The U.S. Bureau of Land Management (BLM) has proposed canceling 25 oil/natural gas leases that were issued more than a decade ago in the Thompson Divide area of western Colorado. Industry representatives were dismayed by the move.
As part of a draft environmental impact statement (DEIS) that is set to be finalized this summer, BLM's western Colorado officials have submitted a "preliminary preferred alternative" in the draft document calling for canceling the existing leases held by two Texas-based operators. The earlier draft EIS indicated 18 of 25 leases might be cancelled (see Shale Daily, Nov. 19, 2015).
While late last year it became evident that new leases in the Thompson Divide were in jeopardy (see Shale Daily, Dec. 4, 2015), operators had not expected that BLM would recommend canceling all of the existing leases.
At the time, BLM was effectively closing off 1.3 million acres to oil/gas leasing, according to Kathleen Sgamma, Western Energy Alliance (WEA) vice president for government and public affairs. She reiterated that the BLM draft environmental work focused on 65 leases sold in 2004 for which the agency has indicated it would retroactively cancel all or part of 25 leases in areas that the forest service plan closes to future leasing.
On Monday, Sgamma told NGI's Shale Daily that it was "odd that BLM is already leaking its intentions so soon after the draft public comment period closed." She said it indicates that BLM "again is not engaged in a deliberative process that respects valid existing property rights.
"Canceling leases many years after selling them, including those with production, calls into question BLM's commitment to responsible oil/gas development and the good faith of a federal government's contract."
The 45 remaining leases in the greater White River National Forest were also part of the environmental analysis, and they will be allowed to go forward, but on lands outside the 221,000-acre Thompson Divide section of the national forest.
A BLM spokesperson told local news media that the alternative "strikes an appropriate balance" by applying recent U.S. Forest Service (USFS) decisions and also considering the producing leases already in place.
BLM Silt, CO, officials made public their alternative proposal last Wednesday while meeting with other federal agencies and representatives from four counties (Garfield, Mesa, Pitkin and Rio Blanco). The local agencies urged the canceling of the leases as soon as possible.
Two Houston-based companies -- SG Interests and Ursa Resources Group -- obtained the 25 leases from the federal government in 2003 in the Thompson Divide. At the beginning of this year, COGA's western chapter touted an SG Interest well drilled just outside the Thompson Divide area that recorded an initial production rate of 7 MMcf/d using a short, 2,700-foot lateral and a strong choke on production (see Shale Daily,Jan. 7).
BLM Silt office spokesperson David Boyd told NGI's Shale Daily on Monday that the agency has not published anything yet on its proposed alternative, but it outlined the alternative on Feb. 10 at a meeting with state/local stakeholders. "We expect to have the final EIS out in July and a final decision in late August," Boyd said.
Boyd characterized the preliminary alternatives as canceling 25 non-producing leases in the Thompson Divide; modifying 13 other non-producing leases farther west of the Thompson Divide to reflect the USFS 2015 decision on future leasing; and keeping intact 27 producing leases with the exception of one lease that would have an additional five acres of timing limitations to correct a discrepancy.
Ranchers and business owners who have tried to buy the non-producing leases in the Thompson Divide for a number of years praised the latest move by BLM while the industry representatives lambasted it as closing off development of huge deposits of gas they contend are in the area.
Western COGA chapter head David Ludlam told local news media this will further poison relations between the industry and BLM. Ludlam pointed out that a former BLM district manager, James Cagney, a 37-year BLM employee in Colorado and Wyoming, has publicly challenged the move to cancel existing leases.
"Cagney has become the latest in a host of voices publicly expressing concerns similar to ours," Ludlam told NGI’s Shale Daily on Monday. "Cagney's position is one we stand behind now as we develop our legal strategy."
In his opinion column in a local newspaper, Cagney questioned whether energy companies should be required to plug producing wells because of 20-year-old environmental analyses being insufficient by current standards. "Virtually all old analysis is outdated given ever-evolving case law requirements," he said.