label: OIL AND GAS

GILLETTE - The Joint Judiciary Committee passed the Surface Owner Accommodation Act late on Monday by a vote of 11 to zero, moving forward a bill intended to give landowners better negotiating powers when dealing with oil and gas developers.

Committee members will attempt to introduce the bill in the coming legislative session.

Legislators say the purpose of the bill is to ensure good-faith negotiations between landowners and oil and gas developers. The committee took up the issue because of growing concerns over mineral development on split estate lands - lands where a surface owner doesn't own the underlying mineral estate.

In Wyoming, the mineral estate is dominate over the surface estate. Split estate surface owners and mineral developers are typically successful at drawing up private agreements for surface damage compensation. But when negotiations fail, a developer can post a bond and move onto the private surface to access his minerals without an agreement in place.

Many split estate landowners say oil and gas companies are not compelled to truly negotiate in good faith. The Surface Owner Accommodation Act would ensure that both parties have an equal obligation to negotiate in good faith to strike a surface-use agreement.

"Most of them are serious and reasonable. But some of them can get pretty tough," Sheridan County split estate landowner Paul Kukowski said of coalbed methane gas companies.

"The bottom line is they have the dominate estate, so they are coming. We're not going to stop it or prevent it. All we want to do is be able to negotiate in a fair and even-handed manner," Kukowski said.

Oil and gas representatives have railed against the bill, noting that there are only a handful of failed negotiations in which a company has bonded onto a private surface.

"My understanding is there's been three bond-on cases and two cases have actually gone to court, so you're talking about five cases out of 40,000 or 50,000 surface-use agreements. So I'm not sure there's a drastic need for it," said Bruce Hinchey, president of the Petroleum Association of Wyoming.

Hinchey said the current form of the bill is detrimental to the oil and gas industry in Wyoming because it attempts to establish a list of items that should be considered for compensation. There shouldn't be such mandates in private negotiations, he said.

"It will really change the whole playing field quite a bit if it is passed as it is," Hinchey said. "If that happens, I'm not real sure where things are going to go with development in the state."

Pennie Vance, of the Powder River Basin Resource Council, said the fact that there are very few bond-on cases in the state proves just how powerful the option is for the oil and gas industry.

"The threat to bond on is a real hammer," Vance said. "Then you have no agreement and there's nothing you can do about it. There's the imbalance: When one party in a negotiation can hold that hammer over the other, there's no justice."

Vance said better balanced negotiations lead to better surface-use agreements and better relationships between landowners and mineral developers.

Rep. Rosie Berger, R-Big Horn, who sponsored the bill, said she and members of the Joint Judiciary Committee accepted a barrage of input from landowners, oil and gas developers and state leaders regarding the bill. She said the committee worked extra hard to create a bill that will protect both parties and ensure that mineral development isn't snagged up in the surface-use negotiating stage.

Rep. Ed Buchanan, R-Torrington, said many people involved were apprehensive about creating a list of items that merit compensation, especially for unfounded claims based on future plans. Buchanan said the committee tried to avoid those problems.

For example, a landowner cannot ask for compensation based on the claim that he was going to build a hunting lodge someday and therefore should be rewarded for the loss of a business that doesn't exist.

"We did allow for a list of (damages), but we didn't want to include future-based damages," Buchanan said. "I expect more amendments on that list when the Legislature takes up the bill."