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BLM Reviewing 'Split Estate' Rules on Surface, Subsurface Rights

Westerners from Montana to New Mexico appear emboldened by a new Wyoming law giving more rights to property owners, and the Bureau of Land Management (BLM) is now reviewing longstanding "split estate" rules, where the surface rights are privately owned but the subsurface rights are publicly held. The issue is of particular concern in the Rocky Mountain states, where coalbed methane (CBM) exploration is expanding, and property owners see their land rights diminishing.

Split estate rules are decades old, enacted under a series of Homestead Acts passed by Congress that transferred unoccupied public lands to homesteaders for nominal fees. A patent certificate could be obtained by a homesteader after continuously residing on and cultivating the land for five years, and patent agreements usually contained a subsurface reservation clause reflecting the retention of mineral rights by the federal government.

However, the Homestead Acts were enacted long before natural gas prices -- and the value of oil and gas land -- began to rise. Under federal law, the mineral estate is dominant over the surface estate; states may enact rules on how the estate split is negotiated. The BLM oversees mineral rights on 700 million acres of federal land, and about 58.5 million acres are under privately owned land.

In most instances, surface owners and mineral developers successfully negotiate private agreements for surface damage compensation, and landowners are able to pocket money they otherwise would not have received for use of their land. However, negotiations can fail, and under current federal law, developers may post a bond and move onto the private surface to access minerals without an agreement in place. Private landowners have tried, mostly unsuccessfully, to implement stronger negotiation rules in the western states, and Colorado, New Mexico, Montana and Wyoming legislatures have all considered -- but up to recently failed -- to enact changes.

However, in February, Wyoming Gov. Dave Freudenthal signed into law regulations giving landowners more rights in split estate issues. The regulations, in a state where 49% of the surface estate and 66% of the mineral estate are owned by the federal government, now require developers to comply with notification and good-faith negotiation requirements to strike a private "surface use agreement." There is a 180-day timeline to strike an agreement, and the federal government is not exempt. The split estate rules also apply to all seismic and exploration activities in Wyoming.

The Wyoming split state initiative was immediately blasted by the BLM, and the federal agency argued it should be exempt from the law. Freudenthal and Wyoming land rights groups, however, are standing firm, and the governor said the state will take the issue to court, if necessary. Now, a group of Montana landowners and legislators has announced public hearings in January to ready new split estate legislation for its state. New Mexico and Colorado land rights groups also are expected to draft property rights legislation this year as well.

Landowners will fight and undoubtedly win, said Laurie Goodman, president of the Landowners Association of Wyoming, which was formed to protect private property rights during oil and gas development.

BLM's rules, said Goodman, have "violated the stated mission of this [Bush] administration to honor state laws and the rights of private property owners..." The landowners "remain open and willing to work with the BLM on changes...that will be more cognizant of state statutes and private property rights." Landowners also want to work to streamline permitting decisions.

Now, it appears, the BLM wants to hear both sides. In late December, BLM announced that as part of its efforts to implement the Energy Policy Act of 2005, it would begin a review and public comment period of current policies and practices the agency uses to manage oil and gas resources in split-estate situations. The Energy Policy Act requires that the BLM consult with affected property owners, representatives of the oil and gas industry, and other interested parties as it conducts the review, and by mid-February, it is supposed to submit a report to Congress.

A BLM spokeswoman said last week the report for Congress is to ensure the oil and gas assets are developed "responsibly." She did not know how voluminous the comments are, but she said there had been a "steady traffic" of comments coming into the agency through its website. BLM may request more time to submit a final report because of the late notice on the public hearings.

The BLM website at www.blm.gov/bmp has a list of where the public hearings are scheduled, and it also offers instructions for submitting written comments on preliminary drafts of the report that will be sent to Congress following completion of the review. The recommendations sections of the drafts have been left blank to encourage broad consideration and participation. Comments may be emailed to BLM through Feb. 6 at SplitEstate@blm.gov.

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