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Bakken, Niobrara: 'Bright Spots' in Otherwise Grim Rockies Leasing Data

As the federal fiscal year comes to a close Friday, oil and gas leasing activity in the Rockies states declined markedly, according to the Denver-based Western Energy Alliance (WEA), a trade association for more than 400 exploration and production (E&P) companies. With the exception of North Dakota, all Rockies states leasing activity has declined since 2008, WEA said.

Lease parcels offered on federal lands have declined 70%, acreage by 81% and revenue by 44% over the past three federal fiscal years, said WEA, noting that the trend runs counter to its "Blueprint for Western Energy Prosperity," a white paper touting the need for greatly increased E&P activity on federal lands as a means of reducing the nation's foreign oil imports.

WEA officials did acknowledge "a few bright spots" -- principally related to the Bakken formation in North Dakota and Montana, and the Niobrara in Wyoming. "North Dakota leasing, while surpassing 2008 only by 416 acres, garnered $104 million in revenue, up 112%," WEA said. In Montana, lease acreage offered dropped 58%, but revenue was up 119%.

WEA said the federal Bureau of Land Management (BLM) had its most profitable sale ever in Wyoming, generating $49 million in August. Despite this, overall 2011 revenues were down 33%. At a time in which the federal government is trying to slash deficits, producers are urging the government to offer more lease sales on federal lands.

"The Bakken [Shale] and Niobrara formation are contributing lease revenues that help to reduce government deficits today while holding the promise of future development and production," said Kathleen Sgamma, WEA director of government and public affairs. "High-value lease sales in these areas indicate industry interest and the potential for significant new government revenue."

According to NGI's Shale Daily Unconventional Rig Count for the week ending Sept. 23, the Niobrara-Denver Julesburg Basin continues to have six rigs operating, which is unchanged from last year. However, the Bakken/Sanish/Three Forks play has enjoyed a 35% increase in activity over the last year as the number of rigs operating has grown from 143 to 193 for the week ending Sept. 23.

According to company reports and NGI's Shale Daily calculations, Continental Resources is the largest acreage holder in the Bakken with 901,370 net acres. The top five is rounded out with Hess Corp. (900,000), Whiting Petroleum (680,137), EOG Resources (600,000) and ConocoPhillips (460,000).

Sgamma said now that BLM has worked through a new set of leasing policies, WEA is hoping the upcoming 2012 fiscal year will see a lot more acreage offered for lease. She argued that if BLM can more closely align with the E&P industry, it could result in greater job creation and economic stimulus throughout the West.

Declines in leasing in recent years have meant jobs and revenue opportunities have been lost in the Rockies, according to WEA. In Colorado BLM offered a "shockingly low" four parcels this year; 17 were offered in Utah, the group said.

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