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Judge scraps Idaho order forcing landowners into oil leases

The federal courthouse in Boise. A federal judge ruled August 13 that Idaho officials violated the U.S. Constitution when they forced landowners to sell their natural gas and oil to a Texas company without a meaningful way to fight the state’s decision. File photo.

Idaho officials violated the U.S. Constitution by forcing several landowners to sell their natural gas and oil to a Texas company without giving them a meaningful way to fight the state’s decision, a judge said.

The ruling August 13 in U.S. District Court in Boise could have significant ramifications for a state-approved process intended to prevent a minority of mineral rights owners from stopping natural gas and oil production.

Citizens Allied for Integrity and Accountability sued last year, contending the state discriminated against landowners with an order finalizing a deal that favors Houston-based Alta Mesa.

Among the group’s concerns are possible pollution and a decline in home values from nearby oil and gas wells that make royalties received by the landowners negligible.

“Every Idaho landowner should be worried that an outside oil company can come here, drill your land, take your oil or gas while exposing your family and greatest lifetime investment to tremendous risk and pay you a pittance for doing so,” Shelly Brock, Citizens Allied board president, said in a statement.

The court ruling directs the Idaho Oil and Gas Conservation Commission to vacate its order, rescind lease contracts and hold a new hearing.

The state is reviewing the decision, and the commission is evaluating its options, Sharla Arledge, spokeswoman for the Idaho Department of Lands, said in a statement.

Idaho can respond by holding another hearing or appealing Winmill’s ruling to the 9th U.S. Circuit Court of Appeals, among other options.

Specifically, the lawsuit involves a process called integration. Under Idaho law, when owners with at least 55 percent of the mineral rights in an area agree to lease, the remaining minority can be forced to take part.

Integration is a common practice in gas- and oil-producing states. It’s intended to prevent a minority of mineral rights owners in an area from stopping natural gas or oil production, which can generate jobs and revenue for the state.

It’s also intended to ensure all mineral rights owners who deserve a share of oil and gas profits get it should one of the landowners decide to drill a well and pull out all the oil and gas.

The area being contested in the lawsuit has leases for more than 55 percent in the 640-acre parcel just across the Snake River from Oregon. But there are holdouts, so Alta Mesa asked state officials to apply integration.

The ruling didn’t invalidate any Idaho laws. But Winmill did find that state officials ran afoul of the Constitution’s protection of procedural due process, intended to protect an individual’s rights from state authority.

Winmill said a special hearing held by Idaho officials to settle the dispute with a hearing officer’s final decision fell short of constitutional protections.

“The lack of any explanation as to what would guide the decision or whether terms of the integration order were just and reasonable meant that plaintiffs’ opportunity to be heard was not ‘meaningful,’ as required to satisfy due process,” Winmill wrote.

The hearing officer, Winmill noted, prevented testimony on the potential for groundwater contamination, declines in property values and noise from drilling operations.

James Piotrowski, an attorney representing Citizens Allied and landowners, said he was pleased with Winmill’s ruling but wished it went further because “just and reasonable” was still undefined.

“The way the law is set up right now is designed so that the oil and gas company is the only one who makes any real money, and that needs to change,” he said.

Idaho has a long history of oil and gas exploration starting in the early 1900s, but it was Alta Mesa using new technologies that made Idaho an oil and gas producing state.

The company has spent more than $160 million finding reserves to tap and building infrastructure but has expressed frustration at times as Idaho officials have tried to find the best regulatory plan.

The company didn’t respond to a phone message from The Associated Press on August 14.

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