Sale of Roan rights sets onshore record
August 14, 2008
GOLDEN, Colo. ” In just a few minutes, the bidding raced past $10,000 an acre. And when it stopped, one bidder was on the hook for $25.2 million to buy a 2,139 acre-parcel on the Roan Plateau.
In little more than an hour, the Bureau of Land Management (BLM) raised about $113.9 million from four bidders as the agency auctioned off 31 parcels encompassing 54,631 acres of the Roan Plateau Planning Area, which is northwest of Rifle in Garfield County.
The total collected in the sale is far below a Golden energy group’s prediction that the Roan sale would bring in about $2 billion, with about $1 billion returned to Colorado. The state now stands to collect about $55 million from Thursday’s sale.
Those who snapped up the vast majority of the area’s parcels were mostly brokers who bought the parcels for large-scale operators in the area or who had designs to possibly flip them to make a profit.
“I did well,” said bidder Mike Haley, part of Meadow Ridge #3 LLC, which is an oil and gas lease brokerage company, after settling up with BLM officials for his winning nine Roan bids.
Haley described himself as a “foot soldier,” whose duties were to purchase parcels. He declined to say whom he may have purchased the leases for.
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Thursday’s lease sale of Roan Plateau acreage is a development that many environmentalists and sportsmen groups have been battling against for almost seven years.
They prize the area for its wildlife, and have sought to protect it because it provides important habitat for mule deer, elk and genetically pure native cutthroat trout. Many have argued against drilling in the area because they say 70 percent of public lands leased for oil and gas production in the state are not producing, and that 70 percent of drilling permits issued in the state are not being used.
“This really represents the crushing thumb of the Bush administration stamping out the voices and concerns of local citizens who have spoken out against development of the Roan Plateau,” Bobby Magill, a spokesman for the Wilderness Society, said of the auction. He described watching the sale as “depressing.”
But for the oil and gas industry, the Roan Plateau Planning Area may be a lucrative target because it is estimated to hold about 8.9 trillion cubic feet of natural gas.
Drilling there could provide Colorado with about $428 to $565 million in revenues over 20 years, according to the BLM.
Thursday’s auction raised the most amount of money ever for a BLM lease sale in Colorado and in the lower 48 states, said David Boyd, a spokesman for the agency. The previous high for a BLM oil and natural gas lease sale in the state was $11.8 million, which was set in February 2006.
The record per-acre bid for a federal mineral parcel in Colorado is $26,000, which was set last year. However, no Roan lease parcel got close to breaking that since the highest per-acre bid in Thursday’s sale was $11,800.
The record-setting federal mineral parcel is located near the Roan Plateau Planning Area and does not carry the same stipulations that cover most of the parcels that were up for auction Thursday.
Boyd said Vantage Energy Piceance, a firm based out of Englewood, bought 19 Roan parcels, Haley’s Meadow Ridge #3 LLC acquired nine and The Sellmar Company purchased one. OXY USA bought two leases in the Roan lease sale, including the $25.2-million parcel.
In the weeks before the lease sale, a coalition of 10 groups filed a lawsuit over the BLM’s management plan for oil and gas development in the Roan Plateau Planning Area.
Jim Angell, an Earthjustice attorney who is the lead attorney for the group’s lawsuit, said that lawsuit seeks to throw out the BLM’s management plan for the Roan Plateau and to challenge “the lease sale itself.”
The lawsuit did not seek a temporary injunction because there are 14,672 protests already filed against the Roan Plateau leases, Angell said.
“The protests stop any leases from being issued,” Angell said. “And we will do everything we can to make sure those leases are never issued.”
Groups who filed protests include the Aspen Valley Land Trust, the Pitkin County commissioners, and the Colorado Division of Wildlife, but not the Garfield County commissioners.
The BLM can only issue leases after it resolves any protest filed against them. That is a process that can take several months. If the BLM rejects a protest, the group who filed it can appeal the decision to the U.S. Department of the Interior’s Board of Land Appeals.
The most expensive parcels ” the $25.2 million parcel and a 804-acre parcel that was bought for about $8.6 million ” were for areas below the rim of the Roan Plateau, right near Interstate 70.
They may have brought in the most amount of money because they are easy to access, close to current ongoing oil and gas production and don’t have a stipulation that covers the top of the Roan Plateau, said Steve Cumella, senior geologist for Bill Barrett Corp., an operator who works in the area.
That stipulation requires that one single oil and gas operator conducts all natural gas operations on behalf of all lease-holders ” an arrangement the BLM calls a federal unit. It is there because it allows the BLM to exert greater control over oil and gas development and eliminates unnecessary infrastructure, such as pipelines, according to the agency.
The BLM’s plan for the area calls for development to be phased over time with one operator working on the ground to limit disturbance to 1 percent of federal land at any time. More than half the acreage in the lease sale has a no-surface occupancy stipulation, which means companies have to drill from other areas to reduce surface disturbances.
Gov. Bill Ritter, along with U.S. Sen. Ken Salazar (D-Colo.), Rep. John Salazar (D-Manassas) and Rep. Mark Udall (D-Eldorado Springs) have criticized the BLM for ignoring the state’s proposals for drilling in the area.
Earlier this year, the congressional Democrats introduced legislation that would have called for phased leasing of the area rather than auctioning of all the Roan leases at one time, which happened Thursday. State officials thought phased leasing could have brought back more revenue to the state.
That legislation is a non-issue, now, since the leases have been sold.