Oil and Gas at Your Door? (2005 Edition) - Earthworks

Tips for Landowners
Quality of life, health and safety issues
• Often, oil and gas companies spray pesticides to keep weeds down along roadsides. If this
is not something you want on your land, be sure to specify this in the agreement.
• Include provisions that protect and preserve aesthetic values (e.g., hide compressors
behind hills, reduce and consolidate the number of above-ground power lines, maximize
use of buried power lines).
• If noise reduction from pumps and compressor stations is a concern, require the use
noise reducing equipment and materials.
General
• Detail what specifically constitutes a breech of the agreement, and give 30 days to cure
the breech.
Enforceability of the agreement
This has definitely been a problem for landowners. Even when landowners have had good experiences
with oil or gas development on their property, non-compliance with surface use agreements
is commonplace. Surface owners have had to resort to legal action when companies
have failed to comply with the agreement, even though it contained protective provisions. Some
landowners have made suggestions for surface use agreement breach of contract provisions
that might make the agreement easier to enforce, 456 including:
• penalty clauses or stipulated damage provisions for violations of the agreement (e.g.,
$300/day while a pit is leaking);
• operator payment of the landowner’s attorney fees if the landowner prevails in a suit to
enforce the agreement; and
• escrow account or other financial guarantee to be created by the initial operator, which
can be drawn against to correct violations of the agreement that are not cured within a
reasonable amount of time.
Industry Perspectives on SUAs
In 2003, interviews were conducted with a number of coalbed methane companies on the topic
of what should be included in surface use agreements. Here are some of the findings: 457
• Some companies said that surface use agreements should address all foreseeable issues
up-front, so that both operator and landowner know what to expect as development progresses.
These operators also believed there was a benefit to having the same agreement
across a number of wells, ensuring that requirements are consistent.
• Some companies resist making commitments on location of wells and supporting infrastructure
during the exploratory phase of development, fearing that this could limit the
ability to locate additional future wells that may be needed to maximize production in certain
areas.
• Some companies prefer to postpone negotiation of a water management agreement until
more information is available on the quality and quantity of produced water, especially in
an exploratory situation. One company negotiates all things up front, so that it does not
spend capital to drill wells only to be “held hostage” by the landowner regarding produced
water disposal issues.
• Company representatives described various approaches to the monetary reimbursement
component of an agreement. Some had a fixed, non-negotiable price that they offered for
each aspect of the development, and if a landowner attempted to discuss a different reimbursement
schedule that signaled the end of “good-faith” negotiations from the company’s
perspective. Others showed more willingness to integrate the damage reimbursement
provisions with operational details to address the individual landowners’ use of the property.
Some companies were willing to consider alternatives to strict damage reimburse-
III-8