When it comes to land management rights, landowners realize there are many factors to take into consideration. Whether it’s an oil or gas lease or a situation involving mineral rights, landowners face many unpredictable situations in these areas of land management. Because these situations often involve many different parties such as contractors, oil and gas companies, government agencies, and many others, it’s imperative that landowners have a thorough understanding of the specifics involved in this area.
In many of these situations, one of the biggest problems landowners face involve land disturbance. When this happens, one of the biggest reasons involves construction of an access road, which can lead to many issues. While many of these situations never have any problems associated with them, others can become problematic and stir up plenty of controversy. For many landowners, one of the most common problems involves disputes as to how much of their land will be used for such functions as drilling, production, pipelines, equipment storage, and more. To make sure disputes such as these do not arise, it’s always a good idea to have reclamation plans that have been mutually approved included in the lease. By doing so, both parties will know exactly what to expect.
“Before a landowner enters into any agreement with an oil or gas company, they should always make sure the lease has a number of essential components needed to keep disputes from happening,” said Sovereign Natural Resources, Inc. One of the most crucial is the cash bonus, which is an upfront payment computed on a per-acre basis. As payment to the landowner for signing the lease, it is understood to be the first year’s rental and is a vital part of any agreement between a landowner and an oil and gas company. In addition to this, secondary terms such as royalties and shut-in royalties should also be spelled out in easy-to-understand terms for both parties. In most leases, a royalty is referred to as a fraction such as 1/8 or 1/4, meaning the royalty will be that fraction of the value of the oil and gas produced and sold by the company. Meanwhile, the shut-in royalty is payment to a landowner when the well or pipeline is not producing due to maintenance or other reasons.
Whenever a landowner is preparing to enter into an agreement with an oil and gas company, it’s extremely important they retain legal counsel that is experienced and knowledgeable in this area. Mineral rights, as well as ownership of water bodies, make up the majority of legal disputes when it comes to landowners who are inexperienced in dealing with oil and gas companies. Whether it’s negotiating access to geological data, rights of way for pipelines, or land use regulations, having legal representation with experience in these areas can make a tremendous difference in the arrangements that are agreed upon by all parties.
Crop and Property Damage
For many landowners, one of the biggest problems that shows itself after an agreement has been reached with a oil and gas company focuses on damage to crops, buildings, and personal property. One of the biggest sticking points when it comes to finalizing a lease agreement, damage provisions are often not given enough emphasis until the damage has already been done. To make sure no problems develop once work has started, landowners should have certain provisions included in the lease, such as fencing built to protect people and livestock. Along with this, a clause should be included spelling out the financial settlement the company will have to follow if it is found to be responsible for damage to crops, livestock, or personal property.
By making sure all necessary avenues of coming together have been worked out to everyone’s satisfaction, the vast majority of disputes will never take place. However, when disputes do arise, having a lease that contains specifics regarding these and other topics will make it far easier to avoid problems. In doing so, landowners and oil and gas companies can not only avoid disputes, but also profit to everyone’s satisfaction.