Is the Bluegrass Pipeline Selling Pipe Dreams to KY Landowners?

Are you a Kentucky landowner in the path of the proposed Bluegrass Pipeline? If so, you need to read this before agreeing to allow the pipeline on your land. Residents in thirteen counties will be affected by the proposed pipeline and a lot is at stake. As a landowner, you need to understand your legal rights and the potential risks associated with the pipeline so you can make an informed decision as to whether or not you are going to allow the pipeline on YOUR property.

Background

The pipeline project is a joint venture between two companies, Williams Co. and Boardwalk Pipeline Partners (“the Companies”). The project calls for a high pressure, 24-inch diameter underground pipeline to be installed. The pipeline will connect to an existing pipeline in Breckenridge County. The pipeline’s purpose is to transport natural gas liquids from the Marcellus and Utica shale regions in the Northeast to Louisiana. Natural gas liquids are used for a variety of purposes in several industries – including petrochemical and plastics.

Before the pipeline can be installed, the Companies must obtain “easements” from all landowners whose property is located in the proposed route.  An easement is a legal right to use the property of another. Easements can be temporary or permanent in nature. For the proposed pipeline, both permanent and temporary easements are necessary.  A permanent easement “runs with the land,” which means that anyone who owns the land after the easement is granted will have to comply with the terms of the easement.  A temporary easement is limited in time.  Once an easement is granted for the pipeline project, the Companies can prohibit and/or require certain actions of a landowner. For instance, Bluegrass Pipeline prohibits the construction of any above-ground structures within the easement.  Additionally, landowners are charged with the responsibility of ensuring that pipeline markers remain in place on the property (and must individually pay for lost or damaged markers).

Knock, Knock

Company representatives, also known as “Right-of-Way Agents” or “Land Agents,” are out in full force contacting landowners in the pipeline’s proposed path promising big payments and little to no risk. But, is it too good to be true?

The Right-of-Way Agent’s first request is to survey the land. The survey process outlines the pipeline’s proposed route and results in stakes and/or ribbons being tied to fences and trees.  Commonly, survey ribbons are pink. The surveyors mark the center line of the pipeline, but do not mark the boundaries of the permanent and temporary easements.

The land required for the proposed easement will vary for each parcel; however, the Companies have generally represented that a 50-foot wide permanent easement, along with another 50-foot temporary easement for workspace is necessary to construct and install the pipeline. For perspective, most four-lane highways are 48 feet wide.

Fair Compensation

A Right-of-Way Agent may use high-pressure tactics in order to obtain an easement. Some landowners have reported that they were promised a 30% payment upfront in exchange for signing the easement, with the remaining balance to be paid if the easement is “extended” to allow the pipeline to be constructed.  Similarly, some landowners have reported being offered an additional 10% signing bonus.  Many landowners fear that if they do not agree, they will be taken to court and lose their property to the power of eminent domain (also known as “condemnation”).

Regardless, the Companies are required to compensate landowners for three things:

  • Fair value for the privilege of establishing a permanent easement across the land;
  • Fair rental value for the temporary easement to construct and install the pipeline; and,
  • Fair compensation for damage to crops, grazing lands, timber or any structures directly caused by construction and installation of the pipeline.

Right-of-Way Agents work for the Companies and do not have landowners’ best interest in mind; instead, their goal is to acquire all the necessary easements for the pipeline’s proposed route, for as little money as possible.

The attorneys at McBrayer, on the other hand, do have the landowner’s best interest in mind and are ready to help landowners get maximum value should they choose to allow the pipeline on their property.

McBrayer understands that every negotiation is different.  That is why we account for not only the land, but its unique characteristics (such as natural springs), loss of use/enjoyment, loss of production, and rent for the temporary workspace. We can review the terms of a proposed easement and include provisions that will further protect a landowner’s interest and future rights. We can work with the Companies to ensure the location of the pipeline is appropriate.  We can review mortgages and insurance polices to ensure that the easement is not prohibited.  We also can work to minimize a landowner’s tax consequences and locate industry experts who can assist in providing property valuation.

Don’t let a Right-of-Way Agent pull the wool over your eyes. The Bluegrass Pipeline is a major undertaking and requires careful consideration.  Landowners who agree to allow the pipeline on their property deserve to have their rights protected and to be fairly compensated.

JMorgan

 

Jason S. Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Morgan actively represents large, small, established, and new real estate developers and homeowners beginning with the planning phase of a proposed development through zoning changes, development plan approval, financing and the land acquisition processes.  He also has extensive experience with residential and commercial construction and insurance litigation. He is located in the firm’s Lexington office and can be reached at  jmorgan@mmlk.com or at (859) 231-8780.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

 

 

 

 

 

Boilerplate Language May Brew Trouble

As a real estate attorney, I am frequently asked by clients to provide a “general form” with boilerplate language that can be used for a lease or contract, whether it be for a commercial or residential property. Alternatively, clients turn to the Internet for one of these one-size-fits-all forms. I cannot fault clients for their desire to have a form that can be used in all situations, but the truth is that no such handy-dandy form exists. If it did, the job of a real estate attorney would be much easier!

Recently, a buyer showed up at a closing armed with a generic power of attorney (“POA”) form that she found on the Internet. Her husband, the co-buyer, could not be at the closing and she thought that executing this document would enable the closing to proceed in his absence. Though the form was completed and authorized by the husband, the terms of the general form did not cover matters related to real estate. Rather, the form focused on a health care power of attorney –a wholly unrelated matter. Due to the inadequate document, the closing was halted and rescheduled for a later date. Not a good outcome for the buyer or the seller.

There are simply too many variables to create a general form for specific transactions. While a general form may be thought to save time and expense up front, they can create disputes and litigation in the long run. What if a general form is silent on a pertinent issue? Boilerplate language more often than not leads to vagueness and ambiguity. If not spelled out clearly, a party will be left without adequate understanding of their rights and responsibilities.

Real estate attorneys can tailor legal documents to fit the intentions and needs of the party they represent. Each and every deal is unique – the forms should be, too. Do not succumb to a standard form when you are looking for an exceptional deal.

MHaggin

Mary Estes Haggin is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Haggin practices in virtually every aspect of real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, lease negotiation and preparation, and any and all other needs related to residential and commercial real estate matters.  She is located in the firm’s Lexington office and can be reached at  mehaggin@mmlk.com or at (859) 231-8780.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

 

 

 

A Gift That Lasts a Lifetime – And Beyond

With the holiday season in full swing, many are trying to find that “perfect gift” for a loved one. If you are lucky enough to own a piece of land in this beautiful Commonwealth, let me offer a suggestion. This gift cannot be wrapped in a bow or placed under the tree, but it will provide perpetual enjoyment while also providing unique benefits to you, the grantor. This gift is a conservation easement.

A conservation easement is a legal agreement between a landowner and a qualified organization such as a non-profit land trust or a government agency that permanently limits uses of the land in order to protect its conservation values. Chances are, if you have driven by the local lush rolling hills and picturesque farms, you have seen such an easement. In Kentucky, a conservation easement is defined by statute as:

[A] nonpossessory interest of a holder in real property imposing limitations or affirmative obligations, the purposes of which include retaining or protecting natural, scenic, or open-space values of real property, assuring its availability for agricultural, forest, recreational, or open-space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archaeological, or cultural aspects of real property.[1]

An agreement between the landowner and a qualified organization can be flexible so that the landowner’s specific objectives are achieved. With any grant of a conservation easement, the landowner will lose some traditional property rights. For instance, he or she may lose the right to erect future structures on the land; but again, every agreement can be tailored so that the land is preserved while also still beneficial to the landowner. In order to qualify for a substantial tax deduction, a conservation easement must be unlimited in duration – meaning that future owners of the land will also have to honor the easement terms.

When you grant a conservation easement to a qualified organization, you are ensuring the preservation of land and its various benefits for future generations. You are gifting the rare and precious commodity of unspoiled space. Yet, grantors may benefit from their own generosity. By making an easement donation, the grantor may be entitled to receive a tax deduction. If the donation meets certain federal tax code requirements, it can qualify as a substantial tax-deductible charitable donation. The value of conservation easements greatly varies, as does the value of any land parcel, and an appraisal will be necessary before taking a potential tax deduction.

Perhaps the most important advantage of gifting a conservation easement is that doing so can reduce the amount of the grantor’s estate tax. Because a conservation easement removes the potential for the land to be developed, the land’s property market value is typically lowered, which in turn lowers the potential estate tax. There is an additional estate tax reduction only available to conservation easement donors which reduces the value of the property with a conservation easement by an additional 40%. It is often a grantor’s intent that heirs receiving real property will be able to keep it intact. Unfortunately, sometimes a deceased’s estate tax is so high that the heirs are left with no choice but to sell the real property in order to pay the outstanding debt. By granting a conservation easement, a grantor is taking a wise step in ensuring that his or her heirs are not saddled with an unsurmountable tax and may be able to continue to own and farm the land for future generations.

If you would like to know more about conservation easements, contact the real estate attorneys at McBrayer today. We can answer your questions and put you in contact with a qualified organization to start the granting process. Conservation easements are truly the gift that keeps on giving for generations to come – no gift wrapping needed.

J. Markham

Joshua J. Markham is a member at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Lexington, KY office. Mr. Markham practices in virtually every aspect of real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, lease negotiation and preparation, and any and all other needs related to residential and commercial real estate matters.He can be reached at jmarkham@mmlk.com or (859) 231-8780, ext. 149.