Seismic Testing: Know Your Rights Around the ‘Big Bang’
- April 23, 2012 | By Alan D. Wenger | Oil & Gas
Testing can involve explosive charges set off in shallow bore holes and compressive “thumper trucks” that create shock waves. Sensing devices and computerized technology allow detailed three dimensional imaging.
The equipment and technology is expensive, and the results extremely valuable to drilling companies.
Seismic testing is mutually beneficial to the lessor landowner and the drilling companies. The knowledge obtained allows efficient location of drilling operations and maximum production, which benefits the royalty recipient.
Is the landowner required to cooperate?
Many leases include rights granted to the lessee for exploration and testing. Law is undeveloped in Ohio as to whether those rights include potentially damaging and destructive explosive charges, which were hardly within the contemplation of the parties when older leases were entered.
A recent court case in Columbiana County suggests that testing permission contained in a lease might not necessarily give parties unrelated to the lessee rights of access to conduct tests.
If the landowner has not signed a lease, there is probably no obligation to allow testing.
What are the risks to the landowner?
Some form permits give broad discretion to the testing company as to what activities they may conduct. Some can involve drilling bore holes of various depths every 200 to 300 feet in grid patterns and setting off explosive charges.
Concerns have been raised as to the effects on water wells, ground water, existing gas wells, building foundations and drain tile systems. Form agreements tend to include anemic landowner protections or none at all.
Who is doing these tests, and what is done with the data?
Often tests are performed by independent testing companies, rather than by lessees.
The testing company then sells the data to a lessee and to other drilling companies interested in the area tested. The testing company may seek access permission independent of any rights under the lease.
The testing company may try to lead the landowner to believe that testing is being done by or on behalf of a lessee under an existing lease, which may not be true.
Many leases explicitly grant “exclusive” rights to the lessee, which might exclude a separate testing contractor from enjoying rights of access.
If the landowner allows the testing under such circumstances, the landowner may not have the guarantees, protections and assurances (such as set-backs, insurance, remediation) contained in the lease.
What should a landowner do?
Here are some import steps a landowner should take upon getting such a request.
- 1. Obtain the proposed permit documents from the contractor.
- 2. Ask for any agreements between the testing contractor and your lessee, and any existing agreements or documents that the testing contractor claims give it any rights to conduct testing on your property.
- 3. Require detailed written plans, timelines, and details of means and methods proposed for testing on your property before entering any agreement.
- 4. Ask for copies of insurance declarations that would protect the landowner’s property and interests.
- 5. Be sure to obtain competent legal counsel before signing any testing access permission.
An example of a seismic testing agreement that addresses key issues can be found here. This agreement is intended for educational purposes only. Do not use it as a substitute for consulting with a knowledgeable oil and gas attorney about the details of your specific situation.
Alan D. Wenger is an attorney in Youngstown, Ohio. His practice areas include oil and gas law, public utilities law, labor and employment law, land use law, environmental law, construction law and school law.