The natural gas boom has created a need for many different types of pipelines.  All of this gas must be transported from the site of the well, and must go through many stages before it can heat your home or dry your clothes.

Generally speaking, gas pipelines can be separated into three major catagories: 1) gathering lines transport the gas from the well site to either a processing plant, or to a transmission line; 2) transmission lines are large pipelines that transport gas for long distances, for example from Texas or Louisiana to Boston or New York; and 3) distribution lines which transport the gas from the transmission lines to the ultimate end user.

If the company seeking the right to install a pipeline does not already have the right to do so under an existing oil and gas lease, then the company must approach the surface owner and negotiate a separate right of way (also called an “easement”) agreement.  The same pipeline issues ought to be considered and negotiated as a part of the oil and gas lease.

The typical oil and gas lease does a lot more than just lease your oil and gas.  It also contains provisions whereby the land owner grants to the drilling company the right to install several different types of pipelines.  Obviously, the drilling company must have the right to install a gathering pipeline to transport the gas off of the well site.  However, the lease might also grant to the drilling company the right to install above ground water lines because the drilling process can use millions of gallons of water.  This can be true whether the well site is on your land or not.  Of particular concern is the “foreign gas” pipeline.  This lease provision permits the drilling company to install pipelines to transport gas over your land, regardless of where that gas is produced.  In other words, your land can be used for a pipeline that has nothing to do with your land, or the unit of which your land is a part.  The worst part is that the foreign gas pipeline easement can be permanent, even if the drilling company never develops your gas, and allows the lease with you to expire.

Most oil and gas leases provide that the lessee can install an unspecified number of pipelines, throughout an unspecified period of time.  The lease also grants to the lessee the right to install other large installations above ground, such as a compressor station or a “pig trap,”- an above ground installation where a device to clean the pipeline (the “pig”) is inserted or removed.  These could be installed years after the oil and gas lease has been executed.  Some pipelines can be quite large, and under very high pressure.  Once these have been installed, the land owner cannot build any type of improvement on top of them, or within a certain distance from them.

Here are some things to keep in mind when you are approached by a company that wants to build pipelines across your land:

1. Clarify exactly what it is that the pipeline company wants and needs, and make sure that the pipeline right of way agreement very clearly describes what is to be installed.  Is it only a single pipeline the company wants?  Or do they also want to install a compressor station?
2. Agree upon the number of pipelines the company wants.  Don’t leave it open-ended.
3. The easement should carefully describe the location of the pipeline.  Is it close to the property line?  Will trees be removed?  Attach a drawing as an exhibit.
4. Agree upon how the company is to gain access to the pipeline with trucks and equipment when repair or maintenance is necessary. Will any additional fencing or gates be necessary?
5. Make sure the right of way agreement provides that the company will repair all fences or other improvements disrupted by the installation of the pipeline.  How deep will the pipeline be?  Must the company use the “double ditch” method?
6. In appropriate cases, provide for plantings or earthen walls as a buffer from anything on the surface that may be unsightly or noisy.
7. Include a comprehensive indemnity clause that makes the company responsible for all injury, death or damage, including any environmental liability.
8. Last, but certainly not least, the land owner is entitled to reasonable compensation for the granting of one or more pipelines.  Once you execute an oil and gas lease that contains the right to install multiple pipelines, you have little bargaining power.

All of these pipelines and surface installations are a very necessary and important part of the exploration for and production of the Marcellus Shale gas formation.  The production of gas, and the accompanying financial benefit to the land owner and the economy, would not be possible without this complex infrastructure.  However, the rights of land owners need to be protected.  Careful preparation and negotiation can result in an agreement that is satisfactory to both parties.

Visit our website at www.bmvlaw.com.

James H. McCune, Esquire

Partner at Bassi, McCune, & Vreeland, P.C.

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