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Question
My "family" (10 cousins from 6 families) own 3 sections (1 section & 2 half sections:  862 nma) of land in Reeves Co, TX.  One section of land (640 acres is state classified - we split any royalities/money with  the state), and the other two half sections we own the surface & mineral rights. On the two half sections of land we own we signed  producer 88 leases, which we found out later were bad leases to sign. Their is a high probability that we may see oil wells drilled in the next two years on the two half sections. We have come to find out that neither of the leases we signed protect us from environmental liability. We now are thinking we should as a "family" form some type of partnership such as an LLC, LLP, FLP, or any other recommended partnership to protect our liability if that is at all possible, and also lower our tax rate on any type of inheritance our children receive one day. CAN YOU SUGGEST WHICH TYPE OF PARTNERSHIP WOULD BE BEST TO FORM TO PROTECT OUR LIABILITY & TO LOWER THE TAX RATE ON INHERITENCE TAX?  Our primary concern is the environmental liabily issue first & foremost though

Also, if possible, can you explain the pro's & con's of the different types of partnership stated above or any other ones you might suggest to use. Would love any suggestions on this topic you may have.

Thank you.

Answer
I can only suggest that you get the advice of a competent attorney regarding the forming of any legal entity for the purposes of holding title to the mineral interests, to create limited liability.

However, I am quite curious as to why you believe your leases do not protect you from environmental liability?  Did an attorney tell you that?  And was it based on what is written (or omitted) in the lease contracts?  There are other protections outside the terms and conditions contained in any oil and gas lease, that severely limit the landowner's liability for environmental issues caused, directly or indirectly, by the Lessee.  So I would need to know the basis for your belief before I can comment further.

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Marsha Breazeale, M.Ed., CDOA, CPLTA

Expertise

All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.

Experience

Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

Organizations
National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

Publications
"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials
B.A.in Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

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