Boulder County’s fight to prove an oil and gas company’s leases expired because of a gap in oil and gas production has reached Colorado's highest court.
The Colorado Supreme Court on Monday granted a petition filed by Boulder County to review two lower court rulings that went against the county’s lawsuit against Crestone Peak Resources Operating, LLC.
In its lawsuit, Boulder County alleged that two county-owned oil and gas leases expired because of a gap in oil and gas production, according to a Boulder County news release. Both the district court and court of appeals held that the leases did not expire even though Creston did not produce oil and gas from them for 122 days in 2014.
The two courts applied what is known as the “commercial discovery rule”, stating that oil and gas production occurs when the resources are discovered and a well is capable of producing them, regardless of whether anything is actually extracted, the news release states. Boulder County argued that the “actual production rule” should apply, which holds that an operator must extract minerals from the ground to call a well “producing” and hold a lease in effect, according to the news release.
The Colorado Supreme Court announced Monday that it will hold proceedings on “whether the Court of Appeals erred in adopting and applying the ‘commercial discovery rule’ in interpreting oil and gas leases,” the news release states.
“This is an important case because the court of appeals adopted what we believe is a minority, disfavored rule that allows operators to keep a lease in effect and avoid the expense of shutting it down. The minority rule allows operators to take advantage of mineral owners like Boulder County,” said Boulder County Commissioner Claire Levy in the news release. “We are hoping the higher court will see this is bad policy for Colorado.”
“The fact that we’ve taken this case all the way to the Colorado Supreme Court shows our determination to fight as hard as possible to protect people and their rights in oil and gas issues,” said Commissioner Matt Jones in the news release. “These are important issues that should be heard at the highest level.”
“We are optimistic that the Supreme Court will determine that the leases are expired,” added Commissioner Marta Loachamin. “That will mean that the rights to the minerals, which we purchased along with open space lands, will revert back to Boulder County, and we will have helped to create legal precedent helpful to mineral owners around the state.”
Boulder County will be filing its opening brief to the Colorado Supreme Court in February.
