As oil and gas lawyers in Texas are well aware, there is a lot of pipeline construction going on in Texas as well as in other parts of the United States. I had a fascinating conversation not long ago with Victoria Myers, Senior Editor for The Progressive Farmer Magazine. If you have not looked at this publication before, it is really an excellent resource for folks who make a living from farming, as well as those “gentlemen (gentlewomen?) farmers out there. (You know who you are!) Since I am a Nebraska farm girl myself (Thayer County, to be precise), I find it especially interesting.
Victoria is the author of an article in an upcoming issue of Progressive Farmer regarding pipeline easements and rights-of-way. My discussion with her has caused me to update my list of issues involved in these kind of agreements by adding a few from her list. Here is the updated list:
1. Is the easement limited to a specific area, or is it a blanket easement over your entire property?
2. Is the pipeline going to be buried to an appropriate depth, in light of your future use of that property, what the pipeline will carry and the anticipated size of the pipeline?
3. Does the easement obligate the pipeline company to refill to the original contour of the land and maintain that contour as the fill packs down?
4. Is the pipeline company obligated to remove and save the top soil from the easement area separately, to replace the topsoil and reseed with whatever grass was there originally and in general to restore the easement area to its original condition?
5. Will any waterways or drainage tiles be impacted by the pipeline? If so, is the pipeline company obligated to repair these to their original condition and possibly pay damages for temporary loss of use?
6. If your land is used for agricultural purposes, can construction, installation and maintenance be performed when the ground is cold or frozen to reduce soil compaction?
7. Is there a “temporary work area” in addition to the easement itself? Are you receiving an additional payment for use of this area?
8. Pipeline installation can involve a lot of very heavy equipment which will compact the soil. Is the temporary work area situated so that the soil compaction is kept to a minimum? Are you being paid damages if the compaction that does occur prevents future crops in this area?
9. Will you be compensated for crop loss or crop damage caused by the installation and construction phase as well as by the permanent pipeline?
10. Is the pipeline company required to notify you prior to use of herbicides for brush or weed control?
11. If fences will be effected, is the pipeline company obligated to use temporary fencing and to restore the original fence to same or better than the original?
12. If fences must be cut, will a gate be installed that is of a design and quality suitable for the use of that gate?
13. Will you have rights to use the surface in any manner that does not interfere with the pipeline?
14. Will the pipeline company agree to avoid important trees and not to remove or trim trees without your consent?
15. Will the pipeline company agree to mark the pipeline route with durable and permanent markers?
16. Will the pipeline company agree to be responsible for any damages that are caused directly or indirectly by the installation, operation, maintenance or removal of the pipeline?
17. Does the easement terminate if it is unused for a certain length of time?
18. Will there be above-ground equipment along the pipeline route? If there is going to be above-ground equipment, are you going to be separately and appropriately compensated for it?
19. Will you get a separate payment for the easement and for damages?
These are just a sample of the kinds of serious issues involved in negotiating a pipeline easement or right of way agreement. Each of these can be major issues if not properly addressed in the easement. For example:
1. If there is no right on your part to declare an unused easement to be abandoned, that easement will show up on your title forever, even if it has not been used for many years. This can create a major impediment to future uses of your property. You can try to get a release of the easement, but the pipeline company may not exist any longer, and there may be no one to sign a release. You may even need to file a suit and obtain a court order to declare the easement terminated.
3. Regarding payments, currently easement payments are taxed as capital gains but damages payments are not taxable. If you get one check and the payment for the easement is combined with the payment for damages, the IRS may well assume that the entire payment is taxable.
4. Construction equipment may prevent irrigation of a field at a critical time. In fact, the construction phase may render the entire field unusable, with the resulting loss of the crop from that field. You need to be sure the compensation paid to you includes the value of the lost crop.
For all these reasons, many landowners consider it simply good insurance to consult an attorney before they sign a pipeline easement. The cost of an attorney is a small fraction of the amount of potential damages caused by pipeline construction. In many cases, an attorney will pay for themselves because they are able to negotiate more complete damage payments from the pipeline company.