Negotiating the pipeline easement your farm can live with forever

(Part II)

(This is the second in a two part series about pipelines being planned across the state of Ohio. To find out what pipelines are on the drawing board and where the initial plans for location are, check out Part I. Also check out the top 10 tips to keep in mind if a landman comes knocking on your door.)

CADIZ, Ohio — If you can’t imagine your best corn field being torn up by pipeline construction, you are not alone. But how you handle the situation is up to you.
That’s the lesson gained from Ohio farmers Dave and George Mizer.

The Mizers’ farms are in Harrison County, in the middle of Utica shale country. In each direction around the farm is shale activity. To the north, a visitor can see a well being drilled; the side of the roadway is lined with trucks awaiting delivery of fracking equipment; and up on a nearby hill is a facility for separating gases, oil and water.

And on the Mizer farm are three pipelines, a separation plant, five producing wells, a stabilization plant and a load-out area.

Interstate pipelines

No matter the pipeline type or other infrastructure, George Mizer reminds other farmers that negotiations are the key.

He said his family would not have chosen for three pipelines to be constructed across their property, however, they were all interstate pipelines, which Federal Energy Regulatory Commission commands. That means that eminent domain can be used, so there wasn’t much of a choice.

He said the easement property on both the family farm and his brother Dave’s farm could have been taken without their approval. At least by negotiating, they could have a say in the plans and get some benefits from the construction.

“Remember, they are coming to you. You have something they want. If you didn’t, they wouldn’t be coming to see you,” said Mizer.

Negotiating

He said one key to negotiations is not to let your temper rule and “don’t be intimidated.” If the company isn’t budging and you are frustrated, just end the meeting for the day, but don’t stop negotiating.

He added it is very important to take your time in negotiations — don’t be in a hurry to get the check because there are things that could be missed. Instead, walk or drive around with the landmen, think about what they want to do with the land and what that will mean to your operation.

For example, he said one area of the farm is currently rented to a farmer as pasture for his beef cattle.

The Mizers negotiated with the pipeline company to have new fencing installed. Once the pipeline is finished, the fencing will be rebuilt by the company the Mizers chose, in the set up they want.

Farmers should also remember to include any USDA, CRP and CREP program obligations on the property. This should be figured into the agreement, especially if it means losing the program benefits.

The players

Another key to negotiations is the landman. Mizer learned there are different levels of landmen in a company, so if one tells you they are not authorized to pay a certain amount or authorize something like bridge construction, just end the negotiations for the day. It’s true, the landman you are talking to might not have the ability to agree to it, but another landman might.

Mizer added you have to recognize there is a point where a company will say no, and as landowners, you have to have patience and respect when you reach that point.

Just remember the pipeline companies will pay only once, but the pipelines are permanent.

Be sure to read this column about what to put in your pipeline easement to protect yourself.

Eminent domain

Landowners are also encouraged to negotiate in good faith for all pipelines, but eminent domain can be used in interstate projects.

The Ohio Farm Bureau Federation reminds all landowners that landmen can’t just threaten the use of eminent domain, there is a specific process that has to be followed. However, very few cases ever make it to court. In fact, it is estimated that over 98 percent of pipeline easement disagreements never make it to court.

Instead, the company involved will usually compromise and come to an agreement with a landowner.

Taxes

Another thing to consider is the responsibility for paying taxes on the pipeline easement rests with landowner.

The Ohio Farm Bureau recommends a pipeline agreement include a section on future unknown tax increases on easements, and who will pay the tax increases on pipeline easements.

Abandoned pipeline

Another key to an agreeable easement is to include language that will divert the land back to the landowners if the pipeline easement is abandoned or the pipeline is taken out of operation, and what exactly constitutes that abandonment.

One pipeline

Both Mizer and the Ohio Farm Bureau said landowners should negotiate for only one right of way, one ditch and one piece of infrastructure. If a second pipeline is to be installed, then it requires a second set of negotiations.

Landowners may also want to consider limiting the pipeline to carry a single substance. For example, if the company claims the line will carry only ethane, then the easement agreement should say it will only carry ethane.

Farm production

The OFBF reminds landowners that crops should be planted and livestock production should resume after the project is finished.

Landowners with Christmas trees, timber or fruit orchards need to negotiate additional points because of the potential loss of that income on a permanent basis.

The Farm Bureau also recommends the agreement spell out that the landowner retains use of the right of way and that they retain rights to use the easement area for normal agriculture use such as crop production and pasture.

“Remember the easement is one a landowner will live with for the rest of his life, as well as several generations,” said Dale Arnold, Ohio energy services director for the Ohio Farm Bureau Federation.

Both Mizer and Arnold emphasize each farmer needs to make a pipeline easement fit his specific farm. Both agreed there is no “one size fits all” template.

Remember drainage tile

Dave Mizer said the family went rounds with one pipeline company, trying to get the company to help them move the drainage tile in the best land on the farm, which would be crossed by the pipeline. The company refused. So the family worked a compromise into negotiations and when the project was finished, the Mizers ended up moving it themselves. However, the pipeline company had to come out and watch while they moved the tile lines to minimize the Mizers’ risk and liability.

During the most recent pipeline construction project, the Mizers wanted a bridge constructed so that they could get equipment where they needed it. It’s also benefiting the drilling company and pipeline companies because it allows them easier access to part of the property. Now the bridge is part of the easement agreement.

Check with crews

Both George and Dave Mizer said the number one thing landowners can do though is to stay friendly and check in daily with the pipeline construction crews. Be sure to walk the property and show them where it is supposed to go. Check on them throughout the day to ensure the construction is being done correctly.

“Once you sign and they come on your property, be with them, see what they are doing,” said George Mizer.

Pipeline depth

Another thing to negotiate prior to construction is the pipeline depth. The state has regulations requiring minimum standards for pipeline depth, however, the pipeline easement agreement gives the landowner the right to require the company to bury the lines at a depth they desire.

Landowners should also remember that burying pipelines “below plow depth” is a meaningless term. Instead, specify exactly how deep the lines should be buried and have the language included in the agreement.

A state law requires pipeline companies to complete 80 percent of the work described in the easement. However, the Mizers said that is not enough.

“Who wants 80 percent? You want the whole project completed,” said Mizer.

A good relationship with the construction crew has meant the crews have done 100 percent of the work on the infrastructure and pipelines on their property.

Restrictions

Another thing to negotiate in the agreement is restricting and clarifying where a compressor station, metering equipment and other pipeline support infrastructure can be placed on the right of way and property.

The Mizers also recommend spelling out in the agreement how the pipeline company or any service provider will access the property for inspection and routine maintenance.

The agreement should identify times when the company should not enter the area (for example if livestock is pastured in the area) and address landowner damages and disruptions (gates being left open).

The agreement should also include language spelling out where pipeline markers and signs will be located.

Farmland preservation

One subject that has been discussed is whether or not farms can be accepted into the Ohio Department of Agriculture Farmland Preservation program if it has a pipeline easement on it. According to the ODA, many of the projects come into the program with existing pipeline easements.

Get an attorney

Both the Mizers and the Ohio Farm Bureau emphasize landowners should hire an oil and gas attorney. However, a landowner may not want to leave it up to the attorney to complete the negotiating.

The Mizer family has had good luck doing its own negotiations and then consulting an attorney to look over the agreement to ensure the language is correct and that they are getting everything they want in the project.

“Once you sign and they come on your property, you are partners,” said Dave Mizer.

Remember to tell the landmen that if you agree to sign an agreement, the signatures will completed at your attorney’s office, then go straight to the courthouse and file the agreement.

“The worst place in the world to sign anything is on the hood of your pickup truck,” said Arnold.

(To find out if a pipeline is planned in your county, check out Part I of the series. Remember by signing an easement, the agreement can limit or end your rights to do what you want with you property. Check out this story by OSU Extension on how to avoid this predicament. )