At common law the dominant estate (owner or lessee of the mineral estate) has the right to use as much surface as is “reasonably necessary” to develop the minerals. Practically speaking, for many years companies took the position that “reasonably necessary” meant they could do whatever they wanted. Over time, Landowners have increasingly resisted the idea that the companies could unilaterally define what is reasonable. The legislatures of some states have enacted surface damage acts to address the competing interests of the development of the mineral estate and the consequences of that development to the surface estate. Other states have taken no such action and have left the issue to be decided on a case by case basis on the argument of what is “reasonable use.”
Regardless of whether or not a state has a surface damage act, almost every company looking to develop an area will attempt to negotiate surface damages so they don’t ultimately end up in court arguing over “reasonable use.” The practical effect of this is that the company will offer money if the surface owner will sign a contract. Most of the time this contract is a release and many times it is a unilateral release that only benefits the oil company. An unsuspecting Landowner will fall into the trap of looking for the most money and failing to focus on the contract. Landowners and sometimes their non-landowner attorneys fail to address issues like noise, hunting damages, livestock damages, fencing, subsurface easements, multiple holes on the same pad, roads, gathering lines, flow lines, disposal lines, water, disposal wells, non-unit rights, etc. This list could go on and on and it is crucial that all of this be dealt with and that the contracts not say anything like “all damages of whatsoever kind and character.”
We believe the proper course of action is to focus on the contract by attempting to negotiate a good surface use agreement that is fair to both parties. A good surface use agreement will clearly set out what each party’s rights are. A good surface use agreement will define and limit the scope of the release. It will be executed by both parties and all terms will be clearly defined. In our experience the best way for a Landowner to not get taken advantage of in these negotiations is for them to have counsel that understands the issues. Surface use agreements are becoming more and more prevalent as companies move outside of drilling units where they don’t have an absolute right to be.
Not only is LandownerFirm well versed in the negotiation of surface use agreements on behalf of surface owners, we also regularly litigate under the appropriate surface damage acts in the jurisdictions where we practice and prosecute companies for using more surface than is reasonably necessary.