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Mineral-rights owners may be paid

Counties with fracking bans would need to compensate
State lawmakers are expected to debate a bill in the upcoming legislative session that would require counties that ban hydraulic fracturing to compensate mineral-rights owners for their lost income.

DENVER – State lawmakers this year are expected to debate a bill that would require counties that ban hydraulic fracturing to compensate mineral-rights owners.

Even before the measure has been introduced, a host of questions are emerging for when the Legislature convenes in January.

Rep. Perry Buck, R-Windsor, said she will introduce the measure to address the lost value of mineral rights as a result of so-called fracking bans.

Five local communities – largely along the Front Range – have banned or placed moratoriums on fracking as a result of ballot initiatives. Many of those ordinances are tied up in legal battles. The efforts stem from health and nuisance concerns.

Boulder County commissioners recently extended a moratorium on fracking, and the Longmont City Council also has enacted separate rules and regulations more stringent than the state.

The hope behind Buck’s measure is that local governments would not encourage or support efforts to ban fracking if those governments were required to compensate mineral owners on the value of lost rights.

“Our government should not have the authority to deprive a mineral owner of their property without just compensation,” Buck said. “My bill protects mineral owners, and ensures they will be fairly compensated if a county decides to enact a fracking ban.”

But questions remain, including how to value the mineral rights, and what constitutes a taking of those rights. Many argue that a ban on fracking is not a de facto loss of rights because there are ways to harvest resources without the controversial process.

Gas and oil companies heavily favor fracking, however, because of its impressive ability to extract resources by employing sand, chemicals and water to stimulate production of gas and oil under the ground.

Gwen Lachelt, a La Plata County commissioner, said conversations continue on takings of rights. She is co-chairwoman of a task force appointed by Gov. John Hickenlooper that is meeting to examine whether more state regulations are needed.

“A ban on fracking does not mean a ban on oil and gas development,” Lachelt said. “It just means the actual fracking process itself. But companies are still developing minerals without fracking.”

Outgoing La Plata County Commissioner Bobby Lieb said he imagines a law requiring counties to compensate mineral-rights owners would get caught in a web of court proceedings.

“A bill to that degree sounds like a legal nightmare,” Lieb said. “I can see all kinds of unintended consequences coming if it’s not well-crafted and can talk specifically to the legal rights of a property owner.”

There are more than 600,000 residents who have mineral ownership in Colorado.

Complications often arise between those who own the mineral rights under the ground, and the surface rights above the ground. Properties have been bought and sold over the years, with some transactions include mineral rights, and others don’t.

Mineral-rights owners have the option of leasing their rights to a producer in return for either a one-time payment, or a percentage of shares, known as a royalty.

Firms are hired to conduct geological surveys and assessments to determine the value of mineral rights. These assessments guide producers.

Michelle Smith, who owns the mineral and surface rights to her Elbert County farm, was featured in a gas and oil industry commercial supporting the rights of owners. She told The Durango Herald that Buck’s bill shines a spotlight on the concerns of owners, and that it would apply some pressure to end bans.

“The conversation does need to take place,” Smith said. “Citizens need to realize that it is the taxpayer who will pay these bills ultimately because the cities and counties don’t have a large enough budget to pay to compensate the mineral owners for their loss of revenue if they are denied having their minerals developed.”

But Chip Taylor, executive director of Colorado Counties Inc, which represents counties in Colorado, said he believes there are too many questions for the measure to move forward this year without careful consideration.

“There’s a lot of details to understand before I’m even able to guess how the commissioners are going to come down,” he said.


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