Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON TRANSPORTATION & ENERGY

Date:01/25/2006
ATTENDANCE
Time:01:43 PM to 07:06 PM
Borodkin
X
Green
X
Place:LSB A
Hefley
X
Knoedler
X
This Meeting was called to order by
Larson
X
Representative Pommer
Lindstrom
X
Ragsdale
X
This Report was prepared by
Sullivan
X
Jamila Rockette
Welker
X
McFadyen
X
Pommer
X
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
HB06-1185Witness Testimony Only

01:43 PM -- House Bill 06-1185

Representative Pommer called a recess.

01:52 PM

Representative Pommer called the committee back to order.

01:52 PM

Representative Curry, prime sponsor, presented House Bill 06-1185. The bill seeks to promote oil and gas development consistent with the protection of the interests of surface landowners. The bill requires a signed surface use agreement (SUA) or a drilling permit bond in the amount of at least $25,000 along with a signed offer of settlement that provides compensation to the surface owner for a decrease in fair market value of the surface estate reasonably expected to result from oil and gas operations.

Representative Curry outlined some of the amendments to the bill. The amendments clarify fair market value by adding the word "current" in front of "fair market" throughout the bill, omit the word "water" throughout the bill, and address the fiscal note on the bill.

02:09 PM

Tom Kourlis, a rancher and wool producer from Moffat County, spoke in support of the bill. Mr. Kourlis discussed the importance of determining the fair market value of property and compensating property owners when damage occurs as a result of oil and gas operations.

02:19 PM

Duke Cox, President of the Grand Valley Citizens Alliance, spoke in support of the bill. Mr. Cox stated that the bill is a necessary tool in leveling the playing field. He stated that the legislation gives surface owners a "trump card" in a game where industry has all the "trump cards."


During Mr. Cox's testimony a power point presentation featuring photos of damages and disturbances caused by gas or oil drilling was shown. Responding to questions from members, Mr. Cox explained that the photos were taken in Garfield County over the last couple of years, he stated that he doubted that damages from oil and gas drilling could equal the total value of his property. A copy of the powerpoint presentation is available at the State Archives.

2:42 PM

Gene Osbourne, representing himself, spoke in support of the bill. Mr. Osbourne stated that the state constitution protects property rights and that the rights of surface land owners should be protected. Responding to questions from members, Mr. Osbourne stated that eleven other states have laws protecting surface owners. Mr. Osbourne distributed a handout (Attachment A).

03:08 PM

Liz Lippitt, representing Liberty Home Loans from Rifle Colorado, spoke in support of the bill. Ms. Lippitt discussed some of the issues mortgage brokers and lenders are facing as a result of damages to surface land from oil and gas operations. Ms. Lippitt stated that investors are not willing to provide loans for properties with active drilling on or nearby the land.

03:12 PM

Orlin Bell, resident of Garfield County, spoke in support of the bill. Mr. Bell discussed the details of an SUA he entered into with a mineral operator. He stated that he felt insulted by the offer the operator gave him for damages caused to his land. Mr. Bell believes the bill simply protects surface land owners.

03:27 PM

Garland Anderson, owner of 80 acres of property in Garfield County, spoke in support of the bill. Mr. Anderson stated that in 1997 the Colorado Supreme Court ruled that neither the rights of surface property owners nor of mineral owners were dominant to the other. He explained that even if an operator is using 10 acres of his land he still has to pay residential taxes on all 80 acres of his land. Responding to questions from members, he did not know what type of taxes the operator pays when operating on the land.

03:39 PM

John Cevette, Executive Director of the Colorado Corn Growers Association, spoke in support of the bill. Mr. Cevette stated that both farmers and oil and gas operators provide useful products to the country. Mr. Cevette stated that the bill sorts out the rights and responsibilities of the various stakeholders.

03:42 PM

John Stencil, President of the Rocky Mountain Farmers Union (RMFU), spoke in support of the bill. Mr. Stencil stated that RMFU supports negotiated SUAs, reasonable and fair compensation for damages caused to the surface land by mineral development, legal recourse for disputes through mediation or arbitration, and a requirement for bonds to encourage surface use agreements.

03:46 PM

Howard Boigon and Ken Wonstolen, representing the Colorado Oil and Gas Association (COGA), spoke in opposition to the bill. Mr. Wonstolen stated that the bill would lead to a significant legal disincentive for oil and gas operators to drill in Colorado. Responding to questions from members, Mr. Boigon explained how oil and gas companies purchase their rights. Mr. Boigon stated that this is a very complex issue and that COGA is willing to work with the committee in developing a solution. Mr. Boigon and Mr. Wonstolen distributed two handouts (Attachments B and C).


04:55 PM

Jay Still, Vice President of Pioneer Natural Resources Company (PNRC), spoke in opposition to the bill. Mr. Still stated that PNRC already enters into cooperative SUAs with landowners. Mr. Still expressed concern that the provision in the bill calling for oil and gas operators to compensate landowners the fair market value for any damage done to their property will discourage property owners from negotiating with oil and gas operators. Mr. Still stated that he understands the issues being raised by the landowners, and just wishes that the parties could come to the table to negotiate more to the middle on many of the issues in the bill. Mr. Still distributed a handout (Attachment D).

05:09 PM

Chairman Pommer announced that no vote would be taken on the bill today, but that the testimony portion of the hearing would continue.

05:15 PM

 Ted Brown, Vice President of Noble Energy and Dave Siple, Vice President of Noble Energy, described the activities of their company. Responding to questions from members, they discussed their process for reclamation in regard to land owners. Mr. Brown stated that the legislation will prevent 25 to 50 percent of Noble Energy's wells from being drilled. Mr. Brown and Mr. Siple distributed two handouts (Attachments E and F).

05:41 PM

Ed Orr, rancher, agriculture developer, mineral owner, and real estate developer, spoke in support of the bill. Mr. Orr stated that the bill may affect the profits of an operator, but it will not prevent the operator from drilling.

05:49 PM

 Traci Houpt, Commissioner for Garfield County, spoke in support of the bill. Ms. Houpt stated that the commission has not taken a stand on the bill, but that she is representing her constituents. Ms. Houpt stated that the bill is an equity and property rights issue.

06:07 PM

 Mary Ellen Denomy, independent Certified Public Accountant, spoke in support of the bill. Ms. Denomy distributed a handout (Attachment G)

06:13 PM

Jim Wason, Vice President of Kerr-McGee Corporation, spoke in opposition to the bill. Mr. Wason described the activities of his company. He stated that his company already compensates surface owners for damages and that the bill would complicate their efforts and slow down the process. Mr. Wason distributed a handout (Attachment H).



06:29 PM

Duane Zavadil, Vice President of Government and Regulatory Affairs for Bill Barrett Corporation, spoke in opposition to the bill. Mr. Zavadil stated that Colorado needs to be careful with regard to how it regulates drilling and production and that this legislation could make it difficult to attract industry to the state to drill and produce oil and gas. Mr. Zavadil distributed a handout (Attachment I).

06:42 PM

 Burt Jones, Vice President of Western Gas Resources, Inc., testified in opposition to the bill. Mr. Jones stated that he is seeking a solution that will accommodate all the stakeholders.

06:50 PM

Britt Weygandt, Director of the State Board of Land Commissioners (SLB), spoke in opposition to the bill. Ms. Weygandt discussed the bill's fiscal note and stated that the legislation will reduce revenues earned by the SLB for education.

7:00 PM

The following organizations did not testify, but distributed information for the committee: Duke Energy distributed information in opposition to the bill (Attachment J); Weld County distributed comments and suggestions on the bill (Attachment K); EnCana distributed information in opposition to the bill (Attachment L); and the American Institute of Professional Geologists distributed information in opposition to the bill (Attachment M).

07:02 PM

The committee adjourned.