Court Opinion

ID: 4108269
Source: CourtListenerOpinion
Date Created: 2016-12-19 08:07:10.519026+00
Date Added: 2024-06-11T14:19:37.682390
License: Public Domain

COLORADO COURT OF APPEALS                                    2016COA178

Court of Appeals No. 15CA2063
Garfield County District Court No. 14CV30180
Honorable James B. Boyd, Judge

Grant Brothers Ranch, LLC,

Plaintiff-Appellant,

v.

Antero Resources Piceance Corporation, a withdrawn Colorado corporation,
and Ursa Operating Company, LLC, a Delaware corporation,

Defendants-Appellees.

            JUDGMENT AFFIRMED IN PART, REVERSED IN PART,
                AND CASE REMANDED WITH DIRECTIONS

                                  Division VI
                            Opinion by JUDGE FOX
                        Bernard and Richman, JJ., concur

                          Announced December 1, 2016

Dufford, Waldeck, Milburn & Krohn, LLP, Nathan A. Keever, Grand Junction,
Colorado, for Plaintiff-Appellant

Beatty & Wozniak, P.C., Michael J. Wozniak, Karen L. Spaulding, Malinda
Morain, Denver, Colorado, for Defendants-Appellees
¶1    Plaintiff, Grant Brothers Ranch, LLC (Grant Brothers), sued

 defendants, Antero Resources Piceance Corporation (Antero) and

 Ursa Operating Company, LLC (Ursa) (collectively, Operators), to

 recover its share of proceeds derived from the production and sale

 of oil and gas. Concluding that Grant Brothers was required and

 failed to exhaust its administrative remedies available under the Oil

 and Gas Conservation Act, §§ 34-60-101 to -130, C.R.S. 2016 (the

 Act), the district court held that it lacked subject matter jurisdiction

 over the action and granted summary judgment in favor of

 Operators. Grant Brothers appeals the judgment dismissing its

 claims with prejudice. We affirm in part, reverse in part, and

 remand with directions to correct the judgment.

                           I.    Background

¶2    Antero, an oil and gas exploration and production company,

 received approval from the Colorado Oil and Gas Conservation

 Commission (the Commission) to establish a drilling and spacing

 unit to produce oil and gas in Garfield County. Grant Brothers

 owned property within this unit. Antero wished to produce the oil

 and gas underlying Grant Brothers’ property, but Grant Brothers

                                    1
 refused Antero’s offer to lease the minerals or participate in their

 production.

¶3    As a result, Antero requested that the Commission pool all

 nonconsenting interests in the unit and allow Antero to produce

 and sell the oil and gas of the nonconsenting owners. Grant

 Brothers asked the Commission to deny Antero’s request. After a

 hearing, the Commission issued an order pooling all of the

 nonconsenting interests in the unit.

¶4    About a year and a half after issuing this pooling order, the

 Commission approved Antero’s request to establish another drilling

 and spacing unit within the same lands as the first unit in order to

 produce oil and gas from a deeper formation. Again, Antero asked

 Grant Brothers to lease the minerals or participate in their

 production and, again, Grant Brothers refused. Antero requested

 that the Commission pool all nonconsenting interests in the second

 unit. After a hearing, the Commission issued an order pooling all

 nonconsenting interests in the second unit.

¶5    As a result of the Commission’s pooling orders, Grant Brothers

 became a nonconsenting owner pursuant to section 34-60-116(7),

 C.R.S. 2016, of the Act. In pertinent part, this meant that Grant

                                    2
 Brothers was entitled to receive its interest in the proceeds derived

 from the production and sale of oil and gas from wells in the units.

 However, Grant Brothers would receive payment only after these

 wells reached “payout,” in other words after Antero recovered the

 costs allowed by section 34-60-116(7). The pooling orders required

 Antero to furnish Grant Brothers with monthly statements

 containing information about its costs and its proceeds.

¶6    Almost three years after the Commission issued its last

 pooling order, Grant Brothers asked Antero for permission to audit

 its books and records regarding the wells at issue. Antero refused,

 noting that it had been sending Grant Brothers the required

 monthly statements.

¶7    About two years after Antero refused the request for an audit,

 Grant Brothers sued Operators in district court.1 Grant Brothers’

 complaint requested an equitable accounting and alleged that the

 wells had reached payout, but Operators had yet to pay Grant

 Brothers. Operators filed a motion for summary judgment,

 asserting that Grant Brothers was required to exhaust its

 1Antero drilled and operated the wells within the units until
 December of 2012, when Ursa assumed operation of the wells.

                                   3
 administrative remedies available under the Act and had failed to

 do so before filing its complaint. Operators argued that the district

 court lacked subject matter jurisdiction over the action and should

 dismiss it with prejudice. The court agreed and granted summary

 judgment, dismissing the action with prejudice.

                        II.     Summary Judgment

¶8    Grant Brothers first contends that the district court

 improperly granted summary judgment because Grant Brothers

 was not required to exhaust its administrative remedies, and, thus,

 the court had subject matter jurisdiction over the action. We

 disagree. Second, Grant Brothers argues that it was inappropriate

 for the district court to dismiss the action with prejudice on the

 basis that the court lacked subject matter jurisdiction over the

 action. We agree that dismissal with prejudice was error.

                   A.         Administrative Exhaustion

¶9    Grant Brothers argues that the Act does not contain a clear

 manifestation of legislative intent requiring an involuntarily pooled

 mineral rights owner to exhaust administrative remedies before

 seeking an equitable accounting in district court regarding the

 amount of proceeds owed after the wells at issue reach payout.

                                       4
  Grant Brothers asserts that the Act’s language and legislative

  history — including the 1998 amendments to the Act and related

  testimony from Senator Tilman Bishop, the sponsor of the

  amendments2 — and the Commission’s rules support this position.

                            1.   Preservation

¶ 10   The parties agree that Grant Brothers properly preserved this

  argument, except to the extent that Grant Brothers uses Senator

  Bishop’s testimony to support its contention.

¶ 11   We do not consider “arguments never presented to, considered

  or ruled upon by” the district court. Core-Mark Midcontinent Inc.

  v. Sonitrol Corp., 2016 COA 22, ¶ 24 (citation omitted). All that is

  needed to preserve an issue for appeal is for the issue to be brought

  to the district court’s attention so that the court has an opportunity

  to rule on it. Berra v. Springer & Steinberg, P.C., 251 P.3d 567, 570

  (Colo. App. 2010).

¶ 12   Responding to the motion for summary judgment, Grant

  Brothers argued that the legislature did not intend for the

  2 In 1998, Senator Bishop sponsored a bill, S.B. 98-159, that
  amended several parts of the Act, including provisions in section
  34-60-118.5, C.R.S. 2016, concerning the Commission’s
  jurisdiction over certain disputes. See Ch. 186, sec. 1,
  § 34-60-118.5, 1998 Colo. Sess. Laws 636.

                                    5
  Commission’s jurisdiction over disputes like the one at issue to be

  exclusive or, relatedly, to require administrative exhaustion. Grant

  Brothers supported this argument by discussing the Act’s 1998

  amendments. On appeal, Grant Brothers merely presents relevant

  legal research — Senator Bishop’s testimony — to further support

  the argument previously made to the district court.3 Therefore, we

  conclude that Grant Brothers’ argument was properly preserved.

                          2.   Review Standard

¶ 13   Although Operators moved for summary judgment, their

  motion argued that the district court lacked subject matter

  jurisdiction over the action. The district court granted Operators’

  motion solely on this basis. The district court’s order left

  unresolved significant factual disputes, such as whether payout

  had occurred. Given these facts, Operators’ motion was effectively a

  3 Although Senator Bishop’s testimony was not specifically
  presented to the district court, the arguments regarding legislative
  intent and related legislative history were brought to the court’s
  attention such that it had an opportunity to rule on this issue. See
  Berra v. Springer & Steinberg, P.C., 251 P.3d 567, 570 (Colo. App.
  2010). We will not address the remainder of the arguments that
  Grant Brothers raised for the first time either on appeal or in its
  reply brief. See Core-Mark Midcontinent Inc. v. Sonitrol Corp., 2016
  COA 22, ¶ 24; see also People v. Czemerynski, 786 P.2d 1100, 1107
  (Colo. 1990) (refusing to address issues not raised in an appellant’s
  original brief but raised for the first time in the reply brief).

                                     6
  motion to dismiss for lack of subject matter jurisdiction more

  properly brought under C.R.C.P. 12(b)(1) than C.R.C.P. 56. See

  Trinity Broad. of Denver, Inc. v. City of Westminster, 848 P.2d 916,

  925 (Colo. 1993) (reasoning that a court’s determination under Rule

  12(b)(1) reveals whether it has power to hear the case, while its

  determination under Rule 56 results in an adjudication on the

  merits); cf. Winslow v. Walters, 815 F.2d 1114, 1116 (7th Cir. 1987)

  (“Seeking summary judgment on a jurisdictional issue . . . is the

  equivalent of asking a court to hold that because it has no

  jurisdiction the plaintiff has lost on the merits. This is a

  nonsequitur.”).

¶ 14   Because the record contains all necesary information, we

  apply Rule 12(b)(1) to the record before us and resolve these issues

  as a matter of law. See Trinity Broad. of Denver, Inc., 848 P.2d at

  925; W.O. Brisben Cos. v. Krystkowiak, 66 P.3d 133, 137 (Colo.

  App. 2002) (citing Norsby v. Jensen, 916 P.2d 555, 559 (Colo. App.

  1995)), aff’d on other grounds, 90 P.3d 859 (Colo. 2004).

¶ 15   We employ a mixed standard of review to motions to dismiss

  for lack of subject matter jurisdiction. Hanson v. Colo. Dep’t of

  Revenue, 140 P.3d 256, 257-58 (Colo. App. 2006). We review

                                     7
 factual findings for clear error, and such findings will be upheld

 unless they have no support in the record. Id. However, we review

 legal conclusions de novo. Id. We also review a district court’s

 interpretation of a statute de novo. Anderson v. Vail Corp., 251 P.3d

 1125, 1127-28 (Colo. App. 2010). In construing legislation, we look

 first to the plain language of the statute, reading it as a whole.

 Young v. Brighton Sch. Dist. 27J, 2014 CO 32, ¶ 11. Then, if the

 language is ambiguous, we “construe the statute in light of the

 General Assembly’s objective,” presuming “that the legislature

 intended a consistent, harmonious, and sensible effect.” Anderson,

 251 P.3d at 1127-28.

                          3.    Applicable Law

¶ 16   In the Act, the Colorado Legislature granted the Commission

 “the authority to regulate: . . . the drilling, producing, and plugging

 of wells and all other operations for the production of oil or

 gas . . . .” § 34-60-106(2)(a), C.R.S. 2016.4 The Act’s declaration

  4 The Commission also regulates “[t]he spacing of wells . . . and
  . . . [l]imit[s] the production of oil or gas, or both, from any pool
  or field for the prevention of waste, and [limits] and [allocates] the
  production from such pool or field among or between tracts of
  land having separate ownership therein, on a fair and equitable
  basis so that each such tract will be permitted to produce no

                                     8
  gives the Commission a broad grant of jurisdiction. See

  § 34-60-105(1), C.R.S. 2016 (“The commission has jurisdiction over

  all persons and property, public and private, necessary to enforce

  the provisions of this article, and has the power to make and

  enforce rules, regulations, and orders pursuant to this article, and

  to do whatever may reasonably be necessary to carry out the

  provisions of this article.”); see also Oborne v. Cty. Comm’rs, 764

  P.2d 397, 401 (Colo. App. 1988) (stating that the Act is a

  comprehensive statute intended to regulate development,

  production, and utilization of gas and oil).

¶ 17   The Act further provides that “[a]bsent a bona fide dispute

  over the interpretation of a contract for payment, the oil and gas

  conservation commission shall have jurisdiction to determine . . .

  [ t]he date on which payment of proceeds is due” and any “amount

  of proceeds” or interest due. § 34-60-118.5(5)(a) and (c), C.R.S.

  2016. Relatedly, the very next provision, subsection 5.5, provides:

             Before hearing the merits of any proceeding
             regarding payment of proceeds pursuant to
             this section, the oil and gas conservation
             commission shall determine whether a bona

   more than its just and equitable share from the pool . . . .”
   § 34-60-106(2)(c) and (3)(a), C.R.S. 2016.

                                     9
             fide dispute exists regarding the interpretation
             of a contract defining the rights and
             obligations of the payer and payee. If the
             commission finds that such a dispute exists,
             the commission shall decline jurisdiction over
             the dispute and the parties may seek
             resolution of the matter in district court.

  § 34-60-118.5(5.5).

¶ 18   In relation to whether payout has occurred, the Act states

  that, “[i]n the event of any dispute” as to the costs allowed to be

  recovered before having to pay the nonconsenting owners, “the

  [C]ommission shall determine the proper costs[.]” § 34-60-116(7)(a).

  It also states that, during the period of cost recovery occurring

  before the wells reach payout, “the [C]ommission shall retain

  jurisdiction to determine the reasonableness” of such costs.

  § 34-60-116(7)(d).

¶ 19   An exception to the Commission’s jurisdiction concerns

  disputes over the interpretation of a payment contract. The

  Commission shall “decline jurisdiction over the dispute,” and the

  parties can “seek resolution of the matter in district court,” if the

                                    10
  dispute involves a contract. § 34-60-118.5(5.5) (emphasis

  added).5

¶ 20   If “complete, adequate, and speedy” administrative remedies

  are available, a party generally must exhaust these remedies before

  filing suit in district court.6 City & Cty. of Denver v. United Air

  Lines, Inc., 8 P.3d 1206, 1212 (Colo. 2000). The administrative

  exhaustion doctrine “enables the agency to make initial

  determinations on matters within its expertise and to compile a

  record that is adequate for judicial review” so as to “prevent

  piecemeal application of judicial relief and to conserve judicial

  resources.” State v. Golden’s Concrete Co., 962 P.2d 919, 923 (Colo.

  1998); accord Great W. Sugar Co. v. N. Nat. Gas Co., 661 P.2d 684,

  690 (Colo. App. 1982) (explaining that primary jurisdiction allows

  an agency to decide “in the first instance . . . technical questions of

  fact uniquely within the agency’s expertise and experience”)

  (citation omitted).

  5 The legislature limited the Commission’s jurisdiction over lawsuits
  for damages or injunctive relief, but this is not at issue in this case.
  See § 34-60-114, C.R.S. 2016.
  6 There are exceptions to administrative exhaustion, but none was

  invoked here.

                                     11
¶ 21   However, when the administrative agency does not have the

  authority to grant the relief requested by the party seeking judicial

  action, and the available administrative remedies are “ill-suited” for

  providing the relief requested, administrative exhaustion is not

  required. Brooke v. Rest. Servs., Inc., 906 P.2d 66, 71 (Colo. 1995)

  (citation omitted). In determining whether a court has subject

  matter jurisdiction over a claim where a party did not exhaust

  administrative remedies available to it, courts examine whether: (1)

  the claim was filed pursuant to the relevant statute; (2) this statute

  provides a remedy for the claim asserted; and (3) the legislature

  intended this statute to provide a “comprehensive scheme”

  addressing the issues underlying the claim. Id. at 68-71; see

  Pfenninger v. Exempla, Inc., 17 P.3d 841, 843-44 (Colo. App. 2000).

                              4.   Analysis

¶ 22   We conclude that the district court was right to dismiss the

  action for the reasons stated below.

¶ 23   First, in determining whether the claim at issue was filed

  pursuant to the relevant statute, Brooke, 906 P.2d at 68-71, we

  understand Grant Brothers’ claim as one for payment of proceeds

  arising under sections 34-60-116 and -118.5 of the Act. At issue is:

                                    12
  (1) whether payout has been reached; (2) if so, the date on which

  payment proceeds became due; and (3) the amount owed (plus

  interest) to Grant Brothers. § 34-60-118.5(5) and (5.5). It is

  undisputed that Grant Brothers is a nonconsenting owner seeking

  payment of funds acquired by Operators by extracting and selling

  natural gas from the wells at issue. Consequently, Grant Brothers

  qualifies as a “payee” entitled to payment of proceeds from

  Operators, the “payers.” See §§ 34-60-116(7), -118.5(1)(a) and (b).

¶ 24   Grant Brothers’ entitlement, however, is subject to a condition

  precedent. Where, as here, an operator and a nonconsenting owner

  have no contract addressing the issue, “[t]he date on which

  payment of proceeds is due” is the date the wells reach payout. §

  34-60-118.5(5). Grant Brothers receives payment only if and when

  payout occurs.

¶ 25   Reading subsections -118.5(5) and -118.5(5.5) together, as we

  must, and applying the statutory language, Young, ¶ 11, we

  conclude that the Act’s comprehensive scheme means that primary

  jurisdiction for the present dispute remains with the Commission.

  See Great W. Sugar Co., 661 P.2d at 690. If one party is dissatisfied

  with the results of the administrative process, that party can then

                                   13
  seek judicial review. See § 34-60-111, C.R.S. 2016 (providing that

  any final order of the “[C]ommission shall be subject to judicial

  review”); see also Dep’t of Nat. Res. Reg. 501(c), 2 Code Colo.

  Regs. 404-1 (adopting the State Administrative Procedure Act

  (APA), sections 24-4-101 to -108, C.R.S. 2016); Dep’t of Nat. Res.

  Reg. 503(b)(8), 2 Code Colo. Regs. 404-1 (allowing a mineral interest

  owner to file an application to the Commission for the purpose of

  seeking a hearing on provisions related to measurement); Dep’t of

  Nat. Res. Reg. 503(b)(10), 2 Code Colo. Regs. 404-1 (allowing an

  aggrieved interest owner to file an application for relief for any

  other matter not described in the regulation); Dep’t of Nat. Res.

  Reg. 522, 2 Code Colo. Regs. 404-1 (allowing a mineral owner to

  file a complaint requesting the issuance of a violation notice

  directing an operator to voluntarily remedy the violation).

¶ 26   Second, as to whether the relevant statute provides a remedy

  for the claim asserted, Brooke, 906 P.2d at 68-71, the Act provides

  a remedy for claims for the payment of proceeds where the parties

  have no contract addressing the issue.

¶ 27   Here, there is no contract; thus, there is no contract dispute.

  See, e.g., Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d

                                    14
  1138, 1157 (10th Cir. 2000) (applying Colorado law); Anderson

  Living Trust v. ConocoPhillips Co., LLC, 952 F. Supp. 2d 979, 1054

  (D.N.M. 2013) (applying Colorado law); Grynberg v. Colo. Oil & Gas

  Conservation Comm’n, 7 P.3d 1060, 1062-63 (Colo. App. 1999)

  (finding the Commission had jurisdiction to calculate the amount of

  proceeds due to a payee and to enforce timely payment, but lacked

  jurisdiction to resolve a contractual dispute over whether operators

  were entitled under a lease to deduct post-production expenses in

  computing royalties due to owners).

¶ 28   A payee contesting the payment (or nonpayment) of proceeds

  must first submit a written request, such as Commission Form 37,

  to the payer(s) requesting certain information regarding the costs of

  installing and operating the well. § 34-60-118.5(2.5); Dep’t of Nat.

  Res. Reg. 329, 2 Code Colo. Regs. 404-1. After submitting Form 37,

  if the dispute remains unresolved, the payee may then submit Form

  38 to request a hearing before the Commission. Any final order

  resulting from such a hearing is subject to judicial review pursuant

  to the APA, sections 24-4-101 to -108. See § 34-60-111; see also

  Dep’t of Nat. Res. Reg. 501, 2 Code Colo. Regs. 404-1.

                                   15
¶ 29   Third, with regard to whether the legislature intended the

  statutory remedy to be the primary remedy for the claim asserted,

  Brooke, 906 P.2d at 68-71, the legislature has said, by the Act’s

  language and structure, that a proceeding before the Commission,

  as described above, is the primary remedy for nonconsenting

  owners’s claims for the payment of proceeds where there is no

  germane contract between the parties. See §§ 34-60-

  118.5(5), -118.5(5.5), and -116(7). The comprehensive statutory

  scheme detailed above — addressing when payout has occurred,

  the date when payment of proceeds is due, and the amount of

  proceeds due where the parties have no contract regarding the

  payment of proceeds — evidences this intent. See Brooke, 906 P.2d

  at 68-71; Egle v. City & Cty. of Denver, 93 P.3d 609, 612 (Colo. App.

  2004). The scheme establishes a typical administrative process

  allowing for rulemaking, hearings, and eventual judicial review of

  disputes within the Commission’s area of expertise.

¶ 30   Contrary to Grant Brothers’ suggestion, the 1998 amendments

  do not evidence a change in the legislature’s intent regarding the

  primacy of the Commission’s jurisdiction over disputes like this

  one. Before the amendments, the Act stated that the Commission

                                   16
“shall have exclusive jurisdiction to determine . . . [t]he date on

which payment of proceeds is due a payee[;] . . . [t]he existence or

nonexistence of an occurrence . . . [justifying] a delay in payment;

and . . . [t]he amount of proceeds plus interest, if any, due a payee

by a payor.” § 34-60-118.5(5), C.R.S. 1997 (emphasis added). After

the amendments, the Act states that, “[a]bsent a bona fide dispute

over the interpretation of a contract for payment, [the Commission]

shall have jurisdiction to determine” the same three issues outlined

in the older version of the Act. § 34-60-118.5(5), C.R.S. 2016. The

1998 amendments did not change the Commission’s primary

jurisdiction over disputes for the payment of proceeds such as the

one before us. Rather, they clarified that disputes involving a “bona

fide dispute over the interpretation of a contract for payment”

should be brought in the district court. See §§ 34-60-118.5(5)

and -118.5(5.5). The history of the 1998 amendments to the Act,

implemented through Senate Bill 98-159,7 reveals the following:

7 Although we conclude that the Act’s language evidences its
underlying legislative purpose, we examine the legislative history of
the 1998 amendments in order to fully address the issues Grant
Brothers raises on appeal. See Kisselman v. Am. Family Mut. Ins.
Co., 292 P.3d 964, 969 (Colo. App. 2011) (“[W]e may consider
legislative history when there is substantial legislative discussion

                                   17
   Senator Bishop repeatedly stated that the thrust of the bill

     was to ensure that royalty owners received more information

     regarding the payments from operators so that they could

     ensure the sufficiency of the payments of proceeds. See

     Hearings on S.B. 98-159 before the Conf. Comm., 61st Gen.

     Assemb., 2nd Sess. (Apr. 16, 1998) (comments of Senator

     Bishop); Hearings on S.B. 98-159 before the S. Agricultural

     Comm., 61st Gen. Assemb., 2nd Sess. (Feb. 4, 1998)

     (comments of Senator Bishop). Bishop, along with the

     Member of the House who worked with him on the bill, also

     stressed multiple times that the bill was not meant to change

     any substantive contractual rights established by oil and gas

     leases, but it would change some procedural rights (such as

     how payments should be made and what information should

     be disclosed regarding such payments). Hearings on S.B.

     98-159 before the Conf. Comm., 61st Gen. Assemb., 2nd Sess.

     (Apr. 16, 1998) (comments of Senator Bishop). Bishop also

     emphasized that the Commission should not be asked to

surrounding the passage of a statute, and the plain language
interpretation of a statute is consistent with legislative intent.”).

                                   18
     resolve disputes that are better addressed by courts (e.g.,

     interpretation of contract provisions). Id.

   Walter Fees, who worked with Bishop on the bill, authored a

     letter discussing changes to section 34-60-118.5, which

     states, “[a]fter my talk with [Senator] Bishop[,] he feels the

     [Commission] should have exclusive jurisdiction over the

     payment of proceeds.” See Hearings on S.B. 98-159 before the

     S. Agricultural Comm., 61st Gen. Assemb., 2nd Sess. (Feb. 4,

     1998) (letter to Richard Griebling, referenced at the hearing).

   Jack Rigg, associated with Amoco and the Rocky Mountain Oil

     and Gas Association, also testified that the Commission

     should not be involved in private contract disputes and that

     one of the main purposes of the amendment was to clarify that

     the Commission was not to interpret contract terms in place of

     a court. See id. (comments of Jack Rigg). He never suggested

     that the Commission should not continue to have primary

     jurisdiction over noncontractual disputes over the payment of

     proceeds. Id.

We are thus unpersuaded by Grant Brothers’ arguments to the

contrary.

                                  19
¶ 31   While section 34-60-118.5 alone does not create an

  entitlement to proceeds, Grynberg, 7 P.3d at 1063, a final order

  from the Commission recognizing one’s status as a nonconsenting

  owner pursuant to section 34-60-116 does. Grant Brothers’

  entitlement to payment is not at issue; the issues are if and when

  Grant Brothers is to receive payment and in what amount.

¶ 32   To allow parallel judicial proceedings on these same issues,

  rather than giving the Commission the first opportunity to decide

  them, see Great W. Sugar Co., 661 P.2d at 690, would go against

  the legislative intent revealed by the Act’s declaration (§ 34-60-

  105(1)), language (§ 34-60-118.5), and administrative processes (see

  Dep’t of Nat. Res. Regs. 501, 503(b)(8), 503(b)(10), 522, 2 Code

  Colo. Regs. 404-1). And, requiring Grant Brothers and similarly

  situated claimants to exhaust administrative remedies promotes the

  policy objectives at the heart of the doctrine of administrative

  exhaustion. See Golden’s Concrete Co., 962 P.2d at 923

  (expounding on the doctrine’s policy objectives, including the

  conservation of judicial resources). The determination Grant

  Brothers seeks concerning key details of the oil and gas production

  process is well within the expertise of the Commission, and allowing

                                    20
  the Commission to develop a record in resolving this dispute will

  conserve judicial resources and result in a more optimal application

  of judicial relief, should the claim undergo later judicial review. See

  id.

¶ 33    We therefore conclude that Grant Brothers was required to

  exhaust its administrative remedies and did not do so before filing

  suit in the district court. As a result, we conclude that the district

  court properly dismissed the action.

                      B.   Dismissal With Prejudice

¶ 34    Grant Brothers contends that the district court erred in

  dismissing its claim with prejudice solely on the basis that the court

  lacked subject matter jurisdiction. We agree.

¶ 35    A dismissal under C.R.C.P. 12(b)(1) is not an adjudication on

  the merits, but rather is the result of a court lacking the power to

  hear the claims asserted. See Trinity Broad. of Denver, Inc., 848

  P.2d at 925. Because we have determined that the issue of subject

  matter jurisdiction raised by Operators’ motion should have been

  addressed pursuant to Rule 12(b)(1), the dismissal we affirm is

  necessarily without prejudice, which the district court shall correct

  upon remand. Grant Brothers therefore retains the ability to seek

                                    21
  further relief from the Commission, whose orders are then subject

  to judicial review. See Dep’t of Nat. Res. Reg. 501, 2 Code Colo.

  Regs. 404-1.

                    III.   Operators’ Request for Costs

¶ 36   Operators requested their costs pursuant to C.A.R. 39.

  Because we affirm in part and reverse in part, we conclude that the

  trial court should determine what amount of appellate costs, if any,

  to award upon remand. See C.A.R. 39(a)(4) (“[I]f a judgment is

  affirmed in part, . . . costs are taxed only as ordered by the trial

  court.”) (emphasis added).

                               IV.   Conclusion

¶ 37   The judgment is affirmed in part and reversed in part, and the

  case is remanded to the district court with directions to correct the

  judgment to clarify that the dismissal is without prejudice and to

  make a determination regarding Operators’ request for costs

  pursuant to C.A.R. 39.

       JUDGE BERNARD and JUDGE RICHMAN concur.

                                      22