Confusion over county-owned mineral rights

County employees unsure about contract details for current mineral and drilling leases

After years of confusion, Moffat County government personnel are working to organize records of county mineral rights that have been leased to the private sector.

Currently, county employees are unsure of when contracts for current mineral and drilling leases end, when lease and royalty payments are due, and how many mineral acres the county owns.

"We're the most confused on county-owned mineral rights," Dan Davidson, director of the Museum of Northwest Colorado, said. Davidson became involved with county mineral rights leasing several years ago when someone donated a section of mineral acres to the museum. Since then, he has been collecting donations of mineral acres to help fund the museum.

The county has four gas and mineral income sources. The first and largest source is federal oil and gas revenues. Natural resource taxes on coal, gravel, oil and gas produced by local mines and power plants provide the second-most income. Mineral leases donated to the Museum of Northwest Colorado provide the smallest amount of revenue, all of which goes to the museum.

But county-owned mineral rights, which fall between the museum's leases and the natural resource tax, have proved to be the hardest for the county to handle.

"That's what we have the most trouble keeping a grasp on," said Jeff Comstock, the county's director of the Natural Resources Department.

Comstock and Davidson met with the Moffat County Board of Commissioners, Moffat County Attorney Kathleen Taylor and Gena Hinkemeyer, assistant to the commissioners, at an oil and gas workshop on Tuesday to discuss solutions to the leasing confusion.

Projections impossible

The county has no payment schedule, and therefore no way of knowing when a payment is due, Comstock said.

But both Comstock and Davidson said that not knowing when payments are due isn't that much of a problem, since the companies the county leases mineral rights to are reputable firms that make their payments as a matter of good business.

"If they don't make a payment, it will be against their contract," Comstock said.

Another problem this presents is that the county only knows a lease is dropped when the checks stop coming, Comstock said. This means leases that are about to end cannot be advertised to prospective clients.

"We know what we have leased, but we don't know what we haven't leased," Davidson said.

Furthermore, not knowing when payments are due makes revenue projections impossible, Davidson said.

After doing some research, Davidson estimated the county owns 62,664 mineral acres. No one in the workshop had ever seen that estimate before, and the commissioners and Comstock all thought the county owned closer to 30,000 mineral acres.

However, the county does know how much revenue has been collected from the acres that are leased. In 2001, the county had a banner year for lease and royalty payments, collecting $433,751. In 2002, the county collected $179,592, and in 2003, $84,448.

Commissioner Marianna Raftopoulos said there are drastic differences in revenue amounts because the county makes the most money off leases the year they are signed. Some of those leases should come up again in 2004, while some of 2001's bigger leases were a one-time deal, she said.

Davidson categorized the lease history of county-owned mineral acres as "poor," "moderate," and "good." Davidson categorized 39,840 of the county's mineral acres as "good."

Most of the good acres lie in the heart of the Green River Basin in the northwest corner of the county. In 2001, most of those acres were leased, so the county won't receive new lease payments from that land for another three to five years.

Drilling permits considered

When the county receives a check from a leaseholder, a copy of the check is made and it's put into a "fat folder," Hinkemeyer said. But neither she nor anyone else knows what to do with the folder.

Records for about the last 50 years of mineral leases are housed in the county courthouse, but the records are disorganized, and many in attendance at the workshop questioned the value of keeping such old records around.

"It's a mess," Hinkemeyer said.

Commissioner Les Hampton said he'd like to know if it is worth devoting some time to organizing those records. If Hinkemeyer, Comstock or Davidson decided there was some value to keeping those files, he said he'd be open to the possibility of hiring a temporary employee to organize them.

"Once we're up and running, how do we keep running?" Hampton asked. "When we get a check, we can say, OK, this guy paid, when's the next check due."

Hinkemeyer said there is currently a database ready for input, it's just a matter of getting organized enough to use it. With the new system, data would be filed by the leaseholder.

As a solution to some of these problems, Commissioner Les Hampton requested a base map of mineral acres the county owns be produced, and that transparent maps displaying when leases expired be laid over that.

He also wanted to know where the productive areas in the county were. In this way, he figured the county could send a list of minerals to companies that lease from the county and ask if they were interested in leasing more.

Commissioner Darryl Steele suggested requiring leaseholders to pay for a permit to drill. Right now, leaseholders only need to file a temporary use permit, and not everyone pays the fee that comes with that, Hinklemeyer said.

"The trend in the industry is to get a specialist for this," Comstock said. Officials in Garfield County expect more than 500 oil wells to be drilled in the next year, and they have hired someone to oversee their leaseholders.

"We'll be there in 24 months," Comstock said.

Hampton advised Hinkemeyer to contact Garfield County about their permit and fee process.



Rob Gebhart can be reached at 824-7031 or by e-mail at rgebhart@craigdailypress.com.

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