Surface Damages

The granting of an oil and gas lease carries with it the implied right to use as much of the surface area as is reasonably necessary for the development of the mineral interest. Only when the lessee goes beyond what is reasonably necessary and negligently injures the surface area will the lessee become liable for damages to the holder of the surface estate. Likewise, the lessee is under no legal obligation to restore the surface area to its condition prior to the commencement of operations.

For better protection, the landowner should insert some provisions in the lease pertaining to surface damages. For instance, a lease clause requiring compensation for all surface damages will render the lessee liable even though the injuries were incurred during the reasonable development of the mineral lease.

When compensation is required, it is commonly made "at the site" when drilling or production operations cease. In order to avoid any conflicts in this matter, the landowner should consider the following lease options.

1. Require compensation for all surface damages.
2. If possible, require the lessee to restore the land to its condition prior to any operations.
3. Describe the method or methods to be employed for determining the extent of damages suffered. In the event the parties cannot agree, provide for arbitration or some other means of resolving the dispute.
4. Describe the items for which the lessee will be liable—e.g., injuries to growing crops, pastures, erosion and stagnation of the soil, growing timber, livestock, fences, ditches, canals, buildings and other structures, or the pollution of any waters.
5. Determine if the compensation will be paid annually or in a lump sum. In part, this decision will depend on whether the damages are temporary or permanent in nature.
6. Resolve beforehand how payments will be distributed on the premises.
7. Designate the time period by which all claims or notices must be submitted to the lessee.
8. Possibly require a bond or an advance payment as security for claims against future surface damages.
9. Whenever someone enters into an agricultural lease or purchases surface rights to land void of any mineral interests, he or she should always enter a contract with the owners of the mineral interests stating that a surface damage clause will be included in any mineral lease that is entered. This will insure the lessee or purchaser that any damages to crops, pasture or surface will be compensated.