Colorado’s highest court to examine Boulder County, Crestone suit ruling

BOULDER COUNTY — The Colorado Supreme Court will weigh in on Boulder County’s ongoing efforts to keep oil and gas drilling activity out of the county.

This week, the state’s highest court issued a writ of certiorari to review the Colorado Court of Appeals ruling in its 2018 lawsuit that sought to block Crestone Peak Resources’ application to drill new well pads in Erie.

That suit was rejected a year later by a district court judge, a decision that was upheld by the Court of Appeals.

Boulder County, which holds mineral rights at the site, argued that leases at existing wells on the site should be considered invalid because production was stopped for about four months in 2014.

“A division of the court of appeals considers the meaning of ‘production’ as that term is used in oil and gas leases. The division holds that production means capable of producing oil or gas in commercial quantities. Applying this definition, the division concludes that two oil and gas leases never terminated because wells on the land subject to the leases never stopped producing,” according to the Court of Appeals decision issued in May 2021. “The division therefore affirms the district court’s judgment, granting summary judgment to the defendant.”

The lower courts applied the “commercial discovery rule” concept in this decision-making.

The Colorado Supreme Court will review “whether the court of appeals erred in adopting and applying the ‘commercial discovery rule’ in interpreting oil and gas leases,” according to its certiorari order. 

“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,” Boulder County Commissioner Claire Levy said in a prepared statement Tuesday. “We are hopeful the higher court will see this is bad policy for Colorado.” 

Boulder County has long fought to keep out oil and gas activity. 

A moratorium on drilling was put in place in 2012. It expired in 2017 and was reinstated in 2019 after the passage of SB-181, a law that allowed local governments more control over regulating drilling operations.

The same year, the Colorado Oil and Gas Conservation Commission decided to hold off on the final rulemaking process for SB-181 until Boulder County’s lawsuit against Crestone had been settled. 

In December, the Boulder City Council rescinded its oil and gas activity moratorium, versions of which had been in place since 2013, and adopted a new set of rules to regulate drilling and extraction activities.

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