FREQUENTLY ASKED QUESTIONS

Surface Owners

Mineral Owners

Additional Resources

Surface Owners

Is an oil and gas operator really allowed to come on my property without my permission?

In some cases, yes; when you are the surface owner of a split estate property and the minerals beneath your property have been leased then the lessee or operator is entitled to “reasonable use” of the surface of the property to develop the mineral estate. However, in most states, for operators to receive a permit-to-drill they must attempt good faith negotiations with the surface owner to agree to terms of their operations on your land. The contract you negotiate with an operator or landman is called a Surface Use Agreement (SUA). The terms of a negotiated and executed SUA is a binding contract between you, the surface owner, and the oil and gas operator that will be operating on your property. The terms of this contract can control any and all aspect of the operator’s operations on your property, including compensation, entry and exit point(s) of your property, the construction of roads, pipelines, electrical lines, tank batteries, placement of the well(s), hours of operations, personnel allowed on the property, use of water on the property, emergency plans, restoration requirements and numerous other terms that are particular to each individual property. It is extremely important that you retain an experienced, industry knowledgeable, professional to assist you in negotiating the terms of a SUA for your property. If a surface owner and a lessee or operator is unable to agree to the terms of a SUA, the operator is able to post a bond to the benefit of the surface owner and proceed with the permit-to-drill process.

What happens when an operator is finished with their operations on my property?

When an operator either drills a dry hole or plugs and abandons a well they place cement in the well bore or casing to seal the well. Once a well is sealed the operator must begin the restoration process as required by federal or state law and/or the terms of the SUA. Restoration requirements vary from state to state and will vary depending on if the leased minerals beneath your property are federally or privately owned. The ideal restoration is for the operator to return the property to its state prior to operations on the land. Restoration of your property is the most important aspect of a SUA, if your property is not properly restored you can suffer negative effects of drilling operations long after they are gone.

Should I sign a Surface Use Agreement that a landman gives me to sign?

It is always advisable to have a legal professional review any contract prior to signing it. Generally, landmen, lessee or operator prepared SUAs will not adequately address all of the issues that can affect a surface owner that has oil and gas operations on their property. The operator is concerned about their operations and terms that are going to cost them money, slow or stop their operations. Since they do not hold an interest in the surface of the property they do not have a reason to address aspects regarding the well being of you and your property. It is your responsibility as a landowner to address these issues in your SUA. Unfortunately, most surface owners have never had to negotiate the terms of a SUA before and have limited knowledge and experience with the oil and gas industry. Which is why is so important to retain the professional services of an industry knowledgeable, experienced attorney to assist you in negotiating the terms of a SUA.

How do I know if I am receiving fair compensation for the use of my property?

Since the fiscal terms of most SUAs are confidential and not recorded in the local Clerk’s office, it is often hard to determine if you are being offered just compensation for the use and reasonable damage to your property. Since the surface of your primary property is often your livelihood it is important to first determine if you are adequately protected under the terms of your SUA; it doesn’t matter what you could gain if you stand to lose everything. Our knowledgeable and professional staff can help walk you through the best way for you to determine what fair compensation for your property is once we have reviewed your SUA to assess that you are adequately protected under it.

How can I find out who owns the minerals under a property?

When you own the surface to a severed estate, either private individuals, the federal government, the state government or in some case, the county owns the minerals under your property. Minerals can be severed from the surface of a property in many different ways, which means there are many places that you can and often need to look to determine who owns the minerals beneath your property. You are welcome to read an article that we wrote for the National Association of Royalty Owners on how to conduct your own mineral research. Mineral research is also a service that our office offers throughout the state of Colorado.

Mineral Owners

Do I need to hire an attorney to negotiate the terms of my oil & gas lease with a landman?

It is always advisable to have an attorney review the terms of a contract before signing it. In the case of an oil and gas lease, it is even more important to have an industry knowledgeable attorney review the lease prior to signing. There are many very complicated clauses in oil and gas leases that are not seen every day by general practice attorneys that may not be in your best interest to agree to. The standard lease that is presented to mineral owners is titled “Producers-88”, which is a standard lessee biased lease that needs many alterations before it is a fair and safe contract for a lessor to sign.

How do I know if I am being offered the “going rate” for the bonus, rental, and royalty on my lease?

Much like the going rate for just compensation for a SUA, you often do not know initially if you are being offered the “going rate”. That being said, you are able to determine the standard royalty percentage in your field by reviewing the oil and gas lease of record in your general vicinity. However, the bonus, rental and delayed rental payments tend to vary more depending on independent aspects of each property and the importance of the piece of property to the operator. Since the fiscal terms of an oil and gas lease are often confidential an independent party is unable to get such information. The key to getting a good rate on your oil and gas lease is information and education; there are resources available online that can provide statistics for the oil and gas industry. The oil and gas industry tends to be dealing with numerous property owners in the same area at the same time, it is always a good idea to talk to your neighbors. And lastly, while legal council could never disclose the terms of another clients contract, an industry knowledgeable attorney will be able to give you a good idea of “going rate” or “fair deal” for a lease in your area.

When should I not sign an oil and gas lease for my minerals?

You should never sign a contract that you are not certain of or do not understand all of the terms within. A successful oil and gas drilling operation can last twenty five years or longer. It is extremely important that you understand and agree to all of the terms with your lease prior to signing. If you do not completely understand any of the terms of your lease or their implications you should not sign the lease prior to seeking a professional opinion. Numerous terms in a “producers-88” can bind you to the lease for many years to come, sometimes without compensation. In some cases, you would be better off not signing a lease with such terms then signing the lease even if it has a considerable bonus payment.

Additional Resources

Useful Oil & Gas Links