SB 181 – WHAT DOES IT MEAN FOR MINERAL OWNERS
By: James Godbold – Published in the BizWest Thought Leaders column in April 2019
Senate Bill 19-181, the proposed comprehensive overhaul of oil and gas regulation in Colorado, has sparked widespread controversy and debate. The bill is now headed to Gov. Polis’ desk for signature. Industry groups strongly opposed the bill, while proponents say it is a logical step in ensuring the safety of Colorado’s communities and the environment. But what do the changes under SB-181 mean for mineral owners?
From the perspective of a mineral owner, the most significant change has to do with what is called “forced pooling.” In order to drill a well, oil and gas operators need to acquire the right to extract the oil and gas from that well. Operators can do this by purchasing the oil and gas rights or by leasing those rights. Under Colorado’s force pooling laws, operators can also force pool the interests of owners from whom it was not able to acquire a lease.
Colorado’s current force pooling laws allow the operator to force pool unleased interests even if it owns or has leased only a small percentage of the oil and gas interests. Landmen for the oil and gas operators will sometimes use the threat of forced pooling to persuade reluctant mineral owners to enter an oil and gas lease.
From the perspective of the mineral owner, SB 181 makes two significant changes to Colorado’s force pooling laws. First, operators will not be permitted to force pool interests unless they own, or have acquired leases from, more than 50% of the mineral interests to be pooled. Second, the royalty rate for mineral owners who are force pooled changes from 12.5% to 15%. These changes provide protections to mineral owners. The threat of being force pooled will be less effective against reluctant mineral owners and, where an owner is force pooled, they will be entitled to a higher percentage of the revenue from a well. Given the complexity of oil and gas leases and Colorado’s forced pooling, it is always best to seek the advice of an experienced oil and gas attorney in responding to proposed development of your mineral interests.
Statistics show that the average American waits until the latter stages of life to obtain an estate plan, and while we all hope to live long and healthy lives, many people are leaving themselves in less than ideal circumstances should tragedy strike. In fact, a staggering 78 percent of millennials (ages 18-36) and 64 percent of Generation X (ages 37 to 52) do not have an estate plan, many of whom have minor children.
Whether you are an executive, top salesperson, professional employee, or business owner; it is likely you have been confronted with a covenant not to compete. These are common agreements which are used in the sale of a business and when hiring top executives, salespeople and professionals such as physicians. A lot of our clients are surprised to discover the truth about these agreements in Colorado. With some exceptions, covenants not to compete are NOT enforceable in Colorado unless they fit into one of four specified categories; and even then, they must be “reasonable in time and geographic scope.” Colorado statute favors the idea that all people should be free to work and any “restraint of trade” is presumptively invalid. However, there are four categories provided by statute in which such covenant will be enforceable in court. They will be enforced when the covenant applies to: 1) the sale of a business; 2) the protection of trade secrets; 3) recovery of expenses for training when the employee has been employed for less than two years; and 4) executive and management personnel. Covenants are also applicable to physicians when the agreement fits certain criteria.
In recent years, growing popularity for keeping chickens in urban and suburban areas has caused many municipalities to adopt ordinances governing backyard chicken operations. While homegrown eggs delight many, the noise and smell of poultry can be a nuisance to nearby neighbors.
If you are a business owner, do you know what will happen to your business in the event you pass away or become permanently disabled? Every business has its own complexities, but let’s say, for example, ownership is divided equally between you and a business partner. If you pass away without a plan in place, how well would the business run if your dependents suddenly became partners with the authority to make important decisions? On another note, what would happen if your child who has been working in the business suddenly becomes partners with siblings that have no knowledge of daily operations? Without a proper plan for the succession of your business, conflict is a real possibility. In some situations, these conflicts can be easily resolved. However, in other circumstances it can result in costly litigation and the deterioration of family relationships. One option to avoid these conflicts is to incorporate a buy-sell agreement into your business as well as your overall estate plan.
The Trump Administration’s emphasis on state empowerment has garnered significant attention, particularly in the environmental arena. So it is somewhat surprising that a recent change in policy having major implications for state permitting authority under the Clean Water Act has gone relatively unnoticed. The process that precipitated this change actually began under the Obama Administration. 
Have you ever wondered if there is a simple way to pass assets at death? Maybe for that elderly parent with few remaining assets? Well, there is. It certainly isn’t appropriate for all, but it can work well in the right situation.
Leon Uris was a prolific author, known for his focus on dramatic moments in contemporary history, including World War II and the Cold War. His best-selling, entertaining, and imaginative novel Exodus (1958) has been translated into over fifty languages and has helped shape our collective understanding of the birth of modern Israel. His novel also, rather unintentionally, gave rise to the seminal defamation case Dering v. Uris, which took place in London in 1964.
