To: Board of County Commissioners
Through: Ron Carl, County Attorney
Prepared By:
prepared
Robert Hill, Sr. Assistant County Attorney
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Subject:
title
Oil and Gas Lease Crestone Resources Watkins Holding LLC for 6.66 mineral acres in Section 1, Township 5, Range 65 and Section 6, Township 5, Range 64
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Purpose and Request:
recommended action
The BOCC is requested to adopt a Resolution to approve an oil and gas lease agreement with Crestone Resources Watkins Holding LLC (Crestone), subject to the County Attorney’s review and approval as to form of the final lease agreement document. The County Attorney review and approval as to form is necessary to verify Crestone’s addition of certain lease terms that the County usually requires in such leases.
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Background and Discussion: When the County acquired the property associated with and described in the lease, the property was conveyed to the County for road use but there were no reservations for minerals. Consequently, the County most likely acquired the mineral rights associated with the land used for these roads. Crestone has proposed to lease 6.66 mineral acres of these mineral rights underlying the road right-of-ways within the described sections. The lease offered by Crestone is for a three (3) year term with option to extend and provision for continuation of on-going drilling operations, does not allow for surface operations, and provides for a $3000/net acre bonus payment and 20% royalty payment to the County. The proposed lease is for 6.66 acres in Township 5 South, Range 64 West, Section 6 and Township 5, Range 65, Section 1. Additional county terms require the Operator to indemnify the county in the event the county is sued over its operations and removes any guarantee of marketable title.
Alternatives: The Board can decline to approve the lease agreement. However, Crestone would be able to apply to COGCC to force pool the County’s mineral interests under less desirable terms.
Fiscal Impact: This will result in revenue for the bonus payment and annual royalty payments if the wells produce oil and gas for market.
Alignment with Strategic Plan:
☒Be fiscally sustainable
☐Provide essential and mandated service
☐Be community focused
Concurrence: There has been no objection from PWD or the Oil and Gas Specialist
Resolution: Attached is a copy of the draft resolution.