Report from the Public Issues Committee: Split Estate Issue Finds Compromise

Title: Report from the Public Issues Committee: Split Estate Issue Finds Compromise

Author: Larry Anna

Publication: The Outcrop, April 2006, p. 16

A split estate bill (HR06-1185) passed the Colorado State House on February 23, 2006 and is on its way to the Senate. After considerable debate and compromise, the bill passed unanimously out of committee and passed nearly unanimously out of the House. The bill, sponsored by Representative Kathleen Curry (D-Gunnison), focused on compensation to surface owners where the surface and mineral estates are split. The bill, partly based on a 2002 Wyoming Split Estate Initiative, mandates as a condition of the final permit to drill that the Colorado Oil and Gas Commission (Commission) require one of the following: (1) a signed surface use agreement, (2) a written waiver signed by the surface owner, or (3) a drilling permit bond of at least $15,000 per proposed new well and an affidavit certifying that the operator has submitted a signed offer of settlement providing compensation to the surface owner for damages caused or reasonably expected to result from the conduct of oil and gas operations (Colorado Legislative Council Staff Summary of Legislation, 2006).

The bill requires that the well operator and surface owner seek a solution to conflicts. If the operator and surface owner fail to agree, the bill requires the operator to make a written settlement offer to the surface owner regarding any damages resulting from oil and gas operations. If the surface owner does not accept this offer within 30 days, the bill allows the operator to post a bond with the Commission of at least $15,000 for each proposed new well. At the request of the operator and after attempted consultation with the surface owner, the bill authorizes the Commission to establish a blanket bond to cover oil and gas operations. Within 7 days of receipt of the financial assurance or blanket bond, the Commission is required to notify the surface owner. If the surface owner does not object to the amount or type of financial assurance within 30 days, the bill requires the Commission to approve the financial assurance. The bill requires the Commission to render a final decision as to the acceptability of the amount and type of financial assurance provided, and to notify the parties of its decision. The bill allows the surface owner or operator, within one year of well completion, to appoint an appraiser to determine damages, and to notify the other party of the appointment. There are also built-in appeal processes. Finally, the bill exempts the state, the State Land Board, and any other state agencies or entities acting on behalf of or pursuant to a contract with such entities from the bill’s requirements.

The Commission estimates that of the 4,363 drilling permits issued in Colorado in 2005, 34 percent are on land where the estate is split (surface and mineral ownership are different). Cost estimates for the Commission to deal with that volume will be about $63,000 in FY 2006. The number of split estate cases is expected to increase each year as is the number of dispute interventions.

Senate passage is expected without major changes to the House version, but there will probably be some minor changes and some language clarification changes. If Governor Owens signs it, the bill will go into effect July 1, 2006. To review the final version of the House bill or the Senate version go to http://www.leg.state.co.us.

The Bureau of Land Management (BLM) held public meetings in March on how to resolve split estate issues. In the Energy Policy Act of 2005, Congress directed the BLM to consult with affected property owners, oil and gas industry representatives, and other interested parties while completing the review to consider how best to facilitate reasonable access for Federal oil and gas activities and minimize impacts to privately owned surface. BLM established a website for interested parties to review background material and documents relating to split estate issues as well as a place for citizens to submit ideas and recommendations to the BLM (http://www.blm.gov/bmp/Split_Estate.htm). Brief statements and recommendations may be e-mailed to: SplitEstate@blm.gov .


Editor’s note: a group of Glenwood Spring’s residents has filed notice that it wants to pursue a state constitutional amendment to increase the rights of landowners when oil and gas companies want to drill on their land. The group is considering a ballot initiative in case the bill dies in the legislature or is not seen as sufficient to meet landowner’s needs.