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September 20, 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 Simpson called the meeting to order at 8:08 a.m. The following sections summarize the committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.
Chairman Simpson explained the process that would be followed with respect to presentation of the draft bill (Appendix 3), discussion by the committee, public comment and presentation of proposed amendments. After public comment and presentation of proposed amendments, the committee would then consider the bill and take action on amendments it may consider.
Chairman Simpson described the draft bill page-by-page, including the sources of the various provisions of the bill and the effect of those provisions. Committee members then commented on the bill page-by-page and described some of the proposed amendments they would be offering later. In some instances, simple amendments were moved and acted upon during the preliminary committee discussion.
On page 1, Senator Hawks moved to delete "development" and insert "operations" on line 7. The motion carried on a voice vote.
On page 2, Ms. Sorenson indicated she may propose an amendment to include a definition of "non-agricultural use." Senator Hawks suggested a definition of "tangible improvements" from 04HB0070 might be a good idea. Representative Semlek believed that line 17 should include a reference to seismic activities. Mr. Robitaille stated that "directly" should be inserted after "activities." Ms. Sorenson was concerned that the term would be too limiting.
On page 3, Representative Semlek was concerned that the definition of "tract of land" contained language that was too restrictive. Chairman Simpson advised that the entire definition may be deleted, depending on whether the term is added to W.S. 30-5-405(a)(iv). Otherwise, the definition is unnecessary in the bill. Mr. Barnes stated the exclusion on lines 9-11 should exclude from the act all lands that are owned as a unified estate. Mr. Healy agreed that the definition of "tract of land" should be deleted and definitions for "good faith negotiations" and "reclamation" should be added to the bill.
On page 4, Senator Hawks moved to amend line 13 by deleting "to survey or drill" and inserting "for oil and gas operations and non-surface disturbing activities". The motion carried on a voice vote.
On page 5, Mr. Healy recommended that "business" be inserted before "days" and "written" be inserted before "notice." Mr. Robitaille questioned the language on lines 17-19 with respect to notice prior to subsequent entry. The language is unclear in terms of what types of subsequent entries will require prior notice. Mr. Healy suggested that another sentence may be necessary to identify the non-surface disturbing activities that should be included in the notice.
On page 6, Ms. Sorenson advised she may propose an amendment to line 3 to delete "attempting" and inserting "entering into." Mr. Robitaille expressed concern that lines 9-10 appear to require payment of damages prior to entry on the land. The language on page 10, lines 14-15, should be used in place of the language on lines 9-10 of this page. Chairman Simpson stated that the provisions on page 10, lines 8-15, might be better to use than the language on page 6, lines 6-10, so the two subsections would be similar.
On page 7, Mr. Healy stated he would later move language that has been developed by the Wyoming Landowners' Association to be inserted into line 20 requiring good faith negotiations for best practices to accommodate the needs of both the oil and gas operator and the surface owner.
On page 8, Representative Semlek stated he may move to require good faith negotiations on line 12 whenever there may be changes in the proposed work plan submitted by the oil and gas operator. Mr. Healy suggested that another requirement after line 14 should be that the surface owner shall receive a copy of the act, similar to 04HB0070.
On page 9, Representative Semlek expressed concern that the language limits the procedures in article 6 of the Wyoming Eminent Domain Act to situations where the amount in dispute is under $20,000. Ms. Sorenson moved to amend line 26 by deleting "whether" and inserting "that." The motion carried on a voice vote.
On page 10, Mr. Barnes suggested that the term on line 1, "surface owner agreement," should be changed to "surface use agreement" on that line and anywhere else in the bill the term appears. Ms. Sorenson moved to amend line 6 by deleting "include whether" and inserting "state that." The motion carried on a voice vote.
On page 11, Mr. Healy advised he may have some proposed changes to the language on line 1 later.
On page 12, Senator Hawks questioned why 2 sureties were specified on line 3. Mr. Rivera explained that language was adopted from 43 C.F.R. 3814.1. Mr. Robitaille questioned if that provision with respect to acceptable sureties would conflict with the language that references surety bonds as defined by W.S. 30-5-101(a)(x). Mr. Rivera advised that it probably does conflict. Mr. Sorenson stated she may consider an amendment to line 7 by adding "to both parties and" after "acceptable," but that amendment would create a conflict with the procedures specified in subsection (c) on the next page. Senator Townsend advised that the Oil and Gas Conservation Commission has developed over the years a bonding process that works well. Mr. Healy stated he is not in favor of specifying a minimum amount for the bond on line 17 because it will become the standard, rather than the starting point, for setting the bond amount.
On page 13, Representative Semlek believed "and the surface owner" should be inserted after "operator" on line 10 and "or against" should be inserted after "support" on line 11. Mr. Healy questioned whether operations would be stayed during the resolution of a dispute concerning the amount of the bond.
On page 14, Mr. Healy recommended adding after "income" on line 31, "and other loss to commercial and non-commercial uses". Senator Hawks suggested line 31 and page 15-line 16, could include "tract of land."
On page 15, Chairman Simpson asked if "non-surface disturbing activities" should be added on line 1 after "caused by." Ms. Sorenson proposed adding "and damage to aquifers and water supplies and costs of surface reclamation" after "improvements" on line 1. Chairman Simpson recommended "and method" should be added after "amount" on line 4 and "exploration" on line 13 should be replaced by "drilling." Mr. Healy suggested adding language to line 15 specifying that the payments would cover land and used mutually agreed upon between the parties. Representative Semlek asked if "tract of land" should be inserted on line 16. Mr. Healy thought that addition would be too limiting on the damages that could be paid.
There were no recommendations for change on page 16 through 18.
Mr. Bruce Hinchey, Petroleum Association of Wyoming, was concerned that W.S. 30-5-402 requires two notices, but the structure of the requirements is confusing. He recommended moving the minimum amount required for the damages bond to $1,000 to conform with the federal requirement. The bill should specify at what point after providing notification that an oil and gas operator may enter the land. The penalty for late payment in W.S. 30-5-405(b) is too high. He questioned what the term "disruption" on page 15-line 19 is intended to mean. The notice requirement to all surface owners is too broad. He recommended amending the bill to require notice only to the record owner for tax purposes. Senator Hawks asked if replacing "clerk" with "assessor" on page 3-line 8 would be sufficient to accomplish the last request.
Mr. Alan Rabinoff, Bureau of Land Management, was concerned that the bill may require double bonding for damages at different amounts if a federal mineral lease is involved. He recommended the bill should clarify if two bonds are necessary in that instance, a federal bond of $1,000 and a state bond of $3,000, or if a single bond could meet both state and federal requirements and how that bond should be held.
Ms. Laurie Goodman, Wyoming Landowners' Association, distributed Appendix 4, containing proposed amendments to the bill, including some that have been proposed by members of the committee. She commended the cochairmen for developing an excellent draft bill that she believes is a good start on addressing concerns of both landowners and oil and gas operators. Tracking the bill with the federal regulations is not necessary and may not be a good approach because the federal Department of the Interior is currently reviewing its Onshore Oil and Gas Order No. 1 and, as a result, may be amending the minimum amount of the required federal damage bond, so that amount is currently in flux. She suggested the minimum bond amount should either not be specified in the bill, or the amount be set at $25,000 with a built-in index to inflation. The bond should not be tied to a well site since damage is not always restricted to the well site. She explained that nonagricultural uses are proliferating among ranchers and farmers as a way to make a living on their land; therefore, losses attributable to the nonagricultural uses should be compensable. She also believed that the "tract of land" definition and the use of "directly" on page 15, line 16 conflict with the "loss of land value" language in W.S. 30-5-405. The term "directly" may be counterproductive to both the landowner and the oil and gas operator, so perhaps it should be deleted. The language in W.S. 30-5-401(a)(vi) should remain as written because even in a unified estate, a lessee can control the landowner who inherited the land subject to a mineral lease. The dispute resolution processes on page 9 should include use of the Agriculture Mediation Service. Notification should be to all surface owners because they all have a legitimate interest in protecting themselves from damages to the land. The bill does not have an award of costs in disputes, unlike 04HB0070. She recommended using language similar to Tennessee's, articulated in Amendment No. 15 in Appendix 4 since W.S. 30-5-402(a) gives a clear advantage to the mineral estate owner or lessee.
Ms. Penny Vance, Powder River Basin Resource Council, supported adding a definition for "nonagricultural uses". The language regarding subsequent entry for non-surface disturbing activities is too cumbersome and should be amended by adding on page 5-line 17, "not previously agreed upon." She would like the reference to the Wyoming Eminent Domain Act to include the statutory citation to the Act.
Mr. Jim Magagna, Wyoming Stock Growers Association, would like the notice requirement changed from 20 and 90 days to 30 and 120 days. The dispute resolution processes should be required if one party makes a request for alternative dispute resolution. A boiler plate check-off form could be required for the surface owner to help the oil and gas operator meet the requirements of W.S. 30-5-402(c). He agreed with inclusion of language to address nonagricultural uses. As a way to accomplish that, he recommended deleting "agricultural" on page 14-line 31. The provisions of W.S. 30-5-403(a) and (b) could be combined as they are in W.S. 30-5-402(c)(i). The language requiring additional notice prior to subsequent entry should include language that such prior notice is only required if requested by the landowner. The bonding requirements make no mention of the time limit the oil and gas operator has to meet the additional bonding amount that may be required by the Commission. Bonds are only intended as assurances that damages will be paid and are not equal to the anticipated amount of damages that may occur. The notice requirement should specify that all record owners shall be notified at the last known address of each. The first two sentences of W.S. 30-5-405(a)(iv) should be deleted.
Mr. Bryce Reece, Wyoming Wool Growers Association, advised that the definition of "good faith negotiations" in the proposed Surface Owners Coordination Act presented at the last meeting and Appendix 4 came directly out of Black's Law Dictionary, so it should not cause a problem if included in the bill. The term "harm" on page 15-line 13 needs to be defined or replaced with "damages." The provisions relating to appraisers in the Surface Owners Coordination Act should be incorporated into this bill. He is concerned that the bill should be careful in its language with respect to damages for nonagricultural uses so that agricultural lands do not lose their existing tax status for agricultural uses.
Mr. Perry Pierce, Burlington Northern Railroad Co., does not like the use of the terms "dominant" and "servient" when discussing split estates, even if those are the terms favored by the law. This bill only would come into play when a failure to agree occurs, which is a very infrequent situation; therefore, not too many problems are going to be solved by this bill. The committee should not be misled that the bonding requirements are intended to equal the damages that may be paid. The bond is only intended to ensure that payment of damages will happen. Thus, the bonding amount required should be the same as the federal government's requirement. He disagreed with the assertion that an award of costs should be made when disputes are resolved. Award of attorneys fees only encourages litigation. If an award can be made to the prevailing surface owner, then the other party should get an award of the fees if he prevails.
Mr. Elmer Parson stated he had been involved in oil and gas operations for many years and has served on the Oil and Gas Conservation Commission. He agrees with Mr. Magagna that the bond is nothing more than an assurance that the payment for damages will occur. The Commission already has a bonding process that has been refined through the help of bankers. A minimum bond amount of $1,000 is sufficient and won't restrict the ability of the oil and gas operator to function. He suggested that page 6 of the bill should also contain a requirement that the surface owner negotiate in good faith.
Mr. Steve Adami, Johnson County landowner, requested the committee consider inserting language on page15-line 2 similar to language from 04HB0070 with respect to reclamation. He agrees with Mr. Magagna that the first two sentences of W.S. 30-5-405(a)(iv) should be deleted.
Mr. Drake Hill, Brown, Drew and Massey, stated the oldest law available to man is the private contract. The proposed bill impairs private contract rights. Potential double bonding provisions are a concern if federal mineral rights are involved. Surface water is owned by the state, so the recommendation that the oil and gas operator should pay the surface owner for damage to aquifers and other water supplies is inappropriate, since only the state can contest damages to those waters. Damages to land are usually confined to small acreage that is taxed as agricultural land, so a minimum bond of $3,000 may be unreasonable. The bill does not appear to allow the oil and gas operator to appeal the bond amount set by the Oil and Gas Conservation Commission.
The committee considered the bill and amendments to the bill page-by-page.
In addition to amendments that were earlier adopted, the following amendments were moved and adopted by the Committee:
The following amendments were moved, but failed adoption:
Mr. Healy withdrew a motion to amend page 9-line 6 to incorporate the language in Appendix 4, Amendment #14, due to lack of time to consider the amendment. Chairman Simpson advised the committee that the cochairmen would work with staff on bonding, mediation and dispute resolution issues discussed by the committee. A revised draft incorporating amendments adopted at this meeting and other changes proposed by the cochairmen between this meeting and the next meeting of the committee would be sent to the committee. A two day meeting may be necessary to complete consideration of amendments to the draft bill and review of a final draft for the committee to consider presenting to the Joint Judiciary Interim Committee by November 1, 2004.
The committee will meet again on Thursday, October 14, 2004, and possibly Friday, October 15, 2004, in Casper to continue consideration of the draft legislation.
There being no further business, Chairman Simpson adjourned the meeting at 4:30 p.m.
Respectfully submitted,
Senator Bill Hawks, Cochairman Representative Colin Simpson, Cochairman