The continued Utica and Marcellus shale development in the oil and gas industry has now brought about the construction of pipelines to move the product to processing facilities. Many landowners in the Utica play have or will be approached with a request to obtain an easement on property for the construction of pipelines.
The easement typically limits in part or entirely the landowner’s rights on the easement property.
Easements can also be temporary or perpetual. This is an important distinction for tax planning purposes. If the easement is temporary the income received is treated as ordinary income. If, on the other hand, the easement is perpetual the income is taxed as capital gains income.
Often a landowner will be approached by a company asking for an easement to install a pipeline across their property and will be presented with a “standard” easement agreement.
These agreements are typically very broad and somewhat vague, and may allow for activities to occur on a property that are not desirable to the landowner.
The document at the bottom of this article is a real easement agreement a landowner was presented with for the installation of a pipeline. The names and addresses have been changed to protect privacy, but the language in the agreement has not changed.
Areas of concern
Following the agreement is a discussion of concerns a property owner should have if presented a similar document.
The agreement presented below raises several concerns for any landowner. While not an exhaustive list, below are a number of concerns any landowner should have if presented a similar lease.