Forced Pooling, Land Reunion Bills Advancing

SB 567 contains two parts: “cotenancy,” which we have dubbed “majority rules,” and “joint development”/“lease integration” or what we call “invisible ink.” Below we have outlined our problems with the different parts of the bill.

On Saturday, the bill was on second reading in the Senate, which is usually when amendments are offered. However the bill was advanced to third reading, or passage stage, with the right to offer amendments preserved.  We’ll update you after tomorrow’s vote on any additional changes, and if the bill passes, what actions are needed once it goes to the House where we believe members are more open to including better protections for surface owners. In the meantime, click here and here to read more about the bill and what various groups and gas companies are saying about it.

In other news, our “land reunion” bill, SB 369, which would  begin to reverse the trend of separate ownership by giving surface owners a first chance to own any interest in the minerals under their land that are sold for non-payment of property taxes, was approved by the Senate Energy, Industry, and Mining (EIM) Committee on Friday, and will be considered by the Senate Judiciary Committee tomorrow. We’re hopeful that the committee will approve the bill and it will be voted on by the full Senate later in the week. We’ll continue to keep you posted.

Problems with Forced Pooling (Cotenancy and Lease Integration) Bill (SB 576)

COTENANCY (Aka: Majority Rules)

Surface only owners:

-We appreciate that a surface use agreement generally is required, HOWEVER, SB 576 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.

-Also, the current version of the bill does not include provisions in earlier drafts that the royalties and ownership of missing and unknown owners go to the surface owner pursuant to the existing missing and unknown heir leasing statute. These need to be included or surface owner rights are taken away.

Surface owners who own minerals:

-We appreciate that the revised 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. However, a knowledgeable mineral owner still might be able to negotiate a better deal than his or her cousins, and the bill lacks due process (right to appeal, etc.) for non-consenting owners.

LEASE INTEGRATION/JOINT DEVELOPMENT (Aka: Invisible Ink)

Surface only owners:

-SB 576 still allows the driller to put well pads and roads etc. on the surface owner’s land! It is appreciated that the common law rights are preserved. And $100,000 might sound like a lot, but it is only 4/100ths of 1% of the value of the gas that will be produced. And the land may have been in a family for generations or something purchased for happiness or into which tremendous energy has been invested that money cannot replace.

Surface owners who own minerals:

-SB 576 is in violation of constitutional prohibitions on altering private contracts, and in violation of the common law of interpreting contracts against the person who wrote them. The bill only modernizes old leases for what the driller wants, a pooling provision, but it does not modernize royalty amounts or give new signing bonuses.