"Split estate" at issue across the West

"Split estate" at issue across the West

The growing controversy over development of federally owned energy resources on private lands has resulted in the U.S. Bureau of Land Management (BLM) initiating a review and at least one state legislature debating legislation on the matter, reports the Wildlife Management Institute.

The federal review was ordered by Congress in the Energy Policy Act of 2005, and was prompted by complaints from private landowners about the process. This controversy is referred to as the "split estate" issue. A split estate occurs when mineral rights lying beneath private property are owned by the federal government and surface rights are retained by private landowner. This ownership division dates back to the Homestead Act of 1862, when many acres of land across the West were transferred to private individuals and interests but the federal government retained rights to mineral resources underneath those lands.

As western energy developments accelerate, split estate conflicts also are increasing and intensifying. Under current law, an energy company can lease mineral rights from the federal government and extract minerals on private land just as on federal property. Private landowners often legitimately feel that they are given little to say about when, where and how the development occurs. A growing number of new property owners in the West who are unfamiliar with split estate prerogatives have made the issue even more contentious.

Under federal rules, energy companies must make an effort to obtain from the surface rights owner an agreement that specifies how the development will be done and identifies the amount of compensation offered. In cases whereby an agreement cannot be reached, BLM requires the energy company to post a bond for damages before the development begins. Landowner complaints focus on inadequate notification of forthcoming development and insufficient bonding to cover damages.

In Colorado, the state legislature has been debating legislation dubbed the "Surface Damages Compensation Bill" (HB 1185). The legislative proposal would encourage agreements between landowners and oil and gas companies before drilling by the former on the latter=s property. If agreement could not be reached, this legislation would ensure the landowners some financial compensation if the development operation were to damage the land or reduce its property value. Predictably, disagreement over the amount of compensation threatens the bill=s passage.

The federal review, consisting of listening sessions with public comments, began in New Mexico in late March and is scheduled to continue into April in Colorado, Wyoming, Montana and Washington, DC. After the hearings, an analysis will determine if "fixes" are in order and, if so, whether they are administrative or statutory in nature.

Obviously, if changes in statutes are needed, Congress will have to intervene.

April 14, 2006