[February 25, 2020]

The Wyoming Oil and Gas Conservation Commission (“WOGCC” or “Commission”) received more than 22,000 Applications for Permit to Drill (“APDs”) in 2018 and far surpassed that number with more than 30,000 permit applications in 2019. The influx of APDs was caused by operators looking to lock up acreage. In response to the flood of applications, the WOGCC promulgated a new APD rule, which went into effect December 20, 2019. However, in attempting to resolve the issues created by the former rule, the new rule may raise new issues. Under the former rule, the first party to file an approvable APD secured their position as the operator of the drilling and spacing unit (“DSU”) and had two years to commence drilling operations.This led to operators securing more permits than feasible to develop, while effectively locking other potential operators out of the DSU for the life of the permit. The rule was criticized for resulting in an unfair advantage to larger operators with more capital, and as detrimental to the interest of mineral owners whose estates go undeveloped.

While retaining the vast majority of the old rule, the new APD rule seeks to undo gridlock created by the old rule and to encourage actual development. Through the addition of Section 8(l), the new rule limits who may file for a new APD or extension to the owner or operator having either a spud or completed well in the DSU or the oldest pending or approved APD.Under Section 8(m),the new rule creates a process whereby an owner or operator who does not meet those criteria can trigger contested case proceedings to determine operatorship of the DSU. Section 8(m)(i) requiresthe parties to provide a wealth of information in contested case proceedings, including a description of their technical ability and experience, details on the percentage of working interest held within the proposed DSU and the “area,” information on the wells operated by the applicant and protestant in surrounding lands, and other information. The Commission will consider all of the information, as well as“other relevant evidence.”If the parties are deemed “equal,”the Commission will grant the permit to the party with the largest percentage of working interest ownership “combined with working interest owners who have expressed written support.”

The various factors identified in Section 8(m) grant the Commission broad discretion and also raise questions about what information is most likely to sway the Commission. For instance, parties are to provide working interest ownership for both the DSU and the “area.” The scope of the word “area” is unclear. Does the rule contemplate working interest in the neighboring sections or some broader category, and why is that relevant to the APD under review? Alternatively, if operators are of disproportionate size, will technical ability and experience always favor larger operators?It is also unclear how operators may be “deemed equal,” triggering the tiebreaker of working interest ownership and partner support. As operators seek to distinguish themselves from one another, the broad standards on supporting evidence may result in floods of information with relatively unknown value. The answers to these questions and more will undoubtedly play out in the coming months.

Despite the uncertainty, the new rule should encourage actual development by raising the stakes associated with APDs. If an operator fails to diligently develop, they will likely face a higher risk of losing operatorship in the DSU. The costs associated with obtaining and maintaining APDs are also likely to increase as owners and operators apply for or defend their operatorship and APDs through contested cases. It remains to be seen whetherthe WOGCC has traded a flood of APDs for a flood of contested cases to determine operatorship.

Further information regarding the new APD rule can be found on the WOGCC website.

[November 12, 2019]

Operators today have access to geographic information that far outstrips the information once commonly available.  County Assessor’s records are routinely linked through GIS (Geographic Information Services) to provide interactive maps that allow for detailed and accurate mapping and measurement.  At the same time, mineral ownership in large subdivisions has created the need for accurate acreage measurement of numerous parcels.  These factors have led operators to undertake mapping and acreage determinations in order to allocate royalty payments and working interest ownership. What happens when these acreage determinations differ from acreages stated in pre-existing leases?  Where the newly determined acreage is smaller than the stated estimate of area it may result in reduced royalties.  Where the acreage is larger a more problematic question arises.  Is the “new acreage” covered by the lease?

In Hild v. Johnson, 723 N.W.2d 389, 391 (N.D. 2006), the North Dakota Supreme Court ruled that an unambiguous property description controls over a statement of acreage.  In 1960, Hild took title to all of Section 21 by marshal’s deed, which described the land as “containing 582.76 acres, more or less,” which represented the section less the lands underlying the Little Missouri River. The same year, Hild conveyed an undivided 382.76/582.76 interest in the minerals of all of Section 21 to Harding.  The Deed described the land as “All of Section Twenty-one in Township One Hundred Thirty-Nine (139) North of Range One Hundred Two (102) West, containing 582.76 acres, more or less.”

In 1992, the 8th Circuit ruled that the Little Missouri River was non-navigable at the time of statehood for North Dakota, and as such, the state did not own the land or minerals underlying the river as previously thought. Instead the minerals underlying the river belonged to the adjoining parcels.  This increased the acreage of Section 21 from 582.76 to 640 acres.

Hild argued that the 1960 deed conveyed only 382.76 acres. The Court disagreed and held that the fraction used in the 1960 deed from Hild to Harding represented an undivided interest, rather than a specified acreage. Id. at 393-394. The Court ruled that “[w]here the deed purports to convey the whole of a designated tract, with the description of it as containing a given number of acres ‘more or less,’ the primary significance of that deed is that the grantor intended to convey all the land in the tract described, whatever may be its acreage, and the grant is not defeated by a discrepancy between the recited and the actual area” Id. At 394 (quoting 16 Am. Jur. Deeds,§ 282).Thus, the 1960 deed conveyed undivided 382.76/582.76 interest in the 640 acres of Section 21.

That same logic was applied to acreage statements in North Dakota Oil and Gas Leases by the Court in Lario Oil & Gas Co. v. EOG Res. Inc., 832 N.W. 2d 49, 53 (N.D. 2013). Colorado has not yet expressly adopted these principles, but numerous other jurisdictions have. See, e.g., Anderson-Prichard Oil Corp. v. Key Okla. Oil Co., 299 P. 850 (Okla. 1931); Koennicke v Maiorano, 682 A.2d 1046, 1053 (Conn. 1996). Moreover, Colorado courts presume that general descriptions include the acreage of adjoining strips.  See Near v. Calkins, 946 P.2d 537, 541 (Colo. 1997). Accordingly, we believe that a Colorado court would agree with the outcomes in the Hild and Lario cases.

Tjornehoj & Hack LLC invites you to join our attorneys Peter Hack and Katie Moisan as they speak at Denver Association of Petroleum Landmen’s luncheon on Wednesday, April 17, 2019. With continued expansion along Colorado’s Front Range and a tense political climate, landmen face growing issues concerning development in suburban areas. The presentation will provide practical solutions to avoid and correct title issues underlying subdivisions, including the severance of lot minerals, after-acquired title concerns, and the Colorado Common Interest Ownership Act.  The discussion will also focus on operational issues with regard to leasing and statutory pooling, as well as an effective approach to community outreach. The luncheon will be held from 11:30 a.m. to 1:00 p.m. at the Denver Athletic Club, located at 1325 Glenarm Place.  For more information, please visit www.dapldenver.org.

Tjornehoj & Hack, LLC was happy to provide burritos to the hungry attendees of the 2018 DAPL and GeoLand Ski Day at Copper Mountain. This fun event was organized by the Denver Association of Petroleum Landman (DAPL) and the Rocky Mountain Association of Geologists. See the links below for more information and to learn how to attend next year!

 

Learn more about this event and how to attend or sponsor next year's event here:

Denver Association of Petroleum Landman (DAPL) - https://dapldenver.org/event/2017-geoland-ski-day/

Rocky Mountain Association of Geologists (RMAG) - http://www.rmag.org/geoland-ski-day

-Tjornehoj & Hack, LLC

 

 

[February 13th, 2018]

Jon Tjornehoj and Alex Finch had the opportunity to present their "Anatomy of a Farmout Agreement" presentation to the Denver Association of Lease and Title Analysts (DALTA) at their first luncheon of the year. The presentation covered the structure, purpose, and function of a typical Farmout Agreement as well as the impact such an agreement can have on your chain-of-title and mineral title ownership.

Free download of our presentation is available here: Anatomy of A Farmout Agreement.

Thank you DALTA for the opportunity and the wonderful crowd.

Check them out at www.DALTA.org and LinkedIn at: https://www.linkedin.com/company/denver-association-of-lease-and-tit-le-analyst/

-Jon and Alex

 

 

 

Law Center Gala

Tjornehoj & Hack, LLC recently attended the 35th Annual Legacy Gala celebrating the Rocky Mountain Children's Law Center. Our attorneys not only enjoyed the evening, but also the opportunity to support a great cause. In addition to corporate support, our attorneys actively volunteer with the Domestic Violence program and provide legal support for Colorado's most vulnerable population. The mission of the Rocky Mountain Children’s Law Center is to positively transform the lives of abused, neglected and at-risk Colorado youth through legal advocacy and public policy reform. The Rocky Mountain Children’s Law Center recently celebrated 25 years of their Domestic Violence Program, which is the only program in the nation providing legal representation for children in domestic violence cases. In 2016, the Domestic Violence Program provided guardian ad Litem representation for 271 children in 146 cases. 

Read more about this great organization and how you can support it at: https://childlawcenter.org/

-The team at Tjornehoj & Hack LLC

 
 

Katie Moisan and Jon Tjornehoj authored the article "Lis Pendens and the Shelter Rule" featured in the April, 2017 Rocky Mountain Landman newsletter published by the Denver Association of Petroleum Landmen. The article discusses the nature of a notice of lis pendens and its relationship to state recording statutes.  You can read our full article by clicking here.

This year we are pleased to again be one of the sponsors of the RMAG-DAPL Geo-Land Ski Day.  This year our t-shirt design features an image of the West Texas Intermediate oil price graph converted into the image of a mountain range.  To us, "Energy to Climb- Fortitude to Ride" encapsulates the spirit of those of us who have endured the rough ride that has been life in the oil and gas business over the past few years.  Peaks and valleys are a fact of life in our industry.  As Tjornehoj & Hack LLC celebrates its ten-year anniversary this summer, we are proud of the work we have done helping our clients navigate the tough terrain.

On February 14, 2017, the State of Colorado filed suit against the County of Boulder concerning its 5-year ban on accepting or processing oil and gas permitting applications.  The State of Colorado asserts that Boulder County's continued ban on oil and gas drilling permits flies in the face of decisions by the Colorado Supreme Court in 2016 that local governments are preempted by state authority from banning or materially impeding oil and gas activities.  The Boulder County Commissioners have repeatedly extended the county's "temporary" moratorium over the years under the guise of needing additional time to develop the county's permitting regulations.  The lawsuit filed by the Colorado Attorney General seeks to end the obvious delay tactics long implemented by the Boulder County Commissioners.  Undoubtedly, that history of delay has cost local landowners significantly in lost royalties that they may never recoup in today's price environment.     

 

As part of our sponsorship of the 2016 Geo-Land Ski Day (hosted by the Denver Association of Petroleum Landmen and the Rocky Mountain Association of Geologists) we gave to attendees t-shirts depicting a pickup truck hauling a few barrels of crude oil and a pumpjack in the background, with the message "Buy Local!"  Producing and refining crude oil is of course not a do-it-yourself job.  Our message was simply this: the oil and natural gas business is-- and has been for many years-- an important part of our local economy here in Colorado.  Our industry is comprised of people who live here and care about this place.  Contrary to the picture that some activist groups seek to paint, we are not faceless corporations residing in faraway places.  The thousands of people who support their families through oil and natural gas development in Colorado are people who believe in our work and love where we live.  We are locals and we are here to stay.

If you would like to get one of our shirts for yourself, shoot us an email at This email address is being protected from spambots. You need JavaScript enabled to view it..

Tjornehoj & Hack LLC, assisting energy industry clients in navigating the legal landscape. Our attorneys offer a full suite of Title Examination services, including preparation of Oil and Gas Title Opinions.