Wednesday, September 30, 2015

Eisenberg on Regulating Landmen

EisnebergAnn Eisenberg (West Virginia) has posted Land Shark at the Door? Why and How States Should Regulate Landmen (Fordham Environmental Law Journal) on SSRN.  Here's the abstract:

This Article examines principles of fairness in bargaining as they apply to the “landman” profession — a largely ignored issue which rests at the intersection of the pressing matters of income inequality and energy development. Landmen have been the middlemen between energy companies and landowners for over a century; they negotiate high-stakes financial transactions and have gained notoriety for unethical conduct, yet they are generally unregulated. In this Article, I argue that this laissez-faire regime is inconsistent with the thrust of modern U.S. law. Specifically, I look to professions with responsibilities comparable to landmen’s, including realtors, lenders, and brokers, and argue that consistent themes emerge across realtor-buyer, lender-borrower, broker-buyer, and landman-landowner relationships — call them, respectively, Party A (realtor, lender, broker, landman) and Party B (buyer, borrower, buyer, landowner). All have issues with Party B’s potential for confusion as to whether Party A is serving her interests; potential conflicts of interest on the part of Party A, such as financial incentives to steer Party B toward something risky; information asymmetries that favor Party A, and Party A’s potential to manipulate Party B through omissions or misrepresentations; and Party B being unrepresented in a complex and potentially hazardous transaction with serious personal ramifications. Yet, regulations applicable to the other professions are stricter than any standards applicable to landmen. Although the law has traditionally not intervened into bargaining processes, intervention has tended to be stronger where one party is perceived as patently weaker. The appropriateness of regulating landmen thus rests not only in the moral imperative to prevent exploitation — such as the mass land dispossession that landmen are known to have facilitated — and in the imperative to manage energy development responsibly, but also in the law’s stronger willingness to intervene into comparable bargaining scenarios. This Article also reviews the few existing regulations governing landmen and attempted reforms, and proposes elements that could be included in state-level legislative regimes governing landmen.

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