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Home / Firm Blog / Oil and Gas / Considerations for Landowners in Surface Use Agreements
04
May
2011

Considerations for Landowners in Surface Use Agreements

Natural gas companies lease land for surface use in order to build access roads, compressor stations, water impoundments, pipeline activity, gas storage infrastructure, or other infrastructure needs on the landowner's property. It can be tempting to enter into a surface use agreement, but there are issues that a landowner needs to think about before giving a company permission to use their land for infrastructure purposes. Landowners can easily give up more rights than they thought they were when entering into one of these agreements.

While the terms and conditions of surface use agreements depend largely on the type of infrastructure proposed, there are some important items to consider when approached about any type of surface use agreement.

What should a landowner be aware of in a contract if approached by an oil and gas company for a surface use agreement? Here are some items to consider:

  1. Who has access to the site now?
  2. How will they be affected if they can no longer use the land in the same way?
  3. Is there an existing gas lease or right-of-way agreement on the property?
  4. Does the surface use agreement violate any conditions of such an existing agreement?
  5. How is the site accessed now?
  6. Where is the access point?
  7. Are more access points needed?
  8. Who and how will they be added?
  9. How much traffic will the site receive on a daily basis?
  10. How frequently will workers need to visit the site?
  11. Is a map of the exact location and area used for the structure included?
  12. Will any changes to the location of the structure or access routes need to be approved by the landowner?
  13. Is the site fenced and locked now?
  14. Does the agreement give the oil and gas company permission to fence and lock the site?
  15. Will there be gates on access roads?
  16. Will the landowner have a key to gates?
  17. What is the intended use allowed by the surface use agreement?
  18. Is the agreement limited to only the stated use?
  19. Can the oil and gas company change the stated use without contacting the landowner?
  20. What construction does the agreement allow for?
  21. Does the agreement allow additional structures to be built without negotiating terms with the landowner?
  22. Are all products allowed to be transported through the infrastructure defined?
  23. Are the products to be transported through the infrastructure limited and unable to be changed?
  24. What is the length of the agreement?
  25. How will the contract end?
  26. Can it be ended early, and if so, by whom?
  27. Can it be renewed, and if so, by whom?
  28. How will equipment be removed from the site?
  29. How will any structures be removed from the site?
  30. How will the site be restored after construction?
  31. How will the site be finally restored after the agreement has ended?
  32. Are there terms for damage payments and site restoration for any repairs or upgrades to the structure?
  33. What will the site will look like when completed?
  34. Can it be landscaped or fenced to screen the structure from view?
  35. Is the structure open or enclosed (in a building)?
  36. Can it be disguised through building design or landscaping to blend into the landscape or community?
  37. If it's a pipeline related piece, are nearby homes outside of the ‘impact area' should there be a leak or explosion?
  38. Will drinking water be monitoring if water-related infrastructure is being proposed?
  39. What happens if there is pollution to the drinking water?
  40. Will sound and air emissions be monitored for compressors or other pipeline related structures?
  41. What happens if sound and air emission standards are broken?
  42. Who is liable for violations?

In addition to the above list, standard items such as landowner liability, dispute resolution, and transferability of the agreement should be considered. Make sure that all of these terms are in writing and part of the agreement or contract rather than a verbal agreement with the landman. As with any contract or agreement, it is important to have an experienced attorney, with knowledge of the oil and gas industry, review any contracts before you sign. An attorney can also be helpful in negotiating terms with an oil and gas company or landman on your behalf.

Author; Pat Gallagher Categories: Oil and Gas

About the Author

Pat Gallagher

Pat Gallagher

Attorney Pat Gallagher is founder of The Gallagher Law Firm overseeing its day-to-day operations, as well as the long-term strategic planning of the firm. He focuses his law practice on the needs of businesses and specializes in a wide variety of transactional matters, litigation and mediation. He received his J.D. legal degree from the Washington University School of Law in St. Louis, Missouri. Mr. Gallagher has litigated cases throughout Michigan before the American Arbitration Association, State and Federal Courts, Michigan Court of Appeals, Michigan Supreme Court and the United States Court of Appeals.