More drilling, less protection

Imagine going to your mailbox and finding a letter from a fossil fuel company informing you that they intend to extract oil or gas from beneath your property. 

You knew this might happen someday. Like many property owners in the western U.S., you own the rights to the surface of your property, but not the minerals beneath. The letter might make you apprehensive – you know that oil and gas companies are allowed to conduct disruptive drilling on or near your property, even without your consent, to reach the minerals beneath, and that drilling can bring with it the risk of water contamination, air pollution, disruption of wildlife and a host of other impacts.

But, because the oil and gas under your private property is owned by the federal government, you know that your land – and the environment – are afforded the “same level of surface protection” as if the well were to be drilled on federal land. To ensure that that promise of protection is actually delivered, drillers tapping federal oil and gas are required to obtain a federal drilling permit.

Now, however, that protection is in jeopardy. A little-noticed provision of the sweeping Manchin-Barrasso “permitting reform” bill currently before the U.S. Senate (Section 203) would eliminate federal permitting requirements for drilling of millions of acres of “split estate” lands with federal mineral leases. 

It’s a loophole big enough to fit a drilling rig through, and advocates for the environment and surface landowners in the western U.S. are sounding the alarm. But what could it mean for the environment? Answering that question requires first learning about who owns in the West.

What are “split estate” lands? 

When the surface and mineral rights of a piece of land are owned by different entities, it is called a “split estate.” 

Split estate is common in fossil fuel and mineral-producing regions of the country, especially in the West. The development of the West in the late 19th and early 20th centuries was spurred by a series of homestead acts. One of those laws, the Stock Raising Homestead Act (SRHA) of 1916, allowed ranchers to privatize lands deemed to have no value outside of livestock grazing and the growing of cattle feed, as designated by the Secretary of Interior. While homesteaders gained rights to the surface of the land, the federal government retained rights to the mineral resources beneath. 

Surface landowners were allowed to develop land as outlined in the homestead acts, including developing water resources and infrastructure associated with agricultural needs. But the mineral rights remained owned and managed by the federal government. 

In a split estate the mineral estate is typically “dominant,” which means that the rights of the mineral owner take precedence over those of the surface owner. Surface owners must allow use of their land as reasonably necessary to allow the mineral rights owner to extract the minerals beneath. In other words, oil and gas companies can drill on or near a private landowner’s land, even without their consent. 

In cases where the mineral estate is owned by the federal government, the government is able to lease those rights to private companies, receiving royalties on the value of the oil and gas produced. 

Why are some mineral resources only partially owned by the federal government?

The Manchin-Barrasso bill would not eliminate federal protections for all 57 million acres of split estate lands; only those whose mineral resources are less than 50% owned by the federal government – a situation that’s extremely common, if a bit difficult to explain.

Let’s start with an analogy: Imagine that your land and that of your neighbors is floating on top of a giant pool of oil. The owner of the mineral rights beneath your property owns the “slice” of oil directly beneath your land. But since you can’t actually slice oil, there may be no way to extract only the oil from under a given property without draining some of the oil from underneath neighboring properties as well.

In addition, to ensure the efficient production of oil and gas and reduce environmental impacts, state governments require that wells be spaced specific distances apart. Some parcels of land might be too small or too close to other wells for drilling on that property to be allowed under state guidelines. In response, the owners of the mineral rights in an area (or a state oil and gas commission) might bundle tracts in “spacing units” big enough to allow production to take place efficiently. When this process includes federally leased mineral rights, it’s called “communitizaton.”

Once a property’s federal mineral rights have been combined with those owned by nearby private landowners, state governments, tribes and other actors, the share of the total resource owned by the federal government might fall below 50%. In other words, you may own the surface rights to your land, and the federal government may own 100% of the mineral rights directly beneath it, but through communitization, those minerals may become fractionally owned by a variety of other interests as well.

The map below, from a fossil fuel-producing region of western North Dakota, provides an illustration. The rectangles outlined in yellow represent drilling spacing units where oil and gas resources may be pooled among various owners. The surface of the areas in blue is owned by private entities, in purple by the state of North Dakota and in green by the federal government. Darker areas are those for which federal mineral leases exist. Many of the spacing units involve a mix of federal and non-federal mineral estate, as well as federal and non-federal surface estate.

Surface and mineral ownership and drilling spacing units in western North Dakota. (Map data: spacing units: North Dakota Industrial Commission; surface ownership and federal mineral leases: U.S. Bureau of Land Management)Photo by Map: Frontier Group | TPIN

Over time, as directional drilling techniques capable of producing oil and gas from a much wider area from a single wellpad have become more common, the size of spacing units has increased. As spacing units get bigger, more land and more mineral rights owners have to become involved in the formation of drilling units. 

Perhaps you can see where this is going. By targeting areas newly exempt from federal drilling rules, and potentially engaging in creative geometry with regard to the size and shape of spacing units – oil and gas producers could ramp up drilling in vast areas of the West with less regard for the environment and the interests of surface landowners.

Threats to water, air and wildlife

Drilling for oil and gas is a messy business. Modern drilling practices create noise, disturb land and can pollute water, while orphaned wells can release planet-warming methane into the atmosphere and pose threats to air quality,  water quality and public health. Mounting air pollution and water pollution problems in oil and gas-producing regions, along with the routine disruption of land and wildlife habitat that accompanies drilling, are examples of the environmental and health costs of our nation’s continued dependence on fossil fuels.

Federal permitting rules are intended to minimize the impact of drilling on the land and environment, but the Manchin-Barrasso bill would strip that protection from millions of acres of land in the West. The Western Organization of Resource Councils estimates that the permitting loophole could affect 4 million acres of drilling spacing units throughout the West, an area larger than the state of Connecticut. The amount of land indirectly affected could be even greater, as the environmental impacts of drilling extend far beyond the well site. 

Wells newly exempt from federal permitting would instead be governed by state rules, which do not afford the same level of protection as federal standards. Federal permitting ensures that new oil and gas drilling complies with key environmental protections – including the National Environmental Policy Act, Endangered Species Act and National Historic Preservation Act – before drilling begins – and provides avenues for surface landowners and the public to defend their interests. In response to a similar Senate bill, the Bureau of Land Management also expressed that weaker state standards for oil and gas wells created “concerns for the protection of water zones and other potential risks.”

Broken bonds

The loophole also potentially throws federal bonding requirements for oil and gas into turmoil. Earlier this year, the Bureau of Land Management increased the minimum bond drillers must post before drilling on oil and gas leases to $150,000 – an amount large enough to deter many oil and gas drillers from evading their cleanup responsibilities. As our organizations found in a 2013 report, state bonding requirements are often well below the cost to plug the average well and clean up a drilling site.  In New Mexico, the minimum bond requirement is $25,000 per well plus $2 for every foot of well depth; in North Dakota, it’s $50,000; in Wyoming, it’s $10 per foot – all well below the new federal requirements. 

Currently, oil and gas drillers must demonstrate that they meet the federal bonding requirements when applying for a federal drilling permit. But without the need to obtain a federal permit in the first place, it’s unclear whether or how oil and gas companies drilling on split estate lands will demonstrate that they have the financial wherewithal to clean up any messes they make.

With the rapidly expanding footprint of oil and gas drilling in the West, strong environmental laws and tight regulation of drilling are critical to ensure that producing fossil fuels doesn’t impose permanent damage on wildlife, landscapes and our nation’s cultural treasures.

The oil and gas industry is already exempt from many key laws designed to protect public health, surface landowners and the environment. Creating another avenue for oil and gas drillers to evade common-sense environmental protections – at a time of record U.S. oil production – would be a step in the wrong direction.

Frontier Group intern Isabella Acosta-Jimenez provided research and editorial support for this article.