The ongoing development of the Eagle Ford shale demonstrates the need for additional investments in the midstream sector, which in turn leads to a shortage of right-of-way (ROW) agents in South Texas, according to Don Valden, chief executive of American Right of Way Associates Inc., speaking at the recently held Right-Of-Way Class held at Hart Energy's Eagle Ford: Developing Unconventional Gas Conference and Exhibition in San Antonio.
Valden said the agents, many of whom are independent contractors for pipeline companies, negotiate with landowners for the right to construct a pipeline on property and to access it periodically for maintenance.
Pipeline companies pay ROW agents a day rate to negotiate on their behalf. A right of way agent with minimal experience can start around $150 per day, but experienced agents can earn more than twice that amount.
To speed the process along, Valden advocates building a relationship of trust before rushing landowners into signing. The first step is to contact the landowner and make an appointment to walk the proposed rightof- way. When the agent does meet with the landowner, Valden says he should discuss the need for the pipeline and the width of the permanent and temporary footage needed during construction.
Pipeline companies are generally very fair about compensating landowners for easements and pay for the right to build the line, the damage to any crops and the inconvenience of a construction crew on the land, he said. "We tell them we are going to make a big mess but that we always clean it up before we are done," he said.
The agreement with landowners generally prohibits them from building any permanent structures over a pipeline, but often do allow them to place driveways or crops over it. Payment can be made by the foot, by the acreage or by the rod, a measurement of about 16.5 feet. The cost of acquiring rightof- way has risen dramatically in active shale plays, and in some cases has gone as high as $15 per linear foot of pipeline.
As a result, many pipeline companies have started to resist the rising cost of ROW acreage, giving their agents strict upper limits on how much they are allowed to pay landowners for right-of-way easements.
Meanwhile, if the negotiation process stalls entirely and the pipeline operator needs to move forward with a project, they may have to use the option of eminent domain. Not all midstream operators have the legal right to condemn a property and, for those who do have the right, this alternative is generally a last resort. It is used only when an operator has no other option. "We don't like to talk about this option," Valden says. "No one wins when the company has to go to court."
The process of condemnation generally requires a third-party appraisal to learn the appraised value of the land, an expense which can cost between $6,000 and $8,000. At a minimum, the process can last 60 to 90 days and can take longer if the landowner continues to fight the condemnation. Once a deal for an easement has been signed, it is usually in perpetuity, so all potential issues should be discussed up front, advised Valden.
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