Record gas lease fuels Roan debate
November 9, 2007
GARFIELD COUNTY ” A record gas lease may lend credence to estimates that billions of dollars in government revenues could result from oil and gas development on the Roan Plateau in western Colorado.
A 200-acre parcel in Garfield County just west of the Roan Plateau went for $26,000 per acre, which is a state record, in a U.S. Bureau of Land Management lease sale Thursday. The $5.2 million in revenues from the sale will be distributed 50-50 to Colorado and the federal government.
Avalanche Energy, based in Larkspur, made the winning bid.
The sale was about three times more than the previous record of $8,400, for a parcel in the same general area on the west side of Parachute Creek north of Parachute, BLM spokesman David Boyd said.
The record sale is for property located about 6.5 miles west of federal land in the BLM’s Roan Plateau Planning Area. The sale comes as energy industry advocates are contending that drilling on the Roan Plateau could bring $6 billion in revenues to the state over 30 years. Environmental groups that want the plateau top protected from drilling have disputed that claim. “The bottom line is that we believe that the studies which predict a $6 billion windfall for the state of Colorado are based on sound methodology,” said Marc Smith, executive director of the Independent Petroleum Producers of Mountain States.
That estimate is based on an assumption that the Roan acreage would fetch $46,000 an acre.
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Mary Ellen Denomy, a petroleum accountant who has questioned industry projections for Roan revenues, called the $26,000-per-acre sale “new and unusual” compared to past sales. She said if the Roan truly has a high revenue potential, the BLM should require a minimum bid of $40,000 an acre.
If the Roan garnered that amount, “then absolutely it would be a very valuable asset,” she said.
Still, she believes the Roan could be worth far less than that because of the stipulations the BLM is planning for drilling on the Roan to help protect the environment. In addition, large acreages usually get far less per acre than small ones do, Denomy said.
Altogether, the BLM’s lease sale Thursday yielded $9.6 million in revenues, for 112 parcels totaling 102,989 acres. That amounts to an average of $93 per acre.
The Parachute-area property was the only Garfield County parcel included in the sale.
Boyd said the record sale shows there’s a lot of interest in leasing near the Roan Plateau.
“There’s good information that there’s a lot of gas there,” he said.
But he added, “We won’t know what the Roan generates until it’s in a lease sale. It’s a little different. There’s different stipulations and things.”
Smith said predicting how much money the Roan might produce for the state of Colorado isn’t easy, and it’s probably best to look at a range of scenarios.
“Whether that number is $6 billion of $5.5 billion, Colorado is facing severe budgetary constraints and those revenues can provide the funding we need for schools, roads, health care,” he said.
State Rep. Al White, R-Winter Park, and state Sen. Josh Penry, R-Fruita, have proposed putting half of Roan revenues into a permanent trust fund for higher education, and the other half into a similar fund that would provide a secure revenue stream for communities impacted by energy development.
The $6 billion projection, made by the group Americans for American Energy, includes $1.5 billion that would go to Garfield County alone for property tax revenues from the gas sold. But that estimate is based on gas selling at $7 to $8 per thousand cubic feet, and Denomy said the current price is little more than $1.
“The county can’t survive on that small an amount of income,” she said.
She has contended that pipeline capacity for locally produced gas is inadequate and limits its value, and it makes no sense to rush to drill on the Roan as long as there’s no way to ship it to more lucrative markets.