Articles Posted in Energy, Oil & Gas Law

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The issue before the Supreme Court in this case called for a determination of whether section 15-11-1106(2) C.R.S. (2013) required a court to reform a revocable option that was negotiated as part of a commercial contract entered into before the effective date of the statutory Rule Against Perpetuities Act. In Colorado, the Act superseded the common law rule for nonvested property interests created after May 31, 1991. The common rule still applied to nonvested property interests created prior to that date. Under the Act, all donative transfers after that date were valid so long as the property interest created vested or terminated within ninety years of its creation. With regard to the specifics of this case, the trial court concluded that the revocable option at issue violated the common law rule against perpetuities. The Court then inserted a savings clause pursuant to statute, to prevent the option from being voided by the common law rule, and ruled that the option holder was entitled to specific performance of the reformed option. The court of appeals affirmed. The Supreme Court concluded, however, that the option did not violate the common law rule, and therefore no reformation by the trial court was necessary. View "Atlantic Richfield Co. v. Whiting Oil and Gas Corp." on Justia Law

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This case was an appeal of a final water court order which voided a rule promulgated by the Office of the State Engineer regarding nontributary ground water extracted in the course of coalbed methane (CBM) production and other oil and gas development. The final rules were challenged by owners of vested water rights and citizen groups whose members owned vested water rights. After extensive briefing by the parties, the water court upheld the Final Rules in their entirety except for the "Fruitland Rule," which it invalidated. The water court held that although H.B. 1303 granted authority to the State Engineer to promulgate the Fruitland Rule, the Tribal Rule essentially divested the State Engineer of that authority. The water court also found that the State Engineer had issued an improper "advisory" rule, and thus could not promulgate the Fruitland Rule unless he first obtained a judicial determination of his authority over nontributary ground water underlying the Reservation. The State Engineer, the Tribe, and several Intervenors appealed the water court's decision. Upon review, the Supreme Court reversed, concluding that the water court erred in invalidating the Fruitland Rule based on the Tribal Rule. The Court concluded the Tribal Rule did not divest the State Engineer of this authority: it stated on its face that the Final Rules themselves do not form the basis of or "establish" the State Engineer's authority to administer the nontributary ground water within Reservation boundaries. Because the Tribal Rule did not divest the State Engineer of his authority, the water court erred in invalidating the Fruitland Rule on that ground. Furthermore, the water court also erred in labeling the Fruitland Rule an "advisory" rule and in requiring the State Engineer to obtain a judicial determination that he had authority to administer nontributary ground water within the boundaries of the Reservation. Accordingly, the Supreme Court reversed the water court’s invalidation of the Fruitland Rule and remanded the case for further proceedings. View "Dick Wolfe v. Pawnee Well Users, Inc." on Justia Law

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The Supreme Court held that CRCP 26(b) requires a trial court take an active role managing discovery on questions of scope. The trial court must determine the appropriate scope of discovery in light of the reasonable needs of the case and tailor discovery to those needs. To resolve a dispute regarding the proper scope of discovery, the trial court should, at a minimum, consider the cost–benefit and proportionality factors set forth in CRCP 26(b)(2)(F). The Court also held that title opinions may contain privileged attorney–client communications if the parameters of that doctrine are met. View "In re DCP Midstream, LLP v. Anadarko Petroleum Corporation" on Justia Law

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Through cold calls, defendants sold plaintiffs shares in oil and gas joint ventures in Texas, Alabama and Mississippi. Plaintiffs all signed agreements with forum selection clauses stating that courts in Dallas County, Texas would have exclusive jurisdiction should any disputes arising from the agreements arise. The ventures lost money, and plaintiffs sued in Colorado, raising violations of the Colorado Securities Act (CSA) and various other common-law claims. Defendants moved to dismiss all claims citing the forum selection clause. Plaintiffs argued on appeal that the clauses were void because they were unenforceable on public policy grounds. Upon review, the Supreme Court held that the forum selection clauses were valid, and that they requires the parties to litigate their claims in Texas. View "Cagle v. Mathers Family Trust" on Justia Law

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Grand Valley Citizens' Alliance filed a complaint alleging that it was entitled to a hearing on an application for permit to drill pursuant to section 34-60-108(7), C.R.S. (2011), of the Oil and Gas Conservation Act. The district court dismissed the complaint. The court of appeals reversed the district court, holding that under subsection 108(7), Grand Valley Citizens were entitled to a hearing because it had a filed a petition on a matter within the jurisdiction of the Commission. After its review, the Supreme Court reversed the court of appeals judgment, holding that section 34-60-108(7) requires a hearing only for rules, regulations, and orders. Permits are governed by section 34-60-106(1)(f), which grants the Oil and Gas Commission broad authority to promulgate rules governing the permitting process, including the authority to determine who may request a hearing. View "Colorado Oil & Gas Conservation Commission" on Justia Law

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With the approval of the Public Utilities Commission (PUC), in 2005 the Public Service Company of Colorado (Xcel) began constructing a coal-fired electric power unit known as "Comanche 3." When Xcel sought to recover a portion of its construction costs nearly four years later in a rate proceeding, Petitioner Leslie Glustrom intervened. Petitioner sought to introduce testimony that Xcel acted improperly and, consequently, should not recover its costs. The PUC excluded most of her testimony, a ruling that Petitioner challenged. Petitioner separately challenged the depreciation rate and the possibility that Comanche 3 might not be "used and useful" at the time rates went into effect. The PUC denied her challenges, and the district court affirmed. Upon review, the Supreme Court held that the PUC did not abuse its discretion when it struck substantial portions of Petitioner's testimony pursuant to the Colorado Rules of Evidence. Further, the depreciation rate approved by the PUC was established pursuant to law and in accordance with the evidence. Lastly, the PUC was free to exercise its discretion in departing from a strict application of the "used and useful" principle. Petitioner failed to meet her burden in showing why such a departure here would result in a rate that is unjust and unreasonable in its consequences. View "Glustrom v. Colorado Public Utilities Commission" on Justia Law

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The issue before the Supreme Court was whether section 38-5-105 C.R.S. (2011) granted condemnation authority to a company for the construction of a petroleum pipeline. Upon review, the Court concluded that the General Assembly did not grant expressly or implication, the power of eminent domain to companies for the construction of pipelines conveying petroleum. Therefore, section 38-5-105 did not grant that authority to Respondent Sinclair Transportation Company for its proposed pipeline project. The Court reversed the court of appeals' opinion that upheld the trial court's order granting Sinclair immediate possession of the property belonging to Petitioners Ivar and Donna Larson and Lauren and Kay Sandberg. View "Larson v. Sinclair Transp. Co." on Justia Law

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In 2003, Plaintiffs filed a class action alleging that Defendant BP America Production Company (BP) improperly deducted postproduction costs from royalty payments due between January 1986 and December 1997. To toll the applicable six-year statute of limitations, Plaintiffs claimed that BP fraudulently concealed material facts which gave rise to their claims. The trial court certified the class, and the appellate court affirmed. BP then appealed to the Supreme Court, arguing: (1) proof of fraudulent concealment was inherently individualized, and not amenable to resolution on a class basis; and, (2) the class time period was overly broad and as a result, includes members who had no costs deducted under the "netback" methodology. BP thus argued that the trial court erred in certifying the class. Upon review, the Supreme Court disagreed with either of BP's arguments, and affirmed the trial court's certification of the class. View "BP America Prod. Co. v. Patterson" on Justia Law

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The issue on appeal to the Supreme Court was whether the Court of Appeals' ruling that the Article X, Section 20 of the Colorado Constitution (Amendment 1) required statewide voter approval each time the Colorado Department of Revenue calculated an increase in the amount of tax due per ton of coal extracted as directed by the formula codified in C.R.S. 39-29-106. After Amendment 1 went into effect, the Department suspended using the tax mechanism for calculating upward adjustments in the amount of coal severance tax owed based on inflation. Following an auditor's review in 2006, an Attorney General's opinion and a rule-making proceedings, the Department recommended applying the statute to calculate the tax due. Implementation resorted in a tax of $0.76 per ton of coal as compared to $0.56 per ton collected in 1992 when Amendment 1 first passed. The Colorado Mining Association and taxpayer coal companies filed an action challenging collection of the $0.76 per ton amount. Colorado Mining asserted that whenever the Department calculated an upward adjustment in the amount of tax due under the statute, it must obtain voter approval. The Court of Appeals agreed, but the Supreme Court disagreed. The Court held that the Department's implementation of section 39-29-106 was not a tax increase, but a "non-discretionary duty required by a pre-Amendment 1 taxing statute which did not require voter approval." Accordingly, the Court reversed the appellate court's judgment and reinstated the trial court's judgment, which held that the Department must implement the statute as written. View "Huber v. Colo. Mining Ass'n" on Justia Law

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The issue on appeal to the Supreme Court in this case pertained to the standards a trial court applies when it decides whether to certify a class pursuant to C.R.C.P. 23. The Supreme Court reversed the court of appeals' rulings: that the trial court must apply a "preponderance of the evidence" standard to C.R.C.P. 23's requirements, that the trial court must resolve factual or legal disputes dispositive of class certification regardless of any overlap with the merits, and that the trial court must resolve expert disputes regardless of any overlap with the merits. The Court also concluded that the trial court rigorously analyzed the evidence in determining that Plaintiffs in this case established an identifiable class and satisfied C.R.C.P. 23(b)(3)'s "predominance" requirement. View "Jackson v. Unocal Corp" on Justia Law