court and preserved for appellate review are meritorious. See

Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003).

B.    Declaratory Judgment

      Declaratory judgments rendered by summary judgment are reviewed under

the same standards that govern summary judgments generally. Hourani v. Katzen,

305 S.W.3d 239, 248 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). Under

the Uniform Declaratory Judgments Act (“UDJA”), a person whose rights, status,

or other legal relations are affected by a statute or contract may have a court



                                        11
determine any question of construction or validity arising under the statute and

may obtain a declaration of his rights under that instrument. TEX. CIV. PRAC. &

REM. CODE ANN. § 37.004(a) (Vernon 2015); Guthery v. Taylor, 112 S.W.3d 715,

720 (Tex. App.—Houston [14th Dist.] 2003, no pet.). We review declaratory

judgments under the same standards used for other judgments and decrees and look

to the procedure used to resolve the issue at trial to determine the appropriate

appellate standard of review. Guthery, 112 S.W.3d at 720; see also TEX. CIV.

PRAC. & REM. CODE ANN. § 37.010 (Vernon 2015) (“All orders, judgments, and

decrees under this chapter may be reviewed as other orders, judgments, and

decrees.”). Because, in this case, the trial court resolved the case on competing

summary judgment motions, we review the propriety of the trial court’s denial of

the declaratory judgment under the same standards we apply to the summary

judgments. See Guthery, 112 S.W.3d at 720.

C.    Contracts

      We construe written contracts to give effect to the parties’ intent expressed

in the text of the contract “as understood in light of the facts and circumstances

surrounding the contract’s execution, subject to the limitations of the parol-

evidence rule.” Americo Life, Inc. v. Myer, 440 S.W.3d 18, 22 (Tex. 2014) (citing

Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d

462, 469 (Tex. 2011)). We construe the parties’ intentions as expressed in the



                                        12
document, considering the entire writing and attempting to harmonize and give

effect to all of the contract’s provisions with reference to the whole agreement.

Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 311–12 (Tex. 2005).

“We construe contracts ‘from a utilitarian standpoint bearing in mind the particular

business activity sought to be served’ and ‘will avoid when possible and proper a

construction which is unreasonable, inequitable, and oppressive.’” Id. at 312;

accord Ace Ins. Co. v. Zurich Am. Ins. Co., 59 S.W.3d 424, 428 (Tex. App.—

Houston [1st Dist.] 2001, pet. denied). If, after the rules of construction are

applied, the contract can be given a definite or certain legal meaning, it is

unambiguous and we construe it as a matter of law. Frost Nat’l Bank, 165 S.W.3d

at 312.

      Summary Judgment on Assumption of Unocal’s DR&R Obligation

      In its first and second issues, Unocal argues that the trial court erred in

determining that the Remaining Owners were not required to assume Unocal’s

DR&R obligation. It argues that the trial court should have denied the Remaining

Owners’ motion for summary judgment on this issue and granted its own summary

judgment seeking a declaration that the TAPS Agreement unambiguously requires

the Remaining Owners to assume unconditionally the obligations to perform or pay

for the DR&R of TAPS arising their acquisition of Unocal’s undivided interest in

TAPS.



                                        13
      Specifically, Unocal argues that section 8.3 of the TAPS Agreement

expressly contemplates incorporation of the DR&R obligation from the rights-of-

way agreements by providing for salvage at the termination of the TAPS

Agreement. It also argues that section 7.8 of the TAPS Agreement, which provides

that “in any transfer, all obligations must transfer with the interest,” applies here.

The Remaining Owners argue, to the contrary, that Texas law requires that the

DR&R obligation must “be located somewhere within the TAPS Agreement itself”

in order to require that they assume that obligation as part of the transfer of

Unocal’s interest. They assert that the DR&R obligations are not part of the TAPS

Agreement but were “created in separate Right-of-Way leases that are not named

in the TAPS Agreement, much less ‘plainly referenced’ with the specificity that

Texas law demands.”

      We conclude that the Remaining Owners’ argument ignores the basic nature

of the owner’s interest in TAPS, as set out in section 3.1 of the TAPS Agreement

and in section 13.1 of the TAPS Operating Agreement incorporated therein, and

the TAPS Agreement’s provisions regarding the calculation of the NSV and the

allocation of salvage operations to the owners upon termination of the TAPS

Agreement.

      Under the terms of the TAPS Agreement, the paragraph governing the

dispute between the parties here is section 8.2(e), addressing conveyance of a



                                         14
withdrawing owner’s interest in TAPS to parties desiring to continue operations.

Under Section 8.2(e), when a party desires to discontinue operations, as Unocal is

seeking to do here, the parties must establish the NSV. Unocal’s undivided interest

in TAPS cannot be transferred to the Remaining Owners until that is done and the

necessary payment is made. Then, section 8.2(e) provides that Unocal, as the

withdrawing party, “shall convey to the purchasing Parties all of its . . . interest in

TAPS and all rights in connection therewith.”

      Section 3.1 of the TAPS Agreement provides that the Owners own an

undivided interest in TAPS, including an interest in “all fee titles, easements,

leases, permits, rights-of-way and other interests in land, required for the design,

construction, operation and maintenance of TAPS,” with each party’s interest

being equal to its percentage of ownership in TAPS. The federal right-of-way

agreement containing the DR&R obligation is an interest in land. Thus, pursuant to

section 3.1, the right-of-way is owned by the Owners in common, with each

Owner’s share being proportionate to its share of the entire value of TAPS as set

out in Article III of the TAPS Agreement.

      The rights-of-way were essential to the creation of TAPS, and the TAPS

Agreement recognizes this by providing, in section 3.1, that “TAPS (including but

not limited to all fee titles, easements, leases, permits, rights-of-way and other

interest in land) shall be owned by the Parties hereto with each Party’s undivided



                                          15
interest in TAPS . . . being equal to its percentage of ownership (“Percentage of

Ownership”) in TAPS as set forth [in this section].” (Emphasis added). The TAPS

Agreement likewise provides that a transfer pursuant to section 8.2(e) transfers “all

of [the withdrawing party’s] interest in TAPS and all rights in connection

therewith.” The property rights conveyed in the federal right-of-way cannot be

separated from the accompanying obligations and must be transferred with the

TAPS interest, pursuant to the TAPS Agreement’s plain language. This reading is

confirmed by section 7.8 which provides for the transfer of all “obligations” of the

withdrawing owner as well as all rights. In addition, section 8.3 contemplates the

division of salvage costs among the Owners upon termination of the TAPS

Agreement unless some other agreement takes its place, necessarily implying that

the Owners at the time of termination will share salvage costs pro rata.

Specifically, section 8.3(d) of the TAPS Agreement provides that when the NSV of

the withdrawing Owner’s pro rata share in TAPS has been determined and paid,

Unocal, as the withdrawing party, must “convey to the purchasing Parties all of

its . . . interest in TAPS and all rights in connection therewith.”

      This reading is further confirmed by section 8.2 of the TAPS Agreement.

Sections 8.2(d) and (e) expressly provide for the determination of the NSV of the

withdrawing party’s interest at the time of the party’s withdrawal. And they

contemplate the exchange of money based on that NSV in exchange for transfer to



                                           16
the purchasing parties of “all of [the withdrawing party’s] interest in TAPS and all

rights in connection therewith.” The NSV of the withdrawing party’s interest is the

gross salvage value minus the DR&R obligation. Paragraph 8.2(d) makes it clear

that “all transferable interests in land” of the withdrawing owner are assessed in

determining NSV; and section 13.1 of the TAPS Operating Agreement, which is

incorporated in the TAPS Agreement, makes it clear that these “transferrable

interests in land” include the obligations that burden the interest, namely, the

DR&R obligation of the withdrawing party.

      Based on this same reasoning, we reject the Remaining Owners’ arguments

that the DR&R obligation under the right-of-way leases is in some way separable

from the rest of the interest in TAPS and must be dealt with separately under the

terms of the rights-of-way themselves. Nothing in the federal right-of-way

contradicts the construction of the TAPS Agreement and TAPS Operating

Agreement as set out above. Regarding transfers of rights and obligations under the

federal right of way, the federal right-of-way agreement states only that

transferring parties must obtain written consent and that transferees (like the

Remaining Owners) must demonstrate their capability to perform the transferred

obligations and liabilities. The federal right-of-way agreement provides that once

the details of a transfer are resolved among the involved parties, approved by the

relevant government entities, and the deal is consummated, “a permittee [like



                                        17
Unocal] seeking to be divested . . . of its right, title, and interest in and to the

Right-of-Way and this Agreement in connection with a transfer shall be released

from its liabilities and obligations (accrued, contingent, or otherwise) to the United

States under this Agreement to the extent and limit that the Transferee assumes

unconditionally the performance and observance of each such liability and

obligation. . . .” (Emphasis added.) The federal right-of-way agreement in no way

prevented the parties from entering into comprehensive agreements—like the

TAPS Agreement and that TAPS Operating Agreement—governing the design,

construction, ownership, operation, maintenance, and expansion of TAPS. The

TAPS Agreement and the TAPS Operating Agreement set out the rights and

obligations of the parties involved in transferring their undivided interest in TAPS.

And the federal right-of-way agreement provides a mechanism for having that

transfer recognized by the federal government.

      This does not mean, however, that by withdrawing from the TAPS

Agreement an Owner can shift all of its share of the DR&R costs onto the Owners

left when the TAPS Agreement terminates. We have already concluded that the

DR&R obligations are obligations “accruing under this [TAPS Agreement]”

pursuant to section 8.2(e). Unocal argues that the DR&R obligations have not yet

“accrued” because there is not a present and enforceable right or demand to pay

them. However, as the Remaining Owners point out, TAPS Agreement section



                                         18
8.2(e) addresses the accrual of an obligation, or an accrued liability, thus referring

to a liability or obligation that is properly chargeable in a given accounting period

but which is not yet paid or payable. See NuStar Energy, L.P. v. Diamond Offshore

Co., 402 S.W.3d 461, 469 n.9 (Tex. App.—Houston [14th Dist.] 2013, no pet.)

(discussing possible interpretation of contract provision allocating responsibility

for “liabilities” that “accrue” after particular date under contract and citing Black’s

Law Dictionary for definition of “accrued liability”). And, indeed, Unocal

acknowledges that it has followed this interpretation of the contract in its

accounting for the accrued DR&R obligations. Unocal’s argument on appeal that

the contract ought to be given a different meaning is unavailing.

      Under the plain language of Section 8.2(e) of the TAPS Agreement, the

conveyance of Unocal’s interest in TAPS “shall require the [Remaining Owners] to

assume the obligations accruing under this Agreement subsequent to the last day of

the Agreement Term during which [Unocal] made the election to discontinue

operations. . . .” (Emphasis added). The Remaining Owners, as the purchasing

parties of “the obligations accruing under this Agreement subsequent to” the

withdrawing party’s election to discontinue operations in order to effectuate the

transfer of its interests in TAPS, assume the DR&R obligation going forward after

the last day of the Agreement Term during which Unocal elected to discontinue

operations, pursuant to sections 8.2(d) and (3) of the TAPS Agreement. But Unocal



                                          19
remains accountable for the portion of the DR&R obligations that had already

accrued under the TAPS Agreement as of the last day of the Agreement Term

during which it elected to discontinue operations—obligations for which it has

already provided an accounting and received tax benefits.

      Accordingly, we hold that the trial court erred in concluding that the DR&R

obligations contained in the federal right-of-way are not transferred when a

withdrawing owner like Unocal withdraws from the TAPS Agreement and

transfers its interest to the Remaining Owners. DR&R obligations are transferred,

but the NSV due to the withdrawing party to purchase an interest thus burdened is

determined by subtracting the value of the DR&R obligation at the time of the

transfer from the gross salvage value of the interest transferred.

      We sustain Unocal’s first issue.1

                      Ripeness of the “Shall Pay” Provision

      In its fourth issue, Unocal argues that the trial court erred in concluding that

the dispute over the “Shall Pay” provision is not ripe.




1
      Because we sustain Unocal’s argument regarding the transfer of the DR&R
      obligation with the transfer of its interest in TAPS, we need not address Unocal’s
      additional argument in the alternative that the contract is ambiguous and the trial
      court erred in rendering judgment as a matter of law at the summary judgment
      phase. We likewise need not address Unocal’s third issue in which it challenges
      the trial court’s ruling regarding summary judgment evidence considered in its
      determination of the summary judgments on DR&R obligations.


                                          20
       Because it determined that the parties’ dispute over the “shall pay” provision

implicated its contractual withdrawal rights, Unocal sought a declaration from the

trial court that:

       The TAPS Agreement entitles [Unocal] to receive [its] proportion of
       Net Salvage Value if it is determined to be positive, but does not
       obligate [it] to pay any proportion of Net Salvage Value to the
       [Remaining Owners] if it is determined to be negative.

The trial court dismissed this claim, concluding that it was not ripe for

consideration because the parties had not yet submitted the issue of determining

the NSV to the arbitrators as provided for under the TAPS Agreement and thus any

judgment that the court rendered regarding a specific NSV value would be

advisory and improper.

A.     Standard of Review

       Ripeness is a component of subject matter jurisdiction and is subject to de

novo review. Robinson v. Parker, 353 S.W.3d 753, 755 (Tex. 2011); Mayhew v.

Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). Ripeness requires the

existence of a “concrete injury”—the facts must show “‘that an injury has occurred

or is likely to occur, rather than being contingent or remote.’” Robinson, 353

S.W.3d at 755 (quoting Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 852

(Tex. 2000)). The ripeness doctrine “focuses on whether the case involves

‘uncertain or contingent future events that may not occur as anticipated, or indeed

may not occur at all.’” Patterson v. Planned Parenthood, 971 S.W.2d 439, 442


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(Tex. 1998) (quoting 13A Wright et al., FEDERAL PRACTICE & PROCEDURE, § 3532

(2d ed. 1984)).

      The requirement that a claim be justiciable or ripe applies to declaratory

judgment actions. Brooks v. Northglen Ass’n, 141 S.W.3d 158, 163–64 (Tex.

2004). “The [UDJA] does not create or augment a trial court’s subject matter

jurisdiction—it is merely a procedural device for deciding cases already within a

trial court’s jurisdiction.” Anderton v. City of Cedar Hill, 447 S.W.3d 84, 94 (Tex.

App.—Dallas 2014, pet. denied). The purpose of a declaratory judgment claim is

“to settle and afford relief from uncertainty and insecurity with respect to rights,

status, and other legal relations. . . .” TEX. CIV. PRAC. & REM. CODE ANN.

§ 37.002(b) (Vernon 2015); Anderton, 447 S.W.3d at 94. However, the UDJA

“gives the court no power to pass upon hypothetical or contingent situations, or

determine questions not then essential to the decision of an actual controversy,

although such questions may in the future require adjudication.” Riner v. City of

Hunters Creek, 403 S.W.3d 919, 922 (Tex. App.—Houston [14th Dist.] 2013, no

pet.) (quoting Firemen’s Ins. Co. of Newark, N.J. v. Burch, 442 S.W.2d 331, 333

(Tex. 1968), superseded by constitutional amendment on other grounds as stated

in Farmers Tex. Cty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81 (Tex. 1997)).

      A declaratory judgment is appropriate if (1) a justiciable controversy exists

as to the rights and status of the parties and (2) the controversy will be resolved by



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the declaration sought. Brooks, 141 S.W.3d at 163–64; Tex. Dept. of Public Safety

v. Moore, 985 S.W.2d 149, 153 (Tex. App.—Austin 1998, no pet.) (citing Bonham

State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995)). A justiciable controversy

is one in which a real and substantial controversy exists involving a genuine

conflict of tangible interest and not merely a theoretical dispute. Moore, 985

S.W.2d at 153. However, “[i]t is not necessary that a person who seeks a

declaration of rights under [the UDJA] shall have incurred or caused damage or

injury in a dispute over rights and liabilities, but it has frequently been held that an

action for declaratory judgment would lie when the fact situation manifests the

presence of ‘ripening seeds of a controversy.’” Id. at 153–54 (quoting Ainsworth v.

Oil City Brass Works, 271 S.W.2d 754, 760–61 (Tex. Civ. App.—Beaumont 1954,

no writ)). Jurisdiction under the UDJA primarily depends on the nature of the

controversy—whether it is merely hypothetical or rises to the justiciable level. Id.

at 154.

B.    Ripeness of Dispute over “Shall Pay” Provision

      As stated above, section 8.2(e) of the TAPS Agreement addresses the

conveyance of a withdrawing owner’s interest in TAPS to parties desiring to

continue operations. It provides that when a party desires to discontinue operations,

as Unocal is seeking to do here, the parties must establish the NSV to effectuate




                                          23
the transfer. Unocal’s undivided interest in TAPS cannot be transferred to the

Remaining Owners until that is done and any necessary payment is made.

      To establish the NSV, section 8.2(d) provides that the parties had sixty days

after expiration of the 2012 term to agree on the NSV. Section 8.2(d) further

provides that when the parties cannot agree on the NSV—as happened here—the

issue of determining the NSV “shall be submitted to arbitration, using the

procedure set forth in Section 11.1” of the TAPS Agreement. Under section 8.2(d),

the NSV includes “transferable interests in land, material, equipment and allotment

items of value.”

      Section 8.2(e), entitled “Conveyance to Parties Desiring to Continue

Operations,” provides:

      Upon establishing the Net Salvage Value as above provided, the
      Parties desiring to continue operations shall pay to the Party or Parties
      desiring to discontinue operations its or their proper proportion of
      such Net Salvage Value (such proper proportion being determined as
      to each Party desiring to discontinue operations hereunder by
      multiplying such Party’s Percentage of Ownership times the Net
      Salvage Value) and upon receipt of such payment, such Party or
      Parties shall convey to the purchasing Parties all of its or their interest
      in TAPS and all rights in connection therewith.

Section 8.2(e) goes on to provide that the transferees shall “assume the obligations

accruing under this Agreement subsequent to the last day of the Agreement Term

during which [the withdrawing party] made the election to discontinue operations.”




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       Under the plain language of the TAPS Agreement, the determination of the

nature and amount of any payment depends upon the parties’ first establishing the

NSV. The Remaining Owners argue, and the trial court agreed, that because the

operation of section 8.2(e)’s “shall pay” clause depends on the establishment of the

NSV, this claim is not ripe until the NSV is determined through arbitration.

       We disagree. The only question to be submitted to the arbitrators is the

question of the amount of the Net Salvage Value of TAPS itself. Section 11.1 of

the TAPS Agreement does not provide for arbitration to interpret the effect of

section 8.2(e)’s “shall pay” provision, which is why Unocal has filed a declaratory

judgment seeking the Court’s interpretation of this provision. Thus, this question

presents a justiciable controversy in that it seeks an answer to a real and substantial

controversy involving a genuine conflict of tangible interest. See Moore, 985

S.W.2d at 153. Unocal has taken steps to withdraw from TAPS but has been

unable to complete the process because of a real and substantial controversy

between itself and the Remaining Owners regarding the construction of section

8.2(e) of the TAPS Agreement and the attendant rights and obligations of the

parties. This is not merely a theoretical dispute, and Unocal’s inability to complete

the withdrawal process represents a concrete injury. See Robinson, 353 S.W.3d at

755.




                                          25
      Furthermore, the controversy will be resolved by the declaration sought. The

court’s construction of section 8.2(e) will “settle and afford relief from uncertainty

and insecurity with respect to rights, status, and other legal relations” between

Unocal and Remaining Owners in light of Unocal’s withdrawal from TAPS. See

TEX. CIV. PRAC. & REM. CODE ANN. § 37.002(b); Anderton, 447 S.W.3d at 94. A

declaratory judgment construing the effect of section 8.2(e) on the parties’ rights

and obligations under the TAPS Agreement in light of Unocal’s attempts to

withdraw from TAPS provides the parties the information they need going forward

in their business dealings and in the litigation.

      The Remaining Owners argue that if the DR&R obligation is not included as

an offset, the NSV could be positive and, thus, Unocal’s issue is unripe because it

might not come to pass that the arbitrators find a negative NSV. However, we have

settled the question of whether the DR&R obligations are part of Unocal’s entire

TAPS interest that transfers pursuant to section 8.2(e). And regardless of what the

arbitrators ultimately determine to be the Net Salvage Value, it is clear from the

current dispute between the parties that section 8.2(e) must be construed to

effectuate Unocal’s withdrawal.

      In fact, the parties’ own arguments regarding the transfer of the DR&R

obligations demonstrate the necessity of the courts’ construing the terms of the

TAPS Agreement regarding Unocal’s withdrawal from operations independently



                                           26
of any NSV found by the arbitrators. In the context of their arguments seeking to

construe the transfer of the DR&R obligations, the parties bring forward competing

views of when the DR&R obligations “accrue” under the TAPS Agreement. When

the obligation “accrues” must be considered and determined as a matter of law by a

court before the valuation of the withdrawing party’s interest and obligations—

interests and obligations that will be transferred to the Remaining Owners—can be

completed by the arbitrators. We have now resolved that issue.

      We conclude that the trial court erred in determining that this issue is not

ripe for consideration. Accordingly, we reverse the trial court’s judgment to the

extent it dismissed Unocal’s claim for declaratory judgment seeking construction

of the “shall pay” provision and remand for further proceedings. See Anderton, 447

S.W.3d at 95, 98 (reversing portion of trial court judgment that erroneously

dismissed claim on ripeness grounds and remanding for further proceedings).

      We sustain Unocal’s fourth issue.




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                                   Conclusion

      We conclude that the trial court erred in rendering a declaratory judgment in

favor of the Remaining Owners regarding the transfer of the DR&R obligations

and in concluding that the “shall pay” issue was not ripe. Accordingly, we reverse

the trial court’s judgment. We render judgment declaring that the DR&R

obligations are part of a withdrawing owner’s interest in TAPS that are transferred

pursuant to section 8.2(e), and we remand Unocal’s claim seeking declaratory

judgment construing the “shall pay” provision for further proceedings consistent

with this opinion.




                                             Evelyn V. Keyes
                                             Justice

Panel consists of Chief Justice Radack and Justices Keyes and Higley.




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