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.

Posted in Community Organization, Politics and History | Tagged , , , , , , , | 5 Comments

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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Free screening of documentary film “Triple Divide” in Red Lodge this Friday, September 19

Click to enlarge

Click to enlarge

Followers of this blog will be pleased to know about  a special free screening of the documentary film Triple Divide at the Cafe Regis in Red Lodge this Friday, September 19 at 6:00pm.

The film’s creators, Joshua B. Pribanic and Melissa Troutman, will be on hand to discuss the film.

From marcellus-shale.us:
The film “tells an alarming story about the downsides to fracking through personal stories, interviews with experts, and in a most exceptional way, case files of public documents uncovered during an 18-month investigation. While the sheer reality of the movie may reduce many to tears by pointing out how desperate the situation is in Pennsylvania, it will spark others with its clarion call of the major improvements needed…before this industrial process can be considered anywhere even close to ‘safe.'”

The film deals with the following subjects common to communities that experience rapid growth of oil and gas drilling:

Weak and under-enforced state regulations
Contaminated water, air, and land
Forest fragmentation
Community disruption
Destruction of the public trust
Loss of property, investments, and standard of living
Intimidation and harassment
Lack of protection over basic human rights
Illnesses

Here’s the film’s trailer:

As we move toward citizen-initiated zoning to protect local land owners from poorly regulated drilling in the Silvertip area of Belfry, this film has importance locally. There has been a great deal of public discussion about Energy Corporation of America’s (ECA) poor track record of compliance in Pennsylvania, which, unlike Montana, keeps detailed compliance records online. ECA has a well-documented record of leaky impoundments, faulty cement casings, and failure to cap abandoned wells that have caused toxic wastewater to leak into local waters. Pennsylvania recently released a list of 243 water wells in the state that have been contaminated by fracking. (Actual report of ECA violations in Pennsylvania here. Actual report of contaminated wells here.)

At a recent public meeting in Red Lodge, ECA said these violations were a result of the company’s “misunderstanding” of state regulations.

Whether you’re just becoming aware of this issue or you’ve been working on it for some time, this is an event worthy of your time.

Refreshments will be served.

Other events this week:
Tonight (9/17): Community meeting in Belfry to discuss oil and gas drilling in that area. Belfry School, 7:00p

Tomorrow (9/18): County Commissioner response to Silvertip citizen-initiated zone. County Administration Building, Red Lodge, 9:30am

Posted in Community Organization, Fracking Information, Politics and History | Tagged , , , , | 1 Comment

Plan to attend public meetings in Belfry and Red Lodge this week. With new video

Yesterday landowners in the Silvertip Zone went before the County Commissioners to clarify their understanding of upcoming meetings and their expectations for the County Commissioners response to their zoning petition.

Meeting notice_091514It was a spirited back and forth, with County Commissioners Doug Tucker and John Grewell stating that they believe the Silvertip landowners have the right to establish a zone as long as it is done correctly and in accordance with the law. Commissioner John Prinkki was not at the meeting.

The Commissioners promised to have a response to the petition at their regular meeting on Thursday morning. The agenda item is scheduled for 9:30am at the County Administration Building.

The Commissioners also affirmed that they plan to hold a public meeting tomorrow night (Wednesday, September 17) at 7:00 at Belfry School, where local residents will have the opportunity to be heard on the issue of drilling in that area. The Commissioners decided to hold the meeting in the evening to accommodate residents who are harvesting and not able to attend regular morning meetings.

Here is video of that discussion:

 

Where we are in the process
Local residents of the Silvertip area in Belfry have been working for many months to put together a citizen-initiated zone, as set forth in Montana law in MCA 76-2-101. Here’s where we are in the process:

  1. Any interested group of land owners in a county can create a zone. It is a democratic process. If 60% of the land owners in an area want to create the zone, it can be brought forward to the County Commission. COMPLETE
  2. A zone map must be created to reflect the properties to be included in the zone and define the perimeter of the zone. COMPLETE
  3. Each landowner who supports the district needs to sign a petition. The signature must match exactly the name on the title of the land. COMPLETE AND VERIFIED
  4. When more than 60% of the landowners in the district have signed the petition, it can be brought to the County Commission. COMPLETE
  5. After the County Commission receives the petitions, it forms a planning and zoning commission. This is a seven member oversight board that reviews the zoning petition and recommends how it should be implemented, and holds a public meeting to determine whether the zone is in the “public interest and convenience.” If so, the zone is established. NEXT STEP: County Commission to provide response to petition at regular County Commission meeting on Thursday, September 18.
  6. The rules of the zone must be drafted to be consistent with the county growth plan
  7. After opportunities for public input, the planning and zoning commission drafts regulations and submits them to the Commissioners for approval.
  8. The planning and zoning commission is responsible for the ongoing administration of the district.

Please attend these meetings if you can. Public input into this process is important.

Posted in Community Organization, Politics and History | Tagged , , , | 2 Comments

Comments on ECA presentation at Carbon County Commission, 9/8/14: Part 3

This post is part of a series analyzing the ECA presentation at the Carbon County Commission last Monday.

The series:

Today’s post is rather long, but I’ve tried to present a comprehensive overview of oil and gas legislation in the state. I recommend you bookmark it and save it for future reference.

If you haven’t seen it, here’s the video of ECA’s appearance before the County Commission on Monday, September 8.


An analysis of how oil drilling is regulated in Montana
The issue of regulation came up early in the discussion at the meeting. You can view for yourself, beginning at 6:41:

Doug Tucker: I guess if you could explain a little about the regulations. There was some hearsay that there were no regulations on (unintelligible) and obviously there are, so if you could explain that.

Seth Nolte: Yeah, so currently we’re regulated by many bodies. Montana Bureau of Oil and Gas is one; the BLM, because we have some federal minerals, the DEQ, the EPA, are all different regulators that kind of monitor us and have to approve many of our permits prior to we drill anything, so we have to send the plan in to the Montana Bureau of Oil and Gas and they have to look over everything in that plan and approve it prior to us doing anything, so we are very well regulated as far as the land side, as far as the air side, as far as just everything. I mean our industry is probably one of the most regulated industries.

I’ll look at the rather astounding fact that a County Commissioner asked a junior employee of a regulated company that question tomorrow, but Seth provides the general framework for this analysis. Today I’ll look at regulation by the Montana Board of Oil and Gas Conservation, the Department of Environmental Quality (DEQ), the Bureau of Land Management (BLM) and the Environmental Protection Agency (EPA). Then I’ll consider how, within this framework, local citizen-initiated zoning with the County Commission is necessary.

Montana Board of Oil and Gas Conservation

The primary agency regulating oil drilling in Montana is the Board of Oil and Gas Conservation (BOGC), which permits well, offers exemptions and writes rules.

The mission of the BOGC is threefold:

  1. To prevent waste of oil & gas resources,
  2. To conserve oil & gas by encouraging maximum efficient recovery of the resource, and
  3. To protect the correlative rights of the mineral owners, i.e., the right of each owner to recover its fair share of the oil & gas underlying its lands.
Horizontal well, Richland County. BOGC photo by Don Thompson

Horizontal well, Richland County. BOGC photo by Don Thompson

That makes it pretty clear. The word “conservation” is not about conserving natural resources, but about conserving oil and gas, and protecting the rights of mineral holders.

However, the board “also seeks to prevent oil and gas operations from harming nearby land or underground resources.” It does this in a number of ways, including “establishing spacing units, issuing drilling permits, administering bonds (required to guarantee the eventual proper plugging of wells and restoration of the surface), classifying wells, and adopting rules,” and regulating injection wells.

When a company wants to drill a well, the oil & gas operator has to apply for a permit , providing specific data about the company and other required information. BOGC staff performs a technical review of the proposal, which also goes through a public notice and hearing process. Then, the BOGC can issue, modify, or deny the permit; regulate the volume and characteristics of the fluids to be injected; and impose operational requirements or limitations for the well.

You can read the BOGC’s rules here.

Composition of the board
According to its rules, the board consists of seven members, as follows:

  • Three members “shall be from the oil and gas industry, and have had at least 3 years’ experience in the production of oil and gas,”
  • Two of the members shall be landowners from oil producing areas of the state but not actively associated with the oil and gas industry.
    • one of these two owns both mineral and surface rights, and
    • one of these two owns surface rights only
  • Two at-large members, one of whom must be an attorney

All are appointed to four year terms by the governor. The first four are appointed when he/she takes office, and the other three are appointed two years later.

Current board members
Current members, with city of residence, classification and date of term expiration:

Linda Nelson, Chair, BOGC

Linda Nelson, Chair, BOGC

Industry representatives:
Wayne Smith, Valier, Vice Chair, 1/1/17
Jack King, Billings, 1/1/15
John Evans, Butte, 1/1/17

Land owners:
Linda Nelson, Chair (with minerals), Medicine Lake, 1/1/17
Bret Smelser (without minerals), Sidney, 1/1/15

Public members”
Ronald Efta (attorney), Wibaux, 1/1/15
Peggy Nerud, Circle, 1/1/17

How it works in reality
Now let’s look at the actual well permit for the Belfry well as an example of how this works in real life.

In October, 2013 Energy Corporation of America CEO John Mork announced in Billings that his company planned to drill 50 wells along the Beartooth Front in Carbon and Stillwater Counties. He said that hydraulic fracturing technology made this drilling economically feasible.

The company filed a permit for its first exploratory well, in Belfry, and a public hearing was scheduled for December 10 at the BOGC offices in Billings.

According to the Billings Gazette, Northern Plains Resource Council members had hand-delivered, mailed and faxed notices of a protest to the permit “weeks in advance” of the hearing.

But the hearing was cancelled after the board’s attorney said that Carbon County Resource Council members had failed to file the final document, a “service list,” an official list of the parties they had served.

So, their board hearing was canceled and the permit was granted without a hearing by the board’s administrator.

Bret Smelser, Board of Oil and Gas member, who voted against protections proposed by Silvertip community members

Bret Smelser, Board of Oil and Gas member, who voted against protections proposed by Silvertip community members

Community members were particularly angered by board member and former Sidney mayor Bret Smelser, who lectured them in what they felt was an arrogant way about the importance of oil and gas drilling to the state’s economy, and, as one community member reported, the need to “put up with a few inconveniences” to support US energy independence.

It’s worth pointing out that Smelser’s family business, Border Steel and Recycling, has thrived during the Bakken oil boom, expanding to to include three Montana locations in Glendive, Sidney and Plentywood plus one in Williston, ND. And that one of the “inconveniences” Smelser is willing to put up with was a non-functional sewage system caused by illegal waste dumping in Sidney, where Smelser was mayor at the time.

Lawsuit filed
Northern Plains Resource Council and Carbon County Resource Council quickly filed suit demanding the permit be revoked and a hearing held.

Charles Sangmeister Chair of the Stillwater Protective Association observed that, “This oil well is the beginning of what ECA says could be a large development in Carbon and Stillwater counties. We have many members whose lives and property will be directly affected by both this well and the others along the Beartooth Front and Bighorn Basin. That’s why we couldn’t stand for the BOGC to simply keep the public from testifying on this permit.”

We documented the concern about the introduction of fracking onto the Beartooth Front in this post, which looks in detail at how the local community would be impacted by the permitted well.

Bonnie Martinell, an organic farmer from the Silvertip area, testifying before the BOGC. Billings Gazette photo

Bonnie Martinell, an organic farmer from the Silvertip area, testifying before the BOGC. Billings Gazette photo by Bob Zellar

Public hearing
At the public hearing, several members of the public spoke and asked the board to acknowledge the environmental risks of using hydraulic fracking at the well site, where groundwater was positioned both above and below the shale belt through which ECA intends to drill. Witnesses also asked the board to consider the road dust and soil erosion. They asked that area water be tested throughout the project’s lifespan to assure the water supply wasn’t fouled.

Licensed geologist Mark Quarles provided expert testimony at the hearing. He presented several concerns with the permit as requested:

    • There is no stated plan for hydraulic fracturing, yet it is expected. Since there are many environmental risks associated with fracking, and because this well is located in a populated area, it makes sense to ask the permit to be modified to include a hydraulic fracturing plan. Such a plan should include such information as fracturing fluid makeup, source water options for millions of gallons of water, disposal plans to fracturing liquids and flowback, and use of production and associated waste pits.
    • Use of pits is antiquated, is not needed, and presents substantial risks. The BOGC should require that ECA use a closed loop system does not include a reserve pit or on-site evaporation and disposal of wastes. Further, calculations should be included to demonstrate that any in ground waste storage pits, if used, are designed to meet all emergency rainfall and snowmelt volumes, in addition to anticipated maximum waste volumes for the proposed vertical well and the horizontal well. Solid wastes should not be allowed to remain in the pits permanently because of the porous soils, shallow groundwater and widespread use of irrigation water that will still be used to grow crops.
    • There is no plan for management of exploration and production (E&P) waste associated with the well. The BOGC should require an amended Application for Permit to describe the plan for proper management of all of these associated E&P wastes and require closed loop systems.
    • Groundwater risks are not fully defined. The application misidentifies the locations and distance of water wells from the drilling site. There needs to be a new groundwater use map that illustrates the horizontal well component, and identifies all wells within a one-mile radius of any portion of the vertical and horizontal component, as well as any regional aquifers that might exist, and any springs.
    • ECA has a recent history of non-compliance drilling in Pennsylvania and West Virginia. This is something that has been well documented on this site, and is easily available in the public record. In Pennsylvania, ECA has been cited in 66 inspections, with 90 separate violations, and 55 enforcement actions. The violations have been for pit failures, methane migration from failed seals, unpermitted discharges to surface water, stream crossings without a permit, erosional control deficiencies, operational deficiencies, and failure to properly close sites.

The consultant made a number of recommendations for changes in design of the well, for industry best practices to be followed in well design, and for the use of more advanced technology than was being proposed at the site.

testify
What the BOGC did

As you read through the public and expert testimony, you can see that these are real property owners who have legitimate concerns and are asking for help from the state. They’re not trying to stop drilling; they’re trying to preserve their property, their water supplies, and their ability to make a living. They’re asking the BOGC to take action to protect Montana citizens, as they are empowered to do.

So what did the BOGC do? Well, they completely ignored all the public and expert input, and went ahead and approved the permit as submitted, without any discussion, by a 6-1 vote, with Peggy Nerud dissenting.

Tom Richmond, BOGC administrator at the time, said there was nothing exceptional about the Belfry well. “The ECA permit proposes drilling a wildcat well, much like the other 35,000 wildcat wells drilled in Montana that have produced oil and gas over the years,” Richmond said.

“There’s nothing special with what’s proposed here that would require special conditions or stipulations.”

What Richmond didn’t say is that, according to Montana regulations adopted in 2011, when ECA decides to fracture the well, which their CEO publicly announced they planned to do and which the expert testimony said is highly likely, they need to provide notification to the BOGC only 48 hours in advance, with no public notification required, as follows:

36.22.608
(2)  For wildcat or exploratory wells or when the operator is unable to determine that hydraulic fracturing, acidizing, or other chemical treatment will be done to complete the well, the operator must submit a notice of intent to stimulate or chemically treat a well on Form No. 2 prior to commencing such activities provided that:
(a)  the written information describing the fracturing, acidizing, or other chemical treatment must be provided to the board’s staff at least 48 hours before commencement of well stimulation activities.

In other words, the BOGC treated this like any other well permit, knowing that public concerns about hydraulic fracturing are legitimate and that fracking is highly likely to occur.

Members of the public later called the experience “exasperating.” The BOGC board didn’t even make a show of honoring public input. The body language of the members, which included walking out during testimony, turning away from the presenters and eye rolling, was exaggerated and offensive.

In retrospect, we can see this playing out as we expected. ECA has filed an “intent to perforate” the well, a precursor to fracking, as indicated below. You can find the notice by clicking on the graphic.ECA notification

Why the BOGC is inadequate to protect the rights of Silvertip landowners
The BOGC is the fox guarding the henhouse. The board cannot serve two conflicting interests. Its primary mission to maximize the profits of the oil and gas industry and mineral rights holders. If it does that, the interests of surface rights holders, like those in the Silvertip area, to protect their property values and conserve water cannot be supported.

The BOGC does not have the resources to protect the safety of citizens of Montana even if it had the inclination. Right now the BOGC has only seven inspectors for the entire state — two in Billings, two in Shelby, and one each in Miles City, Sidney and Plentywood. According to the a study done by the Western Organization of Resource Councils (WORC), this number has grown by only one inspector since 1999. while the number of active wells in Montana has grown by 54% during that time.

Enforcement is also a problem. While the number of violations issued by Montana state inspectors more than doubled from 2004-2011, there’s no teeth in it. According to the WORC study, there were only 26 fines issued in the state over the four-year period from 2007-2010, with total fines issued of $18,950 over those four years.

By comparison, keep in mind that ECA alone received 90 citations in Pennsylvania with fines over $80,000.

This is the key reason why the Silvertip Zone is a necessity.  With three BOGC members coming from the oil and gas industry and another a mineral rights holder, you start with four votes from members who have a financial interest in the expansion of oil and gas drilling. If the governor is not careful in the appointment of the other three, there is a danger of a runaway board that acts only in the interest of the industry.

The Silvertip landowners have a legitimate right to form a zone to protect their rights, and they have reason to believe that, absent a zone, their rights will be violated.

Department of Environmental Quality

The Department of Environmental Quality (DEQ) plays a minor role in oil regulation. The agency requires an air quality permit from oil and gas wells, but it is up to the operator to decide if a well meets the minimum emission requirement for a permit. “The air quality operation fee for…registered oil and gas well facilities is based on the actual, or estimated actual, amount of air pollutants emitted by the facility during the previous calendar year and is an administrative fee of $800, plus $38.24 per ton of PM-10 (particulate matter), sulfur dioxide, lead, oxides of nitrogen, and volatile organic compounds emitted.” It is up to the operator to determine whether it meets the minimum requirements for emissions.

Operators are also required by the DEQ to get a permit for “storm water discharge associated with construction activity.”

According to Northern Plains Resource Council, ECA has not applied for either permit in Carbon or Stillwater County, but other drilling rigs in eastern Montana usually do.

The DEQ also requires the reporting of spills, as outlined below:

A. The following types of spills must be reported to DEQ/DES:

  • Releases or spills of hazardous substances in amounts that meet or exceed the reportable quantities in 40 CFR Part 302. Notification to DES and NRC is required.
  • Spills, overfills, and suspected releases from underground storage tanks and petroleum storage tanks. ARM 17.56.501, et seq.
  • Releases or spills of any materials that would lower the quality of groundwater below water quality standards. ARM 17.30.1045.

B. The following types of spills should be reported to DEQ/DES:

  • Spills that enter or may enter state water or a drainage that leads directly to surface water;
  • Spills that cause sludge or emulsion beneath the surface of the water, streambanks or shorelines;
  • Spills that cause a film, “sheen,” or change the color of the water, streambanks or shorelines; or
  • Spills of twenty-five (25) gallons or more of any petroleum product such as: crude oil, gasoline, diesel fuel, aviation fuel, asphalt, road oil, kerosene, fuel oil; produced water, injection water, or combination thereof; and derivatives of mineral, animal, or vegetable oils.

These regulations are all administrative. Clearly there are few landowner protections in built into DEQ requirements.

(Thanks to Maggie Zaback for her help with this section.)

BLM and EPA

The BLM and EPA are not relevant to this discussion. None of the Silvertip Zone is on BLM land, and so there is no regulation that matters in this discussion

The EPA does not regulate oil and gas wells, although it does get involved if there is a big enough accident that the state cannot handle it on its own.  The EPA is charged with monitoring injection wells, but, as we’ve seen, the agency does not have the resources to do this job.

County Commissions and citizen initiated zoning

Montana law provides a way for local communities to take action to protect themselves in ways that other regulation does not. While you can’t keep mineral rights holders from getting oil out of the ground, they can be constrained by conditions imposed by local governments. Montana counties and municipalities have authority to create special zoning districts that can impose rules for extraction activities.

The process is called citizen initiated zoning, as set forth in Montana law in MCA 76-2-101. Here’s how it works:

  1. Any interested group of citizens in a county can create a zone. It is a democratic process. If 60% of the residents in an area want to create the zone, it can be brought forward to the County Commission.
  2. The rules of the zone must be drafted to be consistent with the county growth plan.
  3. A zone map must be created to reflect the properties to be included in the zone and define the perimeter of the zone
  4. Each landowner who supports the district needs to sign a petition. The signature must match exactly the name on the title of the land.
  5. When more than 60% of the landowners in the district have signed the petition, it can be brought to the County Commission.
  6. After the County Commission receives the petitions, it forms a planning and zoning commission. This is a seven member oversight board that reviews the zoning petition and recommends how it should be implemented, and holds a public meeting to determine whether the zone is in the “public interest and convenience.” If so, the zone is established.
  7. After opportunities for public input, the planning and zoning commission puts in place the regulations for the district.
  8. The planning and zoning commission is responsible for the ongoing administration of the district.

This method has been used in Montana in the past to manage mineral extraction.

The landowners in the Silvertip District have followed steps 1-5, and it is now up to the County Commissioners to form a planning and zoning commission to consider the request.

Tomorrow: The role of the County Commission and where we stand today.

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