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WHAT TO NEGOTIATE IN A PIPELINE RIGHT-OF-WAY AGREEMENT
A number of different provisions can be included in a pipeline right-of-way agreement. There are, however, certain basic elements or components that a landowner should be aware of that should be included in a pipeline right-of-way agreement:
1. Money. What is the consideration that the landowner will receive for the right-of-way? There are two components: (a) payment for the grant of the right-of-way, and (b) payment for damage to the landowner’s property due to the installation of the pipeline.
2. Payment. Payment should be made at the time of the execution of the right-of-way agreement. Some right-of-way agreements provide that the landowner’s consideration will be paid at the time of the installation of the pipeline; however, installation may not occur for quite some time.
3. Number of Pipelines. It is not unusual for the right-of-way grantee to request that more than one pipeline be placed into the right-of-way. In addition, there may be a request to install additional pipelines in the future. If more than one pipeline is going to be installed in the right-of-way, the landowner should be compensated for each pipeline, whenever they are installed.
4. Location. The landowner should approve the location, so the pipeline is not installed in a location unacceptable to the landowner. Once approved, the location should be placed on a temporary drawing or on a picture that should be attached to the right-of-way agreement. Later, the drawing or picture should be replaced by an as-built survey, which pinpoints where the pipeline is located.
5. Material to be Transported. No hazardous materials should be transported through the pipeline. The only substances that should be sent through the pipeline should be oil, gas, their constituents, or water, which is usually transmitted through a second pipeline.
6. Width of the Right-of-Way. The width of the pipeline right-of-way is normally 50 to 100 feet wide with a temporary construction area. The smaller the width the better as a smaller width is usually less intrusive. The right-of-way width should be specified on the temporary drawing or picture, which should be attached to the right-of-way agreement, to be replaced upon the pipeline’s installation with an as-built survey showing the exact location of the right-of-way, its width, the temporary construction area(s), and the location of the access to the right-of-way.
7. Depth of the Pipeline. It is not unusual for the pipeline to be 36 to 48 inches deep, measured from the top of the pipeline. Depending on the landowner’s use of the right-of-way area, the landowner may wish to have the pipeline installed at a depth greater than 48 inches or at a depth that will not interfere with the landowner’s use of the property.
8. Double-ditch method. For excavation and remediation of the right-of-way area, the landowner should insist on the double-ditch method. Under this excavation method, topsoil is placed to one side of the pipeline excavation, and the undersoil is placed to the other side. This allows for easier and better reclamation of the right-of-way.
9. Access. Access to the right-of-way should be designated on the temporary drawing or picture of the right-of-way and later on the as-built survey, so that access to the right-of-way cannot be made anywhere that the right-of-way grantee would like.
10. Above-ground Appurtenances. Serious consideration needs to be given as to whether above-ground appurtenances should be placed in the right-of-way. Except for pipeline markers, the preference is that no above-ground appurtenances be placed in the right-of-way.
11. Landowner’s Use. Once the pipeline is installed, what can the landowner do in the right-of-way? The landowner should insist that he be allowed to use the right-of-way for his activities or operations.
12. Reclamation. Once the pipeline is installed, the right-of-way area needs to be reclaimed. A provision should be included in the right-of-way agreement that addresses reclamation.
13. Abandonment. A time limit should be set on when the installation of the pipeline will occur. If construction has not begun by a date certain, the right-of-way should be deemed to be abandoned.
14. Warranty of Title. The landowner should not warrant title to the right-of-way area.
15. Indemnity. The landowner should be indemnified for damage resulting from the installation of the pipeline and use of the right-of-way.
16. Liability Insurance. The right-of-way grantee should maintain liability insurance, covering loss, damage, or injury for activities related to the pipeline or right-of-way.
17. Restriction of Activity. The right-of-way agreement should restrict the activity that is allowed in the right-of-way. No activity should take place in the right-of-way other than installation, maintenance, repair, and removal of the pipeline.
18. Contact Information. If there is an emergency or an assignment of the right-of-way agreement, the landowner should know whom to contact. Contact information should be provided to the landowner.
19. Water supply. Provision should be made for replacement of the landowner’s water supply should it be adversely affected by operations related to the pipeline.
20. Dispute resolution. If a dispute occurs between the landowner and the holder of the right-of-way, provision should be made for resolution of the dispute. Mediation and arbitration are usually quicker and less expensive for the landowner as opposed to resort to the courts.
These are the basic elements or components that should be in any pipeline right-of-way agreement. The landowner should consult an attorney experienced in pipeline right-of-way agreements, so that landowner will have a right-of-way agreement that protects the landowner’s interest. The oil and gas company or pipeline company will have their own attorney, so should the landowner. If not, the landowner may be at a disadvantage.
By Paul R. Yagelski, Esq.