Boulder County to consider Extraction lease offer, forced pooling threat in November

BOULDER — Boulder County officials will begin hearings on Nov. 1 regarding Extraction Oil & Gas Inc.’s attempt to lease mineral rights on county-owned land, as well as the potential for the oil company to compel the county to participate in “forced pooling,” which would essentially make Boulder County a partner in the drilling operation, responsible for costs associated with the well located just over the border in Weld County and eligible to share in its eventual proceeds.

Extraction issued the lease-or-forced-pooling ultimatum to Boulder County — which has historically resisted attempts by oil companies to drill within its boundaries — this summer.

Forced pooling is a process that allows operators to drill a well to access a pool of resources, often called a drilling unit, from under a parcel of land that has multiple owners with mineral rights.

It usually involves horizontal drilling, a technique that runs well pipes underground at a depth of 2,000 to 7,000 feet from one well to capture resources in a pool area that can be as large as 640 acres — the equivalent of one square mile, a more economical approach than drilling an area with multiple vertical wells.

Forced pooling has become much more common in recent years as the popularity of hydraulic fracturing, or fracking, has increased. 

Once mineral rights owners, who have the ability to appeal their situation to the Colorado Oil and Gas Conservation Commission, are forced into a pool, they receive a royalty of 100% of their mineral acreage/unit size of the oil from the unit only after 200% of the cost of the drilling has been recovered by the operating company.

“Please note that you may elect to either lease your mineral interest under the terms of the enclosed oil and gas lease or you may participate in the cost of drilling the well(s) as a working interest owner. You may not do both,” Extraction said to Boulder County in a forced pooling application filed this summer with the Colorado Oil and Gas Conservation Commission.

If the Boulder County commission declines the lease, which was recommended by the Boulder County Parks and Open Space Advisory Committee, the COGCC has a hearing on the issue scheduled for Jan. 25, 2023.

“The county has a long-time practice of not voluntarily leasing its mineral rights for development. However, considering the threat of forced pooling and the significant amounts of land, minerals, and money at stake in this situation, the county will complete a full public process before rendering a decision,” the commissioners said in a statement. 

In 2018, Boulder County unsuccessfully sued Extraction in an attempt to block it from moving forward with drilling at the Blue Paintbrush pad, which features 32 wells about 1,000 feet east of the Boulder County line.

Source: BizWest