BOISE (CN) – Idaho politicians are paving the way for the oil and gas industry to frack the state and spend tax dollars to provide the industry with information it can hide from the public, stripping landowners of property rights and due process, a grassroots coalition claims.
Citizens Allied for Integrity and Accountability held a public rally Monday at the statehouse after the Idaho Senate Resources Committee approved S.B. 1339 Friday as an “emergency” trade-secrets bill. A floor vote is expected this week.
“Due process, all transparency, would be obliterated and the process of approving industry applications for the integration of private landowners into forced drilling pools would be transformed into a rubber stamp process if this bill passes,” Citizens Allied board member Alma Hasse told Courthouse News.
The bill changes Idaho laws on “integrated” or “forced” pooling, which allows gas and oil companies, such as Alta Mesa Holdings, to force property owners to sign leases that citizens say could affect their property value, mortgage and homeowner’s insurance.
Alta Mesa owns about 15 well pads, six in production, in Payette County, near the small rural towns of Fruitland, New Plymouth and Payette. Residents there and Citizens Allied have spent eight months challenging two pooling applications submitted to the Idaho Department of Lands Oil and Gas Conservation Commission.
In the integration applications, Alta Mesa asked the commission for an order that would, among other things, allow a 300 percent “risk penalty” to be assessed against any homeowner in the integrated section who cannot write a check to Alta Mesa – up front – for their “shares” of the oil and gas wells and all infrastructure required to bring the wells into production, according to Citizens Allied representative Shelley Brock.
“It isn’t in statute or rules, but Alta Mesa has requested this 300 percent risk penalty in the integration application,” Brock told Courthouse News.
“They are asking the commission to issue an order that if you refuse to sign an oil and gas lease, you are then ‘deemed’ leased and are now a nonworking interest owner. In that event, they are requesting that you pay the 300 percent ‘risk penalty’ if you cannot write a check up front for ‘your portion’ of the costs. It also states in the application that the forced person will share in the liability.”
Citizens Allied has recourse to try to stop the commission from approving the application, but S.B. 1339 would transfer authority to approve or deny to one man – Idaho Department of Lands Director Tom Schultz.
Hasse said the bill provides very limited recourse to challenge pooling applications by, among other things, drastically shortening the time limit in which property owners can appeal an approval.
Schultz acknowledged as much during Friday’s Senate Resources Committee hearing on S.B. 1339.
“They know there would be no way a mineral owner, most of whom have no technical or legal background, would be able to participate in an appeals process, and most likely would not have time to retain an attorney with experience in this area,” Brock said. “It’s intentional.”
Citizens Allied attorney Nick Warden, with Fisher Rainey Hudson in Boise, said the Idaho Legislature has approved a statutory framework for forced pooling that allows special interests “like Alta Mesa” to obtain a “bare majority 55 percent” of mineral owners – even if it’s just one owner – in a given “spacing unit” to sign mineral leases that allow companies such as Alta Mesa access to resources under people’s houses – and then apply to the state to force the other 45 percent into the pool.
“The terms of proposed Bill 1339 represent a reprehensible erosion of the private property rights for mineral owners in the state of Idaho and contravenes both this country’s and this state’s centuries-old tradition both constitutional and statutory,” Warden said at last week’s Senate Resources Committee hearing.
Forced Pooling and Mortgages
Courthouse News has obtained a letter dated Jan. 25, 2016 from Idaho Deputy Attorney General Stephanie Guyon addressed to state Sen. Michelle Stennett, D-Ketchum, in response to her inquiry about the state’s mortgage laws.
Stennett was the only committee member to vote against S.B. 1339.
The letter states that “a common provision in most mortgages … prohibits a borrower from transferring any portion of the mortgaged property without the prior approval of the lender. … Leasing the rights to a property’s subsurface minerals without the security holder’s pre-approval violates this provision and triggers the due-on-sale clause. That clause authorizes the security holder to demand full and immediate payment of the amount the borrower owes on the mortgage. The security holder may foreclose on the mortgage if the borrower cannot pay the full amount.”
A subsequent letter of Feb. 10, sent by Idaho Deputy Attorney General Brett DeLange to Stennett, appears to backpedal, stating that “in many circumstances a person can enter into an oil and gas lease without breaching his or her mortgage or causing it to be called. Because each case is fact-specific, individuals with a mortgage can contact their lenders to determine how an oil or gas lease may apply to their specific circumstances.”
Warden said the provisions of forced integration still put property owners between a rock and a hard place.
“An integration order containing the provisions proposed in Bill 1339 would require mineral owners to choose between voluntarily participating in the pool and risking a violation of their lending agreement, or refusing to participate and being forced by the government to give up seven-eighths of royalties generated from … minerals [they own],” Warden said. “Moreover, it would require them to assess the risks to their mortgage associated with leasing their minerals within an impossibly narrow timeframe.”
Alta Mesa and Snake River Oil and Gas say they have no intention to frack, but Citizens Allied and many others don’t believe it.
Snake River president Richard Brown denied allegations that he told four residents at a July 2014 well tour in Payette County that his company would frack.
In a letter to Courthouse News, Emmett resident Wayne Montano said he and three other Payette County residents, including Marty Fry, asked Brown about his company’s intentions.
“Marty asked the kill-shot question: Will you be fracking in Idaho? The answer came back ‘Yes’ from Mr. Brown. He said that it is the most efficient way to extract all the natural resources. Marty asked him to repeat that, and he said it again. You could have heard a pin drop,” according to the September 2015 letter.
Brown denied that in an email to Courthouse News.
“As to the question, ‘Will we be fracking in Idaho?’ I did not say we would. We have no plans to do so. I won’t speculate as to how my comments were interpreted differently,” Brown said.
A fifth resident, Bob Hawthorne of Emmett, said he was involved in a heated argument with Alta Mesa vice president John Peiserich during an informational meeting at the Payette County senior center in 2014. Hawthorne he claims Peiserich, also an industry attorney, became belligerent and aggressive at the mention of fracking.
“We went nose to nose and for a while there I thought things might get out of hand,” said Hawthorne, who is in his 70s. “But he told me, and I will provide a signed affidavit, ‘We are going to frack and there is nothing you can do about it.'”
At the Payette County Courthouse on Nov. 17, 2014, Peiserich became agitated at the discussion of fracking. EnviroNews editor Emerson Urry captured video of Peiserich saying, “I’ll do whatever I want” and “fuck you” when Urry told him not to touch his camera.
Peiserich did not deny the confrontation with Hawthorne when Courthouse News asked about it at a special Oct. 20 meeting with the Eagle City Council.
Eagle is a town of about 20,000 about 8 miles west of Boise, where the state owns thousands of acres of mineral rights.
“Yeah, if when he says we almost got into a fist fight, you mean he was pushing me around, then yes,” Peiserich said, referring to Hawthorne’s statement.
But when asked whether Alta Mesa would frack in Payette, Emmett or Eagle, Peiserich said:
“The answer is No. And, if we did, the State of Idaho has a strict process we would follow.”
One disgruntled resident commented: “I guess that means they aren’t going to frack until they start fracking.”
Peiserich said that fracking a well adds about 40 percent to a well’s average $1 million price tag, suggesting the industry would avoid it if possible.
Hasse said, “Industry keeps saying you need shale to frack, and that there is no shale here in Idaho, but we have historical well logs that show there is shale everywhere here in the state.”
Courthouse News has obtained several of those logs.
Paul Powell, president of Boise-based Petroglyph Energy, spoke on behalf of the Idaho Petroleum Council at the Oct. 20 special meeting in Eagle, providing an overview of hydraulic fracturing and drilling practices in Idaho and across the country.
During his presentation , Powell described drilling in Utah’s Uintah Basin, where the rock “is all tight sandstone” and said that “every one of [the wells] has been fracked.”
The Idaho Petroleum Council has presented PowerPoint presentations to the Legislature that say more than 90 percent of the country’s estimated 1.2 million oil and gas wells are ultimately fracked.
Forced pooling in the affluent community of Eagle is not an issue yet, but “split-estate” leases are. An Idaho law passed in 1923 allows the state to retain mineral rights even if it sells state land, which gives the state the right to lease land to Alta Mesa without the consent of residents and to extract the minerals “by any means necessary.”
Dozens of residents have contacted their state representatives to decry what they fear will be an environmental catastrophe that will decimate property values.
“We’ve already heard from multiple people who say they were looking to buy in Eagle, but they are holding off on that now because it’s too much of a risk if they are going to start drilling,” Brock said.
Bob Frost, of Nampa, said he was searching Eagle for a property for his son, but abandoned the idea because of the anticipated drilling activity.
“My son wants to move there with his family, but when I found out about the drilling and possible fracking, I really didn’t see it as a good investment,” Frost said in an interview.
State Rep. Mike Moyle, R-Star, denied knowledge of any land leases, or any intentions to drill or frack, but said that oil and gas exploration brings dollars to the state.
“I don’t know anything about leases or signing contracts,” Moyle told Courthouse News in September. “Last year a different company drilled in Canyon County, but that was dry, I am told.
He added: “They found the resources here [in Idaho], but we need to proceed to make sure we do it right. There is some money that can come out of this for the state, substantially: We get a piece of the pie.”
Moyle said revenue from oil and gas production could be used for education, which he called “a big majority of our budget.”
Politicians and Big Oil
Senate Bill 1339 is not the first bill the Legislature has considered that opponents say could benefit Idaho politicians who have direct business connections to gas and oil companies.
Documents show that Lt. Gov. Brad Little, one of the state’s largest landowners, signed a lease with Snake River Oil and Gas for more than 2,000 acres in Canyon and Gem Counties in November 2013.
In 2012, former state Sen. Monty Pearce, R-New Plymouth, and chairman of the Senate Resources & Environment Committee at the time, led the charge to push House Bill 464 through the Senate. Signed into law in 2013, it stripped Idaho municipalities and counties of any authority over where oil or gas wells could be sited.
Pearce voted for the bill repeatedly before he disclosed that he “may have signed some oil and gas leases in the ’80’s,” Hasse said.
Senate President Pro Tem Brent Hill named a six-person ethics committee to investigate.
“It was found that Pearce had actually signed an oil and gas lease with Alta Mesa in November 2011, just six weeks before the start of the 2012 legislative session,” Hasse said.
“In his position as the chair of the Senate Resource Committee, Pearce voted more than two dozen times, on a total of 10 different rules, routing slips and bills, and never disclosed that he had signed oil and gas leases with the company pushing the legislation through his committee.”
Pearce was cleared of any ethics violations.
Another oil and gas bill, H.B. 509 , was introduced on Feb. 16.
Under that bill, the Idaho Geological Survey (IGS) would assist with “mineral and petroleum assessments and characterization of geologic resources.”
It would allow the IGS to assist oil and gas development companies with exploration and sampling of reservoir rocks, but would make the taxpayer-funded data proprietary and confidential – i.e., beyond public reach.
“Our politicians are responsible to their constituents, not out-of-state corporations,” Hasse said at the Monday rally.
“I think they have forgotten who put them in those seats, and they seem to think that they work for special interests, but the reality is that they work for us. They have literally passed a plethora of bills that I can list that directly benefit the gas and oil industry. I think we need to make some changes.”
For now, residents are anxiously waiting to see if S.B. 1339 is signed into law. It was reported out of committee on Feb. 22 with a “Do Pass” recommendation and filed for a second reading. The second reading came the next day, and it was filed for a third reading. Hasse and Brock say they will continue the fight.
“I don’t think we have a choice other than to take this to federal court, because our state lawmakers are not interested in protecting our constitutional and property rights, so for Idahoans, I don’t think there is anywhere else we are going to get any hope,” Hasse said.
A floor vote on S.B. 1339 was expected Thursday or Friday.
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