Pipeline Right-of-Way “Option” Agreement Negotiations
Maximizing Upfront Option Payments AND Reducing the Term of the Company Option
Most Pipeline Right-of-Way Agreements presented to Pennsylvania landowners are actually Pipeline “Option” Agreements. Pipeline “Option” Agreements are drafted by pipeline company lawyers to provide the pipeline company the “option” to install a single or multiple pipelines in the future. Typically the pipeline company will offer a landowner a small non-refundable upfront “option” payment with the potential for a much larger payment in the future, should the company exercise its “option” to install one or more pipelines.
Pipeline Option Agreements are problematic for landowners as they typically provide years of uncertainty with only a small upfront financial commitment by the pipeline company. Option Agreements are recorded at the county courthouse to provide notice to third parties that the property is encumbered by a Pipeline Option Agreement that may or may not be exercised in the future.
Option Agreements should be avoided whenever possible and the landowner should seek full compensation at or around the time they sign a Pipeline Agreement. However, if the Pipeline Company will only agree to enter into a Pipeline Option Agreement, the terms of the company “option” must be aggressively negotiated.
In every Pipeline Option Agreement, Landowners must negotiate for:
- The highest possible upfront “option” payment; AND
- The shortest possible option timeframe in which the company must decide if they are going to exercise the “option”. Remember, upfront “option” payments are generally non-refundable and the higher the “option” payment the more money the landowner keeps should the pipeline company elect to not exercise the option and install pipeline(s) in the future. Also, the more money a pipeline company is willing to pay as an upfront “option payment”, the greater likelihood the company will exercise that “option” and make the larger payment in the future.
Attorney Doug Clark negotiates to maximize “option” payments and shorten the “option” term to require the pipeline company to make a decision as soon as possible whether to exercise their option and install the pipeline(s). If the pipeline company does not timely exercise the “option”, the Pipeline Option Agreement will automatically terminate and be released from your title.
Doug is typically able to negotiate “option” payments in excess of the Pipeline Agreement negotiation legal fees so the landowner client does not lose money if the company does not exercise the option and install a single or multiple pipelines in the future.
If you are presented with a Pipeline Option Agreement, contact The Clark Law Firm, PC. Attorney Doug Clark has negotiated hundreds of Pipeline “Option” Agreements across Pennsylvania and he can help you.
Doug is working hard to protect Pennsylvania landowners. Contact us today!