Concerning modification of the laws governing the establishment of drilling units for oil and gas wells, and, in connection therewith, clarifying that a drilling unit may include more than one well, providing limited immunity to nonconsenting owners subject to pooling orders, adjusting cost recovery from nonconsenting owners, and modifying the conditions upon which a pooling order may be entered.
Current law authorizes ‘forced’ or ‘statutory’ pooling, a process by which any interested person–typically an oil and gas operator–may apply to the Colorado oil and gas conservation commission (commission) for an order to pool oil and gas resources located within a particularly identified drilling unit. After giving notice to interested parties and holding a hearing, the commission can adopt an order to require an owner of oil and gas resources within the drilling unit who has not consented to the application (nonconsenting owner) to allow an oil and gas operator to produce the oil and gas within the drilling unit notwithstanding the owners lack of consent.
The bill clarifies that an order entered by the commission establishing a drilling unit may authorize more than one well. The order must specify that a nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the drilling unit.
Currently, a nonconsenting owner must pay the consenting owners from the nonconsenting owner’s share of production 200% of the nonconsenting owner’s proportionate share of the costs of drilling, including equipment. The bill limits this 200% cost recovery to wells 5,000 feet or less in depth and increases the cost recovery to 300% for wells greater than 5,000 feet in depth and for horizontal wells.
Current law prohibits entry of a pooling order until the mineral rights owners have been given a reasonable offer to lease their rights. The bill specifies that the offer must be given at least 60 days before the hearing on the order and must include a copy of or link to a brochure supplied by the commission that clearly and concisely describes the pooling procedures and the mineral owner’s options pursuant to those procedures.
Senator Vicki Marble | Representative Lori Saine | Representative Matt Gray
Signed on June 1st 2018 By: Crisanta Duran (Speaker of The House of Representatives) ; Kevin J. Grantham (President of The Senate) ; Marilyn Eddins (Chief Clerk of The House of Representatives) ; Effie Ameen (Secretary of The Senate) ; John W. Hickenlooper (Governor of The State of Colorado)