Last week a proposal to raise the minimum bond-on amount for split-estate oil and gas wells from $2,000 per well to $10,000 died in a senate committee.
Sen. John Schiffer, R-Kaycee, introduced Senate File 87, “Oil and gas operations-surety bond,” spurred by the Powder River Basin Resource Council’s December report, “The State of the Split Estate. A Landowner Perspective: Five Years After Passage of the Wyoming Split Estate Statute.”
Schiffer, along with landowners and other proponents, testified that the $2,000 minimum bond level was too low to inspire the true intention of the requirement; to negotiate in good-faith with landowners to reach a surface use agreement. Much of Wyoming is under split-estate, which means the person who owns the surface doesn’t own the minerals below the surface. That ownership resides with, or is owned by or leased to oil and gas developers.
Usually, the oil and gas developer strikes a “surface use agreement” with the surface owner, which involves paying a fee to the surface owner for damages and loss of permanent or temporary use of the surface.
But Schiffer and others argued that some developers have figured out it’s easier, and cheaper, to not actually negotiate in good-faith and simply post the $2,000 bond. The surety (not the full dollar-amount) resides with the Wyoming Oil and Gas Conservation Commission, which can cash it in to pay for the cost of clean-up in the event the developer doesn’t meet reclamation requirements.
In this scenario, the surface owner still receives no “surface damage” payment. Schiffer and advocates of the bill said that by raising the minimum bond-on requirement to $10,000, more developers would be enticed to actually strike a surface use agreement resulting in some payment to the surface owner.
“We know that the chance of something happening is minimal, and if it is indeed minimal, then why the concern (about raising the bond),” said Patricia Hawk, a surface owner from Laramie County.
Arguing against the measure was the Petroleum Association of Wyoming, and Sen. Kit Jennings, R-Casper.
“A landowner has the option to go to (the Wyoming Oil and Gas Conservation Commission) to ask that the bond be raised,” said Bruce Hinchey, president of the Petroleum Association of Wyoming.
Wyoming Oil and Gas Conservation Commission supervisor Tom Doll agreed with landowners that there’s been a recent surge in posting bonds on split-estates, and that seems to be coming from companies performing seismic surveys in southeast Wyoming. Doll said that some of the seismic survey companies are not actually working for specific clients, but are gathering seismic data hoping to sell it to potential oil and gas developers.
Schiffer chastised industry representatives for not pressuring companies to adhere to the spirit of the good-faith negotiation implied by the minimum bond-on requirement.
“An industry that chooses to stick their heads in the sand — I’m shocked by that. Absolutely floored. But now you see what the problem is,” said Schiffer.
Dustin Bleizeffer can be reached at 307-577-6069 or dustin@wyofile.com.