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HomeMy WebLinkAboutHEARTHFIRE (HOFFMAN) PUD - PRELIMINARY - 31-95A - CORRESPONDENCE -PART, OIL &- GAS. INC:. City of Fort Collins March 25, 1988 Page 4 As I advised you in our recent meeting, Park has made over the last couple of years, numerous proposals to the surface owner which would eliminate conflicts between land uses. All of these proposals have been rejected and the surface owner has yet to propose to Park any alternatives. By this letter, Park protests the above -referenced PDD application and requests that it be denied or tabled until conflicts dealing with land uses are settled. Very truly your , PARK OIL & A ,-INC. Arthur L. Vermillion Vice President ALV/kez PARE OIL & CAC. INC. City of Fort Collins March 25, 1988 Page 3 in the mineral estate which the lessor owned prior to the lease, namely, the right to explore for and develop the minerals and the right to use so much of the surface as is reasonably necessary in connection with exploitation of the minerals. The fact that an oil and gas lease has been granted does not change the rule that the surface estate is subservient to the mineral estate. The granting of an oil and gas lease merely changes the party who may enforce the mineral owner's rights in the surface estate. The execution of a unit agreement, such as the Fort Collins Field Muddy Unit Agreement, again, does not change this basic legal relationship between the surface owner and the mineral owner. By entering into the Unit Agreement, the owners of interest in the mineral estate are merely agreeing to pool their respective rights to produce oil and liquid hydrocarbons from the Muddy formation underlying the Unit Area with the result that they agree that they will each share in production from that formation within the unit area in accordance with agreed proportions, and they will each bear the cost of such production, again -in accordance with agreed proportions. The royalty owners execute the Unit Agreement because they are likewise pooling their royalty interest and they must likewise agree to the proportion in which they will participate in production from the unit area. Under the Unit Agreement the rights which each mineral owner has in the particular surface estate in the lands in which he owns his mineral interest automatically become rights which all mineral owners may benefit from. Although the Unit Agreement is not in and of itself a conveyance of title, it does result in a mutual transfer of rights and obligations, each mineral owner to the other. After execution of the Unit Agreement, each mineral owner may transfer his rights under the unit Agreement and his interest in the lands covered thereby, each such transfer to be subject to the Unit Agreement.. Indeed, the Unit Agreement specifically provides that the agreement shall constitute a covenant running with the land (Section 21.2). The PUD application is further deficient under the Fort Collins Land Development Guidance System, Section 118-83 (E) (1) because the land involved is not the subject of an application filed jointly by the owners of all the property to be included. Park is an owner of the above -referenced property and did not join in the PUD application. This deficiency alone is sufficient to preclude the approval of the PUD application. Finally, the application is deficient due to its failure to include a detailed description of how conflicts between land uses are being avoided or mitigated. Section 118-83 (G) (3) (a) [ 41 [ f ) . Such conflicts clearly exist in this case where the surface owner is proceeding in derogation of Park's rights. PAF.I: 0 1 L L C. I`, ::. City of Fort Collins March 25, 1988 Page 2 are, therefore, void under federal law (Sherman Act) and under corresponding state law. It could also be argued that Gillespie merely agreed to do that which he was already legally obligated to do; namely allow Pomeroy to use the surface, and there was no consideration for Pomeroy's agreement to restrict his surface usage. Although there is no Colorado case on this particular issue, there has been litigation in a number of jurisdictions on the question, with varying outcomes. In the case of Ph,__.:_ll Petroleum Co. v. Cargill, 340 S.W.2d 877 (Tex.Civ.App. - Amarillo 1960), the court held that a surface use agreement was unenforceable for lack of consideration since the mineral lease already had the right to use so much of the surface as was necessary for mineral development. Serge also, Black Gold Petroleum Co. v. Hill, 188 Okla. 329, 108 P.2d 784 (1940); Martens v Prairie Producing Co., 668 S.W.2d 889 (Tex.Civ.App.- Houston 1984); Miami Petroleum Co. v. Neal, 333 S.W.2d 876 (Tex.Civ.App. - E1 Paso 1960). All these cases come to the same conclusion. Irrespective of the above -mentioned agreements, Park, as the owner of the mineral estates in the above -referenced properties, has such rights of ingress, egress, exploration and surface usage as are reasonably necessary for the exploitation of its mineral interests. Frankfort Oil Co. v Abrams, 159 Colo. 535, 413 P.2d 190 (1966); Rocky Mountain Fuel Co v Heflin, 148 Colo. 415, 366 P.2d 577 (1962). In addition, Park has specific rights under the Unit Agreement and the August 3, 1978 agreement, including rights for surface locations for five (5) wells, installation of surface equipment and easements for access to and from well sites. To the extent that the application fails to recognize such rights, the application is deficient. Under Colorado law, until the surface and mineral estates have been severed, ownership of the surface estate carries with it ownership of the underlying minerals. Radke v. Union Pacific, 138 Colo. 189, 334 P.2d 1077 (1958). Once severed, the mineral estate is the dominate estate. This means that the owner of the mineral estate has such rights of ingress, egress, exploration and surface usage in the surface estate as are reasonably necessary to the successful exploitation of the mineral estate. An easement on and across the surface estate for all such purposes is implied without express language. Rocky Mountain Fuel Co. v. Heflin, 148 Colo. 415, 366 P.2d 577 (1961); Frankfort Oil Co. v. Abrams, 159 Colo. 535, 413 P.2d 190 (1966). The severing of the mineral estate, therefore, by deed or by lease, creates a separate estate in real property, the mineral estate, in fee simple. Mitchell v. Espinosa, 125 Colo. 267, 243 P.2d 412 (1952). If severed by lease or if severed by deed and then leased, the leasehold estate carries with it the same rights PARK OIL & GAS, INC. 4415 SHORES DRIVE METAIRIE, LOUISIANA 70006 PHONE: 504/454.1090 March 25, 1988 City of Fort Collins Community Development Department 300 La Porte Fort Collins, Colorado 80521 Attention: Debbie Debesh Re: Richards Lake Parcel "A" Dear Ms. Debesh: Reference is made to the captioned application which is scheduled for hearing on April 25, 1988. This letter of protest is written regarding the referenced PUD application. Park Oil & Gas, Inc. ("Park") is a mineral owner with respect to Section 30, Township 8 North, Range 68 West, Larimer County, Colorado (the "lands") which will be affected by the appl icati on. The lands are covered by a Surface Use Agreement dated August 3, 1978, between Russ Pomeroy (Park Oil & Gas, Inc.'s predecessor in interest) and Mr. Hoffman's predecessor, F.A. Gillespie, which Agreement was subsequently ratified by Pomeroy and Hoffman. Furthermore, a Unit Agreement was approved by the Oil and Gas Commission on February 17, 1979, under which the Working Interest Owners have the right to use so much of the surface of the land within the unit area as may be reasonably necessary for the unit operations. To the extent that the application includes lands covered by these agreements, the application is deficient in that it totally fails to recognize Park's rights and interests. An argument can be made, however, that Park is not bound by either the Gillespie or the Hoffman Agreement since Pomeroy may not have been bound by these Agreements. The deeds originally severing the minerals expressly provided for the surface use by the mineral owners. Even in the absence of such language, a mineral owner has the right to use such portion of the surface as is reasonably necessary for development of the minerals. Since Pomeroy already had the right to use the surface estate, Gillespie had no right to object to such use,when Pomeroy applied for drilling permits. Gillespie did no'_ own all minerals, therefore, Gillespie may not have had the right to restrict development of other people's minerals and the agreements in question which purport to do that are restraints of trade and August 9, 1995 Mr. Steve Olt City of Fort Collins Planning Department 281 North College Avenue Fort Collins, Colorado 80524 Re: Richards Lake and Hoffman PUD. Dear Sir, With respect to your inquiry and our phone conversation of this date, please note the attached copy of a letter to the Citv of Fort Collins dated March 25, 1988. Your questions concerning certain rights of the mineral interest and an opinion of the basis of those rights are stated in this letter. Although this letter was written by the previous owner of the mineral interest and concerns since resolved issues, it remains just as factual since the same surface and mineral interests are at question. I hope this assists you in ,your efforts to understand the connection between the differing land use questions you have. Should ,you have other questions or concerns you feel I may be able to answer, please do not hesitate to contact me. Respectfully, A" Robert Dale Walters