Opinion by Pat Wade
Landowner Group Successfully Negotiates with Pipeline Company
By Pat Wade, chairman, Progressive Pathways, LLC
In early January 2011, landowners from Sidney, Mont. to Weld County, Colorado received letters announcing that Oneok Partners were “preparing to build an approximately 500-mile natural gas liquids underground pipeline on or in the immediate vicinity“ of our properties.
The Bakken pipeline is being developed to transport natural gas liquids from the Bakken Field in North Dakota and Montana to the existing Overland Trail Pipeline in northern Colorado, southeast of Cheyenne.
Almost immediately, landowner meetings were organized and held in communities in eastern Wyoming and Montana. As word of these meetings spread, the groups were able to merge, and Progressive Pathways, LLC in Wyoming was organized to represent landowners in negotiations with Oneok Partners. The stated purpose of the group was to use collective bargaining practices to reach an agreement with Oneok on its proposed Bakken Pipeline.
For negotiating purposes, and to share legal expenses, Progressive Pathways partnered with Eastern Montana Landowners Group, which shared the same goals. The Wyoming group eventually grew to 121 members, representing close to 160 miles, which is well over half of the privately owned miles in the state for this pipeline. Soon after organizing, Progressive Pathways retained Frank Falen of Budd-Falen Law Offices in Cheyenne as legal counsel. Frank has a great deal of experience representing landowner groups, and had recently finished assisting a similar landowner group in negotiating an agreement on the Keystone XL pipeline.
Early on, the decision was made to negotiate the best terms and conditions possible in an easement agreement. While many of our members would prefer to not have a pipeline on their property, since Oneok had the ability to condemn, we felt it would not be in our members’ best interest to attempt to stop the pipeline from being constructed. It was obvious that the odds of this strategy being successful were extremely poor. For our country to become less dependent on foreign energy, these projects are necessary, but should not take advantage of private property owners in the process.
Progressive Pathways was successful in negotiating a survey access agreement and compensation, something Oneok had never done in Wyoming. These negotiations allowed our group to establish its presence with Oneok, and gave us time to continue to build our membership. The primary easement concerns of Progressive Pathways were liability, construction and reclamation, abandonment, and compensation.
This pipeline, as are most, will be owned and operated as a limited liability company. This allows the pipeline company to limit their owner’s liability to the extent they are invested in the project. Everyone, including land people, survey crews, construction and reclamation companies, and all pipeline company employees and investors are involved with the intent of profiting. Meanwhile, because of the condemnation laws, the landowner is forced into the transaction, and normally has no way to limit their liability or share in the profits generated by the pipeline. Because a landowner’s liability is unlimited, they could potentially lose everything if something terrible would happen due to the pipeline being on their property. Even if a landowner chooses to place his land in an LLC for protection, since land is usually a person’s primary asset, the potential for loss is still very great. Most landowners carry liability insurance to protect themselves against loss, but the value of the pipeline and the product it carries are so great that losses can quickly exceed a landowner’s coverage.
Progressive Pathways was able to negotiate terms that have set new precedent in addressing liability. Our agreement has language that limits the amount for which a landowner can be held responsible. It also protects members against vicarious liability, meaning a landowner cannot be held responsible for actions of employees, guests, contractors or anyone else that may be on his property.
Included in the agreement is indemnity protection that covers any losses that a landowner may incur due to the pipeline being on their property, and it does a good job of limiting an owner’s legal expenses if they are forced to take legal action to prove the pipeline company is responsible for a loss.
The need for construction and reclamation to be properly completed is very important to our members. It was explained to Oneok that we wanted the pipeline built and reclaimed in a way that minimized scaring, and returned the land to its original productivity. For that to occur, we asked that the ground be reseeded with the same plant species that are adjacent to the easement.
We also worked to minimize impacts caused by stream crossing construction. Our local conservation and Weed and Pest districts were very helpful in developing construction and mitigation standards that address our resource concerns. With this help, Progressive Pathways was able to negotiate the ability to have input in the development of the Bakken Pipeline Construction, Mitigation and Reclamation Plans. As far as we know, a pipeline company has never allowed this to happen. Our group’s efforts also paved the way for these local districts to influence these plans, which benefits members and non-members alike.
While abandonment is not likely to occur for quite some time, it was important to our members that it be addressed. We negotiated language that calls for abandonment and decommission to occur according to all regulations in place at that time. Many agreements have abandonment terms in place that do not allow a landowner to take advantage of any improvements in the laws that may occur over time.
After all other terms were negotiated, we worked on compensation. It was important for Oneok to understand that our group was about more than just money, and our other issues were equally as important. While compensation is an important part of our agreement, we understand that the changes to the land will last long after the money is spent.
This strategy worked well, and by the time we discussed compensation I believe we had gained a measure of respect from the Oneok representatives. This, in turn, allowed us to negotiate an excellent compensation package for our members.
Progressive Pathways is very proud of the new precedent set by our agreement in terms of liability and indemnity protection, construction and reclamation and compensation. Our agreement is something that landowners over a large area will be able to draw on in the future. Our group was able to build on the precedent set by the agreement reached by the landowner groups involved in the Keystone XL pipeline, and it is my hope that others will find our agreement helpful in future negotiations.
Frank Falen has been, and continues to be, very instrumental in helping our group achieve its goals, and his experience in representing landowner groups has been invaluable. There are many working parts involved in a group effort, and it takes someone that understands these dynamics to make it all work.
I hope that the success of Progressive Pathways will encourage others to consider forming landowner groups when faced with dealing with the new energy development that no doubt will continue to occur in Wyoming and surrounding states. An individual has very little bargaining leverage, and the strength of numbers and the political help that provides are very helpful when negotiating an agreement with companies that have the ability to condemn.