Court Opinion

ID: 9372439
Source: CourtListenerOpinion
Date Created: 2023-02-21 17:02:32.560254+00
Date Added: 2024-06-11T17:16:35.525820
License: Public Domain

The Supreme Court of the State of Colorado
                  2 East 14th Avenue • Denver, Colorado 80203

                                    2023 CO 8

                       Supreme 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

                                            4
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 at

662 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.

                                           8
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

                                          12
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

                                         13
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.

                                          14
                 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.

                                          19
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

                                          20
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

                                         21
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 . . . .”).

                                         23
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.”).

                                           24
¶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.

                                        25