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Addressing Key Items In Surface Use Agreements

Randall B. Reed, Lindsay A. Woznick, Oil & Gas Agreements: Surface Use in the 21st Century (May 2017)

The changing landscape throughout the West, and particularly in more densely populated areas, is causing a shift in how parties negotiate surface use agreements. What were once fields or pastures have now become residential developments with occupants that very likely have no economic interest in the potential oil and gas reserves beneath their property. Oil and gas development in more populated areas has created a vast array of concerns and implications for all parties involved. With the increase in horizontal drilling and centralized well pads comes an increased importance for both oil and gas operators and landowners to make sure the surface use agreement is thoroughly and thoughtfully drafted. This paper will discuss the backdrop against which the parties enter negotiations for oil and gas surface use agreements and will provide a discussion of customary provisions of a typical surface use agreement.3 While there is no such thing as a "standard form of surface use agreement", this paper is intended to introduce the key items to address in a surface use agreement with the landowner. II. Background A surface use agreement is a voluntary agreement between the surface owner and the mineral owner or lessee that will govern the relations between the two parties with regard to the lessee's use of the surface for oil and gas development. Its primary purpose is to resolve as many of the conflicts that exist between the mineral and surface owners as possible so that the parties avoid future disputes and potential litigation. While not every issue can be anticipated and covered in a surface use agreement, the process of negotiating such an agreement allows the parties to develop trust and rapport, and make positive progress towards avoiding future conflict and maintaining workable relationships. In the absence of a surface use agreement, the actions of the mineral estate and surface estate owners are controlled by the law of the jurisdiction where the property is located. When the mineral and surface estates are severed, the mineral estate benefits from being the "dominant estate," while the surface is the "subservient estate."4 The owner of the mineral estate has the right to use so much of the surface as is reasonably necessary to access and develop the minerals.5 The rights enjoyed by the mineral estate owner have been described as implied easements.6 Without these implied rights a mineral owner's estate "would be worthless."7 The concept of what is a "reasonable use" or "reasonably necessary" is augmented by the accommodation doctrine, adopted by the Texas Supreme Court in Getty Oil Co. v. Jones and followed in many of the oil and gas producing states.8 This doctrine seeks to balance the competing interests of the surface owner's continued use of the surface with the necessity of ingress and egress for the mineral owner. It requires the mineral owner to "reasonably accommodate" or give "due regard" for the surface estate's rights.9 Therefore, when a reasonable alternative is available to the mineral owner, this doctrine requires the mineral owner to exercise that alternative.10 The doctrine also establishes that the mineral owner cannot use more of the surface than is reasonably necessary.11 States vary in how they word and apply this doctrine, with some benefitting surface owners more than others.12