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Negotiating Transmission Line Easements
Michael Irvin
Aug. 2010
Recently, the Kansas Corporation Commission has
approved several new massive electric transmission
lines (two phases) that will run from Spearville to
the Nebraska border. Other lines are in the
planning and development stages. They will travel
south from Spearville to Coldwater and then on East
to Wichita.
The lack of transmission lines have been a
fundamental issue in Kansas and are becoming more
and more of an issue elsewhere. These projects
should improve the state’s power grid system that is
somewhat antiquated. It will also ease a bottleneck
that has become a major obstacle to the development
of wind rich Kansas plains and other areas suitable
for wind generation.
Kansas is already one of the largest producers of
wind power, with over 1,000 megawatts installed.
However, this growth has all but stalled in recent
years partly due to lack of capacity to move
electricity to major markets.
With the encouragement of state officials, new
transmission lines will be sprouting up across
Kansas. Many landowners will be approached by an
agent for the developer seeking an easement across
their land. In order to run these electricity lines
on your property, the power company will want the
landowner to sign an agreement. During this
process, the power company will need to acquire what
is known as a "Transmission Line Easement". In
layman's terms, you will be asked to allow the power
company to take some of your rights in order to use
your property under certain conditions.
Consequently, landowners need to arm themselves with
knowledge and understand the legal ramifications of
entering into these agreements.
The developer seeks to obtain a Transmission Line
Easement to acquire the property rights necessary to
construct electrical distribution system such as
electrical lines, substations, switching facilities,
and operation and maintenance structures. The
property rights to be taken are normally spelled out
within the easement instrument.
Once a legal easement has been
established, utility companies move forward with
construction. Construction involves clearing of
trees and other obstructions from the 150’ (up to
250’) wide easement, erecting towers that are at
least 70’ to 125’ tall, and using cranes and
whatever other special equipment is necessary to
complete and maintain the project.
A number of issues should be addressed prior to
signing any type of agreement. The Transmission
Line Easement, like any easement agreement, is a
legally binding agreement that needs to be carefully
reviewed and understood before executing the same.
This type of agreement will have a long-term effect
on you, your land and future generations. It is
important that you not agree to or sign any
agreement until you have had an opportunity to
discuss it with your attorney.
If you are approached by an agent of the
transmission line company wanting you to execute
such an agreement, take your time, and consider all
the aspects of it. These agreements usually are in
perpetuity. This means the easement will last
forever.
The following is a checklist provided as a guide
when reviewing Transmission Line Easements. The
document represents the types of issues landowners
may wish to consider as they enter into an
agreement. Every contractual agreement between a
landowner and a developer has unique possibilities
that differ across regions and operations and must
be negotiated with the help of legal counsel.
AGRICULTURE
Landowners
typically retain existing surface or sub-surface
rights when entering a transmission line agreement,
including rights granted by existing mineral leases,
special use leases, temporary use permits, and
easements.
However,
landowners and developers must consider the
compatibility of transmission line development with
existing uses of agricultural land.
LANDOWNER CHECKLIST
General Purpose of Transmission Line Easement
·
Allow surveying and testing to be done for the
purpose of determining the feasibility of building a
transmission line (structure) on your property
·
Allow construction, operation and maintenance of
transmission lines
Scope of agreement
- amount of property covered
·
How much of my land will be tied up?
·
What land rights am I giving up?
·
What activities can I continue on this land?
·
What restrictions may be placed on my land –
farming, hunting?
Easement
– An easement is an interest in land in the
possession of another that entitles the
holder of the interest
to a limited use or enjoyment of the land.
·
Easements are either
exclusive or nonexclusive
o
Exclusive easement -
the easement rights are held solely by the holder
o
Nonexclusive easement -
others could have the right to use the land
concurrently
·
The rights granted are
permanent in this type of agreement
·
Payment for these
easements can be either in a lump sum or through
periodic payments, but most of the payments consist
of a lump sum
Transmission Line
Easement Provisions
1.
Area leased
·
Limit to only the land or space that is necessary to
serve its purpose
·
The legal description should be clearly described
and checked for its accuracy
·
Typically, developer is seeking between 150’– 250’
width for the right-of-way
·
Access from public roads to and from the land where
the line and other physical structures are located
·
Consider
o
desired setbacks from farming operations
o
desired setbacks from residences and property lines
o
location of general exclusion areas for development
and for access
o
questions of privacy, access, general disruption,
and safety
o
how to mitigate privacy, access, safety and general
disruption issues
o
controlled access points
o
smoking ban
o
access exclusion areas
o
no living quarters for personnel
2.
Term of Agreement
·
Usually most agreements are for a number of years,
but these agreements are in perpetuity or forever
·
Landowners should understand that you will not be
given a choice - the agreement is perpetual
o
Because the easement is perpetual, there are
typically no renegotiations once the agreement is
signed
o
This means that you have only one chance to reduce
unnecessary terms of the easement agreement while
maximizing easement compensation
3.
Compensation for the Easement
·
Amount of compensation
o
Generally, transmission line easement compensation
involves a one-time payment
o
However, in private transmission lines it is not
uncommon for the developer to offer a lump sum or
yearly rent
·
Compensation for a distribution easement depends on
several factors
o
The general location
o
Type of land involved
o
The width and length of the easement
o
Value of the land
o
Damages to the property caused by installation,
maintenance and/or operation of the structures and
lines
o
Usually you are paid 80% to 90% of the fair market
value (FMV) of the land, especially if it is a
public line. This amount will rise significantly if
it is a private line due to the lack of eminent
domain power
o
The differences in compensation are similar to
differences in property value – there are many
conditions that would increase or decrease
compensation, such as whether it is irrigated, dry
land, grassland or wasteland
o
Also you may request additional compensation for
interference with normal farming activities or the
aesthetic appearance of the property (this may prove
difficult, but should discussed)
o
Landowners may need to factor in possible increases
in insurance premiums, especially if the agreement
requires the landowner to indemnify for potential
damages in the future
·
Consider the advantages and disadvantages of payment
structures
o
Lump sum
§
Consider potential tax consequences
o
Compare the lump sum payments using a standard
financial annuity formula to find the annual payment
equivalent that is sometimes offered by private
transmission line companies
o
Become familiar with typical compensation rates for
other transmission line access for the private
sector or offered by other companies building public
lines in this state or in other states
·
Economic arrangements
o
Compensation for any loss of viable agricultural
operations
o
Compensation for property damage
o
Non-conventional compensation
4.
Rights that Developer will Want
·
Right to conduct certain activities on the land
prior to construction
o
Surveying
o
Taking soil samples
o
Environmental and/or wildlife studies
·
Right to construct and install transmission lines
and structures
o
Foundations, concrete pads and footings
o
Guy wires, support fixtures, anchors and fences
o
Electrical transformation, electric distribution and
transmission towers (poles – wood/steel structures)
and lines above ground or underground
o
Substations or switching facilities
o
Buildings needed for maintenance or storage
o
Private roads providing access from public roads to
facilities or structures
5.
Rights Reserved for the Landowner
·
Landowner should concentrate on reserving any rights
that are unique to his/her agricultural or other
operations on the land
·
Landowner may want to include a “catch all”
provision
o
Rights with respect to the use of the land not given
explicitly to developer are retained
o
If you are unable to use this phase, specific
provision can be incorporated into the agreement
* Right
to conduct farming or agricultural activities on the
land or other activities involving the land such as
mineral, oil, gas, or other natural resources
*
Right to use land to harvest crops, graze and/or
hunt
6.
Minimum Duties and Obligations of Developer
·
Reclamation of premises
o
Long-term weed control?
o
Standards for reclamation?
o
Seed mix specifications?
o
Procedure for topsoil stockpiling, storage, and
future use?
o
Party that will conduct reclamation?
o
Disruption of major rock outcropping or trees?
·
Consider operation compatibility
o
Potential livestock displacement
*
Alternative grazing locations
*
Install cattle guards or gates where developer
enters or leaves premise
·
Who must maintain
·
How maintained
*
Brace fences before cutting
*
Notification the construction completed
*
Reseed cleared areas with original or native grass
after construction completed
·
Alternative - pay landowner the cost of reseeding
and allow him/her the opportunity to replant grass
seed
*
Compensation for costs incurred from displacement
and loss of native grassland cover
o
Gates and locks
*
Location
*
Personnel with access
o
Temporary protective fencing
*
Location
*
Maintenance
o
Fences and cattle guards
*
Location
*
Maintenance
*
Immediate repair of fences if damaged
o
Remove and pile rocks exceeding a certain diameter
o
Chip and spread trees and brush that are removed
o
Where the developer can enter and leave premises
o
Use of chemicals to control weeds and brush
o
Consider the viability of terrain
*
Gentle grade
*
Smooth terrain
*
Accessible for heavy machinery
o
Consider transmission capacity issues
*
Provide survey and transmission plan to landowner
o
Consider potential environment and wildlife concerns
*
Sensitive wildlife habitat
*
Species of concern or of potential concern
*
Invasive species control
·
Annual weed abatement program
o
Consider potential archeological/historic concerns
*
Identify archeological sites, especially places
listed on the National Register of Historic Places
*
Outline a procedure for dealing with archeological
sites if they are uncovered
o
Waterlines
*
Immediate repair of water lines if damaged
*
Responsibility to haul water until waterline is
repaired
o
Access stipulations
*
Maintenance and repair of access roads
·
Location
·
Direction
·
Snow removal
·
Keep lands free from liens such as mechanic’s liens
·
Option of contesting the validity of liens
o
No cost to Landowner
o
May post a bond or escrow to cover the cost of
removing lien
·
Comply with all federal, state and local law and
regulations
·
Obtain and comply with all permits
·
Ensure proper usage, storage, disposal and release
of hazardous substances on the premises
o
Developer may be allowed to use hazardous substances
in its normal business operations provided such use
is not harmful to landlord and in compliance with
all applicable laws
o
Developer should indemnify landowner for any losses
from the use or handling of such substance
7.
Minimum Duties and Obligations of Landowner
·
Allow developer the quiet use and enjoyment of the
land without interference
·
Landowner will not engage in any activity that would
hinder the developer
·
Landowner will have to ensure the proper usage,
storage, disposal and release of hazardous
substances on the premises
o
Landowner should carve out an exception for the use
hazardous substances in its normal business
operations (agriculture use)
o
Landowner will have to indemnify developer if he or
she mishandles the hazardous substances
·
Landowner will have to cooperate with developer in
obtaining any necessary subordination agreements or
approvals from existing lien holders
8.
Taxes and Utilities
·
All tax (personal or real estate) increase due to
improvements associated with the project, as well as
all sales and use taxes should be the sole liability
and responsibility of the Developer
o
This also includes, but not limited to the
installation of the transmission line, structures,
substations, switching facilities and/or maintenance
buildings
·
Developer should be responsible for all water,
electric, telecommunications, and other utility
services used for the transmission line
9.
Assignment Rights
·
Developer normally wants to be able to assign all or
portion of their/its easement rights to another
without consent from the Landowner. Includes:
o
Right to grant to a utility company the right to
construct, operate and maintain the transmission
line, interconnection and switching facilities on
the premise
o
Right to sell or otherwise transfer the easement to
another party
o
Right to grant subleases or sub-easements
·
The assignment usually allows the original developer
to be released from further obligations
o
Usually the party receiving the assignment agrees to
assume all responsibilities
o
Landowner should understand the broad grant they are
giving to developer and should exercise caution
·
Landowner should request that developer provide
prior written notice of any assignments. Including:
o
Name, address and phone number of assignee
o
Liability assumed by assignee
10.
Indemnification and Hold Harmless
·
Most of these provisions describe who protects who
o
Developer should be 100% responsible for all costs
associated with transmission line
activities/operations, both pre and post completion
of the project
·
Usually provide for indemnification for damages
arising out of:
o
Any operations or activity of the indemnifying party
on the premise
o
Any intentional act or omission on the part of the
indemnifying party
o
Any breach of the agreement
o
Be aware of language that forces the landowner to
indemnify the developer for activities of any
tenants or guest
o
Developer should indemnify and hold harmless
landowner for damages sustained as a result of any
claim made by a neighbor or other party arising out
of the activities of developer. Including, but not
limited to:
*
Nuisance, trespass and medical claims
*
Other damages
o
Safety risks (ex. electromagnetic field effects):
human, livestock and structures
o
Risk of storm damage
o
Loss of TV, radio, telephone, cell phone and GPS use
·
Finally, most easements contain a provision that
includes paying the reasonable attorneys’ fees for
the party being indemnified.
o
Note – this may work very well if you are the party
that has been damaged, however this can also work
against you. Here is a quick example:
*
If your farm tenant were to fall asleep while
driving a tractor and hits one of the transmission
line structures and cuts off the electrical power
*
What would it cost to restore power and fix the
tower/structure?
*
Who would pay for the damages?
*
What would litigation cost and could you be
responsible for the developer’s attorney fees if you
lost?
o
We recommend that you speak to your insurance agent
about exposure to future liabilities and the
possibility of insuring that you are covered in this
type of an event
11.
Insurance
·
The easement should require that developer maintain
appropriate liability insurance covering all of its
activities on the premises and name Landowner as an
additional insured
o
The policy should require sufficient liability
limits to protect landowner
*
This amount should be at least 1 million dollars and
up
*
The amount of insurance should also adjust over the
course of time (inflation)
*
Developer should provide a certificate of insurance
annually
*
The policy should provide that it cannot be
cancelled without at least 30 days written notice to
landowner
o
Developer should reimburse for any increases in
premium by landowner for additional coverage of
transmission line, structures, buildings or
operations
*
Landowner should factor in yearly premium increases
over the life of the agreement
o
Landowner should be careful about agreeing to
language in the easement that allows developer to
“self insure”
12.
Eminent Domain
·
If a landowner ultimately declines the developer’s
offer for the easement, they may have the right of
eminent domain (condemnation) to take the easement
·
The power to condemn rest with developers who are
public utilities and as well as some private
companies (ex. transmission line development)
o
The developer can take the portion of the property
from the landowner for just compensation
o
These matters are usually filed in the local
District Court
o
These proceedings usually happen very quickly. It
is always prudent to consult with an attorney prior
to this type of hearing
o
After the court finds that the developer is
qualified to use eminent domain, it will appoint
three appraisers and assign them the task of
determining the FMV of the taking by the developer
o
The court will then consider the loss in value
assessed by the appraisers to the premise and
determine just compensation
13.
Default and Termination
·
Events that normally cause a default on the part of
the developer and allow for the termination of the
easement
o
Failure to make the required payment(s)
o
Failure to pay for damages
o
Usually the agreements require a written
notification of lack of payment or damages incurred
by the landowner
o
If developer has a perpetual easement, it will be
able to continue indefinitely unless it voluntarily
discontinues the easement
o
The easement should provide that upon termination,
developer must remove all towers, substations,
switching facilities, equipment, machinery and any
other structures on the premise
*
A time frame should be set for the developer to
remove all materials and structures from the land in
a timely fashion
*
Any concrete pads should be removed to a depth below
ground of three feet
*
All debris removed from site
*
Payment for any property damages, tile damage, crop
loss, seeding, fencing and/or soil compaction
*
All easements released after decommissioning
o
If termination should occur, developer should
provide and execute a recordable document evidencing
the termination of the easement
14.
Miscellaneous
·
Change in land use options
o
Consider the potential loss of some of those uses
o
Hunting
o
Other recreational uses
·
Determine location of Transmission Line,
substations, switching facilities and other
structures to residence, viewscape, livestock
facilities and important wildlife areas
o
Consider the disruption to farming operation
o
Consider negotiating mitigation strategies
o
Consider and prepare for aesthetic changes to
viewsheds and landscapes
·
Farm Tenants
o
Make sure that you inform any farm tenants of the
easement
*
The easement is an agreement between the landowner
and developer and not the farm tenant. The tenant
has a separate agreement with the landowner which
may be adversely affected by the easement (ex. lost
acreage to farm, work around towers/structures and
inability to conduct aerial spraying)
*
Landowner and farm tenant may need to modify their
agreement regarding the new easement
·
Farm Service Agency (USDA) implications
o
Before signing an easement, landowners need to
consult the local FSA office to be sure or at least
aware of any problems that transmission line may
cause if construction occurs over land in contract
with the Federal Government (ex. CRP)
o
Therefore, landowner should seek USDA approval if
participant in USDA programs, so payments are not
lost or financial penalties are not triggered
·
The manner in which notices are to be given to each
party should be specified
·
The easement should only be interpreted under the
laws of the state in which the property is located
·
Recording of Memoranda of the easement
o
An easement is usually filed with the county
Register of Deeds
o
However, sometimes an easement may not be recorded,
but a Memorandum that memorializes the terms so the
existence of the easement will be filed in an
abstract format. This prevents the financial terms
from being disclosed.
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