"Since it is mostly in the setback area, do I have a chance of being compensated?"
I don't think your are eligible for any compensation because it straddles your property and not on your property. Even if it was on you property you could take your neighbour to court and ask him to remove it on his dime, and then fix your yard. Be then again what would you get out of it? also you would need to survey the property to determine it is in fact on your property.
"Do you think it will have a devaluing effect on my property?"
It will not devalue your property. Only time I think it would be an issue would be if your house was being demoed and the pipe was exposed. Even it if was damaged during demo it is your neighbours responsibility to repair it because it straddles your property. Similar situation happened to me when I demoed a property. The neighbour has built part of his shed on my land along with his garden. Since it was a new construction it had to come down.
The sewer line might straddle your property because the connection for that property to the city line may be at that point. It always makes sense to run a direct line to the city connection.
In my opinion you should not worry about it unless you want to demo your house, if that's the case get your neighbour to replace it.