Roan drilling rights sale sets record
August 14, 2008
GOLDEN, Colo. ” An auction of federal oil and gas leases on Colorado’s Roan Plateau generated nearly $114 million on Thursday, a record for onshore energy lease sales in the lower 48 states.
The U.S. Bureau of Land Management’s auction of leases on 31 parcels covering 54,631 acres marked a major milestone in a multiyear battle over drilling on the western Colorado landmark.
It netted more than 10 times the state’s previous highest-grossing federal auction ” $11.8 million in February 2006.
The BLM estimates the plateau about 180 miles west of Denver contains 9 trillion cubic feet of recoverable natural gas.
Conservationists say the plateau that looms over the Colorado River has been a mainstay of the area economy because it is a hunting, fishing and recreation focal point.
“We’re pleased that we’ve gotten to this point,” said Jon Bargas, spokesman for the Denver-based Independent Petroleum Association of Mountain States. “But the lease sale is not a green light to develop. It’s a first step.”
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Environmental groups have filed a lawsuit challenging the BLM’s development plan for the Roan, and thousands of protests have been filed with the agency over the auction.
The BLM won’t issue the leases until the protests are decided, a process that could take several months, agency spokesman David Boyd said.
Suzanne O’Neill of the Colorado Wildlife Federation said she’s not optimistic that the protests filed by her group, some city and counties and the state Department of Natural Resources will change much.
“This is a very sad day,” O’Neill said.
The BLM rejected a proposal by Gov. Bill Ritter that would have made more land on the Roan Plateau off-limits to drilling and would have phased in leasing. Ritter and others said prices for the leases might have gone higher with a delayed sale because of rising demand.
“What we had today was instant leasing with deficient protections,” O’Neill said.
Clare Bastable, conservation director for the Colorado Mountain Club, called the sale “disheartening,” but said it’s not the end of the fight by environmentalists, hunters and anglers.
“This certainly does not mark the end of the battle to protect this important area,” Bastable. “There’s more to come.”
While a record, the sale revenue was much lower than predictions issued by some industry groups, which reached as high as $1 billion.
A 2,100-acre parcel drew the highest offer at $11,800 per acre, the second-highest bid ever made on federal land in Colorado. The highest was $26,000 an acre last November near the Roan Plateau.
The state and federal governments will each get 49 percent of the revenue, with the remaining 2 percent covering administrative costs.
About 100 people, including media, attend the auction at a hotel in Golden, west of Denver. Two auctioneers, both wearing white cowboy hats, coaxed buyers to increase their bids. BLM officials said brokers usually do the buying and the agency doesn’t immediately know which companies are behind the deals.
After the sale, Mike Haley of Meadow Ridge No. 3 LLC, one of the buyers, declined to say whom he was representing.
EnCana Oil and Gas (USA), one of the largest gas producers in Colorado, unsuccessfully bid on some of the parcels, spokesman Doug Hock said. EnCana didn’t consider the Roan Plateau tracts as a priority because of restrictions in the BLM’s plan for the area and regulatory uncertainty as state officials revamp Colorado’s oil and gas rules, he said.
EnCana already has 1.2 million acres under lease in the gas-rich Piceance Basin, which includes the Roan Plateau. The company is drilling on 45,000 acres of its own land adjacent to some of the land leased Thursday.
The Roan Plateau alternates between open flat spots, deep canyons and rugged peaks as high as 9,000 feet. It provides crucial winter habitat for some of the country’s largest elk and mule deer herds. It’s home to mountain lions, peregrine falcons, bears, rare plants and genetically pure native cutthroat trout dating to the last ice age.
The BLM’s plan projects 1,570 wells drilled from 193 pads over 20 years, including 210 wells from 13 pads on top. The BLM says the proposal would preserve 51 percent of land on top of and below the plateau while allowing recovery of more than 90 percent of the natural gas.
On top, the BLM calls for oil and gas drilling to be done in stages and clusters to limit disturbance to 1 percent of the federal land at any time. Development would be focused on slopes with less than a 20 percent angle.