If a pipeline company has contacted you about installing and operating a pipeline across your property, there are many factors to consider before negotiating and granting the pipeline easement or right of way agreement. An easement generally gives the pipeline company a legal property interest in your property for a specific purpose, usually the construction, operation, and maintenance of the pipeline. Although not the only important term, a primary concern is the monetary compensation the company is offering you in exchange for the easement. The going rate of a pipeline easement in Texas reflects many factors, each of which you should be aware of and incorporate into your analysis..
- Location – Location – Location: Very similar to the age old saying in the context of real estate investment, the location of your property is very important in your analysis. The county in which your property is located is one of the first considerations in determining the price of the pipeline easement. Furthermore, the location of your particular property within the county where it is located is also of primary importance. Similar transactions in your county should be analyzed and researched to ensure that the pipeline easement payment is an accurate reflection of the market. Please note, however, that even though pipeline easements are routinely bought and sold on the open market like any other real property transactions, many Courts around the country have rejected the price per rod of a pipeline easement as well as the price per linear foot of a pipeline easement valuation methods. Because of this counter-intuitive law, litigation involving pipeline rights of way are many times focused on different valuation methods and arguments that only experienced counsel, with the help of retained expert appraisers, land planners, and engineers, can properly prosecute in Court.
- Size of the Pipeline Easement: Generally, the more land (usually measured in linear feet, rods, acres, or square feet) the pipeline company wants to use, the more it will have to pay you. In the typical market for transactions of utility easements between pipeline and utility companies, the easements or right of ways are valued on a per rod or per linear-foot basis. Unfortunately, not all pipeline companies use these customary valuation standards and as stated above, Courts have also rejected that valuation method.
- Current and Proposed Future Uses of Your Property: The current use of your property has a direct correlation with your property’s value. For example, depending on whether it is commercial retail space, industrial, utility easement or corridor, farming, ranching, housing, etc., the value of your property, and therefore an easement thereon, will depend on this particular use. The value of an easement could also increase if your property could be developed into a particular use in the reasonably foreseeable future.
- Product and Pressure of the pipeline: The type of product (i.e. crude oil, natural gas, natural gas liquids, etc.) and pressure of the pipeline are directly correlated to the safety of the pipeline. Generally, the higher the pressure and/or more toxic the product that will be flowing through the pipeline, the higher the cost of the easement. Be sure to ask the pipeline company for this information, as it may not provide it voluntarily.
- Macroeconomic Market Conditions of the Energy Industry: Though the energy sector is known for its boom and bust market cycles, usually the pipeline company seeking to condemn a right of way on your land is usually in good economic standing. You should make sure that the pipeline easement rate offered to you properly reflects favorable energy market conditions and corresponding pipeline activity if they are present.
- Effect of the Easement on the Rest of Your Property: When only part of your land is subject to the easement, it is known as a partial taking. The industry standard for calculating the value owed to you as the property owner is to determine the difference between the market value of all your property before the taking and the market value of the remaining property after the taking. This analysis also includes an analysis as to whether the construction of the pipeline will interfere with any of the activities currently allowed on the property, whether there will be a loss of agriculture on the land, and/or whether there will be any above-ground appurtenances such as compressors or valve sites. Another important factor to consider is the targeting of your property for future utility lines, as it is more attractive for another pipeline or utility company to lay a new line on property with already-existing utility lines. In sum, the more the remainder of your property is negatively affected by the Easement, the more the pipeline company should compensate you.
- Legal Terms of the Right-of-Way Agreement or Pipeline Easement: The legal terms of the right-of-way agreement are a vital point of negotiation for pipeline easement payments. Though it may seem tedious and not as important as the compensation or price per rod paid, carefully reading through all provisions of the agreement will save you from future conflict with the pipeline company, protecting the value of your property, and generally assure your interests are permanently protected. Read through this legal guide on important provisions of a pipeline easement agreement to make sure your bases are covered.
- Competency of Your Legal Counsel: If you decide to engage legal counsel to negotiate a favorable rate for a pipeline easement on your property, be sure to research and engage attorneys who have experience and success negotiating with pipeline companies because this is usually a big factor. The pipeline easement attorneys at Padua Law Firm, PLLC have fought for numerous property owners across Texas and have a track record of significantly increasing compensation from pipeline companies as well as permanently protecting the property rights via the legal terms of the agreements. Our attorneys are well connected to other real estate professionals, appraisers, land planners, and engineers who know how to fairly and accurately value property and fight for the compensation you deserve.
Ultimately, determining the rate for a pipeline easement is property-specific, easement-specific, pipeline-specific, and involves the consideration of several factors. The process can become a complicated. The pipeline company, because it is in their best interest, will inevitably fight to keep the rate as low as possible, while you as the property owner must do the opposite. Don’t let the pipeline company’s experience and usually superior bargaining power undermine the value of your property. A prudent landowner should contact an attorney experienced in easement negotiations before executing a pipeline easement agreement. If you would like professional counsel to help you negotiate the best pipeline easement rates on your property, contact Padua Law Firm for a free consultation at 713-840-1411 or email at [email protected]