I am negotiating an O&G mineral lease on land in western Kiowa County, CO. I would like to include a requirement for Lessee to not only restore the land to pre lease condition at the end of the lease, but also require the posting of a bond to insure money is available to do so. The question is, how large a bond should I request be posted? Does anyone have any information they could share on this subject?
I would get a seperate surface damage agreement that describes what the operator will and will not be responsible for in regards to remediation. If you elect to include a bond requirement in this agreement, I would base the amount on the fair market value of the land being used. I believe that the payment for surface damages is considered "use and depletion" and not taxed at the ordinary tax rate. You may want to talk to you tax accountant about this matter. Good luck.
Thanks Charles-
In this case, the cost of remediation to restore to pre lease condition after drilling would probably be more expensive than the current value. Even so I want the land restored. I will approach my accountant.
Ray