THE REGULATORS' PERSPECTIVE ON OIL & GAS SURFACE USES: MANAGING STAKEHOLDER EXPECTATIONS
| Jurisdiction | United States |
THE REGULATORS' PERSPECTIVE ON OIL & GAS SURFACE USES: MANAGING STAKEHOLDER EXPECTATIONS
Crowley Fleck PLLP
Cheyenne, WY
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LYNNE J. BOOMGAARDEN is a Partner at Crowley Fleck PLLP. Her practice areas include oil and gas, mining, administrative law, federal and state land transactions, energy and mineral transactions and projects, outreach and governmental affairs, and appellate advocacy. Lynne is recognized in Best Lawyers in America for Energy Law and Mining Law, is an American College of Real Estate Lawyers Fellow, and serves on the Board of Directors for Cheyenne Frontier Days, Inc. She served from March 2003 - April 2010 as Director of the Wyoming Office of State Lands & Investments. In that position, Lynne worked closely with the State Board of Land Commissioners and State Loan & Investment Board to manage approximately 4 million acres of state trust land and minerals and more than 7 grant and loan programs. She also chaired the Wyoming Oil and Gas Conservation Commission and served on Wyoming's Enhanced Oil Recovery Commission. Prior to her service with the State, Lynne was an Assistant Professor at the University of Wyoming, College of Law, teaching Oil and Gas Law, Mining Law, Agriculture Law, Constitutional Law and Legal Writing. After graduating from the University of Wyoming, College of Law with honors in 1991, Lynne clerked for the Honorable Wade Brorby on the U.S. Tenth Circuit Court of Appeals and was an associate at Holland and Hart in Cheyenne.
I. Introduction
Regulatory regimes differ from state to state and region to region, and there are as many regulators' perspectives as there are regulators. Yet regardless of regulatory specifics and individual perspectives, oil and gas regulators everywhere face the challenge of managing stakeholder expectations. The regulator's role in managing diverse stakeholder expectations seems to be more prominent than ever and no more acute than when the issues involve surface use related to oil and gas development. Stakeholders' views of what the regulator can and should do to manage and resolve oil and gas surface use issues are as diverse as the stakeholders themselves.
This paper is intended to be more practical than scholarly. It is intended to provoke additional thought and investigation into surface use issues, and to provide the oil and gas attorney, landowner attorney, operator, landman, landowner and other stakeholders practical insight into the regulator's perspective, powers, and duties concerning surface use, using Wyoming law by way of example. With a better understanding of regulatory roles and the scope of regulatory power, stakeholders' expectations will be more realistic and regulators can better focus and spend time on the issues they have the authority to resolve.
II. Jurisdictional Limitations
A. Key Administrative Law Principles
It is a well-established principle of administrative law that a regulatory agency has no inherent or common law powers. E.g., Montana Dakota Utilities Co. v. Pub. Serv. Comm'n of Wyoming, 947 P.2d 978, 983 (Wyo. 1993). Accordingly, an oil and gas commission may only exercise those power legislatively delegated, and must find its authority to decide an issue within the governing statute. Id. In Wyoming, the Wyoming Oil and Gas Conservation Commission ("WOGCC") must find its authority to act on surface use issues within the Oil and Gas Conservation Act ("Conservation Act") or the Wyoming Split Estate Act ("Split Estate Act"). E.g., Exxon Mobil Corp. v. Wyoming Dept. of Revenue, 266 P.3d 944, 951 (Wyo. 2011); Tri-County Elec. Ass'n, Inc. v. City of Gillette, 525 P.2d 3, 8 (Wyo. 1974).
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B. The Conservation Act
The purpose of the Conservation Act, Wyoming Statute §§ 30-5-101 through -127, "is to provide a comprehensive regulatory program which prevents the waste of Wyoming's oil and gas resources and protects the correlative rights of property owners." Anschutz Corp. v. Wyoming Oil & Gas Conservation Comm'n, 923 P.2d 751, 755 (Wyo. 1996). Generally, "waste" is defined as physical waste; the inefficient, excessive or improper use, or the unnecessary dissipation of, oil and gas reservoir energy; producing oil or gas in a manner that reduces the quantity of oil or gas ultimately recoverable, or that causes unnecessary or excessive surface loss or destruction of oil or gas; and, the inefficient storing of oil or gas. Wyo. Stat. Ann. 30-5-101(a)(i)(A) -(C). "Correlative rights" means the "opportunity afforded the owner of each property in a pool to produce, so far as it is reasonably practicable to do so without waste, his just and equitable share of the oil or gas, or both, in the pool." Id. § 30-5-101(a)(ix).
Accordingly, the power and authority of the WOGCC under the Conservation Act is to make rules, regulations and orders, and to take other appropriate action to permit, investigate and enforce the production of oil and gas in a manner that first prevents waste, and second, ensures that neighboring oil and gas owners are not prohibited from producing their fair share. Nothing in the Conservation Act extends regulatory authority to the WOGCC to manage or resolve surface use issues as between oil and gas operators and landowners. Even more obvious, nothing in the Conservation Act permits the WOGCC to make policy choices or determine the relative priority of subsurface and surface resource values when permitting or otherwise regulating oil and gas development. Stakeholders are therefore misguided if they expect the WOGCC to do so.
C. The Split Estate Act
The Split Estate Act, Wyoming Statute §§ 30-5-401 through -410, on the other hand, extends limited authority to the WOGCC to address surface issues in the context of regulating "oil and gas operations." The Split Estate Act broadly defines "oil and gas operations" to include "the surface disturbing activities associated with drilling, producing and transporting oil and gas, including the full range of development activity from exploration through production and reclamation of the disturbed surface." Wyo. Stat. Ann. § 30-5-401(a)(iv). The "surface owner" protected by the Split Estate Act is "any person holding any recorded interest in the legal or equitable title, or both, to the land surface on which oil and gas operations occur, as filed of record with the county clerk of the county in which the land is located. Id. § 30-5-401(a)(viii). Any person or governmental entity that owns both the surface and all of the underlying oil and gas, or that owns only an easement, right-of-way, license, mortgage, lien, mineral interest or nonpossessory interest in the land surface receives no protection under the Split Estate Act. Id.
Surface owners are entitled to timely and sufficient notice of entry on their land for oil and gas operations (both nonsurface disturbing and surface disturbing) and a good faith attempt by the operator to negotiate a surface use agreement for the protection of the surface resources, reclamation activities, timely completion of reclamation of disturbed areas and payment for damages caused by oil and gas operations. Id. § 30-5-402. However, the legislature did not
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provide the WOGCC with authority to enforce those rights. In fact, the Split Estate Act provides that the surface use agreement between the operator and the surface owner "shall not be filed" with the WOGCC, and the "terms of the agreement shall not be required as a condition of approval of an...
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