Durango, CO

The Long Road – lessons learned from more than two decades dealing with the oil and gas industry

When the “landman comes-a-callin”, landowners embark on an unsolicited, long and contentious experience.

Private property rights, the meaning of privacy, and just compensation swirl around us. We ask and debate continually questions such as:

• Why was my property chosen to be a sacrifice area?

• Why is it that the public agencies of my county, state and national government see me at best as a nuisance and at worst, an enemy?

• How does a very small group have the right to change entirely our environment (sounds, water, sight, air)?

• Why do I feel so alone in these negotiations with a multinational industry?

Jim and I own 375 acres southeast of Durango, Colorado. We purchased the property with the understanding that we would own a 1/8th interest in the mineral estate. There was no development in our area at the time.

In the 1980s we began to be visited by several different “land men” who consumed a tremendous amount of our time but gave us a very good education in gas drilling and the various rules and regulations surrounding it. They also made us aware of drilling activities on public lands and private lands in pockets of the county.

By 1991, there was a well on our land and a well on an adjacent neighbor’s land that pulled gas from under our place.

We never signed either a mineral lease or a surface agreement, and from these active omissions we learned the following points:

Why we did not sign a surface agreement

We had been very public about the emerging problems from the time we learned of the activity in our county. We attended meetings of angry landowners, and county hearings. There were workshops sponsored by the Oil and Gas Conservation Commission (OGCC) as a response of the state agency to look accountable. By the time the landmen approached us we were afraid to sign an agreement because the contract backed the surface owner into a set of rules; and when the state promulgated new rules, the old contract held.

There seemed very little reason for signing an agreement after the well was drilled. Both from experience and information from others we learned that the companies will not honor any agreements after drilling is completed. Most of us cannot afford to follow the legal roads to enforce the contracts.

On the issue of well pads

In the state of Colorado the surface owner has a right to use the well pad as long as the activities of the gas producers’ activities are not curtailed. People have frequently used the pads for storage of horse and camping trailers, sheep herder wagons, RVs, extra vehicles, water tanks, etc. Also, in Colorado, interim reclamation should be started no later than 3 months after a well is drilled. Much of the pad can be put back into vegetation or crops. The land owner is responsible for requesting their reclamation.

When negotiating with a company about a well pad, never believe their description of how many people and how many trips will be made to the area. Our wells have been operating for about 12 years. At this point there are small chunks of time when the well traffic is a little less, followed by large periods of time with a great flurry of activity.

Mineral rights and force pooling

We own 1/8th of the mineral rights under our property, and have never leased them.

Since the well has never been “paid out” we still do not know the results of this decision.

Our decision not to lease was based on a right-of-way dispute. At the time, there was little financial incentive to do otherwise.

Through conferences given by the state agency, through discussions with the company, through advice from lawyers, and finally through a careful reading of the state regulations, we understood that we would be “force pooled” if no mineral agreement was signed. The word was used as a threat by the companies, and whispered as if it were a death sentence by the state agency personnel.

There appeared, however, no question that if you did not sign a lease you would be force pooled by the company.

As production began on the wells of our interest, we contacted the state and told them that no agreement had been reached.

The agency gave us false information that would have allowed the company to steal our gas. We asked for clarification from the board of directors of the state agency and ended up force pooling BP-Amoco.

Recently, it has come to light that many companies never force pooled small mineral owners, and the state has sanctioned this theft. The state takes no responsibility to protect mineral interests, does not insist on a full reservoir leasing before drilling permits are issued, and the state will not assist mineral owners in the recovery of their payments after the well begins producing.

Conflicts

If you live near the well conflicts are almost inevitable. We have divided the conflicts into three categories:

1. Workers and crew bosses forget that they are working around others.
   They seem to get a mind-set where the edge of the pad is the end of the world. If the work boss forgot to install a port-a-potty, well, the worker does the obvious. If the company needs to do some welding, never mind the fire ban. If there are closed gates when you enter, it can’t hurt if you leave them open.

   We have felt that these issues usually are best solved by frequent, direct contact with the workers, and calls to the company.

2. Sloppy company procedures.
   These result in erosion problems, road and dust, fencing and waste pit issues, and the never ending noise (we feel that human being’s who can hear are now an endangered species).

   We have found that dealing with the company is at best a very short-term solution, and usually resolves nothing. But political entity (county, city, state) will insist that you begin with the company.

   We have found a simultaneous approach to be more effective. If a well is “blowing off,” a frantic call to the company is necessary; a call to the county should follow immediately. Whenever possible, a letter or email is far superior so that documentation exists.

3. Neighbors.
   It has become customary for the company representatives to foment suspicion among neighbors. Carrying stories about trash, driving habits, infidelities, etc., from one house to another has become common practice. This suspicion can be escalated by secrecy around payments for land use, “better deals” on fencing, gates, culverts, etc.

   When leasing or surface occupancy begins in an area, neighbors need to guard against these tactics immediately. Hurt feelings are hard to cure.

Over the years we have tasted success in measures to improve our situation. Election times are often successfully used to draw politicians’ attention to our problems. The noise problem is still unsolved, but things have improved. No longer are wells “blown-off” to reduce the internal pressure so that work can be done. Now the pressure is released very slowly, and there is no sound. Sound barriers have become routine. Mechanical problems with pumpjacks will be repaired (so long as you report them). Water quality is monitored.

Speaking out really does pay off.

The sages of yesteryear who cautioned “Be nice to the company or they will get you” have been proven wrong.

In anticipation of a new well construction, and in the discussion of compensation, remember that you are entering a time (probably a lifetime) of monitoring, reporting and investigating activities around the well to protect your own health and well being, and that of your neighbors. It is no small task – don’t sell yourself short.