Legal Definitions - location-damage clause

A location-damage clause, often referred to interchangeably as a surface-damage clause, is a specific provision found within a legal agreement, typically in leases or contracts related to resource extraction or infrastructure development. This clause outlines the terms and conditions under which the party conducting operations (such as drilling, mining, or pipeline construction) will compensate the surface owner for any damage, disruption, or loss caused to the land's surface, crops, water sources, existing structures, or other property during their activities.

The purpose of a location-damage clause is to ensure that the surface owner is fairly compensated for the impact on their property, even if they do not own the subsurface mineral rights or have granted an easement for the activity. It addresses the physical alterations and economic losses that can arise from industrial operations on or near the land's surface.

• Example 1: Agricultural Land and Oil Drilling

  A farmer owns a large tract of land used for growing corn. An energy company obtains a lease to drill for oil and gas beneath this property. The lease agreement includes a location-damage clause that specifies the energy company must pay the farmer for any crops destroyed by the placement of drilling rigs, the construction of access roads, or the installation of pipelines. Furthermore, it mandates compensation for any long-term soil compaction or contamination that reduces the land's future agricultural productivity. This example illustrates how the clause protects the surface owner's economic interests by ensuring they are compensated for direct damage to their crops and the productive capacity of their land caused by the drilling operations.

• Example 2: Residential Property and Mining Operations

  A mining company secures the rights to extract minerals from beneath a suburban neighborhood. The agreement between the mining company and the homeowners' association contains a location-damage clause. This clause stipulates that the company must compensate residents for any structural damage to their homes caused by ground subsidence resulting from the mining, disruption to local water wells, or damage to landscaping and common areas due to surface operations like ventilation shafts or processing facilities. Here, the clause serves to protect residential property owners from physical damage and loss of amenity directly attributable to the mining company's activities on or below the surface.

• Example 3: Ranching and Pipeline Construction

  A rancher grants an easement to a utility company for a new natural gas pipeline to cross their extensive cattle ranch. The easement agreement incorporates a location-damage clause. This provision requires the pipeline company to pay for any fences that are cut or damaged during construction, for any livestock that are injured due to construction activities, for grazing land that is temporarily rendered unusable, and for any permanent loss of productivity or aesthetic value caused by the pipeline's presence and associated surface disturbance. This demonstrates how the clause provides a mechanism for the rancher to be compensated for disruptions to their business operations and the physical integrity of their property due to the pipeline project.