Houston-based Alta Mesa Holdings LP, a privately held exploration and production (E&P) company, had its plans for pursuing some E&P activity in Idaho slammed by the state oil/gas regulators Thursday. The state sided with federal authorities who contend their mineral rights will be shortchanged by what Alta Mesa is proposing to do.
At stake is a potential 615-acre drilling unit from which Alta Mesa was seeking to carve out federal lands from the proposed development and deal only with the state authorities. BLM officials indicated they are working on an interim, limited lease sale for next spring that might solve the standoff.
The Idaho Oil/Gas Conservation Commission (IOGCC) rejected Alta Mesa's request to exclude 187 acres of federal Bureau of Land Management (BLM)-controlled lands from its drilling area. Alta Mesa has its eye on potential natural gas production in a part of southwest Idaho where until last year there were little or no drilling prospects.
On a 3-2 vote, the five-member IOGCC was not persuaded by the E&P company's contention that the state had little to lose by excluding the BLM lands from the proposed drilling program.
Alta Mesa argued that BLM's part of the drilling area in Payette County should be left out of the project because the federal agency had failed to make the land available through a lease sale in a reasonable time. Thus, the company said, BLM in essence was blocking the project from going forward by its inaction.
Dave Murphy, an official in BLM’s statewide office in Boise, told NGI that allowing the BLM land to be dropped would open up the possibility for gas supplies under the federal acreage to be tapped without any royalties being paid to BLM.
Last year, an Alta Mesa partner began drilling two natural gas wells in western Idaho and said it would seek permits to construct a 10-mile pipeline that would connect new and existing wells to a pipeline connecting a major gas-fired power plant near New Plymouth, ID (see Daily GPI, July 17, 2013).
The partner, Snake River Oil and Gas, owns existing wells drilled originally in the Willow Hamilton fields in Payette County by Bridge Resources. Snake River and Alta Mesa have sold more than 100,000 acres of gas leases in the area, according to the Idaho Petroleum Council.
In the IOGCC action, BLM told state commissioners that regulations require public comments and an environmental assessment before the federal lands can be opened for drilling. BLM also has concluded that Idaho stands to gain half of the BLM's royalties from any production coming from wells on the federal property.
BLM's Murphy said that because there was no potential oil/gas drilling activity contemplated in the Willow/Hamilton fields until only recently, the agency's land-use plan is out of date. "The plan from the early 1980s did not contemplate natural gas or oil," Murphy said. "Thus, the land-use plans did not have enough information to support leasing."
That is being corrected, but it will take at least through next year to develop a new plan and environmental assessment, Murphy said.
"In the interim, because of the activity, the underlying area includes this gas reservoir, so if the federal lands were not included, there could have been gas taken from under the federal lands and the government would not get compensated for it," Murphy said. In the IOGCC hearing there was no evidence presented that the gas reservoir did not exist under the federal lands, therefore, the commission decided BLM lands should not be excluded, he said.
Murphy said the BLM is considering holding a small lease sale under special circumstances so the BLM lands could be included in the over IOGCC permitted drilling area. "We have already had a public scoping meeting, and we hope to have a lease sale next spring (2015),." he said, noting that would be well ahead of a final determination on a new overall BLM land-use plan in the region.
Under BLM rules, if there is the threat of drainage impacts from drilling on adjacent private lands, the federal agency can hold a limited lease sale on acreage that might be impacted from the adjacent drilling. "So we're in the process of holding one of those lease sales," Murphy said.