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With drilling rules still in the works, city council signs lease agreement

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By Crystal Nelson

BRIGHTON — Brighton City Council is moving ahead with a lease with a nearby drilling operation despite still working on drafting new oil and gas regulations for the city.

Council voted 8-0 during its June 17 meeting to enter into an oil and gas lease with Synergy Resources Corps. for 140 acres of city-owned property in three sections of the city.  Councilman Ken Kreutzer was excused from the meeting and unable to cast his vote.

 

Under the agreement, Synergy Resources Corps. would be able to obtain oil and natural gas from city-owned grounds via horizontal wells using hydraulic fracturing. The wells would be located outside of city limits in unincorporated Adams County. 

Special Counsel Matt Sura outlined the three-year lease with the company option to extend the agreement for another two years if they aren’t able to develop some of the minerals. He also explained that the lease does not allow oil and gas facilities or infrastructure on the city’s property surfaces and that the wells would be at least a half mile away from the city’s water infrastructure.

The city owns 100 percent of the minerals on the property and according to Sura, the city will receive a bonus and a 20-percent royalty rate. Sura said the financial impact of leasing the land is not substantial at this point but will be. The city will receive a bonus payment of between $3,500 and $4,000 per mineral acre within 30 to 20 days of finalizing the lease and will receive the 20-percent royalty rate, which is only payable if oil and/or gas is produced from the well.

“The real long-term financial gain for the city of Brighton is in the royalty rating and in Colorado, really the highest royalty rate that is achievable is 20 percent and with no costs deducted, and that’s what we were able to achieve in this case,” he said. 

Sura said it was always the intention of city staff and council to refrain from doing any leasing activity until it had updated its oil and gas ordinances but that Colorado statutes allow for force-pooling, which allows oil and gas operators to force a landowner who doesn’t want to lease their minerals to participate in development. 

“It was our judgment, it was city staff’s judgment that the city of Brighton doesn’t want to be in the oil and gas business — that the best course for the city was to lease their property on the best terms possible,” he said. 

Because of the timeframe required by the forced-pooling application, the city will need to hold a special meeting at 12 p.m. June 24 (after press deadline) to formally adopt the ordinance, have it signed and submitted it to the city clerk by the following day. Council approved the special council meeting unanimously.


In other business:

— In separate motions, council unanimously approved three grant agreements that will be funded through Adams County Open Space. A $417,300 grant was approved for the landscape of the Bromley-Hishinuma Farm, a $5,000 mini-grant fro the Veterans Memorial at Veterans Park, and a $204,000 grant for the acquisition of the Pleasant Plains Schoolhouse property.

— Amanda Lesinski was appointed as a member of the Liquor Licensing Authority Board with a term due to expire in January 2019. 

— Council approved a special study session from 11 a.m. to 5 p.m. June 25, starting at the Brighton Recreation Center. Council and city officials will be conducting a tour of the facilities, so that council can learn about the state and needs of each facility the city owns. The tour will wrap up during a special study session scheduled for 1 p.m. July 1 at City Hall. Council also approved a study session at 6 p.m. prior to the July 1 council meeting to review its report from Peter Kageyama.

— Council went into executive session for legal advice on Denver International Airport.