So, thinking of buying some old production from Exxon's radioactive dump sites, er, I mean HBP leases? Or, one of El Paso's compressor stations saturated with chlorinated solvents? Just be sure to read the fine print:
About Me
- Elizabeth Todd Burns
- I live on the Tex-Mex Border. I see a lot of stuff on the news about my area. I am out and about schlepping kids and running errands all day. I look around and wonder if the people who write the news have ever been here. ©2008,2009,2010,2011,2012 --------- A Satire
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8 comments:
Ha ha ha, I thought being a used car salesman would require a snow jobs! This is even worse!
Pretty standard language when selling oil and gas assets. Absent these indemnifications and notifications, buyers would be suing right and left. With these clauses, the buyer can't claim they weren't informed of the potential liabilities.
Of course, the whole game will end some day, and the last owner will be left holding the cleanup bag. If they don't have any money, all the indemnifications in the world won't keep the original operator from being sued.
The oil companies grip on the courts just keeps getting stronger. I dont think anyone will ever be left "holding the bag" except the landowners and the people that live in the area.
Elizabeth, are you familliar with the Texas Supreme case HECI vs. Neel?
Yes, I am familiar with HECI - Personally, I think the ruling is overly hyped as a nightmare for royalty and landowners. If you read the total opinion, it is more compelling and reasonable. HECI was suing another company for violating the statewide rules and Neel sued HECI for not including them in the suit. However, HECI did not have any standing to include the Neels in the suit. And the Neels claimed that HECI had an obligation to notify them of the suit against the other operator, but there really wasn't any legitimate reason why HECI would be legally required to notify the Neels of the suit. It was a public lawsuit and trial. It wasn't anything secret.
No one will be left holding the bag because there is no way to fix the problem. Its so widespread. It's not like any landowner has the technical expertise or money to clean up a legacy mess. Plus, in most of the old leases, only the lessor has the right to remove oil, gas, or any variation of from the lands. So, the landowner has no right to clean up old oilfield mess because only the oil company can explore for and remove hydrocarbons and minerals from the land. (i.e. clean up)
The net effect of Neel is the lessor is made co-manager of the mineral estate. This means that the mineral owner must catch the lessee in acts of drainage, bad faith pooling, and a litany of other transgressions within the 2 or 4 year period, or the lessor’s claims are voided my limitations.
This is outrageous, as the oil companies are the keeper of the records , and the average lessor does not understand geology or petroleum engineering, and in many cases does not even have access to the surface to inspect the operations (severed minerals).
Before Neel, limitations were tolled by the discovery rule.
In the case of Neel, HECI was the lessee and they were suing the company on the other side of the fence - for drainage of the HECI lease which belonged to Neel. So, HECI was taking whatever action they could to defend their mineral lease by suing the operators on the neighbors property. Neel argued that HECI didn't do anything about the other operator draining the property - but HECI sued and fought (and eventually won) a suit against the operator next door. However, I think the operator next door filed bankruptcy and never did pay the judgement.
The rub with Neel is that the opinion, written by Justive Owens, reversed 80 years of Texas oil and gas law and place an unrealistic burden on lessors to co-manage the mineral estate. Today, lessees have a duty to investigate issues of drainage, blowing down gas caps (Neel), and well as many other transgressions, or be subject to limitations.
The discovery rule is gone due to Neel in most lessor claims.
There are some really good friend of the court briefs which explain this. Oil companies now hide behind Neel and claim limitations regularly. In my opinion this is the most sweeping, damaging piece of law in the modern era
I asked my friend who hunts on this property who build the plant and he said he thought it was Standard Oil of Kansas, which was assumed by Amaco which was assumed by BP. I'm sure BP will be right over to tidy up once it's brought to their attention.
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