If you own or lease any amount of rural land for livestock or crop production, then you have likely encountered obstacles arising from the division of the surface and mineral estates and the impact that can have on your use of the land.
In the state of Texas, as well as many other states, the ownership of the surface estate and the ownership of the mineral estate can be separated, or “severed.” When this severance occurs, a conflict is inherently created, begging the question of “who can use the surface and for what purpose?”
As natural resource production ramps up across the nation, more and more cattle producers are feeling the impact. Whether your particular area is dominated by oil, gas, wind, solar, lithium or groundwater production, the underlying need to protect your most useful tool – the surface of the land – is the same.
Each state has varying default rules related to the use of the surface estate for natural resource production, and it is important for cattle producers to be familiar with those rules prior to purchasing or leasing land, especially if it is evident that there is already some level of natural resource activity on the property. Beyond the default rules, though, a landowner’s most handy legal tool is a contract containing surface protection provisions. Surface protection language can be included in a deed, oil and gas lease, solar lease, wind lease, etc., but it can also be the subject of a standalone agreement negotiated with a natural resource production entity apart from those standard leases.
The most common document I include surface protection language in is a deed containing a mineral reservation in favor of the seller. When rural land is sold to a buyer, and the seller wants to retain its mineral rights, I make sure to ask what the buyer intends to use the property for and how their plans would be impacted if the mineral owner or third-party mineral producer were to assert their default right to utilize the surface for operations. In most instances, it is favorable to the buyer to include language in the deed that restricts the seller’s right to use or authorize the use of the surface estate for the production of any natural resources that would be included in their reservation of the mineral estate.
The most common items to consider when negotiating for surface protection language in a deed, lease or other contract include the following:
- If possible, a general prohibition on any use of the surface estate for natural resource production
- Limitation of natural resource production to certain areas of the property.
- Setting a formula for surface damages in the event of natural resource production activity on the surface
- Providing for restoration of the surface upon the conclusion of natural resource production activity, with a standard defining what “conclusion” means
- Liquidated damages provision setting a payment amount in the event of a violation of the agreement
- Clear instructions related to construction, maintenance and upkeep of any roads, pad sites, fencing and gates
- Insurance requirements and indemnity language in favor of the landowner
The specific circumstances and parties should always be taken into consideration when deciding how to best protect the surface owner. As a general rule, it is usually better to get paid less in exchange for more protection. Our natural resources are only going to become more valuable as time passes. Similarly, available rural land is becoming harder to keep by the day, and it is more important than ever before to do everything we can to protect its value.
This article is provided for informational purposes only. Readers should consult their own professional advisers for specific advice tailored to their needs. Information contained in this article may be subject to change without notice.
