CHAPTER 2 LAND STATUS PATTERNS IN THE OVERTHRUST BELT

• Jurisdiction: United States

Overthrust Belt--Oil and Gas Legal and Land Issues
(Nov 1980)
CHAPTER 2
LAND STATUS PATTERNS IN THE OVERTHRUST BELT
Robert G. Pruitt, Jr.
Pruitt & Gushee
Salt Lake City, Utah

ERRATA

This Erratta Sheet was provided by attorneys for Union Pacific Land Resources Corporation. The Rocky Mountain Mineral Law Foundation takes no position in this matter:

"Facts and conclusions asserted in the discussion of Railroad Lands at pages 2-7 and 2-8 relating to the history of Union Pacific mineral reservations and mineral policies are vigorously disputed by the defendants in pending litigation brought by Anschutz Land and Livestoc-Company. The author of the paper, although not an attorney of record in that litigation, has a longstanding attorney-client relationship with the Anschutz interests."

INTRODUCTION

The Overthrust Belt is a narrow band of complex geology considered by some to extend from Canada to Mexico, but centered in southwestern Wyoming and northern Utah. The exact eastern and western limits of this belt are sometimes disputed, but parts of five states are involved: western Montana, western Wyoming, southeastern Idaho, Utah and eastern Arizona. The belt is characterized by intense folding and overthrusting from west to east, and the topography is hilly to mountainous.

The recognized heart of the Overthrust Belt is a north-south band about 70 miles long in southwestern Wyoming and northern Utah, containing 16 oil and/or gas fields producing from about ten different formations. The belt is widely recognized as extending northward into western Montana along the trend of the Northern Rockies, and less widely recognized as extending southward down the Wasatch Plateau of central Utah, along what used to be called the "Hingeline Play." The really dedicated advocates of the Overthrust Belt recognize it as extending (somehow) across southern Utah and northern Arizona to link up with similar overthrust structures east of Phoenix, in eastern Arizona.

Land ownership patterns along the Overthrust Belt involve chiefly federal lands (administered by the Forest Service and the Bureau of Land Management), state-owned lands (in each of the five states), a few indian reservations, checkerboard belts of railroad land grants, and scattered private lands depending upon the amount of settlement. Maps depicting land ownership do not accurately portray oil and gas ownership, however, since commonly the federal government reserved certain minerals in patents to private owners¹

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and in grants to the states,² and the states and railroads commonly reserved all minerals in sales of land to private owners. Also, in some regions private owners have carved out mineral interests³ as properties were conveyed, resulting in very complex mineral ownerships for the landman to unravel.

This paper is intended as a discussion of the principal types of land ownership and patterns of land ownership, with particular attention to those aspects relating to oil lease acquisition and operations. Special emphasis is given to land status in the area of southwestern Wyoming and northern Utah, where the Overthrust Belt is being actively drilled.

FEDERAL LANDS

Federal lands comprise the greatest portion of the Overthrust Belt, particularly when you include federal reserved oil and gas rights in patented lands. All federal lands and reserved oil and gas rights are leased pursuant to uniform published regulations administered by the Bureau of Land Management (BLM),⁴ on standard printed lease forms which are not subject to negotiation as to terms or conditions.⁵ Each state has its own BLM State Office, and attitudes toward oil and gas leasing can vary remarkably from one state to another.

The surface administration of federal lands in the Overthrust Belt is divided among the Forest Service (over national forests), the Park Service (over national parks and monuments) and the BLM (over other federal lands). BLM administers all leasing of oil and gas in close cooperation with the surface agency, and simply will not issue a lease unless the surface agency concurs.⁶ BLM will require "special stipulations" to any lease if so requested by the surface agency, even so far as requiring "no surface occupancy" of a lease.

(a) Park Service Lands. Several national parks and monuments are found within the Overthrust Belt, and none of these lands are open to oil and gas leasing. Fortunately, the total percent of federal lands in national parks and monuments is relatively small, but these lands are simply "off limits" for oil and gas leasing in the foreseeable future.

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(b) National Forest Lands. Numerous large national forests are found within the Overthrust Belt, considered by many as comprising the best land for oil and gas exploration. Technically, all national forest lands are open to leasing by BLM in cooperation with the Forest Service,⁷ but many problems exist. Large areas of the national forests are under study as "roadless areas" under RARE II (discussed in detail in another paper).

RARE II areas recommended to Congress as wilderness areas are effectively closed to new leasing;⁸ even areas recommended for "further study" are held in a recent court decision to be effectively closed to development (i.e., leasing).⁹ Due to the extremely rugged topography, even lands open to leasing may prove to be inaccessible due to the proximity of roadless areas.

(c) BLM Lands. As a general rule, all remaining lands are administered by the BLM through District (grazing) Offices under the administration of a central State Office. You would think that BLM administration of oil and gas leases on lands administered by the BLM would be uncomplicated, but that frequently is not the case. BLM District Offices often outdo their counterparts in the Forest Service in requiring "special stipulations" and limitations on surface occupancy of oil and gas leases. Also, BLM is in the midst of a great study to identify "roadless areas" and recommend the same as wilderness.¹⁰

Areas formally designated a Wilderness Study Area (WSA) are effectively closed to leasing activities; existing oil leases may be suspended and new leases are not being issued. The action is being challenged as an illegal withdrawal.¹¹

(d) Leasing Procedures. Federal oil and gas leases are issued "non-competitively" on land not known to be a Known Geologic Structure (KGS), and "competively" on KGS lands.¹² KGS determinations are made by the U.S. Geological Survey, based on known oil or gas producing fields and structures,¹³ but KGS designation is no guarantee of production. Competitive sales of leases are held after published public notice, and the lease is awarded to the qualified party offering the highest first year bonus bid by sealed bidding.¹⁴ Lands can be put up for competitive bidding by nomination of the agency or by private request. Terms of the competitive lease will be specified in the lease sale, but generally competitive leases carry a five-year primary term, $3.00 per acre annual rental, and a royalty of 12 1/2%-25% on oil and 12 1/2% or 16 1/2% on gas.¹⁵ Non- competitive leases are issued to the first qualified applicant for a ten-year primary term and a flat 12 1/2%

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royalty, at $1.00 per acre annual rental.¹⁶ In cases where a previous non-competitive lease expires or terminates, the newly available land must be offered by "simultaneous drawing," a great lottery in which the public is invited to file an offer (one to a customer) to be drawn at a ceremony for each leasing parcel.¹⁷ Sometimes over a thousand offers will be filed for a single parcel, with the winner hoping to sell his lease to a legitimate oil company for a high price. If nobody files at the simultaneous drawing, the parcel may thereafter be leased to the first applicant.¹⁸

STATE LANDS

Each of the five states in the Overthrust Belt is the owner of certain lands acquired from the United States of America at the time the state was admitted into the Union, as a grant-in-aid to the public schools and other institutions. These school grants fall into two broad categories: (a) "inplace grants" of designated sections, the so-called School Sections,¹⁹ and (b) "selection grants" for designated colleges, institutions and other specified purposes.²⁰ In-place School Sections tend to form a regular pattern within each surveyed township, while selected lands can be anywhere. For instance, the States of Wyoming,²¹ Idaho²² and Montana²³ were granted Sections 16 and 36 in each Township as School Sections; Utah²⁴ and Arizona²⁵ got Sections 2, 16, 32 and 36 in each Township. In many cases the state lands (particulary selection grants) were sold into private ownership for money to fund the schools, but many School Sections are still owned by the states. In several instances the state legislature reserved all minerals to the state in any sale of state lands,²⁶ and the beds of all navigable...