The debate over compensation for residents who own surface rights to gas well sites in the county flared up again at the Carbon Commission meeting last Wednesday night.
While the issue has been simmering for years, there is nothing the commission can do about the rates that people are paid by oil companies who are drilling wells on their properties.
The subject came up in the meeting when the JM Huber Company, which is presently operating a number of wells in Carbon County, was referred to the commission by the planning and zoning board for approval of 21 zone changes and conditional use permits in the Emma Park area located above Indian Canyon.
While there was little participation from citizens in the public hearing, the commissioners did have some real strong points to make with the Huber company residents present. And this time, unlike the last meeting where the problems were raised, Brian Wood was not the only Huber representative in attendance. A number of officials were there, including Gary Johnson from the Denver office of the company and the head of operations for this area.
Specifically the issue that has been raised in the last few months has to do with people, particularly ranchers who own surface rights in areas where Huber is drilling.
Some Carbon citizens claim that other companies pay more money for their okay to come in and drill than Huber does.
According to local sources, Huber pays a one time $300 to $400 fee to surface right owners for wells that may be in place 20 years or more.
Some citizens say other companies not only pay more initially, but also pay a yearly fee or sometimes a royalty on the production of the well.
Huber officials have disputed that claim and say that most companies operate just like they do, with similar amounts of compensation.
The discussion heated up at the meeting when Johnson told the commissioners that, instead of the 20 sites the company wanted approved in the second item on the agenda, Huber wanted to cut the number back to 17 because of some “problems” in securing the rights on three of the areas. The problems consist mostly of landowners who have entered into agreements with the company.
“We would like you to roll these over to a June meeting of the commission,” said Johnson. “Some of the wells have federal mineral rights but private surface rights. We’re still trying to negotiate with the surface owners, but if we have to, we will use the federal regulations to go in and drill anyway.”
Questions and comments by commissioners followed.
“I realize that federal mineral rights are superior over surface rights,” said Commissioner Bill Krompel. “But I have talked with an attorney who says that federal law also allows a 1 percent royalty to surface owners for the use of their property.”
Johnson disputed the claim, indicating he had never encountered such a regulation.
“Let’s say you had some mountain property that you owned,” proposed Commissioner Tom Matthews. “Would you let someone move in and use that property for 20 years for $800?”
Commissioner Mike Milovich brought up the fact that the negotiations between private parties can not be regulated or dealt with by county government.
“We are dealing with a lot of land owners in this situation,” said Johnson. “We feel the need to treat everyone the same. We have past and present landowners we have dealt with who have accepted what we offer and to give others more money would be unfair. You also have to look at the scale of this. We have to operate within a budget and that budget sets only so much money for such expenditures. If we started changing all these agreements on the properties we have, it could cost our company hundreds of dollars more each day, over a twenty year period. We are in a very competitive market, even within our own company. Every dollar that goes out cuts our profit. If we exceed our budgets, other divisions within the company could very well get the benefit of our operations.”
“We represent people who are losing money by having your wells on their property,” replied Krompel. “I realize that your company contributes to our economy, but that is still a problem.”
Johnson indicated that he heard, at one meeting, owners said they were losing $1,000 per year per well site since they could not lease the ground to an outside interest who wanted to run cattle.
“I have talked with a number of ranchers and landowners who have told me if that is what these people are getting for grazing rights that they would like to get in on that deal,” said Johnson.
After the last meeting involving the problems, the commission received a letter from the state petroleum council questioning the county’s dealings with the oil and gas industry. The letter suggested the county had little right become involved in negotiations and did not have the right to charge for conditional use permits. Presently, Carbon charges .001 percent of the total project cost for the permits.
“We don’t want to be ornery about this situation, but we have to protect our citizens just the same,” said Milovich. “We are in favor of development, but we also have to work out the problems. When we get letters like the one we received it doesn’t sit too well.”
Milovich and Carbon Attorney Gene Strate confirmed that the realm of private negotiations was outside county jurisdiction.
“I realize we can’t get in on this – but I find it interesting that companies will end up paying big attorney fees to lawyers to work out these surface rights problems when they just could pay the people whose property they need a little more money for,” said Matthews.
Matthews and Krompel also questioned whether Huber’s reclamation bonds were worth enough money to really clean up drilling-related situations if the company went under.
“We follow state statutes and post the bonds according to those guidelines,” argued Johnson.
The commission approved the requested zoning changes and the conditional use permits, but gave indication that they would continue to study the matters brought up in the meeting.
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