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Negotiating Pipeline Easements
A Landowner's Guide

by Brian L. Blakeley

The recent surge in oil and gas production in Texas' Permian Basin has resulted in a product bottleneck that, in turn, is causing pipeline companies to scramble to increase capacity from the oilfields of West Texas to the refineries and ports of the Texas coast. Half a dozen or more major pipeline projects have been announced or are underway since the end of 2017.

Pipelines have to go somewhere and if you are a Texas landowner with property in the path of one of these multi-million dollar projects, you may already have been informed that one or more of them would like to cross your property. If so, it is critical that you understand the nature of the process and your rights as a landowner.

Eminent Domain Authority

First and foremost, since you don't want a pipeline on your property (who does?) can you simply ignore the letters and notices your receive and wait for them to quit bothering you? Probably not.  Most pipeline companies in Texas claim status as common carriers (meaning, in theory, that they accept product shipments from the public). This gives them the power of eminent domain under Texas law which, in turn, means that they can take your property for pipeline use without your consent or approval (but not without compensation). 

Texas is notoriously lax in granting common carrier/eminent domain status for pipelines.  The Texas Railroad Commission regulates pipeline safety and rates, but has no authority to grant or withhold common carrier status to any entity that claims it. An "FAQ" on the agency's website states "I’ve heard that all a company has to do to get eminent domain status is to check a box on a Railroad Commission T-4 Permit." In response, the agency hems and haws before admitting that a "T-4 Permit is essentially a registration process" and that any claimed status as a common carrier stands "unless challenged in court." This is bureaucrat-speak for "Yes, all they have to do is check a box". (Go here for a more detailed discussion of Texas eminent domain law.)

In practical terms, any company that decides it wants to build a pipeline across your property can essentially self-designate itself as having the right to do so and you, as a landowner, are left with no means to stop it short of engaging in a lengthy and expensive court battle. In most situations, this is not a practical solution for the landowner and it makes more sense to focus on preserving the rights that can be protected while getting the best possible compensation for your property. This article examines this approach.

The Taking

Exactly what is it that a company can "take" from a landowner pursuant to eminent domain? In the context of a pipeline project, the company is entitled to acquire property rights in the form of an easement that allows it run a buried pipeline across your property. An easement is the non-exclusive right to use property for certain purposes. As landowner, you retain title to your property and likewise retain the right to continue to use it for any purpose that is not inconsistent with the rights of the easement holder.  For example, it is usually permissible to continue grazing cattle or growing crops on property that is part of a pipeline easement.  It is generally not permissible to build permanent structures over the pipeline. 

In the typical situation, the pipeline company will actually seek to acquire two easements: the permanent one intended for the pipeline and a larger, temporary one that provides work space for the construction crews. The details of both easements —their location,width, duration, as well as exactly what the pipeline company can and cannot do with them, not to mention the landowner's compensation, are all matters of negotiation.  

First Notice

The process will likely begin with the pipeline company sending you a packet that describes the project in vague terms, usually by means of a cover letter signed by the company's "Right of Way" (ROW) agent.  This individual will be your main point of contact with the pipeline company so be sure to save his or her name and contact information. The ROW agent is essentially a salesperson charged with mission of "selling" you on the deal the pipeline company would like you to take. Like most sales people, they tend to be friendly and outgoing.  Developing a good rapport with the ROW Agent can be helpful, but don't be lulled into believing that the agent is "on your side" or that he or she has any real authority over your situation. Other than basic information such as when you can expect work crews on your property, you should take anything the ROW agent tells you with a grain of salt.

The initial packet will also include a document titled the Landowner's Bill of Rights. This documents outlines Texas law and procedures with regard to eminent domain.  It is heavy on legal requirements but light on practical advice.  Hopefully, if your negotiation process goes well, most of it will be inapplicable to you because you should be able to reach an agreed resolution with the pipeline company before formal condemnation procedures are initiated. In any event, save it for future reference.

The packet will likely include some type of permission form that the company would like signed that allows it access to your property for surveying.Usually, attempting to fight or delay this process (in hopes that the company will get tired and decide to go somewhere else) is pointless. Under Texas law, the company is not actually required to obtain your permission in order to enter your property and most ask for it simply to make the process run more smoothly.  You or your attorney can negotiate a right of entry agreement that provides you with more control over the access and more protection should anything go wrong. 

Initial Offer

At some point after the surveying is complete (it could be weeks or even months) you will receive an initial offer from the pipeline company.  This will consist of two parts: the offer of the payment of a lump sum; and a copy of the legal instrument that the pipeline company would like you to execute in order to formalize the grant of the easement.

Damages

Although the payment offered by the pipeline company will be a single amount (and usually a small one, at that) the money is intended to compensate the landowner for the entire impact of the easement, which can be varied and extensive. The elements of damage include the value of the actual property being taken, the value of the temporary construction easement, damage to property during the construction process and the reduced value, if any, of the landowner’s remaining property. Typically, the most important factors are the current and future use of the property. For example, compensation should be higher if the pipeline runs a few feet from the front door of your house than if it goes through a remote pasture.

If you are attempting to bargain with the pipeline company yourself (rather than through an attorney) one thing you can and should do is ask around. What type of deals has the company agreed to with your neighbors or others along the pipeline route?  Texas law prohibits pipeline companies from making confidential offers or requiring that their final deals remain confidential.  Thus, there should never be any limitation on what you can discuss in this regard. 

If you are discussing payment amounts with others, care should be taken to make sure that you are comparing apples-to-apples. To accomplish this, you need to calculate the rate of payment. First, make sure the easements you are comparing are the same width (typically, 50 feet).  Assuming the widths are the same, the next step is to determine the length of each.  You can then divide the payment by the length to arrive at a linear rate in order to make an accurate comparison. Say the pipeline company has offered your neighbor $2,000 while offering you only $1,000.  Are you being short-changed? You can’t really tell until you do the math. If the easement runs 100 feet on your neighbor’s property but only 50 on yours, you are actually be offered the same rate: $10 per linear foot. Frequently, you will hear rates being discussed in “rods” rather than feet.  A rod is 16.5 feet, so an offer of $165 per rod is the same as an offer of $10 per foot.

At some point after the surveying is complete (it could be weeks or even months) you will receive an initial offer from the pipeline company.  This will consist of two parts: the offer of the payment of a lump sum; and a copy of the legal instrument that the pipeline company would like you to execute in order to formalize the grant of the easement.

Although the payment offered by the pipeline company will be a single amount (and usually a small one, at that) the money is intended to compensate the landowner for the entire impact of the easement, which can be varied and extensive. The elements of damage include the value of the actual property being taken, the value of the temporary construction easement, damage to property during the construction process and the reduced value, if any, of the landowner’s remaining property. Typically, the most important factors are the current and future use of the property. For example, compensation should be higher if the pipeline runs a few feet from the front door of your house than if it goes through a remote pasture.

If you are attempting to bargain with the pipeline company yourself (rather than through an attorney) one thing you can and should do is ask around. What type of deals has the company agreed to with your neighbors or others along the pipeline route?  Texas law prohibits pipeline companies from making confidential offers or requiring that their final deals remain confidential.  Thus, there should never be any limitation on what you can discuss in this regard. 

If you are discussing payment amounts with others, care should be taken to make sure that you are comparing apples-to-apples. To accomplish this, you need to calculate the rate of payment. First, make sure the easements you are comparing are the same width (typically, 50 feet).  Assuming the widths are the same, the next step is to determine the length of each.  You can then divide the payment by the length to arrive at a linear rate in order to make an accurate comparison. Say the pipeline company has offered your neighbor $2,000 while offering you only $1,000.  Are you being short-changed? You can’t really tell until you do the math. If the easement runs 100 feet on your neighbor’s property but only 50 on yours, you are actually be offered the same rate: $10 per linear foot. Frequently, you will hear rates being discussed in “rods” rather than feet.  A rod is 16.5 feet, so an offer of $165 per rod is the same as an offer of $10 per foot.

The Instrument

At the time of the initial offer, the pipeline company will also furnish you with a draft of the legal instrument they would like you to execute.  This will be captioned as a “Right of Way Agreement”, a “Permanent Easement Agreement” or something similar.  One of the first things you may notice is that there is a spot for you to sign this “agreement” but no place for the pipeline company to sign.  This is because the instrument is actually deeding an interest in your property and under Texas law, only the grantor (meaning you-the seller) is required to sign.  After you execute the document, the pipeline company will file it with the county deed records (a step known as “recording” the instrument). This serves as legal notice of the pipeline company’s rights.

The instrument will also not state the agreed-to compensation for the easement.  For this reason, it is most prudent not to provide the ROW agent with an executed copy of the agreement unless he is ready to simultaneously hand you a check in the agreed upon amount.  This helps eliminate any disagreement and/or delay over payment.

If you learn anything from this article, it should be that the actual terms of the easement agreement are highly negotiable and that the terms contained in the pipeline company’s first draft will be highly favorable to it rather than to you. (No surprise there). Unfortunately, if you are not an attorney or don’t have significant experience in the area, you will be at a severe disadvantage it attempting to negotiate changes and may even end up doing yourself more harm than good. It is strongly recommended that you seek professional help, at least for this part of the process.

This article is provided for information purposes only and is not intended as legal advice. Always consult an attorney about your particular situation.