Um, I'm not giving any legal advice per se tonight

I'm not establishing an

Attorney-client relationship with anybody

Because I'm a lawyer

I think it's important that I say that

Anytime you have increased drilling activity

in an area,

What you see is, you see the permits go up

This is a timeline from 2004 to 2012 in Canadian County

And you'll see the permits went from nearly nothing in 2004

To, you know, almost 230 in 2012

And that's what we're looking at in this area

Of Carter and Love County with all the activity that's here

We can expect this kind of activity in the coming years

So the outline of today's presentation

I'm going to talk about

The basic discussion of the philosophy

Of an article I wrote called

"Don't Give Away the Farm"

And basically it's the idea of

If you're going to enter into one of these negotiations

Define it well

And as they want to move out of the parameters of where you've defined it

Make that ... make them pay for that

So if you set a specific timeframe

Of when they're going to be able to apply the mud

Also set a specific amount of loads they can apply

And if they want to stay there longer

Or they want to apply more loads

Make them pay more money

It's real important to get strong terms

I mean, I always say it's a battle of the terms

And that's really what I think all these negotiations are about

If you decide to do this

Is make sure

That you don't sign something that's real broad

And just lets them kind of come in

And use your land

However they want

And they kind of set the rules

You need to set the rules yourself

I'm going to talk a little bit about the statutory framework

Allowing the application

We've heard a little bit about that tonight

I'm going to get into a little bit more specifics about it

But I'm going to go through it pretty quick

Because part of that the first presenter covered

And then I'm going to go over a brief overview

Of potential benefits and risks

Which we've heard a lot about that, too

So, I'm going to go through that pretty quick

And then I'm going to go over

What needs to be in a good

Drilling application and surface use agreement

That's kind of the heart and meat of the presentation

I'll probably slow down a little bit when I get to that point

This is an article I wrote called

"Don't Give Away the Farm Negotiating Surface Damage Cases"

It was published in the "Bar Journal"

It's on my website

If you're interested in negotiating with an oil company

I encourage you to go out online

Read this article

It talks a lot about the mentality of negotiating with an oil company

And the way that you think

I mean, to me it's all about how you think

When you're negotiating with one of these operators

They always want to frame the rules

And they always want to say

Well this is how the oil company does things

Well it never made sense to me why landowner can't say

Well, this is how things ought to be done

I mean, it is our land, right?

So the possible benefits

I mean

I've been told that soil farming can improve the water retention in the soil

And that it can in certain situations improve soil fertility

Our our first speaker tonight

Could tell much more about this than I know

The main one I think is that it can provide supplemental income

I mean

Folks that are in agriculture are always looking for creative ways

Now more than ever

To create supplemental income with recreational use of their property

This is just another way to generate some supplemental income

And if done properly it can work really good

It can also be good for the relationship

Between the land owner and operator

Many times when, you know

An operator comes and they're drilling on a ranch

It's tense because the surface owner may not own the minerals

They don't want them there

But a lot of times it can be a real win-win relationship

Between the operator and the surface owner, because

The surface owner can sell water

They can allow soil farming

So, soil farming is just another way to

Kind of improve the relationship with the oil company

And if done properly

It can be a real good thing

The risks

Salinity

Sodicity

Pretty much all the things that we heard

The first presenter talk about tonight

I mean, these are the things

that that we have to think about

So any contract that we enter into

Needs to somehow

Talk about these risks

How we're going to deal with them

And how we're going to define them

What's going to be allowed

This is just another picture of

You know, a piece of ground that's

Got a lot of salt in it

And when it gets a lot of salt

It doesn't want to grow grass

And most of us are in the business of growing grass

So we're going to be trying to grow grass

For the next thirty years

And that's one of the things you need to evaluate

Is what's it going to do to my grazing capacity

On my land if I allow them to come in and pay me

So much an acre

You know, it may not be worth it

Especially if it's not done properly

He talked a little bit about toxins and metals, uhm...

This is a risk but

I guess it's a minor risk compared to the others

Uh... the statutory framework allowing the application is 165:10-7-26

And it defines a one-time land application of drilling fluids

It talks about what that is

The key thing is

Under this rule

It falls under the federal regulations under RCRA

The Resource Conservation and Recovery Act

Now the reason that's so important to you as a surface owner

Is because under RCRA and under federal law

If you're the landowner

And your property becomes polluted

You can be responsible for the cleanup costs

So, if you get a big plume there

As a result of them coming in and

Dumping a lot of stuff that they shouldn't be dumping

And they're not solvent

And they can't pay for it

The feds may be coming in looking to you for the bill

Especially if it's migrating off your property

And getting on somebody else

Any land application made

Under this has to be done on what they call a one-time basis and

You know, we could talk about "one time"

It's defined a lot of different ways and

You could talk a lot more that, Mike, probably than me

But, compliance with the rule

There's a two thousand dollar fine

For non-compliance with the rule

Typically, it's a twelve-month, what is a twelve-month permit

That's what the rule says

Talked earlier about the maximum slope

The application can't be within fifty feet of the property line

um... the water table can't be within six feet

There are somewhat detailed sampling requirements

There's been a lot of discussion tonight about sampling

My recommendation would be

If you're going to do this on a large scale

That you get a geo scientist involved

And you come up with some parameters of your own

And you put those in your own contract

Instead of relying on somebody else to enforce them

He talked earlier about the depth to bedrock and the soil texture

And the soil salinity, so I'm not going to go into that too much

So, negotiations and the surface use agreement

The key thing about this is

An oil company doesn't have the right to do this

If they drill a well on your property

And I think it's already been said, but I want to be real clear about it

They don't have the right to put the drilling mud on your property

They also don't have the right to take your water

So, they do have a right to come and drill the well

And use as much surface as is reasonably necessary for their oil and gas operations

But they don't have a right to put this drilling mud on the property

So that gives a surface owner a little bit more negotiating power

When negotiating the terms of the contract

I believe it's critical that you have a good contract

And you have a good surface use agreement

And that the rules of the game are clearly defined

And everybody knows what they have a right to do

And what they have a right not to do

Mike talked a little bit about the 1014L

Which is the landowner form that's presented at the commission

Before you sign the 1014L

You need to have your contract with them completely done

Don't sign the 1014L first and then start trying to negotiate the contract

I think that's a recipe for disaster

The...

A lot of people, it seems at times, don't understand the difference ...

They think, well, the corporation commission will step in

And they will take care of me as a surface owner

And, they do a lot of good things and they do a lot of good things for the citizens of

the state

But as an individual surface owner

That's really not their job and they really don't have the resources to completely manage

that

And really as it's defined in the constitution

They're charged with protecting the public right

They're charged with protecting everybody and keeping all of us safe

But they're not necessarily responsible for our individual property rights

That's not what the corporation commission does

That's why these types of contracts and why you need to negotiate with them one-on-one

is real important

Because if you sign the 1014L

And you get in a fight with them later if they're doing something wrong

The corporation commission is not going to step in

It's been my experience they're not going to step in

Because you're unhappy with something they're doing

It's going to have to be pretty egregious

Or they're going have to be have something clearly wrong under that other statute

So if you want things outside of that other statute

You're going need to negotiate that in the contract

And they're not going to enforce it

You're going to have to do that in your in your local district court, should it come

to that

But if you have a good contract, it probably won't

We talked a little bit about under RCRA and the federal statutes

The landowner can be held responsible for the pollution on their property

So some considerations to address this

Do what you can, if possible, to make the primary company responsible

Because, the next thing I'm going to talk about is indemnification

Which basically says if they come in and they make a big mess on your property

And somebody else sues you for that

They're going to step into your shoes and they're going to defend you

But if it's just some fly-by-night guy that's out there applying drilling mud

it's not going to do you any good to have that indemnification provision

Because, whoever's going to bring the case

They're going to go after whoever's got the money

So you want to do what you can to make sure

That if you enter into one of these types of contracts

You either make the big oil company that's putting it on the land

You either make them responsible -- get them to agree to be responsible