Oil and gas boom in Douglas County

Parker Chronicle: Industry seeks land leases for drilling sites

Rhonda Moore rmoore@ccnewspapers.com

More than 300 residents from Douglas and Elbert counties joined Douglas County commissioners for an education on the oil and gas industry, which is making its interest known among rural landowners.

Douglas County commissioners on April 27 hosted a panel discussion at the Douglas County Events Center with representatives from industry experts across the Front Range. The only contingent missing from the panel were representatives from the oil and gas companies that are approaching rural landowners with offers to lease their land.

County commissioners organized the panel in the wake of countless calls from county residents hoping for some guidance on how to handle the offers from oil companies seeking drilling sites in Douglas County, said Wendy Holmes, Douglas County director of public affairs.

Representatives from Conoco Phillips, Anadarko Oil and Chesapeake Energy are among the companies approaching rural residents with lease agreements to secure potential drilling sites, said Elbert County Commissioner John Shipper. Attendees at the panel discussion showed their highest interest with applause for panelist Debbie Trujillo, a landowner advocate who helps guide landowners through the oil and gas lease-negotiation process.

Your negotiation rights

When a company approaches a landowner with an oil and gas lease agreement — called a standard lease form — landowners should first be aware those agreements are not written for the sake of the landowner, Trujillo said.

“Those standard lease forms are predrafted by their lawyers and benefit the oil company totally,” Trujillo said. “There is nothing in it to benefit you. No one should sign a standard lease.”

There is little that is standard about an oil and gas lease, Trujillo said. Each company drafts a lease unique to its interests, with little regard to the interests of the landowners, she said. Standard lease agreements are not subject to revisions, but can be changed through an addendum to the agreement, regardless of what representations are made by the oil and gas company, she said.

Landowners can and should negotiate their proposed lease in a co-op with neighboring landowners and with the help of legal representation if possible, Trujillo said.

“Minerals could be one of the most valuable assets you own,” she said. “You don’t know what you don’t know and the unknowns can really bite you. Representation can save you a lot of money.”

A co-op wields more power

Trujillo and other panelists urged landowners who are approached with a lease agreement to consider pooling their resources to increase negotiating power with the oil company. The higher the number of parcels that negotiate in a co-op, the better chances those landowners have at negotiating a good deal, she said.

With that in mind, now is not the time to hold your cards close to the vest. It’s important to discuss the lease offers with neighbors to know what the oil companies are offering across the board.

“It’s better to organize in a group now, not later,” Trujilllo said. “Some of those properties are going to be leased; people will cave and sign that standard lease and you could find yourself shut out of being able to pool acreage. Try to stay organized for the long term. Everyone in the group must be determined to stay in the group in order for it to work for you.”

Surface rights v. mineral rights

Landowners also need to understand the difference between surface rights and mineral rights, said Gil McNeish, an attorney with Grimshaw & Harring P.C. There is inherent tension between surface-right owners and mineral-right owners because mineral-right owners have interests in the surface rights for drilling purposes, he said.

A mineral right is the right to the minerals below the ground surface of a piece of property. Surface rights are typically deeded over in a real estate transaction and include everything above ground level.

In the years since large-parcel landowners have sold or subdivided their property, they have had the option to sever, or separate, mineral rights from the property, said Marian Woodward, assessment manager with the Douglas County Assessor’s Office.

When the mineral rights have been severed from a property, the landowner can sell the surface rights to the property and retain the mineral rights, Woodward said. Most subdivided parcels fall into this category, with no mineral rights conveyed when a property is sold to subsequent buyers. Larger parcels, measuring 100 or more acres, could still have mineral rights conveyed with the property, Woodward said.

In Colorado, state law gives the mineral-rights owner a right to reasonable use of the surface with compensation to the surface owner, McNeish said. The reasonable use is typically established by a surface-use agreement, which is a private contract between the surface-rights owner and the mineral-rights owner to set the terms of the mineral operation, he said. There are several advantages to a landowner to enter into a surface-use agreement since state law gives a mineral-rights owner access to the mineral asset with or without an agreement.

“For the surface owner it is an agreement in advance of how and where drilling operations will be conducted,” McNeish said. “It gives certainty and predictability to how drilling operations unfold and provides an enforcement mechanism. It also establishes the rights, obligations and liabilities of both parties.”

Do you own mineral rights?

Residents can find out if they own their mineral rights by visiting the Douglas County assessor’s website at www.douglas.co.us/assessor/. Complete a property search to find the legal description for your property, which is the key to tracking whether or not that property was sold with mineral rights, Woodward said.

Take the legal description to the assessor’s office at 301 Wilcox St. in Castle Rock or call 303-660-7450. The assessor’s office will use the legal description to track the history of mineral-right ownership.

For additional oil and gas information and resources, visit www.douglas.co.us/planning/oil_and_gas.html.

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