Transcript Common Title Challenges (& Helpful Tips) in the DJ Basin

Common Title Challenges
in the DJ Basin
Jessy Pink & Anna Cavaleri
July 15, 2013
Common Title Challenges
in the DJ Basin
• Title to Minerals Underlying Roadways
“The following is based on actual events. Only the names, locations and
events have been changed.” Anchorman: The Legend of Ron Burgundy (2004)
2
Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Helpful Tip No. 1:
– There is a greater value in combining the
identification and the resolution of problems than
in issue-spotting alone
“You’re so wise. You’re like a miniature Budha, covered in hair.”
3
Common Title Challenges (& Helpful
Tips) in the DJ Basin
1972: Four successful TV personalities from San Diego,
California purchase a single Section of land (with the oil, gas &
minerals) in a risky oil and gas play northeast of Denver,
Colorado.
4
Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Five time Emmy-award winning
anchor, Ron Burgundy (he was
kind of a big deal): W/2NW/4,
NW/4SW/4
Brian
Ron
• Brian Fantana, reporter in the
field: NE/4NW/4, W/2NE/4
Champ
• Champ Kind, Sports: E/2NE/4,
N/2SE/4
• Brick Tamland, Weather:
SE/4NW/4, NE/4SW/4, S/2S/2
Brick
5
Title to Minerals Underlying Roadways
• Who Owns the minerals under highways,
streets and/or alleyways?
• It depends on the language of the conveyance
creating the roadway and subsequent
conveyances thereof, as well as conveyances
of lands adjacent to the roadway.
6
Who Owns the Road?
• Brick Tamland conveys a “strip of ground” to Weld County for “road rightof-way purposes”
• Baxter Energy, Inc. acquires an Oil & Gas Lease from Brick and drills a well
spaced entirely on Brick’s property and pays Brick all of the royalties
attributable to production from the well
• A representative of Weld County calls Baxter Energy, Inc. and claims that
the County is entitled to royalties attributable to production under the
roadway across Brick’s land
• Who owns the minerals under the road?
7
Who Owns the Road?
• A conveyance of an estate in land is presumed
to be fee simple unless expressly limited. C.R.S.
38-30-107.
• However, the presumption can be overcome.
Board of County Commissioners of Logan County v. Morris,
362 P.2d 202 (Colo. 1961).
– In this case, the use of the words “strips of
ground,” for “right-of-way” purposes led the court
to conclude that only an easement, not a fee
mineral interest was granted.
8
Who Owns the Road?
• Weld County owns only
an easement covering
the strip of ground on
Brick’s land and is not
entitled to any of the
proceeds of production
from the well on Brick’s
land.
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Helpful Tip No. 2:
– When you encounter a title issue, review the
ownership AND the comment/requirements in the
most recent Title Opinion covering the Subject
Lands
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
“Well, I could be wrong, but I believe diversity is an old, old
wooden ship that was used during the Civil War era.”
11
Who Owns the Road?
• By Warranty Deed, Brian Fantana conveys a “strip of land” to Weld County
for “road use”
• Baxter Energy, Inc. acquires an Oil & Gas Lease from Brian and drills a well
spaced entirely on Brian’s property. Accordingly, Baxter Energy Inc. pays
Brian all of the royalties attributable to production from the well.
• A representative of Weld County calls Baxter Energy, Inc. claiming that the
County is entitled to the royalties attributable to production under the
road across Brian’s land.
• Who owns the minerals under the road?
12
Who Owns the Road?
• The Colorado Court of Appeals determined
that a fee interest to the surface and minerals
was conveyed when the instrument was titled
a “warranty deed,” the property conveyed was
described as “land” rather than “ground” and
the deed did not contain the words “right-ofway.” Farmers Reservoir & Irrigation Co. v. Sun Production
Co., 721 P.2d 1198 (Colo. Ct. App. 1986).
13
Who Owns the Road?
• Weld County is entitled
to proceeds of
production attributable
to the minerals under
the road.
• Weld County gets fee
title, including minerals,
to the “strip of land.”
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Roadways Dedicated by Plat
• Ron Burgundy owns the W/2NW/4 and
NW/4SW/4 in our subject Section X, Weld County
and decides to subdivide the W/2NW/4, annex it
into the adjacent municipality, Pleasure Town,
and sell individual lots.
• He has a surveyor create a plat of the land he
wants to subdivide and sell.
• He has not sold any of the individual lots yet, but
files the subdivision plat in the county records.
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Burgundy Estates Subdivision Plat
• “All streets,
roadways and
alleys are
dedicated to
the public.”
T3N, R65W, Sec. X: W/2NW/4
Lot 1
Scotchy Scotch Dr.
WCR 53
Burgundy Estates
Lot 2
RON
NW/4SW/4 – outside of
Burgundy Estates
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Who Owns the Roadways in Burgundy
Estates?
• Baxter Energy, Inc. drills a
well spaced entirely on Lots
1 and 2.
• Ron has not yet conveyed
the individual lots, so Baxter
Energy, Inc. pays Ron all
royalties attributable to the
well.
• Pleasure Town claims that it
is entitled to royalties
attributable to production
from that portion of the
minerals underlying Scotchy
Scotch Drive.
T3N, R65W, Sec. X: W/2NW/4
Lot 1
Scotchy Scotch Dr.
WCR 53
Burgundy Estates
Lot 2
RON
NW/4SW/4 – outside of
Burgundy Estates
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Roadways Dedicated by Plat
• C.R.S. § 31-23-107, “All streets, parks and
other places designated or described as for
public use on the map or plat of any city or
town or of any addition made to such city
or town are public property and the fee
title thereto vested in such city or town.”
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Helpful Tip No. 3:
– Note: C.R.S. § 31-23-107 applies to roadways
dedicated to a municipality
“Discovered by the Germans in 1904, they named it
San Diego …”
19
Statutory Dedication
• Under the statutory dedication process, land
dedicated by a developer to a municipality
does not vest the municipality with anything
other than use of the surface for the purpose
specified in the plat. See City of Leadville V. Bohn Min.
Co., 37 Colo 248 (1906) and City of Greenwood Village v. Boyd,
624 P.2d 362 (1981).
20
Who Owns the Road?
• Pleasure Town acquired fee title to the surface
only of Scotchy Scotch Dr.
• Ron Burgundy is entitled to all of the proceeds
of production from the well spaced on Lots 1
and 2.
“I love scotch. Scotchy scotch scotch.”
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Burgundy Estates Amended
Subdivision Plat
T3N, R65W, Sec. X: W/2NW/4
• Ron decides to further
subdivide Lot 2 and files
an amended subdivision
plat.
• The amended plat again
provides that “All
streets, roadways and
alleys are dedicated to
the public.”
• This time the plat states
that “All minerals are
hereby reserved.”
Burgundy Estates
Lot 1
Scotchy Scotch Dr.
WCR 53
Lot 2A
Lot 2B
RON
NW/4SW/4 – outside of
Burgundy Estates
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Who Owns the Minerals?
• Ron Burgundy conveys Lot 2B to Veronica Corningstone
without reservation.
– BUT, The conveyance provides that it is subject to prior
T3N, R65W, Sec. X: W/2NW/4
reservations.
– Ron retains ownership of Lot 1 and Lot 2A.
– Who should receive proceeds of production
from Lot 2B?
Burgundy Estates
Lot 1
Ron
Scotchy Scotch Dr.
WCR 53
Lot 2A
Lot 2B
Veronica
RON
NW/4SW/4 – outside of
Burgundy Estates
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Who Owns the Minerals Under Lot 2B?
• Veronica Corningstone owns
the minerals under Lot 2B and is
entitled to proceeds from Lot 2B.
“Subject to prior reservations”
does not reserve the minerals owned by the Grantor. This
language is only effective to limit the warranty of the estate
conveyed.
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Who Owns the minerals Under Scotchy
Scotch Drive?
T3N, R65W, Sec. X: W/2NW/4
• They Share!
• Ron: Lot 1 to the centerline of
Scotchy Scotch Dr. and Lot 2A to
the centerline of Scotchy Scotch
Dr.
• Veronica: Lot 2B to the centerline
of Scotchy Scotch Dr.
Burgundy Estates
Lot 1
Ron
Scotchy Scotch Dr.
WCR 53
Lot 2A
Lot 2B
Veronica
RON
NW/4SW/4 – outside of
Burgundy Estates
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Conveyances Described as Bounded by
a Road
• Ron conveys the NW/4SW/4
to Champ. In the conveyance,
the parcel is described by
metes and bounds and as
being bounded on the West by
Weld County Road 53.
• “Beginning at a point 33 feet
East of the West ¼ corner of
Section X, thence North along
the East side of WCR 53…..
• Does Ron retain ownership of
the minerals under WCR 53?
T3N, R65W, Sec. X: W/2NW/4
Burgundy Estates
Lot 1
Ron
Scotchy Scotch Dr.
WCR 53
Lot 2A
Lot 2B
Veronica
CHAMP
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Conveyances Described as Bounded by
a Road
• In the absence of an obvious intent to the
contrary, a conveyance of land described as
bounded by a road is interpreted as covering
the adjacent roadway to the centerline of such
road.
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Vacated Roadways
T3N, R65W, Sec. X: W/2NW/4
• Ron conveys Lot 2A to
Brick, reserving all oil, gas
and other minerals.
Burgundy Estates
Lot 1
Ron
Ron
• Ron retains title to the
minerals under Lot 2A as
well as under Scotchy
Scotch Dr.
Scotchy Scotch Dr.
WCR 53
LotBrick
2A
Lot 2B
Brick
• Scotchy Scotch Dr. is later
vacated.
Veronica
CHAMP
• Who owns Scotchy Scotch
Dr.?
28
Title to Vacated Roadways
•
Vacated roads vest in fee in the adjacent owners.
•
Title to not only the interest previously vested in the
municipality, but full fee title to the surface and the
minerals vests in the adjacent owners. Buell v. Sears,
Roebuck & Co., 321 F.2d 468 (1963).
•
Ron retains mineral ownership from Lot 1 to the centerline
of Scotchy Scotch Dr. and Brick acquires title to the surface
and the minerals from Lot 2A to the centerline of Scotchy
Scotch Dr.
•
In 2007, C.R.S. 43-2-302 authorized a county to provide
that title to a vacated roadway shall vest in parties who use
the vacated roadway, rather than
the adjoining
landowners.
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Helpful Tip No. 4:
– Note: If the road was vacated after September 1,
2007, the resolution of the board of county
commissioners approving the vacation should be
examined to determine the disposition of title.
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Pre-existing Pooling Agreements
“The following is based on actual events. Only the names, locations and
events have been changed.”
31
Pre-existing Pooling Agreements
• Five time Emmy-award winning
anchor, Ron Burgundy (he was
kind of a big deal): W/2NW/4,
NW/4SW/4
Brian
Ron
• Brian Fantana, reporter in the
field: NE/4NW/4, W/2NE/4
Champ
• Champ Kind, Sports: E/2NE/4,
N/2SE/4
• Brick Tamland, Weather:
SE/4NW/4, NE/4SW/4, S/2S/2
Brick
32
Common Title Challenges (& Helpful
Tips) in the DJ Basin
• Helpful Tip No. 5:
– Weld County’s EagleWeb/iCRIS database now
includes copies of all recorded documents from
January 1, 1865 to present
https://searchicris.co.weld.co.us/recorder/web/
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Pre-existing Pooling Agreements
•
1978:
– Corningstone Petroleum obtains Oil & Gas Leases from Brick and Champ, with standard
provisions, including pooling, and a five (5) year primary term
– Baxter Energy, Inc. obtains Oil & Gas Leases from Ron and Brian also with standard
provisions, including pooling, and a seven (7) year primary term
POOLING CLAUSE: Lessee may at any time or times pool any part or all of said land and
lease, or as to any stratum or strata, with other lands and leases in the same field so as to
constitute a spacing unit to facilitate an orderly or uniform well spacing pattern or to comply
with any order, rule or regulation of the State or Federal regulatory or conservation agency
having jurisdiction. Such pooling shall be accomplished or terminated by filing of record a
declaration of pooling or declaration of termination of pooling and by mailing or tendering a
copy to Lessor or to the depository bank. Drilling or reworking operations upon or
production from any part of such spacing unit shall be, for all purpose of
this lease, such operations or production from this lease. Lessee shall
allocate to this lease the proportionate share of production which the
acreage in this lease included in any such spacing unit bears to the total
acreage in such spacing unit. (emphasis added)
34
Pre-existing Pooling Agreements
• 1979:
– Corningstone Petroleum and
Baxter Energy, Inc. drill the
AnchorOne J Sand well in the
SW/4NE/4 spaced on the N/2
BRIAN
AnchorOne Well
RON
– Because ownership of the
mineral estate is not uniform
across the spacing unit,
Corningstone Petroleum and
Baxter Energy, Inc. place of
record the following
Declaration of Pooling in order
to pool production from the
separate leases
CHAMP
BRICK
35
DECLARATION OF POOLING
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, those certain Oil and Gas Leases described in Exhibit “A” attached hereto and
by this reference expressly made a part hereof, as originally written, or as heretofore amended,
provide that the Lessee shall have the right and privilege to consolidate the gas leasehold estate
into operating units, by executing in writing and recording in the conveyance records of the
county in which the land is situated an instrument identifying and describing the consolidated
acreage; and,
…do declare that such lands covered by said
Oil & Gas Leases are within the N/2 of
Section X, Township 3 North, Range 65 West,
6th P.M., County of Weld, State of Colorado,
and said Oil & Gas Leases insofar as they
cover the N/2 of said Section X, shall be and
the same are hereby unitized, consolidated,
combined and pooled so as to constitute a
drilling unit comprising the N/2 of Section X,
Township 3 North, Range 65 West, 6th P.M.,
County of Weld, State of Colorado, as to the
production of natural gas and associated
liquid hydrocarbons from the producing
horizon commonly referred to as the “J”
Sandstone formation underlying said lands.
WHEREAS, the undersigned, Corningstone Petroleum as Owner and Operator of the N/2 of
Section X, Township 3 North, Range 65 West, 6th P.M., County of Weld, State of Colorado, and
Baxter Energy, Inc., as an Owner, (hereinafter sometimes referred to as the “parties hereto”) are
the owners and holders of the “Oil & Gas Leases” described on said Exhibit “A” attached hereto
and by this reference expressly made a part hereof, insofar as they cover the lands herein
described;
NOW, THEREFORE, the parties hereto, in order to prevent waste of gas, as defined by law;
to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary
wells, and to insure proper and efficient development and promote conservation of the gas
resources of the State of Colorado, and pursuant to the terms of the Oil & Gas Leases, do declare
that such lands covered by said Oil & Gas Leases are within the N/2 of Section X, Township 3
North, Range 65 West, 6th P.M., County of Weld, State of Colorado, and said Oil & Gas Leases
insofar as they cover the N/2 of said Section X, shall be and the same are hereby unitized,
consolidated, combined and pooled so as to constitute a drilling unit comprising the N/2 of
Section X, Township 3 North, Range 65 West, 6th P.M., County of Weld, State of Colorado, as to
the production of natural gas and associated liquid hydrocarbons from the producing horizon
commonly referred to as the “J” Sandstone formation underlying said lands.
This Declaration of Pooling may be executed in any number of counterparts, each of which
shall be deemed an original instrument. All executed counterparts shall be construed together,
and shall constitute one agreement. The signature and acknowledgment pages may be executed
in counterpart and separate pages may be inserted for purposes of filing and recording.
This Declaration of Pooling is executed Effective March 1. 1979, on this 1st day of July,
1979.
Corningstone Petroleum
Veronica Corningstone
By: Veronica Corningstone, President
.
Baxter Energy, Inc.
Baxter M. L. Gentleman
By: Baxter M. L. Gentleman, President
36
EXHIBIT “A”
Attached to that certain Declaration of Pooling dated Effective March 1, 1979;
covering the North-Half (N/2), Section X, Township 3 North, Range 65 West, 6th
P.M., County of Weld, State of Colorado.
As to production of natural gas and associated liquid hydrocarbons produced from
the producing horizon commonly referred to as the “J” Sandstone formation
underlying said lands.
Lease One:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Two:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Three:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Four:
Lessor:
Lessee:
Date:
Recording:
Description:
Brick Tamland
Corningstone Petroleum
May 1, 1978
May 17, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: SE/4NW/4, NE/4SW/4, S/2S/2
As to production of natural gas and
associated liquid hydrocarbons produced
from the producing horizon commonly
referred to as the “J” Sandstone formation
underlying said lands.
Champ Kind
Corningstone Petroleum
May 5, 1978
May 17, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: E/2NE/4, N/2SE/4
Brian Fantana
Baxter Energy, Inc.
June 12, 1978
June 24, 1978 in Book 834 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: NE/4NW/4, W/2NE/4
Ron Burgundy
Baxter Energy, Inc.
June 2, 1978
June 24, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: W/2NW/4, NW/4SW/4
37
Pre-existing Pooling Agreements
• 1994:
– Corningstone Petroleum and
Baxter Energy, Inc. recomplete
the AnchorOne well in the
Codell/Niobrara formations
spaced on the NE/4
– Because ownership of the
mineral estate is not uniform
across the spacing unit,
Corningstone Petroleum and
Baxter Energy, Inc. place of
record the following
Declaration of Pooling in order
to pool production from the
separate leases
BRIAN
AnchorOne Well
RON
CHAMP
BRICK
38
DECLARATION OF POOLING
KNOW ALL PERSONS BY THESE PRESENTS:
1. Corningstone Petroleum and Baxter Energy, Inc. are the owners and holders
of the Oil and Gas Leases (“Leases”) set forth on Exhibit “A” attached hereto insofar as
the Leases cover and affect the NE/4 of Section X, Township 3 North, Range 65 West,
6th P.M., Weld County, Colorado.
Acting under and by virtue of the pooling
authority contained in the Leases, the
undersigned do hereby pool, combine and
designate the following lands (and the
mineral and royalty rights thereunder) as a
unit for the drilling and production of oil and
gas form the surface to the base of the Codell
and/or Niobrara formations.
2. The Leases contain provisions authorizing the Lessee to unitize or pool the
Leases and the lands covered thereby, in whole or in part, so as to create a unit or
pool as may be required to conform with applicable rules and orders of the Colorado
Oil and Gas Conservation Commission.
3. Acting under and by virtue of the pooling authority contained in the Leases,
the undersigned do hereby pool, combine and designate the following lands (and the
mineral and royalty rights thereunder) as a unit for the drilling and production of oil
and gas from the surface to the base of the Codell and/or Niobrara formations:
Township 3 North, Range 65 West, 6th P.M.
Section X: NE/4
Weld County, Colorado
IN WITNESS WHEREOF, this instrument is executed as of the 19th day of May,
1994, but shall be effective for all purposes as of the earliest date of first production
from the AnchorOne well located in the SW/4NE/4 of said Section X.
Corningstone Petroleum
Veronica Corningstone
.
By: Veronica Corningstone, President
Baxter Energy, Inc.
Baxter M. L. Gentleman
.
By: Baxter M. L. Gentleman, President
39
EXHIBIT “A”
Attached to that certain Declaration of Pooling dated May 19, 1994; covering the North-East
(NE/4), Section X, Township 3 North, Range 65 West, 6th P.M., County of Weld, State of
Colorado.
As to production of oil and gas produced from the producing horizon commonly referred to
as the Codell/Niobrara formations underlying said lands.
Lease One:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Two:
Lessor:
Lessee:
Date:
Recording:
Description:
As to production of oil and gas produced
from the producing horizon commonly
referred to as the Codell/Niobrara
formations underlying said lands.
Champ Kind
Corningstone Petroleum
May 5, 1978
May 17, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: E/2NE/4, N/2SE/4
Brian Fantana
Baxter Energy, Inc.
June 12, 1978
June 24, 1978 in Book 834 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: NE/4NW/4, W/2NE/4
40
Pre-existing Pooling Agreements
•
2008:
– Corningstone Petroleum and
Baxter Energy, Inc. drill the
ChannelFour well to the
Codell/Niobrara and J Sand
formations spaced pursuant to
COGCC Rule 318A(e) on the
W/2NE/4, E/2NW/4
BRIAN
ChannelFour Well
RON
– Because ownership of the
mineral estate is not uniform
across the spacing unit,
Corningstone Petroleum and
Baxter Energy, Inc. place of
record the following Declaration
of Pooling in order to pool
production from the separate
leases
CHAMP
BRICK
41
AnchorOne Well
ChannelFour Well
WELLBORE SPECIFIC DECLARATION OF POOLING
WHEREAS, the undersigned parties are the owners of the Oil and Gas Leases described in
Exhibit “A” attached hereto and made a part hereof, insofar as said Leases cover lands lying
within the unit herein below designated; and,
…Limited to the ChannelFour wellbore and
the Codell/Niobrara and “J” Sand
formations. Said declaration is not intended
to enlarge, reduce or otherwise affect any
existing units
WHEREAS, the provisions of each of said Leases as originally written, or as amended,
grant the Lessee the right and power to pool and combine the lands covered by each of said
Leases, or any portion or portions thereof, with other lands for the exploration and
development thereof and the production therefrom of oil, gas and other hydrocarbons
associated therewith;
NOW, THEREFORE, pursuant to the rights granted by law and under each of the Leases
described in Exhibit “A” attached hereto the undersigned parties hereby consolidate and pool
the following described lands into a single unit for the production of oil, gas and associated
hydrocarbons from the ChannelFour well, drilled under authority of Rule 318A(e), established
by the Colorado Oil and Gas Conservation Commission, and from the formations described
below, situated in Weld County, Colorado, to wit:
Township 3 North, Range 65 West, 6th P.M.
Section X: W/2NE/4, E/2NW/4
Limited to the ChannelFour wellbore and the Codell/Niobrara and “J” Sand formations. Said
declaration is not intended to enlarge, reduce or otherwise affect any existing units.
IN WITNESS WHEREOF, this Declaration of Pooling is executed as of this 3rd day of
October, 2008, but shall be effective for all purposes as of the date of first production of oil and
gas produced from the Pooled Unit. This agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes.
Corningstone Petroleum
Veronica Corningstone
.
By: Veronica Corningstone, President
Baxter Energy, Inc.
Baxter M. L. Gentleman
.
By: Baxter M. L. Gentleman, President
42
EXHIBIT “A”
Attached to and made a part of that certain Wellbore Specific Declaration of Pooling dated
October 8, 2008, covering the E/2NW/4 and W/2NE/4, Section X, Township 3 North, Range
65 West, 6th P.M., County of Weld, State of Colorado.
Lease One:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Two:
Lessor:
Lessee:
Date:
Recording:
Description:
Lease Three:
Lessor:
Lessee:
Date:
Recording:
Description:
Brick Tamland
Corningstone Petroleum
May 1, 1978
May 17, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: SE/4NW/4, NE/4SW/4, S/2S/2
Attached to and made a part of that certain
Wellbore Specific Declaration of Pooling
dated October 8, 2008, covering the
E/2NW/4 and W/2NE/4, Section X, Township
3 North, Range 65 West, 6th P.M., County of
Weld, State of Colorado.
Champ Kind
Corningstone Petroleum
May 5, 1978
May 17, 1978 in Book 833 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: E/2NE/4, N/2SE/4
Brian Fantana
Baxter Energy, Inc.
June 12, 1978
June 24, 1978 in Book 834 at Reception No. 1754xxx
Township 3 North, Range 65 West, 6th P.M.
Section X: NE/4NW/4, W/2NE/4
43
Pre-existing Pooling Agreements
2013
- Ron, Brick, Champ and Brian
discuss the royalties they
are receiving from the oil
and gas production on their
Colorado properties and
take a look at the three
“Declaration of Pooling”
Agreements filed of record
for the AnchorOne and
ChannelFour wells.
“Why are we yelling? Loud noises!!”
Brick Tamland
44
Pre-existing Pooling Agreements
AnchorOne Well:
Champ and Brian receive LORs from CD/NB
production
Ron, Brick, Champ and Brian receive LORs
from JSND production
BRIAN
BRIAN
AnchorOne Well
RON
AnchorOne Well
RON
CHAMP
BRICK
CHAMP
BRICK
45
Pre-existing Pooling Agreements
ChannelFour Well:
Brian Champ and Brick receive LORs from
JSND and CD/NB production
• Ron wants to know why he
isn’t receiving royalties from
the JSND production from the
ChannelFour well, since all
JSND production from the N/2
of Section X was pooled in
1979
• Champ believes he is entitled
to a greater royalty from the
ChannelFour well’s CD/NB and
JSND production on the basis
of all of his pooled acreage in
the NE/4 per the 1979 and
1994 pooling declarations
BRIAN
ChannelFour Well
RON
AnchorOne Well
CHAMP
BRICK
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Pooling Provision
POOLING CLAUSE: Lessee may at any time or times pool any part or all of said land and
lease, or as to any stratum or strata, with other lands and leases in the same field so as to
constitute a spacing unit to facilitate an orderly or uniform well spacing pattern or to comply
with any order, rule or regulation of the State or Federal regulatory or conservation agency
having jurisdiction. Such pooling shall be accomplished or terminated by filing of record a
declaration of pooling or declaration of termination of pooling and by mailing or tendering a
copy to Lessor or to the depository bank. Drilling or reworking operations upon or
production from any part of such spacing unit shall be, for all purpose of
this lease, such operations or production from this lease. Lessee shall
allocate to this lease the proportionate share of production which the
acreage in this lease included in any such spacing unit bears to the total
acreage in such spacing unit. (emphasis added)
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Pre-existing Pooling Agreements
AnchorOne Well:
Champ and Brian receive LORs from CD/NB
production
Ron, Brick, Champ and Brian receive LORs
from JSND production
318A(e)
Offset Well
BRIAN
AnchorOne Well
RON
Offset Well
BRIAN
RON Offset Well
CHAMP
BRICK
BRICK
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AnchorOne Well
CHAMP
REQUIREMENT No. 17: (Pre-Existing Pooling Instruments) Information set forth in the prior Title Opinions examined by the
undersigned indicate that numerous wells have been drilled on the Subject Lands, or on lands pooled therewith, and completed
in the Codell/Niobrara and “J” Sand formations. As to these existing wells, it is likely that the Codell/Niobrara formation has
been pooled on the basis of 80.00 +/- acre standup or laydown unit areas or 160 acre quarter/quarters and it is likely that the “J”
Sand formation has been pooled on the basis of 320.00 +/- acre standup or laydown unit areas. These wells were drilled and
likely pooled based on the then existing spacing unit areas established by the Colorado Oil and Gas Conservation Commission
under Rule 318A. As you are likely aware, Order No. 1R-100 of the Colorado Oil and Gas Conservation Commission amended
Rule 318A, the Greater Wattenberg Area Spacing and Unit Designation Rule, to allow new wells to be drilled to bottom hole
locations located less than four hundred sixty (460) feet from the governmental quarter-quarter section boundary, providing that
the production from such wells will be spaced on a wellbore basis (“wellbore spacing unit”) comprised of the four (4)
governmental quarter-quarter sections nearest to the wellbore regardless of section or quarter section lines. The result of this
well spacing rule is to create new “wellbore spacing units” which overlap one or more existing Codell/Niobrara and “J” Sand
spacing unit areas which were established under Commission Rule 318A and previously pooled under recorded documents.
Amended Spacing Rule 318A(e) standing alone is not sufficient to alter the contractual rights of royalty owners, overriding
royalty owners, and/or working interest owners under existing pooling agreements which entitle such parties to participate
in the proceeds of production attributed to any well located in the pooled area and completed in the pooled formation or
allocated to the pooled area. As a result, it is possible that any party owning a royalty, overriding royalty or working interest
in an existing pooled unit area, which has a portion of the pooled lands lying within the four governmental quarter-quarter
sections comprising the new spacing area established under Rule 318A(e) for the ChannelFour Well, may claim an interest in
the proceeds of production from such well based on their ownership interest in the existing pooling areas, portions of which
lie within the new 318A(e) spacing unit area. Notwithstanding this ownership issue, Operators drilling in the Greater
Wattenberg Area, including but not limited to Corningstone Petroleum and Baxter Energy, Inc. have agreed to take the business
risk of distributing the proceeds of production from all new 318A(e) wells based on the “wellbore spacing units” established by
such rule. Most pooling documents of record reference the applicable provisions of Commission Rule 318(A) and therefore
support for the assumption of this business risk is based in large part on the premises that the existing Codell/Niobrara and “J”
Sand spacing units were pooled pursuant to the original 318A well location rule and therefore limited by implication to those
wells drilled under such rule. At the direction of Corningstone Petroleum and Baxter Energy, Inc., the ownership interests are set
forth herein on the basis of the spacing unit area established for the ChannelFour Well under Commission Rule 318A(e).
Requirement: All pre-existing pooling documents of record covering lands lying within the 318A(e) spacing unit area established
for your ChannelFour Well should be amended to exclude any new wells drilled under new COGCC Rules. Alternatively, any
wellbore pooling instrument filed of record for the ChannelFour Well should contain language stating that the ChannelFour
wellbore and production attributed thereto, is specifically excluded from any pre-existing pooling declaration or instrument.
Recording the wellbore pooling declaration for the ChannelFour Well will not eliminate the possibility that under an existing
pooling agreement or document, a party owning a royalty, overriding royalty or working interest in the pooled area may claim to
own, and successfully establish, an ownership interest in a share of the production from the ChannelFour Well based on the
theory that a portion of their existing pooled unit lies within the ChannelFour Well wellbore spacing unit.
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Common Title Challenges (& Helpful
Tips) in the DJ Basin
Our Final Helpful Tip: Don’t despair…
Sometimes working in the DJ Basin can feel like a battle…
50
Common Title Challenges (& Helpful
Tips) in the DJ Basin
… but it can also be as much fun as shopping for new
suits!
… stay classy DADOA!
51
Common Title Challenges (& Helpful
Tips) in the DJ Basin
Jessy Pink: [email protected]
Anna Cavaleri: [email protected]
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