In the past, I have written articles on Pipelines and Eminent Domain. These were very popular and with another Kinder Morgan pipeline coming through Walker County, I have written a follow up on pipeline negotiations. Thank you to Tiffany Dowell Lashmet with the Texas A&M Agrilife Extension Service for allowing me to use her article for this column.
While the monetary compensation is certainly an important factor for a landowner to consider, the nonmonetary terms of the easement may be more important and more valuable. Therefore, it is imperative to document any statement or promise made by the company seeking the pipeline into a written agreement.
Each property is unique, and the following considerations may not apply the same way to different properties because of their specific use and characteristics. While this list is based on a pipeline easement, these terms may also be helpful in negotiating other easements, such as those for electric or transmission lines (Entergy Reedy Creek project), water, wastewater, drainage, or related infrastructure easements.
I will start with a money saving tip. Because most attorneys bill by the hour, a client can save considerable fees by doing as much legwork as possible before going to the attorney’s office. For example, a landowner could collect necessary documents such as the legal description or plat of the property, saving the attorney the time of locating that information. Another time saver would be for the landowner to prepare a draft of the easement agreement or a list of terms they desire. This will save time when sitting down with the attorney.
Check on Eminent Domain Authority:
Often the company seeking the pipeline will tell the landowner they have the ability to obtain what they want through eminent domain. However, you should check to see if the company is validly registered with the State Comproller’s office as having eminent domain power. Ask the company representative for a copy of the statute that grants them eminent domain power and evidence supporting their claim as a common carrier. If it is a transmission line, obtain a copy of the company’s Certificate of Convenience and Necessity from the Public Utility Commission. This will explain what condemnation power the company has and may provide additional information about the proposed project.
Determine Compensation:
Generally, payment is based per foot, per acre or per rod (a rod is 16.5 feet) of the pipeline. Consider seeking payment per square foot rather than per foot or per rod to be adequately compensated for the entire area the company will use. It is common for the company to seek a temporary work area, as well, and you should seek compensation for this temporary work area.
It is important to know that Texas courts recognize remainder damages for the decreased value of the remainder of the property outside of the easement strip. For instance, if a pipeline splits a 10 acre tract, the acreage remaining outside the easement will likely be worth less per acre than if the 10 acres were sold as a whole.
You should also discuss the payment’s tax implications with your CPA or financial advisor. How the payment is described or structured will make a difference.
The following list of key points may be helpful:
- Seek a Specific Easement
- Seek a Nonexclusive Easement
- Limit Easement to One pipeline
- Determine Pipeline Diameter
- Require a Specific Pipeline Depth
- Request Payment for Damages
- Have a Timber Management Company or Agricultural Consultant evaluate the property
- Have Property Appraised
- Specify Fencing Requirements
- Include Repairs to existing roads
- Determine Maintenance requirements
- Define when the easement will terminate
- State Requirements for Removing Pipe and Facilities
- State Remedies for Violating Agreement
- Include Liability and Indemnification Provisions
- List Landowner as “Additional Insured”
- Do Not be responsible for Warranty of Title
- Limit Terms of Transferability
- Request a Most-Favored-Nations Clause
- Use Choice of Law provision
- Include a Forum Clause
Finally, a licensed attorney familiar with easement negotiation issues should review all pipeline easement agreements BEFORE signing. Although hiring an attorney who specializes in representing landowners in these type of transactions may be an additional cost, it could save money in the long run by preventing a dispute from arising due to an unclear or inadequate easement agreement. Additionally, the fee arrangement with attorneys in these matters is usually a contingency fee agreement. This means the attorney is paid based on the increased amount of compensation they produce for the landowner who’s property is being taken. So, no cost up front.