Rich federal energy lease sale pleases few
August 18, 2008
DENVER ” The $114 million sale of federal energy leases on the Roan Plateau is the highest-grossing for onshore parcels in the lower 48 states. The fact that both foes and advocates of development say it wasn’t enough underscores the controversy surrounding the western Colorado landmark.
The debates among environmentalists, elected officials and industry representatives over last week’s auction also echo those raging nationally on where and how to drill to meet the country’s energy demands.
The Bureau of Land Management auctioned off 31 parcels covering 54,631 acres of the Roan Plateau, cherished for its rich oil and natural deposits as well as wildlife and pristine backcountry. The area 180 miles west of Denver is home to some of the country’s largest mule deer and elk herds and genetically pure native cutthroat trout dating to the last ice age.
“Today is a sad day for Colorado,” Gov Bill Ritter said after the auction Thursday. “It’s a missed opportunity, one we don’t get back, one that falls squarely on the shoulders of the Bush administration.”
Ritter, a Democrat, accused the administration of trying to rush the sale through before Bush leaves office. His proposal, rejected by the BLM, would have phased in leasing over several years in hopes of raising more money as the value of the gas increased with growing demand.
The state will get 49 percent of the lease revenue and royalties on production; the federal government will get 51 percent.
Recommended Stories For You
Industry groups, which had predicted a $1 billion haul for the state, and some Republican officials were also disappointed by the result. Instead of the Bush administration, they blame “anti-energy politicians” and uncertainty created by roughly 15,000 formal protests of the leases and a lawsuit by environmental groups trying to block the sale.
The BLM won’t issue the leases until the protests are decided. Companies also must get their drilling applications approved before they can start work.
Critics in the industry also point to what the BLM calls its most restrictive development plan to explain lower-than-projected bids.
“If the BLM’s goal was to maximize revenue, we would have weakened the protections on top of the Roan Plateau,” BLM spokesman Steven Hall said.
Among the restrictions is the requirement to drill on top in stages and clusters to limit disturbance to 1 percent of the surface at any time.
Vince Matthews, director of the Colorado Geological Survey, said he isn’t sure why people are unhappy with the results. The average price was about $2,100 per acre.
“It’s a good, healthy price,” said Matthews, who worked in the oil and gas industry for several years.
Parcels below the rim of the plateau, where access is better, fetched higher prices, including the highest bid at $11,800 per acre, while parcels on top didn’t raise as much. That makes sense, Matthews said, because wells on top will have to be drilled 2,000 to 3,000 feet deeper to reach the gas.
That didn’t mollify the pro-development group Americans for American Energy, which had touted a $1 billion windfall for the state and enough gas for 4 million homes for the next 20 years. The group’s president, Greg Schnacke, insisted in a press release after the sale that Colorado “lost a cool billion dollars” because of the “near constant political poison” that Ritter and other Democrats injected into the process.
Schnacke didn’t return a phone call to The Associated Press for comment.
State Sen. Josh Penry, a Republican from western Colorado, also thought the state’s share could have reached $1 billion based on previous leases sales in the area.
“There’s no question that significant money was left on the table from the state of Colorado’s perspective,” Penry said Friday.
He blamed the “specter of continued protests, continued litigation” for dampening industry’s interest in the Roan Plateau.
Penry said he agreed with Ritter’s phased-lease approach and talked to the BLM about it, but the agency feared that reopening the plan would further delay development. He said he believes Republicans, including presidential candidate John McCain, should make an issue out of the battle over the Roan Plateau.
Pete Morton, an economist with The Wilderness Society in Denver, said the Roan has already been politicized. He said Ritter and fellow Democrats Sen. Ken Salazar and Reps. Mark Udall and John Salazar have been attacked for their stances on the Roan Plateau, but the restrictions on development criticized by the industry were approved by a GOP administration.
The Salazars and Udall tried but failed to insert Ritter’s Roan proposal into federal legislation.
Besides phased leasing, Ritter had suggested expanding the area considered too environmentally sensitive for direct drilling from the 21,034 acres in the BLM’s plan to about 36,000 acres.
All along, Morton said environmentalists have questioned assumptions by the BLM that fueled expectations of a huge bounty from the Roan. He said analyses by The Wilderness Society, based on industry and U.S. Geological Survey data, estimated the recoverable natural gas in the plateau from less than 1 trillion cubic feet to 5.5 trillion cubic feet, much lower than the nearly 9 trillion cubic feet cited by the BLM.
A more methodical approach to developing the Roan Plateau makes economic and environmental sense, Morton said. Recent economic reports on the energy boom in northwestern Colorado found that demands on infrastructure and services aren’t keeping pace with growth.
“If we slow down, we allow time for communities to absorb this growth,” Morton said. “And we’re going to know more about the environmental effects.”