Oil firm sues in drilling dispute

A Utah oil and natural-gas company has filed suit alleging it likely has lost “millions of dollars” after other companies illegally drilled wells in areas where it leased the mineral rights in north Weld County.

Corvax Oil and Gas Land Services alleges that several companies drilled six wells on land near Grover leased by the company, according to a lawsuit filed last month in Colorado federal court. Corvax is suing several smaller Colorado companies as well as publicly traded Continental Resources, based in Oklahoma City.

Defendants in the lawsuit, including representatives of Diamond Operating Inc. and Flatiron Energy Co., both of Boulder, and Callisto Energy LLC in Wheat Ridge, said they could not comment because they had not been served with the lawsuit. Other defendants, including representatives of VIS OP Oil in Sterling and Boulder Oil Co. in Louisville, did not return phone messages.

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Corvax, based in Salt Lake City, alleges that it owns the title to the property and oil and gas produced from the wells, its lawsuit says.

This isn’t the first dispute over the land.

An earlier dispute stemmed from whether the lease title, first owned by Don and Miles Gillette in 1951, had expired. The court ruled that the Gillettes owned the lease, which included a provision that it not expire unless a court approved.

“It cannot terminate on its own force,” Tom Kimmell, a Denver attorney representing Corvax, explained. “The only way to terminate it is to go into court, and get a determination by the court that the lease is no longer in effect.”

“That was never done,” Kimmell added. “To the contrary, the court determined that it was valid.”

The lease later changed hands, and Corvax took it over in April 2012.

The lawsuit also contends that Diamond Operating Inc. “destroyed” one of the wells. Dave Peterson, owner of Diamond Operating, did not return phone messages seeking comment.

Continental Resources most recently drilled two horizontal wells on the property.

Kimmell told Continental Resources it was trespassing before his client sued. However, Continental Resources “declined” to resolve the dispute, he said.

Before a company drills, it usually has a title opinion completed, and a company must re-lease any property already covered by an existing lease.

“I would expect that happened in this case,” Kimmell said. “Before any of these wells were drilled, all those drilling companies were aware of the existence of the prior lease, and they never obtained a lease.”

Exactly how much payment Corvax contends it should receive is unknown. The company has access to production figures, but revenue from the wells isn’t known yet.