The next phase in Ohio’s Utica Shale development will be the creation of an infrastructure in order to bring the gas to market. Additionally, in certain situations, pipelines may also be used to transport oil and other hydrocarbon liquids away from well sites. As a result, many landowners will be solicited to provide a pipeline easement.
Oil and gas pipelines are a necessary part of the infrastructure development needed to maximize the potential of the Utica shale in eastern Ohio. However, landowners should fully understand the terms of the pipeline easement to avoid any unwelcome surprises. There are a variety of terms to consider in negotiating a pipeline easement including the following:
• Price. Many pipeline easements are based upon a price per foot, while others are based upon a dollar figure per disturbed acre. When calculating the price by foot, be sure to determine whether or not the price will be calculated upon the actual length of pipe installed or the surface area of the pipe installed, i.e. taking into account the contours of the land.
• Location. Landowners should attempt to dictate the location of the pipeline easement. Traditionally, landowners granted blanket easements that allowed the oil and gas operator and/or pipeline company to install a pipeline over any portion of the land the company deemed appropriate. This can create problems for landowners in the future. Thus, landowners should attach a map to the pipeline easement so that there is no dispute or confusion between the pipeline company and the landowner as to exactly where the pipeline should be placed.
• Use of Land. Landowners need to appreciate that they have certain limited rights to the surface above the pipeline easement area. In order to ensure that the pipeline is maintained in a safe condition, the right of way area above the pipeline ranges from 15 to 50 feet on either side of the pipeline. Landowners will be unable to install permanent structures in this area and/or plant trees or roads in this area.
• Depth. Landowners need to consider the depth of the pipeline as well as their current and future use of the property. Many landowners will be satisfied with 24-36 inches, while others would prefer 48 inches in an agricultural area.
• Surface Appurtenances. Landowners should also understand that not all portions of the pipeline are underground. Most standard pipeline easements allow surface developments, such as pigs or valves, to be constructed on the surface of the property. Pigs and valves are a necessary part of any pipeline and some landowners will be required to bear this burden. Landowners should negotiate an additional price if they are willing to permit this type of surface disturbance on their property.
• Number of Lines. Landowners should also consider the number of pipelines that are being installed and attempt to limit the number as well as the size of the pipelines crossing their property.
• Reclamation. Landowners should require the pipeline company to reseed the pipeline area and use the double ditch method which requires the topsoil to be returned in the appropriate location after construction of the pipeline.
• Abandonment. Landowners should also attempt to define “abandonment” in their pipeline easement so that there is a clear determination as to when the pipeline easement will end.
• Future Development. Oftentimes, pipelines pose a difficult problem for future development of the property. As a result, landowners should reserve the right to have the pipeline moved, at the landowner's cost, in the event that such becomes necessary for future development.
• Liability. Landowners will also want to require the pipeline company to indemnify and hold them harmless for any accidents associated with the construction, maintenance, operation, or use of the pipeline.
It is expected that many Eastern Ohio residents will be approached in the near future to sign a pipeline right of way agreement. Although the document may be standard and your neighbors may simply sign off without question in exchange for the proceeds received, you should appreciate that the document may not protect your individual interests. Therefore, all residents approached for a pipeline easement should consult an oil and gas attorney to ensure their interests are protected.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
If you have any questions about this article, feel free to contact Gregory W. Watts at 330.497.0700.