Indemnity and Environmental Indemnity

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Indemnity and Environmental Indemnity

 

 Most industry lease forms do not yet appear to address potential environmental liabilities. This may be because the Superfund statute  excludes petroleum and natural gas from the term “hazardous substance” as defined in that statute. Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C.A. §§ 9601 –  9657 (1983), §9601(14).  Nevertheless, Landowners should consider requesting environmental liability indemnities in all instruments granting oil companies the right to conduct surface operations.  A properly drafted indemnity should be acceptable to the responsible oil and gas operator.  Sample indemnity language that oil companies have agreed to include in Alabama leases is set out below:

 

Lessee’s Covenants and Obligations.  Furthermore, notwithstanding any other provision in this Agreement and without limiting the foregoing, Lessee assumes all risk of personal injury, death, and property damage, including without limitation environmental damage to and interference with the water supply or water quality of any party using any such water supply in the area of the Leased Premises, in any manner caused by, arising from, incident to, connected with or growing out of Lessee’s operations and activities under this Agreement, whether or not the same may be caused or contributed to by an act or omission of Lessor, its contractors, agents, servants, or employees, unless such results solely from (i) Lessor’s gross negligence or (ii) any willful misconduct or intentional wrongful act of Lessor. Lessee hereby agrees to and does hereby indemnify and  hold harmless Lessor, its parent and affiliates, and the agents, employees and representatives of each of them (the “Indemnified Parties”) and further agrees to defend the Indemnified Parties, if requested by Lessor, from and against any and all fines, suits, actions, legal proceedings, claims, demands, court costs, litigation and other expenses (including Lessor’s attorney’s fees, if Lessor does not request that Lessee defend Lessor) in any manner caused by, arising from, incident to, connected with or growing out of: (1) Lessee’s operations and activities under this agreement for any cause whatsoever, unless such results solely from (i) Lessor’s gross negligence or (ii) any willful misconduct or intentional wrongful act of lessor (“claims”); and (2) Lessee’s extraction (wrongful or otherwise) of minerals from lands or mineral interests not owned by lessor.  It is the intent of Lessee as part of the consideration of this agreement to indemnify the Indemnified Parties in connection with claims, as defined hereinabove, regardless of any defense Lessee might have, even if such claims arise in whole or in part from the negligence of Lessor.  Without limiting the foregoing, Lessee shall indemnify, defend (if requested by Lessor) and hold harmless the Indemnified Parties from all fines, suits, actions, legal proceedings, claims, demands, court costs, litigation and other expenses (including Lessor’s attorney’s fees, if Lessor does not request that Lessee defend Lessor) in any manner caused by, arising from, incident to, connected with or growing out of any spills or discharges of hazardous substances or wastes on the Leased Premises that occur as a result of Lessee’s operations and activities on the Leased Premises and from all fines, suits, actions, legal proceedings, claims, demands, court costs, litigation and other expenses (including Lessor’s attorney’s fees, if Lessor does not request that Lessee defend Lessor) in any manner caused by, arising from, incident to, connected with or growing out of Lessee’s failure to provide all information, make all submissions and take all steps required to comply with all federal, state, and local environmental laws, rules, and regulations including, but not limited to, the Comprehensive Environmental Response Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Federal Water Pollution Control Act Amendments of 1972, the statutes of the State of Alabama governing oil and gas exploration, drilling, and production, and/or any other environmental law, as such have been or hereafter may be enacted or amended.  These covenants and obligations shall survive the termination of this Agreement.

Copyright 2011 by Edward G, Hawkins. All rights reserved.