Oil pipeline negotiations halted until right-of-way agreement reached
for The Fence Post
Unlimited liability for potential unintentional damage to a midflow pipeline is one of the clauses standing between a group of landowners and the landmen negotiating the Liberty Pipeline easement for Phillips 66.
As of Thursday, Feb. 13, PRO, a landowner group representing approximately 250 miles of landowners property across Wyoming, Colorado and Kansas on the proposed Liberty Pipeline route is pumping the brakes on entering into agreements with Colorado Liberty Pipeline, LLC, based on the absence of language protecting landowners from liability. Without the specific language, according to Conner Nicklas, legal counsel for the group, landowners are depending on the state’s property laws, case law, and the reasonableness of the pipeline company. With state law often favoring the easement holder, the landowner is left open to potential liability in sums that could force the loss of the property.
Nicklas, an attorney with Falen Law Offices in Cheyenne, Wyo., said if a landowner or employee were, for example, building fence unaware of the pipeline’s location and damaged it, triggering emergency procedures and shutdown of flow, the landowner could be liable for damages that could be in the millions of dollars. For this mistake, he said, a multigenerational ag operation could be lost according to property law. It is worthy to note that pipelines are buried under ground at a depth of 3 to 4 feet, it is state law to call and locate lines prior to digging, and pipeline breaches are extremely rare in the U.S.
Language in the right-of-way agreement specifying limited liability for the surface owner could protect the surface owner from unintentional damage to the pipeline.
“I don’t know about you, but I sure don’t like to have to rely on someone else’s benevolence when I could lose everything, including a multi-generational farm or ag operation,” Nicklas said.
He said easements often change hands, increasing the chance the landowner would eventually be dealing with a different pipeline owner, one he or she has never sat in a room with.
Jill Sweeney, communication adviser, Midstream, Phillips 66, said Phillips 66 has been engaging with landowners and has come to an agreement with the majority along the proposed route that originates in Guernsey, Wyo., and spans to Cushing, Okla., where it connects to pipelines that reach markets on the U.S. Gulf Coast.
Wyoming law, she said, is different than Colorado and oftentimes wording in right-of-way agreements reflect those differences, prompting questions from parties involved in both states.
In terms of liability in Wyoming, condemnation courts evaluate land valuation and contract terms based upon the precedent set by the most recent previous company’s agreement, ensuring that the current agreement meets or exceeds that level.
“We are doing that on the terms and on the price so for Wyoming people to hold out for something more, it doesn’t make any sense,” she said. “In Colorado, it’s different. We feel like there are people thinking because we make that liability agreement in one state, that we would make it in the other. We’re not held to that standard and it’s not our standard practice to use that language.”
An easement and right-of-way agreement filed in Wyoming between a landowner and ONEOK Elk Creek Pipeline, LLC, a foreign LLC organized in Oklahoma, includes a section titled Grantor’s Limit on Liability and Immunity from Vicarious Liability. This section states that grantor (landowner) shall be liable to grantee (pipeline company) only for damage resulting from grantor’s intentional acts, willful misconduct, or negligent acts or omissions. Normal and customary farming is defined outside of negligence as long as One-Call is notified prior to agricultural tilling activities that result in penetration of the surface beyond 30 inches. The agreement also affords the grantor the option to secure comprehensive liability insurance with limits not less than $1 million against loss or liability caused by grantor’s occupation and use of, and activities on the property.
In contrast, one of 10 right-of-way agreements filed in Morgan County between grantors and Colorado Liberty Pipeline, LLC, contains no language addressing grantor’s liability for unintentional pipeline damage. Another such agreement filed in Goshen County, Wyoming, with Colorado Liberty Pipeline, LLC, contains nearly identical content without mention of limited liability for unintentional damage.
Sweeney said about 70 percent of the landowners they’ve negotiated with have entered into right-of-way agreements, signaling that the company is dealing in good faith, something county commissioners will evaluate when condemnation decisions are on the table. Depending on the state, letters will be sent to potential surface owners within the coming week, starting the next phase of the negotiation process and the final weeks of negotiation prior to appearing in condemnation court.
“We are really hoping we can reach a deal and both sides are working hard to find a compromise that will protect the landowner and also fit into Phillips 66’s policy toward landowners before landowners face condemnation,” Nicklas said.
In an effort to communicate their commitment to limiting landowner liability as the condemnation process draws near, the PRO board penned a letter to Phillips 66 CEO Greg Garland. In it, they said the current proposed language holds liable a landowner’s “successors and assigns.” According to the letter, requesting a landowner to sign an easement under the obvious threat of condemnation that requires a landowner be forever liable for the property, even after selling the property, is not good faith negotiating and is an unreasonable request for a landowner.
The language also proposes that a landowner be liable for the intentional acts and willful misconduct of anyone they would otherwise be legally responsible for. The letter reads landowners can be legally responsible for dozens of different people including, employees, guests and family members. According to Nicklas, this could include the acts of an employee outside the scope of their employment, the actions of a hunter on the property, and other examples that exceed the liability exposuxre a landowner would normally have under any law. ❖