Question about how Right of Way (ROW) payments are calculated

Question: When an o&g company quotes/offers an amount per linear foot for a permanent pipeline easement, does that figure typically already include the "extra" compensation for the temporary work space, access roads, damages to timber, etc.? We were told by our Project Coordinator that temporary work space is typically valued at roughly half of the permanent ROW values. So all this time, we were under the [mistaken] impression that we could expect an additional 50% on top of what they had been provisionally quoting us for each linear foot of the pipeline. But now we're being told that the figure is all-inclusive. Thoughts?


Thanks! 

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Permalink Reply by Joe Bezel on June 4, 2015 at 5:20pm

Ethan,

I've negotiated with several pipeline companies for ROWs, but I've not seen a situation quite like this before.  In my experience, timber/crop loss and damage and access roads are separate from the linear foot offer. Often it's a smart move to bargain heavily for damages, even if you end up with a lower per linear foot rate, because damages are not taxed like a ROW payment.  Temporary work space is typically paid at the same rate as the permanent ROW.  Many companies are now using an acreage calculation (length of ROW X width) rather than the linear foot method.  Have you signed the agreement yet?

Permalink Reply by Ethan Taylor on June 5, 2015 at 2:40am

Thanks, Joe. No, we haven't signed the agreement yet. But our Project Coordinator told us the other day that their offer (per linear foot) will go down starting July 1 if we don't settle with them this month (June) because they're feeling a lot of heat from the big-wigs in Houston to stay within budget. Is that normal?  Take care.

Permalink Reply by Bob Shaw on June 5, 2015 at 7:23am

I would expect the July 1 date is intended to induce you to sign the current offer before it gets lower. My expectation is that prices will get higher as time progresses, not lower. 

My instinct would be to not accept an offer until you are faced with eminent domain, and possibly you will do better in the court.

Permalink Reply by Joe Bezel on June 5, 2015 at 5:25pm

Ethan,

What kind of line is it?  If it is a gathering line from a wellpad, it is your choice to accept it or not, unless it is draining your unit.  If it is an interstate transmission line, the company may or may not have eminent domain power.  In general, NGLs do not qualify for use of eminent domain.  We are currently in a legal fight with a pipeline company claiming that right; I guess a judge will decide.  Anyway, in your case,  they are the ones under time pressure; don't let them put it on you.  I agree with what Bob Shaw said, they are far more likely to increase their offer than reduce it.  Here in Harrison County, Ohio, the price of a ROW has been increasing rapidly.  I have spoken to a number of people who have approached $100 or more per foot.  There have been numerous discussions on this website on pipeline ROWs, read the discussions and learn from other landowner's experiences.  There is a wealth of good advice here.  Keep us informed of your progress, and good luck!

Permalink Reply by Ethan Taylor on June 6, 2015 at 5:15am
Much appreciated, Joe. This is definitely an interstate transmission pipeline (Leach Xpress). The FERC certificate is expected sometime next summer. The Project Coordinator told us that they overpaid in neighboring counties (Monroe?) and that they would NOT make the same "mistake" again. He indicated that this was their best (only) offer and that it would go down by $3 per foot starting July 1. (We're looking at more than two miles of pipeline.) He came across as very sincere and convincing so I feel conflicted. I'm also struggling with the "all-inclusive" per linear foot offer he made us. It wasn't broken out/down at all so we have no idea what the ROW payment vs. the non-ROW payment (e.g. access roads, temporary work space, damage to timber, etc.) is. And my understanding is that there are tax implications to consider (capital gains vs. ordinary income) so this is a big deal. I have been following the discussion boards on here closely but the rest of my family is inclined to settle this month (because they are taking the Project Coordinator at his word) so I'm in a bit of a bind. Ugh. Any additional thoughts/insights are welcomed! Thanks!
Permalink Reply by Kathi Albertson on June 6, 2015 at 3:25pm
Wen had an interstate 26" pipeline replaced across over 3000 feet of our land last summer due to a FERC requirement. The final agreement was much different than the original offer and had different line items for temporary work space, access roads, pipeyard, and a very generous amount for timber loss based on the value placed on the trees by a timber consultant. Further, we were paid upfront for three months for the Temporary workspace. As the project drug on due to weather, we were paid a prorated amount for each day beyond the 3 month time limit. Finally, in comparing the ROW agreements from two previous landowners when the line was put in 50 years ago, the landowner who was forced by Eminent Domain ended up with a much better deal in the long run than the owner that accepted the deal without going to court. Good luck to you.
Permalink Reply by Joe Bezel on June 6, 2015 at 5:39pm

Ethan,

I have to tell you that Leach is not handling this in a professional manner.  First of all, their mistakes in other counties are irrelevant in your negotiations.  From what I hear, their offers are in the $30 per foot range, which puts it at about half the going rate. Being associated with Columbia Gas, they can play the eminent domian card, but that ONLY grants them access.  Price and terms are still negotiated, and if you can't come to terms, a JURY decides what they pay.  It is very unprofessional not to explain to you the basis of their offer.  That should have been explained in clear detail.  I understand that he is sincere and convincing; that is the kind of swindler representative these companies hire.  As for their threat of reducing their offer, tell him the price of the ROW goes up $20 per foot July 1st.  Tell him there is disagreement in your family and their offer is going nowhere in its present form.  You haven't mentioned an attorney; do not proceed any farther without a good one.  I don't mean the ambulance chaser that now calls himself an oil & gas attorney, but an experienced attorney, check on this website for names.  Don't be afraid of an eminent domain proceeding; you will come out far ahead with better terms and a better price with a good attorney.  They are the ones who should be concerned, because it will cost them many times what they are offering you in all kinds of ways. Check www.alov.us for a good pipeline easement agreement.  Good luck and keep us informed!

Permalink Reply by Bob Shaw on June 10, 2015 at 9:12am

Joe Bezel, nice narrative.

Permalink Reply by Barry D on June 7, 2015 at 2:32am

Ahh...sincerity.

If you can fake that you've got it made.

Be careful who you trust in this negotiation. Anyone from the company is not looking out for your best interest.

Kathi Albertson posted here. Read her post carefully. As you can see from her post, companies are willing to do far more for you than they first let on.

Permalink Reply by Eleanor V Casler on June 10, 2015 at 5:48am

Hi Barry D 

Thanks for you comments, I have tried doing a search on this site for postings by Kathi Albertson, but cannot find them, could you please send a link so I can see the post you referred to in your reply

Thanks 

Eleanor

Permalink Reply by Kathi Albertson on June 10, 2015 at 9:02am
Eleanor, the post that Barry was referring to was the one I made on Sunday which is two above his. I hope that you find it helpful.
Permalink Reply by Eleanor V Casler on June 10, 2015 at 5:53am

Hi Ben, 

I did a member search and found Kathi Albertson, thanks, I guess I need to learn the site map a little better, 

Thanks 

Eleanor

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