The Denver-based Colorado Petroleum Council applauded the state senate’s passage on Apr. 24 of a bill modifying laws governing establishment of oil and gas well drilling units. SB 18-230 clarifies that a drilling unit may include more than one well, provides limited immunity to nonconsenting owners subject to pooling orders, adjusts cost recovery from those owners, and modifies the conditions under which a pooling order may be entered.
“The Senate’s action strengthens our shared commitment to work with communities and regulators to make modifications that benefit all stakeholders,” said Tracee Bentley, executive director of the CPC, which is an American Petroleum Institute affiliate. “We understand the complexity of pooling procedures and believe that these new measures will create a system that is more understandable and fair for all involved.”
Bentley said that some of the key components of the bill, which Senate Majority Caucus Chair Vickie Marble (R-Denver) and House Minority Caucus Chair Laurie Saine (R-Denver) introduced on Apr. 4, included:
• Requiring that an offer must be provided to mineral owners at least 60 days prior to the hearing on the pooling order.
• Increasing the minimum royalty rate to 15% from 12.5%.
• Changing the penalty recovery rate for an operator to 300% from 200% for wells deeper than 5,000 ft.
• Requiring that every offer letter sent to mineral owners includes clear and concise language, provided through a link or brochure created by the Colorado Oil & Gas Conservation Commission, of the pooling procedures and the mineral owner’s options pursuant to those procedures.
• Clarifying that nonconsenting mineral owners are immune from any liability costs that are related to releases, damage or injury resulting from oil and gas development on that drilling unit.
Statutory pooling, which has been in existence since 1951, is a process to bring together mineral and royalty owners for joint decisions to assure products and profits are divided evenly, Bentley said. Colorado has the sixth largest natural gas reserves in the US and is the country’s sixth largest gas producer, she noted.
“Improving the pooling statute will ensure increased protection for mineral and royalty owners,” said Bentley.
Contact Nick Snow at [email protected].