Both houses of the Idaho Legislature unanimously approved House Bill 301a last week following a seven-hour negotiation and two days of hearings earlier this month. Supported by Governor Otter, this bill will (among other things) amend the forced pooling provisions enacted just 12 months ago. In fact, House Bill 301a is the latest in a series of legislative actions taken since exploration and development operations commenced in western Idaho in 2010. The Idaho Department of Lands’ website shows nine producing wells plus six shut-in wells as of last month.
Changes to Idaho’s current oil and gas statutes brought by House Bill 301a include:
- Decreasing the default spacing unit for a vertical gas well from 640 acres to 160 acres and allowing federal minerals to be excluded from a spacing unit if the U.S. Bureau of Land Management fails to auction a lease for such minerals for at least six months.
- Increasing the consent threshold for forced pooling (aka integration) of a spacing unit from 55% of its mineral interest acres to 67%, but allowing an applicant to use the 55% threshold if (i) it has “negotiated diligently and in good faith” for at least 120 days prior to its application, and (ii) the outstanding interests will get at least a 12.5% royalty on all oil and gas produced and sold. In addition, within a spacing unit being force pooled, a nonconsenting working interest owner will no longer be entitled to receive a 12.5% royalty during the period in which the consenting owners are recouping the associated nonconsent penalty.
- Imposing a $6,000 “surface use bond” requirement for each well site if the surface owner is not a party (or successor of a party) to (i) a lease of the underlying minerals, (ii) a surface use agreement, or (iii) some other agreement addressing use of the surface in connection with oil and gas operations. The bond only protects against “unreasonable” damages to the surface. In this respect House Bill 301a does not depart from the common law, which limits a severed mineral estate owner’s use of the surface to that which is “reasonably necessary” for mineral exploration and development.
- Requiring that operators submit to the Department of Lands well test reports on completed wells, production test reports every six months on all producing wells, well logs, and monthly production reports, gathering facility reports, processing plant reports, and transportation and storage reports. Subject to certain exceptions (e.g., drilling and testing information for 180 days after completion of a well), all such submitted information will be public and published on the Department of Lands’ website beginning no later than December 31, 2017.
- Modifying the makeup of the five-member Oil and Gas Conservation Commission to consist of the Director of the Department of Lands, one county commissioner elected by the county commissioners of Idaho’s oil and gas producing counties, and three governor-appointed “technical experts” (i.e., individuals having a college degree in geosciences or engineering and at least 10 years of industry experience).
- Requiring that metering be installed and operated in accordance with industry standards.
- Mandating that detailed, itemized statements accompany royalty checks.