April 03, 2013 Articles

A Bird's Eye View of the Nation's Oilfield Anti-Indemnity Acts

A brief overview and comparison of the major oilfield-services anti-indemnity acts.

By James Collura and Teia Moore Kelly – April 3, 2013

Indemnity agreements are a common provision in contracts in nearly every industry. Four states have enacted anti-indemnity statutes to specifically address the oilfield-services industry: Texas, Louisiana, New Mexico, and Wyoming. The purpose behind these particular statutes is to promote fairness for owners and operators of oil and gas wells from delegating their duties to those with inferior bargaining power—namely, the well-service contractors. While the policy purposes of such statutes are similar, the precise language and judicial interpretation of each results in very different implementation.

In drafting, revising, or negotiating an oilfield-services agreement, one needs to identify the specific type of services work and the jurisdiction where the work is to be performed to achieve the intent of the parties and avoid potential legal bars. Attempting to tailor the indemnification to a particular state using a choice-of-law provision may have little advantage and ultimately fail to accomplish the drafter’s objective. Further, in certain jurisdictions, a construction anti-indemnity statute may create a second barrier to enforceability. The purpose of this article is to give a brief overview and comparison of the major oilfield-services anti-indemnity acts and to consider the effect of a choice-of-law provision in such agreements.

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