Underground open space


Inconvenient truth alert.

It turns out that the Boulder County property owner with the most oil and gas wells on her land is none other than Boulder County.

There are 119 active oil and natural gas wells on Boulder County open space properties, and 191 additional ones on properties on which Boulder County holds conservation easements (properties on which Boulder County bought the development rights, but remain privately owned).

A majority of the 530 producing oil and gas wells in Boulder County are on county open space.

The wells are spread around too. The 119 wells are on 91 separate County-owned open space parcels; the 191 are on 73 conservation easements.

In all, 13,588 acres of County-owned open space and 8,624 acres of County-owned conservation easements sit above the Wattenberg Field, the 3,000-plus square mile oil field that extends from Weld County into eastern Boulder County.

Boulder County didn’t choose to be in the oil business. In some cases, it bought open space without getting the mineral rights, which were subsequently leased to an oil company. In others, it bought open space properties or conservation easements on which oil companies already held leases.

But that doesn’t change the fact that the County is in the oil business whether it likes it or not. And chances, are it’s not going to get out of it any time soon, much as it might want to.

That’s because the leases on county open space are “held by production,” which means the lease remains valid for as long as a well on the lease is producing oil or gas, even if it is a small amount.

Still, being in the oil business has its little compensations, even for reluctant participants.

The wells that are producing on open space where the County owns the mineral rights pay royalties to the County. The royalties usually come to 12.5 to 18 percent of the value of the oil and gas produced. These royalty payments peaked at $800,000 in 2012, the year the Commissioners started messing around with the unconstitutional use of moratoriums on new oil and gas well permits. It’s a lot less today, thanks to the collapse of oil prices and the absence of new wells.

When you’re in a business relationship, it’s not a good idea to keep picking fights with your partners, especially when A) they have the right to run the business pretty much as they choose, B) you can’t get out of the relationship, and C) sooner or later they may want to expand the business.

Thanks to the global collapse in oil prices, there hasn’t been much interest in drilling new wells in Boulder County. But the price is going back up and the cost of drilling new wells is going down. Sooner or later, the leaseholders are going to seek to drill and frack new wells on county open space.

When that happens, the County will be much more able to minimize the impacts both on the land and on adjoining properties if it has a cooperative relationship with the companies instead of a confrontational one. And if it has some skin in the game, as well.

If the County wants to prevent drilling on county land or oil and gas production under it, there is a simple, legal way of doing it: Buy the mineral rights and/or buy out the leases. Or cut a deal with the production company to locate facilities farther than the minimum required from a subdivision or a school or an environmentally vulnerable area.
Eastern Boulder County is not covered with subdivisions today because for the last 25 years the people of Boulder County have been taxing themselves to buy open space.
If it wants to stop oil and gas production on county lands, an obvious way to do it is to ask the voters to approve a sales tax for an underground open space program. Whether the voters would choose to pass it is another matter, but that is an obvious way to proceed.
However, there is a second way to fund such a program.
Currently the royalties the County receives from oil and gas produced on county land go into the general fund. These royalties are probably down to a couple hundred thousand dollars a year, if that. But if drilling revives and companies start drilling horizontal wells on county leases, those royalties could go up sharply, maybe to several million a year.
Instead of putting royalty revenues in the general fund, the County could put it in the open space fund and use them to acquire leases and mineral rights as they become available or to influence well site decisions — in other words, to create an underground open space program that uses revenues from oil and gas production to mitigate the impacts of oil and gas production.
This opinion column does not reflect the views of Boulder Weekly.