Mineral Rights in Colorado

Technological advancements have dramatically changed both the economic and political climates of American energy policy. In the 1990s, there was significant concern about U.S. energy policy because so much fuel was imported from the middle east. While the U.S. had much of its own supply, it was very reliant on OPEC oil. At the time, there was much discussion surrounding alternative sources of energy and efficient ways to harness that energy.

Over the last several years, there has been an explosion in both oil drilling and hydraulic fracturing, also known as fracking. Fracking uses water (hence “hydraulic”) to extract energy from dead plants and animals. This creates a product known as natural gas. Lately, more and more homes and businesses are switching to natural gas as their energy source. This has created a slowdown in the oil market and has increased overall interest in natural gas as a fuel.

Colorado sits atop the Niobrara shale, an area rich in resources. Located in Northeastern Colorado, energy companies continue to develop the Niobrara shale for its natural gas and oil. While much of its natural resources sit below 3,000 plus feet of rock, recent technological advancements make drilling there attractive. Plus, with technology that allows for the refracking of previously-drilled natural gas wells and directional digging for oil wells, hurdles that discouraged exploration in the past are no longer in play.

With this exciting time in energy exploration comes legal challenges with respect to real estate rights. Under Colorado law, a property can have both a land owner and a mineral owner. That is to say, purchasing a property in the Niobrara Shale does not necessarily grant the surface owner the right to dig; instead, one must determine whether purchasing the property provides the buyer with the mineral rights.

Surface Owner v. Mineral Owner Tension

With the huge shift toward drilling in Colorado, surface owners and mineral owners have butted heads. Surface owners purchased property that is their home or place of business. Often, surface owners have farms and ranches and raise cattle on property that contains mineral rights owned by someone else. Some time ago, those properties were quiet; now, mineral owners want to extract natural gas or oil from the properties while surface owners want to keep the status quo. This causes tension. Surface owners often object to placing a noisy digging machine on their property that disturbs their and their livestock’s peaceful way of life.

A key point in Colorado law regarding mineral rights is that the mineral rights take precedence over surface rights. This means that mineral rights owners have a legal right to enter and use the surface of a property that is reasonable and necessary to extract minerals. At the same time, the mineral owner also has a statutory duty to conduct operations in a manner that minimizes damage and intrusion onto the land. Often, these laws apply to oil and gas companies, who usually negotiate leases with mineral rights owners.

Own property in Colorado? Own mineral rights? Drafting a lease? Contact The Law Offices of Eric L. Nesbitt P.C. at 303-741-2354 or at Info@NesbittLawOffices.com