Corp. v. Lembke, 2020 CO 73

70 Ranch LLC and Robert Lembke (surface owners) petitioned to include a 13,000-acre surface tract (“70 Ranch”) in South Beebe Draw Metropolitan District, a special district providing water/sewer/storm drainage.
Subsurface mineral estates under 70 Ranch were severed and leased to Bill Barrett Corp., Bonanza Creek Energy, and Noble Energy (collectively, Lessees), who operate wellheads on the surface and produce oil and gas.
South Beebe published notice, held a hearing, and approved inclusion under § 32-1-401; it then imposed ad valorem taxes on oil and gas production located within the district.
Lessees sued, arguing § 32-1-401(1)(a) required assent of owners (or lessees) of the severed mineral estates (i.e., their consent) before inclusion and taxation.
The trial court and the court of appeals held the statute governs inclusion of surface territory and does not require assent of subsurface mineral owners or lessees; the Supreme Court affirmed that construction and remanded for remaining issues.
A dissent argued the Court exceeded the issues presented, would have held a lessee is not a “fee owner,” and would not decide whether the district may tax subsurface interests that lie under included surface territory.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a lessee of a severed mineral estate qualifies as a “fee owner” under § 32-1-401(1)(a)	Lessees: oil & gas leases convey a fee interest (fee simple determinable); their consent is required.	Surface owners/District: statute concerns surface fee owners; lessees need not be treated as fee owners for inclusion.	Not reached on the merits; Court resolved case on territorial/surface-grounding grounds (did not require lessee assent).
Whether § 32-1-401(1)(a) permits inclusion of property into a special district without notice/consent when the property cannot be served by the district	Lessees: inclusion was invalid because mineral interests/lessees did not consent and mineral interests cannot be served.	Surface owners/District: Part 4 governs inclusion of surface territory; assent of surface owners suffices and notice requirements were met.	Held: § 32-1-401 governs inclusion of surface territory; inclusion requires assent of all surface property owners and the surface must be capable of being served. Assent of subsurface mineral owners/lessees is not required; inclusion here was valid.

Coquina Oil Corp. v. Harry Kourlis Ranch, 643 P.2d 519 (Colo. 1982) (lessee rights and risks of multiple successive lessees; informs who is treated as fee owner)
Schlarb v. N. Suburban Sanitation Dist., 357 P.2d 647 (Colo. 1960) (special districts exist to benefit landowners and serve surface property)
Coffman v. Williamson, 348 P.3d 929 (Colo. 2015) (standard of review for Rule 56(h) and summary judgment legal questions)
Blooming Terrace No. 1, LLC v. KH Blake St., LLC, 444 P.3d 749 (Colo. 2019) (statutory interpretation: apply plain and ordinary meaning to effectuate legislative intent)
Kinder Morgan CO2 Co. v. Montezuma Cty. Bd. of Comm'rs, 396 P.3d 657 (Colo. 2017) (oil and gas leaseholds are taxable as real property at the wellhead)
UMB Bank, N.A. v. Landmark Towers Ass'n, 408 P.3d 836 (Colo. 2017) (interpret statutes as a whole; avoid constructions rendering words superfluous)
In re Black Forest Fire/Rescue Prot. Dist., 85 P.3d 591 (Colo. 2003) (contextual use of statutory part titles regarding inclusion/exclusion of territory)
Colo. Oil & Gas Conservation Comm'n v. Martinez, 433 P.3d 22 (Colo. 2019) (statutory ambiguity analysis and resort to legislative intent)