December 2015 Report of the CMRHOA Oil & Gas Committee

Purpose of This Newsletter to the Membership

The purpose of this newsletter is to inform CMR lot and homeowners of the existence of the CMRHOA Oil and Gas (O&G) Committee, its role in assessing what protections do or don’t exist in current Resource Management Plan (RMP) or proposed O&G regulations,recommend to the CMR Board of Directors what omissions are perceived that could be addressed during public comment opportunities, and bring neighborhood awareness to issues that potentially could affect all, some, but hopefully none of us as property owners. Philosophically we view a not-in-my-backyard (NIMBY) approach to resource exploration and recoveryto have long term negative consequences and therefore prefer towork towards a mutually agreeable compromise allowing for economically-optimal resource recovery for the benefit of all MontezumaCountyand private property stake holders.

The Committee

The CMRHOA Oil & Gas (O&G) Committee was duly constitutedat the November 18, 2015 Board of Directors meeting as a research and advisory group to the Board for the benefit of the membership. Its current members are Stan Mattingly (Lot 61), Bruce Short (Lot 21), Bob Sanders (Tract S), and Bob Fetterman (Lot 55). Its creation was inspired by Stan Mattinglywho began following Bureau of Land Management (BLM) efforts to finalize fluid minerals/O&Gresource management through a Master Lease Plan process tied to the RMP for Montezuma County. Stan’s federal career experience enabled him to interpret government regulations and BLM documents involved in such a management plan and provided the understanding of how such plans get formulated and implemented. He also uses the same GIS mapping tools as used in federal planning. Stan sought the collaboration of Bruce Short, who also has career experience in federal natural and sustainable resources management. From his research Stan realized that opportunities for public comment on perceived omissions and/or deficiencies in the RMP needed to be brought to the attention of his neighbors before the comment period closed. The HOA Board, when informed of the nature of Stan’s interest and research, felt that due diligence in this technical area was beyond its capability and current capacity and so moved for the committee’s creation to take advantage of these valuable professional assetsin the community who could respond quickly in a limited time frame.

Background

A Resource Management Plan (RMP) was begun by the BLM about 7 years ago for the purpose of management of natural and other resources including fluid minerals and oil and gas exploration/development infive Four Corners counties including Montezuma. The BLM is currently in the process of determining the extent to which a Master Lease Plan (MLP) is needed which, among other functions, is to address any omissions and/or corrections to the original RMP. The Montezuma County Commissioners have gone on current record as being against the MLP and any further regulation of area resource exploration or recoverybut are cooperating with the BLM in inviting public comment on the MLP prior to its finalization slated for 2016.

Although a total of 895 wells have been drilled in the county since 1921, only 121 are currently considered “active”, of which about 73 are CO2 and the rest are natural gas.

About 60% of the tax revenue realized by the county comes from CO2production wells in the McElmo Dome fields – the largest known CO2 deposit in the world. Extraction of natural gas contributes a fraction of that revenue stream, but could be the next major contributor as CO2production eventually declines and the county looks for other mineral revenue sources. Much of northwestern and central MontezumaCounty sits atop the Gothic Shale Gas Play. CMR is situated in this Play and our area is designated as “High Probability” for hydrocarbon productionas shown on federal mineral maps. Should the economics of natural gas production by fracking existing wells around the country eventually prove prohibitive, it is reasonable to assume that interest in new “High Probability” areas such as ours will increase and be welcomed by the county as a revenue generating alternative to raisingproperty taxes.

Current CMR and Surrounding Surface Ownership

(Please consult attached CMR_Vicinity_Land_Own.jpg file for full map)

The Surface Ownership map shows that CMR is surrounded on 3 sides by BLM and state parcels. Please understand that whatever restrictions/protections are provided for in the RMP and eventually finalized in the MLP will only apply toresource managementon federally owned parcels or mineral rights holdings. Resource management on un-patterned (privately held) parcels surrounding and inside CMR is especially susceptible to the effects of poorly considered planning as it is NOT subject to the RMP or MLP, but subject only to whatever planning the county has seen fit or is willing to implement to protect private property interests and the valuation of private property.

Current CMR and Surrounding Mineral Rights and Leases

(Please consult attached CMR_Vicinity_O&G_Rights.jpg file for full map)

The Mineral Rights and Leases map applies to the ownership of subsurface mineral rights in the “split estate”, i.e., the separation of terrestrial Coloradoproperties into a surface estate and a mineral estate. CMR is not only surrounded but completely underlain by such mineral rights. Horizontally patterned areas of the map indicate federally held mineral rights that would fall under whatever restrictions/protections are in the RMP and are eventually finalized in the MLP. Again, un-patterned areas are those under which privately held mineral rights would fall only under county planning and control.

Currently there are some restrictions on O&G infrastructure and development of federally held mineral rights such as those based on certain designations of surface grades and soil types that are found around and within CMR. The designation of much of CMR and the surrounding lands as “critical mule deer winter range” by the BLM in cooperation with Colorado Division of Wildlife has also been incorporated into the RMP with a timing restriction on surface activity still to be determined, but currently up to 5 months of the year.

No such restrictions apply to privately held mineral rights as currently controlled by the county. Current county planning would allow for development of privately held mineral rights (drilling/production) within CMR.

CMR Road Usage and Maintenance Costs

All of CMR is designated a “High Probability” hydrocarbon production area, and as such is among similar areas in the Gothic Shale Gas Play that might receive the most scrutiny for potential development of the underlying mineral resources. Without county intervention it is logical to assume that mineral rights owners will use existing public roads for transport of personnel, drilling equipment, maintenance, and scheduled drill pad servicing if taken to production. Such usage of CMR’s poorly constructed roads could prove considerably more costly to repair and maintain than under current circumstances. The question of liability for crew safety and heavy equipment loss on roads maintained by the HOA is further complicated by the county’s demonstrated disinterest in CMR’s road issues. Road usage/damage has been an ongoing issue in communities adjacent to and west of Rte 491 under regular use by CO2 producers, and the county has chosen not to intervene. County roads can be repaired using the tax revenue from the producers without angering them by assessing road usage fees. CMR road usage for exploration and/or production presents the county withneither the need to assess fees nor the expense of road repairs.

It is crucial that prior to finalization of any resource utilization policy by the county that the costs associated with usage of CMR’s roads by exploration and recovery entities be addressed by such policy, or its costs as reflected by future CMR property devaluation be accounted for in the county’s tax base projections.

Noise and Light Pollution

Issues such as noise and night sky light pollution are difficult to assess as it is not known where or how many installations might be involved or for what period of time. As examples, an exploration well may not prove economical to take to production and will be capped, or awell pad connected to the electrical grid is not as noisy asa Diesel-powered one. Theseissues are mainly subjective unless affected by scale. When the number ofproduction wells reach a certain point a compressor relay station will be required at a geographical low point in the landscape, such as outboard of Tracts P and Q, or R and S. Then the closest neighbors are the most-affected and may incur non-trivial property devaluation but to a greater extent than elsewhere in the community only affected if a viewshed of surroundinglandmarks (La Plata Mtns, MenefeeRange, Sleeping Ute, etc) is involved.

Air Quality

Air quality is another subjective issue and perhaps no more troublesome than currently experienced by those affected by the asphalt plant north of Rte 160between CMR and Mancos. The most acute instance of reduced air quality during O&G exploration and production would occur briefly during the rare occurrence of a methane or hydrogen sulfide pocket eruption. Personnel safety on the drill rigs is provided by sensors and sirens. Safety and evacuation of CMR residents downwind of the rig would need to be provided by the county under a safety/evacuation management plan (reverse 911).

Proposed Surface Activity Restriction

It has been proposed by the Committee, and submitted to the Montezuma County Commissioners, that a ¾ mile buffer zone be established beyond the CMR boundary, inside of which surface activity for the purpose of O&G exploration and development would be restricted. Directional drilling to reach mineral rights and to facilitate fluid mineral recovery beneath CMR and the buffer zone would be permitted commensurate with RMP, MLP, and existing or yet-to-be-established county policies.

Thinking – It is believed that restricting O&G surface activity within CMR and the ¾ mile buffer is our best chance at minimizing or eliminatingthe usage of our HOA roadsfor O&G associated activities. It also removes or reduces the subjective and/or actual impact of wells from internal parcels and parcels immediately outboard ofour properties on CMR’s periphery. In any case, the annual cost of CMR road repair and maintenance attributable to O&G use without any surface activity restriction, along with the impact of such cost on CMR property valuation may offset the tax revenue benefit to the county and jobs impact to the local economy.

Recommendations to CMR Property Owners

CMR property owners are encouraged to research the link below and decide for themselves how they might be affected by anything included or omitted in the planned regulationof O&G activity in our immediate area. To decide if their interests are being adequately represented for allowed development of privately held mineral rights under and around us, property owners should follow local news relating to county planning and commissioner policies and position statements. Owners are also encouraged to attend public comment meetings scheduled by the BLM and/or the county (see next).

- RMP website

O&G Committee Activities, 2015

  • November 19 – Attended a BLM recreational users meeting. CMR had indirect panel representation by Pete Eschallier (Lot 67, Kokopelli Bikes).
  • November 20 - Met to debrief, assess information currently available, and formulate a notice to neighbors.
  • November 26 - Emailed an informational notice to HOA members to bring attention to the MLP and recommend individual due diligence.
  • December 4 -Met and formulated a CMRHOA statement of concern.
  • December 10 – Attended a MLP workshop and public comment meeting sponsored by the CountyCommissioners. Bruce Short presented our statement of concern and Stan Mattingly presented additional comment.
  • December 16 - Met to debrief and decide on content for a proposed newsletter.
  • December 31 - Approved an informational report/newsletter for dissemination to the HOA membership.

Next scheduled MontezumaCounty workshop with MLP interrelationship – January 11, 2016 – subject: Phil’s World restriction of surface O&G activity.