Property rights vs. oil-gas development

Posted: Friday, November 02, 2001

Have you received a request to lease the oil and gas rights under your property? Unocal Corp. is now contacting landowners in Anchor Point and surrounding areas to obtain mineral rights to oil and gas resources under private property. If you expect oil and gas activities on, under or around your land, you should know your legal rights.

Under Alaska law, surface and subsurface property ownership are separate rights (called "estates" in property law). The Alaska Constitution reserves most subsurface (or "mineral") rights to the state for the benefit of all Alaskans, but some homesteaders and corporations still own their own mineral rights.

If you own the surface and subsurface estates on your property, you have considerable legal authority to determine if and how oil and gas will be developed on your land. For example, Unocal typically has been offering a one-eighth "royalty" share to subsurface estate owners, but landowners holding subsurface estates can negotiate a better return.

Subsurface estate owners also are in a better position to negotiate for added protections on their surface estates, such as the timing and placement of drilling equipment, and the removal of pads and roads after drilling operations are completed. And of course, you have a legal property right not to lease your mineral rights, and to prevent oil and gas development on your property.

If you only own the surface estate, however, anyone holding the subsurface estate has a legal right to access the oil and gas reserves under your property. Such access can include tree and ground clearing, road building, pad construction and drill rig placement on the surface estate, among other things. In other words, your right to shape oil and gas development on your property is much more limited.

In 1999, a private property owner in the Mat-Su Valley complained that Unocal had entered his property without prior notice or consent and cut trees, built roads and drilled wells on his property.

Unocal lawyers countered by arguing that industry did not need the consent of the surface estate owner prior to drilling. In fact, Unocal argued it could rightfully sue any surface landowner opposing Unocal's access to their property, and that Unocal should not have to pay damages for tree cutting and other "non-negligent" activities needed to access the minerals rights.

While industry occasionally makes public commitments to protect property rights in the course of doing business, the fact remains that oil and gas extraction is an intensive land use which invariably leads to surface estate impacts. To protect your property rights, the Alaska Division of Oil and Gas requires oil and gas corporations to post a bond to cover potential harm to a surface owner's property, and interested property owners should contact the Division of Oil and Gas for more information.

Finally, everyone needs to understand that water rights are property rights. If you have filed the appropriate paperwork with the state, you have a legally protected right to appropriate and use surface or groundwaters for domestic and other uses. Oil and gas operations can consume enormous amounts of water. For example, the Phillips Cosmopolitan project just north of Anchor Point planned to draw up to 20,000 gallons of groundwater a day, for a total volume over 4.5 million gallons (groundwater studies in Phillips' permit application materials were inadequate, however, and now Phillips has been forced to resort largely to surface waters to satisfy its water needs).

If you have a water right, check with the Alaska Division of Mining, Land and Water to ensure your right is secured; if you have not filed the application for a water right and you rely on ground or surface water for domestic or other uses, consider filing an application today.

Cook Inlet Keeper is a member-supported nonprofit organization dedicated to protecting the Cook Inlet watershed and the life it sustains. Keeper believes landowners have a legal property right to say if and how oil and gas will be developed on their land.

Bob Shavelson is the executive director of Cook Inlet Keeper.

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