Surface owner issues can sometimes be difficult to understand, especially in a split estate situation. “Split estate” is the term used when ownership of the surface estate is legally severed, or split from ownership of the subsurface mineral estate. The members of the North Dakota Petroleum Council recognize this difficulty and want to provide you with the resources to address your questions and to help you understand issues that typically affect a surface owner. Below are some frequently asked questions and the answers are intended to help surface owners.
Click on the question below to see the answer. Once you are done reading it click the question again to hide the answer.
In 1979, the North Dakota legislature adopted the Oil and Gas Production Damages Act. The Act ensured that surface owners be justly compensated for damage to their property and for interference with the continued use of their property due to oil and gas development. The North Dakota Century Code (see Chapter 38-11.1) contains several statutes that operators must comply with before and after drilling. The requirements include surface owner notification before construction activities and compensation to the surface owner due to lost land use and surface damages.
Further, the Code (see Section 38-11.1-05) details the notice requirements that operators must follow before commencing drilling operations. It states the operator must provide written notice to the surface owner 20 days prior to commencing drilling operations unless waived by mutual agreement, or unless an existing lease will expire prior to the 20 day period. If the operator plans to begin drilling operations within 20 days of the termination date of a mineral lease, the required notice may be given at any time prior to beginning drilling operations. In either case, the written notice must be sent to the address of the surface owner of record found in the county recorder’s office. The notice must also explain the “plan of work and operations” in sufficient detail to allow the surface owner to evaluate the effect of the operations. The notice typically includes a surface plat indicating the precise location of the well, the well pad, proposed access road, and any other matters requiring use of the surface.
Included with the notice and plan of operations, the operator must provide the surface owner a form provided by the North Dakota Department of Mineral Resources advising the surface owner of certain rights provided to them under North Dakota law. The form is available at the ND DMR web site: https://www.dmr.nd.gov/oilgas/surfaceowner.pdf.
Along with the notice and plan of operations, the Code (see Section 38-11.1-08) requires the operator include a written offer of settlement for damages. This good-faith offer is the operator’s estimate of damages that may accrue over time and must be made before beginning operations. It is important to note that this offer is a private negotiation and the surface owner may accept or reject the offer. If the offer is rejected and the two parties cannot reach an agreement, then the matter may go to court. If a court decides to award a greater amount than the rejected offer, the operator is required to pay the surface owner’s attorney fees and court costs. An offer of settlement at the time of notice is not required in state other than North Dakota.
Typically, an operator will contact the surface owner directly or through a land agent to discuss details of the well location, access road, and surface damages long before the statutory requirement of a 20-day notice. The statutory notice is a legal formality that must be followed, but if at all possible, most operators typically contact the surface owner to meet and discuss these important issues well in advance of the 20 day requirement.
For reference, ND Code Section 38-11.1-05, concerning the complete statutory notice requirements is presented below:
Except for exploration activities governed by chapter 38-08.1, the mineral developer shall give the surface owner written notice of the drilling operations contemplated at least twenty days prior to the commencement of the operations, unless waived by mutual agreement of both parties. If the mineral developer plans to begin drilling operations within twenty days of the termination date of the mineral lease, the required notice under this section may be given at any time prior to commencement of drilling operations. This notice must be given to the record surface owner at that person’s address as shown by the records of the county recorder at the time the notice is given. This notice must sufficiently disclose the plan of work and operations to enable the surface owner to evaluate the effect of drilling operations on the surface owner’s use of the property. Included with this notice must be a form prepared by the director of the oil and gas division advising the surface owner of the surface owner’s rights and options under the chapter, including the right to request the state department of health to inspect and monitor the well site for the presence of hydrogen sulfide. If a mineral developer fails to give notice as provided under this section, the surface owner may seek any appropriate relief in the court of proper jurisdiction and may receive punitive as well as actual damages.
What surface owner notifications are the operator required to make prior to conducting seismic and geophysical operations under North Dakota law?
For reference, a summary of the statute for seismic and geophysical operational requirements, Section 38-08.1-05, is presented below:
What do North Dakota laws say regarding measurement and payment of surface damages for seismic and/or oil and gas drilling operations?
The statute does not provide a specific formula for reaching an agreement on appropriate compensation, recognizing that: 1) land values vary throughout the state; 2) land uses range from irrigated property to dry land farming to pasture land; 3) land has varying income-producing potential, and 4) land has other unique factors. However, the statute provides that “the amount of damages may be determined by any formula mutually agreeable between the surface owner and the mineral developer.”
For reference, a summary of Section 38-11.1-04 addressing compensation to the surface owner is presented below:
The mineral developer shall pay the surface owner a sum equal to the amount of damages sustained by the surface owner and the surface owner’s tenant for loss of agricultural production and income; lost land value; lost use of and access to the surface owner’s land; and lost value of improvements caused by drilling operations. The amount of damages may be determined by any formula agreed upon by the surface owner and mineral developer. When determining damages, consideration must be given to the period of time during which the loss occurs, and the surface owner may elect to be paid in annual installments over time. However, the surface owner must be compensated for harm caused by exploration only by a single sum payment. The payments contemplated by this section only cover land directly affected by drilling operations. Payments are intended to compensate the surface owner for damage and disruption; any reservation or assignment of such compensation apart from the surface estate except to a tenant of the surface estate is prohibited. In the absence of an agreement between the surface owner and a tenant as to the division of compensation payable under this section, the tenant is entitled to recover from the surface owner that portion of the compensation attributable to the tenant’s share of the damages sustained.
Is there a way to compare the value of an offer of surface damage payment with other land value estimates?
Why are my payments from the oil and gas operator for use of my land different from the payments others have received from wind turbine operators and cellular telephone companies?
Companies constructing wind turbines and cellular towers do not have the same legal rights because, unlike the owners of mineral rights, they do not own any property and do not have a legal right to access and use the surface. Instead, wind turbine operators and cellular telephone companies must buy a usage right from the surface owner to access and use the land for their wind towers and cellular towers.
And while oil and gas operators who own or lease mineral acreage have the right to access and use the land, state law does protect the surface owner. Since 1979, North Dakota law has required that oil and gas operators pay the surface owner for damages to crops and certain other losses caused by oil and gas operations that necessarily take place on the surface. The amount the oil and gas operator must pay to the surface owner is based on the amount of actual loss that the surface owner faces as a result of the oil and gas operations. See above for a reference to common acreage values based on actual agricultural usages. In contrast, the amount offered by wind turbine and cellular telephone companies is not based on any actual losses suffered by the surface owner. In addition to the working acreage, the wind and cell phone companies also must purchase an easement from the surface owner in order to access and use the land. A surface owner is free to negotiate whatever price he sees as fair when selling an easement, and the wind and cell phone company is free to accept or reject an offer based on what it finds fair and reasonable. Often, the surface owner can negotiate payments from wind and cell phone companies that are greater than any actual losses caused by the wind turbine or cell tower because the payments not only compensate for losses, but also for the purchase an easement necessary for the wind or cell phone company to access to the land.
How is the location of a well determined and what are the regulations?
How is the location of a well access road determined?
How much surface land is typically needed for drilling and production operations?
The size of a typical single well pad for a Bakken horizontal well is approximately 4-6 acres. This pad size will accommodate a 1,000 to 1,500 horsepower rig and its accompanying support equipment. Typically, the support equipment includes drilling mud tanks, a reserve pit, and trailers for rig and company personnel. For a multiple well pad (several wells drilled from one pad), the acreage required is approximately 5-7 acres to allow for additional well heads and tanks.
Reserve pits are generally used for storage or disposal of water, drilling mud, and geologic cuttings during drilling operations. Many operators in North Dakota now use a closed-loop drilling system that uses portable storage tanks to handle the drilling fluids, reducing the size of the reserve pit.
Acres needed for completion operations: Completion of the well involves “stimulating” the well bore typically through hydraulic fracturing technology. Typical equipment needed to “frac” a well requires the entire 4-6 acres of a well pad and includes high pressure pumps, sand storage tanks, water storage tanks, and fuel tanks for the pump engines.
Acres needed for production operations: Once a well is producing, the surface footprint can be reduced by approximately 25% depending on actual site conditions and the operator’s future plans for the site, such as additional drilling. The location size must still accommodate oil storage tanks, air emissions equipment, pipeline equipment if available, and allow for oil and water hauling trucks. Productive wells periodically require maintenance and “workover” operations that require access for the smaller workover rigs and supporting equipment on the site.
What sequence of events is typical for developing an oil or gas well from beginning to end? What can I expect regarding notice, surveying, construction, post production?
The staking of a proposed well pad and access road location includes:
At this point a Surface Use Agreement (SUA) is typically negotiated between the company’s Land Department or its representative, such as a land broker, and the surface owner of record. The SUA is a private contract between two parties and it can vary from operator to operator and between surface owners. The SUA typically provides information such as the conceptual design of the well pad and access road requirements, an agreement for land disturbances, and payment for damages or lost value of the land. In some cases, an SUA can be a very detailed agreement that includes other issues such as safety and environmental concerns, use of easements, electrical and power requirements, reclamation goals and other provisions. Requirements for the company regarding its responsibilities in reaching an agreement with the surface owner can be found in Chapter 38 of the North Dakota Code (see questions 1-3 above).
Once the SUA is in place and a staked well location is approved, the notice of drilling operations is sent to the surface owner and operations begin. The NDIC requires a notice be provided to surface owners at least 20 days before beginning operations. The notice can be waived if both parties agree to begin operations sooner or if regulations or an expiring lease require the well to be spudded sooner (see questions 1-3 above).
Construction of the well pad and access road occur before the drill rig can be moved onto the location. Construction of the well pad and access road can take as little as one week or as many as several weeks depending on the season, weather conditions, and work needed to create well pad that is level and stable.
After the well is drilled and completed, the footprint of the well pad can be slightly reduced depending on topography and future plans for the location. Where practical and allowed, an operator might consider locating more than one well on a pad. As a result, the size of the production pad might not be reduced if the operator intends to drill additional wells. Once the well is no longer producing and the operator declares the well to be plugged and abandoned, the disturbed area of the well pad will be reclaimed to the approximate original condition or as agreed between the operator and surface owner. After final reclamation, the operator’s bond is released if NDIC finds that the reclamation objectives have been met and the work is approved.
Once a drill rig shows up, how long does drilling and completion take? How long will the well continue to produce?
Completion – After the drill rig has reached total vertical and horizontal depth, and the well bore is lined and sealed to prevent contact with its surroundings, the rig is released, disassembled, and moved off site. Completion operations can then begin. Actual start of completions, however are dependent on crew availability, weather conditions, materials inventories and other logistical considerations. It’s not unusual for example, of delays of up to 6 months after drilling for completions to commence. Once a completion crew and equipment is on location, a typical completion takes approximately 30 days. Those 30 days typically consist of the following operations:
Production – Once a well is producing, its operation is regular and routine. Traffic to and from the well is generally limited to the trained lease operator every other day or so and fluid haulers, either water or oil. Depending on the well, periodic maintenance and workovers are performed annually or every other year.
The productive life of an oil or gas well is highly variable depending on reservoir characteristics, engineering parameters, and well economics. It is the hope of all operators that well produces at some economically viable rate for 10, 20, 30, or even 40 years. During its productive life, a well requires periodic maintenance and service. In some parts of North Dakota, secondary recovery technologies, such as water flood, are used to recover additional reserves, extending the productive life of a well. However, while secondary recovery techniques in the North Dakota’s Bakken formation continue to be tested, none have yet to proven practical or economical.
How is the location of a pipeline and gathering system determined and how is the surface reclaimed?
Typically, pipeline routes are designed to take advantage of existing road corridors wherever possible for ease of access and repair operations. Safety and maintenance needs are top considerations when burying power and pipelines under or immediately adjacent to the road.
During construction, topsoil material is stockpiled to the side of the pipeline excavation. When construction is completed and line protection in place, fill materials are placed back into the trench followed by the saved topsoil and then the surface is returned to its original contour. Depending on the location, the surface may be seeded with an approved seed mix.
What are the safety issues associated with a producing well?
The safe operation of any oil and gas well is the foremost concern of any operator. Crude oil, natural gas and gas liquids, the materials produced by a well, are inherently dangerous due to the possibility of explosion. Likewise, the machinery and equipment needed to operate a well can be hazardous if caution and safety are not regarded. Do not enter a well site or other location without the company of an authorized representative. If you see an unusual situation, a fluid spill or escaping gas, leave the area immediately and call 911 or the well operator.
Some of the hazards associated with an oil or gas well include:
Call Before You Dig
Pipelines and other underground infrastructure can be accidentally damaged during even the smallest digging project. North Dakota law requires notification for all excavation projects, with a few exceptions that include agricultural activities, gardening and landscaping down to one-foot below the surface. Contact the state’s notification center at least 48 hours before beginning the project. The notification center will then request local operators of underground facilities, including pipelines, electric power, cable television, water and sewer, to locate and mark their lines so the excavator can safely avoid contact. There is no charge to the landowner or excavator for line location service. Remember, call before you dig.
North Dakota One Call: 1-800-795-0555, or 811
How do I report a spill or possible leak in a pipeline?
The State of North Dakota requires immediate reporting of any spill or other incident that could adversely affect human health, the environment, surface water or ground water.
If you suspect a pipeline leak or observe a spill or other condition needing immediate attention at a well location, storage tanks, piping, transport vehicle, or other source, contact the operator or the state of North Dakota at one of the numbers below.
If a company representative is not already on location addressing the spill or release, the company should be notified to take corrective action. Oil and gas companies maintain 24-hour emergency hotlines and if the number is not immediately available, the North Dakota Petroleum Council may have the number on its website. For more information, go to: www.ndoil.org
The well site operator is responsible for making proper notifications to the state. Depending on the spill or incident, one the following agencies would be notified and provided with relevant information.
North Dakota Department of Emergency Services
1-800-472-2121 (24-hour hotline)
North Dakota Oil and Gas Division
North Dakota Department of Health
Always remain at a safe distance from a spill or hazardous situation. Do not attempt to collect information unless it is safe to do so and do not enter a location without authorization. Your safety always comes first!
How does an operator reclaim surface land that was disturbed to develop a well, pipeline or other facility?
Reclaiming surface area can involve short term, or interim, objectives or can be used when the well is no longer productive and has been plugged. In the short term, the aim is to reduce the disturbance footprint and provide site vegetation stability and basic productivity. Interim reclamation is typically performed near active well and facility locations, pipelines, and access roads when once well completion or facility installation is finished and the well is put into production. The final goal of reclamation is to restore the character of the land and water to its pre-disturbance condition.