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MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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Our family sold our grandparents homestead but kept the mineral

Customer Question

Our family sold our grandparents' homestead but kept the mineral lights. We are 13 cousins. They are trying to lease the rights via some landmen, and the "contract" is awful. They refuse to hire an attorney since all the oil patch workers and attorneys say it's "standard" stuff. I revoked my POA, will I be liable for any blowback down the road, or do I need to do more?
Submitted: 1 year ago.
Category: Business Law
Expert:  Thomas McJD replied 1 year ago.

Hello, I would be happy to assist you, but I do need some clarification first.

 

Are you a partial owner? What power of attorney did you revoke -- one that appointed someone to act for you, or do you mean that you resigned as agent for someone else under their power of attorney?

 

Please explain your reasoning for "revok[ing] [your] POA"?

Customer: replied 1 year ago.

The 13 appointed Jim as executive with POA's. I rescinded his authority to act on my behalf.


 


I only had two semester of business law, a long time ago, but many ambiguities, omissions, and just plain bad give aways while we kept all the liabilities.

Expert:  Thomas McJD replied 1 year ago.

Actually a bad contract is construed against the party that drafted it (in the event there is an argument concerning meaning of terms, which arises by ambiguities in drafting).

 

What you have done, however, is prevent him from making you a part of an agreement you may not desire to be a part of. If you don't become a part of the lease, then your interest in the minerals may later be force pooled. That means they'll get to mine the minerals regardless of your consent; they'll just have to pay you a royalty (which is usually less than if you had signed a lease with them).

 

If you lease your minerals and don't retain a working interest, then all liability is on the operator of the well that is drilled, if any.

Customer: replied 1 year ago.

The way the lease reads, they can assign any and all rights without our approval and have no liability for anything the sub does. In fact we agree to approve anything they broker. I know about the forced pooling, but what I am worried about is ownership liabilities for what they leave, like the produced water they get to use and leave.


 


 

Expert:  Thomas McJD replied 1 year ago.

I don't know what else to tell you other than to ask them for revisions or make concessions. Getting an attorney involved may make a difference.

 

I will opt out to see if another expert can further assist you. Please don't worry about rating my answer. Please do not respond to this message.

 

Thanks for your patience.

Expert:  wendy-Mod replied 1 year ago.
Hi, I am a moderator for this topic. It seems the Professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new Professional to assist you right away, but sometimes finding the right Professional can take a little longer than expected.

I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Wendy
Customer: replied 1 year ago.

Hi, Wendy


 


I'm okay waiting. I'm not sure whether we even own the ground water with the split estate and Colo water laws.

Expert:  wendy-Mod replied 1 year ago.
Thank you for your patience. We will continue to search for a Professional for you.

Regards,
Wendy
Expert:  Fran-mod replied 1 year ago.
Thank you for your patience, your business is very important to us, we are waiting on the Professional with the right expertise to come online. Feel free to let us know if you would like us to continue searching for a Professional or if you would like us to close your question. Thank you for your understanding!
Customer: replied 1 year ago.

Gosh! It seems like such a simple question:


If my share of the oil is force pooled, who gets the future liabilities? Does my duty not to pollute end when the oil company takes the oil?

Expert:  Fran-mod replied 1 year ago.
Please understand that it’s rare when we cannot find the right professional. Nevertheless, because you are entitled to your money back with no questions asked, we will process your refund immediately at your request. Please accept our sincere apology. We hope you’ll think of us again when the need arises.
Customer: replied 1 year ago.
Relist: Incomplete answer.
There has been no answer.
Expert:  Roger replied 1 year ago.

Hi - my name is XXXXX XXXXX I'm a Business litigation attorney.

 

You are not liable for the actions of another - - even if it occurs on your property.

 

Therefore, if your interest is force pooled with the others and mineral, oil, gas, etc. excavation occurs on your property, then the company performing the work is liable to you (as a landowner) and the public in general to perform the operations safely.

 

If the excavation company is negligent or otherwise causes damage or harm to the property (i.e. - - pollutes the water), then it is the company's fault. In fact, you and the public would have claims against the company for their actions and damage to your property.

 

The contract SHOULD contain some type of indemnity provision or agreement that says the excavation company will take full responsibility for its activities and will hold you and the other owners harmless and defend you against any claims that stem from activities that they perform.

 

If there is no such provision in the agreement, you should push for one. Even if there isn't such a provision, you should be able to get protection legally, but it would take filing a lawsuit to obtain the protection. Thus, a simple indemnity provision in a contract is easier and much cheaper.

Customer: replied 1 year ago.

Thanks, XXXXX XXXXX those are the reasons I don't want to sign the lease - poor indemnification for the lessor.


 


This is a split estate, so I'm not worried about the immediate land, just the minerals, and what liability might come up in the future.


 


If my portion is force pooled, they send me discounted royalty which sounds like I keep my ownership, including all the duties that involves. True or false?


 


 


 

Expert:  Roger replied 1 year ago.
That's true. If you're receiving royalties, then you still own your interest - otherwise, they wouldn't be paying you. You certainly try to sell your interest to another owner if you don't want the possibility of liability. As long as you own an interest, there is the potential for exposure, but it is very slight. However, as I said above, if there was any damage that resulted from the company's excavation of minerals, even without a clear indemnity provision, the liability should fall to the company / not you or the other owners.
Expert:  Roger replied 1 year ago.

Hi -

Please let me know if you have any additional questions. Also, please take time to positively rate our conversation so I may receive credit for my time. Thanks.

Customer: replied 1 year ago.

Hi, again


 


I feel that perhaps you don't have experience with the Colorado laws regarding mineral extraction and the separate but connected water issues which are the basis of my conundrum. They are different from the rest of the business world.


 


May I go back to the moderators and be more specific in requesting those qualifications?

Expert:  Roger replied 1 year ago.
This is not a complicated issue, really.

The company performing the work would be responsible for any damage caused by excavation.
Customer: replied 1 year ago.

I agree, there are laws and regs covering what happens during active production. My concern is with what they can legally leave behind, for instance produced water, the ownership of which I am not sure.

Expert:  Roger replied 1 year ago.
The company cannot commit legal waste and leave behind environmental hazards, damages, etc. behind. The company would be responsible for any necessary clean up or remediation.

You could also contact the EPA and ask that it indirect the operations to make sure the work is being done within federal law.
Customer: replied 1 year ago.

Dear Kirk!


 


It's my 13 years working in EPA that raised my apprehensions! I was in the Superfund Enforcement section when we went after waste owners as far back as we could find them. Even you, in throwing out some household chemical, can technically be held liable if the landfill leaks. Of course there are de minimus exemptions, but prosecution is pretty much up to the Agency.


 


It's the states who have the authority over the basic ownership rules, and they are not uniform.


 


Do you have the background to speak with any certainty on these issues?


 


 

Expert:  Roger replied 1 year ago.
I have defended several toxic tort lawsuits that have involved companies polluting the water tables, soil, air quality, etc.

The key to these things is finding who is responsible. Just like in your example, if "I" were to dump chemicals, it would be my liability. However, if you dump chemicals on my property, it's your fault/liability.
Customer: replied 1 year ago.

But, I'm not the one doing the dumping, and I'm not sure yet whether or not I will actually OWN the produced water containing the pollutants.
The lease I refuse to sign specifically allows the landmen to USE or even assign it any way they want, but makes no provision for what happens to it when they're done with it.


 


Do you practice in Colorado?

Expert:  Roger replied 1 year ago.
I understand that. Also, you certainly have a right to refuse to sign.

You can file suit to partition your interest, which actually forces the sale of your interest. That could be one way to resolve this.

Also, I don't practice in Colorado.
Expert:  Roger replied 1 year ago.
I'll be glad to opt out as I think the question asked has been answered as adequately as possible.

Good luck!
Customer: replied 1 year ago.
Relist: Incomplete answer.
The question is:
In Colorado split estates, does forced pooling of minerals for extraction, relieve an owner from liability for future pollution. Does the mineral owner even own the produced water?
Customer: replied 1 year ago.

It's okay to admit it when you don't know an answer.

Expert:  MShore Law replied 1 year ago.
Thank you for the post, I am happy to assist you by answering your questions. The unfortunate reality is that there is not a black and white answer, as the law has not produced a bright line rule. Rather, in forced pooling of minerals for extraction a party's culpability (participation in the process giving rise to the pollution) is what gives rise to liability. If you only produce the oil or permit its extraction, you would not be liable for pollution. Whether the mineral owner owns the produced water is determined by contract between the parties. To protect yourself, you should require that the contract contain an indemnity provision such that you cannot beheld liable for pollution or adverse effects from the extraction (or the effect of the manipulation of resources extracted).

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