Surface Damage Agreements

Surface Owner’s Rights: Oil and Gas Exploration

Bond: before the commencement of drilling, Operators must post a Surface Damage Bond ($25,000 minimum) with the Oklahoma Secretary of State. This bond is separate and distinct from Plugging Bond.
Pre‐drilling Notice: before entering a site for oil or gas drilling, Operator gives Surface Owner(s) notice by certified mail, containing proposed location and approximate date to commence drilling.
Negotiations: within 5 days of delivery of pre‐drilling notice, Operator and Surface Owner are required to enter into good faith negotiations.
In determining Surface Damages, these factors are considered:

  • Location or site of drilling operation
  • The quality and value of the land used
  • Inconvenience suffered by Surface Owner
  • Whether damage is temporary or permanent
  • Changes in physical condition of the tract
  • Destruction of native grass and /or crops
  • How long the surface will be used
  • Damages to the land beyond the land taken for the drilling
  • Future damages
  • Whether any of the Surface Owner’s water is to be used
Additional Considerations: other matters should be considered by the Surface Owner, e.g. pre and post drilling water samples.
Petition to Appoint Appraisers: if agreement cannot be reached, Operator must file a court petition to appoint appraisers; Operator appoints one appraiser, Surface Owner appoints one appraiser, and Court appoints a neutral third‐party appraiser. Together, three appraisers create an Appraiser’s Report.
Lawsuit: If either party rejects the Appraiser’s Report, then a jury trial can be demanded. If the party demanding the jury trial does not recover a verdict more favorable than the appraiser’s report, then that party required to pay attorneys fees.
Compliance of the Oklahoma Surface Damages Act is enforced through the imposition of treble (triple) damages. If a surface owner proves that the Operator failed to post a bond, send notice before entering premises, agree on damages or petition to appoint appraisers, then court may treble the damages assessed by appraisers or jury.

On August 27, 2013, Gary Quinnett presented a legal seminar on commercial real estate issues. The attendees rated him "Excellent"