Replies to This Discussion

Permalink Reply by Jack Straw on May 29, 2012 at 9:16pm

Most interesting.

The Mid-Stream Pipeline companies "earn their crust" by charging tariffs, sort of like a toll road charges tolls.

It is most interesting to hear that there are ROW agreements in which a portion of those tariffs (royalties) are remitted to the landowner.

In such matters as a ROW agreement a commercial property company (with their familiarity with contracts, contract law and regular use of legal representation) would have a negotiating advantage over Ma & Pa landowners.

I, for one, would be most interested in any additional information that you might be able to glean.

The boiler plate Pipeline ROW agreements presented to a landowner are typically vague about what ultimate full use of a particular ROW might entail. To my thinking, a share of tariffs seems only fair. The reality of an ongoing  pipeline seems to beg for ongoing compensation, just as property taxes continue to accrue on land impacted by a pipeline.  

As long as one keeps their ears and minds open, we can learn something new every day.

 

JS

 

    

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Permalink Reply by Ron Eiselstein on May 29, 2012 at 10:55pm

I couldn't have summarized it more succinctly Great Wise Man of the Utica.

All kidding aside, the current value of ROW land utilized for this new endeavor should incorporate revenue for the landowner.  The difference on the surface of this ROW usage and let's say a sewer line is that the midstream usage is not directly for the public good but rather a private "good" for a private concern.  Again, as you reiterated, it may have taken negotiation savy from a commercial property concern to hammer out a fair compensation to a landowner for this private process.  In shrimp farm jargon, let me put it dis way, " Yo, you want to put your big pipe thru may shrimp farm, and pump your oil through my land, what's in it for me, or what's my cut? "

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Permalink Reply by Jack Straw on May 30, 2012 at 12:08am

Pipeline ROW is of more than academic interest to me.

By my reckoning; there are pipelines, pipelines, Pipelines, Pipelines, Pipelines and Pipelines.  I will attempt to explain:

There is the pipeline that is essentially a gathering line; connecting a well (or wells) on your property (or a production unit to which you belong). This is a pipeline and benefits you and your O&G Operator.

There is the pipeline that does the above, but additionally connects wells that belong to your O&G Operator – but are outside your property (or a production unit to which you belong). This is a pipeline and benefits you, but especially your O&G Operator.

There is the Pipeline that does all of the above, but additionally connects wells that belong to other O&G Operators. The O&G Operator who owns this Pipeline will charge a Tariff to the other O&G Operators whose product moves through this pipeline.

There is the Pipeline that is owned and operated by a Mid-Stream Pipeline Company. This is a pipeline that acts as a gathering pipeline for an intra-state area. The Mid-Stream Pipeline Company charges a Tariff on all gas that travels through the pipeline. Charging a Tariff is the sole business of many Mid-Stream Pipeline Companies (many of these are set up as MLPs).

There is the Pipeline that is owned and operated by a Mid-Stream Pipeline Company. This is a pipeline that acts as a gathering pipeline for a large inter-state area. This Pipeline likely ends up connecting to a major hub (example New York City Gate).   

There is the Pipeline that is owned and operated by a Utility that ultimately serves individual users (industry, and domestic homes). This is a pipeline that might be either intra-state or inter-state.

What would be appropriate verbiage in a Pipeline ROW agreement depends upon what type of pipeline one is dealing with.

In all but the first type of pipeline, an argument can be made for a Tariff share.

I find it a bit frustrating when someone asks “How much should I get for a Pipeline ROW?”, as it is to a large degree a function of exactly what kind (size) of a pipeline they are referring to (often they do not seem to know). The question that they should be asking is “What should be in a Pipeline ROW Agreement for “X” kind of pipeline?”.

In all but the first type of pipeline, an argument can be made for a Tariff share.

 

All IMHO,

                    JS

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Permalink Reply by Ron Eiselstein on May 31, 2012 at 8:02pm

The adgvantage Ohio Land Management has in Mahoning and Trumbull county are that most of the land we manage and own are pieces dispersed all over the county.  This should give us the lead time to see the pipelines evolve and the direction they must take.  And as planned, majority of OLM's properties are to be leased gradually.

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Permalink Reply by Kathleen on May 29, 2012 at 9:21pm

I think that is so interesting. What would be great is if someone is smart enough to sign an agreement like that than they post the lease for others to follow or at least take to their lawyer.
I know the odds of that happening soon is low but it still would be great.

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Permalink Reply by 2s72s0k9mm8gd on July 20, 2012 at 9:55pm

The lease I have seen from a big midstream player contains a confidentiality clause pertaining to the money end of things.

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Permalink Reply by Ron Eiselstein on July 22, 2012 at 8:37am

Very telling Glenn.

Rationale:  In the lease phase, lease the minerals and include in the "boiler plate" lease, language allowing private pipelines to traverse property when needed without "royalties" but only standard price per linear feet.  In midstream phase secure the pipeline ROW without payment of royalties.  Only pay royalties to property owners who are not leased.

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Permalink Reply by 2s72s0k9mm8gd on July 22, 2012 at 7:46pm

I have never heard of royalties other than pertaining to gas production. Intriguing idea , though.

My Gas lease limits pipelines to those gathering lines necessary to produce the unit , I believe.

I Have been approached by a major midstream player and they may be interested in my land for pipeline(s) , so , apparently , the freedom to lease R.O.W. has been retained by me.

I was told by my landman last year to expect this to happen. I guess he was telling the truth.

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Permalink Reply by Ron Eiselstein on July 23, 2012 at 10:51pm

Glenn,

Keep us posted, I believe mass pipeline negotiations with landowners are upon us.  Will be interesting to see if HBP's will incorporate these pipelines or fresh negotiations with royalties as an inducement will rise to the bargain.

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Permalink Reply by craig on July 23, 2012 at 11:12pm

Ron and Glenn,

If the pipeline Glenn is talking about is the 36" line from Butler to Vanport, then I believe we are golden as it is a pipeline that will not be owned by CHK. Hence I don't believe there is anyway another company could use a gas lease of CHK to secure a ROW. MarkWest has been talking to lots of folks between here and Butler. It appears that they must have 3 alternate routes they are exploring as I know 3 folks that have been contacted about the same line that have property fairly close to each other. They pick the path of least resistance (of which there is enough in my area) and go from there.

This 36" line needs to be paying some kind of royalty (as well as some upfront money) to the ROW folks, even if it is a small amount each month, based on throughput....just like the pipeline owners get. You will lose the freedom to do as you please on/near the ROW forever which justifies this. Also remember that the 100 ' or whatever they are asking you for will eliminate a few frontage lots on any road it crosses....valuable real estate.

My 2 ¢ worth

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Permalink Reply by Ron Eiselstein on July 20, 2012 at 8:37am

I strongly believe that the new big play in the Utica is the midstream right-of-way and that all of us who have already leased for drilling also gave up our rights to royalties on midstream pipelines.  Today, no matter how small your acreage is, if a private pipeline is engineered to pass through your property, you are deserving of royalties.  This is no public sewer line I am talking about.  

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Permalink Reply by petej on July 20, 2012 at 11:13am

Ron,

I agree.  This should be a major topic in general and on every state and county link!

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