COLORADO OIL AND GAS CONSERVATION COMMISSION

1120 Lincoln Street, #801

     Denver, CO 80203

 

                                                                                                                                                       

        APPLICATION FOR INVOLUNTARY POOLING

       (COLORADO REVISED STATUTES 34-60-116

                                                                                                                                                       

APPLICANTS:       

 

Richard Watson and Theresa Watson 

26818 Highway 160

Durango, CO 81303

 

By

R. Nicholas Palmer

P.O. Box 2167

Durango, CO 81302

970 385-9000

Attorney for Applicants                                                   

 

 

OPERATORS:   

 

EnerVest San Juan Operating, LLC

3473 Main Avenue, #23

Durango, CO 81301

 

Texaco Exploration & Production Co., Inc.

4601 DTC Boulevard

Denver, CO 80237

 

                                                     Property Involved

 

Township 34 North, Range 9 West, Section 9: E/2

Parcel No. 1 of Loma Vista Homes, La Plata County, Colorado according to the amended Plat thereof filed for record under Reception No. 386853 on August 27, 1974.

26818 Highway 160

Durango, Colorado 81303

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I.  FACTS:

 


1.  Applicants, Richard and Theresa Watson, are the owners of mineral interests underlying four acres more or less of real property in La Plata County, Colorado which has been included since 1992 in the acreage for a drilling unit and oil and gas well called University 9-1 which was operated by EnerVest San Juan Operating, LLC (“EnerVest”) through at least October of 2000 and has been operated since that time by Texaco and then Chevron.  The latter completed an additional well for this drilling unit in 2002 called the University 9-2.

 

Applicants believe there are other owners of mineral interests within the drilling unit whose addresses are unknown to them except for the adjoining property owners, John Clancy and Judy Campbell, 26822 Highway 160, Durango, CO 81301.

 

2.  In the past Applicants have been offered operating agreements and mineral lease agreements for the subject mineral interests and have not entered into any such agreements for the University 9-1.  No agreement has been offered to Applicants for the University 9-2.

 

3.  Applicants have been told by EnerVest that it would make no payments to Applicants on account of their mineral interests because: (a) an owner is not entitled to revenues from the well until the acreage involved is pooled, (b) EnerVest did not have to pool the mineral interests acreage, this was the responsibility of the mineral interest owners (c) the mineral interest owners would not be entitled to any part of the revenues for the period prior to such pooling because all of the revenue prior to a pooling order belonged to the operators.

 

4.  Applicants believe that there is currently in excess of $20,000 possessed and taken by EnerVest on account of Applicants mineral interests in the University 9-1 well from the period commencing with the first production through December 31, 2000.  No part of this amount has been paid to Applicant by EnerVest who has taken and converted it to its own use and exercised full ownership over said sums on the ground this money belongs solely to it will not be paid to Applicants even after involuntary pooling has been ordered by this Commission.

 

5.  At no time since 1992 has any operator of the University 9-1 well and EnerVest applied to this Commission for involuntary pooling or offered any voluntary pooling agreement to Applicants.

 

II.  RELIEF REQUESTED

 

Applicants request an Order of the Commission against EnerVest as follows:

 

6. that the acreage and mineral interests which have been included in drilling unit for University 9-1 since 1993 be pooled;

 

7. that the pooling be effective as of the 1993 date the well was completed;

 

8. that Applicants be paid the money attributable to their mineral interests from the time of the completion of the University 9-1 in 1993 to the present.


9. that the pooling order contain a list of all of the mineral interests of each owner in the pooled unit and their percentage interest in the 100% of the total mineral interests in the pool.

 

III.  LEGAL AND FACTUAL GROUNDS FOR THE REQUESTED RELIEF

 

10.  EnerVest has failed to apply to this Commission to obtain a pooling order for the acreage and mineral interests involved.  Neither have any pooling agreements been offered to mineral interest owners by Enervest which refuses to make any payments to the owners of the mineral interests in the acreage designated for the University 9-1 without a pooling order from this Commission.

 

11.  The pooling order and the Applicants proportionate 12% royalty and their proportionate 8/8 interest after recoupment of all costs, including the 200% nonconsenting owner items, should be effective as of the 1993 date of well completion on the grounds: (a) it is required by law, (b) it would be both a denial of due process and an unconstitutional taking of property for EnerVest to gain ownership of royalty and production money accrued since the time of production which rightfully belongs to the owners of the mineral interests.

 

12.  The law requires an effective date for the pooling as of the completion of the well in 1993 because:

 

(a)  the unit being pooled has been defined since 1992 and was defined before the University 9-1 well was drilled;

 

(b)  CRS 34-60-116(6) provides:

 

"Each such pooling order shall be made after notice and hearing and shall be upon terms and conditions that are just and reasonable, and that afford to the owner of each tract or interest in the drilling unit the opportunity to recover or receive, without unnecessary expense, his just and equitable share." (Emphasis added)

 

(c)  CRS 34-60-116(7)(c) provides:

 

"A nonconsenting owner of a tract in a drilling unit which is not subject to any lease or other contract for the development thereof for oil and gas shall be deemed to have a landowner's proportionate royalty of twelve and one half percent until such time as the consenting owners recover, only out of the nonconsenting owner's proportionate seven-eighths share of production, the costs specified in paragraph (b) of this subsection (7). After recovery of such costs, the nonconsenting owner shall then own his proportionate eight-eighths share of the well, surface facilities, and production and then be liable for further costs as if he had originally agreed to drilling of the well. (Emphasis added)

 

 

 


13.  Giving an operator like EnerVest the ownership of all revenues up to the date of a pooling order would manifestly deprive Applicant and other owners in the pooled drilling unit of their "just and equitable share".  There is no basis in justice or equity for EnerVest to claim all revenues up to the time a pooling order is entered; there is no basis in justice or equity for an operator to claim more than recoupment of costs, including the 200% nonconsenting owner items, and whatever proportionate share the operator may have in the working interests.  The law unequivocally provides that owners such as Applicant are deemed to have a 12 1/2% royalty from production until recoupment of costs, including the 200% nonconsenting owner items, and that they are then owners of their proportionate 8-8ths share of the well, surface facilities and production.

 

14.  Giving an operator like EnerVest the ownership of all revenues up to the date of a pooling order would constitute a denial of due process to Applicant and an unconstitutional taking of his property.

 

15.  There is no basis in the law or regulations or in equity and it would be bad public policy to reward a knowledgeable oil and gas operator who creates a drilling unit and successfully drills a well and then deliberately refuses to make application for involuntary pooling by awarding it the money rightfully due to the owners of the mineral interests accruing prior to a pooling order that had to be obtained by one of the mineral interest owners.  Such an award would constitute a denial of due process and an unconstitutional taking of property because there is no basis in the law or regulations which would lead a reasonable mineral interest owner to believe there was any risk to their share of production and their royalties during the period prior to a pooling order.  If pre pooling revenues accruing to the account of mineral owners are to belong to or be forfeited to the operator the law or the regulations should be amended to spell this out so in the future such owners would be able to protect themselves by filing applications for involuntary pooling prior to production going on line if the operator has not already done so.  It would be manifestly unjust to apply such a rule in the pooling sought in this Application where there has been no such notice.

 

Dated: December 20, 2002              

           Respectfully submitted,

 

 

                                                                                               ______________________

R. Nicholas Palmer

P.O. Box 2167

                                                                                                Durango, CO 81302

970 385-9000

 

Attorney for Applicants

 

 

 

 

 


VERIFICATION

 

STATE OF COLORADO )

COUNTY OF LA PLATA)    ss

 

 

Theresa Watson, under penalty of perjury, states that she is an Applicant and has read the contents of the foregoing Application and that the matters stated therein are true of her own knowledge.

 

______________________

Theresa Watson

 

 

SUBSCRIBED AND SWORN to before me this      day of December, 2002 by Theresa Watson

 

______________________

Notary Public

 

My commission Expires:

 

 

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CERTIFICATE OF SERVICE

 

 

I hereby certify that the foregoing Application was deposited in the U.S. mail, first class postage prepaid, on December          , 2002 at Durango, Colorado addressed to:

 

Enervest San Juan Operating LLC #23

3473 Main Avenue

Durango, CO   81301

 

 

John Clancy and Judy Campbell

26822 Highway 160

Durango, CO 81301.

 

 

Texaco Exploration & Production Co. ,Inc.

4601 DTC Boulevard

Denver, CO   80203

                              

 R. Nicholas Palmer