As the 4Q15 and 2015 as a whole starts to wind down, there is plenty to cover about how the year went. We’ve seen oil fall from about $75/bbl this time last year to just under $35/bbl as they sit today. This has caused massive overhaul of how operators conduct their business. It has become survival of the fittest efficient. More operators have closed up shop and moved to more profitable plays; put everything on hold; or filed bankruptcy, while a select few have adapted to weather the storm. This has affected every region and every play both socially and economically. Jobs have been lost almost as fast as profits for anyone who owns minerals or leases them. Weld County sure has felt this blow just as badly as the rest.
But with all of the focus on prices and coverage of the major operators at the forefront, there is something that easily gets overlooked and is well worth the time to discuss: Oil & Gas Politics. Although Weld County has fared better than most oil-rich areas, it could very well run into a buzz saw that will negate the careful planning of the players in the area. According to an article posted a few days ago by Catherine Sweeney of the Greeley Tribune, the Weld County Board of Commissioners has been meeting to discuss county regulations that will affect the area for the worse (as far as mineral owners and operators are concerned.) The board is trying to unanimously pass an ordinance that would force oil & gas companies to get special permission, known as a USR, before drilling on any land zoned for agricultural use. How all of this came about is current rules that the COGCC has in place when it comes to oil production. These rules are said to take power away from the surface owner and put the local government in charge. The county likes the revenue brought in by oil & gas production ($42 million in tax revenue for 2015) so the county is incentivized to side with the operators and mineral owners. There is another part of the regulations that causes trouble. The COGCC rules also take land-use authority away from local governments and give them to the state. The Board likes the idea of more USRs because it makes companies and surface owners work together while loosening the apparent stranglehold the COGCC and he State has on said surface owners.
The big problem with all of this is how counter-intuitive it is, according to most residents. All it does is create more hoops to jump through for operators and more confusion for land and mineral owners. Monstrous delays are expected with the total number of USRs going from 100 per year, to 400. This will inevitably delay production and site planning “at least 6 to 9 months” says Kim Cooke, a policy analyst from Anadarko. With prices already at decade-lows, a move like this seems Weld County is cannibalizing itself, all in the name of fairness for the land owner.
Here are some facts to consider:
90% of Colorado’s oil comes from Weld County
Tax revenues from oil for 2016 look to be about $20 million dollars
2.5 million acres (75%) of Weld County is devoted to farming/ranching
There is over 3,000 farms in Weld County
Weld agricultural products create over $1 billion of market value
Weld agriculture value increased by $6.6 million in 2015
Put yourself in the Board’s shoes. What is more important to the community at this point, oil or agriculture? Pleasing the land owner, or pleasing the operator? It seems that they have all but made their decision, and the fate of the oil and gas industry in Weld County could very well be in trouble in the near future.
What does this mean for mineral owners? Please reach out to Vine Royalty for further information on how to strategize and maximize your mineral potential.