With a vote of 5-1 by the Colorado Oil and Gas Conservation Commission (COGCC) Commissioners, the COGCC approved Extraction’s forced pooling order of Lowell South (Livingston Pad) over the protest of Wildgrass Oil and Gas Committee (WOGc) on March 12. This COGCC hearing was held at the order of Judge R. Brooke Jackson from the February 12 hearing on the motion for a temporary restraining order in Wildgrass Oil and Gas Committee’s forced pooling Constitutional lawsuit. WOGc is expected to consider its next steps as Judge Jackson set a return courtroom date of March 26 at 9 a.m.. This return date was to allow for the temporary restraining order to be reconsidered if WOGc felt that its concerns about health, safety, welfare and financial viability of Extraction were not satisfactory addressed at the March 12 COGCC forced pooling protest hearing.
WOGc Attorney Joe Salazar opened the hearing by raising standing objections that the COGCC denied WOGc full discovery on financial viability of Extraction beyond documents that were publicly available. He also stated that Judge Jackson ordered that WOGc be given a full hearing on health, safety, welfare and economic issues but that the COGCC limitation of WOGc’s case to only one hour fifteen minutes made that impossible. Extraction Attorney Joe Pierzchala stated his standing objection that the COGCC should not even have been considering anything about health, safety and welfare in the forced pooling hearing.
In the Commissioners’ comments before voting, they all limited their consideration for approval to whether or not Extraction provided a reasonable lease offer in strict adherence to the current statute. Commissioner Boigon stated that he “was not satisfied” that Extraction’s presentation proved they made a reasonable lease offer, but then said it was probably “customary” and voted to approve the forced pooling order. He said the statute was vague as to how a reasonable lease offer would be defined. Commissioner Ager also voted for approval “the way the statute is written now” but thanked WOGc for their impressive testimony. Commissioner Overturf, the lone vote not to approve the order, said she “had long shared” the thought that the current forced pooling statue was outdated but said she found the briefing inadequate that day to fully consider it and that she wished they had more time to do so.
By phone, Commissioner Holton twice faulted WOGc for not calling Weld County or CAMRO (Colorado Alliance of Mineral and Royalty Owners) to find out what a reasonable lease offer would have been. However, according to statements made by other Commissioners and WOGc Attorney Kate Merlin, the statute states that the burden of proof for offering a reasonable lease offer was on Extraction as the operator. Also, even though the mineral owner is supposed to be given the costs of the wells in the lease offer, Extraction admitted that many of the costs were not included and that was customary practice.
Extraction presented a chart of a progression of various royalty rates and bonuses that Commissioner Boigan pointed out was not consistent with their list of those who were leased. When asked by Commissioner Jolley if WOGc had ever tried to negotiate terms of the lease offer with Extraction, witness Ann Marie Byers testified that in 2016 she had tried to do so in a meeting with Extraction. Extraction Senior Project Manager Chandler Newhall countered that WOGc had made no such attempt and WOGc attorneys were not permitted to enter any evidence to show otherwise.
Extraction stated that they controlled 87% of the mineral interests in the Lowell South spacing unit and they only had 13% left to pool, yet they refused to provide evidence requested in discovery by WOGc of when the leases were signed since Wildgrass residents first began getting leases in June 2016. WOGc witness Mark Lindner stated that might be because a mineral owner had no bargaining power. He also stated that many of his neighbors capitulated in signing out of fear of being force pooled after realizing that it was inevitable after at least one mineral owner in the spacing unit had signed a lease. He stated that he would never sign a lease that put the health and safety of his children at risk. Wildgrass resident Mandy Silar Schuwerk stated in her 510 statement that she was proud to be among the 13% and that the reason that her neighbors told her they signed was because they were afraid of liability. Extraction Landman Jason Rayburn stated unequivocally that no one signed under duress.
Yet Wildgrass resident Kathy Plomer stated in her 510 statement that as an Adams 12 Board Member that the only reason that she voted in favor of leasing was because of the possible loss of district revenue due to well costs and liability if they were force pooled. She stated that her personal decision as a mineral owner in Wildgrass was to be force pooled. In Wildgrass Oil and Gas Board Member Jean Lim’s 510 statement, she (author) pointed to a $800,000 fine that the COGCC had just levied against Extraction the night before for failure to submit documentation showing they performed Bradenhead testing to check well pressure over five sites in Weld County. She cited this as evidence Extraction could never be trusted to keep the Best Management Practices (BMPs) in their Operator Agreement with the City where BMP #32 is for Bradenhead testing.
Anthem Ranch HOA Board Member Jim Bensman read a 510 statement by the Athem Ranch HOA Board in support of the WOGc protest. He also called attention to the fact that the COGCC rules need to be changed to allow their 55 plus community living closest to the Livingston Pad to be allowed to have standing in the process. Anthem Highlands resident Laurie Anderson stated there was a significant violation of the Operator Agreement because Extraction had not completed its required risk analysis. McKay Landing resident Heidi Hinkel described how confusing it was to receive a recent lease offer, how she had to hire someone to find out if she owned minerals and how two landmen just appeared one day knocking at her door.
After the vote to approve the forced pooling order, COGCC Docket Item 190300337 was scheduled to be heard. However, the hearing began and the Commissioners immediately considered if they should be holding the hearing. The COGCC Staff had interpreted an oral statement by Judge Jackson to mean that they had to hold a hearing. The hearing preface stated, “On February 12, 2019, the Honorable R. Brooke Jackson, United States District Judge for the District of Colorado, ordered the Director of the Commission to hold a hearing concerning whether the Form 2s and the Form 2A filed by Extraction for development in the lands covered by Order Nos. 407-2256 and 407-2274 comport with the October 24, 2017 Amended and Restated Oil and Gas Operator Agreement between Extraction and the City and County of Broomfield.” However, the Commissioners put forth a motion that this hearing should not be heard since the matter was currently under scrutiny in the health and safety lawsuit of WOGc in Colorado State Court. The Commissioners asked Extraction and WOGc if they agreed. Both parties said yes and the Commissioners voted unanimously to vacate the hearing.