“Make no mistake, Colorado Rising is all about shutting down energy production” – Haley
From the Grand Junction Sentinel
The entity behind last fall’s defeated ballot initiative seeking to impose 2,500-foot setbacks between oil and gas facilities and things such as homes and waterways have sued over another matter, what’s called the forced pooling of nonconsenting mineral owners in order to drill wells.
Colorado Rising sued in federal court Wednesday on behalf of mineral owners in Broomfield, saying the forced pooling provision of the Colorado Oil and Gas Act is unconstitutional.
“The practice of forced pooling is in essence a taking of private property for corporate gain by order of the state,” Anne Lee Foster of Colorado Rising said in a news release. “Forced pooling is 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.”
Dan Haley, president and chief executive officer of the Colorado Oil and Gas Association, responded in a statement, “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. Yet technical experts and regulators saw it for what it was — an attempt to ban industry. 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.”
Forced pooling lets oil and gas companies pool minerals in a given area so that all of the oil and gas within it is developed and none is wasted. It’s designed to foster efficient and orderly development, and its benefits include maximizing severance and income tax revenues to governments.
Companies are able to ask the Colorado Oil and Gas Conservation Commission for permission to include minerals owned by people unwilling to sign leases, and to compensate those people based on certain terms.
Colorado Rising says that while many states require a threshold, usually a majority, of mineral rights owners to voluntarily participate in developing oil and gas in an area before a company can force-pool the rest, that’s not the case in Colorado.
Here, mineral owners face the choice of leasing their minerals or being force-pooled, even if they prefer to keep those minerals in the ground for health, safety and environmental reasons, the group says.
Forced pooling has become more of an issue in Colorado in recent years due to horizontal wells that are drilled down and then out, sometimes for miles. As a result, a well can encompass minerals owned by numerous mineral owners. Colorado Rising says more than 900 mineral owners were listed on a forced-pooling application for a single well pad in Broomfield, and statewide, companies asked to pool about 30,000 non-consenting mineral owners last year.
The lawsuit says Colorado’s law violates mineral owners’ rights to contract, equal protection, freedom of association and due process, among other rights.
Colorado Oil and Gas groups says the term forced pooling was coined by opponents, and it’s more appropriate to refer to it as statutory pooling. It says more than half of U.S. states allow such pooling, courts consistently have found it to be constitutional, and it’s not a taking or condemnation of mineral interests because mineral owners who are pooled retain their property and receive royalties.
From Law360
Mineral Owners Want Forced Drilling on Their Lands Outlawed
Law360 (January 24, 2019, 5:39 PM EST) — A committee of mineral owners from Broomfield, Colorado, has sued the Colorado Oil and Gas Conservation Commission, arguing its power to approve so-called forced pooling applications, which allow companies to drill on residents’ land even if they object, is unconstitutional.
The mineral owners on the Wildgrass subdivision in Broomfield have been asked by an oil and gas operator whether they want to voluntarily be part of a fracking project or “have their minerals pooled into the project and suffer a hefty penalty” despite their objections, according to the complaint filed Wednesday in Colorado federal court.
The Wildgrass Oil and Gas Committee, whose membership includes the mineral owners, said in the suit that provisions of the Colorado Oil and Gas Act that allow for forced pooling have been abused in violation of the U.S. Constitution, improperly forcing mineral owners to agree to leases when they don’t want to take part in drilling operations. The suit targets the COGCC, which administers the law, and other state defendants.
“The only recourse the non-consenting mineral owners have is to hire an attorney and protest the pooling application to the COGCC. This abuse of the state process is allowing operators to strong arm mineral owners into signing poor leases under duress,” the complaint said. “The private corporations that are benefiting benefitting from force pooling are provided with the means to conduct a government taking, but without due process and without just compensation.”
Colorado Rising for Communities, a group that fights the alleged dangers of mineral extraction, said it filed the complaint on behalf of the mineral owners. It says that Colorado allows nonconsenting mineral owners to be penalized if they do not voluntarily take part in drilling projects.
“Colorado severely penalizes the nonconsenting mineral owner by limiting the royalty they are given and requiring them to pay two times what consenting owners pay for some costs of the fracking project,” Colorado Rising said in a statement. The suit says the COGCC will “rubber-stamp” bids by developers to drill.
The practice violates the privileges and immunities clause of the Constitution because it grants privileges to companies that are not for a public propose without due process or other necessary protections, the complaint says. In addition, the practice deprives mineral owners of procedural due process and their First Amendment rights by forcing owners to subsidize development when they don’t want to.
“Put simply, the act supports operators in forcing mineral owners to either accept offered lease terms or have their minerals taken with deep penalties and, worse, be considered a working interest owner in the project regardless of the health, safety, environmental or economic concerns,” the complaint said.
According to Jean Lim of the Wildgrass Oil and Gas Committee, construction on the project will begin in early February. Drilling is projected to start in June, Lim said.
Anne Lee Foster of Colorado Rising called forced pooling a way to take private property for a corporation’s benefit.
“The oil and gas industry has long used forced pooling as a means of coercing mineral owners into unreasonable, below-market leases and forced extraction of their mineral property,” Foster said in a statement. “The practice is clearly an egregious violation of property rights and must end.”
A representative with the COGCC declined to comment.
The Wildgrass Oil and Gas Committee is represented by Joseph A. Salazar of Colorado Rising for Communities and James D. Leftwich of MindDrive Legal Services LLC.
Counsel information for the state was not immediately available.
The case is Wildgrass Oil and Gas Committee v. State of Colorado et al., case number 1:19-cv-00190, in the U.S. District Court for the District of Colorado.
