Does Texas Chapter 127 apply to my work?

Chapter 127 applies to an "agreement pertaining to a well for oil, gas, or water or to a mine for a mineral." Under Section 127.001, that means a written or oral agreement about rendering well or mine services, or an agreement to perform part of those services or a collateral act, "including furnishing or renting equipment, incidental transportation," and other goods and services furnished in connection with the services.

"Well or mine service" covers, among other things, "drilling, deepening, reworking, repairing, improving, testing, treating, perforating, acidizing, logging, conditioning," as well as purchasing, gathering, storing or transporting oil, brine water, fresh water, produced water, condensate, petroleum products or other liquid commodities, and other services for a well drilled to produce or dispose of oil, gas, other minerals or water. It also covers mine shafts and similar structures.

Read that list against typical service trades:

The definition of well or mine service expressly excludes:

• purchasing, selling, gathering, storing or transporting gas or natural gas liquids by pipeline or fixed associated facilities, and
• construction, maintenance or repair of oil, natural gas liquids or gas pipelines or fixed associated facilities.

A joint operating agreement among working interest owners is also not covered.

Section 127.004 then carves certain losses out of the chapter even when the work is covered: injury or damage from radioactivity; property injury from pollution, including cleanup and control; reservoir or underground damage, including loss of oil, gas, water or the well bore; injury or damage from services to control a wild well to protect public safety or prevent depletion of vital natural resources; and the cost of controlling a wild well. Indemnities for those losses are governed by the contract and general law, not Chapter 127.

Section 127.007 also leaves a surface owner free to seek indemnity from the lessee, operator or contractor working on its land.

Inside the chapter, Section 127.003 voids indemnity for losses caused by the indemnitee's "sole or concurrent negligence," or that of its agent, employee or "an individual contractor directly responsible to the indemnitee," for personal injury, death or property injury.

The exception is insurance. Under Section 127.005, the chapter does not apply if the parties agree in writing that the indemnity will be supported by liability insurance furnished by the indemnitor. A mutual indemnity is then limited to the coverage each party agreed to obtain for the other. A one-way indemnity can be supported by required insurance of no more than $500,000.

For your insurance program, that means the limits in the MSA exhibit, and the wording of your own policies, can set how far the indemnity reaches. See does Chapter 127 require mutual insurance and the Texas oilfield anti-indemnity act.

Chapter 127 is a Texas statute. If you cross into New Mexico, that state has its own oilfield anti-indemnity law, NMSA Section 56-7-2. As amended in 2003, it voids indemnity for the indemnitee's sole or concurrent negligence in agreements pertaining to oil, gas or water wells, and it also voids insurance or other contract provisions that would achieve the same result. There is no Texas-style insurance exception in that text. See Hobbs and Carlsbad for New Mexico work, and the Haynesville page for Louisiana.

Which state's law governs a given job depends on the contract and where the work happens. That is a question for your attorney, and the answer can change what your insurance needs to do.