This video records the presentation section of the Red Oak Pipeline Landowners Forum held in mid-December 2019 in Brenham, Texas. If you’d like to schedule an appointment with Attorney Philip Hundl, please call or text 800-266-4870.
You can request a no-obligation case evaluation by calling us or texting and providing the following information — your name, your email, your cell number, the county where your land is located, and the condemnation project name (if you know it). You can also click this link and complete and submit the form.
Summary of the Red Oak Pipeline Landowners Forum Video
Background of Attorney Philip Hundl
Here’s a little bit of background about me. These gentlemen were asking me about Texas A&M. I went to Texas A&M, graduated from Texas A&M, worked in business for a little while and then went to law school. I worked for a large firm in San Antonio and Houston called Fulbright and Jaworski. Then I returned home to my hometown of Wharton, Texas, in Wharton County, and that’s where I began practicing law.
I’ve been practicing there for about 15 years. Like most lawyers my practice area started out very broad and now I’ve narrowed it over the years to land litigation and primarily to representing landowners in condemnation cases. So that’s who I am and that’s what I do.
Current Texas Condemnation Projects
So with that let’s talk. There are lots of condemnation projects going on right now. From high-voltage power lines to pipelines, they extend across Texas. The Red Oak Pipeline project is the one that’s on a lot of folks’ minds, especially you all here. It affects Washington County and the surrounding counties.
Many of you Red Oak Pipeline landowners already know a lot about the project. One of the main goals of this Red Oak Pipeline Landowners Forum is to provide background information on the pipeline project.
Like a lot of these projects, the Red Oak project is a joint venture of pipeline companies. in this particular case, it’s a joint venture of Plains All American and Phillips 66. Sometimes a single pipeline company will create a business entity to build and manage a pipeline.
Kinder Morgan created an entity for a project called Kinder Morgan Tejas, and then sometimes they’ll create a separate entity for a project. Enterprise, has several pipelines going in right now. One is called the Baymark and the other one is called the South Texas NGL. Those will often times be their own entity. There’s another Enterprise pipeline called the M2E3 LLC, so that’s just an entity that they form for these projects.
Eminent Domain and Condemnation in Texas
Talking about the right to condemn. Who has the power of condemnation and how and why? The state has the power of condemnation — it could be the federal government, the state government, the city, and the county, all have an inherent power of eminent domain. This means they have a right to take your property for a public use.
Is that right given to them without them having to do anything in return? The answer’s no, their obligation to the person that they take a property right from is to pay them just compensation, a fair compensation. Those two words just compensation or fair compensation are construed differently by the the pipeline company and the landowner. The interpretation of what is just compensation or fair compensation is what we fight about, and that’s what I represent landowners and focus primarily on, is just compensation.
What about other entities that have the right or the power of eminent domain? You’ve got these quasi-governmental entities, with LCRA being an example. I mention LCRA because I’ve had several cases recently against LCRA. A lot of times folks overlook these kind of quasi-governmental agencies.
Private for-profit companies tend to be the biggest question. How is it possible that this private company has the right to act like the government? Through the course of years and case law interpreting the power of eminent domain and the need for development of infrastructure and things for the public good, and you’ll hear the term for a public use, or public purpose. When it’s been determined that private entities are doing things for a public use or public good they are given the power of eminent domain.
It’s been determined that these infrastructure projects are for public good. I’m not advocating that they should have the broad powers that they claim they have or that the courts have typically given them. But it’s been determined that they have the power of eminent domain for these projects that have been deemed to be for the public good or public use. One of these examples of private projects for public good is pipelines. The courts have at least for now determined that if a pipeline company submits a T-4 application and that permit is granted by the Railroad Commission, then it’s at least initially determined that they have the right of eminent domain and can proceed with the condemnation action.
I’m often asked about the standard easement width. It varies with the type of line and the diameter of the pipe, but what we see typically now is a 50 foot permanent easement area. The temporary work spaces or temporarily easements that go along with those permanent easements will vary as well. Valve sites and associated power line facilities related to the pipelines expand the standard easement width.
There’s been a lot of highway expansion, especially highways going in and out of Houston. I know there are also highway projects going up to College Station. TxDOT will often acquire land along highways for expansion, and that’s done through condemnation. I mentioned the high-voltage power lines — I’ve got several cases related to CenterPoint and Entergy projects right now. You have canals sometimes related to LCRA or the Lower Colorado River Authority. Water lines or sewer lines are other projects that use eminent domain and the condemnation process.
We’ve seen a huge increase in the pipeline projects in Texas, and you all probably have seen this too. As I mentioned, the Kinder Morgan Permian Highway Pipeline or PHP project has been in the news most of all. They run from the Permian Basin in West Texas down to the coast. Most pipelines will go south of San Antonio or north of Austin. With the Permian Highway Pipeline, they decided to go right through the middle and go just south of San Marcos. They went right through the Hill Country, so they have created a lot of public backlash related to their route.
Who Are the Landowners Affected by the Red Oak Pipeline
The Red Oak pipeline is an interstate project, it initiates out of Cushing, Oklahoma, and it connects in Wichita Falls with a pipeline segment from Midland. Then it comes down to the Brenham-Sealy area and then splits with one pipeline going to Beaumont and the other to Corpus Christi. We call it a 30 inch line, because a big part of it is 30 inch diameter, but the portion of it that goes to Beaumont in Jefferson County is 20 inches, and the part that goes down to Corpus is still the 30 inch line.
This past legislative session I went to some of the legislative subcommittee hearings related to eminent domain reform, and those hearings included discussions about why are all these pipelines needed. So many wells are shut in in the Permian Basin because there’s not enough infrastructure to take product to market, be it natural gas or crude oil. That’s one of the explanations for selling these projects and the need for eminent domain reform. Unfortunately it didn’t pass this past legislative session.
As we mentioned, the Red Oak Line is a 30 inch and 20 inch crude oil, 750 mile pipeline. What they’re proposing to transport on the line is crude oil, it’s not going to be a gas line. The Red Oak Pipeline affects landowners in 28 counties, so this is a very large project.
The Red Oak Pipeline also has a website, but there’s not a lot of information on the website. Hopefully as this project develops, they’ll begin to put more and more information.
Interesting to note they received approval November 7th of this year, but many Red Oak Pipeline landowners were probably contacted before November 7th, 2019, asking for permission to enter your property to survey and things like that. They were already doing that preliminary work before having approval from the Railroad Commission. That was something that we have asked them about and didn’t really get a lot of answers.
So here’s a little bit more detailed map of the route and the counties that it’s affecting. I have folks who from time to time call me and say, I’m in Grimes County, is that too far for you? Because I live in El Campo, Texas in Wharton County, and I tell them, “No, I don’t think that’s too far” because I have a case in Wichita Falls and Wise and Jefferson and one in Nueces. So I do represent Red Oak Pipeline landowners at the extremities of the line and everything in between.
Steps in the Condemnation Process
Initial Steps in Condemnation
We have a sheet that I think we passed out to everyone. I refer to it a lot and I send it to clients so that they can see where we’re at in the process.
We’ll talk about right of way agents, and right of way acquisition companies that pipeline companies hire to acquire easements. A lot of times they’ll make you feel that you’re at the last step in the condemnation process when you’re really at step one and two, and I’m going to go into that in more detail.
You first get contacted and most of you Red Oak Pipeline landowners in this room have probably been contacted already by a right of way acquisition company. These pipeline companies normally hire a right of way acquisition company or right of way agent. I use ROW agent as an abbreviation for right of way agent.
A right of way agent may contact you and say something like, “Hi, my name is John Smith, there’s going to be a pipeline on your property, and we’d like to come on your property to survey.” It’s really a phone call out of the blue or a letter in the mail that notifies you. That’s the initial contact. Then in that same conversation, the right of way agent may start talking about trying to buy an easement from you, the Red Oak Pipeline landowner.
I get extremely frustrated when I run across landowners who have already sold an easement to a pipeline company, without even a survey on the property. Essentially those landowners have sold the pipeline company a blanket easement to put a pipeline anywhere on their properties. I still see this happen. It shocks me to think in this day and age people would fall prey to that, but it happens.
Then the landowner gets the various notices required in condemnation through the Texas Property Code — the initial notice, the Landowner Bill of Rights, then the final notice. So there are all these different notices.
With the final notice they will receive an appraisal that attached to the final offer letter. This is required by law. None of the Red Oak Pipeline landowners has received a final offer yet, so you wouldn’t have seen that. The appraisal is 30 to 40 pages by a a third-party appraiser, hired by the pipeline company to support the payment that the pipeline company is offering you.
The Condemnation Suit
Then if an agreement is not reached, the pipeline company can file a condemnation suit. Then what happens? What’s a condemnation suit?
Well to take your property they need to do it through a legal process which starts with filing a lawsuit against you. Then the process is different from a normal litigation case.
Administrative Phase of the Condemnation Suit
The first part is what we call the administrative phase, and what that means is that the court will appoint three special commissioners to hold a hearing to evaluate what you should receive as just compensation.
Let me unpack that part of it because there is a lot of confusion with words like “commissioners”. I’ll have landowners tell me that they know the commissioners and feel comfortable with the commissioners. The landowner might say that he or she had attended the commissioners court.
So that’s a completely different kind of commissioner. You’ve got county commissioners who are elected — normally there are four precincts in a county so there are four county commissioners. This is not those commissioners and this is not that hearing.
These three commissioners are typically persons knowledgeable about land in the county and the judge is familiar with them. The court will appoint these three persons as special commissioners.
Often it’ll be a realtor if we’re dealing with rural property or landowners that own rural property. Possibly one of the special commissioners will be a farmer or rancher who is very familiar with land in the area. Sometimes one of the special commissioners will be an appraiser, but obviously not an appraiser for you or an appraiser for the pipeline company.
So once the court appoints the three commissioners, either side can object to a commissioner. How does that work? I’ll ask my clients if they know any of these three people? How do you feel about them, do they know you, do you know them? I’m not too worried about whether they will they be favorable or unfavorable to us. This is about finding out if someone is going to be very biased against you. I just want someone who is going to be fair.
If one of the special commissioners is someone we need to strike, we will strike them, and that’s where the alternate then moves up to be a special commissioner. Each side has one strike.
I did have a situation where there was a Special Commissioner appointed who had actually served on one of the volunteer boards of the entity condemning. I said to the judge that I was going to strike one of the special commissioners, and also said to the judge, you need to strike this person for cause because I think they’re biased. The judge agreed. The other side agreed as well.
So once you have these strikes then the the special commissioners hearing is noticed. We’re still in this administrative phase of the condemnation.
What does the special commissioners hearing look like? A lot of times you actually use a room just like this. The pipeline company and their appraiser and lawyer are on one side. The landowner with hopefully his lawyer and possibly their own appraiser are on the other side.
Each side will put on evidence, and the lawyers get to cross-examine the witnesses at the hearing. However it’s an informal hearing — there is no judge, there’s just three commissioners.
Once both sides have presented all their evidence, the special commissioners make an award, or issue an award. So then is it over? That’s the thing I’ve had to emphasize with my clients — the special commissioners hearing and the award issued by the special commissioners are not the end. What does that mean?
It means that If either side it is unhappy with the award, or disagrees with the award, either side can object to the award. A lot of times you’ll hear people say “appeal”, but it’s “object” to the award.
So let’s just say for example the pipeline company is offering you $10,000 and you think you should be awarded $50,000. Then the special commissioners come back and agree with the landowner and award $50,000, That means the pipeline company will have to deposit that $50,000 in the registry of the court before they can begin construction. However, nine times out of 10, or 99 times out of 100 the pipeline company will object to that award of the special commissioners.
Transition to Regular Litigation
In that case. the lawsuit transition into regular litigation. The question is what happens to the money that gets deposited into the registry of the court?
The landowner has a right to withdraw that money, but when the case goes to trial eventually, or if some settlement is reached before trial some of that money may need to be paid back. If at the end of the day at trial a judge or jury determines that you are only to receive $20,000, then the landowner would have to pay back the $30,000 difference. So I tend to recommend not withdrawing the money.
Also by not withdrawing the money, there are some additional claims and defenses or claims that the landowner can make. I like to preserve those additional claims that we can make.
I like to stress that the special commissioners hearing is an important process. It’s is a way for the landowner to be heard by fellow landowners. But the special commissioners’ award can be set aside if the case transitions to regular litigation.
Dealing with Right of Way Agents
Now let’s talk about right of way agents and the law firms working for the pipeline company. Because this project is so large, there are several right of way agent companies involved. There is one called Percheron LLC, another one called Norfleet Land Services, and then there is NFG Energy Services. I know folks at Percheron and Norfleet, and I’m just beginning to be acquainted with NFG Energy Services.
There’s all kinds of different personalities of folks that work at these companies, so I don’t want to make a generalization of right of way agents. I know some good right of way agents at Percheron, and then I also know some that are a little tricky.
The attorneys working for the Project are from K&L Gates and Ross, Molina, Oliveros, PC, out in San Antonio and then Zabel Freeman. I’ve seen more K&L Gates attorneys and Ross Molina attorneys involved thus far, but I believe Zabel Freeman is also involved. All these law firms practice in the condemnation arena. There are probably a dozen law firms in the State of Texas that represent condemners or pipeline companies. These are three of the big ones, so these firms are very familiar with the process and how it works.
At this point in the presentation, Mr. Hundl showed a video from the Texas Farm Bureau with comments from Texas landowners about their experiences with right of way agents.
I didn’t make that video. That’s a video that Texas Farm Bureau made last year when they were one of the several landowner groups that were pushing for eminent domain reform. All of the comments that were made in the video I’ve also heard from landowners speaking about right of way agents.
I don’t want to say that one size fits all, but I have seen some right of way agents who are pretty aggressive. I’ve heard landowners say, “Well it just got a point to where I stopped trusting him “or “I didn’t think he had my best interests in mind.” The point I want to emphasize is that right of way agents don’t represent you the landowner. They just don’t. They’ve got a client and they represent their client, not you, and that client is not you.
The ROW agent’s objective is to get the easement signed as soon as possible and as cheaply as possible. They’re always going to make you feel like they’ve got to get it signed next week. They’re telling me that they’re going to start construction in two months, I’ve heard it all, and that’s what they say.
It works on a lot of folks. It’s a high-pressure sales tactic, and it scares a lot of landowners. They make some misrepresentations. I think some are made intentionally. Sometimes maybe they’re misinformed, and they’re just passing along information that they’re given, I don’t know.
But I know that they’ll misrepresent things, like we’ll have this lawsuit wrapped up by next month. That’s not possible given the way a lawsuit works and the timing and what has to happen. But I’ve had them scare landowners into thinking that things were going to happen sooner or differently than they really would or could.
The false promises or misrepresentations take other forms as well. Landowners have told me that they talked to this right of way agent about the things that are important to be included in the easement agreement. He said he put them in and he did put them in in the first draft, and then we talked about the other things, and he said he put them in there, and then when I looked back he actually took out some of the thing he said he was going to put in. Other landowners have told me that the right of way agents try to trick you.
Is that something that lawyers try to do to each other sometimes? Sure, they can try to do that. One thing actually in the lawyers creed is that we say we won’t do is exactly that thing. When we’re drafting documents we’re not going to say well here goes version one and then version two and then version three, and then somehow I change something in version one and didn’t tell you. It actually says you shouldn’t do that.
When I’ve heard some of those horror stories, it just makes me very frustrated. The right of way agents want to put this pressure on you — the first thing I say is don’t rush to sign.
I read these different industry publications. This one I found very interesting, but I’ll just summarize the article. This is a person who was in the pipeline right of way acquisition business for a long time. He said, “We just used to use ‘the across the fence method’ saying that this is what your neighbors land is worth so your land must be worth this much too.” When they started having a landowner who wasn’t cooperating or agreeing the agent could play the condemnation card and threaten to invoke eminent domain seizure. So the old way was to tell landowners if you don’t reach a deal with us, we’ll get it anyway through eminent domain.
The other comment near the end of the article was that landowners are becoming more knowledgeable and therefore want more money. So right of way agents are happy when landowners are not knowledgeable, so they can offer and get low-ball easements.
Why am I doing this presentation? Because I want to give you as much information as I can so you can make informed decisions. So these are my dos and don’ts.
Don’t provide information to the right of way agent. They’re going to ask you for all kinds of information and you are not required to give them any information. There are different phases in a lawsuit in a condemnation proceedings when you will need to provide information and you are required to provide information.
But you’re not required to provide information when some guy calls you and says I want to survey your property, and by the way do you have the appraisals, do you have any of this, or do you have any of that. You are not required to give them anything.
Don’t agree on a monetary amount first. It never fails — this is a strategy and tactic that is very successful for right of way agents. They want to ask you how much are you interested in. How much would it take? How much? They want to get a feel for your bottom line, even before you probably know exactly what’s going to be on your property.
Is it only going to be the pipe in the ground, or is the easement going to include a surface site? Are they going to need a temporary access road? Are they going to need a permanent access road? These are things that the landowner may not know yet, but that landowner has already been asked to give a dollar figure to the right of way agent. So it’s backwards, and they want to do it that way. They want to get a number from you before you even know what the terms of the deal will be.
Don’t rush to sign, be patient. Do reject their first offer and their proposed easement term, or easement terms. I would be the first one to say the proposed easement agreement by the pipeline companies now is very different than two years ago, three years ago or five years ago. Five years ago it was two pages long. Now it’s about eight pages long. So they’ve put in better terms.
Why? Because they know that landowners are going to ask for it. Why spend two or three rounds of negotiation on things that the pipeline companies will probably agree to anyway. Let’s speed up the negotiating process.
Also the provisions that the pipeline companies are starting to put in easement agreements are the provisions that were proposed in the eminent domain reform laws that did not pass. So there were a certain set of provisions that the reform law’s advocates really wanted to pipeline companies to put in in their standard easement agreement, and they’re starting to do that, so that’s good. But I’ll still say we can always do better than their first proposed easement agreement.
The type of easement, specific or blanket, is very important. Very seldom do I see a blanket easement. I do see some blanket easements on access roads, and we’ll talk about that.
Non-exclusive easement — a lot of times folks get that a little bit confused about this. They might say, “I only want this for Red Oak or Kinder Morgan”. But what this really means is do you only want this 50 foot wide easement to be used by Red Oak let’s say. If we make it a non-exclusive easement that means that Red Oak can’t allow whoever they want to put in additional pipelines. We’re going to limit it to one pipeline. So if Kinder Morgan or Magellan or Enterprise comes along later and says, we want to put a line parallel to their 50 foot easement and put another 50 foot easement right next to theirs. Well that’s beginning to take up 100 feet of your property.
If we make the easement non-exclusive, then it will open up the possibility that those easements could overlap. Maybe they’d overlap by 30 feet, so instead of 100 feet being taken up it’s 70 feet of your property being taken up. So there is some advantage to having a non-exclusive easement.
Once again, in any easement agreement we want to specify, or limit it to one pipe. We want to limit it to the diameter of the easement width. I’ve seen old pipeline easements that did not limit the number of lines. They put in the initial line and then of course will come back in and put another one, and the easement agreement actually allows them to do that.
The easement agreement can limit the products that are in the line. Of course these pipeline companies want to have a very broad scope of products they can run through the line, because to them it’s an asset. Often times they sell the pipeline project once it’s in the ground five years or 10 years. Red Oak wants the ability to run crude oil through it, or something else through it, it depends on the need. So if they don’t want to limit the product.
In the Kinder Morgan PHP line, they started out with a very broad description of products. And then over time they narrowed it to natural gas only. So those are all parts that we like to specify and narrow in our easement agreement.
Also, specifying surface facilities if any. We start out saying we don’t want any service above ground facilities or any aboveground sites. They’re going to have the ability unfortunately in most cases to have a surface site if they want a surface site. So if there’s going to be a surface site, we need to add more compensation to you.
Reserve surface use. That’s important as well, to be able to specify in the easement agreement that you as a landowner can do these different things on the property or on the easement area.
Access roads is really important. Once again, they like a blanket or general right to use surface roads or existing roads or put a road anywhere on your property. Or the pipeline company wants the right to go all over your property to get to our easement area, and the right to go over any of your land adjacent to the land with the easement.
If you buy the land next door to your property, the pipeline company wants to automatically acquire the right to drive on your adjacent land to get to the pipeline if they say they need to. That’s what was included in the easement agreements in the past. So we got to be real careful with that.
Double ditching is pretty standard in most easement agreements nowadays.
We want damage provisions in the easement agreement in the event the pipeline company causes more damage.
Require restoration of the surface — this is a big one. I have a lot of pipeline easement breach of contract cases now. The pipeline company agreed that they would restore the surface and they didn’t. Well then what happens? It’s a breach of contract case. We need to make sure that our restoration provision helps us in the future if we need to file suit against the pipeline company.
The easement agreement should include provisions for fencing and road repairs or fencing requirements. That seems kind of trivial, but it’s not.
Termination of the easement agreement is a provision to consider in the easement agreement. Typically we have a provision that says if they don’t use the pipeline for a period of time, two, three, four, five years then the easement terminates. That’s in most easement agreements. Will that ever happen? I don’t know.
We do not want arbitration provisions in the easement agreement. I don’t see arbitration provisions much anymore. There used to be provisions requiring arbitration if there is a disagreement about the easement agreement. Another possible easement provision requires arbitration if the pipeline company doesn’t restore the property like it should. You’d have to go to arbitration with an arbitrator that the pipeline company likes. You see similar provisions with credit cards. In your credit card agreement there’s an arbitration provision, so even if you wanted to sue your credit card company probably you can’t. We don’t include arbitration provisions in easement agreements.
So here are some aboveground appurtenances. So I put that term in there because that term appurtenances is often times used, and my definition of the term is things related to the pipeline. So these are above and below ground. These are pictures of aboveground appurtenances. One is on a high-pressure gas line on the right, and the other one is on a crude oil line. Another aboveground appurtenance is also sometimes referred to as a facility, and the facilities will have a broad definition. That’s an aboveground valve.
The position of the pipeline company, at special commissioners hearings, or at trial, will be that the pipe is going to be in the ground out of sight. You won’t even know that it’s there. But in their easement agreement, most of the time, or oftentimes, they reserve the right to put things like these appurtenances on your property. They don’t really like to mention that or point that out.
So here are some other items that you’ll hear about. This is what a cathodic protection test lead looks like. This is a single H-bracing at a gate. One of the things that’s pretty standard in my easement agreements with pipeline companies is for t the pipeline company to put double H-bracing at gates. So this is single, we asked for double.
Typically what we’ve come to an agreement on is of the “like style” or “like material” as is used on the fence currently. So if you’ve got H-bracing at your gates of pipe, two and seven eight inch pipe, then that’s what we’re going to ask the pipeline company to put in. But if you’ve got just these treated posts, then that’s what the pipeline company will put in. So they’ll put in what’s consistent with what you already have on the property. These are important details.
The pipeline’s standard easement agreement language is for pipe to be 36 inches deep. That is not very deep. So we want to put it at five feet, and a lot of times we reach an agreement on four feet. I have some clients that say they want it cemented in. Normally pipes can be cemented into the ground.
There are two things that are almost always going to be included in aboveground appurtenances, or aboveground things in a pipeline easement. One is going to be cathodic protection test leads, and the is pipeline markers. Pipeline markers and cathodic protection test leads are going to be in the easement agreement. Typically pipeline markers are required by state and federal regs.
I have a video about cathodic protection that shows the science behind electrolysis or how electrical currents will corrode the pipe. This is a way for the pipeline company to actually pop the top of that white pole, it’s a PVC pole, and they connect up a laptop. This white pole has wires going down to the ground and connecting to the pipe. So it’s a way for the pipeline company to check if the pipe is corroding or not. Then if necessary, the pipeline company could place cathodic protection equipment in place. The cathodic protection equipment looks like a gray box, and it’s connected to a power line that would typically be on the boundary line.
In negotiating easement agreements, we try to require that these cathodic protection test leads, pipeline markers and cathodic protection equipment are placed along the boundary line or fence line, and not in the middle of your pasture or field.
We need to talk about the importance of negotiating favorable terms in the easement agreement. This is something that I say multiple times to clients, because it’s one thing that the special commissioners or the judge or the jury don’t decide. They don’t decide or negotiate the special easement terms.
We had something fairly simple and the landowner just said, “I know the judge will make them do that”. The judge is not going to negotiate easement provisions for you. If a provision is what the pipeline company include in its condemnation petition, that’s what they’re going to get.
The only role of the special commissioners or the judge or jury is to assess compensation. So negotiating a special easement or specific easement terms is between the landowner and pipeline company, or landowner’s lawyer and the pipeline company’s lawyer. If there’s no agreement reached then the pipeline company gets what their petition says.
Calculating Damages to Your Property
Let’s talk about calculating damages to your property. We’ve talked a lot about just compensation, that’s what the landowner is entitled to, and that’s a very broad concept that’s open to interpretation by a jury.
How are damages calculated? The first step is to consider the highest and best use of the land. That’s what an appraiser is going to say in your final offer letter — there’s going to be a big thick appraisal. That appraiser is going to say the highest and best use of this land is agricultural use, or agricultural and recreational use. If it’s land that is along the highway, and it’s still is used for agricultural use, the highest and best use should be probably commercial, future commercial. The highest and best use doesn’t mean what is it being used for right now.
I’ve got some cases in Caldwell County on the Kinder Morgan Permian Highway Pipeline. Lockhart is growing very fast and your land may still be in row crop now, but not even a quarter mile down the road the land is being developed into hotels and motels, so it is future commercial or future retail.
Once the highest and best use is determined, then you calculate the value of part taken. So let’s just use a simple example. Let’s say the land is worth $10,000 an acre. And the amount that they’re taking in the permanent easement is one acre. So that would essentially be $10,000.
But they don’t take 100% of the land, unless the condemnation is for a highway. If a highway is expanding, they’re going to take 100% of the land. In a pipeline easement what’s determined is that they don’t take 100%, they take 90% or 95%. Typically, I’m going to say most of the time everyone agrees it’s about a 90% taking. So the part that they would take in that scenario will be worth $9000. But that’s not the only component of the damages.
The other component of damages that’s extremely important and that gets downplayed by the pipeline company is damage to the remainder of your property. The very fact that you have a pipeline on your property has an effect on the rest of the property. If you own 100 acres and one acre is being taken up by this pipeline, the other 99 acres will be affected. The value of the remainder will be affected by that pipeline.
So then we calculate the damage to the remainder. Is it 10% damage to the remainder or is it 5% damage to the remainder? Then you add the damage from the easement and the damage to the remainder and that’s your total damages. There can also be damages for other access roads, temporary easements and things like that. I also add a cost to cure for loss of production. We go back and forth on is that compensable or not.
What you’ll see from a pipeline company when you get that final offer with an appraisal is ignoring damage to the remainder of your property. As an example the pipeline company might say your land is worth $5000 an acre and we’re taking 90% of two acres of it. That’s going to come up to $9000. They’re going to say that there’s no damage to the remainder, and so therefore you should only be entitled to $9000.
Then the pipeline company might say we’re going to be very generous and we’re going to offer you $15,000 or $20,000 If you take it now. If you don’t, we’re going to tell the court we should pay you what our appraiser is saying we should pay you. I just think their assessment of 0% damage to the remainder is wrong.
Attorney’s Fees in Condemnation Cases
A question that I get asked often is about attorneys fees. You might be asking yourself if I have to fight this pipeline company to get just compensation why should I have to pay an attorney. If we “win at trial”, don’t I get my attorney’s fees from the pipeline company? And the answer is no, you don’t. Do I think that’s unfair? Yes, but that’s what our law says right now. Some states allow it, ours doesn’t. And the expert fees, no. You can get court costs possibly, but those normally are very low.
How do attorneys fees work? I have always included this slide in my presentations because my job here today is to give you the questions to ask. If you’re facing condemnation I strongly suggest you hire a lawyer who knows how to handle condemnation cases. One of the questions you should ask is about attorney’s fees.
Most attorneys who handle condemnation cases handle them on a contingency fee basis. And so the next question you should ask is — “What’s the contingency fee and how does that work”?
I’m going to explain how most contingency fee agreements work, or arrangements work. But you have to read the engagement agreement, or contract that the lawyer sends you. Don’t assume that what he tells you is exactly the way it reads. I hope that it would be.
You’ll receive an initial offer from the pipeline company. Most contingency fee agreements say that’s 100% yours. Anything that the lawyer can get over that initial offer, then that’s the amount used to calculate the contingency fee.
So let’s just use an example. Your initial offer is $20,000. That’s 100% yours. Then in the end your case is resolved for $50,000. So the lawyer was able to get $30,000 above the $20, 000 initial offer. If it’s a one-third contingency fee, the lawyer would receive $10,000 and you would receive the other $20,000. So $20,000 plus $20,000 is $40,000. You would receive $40,000 and lawyer a would receive $10,000 with the one third contingency fee arrangement.
You should clarify that it is a contingency fee. Some lawyers, very few, but some lawyers will handle condemnation cases on an hourly basis, but most will handle it on a contingency fee. It ranges from I’d say 25% to 45%, most of them being a third. I see a third for most fee arrangements, but I’ve seen some 30% contingency fees too. Maybe once in awhile the contingency fee is as low as 25%, but normally it’s a third. It’s whatever the lawyer and the landowner negotiate. I’ve also seen the contingency calculated on the whole amount of the payment for the easement, not just the increase above the first offer. You should have a clear understanding of the fee arrangement between you and your lawyer. I normally do a one-third contingency fee on the payment amount above the initial offer amount.
Another issue is who pays for the experts and how are the case expenses handled. Often the lawyer will say the expert fees and case expenses come out of the landowner’s portion, not the lawyer’s portion. The case expenses could include all kinds of things — mileage, postage, everything. What I’ve found works the best is I’m not going to charge clients for mileage and postage and all that stuff, I’m not just going to do it.
But I consider expert fees and mediation costs to be case expenses. There might be mediation costs if the case transitions into litigation and the court orders us to mediation. If you’re in litigation, often there are depositions so there are deposition costs.
I have three general categories for case expenses, and I share those with clients. So two-thirds of case expenses are paid by the clients and one-third are paid by me. I like to share in those expenses, because it’s my perspective of it, I want the client to know that my interest is also in limiting case expenses when possible.
As for paying for experts, once again, this is a question to ask to your lawyer about. I always clarify with my client that I’m not going to hire experts unless you know about it and you agree with it. I’m going to explain to my client why I think this is a time when we need to get an expert involved and this is what this expert will cost. The client can agree or disagree.
The client’s concern is that the lawyer is going to hire experts that the client doesn’t know anything about and incur a bunch of expenses. Ask that question of your lawyer. Ask if the lawyer will talk with you before hiring experts. That’s important.
I always like to just have action items. I recommend the following for your action items.
- Document your land. Take pictures of the important features on your property, what they look like. These are driveways, fences, trees, pasture, and improvements that you have that will be affected by this pipeline.
- Set aside records related to the costs of improvements. If you’ve got improvements recently put in like cattle pens or new fencing, determine what those improvements cost. Those are damages that we want to include in the damage calculation.
- Keep correspondence from the right of way agent and the pipeline company. Keep all the pipeline letters that you get from the right of way agents and the pipeline company.
- Keep the aerial survey image. The pipeline company normally does an aerial survey before they even come on your land to survey. They usually have a screenshot Google Earth type of image. Maybe they’ve sent it to you and maybe they haven’t. If they haven’t, ask for it. If they’ve sent it, please keep it. That’s one of the first things that I want to look at to see the potential route across your land. I talk with the landowner about whether the route works and if it doesn’t work, about how to get it rerouted. We can try to get the pipeline routed off your property, but if that’s not going to happen we need to look at alternate routes the pipeline company can accept.
- Note comments made by the right of way agent. Any comments made by the right of way agents can be helpful. Sometimes everything’s been delayed two months, or they’re planning on construction in January. Perhaps construction is going to start, there’s only going to be one construction crew. For example, there’s a smaller pipeline that I have quite a few cases on. One of the things that the pipeline company told me was there’s only going to be one crew and they’re going to start on the west side and they’re going to move east. That’s helpful because we know the folks that are on the far west side of the line are going to have special commissioners hearings set sooner than the cases on the tracts on the east side of the line.
- Note your questions and concerns. As a Red Oak landowner, jot down your concerns and questions. We have a questionnaire that’s been very helpful. It’s very similar to the questionnaire the right of way agent will send a lot of times to the landowner. I’ve said there’s no need to answer his questions, but answer my questions and write down your concerns and comments. That information is very helpful for me when we’re drilling down on the easement terms and trying to get things negotiated.
- Please go talk to one or more landowner condemnation lawyers. Whomever you feel comfortable with, feel like you can communicate well with, that’s the person you should probably go with.
- Know where you are in the condemnation process. Right now we’re kind of in step one or two. The right of way agents are going to make you feel like you’re at step six and seven or something like that.
I try to keep things short and to the point. I’ve got a lot of videos on topics related to eminent domain and condemnation, so check that out if you’d like more information. Thank you all very much again once again for coming.
We Can Help Red Oak Pipeline Landowners
The condemnation process is complex, and it can be confusing. We strongly recommend that you talk with an experienced lawyer to help you understand your options at each step in the process. Call or text 800-266-4870 for an appointment with Mr. Hundl. If you’d like a no-obligation case evaluation, please call or text us and provide your name, email, cell number, the county where your property is located, and the condemnation project name (if you know it).
You can also complete and submit our case evaluation form if you’d prefer.
- Red Oak Pipeline Map
- Statement of Bryan Ferguson
- PlainsPipeline ltr of 10-31-19
- Red Oak Pipeline Reg 11-07-19
- Red Oak Rejection Notice 11-07-19
- 19-NC-216-PLAINS PIPELINE LP – New Construction Report – Maysville to Wichita Falls
- 19-NC-217-PLAINS PIPELINE LP – New Construction Report – Wichita Falls to Independence Junction
- 19-NC-218-PLAINS PIPELINE LP – New Construction Report – Independence Junction to Ingleside
- 19-NC-219-PLAINS PIPELINE LP – New Construction Report – Taft to Corpus Christi
- 19-NC-220-PLAINS PIPELINE LP – New Construction Report – Independence Junction to Beaumont
- Landowners Bill of Rights
- Red Oak Pipeline Update
- Red Oak Pipeline Route Changes
- Red Oak Pipeline and Temporary Injunctions