Getting an attorney and ensuring you get fair compensation from the gas company are just some of the things producers should keep in mind when signing a lease for a gas pipeline.
Dave Messersmith, Extension educator in Wayne County who also splits time doing work for Penn State’s Marcellus Center for Outreach and Research, said gas pipeline construction is increasing as gas companies try to increase capacity and get gas to the market.
“What we’ve seen is a lot of production has been constrained by pipeline capacity,” or lack thereof, he said, as up to 50 percent of Marcellus Shale drilled wells aren’t producing because companies don’t have any place to take the gas.
A recent proposal for a 120-mile gas pipeline would bring at least some of that gas to southeastern Pennsylvania and other areas of the Mid-Atlantic.
The $1 billion north-south Commonwealth Pipeline would connect to two existing east-west pipelines in Lycoming and Chester Counties.
The pipeline, which is being built by Inergy Midstream of Kansas City, Mo., and will be owned by UGI Energy Services and Capitol Energy of Washington, D.C., may be operational by 2015, according to a recent article in the Intelligencer Journal/Lancaster New Era newspaper.
It’s route will likely affect many farms throughout eastern Pennsylvania, although farms in Lancaster County, where the pipeline was originally supposed to go, will not be affected.
Messersmith said pipeline construction is increasing in areas where Marcellus Shale drilling is taking place, mostly in northern and western Pennsylvania.
A recent article in Bloomberg News cited Energy Department figures of up to 1,000 Marcellus Shale wells sitting uncompleted because of lack of pipelines.
A typical pipeline, Messersmith said, has a right of way of between 75 and 100 feet.
Pipelines are usually buried no less than 3 feet under ground.
Just as with the initial gas well leases, he said producers have a right to negotiate terms of compensation from the gas company and what sort of impact is expected from a pipeline, including its depth, how it gets buried and how the land is restored after the project is finished.
“The pipeline negotiation is a negotiation. Landowners are certainly expected to negotiate for the best terms,” he said, adding that sites for compressors should be negotiated separate from the pipeline.
Compensation varies, he said, ranging from $5 to $50 per linear foot, with some companies offering a rate based on the acreage that’s used for the right of way.
Payments are usually made as a one-time payment.
Initial gas well leases might have basic pipeline clauses addressing the installation of gathering lines. But Messersmith said that should not be confused with these larger pipelines, which go on for many more miles and travel through multiple states.
“We just highly encourage landowners to talk to an attorney before signing a right-of-way agreement,” he said.