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Larimer County enters into oil and gas lease at Little Thompson Farm

January 04, 2019 | Local News

By Amber McIver-Traywick

The Surveyor

On Dec. 4 Larimer County entered into a non-surface use lease for the oil and gas rights for Little Thompson Farm Open Space, located southwest of Berthoud, Colo. Larimer County owns 100 percent of the surface and mineral rights for this property, including all oil and gas.

The Board of County Commissioners approved the lease between Larimer County and Extraction Oil and Gas, Inc. at its weekly Administrative Matters meeting last week. The lease has been granted for a three-year term with an option to renew for an additional two-year term if production is not established in the initial three-year term. The lease includes an up-front bonus payment of $2,700 per acre, or $594,243, to Larimer County and a 20 percent royalty if production occurs. According to Larimer County Senior Land Agent Charlie Johnson, “The initial bonus payment revenue from the oil and gas lease will go to reduce the debt that our (The Department of Natural Resources) program incurred when we borrowed funds from the County Solid Waste Department to purchase the Little Thompson Farm Open Space. A bonus payment is a payment that is issued at the beginning of the initial term of the lease.”

The lease does not include any surface use of the 220-acre open space, so no infrastructure related to oil and gas extraction will be allowed on the property. With a non-surface use lease, Larimer County has ensured the open space remains a working farm and the property’s agricultural and other conservation values are protected. Johnson confirmed this by saying, “…there will be no activity related to Oil & Gas on the surface of the farm.”

Larimer County was approached by Extraction Oil and Gas, Inc. to lease the oil and gas rights for Little Thompson Farm Open Space. The county was not actively pursuing this lease opportunity. After being contacted by the oil and gas company, Johnson, along with other key staff brought the proposal to the Larimer County Open Lands Advisory Board which eventually was brought to the Board of Commissioners for their approval.

By voluntarily entering into the lease, Larimer County could maximize the financial benefits from oil and gas extraction for the benefit of the public and ensure the county has a non-surface use lease, avoiding surface impacts on the open space. An alternative would have been to reject offers to lease the county’s mineral interest, become a nonconsenting owner and potentially be forced pooled as a result of a third-party application to the Colorado Oil and Gas Conservation Commission (COGCC).  “The lease provides that upon the expiration of the initial 3-year term that Extraction will have the option to extend the lease for 2 more years for the same royalty rate of 20% and they will pay the County 150% of the initial bonus payment. After the expiration of the extended 2-year lease term, it would be renegotiated but it is unlikely that it would play out that way,” Johnson said.

At this time, a permit for this project has not been approved by the COGCC, so any future well pad location is unknown. The county will not have any determining say in where that well pad location will be, apart from it not being located on the open space, as the decision will be made between the COGCC and Extraction Oil and Gas, Inc.

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