![[Top]](/images/nav-top.gif)
![[Back]](/images/nav-back.gif)
![[Home]](/images/nav-home.gif)
August 31, 2004
Oil & Gas Conservation Commission Building
2211 King Blvd.
Casper, Wyoming
Senator Bill Hawks, Cochairman
Representative Colin Simpson, Cochairman
Senator Ken Decaria
Senator C.L. “Chuck” Townsend
Representative Saundra Meyer
Representative Mark Semlek
Frankie Addington
Jerry Barnes
J.J. Healy
Rick Robitaille
Nancy Sorenson
John Rivera, Senior Staff Attorney
Please refer to
Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.
Chairman Hawks called the meeting to order at 8:00 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.
Mr. Rabinoff distributed a notebook containing information on the amount of acreage administered by the Bureau of Land Management (BLM), a summary of the homestead acts that reserved minerals for the federal government on lands that were homesteaded, sample land patents, a copy of pertinent federal regulations implementing the Stock Raising Homestead Act and policies and procedures used by the BLM (Appendix 3). In the fiscal year beginning September, 2003, the Buffalo office of the BLM processed 2,700 permit applications for the Wyoming side of the Powder River Basin. Of those applications only four bonds were received where no surface owner agreement was executed.
In response to questions from the Committee, Mr. Rabinoff stated that 04HB0070 contained some potential conflicts with federal law, but those could be worked around if the participants were willing to negotiate in good faith. He did not believe any delays would occur as a result of conflicts between federal and state law. He stated that he was not familiar with, and thus could not comment on, an Executive Order that was issued the previous week.
Ms. Boomgaarden distributed Appendix 4, consisting of a letter inviting the public to attend statewide meetings scheduled to receive public testimony on proposed rules and regulations, a Board of Land Commissioners Rules and Regulations Handbook on Surface and Mineral Estates and the Chapter 4 Rules governing Grazing and Agricultural Leasing. Wyoming owns 3.6 million acres of surface lands and 4.2 million acres of mineral estates. Most of the surface owned lands are part of a unified estate. If the mineral estate is leased or the mineral estate is split from the surface estate then Chapter 4 Rules would apply. Ms. Boomgaarden explained the Chapter 4 Rules in detail. The surface impact payment definition is broader than the federal definition. After explaining the process required by §13 of the Rules, she advised when the Director sets the surface impact payment it has averaged about $2,000/well site in the Buffalo/Sheridan area. She requested that any legislation considered by the Committee should reflect that the state-owned unified estates are exempt from the statutes.
Ms. Boomgaarden stated that Ms. Sorenson was correct that Chapter 4 Rules would not apply where the surface is fee-owned and the State owns the mineral estate. In that case, the State would be subject to whatever the state law is governing access to minerals.
Mr. Throne explained his history with respect to the split estate issues the Committee is considering. He grew up in Gillette on a family ranch, but has lived in Sheridan for the last 25 years. As an attorney, he has represented oil and gas operators, but is also owner with his sister of both unified and split estates. He provided a historical background of some federal acts that creating federal reservations in minerals and the legislation sponsored by Senator Enzi in 1998 that spurred development of coal bed methane development in the Powder River Basin. There can be several different mineral estate owners on a given parcel of land. Few oil and gas operators have relied upon the process described by Clarence Brimmer in his 1970 Land and Water Law Review article. They generally have to rely upon their good reputation to obtain leases, so they operate in good faith with surface owners. Problems only arise when either the oil and gas operator or the surface owner is unreasonable. He questioned whether legislation was necessary in light of the low number of instances of conflict among the tens of thousands of applications that are processed annually. He believes the courts exist to address those few conflicts that arise. Other concerns include that the legislation may set a ceiling on damages if bond amounts are codified and a simple notice requirement as North Dakota has may cause more problems for surface owners than it solves. In response to a question from Representative Simpson, Mr. Throne responded that the pre-entry notice should be tied to a requirement for good faith negotiations, to avoid the problem that exists with the North Dakota law. Negotiation is the key to satisfaction for both the surface and mineral estate owners. If legislation is to be considered requiring a notice of entry with a statement of proposed impact, the legislation should allow for a revised statement of impact if such is discovered after surface impact has begun. He believes if legislation is enacted, it would probably only benefit attorneys.
In response to a question from Representative Meyer, Mr. Throne replied that an oil and gas operator can condemn part of the surface estate and pay for the reasonable loss therefor. Currently surface owners can sue for damages under various legal theories.
Ms. Addington believes there are more conflicts and the problem is larger than stated by Mr. Throne. Mr. Healy is concerned that there is a significant inequality in the bargaining skills of the participants and, therefore, legislation is needed to level the playing field.
Mr. Bruce Hinchey, Petroleum Association of Wyoming (PAW), introduced other members of the Split Estate Initiative (SEI). Each representative spoke on the SEI's efforts and goals. He explained the process used to develop the group's proposed draft legislation, Appendix 5.
Ms. Dru Brower, PAW, distributed Appendix 6, a booklet describing the SEI, its objectives and recommendations. She stated the surface use agreement should remain a private contract. If the processes recommended by SEI are used conflict would be even further minimized, but there would still remain some isolated instances where resort to the courts might be necessary.
Mr. Bryce Reece, Wyoming Wool Growers Association, expected some requests for SEI assistance in arbitration, but no requests have been received yet. He had also believed that oil and gas operators would not be willing to participate, but they now appear eager to participate. The Wool Growers Association hasn't yet taken a position on the draft legislation that SEI is proposing, but the Board of Directors did authorize him to participate in the drafting. When the Association meets in December, they will then vote whether to support the bill or not. Some members have already stated they don't think legislation is needed because it could result in a diminution of rights. It is difficult to establish a "one size fits all" legislation. The Association is opposed to legislation by ballot initiative.
Mr. Jim Magagna, Wyoming Stock Growers Association, said there is no substitute for good faith negotiation. Each party needs to understand the other party's goals and interests to negotiate successfully. The Stock Growers Association hasn't yet voted to support the bill, but members did support 04HB0070, even with the problems the bill had. Since last session's bill failed, there was a need to work on some solution. He does believe that some process has to be codified. Notice and bonding requirements should be part of the process, but legislation has to recognize and respect private agreements that may vary from the legislative requirements.
Ms. Susan Noecker, Wyoming Farm Bureau Federation, distributed the Model Surface Owner and Mineral Development Accommodation Act (Appendix 7) and an article entitled Tension Beneath the Surface: The Evolving Relationship Between Surface and Mineral Estates (Appendix 8). She agreed that the SEI creates a process to get people talking to each other. The Farm Bureau Federation did not participate in the proposed draft legislation that the group is recommending to the Committee.
Responding to Senator Decaria, Mr. Magagna stated that the SEI did not consider including someone not tied to the oil and gas or agriculture industry because agricultural surface owners own most large acreage in the State. Mr. Reece added that some members of his Association are small land owners, with as few as 10 sheep.
Mr. Hinchey explained the provisions of the bill, including definitions and the requirements for notice, negotiation of damages, appointment of appraisers, the court process to resolve disputes, release of bonds or financial assurances and the applicability of the act.
Chairman Hawks advised that, given the number of people wishing to speak, a maximum of five minutes would be allowed per speaker. Presenters were requested to avoid duplicative or repetitious statements.
Mr. Gary Espenscheid, rancher from Big Piney, stated surface owners need some leverage to have an equal seat at the negotiation table. When he was negotiating a surface use agreement, he had to deal with some very skilled attorneys from Denver sniping at him. Oil executives in his area said 04HB0070 had too much "blue sky" in it to be successful, but he believes biodiversity is necessary.
Ms. Janet Franson, resident of Clark, Wyoming, stated that she returned to Wyoming after retirement in 1998. She and her husband invested their life savings to purchase 40 acres for a retirement home in Clark. In June, 2004, BLM gave them notice of development and seismic testing that would affect their water supply. Now, they cannot sell their property because of the development that has ruined the attractiveness of the land. She provided a copy of her testimony (Appendix 9).
Mr. Tim Thompson, cattle rancher from Big Piney, distributed Appendix 10, containing the full text of his testimony. The creek, which is the lifeblood of the ranch since the family provides fly fishing opportunities, could be affected if development occurs there because it is part of a split estate. He suggests that a unified estate, which most of his ranch is, is the preferable way to own land, but negotiation is necessary when the estate is split.
Mr. Clay Rowley, Sheridan landowner, believes that damage caused by development should be compensated and the loss of market value of the land should also be calculated as part of the damages.
Mr. Patrick Ellbogen is a Casper landman who ranches in Campbell and Sheridan Counties. He sees on a frequent basis how estates are split into surface and mineral estates, which he explained. He offered as a solution that if a rancher sold the mineral estate, perhaps the rancher could purchase the mineral estate and become the grantee of the estate, thereby establishing a unified estate.
Mr. Eric Barlow, a Campbell County rancher and veterinarian, distributed Appendix 11, a letter from Rick Griffith, and Appendix 12, a letter from Tom Dunn. Both letters address the negative impact of oil and gas development on the use and the market value of land and urge legislative action to resolve those problems.
Mr. Tom Dunn, retired UW professor and rancher on the Little Laramie Valley, distributed Appendix 13 containing recommendations for the Committee to adopt provisions in W.S. 35-11-406(b)(xi) and (xii) and 35-11-416, or make oil and gas operators subject to DEQ regulation, to address concerns of surface owners of split estates.
Ms. Phyllis Walker, a mineral rights owner in Clark, Wyoming, stated that between 1971 and 1997 she sold 122 lots, but retained the mineral interest in those lots. At the time of the transfer of the surface estates for those lots, the purchasers could have bargained for the mineral rights. Now those people are attempting to revise the purchase agreements through legislation.
Ms. Carol LeResche, Clear Creek Valley landowner, distributed a copy of her testimony (Appendix 14) describing the negative impact oil and gas development has had on the surface owners in the area. The pristine nature of the surface estates haves been destroyed and it will remain that way for the next few decades. Surface owners need legislative help to address the damages they are experiencing as a result of the impact of oil and gas development.
Mr. Steve Adami, Johnson County landowner, described his experience with an oil and gas developer. He was offered an agreement without opportunity to negotiate. He believes both 04HB0070 and the SEI proposal are discouraging. Specifically, 04HB0070 provides for inadequate bonding.
Ms. Deborah Thomas, Park County landowner, is representing 500 private land owners who do not own the mineral rights on their properties. She distributed Appendix 15, describing problems they have encountered. Development of oil and gas well sites in their subdivision has created chaos for the surface owners. Because of that development, the market value of their properties has declined to the point they can't even sell the land if they tried. After EnRE, the developer, filed for bankruptcy protection in the Fall of 2002, the drill sites have deteriorated and erosion is occurring, creating the potential for flooding.
Mr. John Vincent, attorney and Mayor of Riverton, advised he is appearing own his on behalf after becoming interested in the issue while representing a landowner in a dispute with the oil and gas developer. He distributed Appendix 16, consisting of analyses of 04HB0070 and the SEI proposal. He concludes that both bills will not withstand constitutional scrutiny because they eliminate the litigants' right to a jury trial. Of the two bills, 04HB0070 is better because it attempts to level the playing field for the surface owners.
Mr. Drake Hill, Brown, Drew and Massey, described a case he participated in last year which required a land appraisal costing $12,000. The appraiser reported there was some short-term diminution in property value, but there would be no long-term diminution. In response to a question from Representative Simpson, Mr. Hill stated that if the value of land was to be expanded to include more than the grazing value under the Stock-Raising Homestead Act of 1916, it would be a federal issue that Congress would have to address.
Mr. Joel Ohman, Campbell County landowner, had been a rancher, but was now more of a land manager for his ranch. He believes no legislation is necessary to address the problems being considered. He has only experienced problems negotiating agreements with developers twice in over 30 years, both of which were quickly resolved through communication. Once coal bed methane development began, all his agreements were quickly negotiated.
Mr. Gene Hoffman, owner of a real estate brokerage and appraisal firm in Jackson, stated he was appearing at the request of landowners who want him to explain how appraisals could be incorporated into any bill the Committee will consider. In response to a question from Representative Simpson, Mr. Hoffman stated the three appraisers that could be appointed under the SEI proposal would cause problems because it does not specify the qualifications required of the appraisers. The complexity of appraisals of market loss value requires more skills than a typical certified appraiser possesses. He prefers 04HB0070 to the SEI proposal because it more clearly establishes rights of landowners. He added that there are market value losses to land beyond those permitted by federal law.
Mr. Shaun Andrikopoulos, Sublette County Rancher, provided some data and projections of the number of coal bed methane wells that are expected to be drilled and the effects on profits and losses for the developers and the surface owners. Mr. Robitaille questioned the validity of some of the figures presented by Mr. Andrikopoulos.
Mr. Bill Garland, Pavilion family rancher, distributed Appendix 17, describing the impact of gas well drilling on his ranch. His land is now unmarketable due to the drilling that has occurred and no legislation will help him. The cumulative effect of well density has devalued his land beyond just the loss of use. He expressed other concerns that he believed the Committee should consider as it proceeds with its deliberations.
After public comment ended, Ms. Laurie Goodman provided letters that were distributed to the Committee, including a letter from Rita Lovell (Appendix 19) and a letter from Dan and Barb Renner (Appendix 20).
Chairman Hawks requested the Committee to consider which direction it would like to proceed, given the testimony they had heard. He suggested as possible options to proceed with 04HB0070, the SEI proposal, the Model Surface Owners and Mineral Development Accommodation Act, or something along the lines of the BLM's regulations.
Mr. Healy asked if the Committee could get speakers from other states to describe their experiences. Chairman Hawks advised that only Montana has had to deal with the split estates issue within the region.
Staff was directed:
At the request of Senator Burns, staff was directed to send all the materials the Committee would receive to Senators Burns and Schiffer and Representative Berger.
Representative Simpson explained that, while 04HB0070 did have unanimous consent for sponsorship from the Joint Judiciary Interim Committee last interim, the Committee was not unanimous on the issue of damages contained in the bill. Ms. Sorenson suggested that 04HB0070 should be used as the model and refine it to address those unresolved issues with the bill. Chairman Hawks stated that the Committee needs to explore other alternatives before deciding how it wants to proceed, including adapting the BLM's rules into a bill. Mr. Robitaille recommended that any bill the Committee considers has to include notice and communication, access, dispute resolution and a waiver of the law's requirements if a private agreement is negotiated. Representative Simpson stated that the reason he wants the Committee to have a copy of the Wyoming Eminent Domain Act is that its condemnation procedures provide a good method for informal dispute resolution, which could be incorporated somehow into a bill.
Representative Simpson suggested that perhaps the Committee should consider a bill that incorporates:
Chairman Hawks agreed that the approach seemed good. After hearing the notice period required by several other states, the Committee decided to include a thirty day period of notice prior to the surface disturbance. The bill should have a good faith negotiation requirement.
Staff was directed to proceed with a draft as discussed by the Committee, working with Mr. Rabinoff to determine which sections of the Code of Federal Regulations should be used and sent to the Committee. The Committee could then compare that draft with 04HB0070 and the SEI proposal.
The Committee will meet again on Monday, September 20, 2004, at Oil & Gas Conservation Commission Building to consider the draft legislation which should be sent to Committee members at least a week in advance of the meeting for their preview.
There being no further business, Chairman Hawks adjourned the meeting at 4:55 p.m.
Respectfully submitted,
Senator Bill Hawks, Cochairman Representative Colin Simpson, Cochairman