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January 11, 2022

Colorado Supreme Court to Review Boulder County Oil and Gas Case

Highest state court will examine Boulder County’s claims that oil and gas leases expired

Boulder County, Colo. - The Colorado Supreme Court granted Boulder County’s petition for certiorari review in a lawsuit against Crestone Peak Resources Operating, LLC.

In the lawsuit, Boulder County alleged that two county-owned oil and gas leases expired because of a gap in oil and gas production. Both the district court and court of appeals held that the leases did not expire even though Crestone did not produce oil and gas from them for 122 days in 2014.

The two courts applied what is known as the “commercial discovery rule,” stating that oil and gas production occurs when the resources are discovered and a well is capable of producing them, regardless of whether anything is actually extracted. Boulder County argued that the “actual production rule” should apply, which holds that an operator must extract minerals from the ground to call a well “producing” and hold a lease in effect.

The Colorado Supreme Court grants certiorari review on a very small percentage of the petitions it received. On January 10, 2020, the court announced that it will hold proceedings on “whether the Court of Appeals erred in adopting and applying the ‘commercial discovery rule’ in interpreting oil and gas leases.”

“This is an important case because the court of appeals adopted what we believe is a minority, disfavored rule that allows operators to keep a lease in effect and avoid the expense of shutting it down. The minority rule allows operators to take advantage of mineral owners like Boulder County,” said Commissioner Levy. “We are hopeful the higher court will see this is bad policy for Colorado.”

“The fact that we’ve taken this case all the way to the Colorado Supreme Court shows our determination to fight as hard as possible to protect people and their rights in oil and gas issues,” said Commissioner Matt Jones. “These are important issues that should be heard at the highest level.”

“We are optimistic that the Supreme Court will determine that the leases are expired. This will mean that the rights to the minerals, which we purchased along with open space lands, will revert back to Boulder County, and we will have helped to create legal precedent helpful to mineral owners around the state,” said Commissioner Marta Loachamin.

Boulder County will be filing its opening brief to the Colorado Supreme Court in February.