Senate Committee on Agriculture, Natural Resources & Energy (03/16/2006)

Final
STAFF SUMMARY OF MEETING

SENATE COMMITTEE ON AGRICULTURE, NATURAL RESOURCES & ENERGY

Date:	03/16/2006	ATTENDANCE

Time:	01:57 PM to 05:38 PM	Brophy	X
		Entz	X
Place:	SCR 356	Groff	X
		Taylor	X
This Meeting was called to order by		Tochtrop	X
	Senator Isgar	Grossman	X
		Isgar	X
This Report was prepared by
	Geoff Johnson
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB06-1185		Amended, Referred to Appropriations

01:57 PM -- House Bill 06-1185

Senator Isgar, prime sponsor, said that the bill addresses the inherent conflicts that occur when one person owns surface rights on property and another owns the mineral rights. He said that there has been much progress made since the industry's original position. The bill would require compensation to surface owners for damages and the posting of bonds by operators.

02:03 PM -- Jack Rigg, British Petroleum, commented on the operations of his business. He said that the parties interested in the bill have not achieved consensus on the bill. He walked the committee through the bill. He commented on the requirement for surface use agreements, written waivers, and affidavits guaranteeing compensation to surface owners. He commented on damages that may be awarded under the bill. If surface agreements are not reached, the bill requires that bonds be posted. The bill allows appraisals of land for the determination of damages. Under the bill, the Commission may impose conditions on operators prior to approval of permits to drill. The bill requires that notice be given to surface owners a year prior to drilling. Notice must also be given to local governments, and mineral owners must be notified of surface developments.

02:31 PM -- Lance Astrella, Denver, said that he is an attorney representing landowners. He said that he thinks the bill would hurt surface owners and that the bill adds nothing to what surface owners have under current law. He said that the bill is ambiguous and many determinations would have to be made by the courts. He said that the bill will delay settlements and will be more expensive than the existing process. He said that appraisers will not be able to determine if land is "permanently disturbed" under the bill. He said that people on the Western Slope are getting sick from volatiles from the well sites and that the noise of compressors disturbs land owners. He said that a court, not an appraiser, can determine damages to a landowner under the bill. He said that there already exists an implied covenant of good faith under existing leases. He said that the bill is a "statutory placebo" designed to discourage an ballot initiative effort by landowners.

02:40 PM -- Todd McCormick, Platteville, commented on surface damage agreements. He said that if these agreements are not recorded, future owners will be unaware of the agreements. He said that these agreements essentially allow the purchase of the right to damage the surface. Senator Isgar said that the bill will allow landowners more bargaining power.

02:51 PM -- Ted Brown, Noble Energy, commented on the bill and the right of landowners.

02:53 PM -- Ken Wolenstein, Colorado Oil and Gas Association, said that the bill strikes a fair balance between surface and mineral owners. He commented on the coexistence of housing developments and wells. He said that rules now require the use of common well pads. In Weld County, he notes that 12,000 wells have been drilled and that Weld is the fastest growing county in the U.S. He said that, for the most part, development is going up around existing wells in Weld County.

03:08 PM -- Jim Walker, Petron Development Company, said that he manages oil and gas properties for about 75 people. He said that his company operates 95 wells in the state, and charges $200 a month to manage the wells. He said that the requirement in the bill for a $15,000 bond would be very onerous on his company. He commented on current bonding requirements in the law. Senator Isgar said that he is willing to work on making the bonding requirement less onerous on small operators.

03:19 PM -- Jack Orr, Grandby, asked that the bill be amended back to its original strength. He said that land is the most valuable asset to ranchers.

03:23 PM -- Kirby Hughes, Sierra Club, Mining, Oil and Gas Issues Chair, said that the General Assembly also has a requirement to protect the people and the environment of Colorado. He said that he would like to see "best practices" required in the bill and that it should apply to all Colorado landowners. He said that every drilling operation should have a surface use agreement. He said that there could be a measure on the ballot if these issues are not resolved.

03:28 PM -- Bonnie Kline, Colorado Wool Growers Association, said that they support HB 1185. She said that the bill would require negotiations in good faith.

03:31 PM -- Duke Cox, Grand Valley Citizen's Alliance, said that his organization advocates for property rights. He said that the energy industry has made the bill ineffectual, and that only the industry supports the bill. He asked that the committee repair this damage to the bill. He asked that "best practices" be required in the bill and that the loss of property value be compensated under the bill. He said that an initiative has been filed to address the situation.

03:35 PM -- Carlyle Currier, Colorado Farm Bureau, supported the bill. He supports the provision for a mandatory surface use agreement. He said that the bill is not perfect, but a good compromise. He said that the Farm Bureau does have a problem with some of the notification requirements in the bill.

03:42 PM -- Garin Bray, Colorado Farm Bureau, spoke of the process by which the bill was developed. She said that the bill would guarantee negotiations and notification. She said that the Farm Bureau supports the original bonding requirements. She said that they also support proposed amendment L.023.

03:45 PM -- Terry Fankhauser, Colorado Cattleman's Association, supported the bill. He said that he participated in the stakeholder's process. He supports the requirements for negotiation and notification in the bill. The Cattlemen oppose compensation for loss of market value.

03:49 PM -- Randy Feerstein, Colorado Association of Home Builders, said that he supported the bill as it was introduced, but now opposes the bill. He said that the original bill had clearer language that would have facilitated appraisals, and that the bill no longer addresses loss of market value of properties. He said that operators will not have to pay for surface damages under the current version of the bill. He supports a $25,000 bonding requirement. This would cover the landowners in case of uncollectible damages. He discussed exclusions that were inserted in the bill in the House. He said that no bill would be better than the current bill. He commented on prepared amendment L.023. He said that surface owners pay for directional drilling, not operators.

04:09 PM -- Paul Bernklau, Holy Cross Cattleman, commented on his experiences with surface use agreements. He said that the bill will require an agreement to be in place prior to entry onto property. He supports the bill.

04:13 PM -- Ed Orr, Greeley, Colorado, said that the bill should also address the lost value of land due to drilling.

04:16 PM -- Janice Good, testified as an individual royalty owner. She addressed notification requirements in the bill, specifically the ability to rely on the tax roles, rather than a title search, for notification purposes. She said that not all counties keep accurate lists of mineral owners. A title search would allow a more complete list of owners.

04:20 PM -- Stan Dempsey, Colorado Petroleum Association, said that his members believe that the bill is unnecessary since they almost always reach surface use agreements, but that they support it anyway. He said that his members believe that the bill would permit access to their minerals without too much burden.

04:23 PM -- Roy Savage, National Association of Royalty Owners, supported the bill, but asked for two amendments to the bill, a change in a definition in the bill, and a change to the notification requirements.

04:24 PM -- Jeff Kirkendall, Colorado Association of Realtors, asked for the committee's help in protecting the rights of surface owners. He said that he has a problem with the language addressing compensation in the bill, and that it would result in suppression of the rights of surface owners. He said that surface and mineral owner's rights are equal under Colorado case law. He would like to see language that would require mitigation of damages caused by drilling.

04:31 PM -- Bob Moody, National Association of Industrial and Office Properties, opposed the bill.

04:32 PM -- Mike Chiropolos, Western Resource Advocates and Colorado Environmental Coalition, spoke of the "explosion" of drilling in the State. He said that the bill still favors the industry in its current form. He said that industry has a right to reasonable use of the property, and that the bill is aimed at bad operators. He supports insertion of the fair market value concept into the bill.

04:42 PM -- Dan Randolf, San Juan Citizens Alliance, said that his organization would like to see two changes in the bill. He said that most of the time land cannot be purchased with the mineral rights. He feels that compensation must be for the loss of market value of the tract on which the drilling occurs. He said that the operators should "minimize adverse surface impacts" and that he prefers this language to language that is in proposed amendment L.023.

04:55 PM -- Senator Isgar commented on how the bill was developed. He said that it is important to him that the industry minimize and mitigate their impact.

04:58 PM -- Ken Wolenstein, Colorado Oil and Gas Association, commented on the proposed amendment L. 023. He said that the intent of the bill is to now make reasonable use of the surface compensable. He commented on the "Garrity Case" which requires mineral developers to choose the development option that minimizes the impact on the surface owner.

05:11 PM -- Lance Astrella, commented on the language "reasonable measures to mitigate" in the bill. He said that surface owners would like to see language like "best available economically feasible measures" inserted into the bill.


BILL:	HB06-1185
TIME:	05:16:05 PM
MOVED:	Isgar
MOTION:	Moved a prepared amendment to the bill, L.023 (Attachment A). The motion passed without objection.
SECONDED:
		VOTE
	Brophy
	Entz
	Groff
	Taylor
	Tochtrop
	Grossman
	Isgar
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB06-1185
TIME:	05:18:24 PM
MOVED:	Grossman
MOTION:	Moved a prepared amendment to the bill, L.025 (Attachment B.) He later withdrew the motion.
SECONDED:
		VOTE
	Brophy
	Entz
	Groff
	Taylor
	Tochtrop
	Grossman
	Isgar
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: TIE


BILL:	HB06-1185
TIME:	05:26:45 PM
MOVED:	Taylor
MOTION:	Moved a prepared amendment to the bill, L.024 (Attachment C.) The motion passed 7-0-0.
SECONDED:
		VOTE
	Brophy	Yes
	Entz	Yes
	Groff	Yes
	Taylor	Yes
	Tochtrop	Yes
	Grossman	Yes
	Isgar	Yes
Not Final YES: 7 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:	HB06-1185
TIME:	05:32:22 PM
MOVED:	Isgar
MOTION:	Moved to refer the bill to the Committee on Appropriations, as amended. The motion passed 6-1-0.
SECONDED:
		VOTE
	Brophy	Yes
	Entz	Yes
	Groff	Yes
	Taylor	Yes
	Tochtrop	Yes
	Grossman	No
	Isgar	Yes
Final YES: 6 NO: 1 EXC: 0 ABS: 0 FINAL ACTION: PASS