Boulder, Weld Differ Greatly with Intents for Respective Mineral Ownerships

November 17, 2018

A well site along Weld County Road 20.5, east of East County Line Road, on Friday.

Boulder County oil and gas royalty revenues

2018 (to date): $224,103

2017: $413,123

2016: $247,869

2015: $255,172

2014: $631,715

Weld County oil and gas royalty revenues

2018 (year to date): $10,259,014

2017: $21,860,836

2016: $9,494,851

2015: $11,330,119

2014: $31,503,068

Source: The counties

Both Boulder and Weld counties own a substantial amount of mineral rights, but how they are viewed and used by the respective local governments couldn’t be more different.

Boulder County sees its mineral rights — and the initiative to acquire more with new land purchases — as protective measures against new oil and gas drilling projects by private companies, despite receiving more than $1.7 million over the past five years in royalties from drilling operators harvesting the county’s hydrocarbons.

That revenue, which doesn’t include taxes on oil and gas production and sales, is used by Boulder County’s Parks and Open Space Department to manage its agricultural properties. It isn’t the money, however, the county is after when looking to add to its mineral ownership.

But the strategy of gaining mineral rights with land can beineffective at safeguarding against new drilling.

“Whenever possible, the county purchases the mineral rights attached to lands it buys for open space or where it purchases a conservation easement. Sometimes the seller is not willing to sell those rights and sometimes the county purchases them already subject to leases for extraction,” Boulder County Chief Planner Kim Sanchez said.

Weld County leaders have traditionally been more welcoming toward oil and gas extraction.

The surface land above the minerals owned by Boulder and Weld counties also fall under separate categories respective to the local governments.

While the minerals owned by Weld County rest beneath privately owned land, Boulder County’s are almost exclusively beneath publicly owned open space, which Boulder County officials continue fighting vigorously to defend from new oil and gas drilling, most recently by filing three separate lawsuits aiming to stop two large-scale, multi-well horizontal drilling projects.

Buying mineral rights not associated with county-owned property or land with county conservation easements hasn’t been considered by Boulder County, because of the potential for other mineral owners to “force pool” the below-ground riches into drilling projects when they own a certain percentage of the minerals in a defined drilling area.

“An effort to purchase mineral rights under land that the county doesn’t own as open space has not been part of our strategy and wouldn’t be as long as there is no clarity that minerals couldn’t be forcibly pooled and developed anyway,” Sanchez said.

″ Because of the threat of forced pooling, it is not clear that buying the mineral rights is an effective way to protect the lands or the health and safety of residents.”

Impacts outweigh royalties

In one of its suits against drilling operator 8 North, Boulder County alleges the company hasn’t sufficiently proved it owns enough minerals within the 4,000 acres it plans to drain, and the county’s minerals would be wrongly effected if the project is approved — despite that the county would likely never develop such minerals.

“The potential impacts of oil and gas drilling on our air, water, lands, climate and public health far outweigh any financial royalties,” Boulder County Commissioner Elise Jones said in a statement. “Our top responsibility as commissioners is to protect the health, safety and welfare of our residents and to safeguard the environment. These values are priceless to our constituents and future generations, and impossible to put a price tag on.”

Crestone Peak Resources — which Boulder County has also sued in hopes of stopping its pending project — plans to drill 140 wells to drain 10 square miles along Colo. 52 north of Erie.

The project would bring an average of $15.6 million in tax revenue to Boulder County, St. Vrain Valley School District and three other special taxing districts combined, totaling $391.1 million over the project’s productive life of 25 years, figures shared by Crestone spokesman Jason Oates show.

Those revenues do not include what Boulder County would draw from royalties for the harvest of oil and gas it claims it owns in the drilling area, which are unknown by the county for that project as well as 8 North’s.

“Given that the county hasn’t seen development using modern, horizontal drilling and fracking techniques or in the current market conditions, it is hard to estimate what revenues might be. However, to fully answer this question one needs also to consider the costs,” Sanchez said.

‘All Colorado counties benefit’

Active wells exist on 11,228 acres of the 28,728 total acres of Boulder County open space in the oil-and-gas-rich eastern part of the county, and the few parcels it owns in Weld and Broomfield counties, according to data compiled by Boulder County earlier this year. Boulder County owns all of the mineral rights on 13,839 acres of all that land, and at least some percentage of the minerals on 6,631 acres, versus the 8,025 acres for which it owns no mineral rights and the majority of which hold active wells.

The approximately 40,000 mineral acres Weld County owns were gained by the government during the Great Depression when property owners failed to keep up on their property tax payments, and the county retained those rights when it sold the surface lands during the recovery from the economic crisis, Weld Director of Finance Don Warden said.

In the last five years, royalties paid to Weld by extraction companies for its share of the oil and gas harvested from beneath those properties totals $84.4 million, according to Warden. That doesn’t even include the taxes levied on the production and sale of the energy sources.

“All Colorado counties benefit financially from oil and natural gas production, whether that’s local ad valorem tax revenue, money from special districts, education funding or distributions from state severance taxes. That goes for Boulder County just the same,” Colorado Oil and Gas Association President Dan Haley said.

All that revenue goes into Weld’s road and bridges fund, Warden said, to mitigate the impacts of energy development on the county’s transportation infrastructure, Warden said.

“Obviously, the county commissioners and many members of the public in Weld County have a different attitude toward energy development than the commissioners in Boulder County,” Warden said.

Sam Lounsberry: 303-473-1322, slounsberry@prairiemountainmedia.com and twitter.com/samlounz .

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