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Adventures in Acquisition

Building Rapport With Landowners Key to Project Success

TransCanada-ROWOne of the earliest stages of any pipeline project is the acquisition of a right of way, and in the past seven years that process has received more news coverage thanks in part to the Keystone XL project. Closer to North American Oil & Gas Pipelines’ headquarters are stories about the NEXUS Gas Transmission project in Ohio. These projects also highlight the different processes for acquiring land.

The NEXUS project — a proposed 250-mile interstate natural gas transmission line — is bound by the Natural Gas Act of 1938 and Federal Energy Regulatory Commission (FERC) authority. The Keystone project, on the other hand, is an oil pipeline and thus TransCanada is left to deal with each state differently for land acquisition.

An XL-Ant Starting Point

What has happened at TransCanada since Keystone has drawn on far longer than anyone could have imagined, is the company is revamping the way it handles land acquisition and management for projects. Andrew Craig, land manager for the Keystone projects, sees the changes as industry-wide.

“What it [Keystone delays] has done is forced the evolution of the land industry,” Craig says. “Ten, 15, 20 years ago, the work we did was viewed as a necessary evil. What has happened is that the industry has finally acknowledged that the creation and development of these relationships is critical to our ability to continue growing.”

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When Craig started in the industry, a company would bring in a crew to deal with the acquisition work. This entailed figuring out who was impacted along the right of way, visiting those landowners, discussing their concerns, negotiating and then writing checks. As construction commenced, a company would then transition to a construction support team, which oftentimes had a different set of employees. In that phase, the land agent would work to resolve property-related issues and 14- to 16-hour workdays are typical, Craig explains. Then in post construction, the team would consist of the “cream of the crop” from the construction phase to stick around about one year during restoration to continue working with landowners.

What Craig has found is that the No. 1 gripe land owners have is turnover. They do not want to see a new face when there is a problem, a question or a concern. Craig sees a direct correlation between unhappy landowners who perceive that they are being misled or mistreated, and success on future projects.

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After

That’s why he has the same crew working on projects from start to finish. For instance on the Gulf Coast pipeline, part of the Keystone system, the same land team has been in place since 2012 and by the time it is all said and done they will have been there for eight years.

“They are brought in to develop relationships with the landowners to work through any concerns that they have related to the construction of the pipeline,” Craig says. “Right now we are in a maintenance mode and our expectation would be that staff is touching base with these landowners on a semi-frequent basis, once or twice a month to provide some information about the project’s status at a national or state level.”

Preliminary Work

Similarly, the Spectra Energy and DTE Energy co-owned NEXUS Gas Transmission project will stretch approximately 250 miles, connecting recipient points in eastern Ohio to the existing pipeline grid in southeastern Michigan. The pipeline is designed to deliver 1.5 billion cubic feet per day of natural gas.

Late in 2014, Spectra Energy and DTE Energy started the process of engaging stakeholders. NEXUS hosted nine voluntary landowner informational meetings for residents along the proposed study corridor prior to the commencement of the FERC pre-filing process at the beginning of 2015.

In October and November 2014, NEXUS subject matter experts held meetings in Ohio and Michigan. Information was available at the voluntary meetings regarding all aspects of the project, pipeline operations, safety and the company. Sign-in sheets documented the names and contact information of participants in order to allow for follow-up, as appropriate, with affected landowners. Shortly after receiving approval to utilize the FERC pre-filing process at the beginning of the year, NEXUS hosted 10 open houses for all stakeholders along the proposed study corridor.

The project timeline for the remainder of 2015 includes FERC scoping to determine environmental and stakeholder issues, applicant stakeholder outreach efforts, issue resolution and applicant preparation. NEXUS Gas Transmission anticipates filing its FERC certificate application in the fourth quarter of this year. The NEXUS project is in the development stage, construction is not anticipated to begin until early 2017. The target in-service date is the fourth quarter of 2017.

“NEXUS makes every effort to communicate, work with and seek input from each and every landowner,” says Arthur Diestel, manager of stakeholder outreach for Spectra Energy. “Landowners are encouraged to participate early and often during the pre-filing process to share any questions or concerns so they can be addressed prior to submittal of the certificate application.”

Diestel says that NEXUS Gas Transmission’s right-of-way agents work closely with landowners to ensure that every activity, from route selection to construction and restoration, minimizes impacts and disruptions on the properties and the environment.

Though there are some differences on the permitting end and the acquisition end, should a landowner hold out to the point where eminent domain action is necessary, the bulk of the procurement is the same as with an oil pipeline project. Easements generally are 50 ft wide and once restored the landowner can continue to use the land with some exceptions. These include structures with foundations, trees, pools and anything else that impedes the pipeline owner’s access to the line.

“After the landowner and our company agree to a compensation amount, the landowner signs the easement document, which is then placed on record at the local registry of deeds. The rights and responsibilities described in the document ‘run with the land’ and remain effective with future owners,” Diestel says. “The Grant of Easement conveys to us the rights to construct, operate and maintain the proposed facilities, but the actual fee ownership of the property remains with the landowner. Because the pipeline is buried, the landowner may resume use of the surface of the right of way after construction and restoration, subject to some limitations.”

Conversations Include…

On a TransCanada project, once a line is on the map, land managers and agents have an initial meeting with the landowner with a proposal of how the pipeline would cross their property. Feedback on routing is solicited and if needed, and where possible, micro reroutes to minimize potential effects on a property are made. On Keystone XL, TransCanada offered landowners 110 percent of the value of the property if it were sold at a public auction.

“Part of those conversations early on, once we have the route established, we would focus very heavily on what we need to do to ensure a successful reclamation program on the property,” says Craig. “It’s far easier in the agriculture land in Nebraska, especially irrigated agriculture land, once that pipe is in place and the topsoil put back in the ditch line. It essentially is 100 percent a year after construction. Where this becomes more of an issue is when you get into the native rangelands in northern and western Nebraska, western South Dakota and all the way up through Montana where you have the native grasses that can take several years to re-establish on the right of way.”

The latter is when deeper conversations are made during the pre-construction process. In those situations, a company will work closely with the landowners to ensure that they are happy with the proposed restoration of the property. When the project is complete, TransCanada will closely monitor the restored area for five years post construction.

“Up front is where the details of how that restoration program will be managed,” Craig says. “We iron out those details and then we get into the meat of the negotiations for the easement value.”

Another important part of the right of way easement process is the determination of damages for property that is taken out of commission during construction through restoration. Craig says TransCanada makes sure all of that is hashed out before one yard of dirt is moved.

“By doing all of this, we have been very successful in reaching voluntary easement deals with these landowners,” Craig says.

Last Resort

The success is evident by the fact that there is 100 percent landowner consent in Montana and South Dakota and 90 percent consent in Nebraska for the Keystone XL pipeline. Of the 10 percent, Craig acknowledges there will be some that, no matter what, will refuse to consent. Since filing 86 eminent domain actions on Jan. 20, several landowners have come to an agreement with TransCanada.

“It does not mean we are done working with these landowners to reach voluntary agreements,” he says. “In the last month, we’ve been able to get another 6 percent of these landowners signed up voluntarily.”

Eminent domain is generally the last course of action taken. Condemning authorities often negotiate throughout the process. This is something that attorney Joel Roberts sees almost every day as head of the National Eminent Domain Practice Team at BakerHostetler.

“At the end of the day most of our clients, and landowners, would rather not go to court. Most pipeline companies try to negotiate property acquisitions before utilizing eminent,” he says. “You will always have hold outs here and there and will need to take property through eminent domain in those circumstances. Condemning authorities may choose to negotiate up until the day the jury verdict comes in.”

Roberts says that after filing suit both sides are able to conduct discovery, exchange expert reports and attend mediation. These procedures are the same whether condemning private or public lands. What does vary between the two is the dialogue, going from working with an individual landowner to various boards, commissions or councils that may represent public land.

“As eminent domain lawyers we are involved in the process and work hand in hand with right-of-way acquisition folks, attending public meetings, and counseling the client throughout the process,” Roberts says. “We become more heavily involved, when it gets to a stage where the condemning authority needs to complete pre-suit negations and fulfill any pre-suit requirements to condemn the property.”

Other attorneys like Martin Booher, co-leader of BakerHostetler’s energy practice, work with the oil and gas companies, regulators and stakeholders in the earlier stages of projects, such as during the initial project planning and permitting. On that end, Booher and his colleagues work with the pipeline owner evaluating alternative routes, where the pipelines can run in existing rights of way, environmental impacts and other permit-related items. Land acquisition work and surveying is the pipeline owner’s bailiwick, but BakerHostetler would stay in the loop during this portion as well.

“My experience has been that is much easier to secure right of ways when you have federal licensed natural gas pipeline because the grant of eminent domain is express. You can get resistance but there is a process, the rights are clear and there is a body of case law that tells you what you can and cannot do,” Booher says. “Oil pipelines are not regulated by the FERC (beyond rates) and there is no express condemnation authority under federal law, so again, you are in a situation where it is a state-by-state process and, while each project is different, oil pipelines can be more difficult to get approved than an interstate natural gas pipeline.”

The NEXUS Gas Transmission project is one example of a project that would work through the federal process and FERC permitting. Eminent domain is something that is done as a last resort and not as a negotiating tool.
“NEXUS does not and will not use the eminent domain authority as a negotiating tool. We will only exercise that right as a means of last resort. NEXUS begins each and every easement negotiation with the expectation that a mutual agreement can be reached with the landowner,” Diestel says. “In the unlikely event that we cannot reach an agreement with a landowner and must obtain the easement interests through the eminent domain process, a court will determine the appropriate compensation in a valuation proceeding.”

If the land is taken by eminent domain, the property owner maintains the same rights as one who agreed to the easement earlier in the project.

Whether it’s a project that draws national attention like Keystone XL or local attention like NEXUS, it is clear that oil and gas companies now face more resistance when building infrastructure. According to Craig, the Keystone project has created almost an industry out of opposition to linear infrastructure. There are more people organizing to get landowners fired up against these projects. Craig says it is the land agents and land managers who are on the front lines making sure that landowners have the correct information and that the landowners’ questions are answered in a satisfactory manner.

“Our No. 1 guiding principle is to treat these people fairly,” Craig says. “I tell my staff to treat these people like you would want somebody to treat your parents or grandparents and that really is our philosophy companywide when doing land work.”

Mike Kezdi is an assistant editor at Benjamin Media Inc. and a contributing staff editor of North American Oil & Gas Pipelines. Contact him at mkezdi@benjaminmedia.com.