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Possible Deal Nears on Drilling in Colorado's Thompson Divide

In a long-standing war zone for energy developers and environmentalists fighting over proposed drilling in the Thompson Divide area of western Colorado, local county, industry and environmental officials are working on a land exchange proposal that could resolve the ongoing warfare through congressional action endorsed by Colorado's two U.S. senators and a House member.

In one of six counties involved, Garfield County elected officials last Monday agreed to pursue a letter urging the congressional action, and several other jurisdictions have indicated they will do the same. Involved is the chance for two producers with leases in the White River National Forest (WRNF) to get comparable acreage on public lands in adjacent counties in exchange for giving up the WRNF leases.

"This may represent the last, best chance for the companies to get some value for their investments," said David Ludlam, executive director of the Western Slope Chapter of the Colorado Oil and Gas Association (COGA). COGA's chapter is endorsing the land exchange, but some environmental groups are still taking a wait-and-see approach as Garfield County's commission agreed to pursue a draft letter endorsing the approach in Congress.

Zane Kessler, executive director of the Thompson Divide Coalition, told NGI's Shale Daily on Wednesday, that his group was still working through the details of the county's action, but it was a "first step" in a process that has the potential to to resolve the long-standing issue of drilling for gas in the WRNF.

Ultimately, the environmental groups and the counties involved will not be able to fully endorse the concept until draft legislation develops through the work of U.S. Sens. Michel Bennet (CO-D) and Cory Gardner (CO-R), and the local congressional Rep. Scott Tipton (CO- R). In response to the long-standing uproar about oil/gas leases in the Thompson Divide region, an exchange of those leases for new ones on public lands elsewhere in western Colorado counties is now being pushed as a solution.

This exchange, if enacted in Congress, would resolve only some of the 65 leases in the southern WRNF covering parts of Garfield, Pitkin and Mesa counties that the federal Bureau of Land Management (BLM) is currently reassessing regarding their environmental impact.

Earlier this year, a coalition of industry groups objected to BLM's environmental review process, which it claims has for years hindered efforts to develop oil and natural gas in the Thompson Divide area of the Western Slope (see Shale Daily,Feb. 11).

The exchange proposal now being pursued in similar to a settlement late last year involving another part of the Western Slope on the Roan Plateau in which a bipartisan group of Colorado lawmakers urged U.S. Interior Secretary Sally Jewell signed off on an agreement (see Shale Daily,Nov. 21, 2014).

Under the proposed exchange SG Interests Ltd. would give up 18 federal leases and other interests in Thompson Divide in exchange for leases covering the same amount of land (30,000 acres) in Delta and Mesa counties in three other national forests (Grand Mesa, Uncompahgre and Gunnison). Acreage given up by SG would include Wolf Creek rights near an existing natural gas compressor station.

In addition, Ursa Resources Group would give up seven leases covering about 12,000 acres in the Thompson Divide for a similar amount of acreage on the WRNF in Rio Blanco County.

COGA's Ludlam noted that the new acreage would be adjacent to existing landholdings by the two companies in the new areas, and the proposed exchange would not preclude forever the companies re-activating the leases in the Thompson Divide.

"Probably the key provision [for the operators] is that whatever legislation comes forward cannot include a permanent withdrawal of the mineral rights in the White River National Forest," said Ludlam, noting that this was why COGA's western chapter previously opposed the WRNF plan by BLM. "[Past proposals] have failed to account for the Niobrara and Mancos Shale potential throughout that entire region.

"'Forever' is a long time, and we think it would be bad policy to take those shale gas reserves out of consideration perpetually, and so far the counties and Congressman Tipton have agreed with us."

The six counties involved in the ongoing discussions and debate are Delta, Gunnison, Mesa and Pitkin, in addition to Garfield and Rio Blanco counties. The existing WRNF leases are in Garfield and Pitkin, and the exchange acreage would be in Mesa, Delta and Rio Blanco.

More broadly, the controversy has involved BLM and U.S. Forest Service (USFS) actions in the WRNF, within which Thompson Divide is located. Last December the USFS issued a record of decision (ROD) to amend the resource management plan for the WRNF, which combines part of two alternatives, noting that 194,123 acres are available for leasing and 800,555 acres are legally closed to leasing as the result of Congressional direction (see Shale Daily, Dec. 10, 2014).

In the ROD, 25 contested leases would not be impacted and would be maintained by privately held SG Interests and Ursa Resources. Last year the producers received two-year natural gas lease extensions (see Shale Daily, April 3, 2014).

The extensions were to allow time for BLM's environmental review to be completed, according to the Western Energy Alliance, one of three groups that filed an objection with the USFS earlier this year.

The filing objected to the ROD, which is setting surface restrictions that could lead BLM to restrict or terminate the leases, according COGA.

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