Changes are coming to the statutory pooling process in Colorado. Senate Bill 24-185 (SB24-185), which was signed into law on May 22, 2024, expands protections for and grants additional rights to unleased mineral interest owners and local governments in Colorado.
Under current law, the Colorado Energy and Carbon Management Commission (ECMC) may, in the absence of voluntary pooling, enter an order pooling the mineral interests of two or more separately owned tracts or interests within a drilling and spacing unit, following an application by a person who owns, or has secured the consent of the owners of, more than 45% of the mineral interests to be pooled. Currently, the ECMC requires a sworn attestation by a party with direct knowledge of the applicant’s ownership to satisfy this requirement.
Among other things, SB24-185 will now require an applicant to file an affidavit with the pooling application evidencing that the applicant has obtained the threshold consent needed to file the application. The statute makes clear that the affidavit must include the recording or reception number of the oil and gas lease(s), memorandum of oil and gas lease(s), or other recorded agreements that convey rights to minerals or provide the consent of applicable mineral interest owners that form the basis of the ownership requirement. The affidavit must also include the API number for any oil and gas well that is holding a recorded lease by production into the secondary term that is identified as part of the affidavit. If the applicant is relying on unrecorded instruments to establish the threshold ownership or consent requirements to file the pooling application, this must be disclosed in the affidavit.
Unleased mineral interest owners may challenge the pooling applicant’s affidavit of declaration of ownership and will be granted sixty days before the first noticed hearing date to file a protest against the affidavit. If the unleased mineral interest owner files a bona fide protest to the applicant’s ownership declaration, the ECMC is required to resolve the protest prior to entering a pooling order. The unleased mineral interest owner will also be granted the right to review certain leasing information included in the pooling application.
Beginning on January 1, 2025, drilling units containing the mineral interests of an unleased mineral interest owner that has rejected an offer to lease are prohibited from drilling or extracting minerals from that unit without a pooling order entered by the Commission.
The statutory changes further prohibit the ECMC from entering an order pooling a local government’s mineral interests if: (1) the local government has rejected an offer to lease the mineral interest in question; and (2) the minerals subject to the local government’s mineral interests are within the local government’s geographic boundaries. If an application proposes to pool a local government’s mineral interests after the government has rejected a lease, the ECMC must deny the application unless it is amended to exclude the government’s unleased mineral interests.
Senate Bill 24-185 will take effect on August 7, 2024, provided no referendum petition is filed against the act. At this time, there is no rulemaking scheduled to modify ECMC rules related to the statutory changes enacted under SB24-185. To that end, it is critical that each operator understand the statutory changes when pursuing a development plan in Colorado. For more information, please contact Jill Fulcher, Ryan McKee, or Laura Arentsen.