Date: 02/25/2009
Final
BILL SUMMARY for HB09-1194
HOUSE COMMITTEE ON AGRICULTURE, LIVESTOCK, & NATURAL RESOURCES
| Votes: View--> | Action Taken: |
| <none> | <none> |
01:59 PM -- House Bill 09-1194
Representative Curry, prime sponsor, presented HB 09-1194, concerning accrual of a cause of action upon discovery of a breach of a royalty obligation. The bill extends the period of time for which a person may take legal action for unpaid royalties. Specifically, a cause of action for money owed due to a breach of a royalty obligation accrues on the date the breach is discovered or should have been discovered by the exercise of reasonable diligence. She answered questions from the committee. The committee discussed the status of rulemaking associated with HB 07-1180. The Representative Fischer, chair, indicated that the bill would be laid over after testimony for the committee to consider amendments.
The following individuals testified:
02:07 PM -- Phil Barber, an attorney representing himself, explained his experience with oil and gas law. He explained the current statute of limitations in the law and in the bill. He discussed problems with the current statute of limitations and explained difficulties that landowners have in determining whether they have been underpaid. He answered questions from the committee.
02:29 PM
Mr. Barber continued to answer questions from the committee about the statute of limitations under current law.
02:37 PM
Mr. Barber continued responding to questions from the committee concerning a 2008 Supreme Court case, BP America Production Co v. Patterson, that dealt with the statute of limitations for a breach of royalty obligations. Mr. Barber explained that he disagreed with the court's decision.
02:41 PM
The committee discussed how this bill relates to HB 07-1180.
02:43 PM
Stan Dempsey and Andrea Wang, Colorado Petroleum Association (CPA), testified in opposition to the bill. Mr. Dempsey explained CPA and their relationship with royalty owners. He discussed the rulemaking process that resulted from HB07-1180. Ms. Wang explained the purpose of statutes of limitations and compared the current 6 year statute of limitations to other statutes of limitations for other issues. She explained how the bill creates uncertainty which is detrimental to the industry. Ms. Wong also discussed a 2001 Supreme Court case, Rogers v. Westerman. She continued explaining that she does not believe that it makes sense to single out one industry for a general rule of applicability and that royalty owners are already protected from fraud under existing law. Mr. Dempsey answered questions from the committee about the status of HB 07-1180 and the related Colorado Oil and Gas Conservation Commission (COGCC) rulemaking process.
02:56 PM -- John Gorman, resident of Glenwood Springs, spoke in favor of the bill. He explained his work for a county assessor and discussed the complicated nature of the accounting process and challenges in obtaining information from oil and gas companies. He answered questions from the committee and discussed the process for determining whether there have been inaccuracies in payments to royalty owners.
03:05 PM -- Mary Lou Brophy, Wray resident, spoke about the bill. She explained challenges she has experienced as a royalty owner in receiving multiple payments from oil and gas companies and tracking the accuracy of the information they provide. She distributed a fact sheet on the Payment of Proceeds Act (SB 98-159) regarding royalty payments (Attachment C). She discussed volume measurements, well metering, and reporting differences between companies. Ms. Brophy explained the information royalty owners need to determine what payments should be and the difficulty this creates for owners in being able to prove incorrect payments. She stated that she originally was going to testify in favor of the bill but believed that the bigger problem was access to information, which is not addressed in this bill.
03:19 PM
Committee members expressed concern and confusion about the status of the rulemaking process under HB07-1180.
03:26 PM -- Ralph Cantafio, Steamboat Springs attorney, spoke in favor of the bill and explained his experience on oil and gas issues. He indicated that he agreed with Mr. Barber's testimony. Mr. Cantafio explained why he thinks bill makes sense for the industry and royalty owners. He disscussed the statute of limitations and drew analogies to medical malpractice issues. Mr. Cantafio described problems associated with not having a standardized lease form and discussed a variety of accounting challenges. He answered questions from the committee regarding whether this issue is specific to Colorado or if it is also an issue in other states. He also answered questions about the complaint processes through the COGCC and difficulties associated with determining amounts owed to royalty owners from past.
03:49 PM -- Ken Wonstolen, Colorado Oil and Gas Association (COGA), testified against the bill. He distributed a handout describing COGA's position on the bill (Attachment D). He explained that the bill only addresses the statute of limitations and accrual of royalty payments and not other concerns raised by witnesses. He also discussed challenges regarding retroactive interest payments which he predicted will increase litigation. He also expressed concern that the law already creates uncertainty and that this bill would add to this uncertainty. Mr. Wonstolen disscussed the status of HB 07-1180 rulemaking and indicated that his understanding is that the rulemaking would start no later than July of this year. He referenced resources available to help landowners interpret royalty pay stubs. He answered questions from the committee concerning complaints to the COGCC.
04:06 PM -- Marrion Wells, Parachute resident, mineral owner, and representative to the Garfield County Energy Advisory Board, explained her experience with oil and gas development on and near her property and difficulties she has had tracking royalty payments. She provided copies of her testimony (Attachment E) and answered questions from the committee.
04:17 PM -- Debora Anderson, mineral owner in Garfield county, testified in favor of the bill and explained that average mineral owners are not large land owners. She talked about her family's history and some of her family's experiences on their property.
04:26 PM -- Rose Belden, Garfield County resident, read letter from John Holten (Attachment F), an oil and gas auditor.
04:29 PM -- Bob Koeneke, Arvada, read a letter from Earl Poytress, a royalty owner in Montrose County (Attachment G).
04:31 PM -- Mike Elliot, member of the National Association of Royalties Owners and attorney representing himself, spoke in favor of the bill and discussed the information held by operators. He discussed the Payment of Proceeds Act and what is required of operators. Mr. Elliot also discussed the COGCC complaint process. He explained how the bill allows royalty owners time to determine if there are any inaccuracies in their payments. He explained that HB 07-1180 does not address the statute of limitations issue. He answered questions from the committee.
04:50 PM
Representative Looper expressed interest in statutorily requiring an operator to respond to royalty owners when they request information. Representative Curry responded that there is something already in the Payment of Proceeds Act that addresses this issue.
04:52 PM -- Christy Koeweke, an Arvada royalty owner, discussed a situation where her family did not receive the royalty payments they were owed from an oil and gas company. She distributed a handout with her testimony and letters from oil and gas companies (Attachment H). She explained the many issues involved as a royalty owner in tracking royalty payments.
04:59 PM -- Mary Ellen Denomy, president of the National Association of Royalties Owners, a certified public accountant, and mineral manager, testified in favor of the bill. She distributed a pay statement from Williams (Attachment I). She explained the statement showing adjustments made to mineral owners. She discussed her views about how the bill would clarify the statute of limitations. She answered questions from the committee and explained why a longer statute of limitations is needed. She indicated that she agreed that there are many other problems related to royalty owners having access to information but that this bill addresses an urgent problem.
05:10 PM
Representative Curry provided closing comments. She indicated the need to have a broader bill to address all the issues raised in the hearing and expressed interest in continuing to work on this issue.
05:14 PM
Representative Fischer, closed testimony and laid the bill over for committee until action next week.