Negotiating Gathering, Trunk and/or Transportation Pipeline Agreements – No Threat of Eminent Domain and Condemnation

Unlike the Federal Energy Regulatory Commission (“FERC”) interstate pipeline projects addressed in my last Blog, “Gathering”, “Trunk”, and “Transportation” Pipeline Agreements do not involve the threat of eminent domain and condemnation. It is critical that landowners understand that the vast majority of Pipeline Agreements presented to Pennsylvania landowners have no potential for eminent domain and condemnation. In fact, only a very small fraction of Pipeline Agreements carry the possibility of eminent domain and a “taking” by way of condemnation.

Without the threat of eminent domain the landowner may often have substantial negotiation leverage which used effectively can result in significant increases in compensation and landowner friendly Pipeline Agreement Addendum terms. Also, with eminent domain off the table, the landowner may often simply decline the proposed pipeline offer and avoid the unwanted pipeline easement and corresponding surface damages to their property. However, every landowner’s situation is unique and the landowner must thoroughly understand what rights, if any, the gas or pipeline company may have under their existing oil and gas lease.

One of the most important messages I am constantly trying to convey to landowners is:

Do Not Rely on the Gas or Pipeline Company Landman to Inform You of Your Right to Decline and/or Negotiate a Pipeline Agreement Offer!

Just because your existing oil and gas lease may permit the installation of certain pipelines, in most cases the pipeline or gas company is requesting far more rights and powers under the offered Pipeline Agreement than those pipeline rights the company may have under the gas lease. It is unfortunately common for landowners to mistakenly believe that the pipeline company has the right to install the requested pipeline(s) under their existing gas lease and the landowner concludes that they might as well sign the Pipeline Agreement presented by the landman. Landowners must understand their rights and not fall into this trap!

In most cases, if pipelines are allowed under an existing gas lease, these rights are very limited. Under many gas leases, the gas or pipeline company can only install a pipeline running directly to a well from which the landowner receives royalties. In most cases pipeline companies are seeking Pipeline Right-of-Way Agreements that will authorize the installation of multiple pipelines that may transport “foreign” gas produced from wells across your region or even outside your region. Gas lease terminology regarding pipeline rights can be very tricky and landowners must not rely on the pipeline company landman to interpret their gas lease and explain the legal rights of the landowner. In case you forgot: The Landman Works for the Gas or Pipeline Company, Not You!

If a landowner has the right to refuse the Pipeline Right-of-Way Agreement offer, the landowner must refuse the offer or negotiate to maximize compensation and protect themselves and their property. I have negotiated hundreds of Pipeline Agreements with over 50 gas and pipeline companies and in many cases I have been able to negotiate tens or even hundreds of thousands of dollars in increased compensation above the pipeline company’s original offer. Also, a good negotiator will significantly increase liability and property protections for the landowner in conjunction with increased damages and compensation payments.

Landowners who do not understand their rights and options are entering into very bad Pipeline Agreements when they should have declined or negotiated the offer for more money and better protections. Landowners must stop this trend immediately. A landowner should only enter into a Pipeline Right-of-Way Agreement after fully understanding their options and after negotiating the agreement to maximize financial compensation and landowner protections.

Douglas A. Clark, Esq. – Protecting Pennsylvania Landowners