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Extraction to Boulder County: Lease your mineral rights or face forced pooling

BOULDER — Extraction Oil & Gas Inc. has given Boulder County officials an ultimatum: Lease the company government owned mineral rights on county land just over the border from an Extraction well pad in Weld County, or participate in “forced pooling,” which would essentially make Boulder County a partner in the drilling operation, responsible for costs associated with the well and eligible to share in its eventual proceeds.

The oil company laid out these options for the county in a July 5 letter. A few days later, Extraction filed a forced pooling application with the Colorado Oil and Gas Conservation Commission, which has yet to issue a ruling.

“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,” the letter said.

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 COGCC, 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.

“Boulder County believes it has strong arguments against forced pooling, but the outcome of a COGCC proceeding is not certain,” the county said.

Boulder County officials have long met attempts to drill within the county’s borders or lease its mineral rights with hostility. 

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.

A public hearing on the matter will be held today at 7 p.m. during a meeting of the Boulder County Parks & Open Space Advisory Committee. That committee will provide a recommended course of action to the Boulder County Board of Commissioners, which will hold its own hearing on Nov. 1.

Source: BizWest

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