How Much Should Landowners be Paid for Marcellus Pipelines on Their Property?

With an increase in the number of Marcellus gas wells drilled, comes an increase in the need for pipelines to get that gas to market. Local pipelines that gather the gas and take it to a compressor station where it’s then sent to a larger pipeline, and pipelines that bring water to drilling sites, can be from as small as 4 inches in diameter to as large as 36 inches in diameter. In Marcellus Shale states like West Virginia and Ohio, the mineral rights to drill for gas beneath the ground are often owned by someone different than the landowner who owns the surface rights. A pipeline contract is known as a right-of-way easement with the surface owner.

Since surface owners will not see any royalties from the gas, they understandably want to get as high a price as they can for allowing pipelines to traverse their property, pipelines that once installed, will be there for many years—often longer than the producing gas well. But what’s a fair price?

According to Tim Greene, owner of Land and Mineral Management of Appalachia:

“Some of the gas companies are low-balling surface owners. Some are offering as low as $5 per foot for a waterline,” Greene said. “Some of the surface owners are telling them to come back when they’re serious.”

Greene also said companies are now offering $15-$35 per foot for gas pipelines in Ohio County [WV], very close to the $20-$30 per foot figure he previously said surface owners should seek.*

According to Stacey Brodak, Chesapeake Energy’s director of corporate development:

“Planning and constructing pipelines is significantly more involved than simply connecting point A to point B, particularly in urban and environmentally sensitive areas,” she added.

“From route development to site restoration, many factors are taken into account when laying pipelines. Factors considered both above and below the ground include pipeline constructability, effects on the environment, impacts on community life and existing infrastructure,” she said.*

Chesapeake does not publicly disclose how much they pay surface owners to run pipelines, just as they don’t publicly disclose how much they pay to lease land for drilling.

Pipelines are often buried, but sometimes are run across the surface. According to information from Chesapeake:

Property owners may install a variety of surface amenities above pipelines, including sidewalks, driveways, parking lots and shallow-rooted landscaping. To maintain the integrity of the pipeline and allow for safety inspection access, deep-rooted landscaping and permanent structures are not permitted on pipeline easements.*

*The Intelligencer/Wheeling News-Register (Jul 28, 2011) – Money Differences Plug Progress on Pipelines