FINAL REPORT

Joint Executive-Legislative Committee on Split Estates

I.       Introduction and Background

A.         Committee Composition

                        1.         Legislative Appointees

Representative Colin Simpson, Cochairman

Senator Bill Hawks, Cochairman

Senator Ken Decaria

Senator C.L. "Chuck" Townsend

Representative Saundra Meyer

Representative Mark Semlek

2.          Executive Branch Appointees

Frankie Addington

Jerry Barnes

J.J. Healy

Rick Robitaille

Nancy Sorenson

B.         Scope of Study

The Joint Executive-Legislative Committee on Split Estates was created by 2004 Wyoming Session Laws, Chapter 95, Section 325 (attached hereto as Appendix 1), and was charged with the responsibility to report its recommendations to the Joint Judiciary Interim Committee not later than November 1, 2004 with respect to:

1.  A study of issues related to estates in which the mineral rights and surface rights are held by different parties;

2.  Draft legislation which would modernize laws with respect to the rights of the different estate owners for a parcel of land.

II.      Summary of the Joint Executive-Legislative Committee on Split Estates Study

A.         Review of Relevant Background Materials

Prior to beginning its study, the Joint Executive-Legislative Committee on Split Estates was provided background material, including:

1.  Copies of  prior draft legislation, including:

·         2004 House Bill 0070, Surface Owners' Accommodation Act, considered by the Wyoming Legislature; and

·         Model Surface Use and Mineral Development Accommodation Act, drafted by the National Conference of Commissioners on Uniform State Laws.

2.  Others relevant materials, including:

·         A listing describing the percentages of surface and mineral estate ownership in Wyoming, and in the Powder River Basin;

·         Color-coded maps indicating surface ownership and existing oil and gas projects in the Powder River Basin, as of December 23, 2002;

·         Brimmer, The Rancher's Subservient Surface Estate, 5 Land and Water Law Review 49 (1970)

·         Hill and Rippley, The Split Estate: Communication and Education Versus Legislation, 4 Wyoming Law Review 585 (2004);

·         Legal Memorandum containing analysis of 2003 House Bill 251, dated December 9, 2003, by John Vincent, Attorney-at-Law;

·         Issue Brief: Surface Owner Accommodation in Split Estates, Brian P. Farmer, Legislative Service OfficeAssociate Research Analyst; and

·         Legal Memorandum discussing issues posed by 2003 House Bill 251, dated October 23, 2003,  by Randall T. Cox, Attorney-at-Law.

B.         August 31, 2004 Meeting

The Joint Executive-Legislative Committee on Split Estates met in Casper at the Oil and Gas Conservation Commission Building on August 31, 2004 to receive testimony from representatives of the federal Bureau of Land Management (BLM), the Wyoming Office of State Lands and Investments and other interested parties, including participants in the Wyoming Split Estate Initiative and surface and mineral estate owners who are affected by issues resulting from split estate ownership in Wyoming.

The Committee considered prior examples of draft legislation and a proposed draft bill entitled "Wyoming Surface Owner Coordination Act" presented by the Wyoming Split Estate Initiative.  After discussion, the Committee directed staff to draft a bill for consideration at its subsequent meeting.  The bill was to incorporate BLM rules and regulations relating to procedures, the definition of "tract of land" and damages provisions from the Wyoming Surface Owner Coordination Act, and the informal dispute resolution procedures contained in the Wyoming Eminent Domain Act.

A copy of the Summary of Proceedings for the August 31, 2004 meeting is attached hereto as Appendix 2.

Subsequent to the meeting, the Committee was provided:

·         A copy of the Wyoming Eminent Domain Act;

·         A copy of the Montana statutes codifying its accommodation doctrine, MCA 82-10-501 et seq.; and

·          Flying Diamond Corp. v. Rust, 551 P.2d. 509 (Utah, 1976);

·         A Sample Surface Use Agreement.

C.         September 20, 2004 Meeting

The Joint Executive-Legislative Committee on Split Estates met in Casper at the Oil and Gas Conservation Commission Building on September 20, 2004 to consider draft legislation, 04LSO-0120.W5, Split estates-procedures for oil and gas operations.

After presentation of the bill by Cochairman Simpson and discussion by the Committee, public testimony and proposed amendments were received relating to the bill.  The Committee then considered and took action on proposed amendments.  Because the meeting site had to be vacated by 4:30 p.m., the Committee was unable to complete its consideration of all amendments to the bill.  A subsequent meeting was scheduled to complete consideration of amendments to the bill and to finalize the bill for presentation to the Joint Judiciary Interim Committee with a report no later than November 1, 2004.

A copy of the Summary of Proceedings for the September 20, 2004 meeting is attached hereto as Appendix 3.

D.         October 14 and 15, 2004 Meeting

The Joint Executive-Legislative Committee on Split Estates met on October 14, 2004 at the Holiday Inn in Casper to consider additional amendments to 05LSO-0120.W6, Split estates-procedures for oil and gas operations.  The bill that was considered, enumerated 05LSO-0120.W8, included the amendments that had been approved by the Committee at the September 20, 2004 meeting and other revisions that had been discussed by the Committee at the previous meeting and drafted pursuant to directions from the cochairmen.  After discussion and public input, the Committee adopted additional amendments to the revised bill and directed staff to incorporate those amendments into another revised bill for final consideration on the following day.

The Joint Executive-Legislative Committee on Split Estates met on October 15, 2004 at the Holiday Inn in Casper to consider 05LSO-0120.W9, Split estates-procedures for oil and gas operations, which incorporated all the amendments approved by the Committee on the previous day.  The Committee considered the final draft of the bill, made further amendments to the bill and, pursuant to an motion by Senator Hawks, seconded by Representative Meyer, the Committee voted unanimously by roll call to recommend to the Joint Judiciary Interim Committee that it sponsor 05LSO-0120.W9, Split estates-procedures for oil and gas operations, as amended, in the 2005 General Session of the Wyoming Legislature.  Staff was directed to incorporate the amendments adopted on this day into the draft bill, which would then be enumerated as 05LSO-0120.W10, for presentation to the Joint Judiciary Interim Committee.

A copy of the Summary of Proceedings for the October 14 and 15, 2004 meeting is attached hereto as Appendix 4. 

III.     Findings and Recommendations

A.        Findings 

Based on testimony and information presented to the Joint Executive-Legislative Committee on Split Estates, The Committee finds:

1.  That there is potential for conflict between surface owners and holders of rights to mineral estates when those interests are held by different persons.

2.  That many states have developed and codified their version of the accommodation doctrine to clarify the rights of persons who hold the rights to develop the mineral estate and how the rights of the surface estate owners will be protected when the mineral estate is developed.

3.  That clarification of an accommodation doctrine between surface owners and owners of mineral rights in Wyoming can best be achieved through codification of an accommodation doctrine by the Wyoming Legislature.

4.   That 05LSO-0120.W10, is a reasonable means to accommodate the rights of oil and gas operators and surface owners on lands where the mineral and surface estates are not owned by the same persons. The proposed legislation would allow the oil and gas operator to conduct its oil and gas operations in a manner that is reasonable and necessary, while taking into account what is necessary to accommodate the needs and rights of the surface estate owner by minimizing damage to the surface estate and compensating for damages that occur to the surface estate, as defined by the Legislature.

B.         Recommendations 

The Joint Executive-Legislative Committee on Split Estates recommends:

1.  That the Joint Judiciary Interim Committee favorably consider sponsorship of 05LS0-0120.W10, Split estates procedures for oil and gas operations; and further

2.  That the Wyoming Legislature enact 05LS0-0120.W10, Split estates procedures for oil and gas operations, during the 2005 General Session.

IV.     Report Submission

This report was prepared by John H. Rivera, Senior Staff Attorney, and approved for distribution by Senator Bill Hawks and Representative Colin Simpson, Cochairmen, who submit this report and 05LSO-120.W10, Split estates-procedures for oil and gas operations (attached hereto as Appendix 5) to the Joint Judiciary Interim Committee in fulfillment of the duties created by 2004 Wyoming Session Laws, Chapter 95, Section 325, and respectfully request the Joint Judiciary Interim Committee give thorough consideration to its potential sponsorship of the proposed legislation in the 2005 General Session of the Legislature.