Avoiding split estate conflicts

by Cat Urbigkit

Tuesday night's Wyoming Split Estate Initiative meeting held in Pinedale resulted in a packed meeting room to learn about orderly development of minerals while sustaining agricultural productivity.

WSEI is a coalition of organizations and individuals from the agricultural and oil and gas industry, which was begun in the summer of 2002 by four major groups: Petroleum Association of Wyoming, Wyoming Stock Growers Association, Wyoming Farm Bureau Federation and Wyoming Wool Growers Association. Numerous agencies and organizations are now also involved.

In Wyoming, 49 percent of the surface estate and 68 percent of the mineral estate is owned by the federal government and managed by agencies such as the Bureau of Land Management and U.S. Forest Service, WSEI reported. This separation in ownership creates a situation in which the minerals are owned by one entity and the surface is owned by another, thus the term "split estate."

The goal of the initiative is to assist in minimizing or preventing conflict between landowners and oil and gas operators, according to Petroleum Association of Wyoming Vice President Dru Bower.

"We believe that this is in the best interest of Wyoming and its citizens," said Bower, in introducing the program.

Jim Magagna of the Wyoming Stock Growers Association was next. He encouraged mineral owners to begin developing relationships and close communications with the surface owners.

"Start the process early on," he said, adding that landowners harp on this point as being critical, as is the mineral company sending in a representative with authority to handle negotiations and make decisions. Magagna said the sharing of information and acting in good faith are equally important.

In cases where these best management practices can't be achieved with any great success, WSEI encourages the use of voluntary programs to help minimize conflicts.

Suzy Noecker of the Wyoming Farm Bureau Federation encouraged both parties to establish plans setting forth their goals, and exchanging these plans for the incorporation of the other party's needs in the respective plans.

"We must talk to each other," Noecker emphasized. If negotiations reach rocky spots or problem areas, advisory teams can be organized to help in completing the surface use agreement.

If that doesn't work, a mediator can be called in to assist. If that doesn't work, an arbitrator is an option, but arbitration is done by lawyers. Bower and Noecker noted that this isn't a step-by-step process and that any of these options are available as "tools in the toolbox."

Karen Clause of the U.S.D.A. Natural Resources Conservation Service talked about complex development scenarios faced by some landowners, such as when one ranch surface owner has to deal with three mineral companies holding mineral rights or leases. She explained that local conservation districts are ideal entities to assist the landowner in such a case. She noted conservation districts (which work closely with NRCS) are charged by state law to help property owners, and can take the available technical, educational and financial resources, whatever their source, and focus and coordinate them to meet the needs of the local landowner.

Lucy Hansen of the Wyoming Dept of Agriculture and Natural Resources Mediation Program spoke in support of mediation services offered by her agency. The programs are voluntary and confidential. Services offered range from technical review or advisory teams to arbitration or mediation.

Hansen said that her agency understands the need to address problems quickly, and noted that mediation begins within 15 days of a landowner's request and tries to wrap up the process within 60 days.

Jeff Gillum of the Wyoming Oil and Gas Conservation Commission spoke as well, noting his agency doesn't have much jurisdiction on federal leases, but does do well permitting. He also noted that in cases involving private surface and federal minerals, WOGCC does have authority to take action. WOGCC does decide well spacing issues as well.

State Representative Monte Olsen asked if a permit should be issued before a surface agreement is signed, but Gillum noted there is nothing in state statutes requiring such.

Bower emphasized that the surface-use agreement is a private contract between the surface owner and mineral owner.

Olsen asked, "How do we add value to the land through mineral development?" to which Noecker used water development as an example, as well as developing roads and fencing.

John Andrikopoulos said while the efforts of the organizations "are very good, very interesting and sincere," which he said was very appropriate since the speakers were directors of associations, "you don't deal on a return-on-investment basis."

Andrikopoulos asked if the organizations would "form some kind of policing of your bad actors," suggesting that each organization consists somewhat of a "good old boy" leadership system.

Magagna responded that being industry organizations doesn't lend to police powers, and Andrikopoulos acknowledged that it was a facetious question in the first place.

Magagna said he doesn't believe the split estate initiative process will work without each party acknowledging their own responsibility in becoming educated and being involved in the process.

Andrikopoulos noted that words like "good faith" and "change" were being used in the discussion, but he said good faith loses its meaning when one considers split estates and the notion of dominance and subservient rights, with the dominant right being the subsurface right.

"They are not our partners, they are our masters," he said.

Andrikopoulos said it's time to "get industry to step up" and get rid of the notion of dominance, and "change our custom and culture" and "do something legislatively."

Curt Parsons explained that the industry is reluctant to endorse such an action because "it's rooted in a property right." He noted that nobody acquired the surface with a severed mineral right "without knowing that or should have known that."

Andrikopoulos urged the dominance of the subsurface right be eliminated legislatively.

"It does pose somewhat of a takings, because you have it all right now," Andrikopoulos said. "The door swings one way."

One issue generating discussion involved separating real damages from speculative damages, and whether companies should pay only for crop and structure damage, instead of newly valued attributes, such as scenic value.

For more information on the split estate initiative program, check out the website located at www.wysei.com.