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Oil/Gas/working interest purchase in oil lease


I have recently purchased 75% working interest in an old field.  On further inspecting I found that there is too many plug and abandon liabilities and the previous owner is still the operator.  The field is being operated at a significant net loss.  I am not the legal operator, the previous seller is.  Question - Can I walk away from the transaction without being liable for the plug and abandonment of wells ?

I would need to review the purchase/sale agreements (PSA) and the associated transaction documents to know for sure but my short answer is that you will not be successful in just walking away.

The operator is who the State will go after first but that does not reduce your portion of the liability which was agreed to prior to your acquisition.  Generally, if the operator had a Joint Operating Agreement (JOA) executed by the prior owner of your 75% interest and the PSA states that YOU (actually the 75% interest) are subject to prior agreements then the operator will likely file suit against you for your proportionate share of the plugging and abandoning (P&A) or reclamation of the land.  If the operator defaults then the State will research to determine who the non-operators for the leasehold estate and they will find that you own 75% and begin calling and knocking.

Your best option is to sell your 75% WI to someone who is open to working the wells and has the ability to take the operations from the minority owner.  These buyers are out there.  In fact, a group that I work with was in the process of purchasing a field in Andrews County, Texas, that had 26 wells, 4 shut-in, and 26 wells needing to be P&A'd.  They knew that P&A liability can be somewhat deferred and the capital expense would not hit all at once.  The State (of Texas) will press you into P&A work but they are usually pretty easy to allow a deferral unless the State people feel you have abused their tolerance for additional extensions.

Bottom line answer - you can only walk away if the operator will take 100% of the P & A liability for the field...and, the State will allow you to also walk away without paying your portion.  I suspect that neither will desire to pay your portion of the P & A.  If your acquisition is signed, sealed and recorded then you will need to sell the complete interest to be free of the liability.



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Cliff Williams


I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.


I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

Multiple oil and gas topical columns on

I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

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Husband and father of 26 years

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