What is the liability exposure for a mineral owner? I’m concerned about the possibility of being held liable in the case of an operator fouling an aquifer, leaving wells uncapped, or other major problems-perhaps due to bankruptcy. Can a state agency or landowner try to hold you responsible? Is there insurance available? I’m new to this and I appreciate any advice anyone can offer.
I have not heard of this being an issue in Texas, at least for mineral owners under lease. If you are an unleased mineral owner, then it could be affected by whether you opt to be an active working interest owner or remain an unleased mineral owner. This sounds the same, but there is a difference. You should post the state because statutes or case law is different.
In my many years of practice, I have never heard of any mineral owner being sued. Typically, almost all oilfield suits are claims of negligence wherein it is asserted the operator was negligent. Since the mineral owner is not the operator, and the operator is not acting on his behalf, he would have no liability. Is there insurance? Probably. But, I would save your money.
Tim, thanks for taking the time to reply. I appreciate it. I think what I’m most concerned about is having an operator go out of business and walk off and leave an uncapped well or something like that. I wonder if a regulator or surface owner could then look to the mineral owner. As long as the operator is in business I assume they would be responsible for their obligations. As far as I can see, State regulators don’t appear to have anywhere near the bonding required, or means to collect in a worst case scenerio.
What state are the minerals located in? State laws and case decisions can vary widely and change over time. On this forum, people can speak about their experiences and knowledge for a certain state. And just because an operator is licensed, does not mean that the operator has sufficient funds in the event of a disaster. Just like an auto driver may only carry the state minimum insurance which will not cover all medical and other expenses related to a car accident. I would suggest that you never touch or removed equipment for an abandoned well without knowing if that subjects you to any liability. If you are concerned, you may want to consult an oil and gas attorney in the state where your minerals are located for explicit advice. You could place your minerals in an entity which would shield you from personal liability.
In Oklahoma, well drillers / operators are required to obtain plugging bonds. These are not wholly sufficient in a big industry downturn… but the OERB and some energy industry groups have also helped with the clean-up. Do not think the mineral owner should worry about liability unless they participated in the well, made part of a JOA, etc.
FYI, this is Colorado.
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