The industrial orchestra of the gas patch is being heard. Residents have become accustomed to the rolling thunder of seismic trucks, the unchanging hum of compressor plants, and the high-pitched whine of derricks. Now, the cacophony of oil and gas development is moving to statehouses.
Legislators in Western states are reacting to constituents’ complaints about the impacts of oil and gas drilling. The major impetus for these efforts has been split estates, a common situation where mineral rights have been severed from the surface and are owned by someone else. Laws have historically favored mineral owners’ rights to use the surface. However, a spate of recent bills in different states is trying to protect the surface owner.
New Mexico’s newly enacted Surface Owner’s Protection Act will be the nation’s strongest when it goes into effect July 1. Unless they can reach an agreement with the surface owner, developers will be required to post a bond with the state to cover potential damages. In 2005, Wyoming was the first state to explicitly set a lower bound for efforts at communication and compensation. A key fact in both states is that developers typically offer more than the law requires. Even if a positive relationship is not possible, at least non-combative relations with the landowner are in the interests of the developer. The laws are targeted at a few bad actors who give the industry a black eye.
During the past two legislative sessions, Sen. Kathleen Curry, D-Gunnison, has introduced bills that would “level the playing field” between mineral and surface owners. But these bills have met fierce opposition from an industry that sees the current statutes as sufficient. This year’s split-estate bill (House Bill 1252) is less ambitious in that it would only limit excessive surface impacts, but currently sits in committee.
Because the dominance of the mineral estate is a matter of settled law, the persistence of the issue speaks to the change in the relative importance of mineral wealth and other values.
Although it has not seen the widespread and intensive development of its southern neighbors, Montana also has two bills on the topic in its legislature. Both seek to more clearly define the relationship between surface and mineral rights and protect the surface owner from excessive damage.
Problems of divided ownership are not limited to split estates, as a quick survey of the legislative docket reveals. Rep. Dan Gibbs, D-Silverthorne, sponsored a bill that passed the Colorado House recently that requires the Division of Wildlife to assess the impact of energy development on wildlife. The DOW is charged with managing wildlife, which is “owned” by the people of the state. This “property” is affected by development regardless of who owns the surface and minerals. So Gibbs’ bill merely asserts the rights of another property owner whose interests have been subservient to energy development.
Ownership of minerals may be separate from ownership of surface for many good reasons. Not only does it allow landowners flexibility in managing their assets (e.g., for estate-planning purposes), but it also allows highly specialized energy extraction firms a better opportunity to extract resources that play a critical role in the economy. The unfortunate consequence of the superiority of mineral rights is that the surface owner bears the brunt. Usually the surface owner receives some compensation, although this often seems paltry in comparison to the disruption experienced.
Oil and gas has long been an important part of the Colorado economy. However, the natural surface amenities of Colorado are also responsible for the state’s economic success. People want to enjoy clean air and water, beautiful vistas, wildlife and solitude. Many people have moved to Colorado for these reasons, bolstering the economy in the process. If we didn’t also need energy, then the tradeoff wouldn’t be as tough.
Eroding the legal precedence that energy developers have long enjoyed is likely to raise costs and perhaps energy prices. However, the recent energy boom has spawned an insistence by residents that surface values be protected while the energy beneath is tapped. So, the legal framework is shifting toward recognizing the tradeoff as well.
Tim Fitzgerald is a natural resource economist and was a 2003 Colorado Voices writer.
