“Co-Tenancy” Bill Being Considered by House Energy Committee

The 2018 legislative session is in full swing and you may have heard on the news or via social media that a “co-tenancy” bill (HB 4268) is now being considered by the House Energy Committee. This is one of a series of oil and gas development bills that have been introduced in recent years in various forms and degrees, and which is sometimes referred to as “forced pooling.” A bill passed by the Senate last year (SB 576) contained two forms: “lease integration” or what we call “invisible ink,” and “co-tenancy,” which we called “majority rules.” 

HB 4268 deals only with what the industry calls “co-tenancy,” which we are now calling the “cousins” bill. Like last year’s bill HB 4268 is problematic in a number of ways which we’ve outlined in detail below, and we oppose the bill unless these issues are addressed by the committee.

Please contact members of the House Energy Committee and voice your concerns about HB 4268. Urge them to prioritize other legislation before them that will help those most affect by drilling and natural gas infrastructure.

These include HB 2990, which would require continuous monitoring of air, noise, dust, and particulates as recommended by the studies mandated by the 2011 Horizontal Well Act; and HB 3011, which would allow property owners to share financially in the gains from the various interstate pipeline projects, if they are approved and built. (More information about these bills is available here.)

Click here for a list of House Energy Committee members with their phone number and email address, followed by a ‘list’ of emails for all members that can easily be copied and pasted into the ‘To’ field of your email.

On Thursday, the committee heard an explanation of HB 4268 on Thursday and then delayed further consideration of the bill until Tuesday.

Please act now and make your voice heard. 

Problems with HB 4268

First, in order to drill a horizontal well the driller has to start on one surface tract, drill down to the mineral tract underlying that surface tract, and then drill horizontally a mile or more through many neighboring surface tracts. Under current law, if the driller while drilling horizontally for that mile or more runs into that mineral tract where the driller only has leases from, say, 90% of the mineral owners, the driller has to stop. If this bill passes the driller will be able to keep drilling even longer horizontal well bores through those neighboring mineral tracts. This means more time on the first surface owner’s land, more trucks, more noise, more light, more dust, and other air pollution to drill the longer horizontal.

As the bill is currently drafted the surface owner’s consent is not needed if they use the bill to drill through that neighboring mineral tract. The current bill only requires surface owner consent if the bill is used for the one mineral tract directly under the surface owner.

The bill should require the driller to get the surface owner’s consent if the bill is used to drill not only the mineral tract under the pad, but any mineral tract being accessed from the pad.

Second, the bill contains a loophole that would allow a driller with an existing surface use agreement or other valid contract that pre-dates horizontal drilling to be used to locate well pads for horizontal drilling on a surface owner’s land. 

Last but not least, the bill requires that non-consenting cotenants be paid the highest royalty in leases signed by the consenting owners. This is an improvement over the earlier bill. A knowledgeable mineral owner still might be able to negotiate a better deal but if 75% of their out-of-state cousins sign bad leases with low bonuses, with low royalties, with clauses that allow disposal wells to be drilled on the property, or other bad provisions, then they are stuck with those terms. The bill lacks due process (right to appeal, etc.) for non-consenting owners. Those mineral owners who do not like their cousins’ leases should get a due process hearing before the existing Oil and Gas Conservation Commission to try to get better terms.