Advance Waivers of Oil and Gas Mechanics Liens

A recent oral ruling by a Texas Bankruptcy Court held that oil and gas mechanics liens can be waived in Master Service Agreements (“MSA”). Oil and gas operator Energy & Exploration Partners Operating, LP and several oilfield service companies were parties to an MSA. The MSA provided: “To the fullest extent permitted by Applicable Law, Contractor waives any right to file a lien against any property of Company Group.”If this waiver were enforceable, the service companies could not file oil and gas mechanics liens pursuant to Chapter 56 of the Texas Property Code against the mineral interest. The operator filed bankruptcy and, in a case of first impression, objected to the enforceability of the liens on the basis of the advance waiver provision and other grounds.The service companies argued that the lien waiver was void either by statute or against public policy.  Chapter 53 of the Texas Property Code, which governs regular construction mechanic’s liens, was amended to add Section 53.286. Section 53.286 states, “Any contract, agreement, or understanding purporting to waive the right to file or enforce any lien or claim created under this chapter [53] is void as against public policy.”However, it is Chapter 56 that governs oil and gas liens, and this Chapter does not include the same prohibition against waivers as that contained in Section 53.286. Although Chapter 56 incorporates certain provisions from Chapter 53 regarding enforcement, the Bankruptcy Court did not find that was broad enough to include the waiver prohibition in Chapter 53.Urged by the parties to examine the legislative intent of these statutes, the judge stated:And when we go to 53.286. . . you can argue this particular provision one way or the other depending upon how you want to see it. You can look at it and say, well, this kind of expresses a legislative intent that waiver of statutory liens is  – – void as against public policy. But you can also look at it and say, well, the fact that it exists in Chapter 53 but it doesn’t exist in Chapter 56 is an indication that the legislature didn’t intend for  that to apply to Chapter 56. And we can ascribe all sorts of legislative intent to this if we want to. We can ascribe the fact that, gee, maybe the Texas legislature just didn’t think about it at the time that they amended Chapter 53, or we can say that maybe the oil and gas industry didn’t have as good a lobby as mechanics and materialmen. Or maybe we can just say, the legislature could just as easily have taken the same type of public policy and applied it to Chapter 56. I think that’s the real problem with looking through legislative history or legislative intent, because it can be twisted to make it whatever you want it to be.But at the end of the day, all I’m left with is the statute itself, and there’s nothing in Chapter 56 that precludes waiver of these liens. And I think that the Texas Supreme Court has expressed its preference that the parties are free to contract. – – Texas is a big freedom of contract state in contracting around what would otherwise be statutory or, in some cases, constitutional rights.” Case 16-04065, Bankruptcy Court of Northern District of Texas, Doc 252, Entered 1/26/17, Transcript pp. 89-90 (edited for clarity).In conclusion, this appears to be a close question. The only legal authority is an unreported opinion of one bankruptcy judge with limited precedential value. As a practical matter, however, until some court decides otherwise, operators and service companies should assume advance mineral contractor lien waivers in MSAs in Texas are valid and enforceable and prepare accordingly.Mitchell Ayer & Conrad HesterThompson & Knight LLP