Any guidance regarding what would be reasonable or typical payments to a surface owner for oil well drilling in Mountrail County?
Gary, (a good Scottish name)
Some things to consider in determining a fair price to you:
The size of the drilling pads - Usually 5-6 acres for one well, bigger for combination well development.
Size of producing well - 1.5 to 2 acres/site that will be lost to you permanently (30 plus years).
Access road gross width and length could be lost permanently.
Fences and maintenance.
Reclamation of drill pad area.
Loss of use of land that may be cut off by access road and permanent pad.
Use of access road by you.
Loss of crops.
Noise during drilling and reworking (assuming someone lives nearby).
If you are irrigating by sprinklers, the path may be compromised and more crops lost.
DO NOT SIGN AN AGREEMENT THAT ALLOWS OPERATOR TO TAKE YOUR WATER.
Summary: Figure out the cost of the loss of your land due to an operation thereon and don’t forget inflation and crop speculative losses. Some of your land will essentially be lost permanently so get what you need to accommodate the operator. If a rental is used make certain you get an escalator clause for the long term.
I own no surface and I believe that all of Mr. Hutchinson’s points are good, but I would stress the yearly rental payment. Many people only received a one-time payment and probably regret it now as there could be exploration and production activity on your surface for the next 100 years. I think some substantial payment of a couple of thousand dollars per year rental along with, as Mr. Hutchinson says, an escalator clause, in addition to an initial payment for damages, would probably be most equitable.
Thank you very much for taking the time to respond to my question. Your suggestions and recommendations will definitely be helpful to me as I try to evaluate the offer presented by the drilling company. Do you know if 80 ft. road access width is standard and if $2 per linear foot of road is reasonable or low?
Gary L. Hutchinson said:
Gary, (a good Scottish name)
Some things to consider in determining a fair price to you:
The size of the drilling pads - Usually 5-6 acres for one well, bigger for combination well development.
Size of producing well - 1.5 to 2 acres/site that will be lost to you permanently (30 plus years).
Access road gross width and length could be lost permanently.
Fences and maintenance.
Reclamation of drill pad area.
Loss of use of land that may be cut off by access road and permanent pad.
Use of access road by you.
Loss of crops.
Noise during drilling and reworking (assuming someone lives nearby).
If you are irrigating by sprinklers, the path may be compromised and more crops lost.
DO NOT SIGN AN AGREEMENT THAT ALLOWS OPERATOR TO TAKE YOUR WATER.
Summary: Figure out the cost of the loss of your land due to an operation thereon and don’t forget inflation and crop speculative losses. Some of your land will essentially be lost permanently, so get what you need to accommodate the operator. If a rental is used, make certain you get an escalator clause for the long term.
Gary L. Hutchinson Minerals Management
Thanks for responding to my question. Your point about a yearly rental payment is a very good one. Is it correct that the addition of a yearly rental payment is a fairly recent development in surface owner agreements? The proposed agreement that I have been given contains no such offer, so I will have to see if something can be negotiated.
r w kennedy said:
I own no surface, and I believe that all of Mr. Hutchinson’s points are good, but I would stress the yearly rental payment. Many people only received a one-time payment and probably regret it now as there could be exploration and production activity on your surface for the next 100 years. I think some substantial payment of a couple of thousand dollars per year rental along with, as Mr. Hutchinson says, an escalator clause, in addition to an initial payment for damages, would probably be most equitable.
Gary, I don’t think the rental payment is a recent development except among inexperienced landowners. As for the $2 per linear foot for the road, I think that would be low, considering the loss of use long term and the fact that an 80-foot road probably won’t go anywhere you find useful. Maybe you could counter with $5 per square foot; that would be cheaper than about the cheapest carpet you could buy and may give some incentive for the road to not be 80 feet long and 40 feet wide. Just a thought.
Gary Gernand said:
Thanks for responding to my question. Your point about a yearly rental payment is a very good one. Is it correct that the addition of a yearly rental payment is a fairly recent development in surface owner agreements? The proposed agreement that I have been given contains no such offer, so will have to see if something can be negotiated.
r w kennedy said:
I own no surface and I believe that all of Mr. Hutchinson’s points are good, but I would stress the yearly rental payment. Many people only received a one-time payment and probably regret it now as there could be exploration and production activity on your surface for the next 100 years. I think some substantial payment of a couple of thousand dollars per year rental along with, as Mr. Hutchinson says, an escalator clause, in addition to an initial payment for damages, would probably be most equitable.