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Grant Brothers Ranch, LLC v. Antero Resources Piceance Corp.

Court of Appeals of Colorado, Sixth Division

December 1, 2016

Grant Brothers Ranch, LLC, Plaintiff-Appellant,
v.
Antero Resources Piceance Corporation, a withdrawn Colorado corporation, and Ursa Operating Company, LLC, a Delaware corporation, Defendants-Appellees.

         Garfield County District Court No. 14CV30180 Honorable James B. Boyd, Judge.

         JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED WITH DIRECTIONS

          Dufford, Waldeck, Milburn & Krohn, LLP, Nathan A. Keever, Grand Junction, Colorado, for Plaintiff-Appellant

          Beatty & Wozniak, P.C., Michael J. Wozniak, Karen L. Spaulding, Malinda Morain, Denver, Colorado, for Defendants-Appellees

          OPINION

          FOX JUDGE.

         ¶ 1 Plaintiff, Grant Brothers Ranch, LLC (Grant Brothers), sued defendants, Antero Resources Piceance Corporation (Antero) and Ursa Operating Company, LLC (Ursa) (collectively, Operators), to recover its share of proceeds derived from the production and sale of oil and gas. Concluding that Grant Brothers was required and failed to exhaust its administrative remedies available under the Oil and Gas Conservation Act, §§ 34-60-101 to -130, C.R.S. 2016 (the Act), the district court held that it lacked subject matter jurisdiction over the action and granted summary judgment in favor of Operators. Grant Brothers appeals the judgment dismissing its claims with prejudice. We affirm in part, reverse in part, and remand with directions to correct the judgment.

         I. Background

         ¶ 2 Antero, an oil and gas exploration and production company, received approval from the Colorado Oil and Gas Conservation Commission (the Commission) to establish a drilling and spacing unit to produce oil and gas in Garfield County. Grant Brothers owned property within this unit. Antero wished to produce the oil and gas underlying Grant Brothers' property, but Grant Brothers refused Antero's offer to lease the minerals or participate in their production.

         ¶ 3 As a result, Antero requested that the Commission pool all nonconsenting interests in the unit and allow Antero to produce and sell the oil and gas of the nonconsenting owners. Grant Brothers asked the Commission to deny Antero's request. After a hearing, the Commission issued an order pooling all of the nonconsenting interests in the unit.

         ¶ 4 About a year and a half after issuing this pooling order, the Commission approved Antero's request to establish another drilling and spacing unit within the same lands as the first unit in order to produce oil and gas from a deeper formation. Again, Antero asked Grant Brothers to lease the minerals or participate in their production and, again, Grant Brothers refused. Antero requested that the Commission pool all nonconsenting interests in the second unit. After a hearing, the Commission issued an order pooling all nonconsenting interests in the second unit.

         ¶ 5 As a result of the Commission's pooling orders, Grant Brothers became a nonconsenting owner pursuant to section 34-60-116(7), C.R.S. 2016, of the Act. In pertinent part, this meant that Grant Brothers was entitled to receive its interest in the proceeds derived from the production and sale of oil and gas from wells in the units. However, Grant Brothers would receive payment only after these wells reached "payout, " in other words after Antero recovered the costs allowed by section 34-60-116(7). The pooling orders required Antero to furnish Grant Brothers with monthly statements containing information about its costs and its proceeds.

         ¶ 6 Almost three years after the Commission issued its last pooling order, Grant Brothers asked Antero for permission to audit its books and records regarding the wells at issue. Antero refused, noting that it had been sending Grant Brothers the required monthly statements.

         ¶ 7 About two years after Antero refused the request for an audit, Grant Brothers sued Operators in district court.[1] Grant Brothers' complaint requested an equitable accounting and alleged that the wells had reached payout, but Operators had yet to pay Grant Brothers. Operators filed a motion for summary judgment, asserting that Grant Brothers was required to exhaust its administrative remedies available under the Act and had failed to do so before filing its complaint. Operators argued that the district court lacked subject matter jurisdiction over the action and should dismiss it with prejudice. The court agreed and granted summary judgment, dismissing the action with prejudice.

         II. Summary Judgment

         ¶ 8 Grant Brothers first contends that the district court improperly granted summary judgment because Grant Brothers was not required to exhaust its administrative remedies, and, thus, the court had subject matter jurisdiction over the action. We disagree. Second, Grant Brothers argues that it was inappropriate for the district court to dismiss the action with prejudice on the basis that the court lacked subject matter jurisdiction over the action. We agree that dismissal with prejudice was error.

         A. Administrative Exhaustion

         ¶ 9 Grant Brothers argues that the Act does not contain a clear manifestation of legislative intent requiring an involuntarily pooled mineral rights owner to exhaust administrative remedies before seeking an equitable accounting in district court regarding the amount of proceeds owed after the wells at issue reach payout. Grant Brothers asserts that the Act's language and legislative history - including the 1998 amendments to the Act and related testimony from Senator Tilman Bishop, the sponsor of the amendments[2] - and the Commission's rules support this position.

         1. Preservation

         ¶ 10 The parties agree that Grant Brothers properly preserved this argument, except to the extent that Grant Brothers uses Senator Bishop's testimony to support its contention.

         ¶ 11 We do not consider "arguments never presented to, considered or ruled upon by" the district court. Core-Mark Midcontinent Inc. v. Sonitrol Corp., 2016 COA 22, ΒΆ 24 (citation omitted). All that is needed to preserve an issue for appeal is for the issue to be brought to the district court's attention so that the court has an ...


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