Liability questions

Here's a couple of things I thought I'd ask prior to contacting a lawyer, since someone here probably has experience with this... Certainly more than me.

First, my Mother recently turned over about 20 1/2 acres in Section 35 to my siblings and I. Mom has been leasing out mineral rights for the last 10 or so years, and I've gone through her contracts pretty closely, but I don't see any reference to her liability in the event of accident, and contract time is coming up in less than a year, so...

1) What typically is my liability in the event of an oilfield worker injury on my property while employed by an oil or gas drilling operation?

2) What typically is my liability in the event of an environmental accident, lets say, where EPA is involved?

I'd appreciate any input I could get.

When I negotiated my lease, I had the same concerns. Here's is some suggested language you may want to consider. Keep in mind I am not an attorney nor providing legal advise. Maybe this will give you an idea of what can and probably should be done via your attorney.

INDEMNIFICATION. LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS LESSOR, AND LESSOR'S REPRESENTATIVES, AGENTS, EMPLOYEES, SERVANTS, CONTRACTORS, AND ANY OTHER PERSON ACTING UNDER LESSOR'S DIRECTION AND/OR CONTROL, LESSOR'S INDEPENDENT CONTRACTORS, AND LESSOR'S SUCCESSORS AND ASSIGNS, AGAINST ALL EXPENSES, CLAIMS, DEMANDS, LIABILITIES, AND CAUSES OF ACTION OF ANY NATURE FOR INJURY TO OR DEATH OF PERSONS AND LOSS OR DAMAGE TO PROPERTY, INCLUDING, WITHOUT LIMITATION, ATTORNEY FEES, EXPERT FEES, AND COURT COSTS, CAUSED BY LESSEE'S OPERATIONS ON THE LEASED PREMISES OR LESSEE'S MARKETING OF PRODUCTION FROM THE LEASED PREMISES OR ANY VIOLATION OF ANY ENVIRONMENTAL REQUIREMENTS BY LESSEE. AS USED IN THIS PARAGRAPH, THE TERM “LESSEE” INCLUDES LESSEE, ITS AGENTS, EMPLOYEES, SERVANTS, CONTRACTORS, AND ANY OTHER PERSON ACTING UNDER ITS DIRECTION AND CONTROL, AND ITS INDEPENDENT CONTRACTORS. THIS INDEMNITY SHALL BE AS GREAT AS THE LAW ALLOWS, AND LESSEE SHALL INDEMNIFY AND HOLD LESSOR HARMLESS FOR ALL LOSS, COST, DAMAGE OR EXPENSE OF EVERY KIND AND NATURE, WHETHER THE RESULT OF THE SOLE NEGLIGENCE, CONCURRENT OR COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY OF LESSEE. TO THE EXTENT, AND ONLY TO THE EXTENT, THE FOREGOING INDEMNITIES ARE, BY LAW, ONLY ENFORCEABLE IF SUPPORTED BY AVAILABLE LIABILITY INSURANCE, LESSEE AGREES THAT THE INSURANCE PROVIDED FOR IN SECTION 16 IS INTENDED TO SATISFY ANY COVERAGES AND DOLLAR LIMITS OF LIABILITY PROVIDED BY APPLICABLE STATUTES. TO THE EXTENT, AND ONLY TO THE EXTENT, THE FOREGOING INDEMNITIES ARE, BY LAW, EITHER INAPPLICABLE OR NOT ENFORCEABLE, LESSEE AND LESSOR SHALL EACH BE RESPONSIBLE FOR THE RESULTS OF ITS OWN ACTIONS AND FOR THE ACTIONS OF THOSE PERSONS AND ENTITIES OVER WHICH IT EXERCISES CONTROL.

IN ADDITION TO THE FOREGOING AND NOT BY WAY OF LIMITATION, LESSEE AGREES TO INDEMNIFY AND HOLD HARMLESS LESSOR, AND LESSOR’S REPRESENTATIVES, AGENTS, EMPLOYEES, SERVANTS, TENANTS, GUESTS, INVITEES, CONTRACTORS, AND ANY OTHER PERSON ACTING UNDER LESSOR’S DIRECTION AND/OR CONTROL, LESSOR’S INDEPENDENT CONTRACTORS, AND LESSOR’S SUCCESSORS AND ASSIGNS, FROM AND AGAINST ANY CLAIMS, DAMAGES, JUDGMENTS, PENALTIES, LIABILITIES, AND COSTS (INCLUDING REASONABLE ATTORNEYS’ FEES AND COURT COSTS ARISING OUT OF (1) A BREACH OR VIOLATION OF ANY ENVIRONMENTAL LAW, STATUTE, ORDER, RULE, REGULATION OR ORDINANCE (COLLECTIVELY “ENVIRONMENTAL LAWS”) REGARDLESS OF ACTUAL INJURY OR DEATH OF PERSONS OR LOSS OR DAMAGE TO PROPERTY OR (2) THE PRESENCE, RELEASE OR DISPOSAL OF ANY HAZARDOUS MATERIALS ON, UNDER OR ABOUT THE PROPERTY OR LANDS POOLED THEREWITH DURING THE TERM OF THIS LEASE. LESSEE SHALL CLEAN UP, REMOVE, REMEDY, AND REPAIR ANY SOIL OR GROUND WATER CONTAMINATION AND DAMAGE CAUSED BY THE PRESENCE OR RELEASE OF ANY HAZARDOUS MATERIALS IN, ON, UNDER OR ABOUT THE PROPERTY OR LANDS POOLED THEREWITH DURING THE TERM OF THIS LEASE IN CONFORMANCE WITH THE REQUIREMENTS OF APPLICABLE LAW. THIS INDEMNIFICATION AND ASSUMPTION SHALL APPLY, BUT IS NOT LIMITED TO, LIABILITY FOR RESPONSE ACTIONS UNDERTAKEN PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY ACT (CERCLA), 42 U.S.C. SECTIONS 9601, ET SEQ., OR ANY OTHER ENVIRONMENTAL LAW OR REGULATION. LESSEE SHALL IMMEDIATELY GIVE LESSOR WRITTEN NOTICE OF ANY BREACH OR SUSPECTED BREACH OF THIS PARAGRAPH, UPON LEARNING OF THE PRESENCE OF ANY HAZARDOUS MATERIALS, OR UPON RECEIVING A NOTICE PERTAINING TO HAZARDOUS MATERIALS WHICH MAY AFFECT THE PROPERTY OR LANDS POOLED THEREWITH. THE OBLIGATIONS OF LESSEE HEREUNDER SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION, FOR ANY REASON, OF THIS LEASE.

LESSEE’S INDEMNITY OBLIGATIONS SURVIVE THE TERMINATION OF THIS LEASE.

INSURANCE. Upon the commencement of operations under this lease and at all times thereafter, Lessee shall acquire and maintain insurance covering all of its operations on the leased premises, including any work performed on its behalf by contractors, subcontractors, and others, naming Lessor and related individuals and entities designated by Lessor as additional insureds. Lessor shall be provided certificates of insurance for such coverage and shall be notified if any insurance coverage ceases at any time. The policies shall include coverage for comprehensive general liability for bodily injury and property damage, blowout and loss of well coverage, and coverage for any damage to the environment, including coverage for the cost of clean up and surface remediation.

Compliance with Environmental Laws and Regulations. Lessee shall install and maintain all equipment and conduct all operations in an environmentally sound manner, in accordance with all applicable regulations of all governmental authorities having jurisdiction. Lessee shall not use, store or dispose of any hazardous materials on the leased premises, except to the extent such substances are contemporaneously required for actual oil or gas operations on the leased premises and any such substances shall be used, stored and disposed of in a safe manner, in compliance with all applicable governmental regulations. Lessee shall insure that all contractors comply with the terms of this subparagraph. In the event Lessee is notified of any environmentally harmful or dangerous conditions on the leased premises resulting from Lessee's operations, Lessee shall promptly take all actions required to clean up and correct such dangerous or harmful conditions, in accordance with applicable law and regulations and sound engineering practices. Lessor shall have no responsibility to inspect or oversee Lessee's operations or to identify or correct any potentially harmful, dangerous or damaging conditions, and Lessor shall have no right to control any details of Lessee's operations, nor to designate or control Lessee's contractors. Neither Lessee nor any contractors shall have any right of contribution or indemnity from Lessor for any matters relating to operations on the leased premises or conditions on the leased premises, regardless of whether such matters arise from Lessor's negligence. Lessee indemnifies and holds Lessor harmless from any and all costs, expenses and liabilities Lessor might incur relating to any harmful, damaging or dangerous conditions connected with operations hereunder, regardless of whether such matters arise from Lessor's negligence, but not to the extent such matters arise from Lessor's gross negligence or willful misconduct. By commencing any such operations, Lessee shall acknowledge its consent to the terms of this subparagraph. In the event any claim is made against Lessor based upon an alleged breach of this provision, upon request by Lessor, Lessee shall post a bond for the amount of the alleged damage, such bond to be maintained at Lessee's expense for the benefit of Lessor until such claim is fully resolved. This provision and its indemnities shall survive the termination of this lease, and shall inure to the successors, heirs and assigns of Lessor and Lessee.

Mr. Sims,

That would be a question for the attorney, if you want an good oil and gas attorney for Questions, I would suggest you find someone near you that is a prepaid legal vendor. For $26.00 a month, I can call a attorney every day if I want and they have good Oil and gas attorneys that I have used for leases before. No Contract, so you can get on for 3 months and get off. Very reasonable for the help they give. They also offer ID theft insurance and it's the best.

Sincerely,

Chris

Very impressive information to be added to a lease! We executed a lease without all of this helpful info beforehand unfortunately. Can it be added after the fact? I was under the impression the oil company would be liable?

In the past, I would say many if not most mineral leases didn't have to worry about these liabilities. But given the nature of the EPA as in other states, they are starting to go after mineral rights owners when environmental issues arise. Such is the case in Ohio where the EPA done this sort of thing in the last couple of years. All seems intent to run folks bankrupt and create as many problems with oil companies and mineral rights owners.

Your liability chances for liability on worker injuries is low. Environmental liability exposure is much greater.

Having a strong indemnity, insurance requirements, and notice requirements are a start. However, the best preventative is to have someone check the property often and insist on things being kept clean before they get out of hand. It also gives you a good idea how diligent and prosperous your operator is. The stripper operator running the lease 20 years from now has to be watched pretty closely.



Wade Caldwell said:

Your liability chances for liability on worker injuries is low. Environmental liability exposure is much greater.

Having a strong indemnity, insurance requirements, and notice requirements are a start. However, the best preventative is to have someone check the property often and insist on things being kept clean before they get out of hand. It also gives you a good idea how diligent and prosperous your operator is. The stripper operator running the lease 20 years from now has to be watched pretty closely.
Mr. Caldwell, what is a "Stripper Operator?"

A stripper well is a low producing well that generally receives tax breaks to keep it economic to produce, as something is better than nothing in the states eyes.