Pipeline ROW is forever

The closest thing to eternal life we may ever know is a pipeline right of way.

In 1886 the Standard Oil Co organized the Buckeye Pipeline Co to move it's products out of western OH. Many of the ROW are still in existence in OH, PA and NY. They are still used till this day, that's 127 years.

So when you are negotiating a pipeline ROW take your time, be very thorough you will be living with it for the rest of your life. Not only will you live with it, your children, grand children even great grand children will be affected by the decisions you make today.

In posts to other threads about this subject, people have warned that if you don't cooperate with the company they will go around you. If the company goes around you then you will miss out on the financial rewards. This may be true, but we have seen the results of this type of thinking here in the Marcellus and Utica plays. Many land owners rushed to sign leases to receive the bonus money without a thought for the language of those leases, and about the affect to their property. We see their stories regularly here on GMS.

We should all learn from our mistakes, and the mistakes of others. Take your time and be very thorough, if you can't get comfortable with the terms of the agreement then pass. Otherwise we, will be hearing from you in the future and how your bad decision has hurt you and your property.

Mark

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Replies to This Discussion

Permalink Reply by Greg Smith on March 15, 2013 at 7:21am

Same as Farmer John...Yes. Thank you for taking your time and offering your expertise. Should prove helpful as Landowners enter ROW negotiations.

Permalink Reply by Michael Allen on March 15, 2013 at 7:31am

Sorry for all of the spelling errors, I was typing too fast and wanted to get this into the post before I had another problem to fix. If anyone has a particular question, please let me know.

Permalink Reply by Greg Smith on March 15, 2013 at 7:59am

Thnx...will do; have a couple of questions when I can take a breath and get off the 'gerbil wheel' from work.

Permalink Reply by mark on March 20, 2013 at 12:51am

mike  having read the blog from mr camp on pipelne issues and then  reading this post I think my head just exploded  WOW if we do consider this row agreement we defintely need to lawyer up seems to be much more complicated I re-read the sample ROW they left for us its bad real bad I just never realied how bad THANK-YOU for saving us love this site   again thank-you     mark P.S. does anybody out there have a solid recommendation for an attorney ?

Permalink Reply by Mike Coles on March 15, 2013 at 4:00pm

This is one of the best discussions on GMS.  Mr. Camp's blog was comprehensive and what a land owner should be expected from their attorney.  Mr. Allen's response to Mr. Camp's blog was equally important.  All of the responders helped fill in the blanks.  For those who strive to get good professional information for free, that was offered up in spades with this discussion.  Any person facing a pipeline ROW should realize the complexity of the situation after reading this discussion.

 

If I was hiring a professional to assist me with a pipeline ROW, I would want all the bases covered like Mr. Camp and the savvy of Mr. Allen to know the strength and weaknesses of each sides position.  Mr. Allen is right, on some points Mr. Camp's blog appears to go overboard.  However, if you read Mr. Camp's Disclaimer, he's saying that it’s a 'checklist' of points to consider when negotiating.  As a certified real estate appraiser, I've seen the mistakes made when items on Mr. Camp's blog were missed.  Likewise, I've seen greedy landowners overplay their position.  The end result is the pipeline company  exercises eminent domain with their 'bare bones' easement, as Mr. Allen described. 

 

The real 'take away' from this discussion is gaining the knowledge to know when you need professional help and if the professional you hire really is competent. I stand by my earlier post, the 'land grab' for o&g leases is generally over.  Now it's time for the pipeline ROW 'land grab', except the pipeline ROW will probably be forever.

Permalink Reply by Mike Coles on March 16, 2013 at 2:10pm

Fang F Fang,

Thanks for the reminder.  I always try to give credit where credit is due.  For anyone seeing for the first time,  Attorney Doug Clark, advertises on GMS the link below is from my earlier post on page 2 of this discussion.

http://gomarcellusshale.com/forum/topics/swepi-shell-right-of-way-a...   

Attorney Clark started the swepi-shell discussion that is included in my reference that a lot of good information was provided in this discussion.  Finally, Attorney Clark goes in-depth with 2 radio shows dedicated to the swepi-shell ROW.  For the record, I have no affiliation with The Clark Law Firm, Attorney Camp or Michael Allen.  My dog in this hunt comes from being 'sick and tired' of seeing people taken advantage of when one side realizes/hopes that the other side lacks the knowledge to negotiate on a level playing field.

 

Mike Coles

Permalink Reply by Mike Coles on March 16, 2013 at 3:32pm

Fang F Fang,

 

I agree with your premise.  But to go further, the entire E&P industry relies on uninformed landowners to accomplish their goals.  Some landowners become informed by the various means described on GMS.  But the process from extraction to delivery of oil and natural gas is enormous.  For a landowner to understand their position in that process is challenging.  What's different this time is social media.  This discussion just exceeded 4,700 views.  That's a lot of people becoming better informed than they otherwise would have been before social media.  None-the-less, I realize this site and other sites like it are being monitored by the oil and gas industry.  But that doesn't really matter.  What's important is that landowners are realizing a level of transparency in market transactions never before seen in this industry. 

 

Attorney Camp mentioned that in pipeline ROWs, it's every landowner for themselves.  That a landowner, should seek a secrecy agreement to get  better terms (Item 27).  With all due respect, I suggest that fair compensation is best achieved with market transparency.  The entire real estate appraisal process relies on market transparency creating informed buyers and sellers.  This includes not just the sale of land but oil & gas leases, pipeline ROWs, surface agreements, etc.  The lack of market transparency almost entirely benefits the oil & gas industry.

 

Mike Coles

Permalink Reply by Michael Allen on March 16, 2013 at 4:12pm

Mike-

The only reason a pipeline company would want a "secrecy" agreement is to not let other landowners know how much they are paying per foot/rod, because it is way over the going rate. That is to "buy" their way across the landowners property. If they figure how much more it will cost to go around that landowner, they can afford to pay the landowner big and still save money on the construction costs. Problem is that no one will ever keep the secret. I know of numerous cases on native American lands where the tribes will try and make the company pay huge fees to cross them because they know how much more the company will pay to construct around tribal lands; plus they only do leases, not permanent easements. In those cases, the company is much better off to go around, even if it costs 3-4 times the going rate. In the long term, the company will benefit and take the hit.

Ever heard of a "favored nations" clause ? Maybe Mr. Camp would like to have a discussion on that. There's a can of worms.

Permalink Reply by mark on March 20, 2013 at 1:07am

mr allen tried to put "favored nations" clause into our O&G lease got the letter of resention 2 days later from RR don't know anybody in our area that was able to get that clause in either a ROW or O&G lease and whats scary how many experts (lawyers) don't know the clause exists would really like to see a discussion on the subject  MARK

Permalink Reply by Michael Allen on March 20, 2013 at 1:49am

Companies rarely if ever use the favored nation clause and you can't really blame them. What hasn't been tried or offered by landowners is to add a favored nations clause with a "not to exceed" per cent or amount. That way a landowner could benefit from some of the increase that  usually happens on the last holdout landowners getting more money.

Permalink Reply by Farmer John on March 20, 2013 at 1:55am

No attorney here, but just from my own experience, I would think that most attorneys are familiar with the concept of a 'favored nation' clause, though it would be no surprise that they may NOT be familiar with it as it might pertain to Oil & Gas or ROW Agreements. 

Oftentimes 'favored nation' is included when a Vendor is negotiating with a Payor for a contracted price to provide set services. The Vendor might be willing to cut their price to the prevailing market price, but does NOT want to be paid less than others in the market.  So the Vendor would say, "I will discount my $100 fee for  'X Service', to $75, but IF you, Mr. Payor pay anyone else MORE for that service, then THAT becomes my rate too."  While the Payor seking Favored Nation would say, "I will pay you that much, but IF you, Mr. Vendor accept any LESS for that service, then THAT becomes my new lower rate too."

Why would the Vendor do that?  So to get some work, maybe increase their maket share, while insuring that their competition won't get paid more, unless they also get paid more.

 

Why would the Payor do that?  So to get an assured  provider source for work they will need done, at the lowest market price.

Trouble is, in order for it to work it requires honesty & openness on the part of the parties. I'm not saying that those two things are nonexistant in the Industry, but they sometimes seem to be in critically short supply. 

I;m used to seeing 'favored nations' clauses between larger players, while not so much with the little guys. For example, Giant Insurance Company may sign an Agreement with Cleveland Clinic to pay $800/day instead of the billed $1000/day  room charge.  If you are little Podunk, Ohio hospital, the same insurance Company may say, "Sorry, don't want to give you a 'Favored Nation' clause. You are just too low volume. We will agree to give you $600/day."  What choice does Podunk Hospital have?  They need the business, so they sign up at $600/day.  Works for the Insurance Company AND for Cleveland Clinic.

I've seen it applied in other Industries too. Steel, Automotive, food services, many aspects of business.

Never thought about applying it to O&G stuff.  I can imagine that IF a landholding (possibly for example a "Group") were large enough, AND were needed for a project, then if demanded, a Company may give "Favored Nation" treatment to that landholding.  Still, how do you readily verify?

 

It's hard to act BIG when you're small.

Permalink Reply by Jack Straw on March 29, 2013 at 4:32pm

RE: "But the process from extraction to delivery of oil and natural gas is enormous.  For a landowner to understand their position in that process is challenging. "

I would add to that comment:

The process from extraction to delivery of oil and natural gas is enormous.  For even someone long involved with the industry to understand their position in that process is challenging. 

Those in the industry undoubtedly understand their individual contribution; but they are typically a "link in the chain", a very long chain.

The value of this site is that there are a number of contributors who are (or better yet have been) one of those links.

If enough of these "links" can be connected, it is just possible that the "Big Picture" will become visible.

 

All IMHO,

                  JS

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