Nearly a half century ago, a developer in Greeley sold off the lots surrounding W. 11th Street Road. The deeds did not explicitly say what happened to the mineral rights underneath the road.

Decades later, after advances in hydraulic fracturing and horizontal drilling rendered the mineral rights under the road – and other rights-of-way across the state – more accessible and lucrative, the Colorado Supreme Court has been asked to step in.

The question before the justices now is: Who should earn the royalties for drilling under W. 11th Street Road? The property owners on either side? Or the entity that swooped in four years ago to purchase the below-the-surface rights from the original developer?

“There’s sort of not a ‘right answer’ to this question. There’s just ‘an answer,'” observed Justice Melissa Hart during oral arguments on Tuesday. “What you need from us today is for us to say who has these mineral rights.”

There is no dispute that Extraction Oil and Gas, Inc. has permission either way to drill under W. 11th Street Road. To date, the company has paid royalties to the surface lot owners. However, Extraction’s lawyer warned that the Supreme Court’s decision could empower the recent purchaser of the subsurface rights, Great Northern Properties, LLLP, to seek recovery of those payments under the theory that the original developer retained the mineral rights all along.

“GNP acquired these assets in the beginning of 2019 and then, literally two months later, filed this lawsuit. That is what we’re going to see going forward,” said Joseph C. Pierzchala.

Both sides, however, agreed the state’s Court of Appeals caused an unnecessary problem last year when it resolved the case in favor of the surface lot owners.

Originally, Great Northern Properties sought review in Weld County District Court. Judge Shannon D. Lyons noted the parties viewed the case as a “microcosm for countless other dedicated city streets in Greeley, throughout Weld County, and perhaps across the State.”

Lyons ruled Great Northern Properties did not hold the title to the subsurface mineral rights, prompting an appeal.

In September 2022, a three-judge panel for the Court of Appeals reviewed the doctrine Lyons had used to reach his decision, known as the “centerline presumption.” The concept, previously applied to surface lots, extends ownership to the middle of an adjacent right-of-way. A goal of the centerline presumption is to avoid litigation over tiny strips of land.

The centerline presumption does apply to mineral rights, wrote Judge Jaclyn Casey Brown, as long as the original owner, among other things, “conveys away all the property they own abutting the right-of-way.”

On appeal, both sides were concerned about that caveat in the Court of Appeals’ decision. The original developer along W. 11th Street Road had long ago sold off the surface lots, so the question of ownership did not apply to the case at hand.

But in other situations, warned Great Northern Properties, what if there are 100 lots surrounding a road and the developer sells all but one? What if the original owner transfers their rights to a corporate entity where they own a fraction of the stake? In those instances, does the owner retain the entirety of the mineral rights under the road or not?

“I, too, am struggling with that question, where it came from and how it would effectively apply,” agreed Pierzchala, the lawyer for Extraction.

Instead, the disagreement between the parties focused on whether the Court of Appeals correctly extended the centerline presumption to the mineral rights underneath public rights-of-way when a deed does not specify who the owner is.

Hart observed that the issue was novel because until recently, it was not feasible to access oil, gas and other minerals in urban environments.

“Should something that was not accessible at the time of the sale of the land, but now is accessible – should that define how we think about the legal rights?” she wondered.

Justice Richard L. Gabriel asked about the fallout from surface lot owners learning that the mineral rights they thought they acquired decades ago under adjacent public streets actually belong to another party.

“I worry about the plethora of litigation we’re gonna see from people saying, ‘Hey, I guess I owned those mineral rights all these years,'” he said. “Help me understand why changing the rules of the game now doesn’t create a great problem.”

“And the creation of a market for those rights, which is what happened here,” added Justice Maria E. Berkenkotter.

Patrick M. Groom, representing Great Northern Properties, replied that nothing would change because the centerline presumption has never explicitly been applied to subsurface rights.

“I think the reason it hasn’t been litigated is simply because abutting property owners have only been interested in ownership of the right-of-way. That’s what matters to them. ‘What can I do with the surface?'” he said. “Not, ‘What I can do with an oil and gas rig.'”

The case is Great Northern Properties, LLLP v. Extraction Oil and Gas, Inc. et al.