Pipelines

Pipelines

PipelinesIn negotiating with a company wanting to put a pipeline on your land, it is crucial to know whether or not the company has a “right” to put the pipeline on your property. If the company does have a legal right to do so, where is it derived from and what is that right?  Almost always, the final right will be via a contract because that is much cleaner for the company, but initially it usually starts from another legal right, like the right of eminent domain or certain rights under an oil and gas lease.  It is important to remember that this is not always the case, as sometimes a company does not have either of those rights.  It is crucial to the negotiation process that there is a sound understanding of the legal framework and basis for placing the pipeline on the property before the negotiations ever start.

Here, we will discuss (a) rights under an oil and gas lease, (b) rights under eminent domain, (c) contracts or surface use agreements.

(a)    Under an oil and gas lease a company has a right to lay the line within the unit to transport materials within that unit from that unit – typically this is not enough and the company wants more so they need the landowner to sign a contract.  It has been our experience that these rights are not clearly explained and the landowner is left thinking they have no choice but to sign.  This simply is not the case.  In all reality, the landowner doesn’t have to sign anything and the company would still have to pay damages.  Many do not understand this legal distinction.

(b)    If a company is transporting for interstate or intrastate commerce and they are defined as a common carrier, the company will usually be able to get the right of eminent domain from a state constitution or the federal constitution.  It is crucial to the negotiation process to realize that the rights granted from a condemnation case may not be all the company wants.  For example, the company may want the right to run gas AND oil through a line, but their present use is only for oil.  However, they will only be able to condemn for an oil pipeline.  Here again, they need a contract to do what they want.

Note: It has been our experience that companies use the threat of their right to litigate under either their lease rights or eminent domain rights to get landowners to sign away more than they should because the landowner fears the courthouse.  The result is the landowner signs away rights contractually that the company would not get if the matter proceeded to conclusion at the courthouse.

(c)    Contractual rights – When negotiating contractual rights with a company it is important to make the negotiations bilateral and that the landowner gets a good surface use agreement as part of the easement/row/release/contract, whatever it may be.  Sometimes the company will not have any rights under (a) or (b) so they have to have to negotiate – under this scenario the landowner has more power. 

NRDC StatNote: It has been our experience that many times those negotiating on behalf of companies will say they have rights under (a) or (b) when they actually don’t.  Essentially, the companies use independent contractors to scare the landowner into signing a contract that they don’t have to sign.

Just like other types of negotiations, landowners are prone to falling into the trap of looking for the most money and failing to focus on the contract.  Landowners and sometimes their non-landowner attorneys fail to address issues like noise, remediation, hunting damages, livestock damages, fencing, subsurface easements, roads, non-unit transportation rights, etc.  This list could go on and on and it is crucial that all of this be dealt with and that the contracts not say anything like “all damages of whatsoever kind and character.”  The trend is toward surface use agreements that contain contractual rights for the company as opposed to what historically was called a blanket easement or right away.  Blanket easements or right-of-ways are rarely ever done in this day and age when landowners are better educated about their rights.

We believe the proper course of action is to focus on the contract by attempting to negotiate a good surface use agreement that is fair to both parties.  A good surface use agreement will clearly set out each party’s rights.  A good surface use agreement will define and limit the scope of the release.  It will be executed by both parties and all terms will be clearly defined.  In our experience the best way for a landowner to not get taken advantage of in these negotiations is for them to have counsel that understands the issues.  Surface use agreements are becoming more and more prevalent as companies need rights they can’t get any way other than through contract negotiations.  

Not only is LandownerFirm well versed in the negotiation of surface use agreements on behalf of surface owners, we also regularly litigate under eminent domain and lease right cases in the jurisdictions where we practice.  We try cases when necessary, but prepare our cases so well for trial that companies rarely force our clients into the courtroom and typically agree to good surface use agreements and fair compensation for the landowners we represent.

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