How Does Natural Gas Leasing and Pipelines Impact My Property’s Clean and Green Status?

As rural landowners know, the Clean and Green Act (72Pa.C.S. §5490.1 et seq.) provides landowners a tax break where their property meets certain requirements and is dedicated to agricultural and forest reserved use.

Landowners who are enrolled in the Clean and Green program will face seven years of “rollback” taxes and a six percent (6%) per year penalty if their use of the property is changed to an ineligible use under the Clean and Green program.  Due to inconsistencies in the way in which counties across Pennsylvania applied and enforced the Clean and Green Act relative to gas developments, an amendment to the Clean and Green Act was passed in the fall of 2010.  This amendment has clarified how oil and gas development will impact the Clean and Green program.

Prior to the amendment, landowners who own large acreage parcels could be penalized with seven years of back taxes for their entire property, even though only a few acres may have been impacted by oil and gas development.  The amendment to the Clean and Green Act provides that rollback taxes are only imposed only on the portion of the land devoted to the oil and gas production. This is a great benefit to the landowner as there were several cases where landowners with hundreds of acres had only a few acres impacted by gas exploration but were charged seven years of back taxes for the entire parcel.  Further compounding the problem in this scenario is where the landowner originally signed for Five to Twenty-Five ($5.00-$25.00) Dollars an acre, and received a tax bill for tens of thousands of dollars which greatly exceeded their signing bonus. Fortunately, this situation should no longer be a problem for Pennsylvania landowners.

With respect to natural gas pipelines, THE CLEAN AND GREEN AMENDMENT CLARIFIED THAT PROPERTY DEVOTED TO GAS PIPELINES IS NOT SUBJECT TO ROLLBACK TAXES. The amendment provides that a pipeline right-of-way and easements should not remove landowners’ property from Clean and Green.  However, it is a practice of our office to cover all bases and include an addendum provision to the Pipeline Right-of-Way Agreement that requires the pipeline company to pay any and all rollback taxes for Clean and Green and other agricultural and tax beneficial programs.  Companies have typically been very quick to permit such an addendum.
 
Of course, the Clean and Green addendum is only one of many addendum terms that landowners should seek to have added to any Pipeline Right-of-Way Agreement.  Pipeline Right-of-Way Agreements are significant contracts that typically seek to give the gas company or pipeline company the ability to transport gas and potentially other substances indefinitely, and often without limitation. Pipeline Right-of-Way Agreements should be carefully scrutinized and negotiated with the assistance of qualified legal counsel.

Douglas A. Clark, Esq. – Protecting Pennsylvania Landowners