May 30 2009

Landowner Bill of Rights

Time to Level Playing Field for Property Owners

Wake Up:  Legislators & Regulators

Property owners are key stakeholders in any mineral rights leasing transaction, whether for recovery, storage, transmission or generation of power.  Property owners possess the fundamental asset – the land and property rights – without which, there is no energy project for recovery, storage, transmission or generation.

The power of eminent domain in the hands of government — which is usually transferred to a business — creates a sense of entitlement; and it creates an atmosphere ripe for abuse.  It is not a level playing field legally, economically or ethically for private property owners.

Therefore, landowner property rights need to be protected under law.  In a constructive effort to guide legislators and regulators, here are five principles.

5 Principles to Guide Lawmakers & Regulators:

1) Transparency on Lease Agreements: Property owner lease agreements shall not be less than lease agreements for government entities including local, state, and federal government (e.g., state game lands, federal forest lands, etc.).

a) Energy companies usually have very different lease agreements with state governments than with private property owners.  These lease agreements with the state are much better than the lease agreements with private property owners. It has nothing to do with the size of state lands.  It has everything to do with industry politics.

b) Since public lands are owned by taxpayers, citizens have a right to know what energy companies have stipulated in their lease agreements with government entities.  For example, in the case of underground natural gas storage leases, private property owners usually receive a “one-time payment.”  In contrast, lease agreements with state governments often include a bonus payment, plus a “withdrawal royalty payment.”  In other words, every time an energy company withdraws gas from the underground storage cavity it has seized through eminent domain, the state gets paid.  This is often calculated in the form of a 25-year annuity stream back to the state.

c. In some contracts, a royalty is also paid on the volume of gas injected in addition to the volume of gas withdrawn for transmission through pipelines.

2) Property Owners to be Treated as Key Stakeholders: Informational meetings such as “open houses” and “community meetings” that are hosted by energy companies and/or government entities must include property owner advocates on the agenda.  These are readily available from academic institutions or public interest groups, or from landowner organizations.

3) Transparency on Eminent Domain: Where a government body (local, state, federal) holds the power of eminent domain, landowners will be permitted to attend the same meetings with energy companies regularly held by government entities on specific projects involving landowners’ property.  Meeting schedules and agendas will be communicated in a timely manner to all landowners involved in project reviews that affect or potentially affect their property so that they may attend at their own expense.

4) Energy Priorities: If geological data indicate that there is an opportunity to recover new gas or minerals in the area of a proposed storage field (e.g., Marcellus Shale next to Oriskany Sandstone formation), exploration and recovery efforts will precede storage field development.

5) Accountability on Royalty: Reports from meters for any leasing transaction, whether for recovery or storage of minerals, or generation of power must be made public (i.e., available to landowners and others) on a quarterly basis.  An independent party, agreed to by landowners and paid for by the energy company, will provide an assessment of the quarterly meter reports.  In the case of underground natural gas storage wells, every injection well must be metered (i.e., one meter per storage field is not acceptable; there must be a meter on every injection well).

Energy company lease agreements with states are much better than the lease agreements with private property owners.  It has nothing to do with the size of state lands.  It has everything to do with industry politics.  This is particularly troubling when private property rights have been seized via eminent domain — a form of “taking” that can only occur under the badge of government.

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