Erie town staff say they received an offer\u00a0Friday from SM Energy to lease the town\u2019s mineral rights as a part of the oil and gas operator\u2019s planned Draco Pad project, after the company had pulled out of a deal to buy town-owned mineral rights earlier this month.\n<\/p>\n
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.<\/p>\n
The lease offer was for a \u201cprimary\u201d 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<\/a>.<\/p>\n SM\u2019s offer included $12,000 per net mineral acre owned by Erie, which the offer letter estimated would result in \u201ca total bonus\u201d of about $1.3 million. That amount represents \u201cfull consideration for the lease for the 3-year primary term.\u201d\n<\/p>\n 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.<\/p>\n 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 \u201cparty of interest.\u201d<\/p>\n 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\u2019s website says its attorneys \u201care currently evaluating how SM Energy\u2019s termination of the (sale) agreement affects the Town\u2019s position and interests in the upcoming ECMC proceedings.\u201d<\/p>\n