Parry et al v. IKAV Energy Inc. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 25-cv-00838-PAB-CYC
RICHARD PARRY,
LINDA PARRY,
EVELYN L. PAYNE MINERAL TRUST,
EGR MINERALS, LLC, and
DAVID G. GROBLEBE,
Plaintiffs,
v.
SIMCOE LLC, and
IKAV ENERGY INC.,
Defendants.
ORDER
This matter comes before the Court on Defendants’ Motion to Dismiss Pursuant
to Federal Rule of Civil Procedure 12(b)(1) and Partial Motion to Dismiss Pursuant to
Federal Rule of Civil Procedure 12(b)(6) [Docket No. 18], Defendants’ Motion to Strike
Plaintiffs’ Notice of Supplemental Authority Relevant to Defendants’ Motion to Dismiss
[Docket No. 43], and Plaintiffs’ Motion for Leave to File Supplemental Response to
Defendants’ Motion to Dismiss [Docket No. 48]. The Court has jurisdiction pursuant to
28 U.S.C. § 1332(d)(2).
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I. 	FACTUAL BACKGROUND 1
Plaintiffs own mineral rights in La Plata County, Colorado that are leased to
defendant SIMCOE LLC (“SIMCOE”). Docket No. 3 at 2-3, ¶¶ 1-4. Defendants
SIMCOE and IKAV Energy Inc. (“IKAV”) hold themselves out as a single entity. Id. at 3,
¶ 7. Defendants operate at least 1,300 gas wells in La Plata and Archuleta Counties,
Colorado. Id., ¶ 8. For the period of January 1, 2021 through December 31, 2030,
SIMCOE, on behalf of defendants, entered into a gas sale confirmation with BP Energy
Company to market the major portion of its residue gas 2 produced in La Plata and
Archuleta Counties at $1.72 per MMBtu and the balance for the Gas Daily Price. Id. at
6, ¶ 23. The Gas Daily Price is “the price published by S&P Global in Gas Daily for the
applicable Gas Day under the heading ‘Daily Price Survey ̽ 	Platts locations ($/MMBtu):
Southwest: El Paso San Juan: Midpoint.’” Id. (alteration omitted).
Since November 1, 2022, the value used by defendants to calculate the royalties
owed to plaintiff, the El Paso San Juan Daily index price, was “below the monthly
market value of comparable residue gas in the San Juan Basin for numerous months.”
Id. at 6-7, ¶¶ 24-25. The “best reasonably available price and market value of natural
gas [is] often calculated by computing the arithmetical average of the three highest
prices paid for comparable residue gas each month in the applicable market area.” Id.
at 7, ¶ 26. The value used by defendants, however, was below the best reasonably
1 The facts below are taken from plaintiffs’ complaint, Docket No. 3, and are
presumed to be true, unless otherwise noted, for purposes of ruling on defendants’
motion to dismiss. Brown v. Montoya, 662 F.3d 1152, 1162 (10th Cir. 2011).
2 “Residue gas” is “[n]atural gas from which natural gas processing plant liquid
products and, in some cases, nonhydrocarbon components have been extracted.” See
U.S. Energy Information Administration, “Glossary,” https:// www.eia.gov/tools/
glossary/index.php?id=R.
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available price for “numerous months since November 1, 2022.” Id., ¶ 29. The value
used by defendants was also less than the applicable value produced by the
Department of Interior, Office of Natural Resources Revenue (“ONRR”) Valuation and
Pricing and the IFERC El Paso San Juan Monthly (FOM) Index Price. Id., ¶¶ 29, 31.
ONRR Valuation and Pricing and the IFERC El Paso San Juan Monthly (FOM) Index
price are “evidence of the prevailing market price for residue gas in the San Juan
Basin.” Id., ¶¶ 28, 30.
II. 	PROCEDURAL BACKGROUND
On January 23, 2025, plaintiffs filed their complaint in La Plata District Court.
See generally id. On March 14, 2025, defendants removed the case to federal court,
asserting that the Court had jurisdiction pursuant to 28 U.S.C. § 1332(d)(2). See
Docket No. 1. On March 21, 2025, defendants filed a motion to dismiss pursuant to
Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Docket No. 18. Approximately six weeks after
defendants’ reply, Docket No. 23, plaintiffs filed a Notice of Supplemental Authorities
regarding defendants’ motion to dismiss. Docket No. 36. On July 3, 2025, defendants
filed a motion to strike plaintiffs’ Notice of Supplemental Authorities. Docket No. 43. On
August 14, 2025, plaintiffs filed a motion for leave to file a supplemental response to
defendants’ motion to dismiss. Docket No. 48.
III. 	LEGAL STANDARD
Dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) is appropriate if
the Court lacks subject matter jurisdiction over claims for relief asserted in the
complaint. Rule 12(b)(1) challenges are generally presented in one of two forms: “[t]he
moving party may (1) facially attack the complaint’s allegations as to the existence of
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subject matter jurisdiction, or (2) go beyond allegations contained in the complaint by
presenting evidence to challenge the factual basis upon which subject matter
jurisdiction rests.” Merrill Lynch Bus. Fin. Servs., Inc. v. Nudell, 363 F.3d 1072, 1074
(10th Cir. 2004) (quoting Maestas v. Lujan, 351 F.3d 1001, 1013 (10th Cir. 2003)).
Ultimately, plaintiff has “[t]he burden of establishing subject matter jurisdiction” because
it is “the party asserting jurisdiction.” Port City Props. v. Union Pac. R.R. Co., 518 F.3d
1186, 1189 (10th Cir. 2008).
IV. 	ANALYSIS
Plaintiffs seek to represent the following class:
The persons or entities who own oil and gas Royalty Instruments (leases
and overriding royalty instruments) and have received royalty and/or
overriding royalty payments from SIMCOE/IKAV from sales of natural
gas produced in La Plata and Archuleta Counties, Colorado during and after
the production month of November 2022; and excluding from such Class:
(1) SIMCOE/IKAV and any of its affiliates; (2) the United States insofar as
its interests are managed by the ONRR; and (3) Indian Tribes and their
allottees.
Docket No. 3 at 4-5, ¶ 14. Plaintiffs bring a claim for Breach of the Implied Covenant to
Diligently Market Residue Gas (Claim One); Breach of the Implied Covenant to Obtain
the Best Reasonably Available Price for Marketed Residue Gas (Claim Two); Breach of
the Implied Covenant of Good Faith and Fair Dealing (Claim Three); and Breach of
Express Language of Market Value Leases (Claim Four). 3 Id. at 8-12.
3 A federal court applies the choice-of-law rules of the forum state in which it sits.
See Mem’l Hosp. of Laramie Cnty v. Healthcare Realty Tr. Inc., 509 F.3d 1225, 1229
(10th Cir. 2007). Colorado has adopted the choice-of-law approach of the Restatement
(Second) of Conflict of Laws (the “Restatement”), which requires a court to apply the
substantive law of the state having the “most significant relationship” to the issue. See
Wood Brothers Homes v. Walker Adjustment Bureau, 601 P.2d 1369, 1372 (Colo.
1979). Both parties apply Colorado law, see, e.g., Docket No. 18 at 2; Docket No. 22 at
4, plaintiffs are residents and citizens of Colorado, Docket No. 1 at 1-3, ¶¶ 2-4, and
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A. Subject Matter Jurisdiction
Defendants argue that the Court lacks subject matter jurisdiction over plaintiffs’
claims because plaintiffs have failed to exhaust their administrative remedies through
the Colorado Energy and Carbon Management Commission (the “ECMC” or the
“Commission”), formerly known as Colorado Oil and Gas Conservation Commission
(the “COGCC”). Docket No. 18 at 5-10. Defendants contend that plaintiffs must
exhaust their claims for underpaid royalties through the ECMC and that, even in the
case of a bona fide dispute regarding the interpretation of a contract, the ECMC must
determine its own jurisdiction. Id.
Plaintiffs respond that “pursuing administrative remedies would be completely
futile because there can be no reasonable doubt that the ECMC lacks jurisdiction to
hear the Class claims or to provide the putative class with the requested relief.” Docket
No. 22 at 9. Plaintiffs argue that, in Antero Res. Corp. v. Airport Land Partners, Ltd.,
526 P.3d 204, 207 (Colo. 2023), the Colorado Supreme Court made “clear that the
ECMC – as a matter of law – lacks jurisdiction ‘to interpret any disputed contract terms
– even if those terms seem unambiguous or depend on factual determinations.’”
Docket No. 22 at 9-10 (quoting Airport Land, 526 P.3d at 211). Because plaintiffs
contend that their claims implicate a dispute over the interpretation of a contract, and
the ECMC does not have the jurisdiction to consider such claims, proceeding before the
ECMC would be futile. See id. at 11.
plaintiffs’ claims concern mineral rights in land located in Colorado. See id. at 4, ¶ 10.
Accordingly, the Court will apply Colorado law.
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The Court will first address whether the ECMC or the Court should determine
whether a bona fide contractual interpretation dispute exists. “If complete, adequate,
and speedy administrative remedies are available, a party must pursue these remedies
before filing suit in district court.” City & Cnty. of Denver v. United Air Lines, Inc., 8 P.3d
1206, 1212 (Colo. 2000). Pursuant to Colorado’s Oil and Gas Conservation Act, the
ECMC has jurisdiction to determine “[t]he amount of the proceeds plus interest, if any,
due a payee by a payer” from “proceeds derived from the sale of oil, gas, or associated
products from a well in Colorado.” Colo. Rev. Stat. § 34-60-118.5(1)(a), (5)(c). Section
34-60-118.5 provides that:
Before hearing the merits of any proceeding regarding payment of proceeds
pursuant to this section, the commission shall determine whether a bona 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.
Colo. Rev. Stat. § 34-60-118.5(5.5).
Plaintiffs’ reliance on Airport Land – for the proposition it need not present its
claims before the ECMC for a determination as to its jurisdiction– is misplaced. See
Docket No. 22 at 9-12. In Airport Land, 526 P.3d at 208, the plaintiffs, unlike plaintiffs
here, brought their claims regarding underpaid royalties to the ECMC for a
determination as to whether the ECMC had jurisdiction. Only after the ECMC
determined that it did not have jurisdiction over plaintiffs’ claims did plaintiffs appeal that
jurisdictional determination to the Denver District Court. See id. Airport Land concluded
that § 34-60-118.5(5.5), which requires “the Commission to determine whether a bona
fide dispute over contract interpretation exists, and to decline jurisdiction if it does,
cannot be read to require COGCC to first engage in contract interpretation to assess the
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bona fides of the dispute and then to decline jurisdiction.” Id. at 210. In other words,
Airport Land “said nothing about whether parties may go directly to the district court if
they believe their case involves a dispute over the interpretation of a contract.” C & M
Res., LLC v. Extraction Oil & Gas, Inc., No. 24-cv-00037-NYW-MEH, 2024 WL
3458080, at *13 (D. Colo. July 18, 2024). The “Airport Land decision did no more than
clarify the Commission’s limited role in disputes implicating contract interpretation,
which is properly constrained to determining whether the parties in good faith disagree.”
Boulter v. Noble Energy Inc., 2024 WL 1526289, at *5 (10th Cir. Apr. 9, 2024) (internal
quotation and citation omitted). “[E]ven after Airport Land, a ‘proceeding regarding the
payment of proceeds’ must first be presented to the Commission, and jurisdiction is
proper in district court only after the Commission determines ‘a bona fide dispute exists
regarding the interpretation of a contract.’” Id. (quoting Colo. Rev. Stat. § 34-60-
118.5(5.5)); see also C & M Res., LLC, 2024 WL 3458080, at *8 (“Colorado law also
provides that it is the Commission that must determine, in the first instance, whether a
bona fide contractual interpretation dispute exists.”) (emphasis omitted).
The Court finds that futility exception does not apply. Under Colorado law, a
plaintiff need not exhaust its administrative remedies when it is “clear beyond a
reasonable doubt that further administrative review by the agency would be futile
because the agency will not provide the relief requested. United Air Lines, Inc., 8 P.3d
at 1213 (citation omitted). Plaintiffs argue that the Tenth Circuit in Boulter “left the door
to the futility exception wide open,” see Docket No. 22 at 11, when it stated the
following:
Colorado law, of course, recognizes exceptions to requirements to exhaust
administrative remedies, including an exception for when it is “‘clear beyond a
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reasonable doubt’ that further administrative review by the agency would be futile
because the agency will not provide the relief requested.” State v. Golden's
Concrete Co., 962 P.2d 919 (Colo. 1998) (quoting Colorado v. Veterans Admin.,
430 F. Supp. 551, 558 (D. Colo. 1977)). Appellants make no argument that
exhaustion would be futile, so we do not address this exception here, and we
express no opinion as to whether Colorado law permits district courts to conclude
the futility exception is satisfied upon a finding that “a bona fide dispute exists
regarding the interpretation of a contract.” Colo. Rev. Stat. § 34-60-118.5(5.5).
Boulter, 2024 WL 1526289, at *5 n.3. The fact that the Tenth Circuit declined to
address futility does not change the fact that a “proceeding regarding the payment of
proceeds must first be presented to the Commission, and jurisdiction is proper in district
court only after the Commission determines a bona fide dispute exists regarding the
interpretation of a contract.” See id. at *5 (internal quotations and citation omitted). As
explained above, Airport Land does not affect this principle. To determine that ECMC
review would be futile, the Court would have to determine whether a contractual
interpretation dispute exists, which is a “disagreement between the parties [that] would
require the Court to invade the province of the [ECMC].” Boulter v. Noble Energy, Inc.,
521 F. Supp. 3d 1077, 1085 (D. Colo. 2021).
Plaintiffs also argue that administrative review is futile because the “ECMC is not
capable of providing the putative plaintiff class with an adequate remedy.” Docket No.
22 at 14. Plaintiffs contend that the ECMC “has no authority to find that the amount of
royalty actually paid was less then the amount required by the express or implied terms
of the oil and gas lease, nor can the ECMC provide any remedy for any such royalty
underpayment.” Id. at 14-15. Plaintiffs also argue that the ECMC cannot “hear any
claim brought by a representative on behalf of a class, nor can the ECMC provide any
remedy to absent class members.” Id. at 15. However, in order for the futility exception
to apply, it must be “clear beyond a reasonable doubt that further administrative review
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by the agency would be futile because the agency will not provide the relief requested.”
See United Air Lines, Inc., 8 P.3d at 1213 (citation omitted). Because plaintiffs do not
explain why, and cite no authority for the proposition that, the ECMC cannot provide
class-wide relief, they fail to show futility beyond a reasonable doubt. See Docket No.
22 at 15; see also City of Aspen v. Kinder Morgan, Inc., 143 P.3d 1076, 1082 (Colo.
App. 2006) (rejecting plaintiff’s argument “that exhaustion should not be required
because the [Colorado Public Utilities Commission (“PUC”)] lacks procedures for a
class action” where the PUC could order reparations as a remedy that “can compensate
each aggrieved customer, despite the absence of class action procedures”); cf. Lopez v.
Civ. Serv. Comm’n, 283 Cal. Rptr. 447, 450 (Cal. Ct. App. 1991) (“The mere bringing of
a class action is not ipso facto an exception to the exhaustion requirement.”); Holman v.
S.C. Educ. Lottery Comm’n, 891 S.E.2d 701, 710 (S.C. Ct. App. 2023) (“We hold
Appellants were not relieved of the requirement to exhaust their administrative remedies
merely because they asserted putative class action claims.”). There is nothing in the
Colorado’s Oil and Gas Conservation Act that limits the ability of the ECMC to provide
class-wide relief; rather, it provides that:
The commission has jurisdiction over all persons and property, public and
private, necessary to enforce this article 60, the power to make and enforce rules
and orders pursuant to this article 60, and to do whatever may reasonably be
necessary to carry out this article 60.
Colo. Rev. Stat. § 34-60-105(1)(a).
Because the Court finds that plaintiffs have failed to exhaust their administrative
remedies, it will grant defendants’ motion to dismiss plaintiffs’ complaint for lack of
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subject matter jurisdiction. 4 See Burlington Res. Oil & Gas Co. v. Colo. Oil & Gas
Conservation Comm'n Dep't of Nat. Res., 986 F. Supp. 1351, 1353–54 (D. Colo. 1997)
(“the general rule established in Colorado [is] that failure to exhaust administrative
remedies before seeking judicial relief is a jurisdictional defect”); United Air Lines, 8
P.3d at 1212 (“If a party fails to exhaust these [administrative] remedies, the district
court may lack subject-matter jurisdiction over the action.”).
B. Defendants’ Motion to Strike Plaintiffs’ Supplemental Authorities
Defendants move to strike plaintiffs’ Notice of Supplemental Authorities, Docket
No. 36, because “Plaintiffs attempt to circumvent this Court’s Practice Standards and
supplement their Response to Defendants’ Motion to Dismiss without leave of Court.”
Docket No. 43 at 3. In the Notice, plaintiffs provide “recent orders entered by [the
ECMC]” that “will assist the Court to understand how the ECMC construes and applies
its own jurisdiction.” See Docket No. 36 at 1.
The supplemental authorities cited by plaintiffs are non-precedential and were
available at the time that plaintiffs filed their response to the motion to dismiss. See id.
at 2-3. The Court declines “to consider a new argument raised for the first time in
supplemental authority based on no change in precedent.” Standing Akimbo, Inc. v.
United States, No. 18-mc-00178-PAB, 2021 WL 3931224, at *9 (D. Colo. Sept. 2,
2021), aff’d sub nom., 2023 WL 569405 (10th Cir. Jan. 27, 2023) (citing Hooks v. Ward,
184 F.3d 1206, 1233 n.25 (10th Cir. 1999)). Accordingly, the Court will grant
defendants’ motion to strike the notice of supplemental authorities.
4 Because the Court lacks subject matter jurisdiction, it will not address
defendants’ argument that Claims One, Two, and Three are subject to dismissal
pursuant to Rule 12(b)(6). See Docket No. 18 at 10-15.
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C. Plaintiffs’ Motion for Leave to File Supplemental Response
Plaintiffs move to file a supplemental response to defendants’ motion to dismiss
to “direct the Court to statements made by the Defendants to the Court after the briefing
on Defendants’ Motion to Dismiss had been completed.” Docket No. 48 at 1. Plaintiffs
contend that defendants’ statements undermine defendants’ argument in their motion to
dismiss that “Plaintiffs’ claims do not involve a bona fide dispute regarding the
interpretation of a contract and included in the narrow grant of jurisdiction to the ECMC
to determine the existence and amount of a statutory late payment.” See id.
Because the Court finds that it lacks subject matter jurisdiction over plaintiffs’
claims and the issue of whether there is a bona fide contractual interpretation dispute
must first be raised before the ECMC, plaintiffs’ motion is moot. Therefore, the Court
will deny plaintiffs’ motion.
V. 	CONCLUSION
Therefore, it is
ORDERED that Defendants’ Motion to Dismiss Pursuant to Federal Rule of Civil
Procedure 12(b)(1) and Partial Motion to Dismiss Pursuant to Federal Rule of Civil
Procedure 12(b)(6) [Docket No. 18] is GRANTED. It is further
ORDERED that Defendants’ Motion to Strike Plaintiffs’ Notice of Supplemental
Authority Relevant to Defendants’ Motion to Dismiss [Docket No. 43] is GRANTED. It is
further
ORDERED that Plaintiffs’ Motion for Leave to File Supplemental Response to
Defendants’ Motion to Dismiss [Docket No. 48] is DENIED. It is further
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ORDERED that plaintiffs’ claims are DISMISSED without prejudice for lack of
subject matter jurisdiction. It is further
ORDERED that Defendants’ Motion for Summary Judgment Under Federal Rule
of Civil Procedure 56 [Docket No. 63] is DENIED as moot. It is further
ORDERED that this case is closed.
DATED February 2, 2026.
BY THE COURT:
___________________________
PHILIP A. BRIMMER
Chief United States District Judge
___________________________	_______	_______	__	___________________________________________	_______________________________
PHILIP A BRIMMER
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