I read a circular from the “Pipeline Safety Coalition” about how to sell ROW to pipeline companies. Their advice reads like the Landman’s Handbook on how to negotiate the sale/ purchase of Right of Way (ROW). An excerpt is given below. Simply put, a negotiated sale is less advantageous than a condemnation. But they do not advise landowners to opt for condemnation. Their most recent missive is entitled “Avoiding Eminent Domain.” Au contraire. From a negotiating standpoint, it is almost always better to force the pipeline company to condemn the property.
Indeed, from a negotiating standpoint, the seller is not apt to get the best price unless they are demonstrably indifferent to a condemnation proceeding. They should make that abundantly clear to the landman in order to extract the best written offer they can, before opting for a condemnation proceeding. That is the best, the most straightforward advice any real estate professional could give a landowner because, at a minimum, the landowner will have one of three good outcomes:
1. The landowner will get more money for their land via a condemnation proceeding- on average, 80% more based on a recent university study, copy here:
2. The pipeline may go somewhere else – if enough landowners resist, forcing serial condemnations.
3. The pipeline project may be abandoned – if enough property owners refuse to sell.
In the real estate business, I participated in several ROW acquisitions – and we always forced a condemnation to get more money. The goal of ROW negotiations is to lure the pipeline company into condemnation proceedings – preferably en masse – along the length of the ROW. Not let the pipeline company pick off individual landowners one by one on negotiated sales. Everybody knows that. The only reason you would not provoke a condemnation proceeding is if the value of the property is trivial. (Or the seller, their lawyer and appraiser are clueless) Otherwise, it makes little economic sense not to opt for condemnation.
If threatened with condemnation, the only proper response is “Go ahead, make my day.”
The case law in Texas is increasingly in favor of the landowner. There is a developing series of judgements against pipeline companies sued by landowners for lower the value of their entire property – not just the Right-of-Way – because of the presence of the pipeline.
• Crosstex DC Gathering Company, J.V. v. Terry Titus Button,http://texaseminentdomainlawyer.wordpress.com/2013/11/30/crosstex-dc-gathering-co-j-v-v-button/
• LaSalle Pipeline LP v. Donnell Lands LP, http://fuelfix.com/blog/2013/02/24/supreme-court-won%E2%80%99t-hear-pipeline-case/
• Peregrine Pipeline Co. v. Eagle Ford Land Partners, http://www.abc12.com/story/25056405/texas-landowners-win-21-million-judgment-against-pipeline-company-over-lower-property-value#.UzD6sPZn6vs.facebook
In Nebraska, a pipeline company has raised its ROW offers by 7X in order to avoid having to go through condemnation proceedings. Read the full article here.
Have blogged about this extensively – starting last year with advice on how to deal with pipeline companies. By contrast, here is the advice from the “Pipeline Safety Coalition” which counsels landowners to avoid condemnation proceedings, and but for a phrase or two, could have been lifted from ‘The Landman’s Handbook on Duping Rubes into Selling ROW”:
Negotiating Pipeline Right-of-Way Agreements
Signing a ROW should be reviewed by a professional as if you were buying or selling your property on the open market. ROW agreements become amendments to your property deed. Typically, funds received by a landowner in a ROW agreement are subject to income taxes and often are required to be surrendered to your mortgage company to satisfy their lien as the first deed holder.
Before committing to an easement agreement, you have the right to consider:
- Is your land value affected by a ROW?
- What do you get and what do you give up?
- Any restrictions (land use/ building / recreation / trees/ etc.)?
- Safety – are you putting your home in danger (HCA)?
Here are the top 10 Landowner Rights. You have the right to:
Take time to review the easement offer made by the Operator. You have the right to ask the landman to leave the documents for your review.
Not to sign an agreement at your first meeting.
Negotiate terms of the ROW – You can say No. Don’t take a landman’s word that you cannot say, “No” or cannot negotiate terms when approached with a Pipeline Right-of Way Agreement. Do not sign any contract with a gas or pipeline company without understanding your rights and thoroughly reviewing the documents.
Be represented by an attorney as an individual or as a collective community.
Meet and negotiate as a community. Despite an operator’s insistence that negotiations are private and may not be shared with neighbors, sharing information with neighbors is your right and often helps in receiving the full market value of the right of way, protecting your quality of life, the environment and watersheds.
Request an appointment be scheduled before surveying begins.
- Blah, blah, blah
What they do not advise is condemnation, when the goal of any sale negotiations is to extract the “best offer” from the pipeline company in writing, which serves as the floor price in a condemnation proceedings. Every commercial real estate professional worth their salt knows this.
The only reason not to steer the negotiations toward condemnation is if the value of the land is trivial – not worth getting an appraisal and hiring a lawyer. The landowners should pool their resources and engage an appraiser and a real estate lawyer to represent them. Preferably an appraiser and a lawyer that know how to win a condemnation proceeding. The odds are overwhelmingly in their favor. The landmen know that. Now you do.