Joint Ag Committee hears pipeline liability concerns

Lander – At the May 7-8 meeting of the Joint Agriculture, State and Public Lands and Water Resources Interim Committee of the Wyoming Legislature, one of the many topics on the agenda was common carrier pipelines, and protection for landowners who fear having to bear full liability should pipelines be abandoned.
    Members of eastern Wyoming’s Progressive Pathways, along with their Cheyenne attorney Frank Falen of Budd Falen Law Offices, attended the meeting to share their perspective.
    “We organized to protect our property rights and we wanted to be treated with respect on our own land,” Progressive Pathways Chairman Pat Wade told the committee.
    “I expect most responsible pipeline companies carry insurance, but as the projects age the landowner has no assurance it will continue,” said Wade. “If there’s a point in time where the pipeline operator does not have the financial ability to address a problem, it doesn’t matter how well the easement’s written – it’s the landowner with the problem in the case of a big spill.”
    Wade mentioned one instance where a landowner has an abandoned crude oil pipeline on his place that has sprung a leak.
    “It’s been there a long time, and he doesn’t even know who owns the pipeline, and he’s afraid to say anything because he will become responsible for the cleanup,” he continued.
    “Common sense would dictate that whoever stands to profit from the venture should stand any costs involved,” stated Wade.
    Because of condemnation laws, Wade said that, ultimately, landowners cannot keep a pipeline from crossing their land.
    “It’s very difficult to protect ourselves, even if we use an LLC, because most landowners’ biggest asset is land. We’re still exposed, and there’s a huge transfer of risk to the landowner that is difficult to cap,” he explained.
    Wyoming Stock Growers Association Executive Vice President Jim Magagna commented, “We believe long-term liability is the most serious issue. That pipeline in the ground represents perpetuity perhaps to a greater degree than a conservation easement.”
Lacking in leverage
    From the legal side, Falen said, “We can ask for something like a sinking fund in the easement, but the pipeline companies have the ability to say no, and our bargaining leverage is seriously hampered because they know, at the end of the day, we have no choice but to sell. The landowners could protect themselves if they had the bargaining leverage.”
    “At the end of 20 or 30 years from now, there is no way to guarantee these pipeline companies and the LLCs they put them in will have the revenues to make good on their responsibilities,” continued Falen.
    Falen said Progressive Pathways spent a year working on a good easement that does tie most of the liability back to the company.
    “When folks ask us what good it will do 30 years from now when the company is broke, the answer is none,” noted Falen. “From a landowners’ perspective, you start incurring risk and expense from the day you get the letter that notifies you that you will sell them your property.”
    “What we’re about is recognizing the cost and risk for landowners, and that the risk should be borne and mitigated by those who are making a profit,” said Falen.
    Wade said that he and other members of Progressive Pathways would like to create a fund similar to the Abandoned Mines Fund that would provide some protection to the landowner in case of a spill or abandonment of a pipeline.
Pipeline economics
    Falen said he thinks it would be good for the state to understand the economics of pipelines, and how they work.
    “We’d like the state to understand how much money is in pipeline easements, and what a small percentage of their expenses the landowners are,” he said. “We’re not looking to create an expensive pile of red tape. We’re convinced the economics are there for everyone to win, and it’s not a choice between landowners and the well-being of the pipelines.”
    However, Falen expressed concern over simply creating another permit.
    “In states that have passed expensive red tape, we see pipelines that spend millions to buy their way through, and at the end of the day there are more meetings and more expense for landowners, and at the end of the day the same issues are still there,” he stated. “Instead of creating an expensive set of hurdles, we’d like some of the money they’re making and saving by not having to go through that used to address these concerns from landowners.”
    Falen mentioned that the state could perhaps look into the economics of pipelines with an economist at UW.
    “We’d also like the state to understand the day-to-day expenses and liability that landowners deal with, and that they never get paid for,” he added.
    Regarding Wyoming’s eminent domain statutes, Falen said what he has in mind would only apply to common carrier pipelines, and not power lines, roads or other easements associated with eminent domain.
    “We would be saying that the state does not have to make its authority to condemn available to the companies – that necessarily means the state can condition eminent domain in any way that it sees fit,” he said, further explaining that the state could use an easement similar to the one recently negotiated by Progressive Pathways, instead of the traditional one-page easement that’s used today.
    “And if they wanted to negotiate differently, they could,” he said. “Right now, if they don’t get the agreement they want, they condemn us, and with those changes at least we’d get a decent easement.”
    Following discussion, the Joint Ag Committee directed those with a stake in the subject to meet together over the summer, and bring a list of issues both from the landowner side and the industry side to the committee’s fall meeting.
    Christy Martinez is managing editor of the Wyoming Livestock Roundup and can be reached at christy@wylr.net.