Seismic crews working in the Niobrara shale oil play caused serious rutting and other surface damage earlier this year on 10 different ranch properties in southeast Wyoming, resulting in several state-issued citations for the operator, Fidelity Exploration & Production Co., and the seismic contractor, GeoKinetics.
On Tuesday, the 5-member Wyoming Oil and Gas Conservation Commission (OGCC) board voted unanimously to fine Fidelity up to $500 for failure to follow the approved plan of operations. The board also voted unanimously to fine GeoKinetics $2,000 for each of the 10 ranch properties damaged for a total of $20,000. Originally, OGCC staff had recommended a $10,000 fine, but OGCC board member Gov. Matt Mead successfully added an amendment to double the fine, and suspend the additional $10,000 on the condition that the landowners are satisfied with remediation work.
“I want to make sure the landowners are compensated,” said Mead, whose family owns ranching operations in southeast Wyoming.
For now, there’s no order to compensate the landowners beyond whatever each might have worked out in their individual “surface use” agreements with Fidelity. The state holds a $75,000 bond posted by Fidelity for the project, and GeoKinetics has a $50,000 blanket bond posted with the state, both of which could be used to cover repairs if the companies do not meet their current obligations. However, there’s no compensation for taking significant portions of the ranches out of production as repairs and reclamation take place.
“We haven’t been compensated for it. … I sell my grass to other cattlemen and that’s how I make my living,” Goshen County rancher Darrel Hamilton told WyoFile.
Hamilton and several other ranchers attended the OGCC’s hearing on Tuesday, voicing their concern that the damages to their property may never be fully repaired.
In several areas GeoKinetics used the wrong type of tires for its vibroseis fleet, leaving ruts deeper than six inches, and tearing up hillsides and channels.
Lucas Keeler, natural resource technician for the OGCC, testified that at first the seismic operator downplayed the extent of the damage. “I don’t think the extent of the damages was quite reported,” Keeler told the commission board.
Repairing the damaged surface may be a challenge, and it’s likely to interfere with ranching operations. Hamilton said the biggest concern is erosion from the deep rutting. One option is to haul in topsoil impregnated with seed.
“And hopefully we get the right moisture at the right time to get that to grow,” said Hamilton.
The topsoil amendments must be staked down and fenced off from cattle, which is likely to take a portion of the ranching operations out of production for 3-5 years, according to Hamilton.
In general, farmers and ranchers in the region — especially those who own mineral rights — have embraced the recent search for shale oil in hopes of sharing in the revenue. Some of the landowners who suffered damages in the Rocky Hollow seismic project said they still support the industry. In a letter to the commission, John Kessler of the Kessler Ranch wrote;
“When we were approached by Fidelity about seismography, we agreed without hesitation. Our neighbors’ ranch had been surveyed recently, and they were impressed by their efficiency and lack of impact. We have watched Fidelity build a road and drill two wells in our community. It is obvious that every consideration has been given to their maintenance and reclamation. That is what we expect. We also expect fairness and good representation from our oil and gas commission.”
However, OGCC staff had been dissatisfied with GeoKinetics’ previous work in Wyoming, including the “Little Mitchell” project in northeast Wyoming where state inspectors found “numerous violations of the commissions rules and regulations,” according to state documents. In email correspondence, OGCC’s Keeler explained to a Fidelity representative why he was recommending a higher bond ($75,000) for the Rocky Hollow project; “Truth be told, there are two Geokinetic projects where the work wasn’t satisfactory, and we are having to wait until spring for these projects to be completed correctly.”
Powder River Basin Resource Council (PRBRC), a landowner advocacy group based in Sheridan, said the Rocky Hollow case highlights a profound weakness in Wyoming’s split-estate law.
In many instances, the surface estate is separate from the underlying minerals, yet the owner of the mineral estate has the right to enter the surface to access his minerals. That’s split-estate. If the surface and mineral estate owners don’t come to an agreement and sign a legally-binding “surface use” agreement (which typically includes compensation to the surface owner), then the mineral owner must post a minimum $2,000 bond with the state.
That bond, which resides with the state and not the landowner, is supposed to cover any surface damages by the oil and gas operation. Landowner advocates such as the PRBRC have argued that the $2,000 split-estate bond doesn’t come close to covering the potential surface damage of oil and gas operations, nor does it compel operators to negotiate a surface use agreement in good faith.
The split-estate issue didn’t enter the Rocky Hollow seismic case. However, the extent of the damage is the same that a split-estate surface owner might face — with only a $2,000 bond posted with the state.
“The property damages to these landowners from the seismic operations in this case is another example of what an insult the $2,000 bond is to landowners. That low bond does not begin to address the damages, the cost of reclamation or act as an incentive for industry to act responsibly or negotiate in good faith,” said PRBRC organizer Jill Morrison.
The PRBRC published a report on the state’s split-estate act in 2010, criticizing the $2,000 bond. Industry fought against a measure in 2011 to raise the minimum split-estate bond from $2,000 to $10,000. The Legislative Judiciary Committee is taking up the topic again this summer during the interim.
“At least, the Wyoming Oil and Gas Commission was on top of the damages in this case but only because the landowners forced the issue,” said Morrison. “We need to raise the bond for oil and gas industry for seismic activity and for all oil and gas activity.”
GeoKinetics declined a request by WyoFile to comment on the case. Fidelity didn’t respond to requests for comment.
Contact WyoFile editor-in-chief Dustin Bleizeffer at (307) 577-6069 or dustin@wyofile.com
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