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 Bob Shaw on June 7, 2015 at 2:35pm

Ethan Taylor, I am negotiating with Columbia on the Leach Xpress too. FERC permit is not expected until early 2016. They had 22% of the Ohio ROW acquired by April 10th, I have not seen the May status report, but it should be out soon. Some recent news about Columbia Pipeline Group, they are in the process of being spun-off from parent NiSource, and we have just been assigned to the fourth attorney since we received their first offer. I suggest you get legal representation. 2 mile ROW is a serious transaction. The Project Coordinator does not make financial decisions at that level. He is interested in steering you into terms that are heavily biased in favor of Columbia Pipeline Group, that is his job. 

Permalink Reply by Bob Shaw on June 10, 2015 at 6:07am

May Status just came out. ROW acquisition in Ohio was at 24% on May status report dated June 11, 2015. That is up just 2% from April, which seems to be a slow down from prior pace.

Permalink Reply by Tim Tarr on June 6, 2015 at 4:44am
Just be careful about what you sign. The ROW may have a statement that it's x feet wide during construction. It may provide them with seperate access for construction or anything else they want.
These agreements are very broad in the rights you give them. So you have to amend them.
Permalink Reply by Michael Allen on June 8, 2015 at 6:10am

In reply to Joe at the top of this thread, his statement is totally false. The question is how are you damaged? Are you saying that your property is damaged just because the pipeline is there? All of the surface damages during construction are fixed. A number of years ago we had 2 IRS supervisors come to a right of way association meeting to ask that very question.

1) IF the right of way is being purchased by a company that has eminent domain, then all of the easement width/payment is not taxable. This is because there is not a "willing seller-willing buyer" scenario, no matter if you agree to everything they offer. It is still under threat of condemnation.

2) The extra work space on the other hand is a "rental" agreement for use during construction and no permanent "damages" is done. Therefore, all of this rental money is taxable.

3) Crops and timber payments are all taxable as income.

Typically a rental of property is based upon 10% of the fee value (value per acre) for a 12 month period. Many companies pay more than this for shorter duration, but the typical is 10% for one year. 

Regardless of how the payment is made, per acre, per lineal foot or by rod, you can still figure the easement width and temporary workspace seperate. I would definately require a complete split worksheet with the easement payment and work space separate. In addition, if the company has eminent domain, I would request a letter from the company stating that they can condemn for your records.

If the company DOES NOT have eminent domain power, then ALL of the money you receive from them is taxable income since it is a willing seller-willing buy situation. You have a choice of taking their offer or refusing.

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