Mineral Owners assert property rights in Colorado’s oil and gas fight..

Denver and the West

Mineral owners assert property rights in Colorado’s oil and gas fight

Access to underground assets must be protected as drilling restrictions proliferate

Updated:   03/06/2016 01:55:54 PM MST

Roni, left, and Chuck Sylvester round up two of their horses, a Belgian named Smasher, left, and a Haflinger named Adel, from a pasture Wednesday on their

Roni, left, and Chuck Sylvester round up two of their horses, a Belgian named Smasher, left, and a Haflinger named Adel, from a pasture Wednesday on their ranch in La Salle. (Andy Cross, The Denver Post)

  • LA SALLE — The devastating floods of 2013 sent water from the South Platte River cascading across Chuck and Roni Sylvester’s farm and into their home, creating a high-water mark 17 inches above their baseboard.

The damage to the couple’s house on the outskirts of La Salle was $250,000 — an amount that could have led to financial ruin for the 78-year-old semi-retired farmer and his wife had the 11 oil and gas wells on his 200-acre property not been spinning off a consistent stream of royalty income year after year.

“Having those royalties made it possible to repair my house,” said Chuck Sylvester, who bought his home — and the mineral rights underneath it — from his mother in the early 1970s.

But Sylvester and more than half a million mineral rights owners like him in Colorado increasingly feel like their underground assets are under attack as communities opposed to oil and gas exploration call for temporary drilling bans or well-siting restrictions.

Compounding their troubles has been a dramatic drop in the price of oil — from more than $100 a barrel in mid-2014 to around $35 a barrel Friday. Michelle Smith, president of the Colorado chapter of the National Association of Royalty Owners, said royalty revenue has plummeted up to 70 percent in some cases.

“We are all having to tighten our belts just like industry and reduce expenses,” she said. “It is most difficult for those who are on a fixed income who depend on their royalty checks to survive.”

The upshot: Mineral owners are fighting back more ardently than ever.

At a contentious meeting in Adams County in January that carried on until the early-morning hours, several mineral rights owners stood up before the commissioners and lambasted a proposed 10-month drilling moratorium as an abrogation of their property rights.

In late February, a group of mineral owners appeared before a state House committee to support HB-1181, a bill that would require communities that ban drilling to compensate mineral owners for lost royalties.

And on Tuesday, those who own minerals are being encouraged to attend a Greeley City Council special meeting in which the council will consider an appeal from Extraction Oil & Gas to drill up to 22 wells on the city’s west side. The plan was turned down by the city’s planning commission earlier this year in the wake of strong public resistance.

“It’s all about protecting the economic foundation of our country, which is private property rights,” Smith said. “The issue is this is my property, and I have every right to realize the benefit of that property right.”

That right, she said, is enshrined in the very fabric of the state constitution and reflected in Colorado’s long history of mining.

No simple line


But Rep. Michael Foote, D-Lafayette, said the issue is not that cut and dried. Where one person’s property right ends, he said, another’s begins.


Foote was one of five Democratic legislators on the State, Military and Veterans Affairs committee to vote to kill HB-1181 on Feb. 24.

“It can’t just be that someone has mineral rights and they say they can exploit those rights any way that they see fit,” he said. “You have surface property owners who are losing value in their homes when drilling is done right next door.”

Foote characterizes the clash of property rights revolving around oil and gas activity as a “big issue” playing out across the state. It has even reached the Colorado Supreme Court, where the high court is set to decide in the coming weeks on how far a local community can go in limiting oil and gas development.

Emily Hornback, a community organizer with the Western Colorado Congress, has spent the past few years advocating for residents of Battlement Mesa. They worry about the impacts of a plan by Ursa Resources to drill 53 natural gas wells in the neighborhood.

In December, the company got special use permits from Garfield County but still must get approval from the Colorado Oil and Gas Conservation Commission before moving forward.

Hornback said residents of the 5,500-person community, many of whom are retirees, fear for their property values in the face of heavily industrialized activity on their doorstep.

But they don’t have the political power as an unincorporated community to do much to mitigate the impacts, she said.

“For the adjacent landowner, the world appears against them and they don’t have much legal recourse,” Hornback said. “Whose property right is winning and whose property right is losing?”

Doug Saxton, a retiree who has lived in Battlement Mesa for 11 years, said his wife has asthma that is exacerbated by emissions from oil and gas activity.

Saxton said with the dramatic advances in horizontal drilling technology in the last few years, Ursa should be able to get to the natural gas deposits under Battlement Mesa — and in turn pay the mineral rights owners for their assets — from a much farther distance.

“They have tremendous technology they like to brag about,” he said, “and they ought to be using it when they’re going to impact this many people.”

Key issue


Lance Astrella, a Denver-based attorney who has represented landowners and mineral owners alike, said providing “reasonable” access to minerals beneath the surface is the key issue under Colorado law.

That’s because the state operates under a “split estates” rubric, in which the surface rights and the subsurface rights are often owned by different parties.

Under state law, the mineral estate is considered the dominant estate and operators cannot be prevented from “entering upon and using that amount of the surface as is reasonable and necessary to explore for, develop and produce oil and gas.”

But that dominance isn’t unbridled.

Astrella helped draft a 2007 state statute that introduced the concept of “reasonable accommodation” for a surface owner affected by nearby drilling activity. The law states that an operator shall conduct its operations in a manner that minimizes “intrusion upon and damage to the surface of the land.”

The industry insists that it has made numerous accommodations to surface owners and communities over the years, buffering noise with berms and walls and reducing pad size through the use of directional drilling.

In some communities, oil and gas operators have agreed to abide by memorandums of understanding, which are specific agreements between companies and local governments spelling out stricter standards of operation than what the state mandates.

But Astrella said the people who own the oil and gas deposits that the companies are trying to extract find it hard to prevail in the court of public opinion.

“The ones who have the intrusion and negative effects of oil and gas drilling — their situation is obvious and they have the public’s attention,” he said. “The mineral owners are less likely to have that benefit.”

Smith, with the National Association of Royalty Owners, said that’s because the conflict is between a property you can see — a home — and one you can’t — a pocket of natural gas.

“We don’t have the same voice because the legislature will take care of the property right on the surface rather than the property in the mineral estate,” she said. “It’s out of sight and out of mind. However, it’s a property right you can buy and sell like any other property right.”

Paying the bills


Minerals rights can also be inherited. That’s how Mike Paulsen, a wine and spirits deliveryman in Denver, obtained his minerals in Weld County. He said he used to get $200 a month from his holdings, but the industry’s recent price and production drop means he now gets a $50 check every few months.

It’s harder for him to keep up on his bills and pay off his debts.

“I not only used it to pay my bills but to have something to pass on to my kids,” said Paulsen, 53. “There’s not going to be anything left by the time I get my bills paid.”

He worries about the rising movement to limit oil and gas operations spreading to where his minerals are and impinging on his property rights.

“It really bothers me,” Paulsen said.

The total amount of royalty income in Colorado is hard to determine, Smith said, because agreements between oil and gas companies and mineral owners are privately negotiated. But based on the $475 million in royalties paid out in 2014 on state and federal lands, Smith extrapolates that total payouts statewide were around $1.1 billion.

Jon Isaacs of Adams County showed off a measley $102 check from Anadarko Petroleum Corp. The money represents a year’s worth of royalty payments off a 30-year-old oil and gas well on Isaacs’ property.

It’s not much, he concedes, but the real value under his 40-acre spread located just 4 miles north of Denver International Airport lies in the future. He smooths out a spreadsheet in his basement office that shows estimated royalty collections should a firm using the latest highly productive extraction methods drill new wells on his land.

At $31 per barrel, Isaacs says he’d get $19,000 in royalties a year. That rises to $37,000 annually by 2021, assuming a rebound in prices to $75 per barrel.

It’s his retirement fund, he said. No different than someone who invests in stocks, bonds or cattle futures.

“It’s so I can stay here at this house that I’ve improved and plant crops on my land and stay in Adams County into retirement,” said the 58-year-old, who bought this windswept parcel only because it came with mineral rights. “I bought this land as an investment.”

Roni Sylvester of La Salle is also looking to the future, which she now deems “uncertain” given recent anti-oil and gas efforts in the state. Her husband was planning to donate a ranch he owns in Wyoming to Colorado State University’s agricultural college.

That plan is now on hold because the couple can’t be certain their royalty income stream will remain intact.

“There’s no way you can plan,” Sylvester said. “It knocks the foundation out from underneath you. You have to plan for the absolute worst-case scenario.”

John Aguilar: 303-954-1695, or @abuvthefold

Oil production in colorado (millions of barrels)

2015 — 122.2*

2014 — 95.7

2013 — 65.4

2012 — 49.5

2011 — 39.4

2010 — 33

Natural gas production in Colorado (Mcf, thousands of cubic feet)

2015 — 1.7 billion*

2014 — 1.6 billion

2013 — 1.6 billion

2012 — 1.7 billion

2011 — 1.7 billion

2010 — 1.7 billion


Source: Colorado Oil and Gas Conservation Commission

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Hurricane Gustav/Ike Activity

Oct.  6

NEW ORLEANS– Offshore oil and gas operators in the Gulf of Mexico are reboarding platforms and rigs and restoring production following both hurricanes.  There are no longer any evacuated rigs in the Gulf but production was substantially cut in half by wells that were shut in prior to the hurricane.   Once all standard checks have been completed, production will be brought back on line immediately.  Facilities sustaining damage may take longer to bring back on line.

Sept. 24

Senator Domenici’s Statement on Expiration of OCS Moratorium

WASHINGTON-U.S.  Senator Pete Domenici, ranking member of the Senate Energy and Natural Resources Committee, today issured the following statement regarding the decision by Democrats to allow the moratoriums on offshore drilling and oil shale regulations to expire:

“On May 1, I introduced legislation that would have lifted the bans on offshore drilling and on issuing regulations for oil shale development.  I knew that in order to break our cycle of dependence on foreign oil, we must take advantage of the billions of barrels of oil offshore and in oil shale.  At the time, few gave my bill much chance of passing, and most on the other side of the aisle dismissed my ideas out of hand.

“Now, not even five months later, Democrats have done a 180 on this issue.  As the price of gasoline rose, the American people became outraged that Democrats have blocked us from producing offshore and from developing oil shale for many years.  The american people spoke- and joined Republicans in the Senate with a unified message: find more oil, use less.

“Now that the ban on offshore drilling will end, and the final regulations on oil shale can be issured , it will be up to the next President and the next Congress to decide if they want to take these resources off the table once again.  With these bans no longer in place, work can begin to allow us to tap into our abundant oil and gas resources- if our leaders don’t lock them back up next year. Americans will be watching closely.”


The White House just released the President’s remarks made at the signing of the Energy Bill.

They follow:

Sent: Wed Dec 19 15:20:50 2007


Office of the Press Secretary
For Immediate Release                          December 19, 2007

U.S. Department of Energy
Washington, D.C.

10:25 A.M. EST

THE PRESIDENT:  Thank you, all.  Mr. Secretary, thank you for that introduction.  We’re all pleased to be here at the Department of Energy.  I particularly want to thank the employees here for their daily efforts to help our country meet its energy needs.  Thanks for your hard work.  Sam, thank you for your leadership.

As Sam mentioned, I firmly believe this country needs to have a comprehensive energy strategy, and I appreciate the members of Congress for understanding that as well.  Two years ago I was pleased to stand with members — many of whom are here — to sign a bill that was the first major energy security legislation in more than a decade.  At the time I recognized that we needed to go even further.  And so in my State of the Union I proposed an aggressive plan to reduce oil consumption of gasoline by 20 percent over 10 years.

Today we make a major step with the Energy Independence and Security Act.  We make a major step toward reducing our dependence on oil, confronting global climate change, expanding the production of renewable fuels and giving future generations of our country a nation that is stronger, cleaner and more secure.  (Applause.)

I do welcome members of the Cabinet who’ve joined us.  I particularly want to thank the Speaker and the Leader.  I appreciate your leadership on this important issue.  (Applause.)  Speaker Pelosi is here with Congressman Steny Hoyer, House Majority Leader; welcome, Mr. Leader.  (Applause.)  Leader Reid has brought members of the Senate with him:  Senator Inouye, Senator Bingaman, Senator Stevens — I think that’s Senator Domenici there is disguise — (laughter and applause) — looking pretty handsome, isn’t he?  (Applause.)  I appreciate Congressman Dingell and Congressman Markey, Congressman Gordon — these are all leaders on their respective committees that help bring this bill to my desk.  I also want to welcome all the other members of Congress who have joined us.  (Applause.)

One of the most serious long-term challenges facing our country is dependence on oil — especially oil from foreign lands.  It’s a serious challenge.  And members of Congress up here understand the challenge and so do I.  Because this dependence harms us economically through high and volatile prices at the gas pump; dependence creates pollution and contributes to greenhouse gas admissions [sic].  It threatens our national security by making us vulnerable to hostile regimes in unstable regions of the world.  It makes us vulnerable to terrorists who might attack oil infrastructure.

The legislation I am signing today will address our vulnerabilities and our dependence in two important ways.  First, it will increase the supply of alternative fuel sources.  Proposed an alternative fuel standard earlier this year.  This standard would require fuel producers to include a certain amount of alternative fuels in their products.  This standard would create new markets for foreign products used to produce these fuels.  This standard would increase our energy security by making us less vulnerable to instability — to the instability of oil prices on the world market.

The bill I sign today takes a significant step because it will require fuel producers to use at least 36 billion gallons of biofuel in 2022.  This is nearly a fivefold increase over current levels.  It will help us diversify our energy supplies and reduce our dependence on oil.  It’s an important part of this legislation, and I thank the members of Congress for your wisdom.  (Applause.)

Second, the legislation also — will also reduce our demand for oil by increasing fuel economy standards.  (Applause.)  Last January, I called for the first statutory increase in fuel economy standards for automobiles since they were enacted in 1975.  The bill I’m about to sign delivers on that request.  It specifies a national standard of 35 miles per gallon by 2020, which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.  This bill also includes an important reform that I believe is essential to making sure that we realize this strategy.  It allows the Department of Transportation to issue what are known as “attribute-based standards,” which will assure that increased fuel efficiency does not come at the expense of automobile safety.  This is an important part of this bill, and again I thank the members for taking the lead.  (Applause.)

The bill also includes revisions to improve energy efficiency in lighting and appliances.  It adopts elements of the executive order I signed requiring federal agencies to lead by example in efficiency and renewable energy use.

Taken together, all these measures will help us improve our environment.  It is estimated that these initiatives could reduce projected CO2 emissions by billions of metric tons.  At the U.N. climate change meeting in Bali last week our nation promised to pursue new, quantifiable actions to reduce carbon emissions.  Today we’re doing just that.  The legislation I’m signing today will lead to some of the largest CO2 emission cuts in our nation’s history.  (Applause.)

The legislation I’m about to sign should say to the American people that we can find common ground on critical issues.  And there’s more we can accomplish together.  New technologies will bring about a new era of energy.  So I appreciate the fact that Congress, in the omnibus spending bill that I’m going to sign later on, recognizes that new technologies will help usher in a better quality of life for our citizens.  And so we’re going to spend money on new research for alternative feedstocks for ethanol.  I mean, we understand the hog growers are getting nervous because the price of corn is up.  But we also believe strongly that research will enable us to use wood chips and switchgrass and biomass to be able to develop the ethanol necessary to help us realize the vision outlined in this bill.

I appreciate very much the fact that we’re going to fund additional research on new battery technologies to power plug-in hybrids.  We’re spending money on innovative ways to capture solar power.  We’re making — providing incentives for nuclear energy.  If we’re serious about making sure we grow our economy and deal with greenhouse gases, we have got to expand nuclear power.  (Applause.)

It is going to take time to transition to this new era.  And we’re still going to need hydrocarbons.  And I hope the Congress will continue to open access to domestic energy sources — certain parts of the outer continental shelf in ANWR.  And to protect us against disruptions in our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve.

With these steps, particularly in the bill I’m about to sign, we’re going to help American consumers a lot.  We’ll help them by diversifying our supplies, which will help lower energy prices.  We’ll strengthen our security by helping to break our dependence on foreign oil.  We’ll do our duty to future generations by addressing climate change.

And so I thank the members of Congress.  I appreciate the fact that we’ve worked together, that we can show what’s possible in addressing the big issues facing our nation.  This is a good bill and I’m pleased to sign it.

(The bill was signed.)  (Applause.)


December 14, 2007

Last night in an 86 to 8 vote the Senate passed the energy bill (HR6). Those voting against the measure were:

Barrasso (R-WY), Coburn (R-OK), DeMint (R-SC),  Enzi (R-WY), Hatch (R-UT), Inhofe (R-OK),
Kyl (R-AZ), Stabenow (D-MI)

Following the Senate action, the White House issued the following statement:

Office of the Press Secretary


For Immediate Release December 13, 2007


Last January, President Bush called on Congress to reduce our nation’s consumption of gasoline by 20 percent in 10 years by modernizing CAFE standards and greatly expanding the use of alternative fuels. We congratulate the United States Senate for their effort to address the challenge of the President’s bold “20 in 10” initiative. The Senate energy plan will update CAFE standards and enhance the use of renewable fuels. By addressing the concerns of the Administration and moving forward with a bipartisan approach, senators have taken steps to improve our economic and energy security. If this legislation makes it to the President’s desk, he will sign it into law.

Earlier in the day, when the Senate did not invoke the Cloture motion sought by Majority Leader Reid (D-NV), the following Republications voted with the Leader:

Grassley (R-IA), Hatch (R-UT), Lugar (R-IN), Murkowski (R-AK), Smith (R-OR), Snowe (R-ME) and Thune (R-SD).

The only Democrat who voted to not invoke Cloture was Mary Landrieu (D-LA).

The bill now goes back to the House, for its consideration.


December 13, 2007

RE: Senate Cloture Motion Fails 59 to 40

This morning the Senate voted 59 to 40 to not invoke cloture on the Senate energy bill (H.R.6). Senator McCain (R-AZ) was absent.

As a result of the vote, Majority Leader Reid (D-NV) said that he would bring the energy bill back to the floor later today with the onerous $21 billion tax provisions stripped from the bill. With this modification the bill is expected to be adopted, as long as no additional procedural hurdles are placed in front of the vote on final passage.

Oklahoma Updates

2007 Oklahoma SB 507 helps promote drilling


• In order to commit to a law suit, you should be required to sign on the dotted line and affirm your belief in the lawsuit.

• Oklahoma’s natural resources should not be threatened by lawsuits.

• Many royalty owners are elderly and should be advised that they are committing to a law suit.

• At the present time, Oklahoma law allows you to do nothing and you become a plaintiff.

• The American Royalty Council does not support the McMullen amendment.


Under current law, most potential class action clients don’t get to choose their lawyer, Class Action lawyers choose the clients.  The attorneys and their designated supporters remain firmly in control.  Class members have little or no say over who represents them, or how the case will be handled.

Class Action litigators in the past helped protect royalty owners from abusive practices; but what protects royalty owners from abusive lawyers?

S.B. 507 will put the clients in control of lawsuits, not the lawyers.

Royalty Owners do not lose anything.

The “opt in” language in SB 507 will add accountability, clarity and fairness to the attorney-client relationship.  Lawyers will have to work to gain the support and confidence of their potential clients.  The “opt in” language will allow royalty owners to select from several lawyers, and pick the best one, instead of the present “like it or leave it” system.

The American Royalty Council supports the enhanced notice requirements in the bill.  Too often class representatives claim to represent thousands of people, but make no real effort to try to contact them.

In conclusion, the American Royalty Council supports putting clients in charge of litigation.  After all, it is our money.




For those of you who are watching Oklahoma legislative interim studies, the agendas for the House Judiciary Committee and House Revenue and Taxation committees are below.

The studies on Mineral Deed Conveyance and Indemnification and Hold Harmless Agreements both came from bills introduced during the 50th Oklahoma Legislature. At one point SB 1793 contained an amendment changing the standard of competence for the conveyance of mineral or royalty interests. It was an attempt to halt the practices of a few unscrupulous mineral buyers who disguise mineral conveyances as mineral leases. After discussions with the authors, they agreed to an interim study.

Late in the session, Rep. Danny Morgan, who owns a well servicing company, designed an amendment intended for a conference committee report prohibiting the use of certain “indemnification clauses” in contracts between oil and gas operators and contractors working for them. He indicated that small contractors were having difficulty obtaining insurance with these indemnification clauses in the contracts. After discussions with Rep. Morgan, he withdrew the amendment and the Mid-Continent Oil and Gas Association agreed to work with him to try and develop a suitable compromise for this complex problem.

Judiciary Committee
Thursday, October 12, 2006
8:30 a.m., Room 412C, State Capitol Building

8:30-9:25 Interim Study #06-46 – Council on Judicial Complaints; Representative Rob Johnson

9:30-10:25 Interim Study #06-06 – Mineral Deed Conveyance Process; Representative James Covey

10:30-11:25 Interim Study #06-60 – Examination of Oklahoma’s Residency Requirements; Representative Sue Tibbs

11:30-12:30 Interim Study #06-25 – Examination of Indemnification and Hold Harmless Agreements; Representative Danny Morgan

Colorado Updates

At Issue: Colorado Oil and Gas Conservation Commission rulemaking

This year, Colorado is in the process of re-writing many rules at the Colorado Oil and Gas Conservation Commission (COGCC).  The rules that have been proposed govern oil and gas exploration and development as a result of legislation passed in Colorado last year that reorganized the commission and added new regulatory and permitting requirements.  Members of industry understand the public concerns that led to this new legislation.  However, many believe the proposed rules would unnecessarily discourage and delay – or even prohibit – investment and further development of these important resources in Colorado

Among the concerns, the proposed rules:

• Impose a three month timing restriction in the name of protecting wildlife habitat and migration;
• Create a “one size fits all” set of rules, restrictions and requirements for all lands regardless of ownership;
• Require wildlife surveys on private adjacent lands, setting up potential conflicts with landowners;
• Require notification and consultation with adjacent landowners on new well and production equipment locations;
• Greatly expand the definition and regulation of development near rivers, creeks and other water courses;
• Preempt both federal government and Indian tribal regulation and the authority of local government;
• Result in lengthy delays and uncertainty in permitting that runs counter to the statutory mandate for a “timely and efficient” permit process;
• With their wide-ranging scope, many of the proposed regulations exceed the legislative intent of Colorado HB1341 and HB1298;

To review the process the state will follow to consider impacts and hear input from the community and public, visit the COGCC website.

The rulemaking process allows for public comment and ARC will be participating, but personal letters from mineral and royalty owners across Colorado will be invaluable.

The American Royalty Council is a forum for reasonable dialogue about the energy industry, and the industry’s ability to provide secure sources of fuel.  Remember, as a royalty owner you can testify as to the importance of royalty income as it flows through your community and state.

Contact ARC for information about becoming a member and joining the effort to protect your royalty interests.