Accountability and keeping your word

Don Gadd Landman Published:

I paid $16.50 a rod ($1 a foot) for a pipeline right of way in the mid-eighties. The price was being necessitated by a competing oil and gas company paying $25 a rod. You would have thought I robbed the national treasury when my boss found out about this exorbitant amount. I had to explain myself and was relieved I only received a tongue lashing for being so cavalier with the finite resources of the company.

A lesson I never forgot. But, in some respects, a good lesson to learn as a young man. Accountability and keeping your word became much more important than just seeing how much money you could throw at a problem to make it go away.

I was reminded of my first time of paying for pipeline by the foot when I ran into a Harrison County resident in Venice, Florida. After some conversation about oil and gas, he asked me to review his right of way form he had received. His property was along State Route 800 and the lake. He didn’t necessarily want a pipeline taking up his entire prime frontage. I knew the area and could see his point. But to be fair to those around him, I encouraged him to sign the agreement with stipulations he could live with.

The first item to look at was the term “lineal feet.” It was unclear to him what that meant. I explained that for each foot of pipeline laid on the property, the company would pay him X amount of dollars. The catch being (in this agreement) they had rolled up the payment for pipeline with the damages to be paid when the line was finished. One payment for all. I explained further that though the fee seemed reasonable, the idea of combining everything into one payment was not.

As your favorite tax accountant will tell you, there is tax to pay on all ordinary farm income. And getting paid on a right of way is considered that. However, damages are not. They are the reparation costs that you have incurred as a result of letting someone do business on your property. Figure loss of income from crops such as corn, winter wheat, timber, etc. And, believe it or not, this isn’t a one year problem. Once the ground is disturbed, it may take many years for it to come back to the necessary place in order to grow crops again. You may want to have language in fertile fields to separate the top soil from the sub soil and make sure it is laid back appropriately.

The second flag I pointed out with his right of way was the half-sentence allowing the company to place “additional” lines alongside of and through the property “at the same cost.” What did that mean? It didn’t say for “additional” payment of X amount per foot which is common in right of ways. The decision he had to make was how many lines did he want going through his property and if it was going to be more than one, how much was he going to be paid?

I had told him earlier that to satisfy his mind he should ask the company to survey or set out the route of the line and have the company make a map of same to be recorded with the right of way (a term the company later agreed to). At that point he had to decide whether or not he would grant a right of way for just one line only, or for additional lines to be laid in the future for additional payments.

The money seemed great at first ($25 a foot). However, I have seen as high as $65 a foot in some areas here recently. Now, that figure involved not only paying for lineal footage, but took into account the diameter of the line. Each increase in pipe size increased the fee to be paid for the right of way. What a novel idea. But, an expensive one. I wish I would have had a check book like that.

With these changes in mind, he was ready to have his first meeting with the right of way company and begin the process of getting a right of way agreement that was not only acceptable to him, but worked for the company. Next month I will tell you how it worked out with some of the additional clauses we needed to add, and the hitches encountered prior to getting down to business.

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