HomeMy WebLinkAbout20170676.tiffWeld County, CO Charter and County Code Page 1 of 1
Sec. 2-2-70. - Mineral leasing policy.
A. The County owns mineral rights for approximately forty thousand (40,000) acres. The Board
of County Commissioners adopted the following mineral leasing policy:
1 The term of the leasing period shall be a maximum of three (3) years.
2. There shall be a continuation of the sealed bid process with the amendment that the top
two (2) bidders and any other bidder within ten percent (10%) may participate in an
auction. The opening of the sealed bids and the auction shall be held on the same day.
3 A bid of at least six hundred dollars ($600.00) per acre shall be the minimum bonus
amount required.
4. There shall be a continuation of the requirement for certified funds.
5 Where there is a conflict concerning the ownership of the lease, the owner of the lease
shall provide evidence of ownership.
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6 Royalty interest in the production to be paid to the County shall be at least
perc1k t- (22.5°(c)
percc-Fa (255 ). Specific amount of royalty interest shall be set by the Board of County
Commissioners prior to the bidding process.
7 Royalty interest in the production to be paid to the County shall be eighteen and one-half
percent (18.5%) when bidding is waived on small parcels under five (5) acres, with a
minimum of a twelve -hundred -dollar royalty bonus per acre.
B. The Board of County Commissioners adopted the following policy for extending the terms of
all mineral leases. The Board will extend the terms of all mineral leases in which it is the
Lessor according to the following conditions:
1. No lease term will be extended for more than six (6) months from the origjnal expiration
02.-/7-/7
date as contained in the mineral lease.
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2. The Lessee shall pay to the Lessor the sum of on 'third (?) of thebriginal bd�nus.
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3. The Lessee must pay to the Lessor the sum of t dollars ($2.50) per acre
leased as delayed rental for the term of the ext
4. The royalty will remain the same as in the original lease.
(Weld County Codification Ordinance 2000-1; Weld County Code Ordinance 2007-6; Weld County
Code Ordinance 2009-2; Weld County Code Ordinance 2010-10 ; Weld County Code Ordinance
2013-5 ; Weld County Code Ordinance 2014-2 )
2017-0676
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BOARD OF COUNTY COMMISSIONERS
WORK SESSION COVER LETTER
Department/Office Clerk to the Board Date: December 12, 2016
Person requesting work session: Esther Gesick Extension: 4226
Has your commissioner coordinator/elected official approved the work session?
Yes, per Pass Around direction from the Board.
Recommended length of time needed for discussion:
10-15 Minutes
In addition to yourself and the board, who should attend?
Bruce, Frank, Karla Ford, Troy Swain, Tom Parko, Don Warden
Brief description of the issue:
Since 2010, the frequency of oil and gas lease nominations averaged three (3)
auctions a year. The Board originally increased the bonus to $400 in 2010, and it
remained at that amount until 7/29/2013, when it was increased to $600 during the
peak of the oil and gas boom.
The Clerk to the Board has received a couple of verbal inquiries, as well as a written
request from Bill Barrett Corp (attached), regarding whether the Board would
consider reducing the minimum Oil and Gas Lease bonus amount, considering the
current oil and gas market prices. As a point of reference - the last nomination/
auction was on August 3, 2015.
Options for the Board:
1) Retain the current minimum bonus amount of $600.00 and Royalty interest of
25%;
2) Reduce the per mineral acre bonus amount and/or the Royalty interest amount in
response to industry requests to make leasing more financially feasible.
Recommendation to the Board:
This decisions is purely at the discretion of the Board. At the previous work session
the Commissioners present (MF, JC, SM) expressed support for retaining the $600
bonus but considered reducing the royalty amount to 20% or 22.5%, or some other
amount deemed appropriate by the Board to be more consistent with going rates.
BOARD OF COUNTY COMMISSIONERS
PASS -AROUND REVIEW/ WORK SESSION REQUEST
RE: Oil and Gas Lease Bonus/Royalty Amounts
DEPARTMENT: CTB
PERSON REQUESTING: Esther Gesick
DATE: 12/05/2016
Brief description of the problem/issue:
Since 2010, the frequency of oil and gas lease nominations averaged three (3) auctions a year. The Board
originally increased the bonus to $400 in 2010, and it remained at that amount until 7/29/2013, when it was
increased to $600 during the peak of the oil and gas boom.
The Clerk to the Board has received a couple of verbal inquiries, as well as a written request from Bill Barrett
Corp, regarding whether the Board would consider reducing the minimum Oil and Gas Lease bonus and/or
royalty amount, considering the current oil and gas market prices. As a point of reference - the last
nomination/auction was on August 3, 2015.
What options exist for the Board? (Include consequences, impacts, costs, etc. of options)
1) Retain the current minimum bonus amount of $600.00 per mineral acre and 25% Royalty interests;
2) Reduce the amounts in response to industry requests to make leasing more financially feasible.
Recommendation:
Based on the lack of activity and the industry's expressed interest to pursue a lease if the amounts were more
consistent with market conditions, it was my initial recommendation at the 11/22 Work Session to reduce the
amount back down to $400, or some other amount deemed appropriate by the Board. Following that discussion,
the three Commissioners present (MF, JC, SM) indicated support for retaining the $600 bonus, but reducing the
Royalty interest down to 18%, 22% or 22.5% to be more consistent with market practices. I was also instructed
to recirculate this topic for further consideration and discussion via a Pass Around memo.
Please advise.
Mike Freeman, Chair
Sean P. Conway
Julie A. Cozad
Barbara Kirkmeyer
Steve Moreno
Approve
Recommendation
Schedule
Work Session
me
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Other/Comments:
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3131 McKinney Ave., Ste. 600
Dallas, TX 75204
(214) 643-6075
hervoil.com
November 21, 2016
Weld County Commissioners
1150 O St.
Greeley, CO 80632
Re: Mineral Interest Lease Offer
6 -08N -59W, Weld County, Colorado
To whom it may concern:
Our records indicate that Weld County owns a 123 net mineral acre tract in the above referenced section which
appears to be unleased. We are interested in leasing this tract, but the requested royalty and bonus consideration
($600.00/net mineral acre with a 1/4th royalty) is not economically feasible in the current commodity price
environment.
While we understand that there are certain areas that the 1/4th royalty is economically feasible we do not believe
that to be the case here. In over 1,000 oil and gas leases taken in township 8N over the last 5 years there has
only been one taken in an arms -length transaction for over a 1/5th royalty, and that was an oil and gas lease
taken from Weld County in 2013 when the price of one barrel of WTI crude oil ranged between $88.01 and
$110.53. That oil and gas lease, containing a 1 /4th royalty, has since expired due to it not being economically
viable to drill on that high of a burden. The average royalty in township 8N, ranges 57W -62W has been 17.09%
with the median being 17.50%.
In an effort to reduce waste and encourage development we humbly request the Commissioners reconsider the
terms and allow us to extend a lease offer with a lesser royalty, e.g. 1 /5tn
If you have any questions, please contact us at the phone number or e-mail address shown below.
Sincerely,
-1/2/
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Bennett Neale
HERV Oil, LLC
Office: 214-643-6075
Cell: 918-605-5128
Bennett.neale@hervoil.com
Esther Gesick
Subject: FW: Mineral Leasing Bid
From: Kelly Muldoon [mailto:kmuldoon@billbarrettcorp.com]
Sent: Friday, November 11, 2016 1:57 PM
To: Esther Gesick <egesick@co.weld.co.us>
Subject: RE: Mineral Leasing Bid
Good afternoon Esther. I apologize for the delay in replying, I was on vacation and just got back to a pile of
work and a very long list of emails.
In response to the question posed below, I have come up with a number that I believe is reasonable. I used
basically a similar formula for negotiating an adjustment to a few lease extensions with the State; which the
State accepted.
The avg. price of oil:
1/31/2014 - 10/31/2014: $101.71
1/31/2016 - 10/31/2016: $ 41.59
Current prices are 40.89% of what they were when Weld County set the minimum bonus of $600/ac.
$600.00 x .4089 = $245.34, so to simplify things round up to $250/ac?
I hope this helps.
Thanks,
P. Kelly Muldoon, J.D., CPL
Land Operations Manager
BILL BARRETT CORPORATION
1099 18th Street I Suite 2300
Denver, CO 80202
Main: 303.293.9100 I Direct: 303.312.8553
kmuldoon(t billban-ettcorp.com
‘vw. bi 11 barrettcorp.com
Bill Barrett Corporation
From: Kelly Muldoon [maiIto: kmuldoon@billbarrettcorp.com]
Sent: Monday, August 29, 2016 2:22 PM
1
To: Marcia Walters <m‘valters@co.weld.co.us>; Rose Everett <reverett!l%co.NAweld.co.us>
Subject: Mineral Leasing Bid
Good afternoon,
I am interested in discussing the bidding process for an Oil and Gas Lease in Township 5N Range 61W Section
34 (S/2).
It appears the code requires a minimum bid $600/acre; however, the code was written in 2014 when Oil and Gas
prices were much higher. We have worked with the COGCC on similar type leases and they have adjusted the
minimum requirements to more accurately reflect the current market. Is there someone I may speak with
regarding the minimum bid for an Oil and Gas lease?
Thanks,
P. Kelly Muldoon, J.D., CPL
Land Operations Manager
BILL BARRETT CORPORATION
1099 18th Street I Suite 2300
Denver, CO 80202
Main: 303.293.9100 I Direct: 303.312.8553
knruldoon@billbarrettcorp.com
www.hillbarrettcorp.com
Bill Barrett Corporation
2
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BOARD OF COUNTY COMMISSIONERS
WORK SESSION COVER LETTER
`JU.ao• tiov. o22ridl
3'0c. - 3 /5
/c2/5 PA. "lento -
Department/Office Clerk to the Board Date: November 7, 2016
Person requesting work session: Esther Gesick Extension: 4226
Has your commissioner coordinator/elected official approved the work session?
Yes, per weekly briefing discussion with Chair Freeman.
5m -5 rest'
Recommended length of time needed for discussion:
10-15 Minutes
In addition to yourself and the board, who should attend?
Bruce, Frank, Karla Ford, Troy Swain, Tom Parko, Don Warden
Brief description of the issue:
Since 2010, the frequency of oil and gas lease nominations averaged three (3)
auctions a year. The Board originally increased the bonus to $400 in 2010, and it
remained at that amount until 7/29/2013, when it was increased to $600 during the
peak of the oil and gas boom.
The Clerk to the Board has received a couple of verbal inquiries, as well as a written
request from Bill Barrett Corp, regarding whether the Board would consider
reducing the minimum Oil and Gas Lease bonus amount, considering the current oil
and gas market prices. As a point of reference - the last nomination/auction was on
August 3, 2015.
Options for the Board:
1) Retain the current minimum bonus amount of $600.00 per mineral acre;
2) Reduce the amount in response to industry requests to make leasing more
financially feasible.
Recommendation to the Board:
Based on the lack of activity and the industry's expressed interest to pursue a lease
if the amount is more consistent with market conditions, it would be my
recommendation to reduce the amount back down to $400, or some other amount
deemed appropriate by the Board.
Esther Gesick
Subject: FW: Mineral Leasing Bid
From: Kelly Muldoon[mailto:kmuldoonf'uhillbarrettcorp.conl]
Sent: Monday, August 29, 2016 2:22 PM
To: Marcia Walters <mwaltersgeo.weld.co.us>; Rose Everett <reverett@co.weld.co.us>
Subject: Mineral Leasing Bid
Good afternoon,
I am interested in discussing the bidding process for an Oil and Gas Lease in Township 5N Range 61W Section
34 (S/2).
It appears the code requires a minimum bid $600/acre; however, the code was written in 2014 when Oil and Gas
prices were much higher. We have worked with the COGCC on similar type leases and they have adjusted the
minimum requirements to more accurately reflect the current market. Is there someone I may speak with
regarding the minimum bid for an Oil and Gas lease?
Thanks,
P. Kelly Muldoon, J.D., CPL
Land Operations Manager
BILL BARRETT CORPORATION
1099 18th Street I Suite 2300
Denver, CO 80202
Main: 303.293.9100 I Direct: 303.312.8553
kmuldoon arbillbarrettcorp.com
www.billbarrettcorp.com
Bill Barrett Corporation
1
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