Pipeline Right of Ways
A landman comes knocking on your door. The gas company that he represents would like to lease your oil and gas rights. Part of the lease will involve transportation of gas, possibly other substances, across your land, either from a well drilled on your land or from a well drilled on other lands. Assuming that you are agreeable to leasing your oil and gas rights, can the pipeline be addressed in the lease or should you have a separate agreement for the pipeline? In either case, what provisions should be considered in order to protect you and your land?
In the alternative, a landman comes knocking on your door. The gas company that he represents doesn’t want to lease your oil and gas rights; however, it would like to put a pipeline across your land in order to transport its gas and possibly other substances. Do you need a right of way agreement? What things should be considered in order to protect you and your land?
First, it should be stressed that in either scenario you should consult with an attorney who is familiar with oil and gas leases, right of way agreements, and oil and gas law. DO NOT attempt to negotiate the provisions in an oil and gas lease or right of way agreement by yourself. If you do, you may be doing yourself a great disservice. If you do not consult with an attorney who deals with oil and gas law, provisions that should be placed in a lease or right of way agreement for your protection may be overlooked. Once you sign a lease or right of way agreement, it may be too late for an attorney to help you, if problems arise at a later date.
If the gas company is offering to lease your oil and gas rights, in every oil and gas lease there will be a granting clause, which normally grants the gas company the exclusive right to your oil and gas and the exclusive right to come onto your land to drill for oil and gas and to transport the same. If provisions are not considered as to the location of the pipeline and what can be placed on your land in conjunction with the pipeline, then the gas company may be able to place its pipeline wherever it wants on your property with whatever equipment or facilities it wants. Protections can be inserted in your lease in order to locate the pipeline where you want it to be and to limit the equipment and facilities that will be placed in the pipeline area. Preferably, a separate right of way agreement should be done in conjunction with the lease.
In the other scenario, you will not have a lease with the gas company. However, should you be amendable to allowing the gas company to place a pipeline on your land, you need a right of way agreement so that the pipeline can be located where you want it to be and so you can be protected in other ways.
What are some of the provisions that should be considered in negotiating a right of way agreement, either in conjunction with an oil and gas lease or by itself?
One of the first considerations is the number of pipelines that the gas company wants to put on your land. It is not unusual for a gas company to want to place more than one pipeline across your land. If this occurs, each pipeline should be considered separately, with separate remuneration paid for the right to install each pipeline across your land.
Consideration also needs to be given to what can be transported in the pipeline. There are certain substances that you may not want transported across your land. It is possible to limit the substances that the pipeline will be used to transport. Size of the pipeline, particularly diameter, and also the depth at which the pipeline will be buried are also important and need to be addressed.
Location is a paramount concern. You do not want the pipeline to interfere with the use and enjoyment of your land. If your land is used for farming or livestock operations or any other purpose that you want continued, then the pipeline needs to be placed in an area where the particular use is preserved. The location can be specified on an as-built survey or a drawing.
Of course, the monies that you will receive for the right of way will be of particular importance. The remuneration is normally based upon a particular dollar amount per lineal foot and sometimes per foot. The price per lineal foot or per foot is subject to negotiation. Once agreed upon, the date of payment is also important. Some gas companies may not want to pay you at the execution of the agreement, but rather at some distant time.
Ingress and egress must also be considered. Once installed, the gas company will need to access its pipeline. The point of ingress and egress should be specifically identified so that the gas company can’t enter or exit your land wherever it wants
The installation and location of above-ground appurtenances; e.g., compressors, are also important. If this is not addressed, the peaceable enjoyment of your land may be disrupted.
The installation of the pipeline may disturb your water supply. Provisions can be inserted in a right of way agreement that will protect you if your water supply is adversely affected by the gas company’s operations. Such provisions can provide for the testing of your water before operations begin and after operations end.
There are also other matters that need to be considered in drafting a right of way agreement. Some of these are:
- Who it is that is authorized to come onto your land once a pipeline is installed and for what purpose.
- If there are creeks, streams, open trenches, or ditches on your land, the right of way agreement can address this and provide for temporary crossings.
- The type of excavation; e.g., the “double ditch” method, can be mandated.
- Transportation of hazardous materials through the right of way can be limited.
- What rights you have to use the right of way; e.g., for agricultural activity, can be specified.
- Indemnification is also important. If you are sued because of the operations of the gas company, an indemnification provision can help to protect you.
- Provisions concerning insurance can be vitally important. It is possible to have the landowner added as an additional insured on the gas company’s liability policy.
- Assignment should be addressed. If the gas company is going to assign its rights under the right of way agreement, you should be notified.
- If there is a dispute, how will this be determined?
- Can the right of way agreement be terminated and how can this be done?
Bottom line: you need to protect yourself. You need to protect your rights. If approached by a landman, please contact an attorney. If you don’t, you may be very sorry. If you’ve signed a lease or right of way agreement without consulting an attorney, it may be too late to rectify whatever issue or problem may later arise. If you need an oil and gas attorney, we here at Rothman Gordon can help you.