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Boulder County's possible fight against forced pooling

Commissioners have suggested they will resist a forced pooling of county's oil and gas rights
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Blue Paintbrush DSU

Boulder County may be taking on a legal battle against a forced pooling order, depending on the outcome of a January hearing with the state.

Earlier this month, the Boulder County commissioners rejected a lease offer from Extraction Oil and Gas for county-owned mineral rights near Longmont. Extraction’s Blue Paintbrush well pad in Weld County sits 1,000 feet east of the Boulder County line near Longmont on land that includes a county-owned conservation easement.

Extraction has permits from the state and Weld County to drill up to 32 wells on the pad, which are designed to drill horizontally to produce oil and gas under four square miles of Boulder County. Boulder County filed a lawsuit in 2019 arguing that its conservation easement and several existing leases do not allow for the approved drilling, but that suit was unsuccessful.

Extraction filed an application with the state to pool the county’s minerals on July 7, which is set for a Jan. 25 hearing. If the state rules in favor of Extraction, Boulder County will be forced to allow the fracking of their minerals anyway.

Commissioners indicated in the comments about their decision that they would fight a forced pooling order from the state, arguing that forcing a government entity to be part of a business enterprise would be unconstitutional.

As that decision looms, it's worth looking a little deeper at forced pooling and legal battles against it in Colorado.

 

What is forced pooling? 

According to an information sheet from the Colorado Oil and Gas Conservation Commission, pooling is meant to allow owners to share the costs and proceeds from oil and gas development from a pooled unit without requiring each mineral owner to drill their own well.

“Pooling also ensures that a mineral owner who refuses to enter into a lease does not prevent

the development and production of oil and gas minerals owned by others,” the sheet reads.

Thirty-four states have forced-pooling statutes, including Colorado, and it is widely seen as a key tool to ensure development of oil and gas resources.

Colorado adopted a pooling law over 50 years ago to ensure mineral owners pay their proportionate share of oil and gas development and receive a share of the revenues.

Any mineral owner that owns or has secured consent of more than 45% of the mineral interests to be pooled can begin pooling the interests of the remaining mineral owners, either voluntarily or through the administrative hearing process that will begin for Boulder County next month.

According to the sheet, for those who do not willingly participate in the oil and gas production, minerals will still be pooled, and the owner of those mineral rights will be considered a “nonconsenting party.” Nonconsenting parties receive 13% of their proportionate proceeds until the remaining 97% offsets 200% of the drilling costs as a “risk penalty” and 100% of surface equipment costs.

Nonconsenting parties have the option to petition the application, but there’s not been much success doing so in Colorado.

 

Previous attempts

The most notable attempt in recent memory to resist a forced pooling order came in 2019, when property owners in Broomfield attempted to fight a forced pooling order from the same company, Extraction Oil and Gas.

That lawsuit filed by the Wildgrass Oil and Gas Committee of Broomfield against the Colorado Oil and Gas Conservation Commission called the lease offer from Extraction “unreasonable” and raised issues with the process, but the judge in the case concluded that a federal court was not the appropriate forum to resolve their questions.

He noted that Wildgrass passed over the option to ask the state to review the case before filing a federal lawsuit, according to reporting. The case was dismissed and Wildgrass was ordered to pay the state commission’s legal fees.

In 2017, a bill aimed at limiting the influence of forced pooling failed in committee. Matt Jones, current county commissioner and former state legislator, was one of the sponsors of the bill.

A bill passed in 2018 modified laws by increasing the amount of time before property owners had to respond, requiring more information and transparency be provided to owners, raising royalty payments and ensuring nonconsenting owners wouldn’t be held liable for spills or accidents. The bill was supported by the oil and gas industry, and Jones told Colorado Politics at the time that the bill made “a very bad problem worse.”

Boulder County has a longstanding policy of protecting open space from oil and gas development, but is not often successful due to standing state laws. Previous incidents of forced pooling suggest that the state will deem the county a nonconsenting party, and with Boulder County’s ongoing resistance to oil and gas development, a legal battle seems likely to follow.


Amy Golden

About the Author: Amy Golden

Amy Golden is a reporter for the Longmont Leader covering city and county issues, along with anything else that comes her way.
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