Time, economics against Thompson gas drilling
The Aspen Times
Aspen, CO, Colorado
CARBONDALE – Time appears to be running out for a Houston-based oil and gas company that has the most aggressive drilling plan in the Thompson Divide area west of Carbondale.
Twenty gas leases held by SG Interests on public lands in the Thompson Divide area will expire next year between May 31 and Aug. 31, according to research by the Thompson Divide Coalition, a Carbondale-based coalition opposed to drilling there.
SGI wants to avoid losing the leases so it has applied to the Bureau of Land Management to lump 18 of the leases together in a unit covering 32,000 acres. Creation of the proposed Lake Ridge Unit would allow SGI to hold the leases for a substantially longer time, as long as it drills wells and produces gas within the unit.
But in a counter move, the Thompson Divide Coalition got U.S. Sens. Mark Udall and Michael Bennet to write a letter to the BLM asking the agency to delay its decision on the “unitization” of the leases. The BLM has no estimate of when a decision will be made, according to agency spokesman David Boyd.
By a football analogy, the game is in the waning minutes of the fourth quarter. SGI will be forced to put together a dramatic drive to retain its leases.
To try to enhance the chances of the game ending without a fight, the Thompson Divide Coalition offered nearly $2.5 million to SGI and other companies to reimburse them for the cost of acquiring 43 leases and renting the land. The settlement proposal also seeks federal legislation to retire the leases forever.
Peter Hart, an attorney for Wilderness Workshop, a Carbondale-based conservation group allied with the Thompson Divide Coalition, said SGI and other companies paid small amounts – as little as $2 per acre – for most leases in Thompson Divide. The highest price paid among the 18 leases SGI wants to lump together in the Lake Ridge Unit was $8 per acre, he said.
Lease prices typically reflect the promise of natural gas on the lease. In the Roan Plateau near Rifle, for example, the average paid per lease in a 2008 sale was $2,084 per acre, Hart’s research shows. The highest price paid was $11,800 per acre.
Thompson Divide stretches from Sunlight Peak outside Glenwood Springs to McClure Pass, including land in extreme western Pitkin County. All told, the area encompasses about 221,490 acres, including 180,330 acres in the White River and Gunnison national forests. Thompson Divide is on the southeast edge of the gas-rich Piceance Basin.
Jock Jacober, a member of the Thompson Divide Coalition’s board of directors, said there are a number of “complexities” facing development of gas wells in Thompson Divide. The land is rough with few roads. An official roadless designation by the Forest Service on much of the land requires gas companies to drill from the edge of the roadless boundaries. They cannot build roads and create drilling pads in roadless areas, Jacober said.
In areas where roads and pads can be built, economics isn’t in the gas companies’ favor right now. Drilling a single well can cost $2 million to $3 million, depending on the hydraulic fracturing techniques required to lease and extract gas. Natural gas prices hit a 10-year low in February.
Randy Udall of Carbondale, a nationally recognized expert on energy issues, told The Aspen Times in December that drilling in areas where there are no roads or pipelines “is a losing proposition at today’s gas prices.”
SGI spokesman Eric Sanford said Thursday that the company had no interest at this time discussing its leasehold interests or its proposal for the Lake Ridge Unit.
Jacober said that Thompson Divide Coalition’s research indicates gas companies typically wait until the eleventh hour before leases expire and then apply to create a unit. The Lake Ridge Unit proposal is unusual because it is significantly larger than virtually all other proposals for units, he said.
Jacober said the coalition believes it’s clear that SGI is making a last desperate move to hold the leases.
“If you’re reading between the lines, it’s like ‘What are you doing, boys?'” he said.
So why is the Thompson Divide Coalition offering $2.5 million for leases likely to expire? Bennet and Udall and U.S. Rep. Scott Tipton want a solution that all parties find palatable, Jacober said. The coalition is trying to deliver by compensating the gas companies for their costs on undeveloped leases.
The key is making sure the federal lands in question cannot be leased again. So far, none of the gas companies has responded to the coalition’s letter of intent. Jacober said the coalition is just reaching out to them for a reaction.
“Our hope is to get out and solve it,” he said.