Myrick v. Colorado Energy and Carbon Management Commission.
2026 COA 61. No. 25CA0686. Oil and Gas Leases—Energy and Carbon Management Act—Pooling Interests—Overriding Royalty Interests.
July 23, 2026
Tate Myrick, David Myrick Jr., and Woodby (collectively, the Myricks) own an overriding royalty interest (ORRI) in oil and gas leases for property in Weld County. Verdad Resources LLC (Verdad) is both a mineral owner and an operator of eight oil and gas wells within a drilling and spacing unit (DSU) known as the Sonic Star Drilling and Spacing Unit. The Colorado Energy and Carbon Management Commission (commission) established the DSU after the federal government executed an oil and gas lease to Sonic Star, a Myrick entity, in 2010. The lease provided that the lessor (the federal government) was to be paid a royalty of 12.5%. The Myricks then conveyed the mineral interest in the lease to other parties, reserving a 1.25% ORRI. The eight wells at issue have four working interest owners, including Verdad. For seven of the wells, Verdad is a consenting working interest owner, while the other three working interest owners are nonconsenting working interest owners. On the other well, two working interest owners joined Verdad as consenting owners. In 2022, Verdad sent the Myricks profit division orders showing the amount they were entitled to receive for their ORRIs, which reflected no ORRI revenue owing to the Myricks from the nonconsenting owners. The Myricks requested a hearing before the commission regarding Verdad’s failure to pay their ORRIs. In 2023, Verdad filed a petition in opposition to the Myricks’ request for a hearing, asserting, as relevant here, that because the Myricks’ ORRIs were carved out of both consenting and nonconsenting working interests in the DSU, they were only entitled to receive ORRI revenue attributable to the nonconsenting owners after the consenting owners had recovered their share of costs and penalties from the nonconsenting owners’ interests. On competing motions for summary judgment, a hearing officer entered a recommended order concluding that the Myricks were not entitled to payment of the ORRIs derived from nonconsenting working interests prior to the cost recovery period. The recommended order granted summary judgment to Verdad and denied the Myricks’ motion for summary judgment. The Myricks filed for an exception to the recommended order (the exception). The commission held oral argument on the exception on January 17, 2024. On January 23, 2024, HRM Resources IV, LLC (HRM) filed an untimely public comment with the commission in support of the exception. The commission declined to consider HRM’s comment because it was filed after the exception had been fully briefed and argued and was therefore untimely. The commission adopted the recommended order, and the district court affirmed the commission’s order.
On appeal, the Myricks contended that § 34-60-116(7)(a)(I) is unambiguous and plainly provides that an ORRI is a statutory exception to the cost recovery scheme that should be paid upon production, even before the consenting working interest owners recover costs plus a penalty from the nonconsenting working interest owners. Alternatively, they argued that the statute is ambiguous and that industry standards and customs support their argument. The court of appeals first concluded that § 34-60-116(7) (Pooling Statute) is unambiguous. It then determined that § 34-60-116(7)(a) clearly distinguishes between owners who agree to bear the risks and upfront costs of developing an oil well (consenting owners) and those who do not (nonconsenting owners), concluding that the Pooling Statute clearly sets forth that consenting owners are to be reimbursed first during the cost recovery period until the well pays out. Thus, nonconsenting owners are not entitled to any payments until the well reaches payout and the statutory penalties have been paid. The parties agreed that an ORRI is a derivative interest, and the Myricks conceded that their ORRI was carved out of the working interest of a nonconsenting owner. The ORRI here derives from a separate contract between the Myricks and the nonconsenting owner, which may entitle the Myricks to receive an ORRI on the nonconsenting owner’s entire share of production. But the nonconsenting owner remains subject to the reimbursement provisions of the Pooling Statute, so payment of the Myricks’ ORRI cannot come from the nonconsenting owner’s share of production until the consenting owners have recouped the costs allowed under subsection (7)(b). The court also rejected the Myricks’ argument that their interpretation of the Pooling Statute conforms with industry trade and usage because it relies on materials that were not presented to or considered by the commission and are disputed on appeal. Accordingly, the district court did not err in affirming the commission’s order.
The Myricks also argued that the district court erred by approving the commission’s decision not to consider HRM’s untimely public comment. It is undisputed that the comment was late, as it was not filed until after oral argument on the exception, so it was not part of the hearing officer’s record. And the commission reviewed the hearing officer’s recommended order based on the same record that was before the hearing officer. The commission thus did not act arbitrarily or otherwise abuse its discretion by following its own rules and rejecting the HRM public comment.
Lastly, the court denied the Myricks’ request for appellate attorney fees because they are not the prevailing party, and it denied Verdad’s similar request because it failed to comply with C.A.R. 39.1.
The judgment was affirmed.