On April 24, 2018, Colorado state district courts solidified judicial recognition of the Colorado General Assembly’s delegation of primary jurisdiction to the Colorado Oil and Gas Conservation Commission (Commission) over royalty underpayment disputes. Two judges of the District Court for the City and County of Denver dismissed royalty underpayment lawsuits for failure to exhaust administrative remedies before the Commission.
These decisions are significant because one judge vacated his prior ruling in the same case that had denied a substantively similar motion to dismiss, and the other judge had previously denied a similar motion to dismiss in a different case.
On March 23, 2018, we wrote on the evolution of Colorado royalty litigation and exhaustion of administrative remedies before the Commission. At that time, 13 Colorado district court opinions had granted motions to dismiss royalty underpayment claims for failure to exhaust remedies before the Commission, and four opinions had denied similar motions. In the ensuing months, courts have issued seven additional opinions granting motions to dismiss for failure to exhaust administrative remedies. Because one judge vacated his prior denial, the tally now stands at 20 dismissals and three denials:
Cases Dismissed
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Richard & Mary Jolley Family LLLP v. Bill Barrett Corp., No. 2014CV30330 (Colo. Dist. Ct., Garfield Cty., Feb. 12, 2015)[1]
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Miller Land & Cattle Co. v. Bill Barrett Corp., No. 2016CV30102 (Colo. Dist. Ct., Garfield Cty., March 6, 2017), cert. denied (Dec. 4, 2017)
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Airport Land Partners, Ltd. v. Antero Res. Corp., No. 2016CV30259 (Colo. Dist. Ct., Garfield Cty., July 31, 2017)
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Limbach v. Antero Res. Corp., No. 2016CV30263 (Colo. Dist. Ct., Garfield Cty., July 31, 2017)
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Shidelerosa v. Antero Res. Corp., No. 2016CV30280 (Colo. Dist. Ct., Garfield Cty., Aug. 16, 2017)
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Shuster v. Antero Res. Corp., No. 2016CV30049 (Colo. Dist. Ct., Garfield Cty., Aug. 16, 2017)
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Casey v. Antero Res. Corp., No. 2017CV30071 (Colo. Dist. Ct., Garfield Cty., Aug. 17, 2017)
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Freeman Invs. v. Bill Barrett Corp., No. 2017CV32667 (Colo. Dist. Ct., Denver City & Cty., Nov. 6, 2017)
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McClintock & Nikoloric LLC v. Bill Barrett Corp., No. 2017CV34092 (Colo. Dist. Ct., Denver City & Cty., Dec. 20, 2017)
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Daniels Petroleum Co. v. Antero Res. Corp., No. 2016CV30265 (Colo. Dist. Ct., Garfield Cty., Jan. 19, 2018)
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Energy Invs., Inc. v. Antero Res. Corp., No. 2016CV30261 (Colo. Dist. Ct., Garfield Cty., Jan. 19, 2018)
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Jerry Jones v. Antero Res. Corp., No. 2017CV30033 (Colo. Dist. Ct., Garfield Cty., Jan. 19, 2018)
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C & M Res., LLC v. Extraction Oil & Gas, Inc., No. 2017CV30685 (Colo. Dist. Ct., Denver City & Cty., Mar. 2, 2018)
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Bar Seven L, LLC v. Antero Res. Corp., No. 2016CV030258 (Colo. Dist. Ct., Garfield Cty., Mar. 29, 2018)
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Watson v. Antero Res. Corp., No. 2016CV030262 (Colo. Dist. Ct., Garfield Cty., Mar. 30, 2018)
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Pollvogt Garfield, LLLP v. Antero Res. Corp., No. 2016CV30279 (Mar. 30, 2018)
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McPherson v. Antero Res. Corp., No. 2017CV30034 (Colo. Dist. Ct., Garfield Cty., Apr. 2, 2018)
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Arroyo v. Antero Res. Corp., No. 2017CV30054 (Colo. Dist. Ct., Garfield Cty., Apr. 2, 2018)
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Paradise Valley Minerals, LLC v. Ursa Piceance, LLC, No. 2017CV34723 (Colo. Dist. Ct., Denver City & Cty., Apr. 24, 2018)
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Retova Ress., LP v. Bill Barrett Corp., No. 2015CV34351 (Colo. Dist. Ct., Denver City & Cty., Apr. 24, 2018)
Cases Denying Motions to Dismiss
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Salgado v. URSA Operating Co., No. 2015CV30057 (Colo. Dist. Ct., Garfield Cty., Sept. 23, 2015)
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STILL VALID?: Retova Res., LP v. Vanguard Permian, LLC, No. 2015CV34352 (Colo. Dist. Ct., Denver Cty., Feb. 18, 2016) (denial without opinion)
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VACATED:
Retova Resources, LP v. Bill Barrett Corp., No. 2015CV34351 (Colo. Dist. Ct., Denver City & Cty., March 11, 2016)
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Crichton v. Augustus Energy Res., L.L.C., No. 15-CV-00835-KLM, 2017 WL 4838735 (D. Colo. Oct. 26, 2017)
Retova Resources, LP v. Bill Barrett Corp.
On April 24, 2018, Judge Michael A. Martinez vacated (click here for the order) his March 11, 2016 denial of Bill Barrett Corp.’s − now HighPoint Resources Corp. − motion to dismiss and granted a renewed motion to dismiss, which was based on the developing law discussed in our prior alert. The court definitively rejected its previous holding that the judicial branch has concurrent jurisdiction to decide royalty underpayment cases:
[T]he Court holds that the [Colorado Oil and Gas Conservation] Act confers initial, primary jurisdiction to the [Commission] to determine (1) whether it has jurisdiction over the payment of proceeds dispute, and (2) whether a claim concerning payment of proceeds pursuant to § 34-60-118.5 involves a bona fide dispute over the interpretation of a contract, removing jurisdiction from the [C]ommission.
The court’s holding not only provides a thorough and complete analysis of why royalty underpayment plaintiffs must exhaust their administrative remedies before the Commission, but it vacates one of the opinions that plaintiffs had relied on to circumvent the Commission’s primary jurisdiction.
Paradise Valley Minerals, LLC v. Ursa Piceance, LLC
On April 24, 2018, Judge Elizabeth A. Starrs also dismissed a royalty underpayment case, marking a change in position from the court’s previous denial of a similar motion to dismiss in Retova Resources, LP v. Vanguard Permian, LLC. The court foreshadowed that similar royalty cases must first be filed with the Commission: “The Court agrees with Defendant, and with many other recent district court decisions, that this case, and cases similarly situated, must first proceed before the Commission” (emphasis added). The court’s holding not only indicates a reversal in the court’s previous position, weakening the persuasive value of another previous opinion upon which plaintiffs rely to circumvent the Commission’s primary jurisdiction, but it forecasts the court’s view that all similar royalty underpayment cases must first be filed with the Commission.
The Path Forward
These recent decisions highlight a few issues to watch in future Colorado royalty litigation:
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On June 11 − 12, 2018, the Commission is set to decide whether it has jurisdiction over a number of royalty underpayment cases.
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The current tally of 20 dismissals and three denials − arguably only two denials, with Judge Starrs’s decision − raises the following question: Is there a good-faith basis to file royalty underpayment cases in district court? The Colorado General Assembly conferred primary jurisdiction on the Commission for payment-of-proceeds disputes − particularly over the amount of proceeds due. The Colorado Court of Appeals recognized such primary jurisdiction in Grant Bros. Ranch, LLC v. Antero Res. Piceance Corp., 409 P.3d 637, 643 (Colo. App. 2016). And the overwhelming number of state district courts have agreed. In light of this authority, what justifies filing royalty underpayment cases in district court?
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Ignoring the courts’ previous dismissals, a handful of plaintiffs have refiled their cases in district court while their matter is still pending before the Commission. See, e.g., Energy Invs. Inc. v. Antero Res. Corp., No. 2018CV30068. This tactic met a terse reception and a prompt dismissal from the court. See, e.g., Shidelerosa, LLLP v. Antero Res. Corp., No. 2017CV30212.
[1] The dates in the citations reflect the date the court issued its relevant order.
