ORDER

PHILIP A. BRIMMER, District Judge.

This matter comes before the Court on the Motion for Order Confirming Arbitration Award and Directing Entry of Judgment [Docket No. 18] filed by Slawson Exploration Company, Inc. ("Slawson"). The Court has jurisdiction pursuant to 28 U.S.C. § 1332.

Slawson is a Kansas corporation involved in the acquisition and development of oil and gas leases in McKenzie and Williams Counties, North Dakota. Docket No. 1 at 3. On January 15, 2010, Slawson and respondent U.S. Energy Development Corporation ("U.S. Energy") entered into an Exploration and Development Agreement With Area of Mutual Interest, Project X, McKenzie and Williams Counties, North Dakota ("Exploration Agreement"). Id. at 2, ¶ 5. Pursuant to that agreement, U.S. Energy agreed to pay Slawson various fees and costs, including "a cost-plus fee of 10% on its share of well drilling and completion costs (the "Drilling Promotes"). Id. at 3, ¶ 8. The agreement also provided that "[a]ny dispute arising under this Agreement shall be finally determined by binding arbitration in Denver, Colorado, with a single arbitrator, and the arbitrator's determination shall be final [and] binding upon the Parties." Id. at 2, ¶ 7; Docket No. 1-3 at 5, ¶ 14(c).

On August 2, 2016, Slawson initiated arbitration proceedings against U.S. Energy, claiming that U.S. Energy had breached the Exploration Agreement by failing to pay Slawson for Drilling Promotes on certain wells. Docket No. 1 at 3, ¶¶ 9-10. After an evidentiary hearing on March 8, 9, and 10, 2017, in which both parties participated, Arbitrator Boyd N. Boland concluded that U.S. Energy "breached the [Exploration] Agreement as amended by failing to pay Drilling Promotes on all wells in which US Energy participates which are located on leases acquired by US Energy pursuant to the Agreement and on all wells drilled on lands covered by pooling orders that include those leaseholds." Docket No. 1-2 at 28; see also Docket No. 1 at 4, ¶ 11. On May 11, 2017, Arbitrator Boland awarded Slawson $689,338.78 in damages for unpaid Drilling Promotes, plus prejudgment interest at a rate of 8% per annum compounded annually, pursuant to Colo. Rev. Stat. § 5-12-102. Docket No. 1-2 at 28. On May 25, 2017, Arbitrator Boland ordered the release of $184,345.81 in funds that were being held in trust to Slawson, in partial payment of the arbitration award. Docket No. 18-1. On June 20, 2017, U.S. Energy filed a Motion to Correct or Modify Award with Arbitrator Boland, seeking reconsideration of the award of prejudgment interest. Docket No. 18 at 3, ¶ 7; see also Docket No. 18-2 at 3-4 (identifying grounds for motion to correct or modify). Arbitrator Boland denied the motion on July 28, 2017, noting, among other things, that "the FAA does not provide any mechanism for an arbitrator to correct or modify an award." Docket No. 18-2 at 10.

On May 23, 2017, Slawson filed a Petition to Confirm Arbitration Award [Docket No. 1] in this Court. Slawson served U.S. Energy through its registered agent on July 7, 2017 and filed an affidavit of service on July 13, 2017. Docket No. 12. On July 31, 2017, Slawson filed the instant motion for an order confirming the arbitration award and directing entry of final judgment. Docket No. 18. On May 25, 2018, the Court entered an order requesting supplemental briefing on plaintiff's request for post-award/prejudgment interest as well as an updated proposed final judgment. Docket No. 26. Plaintiff filed its supplemental brief on June 8, 2018. Docket No. 27. U.S. Energy has not responded to Slawson's original petition or its motion for confirmation of the arbitration award.

Under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 9 et seq., confirmation of an arbitration award is a summary procedure. "If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration," a court "must grant . . . an order [confirming an arbitration award] unless the award is vacated, modified, or corrected." 9 U.S.C. § 9. Because the parties have contracted to resolve their disputes by way of binding arbitration, "maximum deference" is owed to the arbitrator. Hosier v. Citigroup Global Markets, Inc., 835 F.Supp.2d 1098, 1101 (D. Colo. 2011). "Courts [ ] do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts." United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987). Thus, arbitration awards "must be confirmed even in the face of errors in an arbitration panel's factual findings, or its interpretation and application of the law." Hosier, 835 F. Supp. 2d at 1101 (citing Denver & Rio Grande W. R.R. v. Union Pac. R. R., 119 F.3d 847, 849 (10th Cir. 1997)).

An arbitration award may be disturbed only under "exceptional circumstances." Burlington N. & Santa Fe Ry. Co. v. Pub. Serv. Co. of Okla., 636 F.3d 562, 567 (10th Cir. 2010); see also Brown v. Coleman Co., Inc., 220 F.3d 1180, 1182 (10th Cir. 2000) (stating that "the standard of review of arbitral awards is among the narrowest known to law." (internal quotation marks omitted)). Section 10 of the FAA enumerates four situations in which a district court may vacate an arbitration award: (1) the award was procured by corruption, fraud, or undue means; (2) there was evidence that the arbitrators were partial or corrupt; (3) the arbitrators were guilty of misconduct; or (4) the arbitrators exceeded their powers or imperfectly executed them. 9 U.S.C. § 10(a)(1)-(4). There is also a "handful of judicially created reasons" for which vacatur is appropriate, including violations of public policy, an arbitrator's manifest disregard of the law, or the denial of a fundamentally fair hearing. Sheldon v. Vermonty, 269 F.3d 1202, 1206 (10th Cir. 2001) (citation omitted).1

Before assessing whether there is any ground for vacating, modifying, or correcting the arbitration award, the Court must first determine whether it has jurisdiction to confirm the award. The "jurisdictional inquiry [in arbitration confirmation cases] is two-fold." P & P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 866 (10th Cir. 1999). First, a court must have an independent basis for federal jurisdiction. Id. Second, the parties must "have agreed, explicitly or implicitly, that any eventual arbitration award shall be subject to judicial confirmation." Id.; see also 9 U.S.C. § 9 ("If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award. . . ."). In this case, federal jurisdiction exists under 28 U.S.C. §1332 because the parties are completely diverse and the amount in controversy exceeds $75,000. See Docket No. 1 at 1, ¶¶ 1-2. Additionally, the parties have agreed that any arbitration award will be subject to judicial confirmation. The Exploration Agreement provides that "the arbitrator's determination shall be final and binding upon the Parties" and that "either Party may apply to a court of competent jurisdiction to enforce any arbitration awarded, specific performance, or injunctive relief granted by the arbitrator." Docket No. 1-3 at 5, ¶ 14(c). Courts have found implicit consent to judicial confirmation based on similar language. See Will v. Parsons Evergreene, LLC, No. 08-cv-00898-DME-CBS, 2011 WL 2792398, at *1 (D. Colo. July 15, 2011) (finding that parties had consented to court's authority to enter judgment confirming arbitration award where agreement provided that the arbitration award would be final and binding and that parties had "consented that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction"); Dish Network L.L.C. v. JBS Dish, Inc., No. 10-cv-00212-CMA-CBS, 2010 WL 2004570, at *1-2 (D. Colo. May 19, 2010) (exercising jurisdiction to confirm arbitration award where the parties' agreement stated that "[t]he decision of the Arbitrator(s) shall be final and binding" and "any award of the Arbitrator(s) may be entered and enforced as a final judgment in any state or federal court of competent jurisdiction in the United States"); see also Okla. City Assocs. v. Wal-Mart Stores, Inc., 923 F.2d 791, 795 (10th Cir. 1991) (stating that section 9 "requires some manifestation of the agreement to have judgment entered in the contract itself").2

In addition to having jurisdiction to confirm the arbitration award in this case, the Court is unaware of any grounds on which to vacate, modify, or correct the award. Because U.S. Energy has not responded to Slawson's original petition or its motion for an order confirming the arbitration award, the Court has been presented with no grounds on which to deny Slawson's request for judicial confirmation. See Youngs v. Am. Nutrition, Inc., 537 F.3d 1135, 1141 (10th Cir. 2008) ("The burden is on the party seeking to vacate an arbitration award . . . to show that one of the limited statutory grounds exists for setting aside the arbitration result."); Dingo, Inc. v. Who Ya Gonna Call Bark Busters Pty, Ltd., No. 12-cv-02583-PAB-KMT, 2013 WL 3357662, at *2 (D. Colo. July 3, 2013) (confirming arbitration award where plaintiff had not presented any valid grounds to vacate, modify, or correct the award). Accordingly, the Court will confirm the arbitration award of Arbitrator Boyd N. Boland that was entered on May 11, 2017.

Finally, Slawson requests both post-award, prejudgment interest and postjudgment interest. "State law applies when determining the issue of prejudgment interest." Hicks v. Cadle Co., 355 F. App'x 186, 199 (10th Cir. 2009) (unpublished); see also Strickland Tower Maintenance, Inc. v. AT&T Commc'ns, Inc., 128 F.3d 1422, 1429 (10th Cir. 1997) ("A federal court sitting in diversity applies state law, not federal law, regarding the issue of prejudgment interest.").3 Under Colo. Rev. Stat. § 5-12-102(1), a prevailing party is entitled to prejudgment interest at the rate of 8% per annum, compounded annually, when "money or property has been wrongfully withheld."4 This statute applies in contract and property damage cases where a party has been awarded compensatory damages. See Thompson v. United Secs. Alliance, Inc., 2016 WL 4699113, at *5 (Colo. App. Sept. 8, 2016). During the arbitration proceedings in this case, Slawson requested — and the arbitrator awarded — prejudgment interest pursuant to § 5-12-102. See Docket No. 1-2 at 28. In an order releasing funds held in trust, the arbitrator further indicated that prejudgment interest would continue to accrue. See Docket No. 18-1 at 3 (noting that Slawson was awarded "interest exceeding $232,657.88," the amount that had accrued as of March 7, 2017). Slawson's request for post-award, prejudgment interest is therefore consistent with the arbitration award and does not represent an impermissible modification of that award. See Duncan v. Nat'l Home Ins. Co., 36 P.3d 191, 193 (Colo. App. 2001) (reversing award of prejudgment interest where prevailing party did not request prejudgment interest during the arbitration proceedings and thus "trial court's addition of prejudgment interest upon confirmation of the arbitration award [ ] constituted an impermissible modification of the award); see also Barrett v. Investment Mgmt. Consultants, Ltd., 190 P.3d 800, 802, 805 (Colo. App. 2008) (affirming trial court's award of post-award, prejudgment interest at rate of 8% per annum where arbitration panel had ordered payment of prejudgment interest at same rate).

The Court will also grant Slawson's request for post-judgment interest. In contrast to prejudgment interest, the issue of post-judgment interest is governed by federal law. Hosier v. Citigroup Global Markets, 858 F.Supp.2d 1206, 1209 (D. Colo. 2012) (citing Fid. Fed. Bank, FSB v. Durga Ma Corp., 387 F.3d 1021, 1024 (9th Cir. 2004)). Accordingly, once an arbitration award is confirmed in federal court, post-judgment interest is mandatory and "the rate specified in [28 U.S.C.] § 1961 applies." Id. While prejudgment interest under Colorado law may only be awarded on compensatory damages, see Seaward Constr. Co., Inc. v. Bradley, 817 P.2d 971, 977-78 (Colo. 1991), post-judgment interest "applies to the entire Award." Hosier, 858 F. Supp. 2d at 1211 (internal quotation marks omitted) (citing F.D.I.C. v. United Pac. Ins. Co., 152 F.3d 1266, 1277 n.8 (10th Cir. 1998)).

For the foregoing reasons, it is

ORDERED that petitioner's Motion for Order Confirming Arbitration Award and Directing Entry of Judgment [Docket No. 18] is GRANTED. It is further

ORDERED that the award of Arbitrator Boyd N. Boland, executed on May 11, 2017 and attached hereto as Exhibit A (the "Award"), is CONFIRMED. It is further

ORDERED that U.S. Energy Development Corporation shall be liable to Slawson Exploration Company, Inc. in the amount of $30,033.97.5 It is further

ORDERED that post-judgment interest, accruing on any unpaid portions of the Award from the date of entry of Final Judgment in this Court until the judgment is paid in full, is awarded in accordance with the rate and method of calculation set forth in 28 U.S.C. § 1961. It is further

ORDERED that U.S. Energy Development Corporation shall pay Drilling Promotes, as that term is defined in the Award, on (1) any well in which U.S. Energy participates which is located on a lease acquired by U.S. Energy pursuant to the parties' Exploration Agreement and (2) any well drilled on lands covered by pooling orders that include such leaseholds. It is further

ORDERED that U.S. Energy Development Corporation has no continuing liability for Drilling Promotes on wells drilled on the leases assigned by U.S. Energy to Emerald Oil, Inc., to which Slawson Exploration Company, Inc. consented. It is further

ORDERED that, within 14 days of the entry of this Order, petitioner may have its costs by filing a Bill of Costs with the Clerk of the Court.6 It is further

ORDERED that this case is closed.

This arbitration concerns a disagreement between Slawson Exploration Company, Inc. ("Slawson"), and U.S. Energy Development Corporation ("US Energy") about the interpretation of the Exploration and Development Agreement With Area of Mutual Interest, Project X, McKenzie and Williams Counties, North Dakota (the "Agreement"), dated January 15, 2010, as amended by a letter agreement (the "Amendment") dated September 29, 2011. Slawson and US Energy are the only parties to the Agreement and Amendment. They disagree about the circumstances under which US Energy must pay to Slawson a 10% drilling promote (the "Drilling Promote"). EXHIBIT A

Slawson argues that the Drilling Promote is owed on every well in which US Energy elects to participate: (1) located on a lease acquired by US Energy pursuant to the Agreement (the "Project X Leases") and on lands covered by pooling orders that include a Project X Lease (the "Pooled Wells"); (2) whether Slawson or a third party proposes the well; (3) whether Slawson or a third party is the operator of the well; and (4) regardless of the Project X Group's1 percentage interest in the well.

US Energy disagrees and argues that the Drilling Promote is owed on wells where US Energy makes an election to participate under two circumstances only. First, US Energy acknowledges that it owes the Drilling Promote on Slawson operated wells: (1) drilled on land subject to a Project X Lease; (2) proposed by Slawson or US Energy (and not a third party); (3) governed by the specific Joint Operating Agreement required by the Agreement; (4) where Slawson provides US Energy with written notice of the proposed spud date of the well; (5) where Slawson markets the production from the well; and (6) operated by Slawson. US Energy also acknowledges that it owes the Drilling Promote on third-arty wells where: (1) a third party proposes the well; (2) the well is not drilled on land subject to a Project X Lease but is within a spacing unit that includes a Project X Lease; and (3) the total amount of the Project X Group's acreage is less than 5% of the total acreage in the spacing unit.

Slawson commenced this arbitration and asserts three claims:

(1) Breach of Contract—Third-Party Operated Wells; (2) Breach of Contract—Wells Transferred to Third Parties; and (3) Declaratory Relief that the Agreement as amended is "binding on and enforceable against US Energy on a going-forward basis." US Energy denies liability and denies that Slawson is entitled to the relief sought; asserts a counterclaim for breach of the Agreement as amended; and seeks the award of damages based on its payment of double billed and miscalculated Drilling Promotes.

I agree with Slawson's interpretation of the Agreement as amended that US Energy is obligated to pay a Drilling Promote on any well in which US Energy participates which is located on a Project X Lease or on lands covered by pooling orders that include a Project X Lease. I award Slawson damages for unpaid Drilling Promotes in the amount of $689,338.78, plus prejudgment interest pursuant to section 5-12-105, C.R.S., at the rate of 8% per annum compounded annually.

I agree with US Energy that Slawson's express written consent for US Energy's sale of Project X Leases to Emerald relieved US Energy of any continuing liability for unpaid Drilling Promotes on the leases assigned to Emerald.

I agree that Slawson is entitled to a declaration that the Agreement as amended is binding and enforceable against US Energy going forward in a manner consistent with this Award.

Finally, I find that Slawson did not breached the Agreement as amended.

I. THE AGREEMENT

The parties are not strangers. They have a longstanding business relationship and have worked together in oil and gas exploration and development since 1996. Between 1996 and 2010, US Energy entered into several participation agreements with Slawson that included various promote structures. Slawson's billing practices in its deals with US Energy have remained consistent throughout the course of the parties' relationship.

Slawson and US Energy entered into the Agreement effective January 15, 2010. Other, substantially identical agreements concerning Project X were entered into between Slawson and the other Investors. See n. 1, supra.

The Agreement is limited to a defined Area of Mutual Interest, referred to as Project X, located in McKenzie and Williams Counties, North Dakota. The Agreement also is limited in time to the period between January 15, 2010, and January 15, 2012. Subject to those limitations, and certain enumerated exclusions not relevant here, US Energy was granted the opportunity to obtain a 5% interest in any of the Project X Leases that already had been acquired by Slawson prior to the date of the Agreement and additional leases acquired during the two year term of the Agreement. In exchange, US Energy was required to pay Slawson a Lease Promote ranging from 20% to 60% of the cost of the lease acquisition. The Lease Promote is not in dispute.

In addition, the Agreement allows US Energy to participate in wells "drilled on leasehold acquired under the terms of this Agreement in which [US Energy] elects to participate." Agreement at §2(b). In exchange for its right to participate in the development of a well, US Energy was required by the Agreement to pay to Slawson a Drilling Promote equal to 10% of US Energy's share the estimated drilling costs of the well as shown by an Authority For Expenditure ("AFE"). Id. It is the Drilling Promote which is in dispute.

Although the Agreement required that the Drilling Promote be calculated based on estimated costs proposed in AFE's, it is undisputed that until the effective date of the Amendment, Slawson billed the Drilling Promote based on actual well costs. US Energy now complains about this practice, and it forms one basis for its counterclaim, but Douglas Walch, the president of US Energy, testified:

Trans., Day 2, at 84:2-15.

The Agreement provides that Slawson "will generally be responsible for initiating well proposals" to US Energy. Id. at §3(a). US Energy also may propose a well when it "owns an interest in the leases on which the well is to be proposed. . . ." Id. Finally, a third party may propose "a well that includes leasehold acquired by the Parties. . . ." Id. at §3(d).

The Agreement provides:

Id. at §3(b).

In one specific circumstance, Slawson is granted authority to act for the entire Project X Group to elect whether to participate in a well. In particular, Section 3(d) of the Agreement provides:

Id. at §3(d).

Under the terms of the Agreement, Slawson retained in its name record ownership of all leases, and it assigned to US Energy its interest as follows:

Id. at §6.

Todd Slawson clarified at the hearing the manner in which well proposals were handled in practice prior to the Amendment:

Hearing Transcript ("Trans."), Day 1, at 171:1 to 174:11.

US Energy does not dispute Mr. Slawson's explanation of how the well proposals were handled in practice. Reply Witness Statement of Joshua Smith at ¶11.

II. THE AMENDMENT

In 2011, US Energy requested that Slawson assign to US Energy its proportionate share of all Project X Leases so that US Energy would be a record owner of the leases prior to well completion. Slawson agreed to the request, and Slawson and US Energy entered into an Amendment to the Agreement on September 29, 2011, providing:

Amendment at pp. 1-2.

The text of the letter containing the Amendment makes clear its purpose and necessity:

Id. at p. 1.

III. THE DRILLING PROMOTE

The Agreement provides that US Energy is obligated to pay a Drilling Promote "[a]s to each well drilled on leasehold acquired under the terms of this Agreement in which [US Energy] elects to participate. . . ." Agreement at §2(b) (emphasis added). US Energy focuses on this language to assert that a Drilling Promote generally is owed only in those circumstances where the well bore penetrates the Earth's surface on property subject to a Project X Lease. More precisely, US Energy articulates a six factor test which must be fully satisfied before a Drilling Promote is owed:

(1) Slawson drills a well on leasehold acreage acquired under the Agreement;

(2) Slawson or US Energy (and not a third party) proposes the well;

(3) the well is governed by the specific Joint Operating Agreement required by the Agreement;

(4) Slawson provides US Energy with written notice of the proposed spud date of the well;

(5) Slawson markets the production from the well; and

(6) Slawson operates the well.

Walch Reply Witness Statement (Exh. R-VVV) at ¶10.

US Energy acknowledges one limited exception to its six factor test, applicable to third party wells. US Energy agrees that it owes a Drilling Promote on third party wells where:

(1) a third party proposes the well;

(2) the well is not drilled on a leasehold US Energy acquired from Slawson pursuant to the Agreement, but the spacing unit for the well includes some leasehold US Energy acquired from Slawson; and

(3) the total amount of the Project X Group's acreage is less than 5% of the total acreage in the spacing unit.

Walch Witness Statement (Exh. R-UUU) at ¶39.

Slawson disagrees. According to Slawson, the Drilling Promote is owed on any well drilled on land subject to a Project X Lease or which is located within a spacing unit that includes a Project X Lease. Miller Witness Statement (Exh. C-81) at ¶13.

Slawson points to Section 14(e) of the Agreement, concerning "Governing Law," in support of its position:

Specifically, North Dakota Century Code Section 38-08-08(1) provides:

The reference in the Agreement to the North Dakota Century Code resolves the matter. I find that the property within Project X is covered by pooling orders. See Exh. C-92.2 This finding is supported by the testimony of William Miller, Slawson's production and reservoir engineer, that "U.S. Energy's interests in the Project X Leases were pooled in the relevant spacing unit(s). . . ." Miller Reply Witness Statement (Exh. C-86) at ¶3; Trans., Day 1, at 237:13-22 and 295:1-5. And, despite arguments by US Energy to the contrary, Mr. Walch acknowledged that the Project X Leases are covered by pooling orders:

Trans., Day 2, at 29:5-13. Consequently, wells drilled anywhere within a spacing unit that includes a Project X Lease are deemed to have been drilled on the Project X Lease.

I am not persuaded by any of US Energy's multiple arguments to the contrary.

US Energy argues that the plain language of the Agreement requires that the Drilling Promote is owed only on wells drilled "on leasehold acquired under the terms of this Agreement. . . ." Agreement at §2(b). US Energy's "on the leasehold" argument ignores Section 14(e) of the Agreement that adopts the substantive law of North Dakota with respect to oil and gas matters. Id. at §14(e). When read together and harmonized, Sections 2(b) and 14(e) direct that "on the leasehold" requires payment of the Drilling Promote in connection with wells drilled on lands subject to Project X Leases and lands covered by pooling orders that include those leases.

US Energy argues that the lands subject to its leases are not forced pooled and, therefore, N.D. Cent. Code § 38-08-08 (1) does not apply. US Energy's argument is difficult to understand and is contrary to the evidence. See, e.g., Exh. C-92; Miller Reply Witness Statement (Exh. C-86) at ¶3; Walch testimony, Trans., Day 2, at 29:5-13.

US Energy argues that the Amendment was intended to address the single accounting issue of how Slawson would know, post-assignment of US Energy's interests in the leases, whether US Energy had elected into a third party well and the amount of the Drilling Promote. In particular, US Energy argues that the Amendment was not intended to change the provisions of the Agreement directing when a Drilling Promote is owed. Walch Witness Statement (Exh. R-UUU) at ¶53. I agree that the Amendment was not intended to alter terms of the Agreement concerning when a Drilling Promote is owed, and it does not. Prior to the Amendment, Section 2(b) of the Agreement required US Energy to pay a Drilling Promote on any well drilled on a Project X Lease. In addition, N.D. Cent. Code § 38-08-08(1), made applicable to the Agreement through Section 14(e), required US Energy to pay a Drilling Promote on any well drilled within a spacing unit that includes a Project X Lease. Consequently, the Amendment's provision requiring US Energy to pay the Drilling Promote "after US Energy makes an election to participate in any third-party well proposal" simply makes express what Sections 2(b) and 14(e) of the Agreement, read together, already required.3

U.S. Energy argues that the parties' course of conduct demonstrates that they intended that the Drilling Promote is owed only when a well is drilled "on the leasehold," and not on lands pooled with a Project X Lease. It is difficult to discern a consistent course of conduct between the parties in connection with the Drilling Promote. This appears to be due, at least in part, to the fact that the Drilling Promote dispute arose at the peak of the Bakken oil boom when the parties had many competing demands on their time. See Slawson Witness Statement (Exh. C-80) at ¶¶26 n.4, 31, and 34. However, there is substantial evidence of conduct by US Energy supporting Slawson's position that the Drilling Promote is owed on wells drilled on Project X Leases and on Pooled Wells. In particular, the partial assignments of oil and gas leases from Slawson conveying to US Energy its interests in the leases contain the following provisions:

Exhs. C-13 through C-17 (emphasis added).

Similarly, Mr. Walch, acting on behalf of US Energy, accepted a proposed amendment extending the Agreement for one additional year that expressly recognized US Energy's obligation to pay the Drilling Promote on pooled wells:

Exh. C-31 (emphasis added).4

US Energy argues that a Drilling Promote is owed only on wells that meet a six factor test (plus third party wells where the Project X Group's interest is less than 5%). Walch Reply Witness Statement (Exh. R-VVV) at ¶10. US Energy's six factor test finds no support in the Agreement, Amendment, or evidence, however.

US Energy argues that it makes no sense for US Energy to pay a Drilling Promote in circumstances where Slawson is not the operator and did not drill the well. In those cases, US Energy argues, Slawson is not performing any services benefitting US Energy and justifying the payment of the 10% promote. I disagree. As Mr. Slawson testified:

Slawson Reply Witness Statement (Exh. C-85) at ¶¶7-8. Thus, the Drilling Promote is part of the fee charged by Slawson for allowing US Energy to acquire Project X Leases pursuant to the Agreement, and not compensation to Slawson for services rendered.

Accordingly, I find that US Energy owes the Drilling Promote on any well in which US Energy participates which is located on a Project X Lease and on any well drilled on lands covered by pooling orders that include a Project X Lease.

US Energy asserts that Slawson's claim for the Drilling Promote is barred in whole or in part by the three year statute of limitations contained in section 13-80-101(1)(a), C.R.S. I disagree and find that Slawson's claim is governed by the six year limitation period of section 13-80-103.5(1)(a), C.R.S., which provides:

"Claims for breach of contract generally are barred if they are not filed within three years after the cause of action accrued." A PDX Pro Co., Inc. v. Dish Network Service, LLC, 2014 U.S. Dist. LEXIS 28063 at *22 (D. Colo. March 5, 2014). Section 13-80-103.5(1)(a) creates an exception to the general three year statute of limitations on contracts, but it applies only to the enumerated actions, including those to recover "a liquidated debt or an unliquidated, determinable amount of money due. . . ."

The Colorado Supreme Court explained the distinction between claims subject to the three year limitation period of section 13-80-101 and those subject to the six year period of section 13-80-103.5 in Portercare Adventist Health System v. Lego, 286 P.3d 525 (Colo. 2012):

Id. at 528-30 (internal quotations, citations, and notes omitted).

Here, as in Portercare, the Drilling Promote is "liquidated" because it is capable of ascertainment by simple computation using extrinsic evidence. In the case of a third party well, the Drilling Promote is 10% of the estimated well costs specified in an AFE; in the case of a Slawson operated well, the Drilling Promote is 10% of the actual well costs charged by Slawson. Consequently, Slawson's claims for the Drilling Promote are subject to the six year limitations period of section 13-80-103.5(1)(a), C.R.S.

Slawson's first claims for a Drilling Promote accrued no earlier than September 29, 2011, the date of the Amendment, and this arbitration was commenced on August 2, 2016. Thus, Slawson's claims are timely.

IV. WELLS TRANSFERRED TO THIRD PARTIES

Section 14(j) of the Agreement provides:

Slawson asserts in its Demand for Arbitration that U.S. Energy breached the Exploration Agreement by assigning leases to third parties "(a) without informing Slawson of the assignments or obtaining Slawson's written consents and (b) without preserving Slawson's rights to create a lien and offset in the documents that assigned US Energy's interests or obligations, or both, to third parties." Slawson Demand for Arbitration at ¶39.

Slawson has narrowed this claim to address only US Energy's assignments to Emerald Oil. Miller Witness Statement (Exh. C-81) at ¶¶25, 28. Slawson now acknowledges that U.S. Energy obtained Slawson's written consent to the Emerald assignment. Slawson's Prehearing Brief at p. 36

Slawson argues:

Id. at pp. 36-37 (internal citations omitted).

This issue was addressed in US Energy's Motion for Summary Judgment, where Slawson argued that "[n]otwithstanding Slawson's consent to U.S. Energy's assignments of its interests in Project X Leases to third parties, U.S. Energy is liable to Drilling Promotes for wells drilled on Project X Leases that neither U.S. Energy nor its assigns paid to Slawson." Response at p. 22. In support, Slawson cited treatises and non-controlling cases for the proposition that "parties to oil and gas leases may not escape their contractual obligations by delegating their duties to others, absent an express release." Id. at pp. 22-23. In particular, Slawson relied on Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 344 (Tex. 2006), which it described as "the seminal case." Response at p. 23. Seagull varies from this case in one crucial respect. Here, it is undisputed that Slawson expressly consented to U.S. Energy's assignment to Emerald. By contrast, there is no indication in the Seagull case that the operator consented to Eland's assignment of its interest. The Texas Supreme Court ruled:

Id. at 346-47 (internal citations, quotations, and notes omitted)(emphasis added).

I denied US Energy's Motion for Summary Judgment with respect to the assigned leases finding that there was a disputed issue of material fact about whether Slawson's consent to the assignments constituted an express or implied release of U.S. Energy's obligations under the Agreement with respect to the assigned leases.

US Energy directs my attention to Club Telluride Owner's Ass'n v. Mitchell, 70 P.3d 502 (Colo. App. 2002), where the Colorado Court of Appeals held:

Id. at 504 (internal citations omitted). Thus, under Colorado law, an obligor is released from continuing liability if the obligee "consents to the delegation," and the greater showing of an express or implied release is not required.

Slawson admits that it gave its "express written consent for U.S. Energy's sale of Project X Leases to Emerald." Slawson's Prehearing Brief at p. 36. Consequently, U.S. Energy has no continuing liability for Drilling Promotes on the leases assigned to Emerald.

V. DAMAGES

Slawson claims damages for unpaid Drilling Promotes totaling $1,217,325.69. Slawson also seeks prejudgment interest on the unpaid Drilling Promotes at 8% per annum compounded annually, totaling $386,822.06 through March 7, 2017. Of the unpaid Drilling Promotes claimed, $527,986.91 is attributable to Drilling Promotes on leases that US Energy assigned to Emerald, to which Slawson consented, and for which I have determined US Energy has no continuing liability.

US Energy criticizes Slawson's damages model because it fails to comply precisely with the parties' practices and agreements concerning Drilling Promotes on third party wells to bill pre-Amendment Promotes based on actual well costs and post-Amendment Promotes based on estimated costs reflected on AFEs. The evidence demonstrates that the discrepancy is an unintended consequence of the transition from performance under the Agreement (where the Drilling Promote on third party wells is based on actual well costs) to performance under the Amendment (where the Drilling Promote on third party wells is based on estimates reflected on AFEs). Mr. Miller, who prepared Slawson's damage model (Exh. C-11), testified:

Trans., Day 1, at 259:14 through 260:2, and 290:19 through 291:5.

The discrepancy is the result of US Energy's failure to provide actual well cost information to Slawson and failure to provide meaningful feedback to Slawson's damages model. Id. at 293:20 through 294:20.

Colorado law concerning proof of damages is long-standing and clear:

Riggs v. McMurtry, 400 P.2d 916, 919 (Colo. 1965). Similarly in Tull v. Gundersons, Inc., 709 P.2d 940, 945 (Colo. 1985), the court held:

(Internal quotations and citations omitted.)

I find that Slawson has proven by a preponderance of the evidence that it was damaged by US Energy's failure to pay the Drilling Promotes. In addition, US Energy's damages model provides a reasonable basis for a computation of the damages sustained and is the best evidence obtainable under the circumstances of the case.

Accordingly, I award Slawson damages for unpaid Drilling Promotes in the amount of $689,338.78. In addition, Slawson is entitled to prejudgment interest in the amount of 8% per annum compounded annually. The interest due through March 7, 2017, is $232,657.88.

VI. SLAWSON'S REQUEST FOR DECLARATORY RELIEF

Slawson requests a declaration that the Agreement and Amendment "are binding on and enforceable against US Energy on a going-ahead basis." Demand for Arbitration at p. 16. US Energy admits that the Agreement and Amendment "are valid and binding contracts on [US Energy] and Slawson," US Energy Answer and Counterclaim at p. 21, but otherwise does not address Slawson's request for declaratory relief.

It is undisputed that the Agreement and Amendment are valid and binding agreements. I agree with Slawson that there is a real and current controversy between the parties about the parties' rights and obligations under the Agreement and Amendment concerning (1) the circumstances under which US Energy must pay the Drilling Promote and (2) whether US Energy is obligated to pay the Drilling Promote in connection with wells on leases assigned to Emerald.

Consistent with my rulings above, I declare the disputed rights and obligations of the parties under the Agreement and Amendment as follows:

1. US Energy owes the Drilling Promote on any well in which US Energy participates which is located on a lease acquired by US Energy pursuant to the Agreement and on any well drilled on lands covered by pooling orders that include those leaseholds; and

2. U.S. Energy has no continuing liability for Drilling Promotes on wells drilled on the leases assigned by US Energy to Emerald to which Slawson has consented.

VII. US ENERGY'S COUNTERCLAIM

US Energy asserts a counterclaim against Slawson for breach of the Agreement as amended, alleging:

(1) The Agreement required Slawson to bill US Energy for the Drilling Promote based on estimated expenses as proposed by AFE's, but Slawson improperly billed based on actual well costs instead, Counterclaim at ¶3;

(2) Slawson breached the Amendment by invoicing US Energy for the Drilling Promote in circumstances where US Energy already had paid the Drilling Promote, id. at ¶6; and

(3) Slawson breached the Amendment by invoicing US Energy for the Drilling Promote based on actual expenses incurred on the well instead of estimated expenses as proposed by AFEs. Id. at ¶7.

Although the Agreement states that the Drilling Promote is to be calculated based on estimated well costs as proposed in AFEs, US Energy understood and agreed, prior to the Amendment, that the Drilling Promote was calculated and billed based on actual well costs. Walch testimony, Trans., Day 2, at 84:2-15. Consequently, US Energy's first alleged breach of the Agreement as amended lacks merit.

The evidence shows that in connection with two wells—the Lundin 11-13SEH and the Johnsrud 19-18H—US Energy paid the Drilling Promote within 15 days after US Energy made its election to participate and without being invoiced by Slawson. Subsequently, Slawson sent an invoice to US Energy for the Drilling Promote on those wells. US Energy recognized the issue immediately, resulting in an exchange of emails between US Energy's Howard Melcher and representatives of Slawson. See Exh. C-21. In any event, US Energy either did not pay the invoices or received a credit for any double payment. This occurred shortly after the parties executed the Amendment and while they were attempting to reconcile accounting issues related to the Amendment. US Energy suffered no damage as a result of the alleged breach. I find that the billing by Slawson was a mere error, and not a breach of the Agreement as amended.

Finally, US Energy alleges that Slawson breached the Amendment by invoicing US Energy for the Drilling Promote based on actual expenses incurred instead of estimated expenses as proposed by AFEs. US Energy does not address this alleged breach in its prehearing brief, and its basis is not clear. In view of the state of the record, I conclude that US Energy failed to carry its burden to prove that Slawson breached the Amendment as alleged.

I find that Slawson did not breach the Agreement as amended

VIII. AWARD

1. US Energy breached the Agreement as amended by failing to pay Drilling Promotes on all wells in which US Energy participates which are located on leases acquired by US Energy pursuant to the Agreement and on all wells drilled on lands covered by pooling orders that include those leaseholds. Slawson is awarded damages resulting from US Energy's breach in the amount of $689,338.78. In addition, Slawson is awarded prejudgment interest on its damages pursuant to section 5-12-102, C.R.S., at the rate of 8% per annum compounded annually. The prejudgment interest on Slawson's damages through March 7, 2017, totals $232,657.88.

2. Slawson expressly consented to US Energy's sale of Project X Leases to Emerald. Consequently, US Energy did not breach the Agreement as amended by refusing to pay Drilling Promotes on the leases US Energy assigned to Emerald with Slawson's consent.

3. The Agreement as amended is binding on and enforceable against US Energy on a going-forward basis, including the following:

(a) US Energy must pay Drilling Promotes on any well in which US Energy participates which is located on a lease acquired by US Energy pursuant to the Agreement and on any well drilled on lands covered by pooling orders that include those leaseholds; and

(b) U.S. Energy has no continuing liability for Drilling Promotes on wells drilled on the leases assigned to Emerald, to which Slawson expressly consented.

4. With respect to US Energy's counterclaim, Slawson did not breach the Agreement as amended.

SO ORDERED.