So oil drilling has come to your community and you do not want it. Even if you are a mineral owner (and stand to benefit monetarily), you still do not want it because you feel there are too many unknowns that could possibly affect you such as, possible water contamination, affects on property values, affects on local wildlife, increased traffic, the industrialization of land in your community, or a host of other quality of life issues.
How large an area is affected?
This is a situation being faced by many communities, large and small, in areas where oil companies believe the Niobrara will be productive. The affected area is huge and runs from southern Wyoming to Southern Colorado.
Why are the oil companies wanting to drill in populated areas?
At the risk of sounding trite: the oil companies will only drill where the oil is, however because of recent developments in technology, oil that was out of reach ten years ago is now commercially in reach.
In the past oil drilling has typically been conducted in agricultural areas of the country where a farmer could lease few acres to an oil company make make a nice income or even retire on the proceeds. With the recent developments in horizontal drilling and hydraulic fracking (fracking) this has all changed. Previously an oil company had to intersect a geologic structure to be successful so the affected areas were very small and the possibility of a dry hole was large. However with these new technologies the oil companies are now able to drill into the oil bearing source rock so there are no dry holes, and the target area is now in the form of a blanket (your oil bearing formation) as opposed to a point (a geologic structure).
Aren’t there any State regulations to prevent drilling in populated areas or areas that do not want it?
This is a complex question and I will defer that answer to the FAQ page on the Colorado Oil and Gas Conservation Commission’s web site. You can click on the link or read the text below which I have referenced from their site. You may direct any legal, statutory, or regulatory questions to the COGCC as these are their words. I do suggest however that you read these answers carefully and completely so as not to miss anything.
STOPPING OIL AND GAS DEVELOPMENT IN GENERAL
Question 1.a.: I own only the surface and have no interest in the oil or gas underlying my land. How can I stop oil and gas development on my property or in my area of the state? What can the Colorado Oil and Gas Conservation Commission (COGCC) do to stop additional oil and gas development?
Answer 1.a:“Colorado, like all other western states, recognizes separate ownership of the surface estate and the mineral estate and the distinct private property rights associated with each. Often, different parties own the surface and the subsurface, commonly referred to as severed or split estate lands. The different ownership may have been created through the reservation of the minerals to the government when the lands were originally patented, or may result from a decision by a previous landowner to separately sell or lease the subsurface mineral interest.
Because each party has property rights associated with the ownership of their respective estate, oil and gas companies that have purchased or leased mineral rights are entitled to exercise their property rights to develop the resource. Colorado law recognizes that access to the mineral estate from the surface estate is necessary in order to develop the mineral interest. The law provides for access to the mineral estate by allowing subsurface owners “reasonable use” of the surface estate. The COGCC did not create these legal relationships, and it does not have the statutory authority to alter these private property rights. Instead, surface and mineral interests are created or transferred through private party contracts, including deeds and leases.
In contrast, the COGCC is a state regulatory agency created by the Colorado General Assembly to promote development of the oil and gas resources throughout the state, consistent with the protection of public health, safety and welfare. Thus the COGCC may suspend operations if it finds a company is violating COGCC rules, or to protect the public from significant injury, but the COGCC cannot interfere with the private party contracts establishing the surface and mineral owners’ rights to the property.”
STOPPING OIL AND GAS DEVELOPMENT TO PROTECT AN INDIVIDUAL’S PROPERTY VALUE OR QUALITY OF LIFE
Question 1.b.: If COGCC is obligated to protect public health, safety and welfare, why won’t they stop oil and gas development that threatens my property values or my quality of life?
Answer 1.b.: The law that created the COGCC and empowers their regulation of the oil and gas industry provides for the COGCC to promulgate rules to protect the health, safety and welfare of the general public in the conduct of oil and gas operations. The law is intended to keep the general public safe when drilling and development occurs, and is not directed at protecting individual property values or a preferred quality of life.
An example of COGCC rules enacted to protect public health, safety and welfare are the “high density rules” that apply significant restrictions on oil and gas development in areas where there is dense surface residential development on 2 acre or less equivalent lot sizes. In some cases these rules essentially preclude new oil and gas development because of safety concerns.
For more FAQ from the COGCC click here
I have read all that the COGCC says they can do to protect me and my interests, and I am still not satisfied, what more can I do?
Assuming you have read the answers to the questions above from the COGCC, you now realize that the State has the “legal” obligation to allow a mineral owner to develop their minerals (in this case oil and gas).
COGCC Niobrara Spacing Orders
Currently, the COGCC has established orders which set the precedent for field rules of horizontal Niobrara formation drilling to be 640 acres (1 sq mile or a section) see Order 421-1. There are also applications to establish 1280 acre spacing in some Niobrara fields. (1280 acre spacing application to supersede 421-1) This is the reason oil companies need to lease at least a whole section before they could possibly drill for those minerals.
So what does all that mean to you and why do you care about spacing units? Well if you own the minerals of 640 acres, you can probably just tell an oil company you are not interested and they will not be able to drill. Its as simple as that. If however you own a smaller part of a section, then it will not be so easy.
Without getting overly verbose, your options are severely limited in preventing drilling if you do not own a full section worth of minerals. Options become even more limited if a 1280 unit spacing order is granted by the COGCC.
- Your best option would be to get your neighbors to to all agree not to lease their minerals to an oil company. This task will become more difficult as the number of properties increase,. You will find some mineral owners will want drilling, or they will be absentee owners and will lease their mineral acres regardless. You may also find that minerals have already been severed and are already leased by an oil company. At this point your best option is no longer viable.
Once your section is compromised by some leasing then drilling is most likely a very hard thing to stop. We will let you decide if this is true statement or not.
What about stopping drilling with legislation?
- Another option is to to talk to your State Representatives about what can be done to stop drilling. You may have success, you may not. Realize, there are many people with legitimate interests that differ from yours and you will be trying to get legislation passed. That does not mean you should not try, however it is a laborious process and you will no doubt face opposition.
- One last option is that you might try and get some of the COGCC statutes or regulations changed that would prevent drilling in your community due to zoning or setback considerations.
What if I just ignore the situation?
If you ignore the situation the only way you can succeed is if the “oil play” becomes uneconomic and the oil companies go away. This could happen if there is not as much oil as originally thought, or if the geologic setting in your area is discovered to not be favorable based on drilling results nearby.
However in ignoring the situation you run the risk of running into the “Involuntary Pooling” regulations enforced by the COGCC. Doing nothing can result in your minerals being “force” pooled in the end, and that is something you do not want.
In summary, it would seem that it is very difficult to stop drilling once your area has been compromised with leasing. While leasing does not mean drilling, drilling is certainly implied. Some mineral owners who do not want drilling but realize that they must deal with the situation can decide to unite together to negotiate a “Protective” lease with an oil company and outline the best terms for their community if drilling must take place. We refer you to our Leasing 101 page for info about lease negotiations and obtaining the best deal you can.