Are You Liable if the Oil and Gas Company Fails to Pay its Bills?

Are You Liable if the Oil and Gas Company Fails to Pay its Bills?

Litigation pending before the West Virginia Supreme Court could raise important questions about potential liabilities owed by landowners who signed oil and gas leases. In Hanover v. LML Properties, et al a company providing contract mining services filed a lien against the owners of the coal and land at issue when it was not paid by the company that hired it. The trial court in Boone County, WV ruled that the lien was not enforceable, but the issue is now up on appeal.

While Hanover relates to coal mining directly, it raises questions in the oil and gas environment as well. Imagine that you signed a lease agreement with ABC gas company. ABC gas company hires XYZ Drilling to drill the well that will obtain your gas. XYZ incurs millions of dollars of bills in doing so, but ABC refuses to pay. Should XYZ be able to file a lien against your property to protect its interest? That is one of the questions that the WVSCA could answer. West Virginia does generally allow an entity, such as a contractor, to file a lien against property if they have not been paid pursuant to an agreement to perform work and that work added value to the property. For example, say you hired someone to install a pool at your home, but did not pay. The person who installed the pool could file a mechanic’s lien at the court house. That mechanic's lien can then prevent you from selling your land or getting a loan for your land without first making sure that the contractor was paid. The mining company in the Hanover case has taken that principle and attempted to extend it to mineral mining/extraction.

It seems that the trial judge in Boone County got the decision right. He reasoned that since the mining company had no direct contract or relationship with the mineral owner guaranteeing that it would be paid that a lien is an improper way to secure payment. Thus, the mining company could not cloud the title to a landowner’s property. This should be an issue that the West Virginia Supreme Court will get behind to protect individual West Virginians. For a more in-depth preview of the case you can visit and get information about that case and many others to be considered by the Court. You can also get opinion analysis as the Court issues its rulings.

Image courtesy of Unsplash.

Today's blog: Are you a landowner who signed an oil and gas lease? You'll want to read the blog today to find out more about whether or not you are free from paying up if the oil and gas company fails to pay their bills.