Surface Damage Clauses in Mineral Leases – What You Need to Know
Posted On behalf of Simien & Simien on Oct 10, 2014 in Oil And Gas
When a company approaches you to request drilling into your land for minerals, many landowners will jump at the chance to make some extra money through an oil and gas lease. Unfortunately, failing to read the fine print can sometimes lead to trouble.
Depending on where you live, ownership rights can be severed, which means that surface rights and mineral rights may be segregated. Some states where mineral rights may be severed from surface rights include New Mexico, Colorado, Texas, Louisiana and other states where oil and gas production is common.
For example, one person who owns the surface and mineral rights of their property, may sell the surface rights to another. When this happens, the mineral rights owner is the person an oil and gas company will approach to sign an oil and gas lease. However, this does not mean that the individual who owns the surface rights does not get a say in what happens. The company will typically have to speak with the surface rights owner about surface operations on the land.
Surface Rights Clauses
Although there has been a trend toward horizontal drilling, which reduces the amount of surface damage caused, there is still a certain amount of surface space needed for an oil and gas operator to drill a well and keep it in production.
The following are some different types of clauses that may be presented in a mineral lease:
- Surface damage payment – This type of clause is often used if an owner uses their land for agriculture or other income producing purposes. This clause will allow owners to be compensated for the altered production capacity they must endure while the company drills. This may require the use of a third party to appraise the value.
- Location approval – If a landowner wants to establish approval authority over the placement of drilling or surface production, this clause will come in handy. The mineral owner and company must both agree where the drill sites will be positioned. Although the decisions are only between the mineral rights owner and oil and gas company, it can affect the surface owner.
- No surface operations – If an owner does not want certain operation to occur on their property, this clause may help protect their rights. One of the most common examples of this is when an owner does not want a well physically located in their area. The clause may extend to the whole property or just a portion of the property.
- No drilling areas – Similar to the location approval clause, owners may wish to a tell a company that they do not want a well, pipeline or other related item within a certain distance of their house, well water, pond, etc.
Finally, a land reclamation should be added if one is not already in the mineral lease when it is presented. This clause will ensure that an oil and gas company will have to restore the land to its original condition to the best of their ability.
The oilfield contamination lawyers at Simien & Simien have a tremendous amount of experience in oil and gas well. We understand how important it is that landowners read their mineral leases thoroughly, as well as how tricky oil and gas companies can be.
If you believe that an oil and gas company has breached their contract or if you’re in the process of signing a mineral lease, we can help guide you through the process.
For a free legal consultation, call us at (800) 374-8422 or fill out our online contact form.