Supreme Court Weighs in on Mineral Rights Taxation Case
In a split decision, the court said mineral rights holders need not assent to inclusion in a special tax district

by Jessica Folker
Colorado's Ralph Carr Building

The Colorado Supreme Court on Sept. 14 ruled in a 4-3 decision that while all owners of surface property must assent to inclusion in a special tax district, the assent of owners or lessees of subsurface mineral estates is not required.

In doing so, the majority affirmed the decision of the Court of Appeals. However, the three dissenting justices said the majority didn’t answer the question before the court and echoed concerns from oil and gas leaseholders about the due process rights of mineral rights owners.

In 2015, the owners of 70 Ranch in Weld County successfully petitioned for the 13,000-acre tract to be included in the South Beebe Draw Metropolitan District, which provides sanitation and other services. After the property’s inclusion, the district began taxing the leaseholders of subsurface mineral rights for the oil and gas produced at their wellheads on the property.

Leaseholders Bill Barrett Corporation, Bonanza Creek Energy and Noble Energy sued 70 Ranch and the district, arguing their mineral interests could not be included in the special district because neither they nor the owners of the mineral rights consented to inclusion, which they said was required by the state’s Special District Act.

One of the questions before the court was whether the Special District Act permits inclusion of “real property” into a special district when inclusion occurred without notice or consent by the property owners and the property can’t be served by the district.

“The answer to this question is ‘no,’ but that does not save Lessees here,” states the majority opinion written by Justice Melissa Hart. The majority concluded that subsurface estates are not the “real property” contemplated by the act’s procedures for including territory in a special district, pointing to the act’s use of words such as “territory,” “area,” “boundaries” and “tract” to show the procedures are only concerned with surface property.


This complete article appears in the Sept. 21 issue of Law Week Colorado. To read other articles from that issue, order a copy onlineSubscribers can now access a digital PDF here.