Stephen J. Sullivan represents clients in all aspects of natural resources with a primary focus on oil and gas exploration and development in the Rocky Mountain area. A large part of his oil and gas practice involves acquisitions and divestitures as well as operational matters. Mr. Sullivan represents mining companies from the initial staking of cl...aims through financing, permitting, and start-up of mining operations. He also represents parties in the purchase of ranches and in the acquisition and sale of water rights in Colorado, including acquisition of water rights and construction of water delivery systems.  Real estate transactions in which Mr. Sullivan has been involved – in both negotiation and legal representation – include land exchanges, open space dedication, mineral development agreements and intergovernmental agreements for construction of transportation and water infrastructure, and development of commercial properties. More

Colorado Legislature Considers Limitations On “Force Pooling”

Rep. Mike Foote (D-Lafayette) and Rep. Dave Young (D-Greeley) introduced House Bill HB17-1336, legislation which would prevent a lessee representing less than a majority of the mineral royalty owners from obtaining a force pooling order. The authors of the legislation argue the intent of the bill is to prevent a mineral rights owner or lessee from forcing adjacent mineral interest owners to lease their minerals and to provide better information to affected parties. In addition, the legislation would provide mineral owners with additional time to decide whether to lease, participate in proposed well(s), or decide not to participate in the drilling of proposed well(s). Proponents of the legislation also argue that under current law, an oil and gas operator has too much of an advantage when it can tell an unleased mineral owner that if he or she does not sign a lease, then they will be force pooled.

The bill was introduced late in the session where rules allow expedited consideration, with the probable strategy being to prevent extended deliberation. The bill appears to conflict with Colorado property and constitutional law. Given significant departures from existing law, a longer time is necessary to fully appreciate how current law would be changed. Here are some of the problems:

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Underground Rights are Defined in Texas

     On August 19, 2015 the Fourth District Court of Appeals in San Antonio, Texas, ruled that, because the surface estate owner controls “the matrix of the underlying earth,” it could grant an oil and gas operator the right to site wells on the surface owner’s property and drill through the earth within the boundaries of the surface owner’s property to reach adjacent minerals.

     In Lightning Oil Co. v. Anadarko E&P Onshore LLC, Case No. 04-14-00903, Lightning Oil sued Anadarko to prevent it from locating an oil and gas well on land subject to Lightning’s oil and gas lease. In 2009 Lightning leased the Briscoe Ranch from the owner of the mineral estate. Later, Anadarko obtained a surface use agreement from the owner of the Briscoe Ranch surface estate. Anadarko planned to place drilling rigs on the Briscoe Ranch, drill into an adjacent tract and complete the wells in an adjacent tract where it owned an oil and gas lease. Anadarko was not going to test or complete the well in the Briscoe Ranch tract. In the lawsuit Lightning Oil asserted that it had exclusive rights to drill through the Briscoe Ranch tract. Both the trial court and the appeals court, however, found that absent an express grant to the mineral owner, the surface owner controls the earth beneath that tract.

     This issue has not been directly addressed in Colorado, Utah or Wyoming. Wyoming’s statutes, however, provide that ownership of all pore space below the surface is vested in the owner of the surface estate. A conveyance of the surface estate in a tract of land shall be a conveyance of the pore space below the surface of that tract of land although the owner of the mineral estate has the right to inject substances to facilitate production of minerals. And no agreement conveying mineral or other interests underlying the surface shall act to convey ownership of any pore space in that tract unless the conveyance explicitly conveys that ownership interest. Although this Wyoming law was passed in 2008 with the intent of clarifying ownership of pore space underlying the surface, it indicates a legislative intent that the surface owner rather than the mineral owner controls at least some of the rights underneath a tract of land.

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3023 Hits