Bill Barrett Corp. v. Lembke, Supreme Court Case No. 18SC760

• Docket Nº: Supreme Court Case No. 18SC760
• Citation: 474 P.3d 46
• Case Date: September 14, 2020
• Court: Supreme Court of Colorado

474 P.3d 46

BILL BARRETT CORPORATION; Bonanza Creek Energy, Inc.; and Noble Energy, Inc., Petitioners,
v.
Robert LEMBKE, 70 Ranch LLC, South Beebe Draw Metropolitan District f/k/a Bromley Park Metropolitan District No. 1, and United Water and Sanitation District, Respondents.

Supreme Court Case No. 18SC760

Supreme Court of Colorado.

September 14, 2020
Petition for Rehearing Denied November 2, 2020

Attorneys for Petitioners Bill Barrett Corporation and Bonanza Creek Energy, Inc.: Davis Graham & Stubbs LLP, R. Kirk Mueller, Emily Wasserman, Denver, Colorado

Attorneys for Petitioner Noble Energy, Inc.: Hogan Lovells US LLP, Elizabeth H. Titus, Denver, Colorado

Attorneys for Respondents Robert Lembke and 70 Ranch LLC: Hamre, Rodriguez, Ostrander & Dingess, P.C., Donald M. Ostrander, Richard F. Rodriguez, Paul C. Rufien, Joel M. Spector, Denver, Colorado

Attorneys for Respondent South Beebe Draw Metropolitan District: Brown Dunning Walker PC, Douglas W. Brown, David C. Walker, Drew P. Fein, Denver, Colorado

Attorneys for Respondent United Water and Sanitation District: Hamre, Rodriguez, Ostrander & Dingess, P.C., Donald M. Ostrander, Richard F. Rodriguez, Paul C. Rufien, Joel M. Spector, Denver, Colorado

Attorneys for Amicus Curiae Colorado Alliance of Mineral and Royalty Owners: Visani Bargell LLC, Cynthia L. Bargell, Dillon, Colorado

Attorneys for Amicus Curiae Special District Association of Colorado: Butler Snow LLP, Martina Hinojosa, Dee Wisor, Denver, Colorado

En Banc

JUSTICE HART delivered the Opinion of the Court.

474 P.3d 47

¶1 In 2015, the owners of a 13,000-acre tract of land known as 70 Ranch successfully petitioned to include their tract in a special district. After 70 Ranch was incorporated into the district, the district began taxing the leaseholders of subsurface mineral rights—Bill Barrett Corporation, Bonanza Creek Energy, Inc., and Noble Energy, Inc. (collectively "Lessees")—for the oil and gas they produced at wellheads located on 70 Ranch. Lessees, however, objected to being taxed. They argued that the mineral interests they leased could not be included in the special district because neither they nor the owners of the mineral estates consented to inclusion, which they asserted was required by section 32-1-401(1)(a), C.R.S. (2019), of the Special District Act.

¶2 We granted certiorari to review two questions concerning the statutory construction of section 32-1-401(1)(a),¹ but our answer to one obviates the need to answer the other. We therefore consider only whether subsection 401(1)(a) permits the inclusion of real property covered by the statute into a special taxing district when (1) the inclusion occurred without notice to or consent by the property's owners and (2) that property is not capable of being served by the district.

¶3 The answer to this question is "no," but that does not save Lessees here. Section 32-1-401 sets out the processes for "[i]nclusion of territory" within the boundaries of a special district—i.e., an expansion of the surface area of the district. Therefore, section 32-1-401(1)(a) requires the assent of all of the surface property owners to an inclusion under that provision, and inclusion is only appropriate if the surface property can be served by the district. Section 32-1-401(1)(a) does not require assent from owners of subsurface mineral estates because those mineral estates, while they are real property, are not territory. Thus, Lessees' consent was not required for the inclusion of 70 Ranch in the special district. We therefore affirm the holding of the court of appeals, albeit on other grounds.

I. Facts and Procedural History

¶4 Robert Lembke and 70 Ranch LLC collectively own the entirety of the 13,000-acre tract of land known as 70 Ranch, which is located in unincorporated Weld County. The subsurface mineral estates underlying 70 Ranch have been severed from the surface estate and are owned in part by 70 Ranch LLC and in part by various nonparties to this case. These mineral interests are leased by Lessees, who produce oil and gas at wellheads located on 70 Ranch.

¶5 In 2015, Lembke and 70 Ranch LLC petitioned to include 70 Ranch within the boundaries of South Beebe Draw Metropolitan District ("South Beebe"), a special district that provides sanitation, sewer, water, and storm drainage infrastructure in Adams and Weld counties. As required by section 32-1-401(1)(b), Lembke and 70 Ranch LLC published notice of the inclusion petition and information about the public hearing on inclusion in a local newspaper. The published notice included a legal description of the

474 P.3d 48

property; the place, time, and date of the public hearing; the names and addresses of the petitioners; and notice that anyone who opposed the inclusion of the territory into the special district should appear at the hearing and should show cause in writing why the petition should not be granted. See § 32-1-401(1)(b) (setting out the notice requirements for this process).

¶6 In April 2015, after the public hearing, South Beebe approved the inclusion petition. Thereafter, South Beebe began imposing ad valorem taxes on Lessees' oil and gas production pursuant to section 32-1-1101(1)(a), C.R.S. (2019). See § 32-1-1101(1)(a) (giving special districts authority to impose ad valorem taxes on all taxable property located within the district).

¶7 Lessees sued, and the district court issued a temporary restraining order enjoining disbursement of taxes already collected by South Beebe and collection of any further taxes.

¶8 Lessees then moved for a preliminary injunction. They argued, as relevant here, that (1) lessees of mineral estates should be considered fee owners of those real property interests, and (2) section 32-1-401(1)(a) requires the assent of "the fee owner or owners of one hundred percent of any real property" to be included in a special district. Because neither the owners of the severed mineral interests nor Lessees had given their assent to inclusion within South Beebe, and because mineral rights are "real property," Lessees asserted that the inclusion of 70 Ranch did not comply with the Special District Act. The district court rejected this argument, concluding that only surface estate fee owners are statutorily required to consent to inclusion under this provision of the Act because "a severed mineral estate is not real property ‘capable of being served with facilities of the special district’ " and section 32-1-401(1)(a) only requires consent from owners of property that can be served by the district. Order Den. Mot. Prelim. Inj., 17. The court entered final judgment pursuant to C.R.C.P. 54(b) and 56(h) with regard to this holding so that this question of statutory interpretation could be resolved on appeal.

¶9 A division of the court of appeals affirmed in relevant part. Barrett Corp. v. Lembke , 2018 COA 134, ¶¶ 49, 125, ––– P.3d ––––. Like the trial court, the division concluded that the owners of the severed mineral estate underlying 70 Ranch did not have to consent to its inclusion in South Beebe because "a mineral estate ... is not ‘real property capable of being served with facilities of the special district.’ " Id. at ¶ 47.²

¶10 Lessees petitioned this court for certiorari, and we granted the petition in order to determine the proper construction of section 32-1-401(1)(a).³

II. Analysis

¶11 After setting forth the standard of review, we turn to the Special District Act, sections 32-1-101 to - 1807, C.R.S. (2019). Specifically, we look to subsection 401(1)(a) within the context of Part 4 of the Act to determine whether Lessees were required to assent to the inclusion of 70 Ranch in South Beebe. We conclude that the statute does not require their assent.

¶12 The interpretive question before us is straightforward. By its plain language, section 32-1-401 addresses the "[i]nclusion of territory" encompassed by a special district. Thus, the assent subsection 401(1)(a) requires is the assent of all owners of surface property whose inclusion would expand the boundaries of a special district, and inclusion is only appropriate if the surface property can be served by the district. Accordingly, we agree with the district court's entry of summary judgment and affirm the decision of the

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court of appeals, though on different grounds.

A. Applicable Law

1. Standard of Review

¶13 We review de novo a district court's order deciding a question of law pursuant to Rule 56(h). Coffman v. Williamson , 2015 CO 35, ¶ 12, 348 P.3d 929, 934. "The summary judgment standard applies: an order is proper under Rule 56(h) ‘if there is no genuine issue of any material fact necessary for the determination of the question of law.’ " Id. (quoting C.R.C.P. 56(h) ); cf. People ex rel. Rein v. Meagher , 2020 CO 56, ¶ 19, 465 P.3d 554, 559 (noting that summary judgment is proper under C.R.C.P. 56(c) when "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law").

¶14 Questions of statutory interpretation are also...