The festering war in Colorado between some landowners and the oil and gas industry shifted to a new front, as a group of Broomfield mineral owners is challenging the state’s pooling statute as unconstitutional.
With the support of anti-drilling group Colorado Rising, the lawsuit filed by the Wildgrass Oil and Gas Committee in U.S. District Court for the District of Colorado is challenging the statute, which allows an operator to extract, for a price, minerals belonging to those unwilling to sell their deposits [Wildgrass Oil and Gas Committee v. State of Colorado et al, No. 1:19-cv-00190-RBJ-NYW].
Plaintiffs include mineral owners who own property in the Wildgrass subdivision in Broomfield, one of the neighborhoods affected by pending oil and gas operations. Wildgrass is suing Gov. Jared S. Polis, the Colorado Oil and Gas Conservation Commission (COGCC) and COGCC acting director Jeffrey Robbins regarding the constitutionality of Colorado Revised Statute 34-60-116, which allows regulators “to provide private companies access to residents’ minerals without the owner’s consent and even when the mineral owner objects.”
Under COGCC rules, pooling to combine various parcels or interests for extraction may be voluntary or involuntary, i.e. forced, requiring reluctant mineral owners to participate, with costs and revenues apportioned among the interest holders.
Among other things, the Wildgrass group does not want hydraulic fracturing (fracking) performed.
Following “sustained participation in COGCC administrative processes and proceedings over countless hours spanning almost two years,” the lawsuit said, “plaintiff’s members who own minerals (Wildgrass owners) have received an election letter requiring that they either elect to voluntarily participate in the large-scale residential fracking project or have their minerals pooled into the project and suffer a hefty penalty despite their myriad objections to the residential fracking project.”
The rules allow COGCC to “consistently ‘rubber-stamp’ requests by private corporations for orders granting them access to the minerals of nonconsenting mineral owners and penalizing nonconsenting owners in violation of the U.S. Constitution.”
The plaintiffs claim the state law allows regulators to not only access nonconsenting owners’ minerals, but “does so for the benefit of a private corporation, and without protection of the mineral owners’ substantive and procedural due process rights.” The act also “interferes with Wildgrass owners’ right to freedom of association and allows unlawful trespass,” as well as impairs their “right to contract.”
Once rare, forced pooling has become more common because drilling units are larger, and most drilling today is unconventional, i.e. horizontal, across 640-1,280-acre units. If an operator owns or has leased any acreage within the relevant drilling unit, it may force pool multiple landowners even if there only is direct access to one acre.
“While the COGCC does not require operators to report the number of people that they force pool, and does not itself publish this information, plaintiff estimates that at least 30,000 mineral owners were force pooled in 2018 alone,” the Wildgrass lawsuit claims.
The Colorado Oil and Gas Association said the lawsuit was another attempt to shut down energy production in the state. “This lawsuit exposes the charade of Colorado Rising’s failed 2,500-foot setback measure, as they repeatedly claimed during the campaign that horizontal drilling would overcome that extreme distance,” CEO Dan Haley said.
Colorado regulators in December unanimously finalized a less onerous setback rule covering schools and affiliated properties, which takes effect next week (Jan. 30), at 1,000 feet. A ballot measure failed last November that would have required setbacks be 2,500 feet.
The environmentalist push for a wider setback rule was “an attempt to ban industry,” Haley said.
“Turning their argument on its head, now they are going after horizontal drilling itself, as pooling is essential for modern-day horizontal drilling. Make no mistake, Colorado Rising is all about shutting down energy production. Whether it’s their failed ballot initiatives or frivolous lawsuits meant to gum up our legal process, their stated intent is to end Colorado’s oil and natural gas industry and put working families on the unemployment line. That’s what this is about.”
Haley noted that the oil and gas industry last year worked on bipartisan legislation with environmental stakeholder support to update Colorado pooling laws.
Former Gov. John Hickenlooper signed legislation supported by the industry that, among other things, better protected mineral and royalty owners in pooling disputes.
Senate Bill 230 regulates how mineral and royalty owners fairly divide products and profits without inhibiting energy development. The time mineral owners receive to consider a leasing offer also was extended to 60 days from 35 days. The bill also provides immunity from liability for costs to any nonconsenting owner forced into a pool arising from spills or injuries at a drilling unit.
“Pooling has not only stood on sound legal footing for nearly a century, but it is a critical step in energy development that now requires detailed communication among mineral right owners well before permits are ever filed,” Haley said.
The Colorado Alliance of Mineral and Royalty Owners called the Wildgrass lawsuit “meritless” and noted that current law protects mineral owners. The challenge to state statutes is “yet another attempt by Colorado Rising to hamstring one of the state’s largest industries.”
Colorado Rising spokesperson Anne Lee Foster said forced pooling was “a perfect example of Colorado's antiquated oil and gas laws that must be updated in accordance with modern technology, including horizontal fracking and the practice of residential drilling...The practice is clearly an egregious violation of property rights and must end."
In related news, the Erie, CO, board of trustees on Tuesday extended a moratorium on new oil and gas drilling by six months to prevent a lapse in the freeze, which was set to expire in February. The city of Boulder has imposed a drilling moratorium that extends through June 2020, and the Colorado towns of Lafayette and Superior also have drilling moratoriums.