By: Heidi R. Kemp, Associate Attorney
Emens Wolper Jacobs & Jasin Law Firm
In my oil and gas practice, we tend to see all phases of the oil and gas industry that may affect landowners. These phases ebb and flow. One of the things we have been seeing more of lately is sub-surface easements. It seems that some companies are asking for these agreements and a lot of landowners do not know anything about them.
So, when do oil and gas companies request sub-surface easements? The normal scenario is when there are wells going off of a single well pad in different units. For instance, let’s say a landowner owns Parcel A. Parcel A has a well pad on it. That well pad has (or will have) four Wells (1, 2, 3, and 4) coming off of it. Wells 1 and 2 are in Unit Y and Wells 3 and 4 are in Unit Z. Parcel A is included in both Unit Y and Unit Z. The well bores for Wells 3 and 4 pass through Unit Y to get to Unit Z.
In this scenario, the oil and gas company may be concerned that Unit Y will stop producing oil and gas in the future. If that happens and if the landowner negotiated a Pugh Clause in his lease, then the Parcel A acreage in Unit Y will no longer be held by the lease. Since it has been released, the company no longer has the right to have wellbores on the property that is not in Unit Z (that is still producing). The sub-surface easement is intended to cover this situation and allow the oil and gas company to use the sub-surface of the property even if it is not in a producing unit.
Another scenario where a sub-surface easement may be requested is when a company wants to basically “back-drill” or “build-back” well bores off of a well pad. In this scenario, assume that there is a well-pad on Parcel A that has wells coming off of the pad going southeast. The well pad is on the edge of the boundary of the unit and the unit then extends southeast. The oil and gas company may want to drill the well-bore off of the well pad by going northwest first and then turning horizontally southeast so that the first perforation in the horizontal lateral is right at the beginning of the unit. This enhances the amount of gas that is produced in the unit. But, the part of the property that is northwest of the well pad is not included in the unit so the company needs to have permission to use the subsurface of that property for the well-bore.
I know those examples are hard to follow without drawings. But, the main point here is that just like any agreement or document that the oil and gas company hands you to sign, you should consult an oil and gas attorney and negotiate the compensation and the terms of the sub-surface easement. Most sub-surface easements are very broad and give the oil and gas companies way more than necessary. We highly recommend that the sub-surface easement be revised to only give the oil and gas company the rights specific to the situation and why they need the easement.