Pipeline Easements for Marcellus Shale Development

by Kit F. Pettit, Esq.

As the leases for the Marcellus and Utica shale gases are now aggressively being developed by the exploration and production companies, some of our client inquiries are starting to shift from various leasing questions and concerns to pipeline right of way matters.

As is the case with a natural gas lease, a pipeline right of way agreement is an important legal document that should not be signed without the advice of counsel as it is a transfer of certain rights in the land to the pipeline operator. Once the right of way or easement has been granted, the rights of the landowner in the right of way become limited while the rights of the operator generally become permanent. The landowner is limited in that he or she cannot build or install any structures over the right of way, plant trees or engage in any activity that would obstruct the right of way.

As with most any agreement, proper negotiation of the document is very important as the rights granted to the operator are long-term and run with the land. There are numerous matters that should be considered and negotiated in the negotiation process, some of the which I have listed below.

1.   Payment. As the pipeline operator is going to be occupying your land indefinitely, a landowner should be compensated properly. The payment methods vary depending on the nature of the pipeline and there are also different basis for compensation. In addition to being paid by the foot, rod or square foot, there are often additional payments which can be negotiated into the agreement. An example of other compensation may include the payment for any timber that is cleared or any crops that are lost or disturbed as a result of the pipeline construction.

2.    Location. The old saying “location, location, location” does not only apply to the value of real estate or the success of a business, but it is a key element with respect to pipeline easements. As pipeline right-of-ways are indefinite in time and restrict the landowner as to his or her use of the easement area, the location of the pipeline is very important. The location should be agreed upon by the landowner and pipeline operator in advance and then specifically defined by metes and bounds in a properly prepared and sealed survey. A landowner should not agree to a simple sketch or general references or landmarks as to the location of the easement.

3.   Construction Guidelines. A pipeline agreement should address and govern numerous matters related to the construction of the pipeline. In addition to the location, the width of the easement during and after construction should be defined. A landowner should know that the width of the construction easement is going to be wider than the width of the permanent easement. Other considerations should include the time for restoration of the surface, depth of the buried pipeline, surface identification and marking of the pipeline and even a list of the names of the contractors and subcontractors that will be working on your property.

4.   The Pipeline. A pipeline agreement should limit the number of pipelines permitted in the easement or require compensation for each and every pipeline to be constructed. The pipeline agreement should govern what is permitted to be transported in the pipeline and the size of the pipeline. It should also govern rights with respect to increasing the diameter of the pipeline at a later date.

5.   Other Facilities. A landowner should be aware that some pipeline agreements provide for the installation of certain facilities within the easement area. A properly negotiated pipeline agreement should identify and limit what above-ground facilities, if any, are permitted to be placed upon the land.

6.   Termination or Abandonment. At some point, the Marcellus and Utica shale gases may be exhausted and the pipeline agreement should address what will happen to the pipeline if gas is no longer being transported through it. The landowner should want the pipeline to be removed and the easement to be terminated and released so this should be negotiated into the pipeline agreement.

In addition to these key issues outlined above, there are many more issues that should be considered when negotiating and drafting additional terms of a pipeline agreement. As with the natural gas lease, the pipeline agreement is a negotiable document and the landowner should not sign the document that has been prepared by the pipeline operator without seeking the assistance of counsel.

Written by Bernstein- Burkley, P.C. on October 3, 2011

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