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Colorado Supreme Court: General Assembly Did Not Grant Condemnation Authority to Companies to Construct Petroleum Pipelines

May 21, 2012 by Leave a Comment

The Colorado Supreme Court issued its opinion in Larson v. Sinclair Transportation Co. on May 21, 2012.

Real Property—Eminent Domain—Condemnation.

The Supreme Court held that the Colorado General Assembly did not grant, either expressly or by clear implication, condemnation authority to companies to construct petroleum pipelines. Accordingly, Sinclair Transportation Company was not entitled, under CRS § 38-5-105, to immediate possession of easements for the construction of its gasoline pipeline. The judgment of the court of appeals was reversed.

Summary and full case available here.

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Spark the Discussion: Hemp for Victory

May 16, 2012 by 2 Comments
“Spark the Discussion” is a monthly Legal Connection column highlighting the hottest trends in the emerging field of medical marijuana law. This column is brought to you by Vicente Sederberg, LLC, a full-service, community-focused medical marijuana law firm.

By Brian Vicente, Esq. and Rachelle Yeung

In the final weeks of the Colorado legislative session, while House Democrats and Republicans were fiercely battling over same-sex civil unions, a landmark piece of drug policy reform legislation snuck through the Legislature nearly unopposed. The “Hemp Bill,” or HB 12-1099, sets up the framework for the study and use of industrial hemp, and seeks to use this “taboo” crop to clean up contaminated soil through a process called phytoremediation.

The passage of the Hemp Bill is a victory in a 70-year long battle against the prohibition of marijuana and a turning point towards a more sensible approach to drug policy. The regulation of marijuana is a topic of increasing importance to Colorado voters because of Amendment 64, the statewide ballot initiative to regulate marijuana like alcohol, which will be voted on in November. Amendment 64 would also make Colorado the first state in the nation to regulate the cultivation, processing, and sale of industrial hemp.

Historically, hemp production was encouraged in the United States – from being one of the most important crops in colonial America to being promoted by the federal government in a World War II film called “Hemp for Victory.” However, growing hemp has been outlawed since the Controlled Substances Act, because of its close association with marijuana.

Though it shares the same genus (“Cannabis sativa L.”) as its better-known cousin, industrial hemp is distinguished from marijuana by its low concentration of the psychoactive ingredient tetrahydrocannabinols, or THC. Industrial hemp contains no more than three-tenths of a percent of THC.

Several factors make Colorado a particularly compelling candidate for hemp-based phytoremediation. Extensive mining throughout the state has left vast tracts of land contaminated with toxic waste. Phytoremediation would remove those toxins from the ground, which could then be used for agriculture and cattle grazing which are cornerstones of the state’s economy. Finally, a plant requiring very little water to grow – like hemp – is a necessity in a water-constrained state like Colorado.

The use of industrial hemp in phytoremediation is not entirely novel. In 1986, the explosion at the Chernobyl Nuclear Plant caused severe radioactive contamination in areas up to 100 km away. Soil in that area became saturated with toxic waste and heavy-metals which rendered it useless for agriculture. In 1998, a group called PHYTOTECH began growing hemp in the area to decontaminate the soil and, according to Slavik Dushenkov, a research scientist with the company, “Hemp prov[ed] to be one of the best phytoremediative plants we have been able to find.”

Activists hope that phytoremediation is just the introduction of industrial hemp into mainstream use. Hemp is cheap and easy to grow, requiring few pesticides and no herbicides. It can be used in textiles, construction materials, paper products, and even body care products. Hemp seed is considered a “superfood” – a good source of protein and dietary fiber, high in B-vitamins and essential omega-3 and omega-6 fatty acids. Hemp can even be reduced to ethanol and biofuel, a boon to our petroleum-addicted society. Some activists go so far as calling hemp “the plant that could save the world.”

A similar bill was introduced in the Colorado Legislature in 1994 by then-Senator Loyd Casey, but received only a single, sad vote before disappearing into history. If Governor Hickenlooper gives this year’s HB-1099 his stamp of approval – and given its support in the Legislature, there is no reason he would not – Colorado could become the first state in the nation to grow industrial hemp since the 1930s.

Brian Vicente, Esq., is a founding member of Vicente Consulting, LLC, a law firm providing legal solutions for the medical marijuana community. He also serves as executive director of Sensible Colorado, the state’s leading non-profit working for medical marijuana patients and providers. Brian is the chair of the Denver Mayor’s Marijuana Policy Review Panel, serves on the Colorado Department of Revenue Medical Marijuana Oversight Panel, and coordinates the Colorado Bar Association’s Drug Policy Project.The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.
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Colorado Court of Appeals: Sale of Shares of Joint Venture Constituted Investment Contract Under the Colorado Securities Act and Thus Were Required to be Registered with Division of Securities

May 15, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Joseph, Colorado Securities Commissioner v. Meika Corporation on May 10, 2012.

Colorado Securities Act—Cease and Desist Order.

Respondents Mieka Corporation, Daro Blankenship, and Stephen Romo appealed the order prohibiting them from committing any violation of the Colorado Securities Act (CSA), CRS §§ 11-51-101 to -908, in connection with the offer and sale of any security in or from the State of Colorado. The judgment was affirmed.

The Colorado Division of Securities (Division) issued an order directing respondents to show cause why a final order should not be entered against them in conjunction with the alleged sale of securities. The order alleged respondents had violated provisions of the CSA by offering for sale interests in a joint venture to develop an oil and gas lease in Pennsylvania (Joint Venture).

The Division, through a hearing panel (Panel), issued a detailed opinion concluding that the presented evidence established that the interests in the Joint Venture were securities under the CSA and that there had been an offer and sale of such security interests. Because those securities had not been registered with the Division, the Panel recommended that the Colorado Securities Commissioner (Commissioner) issue a cease and desist order against respondents to enjoin them from violating the CSA.

In April 2011, the Commissioner affirmed the decision of the Panel and made two additional conclusions of law: (1) that “the strong presumption that general partnerships are not securities as found in the Williamson case [Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981)] is not the law under the Colorado Securities Act”; and (2) that respondent Romo had acted as an unlicensed broker-dealer or sales representative, in violation of CRS § 11-51-401(2). These additional conclusions were appealed by respondents.

Respondents argued that the conclusion of the Panel and the Commissioner that the Joint Venture interests were unregistered securities because they were interests in an investment contract was based on an erroneous view of the law or was unsupported by substantial evidence in the record. The Court of Appeals declined to address the first contention, because the Panel and the Commissioner found that the Joint Venture interests were securities on grounds that did not turn on the legal argument made by respondents. The Court then found that there was substantial evidence in the record to support the decision of the Panel and the Commissioner. The judgment was affirmed.

Summary and full case available here.

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HB 12-1356: Imposing Punitive Sanctions on Local Governments That Interfere with Oil and Gas Production

May 4, 2012 by Leave a Comment

On April 27, 2012, Rep. Jerry Sonnenberg and Sen. Greg Brophy introduced HB 12-1356 – Concerning a Prohibition on a Local Government that Impacts Oil and Gas Extraction from Receiving Any Moneys from the Local Government Severence Tax Fund. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Currently, moneys in the local government severance tax fund are primarily used for 2 purposes:

  • For the executive director of the Department of Local Affairs to provide grants and loans to political subdivisions impacted by development, processing, or energy conversion of minerals and mineral fuels; and
  • For direct distributions to counties and municipalities based on factors related to oil and gas production.

The bill prohibits any local government that restricts or delays the ability of an oil and gas producer to exercise the producer’s property right as a lessee or owner to extract oil and gas from receiving any grants or direct distributions from the local government severance tax fund.

The bill is assigned to the Assigned to Agriculture, Livestock, & Natural Resources Committee. Committee review of the bill is scheduled for Monday, April 30 at 1:30 p.m.

Summaries of other featured bills can be found here.

Filed Under: Legislation Tagged With: , , , , ,

HB 12-1314: Creating Exception to Requirement that Anyone Who Owes Severance Tax on Oil and Gas Revenue Must File a Tax Return

April 13, 2012 by Leave a Comment

On February 20, 2012, Rep. Jerry Sonnenberg introduced HB 12-1314 – Concerning an Exception to the Requirement to File an Oil and Gas Severance Tax Return for a Person Who Has Less Than a Certain Amount Withheld. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill creates an exception to the requirement that everyone subject to the severance tax on oil and gas must file a return with the department of revenue. This exception applies to any person who has less than $250 withheld by all unit operators and first purchasers in a taxable year.

Under current law, if any person fails to file a report related to the severance tax, the executive director of the department of revenue may estimate the amount of tax, interest, and penalties due and mail the estimate to the last-known address of the person. If, within 10 days of receiving the estimate, the person fails to file a correct report and payment, the estimate becomes the amount payable to the state. The bill prohibits the executive director from sending the estimate to a person who is not required to file a return pursuant to the bill. On March 21 the Agriculture, Livestock, & Natural Resources Committee amended the bill and sent it to the Appropriations Committee. The bill is scheduled to go before the Appropriations Committee on Tuesday, April 10 at 7:30 a.m.

Since this summary, the bill was amended in the Appropriations Committee and referred to the House Committee of the Whole.

Summaries of other featured bills can be found here.

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Executive Order to Create Task Force to Examine Oil and Gas Regulatory Jurisdiction

March 13, 2012 by Leave a Comment

On Wednesday, February 29, 2012, Governor John Hickenlooper signed an Executive Order that created a task force to help clarify and better coordinate the regulatory jurisdiction between the state and local governments over oil and gas operations.

The task force is expected to report its recommendations and findings to the Governor, the Speaker of the House of Representatives, and the President of the Senate no later than April 18, unless the group is either terminated or extended beyond that date by another Executive Order.

“This is an important step to better define state and local jurisdiction regulatory structures as Colorado’s oil and gas industry continues to grow,” Hickenlooper said. “We want to protect public health, the environment, and wildlife and to avoid duplication and conflict between different regulations of oil and gas activities. We expect these efforts to also help foster a climate that encourages responsible development and enhances existing cooperation and coordination between state and local government.”

The issues that the Task Force will address include:

  • Setbacks of oil and gas facilities or roads necessary for oil and gas operations from any building, public road, above-ground utility line, railroad, or water body, or other restrictions on the location of an oil or gas well and its related production facilities.
  • Floodplain restrictions.
  • Protection of wildlife and livestock.
  • Noise abatement.
  • Operational methods employed by oil and gas activities.
  • Air quality and dust management.
  • Traffic management and impacts.
  • Fees, financial assurance, and inspection.

“In establishing this task force, we have worked with a variety of stakeholders, including local government, industry, the environmental community, Speaker McNulty, President Shaffer, and Majority Leader Morse,” Hickenlooper said.

The Task Force will be chaired by Mike King, the Executive Director of the Colorado Department of Natural Resources. The task force members will include: the Executive Director of the Colorado Department of Local Affairs, or his or her designee; two members of the Colorado Oil and Gas Conservation Commission as determined by said Commission; the President of the Board of Directors of Colorado Counties Inc., or his or her designee who must also be a member of said organization; the President of the Board of Directors of the Colorado Municipal League, or his or her designee who must also be a member of said organization; the Chief Executive of the Colorado Petroleum Association, or his or her designee; the Chief Executive Officer of the Colorado Oil and Gas Association, or his or her designee; the Executive Director of Colorado Conservation Voters, or his or her designee; one member appointed by the Speaker of the House of Representatives; one member appointed by the President of the Senate; and the Colorado Attorney General or the Attorney General’s designee.

The full text of the Executive Order can be found here.

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Tenth Circuit: Breach of Contract At Issue; Limitation of Liability Provision Held Invalid Due to Unequal Bargaining Positions

March 6, 2012 by Leave a Comment

On March 6, 2012, the Tenth Circuit Court of Appeals issued its opinion in Arnold Oil Properties LLC v. Schlumberger Technology Corporation.

Plaintiff Arnold Oil Properties (Arnold) hired Defendant Schlumberger Technology Corp. (Schlumberger) to perform a cement job on its gas well. The contract contained an indemnity provision and a limitation-of-liability provision. After Schlumberger poured too much cement into the well, Arnold incurred additional expenses and sued Schlumberger.

Schlumberger moved for summary judgment, arguing the contract precluded its liability based on what it claimed to be an exculpatory provision that barred Arnold’s recovery. Alternatively, Schlumberger argued the contract limited its liability to the cost of work performed. The district court ruled the alleged exculpatory provision was in fact an indemnification provision and therefore did not bar Arnold’s recovery. The district court also held that fact issues remained as to the parties bargaining positions, and therefore denied Schlumberger’s motion to enforce the limitation-of-liability provision.

A jury returned a verdict finding that Schlumberger breached its contract with Arnold. The jury also determined that the parties were in unequal bargaining positions. Pursuant to Rule 50(b), Schlumberger renewed its motion for judgment as a matter of law seeking to enforce the contract’s limitation-of-liability provision. The district court denied the motion. Schlumberger appealed the denial of this motion and the district court’s denial of Schlumberger’s motion for summary judgment.

Schlumberger argued that the district court misconstrued the indemnity provision of the contract. The 10thCircuit’s analysis of Oklahoma law led the Court to the conclusion that they need not decide this issue. Under Oklahoma law, courts may enforce contractual provisions limiting a party’s liability for ordinary negligence if the parties have equal bargaining power. Elsken v. Network Multi-Family Sec. Corp., 838 P.2d 1007, 1009-11 (Okla. 1992). The jury found that Arnold and Schlumberger did not have equal bargaining power. Accordingly, even if the Court were to hold the contract did exculpate Schlumberger from liability, because the jury found the parties to be in unequal bargaining positions, the exculpatory provision would be unenforceable under Oklahoma law.

Schlumberger also argued the district court erred in denying its Rule 50 motion for judgment as a matter of law to enforce the limitation-of-liability provision limiting recovery to the cost of work performed. In reviewing the denial of a Rule 50 motion, the Court needs to determine whether the jury’s verdict is supported by “substantial evidence when the record is viewed most favorable to the prevailing party.” Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1128 (10th Cir. 2002). The Court held that the evidence offered at trial was sufficient for the jury to conclude the parties were in unequal bargaining positions. Therefore, the district court was correct in denying Schlumberger’s Rule 50 motion for judgment as a matter of law to enforce the limitation-of-liability contract provision.

Affirmed.

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SB 12-107: Enacting the “Water Rights Protection Act”

March 4, 2012 by 2 Comments

On January 31, 2012, Sen. Morgan Carroll and Rep. Roger Wilson introduced SB 12-107 – Concerning Additional Protections for Water Related to Hydraulic Fracturing. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill enacts the “Water Rights Protection Act”, under which the Colorado oil and gas conservation commission must establish rules for:

  • Hydraulic fracturing near radioactive materials and sites listed on the national priority list pursuant to the federal “superfund” law; and
  • The shut-down of hydraulic fracturing operations when monitoring equipment detects a pressure drop.

Oil and gas operators must submit water quantity reports showing projected and actual sources and amounts of water needed for hydraulically fracturing a well. Operators must also submit pre- and post-fracturing water quality reports for all active water wells located within .5 mile of oil and gas wells that will be or have been hydraulically fractured. This information will be posted on the commission’s web site. Operators cannot inject into the ground any chemical compound that would cause cancer.

In addition to existing financial assurances, each operator that engages in a high-risk hydraulic fracturing treatment must take out an environmental bond that would be forfeited if the operator’s operations cause any damage to water rights.

Subject to listed affirmative defenses, an operator is presumed to be responsible for the pollution of a water supply that is within .5 mile of a line between the well head and the surface projection of the bottom hole location of the well, if the pollution occurred within 6 months after the completion of the hydraulic fracturing of the well. Hydraulic fracturing would be prohibited within .5 mile of any surface water, including a pond, reservoir, or other natural or artificial impoundment or stream, ditch, or other artificial waterway, unless the operator uses a closed-loop system. The bill is assigned to the Judiciary Committee; the bill is not listed on the printed calendar.

Summaries of other featured bills can be found here.

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Governor Hickenlooper Announces Appointments to the Oil and Gas Conservation Commission

August 1, 2011 by Leave a Comment

On Friday, July 29, 2011, Governor John Hickenlooper announced eight appointments to the Colorado Oil and Gas Conservation Commission.

The Colorado Oil and Gas Conservation Commission promotes the responsible development of Colorado’s oil and gas natural resources by balancing the efficient exploration and production of oil and gas resources, the prevention of waste and the protection of the public health, environment, and mineral owners’ rights.

The new commission members replace those members whose terms expired July 1, 2011. They must be confirmed by the State Legislature and will serve terms of four years, expiring July 1, 2015.

The new commission members are:

  • Mayor Tommy E. Holton of Fort Lupton
    • Holton will serve as a local government official and as a Republican. He has extensive land use experience and once served as Chairman of the Weld County Planning Commission.
  • John H. Benton of Littleton
    • Benton will serve as a member with substantial experience in the oil and gas industry and with a college degree in petroleum geology or petroleum engineering and as a Republican. He is vice president and general manager for the Rockies Division of Rex Energy Corp. in Denver.
  • W. Perry Pearce of Denver
    • Pearce will serve as a member with substantial experience in the oil and gas industry and as a Democrat. He is manager of state government affairs for ConocoPhillips/Burlington Resources.
  • Andrew Lawrence Spielman of Denver
    • Spielman will serve as a member with formal or substantial experience in environmental or wildlife protection and as a Democrat. He is an attorney at Hogan Lovells in Denver and has federal, state, and local government experience with natural resources, land use, and Western public lands law to assist energy developers, ski areas, water suppliers, ranchers, tribes, and others with obtaining regulatory approvals and permits from governments across the United States. Spielman currently serves as Chairman of Colorado’s Regional Air Quality Council.
  • Thomas L. Compton of Hesperus, reappointed
    • Compton will serve as a member actively engaged in agricultural production and also a royalty owner, west of the Continental Divide, and as a Republican. He is the owner and manager of Compton Cattle Co., a commercial beef cattle enterprise.
  • Richard D. Alward of Grand Junction, reappointed
    • Alward will to serve as a member with formal training or substantial experience in soil conservation or reclamation, west of the Continental Divide, and as a Democrat. He is a principal ecologist and environmental scientist at Aridlands Natural Resource Consulting in Grand Junction and works as an adjunct instructor of environmental science at Mesa State College.

The governor also appointed Mike King, Executive Director of the Department of Natural Resources, and Dr. Chris Urbina, Executive Director of the Department of Public Health and Environment, to the commission.

A ninth member of the commission, Dolly Ann “DeAnn” Craig, of Denver, serves as a member with substantial experience in the oil and gas industry and a college degree in petroleum geology or petroleum engineering and as a Republican. Her term expires July 1, 2012.

The full press release from the Governor’s Office concerning these commission appointments can be found here.

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Tenth Circuit: Challenges to Northern San Juan Basin Drilling Project Not Ripe under the National Forest Management Act until Improper Construction of a Well is Approved

July 22, 2011 by Leave a Comment

The Tenth Circuit Court of Appeals issued its opinion in San Juan Citizens Alliance v. Stiles on Thursday, July 21, 2011.

The Tenth Circuit affirmed in part and reversed in part the district court’s decision. This appeal concerns the Northern San Juan Basin Coal Bed Methane project (the Project), which has been approved by the Forest Service and the BLM. The Project contemplates the construction of numerous gas wells within the San Juan National Forest and on other federal lands. Petitioners filed suit against the Forest Service, the BLM, and four government officials for alleged violations of the National Forest Management Act (NFMA) and NEPA. The suit contends that the 2007 record of decision approving the Project was unlawful; several companies holding valid leases in the area and interested in drilling for gas were permitted to intervene as additional defendants. The district court entered judgment in favor of the defendants.

Petitioners argue on appeal that the Project violates the NFMA because it is inconsistent with provisions of the San Juan National Forest Plan protecting old-growth ponderosa pine forests, wildlife habitat, and riparian areas, and that the record of decision approved individual wells under the Project that violate the Forest Plan’s standards and guidelines protecting riparian areas. It further argues that the Federal Defendants violated NEPA in two respects when they prepared an environmental impact statement (EIS) assessing the Project’s environmental consequences.

The Court concluded that the ripeness doctrine precludes it from addressing the merits of any of Petitioner’s challenges to the Project under the NFMA. A claim that the Project is inconsistent with the Forest Plan is not ripe until that inconsistency leads to the improper approval of a specific well (or associated construction). If that causal connection is present, the challenge to the well can encompass a challenge to the defective Project provision under which the well is approved. Because these NFMA claims are not ripe, the Court remanded them to the district court to vacate its judgment on those claims and to dismiss them without prejudice.

As for Petitioner’s NEPA claims, the Court rejected them on the merits. “First, the EIS’s discussion of riparian-area mitigation measures is more than adequate to satisfy NEPA. An EIS assessing environmental consequences at the programmatic stage of a multi-step development project can properly discuss mitigation measures in general terms when the specifics of possible well locations are still uncertain, leaving for later a more complete analysis of environmental consequences associated with permitting a particular well site. Second, the Federal Defendants’ decision on which public lands to include in the cumulative-impact analysis of air quality was a reasonable choice involving technical and scientific matters within their areas of expertise.” The Court therefore affirmed the district court’s decision regarding the NEPA challenges.

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Department of Natural Resources Amends Rule Regarding Drilling in the Greater Wattenberg, Colorado Area

July 8, 2011 by Leave a Comment

The Department of Natural Resources’ Oil and Gas Conservation Commission has amended a rule regarding drilling in the Greater Wattenberg Area. On it’s own motion, the Commission will consider these proposed amendments designed to permit greater flexibility in the creation of wellbore spacing units for the purposes of drilling horizontal and infill wells in the area.

The proposed amendments are intended to reduce need for routine well location exception applications filed with and approved by the Commission. Such applications have increased significantly in recent months, due to ongoing oil and gas development activities in the Greater Wattenberg Area.  The proposed amendments are intended to establish rules of general application across the area that will facilitate responsible, balanced oil and gas development in the area, with appropriate protections for surface owners and the environment.

A hearing on the proposed rules will be held on Monday, August 8, 2011 at 1120 Lincoln Street, Suite 801, The Chancery Building, Denver, Colorado 80203, beginning at 9:00 am.

Full text of the proposed rule and more details about the specific changes can be found here. Further information about the rule and hearing can be found here.

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Colorado Court of Appeals: Lease for Oil Drilling Not Violated; Trial Court Erred by Not Considering Trade Usage and Commission Regulation Language Regarding the Capability of a Drilling Rig to Produce Gas

June 27, 2011 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Bledsoe Land Company LLLP v. Forest Oil Corp. on June 23, 2011.

Breach of Contract—Oil and Gas Lease—Contract Interpretation—Ambiguous.

In this dispute alleging breach of an oil and gas lease, defendants Forest Oil Corporation and Omimex Petroleum Inc. (collectively, Forest Oil) appealed the trial court’s judgment in favor of plaintiffs (collectively, the Bledsoes). The judgment was reversed.

The Bledsoes own a ranch in Yuma and Phillips Counties covering 60,418.79 gross surface acres and 37,771.64 net mineral acres. In September 2001, the Bledsoes entered into a lease with William H. Champion, an oil and gas landman doing business for Tipperary Oil & Gas Corporation (Tipperary). The lease granted Tipperary the right to explore and develop the minerals on the Ranch through drilling for and production and sale of oil and gas. In June 2007, the lease was assigned to Forest Oil. In July 2008, the Bledsoes filed this action, alleging that Forest Oil failed to drill a new well within 180 days of completion of a prior well and failed to continuously prosecute wells on the ranch as required by the lease. Thereafter, the court entered judgment in favor of the Bledsoes.

On appeal, Forest Oil contended that the trial court erred in its interpretation of the terms “completion” and “continuously prosecuted” as used in the lease. “Completion” has a common trade usage meaning “capable or ready to produce gas,” which the trial court disregarded in concluding that completion occurred at the time the drilling rig was released. Further, there is nothing in the lease that altered this definition. The lease also is subject to Colorado Oil and Gas Conservation Commission regulations, which state “[a] gas well shall be considered completed when the well is capable of producing gas through wellhead equipment from the ultimate producing zone after the production string has been run.” The undisputed testimony at trial established that Forest Oil did not complete Well #10-6-5-44 until it was hydraulically fractured on August 9, 2007; therefore, only 176 days passed between completion of Well #10-6-5-44 and commencement of Well #8-3-5-45. Accordingly, Forest Oil did not violate the 180-day provision of the lease. Further, because the lease defined the term “continuously prosecuted” as drilling a new well every 180 days, the trial court erred in concluding that Forest Oil breached the lease by failing to drill or rework wells on a continuous basis. Consequently, Forest Oil did not breach the lease and reversal was required.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on June 23, 2011, can be found here.

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