Easement Agreements – Facts to Consider for Property Owners
Notice: This material is not legal advice, and is not a substitute for credentialed, qualified, legal counsel, licensed to practice law in Texas. Any property owner who is negotiating an easement agreement should retain, and consult qualified legal counsel. Although no lawyer is required to negotiate an easement agreement, Texas property codes, taxation issues, and other civil statutory matters associated with utility, oil & gas, pipeline and similar matters are legally complex, and require specialized knowledge in this practice area. Property owners would likely be best served by engaging appropriate legal counsel. This material is provided for informational purposes only.
This material is one of several modules prepared by the Big Bend Conservation Alliance (“BBCA”), providing resources for landowners, and the public who have interest in understanding easements, landowner rights, legal issues, economic, and business issues associated with easements.
When common carrier or private pipelines, transmission lines, communications lines, railroads, roads, and similar infrastructure systems cross private property, an “easement” is required. This material specifically covers easements associated with pipeline systems.
An easement is a legal right to use another’s land for a specific, limited purpose. There are many types of easements. With respect to easements associated with pipelines, they are also known as right-of-way, sometimes abbreviated as ROW, or R-O-W. A pipeline easement is created by a land or property owner, the Grantor, to a pipeline operating company, or Grantee.
The easement is a legal, contractual agreement, and it specifies the Grantor, and Grantee’s rights with respect to the easement. An easement does not confer, or transfer absolute ownership from the Grantor to the Grantee, it provides a right to use, specific to pipeline easements, a right-of-way to allow the Grantee to cross private property.
A pipeline easement, for right-of-way, is classified as an “appurtenant” easement, said to “run with the land.” As such, it becomes part of the property ownership, and any easement agreement in force transfers with the sale, or transfer of the property as part of an estate or trust.
Easements are negotiated between the Grantor, and Grantee, almost always at the Grantee’s request. In most cases, the Grantee will be a pipeline operating company, and that company will be represented by an agent, known as a land-man. The land-man is a specialized real-estate business person, who may, or may not be a licensed agent. The State of Texas does not require Texas Real Estate Commission licensing, nor does the State require certification by the American Association of Professional Landmen.
Counter to conventional wisdom, there is no such thing as a “standard easement contract.” While land-men and pipeline operating companies commonly approach landowners with this claim, and associated initial inflexibility, easement agreements are unique to the Grantor, and Grantee, and the completed agreement represents the results of a negotiated set of terms between these parties. Do not feel compelled to sign, as Grantor, a so-called “Standard Easement Agreement” presented by the company’s agent. It is an entirely negotiable contract.
An easement agreement can be complex, and filled with unfamiliar language to the layperson. A typical agreement has a four to five page, or longer narrative component (document), and may include several attached documents, including surveyor’s diagrams and notes, tax forms, waivers, or other materials.
Among the many elements of the easement is an offer of compensation from the Grantee, to the Grantor, in return for the grant of the easement of right-of-way. The offer, or payment received from the Grantee is important, but it is not the sole, or only important element of the easement agreement.
In essence, the offer, or compensation associated with the easement agreement and right-of-way represents several elements:
- a payment for damages, to the Grantor
- a payment for loss of specific uses of the easement
- a payment for temporary uses of the easement, and potentially adjacent portions of the property, related to construction of the pipeline, access to the easement via existing roads, etc.
- special damages, for example loss of grazing/forage or crops that may be in place on the easement, not yet harvested
- remainder damages, a special component of the compensation associated with a reduction in value, use, or access to portions of the property adjacent to the easement
- a payment for the harvest of timber, or other resources present in the easement, cleared by construction in order to prepare the easement for the pipeline
The individual value of any of these components of the offer, and the total, are a function of several things, including property values, market conditions, the diameter of the pipeline, and the length and width of the easement across the affected property, the term (duration) of the easement, and so on.
Typically, the land-man’s or agents offer of compensation will be low. The pipeline operating company compensates the land-man for obtaining the most favorable easement terms, at the lowest price, for the Grantee.
Other terms in the easement relate to where the pipeline is physically located on the property, who is responsible for certain events, like spills, ruptures, fires or injury, repair of fences, irrigation systems, roads, changes in taxable value to the property, the restoration process after construction, access to the easement, and so on. In most cases, the initial easement contract presented by a Grantee is lopsided, in favor of the pipeline operating company.
While many land-men, or agents are honest, and ethical, and attempt to deal with landowners in a fair, and equitable manner, this is not always the case.
Every landowner contemplating grant of an easement has the the ethical, and legal right to fair treatment, equitable negotiations, and clear answers to questions about the easement agreement terms.
State law in Texas requires the following:
- the landowner must be presented with a Landowner’s Bill of Rights, a specific document prepared by the State of Texas, that enumerates the landowner’s legal rights with respect to easements. Here is a link to that document:https://www.texasattorneygeneral.gov/agency/landowners-bill-of-rights
- Prior to the final offer, the easement agreement must include a copy of the certified appraisal used to generate the compensation, or offer proposed in the agreement. The Grantee, or Grantee’s agent contracted this appraisal, so it is not independent, or neutral. The appraisal may, or may not reflect the actual value of the property affected by the easement. Landowners will want to obtain their own independent appraisal, or conduct their own research for comparative purposes in determining if the Grantee’s offer is fair.
- The offer for the easement agreement must be a “bona fide offer”, as described in Texas Property Code, Chapter 21, Section 21.0113, as referenced in the following link: http://www.statutes.legis.state.tx.us/Docs/PR/htm/PR.21.htm
The Landowners Bill of Rights, and the Texas Property Code, Chapter 21 can be alarming to read, as both reference eminent domain, and eminent domain condemnation. Do not be initially alarmed by use of these terms, as they do not represent the first part of the process. The BBCA has published a separate module, that distills the eminent domain condemnation process, so the details are not covered here – eminent domain condemnation is the process by which a “taking” of private property occurs, should the landowner, and pipeline company be unable to reach an agreement.
In this instance, there are two primary considerations:
- a landowner is classified as a “willing seller,” who may desire to grant an easement. In this case, the negotiation may proceed favorably for both the landowner, and the Grantee, resulting in a mutually agreeable offer, and easement terms, and a signed easement agreement. Another possibility is that negotiations fail, either based on the compensation in the offer, or terms, and no easement agreement is completed. In this outcome, an impasse exists, and the formerly “willing seller” transitions into the position, and role of “unwilling seller.”
- a landowner is classified as an “unwilling seller,” when one of two conditions occur – as outlined in the prior paragraph, a landowner may transition from “willing seller” to “unwilling seller” due to the inability to reach an acceptable offer, either based on compensation, and/or terms. The other case is the landowner may be unwilling, at any price and/or terms, to consider granting an easement for right-of-way. In this case, the landowner for whatever reason is not interested, or willing, to grant an easement on his, or her property. As such, the landowner is categorized as an “unwilling seller.”
The “taking,” or eminent domain condemnation proceeding forces, through the courts, the grant of easement to the condemnor, and compensates the landowner, for the “taking” of the property associated with the easement. In this case, the landowner loses the ability to negotiate any terms of the easement agreement – a special commission, appointed by a judge decides on some basis, the compensation due the landowner, and the pipeline operating company proceeds to take the property, and puts in place their notion of a “standard form” easement document, which does not allow the landowner any negotiated terms. This is generally unfavorable to a landowner.
A taking, through eminent domain condemnation may only occur under certain circumstances. A taking through eminent domain condemnation may only occur by actions of the government (in this case State), an agency of the State, or by an entity that has been granted statutory authority for exercise of the powers of eminent domain, for example certain kinds of common carriers – utility companies, gas distribution companies, railroads, or common-carrier pipelines, which include in certain cases pipelines used for transport of crude petroleum, crude petroleum products, natural gas liquids, or compressed natural gas. The courts make the determination regarding common carrier status. Any landowner who falls into the unwilling seller category is strongly urged to seek qualified, specialty legal counsel.