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The Extended Reach Well and the Surface Owner

From time to time, oil companies will want to use a surface location that is not located within the boundaries of a lease or unit to develop the minerals.

In order to do so, they have to get the permission of the surface owner to do so.  This is in the nature of an "easement of passage."

So, what are these things worth?  With a road, 10 years ago, in my area, the cost was about $50K per well.  That is now up to $75K for 5 years and a rental of $25K for each additional 5 years.  The market may be different where you live.

What do you want in such an Agreement?

Let's hit the high points.

1.  Grantor and Grantee

2.  Description of the tract.

3.  Number of well locations (drill sites).

4.  For example, if this is for one well, will you allow replacement wells or sidetrack wells with no additional charge?

5.  Term and renewal term and renewal term amount.

6.  Maintenance of the property during use.

7.  Clean up during use and restoration afterwards.

8.  Water well?  How many?  Returned to landowner when finished?

9.  Road Easement?  Location?

10.  Road construction and maintenance.

11.  Remove road when completed or turned over to surface owner.

12.  Storage of machinery and supplies?

13.  Employee housing during operations?

14.  Social gatherings?

15.  Access to other portions of the property?

16.  Hunting, fishing, guns, alcohol prohibited?

17.  Gate guard during drilling operations?

18.  Construction of production facilities?  Berns, etc.

19.  Disposal of salt water and drilling fluids.

20.  Damage to property.

21.  Noise abatement?

22.  Indemnity, General

23.  Indemnity, Environmental.

24.  Indemnity, existing encumbrances (easements, etc.)

25.  Road use exclusive or non-exclusive?

26.  Gates and Fences.

27.  Obligations survive agreement.

28.  Attorneys Fees

29.  Compliance with Laws.

30.  No Warranty

31.  Assignability

32.  Lest we forget, initial consideration.

In a complete negotiation and form, all of these should be included to fully protect the surface owner.

Best,

Buddy Cotten

Mineral Manager

www.cottenoilproperties.com

Views: 1137

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