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Pipeline Negotiations

It’s what you don’t know that can hurt you...

By Bobby Horecka
Field Editor

Jerry Kasper is quick to say he and his family has been blessed. Growing up in South Texas, his demeanor and cadence suggest a country life, one spent in much more toil than he likely endures now on a day-to-day basis.

He’s a sizable landowner by most standards, earning money off both his cattle and crops as well as tapping the recreational market on his wooded acreage with deer leases. He’s run a successful insurance business in Cleburne since the 1970s. And like many of his neighbors in the gas-rich fields of the Barnett Shale region, the mineral rights he owns have also made their mark.

But he has also seen his share of hardships. He and his self-described new wife of eight years, Carolyn, both lost their first spouses to cancer. That town job has proven the lifesaver more than once as he struggled with the farm and ranch operations. And, as he learned more recently with nine different pipelines crisscrossing his 3,000-acre ranch—once one of the largest Hereford cattle operations in Texas—those gas wells aren’t all they’re cracked up to be.

"They just cram it down your throat," Kasper says of the pipeline companies’ task in carving up his ranch.

And while he is compensated for such inconveniences—he spoke of a recent $48,000 award handed to him by a tribunal serving on the local review board—the process leaves much to be desired.

For one, that cash award, about $8 per foot of pipeline by Kasper’s estimate, has yet to be paid. Rather, the pipeline company slapped some funds in escrow and started its land clearing project at almost the same time the decision was handed down. Its original offer of $6 per foot, which Kasper challenged in court, was less than half what he heard some neighbors earned for the same project. And despite lawyers hired and cases argued, there was always the fear the company could simply claim his land for less by exercising its rights of eminent domain.

The actual exploration and drilling rights are an extravagant affair in diplomacy, complete with contracts and declarations that allow these companies onto your land, Kasper says. The pipeline agreements are far less formal affairs, often handled by field men who simply walk up and make an offer. Yet despite the informalities, the pipelines can carry even more lasting consequences to the landowner.

And that’s where so many can get burned, Kasper says.

"You have to be so careful when it comes to these agreements," he says. "You’re not just dealing with something that will be over in a few months. If you’re not careful, you’re signing away an easement forever—the rest of your life, your children’s lives and their children’s children’s.

"So what’s the worth to you?" Kasper continues. "How do you place a worth on something like aesthetics? How do you place a value on something you know—years after you’re long gone—will still be there? Is $48,000 enough to know your great-great-grandchildren will still have to deal with whatever you’re doing to them today?"

•••

Pipeline companies are one of literally hundreds of entities statewide with the right to claim private property as their own, a fact Farm Bureau has worked diligently to correct within state law.

House Bill 2006 that went to the House floor debate as this story was written, carries with it many of the hopes the organization’s voting delegates wish to make a reality—fair negotiations, just compensations and royalties on projects like pipelines that earn steady incomes.

That’s certainly not too much to ask of those looking for our land, Kasper says. Keep in mind, he considers himself blessed; his brother-in-law has twice the number of lines across his land, located just across the road from his place.

One of the main reasons so many pipelines cross his property, Kasper reasons, is that companies don’t want to share profits in the gas gathering business.

Every well needs a means of transferring its contents to a viable end-user to make a profit. In the ideal situation, Kasper says, a trunk line would be built, feeding from the wells to that main transfer corridor. What happens instead is that pipeline companies choose their own lines over the oft nearby resources of other companies in the area to avoid the fees tied to such transfers.

"It’s more economical for them to build a separate line to the main lines than tap into someone else’s," he says. "If they do that, then they must pay a ‘user fee,’ a percentage of the gas flow through the line."

And considering building a pipeline through an area can cost as much as $100,000 to $1 million, it’s scary to think what those end profits must be, he says.

"Once the pipeline gets built, they basically have a permanent cash cow," said Mel Robinson, a partner in Prime Resources, a company which specializes in landowner-friendly oil and gas lease acquisitions, also based in Cleburne.

(In the interests of full disclosure, Robinson isn’t exactly new to the pages of Texas Agriculture. Should Mel’s name ring a bell, he’s the affable rancher oft quoted in the "Little Spouse on the Prairie" column by former Texas Farm Bureau field editor Lana Robinson.)

Robinson said he’s seen a vast array of nightmares unfold when it comes to such agreements. Once, a subdivision of homeowners was asked for its signature on a pipeline deal billed as a three-year agreement. Several signed on, but clauses within the contracts prompted questions in others.

"The part in question involved a perpetual agreement," Robinson says, "meaning those who agreed would be bound to the contract as long as the land remained. If they signed it, they were stuck."

And despite the cash flow across their property, landowners don’t see a cent beyond the initial pipeline-building payment, Robinson says.

"We actually asked for royalty considerations when we took the issue to court," Kasper says. "We knew it was a blue-in-the-sky request, but we tried."

Considering these companies have the means in which to charge their competitors with a hefty price tag for tapping their lines, Kasper says he didn’t see why it would be a terrible inconvenience for him to get the same.

"Quite honestly, we weren’t surprised with the outcome," he says. "They laughed at us."

•••

As much as those gas wells and pipelines have altered the landscape, so have the tendencies of land buyers in Texas.

Directly across the road from his first stop on the tour of his ranch lies a brand new housing development, no doubt targeted at the wealthy businessmen of the Dallas-Fort Worth Metroplex, which is located less than a half hour north. At the entrance is a castle of a building, surrounded by pristine gates and lawns and what appears to be a pro-style golf course set adjacent to the multi-acre ranchettes, complete with multi-million dollar homes.

"That will never happen on my property," Kasper says. "There’s no way we could ever see a development like that on this side of the road. We’re forever locked in as the pipeline property."

And that wouldn’t be awful—keep in mind, Kasper considers himself blessed—if only the pipeline placement seemed a bit more fair.

At that nondescript corner of his property, directly across from the mansions across the road, Kasper pointed out a 20-inch line running along the inside of his fence line, with another 8-incher running parallel along the state-owned right-of-way.

Then he pointed about a quarter mile up the road, where the obvious digging on his place started and evidence suggested the same on the road’s other side. Apparently, the pipeline company opted to cross the road to splice his land in favor of another’s, despite that particular line running for about six miles down the opposing ditch.

Kasper’s explanation: His neighbor farther down the road is a bit more blessed. As he put it, "They’re wealthy enough to have hotels full of lawyers, and the pipeline companies don’t dare come after them."

•••

A variety of factors come into play when pipeline contracts are under consideration, Robinson says.

"Obviously, you don’t want to give up too much," he says. "But there are a ton of items people don’t even think about."

It’s those overlooked items that can be the most troublesome, agreed Kasper, who sought Robinson’s services after enduring more than one bad dealing with pipeline companies. He says he was so impressed by Robinson’s assistance to him, he later went to work with him to help others.

Although often overlooked as a possibility, it was hard to do so as Kasper drove the new petroleum company roads that coursed his land. The roads themselves weren’t half bad, a little mushy after recent rains but far superior to the alternative. What got Kasper’s goat were the mountains of litter lining those roads where bulldozers piled brush well over the cab of the truck.

"Part of our agreement," Kasper explains, "was that these brush piles would be burned, shredded or buried once the project was done."

As man-sized new growth spurting from the enormous piles will attest, that particular agreement isn’t always upheld.

Robinson said he lobbies for all sorts of landowner protections during the contract process, including clean-up of eyesores such as the brush piles of which Kasper spoke, abandonment of easements should production not occur, and always, top possible dollar for the infraction of the land.

"But the real fix has to start in Austin," he says.

Until that comes, Robinson says the best defense lies with companies like his or the work of competent attorneys.

He stressed that latter point: "I’ve seen a lot of good attorneys who don’t know squat about pipeline leases. You need to be sure you have someone look it over who knows something about it."

Meanwhile, Kasper says he hopes for the best.

"I’ve said this before, I consider myself blessed," he says. "If I wouldn’t have the acreage I do, I couldn’t have even gotten this much, for whatever that’s worth. We’ve got to do something to fix this. Smaller landowners don’t stand a chance, and that’s just not right."