Texas Attorney Blog

As lawyers in Texas are well aware, there is a lot of construction of high voltage transmission lines ("HVTLs") going on in Texas as well as in other parts of the United States. Research by electricity providers shows that they may lack capacity for the future demand, and so the race is on. Most landowners, when approached by the transmission line company, really wish they would just go away. They don't want one of those lines across their property. However, they won't go away. In addition, if you cannot come to an agreement with the company, they have the right of eminent domain, which is the right to condemn the portion of your property that they need for the easement or right of way. It is truly in the land owner's best interest to negotiate the best agreement possible under the circumstances. Here are some of the questions that should be addressed in the agreement:
1. Is the easement limited to a specific area, or is it a blanket easement over your entire property?
2. Is the company obligated to reseed with whatever grass was there originally and in general to restore the easement area to its original condition?
3. 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?
4. Is there a "temporary work area" in addition to the easement itself? Are you receiving an additional payment for use of this area?
5. HVTL installation can involve a lot of very heavy equipment which will compact the soil. Is any 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?
6. Will you be compensated for crop loss or crop damage caused by the installation and construction phase as well as by the permanent easement?
7. Is the company required to notify you prior to use of herbicides for brush or weed control?
8. If fences will be effected, is the company obligated to use temporary fencing and to restore the original fence to same or better than the original?
9. If gates must be installed, will a gate be installed that is of a design and quality suitable for the use of that gate?
10. What route will the construction and maintenance contractors use? Is the route situated so as to minimize damage to the service and inconvenience to you?
11. Will you have rights to use the surface in any manner that does not interfere with the transmission line?
12. Will the company agree to avoid important trees and not to remove or trim trees without your consent?
13. Will the company agree to be responsible for and indemnify you against any damages that are caused directly or indirectly by the installation, operation, maintenance or removal of the transmission line?
14. Does the easement terminate if it is unused for a certain length of time?
15. Will you get a separate payment for the easement and for damages?
16. Will you get paid for the actual easement or right of way area, as well as for the possible decrease in value to the rest of your property because of the presence of the line?

These are just a sample of the kinds of serious issues involved in negotiating an HVTL easement or right of way agreement. Each of these can be major issues if not properly addressed in the easement. For all these reasons, many landowners consider it simply good insurance to consult an attorney before they sign an HVTL or electrical line easement. The cost of an attorney is a small fraction of the amount of potential damages caused by the line. In many cases, an attorney will pay for themselves because they are able to negotiate more complete damage payments from the company.

Any Texas oil and gas attorney who has practiced for any length of time has been through the cycle many times: oil prices go up, and leasing and drilling activity increases. Oil and gas prices decline, and many oil and gas companies pull back on their leasing and drilling efforts. The past year has seen an especially extreme example of this cycle. Last summer, according to WTRG Economics, the price the operator received for oil in some areas of Texas reached $150.00 per barrel or more. According to the Energy Information Administration (a division of the Department of Energy), gas was going for $8.00 per mcf at the wellhead in some places. Leasing was going on at a frantic, almost giddy, pace and substantial primary term payments and royalty percentages were the norm. Then prices declined sharply, to less than $30.00 per barrel of oil and $3.00 per mcf for gas at the wellhead in many areas of Texas. Most operators pulled way back, some walking away from signed leases and others signing leases only at substantially reduced bonus and royalty levels.

Now the price of oil and gas is increasing, and phoenix-like, the Texas energy industry begins to rise from the ashes. This time, there are some dark clouds on the horizon, coming in from our nation's capitol, that do not bode well for the energy industry. President Obama, while proclaiming that he wants to achieve independence from foreign oil sources, is considering two things that would cripple our domestic oil and gas industry. Specifically, he wants to eliminate intangible drilling costs and depletion allowance as deductions for oil and gas operators on their federal income tax. He wrongly calls these "subsidies", in an attempt to gain support for this policy.

The deduction for intangible drilling costs allows oil and gas companies to deduct the cost of exploring for oil and gas from later oil and gas income. These costs include such things as seismic tests, surveys, engineering fees, wages, etc. The intangible drilling cost deduction encourages oil and gas companies to explore for new energy sources. The depletion allowance allows oil and gas companies to deduct a portion of the value of their mineral deposits as those deposits are used up, just as the owner of a machine used to produce goods is allowed to depreciate his machine.

It took decades for the domestic energy industry to recover from the ill-conceived, poorly timed and wrongly executed policies of Jimmy Carter. President Carter's policies drove many smaller companies out of business, and encouraged other producers and refiners to move outside of the United States. When we experience those times of high gasoline prices in the United States, it is primarily Carter that we have to thank. Unfortunately, we now seem to have another President headed down this same irresponsible path.The announced policies of Obama are bad policy policy for at least four reasons: 1) most energy production in this country comes from small, independent companies, not "big guys" like Exxon or Mobil, and these small companies are going to be hurt badly by this policy; 2) these policies will result in much higher prices at the pump for consumers, who are having a hard enough time already; 3) Carter's policies drove the "big guys" overseas, and now Obama's policy would diminish the remaining independents; and 4) the higher energy prices will contribute in a big way to inflation. Is this really the way to achieve energy independence? I think not!