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What Will Happen  To Your Land When An Oil or Gas Well Is Drilled?

 

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A concern of many landowners is how their property will look after oil and gas drilling begins. In most states the interests of the owners or lessees of mineral rights will trump the rights of surface - only owners. For example, in most cases, you can't keep an oil company from drilling a well on your land if you don't own the mineral rights under it. As a landowner with mineral rights, much of what happens to your land can be specified in the terms of the oil and gas lease you agree to. As a surface rights owner you are still entitled to compensation for damages to your land, space taken up by wells, etc.

A Checkered Past

The oil and gas industry of earlier years did not always have the best reputation when it came to leaving the land as they found it. Things have improved considerably and the mistakes of the past are seldom repeated today. However, even with increased regulation, a property owner should always be watchful to ensure that the operator is sticking to the terms of the contract.

It should be of particular concern to you how your land is restored after drilling activity ceases. Whether you are the owner of the mineral rights or just the surface rights does not matter. If you own the mineral rights and are getting revenue from oil and gas activity on your land, don't be complacent about damage to your land and let things like saltwater or oil spills go unmanaged. Most regulatory agencies, such as the Texas Railroad Commission, are understaffed and underfunded. Inspections of oil and gas leases may be infrequent so it is often up to individuals to report problems such as leaking lines, spills, gas leaks, etc.

As a landowner with mineral rights, you should still look out for your interests since the wells may eventually play out, leaving you with damaged property which is no longer fit for agriculture or development.

Regardless of whether you own the mineral rights or not, you should be entitled to compensation for any damages to your land. This includes loss of present or future value. The oil company will most likely have to pay you a certain amount, based on the value of land in your area and amount of land that it utilized, for things such as open water pits, tanks, well locations, etc.  Your future income off of the areas where tanks and wells are placed will be zero for many years to come, so you should utilize the services of a qualified oil and gas attorney to negotiate a fair price.

(Some) oil companies employees are notorious for leaving gates open and allowing farm animals to escape. If your livestock are lost or killed you are entitled to compensation. A good  attorney specializing in oil and gas law or real estate can draw up a contract that states how you will be paid for your losses and the time you spend gathering up loose livestock which resulted from negligence. As a landowner, you may also be able to set a maximum speed limit for oilfield roads and have that written into your contract.

In some states, landowners may have the right to negotiate how their property is accessed by service companies and production employees once a well is drilled and producing.  You may be able to stipulate that routine, non - emergency work must occur during certain hours and you can be compensated if oil drilling affects the income you make from activities which are disrupted, such as hunting leases. You can add clauses to your lease that specify what type of gates or cattle guards are installed, what type of locks and chains are used on gates, whether flow lines are buried or laid on top of the land, and much more. As for royalties, this is a whole different subject. Simple changes to an oil or gas lease, such as the percentage of royalty to be paid, or specifying how deep the lease goes, can be worth millions. Never, ever sign an oil and gas lease without having an attorney look it over. The money you spend could be worth millions.

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Having A Gate Guard Is A Good Idea

As a landowner  you may be able to request that a gate guard be stationed at the entrance to your property. Gate guards are generally private security personnel who are paid by the oil and gas company and set up a travel trailer at the main gate leading into your land. How strict the  gate guard is in checking personnel and vehicles entering your property can often be stipulated by you as the landowner, up to the point of inspecting all vehicles for firearms, alcohol and drugs. Your oil and gas lease should state that items such as firearms, dogs, and alcohol are prohibited on the property.

Surface - Only Property Owners Can Often Profit From Oil And Gas Exploration

If you only own the surface rights you may still reap a windfall if the oil company needs certain things that may be on your land. If you have a layer of gravel bearing soil on your property you may sell that to the oil company, if it does not fall under the category of minerals in your state.

You may also be able to sell surface water from ponds or private lakes, since it may be needed by the oil company when wells are drilled. In areas where frac water is scarce, a landowner could make several thousand dollars from the sale of  pond water alone.

Also, if the oil company drills a dry hole you may be able to request that they make a water well out of it. You would most likely have to pay for the casing and cement and possibly some labor and rig time. This practice isn't as common as it used to be, since rig time is expensive and the company usually wants to move on as soon as possible. The laws of most states allow oil and gas companies to use a reasonable amount of water from wells they drill during the exploration phase. Water wells used during the drilling phase may also be turned over to the landowner. Since water wells are often expensive to drill, this can be a win - win situation for you.

When dealing with oil and gas companies, just remember that you have many legal rights on your side. Also, just because you don't own any mineral rights doesn't mean that you can't stop an oil company from leaving your property a mess. If you do own the mineral rights below your land, don't put up with destruction of your property just because you might get some revenue from an oil well.

Many of these details may seem trivial and like "nit picking", However, if you don't think of everything that might affect your land, you may spend years resenting the oil company for making profits off of your property and leaving it a mess.

Check for a good oil and gas or real estate attorney in your area and contact them before signing an oil lease or a surface damage agreement.

  Helpful Links: Rigzone.com  Rig Count Page   Schlumberger Dictionary   Baker Hughes                                   

     

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