Tips for Negotiating Pipeline Rights of Way
- [Voiceover] Tips for Negotiating Pipeline Rights-of-Way.
A pipeline right-of-way is a strip of land over and around natural gas pipelines, with some of the property owner's legal rights have been granted to a pipeline operator.
A right-of-way agreement between the pipeline company and the property owner is also called an easement, and is usually filed in the county Register and Recorder's Office with property deeds.
Rights-of-way and easements provide a permanent limited interest in the land and enables the pipeline company to install, operate, test, inspect, alter, repair, maintain, replace, and protect one or more pipelines within a designated easement.
The agreement may vary the rights and widths of the pipeline right-of-way, but generally the pipeline company's rights-of-way extend 25 feet from each side of a pipeline unless special conditions exists.
These easements can be both permanent and temporary, with temporary easements granting the pipeline company additional space during construction.
The permanent easement is nearly always maintained as an open vegetated corridor, that is periodically mowed by the pipeline operator, for the ease of inspecting and in servicing the pipeline.
Easement agreements are formal legal agreements between the property owner, or grantor, and the pipeline operator, or grantee, providing the operator long term use of the right-of-way.
A change in ownership of the property does not alter the easement agreement, especially if the easement agreement or a memorandum of the easement agreement is filed on record.
Many aspects of the pipeline easement are negotiable.
Typically a pipeline representative will present the landowner with a pre-printed agreement.
This document can serve as a starting point for a two-way negotiation, or it can be fully accepted or rejected by the landowner.
Most of the easements are negotiated by an independent contractor, generally known in the industry as a land man, regardless of a person's gender.
Changes can be made to the easement agreement by creating an addendum that is approved by both parties.
Refrain from making decisions under pressure, and limit the agreement as much as possible.
The land man will likely not be involved with day to day construction and operation of the pipeline on the property, so it's important to have all the final negotiated points of the agreement in writing.
Here are examples of various conditions that may be addressed in a pipeline agreement addendum.
The general suggestion is for the landowner to use addenda to limit the easement agreement as much as possible to the currently proposed pipeline, and not allow the placement of additional pipeline or other utilities in the right-of-way without getting written permission, and perhaps additional compensation for the landowner.
Other conditions such as indemnifying the landowner from liability that may result from incidents during construction or operation of the pipeline, pre and post construction, water testing, right-of-way location approval, and other considerations may be important.
The extension publication, Negotiating Pipeline Rights-of-Way in Pennsylvania, contains a sampling of additional considerations that may be included in a pipeline agreement, or addressed with an addendum.
Payments to landowners for granting right-of-way easements can be quite variable between pipeline operators, types of pipelines, and from location to location.
Most payments for gathering lines involve a set dollar amount per linear foot or per rod, which is 16-1/2 feet.
In Pennsylvania, easement agreements for gathering lines have ranged from less than five dollars to more than $25 dollars per linear foot.
Payments to landowners for interstate transmission pipelines are generally based on a value per disturbed acre and can be highly variable based on the prevailing property values in the area.
Easement payments may include restitution for damages to timber, crops, etc, or damages may be paid over and above the quoted value per foot or per acre.
It's important for the landowner to know exactly what is being offered and whether this offer includes damages.
Some pipeline operators will also offer a signing bonus, a fixed dollar amount for signing an easement agreement, in addition to the payment per linear foot.
Be sure to get the amount and terms of payment in writing before signing an easement agreement.
Because easement agreements are legally binding contracts, landowners are encouraged to have the contract reviewed by an attorney who is knowledgeable in Pennsylvania oil and gas law, and experienced in reviewing right-of-way agreements before entering into any contract.
Experienced oil and gas lawyers can also be immensely helpful in the negotiation of the easement agreement if the landowner needs help.
Penn State extension provides educational resources for landowners and other stakeholders about shale energy development and the natural gas leasing and exploration process.
County extension offices may host an educational workshop, discuss leasing arrangements, or refer you to regulatory or legal specialists.
Although extension educators cannot provide legal advice, they can provide additional insights about leasing and right-of-way considerations.
For more information about shale energy and natural gas pipelines, visit the Penn State Extension Natural Gas website.