The pace of oil and gas pipeline construction in Texas has increased enormously. As a Texas pipeline attorney, I regularly get calls from folks who ask me why they should go to the expense of having an attorney review their pipeline easement before they sign it. Here are the reasons why I believe that consulting an attorney is important:
1. The law in Texas regarding compensation for pipelines has been evolving. There is now greater recognition of what are called “remainder damages”, that is, compensation for the effect that installation of the pipeline and any surface equipment has on the market value of the rest of your property. Only by having a Texas pipeline attorney review the application of the current law to your specific situation will you know if you are entitled to these additional damages.
2. It is important to know whether the pipeline for the easement you’re being offered is a “common carrier” or not. A common carrier pipeline is a pipeline that carries oil or gas for third parties for hire. The law now requires that the pipeline company proves that they are a common carrier. If they are a common carrier, and can prove it, they will have the power of eminent domain (also called condemnation) if you cannot agree on easement terms with them. If they are not a common carrier, they cannot use condemnation and your bargaining position with them is much different.
3. A land man or other representative of the pipeline company may tell you that the easement you are being offered is “just a standard form”. Watch my lips on this one: there is no such thing as a standard easement form. The land man may have meant that the easement they offered was standard for that particular land man, or for the particular pipeline company the land man was representing. However, there is simply no such thing these days as a standard, industry-wide form.
4. Some folks will look at the easement and think that it doesn’t look that complicated, so why use an attorney? If you are not an oil and gas or pipeline lawyer, do you really know what the terms in that easement mean? Do you know when words in the easement have one meaning in ordinary use and another meaning in the oil and gas industry? Even more important: do you know what’s missing? Do you know what the legal implications of the language in the easement are?
5. Some people think that if they are getting the compensation they want, then the fine print in the easement does it really mean much. The truth is that what is in the body of the easement, in the “fine print”, can have a greater impact on your pocketbook in the long run than the amount of the compensation. In some cases, depending on the easement, the financial gains to you by eliminating future problems with a few changes in the easement can result in much savings to you than what you receive in initial compensation!
6. An easement can go on for many years, and perhaps forever. What remedy do you have if the pipeline company stops using the pipeline, but you still have to abide by the terms of the easement? Some people think that if they simply include language in the easement that says they can terminate the easement if it’s not used, then this will be taken care. In many cases, it does not.
5. Sometimes people are taken in by the friendly and cordial attitude of the land man or pipeline representative and think that he or she is on their side. Yes, good land men are nice. It is their job to be nice. If they weren’t nice, they would have been fired a long time ago. Whether the land man is nice or not, the land man’s professional and legal allegiance is to the pipeline company the land man represents, and not to you.
7. There are those landowners think that it’s just too expensive to have an experienced lawyer review the easement for them. However, there are many oil and gas attorneys in Texas whose fees are not only reasonable, but whose rates are a fraction of the amount of damage that can be done to your land because of an improper agreement. In addition, the attorneys fees are sometimes offset by the increased compensation as the result of an easement negotiated by an attorney. This easement may last your lifetime, or longer. Doesn’t it make sense to be sure you can live with it? Your land may be a big investment. Isn’t it worth taking care of?
8. In some cases, the land man may make verbal representations or assurances that a land owner relies on in signing the easement. Unfortunately most (there are a few exceptions) verbal promises by the pipeline company or its land man are not enforceable under Texas law.
9. There are times when the land man may pressure you to sign the easement right away. They may say this is “high priority” and if you don’t sign quickly, the offer will be withdrawn. However, it usually takes quite a while to plan, survey, and obtain easements for each section of pipeline. There is almost never a situation where it is truly a case of “sign right now or no deal”.
10. There are times when a land owner’s property is quite small and so the land owner assumes that the pipeline company won’t make any changes in its easement anyway. However, sometimes even small interests count. Secondly, many times owners of small interests, such as family members, go together and retain me to negotiate their easement, and together, they have more leverage than they did acting individually. In my office, the cost to review, evaluate and negotiate an easement is the same whether it’s for one family member of twenty. Finally, most pipeline companies are reasonable, and are open to making reasonable changes even when your interest is small. The key is to have someone who is experienced and who knows what changes are appropriate to ask for given the size of your interest. Even small changes can make a big difference in the overall fairness of an easement.
11. I occasionally have been asked to try to work out easement problems caused by the land owner’s failure to read easement before they signed it. The land owner tells me that they thought they could negotiate the easement themselves, and save the money that an attorney would’ve cost. Unless you have experience in negotiating an easement, you are almost always not going to get the best deal for yourself. Land men can spot an inexperienced person a mile away, and they are not going to cut you any slack! Remember, their loyalty is to the pipeline company, and not to you.
12. It is important to know exactly what the pipeline company will be building. Are they going to install only an underground pipeline? Or are they intending to install surface uses, such as a cleaning station or a compressor? Where exactly are the pipeline, any surface equipment, and the temporary work area going to be located? Will it be necessary to destroy any large, old trees? A landowner should be compensated appropriately for surface equipment, temporary work area, and large important trees, over and above compensation for the pipeline itself. An experienced attorney can assist you with a determination of what additional damages are appropriate to request.
13. Some types of compensation for damages from a pipeline company are taxable and some are not. Often, it is appropriate to request that the pipeline company give you two checks, one for the taxable damages and one for the nontaxable damages, so that you can prove this to the IRS if necessary. An experienced attorney can help you separate the taxable from the nontaxable compensation and ensure that the payment procedures bear this out.
If you get an offer from pipeline company or its land man, simply smile and say: “Thank you. I will seriously consider this. I will send it to my attorney promptly and we will be in touch with you soon”. And then call your attorney!!