Oil and Gas Drilling Surface Use Agreements
Mineral Estate vs. Surface Estate
Texas law holds that the mineral estate is dominant over the surface estate; thus, the owner of the mineral estate has the right to freely use the surface estate to the extent reasonably necessary for the exploration, development, and production of the oil and gas under the property.
This right to freely use the surface estate for the benefit of the mineral estate may be exercised by a company or individual (generally the "lessee") who has taken a mineral lease from the actual owner of the mineral estate.
What Rights Do Lessees Have? What Might Lead to Liability?
The lessee has the right to conduct activities and reasonably use the surface without getting permission from the surface owner and without restoring the surface or paying for any non-negligent damages it causes. However, if a lessee's use of the surface is found to be negligent, unreasonable or excessive, the lessee may be liable to pay damages to the surface owner for the resulting injury.
Surface Use Agreements
Since the lessee has the right to reasonably use the surface without restoring it or paying for any non-negligent damages it causes, many surface owners acquire a surface agreement that either restricts use of the surface or sets damages for surface use. Surface use agreements, when put in place prior to drilling, serve to allow the owner of the land and the drilling company to reach an agreement to the adequate use and extent of damage that will occur to the land's surface during the process of drilling for minerals.
A contract should be written by an experienced attorney to ensure both parties are in a fair agreement.
Drilling for minerals can cause long-term critical damage to the surface of land that many drillers would not care about in light of the potential of the minerals underneath. An owner of the surface estate should establish an agreement to prevent irreparable damage and obligate the owner of the mineral estate or drilling company to a standard of reclamation including filling drill pits and reseeding to enable future development, restoring access to damaged wells, replenishment of livestock and other issues that can mitigate future royalties.
Some provisions to consider in the surface agreement are as follows:
- Development Plan
- Water Issues
- Land Use Issues
- Rights and Responsibilities of the Company
- Benefits Granted to the Surface Owner
- Quality of Life, Health and Safety Issues
- Enforceability of the Agreement
- Separate Agreements
These contracts are especially pertinent to real estate development as drilling operations affect the state's setback rules for new development. In addition, acquiring a drill site plat will show the planned access roads, including any roads necessary over pooled surface estates and the necessary easements to obtain. As well, agreements can define whether the pipelines are buried or left above ground and outline procedures for noise abatement.
We strongly recommend negotiation of surface use agreements to address these concerns. Hendershot, Cannon & Hisey, P.C., represents individuals and corporations who seek to obtain a surface use and/or production agreement to ensure compatible development of underlying minerals, whether severed from the surface estate or not. Through negotiation of surface use agreements that define notice, location and operational requirements, our attorneys can provide certainty for clients regarding the potential impacts of oil and gas operations or mineral development on their properties. Additionally, the firm counsels clients about protections that will allow property owners to preserve the integrity of surface uses such as residential and commercial uses, livestock grazing or hay production, energy production and wildlife habitat and open space.