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Erie reaches tentative mineral rights deal with Draco operator.Erie has reached a tentative agreement with Civitas Resources over the town’s mineral rights within the contested Draco oil and gas project, a deal that could bring the town more than $21 million in combined cash and future revenue, along with land transfers and closures of certain wells.Details about the agreement came to light during a Tuesday night Town Council meeting, after months of private negotiation between the town and company.Erie officials said they were first contacted in spring 2025 by Civitas Resources — which earlier this year merged with SM Energy Company — about acquiring Erie’s mineral rights within the proposed drilling area for Draco.That drilling area was approved with conditions by the Colorado Energy & Carbon Management Commission in March 2025.But before drilling can begin, the operator must demonstrate it has access to the underground mineral resources included within the approved plan.Mineral rights allow their owners to access and extract underground resources or lease and sell that access.Erie owns about 180 acres of unleased mineral rights within the roughly 3,900-acre underground drilling area approved for the Draco Pad, according to the town, proposed to sit northwest of the Garfield Road and County Road 7 intersection in unincorporated Weld County.Under the agreement discussed by the Town Council on Tuesday, in exchange for the mineral rights, Erie would receive three parcels owned by what the town called an SM Energy “subsidiary” totaling about 160 acres on County Line Road, a $4.5 million cash payment and 2% of production revenue for the lifespan of the Draco project.The town estimated that revenue share could exceed $17 million over the next 20 years or more.The potential agreement includes “additional safety provisions,” a Tuesday presentation from town staff says.Those include plugging and abandoning 17 wells within or near town limits, beyond the 22 wells the state commission previously ordered closed as part of the Draco plan.Local oversight woven into the agreement would also allow Erie to conduct on-site inspections of the Draco Pad, despite the site being located outside town limits.Mayor Andrew Moore said during the Tuesday meeting that the town plans to publish the full agreement later in the week, along with a “Q&A” document.A meeting has been scheduled for June 16, when the Town Council could decide whether to approve the agreement through an ordinance after public comment.Erie’s leverage The Draco Pad — approved by the state ECMC in March 2025 despite objections from members of the Erie community — is proposed to include 26 wells.Those wells would be drilled from a pad in unincorporated Weld County and extend more than 7,000 feet underground before turning horizontally and running west for more than 4 miles, beneath portions of Erie and unincorporated Boulder County.“Most of Erie’s neighborhoods have been drilled and fracked under, either before they were built or, in many cases, after, so this isn’t a terribly unusual process,” David Frank, Erie’s environmental services director, said on Tuesday, while displaying a map crowded with earlier drilling lines in the area.Frank said the package negotiated with Civitas reflects the leverage Erie gained under a recent change in state law.Under Senate Bill 24-185, local government-owned mineral rights cannot be force pooled.Forced pooling allows operators, with state approval, to combine mineral interests within a drilling area even when some owners object.“The leverage is with the oil and gas producer in normal circumstances,” Frank said.“In this circumstance, the leverage instead shifts to the local government.Because if our terms are not reached, if negotiations are unsuccessful, then our minerals cannot be forcibly pooled and therefore must be avoided.” Civitas “initially” offered Erie only one parcel of land, totaling about 31 acres and appraised at roughly $2.85 million, in exchange for mineral rights, according to town staff.A valuation of the town’s mineral rights reviewed by the council in executive session last year was considered “extremely conservative,” Frank said, because it did not fully account for the leverage created by the new law.He described the agreement on the table now as the strongest offer that could be secured from Civitas.“This will never see value this high ever again,” Frank said.“We are moments from imminent production.There’s a permit to produce these minerals.” The potential agreement’s requirement that 17 additional wells be plugged and abandoned also provides benefits that likely would not have occurred as quickly without the deal, Frank added.“They will eventually be plugged and abandoned, as will every well in the state of Colorado,” he said.“But the timeline of when that would occur without this agreement is very uncertain.Certainly, a longer timeline than with this agreement.” If Erie doesn’t sell At an April public hearing about the negotiations, it remained unclear among Erie council members whether Draco could move forward without access to the town’s mineral rights.But at Tuesday’s meeting, the message was clearer: Draco will move forward — regardless.“We’re not under the illusion that Draco is going to go away,” Frank said.“There will be a large number of wells drilled.” State ECMC spokesperson John Brown said operators that encounter local government-owned mineral interests that are not participating in a project must revise their applications.“If a local government declines participation, the operator must amend the pooling application to exclude those local government interests,” Brown said in an email to the Daily Camera.That could require a change to the underlying drilling and spacing unit, or DSU, which defines the area from which a well can legally produce leased minerals, Brown added.A DSU establishes setbacks from unit boundaries while ensuring minerals outside the approved unit are not produced.“The Draco plan approved in 2025 is in the pre-construction stage; it’s not uncommon for operators to file amendments before the surface pad has been built and the site has obtained additional ECMC approval for drilling,” Brown said.Frank said it remains unclear exactly how the state would handle Erie’s unleased mineral interests, because the law is relatively new.“What ‘avoided’ means is sort of an open question that has not been addressed because this is the first time the state’s dealt with the repercussions of passing this law,” he said.“It could be that the overall direction of those laterals changes.… You produce everything around that, but you never get underneath the town’s unleased minerals.” If Erie rejects the agreement, it would receive royalty payments only on mineral interests that are already leased, which account for about 103 acres within the proposed Draco drilling area.Tension over the process A moment of tension emerged during Tuesday’s discussion when some council members questioned both the town’s hiring of Alameda Mineral Advisors and the process used to negotiate the proposed agreement.The Town Council voted 4-3 in December to hire Alameda to evaluate Erie’s mineral assets and conduct a bidding process.Under the contract approved by the council, Alameda would receive 7.5% of the total value of any completed deal, capped at $4.5 million.On Tuesday, Councilmember Dan Hoback questioned whether Alameda adequately tested the market before narrowing in on a Civitas deal.“It does not sound like we did a competitive bidding process,” Hoback said.“That’s the only way to determine whether we have fair value for the sale.” Councilmember Emily Baer raised a similar concern.“I’ve never heard of another offer from any other entity,” Baer said.Apart from the competitive bid topic, during the discussion, Town Attorney Breena Meng said the town did not follow its purchasing policy when Alameda was hired.“There is no requirement in either the town charter or t