In this case, the Colorado Supreme Court analyzed the meaning of a “bona fide dispute over the interpretation of a contract.” After a dispute arose between Antero Resources Corporation (“Antero”) and royalty owners alleging underpaid royalties in violation of their lease contracts, the court considered whether the Colorado Oil and Gas Conservation Commission (“COGCC”) had jurisdiction.
Colorado legislation gives the COGCC jurisdiction over “actions for the timely payment of proceeds” under oil and gas leases, but not if such proceeds require contract interpretation. The district court found that COGCC had jurisdiction in this case because the contracts were unambiguous, requiring only factual determinations. However, the Supreme Court explained that a determination that contract language is unambiguous is itself contract interpretation.
The court clarified that “once parties whose mineral interests are the subject of a lease agreement have raised a nonfrivolous, genuine dispute about a contract term, jurisdiction to interpret that contract lies with the courts and not COGCC.” It concluded that because the parties had a good faith disagreement over the meaning of relevant contract terms, each lease presented a bona fide dispute of contract interpretation and divested the COGCC of jurisdiction.