BP America, the U.S. arm of the global energy giant, plans to contribute $1.1 million to fund a housing assistance project in La Plata County, CO. BP is the leading natural gas producer in the county, which is located in the San Juan Basin.
The BP Neighbors Fund, which would be set up for a two-year period, is expected to help at least 20 people afford homes in the area, the center of Colorado's natural gas boom, where housing prices have more than doubled in six years.
"This is a breakthrough program that helps families buy their first homes, families that would otherwise be kept out of the market," said BP's Curtis Thomas, who directs the producer's Rockies government and public affairs program. "We see it as an investment in the long-term health of the community since the fund is designed to continue supporting families for many years to come."
The county's Regional Housing Alliance (RHA) said the money would be used to fund second mortgages for buyers to make up the difference between what they can afford and the cost of entry-level housing in the area. The program would target families that make between 80% and 125% of the area's median household income, or $49,900-78,000 for a family of four.
"The beauty of a program like this is that it follows the market," said Thomas. "If the housing market continues to appreciate, the Neighbors Fund grows and can expand its investment in future families. If the market slows down, the fund can help stimulate sales of entry-level homes."
Housing prices in the region have escalated as energy companies have moved in, the RHA noted. Entry-level studio and one-bedroom homes are selling for about $170,000, while two-bedroom homes are going for $210,000. A three-bedroom home averages $260,000.
The second mortgages would cover as much as $50,000 of the price of a home and would require no monthly payments, according to the RHA. When the home is sold by the family holding the second mortgage, part of the appreciated value of the home would go to the seller and the remainder would be returned to the housing fund to assist other families. RHA will administer the program with a governmental entity created by the county.
La Plata County Commissioner Joelle Riddle, who also is a RHA board member, said the county was "thrilled to have a partner like BP in our community supporting the issues important to all of us. And we are tremendously grateful for this investment that will keep revolving in perpetuity, as loans are repaid." She said she hopes other contributors would follow BP's lead.
BP said it plans to invest up to $2.4 billion through 2020 to recover CBM in the San Juan Basin (see NGI, Feb. 5, 2007). The federal government last year cleared the way for several producers to develop gas wells on thousands of acres in the northern part of the San Juan Basin in Colorado (see NGI, April 9, 2007). The record of decision (ROD) by the U.S. Forest Service and the Bureau of Land Management allowed the Northern San Juan Basin Coalbed Methane (CBM) Development Project in Archuleta and La Plata counties, CO, to move forward.
Six companies -- HEC Petroleum, XTO Energy, Petrox Resources, Elmridge Resources, Exok and BP America -- originally proposed drilling 185 CBM wells and constructing the ancillary facilities needed to support the wells within the basin. The ROD allows 127 wells to be drilled and 93 miles of roads and pipelines to be built in the area straddling the two counties. Except for the Southern Ute Reservation, total CBM reserves, including production as of August 2006, are estimated at 2.5 Tcf.
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