Erie studies proposed sale of town mineral rights tied to DRACO project; no decision made

Erie's town council on June 2 reviewed a proposed agreement that would transfer specified town-owned mineral rights beneath parts of eastern Erie to an operator tied to the DRACO oil-and-gas project in unincorporated Weld County. The study session was informational; the mayor said, "we're not gonna be making any decisions tonight," and staff said the council will consider an ordinance on June 16 after the proposed agreement and a Q&A are posted for public review.

The presentation by David Frank, the town's director of environmental services, laid out the core elements staff negotiated: three parcels (about 158 acres) would be deeded to the town, staff cited appraisals around $13.5 million for those parcels, the town would receive an upfront cash payment (presented in the session as $4,500,000) and a 2% share of production revenue. Frank said the production share has been projected as "something like $17,000,000 over the course of the facility," while noting that estimates depend heavily on future oil prices and market conditions.

Frank described the regulatory and technical context: the Energy and Carbon Management Commission (ECMC, formerly the Colorado Oil and Gas Conservation Commission) approved a Form 2A permit in March 2025 to construct a surface facility for DRACO (roughly 26 new wells). He summarized Colorado's pooling rules and a 2024 state law that prevents forced pooling of local-government-owned minerals within a municipality's boundary, a legislative change staff said gives towns leverage in negotiations. "Once you've achieved the bar of 45%... the other up to 55% can be what's called force pooled," Frank said while explaining how the law changes the dynamics for municipal mineral owners.

Council members pressed staff and outside counsel on legal mechanics and operational choices if the town refuses to sell. Outside counsel John Sullivan described two practical engineering/legal paths operators could take: create a new spacing unit that excludes town minerals ("go around"), or drill through a town-owned subsurface interval but not complete/perforate that segment so it is not produced. Sullivan said drilling or producing through town minerals without town consent would require some form of subsurface easement or other permission and could raise subsurface-trespass claims.

On environmental safeguards and operations, staff said inspection access is included in the deal: monthly inspections during drilling and production and quarterly inspections in steady production periods, though the town would not gain standalone penalty authority (enforcement of technical violations remains the state's role). The session also covered legacy wells: the presentation identified 22 existing wells in the permit area and a separate set of 17 legacy wells tied to SM Energy's leases; staff emphasized those older wells lack modern remote shutoff and monitoring and that the agreement would accelerate plugging-and-abandonment timelines compared with uncertain, potentially decades-long schedules without the deal.

Councilors asked about community impacts: Frank confirmed the DRACO surface facility is in unincorporated Weld County (outside Erie's municipal boundary) and that the nearest existing residential areas include Kenosha Farms, Erie Village and Erie Highlands. He said the DRACO pad sits more than a mile from Erie High School and that state setback rules and ECMC permitting conditions govern proximity to schools and other sensitive sites.

On water and waste: staff said water for hydraulic fracturing will not be drawn from Erie municipal supplies and estimated very large nonpotable volumes would be needed over the project's life (presenter cited a working figure on the order of hundreds of millions of gallons). Frank said most of that water would be disposed of by deep injection and "a little bit will be reused again as frac fluid for other wells," but "none of it's ever coming back to potable."

Procurement and oversight questions featured prominently. Council members asked whether Alameda Minerals followed a competitive process required by its contract; the consultant and staff said bid solicitations occurred but councilors pressed about whether the town's purchasing policy and the absence of an RFP created a policy violation. Town attorneys said the purchasing policy was not followed in this instance and staff are preparing remediations, including a memo and audit follow-up for the council.

No formal vote or ordinance was taken at the session. The mayor and staff said the proposed agreement will be posted on the town's website later in the week with a mechanism for submitting questions and comments; a Q&A document will be published and the council will revisit the agreement at a public meeting on June 16, when public comment will be accepted and the council may vote on an ordinance.

The study session brought technical, legal and financial trade-offs into relief: potential short-term and up-front revenue and deeded land for development or open space versus long-term local control over subsurface access, environmental concerns about water and injection, and governance questions about procurement. Council members asked for additional title work, a clearer competitive-bid record, more detail on what parcels are developable, and written clarification of the procurement/purchasing-policy issue ahead of the June 16 meeting.