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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Video: Carbon County Commissioners response to Silvertip Zone petition, 9/18/2014

Today we have video of the September 18, 2014 Carbon County Commissioners meeting in which the County provided feedback on the Silvertip citizen-initiated zoning petition presented to them last month.

All three Commissioners were in attendance, as was Energy Corporation of America attorney Mike Dockery of Billings, and several land owners from the Silvertip Zone.

The bottom line
County attorney Alex Nixon provided feedback to the Silvertip Zone petitioners on the legal standing of their petition.

Alex Nixon, Carbon County Attorney

Alex Nixon, Carbon County Attorney. Photo credit: Lloyd Blunk, Billings Gazette

He advised the County Commissioners to not take action on the petition for one primary reason: the law requires that the land in a citizen-initiated zone be contiguous, and the Silvertip Zone is not a single contiguous parcel.

He commented that zone boundaries can be creatively drawn, but they must be a single piece of land. He said that even the main parcel in the Silvertip Zone seems to be two or three distinct pieces of property.

He also indicated that he had concerns that the petition was not specific enough about what is to be zoned, even though supporting documents are much more specific.  He said that this concern by itself was not enough to keep the Commissioners from acting on the petition.

He said that this is common in petitions of this type, and that he has been involved with many that required multiple iterations to achieve approval.

He recommended that the petitioners redo the petition, define the zone properly and come back.

As a result of his recommendation, the County Commissioners took no action on the petition, meaning they did not move to the next step of creating a planning and zoning committee.


The legal requirement for contiguous zones
The law requiring contiguous zones is pretty clear. According to Montana Code Annotated 76-2-101(3), a zone means “any area that consists of not less than 40 acres.” Further, according to a Montana Attorney General’s Ruling issued in 1987, “Section 76-2-101(3) requires that the acreage in a zoning district be one contiguous 40-acre parcel.”

Mr. Nixon went into some of the reasoning behind this, but the bottom line is that, in order for Carbon County to consider the Silvertip Zone petition, the land in the zone will need to be a contiguous parcel.

What’s next
I spoke to the organizers of the Silvertip Zone, and they were not deterred by this decision. They plan to correct the issue and come back to the Commissioners with a new petition that meets the requirement of the law as soon as possible.

Keep in mind that the decision to take no action based on the multiple fragments of land has no bearing on any future decision the County Commissioners might make on whether to form the zone.

Click to view full letter

Click to view full letter

Energy Corporation of America letter
In yesterday’s post I referred to a letter that was the basis for Energy Corporation of America (ECA) attorney Mike Dockery’s comments at the Belfry meeting. County Commissioner John Grewell was kind enough to provide me with a copy of the letter, which is available here for your review. You can view the entire letter by clicking on the graphic on the right.

The letter is consistent with his remarks at the meeting. Mr. Dockery is trying to rewrite the rules for citizen-initiated zoning so it doesn’t apply to the oil and gas industry in Montana. You can view my initial comments on those remarks in that post.

Do mineral rights holders need to be considered in a citizen-initiated zone?
I’d like to focus on the issue raised in the letter of whether mineral rights holders should be included as land owners for the purpose of establishing a citizen-initiated zone, as Mr. Dockery contends.

As Alex Nixon points out, there is no established law or existing opinions on this contention. What we have is a Super Lawyer hired by a big oil firm dreaming up a legal fight that he can take to the Montana Supreme Court to add to the list of citizen protections overturned by the oil and gas industry.

What Mr. Dockery is trying to do is effectively end citizen-initiated zoning by imposing a requirement so burdensome that most petitioners will find it impossible to meet it. They’d have to go to the County Clerk and spend hours researching sketchy records to determine the mineral ownership of each property, contact these mineral owners, many of which are corporations spread all over the world, and get them to agree to sign a zoning petition dealing with local surface properties in which they have no interest.

This defeats the entire purpose of citizen-initiated zoning, which has to do with “the public interest or convenience.” The surface owners — those really concerned with the public interest and convenience — will have no ability to act in their own behalf.

Mr. Dockery offers no advice on how this might work:

  • In citizen-initiated zoning, established rules clearly state that if there are multiple owners of a property, the signature of only one of these is allowed. Multiple owners of a property count as one in both the numerator and denominator for measuring 60% of land owners in a district. If we count mineral owners, where do they go in the numerator and denominator?
  • If they count only as additional owners of a single property, then we don’t need their signatures if we already have the signature of one of the surface owners.
  • If we count the mineral owners as an additional property in the denominator, do we then allow the signature of a surface owner AND a mineral owner to reach the 60%?
  • And what about a surface owner who also owns the minerals? Do we get his signature twice and count both in the numerator as we try to reach 60%?

Clearly Carbon County can’t offer direction to petitioners on this because there is no law, no rules or legal recognition of Mr. Dockery’s imaginative new legal provision.

The Silvertip petitioners are under no obligation to determine mineral rights ownership or get signatures from mineral rights holders because there is no process defined in the law for them to do so. As I’m sure Alex Nixon knows, Carbon County would be legally exposed if it took Mr. Dockery’s suggestion and made up guidelines for the inclusion of mineral rights owners and getting their signatures.

Mr. Dockery is welcome to have an opinion about the way citizen initiated zoning should work or not work. If he and John Mork want to spend lots of money to go to the Montana Supreme Court to try to get them to agree to disenfranchise local land owners, they are welcome to do so.

In the meantime, the Silvertip Zone petitioners should move forward the way the law works today.

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Video: Public meeting at Belfry School, September 17

Today we have video and commentary on a public meeting that the Carbon County Commissioners held at Belfry School on Wednesday evening, September 17. The Commissioners scheduled the meeting to provide more community members with an opportunity to discuss oil drilling in the area.

Presenters
The Commissioners invited the following people in advance to attend and make presentations:

Mike Dockery

Mike Dockery

Michael (Mike) S. Dockery, a partner in the Billings office of the law firm Crowley Fleck. His practice focuses on the areas of real estate and commercial law, including commercial and real estate sale, lease and financing transactions, subdivision, development, zoning and planning matters, title insurance issues and claims, creditors’ rights and foreclosures. Mike also represents clients in government and municipal finance transactions.

Dockery is a “Super Lawyer” who receives a prestigious “AV”  Preeminent rating from Martindale-Hubbell.

Seth Nolte, ECA project manager for the Belfry well. Seth also presented at the Carbon County Commission meeting on September 8.

Jim Halvorson, Montana Board of Oil and Gas (BOGC). According to John Grewell,  Halvorson, senior geologist at the BOGC, was invited but “couldn’t attend.”

Bonnie Martinell, who has been one of the leaders of the group organizing the Silvertip Zone was not asked to present in advance, but was asked to “join us at the table” at the beginning of the meeting.

What the presenter list says about the meeting
Who is invited and who attends says a lot about the importance and intent of a meeting.

It was certainly appropriate for the County Commissioners to invite ECA to speak. Belfry residents would want to hear what the company has to say.

The company’s choice of participants is curious. Seth Nolte gave pretty much the same presentation he gave to the County Commission two weeks ago. Once again, he was unable to give a direct answer to any question. This is frustrating, and ECA should reconsider whether he does more harm than good in public meetings.

The choice to send a polished Super Lawyer is interesting. If the company wanted the community to know what they are doing they would have sent a senior executive like Peter Sullivan, the company’s Vice President of Exploration. Mr. Sullivan would have been familiar with all the issues and could have been open and specific about every question raised.

That they sent their high-priced Super Lawyer is a clear indication of where they are coming from. They have no interest in meeting their industry standards for community engagement, which call for open communication and mutual problem resolution. Instead the choice of an attorney shows once again that they are not interested in trying to resolve the concerns of the Silvertip residents.

That Jim Halvorson of the BOGC “couldn’t attend” is not surprising. The Board that supposedly regulates oil and gas extraction has consistently shown no interest in hearing from the citizens affected by their regulations.

Finally, including a representative from the Silvertip Zone as an afterthought is indicative of the sensibilities of the County Commissioners. They have now held two well-attended events in the community, one last January 30 at the Elks Club, and now this one. In neither case was a concerned community member invited as part of the planned program. (Correction: It has been pointed out to me that the meeting at the Elks Club was not an event sanctioned by the Carbon County Commissioners. Mr. Prinkki participated as a private citizen.)

Including a concerned citizen at the last minute is a small step forward I guess. Thankfully she was ready to go and did a great job without having the opportunity to prepare.

The meeting
The meeting is an hour a half long. I urge you to watch it. It’s a great example of participatory citizen engagement. The first twenty minutes or so are prepared remarks by Seth Nolte, Mike Dockery, and extemporaneous remarks by Bonnie Martinell of the Silvertip Zone.


Comments by Mike Dockery, ECA attorney

Mike Dockery’s comments were focused on ECA’s problems with the proposed Silvertip citizen-initiated zone. Forgive my paraphrasing, but I have tried to do justice to his arguments below. He said he has expressed these in a letter to the County Commissioners. I have asked John Grewell for a copy of the letter, and will post it if he sends it to me.

1. The Silvertip Zone is not contiguous, but is a set of four small clusters of property. This, according to Dockery, is undermines the potential benefits of a zone.

Comment: This issue was part of the County’s response to the Zone. I’ll have more on this tomorrow.

2. The law requires that the petition have the signatures of 60% of the real property owners in the district. This means not only the surface interests, but the mineral interests. Because the Silvertip petition includes only signatures from the surface owners and no attempt has been made to ascertain the mineral owners and get their signatures, it has not met the requirement of the law.

Comment: This seems like a real stretch. If you look at MCA 76-2-101, the provision of Montana law that establishes citizen-initiated zoning,  the County Commissioners may establish a zone “whenever the public interest or convenience may require and upon petition of 60% of the affected real property owners in the proposed district.” So what Dockery is doing is defining mineral rights as real property. Since the mineral rights have actually been severed from the surface rights (in the same way that timber rights could be), they should not be considered.

3. The Board of Oil and Gas is responsible for regulating oil extraction. It “makes us go through a very rigorous process.” They do a complete environmental assessment. That’s what occurred here. Not only does the BOGC regulate the drilling, but they have the power to regulate the development of the oil and gas resources, and the power to enforce the regulation. It is a quasi-regulatory body. From our viewpoint the BOGC is the agency with the authority to regulate. For that reason the regulation of oil and gas through zoning is prohibited, and a zoning district can’t have “concurrent authority.” Further, there has to be a required public interest or convenience. Given the extensive regulation that already exists, there is no public need.

Comment: We’ve looked at what’s wrong the BOGC many times.It’s primary mission is to “conserve” oil and gas for extraction, and to support the development of wells for profit. It’s composition is weighted heavily to make sure that this mission is supported.

The BOGC does not protect the rights of surface owners. We have seen that in practice when residents of the Silvertip Zone had to sue to get a hearing on the Belfry well, and were completely ignored when they made legitimate requests for protection in the drilling of that well.

The citizen-initiated zoning process was set up exactly for this reason. It states specifically that a zone may be set up “whenever the public interest or convenience may require.” In other words, if the residents of a zone determine that a zone is necessary to protect their interests, then they can establish one.

A look at ECA’s record of trampling on the rights of real property owners in other states makes it pretty clear why residents would feel the public interest requires this.

4. Dockery expreessed a concern that there haven’t been any specific regulations proposed, which leads him to be concerned that citizens are trying to regulate mineral interests, effectively a “taking” of these interests.

Comment: This concern probably stems from the 1963 Mont. Code Ann. § 76-2-209,  part of the Montana Zoning and Planning Act (MZPA). This law effectively prohibits local governments from

prevent(ing) the complete use, development or recovery of any mineral, forest, or agricultural resource.

According to the law governing citizen-initiated zoning, the regulations will be set by a planning and zoning committee (PAZC) established by the County Commission. There will be plenty of opportunity for ECA to have input into these regulations, and to alert the PAZC if there is a concern about any specific regulations.

5. This would be an unlawful delegation of authority to citizens. A Citizen initiated zone shouldn’t be able to exercise powers greater than the government of the county.

Comment: This doesn’t make much sense. Montana law enables citizen-initiated zones. Is he complaining the law is unconstitutional?

7. The zone is not consistent with the growth plan, which commits Carbon County to exploit oil and gas development.

Comment: This is a reach. The zone is entirely consistent with the plan. It does not call for a ban on oil and gas drilling. It just requires fairness in the way it is done. The proposed regulations are entirely consistent with other elements of the growth plan.

Is oil and gas drilling regulated or not?
After Dockery finished, Bonnie Martinell spoke. Despite being given no prior notice, she spoke clearly with a strong voice, and effectively represented the interests of her neighbors in the Silvertip Zone.

Paraphrasing again, but the gist of her remarks was: “A lot of what he says is not true. There is no regulation, there is no control, there is no monitoring. A number of these land owners went to BOGC and were denied an opportunity to speak. ECA said they did not want us speaking to the BOGC.

“We’re just land owners who want to do the right thing and protect our land. We live in an area with very limited water. They put this well in a drainage area. With all these rules and regulations, this shouldn’t be allowed. We have no other option. We are not regulating the minerals. What we’re doing is allowing the land owners to negotiate as to where the well goes. So we don’t wind up being Pavillion Wyoming, where they walk away and we suffer.”

A number of people have focused on Bonnie’s repeated claim that there “is no regulation.”

Those who scoff and say, “Of course there’s regulation” are missing the point.

Bonnie has studied the law and probably understands the nature of regulation as well as Mike Dockery.

What she’s learned is that there is plenty of regulation that enables oil and gas drilling, but next to nothing that protects local land owners. Major protections in federal law have been stripped away over the years. The BOGC has demonstrated that it has no interest in hearing her neighbors’ concerns, or of requiring anything in a permit that protects their interests.

What few protections there are are not enforced by the BOGC. They have seven staff for inspections throughout the entire state. They have issued almost no fines for non-compliance over the last several years.

This is exactly why citizen-initiated zoning is necessary.

So please. When Bonnie says there are no regulations, what she means is that citizens are powerless to keep ECA from doing the same kind of damage in the Silvertip Zone that they have done all over Greene County, Pennsylvania.

Watch the Q&A
I strongly recommend that you listen to the question and answer session that follows Bonnie’s presentation. It is a wonderful example of citizen involvement. There were many speakers with comments, questions and concerns. They represent different points of view, different levels of understanding, and personal experiences.

It is exciting to hear people engage in the process.

I do want to call your attention to one comment by Commissioner John Prinkki that concerned me a great deal. At 1:19.37, on the subject of the impact of oil drilling on infrastructure, he says

We have the ability to work with oil companies to make sure that any impact they have on County infrastructure that they will help us maintain. We can ask them to do dust control, road (unintelligible) plugs, and if we have road traffic we have ways of regulating that by speed control. We’ll work with them to do that, and they will work with us.

That was not the experience of former Sidney Mayor Bret Smelser, who is also a member of the BOGC. While I’m certain that there are some accommodations that can be made, the certainty that “they will work with us” is reminiscent of other projects that Mr. Prinkki has been responsible for that have not worked out so well.

One of the reasons for citizen-initiated zoning is to establish agreements for behavior in writing rather than to trust companies that have proven unreliable in other settings.

Central Avenue in Sidney. Click to enlarge.

Central Avenue in Sidney. Click to enlarge.

The bottom line
What the Silvertip Zone seeks to do is to establish the rules for oil drilling in an environment where surface property is not adequately protected. This is what’s fair.

ECA’s decision to send their Super Lawyer to represent them tells us they are not interested in understanding our concerns and meeting them, but plan to settle this in court if necessary.

The Silvertip Zone is not an attempt to ban oil and gas drilling. It only establishes rules that enable companies like ECA to exploit their mineral leases while protecting the property and way of life of local land owners.

Tomorrow I’ll post video of the County Commissioners’ response to the Silvertip Zone petition.

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Video of public meetings will be posted Sunday or Monday

We’ll post video of the public meeting last night in Belfry and the County Commission meeting this morning.

I’m traveling and will post as soon as I can, on Sunday or Monday.

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