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Is the Bluegrass Pipeline Selling Pipe Dreams to KY Landowners?

Are you a Kentucky landowner in the path of the proposed Bluegrass Pipeline? If so, you need to read this before agreeing to allow the pipeline on your land. Residents in thirteen counties will be affected by the proposed pipeline and a lot is at stake. As a landowner, you need to understand your legal rights and the potential risks associated with the pipeline so you can make an informed decision as to whether or not you are going to allow the pipeline on YOUR property.

Background

The pipeline project is a joint venture between two companies, Williams Co. and Boardwalk Pipeline Partners (“the Companies”). The project calls for a high pressure, 24-inch diameter underground pipeline to be installed. The pipeline will connect to an existing pipeline in Breckenridge County. The pipeline’s purpose is to transport natural gas liquids from the Marcellus and Utica shale regions in the Northeast to Louisiana. Natural gas liquids are used for a variety of purposes in several industries – including petrochemical and plastics.

Before the pipeline can be installed, the Companies must obtain “easements” from all landowners whose property is located in the proposed route.  An easement is a legal right to use the property of another. Easements can be temporary or permanent in nature. For the proposed pipeline, both permanent and temporary easements are necessary.  A permanent easement “runs with the land,” which means that anyone who owns the land after the easement is granted will have to comply with the terms of the easement.  A temporary easement is limited in time.  Once an easement is granted for the pipeline project, the Companies can prohibit and/or require certain actions of a landowner. For instance, Bluegrass Pipeline prohibits the construction of any above-ground structures within the easement.  Additionally, landowners are charged with the responsibility of ensuring that pipeline markers remain in place on the property (and must individually pay for lost or damaged markers).

Knock, Knock

Company representatives, also known as “Right-of-Way Agents” or “Land Agents,” are out in full force contacting landowners in the pipeline’s proposed path promising big payments and little to no risk. But, is it too good to be true?

The Right-of-Way Agent’s first request is to survey the land. The survey process outlines the pipeline’s proposed route and results in stakes and/or ribbons being tied to fences and trees.  Commonly, survey ribbons are pink. The surveyors mark the center line of the pipeline, but do not mark the boundaries of the permanent and temporary easements.

The land required for the proposed easement will vary for each parcel; however, the Companies have generally represented that a 50-foot wide permanent easement, along with another 50-foot temporary easement for workspace is necessary to construct and install the pipeline. For perspective, most four-lane highways are 48 feet wide.

Fair Compensation

A Right-of-Way Agent may use high-pressure tactics in order to obtain an easement. Some landowners have reported that they were promised a 30% payment upfront in exchange for signing the easement, with the remaining balance to be paid if the easement is “extended” to allow the pipeline to be constructed.  Similarly, some landowners have reported being offered an additional 10% signing bonus.  Many landowners fear that if they do not agree, they will be taken to court and lose their property to the power of eminent domain (also known as “condemnation”).

Regardless, the Companies are required to compensate landowners for three things:

  • Fair value for the privilege of establishing a permanent easement across the land;
  • Fair rental value for the temporary easement to construct and install the pipeline; and,
  • Fair compensation for damage to crops, grazing lands, timber or any structures directly caused by construction and installation of the pipeline.

Right-of-Way Agents work for the Companies and do not have landowners’ best interest in mind; instead, their goal is to acquire all the necessary easements for the pipeline’s proposed route, for as little money as possible.

The attorneys at McBrayer, on the other hand, do have the landowner’s best interest in mind and are ready to help landowners get maximum value should they choose to allow the pipeline on their property.

McBrayer understands that every negotiation is different.  That is why we account for not only the land, but its unique characteristics (such as natural springs), loss of use/enjoyment, loss of production, and rent for the temporary workspace. We can review the terms of a proposed easement and include provisions that will further protect a landowner’s interest and future rights. We can work with the Companies to ensure the location of the pipeline is appropriate.  We can review mortgages and insurance polices to ensure that the easement is not prohibited.  We also can work to minimize a landowner’s tax consequences and locate industry experts who can assist in providing property valuation.

Don’t let a Right-of-Way Agent pull the wool over your eyes. The Bluegrass Pipeline is a major undertaking and requires careful consideration.  Landowners who agree to allow the pipeline on their property deserve to have their rights protected and to be fairly compensated.

Jason S. Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Morgan actively represents large, small, established, and new real estate developers and homeowners beginning with the planning phase of a proposed development through zoning changes, development plan approval, financing and the land acquisition processes.  He also has extensive experience with residential and commercial construction and insurance litigation. He is located in the firm’s Lexington office and can be reached at  jmorgan@mmlk.com or at (859) 231-8780.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

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