Petroleum Landman Complexities.
An advantage of thorough and applicable Petroleum Landman Training comes from highly experienced oil and gas attorneys, senior right-of-way personnel, and senior landmen (See: The Advisory Board of the Institute of Energy Management) who, in their career, have dealt with certain “landmines” (like this subject) and how they resolved them.
Most Petroleum Landman training courses do not explain the complexities of dealing with a ‘Land Trust’ or a ‘Conservation Easement.’ So, as a Petroleum Landman, have you ever heard of a ‘Land Trust’ or a ‘Conservation Easement’ or dealt with one. Do you know what i a ‘Conservation Easement’ is and how can it affect your ability to drill a well on a property where it exists?
Here is the Definition of Each:
Land Trust
“A Land Trust is a nonprofit organization that, as all or part of its mission, actively works to conserve land by undertaking or assisting direct land transactions - primarily the purchase or acceptance of donations of land or Conservation Easements.”
Conservation Easement
“A Conservation Easement is a voluntary, legal agreement that permanently limits uses of the land in order to protect its conservation values (scenic, wildlife, farming). Also known as a conservation restriction or conservation agreement, a Conservation Easement is one option to protect a property for future generations.”
Are Land Trusts a Government Organization?
No. They are a private entity.
Benefits for Landowners
Why do they Exist and what are the Benefits for Landowners?
- Conservation Easements can be an effective tool to protect land, often at a lower cost to land trusts and public agencies.
- A Conservation Easement is a legally binding agreement between a Landowner and a land trust or government agency where the Landowner retains many private property rights.
- If donated, Conservation Easements may provide valuable tax benefits to the Landowner.
- Conservation Easements keep land in private ownership and continuing to provide economic benefits to the area.
- Conservation Easements do not automatically make properties open to the public.
Drilling a Well
What if the Landowner does not own the minerals under the land that was donated to a Land Trust and where the Conservation Easement exists or just owns a portion of the minerals (undivided interest)?
This can be a bit of a challenge for the Petroleum Landman where the minerals owners agree to lease, and you wish to drill a well on the land.
Remember, just because a Land Trust has a Conservation Easement on a piece of land, that does not change the Dominant Estate of the minerals over the Servient Estate of the surface lands, but it can be somewhat of a challenge in that you have to get the Land Trust to sign off on the Surface Damage and Use Agreement. And, just like any other disgruntled Landowner who refuses to sign a Surface Damage and Use Agreement, an oil company has the right to drill a well without such an agreement.
Generally, Land Trusts are very willing to allow the Lessee to honor his obligations that are set forth in the oil and gas lease, but they are extremely adamant about putting language in the agreement whereby the Lessee uses prudence and the Reasonable Accommodation Rule when performing their operations.
NOTE: As a Petroleum Landman, if you are trying to settle surface use and damage issues with the Land Trust and the Landowner owns all the minerals, too, you may have a different set of issues getting the Land Trust to sign off on the agreement. You should be made aware of this situation before attempting to reach an agreement.
The Petroleum Landman who performed the title work and the oil and gas lease agent who purchased the lease should let you know that a Conservation Easement exist (and whether the minerals are being donated as well) ahead of time and provide you with a copy. Some Easements do allow for development on the land. So, when you read the Easement, look for the restrictions.
What if the Landowner owns all the minerals and wants to lease them. Another reason for reading the Easement prior to attempting to reach an agreement is that it generally addresses oil and gas development issues.
As a Landman having to deal with a Land Trust, be sure to carefully read the document or deed where the Landowner donated his land to the Land Trust. It may be that they did not convey the mineral rights, only the surface lands. These agreements (conservation easements) will set forth guidelines in which the surface can be used in the development of the minerals, such as oil and gas drilling. Again, this only applies if the Landowner owns all the minerals.
What if the Landowner donated both the surface and the minerals to the Land Trust? If this is the case, leasing the minerals may be a challenge, if not impossible. In states that have either ‘Compulsory Pooling’ or ‘Forced Pooling’ statutes, leasing these minerals will be much easier since the minerals which were donated can be forced into a particular spacing unit.
Land Trust Donation
Below is a real example of dealing with a Landowner who did not own the minerals and who had donated his land to a Land Trust in Walsenburg, Colorado on a piece of a land that had a beautiful scenic value, including a spectacular view of the Spanish Peaks.
This Landowner did not own the minerals under his land, the state of Colorado did. The Landman contacted the State of Colorado prior to talking with the Landowner. The State leased their minerals to the Landman’s company, so the Landman already had a leg up on the situation.
At first, the Land Trust was not interested in working with the Landman except on their terms.
They started making restrictions on where wells could be drilled, pipelines laid, road locations, and the placement of production facilities.
Using the ‘Reasonable Accommodation Rule’, the Landman showed them on aerial photos of the land the best place to place the roads, etc and showed them areas where the best drill sites should be to best suit both parties but also to best protect the geologist’s choice of drill sites.
This is where the rub came in.
However, after several months of going back and forth, the State of Colorado said they would step in and assist when it came to the restriction of drill site locations, because they were specific to the geologist’s report and the potential success of the wells. The Landman did not have to use this assistance, but it was nice to see it could be available. It took over 90 days to come to an agreement. Both parties were satisfied with the results.
Surface Use and Damage – Critical Issues
The Institute of Energy Management has a thorough course titled, “Surface Use and Damage – Critical Issues. We have a sample of this Surface Use and Damage Agreement for our students who take the Surface Use and Damage course.
The Petroleum Landman School, Professional Landman Schools, and the Institute of Energy Management’s courses deal with many other critical issues to help a Petroleum Landman become more aware of things which could become critical issues.
Please visit www.instituteofenergymanagement.com for a complete list of the most comprehensive and applicable Petroleum Landman training courses available.