A new version of a bill aimed at protecting royalty owners, providing transparency and encouraging competition in the state's nascent oil and gas industry gets a hearing before the House Resources and Conservation Committee Monday.
Rep. Judy Boyle, R-Midvale, reworked the bill after talks between oil and gas companies, landowners and state officials.
Boyle said she made changes to address concerns raised by the only company producing oil and gas in the state, Houston-based Alta Mesa. The company had no comment Friday on the bill.
One major criticism of the original version was that it put the governor on the Idaho Oil and Gas Conservation Commission. The new version puts three petroleum industry experts, the Department of Lands director and a county commissioner from an oil producing county, on the commission.
“We made many changes while protecting property rights, the state endowment and the taxpayer,” Boyle said. “We will not concede on those vital points.”
Boyle and her District 9 colleagues, Rep. Ryan Kerby, R-New Plymouth, and Sen. Abby Lee, R-Fruitland, pressed for the legislation after complaints from property owners and suspicions that the state and landowners weren’t getting their fair share.
The bill would open up to public review records that had been closed to the public and, for six months to a year, the state. To help other drillers compete, it would require the Idaho Department of Lands to post the records on its website and release them without first requiring a public records request.
The new bill also would allow operators to use default spacing for gas wells of one in 640 acres or one in 160 acres. The unit spacing can be changed and shaped to ensure that gas reservoirs are developed to best conserve the resource and ensure mineral rights holders are properly compensated. Alta Mesa wanted to keep the 640 acre spacing that’s in current law.
The bill would still require operators to show that it has 67 percent of the royalty owners in a spacing unit supporting its application to force all owners in the pool to allow drilling. But after a period of time, the requirement could drop to 55 percent.
Although Alta Mesa had no official comment, it shared a letter from the Western Energy Alliance, a trade association representing 300 companies across 12 states, to House Resource Committee Chairman Rep. Marc Gibbs, R-Grace, in opposition to the bill.
The bills provisions’ “interference with contract terms and negotiations between mineral owners and lessees, and operators and midstream companies, is not just contrary to fundamentals of American jurisprudence, but also basic free-market principles,” said Kathleen Sgamma, president of the group
Boise attorney Mike Roe, a landowner in Payette County who has represented other landowners negotiating leases with Alta Mesa, called Sgamma’s assertion “absurd.”
“What this legislation does is level the playing field between three parties: the operators, the royalty owners and the state,” Roe said.
Roe said the legislation doesn’t change any existing contracts, but it pulls the curtain away so royalty owners don’t get bad deals.
The new bill retains the setbacks of oil and gas infrastructure at 300 feet for water wells and occupied structures and increases the surface bond from $5,000 to $6,000.
The new bill also would allow an operator to keep well records confidential for up to 180 days, although that information would be shared with the state. It would set limits on what an operator can keep confidential as a trade secret.
The challenge for Boyle, Kerby and Lee to get their bill passed is that the session is nearly over. If approved Monday, the bill could go to the House floor quickly. But it would then have to go through the Senate Resources and Environment Committee, whose chairman was skeptical of the first version, before reaching the Senate floor.
Getting the bill passed this year will be critical to attracting new companies to compete for Idaho gas and oil, Lee said.
“This is not a perfect bill,” Lee said. “But its real step forward.”