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Due Diligence For the Purchase of Pipeline Systems

Gregory R. Danielson, Rights-of-Way: How Right is Your Right-of-Way?

Numerous papers have been written about organizing and executing a due diligence plan for a natural resources acquisition.1 These papers are an excellent resource for information related to organizing the project, defining the roles and responsibilities of the due diligence team and analyzing due diligence strategies under the purchase and sale agreement. Although many of the same issues arise in the acquisition of a pipeline system, the pipeline examination is unique because the buyer must verify the value of a system. The system may be composed of a burdensome number of right-of-way segments, yet each segment has relatively equal importance and value. This paper will therefore focus on the checklist of items that need to be examined in a pipeline due diligence project and discuss strategies for limiting the scope of the project.

This paper will discuss four areas which need to be addressed in any due diligence project for a pipeline acquisition:

1.Title

2.Contracts and Accounting

3.Equipment and operations

4.Environmental and permitting issues

To address each of these areas of concern, the due diligence team will examine the seller's records, examine the applicable public record repositories and conduct a surface inspection along the pipeline system. In the event you read no further, you should be aware that Attachment I i