NGI The Weekly Gas Market Report / NGI All News Access

Roan Plateau Drilling Plan Gets Green Light

The Bureau of Land Management (BLM) is moving ahead with plans to allow natural gas development of Colorado's Roan Plateau, rejecting nearly all of Colorado Gov. Bill Ritter's suggestions to protect more acreage. Drilling could begin as early as this summer.

The federal drilling plan achieves the goals of environmental and wildlife protection set forth by Ritter, said Stephen Allred, an assistant secretary of the Department of Interior, which oversees the BLM. However, "there are some areas where we cannot meet the desires of the state of Colorado," he added.

Last June BLM's Colorado office recommended opening about 34,000 acres of the plateau to drilling and putting about 50,000 acres off limits, but the decision was met with protests from the energy industry and environmental groups and the deadline for comments was extended (see NGI, Aug. 13, 2007; June 18, 2007). BLM's plan would allow producers to drill about 1% of the land on the plateau at a time, which is about 350 acres. A plot would have to be fully reclaimed before a producer would be allowed to drill a new area.

Ritter, who had earlier opposed any drilling on the western landmark, in December urged the BLM to lease the Roan Plateau in phases and set aside 36,000 acres of the plateau as areas of critical concern (see NGI, Dec. 24, 2007).

Most of Ritter's compromise suggestions were ignored by BLM, and the Democratic governor said Thursday he was disappointed in BLM's decision. He promised to continue to fight to protect the plateau.

"We are committed to pursuing the right outcome for Colorado, and we are disappointed that a procedural hurdle will preclude the thoughtful development and maximum economic benefit to the citizens of the state," Ritter said. BLM's decision "is not an end by any measure. We will now quickly begin discussions with [Colorado] Sen. Ken Salazar, Sen. Wayne Allard, Rep. Mark Udall, Rep. John Salazar and the rest of our congressional delegation about possible legislative alternatives."

Phasing in leases over a period of time would be more disruptive to the environment, said Allred. BLM also did not increase the amount of acreage under Ritter's suggested "environmentally critical" category because the federal plan in place already bans any surface disturbance on more than 38,000 acres, he noted.

As expected, the decision was praised by industry advocates and criticized by environmental groups.

"Essentially, the Bush administration put Colorado and the West on notice today: Our water, our wildlife habitat, aren't more important than their plans to open up the Rocky Mountains for oil and gas companies to drill in 2008," said Joe Neuhof, chairman of Save the Roan Campaign.

Sen. Ken Salazar called the decision "irresponsible and shortsighted." He plans to introduce federal legislation to prevent BLM from "rushing forward with oil and gas development in one of Colorado's last pristine areas."

However, Americans for American Energy, an energy industry advocate, applauded the decision. "This decision is equivalent to the BLM giving Colorado a $1 billion winning lottery ticket," said Greg Schnacke, CEO of Americans for American Energy. "The question now is, will Gov. Bill Ritter let the state cash in."

Schnacke warned that growing concern over newly proposed state oil and gas drilling regulations, and whether the state puts up roadblocks to the Roan implementation plan, could adversely affect revenues from the development project.

"You can't make drilling companies spend billions of dollars if the regulatory environment makes it impossible to generate a reasonable rate of return," he said. How these concerns unfold could reduce or eliminate the expected $2 billion bonus for Roan leases, according to Schnacke. Under new federal rules, 48% of the bonus money would go directly to the state.

"The nightmare scenario that Gov. Ritter must now consider is the possibility of being liable for a refund of up to a $1 billion lease bonus should a company decide state roadblocks are too much to swallow," said Schnacke. "The more difficult it becomes for companies to operate in Colorado, the less money the state will receive. It's simple."

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus