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Robert D. Congdon Jr., MAI, SRA

Pipelines: Direct and Indirect Damages

    By: Robert D. Congdon Jr., MAI, SRA | 2012-08-14 22:27:19

All landowners know that gathering and pipelines are necessary to bring natural gas to market. Many old leases allow the gas companies free reign as to when and where these lines are placed. Newer documents require some notice and negotiations on placement and payments.

The Direct Damages to your property include the portion of the bundle of rights that is impaired and any surface improvements that are damaged or taken. Usually, the easements are for surface rights only and to a particular stated depth. Typically, landowners are reimbursed for the loss in crops or timber value. Generally the Company wants a Permanent Easement (PE) of a certain width, as well as a Temporary Easement (TE) on each side to facilitate construction. Your maps and payment details should be clear on the pathway.

Less understood is the concept of Indirect Damages to the overall property. These can be defined as the reduction in value to the remainder parcel(s) after the imposition of the appropriation (PE). We have done literally hundreds of DOT and PENNDOT appraisals illustrating this concept and within various appropriations taken from a wide variety of property.

Depending on the language of the easement, you may or may not have full surface use of the area after the line is in and restoration completed. Examples of indirect damages would include loss or impaired access to a portion of your property, inability to grow crops on the affected area, unsightly above ground improvements which would cause a potential purchaser to pause or turn away, impaired use or access to on site buildings, or poor crop growth on the affected area due to inadequate soil quality replacement. Generally, the condition "after" and caused by the appropriation could negatively affect the value of the remainder.

I did many appraisals for a regional pipeline and noted in one case that their chosen path was between two ponds and within 200 feet of the house. I was able to convince them to alter the path to the extreme property boundary to avoid landowner objections, costly indirect damages to the property and probable litigation.

Some indirect damages can be devastating. For example, I know of one industrial property that had so many surface easements as to render the entire parcel useless for any development, since surface construction was prohibited by the documents. Typically these easements are perpetual and difficult to extinguish. It is critical to fully understand the scope of the consequences BEFORE negotiating any lease/easment rights and have a thorough understanding of the potential long term negatives.


Author's Bio: Robert Congdon is President of Congdon & Company, Inc. Bob has over 30 years of experience in industrial, commercial, multiple and residential valuations. www.congdoncoinc.com

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