Pipeline Deals

General Mineral Rights Discussion
1

Hello forum. New member and first post.

We are negotiating a deal in Moore County, Texas for a 20" pipe across our ranch.

I was just wondering if anyone else around that area (or anywhere) could chime in with what their experience is with this type of deal. So far, we’ve asked for $350/rod for a 30’ permanent easement but they want a 50’ wide permanent which we shot back $500/rod for that. All the other standard lease language is in our contract which has been drafted by Wells Fargo Bank who is our Trust administrator.

Any comments good, bad, indifferent are welcome. Thanks in advance.

Mark

2

I personally think that the dollars are a bit modest.

The last transaction that I negotiated, a Trust Administrator was in charge of 1/4 of the surface. We were able to get 20% more up front than the Trust Administrator could negotiate. We also negotiated a 10-year term, required renewal, with a CPI escalation clause. Our pipeline agreement was much stronger than the one offered by the trust. The trust, whom I did not represent initially, was glad to ride our coat tails and the beneficiary instructed the trustee to pay my fee.

A lot of things are left out of your question. Such as, is this a very large gathering line or a transmission line? Is it for the transportation of crude oil (which means that they may have eminent domain as a matter of law) or is it something else? Salt water perhaps? Maybe natural gas. Does the pipeline company have condemnation rights? All of these things matter a lot. Is the proposed line paralleling an old line? That may make a difference in the negotiation process. What is the property used for currently? Is the pipeline on a fence line or does it cut across a field? Do you have game management in place? Is there a planned future use of the property that would be affected negatively by the laying of the line? The questions could go on and on.

3

What does a bank know about negotiating easements? There is no such thing as “standard” lease language, because there are many situations to consider. I have attached a few to consider.

If it were me, I would feel very “safe” with employing Mr. Cotton to negotiate an easement agreement on my behalf.

Good luck,

Pat

954-Easementprovisionstoconsider.doc (51.5 KB)

4

Mr. Cotten,

Please excuse the misspelling. My slow ‘at the farm’ landline wouldn’t allow me to correct the faux pas before sending.

Thank you.

Pat

5

Mark:

Both, Ms. Malone and Buddy make excellent points here. One thing for sure, there are no “standard” or normal leases or lease language. What Buddy says about the possibility of the pipeline company having eminent domain is a key issue when trying to negotiate a pipeline, plus this $350/rod may sound like a lot of money; but, it isn’t. The pipeline companies are still using rods instead of feet because the dollar number looks more impressive. IMO, the money as well as the “permanent” provision makes this a bad deal to start with. The initial offer for even small, up to 8" polyethylene gathering gas lines with a 30 foot easement in my Central Texas area start off at $20/foot and will settle in the neighborhood of $30 or more. Sounds like you need someone like Buddy to help negotiate this deal. Also, remember, “permanent” is a long time.

6

Thanks for the replies everyone.

I’m dismayed that Wells Fargo is receiving such a hard knock because the administrator that works for us is a land management expert who has negotiated many pipeline deals including a deal he just did in the Pecos area with the very company we’re dealing with. If we’re leaving money on the table that would be very surprising to me. They initially offered $150/rod and it sounds like they are close to agreeing on the $500/rod.

It’s a natural gas pipeline and as y’all know, Ngas isn’t bringing much. My bank accounts can attest to that. :smiling_face:

Another issue is they are asking for a temporary lease (one year) for some land for a lay down yard for all their pipe and equipment during construction. Rodney (Trust guy) is going to ask around about the terms for that and I don’t have a clue what to ask for it. We have not begun to negotiate the lay down yard yet until we reach full agreement on the pipeline.

Thank you everyone.

8

I live in Brenham but the ranch in question is outside Dumas in Moore County like you’re going to Lake Meredith. It’s in the West Panhandle natural gas field. It’s an old field and has been in production for many years.

I’m surprised it’s still in production. There must be billions of cubic feet down in there.

I think they’re pulling a vacuum on it so I don’t know how much longer we’ve got…

9

Mark:

My internet connection messed up while I was writing this message the first time, so I deleted it and hopefully got it correct this time.

Where are you located? I checked to see your personal location and that showed to be Brenham, Texas. If your property is in Texas, you really need to be careful with the lay down yard situation if your property is under agriculture exemption, since many and probably most counties, now that they know they can do it, are removing these properties from the agriculture roll. One year might not do it; but, if it stretches out to two years and they remove that lay down area then you will be paying a hunk of taxes for a long time including back taxes and interest for 5 years. Just a thought.

10

Bigfoot,

The place is eleven thousand acres and they want maybe twenty acres of it for a lay down yard so I wouldn’t think our ag exemption is in jeopardy, unless they separate out the twenty acres. I understand and appreciate your post.

I will definitely mention it to our Trust administrator. Thank you.

11

I have no idea if they will do that out in these more open areas since the raw land may not be as valuable as land closer to Houston, San Antonio, and Austin; but, we do know that some Counties are doing it. For sure Gonzales County is doing it. The way I understand, it doesn’t matter how large the piece of property is. If the area not used for something that is ag exempt and is fenced off, then they break that out and take that piece out of ag exemption and then start charging the full tax rate and then go back the 5 years.

12

I wouldn’t put it past them. Our taxing authorities are trying to feed a growing population with ever decreasing revenue.

They have to take money from someone to give it to another, so guess who that’s going to be? The person with the money of course. We see it every day.

I’m definitely going to bring this up with the powers that be. We may even write it in the lease that if that happens, the oil company picks up the tab until that land is restored and put back into agriculture and the exemption is re-issued.

13

The last statement would be my recommendation, that is the reason I brought it up at this point.

14

In my opinion, I would implement a separate agreement for the lay-down yard, with its own provisions, including a survey that would help to eliminate any confusion with the taxing authority should they decide to take this plot out of AG. A start and ending date is important, along with the reasonable compensation (paid prior to entry) for its use, including damages.

A “road” clause may also be needed. Don’t forget to give yourself rights of ingress/egress.

Good luck,

Pat

15

Thanks Pat, we will do that. A separate agreement (lease) will be drafted for the pipe yard after we come to terms on the pipeline.

16

Dear Mr. Travis,

No knocking Wells Fargo from me. I sat on the Texas board of NARO with a Wells Fargo Trust Officer and was a nice enough fellow. I do not have any idea of his skills, just like he does not have any idea of mine.

I just think, personally, that Trust Departments are so expensive. But I am frugal by nature. For example, I am concluding a negotiation where the pipeline company agreed to pay my fee. No cost to my client.

Many Trust Departments charge around 2.5% - 4%. Let’s say 2.5% on an easement amount of $226,447.50 would work out to a charge of $5700±. To me, that is just a lot of money going out for not a lot of man hours spent in negotiation and ROW preparation.

Ask your administrator if he asked for a renewal term easement. Dollars to doughnuts he will say that “Pipeline companies don’t do that anymore.” Well, he would be wrong (I did two the last quarter of 2015) and not only that, he has absolutely positively no opportunity to negotiate a term agreement if he does not ask for one.

The last Trust ROW form that I saw required re-seeding, contouring, etc after the initial line was laid and not afterward – even if the company came in to do repairs. That is an example of just one clause that you would want in the ROW agreement. Flow reversal might be another.

One more little item. If you have ranch road that you will let them use – have a separate road use agreement that they pay for…at least $2.75 per foot and repair or maintain when they are done.

OK, one more. A drop dead start and end date of operations. I put that in all of my agreements and sometimes they cannot make the deadline and that gives you another opportunity to monetize an amendment.

Again, no knocks. When you read my posts, if you do, you will see that I really do try to be helpful.

Warmest regards, Buddy Cotten

17

Plains pipeline has begun construction on the Caddo Pipeline between Longview, Texas, to south Shreveport. They’re currently doing land preps in Panola County along the Swepco High-power line headed east.

18

Thanks Mr. Cotten. I will bring up all these issues with Rodney.

As far as farming out the negotiations, I’m stuck with these Trust people for now because the estate is still being settled. They are going to collect their fees regardless of what I say, so that’s my deal at present.

I have to go along to get along, as they say … :smiling_face: