Monday, October 18, 2010

LANDOWNERS BEWARE: Water Deals In The Eagle Ford

A new feature of this page will be Water News beginning January 5. 2010

Sinking feelings
Gas fracking may already be lowering water tables in South Texas

"The landman systematically feeds misinformation, disinformation and wrong information." My property near Hochheim used to have a live spring that flowed into the Guadalupe River all the time, even during the drought of 2009-2010 but it went dry after the oil company came in and did a seismic survey of the surrounding property. I never agreed to a seismic survey on my property. Be alert and document what is going on in regards to you water wells and springs. The massive seismic shoots and oil company drilling large water wells to fracture Eagle Ford wells, and the drilling of the wells themselves is affecting your water. Landowners need to keep their eyes open. added 11-9-2010
Mike Green

      Many experts are telling us that water, especially here in South Texas, will eventually become as valuable a commodity as crude oil or natural gas some day. Right now there are landman on the hunt to lock up water rights in South Texas. Landowners should be as vigilant when signing any water sales contracts as they would be in signing a oil and gas lease. Water contacts can be dangerous territory to landowners. There are some real predators out there attempting to capture your water rights under the false flag of a Water Sales Contract. The pitch is usually that they need a lot of water to frac Eagle Ford wells. That's true, a lot of water is required, but what usually follows the solicitation to buy your water, is to maneuver the landowner to sign a document that effectively transfers their water rights to the landman. Generous quantities of free money from selling your water falls into the proverbial too good to be true category. While there is a legitimate need for water, a ethical landman will not present you with a document that severs your water rights and transfers those rights to him. If you sign such a document, you are effectively putting a permanent encumbrance on your land to sell your water exclusively to someone for a ridiculous low price. After you sign, the landman thereafter effectively owns your water rights, subject only to paying you the agreed to terms. Some landman that I am aware of only offer a paltry .35 cents per barrel of fresh water. It is my understanding that fresh water is worth well over $2.00 per barrel.  Like many bonanzas before it, the South Texas Eagle Ford has been plagued by a swarm of locusts trying to separate you from your property rights. DON'T BECOME A WATER RIGHTS VICTIM!

The following document is one making the rounds these days. See if you can find how someone's water rights would be transferred. I personally think this is a very bad deal for the landowner.








Seller's and Purchaser, named above, desire to enter into an agreement whereby Seller's will sell to Purchaser, and Purchaser will buy from Seller's fresh water produced from the Carrizo formation, from water wells on lands located in the county and state above named, and being more fully described on the Exhibit “A” attached hereto and made a part hereof.

For adequate consideration and the mutual agreements, benefits and obligations set forth below, Seller's and Purchaser agree as follows:


Seller's is the owner of the surface estate and acknowledges that Seller's has full right and authority to enter into this Agreement and grant the rights set out in this Agreement in the lands described on the attached Exhibit “A” (the “Land”).


As owner of the surface estate, Seller's owns the fresh water underlying the Land. Seller's agrees to sell to Purchaser and Purchaser agrees to buy from Seller's that quantity of fresh water from Seller's water wells, being water produced from the Carrizo formation which Purchaser, in the exercise of its sole discretion.

Purchaser shall pay to Seller's monthly, at Seller’s address, on or before the 20th day of the month following the month in which fresh water is removed from the Land, the cash sum of $_0.35 ( Thirty five cents) per barrel of fresh water removed. Purchaser will meter the water being produced and shall provide Seller's an accounting of the amount of fresh water produced and removed by Purchaser.


In conjunction with the purchase of fresh water by Purchaser, Seller's grants Purchaser the right, at its option, sole risk, and expense, to drill fresh water wells on the Land (the “Wells”). All Wells shall be drilled in a workmanlike manner and Purchaser shall select the location of each well.

Purchaser agrees all Wells drilled by Purchaser, when abandoned by Purchaser, shall be preserved in useable condition for the benefit of and ownership of Seller's. This shall include all casing and equipment, surface and subsurface, but shall specifically exclude all surface and subsurface poly pipe and tubing used in the transportation of fresh water.

If Purchaser abandons any Wells and Seller's agrees to accept ownership of and full responsibility for the Wells, Seller's agrees to indemnify and hold Purchaser harmless from and against any and all claims, actions, suits, or demands for injuries or damages of whatever kind and character resulting from the existence and operation by Seller's of the Wells.

If Seller's elects not to accept any Wells, Purchaser shall, as provided in Paragraph VIII, remove all surface equipment pertaining to the Wells and plug and abandon the Wells in accordance with applicable rules, laws and regulations.


In addition to the right to drill Wells, Producer is granted the right to produce, transport and deliver fresh water from existing Water Wells (“Existing Wells”) located on the Land. Purchaser is granted the right, at its sole cost, risk and expense, to lay, construct, and install water lines, both surface and subsurface, for the purpose of transporting and delivering fresh water produced from Wells and Existing Wells for Purchasers sole use.

Purchaser is also granted the right to construct and maintain any surface facilities deemed necessary for the production, transportation, and delivery of fresh water produced from the Land. Seller's grants Purchaser those easements and right-of-way necessary for the construction, maintenance, and use of all water lines and fresh water wells. Purchaser shall have, during the term of this Agreement, full, free, and exclusive use of the surface for the purposes set out in this Agreement.


Purchaser shall conduct its operations on the Land in compliance with all applicable laws, rules, and regulations of state agencies, regulatory commissions, and other governmental or regulatory authorities having jurisdiction over Purchaser’s operations. Purchaser shall hold Seller's harmless from any losses, damages, liabilities, or claims of any kind which may be suffered by or brought against Seller's as a consequence of, in connection with, or resulting from the activities of Purchaser under the terms of this Agreement.

All rights granted to Purchaser by Seller's shall be exclusive. No agreements shall be made by Seller's with third parties for the purpose of granting to any third parties the right to purchase, transport, and/or deliver fresh water from the Land.


The term of this Agreement shall be three (3) years from the Effective Date stated above, and as long thereafter as Purchaser continues to use fresh water from the Land. Purchaser may, however, terminate this Agreement at any time by delivering to Seller's within thirty (30) days of the intended termination date, a written notice of termination.


Subject to the provisions of Paragraph III, Purchaser has the right, responsibility, and duty at any time prior to or within ninety (90) days after the final termination of this Agreement, to remove any and all surface and subsurface equipment owned or placed on the Land by Purchaser.


Purchaser has the right at any time, without the consent of Seller's, to assign this Agreement and the rights granted, in whole or in part. Any assignment made will not relieve Purchaser of its obligations under this Agreement unless Seller's expressly consents to the assignment. Seller’s consent will not be unreasonably withheld.


If Purchaser fails to timely pay any of the cash sums required under Paragraph II, or to comply with any of the obligations and requirements of this Agreement, that failure shall not constitute a termination of this agreement or a forfeiture of the rights granted unless written notice of a default, by certified or registered mail, is delivered to Purchaser, and Purchaser fails to remedy such default within thirty (30) days after receipt of notice. If Purchaser remains in default for more than thirty (30) days after receipt of notice, this Agreement and the rights granted shall terminate automatically.

This Agreement and all of its terms and provisions shall extend to and be binding upon Seller's and Purchaser and their respective heirs, devises, personal representatives, successors, and assigns.



____________________________ __________________________


By: ___________________________

            The following agreement incorporates many of the clauses that a good water agreement will contain. It is furnished for informational purposes only and does not constitute legal advice. It was drafted as a counter offer to a  River Access Point Agreement. It is a SUA or Surface Use Agreement.


EFFECTIVE DATE: __ _____________________, 2010






This is an Agreement between User and Landowner, to permit access by User of a fifty foot (_50_’) wide surface corridor (the “Access Parcel”) that runs parallel with and adjacent to the fence line boundary along a line from the South most part of Subject Property on XXXXXX, running with the fence to the Guadalupe River, [that portion of the Subject Property depicted on Exhibit “A” attached hereto] of the surface of Subject Property together with an access point along Landowner’s river frontage within the Access Parcel, to use for pedestrian, vehicular and equipment access to the Guadalupe River (the “River”) in order to pump water lawfully there from, the rights to which User has purchased under a separately negotiated water supply contract from the Guadalupe-Blanco River Authority (the “River Authority”). This Agreement is subject to the following conditions:

1. Existing Water Rights: Landowner retains 100% of the existing water rights, whether riparian, groundwater, or of whatever nature pertaining to the Subject Property, including the Access Parcel, and this Agreement does not transfer or assign any of Landowner’s existing water rights, whether riparian, subterranean or surface, to User. User will not take water from the river at any time the user is not in possession of a valid water contract with the River Authority to take water.

2. User Fees: User agrees to pay Landowner the sum of  XXXXXXXX  in cash upon the execution of this Agreement on the Effective Date, plus a monthly Access Parcel usage fee thereafter for the Term of this Agreement of:  XXXXX per barrel of all fresh water pumped out of the River from the Access Parcel during the previous calendar month or $500.00, whichever is greater. At all times during pumping operations User is required to have installed on either the pipeline/pipelines or pump/pumps an inline or on-pump water meter device/devices visible to Landowner that registers and displays the cumulative, true and accurate actual gallons/barrels of water being pumped and having been pumped through the pipeline/pipelines across the Subject Property to terminus at the Subject Property boundary on XXXXXX.  Copies of any and all reports of water usage delivered by User to the River Authority shall be made available to Landowner. The monthly Access Parcel usage fee will be due and payable on the 1st of each calendar month beginning on August 1st, 2010 and each month thereafter until this Agreement terminates. All payments made by User shall always and only be payable to the respective owner(s) of the Subject Property. Any late payment shall bear interest, from the date due until paid, in full, at a rate of fifteen percent (15%) per annum compounded annually, together with the costs, expense and attorney fees incurred in collecting such amount due.

3. Guadalupe-Blanco River Authority: This Agreement between Landowner and User solely allows User access to the fresh water flowing in the River obtained under a separate water supply contract by User from the River Authority and shall not interfere with any other type of current or future surface or mineral lease on the Subject Property. User is fully responsible for obtaining any and all water supply contracts and any and all permission required from the River Authority to take water from the River at User’s own expense and furthermore agrees to hold Landowner harmless from any cause of action resulting from any water taken from the River. User agrees to furnish Landowner with a copy of a valid water usage contract issued by the River Authority prior to beginning actual pumping operations and also agrees to promptly notify Landowner when or if said water usage contact expires or is revoked. User further agrees to only withdraw water from the identified River Access Parcel on the Subject Property, and in the amounts and at the times specified by a valid water supply contract issued by the River Authority.

4. Entrance and Exits: The entrance and exit points on and to the Access Parcel will be agreed upon by both parties. Any gate will have a lock and be locked at all times and kept closed. The entrance and exit points to the Access Parcel are depicted on Exhibit “A.”

5. Similar Access: No agreements shall be made by Landowner with any other third parties for the purpose of granting to any third parties similar access to the River from the Subject Property during the term of this Agreement so long as User is current on payments due.

6. Term of Agreement: The term of this Agreement shall be for a period of two (_2_) years from the effective date first written above.

7. Maintenance: User shall at all times keep the Access Parcel site used by User safe and in good order, free of noxious weeds, litter and debris. User shall conduct periodic trash pickup if requested by Landowner. User shall not permit the release or discharge of any petroleum products or toxic or hazardous chemicals or wastes on the Land.

8. This Agreement may be executed in multiple originals, all of which shall be considered counterparts of one another. This Agreement shall be binding upon the parties hereto and their respective heirs, successors, personal representatives and assigns.

9. Excavation: No excavations of any kind or nature on the Subject Property are permitted by User under the terms of this Agreement. Pump equipment or pumps, along with water transfer pipelines will be located above the surface of the Subject Property and within the Access Parcel. User will not intentionally cut or damage any trees located on the Subject Property unless agreed to in writing by Landowner. User will exercise reasonable due care and diligence so as to not contaminate the soil where any petroleum based fuels or lubricants are stored on the Subject Property.
10. Vehicular Use: User agrees to use reasonable care when operating vehicles on the Subject Property and agrees to not use automobiles, pickups, heavy trucks or any equipment to travel on the Subject Property during wet conditions causing ruts and damage to the Subject Property. Should any damage occur to the Subject Property, other than the ordinary wear and tear of ingress and egress during dry conditions, User assumes responsibility for remediation of such damage or pay for damages caused.

11. Notices and Demands: Any notices or demands provided to be given herein by the parties shall be in writing and mailed by certified or registered mail to the other party at the address set forth above. Any notice or demand shall be deemed to have been received the earlier of five (5) days after the date of mailing or the date of actual delivery as shown by the addressee’s certification or registry receipt.

12. Prohibited Non Related Activities: User shall not permit its agents, employees, contractors, subcontractors, or service company personnel to carry firearms, archery equipment, wildlife calls, weapons, spotting, optical or night vision equipment (other than as required for water pumping operations), or to bring dogs or other animals on the Subject Property. Nor shall User permit such persons to neither bring friends or family onto the Subject Property nor to picnic, barbeque, transport firewood, cut Christmas trees, hunt or injure wildlife, nor remove pecans, artifacts or other materials from the Subject Property. User's employees, agents, and contractors shall at all times carry identification which identifies them as agents of User, and shall promptly and courteously produce such identification upon request by Owner's representatives. User is not permitted to use Access Parcel for storage of anything unrelated to the installation and operation of pumping water from the River through a pipeline to XXXXXX.

13. Use and Enjoyment: User's surface use pursuant to this Agreement shall be non-exclusive. Landowner shall have the right to use the surface of the subject property in any manner which does not unreasonably interfere with the rights of User. Landowner retains the exclusive right to grant hunting and fishing rights.

14. Gates and Fences: User shall promptly restore all fences which may become damaged during User's operations on the Subject Property to as good a condition as such fences were prior to User's operation. When any fence upon the Subject Property is required to be opened, such opening shall not be left unattended unless a good and sufficient gate or fence capable of turning domestic livestock shall be installed. All openings in fences shall be made by installing "H" braces six feet (6') in width, and constructed of pipe at least four inches (4") in diameter on both sides of such opening prior to cutting the fence, which shall be attached to the “H” braces. If User shall breach any fence in constructing a pipeline, User shall install a sixteen (16) foot steel pipe gate across such pipeline between the installed “H” braces. User shall install and maintain in good condition, at User’s expense, a sixteen (16) foot steel pipe gate, “H” braces (as described above) and adequate fences to prevent third party vehicles to the Subject Property at fence line with US 183. When requested to do so by Landowner, User agrees to install a gated cattle guard with an adjacent pipe gate at each point described above. User agrees that such gates, cattle guards, “H” braces, and fences shall be maintained by User in good and operable condition and that all exterior gates, together with any other gate designated by Landowner from time to time, shall be locked at all times (except when being used for passage of vehicles or personnel) with a User lock and a Landowner lock.

15. Monitoring of User Operations: User will provide Landowner with an updated list of User’s
Personnel responsible for all or a portion of User’s operations on the Subject Property together with the address, phone and cell phone numbers of each such employee, together with a twenty-four hour/seven days a week emergency contact number. Further, User agrees not to permit nor authorize entry onto the Subject Property by any person who is not required to conduct its water pumping and transfer on the Subject Property.

16. Livestock: User agrees to pay the fair market value for all domesticated livestock killed or injured by its operations on the Subject Property.

17. Notice: User shall notify Landowner or Landowner's representative prior to entry upon the Subject Property and departure from the Subject Property for any purpose other than those which rights are granted by this Agreement.

18. Indemnification: User, its employees, contractors, agents, and assigns do hereby covenant and agree to indemnify, defend and hold Landowner free and harmless against any and all loss, damage, claims, injury, demands and suits which Landowner may suffer as a result of or related to User's operations on the Subject Property, excluding any portion of such loss, damage, claim, demand or suit resulting directly from the negligence or willful misconduct of Landowner.

19. Compliance with laws and construction: User shall conduct its operations in a manner which fully complies with applicable laws, rules, regulations and lease terms and stipulations. This agreement shall be construed in accordance and subject to the laws of State of Texas and subject to the jurisdiction of the Texas Courts.

20. Time: Time is of the essence regarding matters covered by this agreement.

21. Assignment: User may assign its rights, benefits and obligations pursuant to this agreement to surface use on the Subject Property only to a single person or entity who is the single successor operator to XXXXXXXXXX on the Subject Property. Landowner, and its assigns, shall be deemed to have proportionally assigned its rights, benefits and obligations pursuant to this agreement to any person or entity which acquires all or part of the surface of the Subject Property.

22. Termination of Rights. This AGREEMENT FOR ACCESS AND SURFACE USE OF REAL PROPERTY will terminate after two (2) years from the effective date. At such time User agrees that he will remove at his own expense everything he has caused to be placed on the Access Parcel and leave the land as he found it.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.





By: _____________________________________


[Acknowledgements for Landowner(s)]

COUNTY OF ___________ §

This instrument was acknowledged before me on the ___ day of ___________, 20___ by ____________________________________________________________.

Notary Public in and for the State of Texas
[SEAL] My Commission Expires: ___________

COUNTY OF ___________ §

This instrument was acknowledged before me on the ___ day of ___________, 20___ by ____________________________________________________________.

Notary Public in and for the State of Texas
[SEAL] My Commission Expires: ___________

1 comment:

  1. There are some very "dangerous" water lease contracts being signed. Many give the company unlimited use of water until the end of time. Others claim to source "unconventional" water from deep rivers, but none of their contracts state that they cannot tap the Carrizo Wilcox, etc. Beware of water scams!