National Association of Royalty Owners study shows Boulder County could be on the hook for over $1 billion due to bans on energy development
DENVER (June 12, 2014) – The National Association of Royalty Owners today released a report prepared by Netherland, Sewell & Associates, a leading international petroleum engineering firm, that estimates the future cash flows related to expected horizontal well results in the Wattenberg Field in Boulder County. The results show that Boulder County could be on the hook for over $1 billion from successful takings claims, or just compensation for the public use of private property, such as a ban on developing minerals in the Wattenberg Field.
Boulder County’s moratorium on natural gas extraction is preventing the development of dozens of one square mile “sections” within the Wattenberg Field. According to this estimate of future cash flows, a royalty owner with a 1/8 royalty interest in a single section could receive as much as $40 million in royalty payments over the life of production. Royalty owners with a 1/5 royalty interest in a single section could receive as much as $64 million in royalty payments over the life of production.“If the seizure of private property rights to appease clamoring special interests in Colorado is codified through the local control ballot initiatives, all property rights throughout the state are under attack. Not only do these estimates represent a staggering value that could be taken without compensation from mineral owners by proposed ballot initiatives, but they represent funds taken from tax coffers that fund schools, roads, and other community services that we all rely upon,” said Michelle Smith, president of NARO-Rockies. “This real property right contributed by mineral owners is an essential element of nearly $10 billion of annual revenue that oil and gas brings to the state of Colorado each year.”
If the owners of just 50 sections of undeveloped mineral interests successfully sued Boulder County based on a takings claim, the present value of the mineral rights could range from approximately $1 billion to $2 billion in settlements, depending on total per-well recovery. To put these numbers into perspective, Boulder County’s budget is $366 million this year.
“Local municipalities that move forward with similar bans or takings through local control initiatives without just compensation through ballot initiative may be pursuing a potentially financially devastating path for their jurisdiction,” said Smith.
According to the Colorado Oil and Gas Association, in 2012, the oil and gas industry contributed over $1.6 billion in public revenues and nearly $500 million went to funding education. Additionally, a University of Colorado LEEDS School of Business study found that the oil and gas industry supported 110,000 jobs in the state and contributed nearly $30 billion to Colorado’s economy.
About the Netherland, Sewell & Associates Estimate
The estimate of future cash flows related to expected horizontal well results in the Boulder County’s Wattenberg Field cover a range of expected total oil and gas recoveries from undeveloped horizontal well locations in the Codell and Niobrara formations that are assumed to be section length with 4,000 feet of completed horizontal lateral.
Netherland, Sewell & Associates used technical and economic data including, but not limited to, geologic and production maps, analogous historical price and cost information, and property ownership interests. The volumes in the estimates have been estimated using deterministic methods, these estimates have been prepared in accordance with generally accepted petroleum engineering and evaluation principles set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards). The firm used standard engineering and geosciences methods that it considered to be appropriate and necessary in accordance with the 2007 Petroleum Resources Management System definitions and guidelines. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering an geosciences data; therefore, our conclusions necessarily represent only informed professional judgment.
The data used in the estimates were obtained from National Association of Royalty Owners, various operators, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. and were accepted as accurate.
About the National Association of Royalty Owners (NARO) – Rockies Chapter
NARO encourages and promotes exploration and production of minerals in the Rocky Mountain region. NARO represents the interests of the nearly 600,000 mineral interest owners in the state of Colorado. The organization preserves, protects, advances and represents the interests and rights of mineral and royalty owners through education, advocacy and assistance to its members, to NARO chapter organizations, to government bodies and to the public. Additional information about NARO can be found here.