Erie town staff say they received an offer Friday from SM Energy to lease the town’s mineral rights as a part of the oil and gas operator’s planned Draco Pad project, after the company had pulled out of a deal to buy town-owned mineral rights earlier this month.
The offer was contingent on a response by 5 p.m. Friday, and because a sale or lease of town-owned property requires the approval of the Town Council, SM Energy was informed meeting that deadline would not be possible.
The lease offer was for a “primary” term of three years with an option to extend for an additional two years, with a landowner royalty of 20%, according to the offer letter.
SM’s offer included $12,000 per net mineral acre owned by Erie, which the offer letter estimated would result in “a total bonus” of about $1.3 million. That amount represents “full consideration for the lease for the 3-year primary term.”
On Tuesday, Erie staff is expected to ask for direction from the Town Council on how to respond should they receive any further sale or lease offers from SM Energy.
At the meeting, staff also plans to review the state Energy & Carbon Management Commission process that lies ahead for the Draco project, and what role the town may play in that process as a “party of interest.”
Because the town remains the owner of its mineral interests within the area proposed for drilling, Erie filed a petition Aug. 21 to be allowed to participate as a party in a state commission hearing. Erie’s website says its attorneys “are currently evaluating how SM Energy’s termination of the (sale) agreement affects the Town’s position and interests in the upcoming ECMC proceedings.”
Erie received an Aug. 19 letter that terminated SM Energy’s agreement to purchase Erie-owned mineral rights within its plan for the Draco Pad.
The commission had approved a plan for the Draco Pad in March 2025, but before SM Energy could start drilling, the company needed to establish legal access to the underground minerals included in the plan. Without a new deal, under recently enacted state law, SM Energy can only move forward with a redrawn drilling plan to avoid Erie mineral rights.
On Friday, the operator pulled its previous application and submitted a new application with the commission, outlining a new plan for drilling.
On Monday, John Brown, a spokesperson for the state commission, said Erie has to submit a new petition to be a party of interest since SM Energy submitted a new application.
“Because the operator withdrew the previous application and has submitted an amended application, potential interested parties are required to re-submit a petition to be considered by the ECMC Hearing Officer to be included in future proceedings,” Brown said.