HomeMy WebLinkAboutMemo - Mail Packet - 6/7/2022 - Memorandum From Cassie Archuleta And Kelly Smith Re: Oil And Gas - Mineral Interests
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Environmental Services
222 Laporte Ave
Fort Collins, CO 80522
970.221.6600
970.224.6177 - fax
fcgov.com
MEMORANDUM
DATE: May 24, 2022
TO: Mayor and Councilmembers
THRU: Kelly DiMartino, Interim City Manager
Tyler Marr, Interim Deputy City Manager
Jacqueline Kozak-Thiel, Chief Sustainability Officer
Caryn Champine, Director of Planning, Development and Transportation
Paul Sizemore, Director of Community Development and Neighborhood Services
Rebecca Everette, Planning Manager
Lindsay Ex, Environmental Services Director
FROM: Cassie Archuleta, Air Quality Program Manager
Kelly Smith, Senior Environmental Planner
SUBJECT: Oil and Gas Mineral Interests
Bottom Line
The purpose of this memo is to provide City Council with an update regarding information requested at the
March 22, 2022 Work Session about the idea to potentially acquire mineral interests to eliminate and prevent
oil and gas operations in Fort Collins. Preliminary findings indicate that acquisition of mineral rights and oil
and gas leases would be complex and involve substantial time and resources. Additional research and staff
time would be required to identify the owners of the mineral rights and leases, determine the value of rights
and leases, and negotiate and complete the acquisitions. The definitive total cost of purchasing mineral
interests is a difficult number to attain, but with some basic assumptions it is approximately $25M. In order to
determine the real number, staff will need direction and resources from City Council.
Mineral Interests Overview and Considerations
At a March 22, 2022, Work Session, Councilmembers suggested exploring the idea of purchasing mineral
rights to eliminate and prevent impacts from oil and gas development within Fort Collins City limits.
Preliminary research indicates that eliminating current and preventing future development would require the
purchase of both mineral rights and oil and gas leases of such rights. The two following definitions are useful
for this discussion:
Mineral Rights refer to the right to remove minerals from the land, including oil and gas. In
Colorado, ownership of the surface rights and ownership of the minerals beneath the property are
or none of the
mineral rights. Mineral rights may also be split, allowing several parties to own a percentage of the
minerals underlying a parcel of land.
Oil and Gas Lease Rights refer to an arrangement whereby a mineral owner enters into a binding
cont operator the right to explore and produce oil and
gas in exchange for a percentage of any revenue produced. Leases remain valid for as long as
minerals are produced and will automatically transfer when the mineral rights are sold.
Currently, most of the
Muddy Unit
in 1978. Preliminary research shows that there are potentially 150+ leases related to the Fort Collins Muddy
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Unit, estimated at 2,681 acres. All the leases within the Unit remain valid for as long as any of the wells
within the Unit are producing or are capable of production. Therefore, to eliminate future and existing
development through the purchase of mineral rights, the City would need to purchase both the mineral rights
from the owners and the oil and gas leases from the active operators in the entire area. Additional research
would be required to determine what scaling might be possible to eliminate existing development by
acquiring only mineral rights and lease rights for existing wells within City limits or the Growth Management
Area (GMA).
acquire rights that may be affected by City regulations, staff would first analyze title work to determine and
verify the ownership of mineral rights involved and to identify the owners of any oil and gas lease rights for
the affected properties. Based on past evaluation of possible similar title work on City-owned properties, the
effort and resources required to determine the relevant ownership interests could itself be significant,
depending on the scope of the acquisition plan, and would likely require an appropriation from Council for
outside resources and expertise.
Determining the value of the relevant mineral interests and oil and gas leasehold interests would require
more research and negotiation with mineral owners, with values dependent on existing leases, production
history, additional development potential and current title ownership. As a starting place, assuming a
minimum $10K per acre for both the oil and gas leases and mineral rights, an estimate for the entire Fort
Collins Muddy Unit would be upwards of $25M.
Next steps
If further exploration is requested, additional analysis and expertise would be required from third party
consultants to help determine the ownership of rights involved, values of existing rights and leases, assist in
negotiations with mineral owners, and understand the scalability of this approach. In the meantime, staff is
exploring newly available options to reduce or eliminate surface impacts from oil and gas operations through
State regulations, that went into effect on April 30, 2022. Staff will provide an update regarding these new
options available through State regulations in a separate memo.