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
Views: 12332
Replies to This Discussion
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Permalink Reply by James Brink, Esq. on -
This has been an interesting thread, so let me offer a topic for consideration. Can anybody tell me why a landowner must grant a permanent easement for a pipeline ROW? I know that this is how "it has always been done," but is this any reason for this practice to continue? Atty. Camp's blog offers great suggestions and is very informative. But, the premise is again built on selling a permanent easement. Thoughts?
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Permalink Reply by Michael Allen on
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Only if the company has condemnation power, but no reason on gathering lines for the easement to be permanent. The biggest reason companies always want a permanent easement is, number 1, a permanent asset that they can sell or assign. The other reason is the cost of building a pipeline is not cheap, so they go after the most they can get. Multiple line rights is another plum that companies would like to get in an easement. Again, if the pipeline is of benefit to a landowner that has production on their property, why not do the dance?
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Permalink Reply by James Brink, Esq. on
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I agree that it is always the landowner's call. But the feeling that I am getting from reading these posts and talking to real landowners is that they somehow feel obligated to the operators to grant a ROW. My position is that no such obligation exists, except, as you pointed out, an interstate pipe's condemnation power. What is truly sad is the case where the landowner needed a new F-250 more than a strip of land along the back 40 and now realizes that the back 40 will always remain the back 40 and nothing more due to the permanent easement. The F-250 will wear out someday while the ROW will not. Maybe there is another option?
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Permalink Reply by Michael Allen on
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That all depends on the landowners property location and land use issues. The back 40 may get improved with a pipeline right of way installed. The only restriction is no permanent structures over the pipe. anything else including paved parking lots, roads, etc, is doable. I would suggest a minimum of 48" depth from top of pipe be in the document as that decreases the need to lower the pipe if there is ever a road or parking ever needed or desired. I have had landowners get an encroachment agreement from a pipeline company for a "movable" lambing shed. There was no permanent foundation and the landowner built the large shed on a skid so that in an emergency, a dozer could latch onto the shed and pull it off of the easement, if there was ever an emergency.
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Permalink Reply by 2z248p19vqnh9 on
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James Brink, Esq. - DOES one 'have to' grant a P-ROW...if they decide that is not in their property value's 'best interest' to do so? CAN a 'pipeline Co. infringe & basically 'lock down' a person's hands (behind their back...) to 'GIVE/GRANT/DEMAND' a ROW?
I can understand IF the gov't is going to put a road through somewhere - for PUBLUC TRANSPORTATION USE... or the 'eminent domain' concerning electrical lines/water/sewage lines/ gas transmission lines - for INDIVIDUAL HOMEOWNERS utilization...my question is this: IF a pipeline Co. 'doesn't GET IT's WAY'...can they basically 'hog-tie you' throw you down & make you cry & FORCE 'their way or the by-way' - down your throat...while YOU are left to 'stand up & take it'?
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CAN they do that?...PIPELINES to 'transfer GAS/OIL from a WELL to a REFINING FACiLITY...t's basically a 'wholesale endeavor' - for an 'Individual Company's PROFIT'...not 'individual use ('retail - i.e. for 'heating your house, cooking your food, heating your water...) of the 'basic family'...Can they?...can you please place a connection to this Atty. Camp's blog since you say it would be worth the read for it's knowledge. thank you, sir.
***OH - this is for individuals to be knowledgable about...if you read the 'pipline' threads...I mention how the G&O Co. 'mysteriously' has NOW decided to 'include me' in their drilling block. When I read through it...and the fellow just POPPED IN to see if he could 'do' anything for me - to help 'influence me' to 'sign'...by March 31 (it was the 27th! - for God's sake!). I read a 'paragraph' that caused me CONCERN & ALARM.... Went something like this: that THEY could 'reverse' and CHANGE (at THEIR discrepancy/will) - and TAKE ME BACK OUT of the 'drilling block'! Basically leaving ME to think that IF I 'didn't do' what THEY wanted me to DO (sign the P-ROW with the Pipeline Co...) that they would REMOVE ME from the 'drilling block'. What a kunundrum! BRIBERY? Definite feeling of just 'hanging out there - left to dry'....
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But HERE is the interesting thing...had another question - called to inquire...while chatting - asked HOW this could 'work'...IF I was somehow 'excluded' from the 'drilling block' would I be notified 'in writing' (as they 'baited me' with the enticing ***You're NOW 'in the club/group'!!! Yeah!*** whatever.). You're IN - You're OUT...you just 'NEVER KNOW'!!!..now isn't THAT interesting.
*** 'HANGING'? I am STILL in a position 'state of mind' of being leaning as close to 'yes' as I am to 'no'...no one likes to be 'pushed' - feeling of 'being ensnared in a net'...hung up by your heels...It's a strange place to be - being left feeling like you're hanging by a string. No worries - it's just all VERY intriguing to see the 'play' of the various minds. The more 'tangled' things become, the closer to ...I become. My 'answer' shall either be 'yes, no...OR a big, fat MAYBE'.... TIME does 'tell'...
As one light lights another, nor grows less - so nobleness enkindles nobleness. Nobleness - interesting day in this day & age....
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I'm going to attempt to address Mr. Mike Coles - Land Appraiser...you get to see/hear lots of 'backyard' info. from clients - complaints, happy decision stories...the whole gamut - and quite a range that would entail.
WHAT are some of the biggest 'complaints'/ fears/ if 'wishes were...' then I'd do this -or that...or did you hear about 'x' & what happened with that scenario...you get to hear many 'voices' - what ARE some of YOUR thoughts - as to 'advice' for people seasoned & unseasoned - concerning their property potentials (pluses & downfall pits...) in HOW to think about things?...WHAT matters they may want to be thinking of & addressing concerning their properties - from an 'asset' or 'loss' side of the RE equation....
WHAT matter concerning 'property issues' can you say are 'constant pitfalls' that you may happen to 'hear about' - after-the-fact...from clients - as WELL as concerning the G&O 'industry' itself?
DO you feel that people ARE or are NOT 'well' informed - concerning their property. YES - we all are now able to access a myriad of offerings via the internet, but that STILL doesn't mean that even the 'most informed' persons don't get 'squashed' under the 'wheels of progress'...
HOW can a 'G&O lease' effect property value? How about P-ROW? Now THAT seems to be the 'stickler'...the ROW matters. Seems to be overwhelmingly LIMITING no matter HOW WELL a 'agreement' gets wrapped up - lawyer or no lawyer...VERY LIMITING...as you have shared - to a person's unfortunate demise/detriment - HOW can people AVIOD those potential snares?
Land Appraisal/ RE App. is a very technical field - especially today when you are held to a MUCH TIGHTER responsibility - given the RE fiasco...WHAT are some matters that people SHOULD be concerned about? IF that doesn't open up TOO bug of a 'can of worms'...you are getting to see/experience BOTH 'sides of the RE fence' & the impact of G&O upon it.
Some things are good - others downright EVIL...God knows. As one light lights another, nor grows less - so nobleness enkindles nobleness. Thank you for your consideration in sharing some of your knowledge for those who need guidance....
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GG
I hope no one ever accuses you of asking short questions.
Anyone reading this needs to know that real estate appraisers do not make the market. An appraisal report is developed by collecting the relevant data (or facts) and then analyzing those facts to estimate a value for what we are appraising. How does this apply to the current real estate market? I am being asked to appraise the surface estate or the mineral estate, with an o&g lease, without and o&g lease etc. What's below comes from collecting those facts.
1) Complaint: Dealing with dishonest people. In the o&g industry a verbal promise is absolutely meaningless at every level, leasing, drilling, ROWs, etc. Whenever a dispute arises the standard answer is 'read the agreement'. The o&g process is a convergence of part property rights, contract law and (hopefully) wealth management. The o&g lease is a contract agreement that has the potential to dramatically alter the appearance of your land. Here's a standard phrase, " I knew from neighbors to ask about that part of the agreement. The man representing the company said he would fix it. He changed that paragraph. But he did not tell me added another paragraph in another part that changed it back. Everyone at the big company says they know nothing about my lease changes. The man/lady, I talked to doesn't work there anymore."
And it's not just what is in writing but what's not in writing. As one example, many leases have poorly written or no environmental clauses. Some people believe that DEP, ODNR or DEC (my office in NY, ok) will make the company responsible for any environmental catastrophes. That's not the point, in this litigious society the rule is 'sue everybody'. As the landowner, who is going to pay your legal fees. GET IT IN WRITING AND (someone said this before me, but it's so true) WHEN READING A LEGAL DOCUMENT THE IMPORTANCE OF READING THAT SECTION IS IN A DIRECT INVERSE RELATIONSHIP TO THE SIZE OF THE FONT USED. (The smaller the font the more important it is to read.)
2) Complaint: I took the agreement to my attorney, he/she said 'it's the same agreement other people are signing so it must be ok'. Attorneys have areas of specialization like any other profession. You don't make an appointment with the dentist for heart surgery. The same is true for real estate appraisers. I have to develop a level of competency in order to deal with the issues that arise from these types of assignments. I have had seasoned real estate attorneys who know what it takes to competently deal with o&g issues tell it's too much and they are referring those cases to other attorneys who specialize in o&g leases, ROW agreements, mineral estates, royalty estates etc. Your attorney should be able talk about relevant assignments and the results. (forgive me James Brink, Esq. , I know I am leaving something out, I don't want to write all night) The same is true for real estate appraisers.
3)"Wish I had become better informed. I could not find any information." When I asked these uninformed people where they looked for information, they said they looked in the paper, watched tv or (and I like this one the best) 'I talked to the guys at work'. A common thread among the uninformed is that they have attended few if any meeting on the topic; do not access the internet; and rely on representatives from the o&g industry to become informed. See Complaint #1 above.
The old real estate adage is also true for o&g, 'location, location, location'. People fail to look far enough ahead. This entire PIPELINE ROW discussion is so true, a pipeline is forever or at least several generations. If you make a mistake in an o&g lease or ROW agreement, you or your heirs will pay for the mistake when someone offers less for the property than it otherwise might have been worth or in many other ways as you continue farming. I am not saying all risk can be eliminated and all reward guaranteed. But the risk can be better managed. People fail to realize that the o&g process from leases to final delivery to market is long and complicated. BUT THERIN LIES THE OPPORTUNITY. The landowners and o&g companies need each other in this process. Sometimes the need will arise to modify an agreement. Depending on your leverage, this may offer a chance to modify other parts of an agreement. The best thing a landowner can do is contact different professional to build your own team of people you trust to protect your interest.
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Mile Coles - Thank you for your time that you've taken to bother answering my questions/thoughts concerning HOW these G&O matters CAN and WILL affect property values. As far as the 'short questions' go - there ARE no 'short questions'...only short tempers (maybe the 'short tempers' come FROM myself?! - Ha-ha!
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Would you agree that he 'answer' to one of the most straightforward considerations of RE appraisal is this: *What is the 'HIGHEST & BEST USE'....?
HIGHTEST & BEST USE...*HIGHEST & BEST USE* ('hightest' included - had to leave that!)
So, would people be best overall to analyze their options & go from THIS standpoint?...an example as follows:
i.e. A landowner is being rather 'STRONGLY approached' concerning a pipeline/actually GATHERING LINE (WHAT is the 'difference'?!?). There are x2 wells ALREADY IN PLACE, awaiting the 'pipeline/gathering lines' to be laid for transport of product BEFORE FACKING...
The 'pipelines' would end up being a detriment because they would need to exit in the MIDDLE/Center-point of the 'road front acreage' - and the two 'routes' that the pipelines will travel would be detrimental as well.
IF the landowner decides that it's just NOT in their 'best interest' to do so - will they be FORCED to allow the lines - even if they don't want them? The landowner has come to the conclusion that the 'highest & best use' for this property is to do nothing with ANYTHING concerning the G/O Co.'s...of course, I am referring to myself....
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I HAVE 'researched', the pipeline co. has even gone so far as to contact the O&G Co. (?!) to get THEM to 'put me' in the 'drilling block'...BUT when I perused through the information, it said that they could decide to 'take me out' at ANY TIME...meaning that IF I didn't decide to 'co-operate' & allow the pipeline/gathering line go on - that I'll PROBABLY be taken back out of 'drilling block'! CHA' - WOW!
...then I deduced & asked if they could 'remove me' from the drilling block even IF I DID put the gathering lines in...at ANY time? (but yet they are HOUNDiNG me like a pack of wolves!)
------I'm getting closer & closer to thinking that this is just a bad, bad, *VERY BAD idea.... The 'depending on your leverage' situation is very true. I get the feeling that they need to get through MY property very, VERY badly...and the more I am getting that feeling - and their NOT wanting to work with me...gets me closer to a flat out no. I don't like stupidity.
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I don't need the aggravation - more than anything. I did mention some small things that would potentially make me consider things more seriously...but get the feeling that they just don't want to dance. *I don't need it - *they're becoming a real nuasince. No one likes to be badgered. They 'want what I've got', but they just don't want to GIVE to GET...
They have x2 HORIZONTAL WELLS in place - ready to go, NO pipeline in place...you'd think that they'd be more amenable to get what works best for them, eh?...go figure...hightest & best abuse?...again - thank you. I will read over again (and probably again...) to make sure I catch what you are sharing. VERY FINE! Hope that it helps others as WELL!
*OH, concerning 'CONTRACT ADVICE': ***the 'bold' on how the 'letter size' affects HOW you do not only, but ABSORB the document.
*GET A COPY OF THE LEASE THEY WOULD LIKE FOR YOU TO SIGN - read through it.
*THEN - One can take a document to a print shop / Staples, spend some pennies to get it 'enlarged' (so they can read it better)...Another thought - get *3-5 copies so that you can HIGHLIGHT & make notations of WHAT YOU ARE wanting to change & address. Go over it again & again....
ALSO - when IF you 'sign' - make sure that you have ANY & ALL addendum's, additions, as well as deletions (lines crossed out) INITIALLY & DATED by YOURSELF as well as the landman that you are signing with...is that good thought, too?...again, much appreciated. *DATE & INITIAL CHANGES - property owner & landman for contract...
As one light lights another, nor grows less - so nobleness enkindles nobleness. You are noble, Mike - thanks for the reply.
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GG
Sorry, for the slow response but writing appraisals has to be my priority.
When you start your response by asking about 'Highest & Best Use', you're going right to the heart of the matter. Some people think appraisal development is a step-by-step process. To the contrary it's a simultaneous multi-step process that hinges on 'Highest & Best Use'. Without boring everyone with the technical definition and 4 step process an appraiser uses, the bottom-line is what use produces the highest monetary value for the owner.
How does this apply to pipelines? The appraiser has to determine the 'Highest & Best Use' of your land in order to select the proper comparable sales. In pipeline valuation, a common phrase is 'across the fence valuation'. This translates to what is the land nearby selling for today. This phrase assume that the land next door has the same 'Highest & Best Use'. The phrase also implies there is 1 value to be determined. As mentioned by Mike Allen in this discussion, there is the value of the taking, the value of damages and temporary work space. As an example, if a farmer has agricultural land and the pipeline goes across the field, sometime later the farmer decide to lay tile to improve drainage. At what depth is the pipeline, do you even have the right to lay tile over or under it (remember I said get it in writing). If you want a real life example Google "Buckeye Pipeline Aureilus NY" and see the articles that come-up. A farmer laying tile cut through the pipeline even after some markings had been placed. What if the pipeline comes close to your farm buildings and you can't expand the farm buildings in that direction ? If the pipeline is going through a more populated area that makes "Highest & Best Use' even more critical.
The appraisal process described above is talked about as if it happens every time for every property. The person representing the pipeline company will say the appraisal was done and here's our offer (as in this happened to my client with me on his side of the table). You might ask to see the appraisal, but document belongs to the pipeline company. Chances are you'll never see it. Actually, it probably doesn't exist. The appraisal process involves establishing the 'across the fence values' that will be used for negotiating purposes. This is the most cost effective way for the pipeline company to negotiate ROWs on hundreds or thousands of properties along the route of the pipeline. None-the-less, you'll be told that you will see the appraisal when they take you go to court as they exercise eminent domain(believe what Jack Straw says about eminent domain). If by now you're getting the feeling that nobody REALLY looked at your property, you're probably right. This is followed by a strong feeling that the offer makes no sense relative to how your property is being impacted(again, actual taking, damages and temporary work space). Remember, interstate pipelines use federal rules, intrastate transmission pipelines use rules that vary by state and gathering lines are another set of rules. Make sure you know the rules that apply to pipeline you're dealing with. At the risk of repeating myself, this is where competent professionals help to level the playing field.
Mike Coles NYS Cert. General Appraiser
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Permalink Reply by Michael Allen on
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When I supervise pipeline projects, one of the first things I order are "windshield" appraisals with pictures, all based upon comparable sales of similar properties. Crops speak for themselves as does timber, the going prices. I don't like to pay for crop damages until after construction is complete. Too many variables to contend with; crops are harvested before construction, alfalfa issues, pivot issues, temporary roads-compaction issues, and of course, tile issues.
As far as "highest and best use" determination, seems to me based upon the prices paid per foot, that pipeline right of way easements are the ultimate highest and best use. Maybe the county assessors will start to take that into account on the next re-appraisal of the property for county taxes.
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Good point, Frank. - DO you work with/for one of the G&O or PIPELINE Co.'s, Michael Allen?
*Has anyone read thoughts concerning 'color-coding' people's 'names' used on this site - so that when a *landowner* is communicating with or to an individual involved IN the G&O game...then it's all KNOWN.
* Landowners - stay the shale/slate blue
* Gas Co. employees - ... ? color
* Pipeline - ... ? color
* Lawyers - ...? color
* Various 'gas related' individuals - ... ? color
SEE - THAT really would simplify & take many of the QUESTIONS of WHO are you 'talkin' to' -or- WHO is comment or replying to something.
THAT WAY - it would clarify for many individuals in the simplest manner possible...who is saying/asking what. ***YES - this site has grown - and with all 'growing pains' come the 'groans'...ha-ha. Just a thought for those above - higher up (owners of the site) to help AGAIN in clarity for all individuals involved. Just a thought, all information is good information.
As one light lights another, nor grows less - so nobleness enkindles nobleness (and sometimes it does 'groan' less, too! Ha-Ha!)...Octopus Arms - OCTOPUS ARMS! (James Bond Octopus Arms...)
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Michael A.
IMHO, I think I can fill the gap between 'windshield appraisals' and a court worthy appraisal for eminent domain purposes. As an example, let me switch gears for 1 minute. My company also does mass appraisal revaluation projects. Whereby, we are hired to reappraise every property in the town or city. We have done over 20 projects and 40,000 properties. In mass appraisal, these were the equivalent of 'windshield appraisals'. It would have been prohibitively expensive (and unnecessary) to hire us to individual written appraisals on each property by a factor of 10 or more. Now I will switch back to pipelines, as I mentioned earlier, the pipeline is going to go through 100s of not 1,000s of properties along the route. The 'windshield appraisals' are the cost effective to begin the process. However, the name is self explanatory, the appraiser probably never gets out of the car to inspect the subject and/or the comparable sales.
Here's an life example, some factors are modified to protect the innocent. The pipeline company's appraiser valued the land for agricultural purposes. The property adjoined a mobile home park that had received all the governmental and bank approvals to expand (doubling in size) before the filing of the taking for the ROW. The pipeline ROW went through the field effectively stopping the expansion. The cost of working around the pipeline with the underground utilities for the mobile home park; the land lost to the taking; and no permanent structures in the easement killed the project. Now comes the question of 'just compensation' under eminent domain. The land owner, who also owned the mobile home park, wants the increase value that the mobile home park would have realized with the expansion been completed. The attorney for the pipeline company went to court arguing that they have an appraisal and made an offer of 'just compensation' for the farmland. This comes back to the issue of 'Highest and Best Use'. Every factor necessary was met to make a determination of 'Highest & Best Use' as commercial development for the expansion of the mobile home park. Nothing in the 'windshield appraisal' process would have given the appraiser a clue as to the planned expansion. However, in later meetings between the pipeline company and the landowner all the information was exchanged to make everyone fully informed. Verbal promises were made to take everything into consideration (see verbal promises in my earlier post above). The pipeline went across the land as planned. After the pipeline was installed the pipeline company reversed its decision insisting that their appraisal was done with 'Highest & Best Use' as farmland. The landowner would have to get his/her own appraisal and hire their own attorney to go the court. This is not just any appraisal. This has to be a court worthy appraisal for eminent domain purposes, correctly prepared taking into consideration the value of the taking, damages to the property and temporary work space. Otherwise, the pipeline's attorney will argue that the judge should dismiss the appraisal as not being properly prepared. Thus, the appraisal as farmland will be the only one left standing to determine 'just compensation'. (again at the risk of repeating myself, remember what Jack Straw said about eminent domain.) GG asked about cost, with a competent attorney and appraiser, the assignment started at $xx,xxx. Therefore, I understand the need and use for 'windshield appraisals', but I also understand 'just compensation' through the prism of Frank Dux and Jack Straw.
Mike Coles
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