At its meeting on Wednesday, the Montana Board of Oil and Gas Conservation (BOGC) decided not to take up rulemaking for setbacks. Instead, they created a review panel to consider the issue. This is another example of a Montana state agency running roughshod over the rights of surface owners, whose only recourse is local regulation.

Keep in mind that the vote was not about setback limits themselves, but about whether the BOGC should even consider setting rules on the the minimum distance between a well and occupied property.

“We’re just finding out the issues a little more, clarifying issues before we would go into rule-making,” said Linda Nelson, BOGC chair. Nelson said the committee, made up of landowner, oil industry and legal representatives, could have some information at the next meeting.

Don’t hold your breath.

According to the Billings Gazette, “Not one official voiced support Wednesday for board member Peggy Ames-Nerud’s call for a vote to begin working on setback rules.”

The Board of Oil and Gas deciding to do nothing. Photo: Casey Page, Billings Gazette

What this means is that Montana landowners are left with no protection from having wells placed next to occupied property. What’s worse, they can’t even prepare for the disruption. Oil and gas companies don’t have to provide more than 48 hours notice when they are going to hydraulically fracture a well.

Montana is the only oil producing state in the area that has no setback rules. Wyoming, North Dakota and Colorado have put setbacks in place long ago.

Why setbacks are important
There are several reasons setbacks are important:

1. The division in property rights between surface and mineral estates is fundamentally unfair to surface owners.
2. Drilling activity that is too close to water supplies can result in the contamination of water used for agriculture, ranching and drinking.
3. There is considerable scientific evidence that proximity to oil and gas activity negatively affects human health and safety.
4. Drilling reduces property values for homes close to oil wells.

I have written extensively on this topic on this site, and encourage you to read this article for background.

The BOGC exists to protect mineral interests
It should come as no surprise to anyone that the BOGC has no interest in taking up setbacks. It is an organization designed to protect mineral interests, not surface interests.

The primary mission of the BOGC is threefold:

1. To prevent waste of oil and gas resources,
2. To conserve oil and gas by encouraging maximum efficient recovery of the resource,
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 and gas underlying its lands.

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.

Horizontal well, Richland County. BOGC photo.

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.

Composition of the board
Part of the issue for landowners is way the board is structured. 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

This structure is a problem. With three members coming from the oil and gas industry and one 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.

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

Rancher and BOGC board member Peggy Ames-Nerud. Billings Gazette photo

Industry representatives
Wayne Smith, Valier, Vice Chair, 1/1/17
Steve Durrett, Billings, 1/1/19
John Evans, Butte, 1/1/19

Landowners
Linda Nelson, Chair (with minerals), Medicine Lake, 1/1/17
Paul Gatzemeier (without minerals), Billings, 1/1/19

Public members
Ronald Efta (attorney), Wibaux, 1/1/19
Peggy Ames-Nerud, Circle, 1/1/17

This is not a board that is going to look out for landowner rights. Three members from the oil and gas industry and one mineral rights holder, and Paul Gatzemeier, the landowner without minerals, has spent his career as an oil company executive. Ronald Efta is a second-term member who has shown no interest in protecting landowner rights.

Of this group only Peggy Ames-Nerud, a rancher and member of Northern Plains Resource Council, has environmental credentials.

No setbacks, but a toothless protest provision
BOGC member Steve Durrett, an industry representative, justifies the board’s failure to act this way:

“Other states do have setback rules, but what Montana has that other states don’t have is the ability to protest. Anyone can protest any well for any reason, or no reason at all. This is also clearly a solution in search of a problem. The vast, vast, overwhelming majority of these issues are resolved through negotiation between the landowner and the company.”

Perhaps Mr. Durrett can say this with a straight face because he is a new BOGC member. Anyone with a memory will recall the 2013 fiasco in which landowners from Belfry tried to protest a well and had to sue to get a hearing, and then were completely ignored by the BOGC.

And the notion that issues of setbacks can be fairly negotiated between sophisticated oil companies and landowners, who can’t possibly know all the risks of oil and gas drilling, is preposterous. This is exactly why regulations are required.

If you are interested in background on what’s wrong with the Montana Board of Oil and Gas Conservation, I encourage you to read my earlier post on this subject.

A pattern of Montana government refusal to protect landowners
In the last year, Montana landowners have been shut down over and over by government agencies

• In January, the Carbon County Commission rejected a petition by Belfry landowners to establish the Silvertip Zoning District, which would include nearly 3,000 acres of agricultural land. The Commission’s rejection was based on the opposition of certain neighboring landowners under a provision of the law that landowners argue is unconstitutional.
• In June, Judge Blair Jones rewarded the Carbon County Commissioners for failing to follow their own procedures by dismissing the Silvertip landowners’ lawsuit in a narrow ruling that didn’t consider the constitutional issues involved. The landowners have appealed to the Supreme Court.
• In February the Montana Senate rejected SB177, which would have prevented oil and gas drilling within 1,000 feet of a home, water well or surface water. Current law gives operators discretion over where to place a permitted well, regardless of how close it is to occupied structures. The bill didn’t even get out of committee and onto the floor for a vote.
• In August, the Board of Oil and Gas refused to even consider rulemaking for setbacks, instead punting the issue to a committee of members who don’t believe it is necessary.

Local regulation is the only answer
The record speaks for itself. Governmental agencies in Montana have no interest in setting up reasonable protections for landowners from oil and gas drilling. It is up to local landowners to do it themselves, using provisions for citizen initiated zoning established in Montana law.

In Carbon County, landowners have gone through the zoning process and met all legal requirements to do so, only to be rejected by the County Commissioners. They have appealed to the Montana Supreme Court to protect their rights.

In Stillwater County, landowners are in the process of collecting signatures for a large zone that consists of about 600 properties. They will be presenting these signatures to the County Commissioners later this year.

Local regulation is the only available path to protect landowner rights. These groups are doing a tremendous amount of work, and deserve your thanks, for fighting against all odds to protect your rights.