Extraction Continued Its Breach Claims in August 14 Email To City

In a 3 pm email to the City before the 5 pm August 14 Special Council Meeting to hear public comments on the Comprehensive Drilling Plan (CDP), Extraction continued its claims of breach of contract and financial damage due to the “unreasonable refusal” of the City to approve the CDP.  The claims that Extraction Attorney Eric Christ listed in his letter to City and County of Broomfield Attorney Shaun Sullivan can be found in italics in the text quoted below.

As of August 17, the CDP has not been approved by the City.  Citizen groups are currently in the process of gathering signatures on a petition to ask the City to deny the CDP.

 

Mr. Sullivan, 

Despite the City Manager declaring that Extraction’s CDP was complete on July 31, 2018, the City still has not approved the CDP in direct breach of our agreement. As a result of that and other breaches, Extraction is incurring substantial damages.    

First, several pipeline crews have already been put on standby rate for the last 45 days at a cost of approximately $30,000 per day. Remaining crews and inspectors will be put on standby next week due to uncertainty surrounding CDP approval and the City’s failure to approve PPIP applications at an additional cost of approximately $52,000 per day for a total of $82,000 per day.  In early June, in a meeting with Extraction at the City’s offices, Mr. Standbridge issued a directive to City staff that no PPIP’s are to be approved in the lower portion of Broomfield without his approval, as they would be conditioned on CDP approval.  

Second, Extraction has already spent or made firm, non-refundable commitments to purchase approximately $25.5 million of materials to date specifically to implement the BMPs included in the Operator Agreement.  As a result of the unique and extraordinary nature of the BMPs included in the Operator Agreement, Extraction is unlikely to be able to repurpose these materials to other projects. It is also possible that materials stored for a significant amount of time will become unusable and will need to be repurchased. The City’s continued unreasonable refusal to approve the CDP is significantly increasing the costs associated with the project contemplated by the Operator Agreement.  

Broomfield’s ongoing breach is causing Extraction to suffer extensive damages.  Most of these damages cannot be mitigated and continue to increase daily, such as increased labor and materials costs, as well as ongoing financing costs.  Additionally, the City’s continued delay and breach causes the present value of an asset valued at hundreds of millions of dollars to be diminished as each day of delay goes by. Extraction expects the City to approve the CDP and all outstanding PPIP applications without any further delay. 

Regards, 

Eric Christ

Extraction Oil & Gas, Inc.