Michigan Crude Oil And Petroleum Act 16 of 1929 and landowners: Part 3

As energy infrastructure for our state and nation improve and grow, a landowner may be approached to allow the construction of a pipeline across their property.

It is important for landowners to know the process if they are approached to allow the construction of a pipeline across their property. Here are some important things to consider:

  1. The power of eminent domain is not granted if the project does not provide a public interest.
  2. The Michigan Crude Oil and Petroleum Act 16 of 1929 provides a specific procedure for dealing with and compensating an affected landowner from initial surveys to the payment of the right of way or easement.
  3. As with other contract offers, negotiation of some of the terms and conditions is possible. Right of way width, need for and payment rate for temporary work space and route location modification are but just a few of the terms and conditions that should be considered. For example, many landowners prefer a pipeline along the edge of the property or down an existing farm road. Even though a project may have eminent domain authority, it does not preclude suggestions from the landowner to make these types of modifications. Michigan State University Extension created the document Right of Way Information for Landowners that discusses the right of way process.
  4. The Act contains both terms “right of way” and “easement.” A right of way commonly has an expiration date, while an easement is commonly perpetual. It is not uncommon for landowners to prefer a right of way because it allows them to negotiate a new right of way contract when the existing contract expires. For example, if the right of way has a 30-year term, at the end of 30 years the company and the landowner will negotiate a new agreement and payment for the continued use of the landowner’s property. Conversely, the payment for an easement only occurs once because it is usually a perpetual agreement.
  5. The Michigan public utilities commission does not determine whether a right of way or easement should be offered. The commission only decides if the project is worthy of allowing the project initiator the power of condemnation. It does not determine if the contract should be an easement or right of way. That is at the behest of the project developer. Because the act uses both terms “right of way” and “easement”, a property owner should carefully consider, and seek qualified counsel to determine if the project is authorized to condemn private property. An aggressive right of way agent may use only portions of the act to convince someone the project is allowed to use the power of condemnation, when in fact it does not.

Before signing a right of way or easement agreement it is recommended that an attorney knowledgeable in real estate transactions be consulted for additional provisions or interpretation.

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