Billings Gazette Guest Opinion: Dennis Hoyem

This guest opinion appeared in the October 21, 2014 edition of the Billings Gazette:

Guest opinion: Surface owners, know your oil and gas mineral rights

If you own only surface rights and a company intends to drill a well on your land, you’ll do well to get the time of day from them. I say this as an anti-clock watcher (I’m sorry, I’m late.). Mineral rights take precedence over surface rights in Montana, and many other states — thanks to boards of oil and gas and heavily lobbied legislatures who haven’t always thought things through.

In a surface ownership-only scenario, you would obviously not be entitled to any “signing bonus” or royalties. Further, you would likely be undercompensated for surface disturbance. Worse, you would have little or no control over where the disturbance of your surface occurred; in Montana there are no required setbacks from water wells, streams, or even your home.

Picture a case where you do own the majority of oil and gas rights, and several others own much smaller individual percentages of that same mineral estate. One owning the smallest interest could give permission for total oil-gas extraction — even if everyone else were opposed to it! Uncle Pete may then no longer be everyone’s favorite uncle. Hide the musket.

Apparently, unanimity is required here to say “no,” but not to say “yes.” Would the company fairly compensate the naysayers? It’s kind of like Pete alone owned all the oil and gas. Life isn’t always fair is it?

So, it’s very important for you and me to pre-determine who all owns the minerals under our land. We can then begin conversations which may avoid family members falling out with each other. And we can make easier, quicker, and more-informed decisions when the oil company comes.

Local title companies are often very busy doing what they do best and are not interested in adding mineral/mining right searches to their job description. So, what are other options?

Although I don’t personally know any yet (the courthouse might), there are those who will provide such research service at a cost of, say, $500 per day.

Fortunately, for private and state minerals, the Montana Department of Natural Resources can help you, and your local Bureau of Land Management office can help you with federal mineral ownership.

Finally, you and I can do the research ourselves in our county’s courthouse. Most clerk and recorder offices have computers available for such use. A learning curve is unavoidable. Given that and competition for use of such computers with others researching — not just mineral rights, but many other things — don’t dally.

Dennis Hoyem of Nye spent 36 years in public service with the U.S. Coast Guard, Stillwater County Commission and federal Bureau of Land Management in Miles City where he was a surface protection specialist for oil and gas exploration and development.

Find out more
You can read more about this topic on this blog by clicking here and here.

Dennis Hoyem and his wife Cathy were interviewed for our Preserve the Beartooth Front video. Here’s that video. If you receive this via email, click on the title of the post to see the videos.

and here are outtakes from Dennis and Cathy’s interview:

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Outside corporate interests are trying to shift the balance of the Montana Supreme Court. What it means for oil drilling along the Beartooth Front.

A political action committee funded by corporate interests from outside Montana is trying to shift the balance of the Montana Supreme Court. The goal is to drive an agenda that endangers the property rights of local citizens, and their ability to control oil and gas drilling in their towns and counties.

This blog focuses on issues related to oil and gas drilling along the Beartooth Front. I try to stay out of election campaigns because I believe that the issues that readers of the blog care about — developing policies to make sure that drilling happens on terms acceptable to local citizens — appeal to voters of all parties across the political spectrum.

That said, there is a new development in a statewide nonpartisan Supreme Court race that could directly affect the future of oil exploration in the state, and it’s something that should outrage anyone who believes that Montanans, not multi-national corporations, should control Montana’s future.

The Montana Supreme Court. Mike Wheat is on the right.

Montana’s Supreme Court justices. Mike Wheat is on the right. Click to enlarge.

The election pits incumbent Justice Mike Wheat against Montana newcomer and former State Solicitor General Lawrence VanDyke.

The disturbing development is that a political action committee from Washington, DC is using corporate money raised outside Montana to turn this into a campaign designed to drive a clear partisan agenda.

Mike Wheat. Click to enlarge.

Mike Wheat. Click to enlarge.

Wheat vs. VanDyke
In a traditional nonpartisan judicial race, it is hard to imagine Mike Wheat being defeated. He is a nonpartisan judge with an impeccable record. He served with distinction as a Marine in Vietnam, earning a Purple Heart. He graduated from Montana State University in 1975 before graduating from the University of Montana Law School in 1978. He has practiced law for over 30 years in the state, three of those as a criminal prosecutor in Butte-Silver Bow. He was appointed to the Supreme Court by Governor Schweitzer nearly five years ago, and was  elected in 2010. His opinions do not follow party lines, and he has taken a measured view in supporting the environment laws set out in Montana’s statutes and Constitution.

Lawrence VanDyke. Photo Credit: Larry Mayer, Billings Gazette. Click to enlarge.

Lawrence VanDyke. Photo Credit: Larry Mayer, Billings Gazette. Click to enlarge.

VanDyke has a very different profile. He graduated from Harvard Law School in 2005, and has practiced law in Montana for less than two years. He has no experience as a prosecutor. He has no judicial experience, and no known courtroom experience. His career in Washington, DC and Texas has involved representing multi-national corporations.

VanDyke’s public remarks reveal a clearly partisan agenda. According to the web site Right Wing Watch, “in public statements, VanDyke has indicated that he would have sided with the U.S. Supreme Court on Citizens United, defending the decision in a debate last month. And although his race is officially nonpartisan, VanDyke has made it very clear which side of the aisle he falls on, accusing his opponent of judging ‘like a liberal Democrat’ and being ‘results-oriented’ in his rulings — a loaded accusation favored by conservative activists.”

In a recent interview with the Great Falls Tribune, VanDyke was asked about independent spending in Court races. He “argued there is a benefit to dark money spending in judicial elections.”

You can learn a great deal about a candidate from the people who know him personally. In an email forwarded to me, a Montanan who worked with Mr. Van Dyke in the Attorney General’s office has this to say about his personal experience with the candidate:

Montana’s Supreme Court elections have been non-partisan for nearly 80 years, and for good reason.   A Montana Supreme Court justice has a very important job, and candidates should be judged on their own qualifications, not by whether they are Democrats or Republicans.  VanDyke, however,  insists on turning the Supreme Court election into a partisan race, as demonstrated by his campaign website. You can hear VanDyke’s partisan attacking approach at a candidate forum held in Missoula last month.

VanDyke came back to Montana from Texas in order to work for Attorney General Tim Fox in early 2013.  Few people in Montana know much about VanDyke.  He resigned from his position in the Attorney General’s office in January 2014, and has not worked there for months (even though his website still characterizes Attorney General Tim Fox as his “boss”).   I worked with VanDyke for over a year, and had the opportunity to see him in action.  He has little experience with the Montana legal system, and showed little interest developing a working knowledge of how to practice in our courts.  It is my opinion that VanDyke lacks the maturity and work ethic we should expect of someone aspiring to be a Supreme Court justice.

In a recent Great Falls Tribune article, the Director for the Center for Law, Philosophy, and Human Values at the University of Chicago Law School, Brian Leiter, recalled his experiences with Mr. VanDyke several years ago on the issue of a book review written by VanDyke about “intelligent design.” Professor Leiter believes Mr. VanDyke’s writing on the topic was “intellectually dishonest” and notes:  “Are his religious commitments so strong that it’s going to lead him to ignore the law when they conflict? In that book review, he ignored the science, he ignored the philosophy and he ignored the logic. That would be bad news if he does the same thing as a judge.”

I believe everyone should be free to practice their chosen religion and I admire persons of faith.  Judges, however, should only be concerned with the law.  Based upon my recent experiences with VanDyke, I share Professor Leiter’s concerns — especially with respect to Montana’s election laws.  For example, based upon freedom of religion under the First Amendment, VanDyke has told me he does not believe Montana should be able to regulate speech by religious organizations in our elections.   It would not be difficult for “dark money” interests to use religious organizations as a front to avoid regulation or disclosure.  I am concerned that VanDyke will not cast aside his personal beliefs on these sorts of issues if elected to the bench….

My conversations with VanDyke lead me to believe that he does not support many (if any) of our important election laws, including  Montana’s attempts to require disclosure of those behind “dark money” and their activities in Montana elections.

What this has to do with oil drilling along the Beartooth Front
If you’ve been following this blog, you know that Energy Corporation of America and its attorney Mike Dockery have begun to challenge the fundamental right of citizens to legally protect their property through the process of citizen initiated zoning.

Click to view full letter

Click to view full letter

In a letter written to the Carbon County Commissioners, Dockery has claimed, among other things, that mineral rights owners are proper petitioners for a citizen initiated zone, that citizens have no right to supercede the authority of the Montana Board of Oil and Gas Conservation, and that a zone is an “unlawful taking” of mineral rights. You can read the full letter by clicking on the photo at the right.

It is possible that these issues will wind up in court, and it is entirely possible that they will wind up in front of the Montana Supreme Court. If Lawrence VanDyke is elected next month in a hyper-partisan race funded by, among others, oil and gas interests, it is highly possible that the deciding vote in that case will be cast by a justice who has been bought and paid for by the oil and gas industry.

Click to enlarge

Click to enlarge

A recent mailer sent out by his supporters shows a picture of an oil well pumping unit, a pipeline and VanDyke with the title “As Supreme Court Justice, Lawrence VanDyke will protect Montana jobs from environmental extremists.” I think this means you and just about anyone who wants to place reasonable restrictions on extraction.

This is what happens when you inject partisanship into historically nonpartisan races. “It’s just a clear indication, I think, of the downside of Citizens United,” said Justice Wheat. “The judiciary is typically separated from the political process because they may have to make decisions that are unpopular. Focusing on state Supreme Court races in a partisan way is a dangerous road to go down.”

Click to enlarge

Click to enlarge

VanDyke’s pro-business, anti-environmental partisan views are on display on his campaign website, and in the corporate-funded attack piece at right. He says he favors efforts to “produce and preserve” natural resources, which he contrasts with Wheat’s dissent in the 2012 case Montana Wildlife Federation vs Montana Board of Oil and Gas Conservation et al, (see p. 37) in which Wheat sided with preservationists in a dispute over drilling gas wells. Last month VanDyke spoke at a “Coal Appreciation Day” sponsored by a coal industry group.

Corporate money from out of state
The money is coming from a little-known group called the Republican State Leadership Committee (RSLC). Formed in 2002, it is the only national organization that focuses on electing Republican majorities to state legislatures and other statewide offices. It has been active in forty-six states and has spent tens of millions of dollars. Based in Alexandria, Virginia, the committee targets legislative chambers — from Maine to Wisconsin — where there is a chance for control to change hands.

According to The Progressive,

The committee’s main tactic was to barrage the public airwaves with negative ads, much of it done at the tail end of the campaign season. GOP stalwarts such as Karl Rove and Ed Gillespie aggressively executed the battle plans through their consulting firms.

“We’ve had hard-fought campaigns before, but we’ve never seen out-of-state money drop a negativity bomb in so many races,” says Ann Luther, who sits on the board of Maine Citizens for Clean Elections. “It was shocking.”

In 2014, the RSLC has branched out into judicial elections, with plans to spend $5 million on judicial races, including $200,000 to defeat a single local judge in Missouri, and at least $110,000 in media in the Wheat-VanDyke race.

Where the donations come from
The RSLC is funded by money from national corporations that, for the most part, have no direct interest in Montana. What the organization is funding is a partisan agenda on many levels across the country.

The largest donors:
Reynolds American, Inc, the parent company of RJ Reynolds Tobacco:   $1, 114, 647
Blue Cross/Blue Shield:                                                                                            958,513
US Chamber of Commerce                                                                                       615,995
US Chamber of Commerce and related entities:                                                  496,245

Oil and gas related donors:
Koch Industries:                                                                                                        460,530
Devon Energy (corporate headquarters in Oklahoma):                                      400,000
America’s Natural Gas Alliance:                                                                              380,030
Exxon Mobil:                                                                                                              325,000

Why Montana?
It’s clear why the RSLC has targeted Montana. The Montana Supreme Court has special significance. The Court resisted the 2010 Citizens United ruling, which makes the RSLC’s financial involvement in the race possible.

In December 2011, the Montana Supreme Court, in Western Tradition Partnership, Inc. v. Attorney General of Montana, upheld the Corrupt Practices Act, passed by the voters of the state, that limited corporate contributions only in elections on initiative ballot measures. Examining the history of corporate interference in Montana government that led to the Corrupt Practices Act, the majority decided that the state still had a compelling reason to maintain the restrictions. It ruled that these restrictions on speech were narrowly tailored and withstood strict scrutiny and thus did not contradict Citizens United v. Federal Election Commission.

In 2012 the US Supreme Court rejected the Montana Supreme Court argument.

The Montana Court could soon be ruling on other issues that are part of the RSLC agenda, such as abortion rights.

What the money will buy
I spoke to a media buyer who handled a Montana statewide campaign in the primary. She told me that the campaign spent $205,000 over five weeks on television ads, half as much as what the out-of-staters are likely to be spending. Based on her experience, she estimated that the anti-Wheat campaign would buy time in five markets that cover most of the state: Missoula, Billings, Butte-Bozeman, Great Falls and Helena.

At the rate charged to PACs, they would be able to purchase enough television time to reach 90% of television viewers an average of 15 times each between now and the election.

According to her, this is a “very strong” buy in terms of its statewide impact.

Based on all the money the RLSC is spending, you’ve probably already seen the ad.

Here is the counter attack ad in support of Wheat that you probably haven’t seen.

Where the race stands
Given the current state of the race, the RSLC money could be enough to tilt the seat from Wheat to Van Dyke.

According to a Montana State University Billings poll published last Friday, Wheat leads 25% – 13%, but 60% of voters remain undecided. That leaves Wheat vulnerable to a late surge of negative ads funded by outside interests.

What you can do about it
The only way to combat money is with money. If you believe in maintaining a state judiciary that is independent of corporate money from outside Montana, you can send a contribution to Mike Wheat on his website. Or, you can visit Montanans for Liberty and Justice.

There’s a lot at stake here. Don’t pass on this one.

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Billings Gazette Letter to the Editor: Deborah Griffin

The following letter to the editor appeared in the Billings Gazette on Monday, October 19, 2014:

Who watches the Board of Oil and Gas?

Montana is a state of proud tradition. Simple, but important truths. Leave the gate the way you found it. Whiskey is for drinking, water is for fighting. Take care of your own. So when it comes to understanding why we relinquish so much authority to the Board of Oil and Gas I am a bit confused.

Currently they have no stated plan to regulate hydraulic fracking, no requirements for closed-loop systems to deal with disposal of wastewater and chemicals and the mission is primarily to protect the oil and gas industry. There are only seven inspectors for the entire state. I continue to be surprised at how many folks think “Montana is not going to let our state be damaged like North Dakota” without knowing how lax the Board of Oil and Gas is on development.

One does not need to be against development to want good rules about the use of our land and our resources. Why don’t simple truths apply here? We need to close the gate, fight for our water and take care of our own.

Deborah Griffin
Nye

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Screening of the film “Split Estate” at Cafe Regis in Red Lodge, Thursday, October 16

The 2010 Emmy Award-winning film Split Estate will be screened at the Cafe Regis in Red Lodge this Thursday, October 16, at 6pm.

split_estate_poster

The film tells the story of oil and gas drilling in Colorado and the San Juan Basin in the four corners area. The story is told through the eyes of Laura Amos of Encana, Colorado (who was the subject of a personal story on this blog); Gilbert Armenta, a fifth generation Hispanic and Native American (Cochiti) rancher living with the industry in his backyard for more than half a century in Bloomfield, New Mexico; and Chris and Steve Mobaldi, who settled in Rifle, Colorado, only to experience the drilling of 20 wells within a mile of their home, as well as an unlined disposal pit that burns and flares a few hundred feet from their front door.

Elected officials, policy makers, attorneys and other advocates are also interviewed for the film.

As one reviewer commented,

I live in one of the areas depicted in the film, and I have a professional job, highly dependent on the oil and gas industry….

I saw the television premier of Split Estate a few days ago. Being an industry insider, I had heard a lot of anticipation buzzing around the field about the movie, most of it negative. I wanted to see it for myself and formulate my own opinions before hearing about it from others. Let me just say I was impressed.

The filmmakers did an incredible job of visually portraying the size and scope of oil and gas production in the western US. The dramatic aerial shots showed the enormity of the operations in progress that someone on the ground cannot see.

I felt the film was quite balanced considering the press that it’s been given. I thought the scientist’s were believable and not agenda driven. The Conoco/Phillips representative was and especially good speaker both defending the industry and acknowledging that there were still issues to be solved. This movie is in stark contrast to the horribly one sided, factually incorrect and finger pointing Gas Land.

Whether you’re just beginning to get informed about this issue or you’ve been working on it for a long time, drop in Thursday night. The event is sponsored by the Carbon County Resource Council. Martha will be serving snacks and beverages. There is no admission, but a donation is requested.

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Billings Gazette Letter to the Editor: Jane Moses

The following Letter to the editor appeared in the October 12, 2014 edition of the Billings Gazette:

Although oil and gas companies would have you believe otherwise, the regulations they must follow while drilling do not protect landowners and their water supplies from contamination. They don’t even come close. The Energy Corporation of America has plans to “bring something like the Bakken” to the Beartooths. They’ve already begun the drilling process, and wells on private property are not being protected.

Right now, the best option for protecting private water supplies is for each landowner to pay hundreds of dollars for baseline testing of wells to show what chemicals are present in the water before drilling begins. Landowners must then pay to have wells retested on a regular basis (possibly for years) to learn if water has been contaminated.

And that is not enough. Oil companies don’t have to disclose what chemicals they use in fracking because the law protects that information as “trade secrets.” So even if testing shows contamination by a certain chemical, there is no way to prove the oil company used that particular chemical in the drilling process.

There’s something wrong with the law in Montana when landowners have to pay to protect themselves from damage done by oil and gas development, which produces millions of dollars for the oil and gas companies. County commissioners should require every oil and gas operator to pay for regular testing and monitoring of all wells near a drilling site to prove they are not contaminated. This testing should be done by independent companies, not companies chosen by the oil and gas developers. It is a cost of doing business here in Montana, and it is necessary to protect our property rights.

Jane Moses
Billings

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$1 million award to North Dakota ranch could influence future judgments against oil companies

A Bismarck jury awarded a western North Dakota hunting ranch a $1 million judgment based on a claim that oil drilling turned their pristine landscape into “an industrial zone”. The claim by Deadwood Canyon Ranch was graphic, but familiar to readers of this blog:

“The well pumps operate continuously and emit a loud groaning noise; the oil wells flare and smell of excess gas; and the well sites are serviced by a fleet of 14-wheel tanker trucks that barrel down the newly constructed access roads, sometimes kicking up a dust storm as they pass.”

The judgment is based on a 1979 North Dakota law known as the Oil and Gas Production Damage Compensation Act.

The law provides that a mineral developer “shall pay the surface owner a sum of money equal to the amount of damages sustained by the surface owner and the surface owner’s tenant, if any, for lost land value, lost use of and access to the surface owner’s land, and lost value of improvements caused by drilling operations.”

Deadwood Canyon Ranch. Photo Credit: Kathleen J Bryant/Forum News Service
Deadwood Canyon Ranch oil well. Photo Credit: Kathleen J Bryant/Forum News Service

“Kind of like the tobacco industry
James Grijalva, a University of North Dakota law professor whose areas of expertise include property law, said a jury verdict doesn’t set a precedent from a legal standpoint, but it could be an example for other juries to follow in thinking that a particular kind of damage is compensable.

“It’s kind of like the tobacco industry. They fought really hard never to lose a case, because once there’s a hole in the dam, the dike is breached,” he said.

This could happen in Montana too
This judgment is of particular interest to Montanans because Montana has a similar law on the books, Mont. Code Ann. § 82-10-504, “surface damage and disruption payments — dispute resolution.”

According to the Wyoming Law Review (p. 421),

Montana’s Surface Damage Act is quite similar. Written notification is again required of the producer to the surface owner not more than ninety days or less than tendays prior to entry and must relate the proposed operations.

Montana does not require a surface bond and mirrors North Dakota in requiring damages for loss of value to surface improvements, loss of land value, and loss of production and income from agriculture.

After entry, the surface owner has two years to notify the mineral developer of damages. Upon such notification, the developer has sixty days to make an offer of restitution. The surface owner can accept or file suit inthe appropriate state district court.

Whatever the route to calculating damages, payment must be made within sixty days of the agreement or award, or the surface owner is entitled to twice the amount of the owed damages.

The major difference between the North Dakota and Montana is timing of payment of surface damages. North Dakota requires the parties to speculate on the damages and agree—or seek a judicial determination if no agreement is reached—on a settlement beforehand. Montana’s statute considers damages in retrospect, with the surface owner essentially keeping tabs and presenting a bill after the alleged damage is done.

The judicial landscape may be changing
We seem to be seeing a change in the judicial landscape. Juries are increasingly willing to grant damages to plaintiffs for a variety of problems caused by oil and gas drilling. We’ve reported on some here:

We’ve established that the law is tilted far in favor of the oil and gas industry. It’s a positive step that courts are willing to protect land owners in ways that our federal and state legislatures have not.

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Energy Corporation of America is being sued for underpaying royalties to hundreds, possibly thousands, of land owners

It’s one thing when you have a poor record of compliance with regulations protecting land owners. It’s quite another when you are being sued by hundreds (perhaps thousands) of people who feel they are being cheated out of energy royalties that you owe them. Sadly, Energy Corporation of America (ECA), the company that wants to “bring the Bakken” to the Beartooths, has hit the perfecta. They qualify on both counts.

Click to view Pennsylvania DEP report

Click to view Pennsylvania DEP report

We’ve written extensively about ECA’s poor environmental record in Pennsylvania and West Virginia. If you haven’t seen it, I urge you to look at the report from the Pennsylvania Department of Environment Protection (click on the graphic at right) detailing their record as a serial polluter in that state.

Pollock et al. v. Energy Corporation of America
Today we’re reporting on something entirely different. It’s a class action lawsuit originally filed in federal court in 2010 and currently working its way through the court system. The suit is Pollock et al. v. Energy Corporation of America.

I recently spoke to representatives of the two law firms representing the plaintiffs in the case.

Discussions with the plaintiff attorneys
Attorney Robert Sanders describes this type of class action suit this way:

Attorney Robert Sanders represents the plaintiffs in Pollock at al v Energy Corporation of America

Attorney Robert Sanders represents the plaintiffs in Pollock at al v Energy Corporation of America

Oil and gas leases typically require the producer to pay the landowner a monthly royalty equal to an agreed upon share of the proceeds of the gas produced from the leasehold each month….

Gas producers do not generally sell the gas at the well. They typically transport the gas through a system of gathering lines to the interstate pipeline system and sell the gas at delivery points into the interstate system. In some cases, gas producers hold title to the gas during its interstate transport and sell it to more distant buyers.

Depending on state law and the lease language, gas producers are sometimes permitted to deduct certain “post production” costs from the royalty. These are costs incurred between the well and the point of sale, such as gathering, compression, processing, dehydration, marketing and interstate transportation.

Royalty checks stubs often report only the amount of gas produced and sold from each well (in units of a thousand cubic feet or “mcf”) and the dollar amount of the monthly royalty. In such cases, the royalty owner must do the division to determine the price paid by the buyer per mcf. This division will not always yield the price per mcf, however, because sometimes the dollar amount of the monthly royalty is net post production costs. Often it cannot be determined from the check stub whether post production costs were deducted and, if so, what costs were deducted and how much was deducted for each cost.

Since gas producers have total control over the calculation and reporting of royalties, royalty owners often have no choice but to trust that the calculation is correct. No government agency oversees the process. Unlike the environmental aspects of gas production, royalties arise from private contracts. The enforcement of those contracts is left to the parties.

Not surprisingly, disputes over royalty payments often lead to litigation. Often royalty underpayment cases are brought as class actions. This is because the time and expense of litigating a single claim can be cost prohibitive and because the gas producer’s method of calculating the royalties is either uniformly correct or uniformly incorrect as to all its royalty owners.

David McGowan

David McGowan

Caroselli, Beachler, McTiernan & Conboy
David McGowan, an attorney at the law firm of Caroselli, Beachler, McTiernan & Conboy,  the other firm handling the case, went into some detail about the nature of the suit.

Mr. McGowan explained that much of Pennsylvania law regarding post production costs is governed by a State Supreme Court decision in the case Kilmer v Elexco, a sweeping decision that favored the oil and gas industry by allowing the deduction of post production costs from the well to the point of sale. The 2010 decision therefore eliminated some of the initial claims in Pollock, but the case continues. The remaining claims are based on the fact that ECA sold the gas to a marketing affiliate, but continued to deduct costs all the way to the point at which the affiliate sold the gas.

There is currently a movement afoot in Pennsylvania to enact law to change Kilmer. Several states, including Wyoming, do not allow the deduction of post production costs from royalties.

The suit is currently scheduled to go to trial in March, 2015. We’ll keep you updated.

ECA’s comment on the lawsuit
When questioned by the Billings Gazette about the lawsuit, ECA spokesperson Jennifer Vieweg commented, “The courts are an important component of our governmental structure and when two parties cannot agree, it is not unusual to seek relief through the court system.”

Vieweg was the ECA representative who also said the company was “in full accordance with the law” right before the Montana Department of Natural Resources shut them down for taking water without a right in Belfry last June. She also recently told the Carbon County Commissioners that ECA’s poor compliance record in Pennsylvania was the result of “a lot of misunderstanding with regard to the regulations.”

Whether you’re talking about the integrity of accounting practices, the appropriate use of precious water or adherence to regulations that protect land owners, there seems to be a pattern here. Good corporate citizens take responsibility for their actions.

What does it mean for the Beartooth Front?
For ECA, and likely for any oil operator that wants to drill along the Beartooth Front, the law is just a roadblock to their primary goal: maximizing profit from each well.  They do not have a long-term stake in the community, and are not necessarily going to offer land owners a fair deal. They are not necessarily going to honor whatever contracts they sign.

ECA has shown it has no interest in following the good neighbor standards of the American Petroleum Institute.

For you as a landowner:

  • Figure out whether you own the mineral rights to your land
  • Find an attorney who can help you negotiate with the landman representing ECA or another oil company. This may not be your family attorney — it should be someone who has experience in surface use agreements.
  • DON’T sign anything the first time it is presented to you and without legal representation.

For us as a community:

  • It doesn’t matter whether you regard yourself as an environmentalist or a pro-growth advocate. Our primary goal as a community should be to make sure that drilling is done on terms that protect our land, our water, and our way of life. It is entirely reasonable to enact regulation that does that. This is the basis for the Silvertip Zone in Carbon County and another zone that is being formed in Stillwater County.
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Billings Gazette Letter to the Editor: Mechelle Harper

This letter to the editor appeared in the September 28 edition of the Billings Gazette:

I was one of the landowners who attended the Sept. 8 meeting of the Carbon County Commissioners to hear what the representatives of the Energy Corporation of America had to say about their planned development of the Beartooth Front. It was a great opportunity to hear what they’re planning, what we can expect and which rules they are following. What could have been a helpful and informative meeting, though, became one of generalities and few specifics.

We know that oil development is mainly regulated by the Board of Oil and Gas Conservation. The board writes rules, offers exemptions, inspects and permits. It even goes so far, (like in Belfry) as Googling the environmental assessment. The actual area was not even seen before the permit was approved.

The Department of Environmental Quality simply requires an air quality permit (the operator decides if they need one), possibly construction permits and regulates offsite spills.

Although our state has basic laws, the state of Montana is far behind others in landowner and citizen protection than other states. We have no baseline water, air or soil testing. There are no setback limits and very weak well casing standards to protect aquifers. Both the BOGC and DEQ only have seven inspectors each to regulate the vast numbers of wells and polluting entities. This is greatly insufficient and, therefore, fines are rare and more cost effective for the companies than actually complying with the laws.

The local community is willing to welcome oil companies that utilize responsible resource development in our area. But in return we hope that they will not cut corners or ignore our concerns.

Mechelle Harper
Bridger

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Billings Gazette Letter to the Editor: Lee Wilder

This letter to the editor appeared in the September 30 Billings Gazette:

Energy Corporation of America, the company that wants to bring “a little bit of the Bakken” to our community, has a troubling safety record. In Pennsylvania, ECA has had 66 state inspections resulting in 90 separate violations, 55 enforcement actions and fines of more than $80,000. In West Virginia, there are 70 more violations.

These violations include letting fracking wastewater flow into a trout stream, faulty cement casings on a well bore and failure to cap abandoned wells — all of which allow toxic chemicals to seep into the air and ground, resulting in water contamination.

ECA’s fracking activities (and all companies involved with fracking) are exempt from the clean water drinking act. If clean water is valued by society and by Congress, why are companies who utilize chemicals in the very core of their activities exempt? This is like exempting commercial airlines from FAA regulations. Chemicals in a bottle of shampoo must be clearly disclosed, but ECA need not disclose the chemicals used in fracking, the chemicals that could enter our aquifer.

Ronald Reagan said, “Trust but verify.” ECA’s track record does not warrant trust. Montanans must be able to “verify” in order to protect our land, our water and our health. It is time for county, state and federal officials to make sure that any and all oil drilling is conducted on terms that are safe for us, not just convenient for a company that is only focused on profit. Once groundwater is contaminated, there is no turning back.

Lee Wilder
Nye

***

We have written often about ECA’s record as a serial polluter in Pennsylvania and West Virginia. ECA has said in a public meeting in Red Lodge that their record is a result of a “misunderstanding with regard to the regulations.” These “misunderstandings include multiple instances of torn pit liners, faulty casings, dumping pollutants into surface waters, and other violations that we cannot afford along the Beartooth Front.

If you haven’t read the actual report from the Pennsylvania Department of Environmental Protection, you should. Click below to view the report.

ECA Pennsylvania DEP Report

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Let’s not choose oil development over tourism in Carbon County

When Energy Corporation of America (ECA) presented at the Carbon County Commission meeting on September 8, Commissioner John Grewell asked (starting at 5:27), “Do you have any idea how much money your company’s put into the County’s funding through these wells that you’ve drilled so far?”

The company wasn’t able to answer, and the truth is that it is very difficult to figure out how much oil drilling affects the local economy.

One thing is clear: the economic impact of oil drilling won’t grow in a vacuum. If oil drilling expands along the Beartooth Front it will run headlong into the tourism industry that is the cornerstone of the local economy.

Carbon County is currently developing a four-year growth plan that will be complete in January, and has contracted with CTA Group of Billings to head the process. Brent Moore of CTA is leading the project, conducting regular public hearings.

For this plan to be a relevant document, it needs to deal directly with the issue of how to manage oil drilling so that it can coexist with tourism.

Mike Garcia

Mike Garcia

Economic impact of tourism
Tourism is the backbone of the local economy. Its economic impact is well understood. Red Lodge thrives on tourism in winter and summer, and a recent article by Alastair Baker in the Carbon County News states the impact clearly: tourists spent over $73.2 million in Carbon County in 2013, according to Mike Garcia, Director of Voices of Montana Tourism.

According to a 2012 study entitled The Economy of Carbon County prepared by the US Forest Service, tourism is the primary driver of employment in the County. Of total private employment in the area, 37.5% is associated with sectors related to travel and tourism, much larger than the total for the State or the US as a whole. Of these jobs, 47% are associated with lodging and food services, and 43% fall into the category of arts, entertainment and recreation, as shown in the chart below.

Economy of Carbon CountyThe high percentage of jobs associated with tourism is reflected in this list of the largest employers in the County from 2009:

Carbon largest employersTourists spend money
According to the Carbon County News article, 11 million visitors to Montana spent $3.62 billion last year, of which $440 million was spent by foreign visitors. Statewide, tourists supported nearly 34,000 jobs statewide — one in every nine Montana workers. Tourism  generated $236 million in state and local taxes, which is up 10 percent from 2012 and it helped lower taxes on each Montana household by nearly $550, up 9 percent from 2012.

Why do tourists come to Carbon County? According to visitor statistics collected on daily pass purchasers at Red Lodge Mountain, nonresidents spend on average five nights in Montana on a ski trip and stay mostly in hotels (42%) or rental cabins (26%). Nonresidents identified location (88%), price (52%) and family friendly area (46%) as the primary reasons they chose Carbon County. 72% of nonresidents did not plan to ski at any other location during the season.

Tourism brings local tax revenue
The city of Red Lodge, with a 2010 population of 2,297, is one of eight communities in Montana that levy a resort tax on the retail value of goods and services sold by retail establishments connected with tourism. The Montana Department of Commerce has determined that the community meets key requirements necessary to levy such a tax (populations less than 5,500; community’s economic well being tied to non-business travelers). The purpose of the tax is to allow communities that have high numbers of visitors but small local populations to collect funds to “manage the wear and tear on local infrastructure without overburdening local citizens.” The City’s resort tax is 3%, the maximum allowed.

According to Red Lodge Mayor Ed Williams, who was quoted in the Carbon County News article, the resort tax reduces local real estate taxes by 15%. “Without it, we’d have to find funding elsewhere,” he said.

The economic impact of expanded oil drilling along the Beartooth Front
An expanding oil economy produces a much less certain picture.

Clearly, some residents would receive a financial windfall — those lucky enough to own mineral rights, and lucky enough to have oil on their property, and lucky enough to have an oil operator decide to extract oil from the shale beneath them. It’s kind of like a lottery, with no rhyme or reason for who wins and who loses, but certainly not a basis to build an economic foundation on.

There will be some jobs, but the highest-skill, highest-paid jobs will go to immigrants from elsewhere, as has been the case in the Bakken.

The social fabric of the town will change. Population growth will be almost entirely men, who will have money and be looking for things to spend it on. Man camps, drug use, crime, and prostitution are all byproducts that oil towns have to live with.

With regard to tax revenues, production on wells in Montana isn’t fully taxed for 18 months because of Montana’s oil and gas tax holiday, leaving towns to wait two years for money to upgrade infrastructure. When taxes do kick in, the state receives 52 percent, with about 47 percent divided between counties and school districts. Cities get one-tenth of 1 percent. And the funds don’t return to counties in proportion to what they put in, so having more wells in your county doesn’t necessarily mean you get more back.

This causes substantial problems for local infrastructure, which we have discussed here. You can listen to this Montana Public Radio piece on the plight of Sidney, which faces this nightmare:

  • Traffic is up as much as 50 percent in the last five or six years, “pounding local roads into gravel.”
  • New hotels and housing are straining the city’s sewer system to its limit.
  • The town brings in about $10 million dollars a year in taxes, but it has $55 million dollars in infrastructure needs.

As drilling expands, it will come into conflict with tourism
But here’s the big issue facing Carbon County growth planners: as oil drilling expands it will inevitably come into direct conflict with tourism. We’ve established that tourism depends on the “family friendly” atmosphere of Red Lodge and surrounding areas.

Central Avenue in Sidney. Click to enlarge.

Central Avenue in Sidney. Click to enlarge.

There can be no question that an expanding oil economy erodes family friendliness. Imagine truck after truck rumbling down Broadway in Red Lodge as they do today on Central Avenue in Sidney. Imagine the largely male oil workforce heading into town on payday Friday night, looking for places to drink and women to meet. Imagine the quaint restaurants and shops turned into strip clubs and discos, with soft music replaced by pulsating bass beats. Imagine female tourists getting leered at and propositioned on the street.

This is not a fantasy. This is what happens in oil towns. And it’s not family friendly.

Watch the Preserve the Beartooth Front video
If you haven’t seen our video “Preserve the Beartooth Front” you should watch it. It’s an excellent description of why it is important for local residents to take action to make sure their property and way of life are preserved.

Pay close attention to the poignant words of Mary Johnson, who lives in Red Lodge with her husband Bob. They’ve retired from the family farm near Tioga, North Dakota, where they lived through the Bakken oil boom.

At 8:43, Mary describes how drilling affected their family:

Here’s our beautiful little farm with trees, and it’s such a pretty place. But on both sides, about a mile in each direction, was oil stuff. It was stinky, it was dusty, I could hear lots of machinery, I could hear people talking at 2am. I said to Bob, ‘If we lived there now and we had small children, and I’m not kidding, I would not let them out of my sight.

We need to manage the growth of oil extraction to preserve tourism
One well in Belfry is not going to change the family friendliness of Carbon County, but the task of those who are planning County growth is this: how do you manage the growth of the oil economy in such a way that it doesn’t crowd out tourism?

Red Lodge Fire Chief Tom Kuntz

Red Lodge Fire Chief Tom Kuntz

If you don’t manage that growth, if you don’t put regulations in place, you’re going to kill the goose that lays the golden egg. As Red Lodge Fire Chief Tom Kuntz recently put it, the success of tourism is a result of all the elements of business in town functioning together like a “house of cards” supporting the economy of Red Lodge. “Take away a chunk of 30 percent and it won’t stand up.”

If, as Kuntz says, a 30% reduction in tourism would destroy the economy, what growth policies should be put in place to keep that from happening?

We believe that the highest and best management practices proposed by the land owners in the Silvertip Zone are a good start.

If the County Commissioners believe they should do nothing and let the oil business grow without controls, they are rolling the dice with the economic future of the County. The oil boom will end eventually, and if the Commissioners do not put growth policies in place to protect tourism, they may find Carbon County with no oil and no tourism, and as desolate as a ghost town.

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