Bill Rekindles Debate Over Split Estate

Feb 14, 2014

Senator Jim D Anderson

There’s a fight brewing in Wyoming over the rights of landowners who don’t own the minerals below their properties. In 2005, the legislature passed a Split Estate law, but now, one lawmaker is saying it may be time to revisit the issue, in light of changes in drilling technology and intensity.

Senator Jim Anderson introduced a bill this week that would increase bonding on split-estate properties. Wyoming Public Radio energy reporter Stephanie Joyce joins us to discuss the bill, and its implications.

WILLOW BELDEN: So, what does this bill do?

STEPHANIE JOYCE: The bill itself is relatively straightforward. Right now, if companies and landowners can’t reach a surface use agreement, the company can petition the Oil and Gas Commission to “bond-on” -- basically, they post money with the Commission to cover the cost of any damages to the property, and then they’re allowed to proceed, with or without the landowner’s consent. Currently, the standard bonding amount is $2,000. This bill would increase the standard bond to $10,000. Landowners would still be able to petition the Oil and Gas Commission for a higher bond, if they felt it was necessary, but that base amount would be higher.

BELDEN: Senator Jim Anderson, who represents Converse County, District 2, is the main sponsor of the bill. What were his reasons for introducing it?

JOYCE: Well, Senator Anderson told me he got an earful from his constituents during a meeting in January in Douglas about the shortcomings of the Split Estate law, and decided maybe it’s time to have another conversation about it, especially in light of new drilling technologies and the increasing intensity of drilling in some areas. Here he is:

JIM ANDERSON: “Bonding is kind of a tip of the iceberg. If in fact there are other issues that lie deeper, underlying issues, then perhaps this would be an opportunity to discuss those. But if not, then we’ll just dealing with the bonding issue and let the others lie.”

JOYCE: So, while bonding is the only thing that’s actually on the table this legislative session, we’re likely to hear more about this issue over the coming year.

BELDEN: How has the bill been received in the Legislature?

JOYCE: The vote to introduce the bill was overwhelming in support. Twenty-five senators voted to discuss it in committee, while just five voted against it. But the Petroleum Association of Wyoming is pretty strongly opposed to it, and a similar bill died last year. So, it will definitely be discussed, but whether it passes or not remains to be seen.

BELDEN: What are the Petroleum Association’s objections?

JOYCE: Well, I talked with Bruce Hinchey, the Association’s executive director, and he basically just said that he doesn’t feel it’s necessary. He couldn’t articulate what kind of impact it would have on the Association’s member companies if the bonding amount were increased, but he said the current system for dealing with landowner complaints -- petitioning the Oil and Gas Commission to raise the bonding amount -- is just fine.

Unsurprisingly, Senator Anderson and the landowners I’ve spoken with disagree. Amber Wilson, with the Wyoming Outdoor Council, says starting with the higher amount, rather than relying on the Commission process, would be more efficient.

AMBER WILSON: We're always talking about trying to speed things up, and the more you don’t set this up for success from the start, the more you’re going to bog down the process.

JOYCE: The other thing is that the Oil and Gas Commission hearing process is very formal. You’re expected to show up with your attorney, present exhibits… A lot of landowners say it’s overwhelming, and that was another reason Senator Anderson gave for introducing the bill.

BELDEN: Are there other potential impacts of this legislation, other than maybe reducing the need for Commission hearings?

JOYCE: There’s also a feeling among some landowners and landowner groups that a bigger bond would be a bargaining chip. As Alex Bowler with the Cheyenne Area Landowner’s Coalition put it, right now, bonding-on for $2,000 might seem like “the path of least resistance” to oil and gas companies… rather than negotiating a surface use agreement that might total many thousands of dollars. He thinks the $10,000 amount would incentivize more negotiations.

That might be a bit of a straw-man though. Bonding-on isn’t exactly common practice. There were more than a thousand wells drilled in Wyoming in 2013, and only 22 of those were subject to bonding. Presumably for the rest of them, companies were able to negotiate surface use agreements. There’s also no indication that there’s an increase in the amount of bonding-on that’s happening. Nevertheless, it tends to be a very heated topic when it does happen.

BELDEN: We’ll look forward to hearing more as the bill moves through the Legislature. Thanks.

JOYCE: Thank you, Willow.

BELDEN:That was WPR’s energy reporter, Stephanie Joyce, discussing split estate bonding.