Colorado Property Tax Administrator v. CO 2 , 2023 CO 8 ( 2023 )

 The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2023 CO 8Supreme Court Case No. 21SC393
Certiorari to the Colorado Court of Appeals
Court of Appeals Case No. 19CA1798
Petitioner:
Colorado Property Tax Administrator,
v.
Respondent:
CO2 Committee, Inc.
Judgment Reversed
en banc
February 21, 2023
Attorneys for Petitioner:
Philip J. Weiser, Attorney General
Robert H. Dodd, First Assistant Attorney General
Jessica E. Ross, Assistant Attorney General
Danny Rheiner, Assistant Attorney General
Denver, Colorado
Attorney for Respondent:
John M. Cogswell
Buena Vista, Colorado
JUSTICE BERKENKOTTER delivered the Opinion of the Court, in which
CHIEF JUSTICE BOATRIGHT, JUSTICE MÁRQUEZ, JUSTICE HOOD,
JUSTICE GABRIEL, JUSTICE HART, and JUSTICE SAMOUR joined.
2
JUSTICE BERKENKOTTER delivered the Opinion of the Court.
¶1 In this oil and gas leasehold taxation case, we address whether nonoperating
fractional interest owners in a unitized oil and gas operation have standing to
independently challenge a county’s retroactive property tax increase. We
conclude that they do not.
¶2 CO2 Committee, Inc. (“CO2”) is a nonprofit corporation whose membership
is comprised of nonoperating owners of fractional interests in the McElmo Dome
unit, a consolidation of working interests in a large deposit of pure carbon dioxide
in Montezuma County and Dolores County, near the Four Corners area of
Colorado. Kinder Morgan CO2 Company, L.P. (“Kinder Morgan”) is the operator
of the unit. Following an audit for the 2008 tax year, Montezuma County
determined that Kinder Morgan had underreported the value of gas produced at
the unit’s leaseholds by improperly deducting certain costs that it, as the unit
operator, was not entitled to deduct. The county ultimately increased its valuation
of the entire unit by approximately $57 million. The Montezuma County assessor
then imposed a retroactive tax assessment on the unit totaling more than $2 million
based on that increased value. That prompted Kinder Morgan to challenge—
ultimately unsuccessfully—the county’s authority to impose the retroactive tax.
Kinder Morgan CO2 Co. v. Montezuma Cnty. Bd. of Comm’rs, 2017 CO 72, ¶ 2, 396 P.3d
657, 660 (concluding that the statutory scheme authorized the retroactive tax).
3
¶3 After we decided Kinder Morgan, CO2 challenged the same retroactive
property tax increases, arguing that Montezuma County violated its members’
due process rights by failing to provide individual notice of and an opportunity to
separately challenge the retroactive assessment and increased property tax. The
trial court dismissed CO2’s case for lack of standing. CO2 appealed, and a division
of the court of appeals reversed, concluding that CO2’s members were taxpayers
with standing to pursue the claims asserted in the complaint. CO2 Comm., Inc. v.
Montezuma Cnty., 2021 COA 36M, ¶ 20, 491 P.3d 516, 521–22. We now reverse the
division’s judgment and hold that nonoperating fractional interest owners lack
standing to independently challenge a retroactive assessment and property tax
increase assessed against a unitized oil and gas operation. We reach this
conclusion after examining the statutory scheme and administrative guidance
related to the taxation of oil and gas leaseholds and determining that article 7 of
title 39 creates a unique representative system in which a unit operator is the sole
entity with standing to protest a retroactive assessment of tax on the unit it
operates.
I. Background
¶4 An estate in oil and gas is a form of real property. § 24-65.5-101, C.R.S.
(2022); § 39-1-102(14)(b), C.R.S. (2022). “Unlike most real property interests,
however, the value of an oil and gas leasehold interest comes not from the physical
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space or land the leasehold occupies, but rather, from the quantity and value of oil
and gas underground.” Kinder Morgan, ¶ 4, 396 P.3d at 660.
¶5 When the owner of a mineral estate leases the right to extract oil and gas
from the land, the lease can create either a working interest, in which the lessee
has the right to enter the land and extract minerals, or a royalty interest, in which
the lessee does not have the right to enter the land but is entitled to a portion of
the minerals extracted or the proceeds from that portion. Id.; see 1 Patrick H.
Martin & Bruce M. Kramer, Williams & Meyers, Oil and Gas Law §§ 202.2–202.3,
LexisNexis (database updated Nov. 2022). Nonoperating interest owners may
take their “production in kind”—that is, taking their proportionate share of the
mineral estate and selling it themselves—or they may rely on another party to
market the minerals and take their proportionate share of the resulting proceeds.
See 6 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers, Oil and Gas Law
§ 921.11, LexisNexis (database updated Nov. 2022); see, e.g., John Burritt McArthur,
The Restatement (First) of the Oilfield Operator’s Fiduciary Duty, 45 Nat. Res. J. 587,
679–80 (2005); 3 Colo. Div. of Prop. Tax’n & Dep’t of Loc. Affs., Assessor’s Reference
Library: Real Property Valuation Manual (“3 ARL”) 6.25 (Rev. Jan. 2023) (defining
“Take-In-Kind”).
¶6 These types of geological resources are often developed as a “unit.” A
“unit” in the oil and gas context is “a consolidation of working interests that extract
5
resources from a single geological reservoir.” Kinder Morgan, ¶ 12 n.4, 396 P.3d at662 n.4; see also § 39-10-106(5), C.R.S. (2022) (“‘[U]nit’ means any single oil, gas, or
other hydrocarbon well or field which has multiple ownership, or any
combination of oil, gas, or other hydrocarbon wells, fields, and properties
consolidated into a single operation, whether by a formal agreement or
otherwise . . . .”). “Units are created for the purpose of efficiently extracting
resources from the reservoir through coordinated engineering and operation.”
Kinder Morgan, ¶ 12 n.4, 396 P.3d at 662 n.4. And, though the fractional interests
in a unit may be owned by many entities, a single unit operator often handles the
day-to-day operations. Id.; 3 ARL 6.25 (defining “[o]perator” as “any person
responsible for the day-to-day operation of a well by reason of contract, lease, or
operating agreement”).
¶7 Once a year, every unit operator is responsible for preparing, signing, and
filing a statement (“Annual Statement”) with the local county assessor.
§ 39-7-101(1), C.R.S. (2022). The Annual Statement must include, among other
things, the “selling price [of oil or gas] at the wellhead,” also known as the “net
taxable revenues.” § 39-7-101(1)(d). This information is important because “[o]il
and gas leaseholds are subject to taxation as real property,” Kinder Morgan, ¶ 4,
396 P.3d at 660, and taxes for these leaseholds are determined based on the selling
price at the wellhead, § 39-7-101(1)(d).
6
¶8 “The sale of unprocessed oil or gas, however, rarely occurs at the wellhead;
instead, the oil or gas is typically gathered from multiple wells, processed, and
transported away from the wellsite before sale.” Kinder Morgan, ¶ 8, 396 P.3d at
661. “As a result, an operator typically must estimate its ‘selling price at the
wellhead’ for purposes of section 39-7-101(1)(d) by deducting from its final,
downstream selling price the costs of gathering, processing, and transporting the
extracted material.” Kinder Morgan, ¶ 8, 396 P.3d at 661 (quoting Wash. Cnty. Bd.
of Equalization v. Petron Dev. Co., 109 P.3d 146, 153 (Colo. 2005)); see § 39-7-101(1)(d)
(“The net taxable revenues shall be equal to the gross lease revenues, minus
deductions for gathering, transportation, manufacturing, and processing costs
borne by the taxpayer pursuant to guidelines established by the [Property Tax
Administrator].”).
¶9 The assessor uses the Annual Statement to “value such oil and gas
leaseholds and lands for assessment.” § 39-7-102(1), C.R.S. (2022). The assessment
is then used to calculate property taxes. See §§ 39-7-101 to -102; Kinder Morgan, ¶ 7,
396 P.3d at 661.
¶10 Unit operators are responsible for collecting these taxes from all of the
nonoperating fractional interest owners and remitting the total amount owed to
the county treasurer. § 39-10-106(2).
7
II. Facts and Procedural History
¶11 Kinder Morgan is a 44% fractional interest owner in the McElmo Dome unit.
The members of CO2 are nonoperating working interest owners who collectively
own an 11.224% fractional interest in the unit.1 Many other entities own fractional
interests, either working interests or royalty interests, in the unit. As the operator
of the McElmo Dome unit, Kinder Morgan extracts and compresses carbon dioxide
and then transports it by pipeline to Texas where it is sold for use in oil and gas
operations. Kinder Morgan also pays for the unit’s facilities and equipment,
supplies labor, and bills the other fractional interest owners for expenses
associated with operating the unit and arranging for transportation of the carbon
dioxide to the point of sale. Further, as the unit operator, Kinder Morgan files the
Annual Statement for the unit and pays the entire amount of property taxes due
on behalf of all of the interest owners in the unit.
¶12 In 2009, the Montezuma County tax assessor (“the assessor”) audited the
Annual Statement that Kinder Morgan filed on behalf of the McElmo Dome unit
for the 2008 tax year and determined that Kinder Morgan had underreported the
value of gas produced at the unit’s leaseholds by improperly deducting certain
1In this context, “nonoperating working interest owner” simply means any
working fractional interest owner that is not also the unit operator.
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costs that it, as the unit operator, was not entitled to deduct. The assessor,
accordingly, retroactively increased its valuation of the unit by $57 million, which,
in turn, increased the overall tax liability for the unit by more than $2 million.
Kinder Morgan paid the additional tax bill and subsequently unsuccessfully
appealed the retroactive assessment, Kinder Morgan, ¶¶ 40–41, 396 P.3d at 667–68,
after which it appears to have charged the fractional interest owners for their
proportionate share of the taxes.
¶13 Then, in January 2018—after Kinder Morgan lost on appeal—CO2 filed an
objection with the assessor, claiming that the assessor had wrongfully determined
that CO2’s members had underreported the selling price at the wellhead.
According to CO2, the assessor responded that it could not establish that CO2’s
members should be treated differently from Kinder Morgan for the purpose of
computing the selling price at the wellhead and that separate special notices of
valuation were never sent to CO2’s members because the assessor was not required
to do so. CO2 next appealed to the County Board of Equalization pursuant to
sections 39-8-106, C.R.S. (2022), and 39-1-113, C.R.S. (2022). According to CO2, the
Board of Equalization responded that the assessor did not send notices of
valuation to CO2 or its members as they were not identified as Montezuma County
taxpayers.
9
¶14 CO2 then commenced this litigation, claiming that Montezuma County
violated its civil rights under 42 U.S.C. § 1983 by failing to provide due process
and an opportunity for CO2’s members to separately challenge the retroactive
assessment and property tax increase. Montezuma County filed a motion to
dismiss, arguing that, as pertinent here, CO2’s members were not responsible for
paying the taxes and thus did not have standing to seek abatement. The trial court
granted Montezuma County’s motion and dismissed CO2’s complaint.
¶15 CO2 appealed, and a unanimous division of the court of appeals reversed.
CO2 Comm., ¶ 4, 491 P.3d at 519. The division concluded that CO2 had standing
because it suffered an injury in fact and because it had a legally protected interest.
Id. at ¶¶ 34, 37, 491 P.3d at 523. In concluding that CO2 had a legally protected
interest, the division explained that “each nonoperating fractional interest owner
who pays taxes is entitled to the panoply of rights afforded a ‘property owner,’
‘person,’ or ‘taxpayer’ under the review, audit, protest, abatement, and appeal
procedures detailed in the statutes and guidelines.” Id. at ¶ 37, 491 P.3d at 523.
10
¶16 The Colorado Property Tax Administrator (the “Administrator”) filed a
motion to intervene, which we granted, and petitioned for certiorari review. We
granted certiorari.2
III. Standing Analysis
¶17 The sole issue before us is whether nonoperating fractional interest owners
in an oil and gas unit have standing to independently challenge a retroactive
assessment and property tax increase. We conclude that they do not.
A. Standard of Review
¶18 “Whether a plaintiff has standing to sue is a question of law that we review
de novo.” Barber v. Ritter, 196 P.3d 238, 245 (Colo. 2008). “In determining whether
standing has been established, we accept as true all material allegations of fact in
the complaint.” Reeves-Toney v. Sch. Dist. No. 1, 2019 CO 40, ¶ 20, 442 P.3d 81, 85.
B. Standing Principles
¶19 “Standing is a threshold issue that must be satisfied in order for a court to
decide a case on the merits.” Id. at ¶ 21, 442 P.3d at 85. A standing inquiry assesses
a litigant’s right to raise a legal claim. City of Greenwood Vill. v. Petitioners for the
2 We granted certiorari on the following issue: “Whether the court of appeals erred
in holding that nonoperating fractional interest owners in an oil and gas unit have
standing to separately challenge a retroactive assessment of tax on the unit, apart
from the designated unit operator.”
11
Proposed City of Centennial, 3 P.3d 427, 436 (Colo. 2000). To have standing, a
plaintiff must demonstrate that (1) they have suffered an injury in fact from the
challenged action and (2) the injury is to a legally protected interest. Ainscough v.
Owens, 90 P.3d 851, 855 (Colo. 2004).
¶20 Our standing test includes a constitutional requirement and a prudential
requirement. Id. at 855–56. Article III of the Colorado Constitution requires a
plaintiff to demonstrate that they have suffered an injury in fact as a result of the
challenged action. Id. The injury-in-fact requirement mandates that the plaintiff’s
alleged injury is not “overly ‘indirect and incidental’ to the defendant’s action.”
Id. at 856 (quoting Brotman v. E. Lake Creek Ranch, L.L.P., 31 P.3d 886, 890–91 (Colo.
2001)). Our jurisprudence also requires that the plaintiff’s injury be to a legally
protected interest. Id. at 855. Under the legally-protected-interest prong, the
question is “whether the plaintiff has a claim for relief under the constitution, the
common law, a statute, or a rule or regulation.” Id. at 856. If a party fails to satisfy
either one of those two requirements, it lacks standing. See id. at 855.
C. Application
¶21 Next, we turn to examine whether nonoperating fractional interest owners
in a unitized oil and gas operation have a legally protected interest in the
retroactive assessment of tax on the unit. To do this, we first discuss our rules of
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statutory construction; we then lay out the pertinent statutory and administrative
provisions in detail; and, finally, we explain our interpretation of those provisions.
1. Principles of Statutory Construction
¶22 We review questions of statutory interpretation de novo. McCoy v. People,
2019 CO 44, ¶ 37, 442 P.3d 379, 389. “Our primary task in construing a statute is
to effectuate the intent of the General Assembly.” Kinder Morgan, ¶ 24, 396 P.3d at
664. We give words and phrases their plain and ordinary meanings and read a
statutory scheme as a whole, “giving consistent, harmonious, and sensible effect
to all of its parts.” People in Int. of A.C., 2022 CO 49, ¶ 10, 517 P.3d 1228, 1233
(quoting McCoy, ¶ 38, 442 P.3d at 389). “If the statute is unambiguous—that is, not
open to multiple interpretations—then our work is done.” Id., 517 P.3d at 1234.
We apply the same rules when construing an administrative regulation. Regular
Route Common Carrier Conf. of Colo. Motor Carriers Ass’n v. Pub. Utils. Comm’n,
761 P.2d 737, 745 (Colo. 1988).
2. Property Tax Assessment of Oil and Gas Leaseholds
¶23 To ensure uniform taxation premised on uniform assessment of property
values, the General Assembly enacted article 7 of title 39, which governs the
valuation of oil and gas leaseholds and lands. Yuma Cnty. Bd. of Equalization v.
Cabot Petroleum Corp., 856 P.2d 844, 848 (Colo. 1993); see also § 39-1-103(2), C.R.S.
(2022); see generally §§ 39-7-101 to -110, C.R.S. (2022). Other statutory provisions
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outside of article 7 also govern the taxation of oil and gas leaseholds; some apply
more broadly to all property taxation, see, e.g., § 39-5-122, C.R.S. (2022), and some
specifically apply in the oil and gas context, see, e.g., § 39-5-121(1.5)(b)(I), C.R.S.
(2022); § 39-10-106. The General Assembly has additionally granted authority to
the Administrator to publish “manuals, appraisal procedures, and instructions . . .
concerning methods of appraising and valuing land” and “guidelines . . .
concerning the audit and compliance review of oil and gas leasehold properties
for property tax purposes.” § 39-2-109(1)(e), (k), C.R.S. (2022).
¶24 Pursuant to that authority, the Administrator publishes the Assessor’s
Reference Library (“ARL”), a series of manuals addressing Colorado property tax
assessment. See Colo. Dep’t of Loc. Affs., Assessor’s Reference Library Manuals,
https://cdola.colorado.gov/publications/assessors-reference-library-manuals
[https://perma.cc/5RTH-JMSA]. County assessors are required to comply with
these manuals, procedures, instructions, and guidelines. § 39-2-109(1)(k);
Huddleston v. Grand Cnty. Bd. of Equalization, 913 P.2d 15, 17 (Colo. 1996) (“[T]he
manuals are binding on the county assessors.”).
¶25 To understand the parties’ arguments, it is necessary to take a quick tour of
how unitized oil and gas operations are valued and taxed and how audits, tax
protests, and retroactive assessments work.
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a. Assessor Valuation and Protest Procedures
¶26 As noted, section 39-7-101(1) requires unit operators to prepare and file the
Annual Statement with the county assessor for each unit the operator manages
that is producing or capable of producing oil or gas. The Annual Statement must
be submitted by April 15 each year and include the following details:
(a) The wellhead location thereof and the name thereof . . . ;
(b) The name, address, and fractional interest of the operator thereof;
(c) The number of barrels of oil, or the quantity of gas . . . sold or
transported from the wellhead during the calendar year
immediately preceding . . . ;
(d) The selling price at the wellhead. . . . [;]
(e) The name, address, and fractional interest of each interest owner
taking production in kind . . . ;
(f) A declaration made under the penalty of perjury . . . .
§ 39-7-101(1).
¶27 The county assessor then values the entire unit based on the information
contained in the Annual Statement submitted by the unit operator. § 39-7-102(1).
The assessor “send[s] the notice of valuation only to the operator, who shall accept
it.” § 39-5-121(1.5)(b)(I). The unit operator’s acceptance of notice, however, “shall
not be construed as an indication that the operator agrees with the amount of the
actual value of the property stated in the notice or as obligating the operator to
15
pay the tax attributable to property in which the operator has no ownership
interest.” Id.
¶28 Section 39-5-122(2), which applies generally to all property taxation,
provides that “[i]f any person is of the opinion that his or her property has been
valued too high, . . . he or she may appear before the assessor and object, complete
the form mailed with his or her notice of valuation . . . , or file a written letter of
objection and protest” with the assessor. See also 2 Colo. Div. of Prop. Tax’n &
Dep’t of Loc. Affs., Assessor’s Reference Library: Administrative & Assessment
Procedures Manual (“2 ARL”) 5.1 (Rev. Jan. 2023) (“If a taxpayer disagrees with the
value assigned by the assessor, the taxpayer may file a protest during the statutory
protest period.”).
¶29 Then, “[a]ny person” whose objection is denied by the assessor can appeal
to the county board of equalization. § 39-5-122(3). If the appeal is denied by the
board of equalization, the person has the right to appeal to the Board of
Assessment Appeals or to the district court. § 39-8-108(1), C.R.S. (2022); 2 ARL 5.6.
Title 39 broadly defines “[p]erson” as “natural persons, corporations,
partnerships, limited liability companies, associations, and other legal entities
which are or may become taxpayers by reason of the ownership of taxable real or
personal property.” § 39-1-102(9).
16
b. Payment and Abatement
¶30 Although only the unit operator submits the Annual Statement, each
fractional interest owner is liable for its proportional share of the unit’s taxes.
§ 39-10-106(1). The unit operator collects each fractional interest owner’s share
and remits the tax to the county treasurer. § 39-10-106(2). “The unit operator may
deduct and withhold from royalty payments or any other payments made to any
fractional interest owner . . . the estimated amount of the tax to be paid by such
fractional interest owner.” Id. If the operator fails to collect the tax, the county
treasurer is not precluded “from utilizing lawful collection and enforcement
remedies and procedures against the owner of any fractional interest to collect the
tax owed by such owner.” § 39-10-106(4)(a).
¶31 Section 39-10-114(1)(a)(I)(A), C.R.S. (2022), also provides that a county
treasurer may provide an abatement or refund of taxes if “a petition for abatement
or refund is filed within two years after January 1 of the year following the year in
which the taxes were levied.” See also 2 ARL 5.13–5.16.
c. Audit and Retroactive Assessment
¶32 County treasurers also have the authority to audit taxpayers and impose
retroactive assessments. See § 39-10-101(2)(a)(I), C.R.S. (2022); § 39-5-125(1), C.R.S.
(2022); see also Kinder Morgan, ¶ 25, 396 P.3d at 664. If a treasurer discovers that
17
taxable property has been omitted in the valuation process, the treasurer may
value the omitted property for assessment. § 39-10-101(2)(a); § 39-5-125(1).
¶33 The ARL also sheds light on this process. It explains that counties may
establish audit procedures for determining the actual value of oil and gas
leaseholds and lands and lays out several requirements for doing so. It provides,
in pertinent part, that the county assessor must mail a letter to the taxpayer
“indicating that an ‘audit’ of that taxpayer’s oil and gas declaration” will occur.
3 ARL 6.56. When the audit is complete, the county must (1) “[m]ail[] a notice of
preliminary ‘audit’ findings to the taxpayer at the address recorded on the annual
declaration,” (2) give the taxpayer thirty days to submit additional information,
(3) consider that additional information, and (4) provide a listing of the taxpayer’s
audit rights. 3 ARL 6.57.
3. CO2’s Alleged Legally Protected Interest
¶34 The Administrator argues that the division erred in concluding that
nonoperating fractional interest owners have a legally protected interest in the
valuation and taxation of their oil and gas leaseholds and lands. See CO2 Comm.,
¶ 73, 491 P.3d at 529. In the Administrator’s view, these owners are not taxpayers
and thus not entitled to all of the rights provided to taxpayers under the statute.
See id. at ¶ 72, 491 P.3d at 529.
18
¶35 More specifically, she contends that property taxes on these types of oil and
gas interests are based on a representative system where the unit operator is the
sole point of contact for reporting, notice, and taxpaying purposes. The
Administrator asserts that the General Assembly created this system to make the
operator alone responsible for paying taxes on behalf of the entire unit and that
the division’s opinion essentially disregards that system. We agree that article 7
creates a representative system for oil and gas leaseholds and lands, in which the
unit operator serves as the sole taxpayer. See § 39-7-101(1).
¶36 The many statutes outlining the unit operator’s unique role demonstrate the
General Assembly’s intent in this regard. For instance, section 39-7-101(1)
explicitly provides that the operator files the Annual Statement “for the . . . unit.”3
Fractional interest owners have no obligation to do so unless there is no unit
operator. Id. And while any nonoperating fractional interest owner may report,
by March 15 of each year, its “actual net taxable revenues received at the wellhead
3 Although section 39-10-106(4)(a) provides that a treasurer may collect taxes
directly from a fractional interest owner, it may only do so if the unit operator fails
to collect and remit the tax from the fractional interest owners. That provision
does not demonstrate the General Assembly’s intent to disrupt its representative
structure; rather, it is a practical provision that allows a treasurer to collect
payment in the event that the operator fails to satisfy its statutory obligation. See
id.
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and the actual exempt revenues received at the wellhead by such owner for
production taken in kind from the property during the calendar year immediately
preceding,” it reports that information to the unit operator, not to the assessor.
§ 39-7-101(1.5). When a nonoperating fractional interest owner provides this
information to the unit operator, the unit operator shall use this information to
determine the selling price at the wellhead for that owner, id., thus giving the
owner an opportunity to weigh in on the Annual Statement as to its proportionate
share through the unit operator. Taxes for the unit are then determined based on
the price reported by the unit operator. See id.; § 39-7-101(1); § 39-7-102(1);
§ 39-10-106(1).
¶37 The plain language of section 39-5-121(1.5)(b)(I) further supports our
conclusion that the General Assembly intended the unit operator to represent the
nonoperating fractional interest owners in the taxpaying process: “the assessor
shall send the notice of valuation only to the operator.” (Emphasis added.)
Nonoperating fractional interest owners are thus not statutorily entitled to notice
of valuation at the initial valuation stage. See id.
¶38 Read alongside sections 39-7-101 and 39-5-121(1.5)(b)(I), the statutory
valuation protest procedure—which applies generally to all property-tax-
valuation protests—also supports our conclusion. See § 39-5-122. That provision
dictates that “any person” who disagrees with the valuation of “his or her
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property” has three options to object. § 39-5-122(2). One of those options is to
“complete the form mailed with his or her notice of valuation pursuant to section
39-5-121(1) or (1.5).” § 39-5-122(2). The entity with the authority to protest a
valuation, then, must be the one that received the notice of valuation, and in this
context, the only entity that receives notice of valuation is the unit operator. See
§ 39-5-121(1.5)(b)(I). Although “any person” may object, the meaning of “any
person” must be limited by the context of the relevant statutes here to mean the
unit operator. See id.
¶39 CO2 essentially concedes that the statute contemplates the unit operator as
the sole point of contact for the initial valuation and corresponding protest process
but contends that those procedures do not apply to the “retroactive assessment”
and “special notice of valuation” processes. It asserts that because there are no
statutory provisions specifically governing oil and gas audits, the Administrator’s
contention that nonoperating fractional interest owners lack standing to challenge
these assessments deprives them of due process. We disagree for two reasons.
¶40 First, we read statutes dealing with the same subject alongside one another,
“giving consistent, harmonious, and sensible effect to all of their parts.” Kinder
Morgan, ¶ 24, 396 P.3d at 664. True, the statutory scheme does not specifically
discuss audit procedures in the context of unitized oil and gas operations, but that
does not mean that such procedures should be at odds with the overarching
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statutory scheme for the valuation and taxation of oil and gas leaseholds. To the
contrary, the General Assembly’s decision to make the unit operator the sole point
of communication with the assessor throughout the initial valuation and protest
process demonstrates its intent to create a representative system in which the unit
operator represents fractional interest owners at every stage of the property tax
assessment process. Construing the statutory scheme as affording standing to
nonoperating fractional interest owners in the audit and post-audit process would
clearly contravene that legislative intent.
¶41 Second, the ARL’s oil and gas audit procedures support our conclusion that
nonoperating fractional interest owners lack standing, and the Administrator’s
construction of these statutes warrants our deference. See El Paso Cnty. Bd. of
Equalization v. Craddock, 850 P.2d 702, 704–05 (Colo. 1993) (explaining that although
courts are not bound by agency interpretations, courts afford deference to such
interpretations, especially “when the subject involved calls for the exercise of
technical expertise which the agency possesses and when the statutory language
is susceptible to more than one reasonable interpretation”).
¶42 Those procedures provide that the assessor “provides a letter to the
taxpayer . . . indicating that an ‘audit’ of that taxpayer’s oil and gas declaration”
will occur. 3 ARL 6.56. The “taxpayer” here must be the unit operator because the
22
unit operator is the one who files the Annual Statement. 4 See § 39-7-101(1).
Fractional interest owners do not file a separate statement with the assessor, so if
the fractional interest owners were the “taxpayer[s],” the assessor would have
nothing to audit. See id.
¶43 Yet another provision in the ARL further supports our conclusion. On
completion of the audit, the ARL requires the assessor to “[m]ail[] a notice of
preliminary ‘audit’ findings to the taxpayer at the address recorded on the annual
declaration.” 3 ARL 6.57. But because section 39-7-101(1) only requires that the
Annual Statement include the address of the unit operator and of the fractional
interest owners taking production in kind, the statute excludes all of those
fractional interest owners who do not take their production in kind. Thus, if we
construe “taxpayer” expansively, as CO2 suggests, to include all fractional interest
owners, we would be requiring the assessor to mail notices of preliminary findings
to fractional interest owners who are not identified in the Annual Statement. See
§ 39-7-101(1). That interpretation would be illogical. See McCoy, ¶ 38, 442 P.3d at
4 The ARL uses the term “declaration” rather than “statement,” but that term
should be read synonymously with “statement” as it appears in section 39-7-101.
See 3 ARL 6.21 (“Section 39-7-101, C.R.S., requires every operator or owner . . . to
file a statement with the county assessor . . . . The statement is an Oil and Gas Real
and Personal Property Declaration Schedule . . . .”).
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389 (“[W]e must avoid constructions that would . . . lead to illogical or absurd
results.”).
¶44 Finally, the recent enactment of clarifying legislation further bolsters our
interpretation of the statutory scheme. After the division published its opinion,
the General Assembly passed S.B. 22-026 to clarify the role of the unit operator:
Notwithstanding any other provision of law, the partial interests of
oil and gas fractional interest owners are not subject to separate
valuation by the assessor and shall be represented by the well or unit
operator of each wellsite. The well or unit operator is the sole point
of contact for all notification, review, audit, protest, abatement, and
appeal procedures.
Ch. 58, sec. 2, § 39-7-110(2), 2022 Colo. Sess. Laws 265, 265–66. Both the legislative
history and the plain language of the statute demonstrate the General Assembly’s
intent to clarify the statute rather than to change it. See id.; Hearing on S.B. 22-026
before the S. Fin. Comm., 73rd Gen. Assemb., Reg. Sess. (Feb. 9, 2022) (statements
of Sens. Ginal and Kirkmeyer); Hearing on S.B. 22-026 before the H. Fin. Comm.,
73rd Gen. Assemb., Reg. Sess. (Mar. 10, 2022) (statements of Reps. Boesenecker
and Rich); see also Acad. of Charter Schs. v. Adams Cnty. Sch. Dist. No. 12, 32 P.3d 456,
464 (Colo. 2001) (explaining that although we usually presume that the General
Assembly intends to change a law by amending it, that presumption is rebuttable
if the legislature intended only to clarify an ambiguity in the law); Vensor v. People,
151 P.3d 1274, 1279 (Colo. 2007) (“[T]he testimony of a bill’s sponsor concerning
its purpose and anticipated effect can be powerful evidence of legislative intent.”).
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¶45 That the General Assembly chose to clarify that fractional interest owners
are not subject to independent valuation or notice only after the division published
its decision concluding otherwise is instructive. To hold that fractional interest
owners have standing in the audit and protest process in light of this amendment
would clearly contravene the intent of the General Assembly.
¶46 For these reasons, we conclude that the “taxpayer” as contemplated by the
pertinent statutes and the ARL’s audit procedures must be the unit operator.
IV. Conclusion
¶47 Because CO2 lacks a legally protected interest, it lacks standing to challenge
Montezuma County’s retroactive assessment and increased property taxes. This
conclusion aligns with the General Assembly’s carefully crafted statutory system,
which designates the unit operator as the representative for the fractional interest
owners throughout the unitized oil and gas property tax process. Accordingly,
we reverse the division’s judgment and affirm the trial court’s order granting
Montezuma County’s motion to dismiss.
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