Armed with interests in natural gas production, gathering and treating operations, the Southern Ute tribe, one of the smaller Native American tribes in terms of population, is fast becoming a major energy force to be reckoned with in the West.

The tribe, which has nearly a half a million acres of land in Southwest Colorado, “has moved outside the normal way an Indian would do…gas development,” said Howard Richards, tribal chairman, at a conference Thursday on Indian energy sponsored jointly by The Council of Energy Resources Tribes and the Chicago-based law firm of Gardner Carton & Douglas LLP, which represents Native American interests.

“We learned to play the game,” and are “probably a little ahead” of private energy companies today. “We are one of the big boys. We put on our business hat every day,” he told NGI following the conference. “The days of survival for the Southern Ute people are over. The days of living have begun…We are the Joneses.”

The tribe has not relied on the Bureau of Indian Affairs for its success, Richards said. If anything, it considers the bureau a “hindrance.”

The Southern Ute tribe began its own production company, Red Willow Production, in 1992, and in the past 10 years has become one of the top five coalbed methane (CBM) producers in Colorado, following companies such as Burlington Resources and BP, said Robert Santistevan, executive director of the Southern Ute Growth Fund, the business arm of the tribe. The company’s CBM production is 750 MMcf/d, all in Colorado, Richards noted.

The tribe is into “strictly CBM,” not wind power, biomass, geothermal or other renewable resources, as are other Native American tribes, he said. The bulk of the gas is sold to California utilities. A Sempra Energy official said the utility bought $100 million in gas from the Southern Ute Indians in one year.

The tribal council moved to establish Red Willow because it didn’t feel the federal government was living up to its obligations with the Indians. It was a “big, bold step,” Richards said.

The Southern Utes also are the only Indian nation with their own royalty auditor for producers drilling on their lands. The tribe, with its 1,400 members, took this step because it felt the federal government was making deals for it that “weren’t right,” he noted. An estimated 60 producers operate on Southern Ute lands, and pay royalties.

“In the beginning, it was tough to be taken seriously” by other energy companies, but the tribe eventually established a “track record” and was recognized as a serious player, Santistevan noted.

The tribe did not stop with Red Willow; it has moved into a number of other energy businesses. It formed an on-reservation gas gathering venture, Red Cedar Gathering, with Kinder Morgan, and retains 51% ownership in the company, Richards said.

It also “has moved into the international world of oil and gas development,” with operations in Canada and Mexico, he noted. The tribe is operating five to six wells in the Gulf of Mexico. The tribe’s Canadian venture is named Trident, Santistevan said.

Given that the tribe’s enterprises are private, Santistevan declined to disclose annual earnings. But he did tell reporters they were “considerable,” in the hundreds of millions. The Southern Ute tribe is considered the “most successful in energy” of all the Native American tribes, which number more than 500.

The Southern Utes also bought Frontier Energy in Tulsa, OK, last year, which provided them with pipeline interests in Oklahoma, New Mexico and Wichita, KS, according to Richards.

In addition, it created two years ago a 100% tribally owned, off-reservation gathering company, Aka (“red” in Ute) in Ignacio, CO, Santistevan said. Aka’s first acquisition was the Gilcrest treating plant in Greeley, CO, he noted.

Major interstate gas pipelines, such as El Paso Natural Gas and Transwestern Pipeline, and smaller pipes criss-cross the Southern Ute’s territory, he said. The tribe renews the rights of ways for terms of 10 or 20 years.

The tribe has a AAA rating from both Standard’s & Poor and Fitch, according to Richards. As for the future, it’s looking to diversify into other areas, including private equity and real estate.

It has no plans for going public. “We don’t see the benefit of going public. They [energy companies] go quarter to quarter, and we’re in it for the long term,” Santistevan said.

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