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Area of Interest Provisions—Two Edged Swords

Mark T. Nesbitt, Proceedings of 35th Annual Rocky Mountain Mineral Law Institute (1989)

Area of interest provisions grant a party the right to obtain a portion of an interest that is acquired in lands located in a certain area. While they have been used in coal, mining, and oil and gas agreements for many years and disputes have arisen, few disputes have actually been litigated. The general practice in the past has been to continue to use basically similar provisions, believing the purposes of the parties to an agreement would be adequately served. In fact, disputes and problems concerning area of interest provisions have occurred more frequently in recent years. The circumstances and important nature of the interest in dispute invariably compels a settlement of the disagreement so the party or parties may proceed with the program or operation at hand. This paper will analyze the intent, purpose, and use of area of interest provisions, address their common pitfalls, and recommend how to avoid problems through good prior planning.1

[1] General Conclusions

[a] No Standard Provision

One must readily conclude after studying the use of area of interest provisions that there is no standard form that can be used in all circumstances (see Appendix G). Each provision should be drafted according to the particular circumstances of each agreement. Problems related to area of interest provisions are caused primarily by their lack of specificity with