Like many Coloradans in growing communities along the eastern slope of the Rocky Mountains, Longmont resident Chris Klinke doesn’t know if an oil and gas company is extracting fossil fuels trapped in layers of shale beneath his home.
Two wells were drilled within a mile of his house last year. Klinke, the president of a climbing equipment company, had ignored multiple mailed offers to lease his mineral rights in 2021 as he concentrated on bringing the farmhouse on the historic land grant property up to code. He thought they “were standard” because he just purchased the property. Now he’s concerned he might “never see a dime” in royalty payments.
“I feel like I’ve been robbed at gunpoint by this industry because I had no choice in the matter,” Klinke told state lawmakers at a recent committee hearing. The law requires oil and gas companies to send a lease offer and a notice of pooling to mineral owners.
The mountaineer is one of thousands of Coloradans who were unable to choose whether they wished to lease their oil and gas rights to operators, either because they never received an offer (which companies often send to the last address listed on a mineral title, rather than the last known residence), didn’t want drilling under their property or wanted to negotiate a better deal.
Conflicts between residents and operators are escalating as hydraulic fracturing, or fracking, operations infringe on suburban neighborhoods. Disputes often arise after companies invoke a 72-year-old law that allows them to take private property owners’ mineral rights without their consent, paying them just 40% of the royalties consenting property owners often receive.
Using advanced technology, operators can drill a mile or more down, before turning the bit horizontally and traveling several thousand feet across to penetrate rock and release oil and gas. The breadth of such production ensures more homeowners will be swept into what’s known as the “forced pooling” process.
Energy companies think it’s important to maintain the status quo, citing technical limits, consenting mineral owners’ rights to develop their oil and gas deposits and the environmental benefits of the way they produce oil and gas today.
At least 39 states have “forced pooling” laws. The arcane statutes, written when oil existed in pools underground, ensured drilling occurred in an orderly way that didn’t disenfranchise mineral rights owners. In Colorado, property owners don’t hold their oil and gas rights in eight out of 10 cases. And many don’t know who does.
Existing law requires companies to try to attain mineral rights through voluntary agreements. If owners don’t wish to lease their minerals, firms can apply to the Colorado Oil and Gas Conservation Commission, or COGCC, to “force pool” them in an administrative hearing.
Democratic state lawmakers’ legislative attempts to provide constituents more transparency in this process have been stymied by the industry, which is a powerful economic driver in a state that is nation’s fifth biggest oil producer and eighth largest producer of natural gas.
“Mineral owners can’t say no to operators — there are no in-good-faith negotiations.”~ Democratic state Sen. Sonya Jaquez Lewis
Court challenges to the forced pooling statute also failed. In 2019, Broomfield residents questioned the law’s constitutionality in federal court. A judge dismissed the case, and the COGCC allowed Extraction Oil & Gas to proceed with the Livingston project.
Efforts to modernize the forced pooling statute also ran into roadblocks this spring. On April 13, after hours of testimony from homeowners, attorneys and oil and gas representatives, state senators pulled a bill aimed at reforming the law from committee consideration. SB23-201 attempted to level the playing field between mineral rights owners and the industry. A similar measure failed in 2017.
Democratic state Sen. Sonya Jaquez Lewis, who had mineral rights under her Longmont farm taken without her approval, introduced the bill in the General Assembly in March. She said the measure would require companies to provide regulators with a third party expert’s title report proving that at least 45% of mineral rights owners in a drilling unit have agreed to sell their oil and gas in exchange for royalty payments. Existing law mandates firms submit a statement to the COGCC that they’ve met the 45% legal threshold.
The measure would also prohibit operators from taking mineral rights from municipalities, or school districts, and remove penalties for owners who don’t consent to lease their minerals. Today, nonconsenting owners typically receive about a 12.5% royalty, compared to the 20% rate — which is a recent rate quoted to mineral owners — offered to consenting owners.
The measure also seeks to give property owners more control by requiring the commission to determine if companies can access minerals without disturbing those that belong to an owner who doesn’t wish to lease. If so, it must include a condition in its forced-pooling order that the nonconsenting owner’s minerals not be disturbed.
“This is one of the main reasons I decided to run for office five years ago,” said Jaquez Lewis, a retired pharmacist, at a Senate Agriculture & Natural Resources Committee hearing after which she and her co-sponsor asked to postpone a vote on the bill. The committee is scheduled to take up the matter, for action only, on Thursday.
“Mineral owners can’t say no to operators — there are no in-good-faith negotiations,” she added. “If an oil and gas company wants the minerals and the mineral owner doesn’t like the offer, the company goes to the state, and the state can force the mineral owner to lease the minerals.”
Oil and gas companies warned a provision in the bill that would require them to go around nonconsenting mineral rights owners would force them to build more pads on the surface.
Jaquez Lewis said she and her co-sponsor would continue to work on the measure. The bill’s sponsors represent districts atop the nation’s most prolific oil and gas fields.
The complexities of updating a law implemented when Harry S. Truman was president and the first coast-to-coast telephone call was placed quickly became apparent during the April 13 Senate hearing.
Oil and gas companies warned a provision in the bill that would require them to go around nonconsenting mineral rights owners would force them to build more pads on the surface, instead of clustering wells on a single concrete slab.
“If this bill were to pass, operators would be forced to develop multiple new spacing units and more well pad locations,” testified Dan Haley, president and CEO of the Colorado Oil & Gas Association.
“This would create a larger environmental footprint, more destruction of wildlife, more truck traffic and increased impacts on communities,” he added.
Energy company representatives added their technology isn’t robust enough to avoid every entity that doesn’t wish to sell its minerals.
“The bill’s requirement that nonconsenting owners minerals not be disturbed supposes technological abilities that simply don’t exist,” said Justin Prendergast, a Colorado spokesman for the American Petroleum Institute.
Senators, Republican and Democrat alike, repeatedly tried to get clarity from witnesses who testified for and against the bill about how the state’s current law works. There was confusion about whether operators could start drilling before the commission issues a forced pooling order.
Jaquez Lewis’ bill requires the COGCC to issue a pooling order before a well is drilled and any minerals subject to the order are extracted.
“As the law currently stands, the city does not have the right to say no to oil and gas development.”~ Longmont Mayor Joan Peck
City and County of Broomfield Attorney Nancy Rodgers testified that an operator started drilling near hundreds of homes even as a dispute that cost the city more than $250,000 was ongoing. Ultimately, the parties came to an agreement, but not one the city would have chosen on its own, she said.
“We ended up with an operator agreement,” she said. “Part of that was to site one of the pads in our open space — that is certainly not what we would have done if we felt we had had an even playing field in negotiating with the operator.”
Longmont Mayor Joan Peck told senators that in the last decade her city, which has a population of 101,000, forewent millions of dollars in royalties as part of a compromise with an operator to move drilling operations away from residents.
“As the law currently stands, the city does not have the right to say no to oil and gas development,” she said. Peck and Rodgers urged adoption of Jaquez Lewis’ bill, applauding the provision that prohibits state regulators from pooling mineral rights owned by municipalities.
This provision is also aimed squarely at a proposed 32-well project that would impact Jaquez Lewis’ constituents. In this case, Extraction Oil & Gas Inc. filed an application with the COGCC seeking to force Boulder County to lease oil and gas rights under open space purchased with taxpayer money.
The company, now part of Civitas Resources Inc., made the request after the three-member Boulder County commission rejected in November its offer to lease the rights to drill under 552 acres of county open space. The proposal encompasses a 2,270-acre area in Boulder and Weld counties, about 30 miles north of downtown Denver.
The COGCC postponed a hearing on the matter several times this year due to an ongoing disagreement over whether the company owns 45% of the mineral rights in what’s known as the Blue Paintbrush project.
“Upon review, material facts remain in dispute with regard to Extraction’s ownership percentage within the application lands,” wrote hearing officer Elias Thomas in a March 22 order in which he rejected a motion by Boulder County attorneys asking to stop the pooling process through summary judgment. “It is therefore unclear whether Extraction currently owns or has secured the consent of owners of 45% of the minerals.”
It’s unknown how many Colorado residents have been force pooled in the last four years — state records show it’s likely in the thousands.
Legal representatives from Boulder County and the city of Longmont asked the COGCC to compel Extraction to provide them with title opinions and title reports that show whether the leases the company says it owns are still valid. The company argued in a response that such a request is outside the agency’s purview.
A Capital & Main review of documents filed with the COGCC found that Boulder County claims to own close to 60% of the unleased minerals in the area Extraction proposes to drill. Extraction believes the county’s share is 20%, filings show. A hearing is currently scheduled on the matter on May 31.
At the April 13 hearing, senators questioned whether such disputes are ever settled in favor of the nonconsenting mineral owners. Democratic state Sen. Kevin Priola, who represents Weld County, where most of the state’s oil production takes place, asked state regulators if all “forced pooling” applications are approved.
“I’m not aware of any pooling applications that have been denied” since 2019, answered Mimi Larsen, the commission’s hearings and regulatory affairs manager. That year, the Democratic-controlled Legislature adopted a landmark law that changed the COGCC’s mission to prioritize health, safety and the environment. It’s unknown how many people have been force pooled in the last four years — state records show it’s likely in the thousands.
In one of many examples listed on the agency’s website, the COGCC approved a request by Extraction Oil & Gas to force more than 800 mineral owners in Broomfield to pool their rights, said Mike Foote, an attorney and former state senator who is representing residents in an appeal of the agency’s order filed in Denver District Court, in an interview.
What’s known simply as “181” — its bill number in 2019 — increased some protections for those who are forced to pool their mineral rights. Such measures included requiring companies to obtain the consent of at least 45% of mineral rights holders before drilling can begin.
It also required that mineral owners be given at least 60 days to review a lease, Larsen said. If a dispute arises, the COGCC must ensure such owners received a “good faith” offer by comparing what the company offered various owners in a spacing unit. Mineral owners have several opportunities to protest during the leasing process in front of the commission, she added.
Some mineral rights owners don’t want the existing statute to change. The Colorado Alliance of Mineral and Royalty Owners, which claims 600,000 members statewide, said the bill could harm the rights of its members by preventing their minerals from being developed.
“These valuable minerals are virtually worthless if they can’t be developed,” testified Don Phend, the group’s treasurer.
