When a gas company wants to use the surface of a Pennsylvania landowner’s property, the company may present a document called a Surface Use Agreement.
This agreement may involve a well pad, access road, water line, pipeline, impoundment, above-ground facility, meter station, valve site, staging area, or other surface operation. In many cases, the surface impact may be more visible, disruptive, and long-lasting than the oil and gas lease itself.
A Surface Use Agreement should never be treated as routine paperwork.
The location of roads, well pads, pipelines, equipment, gates, fences, drainage changes, and other surface uses can affect a property for years. The agreement can also determine compensation, restoration obligations, liability protection, insurance requirements, tax consequences, and the landowner’s ability to use the property in the future.
Before signing any Surface Use Agreement, Pennsylvania landowners should carefully understand what rights the company is requesting and what protections should be negotiated.
What Is a Surface Use Agreement?
A Surface Use Agreement is a contract between a landowner and an oil and gas company, pipeline company, or related energy company that governs how the company may use the surface of the property.
The agreement may address:
- where the company may build a well pad;
- where access roads may be located;
- whether pipelines, water lines, or electric lines may cross the property;
- whether above-ground facilities may be installed;
- how much compensation will be paid;
- how damages will be handled;
- what restoration obligations apply;
- and what restrictions remain after construction.
A Surface Use Agreement can be extremely important because it governs what actually happens on the land.
Why Surface Use Agreements Matter
Many landowners initially focus on bonus money, royalty percentages, or lease language. Those issues are important, but surface use may be the issue that most directly affects day-to-day property use.
A poorly drafted Surface Use Agreement can create problems involving:
- loss of usable acreage;
- construction disruption;
- road damage;
- drainage problems;
- soil compaction;
- timber loss;
- crop loss;
- fencing problems;
- noise;
- truck traffic;
- visual impact;
- and future development limitations.
A strong Surface Use Agreement can reduce those risks and require the company to provide fair compensation and clear protections.
Surface Use Rights Should Not Be Assumed
A company may suggest that it already has broad rights under an existing oil and gas lease. That may or may not be true.
The answer depends on the language of the lease and the specific activity proposed. Some leases may provide certain surface rights reasonably necessary to develop oil and gas. Other proposed activities may go beyond what the lease allows, particularly where the company seeks additional rights, new infrastructure, unrelated pipelines, large surface installations, or facilities serving lands beyond the leased premises.
A landowner should not simply accept the company’s position that it already has all necessary rights.
Before signing, the existing lease should be reviewed to determine:
- what surface rights were already granted;
- whether the proposed activity is authorized;
- whether the company needs additional consent;
- and whether the landowner has leverage to negotiate better terms.
Well Pad Location Is One of the Most Important Issues
If the Surface Use Agreement involves a well pad, location is critical.
A well pad can affect:
- views;
- noise;
- dust;
- lights;
- truck traffic;
- access;
- drainage;
- farming;
- hunting;
- timber;
- residential use;
- and future property value.
Landowners should avoid giving the company broad discretion to choose the location without meaningful landowner input. The agreement should identify the exact location of the well pad, access road, and related facilities through detailed maps and exhibits.
The landowner should also consider setbacks from:
- homes;
- barns;
- water wells;
- springs;
- ponds;
- streams;
- property lines;
- roads;
- and future building sites.
The goal is to avoid surprise and minimize long-term surface disruption.
Access Roads Must Be Carefully Defined
Access roads can become one of the most disruptive parts of surface development.
A road may be used for heavy truck traffic, drilling equipment, water trucks, maintenance vehicles, and future operational access. If the road is not carefully located and controlled, it may interfere with farming, residential use, hunting, timbering, or future development.
A Surface Use Agreement should address:
- where the road will be located;
- whether existing roads may be used;
- whether new roads may be built;
- road width;
- gates and locks;
- maintenance obligations;
- dust control;
- drainage;
- winter maintenance;
- speed limits;
- and restoration if the road is later removed.
The agreement should also clarify whether road rights are temporary or permanent.
Compensation Should Reflect the Full Surface Impact
Surface Use Agreement compensation should not be evaluated only by the amount of land physically occupied.
The payment should account for the full impact on the property, including:
- well pad acreage;
- access roads;
- pipelines and utility corridors;
- temporary work areas;
- equipment staging;
- crop loss;
- timber loss;
- drainage issues;
- loss of use;
- inconvenience;
- visual impact;
- and long-term restrictions.
Landowners should also consider whether compensation should be paid as:
- a lump sum;
- annual payments;
- per-acre payments;
- separate damage payments;
- separate road payments;
- separate pipeline or utility payments;
- or additional payments for expansion or new facilities.
A company’s first offer may not fully account for all property impacts.
Restoration Language Is Critical
Restoration is one of the most important parts of a Surface Use Agreement.
The agreement should clearly state what the company must do after construction, drilling, or operations. Vague promises to “restore the property” may not be enough.
Strong restoration language may address:
- topsoil segregation;
- grading;
- reseeding;
- erosion control;
- drainage repair;
- compaction remediation;
- removal of debris;
- fencing repair;
- road repair;
- timber cleanup;
- and restoration of disturbed areas.
The agreement should also define when restoration must occur and what happens if the landowner is not satisfied with the work.
Drainage and Water Issues Deserve Special Attention
Surface operations can change water flow on a property.
Improperly designed roads, pads, ditches, culverts, or pipelines may create:
- erosion;
- ponding;
- flooding;
- sediment issues;
- wet areas;
- driveway damage;
- and crop or pasture damage.
A Surface Use Agreement should require the company to protect existing drainage patterns and repair any drainage problems caused by construction or operations.
If the property includes springs, water wells, ponds, streams, wetlands, or agricultural drainage systems, those features should be specifically addressed.
Water Wells and Water Supplies Should Be Protected
If there are water wells, springs, or private water supplies on or near the property, the agreement should include protections.
Depending on the circumstances, landowners may seek provisions involving:
- pre-construction water testing;
- post-construction water testing;
- replacement water obligations;
- responsibility for contamination or diminished supply;
- and clear procedures for addressing water complaints.
A landowner should not wait until a problem occurs to determine whether the agreement provides protection.
Indemnification and Liability Protection Matter
Surface operations create liability risks.
Accidents may involve:
- contractors;
- heavy equipment;
- trucks;
- visitors;
- hunters;
- tenants;
- neighboring landowners;
- livestock;
- or environmental issues.
The Surface Use Agreement should include strong indemnification language requiring the company to protect the landowner from claims, damages, injuries, environmental issues, and losses arising from company operations.
The landowner should not be left exposed for activities controlled by the company or its contractors.
Insurance Requirements Should Be Included
Indemnification language is important, but it should be supported by insurance requirements.
The agreement should require the company and its contractors to maintain appropriate insurance coverage. The landowner may also seek to be named as an additional insured where appropriate.
Insurance provisions should be reviewed carefully because they provide practical protection if something goes wrong.
Above-Ground Facilities Should Be Specifically Addressed
A Surface Use Agreement may involve more than roads and well pads.
The company may seek authority for:
- valves;
- meters;
- pig launchers;
- pig receivers;
- compressor-related equipment;
- electric lines;
- water lines;
- communication lines;
- fences;
- signs;
- tanks;
- or other installations.
These facilities can create long-term burdens on the property.
If the landowner does not want certain above-ground facilities, the agreement should prohibit them or require separate written consent and additional compensation.
Expansion Rights Should Be Limited
A company may want flexibility to expand operations later.
That may include:
- enlarging a well pad;
- widening a road;
- adding pipelines;
- adding utility lines;
- adding new equipment;
- or using additional acreage.
The landowner should avoid granting broad future expansion rights without future consent and additional compensation.
If future expansion is permitted, the agreement should clearly define the limits and payment obligations.
Tax Consequences Should Be Considered
Surface Use Agreement payments may have tax consequences.
Different types of payments may be treated differently depending on how they are structured and reported. Payments for damages, easements, surface use, timber, crops, or other items may raise different tax considerations.
Landowners should discuss tax issues with their tax professional before signing.
The agreement should also address whether the company is responsible for any rollback taxes, assessment changes, or other property-tax consequences caused by company activity.
Tenant, Farm, and Family Use Issues
If the property is farmed, leased, hunted, occupied, or used by family members, those issues should be considered before signing.
The agreement may affect:
- tenant farmers;
- hunting leases;
- livestock;
- crop production;
- residential access;
- recreational use;
- and family plans for future building or development.
The landowner should consider the full property use before agreeing to surface operations.
Do Not Rely on Verbal Promises
A landman or company representative may make assurances about location, restoration, compensation, road use, or future plans.
Those verbal assurances are not enough.
If a promise matters, it should be written into the Surface Use Agreement. The written agreement will control the relationship.
Landowners should not sign a broad company-drafted agreement based on verbal statements that are not included in the document.
Surface Use Agreements Should Be Negotiated Before Signing
The strongest negotiating position usually exists before the landowner signs.
Once a Surface Use Agreement is signed, it may be difficult to change the terms. That is why the document should be carefully reviewed and negotiated before execution.
Important negotiated terms may include:
- higher compensation;
- better location control;
- limits on roads and pads;
- stronger restoration obligations;
- indemnification;
- insurance;
- water protections;
- tax protections;
- drainage protections;
- limits on future expansion;
- and termination or release obligations.
Questions Pennsylvania Landowners Should Ask
Before signing a Surface Use Agreement, landowners should ask:
- What exact surface rights is the company requesting?
- Does the existing lease already grant any of these rights?
- Where will the well pad, road, pipeline, or facility be located?
- Are detailed maps attached?
- How much acreage will be affected?
- Is compensation fair for the total impact?
- What damages are separately payable?
- What restoration obligations apply?
- What water protections are included?
- Does the agreement include indemnification and insurance?
- Are above-ground facilities allowed?
- Can the company expand operations later?
- Are tax consequences addressed?
- What happens when operations end?
- Does the agreement require a release of unused rights?
These questions can make a major difference in the final agreement.
Speak With a Pennsylvania Surface Use Agreement Attorney Before Signing
A Surface Use Agreement can affect a Pennsylvania property for years or decades. It may control where facilities are built, how roads are used, how damages are handled, and what protections the landowner has if problems occur.
At The Clark Law Firm, PC, Attorney Doug Clark represents Pennsylvania landowners only. He does not represent gas companies and never will.
If you have been asked to sign a Surface Use Agreement, well pad agreement, access road agreement, pipeline agreement, amendment, ratification, or related document, contact PAGasLeaseAttorney.com before signing.
Frequently Asked Questions About Pennsylvania Surface Use Agreements
What is a Surface Use Agreement?
A Surface Use Agreement is a contract governing how an oil and gas company, pipeline company, or related energy company may use the surface of a landowner’s property.
Should I sign a Surface Use Agreement if I already signed an oil and gas lease?
Not without review. The existing lease may or may not grant the rights the company is requesting, and the Surface Use Agreement may create additional obligations or opportunities for negotiation.
Can a Surface Use Agreement include compensation for well pads and roads?
Yes. Compensation should be evaluated based on the full impact of the surface use, including well pads, roads, pipelines, work areas, damages, restoration, and long-term property restrictions.
Why is restoration language important?
Restoration language determines what the company must do after construction or operations, including grading, reseeding, drainage repair, compaction remediation, and cleanup.
Can a landowner negotiate a Surface Use Agreement?
Yes. Surface Use Agreements are negotiable and should be reviewed carefully before signing.
