Lawsuit targets mineral rights pooling

DAN HALEY "Make no mistake, Colorado Rising is all about shutting down energy production."

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 this week 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.

The Colorado Oil and Gas Act 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.