More Roan

[Oak]

I flew over the Roan Plateau again this morning and snapped a few photos on the way there, as well as on top. The colors are funky in some, due to shooting through the helicopter canopy.

The Colorado River:

A few photos near Parachute, CO:

 

[Oak]

A few from the top of the plateau. First, the area where development has begun:

And now the area for which the gas leases will be auctioned on Thursday. Bid early and often!

 

[JoseCuervo]

That is pretty cool how they put roads on all those ridges and up all the canyons. That has got to make hunting a lot easier with that kind of quality access to the land.

 

[Big Fin]

I am sure I will get flamed for this, but if they withdrew leases in areas like that, I would gladly pay a few cents more per gallon or per cubic ft.

Some will say such exploration activity keeps prices lower, though we know drilling and exploration in those rare places amounts to less than a penny per unit in oil and gas prices. I consider paying a few extra cents during the life of my generation as payment for all we are fugging up for my child's and grandchildren's generations.

Blasphemy, I know. Better watch out for liberal whackos like me.

 

[stilllearning]

I don't know what to say other than WOW you have some nice areas around you.

 

[Oak]

Roan lease auction to be today
Development of 55,000 acres to happen after years of debate

By DENNIS WEBB
The Daily Sentinel
Thursday, August 14, 2008

A day long opposed by conservation groups and long sought by the energy industry has arrived, with oil and gas development rights beneath 55,000 acres of the Roan Plateau scheduled to be auctioned this morning in Golden.

After years of debate over whether the Bureau of Land Management’s lease auction should occur, the big question this morning is how much bidders will pay for the development rights. It’s a complicated question that has become even more so with recent reports that the nation may be experiencing a natural gas glut that is causing lower gas prices.

The glut is a result of factors including the developing use of hydraulic fracturing in shale formations in Texas, Louisiana and the Northeast to open vast gas reserves once viewed as not economical to develop.

Steve Smith, assistant regional director of the Wilderness Society, said the fact that the domestic gas supply may be exceeding demand “just makes it that much more poignantly clear that we don’t need to rush into places like the Roan Plateau.”

For years, conservation groups and several local municipalities have sought to protect the 34,000 acres on top of the plateau near Rifle from drilling.

Tom Sherman and Mark Chung are energy analysts from Evergreen-based Bentek Energy, which advises industry traders. They said U.S. oil and gas producers are still willing to lease land at a premium to add to their inventories, boost stock prices and be able to maintain production levels as the yields of existing wells drops off.

But they said the recent drop in natural gas prices should result in lower proceeds from the Roan lease because gas is more expensive to produce in the Rockies than in some other drilling hot spots.

Although the leasing of the Roan is expected to attract a lot of interest, numerous restrictions on gas development there, rough terrain and environmental protests may cause some large producers to invest their time and money elsewhere, the two said.

The BLM is requiring phased development of the top of the plateau, with a single operator in charge, which it says will help protect the environment. Colorado Gov. Bill Ritter has called for phased leasing instead, arguing that it would boost lease revenues and better protect the Roan.

In a formal protest of the lease sale, the state Department of Natural Resources claims the state’s share of proceeds from today’s auction could be $200 million less than would have been the case with phased leasing, because companies aren’t going to pay much upfront for areas that they won’t be able to drill for decades under phased development.

BLM spokesman Steven Hall said the agency was willing to accept lower lease payments in return for ensuring that the plateau is developed in an environmentally responsible manner. He also said companies interested in drilling on the Roan probably are thinking less about whether there’s a gas glut and more about what kind of demand there might be in coming decades.

The BLM has estimated today’s auction might generate up to $300 million in lease proceeds. But the majority of revenue from oil and gas development on the Roan probably will come later, in royalty payments from production, Hall said.

Although the BLM is proceeding with leasing the Roan, it still must respond to protests that have been filed against the leases — a process that could take weeks or months and lead to some leases not proceeding. In addition, conservation groups have filed a lawsuit legally challenging the BLM’s natural gas development plans for the Roan.

 

[Oak]

GOLDEN — The federal Bureau of Land Management today auctioned 55,186 acres on the Roan Plateau for oil and gas development.
The sale at the Denver Marriott West in Golden raised $114 million from a half dozen bidders.

One parcel of 2,139 acres went for $11,800 per acre. Parcels below the rim of the plateau fetched the best prices.

The BLM has environmental and other restriction on the land, including that no more than 350 acres may be disturbed at any one time.

"Those restrictions lowered the bidding prices," said Kathleen Sgamma director of government affairs for the Independent Petroleum Association of Mountain States.

Steven Hall, a spokesman for the BLM, said the agency was "very satisfied" with the sale.

 

[mtmiller]

The BLM has environmental and other restriction on the land, including that no more than 350 acres may be disturbed at any one time.

Oak, not sure you know the answer, but I am curious how this is figured. Say there are 125 acres of disturbance from roads. Does this count towards the total disturbance until the time they are obliterated, recontoured and back to native vegetation? How about pipelines?

Obviously the deep wells you are seeing down there are more intrusive then my shallow gas. What would you estimate to be the short-term footprint for the pad and also the footprint of the well after the pad has been "reclaimed"?

thanks for the pics and the update.....

 

[Oak]

The stipulations are comparatively strict. The 350 acres of disturbance includes all infrastructure (roads, pipelines, pads). These areas count towards total disturbance until they are recontoured and seeded. I'm not sure what the criteria for revegetation will be, but they are generally not very strict. I think the Roan RMP says that a reclaimed area must be showing "satisfactory progress" to be removed from the total. It goes on to say that reclamation can take 20 years or longer to be successful. Even in areas of less slope, the topography is such that a lot of cut-and-fill is required for pad construction. Reclamation results are not very good in the poor soil that is left, despite stockpiling of topsoil.

Development will be phased, with drilling allowed in 1 of 6 areas at a time. However, if you read the fine print, companies will be allowed to drill "exploratory" wells in the other 5 areas at any time, effectively eliminating that restriction.

No drilling will be allowed on slopes greater than 20%. Pads must be at least 1/2 mile apart. Generally, the short-term footprint for pads in this area is 2.5-3.5 acres. With directional drilling they are increasing them up to 5 acres, but I hear that at least one company is now punching up to 32 holes on one pad. The reclaimed pads cover about 1/2 to 3/4 of an acre.

The FEIS also mentions the possibility of closing the area temporarily to hunting if crowding becomes a problem.

 

[MarvB]

More of the same...

Roan Plateau Lease Sale Indicates Producers Undeterred by Restrictions

In less than an hour's time Thursday the Bureau of Land Management (BLM) auctioned 31 parcels on 55,186 acres of the prized Roan Plateau in Colorado for natural gas and oil development. How soon development begins, however, is anybody's guess.

The sale raised almost $114 million from a half dozen bidders, according to BLM. The agency in June had said it would auction 46 parcels, or about 73,552 acres, in Garfield and Gunnison counties, which included the 55,186 acres on top of the Roan Plateau and around the sides.

Leaseholds offered below the rim of the plateau fetched the best auction prices, according to statistics. One parcel containing 2,139 acres grabbed the highest bid of $11,800/acre. Denver-based Vantage Energy LLC, which is headed by former EnCana Corp. executive Roger Beimans, grabbed most of the bids, according to BLM.

BLM requires that the Roan Plateau be developed in phases, a stipulation also urged by Gov. Bill Ritter. Under BLM's Resource Management Plan for the plateau, drilling is only allowed on 1% of the land on top of the plateau at any one time -- or no more than 350 acres at a time. It could require energy companies to take several years to develop a lease.

"Those restrictions lowered the bidding prices," Kathleen Sgamma, director of government affairs for the Independent Petroleum Association of Mountain States told the Denver Post.

However, BLM spokesman Steven Hall said the agency was "very satisfied" with the sale. The sale is the largest ever on BLM lands in Colorado, and it is among the highest among on-shore leases in the nation, he said. More typical lease sales average $20-40 million, he said. A lease sale held in Louisiana, which included acreage in the emerging Haynesville Shale, raked in $93.9 million Wednesday.

The Roan Plateau holds an estimated 9 Tcf of gas, according to BLM. Revenue from leases and royalties on gas sales could generate between $857 million and $1.13 billion over the next two decades, with Colorado receiving about half of it, according to the federal agency.

Development of the acreage sold Thursday may take some time. A lawsuit filed by environmental groups in July, as well as administrative protests by the state, remain unresolved, Hall noted. Ten environmental groups last month filed a lawsuit to block leasing on the Roan Plateau until federal officials evaluate alternative ways to develop the region's energy resources.

SO Oak is it then a "race" to see who amongst the lease holders can get approval to begin...in other words, if only 1% of the plateau top can be exploited, errr, drilled at any one time how is that decerned amongst the holdees??

 

[Oak]

A single operator will be selected by the BLM from those who were successful in the auction today. That company will do all the work on behalf of all of the companies with leases. I have no idea how they will decide which areas to drill first.

 

[mtmiller]

However, if you read the fine print, companies will be allowed to drill "exploratory" wells in the other 5 areas at any time, effectively eliminating that restriction.

Good thing there are no pads, roads or other surface disturbances with "exploratory" wells.

 

[Oak]

Let the finger-pointing begin...

Roan lease auction nets far less than expected

By DENNIS WEBB
The Daily Sentinel
Thursday, August 14, 2008

GOLDEN — Both opponents and supporters of a federal drilling plan for the Roan Plateau are lamenting what they say is disappointing revenue from Thursday’s leasing of the area for oil and gas development.

The Bureau of Land Management’s lease auction of more than 55,000 acres in its Roan Plateau planning area near Rifle Thursday yielded about $114 million, or an average of $2,084 per acre.

That’s well below the $300 million high-end estimate the BLM had said the leasing of the Roan might generate, not to mention the $2 billion the industry advocacy group Americans for American Energy had said last year might be bid for the leases.

In a news release, Colorado Gov. Bill Ritter said the BLM’s actions shortchanged Coloradans. He had called for phasing leasing of the plateau top, which he says would have increased revenue and better protected the environment.

The lease revenue will be split between the federal and state governments.

“Today is a sad day for Colorado. It’s a missed opportunity — one we will never get back, one that falls squarely on the shoulders of the Bush administration, which is rushing through bad fiscal policy in its waning days,” Ritter said.

U.S. Reps. John Salazar and Mark Udall, and Sen. Ken Salazar, all Colorado Democrats, also criticized the outcome of the leasing of the Roan. But Americans for American Energy president Greg Schnacke said politicians such as Ritter and Ken Salazar depressed values of the Roan leases through their efforts to stop the leasing from going forward.

“We lost a billion dollars today. It’s absolutely outrageous,” Schnacke said Thursday.

Meg Collins, president of the Colorado Oil & Gas Association, said lease sale protests by elected officials and environmental groups, and a lawsuit conservationists also have filed, cast a “dark cloud of uncertainty” that caused lease proceeds to be disappointingly low.

BLM spokesman Steven Hall defended the sale outcome. In total dollars, it was the BLM’s largest lease sale in the continental U.S. It was the second-largest when ranked by the average amount bid per acre, he said.

BLM officials say the agency’s goal was not to maximize lease revenue, but instead to allow for gas development on the Roan in a way that protects the environment and other resources. Under its plan, gas development will have to occur in phases on the plateau top, with surface disturbance limited to 1 percent at any one time.

“Given the environmental restrictions involved, to be able to generate that kind of revenue I think is evidence that the BLM found the right balance,” Hall said.

Vantage Energy of Englewood was the top bidder for all of the leases on the plateau top, agreeing to pay amounts ranging from $155 to $2,800 per acre, depending on the parcel.

Some of the lowest bids Thursday appeared to be driven by geological rather than other considerations. They were for parcels near Colorado Highway 13 north of Rifle. That’s along the edge of the gas-rich Piceance Basin, in an area where questions remain about whether drilling will be productive.

At least some leases drew sizable bids. The highest— $11,800 per acre, or more than $25 million in total — was made on a 2,136-acre parcel between the plateau rim and Interstate 70 east of Parachute, in an area already undergoing extensive and productive drilling.

That’s below the $26,000-per-acre state record set in a BLM lease sale last year for a 200-acre parcel just west of the Roan planning area. However, it’s well above the previous $8,400 Colorado record for a single parcel.

Scott Sellers of Denver made the high bid at Thursday’s auction, held in a Marriott conference room. He said he was acting as a broker and obtaining the leases on behalf of someone whom he wasn’t allowed to identify. It’s common practice at lease auctions for agents to work on behalf of energy companies wishing to remain anonymous at the time of an auction.

Alan Schwartz of Houston also successfully bid on some of the priciest parcels, but declined to discuss his plans for them.

Because of the formal protests that have been filed against Thursday’s lease auction, no leases will be issued until the protests are resolved.

Colorado GOP, Dems play blame game with Roan Plateau auction
GOP, Dems agree state loses out, disagree on why

By Burt Hubbard
Thursday, August 14, 2008


Democrats and Republicans alike agreed Thursday the state was shortchanged hundreds of millions of dollars on the Roan Plateau energy lease auction.

But both sides point the finger at each other as the reason why.
Gov. Bill Ritter and U.S. Sen. Ken Salazar blasted the Bush administration for rushing to lease the 55,000 acres on the Roan all at once at depressed prices.

"Today the administration and the BLM turned their backs yet again on Western Slope communities," Salazar said.

Republican state lawmakers charged that formal protests against the lease auction, including those by Ritter's administration, scared bidders away.

"Of course the protests had an impact," said state Sen. Josh Penry, R-Fruita. "The circus was complete when the governor joined environmental legal challenges that in the end massively undercut the financial returns on the Roan that the governor once claimed to be so concerned about."

Less than six hours after the BLM auctioned off 55,000 acres on the Roan for energy development for $114 million, Ritter called a news conference to denounce the meager returns. The state will get $57 million for higher education and mitigating the impacts from drilling instead of the hundreds of millions officials expected.

Ritter wanted to phase the auction of the leases over decades instead of leasing all the federally owned portion of the Roan at once, as happened Thursday. But the BLM overruled him. Ritter didn't agree with industry estimates that the leases would bring $2 billion, but he said he thought the revenue to the state should have been a lot higher than the $57 million it will get from the auction.

"Yes, I'm upset," Ritter said. "This is our resource. By leasing it all at once you get an undervalued price. The federal government has done a disservice to our state."

But Penry and State Rep. Al White, R-Hayden, said the large number of protests filed by environmental groups and the state put a damper on bidding. The leases can't be issued until the protests are resolved.

Environmentalists protested leasing in a wilderness area, while the state wanted the leasing phased over decades.

"The people who bought these leases don't know whether those protests will be dealt with in a matter of months or a matter of decades," White said. "I guess the environmental community or whoever was responsible for those protests should recognize the disservice they have done the citizens."

White and Penry believe the auction could have taken in as much as $2 billion, with $1 billion going to Colorado.

State Sen. Chris Romer, D-Denver, said he thinks the BLM should redo the auction because of the low prices. In many cases, there were only two bidders for the leases.

"As an elected official and a taxpayer, I am very disappointed," Romer said. "If there are not at least 10 bids for those assets, they ought to reject all bids and start over."


ROAN REACTION

Development of the massive natural gas deposits underneath the environmentally sensitive Roan Plateau has been a political football for years, and it remained so Thursday. A federal lease auction netted a disappointing $57 million for Colorado, and finger-pointing across the political spectrum was swift.

Gov. Bill Ritter
"Today is a sad day for Colorado. It's a missed opportunity, one we will never get back, one that falls squarely on the shoulders of the Bush administration, which is rushing through bad fiscal policy in its waning days."

U.S. Sen. Ken Salazar, D-Colorado
"Someone got a bargain in today's sell-off and it wasn't the American people."

Greg Schnacke, executive director of Americans for American Energy, based in Golden.
"Today was a fire sale. It was all because of the political poison that Gov. Ritter and Sen. Salazar have injected into the project."

State Sen. Josh Penry, R-Fruita
"The Roan Plateau has become a legal and political circus - a Colorado case study of what's wrong with American energy policy. The circus was complete when the governor joined environmental legal challenges that, in the end, massively undercut the financial returns on the Roan that the governor once claimed to be so concerned about."

Duke Cox, Western Colorado Congress
"This sale is the ultimate symbol of the heavy thumb of the energy industry and the Bush administration crushing the will and needs of local communities and drowning out the voices of citizens concerned about public health and air and water quality."