10 Common Landowner Mistakes in Negotiating Pipeline Right-of-Way Agreements
1. Mistakenly Believing You do not Have the Right or Power to Say “No” to a Proposed Pipeline Right-of-Way Easement Agreement.
Critical: Landowners must understand their right to decline a requested Pipeline Agreement and their ability to negotiate for substantial compensation, crucial property protection terms, and protection from future liability.
Many landowners unfortunately sign Pipeline Right-of-Way Agreements under the mistaken belief that the gas or pipeline company has the authority to install the requested pipeline(s) under the terms contained in their existing oil and gas lease. Landowners also often incorrectly believe, or are misled by company landmen to believe, that the gas or pipeline company ultimately will obtain Eminent Domain authority and the power of Condemnation to install the requested pipeline(s).
Although most oil and gas leases provide the gas company the ability to run a pipeline across your property from wells that are producing gas from your property or from a Production Unit that includes your property, the vast majority of gas leases require a separate written Pipeline Agreement to run pipelines across property that carry gas from other Production Units that do not include the landowner’s property. In other words, most gas leases do not grant gas or pipeline companies the authority to install pipelines to transport “Third Party Gas” or “Foreign Gas” across a landowner’s property.
Determining a gas or pipeline company’s authority to install pipelines under your existing gas lease is the first step, and most important step, in evaluating a landowner’s negotiation leverage when presented with a Pipeline Right-of-Way Agreement.
2. Relying on the Gas or Pipeline Company Landman to Tell You Whether You Have the Right to Decline or Negotiate a Presented Pipeline Right-of-Way Agreement.
Critical: Do not just take a landman’s word that you do not have the ability to say “No” to a proposed Pipeline Right-of-Way Agreement. Remember, the Landman works for the company, and not for you. Determining your right to decline a proposed Pipeline Agreement requires a detailed review of often complicated Oil and Gas Lease terms and Addendum language. The landowner must understand the purpose of pipeline(s) the company is seeking to install and whether the proposed Pipeline Agreement allows for multiple lines that may be installed in the future. Any missteps can be very costly to the landowner.
In many cases a landowner’s gas lease may allow for the installation of a single pipeline only to wells from which they receive royalties. Remember, in almost all cases where a company is requesting a Pipeline Right-of-Way Agreement, they are requesting substantially more authority to operate on your property and for the authority to install pipelines that are not permitted under your gas lease.
If you are approached with a Pipeline Easement Agreement you should immediately contact an attorney with experience in negotiating Pipeline Agreements and evaluating your rights and negotiation leverage. Attorney Douglas Clark examines your original oil and gas lease and advises you of your rights to refuse or substantially negotiate a potential Pipeline Right-of-Way Easement across your property. Do not sign ANY contract with a gas or pipeline company unless you fully understand all of your rights.
3. Fearing the Installation Pipelines Under the Terms of Your Existing Oil and Gas Lease.
Gas and pipeline company landmen often try to scare landowners into signing bad Pipeline Agreements by telling the landowner that if they do not sign the Agreement, the company will move forward and install the requested pipeline under the authority of the landowner’s existing gas lease. Quite simply, there are far worse things than a gas company installing a pipeline on your property under the authority of your existing oil and gas lease. Most gas leases only permit pipelines that will carry gas from wells that are producing your gas.
If a landowner does not agree to enter into a Pipeline Agreement and the company installs a pipeline under the authority of your gas lease, the company generally loses the right to use the installed pipelines once your gas lease terminates. This is a very important and often overlooked fact.
Pipeline companies want separate Pipeline Agreements, in part, to allow the company to install pipelines not permitted by the existing oil and gas lease and to operate their pipelines for many decades after the oil and gas lease terminates.
Remember, it is not necessarily bad to reject a Pipeline Agreement offer and allow the company to install a pipeline under the terms of your gas lease. If pipelines are installed under the terms of your gas lease, the company must comply with all the operation limitations contained in your gas lease which may be very favorable to the landowner. Also, in most cases where a company installs a pipeline under your gas lease, the company will only install one pipeline that carries your gas.
Even though a company may have authority to install limited pipelines under your gas lease, the company will often choose to bypass your property to avoid pipeline restrictions contained in your gas lease and to avoid the termination of their ability to use the pipeline when the gas lease terminates. All gas leases will expire, but most Pipeline Agreements are permanent.
4. Simply Accepting the Company “Form” or “Boilerplate” Pipeline Right-of-Way Easement Agreement without Negotiating to Maximize Compensation and to Insert Powerful Landowner Friendly Addendum Terms.
No landowner should sign any agreement with a gas or pipeline company without completely understanding the impact of the agreement for the short and potentially very long term. The “form” or “boilerplate” Pipeline Right-of-Way Agreement presented by the company landman is an extremely powerful document specifically drafted by experienced pipeline company lawyers to benefit the company and not the landowner.
Landowners should never enter into a Pipeline Right-of-Way Agreement with a gas or pipeline installation company without negotiating the Agreement through a qualified and skilled attorney versed in pipeline operations and Pipeline Agreement and Addendum terms. In order to maximize current compensation, future compensation opportunities, and crucial property protections, the company “form” Pipeline Agreement must be vigorously challenged and negotiated to protect the landowner and their property for generations.
It is very common for a knowledgeable attorney to add several pages and dozens of additional terms to the form Pipeline Agreement presented by the company Landman. But Remember, it is not simply the quantity of Addendum terms added to an agreement that benefit the landowner, it is the quality of the terms and the effective drafting of these terms to eliminate loopholes and ambiguity that is crucial.
5. Failing to Fully Understand and Properly Assess Your Pipeline Agreement Negotiation Leverage.
Almost all landowners lack the experience to effectively evaluate their leverage in pipeline negotiations and are unaware of critical Addendum terms and other language that may be added or negotiated into a proposed Pipeline Agreement. Effective pipeline negotiations are not simply requesting Addendum terms that you print off of the internet or copy from your neighbor’s Pipeline Agreement Addendum. Effective pipeline negotiations involve a complete understanding of each landowner’s leverage and using this leverage to maximize compensation and limit the company’s authority under the final Pipeline Agreement.
Many landowners have missed out on hundreds of thousands of dollars in compensation and critical liability and property protection terms by failing to understand their pipeline negotiation leverage. Do not repeat this very costly and frequent landowner mistake.
6. “Negotiating” Pipeline Agreements by Printing Addendum Terms Off of the Internet, or Requesting Your Neighbor’s Addendum.
Many landowners think they are “negotiating” by simply printing Addendum terms off of the internet and handing them to the company landman. Other landowners may “negotiate” by providing the landman a copy of their neighbor’s Pipeline Addendum and demanding, “I want what my neighbor got.” Requesting Addendum terms that you find on the internet or copy from your neighbor’s Pipeline Agreement Addendum is not effective negotiation and will not maximize this one-time opportunity.
Companies routinely refuse generic Pipeline Addendum terms plucked from the internet. In the alternative, the company may counter your requests with language appearing to address your Addendum only to have completely emasculated the substance and impact of your requested Addendum language. Remember, this is not the gas and pipeline company’s first rodeo! Companies also have the internet and they have smart lawyers to draft Addendum terms with numerous company friendly loopholes to avoid giving the requesting Addendum any real teeth for the landowner.
Also, just because your neighbor signed a gas or Pipeline Agreement with Addendum terms, does not mean that those terms are the best you can negotiate in your situation. Remember, every single pipeline negotiation is unique and no two landowners have the same identical leverage. Also, maybe your neighbor was a poor negotiator, or their Addendum is otherwise weak and filled with company friendly loopholes. Every landowner must negotiate the most powerful Addendum possible for their unique individual situation.
7. Believing the Company Landman is Your Friend and Failing to Fully Appreciate that the Landman Makes His Money Working for the Gas or Pipeline Company – NOT the Landowner.
This mistake arguably could be listed as the “Number 1 Biggest Landowner Mistake”. Doug repeatedly announces every week on his radio show that: “The Landman works for the gas or pipeline company and NOT for the Landowner!” If there is any doubt, ask the Landman to show you their business card. Read it carefully, but you will not find your name on the landman’s business card.
Landmen generally work for land service companies hired by the gas or pipeline company, or they may be a direct employee of the gas or pipeline company. Less often, the Landman will be an “independent” Landman who works as an independent contractor for the gas or pipeline company. However, in no circumstances does the Landman work for the landowner.
Remember, the Landman’s job is to get Landowners to sign the Oil and Gas Leases, Pipeline Agreements, or other oil and gas related document(s). Landmen are paid to secure your signature and they are not hired by the gas or pipeline company to negotiate a fair contract on your behalf.
No matter how “nice” the Landman may be, Landowners must understand the adversarial nature of the Landman/Landowner relationship. Landmen knock on your door with many tricks up their sleeve (and sometimes donuts in hand) that they employ to achieve their goal.
A common landman technique is to befriend the landowner and assure them that they are a “landowner friendly” landman. The Landman will listen to your requests and say that they will fight for you, and then act disappointed when they return to tell the landowner that they were not able to get the company to agree to your requests. The landowner then mistakenly believes that the landman fought for them and if their “friend” the landman could not obtain their requests, these requests must be unavailable. Think about that… You are believing that the company paid landman is working for you and not their employer?
Remember, landmen are specially trained and experienced in the art of landowner communication and persuasion. Landowners’ confidence in their “friendly landman” has cost Pennsylvania landowners tens of millions of dollars over the past decade and lost royalties will continue for many decades into the future. Do not rely on the company paid landman for advice. Retain high quality experienced and skilled legal counsel to protect your rights and maximize financial compensation.
8. Failing to Appreciate and Understand that Every Pipeline Agreement Negotiation is Unique and a Good Agreement for One Landowner May be a Terrible Agreement for their Neighbor.
Evaluating Landowner leverage is critical in every pipeline negotiation. Landowners must understand that there are countless Oil and Gas Lease forms and gas lease Addendum terms that come into play in pipeline negotiations. A single sentence or clause buried within a gas lease or addendum may completely shift pipeline negotiation leverage in the landowner’s favor.
Nearby or neighboring properties may present unique geographical or environmental challenges to a pipeline company that make the acquisition of a Pipeline Easement Agreement on your property substantially more valuable. A deeper investigation may reveal that the pipeline company lacks alternatives to by-pass your property which renders your property a higher value parcel in the company’s pipeline infrastructure plans. Perhaps your parcel is close to or adjacent to a Compressor Station that the company needs to access. This too can significantly increase your Pipeline Agreement negotiation leverage.
Remember, there are many hidden circumstances that can turn a seemingly routine pipeline negotiation into an opportunity for hundreds of thousands of dollars in compensation.
Landowners must understand the uniqueness of their particular situation and effectively evaluate and understand their negotiation leverage. Attorney Doug Clark has seen many pipeline offers start well below $50,000.00 only to end in agreements for hundreds of thousands of dollars in compensation. Leverage is king!
9. Repeating the Same Mistakes Made by Landowners During the Gas Leasing Process.
Unfortunately, many landowners presented with Pipeline Agreements are repeating the same mistakes they made during the gas leasing process. Landowners must learn from mistakes made during the gas leasing phase of Marcellus and Utica Shale gas development.
Many landowners regret not contacting a qualified and knowledgeable attorney to represent their interest in gas leasing negotiations and this mistake should not be repeated when approached with a Pipeline Right-of-Way Easement Agreement. Pipeline Agreements often present the landowner an opportunity to negotiate significant compensation if handled properly. It is not uncommon for Pipeline Agreement negotiations to result in hundreds of thousands of dollars of compensation. Do not leave money on the table!
Remember, Oil and Gas Leases often carry initial terms of 5 years if drilling does not occur. However, many Pipeline Agreements are permanent or may extend for hundreds of years. Do not go into Pipeline Right-of-Way Agreement negotiations alone or with an unqualified or inexperienced attorney. The Clark Law Firm, PC has extensive experience in negotiating hundreds of Pipeline Agreements across Pennsylvania. Contact us today!
10. Fear of Attorney Fees.
Landowners sometimes mistakenly resist retaining an attorney in Pipeline Agreement negotiations in an effort to avoid legal fees. This is an unfortunate mistake as many times a skilled attorney is able to negotiate tens of thousands or even hundreds of thousands of dollars above and beyond the company’s initial offer to the landowner.
A critical factor in Pipeline Agreement negotiations is an accurate evaluation of the landowner’s negotiation leverage. An accurate evaluation of landowner leverage coupled with skilled negotiation techniques can lead to substantial financial gain AND a strong final agreement to the great benefit of the landowner.
Remember, Pipeline Right-of-Way Agreements typically impact your property for generations and a strong company favored Agreement will apply through the life of the Agreement to the detriment of the Landowner. Remember, pipeline companies will maximize the benefits they obtain in company friendly Agreements and landowners must obtain the best possible Agreement in every negotiation.
We are confident that the price of our oil and gas legal services will be substantially outweighed by the benefits we can obtain for the Landowner. Our clients have the confidence of knowing that their Pipeline Right-of-Way or other natural gas Agreement has been skillfully negotiated and carefully reviewed by an experienced oil and gas attorney who is working for them, and not the company.
11. Failing to Hired an Experience and Qualified Gas and Pipeline Attorney with the Tools to Effectively Negotiate Pipeline Agreements on Behalf of the Landowner. There are many pitfalls and complicated issues that must be fully understood and addressed when engaging in Pipeline Right-of-Way Agreement negotiations. A landowner or inexperienced attorney may easily overlook critical Addendum terms and protections that may be available with effective negotiation. Perhaps more importantly, an inexperienced negotiator may leave tens or hundreds of thousands of dollars on the negotiation table.
Standard company offered Pipeline Right-of-Way Agreements are entirely insufficient to protect the property owner and are typically offered at the lowest possible compensation rates. Most standard Pipeline Agreement terms should be negotiated by a skilled lawyer to greatly benefit of the landowner. However, in order to effectively negotiate Pipeline Easement Agreements, the negotiator must have, at minimum:
- The ability to accurately evaluate negotiation leverage;
- The ability to draft complex contract language eliminating company friendly loopholes;
- An intricate knowledge of Pipeline Agreements and Addendum terms; and
- A detailed understanding of pipeline construction operations.
The Clark Law Firm, PC negotiates Pipeline Right-of-Way Agreements on a daily basis. Attorney Doug Clark is at the forefront of the Pennsylvania Pipeline Agreement negotiations. Doug constantly incorporates new ideas into Pipeline Agreement negotiations and pushes the envelope to the benefit of his clients.
By negotiating hundreds of Pipeline Agreements with over 50 different companies across Pennsylvania, Doug has detailed knowledge of the ever changing pipeline market and understands which invaluable property protections must be obtained and how to get them. Attorney Clark brings his extensive oil and gas experience into each Pipeline Agreement negotiation on behalf of his landowner clients.
Doug fights for every single landowner client to get the absolutely highest compensation and best possible Pipeline Agreement. Let Doug Clark’s experience work for you! Contact us today.