BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO
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CAUSE NO. 407
DOCKET NO. 150400195
ORDER NO. 407-1308
TYPE: POOLING
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REPORT OF THE COMMISSION
The Commission heard oral argument in this matter on May 18, 2015, at the Aims Community College, 260 College Avenue, Fort Lupton, Colorado and enters the following order:
LEGAL STANDARD
Section 34-60-115, C.R.S., of the Colorado Oil and Gas Conservation Act, §§ 34-60-101 – 130, C.R.S. (“Act”), provides:
Limitation on actions. No action or other proceeding based upon a violation of this article or any rule, regulation, or order of the commission shall be commenced or maintained unless it has been commenced within one year from the date of the alleged violation.
“When a cause of action accrues is a question of law, the formulation of which settles a general rule of law. Once the rule is settled upon, when a particular claim accrues and whether that claim is time-barred by a statute of limitations ordinarily are questions of fact for a jury to resolve. However, when the material facts are undisputed and reasonable persons could not disagree about their import, these questions may be decided as a matter of law.” Sterenbuch v. Goss, 266 P.3d 428, 432 (Colo. App. 2011) (internal citations omitted).
In Colorado, statutes of limitations bar various claims initiated after a specified period of time “after the action accrues.” To determine when an action accrues, the General Assembly has adopted a form of the “discovery rule,” which states that an action accrues on the date both the injury and its cause are known or should have been known by the exercise of reasonable diligence. Morrison v. Goff, 91 P.3d 1050, 1053 (Colo. 2004).
DISCUSSION
1. On November 22, 2011, Noble Energy Inc. (“Noble”) spud the Flockhart 12-43D well.
2. On November 28, 2011, Noble spud the Flockhart 12-45 well (collectively, the “Wells”).
3. On December 7, 2011, Noble filed its application for an order to pool all interests in the Wells (“Pooling Application”).
4. On March 5, 2012, the Commission held a hearing and entered Order No. 407-571 pooling all interests in the wellbore spacing units and subjected the nonconsenting parties to cost recovery penalties for the Wells. Bright Star Energy Services, Inc. (“Bright Star” or “BSE”) claims the entry of the pooling order was invalid insofar as its interests were concerned due to ineffective service and notice.
5. On August 6, 2013, Bright Star, through counsel, sent a letter to Noble claiming, among other things, it did not receive proper notice of the Pooling Application.
6. On August 26, 2013, Noble, through counsel, responded to Bright Star’s August 6, 2013 letter stating that Order No. 407-571 was properly entered.[1]
7. On January 20, 2015, Bright Star filed the Application of Bright Star Energy Services Inc. Seeking Relief from Order 407-571 (“Application”). The Application was filed more than 500 days after Bright Star’s August 6, 2013 letter to Noble.
8. The Application requests the Commission enter an order:
a) Finding Noble failed to “exercise reasonable diligence to notify” Bright Star of Noble’s pooling application;
b) Finding Bright Star and its successors are not bound by Order No. 407-571;
c) Directing Noble to provide documents and information concerning the operation of the well-bore spacing units at issue to Bright Star; and
d) Directing Noble to “pay all proceeds due to BSE and its Successors In Interest from the production of the” units at issue within 10 days, plus statutory interest. Application, p. 6.
9. On May 15, 2015, the assigned Hearing Officer entered a recommendation as follows:
The Hearing Officer recommends the Application should be DISMISSED WITH PREJUDICE insofar as it alleges Order No. 407-571 was entered in violation of the Oil and Gas Conservation Act or Commission Rules. It is undisputed Bright Star had actual notice of its claim that Order No. 407-571 was improvidently entered more than one year prior to filing the Application. Accordingly, the one year statute of limitations codified at § 34-60-115, C.R.S., bars such an action or proceeding before the Commission.
The Hearing Officer further recommends the remaining claims in the Application should be DISMISSED WITHOUT PREJUDICE and Bright Star be permitted to file an amended application consistent with this recommendation.
This recommendation expresses no opinions as to the merits of the parties’ remaining claims and defenses.
10. On May 18, 2015, the Commission heard oral argument from counsel for Bright Star and Noble on whether the Commission should adopt the foregoing recommendation pursuant to § 34-60-106(6), C.R.S.
11. In opposing the adoption of the recommendation, Bright Star, through counsel, advocated it was unaware of the “full impact” of the pooling order on its interests until sometime after sending its August 6, 2013 letter to Noble. Bright Star’s August 6, 2013 letter to Noble, however, shows Bright Star knew the Wells were producing as of the date of the letter, and that Bright Star believed it had sustained damages as of the date of the letter:
Neither Petro-Canada nor Noble has ever provided Bright Star with an accounting for oil and gas production from any of the three Flockhart wells. In addition, Bright Star has never received any revenues for its share of the oil and gas production sold from the wells. The purpose of my letter is to request that Noble provide Bright Star with a complete and detailed accounting of all production from the Flockhart [wells], and the proceeds attributable to Bright Star’s working interest share of production from the date of first production to the present, in accordance with Colorado’s payment of proceeds statute, C.R.S., § 34-60-118.5.
12. Bright Star’s “full impact” argument is without merit because a statute of limitations begins to run at the time damages are realized, and not when the full extent of the damages is known. Taylor v. Goldsmith, 870 P.2d 1264, 1266 (Colo. App. 1994) (rejecting “full impact” argument and stating that a “plaintiff's uncertainty as to the full extent of the damage does not prevent the filing of a timely complaint.”); Mosher v. Lakewood, 807 P.2d 1235, 1237 (Colo. App. 1991) (action was time barred because it was initiated one year after plaintiff was aware of his injuries even though “receipt of the investigative report may have provided further information concerning his claim”).
13. In its argument, Bright Star requested that the Commission invoke the Commission’s own authority to investigate Bright Star’s allegations and amend or modify the Order. The Commission took no action on this request.
14. Having heard the arguments of counsel and being fully advised, the Commission finds and concludes that on or before August 6, 2013, Bright Star had actual notice of the facts and circumstances giving rise to its current claim that Noble violated the Act by failing to provide Bright Star with proper notice of the Pooling Application as required by the Act and Commission Rules. Reasonable persons could not disagree about the importance of these letters, and the application of § 34-60-115, C.R.S., to bar such a claim can be decided as a matter of law.
ORDER
15. The Commission adopts the following Hearing Officer recommendations and hereby:
a. Dismisses the Application with prejudice insofar as it alleges Order No. 407-571 was entered in violation of the Oil and Gas Conservation Act or Commission Rules. It is undisputed Bright Star had actual notice of its claim that Order No. 407-571 was improvidently entered more than one year prior to filing the Application. Accordingly, the one year statute of limitations codified at § 34-60-115, C.R.S., bars such a claim before the Commission.
b. Dismisses the remaining claims in the Application without prejudice and permits Bright Star to file an amended application.
c. Expresses no opinions as to the merits of the parties’ remaining claims and defenses, which will be heard at a subsequent Commission hearing.
ENTERED this ____ day of June, 2015, as of May 18, 2015.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Murphy, Secretary
[1] Bright Star’s Prehearing Disclosure Statement endorsed these letters as exhibits for use at hearing.