Legal Definitions - location-damage clause

A location-damage clause, also known as a surface-damage clause, is a provision in an oil and gas lease agreement that requires the lessee to compensate the lessor or surface-interest owner for any damage caused to the surface as a result of oil and gas operations.

For example, if an oil company drills a well on a farmer's land, the location-damage clause would require the oil company to pay the farmer for any damage caused to the surface of the land, such as soil erosion or damage to crops.

This clause is important because it ensures that the lessor or surface-interest owner is fairly compensated for any harm caused to their property during oil and gas operations.