Notice to Surface Owners Concerning the Right of Compensation For Damages Caused By Oil And Gas Operations

I have been contacted by Oil Company to construct a multi-well pad plus a road easement on my land in McKenzie County. They sent me copies of the easement and the pad agreement with my choice of two different payment options and I am supposed to pick one(never had a company do this before). They also sent a Notice to Surface Owners Concerning the Right of Compensation For Damages Caused By Oil And Gas Operations from the ND Century Code Chapter 38-11.1. In their cover letter they mention a 20 day notice which commences upon receipt of the paperwork which I just received. The 20-day period is referenced in the Notice to Surface Owners Concerning the Right of Compensation For Damages Caused By Oil And Gas Operations (NDCC Chapter 38-08.1). This part I do not understand at all.

I have negotiated with other oil companies as recent as January 2015 and none have ever sent me the information indicated in the Notice to Surface Owners from Chapter 38-11.1. It seems to me, they are demanding I chose one of the two payment options within the 20 day time limit.

Hopefully someone can provide some insight into this matter.

Thanks

Sounds like they are giving you a take it or leave it offer where if you don't agree they will do what they need legally to drill and you can fight over the damages later. If such is the case, I assure you that the lawyers will win.

Have they complied and offered to discuss changes and provided sketch/plat map? If not I would talk to a lawyer and put the brakes on right now because you are entitled to those things at time of notice.

I wonder if any of the wells they plan to drill from your surface are not for your benefit, in explanation, producing minerals none of which you will receive royalty for? If they have a lease on the minerals under your surface they have the right to come on your land to produce the leased minerals in your drill spacing, I'm not so sure they have the right to drill/produce minerals from another drill spacing for which you receive no benefit from a site on your property as it will increase traffic/disruption and the size of the pad site.

To keep from having to build another pad, road and pay for surface in another spacing, I think they would be willing to negotiate. Once again, consult with your trusted lawyer. Once again, don't wait until they start because it's too late, a fait accompli.

Just something I would be exploring.

Mr. Kennedy,

Thanks for your response. They did mention that if I was satisfied with the terms, to sign the agreement an return to them. On the other hand they indicated that I need to chose between Option one and Option two. Option one is the lower amount up front with an annual rent payment. Option two is a higher amount with no annual rent payment. They also did send maps with the agreements and no matter which way they drill I have mineral interests so I'm not worried about that.

Needless to say I will be contacting my attorney first thing in the morning. Maybe I'm just over reacting but their approach to getting their agreements signed is quite different from other companies.

Out of curiosity, how many yearly payments would it take to equal the lump sum payment and are the yearly payments pegged to the rate of inflation/cost of living? With this tight oil, the oil is a bit stubborn about migrating to the wellbore. A well could exist for another 50 years as a stripper well after a 10-20-30 year productive life. I think it possible that your surface could be used for the next 100 years. I hope you did not include pipeline right of way rights in any surface or lease agreement. Good luck.

It would take eight years to equal the lump sum payment and their offer is not pegged to the CPI. But I will be asking for the CPI as I have other wells in which I am paid X$'s per well bore until the wells are "permanently abandoned." And these payments are tied to the CPI.

Right now I'm wondering if being paid a yearly rent or asking to be paid a yearly fee for each well bore is best, as the yearly payment would be about the same. The question is, which one would pay out for the longer period of time? Additionally I did not include a pipeline right of way in any agreements. My attorney is currently reviewing the agreements and is contacting the company and will advise me.

Mr. Peterson, you are in the same general area where some of my minerals are. The area where I expect conservatively that there will be 20 wells per 2 section spacing... eventually. The director of the NDIC predicted up to 48 wells per 2 section spacing. If you are planning to negotiate a wellbore fee, I'm sure those numbers will be a factor. I would rather be paid yearly for damages because I think it is going to be many years before they leave your surface.

That's exactly what I've been thinking. Hopefully I will hear back from my attorney in the next day or so. Then I will know if they will negotiate with me or if they want to jam it down my throat. I would like to negotiate the terms before they begin construction of the road and pad.

UPDATE:

My attorney did an Exhibit to attach to their agreement and we did receive a one sided response stating they will not agree to the proposed changes. It is not their policy to change the wording in the body of the easement. If the landowners have one or two reasonable requests for an addendum they might be able to work that out. They further state that they operate in accordance with all federal and state regulations as required by law. They continue stating that they will not agree to other items in the agreements.

We did propose 5 changes and they did accept 4 of them but that is all. My attorney has worked with this company in the past and they have been willing to negotiate but as the years go by it seems they are changing and taking a hard line stance.