BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PAYMENT OF PROCEEDS FROM THE PRODUCTION OF OIL AND GAS AS ESTABLISHED BY SECTION 34-60-118.5, C.R.S., BUSCADERO FIELD, KIOWA COUNTY, COLORADO |
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CAUSE NO. 1
DOCKET NO. 170300100
TYPE: GENERAL ADMINISTRATIVE
ORDER NO. 1-203 |
REPORT OF THE COMMISSION
The Commission heard this matter on December 11, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon applications pursuant to §34-60-118.5, C.R.S, by Janet Schiel, Linda Tallman, and Marla Hindes (“Payees” or “Applicants”), pro se, for an order to award payment of proceeds and interest due from Trinity Bay Oil and Gas, Inc. (Operator No. 10367) (“Trinity” or “Payer”) for production attributable to the Tallman #23-2 Well (API No. 05-061-06220) (“Well”), from the Mississippian Formation in the Buscadero Field, Kiowa County.
The Commission finds as follows:
1. The Applicants are interested parties in the subject matter of the above-referenced hearing.
2. Trinity is an interested party in the subject matter of the above referenced hearing.
3. Due notice of time, place, and purpose of the hearing has been given in all respects are required by law.
4. The Commission has jurisdiction over the subject matter embraced in said matter and the parties interested therein, and has authority to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act (“Act”).
PROCEDURAL HISTORY
1. On October 26, 2016, Applicants mailed, via certified mail, three Commission Form 37s, Payment of Proceeds – Sales Volume Reconciliation Payor Contact Form, to Trinity requesting payment for the Applicants royalty interests for the months of December 2014, February 2015, April 2015, June 2015, and September 2015.
2. Trinity did not make payment or otherwise respond.
3. On December 30, 2016, Applicants each filed Form 38s, Payment of Proceedings Hearing Request for an order to award payment of proceeds and interest due from Trinity for production attributable to the Well, and to award relief for all associated costs and attorney's fees due to Payees attributable to the payment due from Trinity.
4. At the request of the Applicants, this matter was continued on multiple occasions.
5. Trinity never appeared in this matter or otherwise defended.
APPLICABLE LAW
6. Section 34-60-118.5 of the Act provides the legal requirements for the Commission to enter an order directing an operator make payment for interests in a well.
7. Subsection 5.5 of § 34-60-118.5 provides that before hearing the merits, the Commission must first determine whether a bona fide dispute exists regarding the interpretation of a contract defining the rights and obligations of the payer and payee. If the Commission finds such a dispute exists, it must decline to hear the matter.
8. “This statute makes clear that the Commission can order a payment be made only to one who is ‘legally entitled’ to payment.” Grynberg v. Colorado Oil & Gas Conservation Comm'n, 7 P.3d 1060, 1063 (Colo. App. 1999). “Section 34-60-118.5 does not create an entitlement to proceeds; it presumes the existence of such an entitlement and imposes deadlines for the payment to those legally entitled to receive payment. The statute demonstrates the General Assembly's intent to grant to the Commission jurisdiction only over actions for the timely payment of proceeds and not over disputes with respect to the legal entitlement to proceeds under the terms of a specific royalty agreement.” Id. at 1062.
9. Absent such a dispute, the Commission has jurisdiction under Subsection 5 to determine: 1) the date upon which proceeds are due to a payee; 2) whether a delay in payment was justified for reasons set forth in the statute; and 3) the amount of proceeds, plus interest, due to the payee. §34-60-118.5(5), C.R.S.
10. Subsection 3 provides that compliance with payment deadlines must be suspended when payments are withheld because: 1) the payee failed to confirm their interest; 2) the payer had reasonable doubt as to the payee’s identity, location, or title; or 3) the payer and payee were parties to ligation regarding payment. §34-60-118.5(3), C.R.S.
11. Subsection 7 requires that a payee must first give the operator written notice by certified mail of such failure to pay and the operator is allowed twenty days after receipt of the required notice in which to pay or respond in writing explaining the reason or nonpayment. §34-60-118.5(7), C.R.S.
12. Subsection 2 provides that, for the sale of oil, payments must be made to interest owners no later than sixty days following the end of the calendar month in which production is sold. §34-60-118.5(2), C.R.S.
13. Subsection 4 provides the operator must pay the interest holder “simple interest” on the amount of proceeds withheld, as the rate set forth in Subsection 4. §34-60-118.5(4), C.R.S.
14. Under Subsection 6, the Commission has discretion to assign the administrative costs of this proceeding to any party and in any proportion the Commission deems appropriate. The Commission also has discretion to award reasonable attorney fees and costs to the prevailing party. §34-60-118.5(6), C.R.S.
HEARING
15. This matter was heard by the Commission at its December 11, 2017 meeting.
16. Applicants appeared pro se at the hearing.
17. Trinity did not appear at the hearing.
18. The Commission reviewed documents submitted by the Applicants in advance of hearing.
19. The Commission also reviewed documents submitted by the Applicants at hearing further evidencing ownership of interests.
20. As the Applicants were not represented by counsel, the Hearing Officer aided Applicants in calculating the amount alleged to be owed by Trinity for Applicant’s interests. The Applicants stated at the hearing that they agreed with the calculation for the amount owed by Trinity.
21. The Commission questioned Applicants as to whether they were only requesting an order for payment from Trinity, and not the current operator of the Well. Applicants confirmed they were only requesting payment from Trinity.
22. Applicants were not represented at the hearing, and did not request the Commission award attorney fees or costs.
COMMISSION CONCLUSIONS
1. There is no dispute regarding the interpretation of a contract presented in this matter. There is also no indication that a delay in payment is justified pursuant to Subsection 3.
2. Applicants properly provided Trinity with written notice of the failure to make payment for their interests pursuant to Subsection 7.
3. Trinity was the operator of the Well for the months which Applicants allege they were not paid for their interests.
4. Trinity failed to make payment to Applicants for their interests for the months of December 2014, February 2015, April 2015, June 2015, and September 2015.
5. The Applicants have interests in the Well which entitle them to payment. Each of the Applicants owns a 0.041666 royalty interest in production from the Well.
6. The calculations made in Bates pages 00030-31 properly calculate the amount due to each of the Applicants pursuant to the Act, including interest as provided for in the Act.
ORDER
IT IS HEREBY ORDERED:
1. The Applications are GRANTED.
2. Trinity shall make payment to Applicant Janet Schiel in the amount of $1,932.29.
3. Trinity shall make payment to Applicant Linda Tallman in the amount of $1,932.29.
4. Trinity shall make payment to Applicant Marla Hindes in the amount of $1,932.29.
5. Interest on the amounts due to Applicants shall continue to accrue at the rate provided for in §34-60-118.5(4), or in accordance with any other applicable statute for postjudgment interest, whichever is appropriate.
IT IS FURTHER ORDERED
1. The provisions contained in the above order shall become effective immediately.
2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
3. Under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.
4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this day of 10th January, 2018, as of December 11, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By_______________________________________
Julie Spence Prine, Secretary