If so, and you own property on which tenants engage in certain regulated activities, you should consider consulting a specialist for a little preventive care – legal, not medical. Controlling the activities of these tenants can draw enforcement against the property owner when the tenants’ operations raise environmental compliance issues, as a recent federal case illustrates.

The case involved a sportfishing group that sued an industrial park owner for Clean Water Act (“CWA”) violations caused by discharges of polluted storm water. The fact that any pollutants in the storm water were put there by the tenants did not protect the landlord. The court held that “owners and/or operators who have sufficient control over a facility can be held liable under the CWA even if they do not themselves perform the industrial activities that create the pollutants in the storm water discharge.” Here, the landlord owned and controlled the storm water drainage system from which the pollutants were released.

Operations requiring storm water permits are not uncommon, and can include transportation, food processing, and recycling businesses, as well as construction activities. The requirement can also apply to other operations on a case-by-case basis.

Moreover, this potential enforcement trap for landlords goes beyond CWA concerns. Owners who exert control over their tenants’ waste management practices may also risk enforcement. In recent years, retail outlets like hardware stores, pharmacies, and even groceries have been targeted by hazardous waste enforcement actions. This is because many common products like drain cleaners, over-the-counter drugs, and hand sanitizers can be considered hazardous wastes under certain circumstances.

Thus, a tenant’s business may not necessarily raise a red flag. Landlords should consider how monitoring protocols or proper lease provisions could provide protection from the environmental afflictions of their tenants, and save the expense of a pound of cure.

If you have reviewed a royalty revenue statement you have probably asked, “Why are there all of these deductions?” Many mineral owners have recently asked this question which has brought the issue of royalty deductions to the forefront. The simple answer is taxes and your oil and gas lease.

Typically, Ad valorem, Conservation, and Severance taxes are deducted from royalties. Ad valorem means “according to value” and the percentage is decided by each local government. Conservation tax is levied by the Colorado Oil and Gas Conservation Commission and ranges from 0.7% to 1.5% of the value of the minerals produced. Severance tax is levied by the State and ranges from 2% to 5% depending on the value of the minerals produced.

Other deductions, such as pump overs, transportation, and pipeline tariffs to name a few, come from the oil and gas lease. Even if you did not personally sign a lease, a lease may still bind your minerals. Oil and gas leases generally “run with the land.” This means that the lease is binding on purchasers of land that include mineral rights even if the purchaser did not sign it.

If the lease does not include a provision regarding allowable deductions, law defines what deductions are allowed and which are not. Some states allow deductions for any costs incurred after the minerals are severed from the land, i.e., brought to the surface. Colorado is different and follows the marketable product rule. Deductions for costs incurred before the minerals are considered marketable are not deductible. If you have questions about deductions, you should review your oil and gas lease with an attorney.

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Otis, Bedingfield & Peters, LLC provides a range of legal services throughout Northern Colorado. OBP has 15 attorneys spread across its two offices in Greeley and Loveland. For more information, contact Lee Morehead at lmorehead@nocoattorneys.com  or call 970-330-6700 or visit www.nocoattorneys.com.