What is a Gas Pipeline Easement?
A gas pipeline easement, by definition, is an interest in real property that gives the company the authority to install pipelines in, on, or under the landowner’s property. A gas pipeline easement allows the gas company to use the property of another for their benefit. Gas pipeline easements can run with the land so that a company can continue to use the property even after it sells the property to someone else.
When an oil company wants to install a pipe line on your property, they will approach you and ask you to sign a document granting them a Right of Way. The Right of Way gives the company the right to lay piping or build on your property; however, the rights of the oil company are limited to what is listed in the right-of-way . If the document gives the oil company the right to build a road on their property to access the pipeline, the oil company has no business building anything other than a road onto your property. If they want to do anything else, they would need to come and get permission from you. Review the document carefully and make sure that the wording does not grant the right for the landowner to permit any use of the land. If there is a large portion of land and it is valued highly, the landowner may be able to negotiate additional payment in exchange for allowing the oil company to do anything on the property.
Easements in Texas Law
The legal framework governing easements conveying the right to construct, operate, and maintain a gas pipeline in Texas is based on the principle of implied easements. Implied easements are those that are not expressly set out in the document granting the easement, but rather inferred from the grantor’s intention that the easement is necessary or convenient for the beneficial use and enjoyment of the land granted. In Texas, there are two primary types of implied easements: prescriptive and implication by necessity.
Under the jurisprudence of Texas, an easement by implication of necessity must be extinguished by an express release or abandonment. A prescriptive easement, on the other hand, is one acquired through open and obvious use, and is extinguished once the use ceases to be continuous or interrupted for the necessary length of time. The periods established by the various statutory limitations laws of Texas are controlling as to duration. Once title to the land is reacquired by the servient tenement owner, the right of the owner of the dominant tenement is extinguished and possession is not obtained by open and notorious acts sufficient to put the owner of the property on inquiry as to the nature and extent of the claim or basis of the possession.
The Texas Railroad Commission (the "Commission") generally governs all surface coal mining operations, including any related activities, in Texas. The Commission is not responsible for regulating underground coal mines or underground coal gasification in Texas, however. The Commission has the direct oversight of gas pipeline activities, provided that the particular pipeline activity is regulated by the Commission. The activities subject to regulatory oversight pursuant to the Natural Resources Code Chapter 111 Subchapter C and Railroad Commission General Rules Chapter 8 are as follows: well construction, development, operation, plug and abandonment, method of production, storage and gathering. Since gathering pipelines are regulated under Chapter 111, Subchapter C, the Commission oversees easement grants for gathering pipelines, which gather natural gas from a production facility for further compression and compression activities, dehydration, connection to transmission pipelines and transportation.
Landowner Rights and Obligations
Texas law grants landowners with easements for the construction of a gas pipeline the right to use the surface of the land granted for the purpose of constructing, operating, maintaining, repairing and replacing the gas pipeline, as long as the easement right does not interfere with the surface rights of the landowner in a material and substantial way. Myers Subsurface Coring & Exploration, Inc. v. Phillips Petroleum Co., 692 S.W.2d 95, 98 (Tex. App.—Eastland 1985, writ ref’d n.r.e). Landowners also have the right to use the land for any purpose as long as that use does not interfere with the easement right of the gas pipeline operator. Id.; Hart v. Ward, 803 S.W.2d 766, 770 (Tex. App.—Tyler 1991, writ denied).
Landowners may also possess the right to restrict the use of the surface of the land covered by the easement and demand compensation from the gas pipeline operator for damage resulting from the exercise of this right. Gas pipeline operators have limited rights with respect to the subsurface of the land covered by an easement and must have express permission from the landowner to enter the subsurface. In re Columbia Pipeline Group, Inc., 279 S.W.3d 816, 821 (Tex. App.—Tyler 2008, orig. proceeding [mand. dism’d); Myers, 692 S.W.2d at 98. As such, landowners have the right to restrict the entry to subsurface or deny permission to drill in the subsurface of the land subject to the easement. Id. If the gas pipeline operator applies for a permit to drill into a specific portion of the subsurface, the landowner cannot unreasonably withhold, condition or delay consent to the drilling. Tex. Nat. Res. Code § 91.102(a). However, if the operator cannot obtain the landowner’s consent after sixty days, the operator may use the power of eminent domain or common carrier pipelines will be given a certificate of convenience and necessity in order to enter and use the subsurface without the landowner’s consent. Tex. Nat. Res. Code § 111.002; 111.0195.
Pipelines’ Rights
Gas pipeline companies in Texas operating under an easement are granted several rights and obligations that dictate how they can use the land granted by the easement. Companies have the right to use the land in any way related to transporting gas through the pipeline. For example, a gas pipeline company may construct and erect buildings, stations, machinery, tools, roadways, and approaches considered necessary or convenient for the operation of a gas line in the easement area.
The Texas Supreme Court explained obligations and rights of a gas pipeline company in an easement in 1904: In such case [grant of pipeline easement], the company is empowered to do whatever is necessary or convenient to the operation of its line of pipe, and it owns to the center or middle of the road, street, highway, or alley, subject only to the public right to use the street, road, highway, or alley as a passageway. … The grantee cannot appropriate the soil, earth, or minerals, so as to leave the grantor without the means of using the land according to the grant; that is, as a street, alley, or highway; and it has no right to store material thereon. It can only use the surface in the exercise of its right to transport gas and, in other respects, subject to the rights of the public with respect to the road, street, alley, or highway. Jackson v. Houston, N.E. 447 (Tex. 1904) (emphasis added). Courts generally construe language in the grant of the easement broadly in favor of the gas pipeline company. Advics, Inc. v. Trans-Pecos Gas Corp., 134 S.W.3d 551, 556 (Tex.App.-Austin 2003, no pet.). However, when the grant has restrictive language, courts will not allow the gas pipeline company to enter the land for other than the purposes stated in the deed. Smith v. Longview Natural Gas Co., 394 S.W.2d 687, 688 (Tex.1965).
Gas pipeline companies have the discretion to determine the location of the pipeline on their easement. Neither the grantor nor any third party has a claim against a gas pipeline company for its failure to locate a pipeline under a specific location in the easement, even if that location would create less of an impact on the grantor’s property. See Transcontinental Gas Pipe Line Corp. of Am. v. 50 Acres of Land, 373 F.2d 152, 154 (3d Cir. 1967); Railroad Commission of Texas v. Arkla, Inc., 123 S.W.3d 839, 865 (Tex. 2003).
Gas pipeline companies also have "the right to enter upon the land so occupied at all times for the purpose of inspecting, repairing, maintaining, replacing, and renewing the pipe line." Arkla, Inc., 123 S.W.3d at 865-66. To exercise the right of ingress, a gas pipeline company may enter the land only for the exercise of the rights granted by the easement. Id. However, gas pipeline companies may enter the easement only at reasonable times. Further, if a correction of a defect requires the gas pipeline company to excavate the area, the gas pipeline company must refill the trench, compact the soil so that it will settle adequately, and repave any paved streets. See Arkla, 123 S.W.3d at 865-866; Granger v. Arkla, Inc., 314 S.W.2d 275, 277 (Tex. Civ. App.-Dallas 1958, writ ref’d n.r.e.).
Where the easement is completely used—as shown by full occupancy—for its purpose, "no duty, duty, express or implied, arises on [the pipeline company’s] part, to fill up the trenches trench razed and torn down for the pipe line." Granger, at 276-77. However, "[i]f nothing had been done by defendant, the trenches would have filled with dirt, so that the premises could have been practically used without further injury from causes which, under the law, it was the duty of [the pipeline company] to guard against." Id. at 279. A pipeline company therefore has a duty to its employees and to the public or its tenants to "correct conditions that it knew or should have known would likely result in injury and to exercise reasonable care." Dukes v. Arkansas Louisiana Gas Co., 414 F.2d 227, 230 (5th Cir. 1969).
If a landowner denies a gas pipeline company the opportunity to exercise its right of ingress, they may break down gates or fences to gain entry onto the land. See Phillips Petroleum Co. v. Neel, 432 S.W.2d 925, 926-27 (Tex.Civ.App.-Fort Worth 1968, writ ref’d n.r.e.).
Lease Negotiation
The first step in preparing an easement agreement is agreeing on its terms. This may sound simple, but in most negotiations, both sides have their own priorities.
Easement agreements primarily address three areas: the type of easement, the limits of the easement, and compensation for the easement. In nearly all cases, landowners want to limit the easement to certain activities and seek maximum compensation. Likewise, the company wishes to assess the easement’s potential to meet its business requirements, including consideration of what activities are permissible and at what locations; what will be disturbed and what will be restored; and whether and when repairs will be made to damaged crops, fences, roads and structures . In all cases, there is an inherent tension between the landowner’s right to exclude and the company’s asset development plan which includes the right to use.
A critical part of negotiation is considering the development options that the pipeline company is looking at. Some common options include:
It is also important to remember that easement agreements may not be the only items to negotiate. It is common for landowners and companies to negotiate a surface use agreement or preconstruction agreement for the affected land or an agreement to pay for damages in return for the right to conduct construction activities.
Disputes and Resolutions
Pipelines, like any other area of big business, are prone to disputes between landowners and pipeline companies. The most common dispute is over compensation. Often, a pipeline company has not truly engaged in a conversation with a landowner about what will be disturbed. Some landowners believe that they must accept the offered payment because they don’t have the money or tenacity for a lawsuit. Others believe that a pipeline company simply cannot take their property and so the matter can never get to court. Finding that middle ground, arbitration, is generally better than litigation, especially when a landowner and a business entity engage in a legal dispute. The Texas Supreme Court has encouraged arbitration as an efficient, fair way to resolve disputes.
Under the rules of the Texas’ general arbitration act, a "party" might not be eligible for arbitration, since there is no contract entered into by the parties. The landowner is not a "party." For instance, even if there is no arbitration clause in the easement, a landowner can ask the court to appoint an arbitrator. An important point in favor of arbitration is that even if the landowner chooses not to arbitrate, the question of how much the landowner is entitled to is submitted to a jury.
Effect of Easements on Property Value
Easements can have a negative or positive impact on marketability and value depending on how they are viewed by potential buyers of the property. Considerations for property buyers include whether the easement is permanent. Long-term ownership of property with an easement would minimize the impact of the easement. Conversely, short-term owners would likely be more sensitive to the easement and its possible impact on the value of the property. Buyers may also consider changes in the surface of the property that may result from the easement, including the extent of the impact to the property such as laying a pipeline or constructing facilities or other improvements. If construction is extensive, such as for a compressor station in addition to the pipe and right of way, it may be more difficult to get financing or use a resale approach if the station is unsightly and obtrusive. In addition, the potential for other future uses of the property may be considered, such as residential or commercial development, in which case an easement might render the property unsuitable after construction. For example, dividing of a parcel of land for single family housing might conflict with a proposed easement for a major pipeline.
Legislative Changes and Recent Developments
An important change to legislation relating to gas pipeline easements was signed into law by Governor Abbott in June of 2015 and took effect in September of that year. This new law is significant and provides greater protections for landowners in eminent domain proceedings. The biggest change for landowners under Senate Bill 18 is the requirement that pipeline companies obtain a bond prior to occupying private property with gas pipelines or related infrastructure. The bond is in favor of the landowner and for damages up to 125% of the agreed value of the easement (or the value of the property without the easement or construction activities) to be paid if the pipeline company fails to comply with the law. Additionally, notice of final possession was added as a trigger for the statute of limitations on an inverse condemnation claim.
In addition to this new law, there have been some recent opinions issued by the Texas Supreme court. In 2014, the Supreme Court of Texas upheld the oil and gas pipeline central appraisal district and the constitutionality of Texas local government code criteria for determining the valuation of easements. In BP America Production Co. v. Crump, 516 S.W.3d 887 (Tex. 2017), the court held the valuation provisions of local government code section 23.175 were not "special privileges." There was no special privilege in limiting the oil and gas pipeline appraisal to the lesser of the actual costs to construct the pipeline , or the income approach to determine the value of the property. The court held that the pipeline company, BPX, can be taxed on the full amount of the initial cost of constructing its pipeline, but not on any increase in the taxable value of the pipeline attributable to any increase in income received from nonregulated uses of the pipeline.
In a case turned around by opinion of the Supreme Court of Texas, create narrow interpretation to the Texas condemnation statute section 21.014. This statute allows confiscation of an easement subject to an existing pipeline easement (whether partial or total) once that party completes its project. This statutory interpretation contradicted the well-known "rule of capture" and it overturned 10 years of established jurisprudence. In Energy Transfer Partners v. Entergy Gulf States, Inc., the 10th Court of Appeals in Waco’s opinion conflicted with seven other courts of appeals in Texas. The court of appeals in Waco construed the term "part of the property for which the entity intends to exercise the right of eminent domain" to mean a "whole" property, contrary to the plain and ordinary meaning of the term "part." The Texas Supreme Court reversed and remanded the case back to the 10th court of appeals for further handling.
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