The Enid News and Eagle, Enid, OK

June 10, 2013

Some landowners band together, unhappy with Hiland pipeline deals

By Kyle Roerink
Casper Star-Tribune

CASPER, Wyo. — Rocky Foy has 11 pipelines running through his property.

Hiland Crude LLC wants to install another.

The oil company, owned by billionaire Harold Hamm, offered Foy a one-time payment of $22,400 for running 3.5 miles of pipeline on his land for a lifetime. Foy said the payment wasn’t worth the liability. He refused to sign, worried the deal wouldn’t protect him if the company abandoned the pipe, changed hands or went belly up.

Even though Foy snubbed the contract, Hiland doesn’t have to reroute. The state’s eminent domain laws give the company the authority to condemn Foy’s land if the two parties fail to negotiate an agreement.

Foy isn’t alone in his battle against the company. He and other ranchers have lassoed more than 100 landowners in the pipeline’s 462-mile path to start a group that will push for what they say are fairer contracts.

The group’s name is the Wyoming-Montana Land Stewardship LLC. It has members from both states because the line will transport Bakken crude from North Dakota through Baker, Mont., into Campbell, Converse and Platte counties to connect with a pipeline in Guernsey.

“We’re not anti-pipeline,” Foy said. “We just want a say in this thing.”

The new Hiland pipeline will connect Rocky Mountain crude to the rest of the world, said Jim Suttle, senior vice president of Hiland Crude. He said crude in the Bell Creek area of Wyoming may also get tied into the pipeline.

Hiland came to the home of state Sen. John Hines, R-Gillette. The company gave him an offer he didn’t like. He told them to “take the papers and get out,” he told the Star-Tribune. He said he has numerous pipelines on his land and joined the landowners’ group to help create a new standard for negotiating with companies in the industry. They are abusing eminent domain, he said.

“It’s like someone coming to your house and saying, ‘I want that room,’” said Darin Miske, a Montana rancher and board member of the new group. “And you can’t do anything about it.”

When companies want to install pipelines, it’s a big risk with no reward for landowners, said Frank Falen, legal counsel from Budd-Falen law offices in Cheyenne who represents the new group.

“They’re paid for the (market value) of the land, but not paid for the industrial risk,” Falen said. “There’s a misconception that simply compensating them for (market value) also compensates them for risk. They don’t get 10 cents for that transfer of risk.”

Ranchers can be responsible for damages that happen to the pipelines and can be accountable for cleanup and accidents — especially if the pipeline company goes out of business, Falen said.

Suttle said pipelines aren’t abandoned because there are two valuable commodities at stake: crude and steel.

Companies that ship crude don’t let it sit in a pipeline forever, Suttle said. It won’t spill because people get it to market, he said. Pipelines that are no longer in use seldom sit and rot, he said, because people use the metal and sell it as scrap.

“I am aware of pipelines that have gone bankrupt, but I am not aware of pipelines that are walked away from because of the value of those commodities,” he said.

When pipelines cave in or otherwise fail 40 or 50 years after the agreement, it’s not easy to track down the owners of the pipeline, said Jim Magagna, executive vice president of the Wyoming Stock Growers Association.

“The people who stand to make millions get to specifically design their risks,” Falen said.

When landowners need to track down companies, they often track down empty shells, Falen said.

The giants of the energy industry don’t use parent companies when dealing with private land owners, Falen said. They create limited liability companies. Hiland Crude LLC is a subsidiary of Hiland Partners. The profits will flow to the parent company, Falen said, but Foy would only be able to go after Hiland Crude if he needed to pursue legal action.

“The parent companies start LLCs and only put in an amount of money that they’re willing to risk,” Falen said. “For landowners, everything is at risk.”

There are unintended consequences of housing pipelines on private land. Foy has had three fires on his land. One destroyed his haystacks and winter feed for his cattle. The company repaid him for the damages, but it couldn’t make up for the time that went into repairing and restoring his operation, he said.

Employees on the pipeline can come and go as they please. They come in helicopters and they come in trucks, he said.

“You never know what they’re up to,” he said.

The major companies that are drilling wells are fellow corporate citizens in Wyoming, Magagna said. Pipeline companies are a different story.

“They’re here today and gone tomorrow,” Magagna said.

In April, Oklahoma-based Hiland sent out letters telling landowners a pipeline would be built on their property.

Fifty percent of landowners in the pipeline’s pathway are not involved with the group, said Hiland Crude’s Suttle. Of the half who aren’t in the group, 70 percent have signed the contract or made verbal agreements with Hiland, he said.

But since the others refused, they are in jeopardy of facing off against Hiland in court. Hiland will send out its final offer in the coming days, Falen said. The next step is condemnation. If the landowners don’t accept, Hiland will be able to bring them to court two weeks after the letters are sent. The company has said it’s willing to work with the group, but it is also “showing aggressive signs of using their condemnation authority,” Falen said.

Suttle said he is meeting with the group on Monday.

“We’re committed to reaching an agreement,” he said. “We’re going to be working with these landowners for many years to come.”

In the past, a pipeline company could come onto private property and have free reign to build. But thanks to a law passed during the recent legislative session, energy companies must now prove three factors to condemn land: The pipeline must be a public necessity; the land must be necessary to meet the needs of the project; the benefits of using the land must exceed the loss for the landowner.

Sen. Ogden Driskill, R-Devils Tower, sponsored the legislation.

“We’re just trying to level the playing field for landowners,” he said.

If companies could pay out enough money to satisfy landowners and still make a profit, there would be no need for eminent domain, said Bruce Hinchey, president of the Petroleum Association of Wyoming.

“There are landowners that no amount of money will satisfy them,” he said. “It depends on who you’re dealing with and what their situation might be.”

Today, Foy’s land is dotted with pipeline markers and dirt tracks left by the energy companies. Foy’s grandfather came from Ireland to homestead the land more than 100 years ago. He grew potatoes and raised livestock amid the sagebrush. Laramie Peak stands tall in the background. Foy’s grandfather sold pipeline crews slabs of beef for food every day when the first company made a deal to put in a pipeline 90 years ago.

“He was happy about it because he was selling a lot of beef,” Foy said. “Now things are a lot different.”